Good morning. My name is Lindsey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Pentair Q2 2015 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. Mr. Jim Lucas, Vice President of Investor Relations and Strategic Planning, you may begin your conference. Jim Lucas - Vice President-Investor Relations & Strategic Planning: Thanks, Lindsey, and welcome to Pentair's second quarter 2015 earnings conference call. We're glad you could join us. With me today is Randy Hogan, our Chairman and Chief Executive Officer; and John Stauch, our Chief Financial Officer. On today's call, we will provide details on our second quarter 2015 performance as well as our third quarter and full-year 2015 outlook, as outlined in this morning's release. Before we begin, let me remind you that any statements made about the company's anticipated financial results are forward-looking statements subject to future risks and uncertainties, such as the risks outlined in Pentair's most recent 10-K and today's release. Forward-looking statements included herein are made as of today, and the company undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances. Actual results could differ materially from anticipated results. Today's webcast is accompanied by a presentation, which can be found in the Investors section of Pentair's website. We will reference these slides throughout our prepared remarks. Any references to non-GAAP financials are reconciled in the appendix of the presentation. We will be sure to reserve time for questions and answers after our prepared remarks. I would like to request that you limit your questions to one and a follow-up and get back in the queue for further questions, in order…

Certainly. Your first question comes from the line of Steven Winoker of Bernstein. Your line is now open. Steven E. Winoker - Sanford C. Bernstein & Co. LLC: Thanks and good morning, all. Randall J. Hogan - Chairman & Chief Executive Officer: Good morning. John L. Stauch - Chief Financial Officer & Executive Vice President: Hi, Steve. Steven E. Winoker - Sanford C. Bernstein & Co. LLC: I'd love to dig into the whole commentary around industry reset and make sure I understand the difference between a reset and structural problems, as evidenced by pricing pressure and increased competition in Valves & Controls. So, Randy, could you just maybe clarify your thinking on this front? Are you seeing increased competition? What are you seeing in the marketplace? You talked about excess capacity, et cetera, from a structural perspective. Randall J. Hogan - Chairman & Chief Executive Officer: Let me back up and just talk about – what we did during the quarter is we actually saw – as you can see, we saw revenue come in about where we thought we were seeing, but we weren't seeing the margins come in. So when we dug in deeper, we saw that the business was under more margin pressure. That was less about price and more about the fact that the costs that we had agreed would come out weren't coming out, and that's cost above material. And at the same time, we saw too much optimism in terms of all of the products not only in the quote log that was going to close, but in the backlog some more hope than certainty about when those things would ship. So as we looked at those realities, we said we need to be much more radical about our cost reductions, we need…

And your next question comes from the line of Deane Dray with RBC Capital Markets. Your line is now open.

Thank you. Good morning, everyone. Randall J. Hogan - Chairman & Chief Executive Officer: Good morning, Deane.

I'd like to stay within this industry reset definition and maybe if you could share with us in Valves & Controls what the CapEx decline expectations are for this year. You said it's 20% year to date. How bad do you think it turns out for the year? And maybe if you can give the specifics around upstream, midstream, downstream. John L. Stauch - Chief Financial Officer & Executive Vice President: There's a lot of data out there, Deane. We've seen it as bad as 30% on the high end of the data that we've seen. And that would probably represent the upstream CapEx spending where the cuts are harder, and we've seen the average that we were using around 20%. It's a little less than the downstream and a little deeper in the upstream. The midstream is, as Randy mentioned, especially outside oil and gas and LNG, et cetera, is still in a relatively growth mode. So it's a pretty deep cut. And we think that given the fact that we've come through two quarters, it's not likely that August and July, which tend to be slower months, are going to rapidly pick up. And then when you come out of the Q3 window and you've got one quarter left, it's very easy to push those projects into next year. So we're taking the view that the high end of the range is what's likely to occur, and we think that this lingers through the first half of 2016, and then we're hopeful that it starts to recover at the end of 2016 as some forecasts would suggest. Randall J. Hogan - Chairman & Chief Executive Officer: So I would think of it as – obviously exploration and production, the exploration side is down the most, and that's well understood. But particularly the large integrateds, they cut capital more generally. And we understand how that works for a big company. It could be as much as 30%. That's what we're using as our planning assumption.

Is that 30% across the upstream, midstream, downstream, so in total for Valves & Controls? Randall J. Hogan - Chairman & Chief Executive Officer: Yes, I'd say roughly it fits. It's how we're looking at it, how it will impact us.

Okay. Randall J. Hogan - Chairman & Chief Executive Officer: So that's why we're being more aggressive on cost. And, Deane, you followed us a long time. We've been, unfortunately, at this movie before, so we know how to get it to turn out right.

All right. So just from our perspective, it looks like you are being very conservative, and certainly you couldn't look at this and say you're being optimistic. So we like seeing a point that it could worsen from here, and we know this is an industry event, not a Pentair execution side. And then, just to switch gears, if we could, Randy, to the extent that you can, can you comment on the activist news, any initial discussions? And very specifically, I think where everyone was a bit surprised was the emphasis that you all would be a consolidator in the Flow segment. And maybe if you could, reconcile what your ambitions are in M&A versus what the activist might be suggesting. Randall J. Hogan - Chairman & Chief Executive Officer: We have a lot of shareholders, and we've talked to all of them. We welcome constructive input from all of them. So we've had discussions with a lot of folks. That's why we've led to a lot of things we've done. I talked for some time about the fact that we have – and it's one of the reasons why we changed the way we were talking about earnings. We believe we have an advantaged structure. We have strong execution skills. We have proven that we can do large and creative deals and pull them off well despite what we're seeing now, which is as you said, a market downturn, not an issue with what we've done with the business. So we are logically the right consolidator. It was part of the vision as we looked at it to build the company and get scale and have this advantaged structure. And we want to put it to work. We want to put it to work across the segments in a way that creates shareholder value going forward. We think we are aligned with shareholders on creating shareholder value. We're not happy. We're not satisfied at all with recent performance, and we're open to all kinds of ideas. And we believe we've earned the right to be a consolidator, and we want to be.

Great, thank you.

Your next question comes from the line of Mike Halloran with Robert Baird. Your line is now open. Michael P. Halloran - Robert W. Baird & Co., Inc. (Broker): Good morning, guys. Randall J. Hogan - Chairman & Chief Executive Officer: Hi. Michael P. Halloran - Robert W. Baird & Co., Inc. (Broker): On the cost saves side, could you just line out what's incremental this quarter versus what you guys lined out on the first quarter? It certainly sounds like you're layering on more cost saves going into next year based on just three months ago, but I wouldn't mind hearing what the difference is and, if you can, put some numbers around it. John L. Stauch - Chief Financial Officer & Executive Vice President: So when we came out of Q1, and I'll just talk to Valves & Controls specifically, Mike, and I'm going to come back to the other GBUs, which are actually performing relatively well in the markets that they're involved in. We wanted to get $40 million to $60 million across Valves into 2015 to 2016, and that was relative to expecting that the foreign exchange headwinds would be about that and suggesting that that would be a permanent reset that needed to be dealt with. We're now tasking, if you look at the slide, close to $135 million of costs out when you add in the sourcing benefits, and so those are comparable numbers. We did not and have not felt like we're going to realize much of that first opportunity of cost that we wanted to get out, and that's why we're making the change and ongoing in there with Randy's direction. And we're working through how to get it out in a way that actually reduces complexity, improves the customer experience, and…

Your next question comes from the line of Scott Graham with Jefferies. Your line is now open.

Hi, good morning. So obviously, the process markets are treating you with a lot of difficulty like everyone else. My question is really about within 30 days – I'm sorry, 90 days, we've had what I would call a draconian change in the way you guys are talking about this business. It was looking weak, and now it's looking really weak. So my question is a couple years ago, we went to a structure where your global business unit heads reported directly to you. And I'm wondering now if we need another layer in there because it just seems as if whatever happened in Valves & Controls I believe should have been sniffed out a little earlier than this given the degree. Could you bring some thought to that, Randy, and whether in fact the company needs a COO? John L. Stauch - Chief Financial Officer & Executive Vice President: Scott, it's John. Real quick, let me just give you the Valves & Controls view. When you take a look at the quote funnels Randy mentioned, it was at record levels. We have a record quote funnel. I think the a-ha moment for us was when we started to ask appropriately the movement in that funnel, what was actually getting quoted, what was actually getting pushed out, how many of those projects have been there for long periods of time. And then you get to the fact that there was a lot of projects in there that we honestly felt were not going to get quoted this year and therefore not going to come into backlog. It's very easy for people to want to believe in an optimistic forecast, especially in the future, because it takes away the pain of having to deal with the reality. And so we're acknowledging the reality of where we are. We're getting on with the solutions that we have to implement, and that's where we're going forward. I think it was our questioning of the leadership and going through that funnel that led to the realization that the back half was not going to recover. Now there's a lot of market data out there that would say that there is some hope that the second half will recover. We're just not buying into it. Randall J. Hogan - Chairman & Chief Executive Officer: Layers don't improve. Simplicity layers don't improve communication. Layers don't do anything except for expand capacity which – I think that would be a fair question to ask. When our COO retired, we asked four presidents to step up to be mini COOs. Could we have seen this sooner? Probably. Should we have seen it sooner? Your judgment, it's up to you. But we did see it. And we thought we acted as fast as any COO would have ever acted.

Fair enough, thank you for that answer. Let me just ask this one follow-up, if I can. On the synergies with the Valves & Controls business, we had that number pegged at about $270 million, if I recall. I was just wondering how much synergy savings, separate and apart from your restructuring, is still on the come for you guys in this business. Randall J. Hogan - Chairman & Chief Executive Officer: Let me start by – let's look at the arc of Valve & Controls since we got it. If you take a look at our current outlook on a like-for-like basis – John, correct my numbers to get them accurate, we were down $400 million in sales. Yet on $400 million down in sales, we will have the same margin as the business had when we bought it. That isn't because we haven't done anything. That is because we've done a lot. And with volume, we get the cost structure down more. Even with pricing pressure, we'll be a winner in this. We've had to do this before. It's not pleasant. Yes, I wish I started it six months ago or even three months ago. We started it a month ago. And so all the cost we took out is out. This business wouldn't be making 10% right now in this outlook if we hadn't. It was making 10% when we bought it. John?

So you're saying that the answer to my question is that the costs are out, the $270 million is done. Randall J. Hogan - Chairman & Chief Executive Officer: Yes, run the math and you'll see what this business would look like if we hadn't done what we did already.

Thank you. Randall J. Hogan - Chairman & Chief Executive Officer: But there's still too much complexity. There's still too much. There's still opportunity.

And your next question comes from the line of Joe Ritchie with Goldman Sachs. Your line is now open. Joseph A. Ritchie - Goldman Sachs & Co.: Thank you. Good morning, everyone. Randall J. Hogan - Chairman & Chief Executive Officer: Good morning, Joe. Joseph A. Ritchie - Goldman Sachs & Co.: Just touching on the leadership change for a second in Valves & Controls, can I just better understand what your thought process is right now? John is going to take over in the interim. You mentioned you hired a new sales leader. I'm just trying to understand what the long-term direction of the management team is on that business. Randall J. Hogan - Chairman & Chief Executive Officer: Sure. One of our management philosophies is when you don't fully understand what the core issues are, you go to the problem. That's what we expect in leaders. You go to the problem. You understand the problem yourself. And then you define the execution plan, and then you act. And that's what John and I did on this. And what we do is, to the earlier point, you've got the layers out of the way in order for you to see that. And we decided that rather than appoint a new president right away, we should understand the problem more fully. And I have ultimate trust in John. And barring myself doing it, John is the right guy to do it. So we will find and appoint the right president for that and make a very thoughtful choice. And so the structure will still be four presidents, four segments. Joseph A. Ritchie - Goldman Sachs & Co.: Okay. But I guess from a timing perspective, how long do you think it will take to really decipher what's going on and…

And your next question comes from the line of Steve Tusa with JPMorgan. Your line is now open.

Just on Technical products, you guys cut the forecast there on sales as well as margins a bit. I think on the sales front, it looks like the fourth quarter is going to be really tough there. Can you maybe just talk about those dynamics? John L. Stauch - Chief Financial Officer & Executive Vice President: We have an energy and industrial business in Technical Solutions, and we took a little bit of the trends that we're seeing in the Valves & Controls business and applied them to some of the fourth quarter assumptions, thinking that some of that might slip into 2016.

Okay. And so that's like backlog-related business like maybe some offshore stuff where the backlog rolls down? John L. Stauch - Chief Financial Officer & Executive Vice President: Correct.

Okay. And then on this cash EPS change, obviously there was a filing from one of your major shareholders that talked about this move. This happens a few weeks after that comes out. Was there something that was in consideration prior to the activist discussion? It just seems the timing here in concert with the $0.40 EPS cut, I'm just curious as to what the thought process was on that front. John L. Stauch - Chief Financial Officer & Executive Vice President: We've been considering this for some time and we've been hinting at this for some time in several of other earnings calls and analyst discussions where we had the slides out there showing the impact of the amortization. When we take a look at our advantaged structure, how Randy said, we don't think necessarily people are looking at below the EBITDA valuation of the company and we think the performance isn't being properly reflected.

Okay. One last question. If you adjust to the new margin guidance for Tyco Valves & Controls, and clearly I think without the cost-out you would be at a lower profit level. That's pretty clear in light of the revenue dynamics. What is your return? Have you reset that return on that investment? Where is your return now on the Tyco Flow deal ROI? John L. Stauch - Chief Financial Officer & Executive Vice President: It's still exceptionally high. We're well north of 10% on that deal. You've got to remember that the advantaged structure also leaks over into the value on the rest of the Pentair businesses. So the structure itself and what it's done to optimize the below the line has helped us immensely.

Right, the tax benefits. Randall J. Hogan - Chairman & Chief Executive Officer: Thermal has done very well.

Okay. Thanks a lot. Randall J. Hogan - Chairman & Chief Executive Officer: Thank you.

Your next question comes from the line of Shannon O'Callaghan with UBS. Your line is now open.

Good morning, guys. Randall J. Hogan - Chairman & Chief Executive Officer: Hey, Shannon. John L. Stauch - Chief Financial Officer & Executive Vice President: Good morning.

Hey. Can you explain a little bit more this retooling of the sales force in Valves & Controls? I know obviously there's just a ton of end market pressure on you guys right now. But even back when those end markets were pretty decent, it seems like there was work to be done on retooling the sales force. What are the issues there that you're trying to resolve and what do you think the fix is? Randall J. Hogan - Chairman & Chief Executive Officer: We're working with a professional sales leader. And we have always felt that where a territory leader might have a budget, that budget is not properly broken out by account. And we feel it takes a different type of sales leader to call on a global account, a different type of sales leader call on an EPC and then a different type of sales leader to call on the base MRO/services opportunities. In some cases, that was the same sales leader in that territory calling on all three. So we're looking at it from a customer back account-based optimization and looking at those metrics globally to make sure we're properly dealing with the opportunities in the regions where those opportunities exist and we're making sure that we have that optimization. We're also going a step further to say once that quote comes in, how do we optimize the quote process. And when we're in a standard product quoting, we should have that in hours, not days. And when we get into longer-cycle engineer to order, there should be some thoughtfulness put into which projects we should be quoting and what is the prioritization of what's in the backlog, not all projects being equal. So that's what we've been working on. We've been working on that for close to nine months now. We've rolled it out in some of the regions and seen some great results from it. And we think we're going to continue to advance that sales optimization throughout the rest of 2015 into 2016.

And is there another business within Pentair that you're modeling that off of that does that well, or is that something outside the company that you're using where you've seen that work? Randall J. Hogan - Chairman & Chief Executive Officer: Clearly, our aquatic systems business is account-based, sales-focused, calls on the end user, specifically on the end user, and that's served us quite well. We do also have other pockets of success in Pentair that we're modeling that against it as well.

And then just in terms of the acquisition potential in Water Quality and Technical Solutions, I understand those are the ones operating well, and so they're the ones that are ready to fire away on acquisitions if they find them. But can you just give us a little sense what that market map looks like for those businesses in terms where you could take them via acquisition? Randall J. Hogan - Chairman & Chief Executive Officer: There are a number of opportunities for consolidation there. They're still pretty fragmented, too, when you take a look at Water Quality, which includes the whole residential and commercial filtration area. It includes the aquatics area, which is pool; and then the aquaculture space, which gets us into some food processing, which is growing very rapidly. It's just small still, still small. So really there's a pretty broad play there. We're large in residential filtration. We think residential and commercial filtration is a good space. And now I think it's really well in a good home in Water Quality Systems. Then in Technical Solutions, we have a high-performing, high-execution business that has done great with everything we've ever put in there. And there's still – despite the consolidation that's going on in the whole industrial and electrical space, there are still opportunities there.

Okay. Randall J. Hogan - Chairman & Chief Executive Officer: I'm not going to get into it right now.

That's helpful. Thanks a lot, guys. Randall J. Hogan - Chairman & Chief Executive Officer: Thank you.

Your next question comes from the line of Jeff Hammond with KeyBanc Capital Markets. Your line is now open.

Hey. Good morning, guys. Randall J. Hogan - Chairman & Chief Executive Officer: Hey, Jeff.

Hey, just as a follow-on to Shannon's question, can you just talk about what's in the pipeline more imminent or visibility within those two segments where you want to grow and how that does or doesn't impact how you're thinking about buyback? Randall J. Hogan - Chairman & Chief Executive Officer: I'm not going to talk about – we have things in the pipeline. That's as far as I want to go. And we have a $1 billion authorization. We already did the first $200 million of it this year, and that was what we intended to do. So I wouldn't announce any change in that. So we've talked for some time about the fact that we've been looking. But there have to be sellers as well as buyers. I guess that goes without saying. I don't know if I... John L. Stauch - Chief Financial Officer & Executive Vice President: Jeff, and the other thing I would add is we have a very active pipeline. It's across a lot of our growth, as we call them, platforms or technology positions. We're always looking at that active pipeline. And right now, I would feel that we're far enough down the line on several of them that we feel that our current capital allocation plan is appropriate.

Okay. And then just real quick on Tech Solutions and the Thermal business, can you just speak to maybe why that business is growing so nicely in this tough environment and maybe the disconnect versus what you're seeing in Valves & Controls? Randall J. Hogan - Chairman & Chief Executive Officer: I would say that they went through their – the thermal business went through their adjustment to the new reality in oil prices when oil prices first started to fall. And even before they started to fall, when the oil fans, which is a large segment for thermal large market, cancelled a lot of projects. And so a lot of their opportunity was wrung out during 2013, even the fourth quarter of 2012 and 2014. And then their focus was on winning the things that we thought would really happen, and they did. So those are in the backlog now. That's why we showed a measure of caution about how long that will continue. But right now, they have a good backlog. They have great execution. They've been very responsive to customers' needs to reconfigure projects to save money, and our team is really good now. And so the backlog is good, but I mentioned actually the backlog is up in the quarter and there are a lot of smaller projects. There's a fair degree of maintenance in that business. So these small projects we think are pretty solid, but we're going to be cautious given what we've seen in Valves & Controls.

All right, thanks a lot. Randall J. Hogan - Chairman & Chief Executive Officer: Thank you.

And your next question comes from the line of Nathan Jones from Stifel. Your line is now open. Nathan H. Jones - Stifel, Nicolaus & Co., Inc.: Good morning, Randy, John, Jim. Randall J. Hogan - Chairman & Chief Executive Officer: Good morning. Nathan H. Jones - Stifel, Nicolaus & Co., Inc.: If I could just ask you a question about slide 14, you have a lower sales outlook there of $110 million and an operating income impact there of an additional $90 million just on volume, which is a decremental margin on that of about 82%, which seems incredibly high. I would have thought just not buying steel would have the decremental being lower in that. And obviously, it looks like zero benefit from any restructuring actions. What could move the needle there so that that is not quite as bad as what you've put in that forecast? John L. Stauch - Chief Financial Officer & Executive Vice President: So your math is right. The slide is right. We reviewed the slide and did the same look internally. It is solely related to the drop in the operating income outlook of Valves & Controls, and you're seeing there both the high volume drop-through, which is the high decrementals in the first bullet, plus the realization that the cost actions that Randy and I tasked them to focus on this year are not likely to occur this year. Randall J. Hogan - Chairman & Chief Executive Officer: (59:23). John L. Stauch - Chief Financial Officer & Executive Vice President: And that's the impact that you're seeing that drifts into (59:28). Nathan H. Jones - Stifel, Nicolaus & Co., Inc.: Okay. So the absence of some benefit from cost actions in there as well, as Jeff illustrated, leverage on sales. John…

And your next question comes from the line of Brian Konigsberg with Vertical Research Partners. Your line is now open.

Yes, hi. Good morning. Randall J. Hogan - Chairman & Chief Executive Officer: Good morning.

Okay. I'm going to ask one in Valves & Controls and then I'll move on as well. But on Valves & Controls, and I think it relates to Nathan's question also. So I guess I just didn't understand the explanation there, just the fact that you're not going to be realizing some of the savings you had previously anticipated. I don't understand why that would add to the incremental the way you're describing it. The incremental should be incremental on the volume. Just because you're not getting the savings, I would assume that doesn't – that would reduce the decremental, not augment the decremental. John L. Stauch - Chief Financial Officer & Executive Vice President: We're comparing to a previous forecast where the expectation of realizing those benefits was in it. We're not comparing to prior year. So what we're looking at and what we're saying is that the change in the year, the change in the forecast and revenue versus the April forecast about changing the operating income, that was the question he was asking. If you look at it year over year, you'll see those high decrementals as well, but they're close to being in the 60s, and that's just the difference between sales and material.

Okay. But maybe you could... Randall J. Hogan - Chairman & Chief Executive Officer: (1:02:27) other costs out.

Okay, I got it. But just maybe touching more on that, previously Valves & Controls, you were looking at 14% previously. Now you're looking at 10%, and 10% excludes intangible amortization as well. So it's probably more like a 500 basis point decline, maybe more, I don't know. John L. Stauch - Chief Financial Officer & Executive Vice President: It depends. We have not adjusted any of the segment margins for enhanced lag (1:02:50).

That hasn't been adjusted, okay. But can you bridge that a little bit? How much of that is volume? And I know you're not baking any savings than they are now. How much of that is volume, price, and exclusion of savings? Can you maybe give a little bridge from that perspective? John L. Stauch - Chief Financial Officer & Executive Vice President: There are one to two points of standard margin decline on a year-over-year basis, and the rest is just the volume drop-through. Randall J. Hogan - Chairman & Chief Executive Officer: Just leverage.

So no price is in that number pressure? John L. Stauch - Chief Financial Officer & Executive Vice President: I just said it's one to two points of margin decline.

Okay, got you. And then I'll just move on to – in Water Quality, so resi, commercial, food and beverage still doing well. Maybe food and beverage specifically, so that's been doing very well for a long time. Maybe just give a taste of how do you see the market progressing from here. Is that still going to be a source of growth for you? Is there an opportunity for that to remain a nice contributor for the top line? Randall J. Hogan - Chairman & Chief Executive Officer: We think it will. We have innovative products. We have a great relationship with customers. Our newer products are gaining share. So in both the foodservice business and in food and beverage manufacturing, we expect that to continue.

Okay, thank you very much. Randall J. Hogan - Chairman & Chief Executive Officer: All right. John L. Stauch - Chief Financial Officer & Executive Vice President: Thank you. Randall J. Hogan - Chairman & Chief Executive Officer: Thank you. Randall J. Hogan - Chairman & Chief Executive Officer: All right, thank you very much for your questions. Operator, you can give the call number or the replay number?

Thank you for participating in today's Pentair Q2 2015 earnings conference call. This call will be available for replay beginning at 12:00 Eastern Time today through 11:59 PM Eastern Time on August 28. The conference ID number for the replay is 77788152. Again, the conference ID number for the replay is 77788152. The number dial for the replay is 800-585-8369. Again, the dial-in number for the replay is 800-585-8369. Thank you. This concludes today's conference call.