Bradley Alexander John T. Gremp - Chairman and Chief Executive Officer Maryann T. Seaman - Chief Financial Officer and Senior Vice President Robert L. Potter - President

Byron K. Pope - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division Brad Handler - Jefferies LLC, Research Division John David Anderson - JP Morgan Chase & Co, Research Division Jonathan Sisto - Crédit Suisse AG, Research Division William Sanchez - Howard Weil Incorporated, Research Division Angeline M. Sedita - UBS Investment Bank, Research Division Ole H. Slorer - Morgan Stanley, Research Division Robin E. Shoemaker - Citigroup Inc, Research Division William A. Herbert - Simmons & Company International, Research Division James D. Crandell - Cowen Securities LLC, Research Division James D. Crandell - Cowen and Company, LLC, Research Division Will Gabrielski - Lazard Capital Markets LLC, Research Division Robert MacKenzie Michael K. LaMotte - Guggenheim Securities, LLC, Research Division

Welcome to the Second Quarter 2013 FMC Technologies, Inc. Earnings Analyst Call. My name is Vanessa, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. And I will now turn the call over to Mr. Brad Alexander. You may begin.

Thank you, Vanessa. Good morning, and welcome to FMC Technologies Second Quarter 2013 Earnings Conference Call. Our news release and financial statements issued yesterday can be found on our website. I would like to caution you with respect to any forward-looking statements made during this call. Although these forward-looking statements are based on our current expectations, beliefs and assumptions regarding future developments and business conditions, they are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by these statements. Known material factors that could cause our actual results to differ from our projected results are described in our 10-K, 10-Q and other filings with the SEC. We wish to caution you not to place undue reliance on any forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any of our forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise. I will now turn the call over to John Gremp, FMC Technologies' Chairman and CEO. John T. Gremp: Good morning. Welcome to our second quarter 2013 conference call. With me today are Maryann Seaman, our CFO; and Bob Potter, our President. I'll discuss highlights from the quarter, Maryann will provide specifics on our financial performance and then we'll open up the call for your questions. Earnings were $0.44 per diluted share for the quarter. Total company quarterly revenue was $1.7 billion and operating profit was $199 million. Subsea Technologies inbounded $2.6 billion of awards in the quarter, which included 117 subsea trees. Segment backlog now stands at $5.9 billion. Revenue for the quarter in Subsea Technologies was $1.1 billion, an increase of 19% over the prior year quarter. Our subsea margins improved sequentially, as the contribution from our higher-margin subsea service work improved from the first quarter. However, the margin improvement was less than anticipated as we incurred some absorption costs associated with slower-than-expected project progression and project award delays. So while our margins improved sequentially, we had expected to see better performance in the quarter. As we enter the back half of the year, our mix of projects is improving and we continue to expect significant margin expansion in the next 2 quarters. We received two large project awards during the quarter. The Egina award from Total for $1.2 billion, includes 44 subsea trees and associated manifolds, control systems and tooling. This important Nigerian project is one we are well prepared to successfully execute. We were also awarded the second call off related to last year's pre-salt tree award from Petrobras. This $0.5 billion awarded includes 49 pre-salt trees that we will deliver in 2016 and 2017. In addition to these 2 large awards, we received multiple orders from operators in the Gulf of Mexico. This markets is continuing to show the strength we have expected, and much of the future activity in this region will come from our alliance partners. We continue to be encouraged by the Petrobras Marlim subsea separation system. It is continuing to perform very well, and Petrobras is currently assessing and analyzing how to apply the Marlim technology to this and other fields. Turning now to our Surface Technologies segment. Surface Technologies delivered favorable quarterly volume and margin results. Surface Technologies revenue was up from the first quarter, as fluid control and surface wellhead activity more than offset the expected slowdown of completion services activity related to Canadian breakup. U.S. rig count was flat in the quarter, and going forward, we do not expect rig count increases in the second half of the year. However, with increased drilling efficiencies being recognized and the recovery of the Canadian activity, we should see improved results in the back half of the year. International surface wellhead revenue was strong during the quarter, as activity increased sequentially in both the Middle East and Europe. We continue to perform well in both of these important markets. Energy infrastructure results were improved on sequential growth in both our measurement solutions and loading systems businesses. Looking forward, we recorded record subsea awards in the second quarter and are confident we will exceed $5 billion of orders for the year. Our margins in subsea backlog continued to improve and we expect this to translate to stronger subsea margins in the second half of the year and into 2014. International surface wellhead activity remains strong and U.S. land activity appears to have stabilized. Our margins trough in the second quarter and we expect improved results in Surface Technologies in the coming quarters. Maryann will now take you through some of the financial details for the quarter. Maryann T. Seaman: Thanks, John. Subsea Technologies operating profit was $123 million in the quarter with a margin of 11%. Sequentially, our EBIT margins improved. As John mentioned, we have some projects that have been progressing slower than we originally forecast. This is the result of differences in our customers' schedules. We have also experienced some suspension and postponement on projects. These project delays have given rise to under-absorbed cost in the quarter, and impacted our short-term results. We have structured our organization to be able to support and deliver a higher level of projects by adding the required project support staff. Given the anticipated shift and the timing of these projects, we are taking actions to more appropriately align our cost structure to the project requirements. Consistent with our previous forecast, EBIT margins in the second half of 2013 will improve sequentially now supported by these additional actions. We expect our full year subsea margins in a range of 12% to 13%. We remain confident in our ability to execute our record backlog and achieve the margin improvement heading into 2014, as margin and backlog improves and our structure is optimized to deliver these projects. Our Subsea Technologies backlog stands at a record $5.9 billion. It was negatively impacted by approximately $200 million of foreign exchange translation in the quarter. Moving to our Surface Technologies results. Surface Technologies operating profit for the second quarter was $57 million, a 32% decrease from the prior year quarter, but flat sequentially. In the second quarter, we saw the decline of completion services activity related to Canadian breakup. This was offset by continued strength in our international surface wellhead business and better-than-expected segment activity in the U.S. International surface wellhead orders were strong in the quarter, and we expect the results in the second half of the year to improve. Fluid control profit improved sequentially as pressure pumping activity is stabilizing. Segment margins in the quarter were 13%. The sequential decline was consistent with our expectation of margins troughing in the second quarter but was better than anticipated mainly given the strength of the international surface wellhead business. In the back half of the year, we expect overall Surface Technologies sales volume to increase and margins to improve. We continue to see strength in international activity and are more confident in the U.S. markets. Orders for Surface Technologies for the quarter were $501 million, as a result of continued strength in the international surface wellhead business and sequential growth in fluid control orders. Segment backlog stands at $582 million with the year-over-year increase coming from the growth in international surface wellhead. Moving to energy infrastructure. Energy infrastructure operating profit for the second quarter was $19 million, with a margin of 11.8%. Strong results in both measurement solutions and loading systems drove segment results to more favorable levels. We expect full year margins to approach 11%. Now for the corporate items. Corporate expense in the quarter was $12.5 million. We expect this to average between $12 million and $13 million per quarter for the remaining of 2013. Other revenue and expense net reflects expense of $31.5 million. This includes $9 million related to the MPM earn-out as a result of the business' exceeding performance expectations for 2013. Absent foreign exchange fluctuations and any further MPM earn-out adjustments that may be necessary, we expect other expense net to average approximately $20 million per quarter in the second half of 2013. Our second quarter tax rate was 28.2%. We anticipate our 2013 tax rate to be between 26% and 27% for the full year, subject to fluctuations in our earnings mix. Capital spending this quarter was $78 million, primarily directed towards Subsea Technologies expansion initiatives. A payment of $57 million was made during the quarter for the 2012 MPM earn-out obligation. Capital spending in 2013 is forecasted approximately $400 million. At the end of the second quarter, we had net debt of $1.3 billion, comprised of $268 million of cash and $1.5 billion of debt. We averaged 239.3 million diluted shares outstanding in the quarter, and we repurchased 404,000 shares of stock during the second quarter at an average cost of $54.45 per share. So in summary, 2013 will be a record year for subsea awards. Subsea Technologies margins are expected to improve sequentially in the next 2 quarters, averaging 12% to 13% for the full year. Margins for Surface Technologies were better than expected as international markets continue to perform well and the U.S. market is stabilizing. Surface Technology margins have troughed, and with the expected strengthening in U.S. activity, we will deliver stronger margins in the back half of the year. As a result, we are raising the lower end of our full year earnings guidance to the range of $2.10 to $2.25 per share, as our overall subsea performance continues to improve and the North America surface market strengthens in the second half of the year. Operator, you may now open up the call for questions.

[Operator Instructions] And our first call comes from Byron Pope with Tudor, Pickering. Byron K. Pope - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Just, John, if you could frame the back half of the year in terms of how you think about the subsea margin progression? Obviously, you're now saying 12% to 13%, but just in the context of the actions you're taking to rightsize the cost structure, just trying to think about the progression as we think about Q3 and Q4. And then also thinking about of your existing subsea backlog, how should we think about how much of that kind of flows through the revenue line in the back half of the year? John T. Gremp: Byron, to talk about the cost adjustments, and that's really the disappointment I referenced regarding the second quarter subsea margins, as Maryann explained. Because of the project delays, we had a project -- we had a cost structure that was designed in place to deal with those projects. As they were delayed, we need to make some adjustments. We're implementing that now, and that'll get us back to the margins that we would have originally anticipated in the second quarter. But the real drivers for the back half margin improvement come from project mix flowing through the backlog. As you know, the problematic projects of ours like LLOG [indiscernible] are clearing out of the backlog and are being replaced by high margin. That's the big driver in the second half margin improvement. But we've also mentioned the higher -- or the increase in higher-margin subsea service revenue, and that's being driven by our Light Well Intervention stacks being fully operational in the second half, plus higher demand for refurbishment equipment. And so that increase in higher-margin business will be a pretty important contributor to the higher margin in the back half. And then finally, the lower R&D spending that we called out in the last quarter where we had accelerated, that will contribute to the margin improvement. So there's really 4 things: project mix going through the P&L, increase in higher-margin service, lower R&D and then some cost adjustments to align with the new schedules from these project delays will all contribute and really gives us confidence in the second half margins being what we've projected. Byron K. Pope - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Okay. And then just a second question for me on the surface business. The tone around the North America business sounds a little more constructive than a quarter ago. And so just wondering if you could speak through within that segment, which of the businesses are on the margin are giving you that what I sense to be an increased sense of confidence about the back half from a visibility point of view? John T. Gremp: Right. So the first thing to point out is that we think our North America Surface Technologies business has stabilized. That's important obviously. And the second half improvement comes from the Canadian improvement, which the Canadian breakup was more pronounced than delayed, so that clearly improves in the second half. And then there is potential for some U.S. improvement in the second half, and that all contributes to potential for increase in Surface Technologies contribution in the second half of the year. But the driver in the second quarter was really the strength of our international surface wellhead business, which continues to be very strong. I'll ask Bob Potter to make some additional comments on this potential strength in Surface Technologies, both in the second quarter and going into second half. Robert L. Potter: Yes. Just to add to what John said about Canada, in the U.S., we do -- while we're forecasting rig count to be essentially flat through the remainder of the year, we do see activity increase beginning to develop just based on drilling efficiencies, frac intensity, more pad drilling, so more wells per rig, and that certainly will help drive our repair and replacement business, and fluid control, and our frac rental assets and our surface wellhead business.

And our next question comes from Brad Handler with Jefferies. Brad Handler - Jefferies LLC, Research Division: Maybe the first question actually, I would appreciate a little bit more color on Egina. I supposed in the context of it, it's a very nicely high dollar value per tree, and I'm wondering if that tells us that it's setting the stage for future phases, how much of it is a function of Nigeria? Just maybe some more color on the significant size of that project. John T. Gremp: Brad, typically in the West Africa project, where you're going to a national oil company and you're dealing with the procurement production and contract practices, it's not uncommon to define the entire system because you only want to go through that process with the national oil companies once. So you tend not to have call offs, you tend not to break it up in the bits, you tend to put the entire system out there as a tender and then go through the production-sharing contract system. And I think that's why you typically see in West Africa such large projects because it includes everything. And when they go to a next phase, it's not sort of a call-off type situation, it's going to be a major project to go to a next phase. So Egina was big because everything was in handle that system, because you only want to go through that process once with the national oil companies. Brad Handler - Jefferies LLC, Research Division: I understand. I'm not sure if this is ever -- forgive me if you've already outlined this in maybe your initial release and I'm just forgetting it, but what is the timing of revenue realization on Egina? John T. Gremp: Well, of course, that changed a little bit because of the delays. We did this project almost two years ago. We had originally thought we booked the inbound late 2012 then early 2013, and now it's mid-2013, so everything has pushed to the right. We'll start recognizing revenue a very little bit this year because it's mostly just the beginning engineering. We'll probably get, I'm sort of guessing here, about but 25% to 30% maybe in 2014. And then it starts billing 2015, we'd probably be 2/3 of the way through the project. Brad Handler - Jefferies LLC, Research Division: Okay, that's helpful. Was this the project -- can I ask if this was the project that pushed to the right that hurt the -- then in terms of the cost structure, you had put in place? Is that what -- this is the most important reference to that? John T. Gremp: Yes, Brad. But it was one of several. Mad dog was another one, and there were a few others that contributed. But true, this was one of several that we referenced as being delayed. Brad Handler - Jefferies LLC, Research Division: Got it, okay. If I hide and call those all one question, maybe just a follow-up. As it relates to your 2014 subsea margin thought process then would be helpful. I mean, it sounds like the dynamics are more or less consistent with what you thought they were last quarter. Do some of the -- whether it is the weight of this Egina project specifically and some of the margins you might book early on in that process? Or is there any reason to think about 2014 as being closer to a 12% to 13% average margin versus being something higher, how do we think about '14 subsea margins, please? John T. Gremp: Right. We've been saying that we thought margins in 2014 would be in the mid-teens, and we still believe that, that is the case. Obviously, we're going to exit 2013 at higher margins. Fourth quarter are going to be typically our higher-margin. First quarter, they're lower. So I think we're very confident that the 2014 margins will continue to be in the mid-teens.

And our next question comes from David Anderson with JPMorgan. John David Anderson - JP Morgan Chase & Co, Research Division: I was wondering if you could expand -- as we're looking kind of growing order book obviously comes expansion cost from headcount additions and a build out of supply channel, I was just wondering, John, if you could kind of talk about kind of where you think you are and -- what any degree we are in terms of these additional costs getting absorbed? John T. Gremp: Well, David, I think our strategy has been to prepare for the subsea growth and make investments not only in capital but also in people. And we believe the market's materializing exactly like we thought it would, and we think we're very well prepared to execute well in growing much larger market. What we saw in Q2 was some delays. We had built and sized the organization to execute those projects. They were then delayed. And so we took some actions on some of the product -- project support staff. I wouldn't say its real significant, but they're important actions for us to take to make sure that our capacity is aligned with the timing of the growth in subsea, and that's exactly what we've implemented. John David Anderson - JP Morgan Chase & Co, Research Division: So it sounds like you don't really see it's kind of a catch-up period. You -- I mean, I think we did see that last year. You kind of feel like we're -- you're pretty close to where you want to be, is that kind of what I should take from your comments? John T. Gremp: That's exactly right. We had significant headcount additions in 2012 -- 2011 and 2012. We projected in 2013 those additions were adequate for the load that we saw, and then it would taper off in 2000. The reason, David, that we added that talent so early is because we're very focused on the technical talent, which we believe is going to be the constraints in the industry. And this is talent that needs one, two, three years of development before they are really in a position to be put on these project teams. So that's why we add them so early, that's why we took some of the additional absorption costs, if you will, of this very new and efficient talent. But that starts to go away in 2013, as they get down their learning curve and we start applying with these projects that are now materializing. Brad Handler - Jefferies LLC, Research Division: A more general question for you, John. If I look back in last cycle, FMC posted better than 20% return on capital for, it looks like, seven years in a row. You averaged around 30% returns at that time. Your business mix has changed a bit over the years, and I know pricing isn't where you want it to be yet on the subsea side. I just have two questions. Here's the one. Do you think your return to capital back up to that 30% level over the next several years? And I guess the second question is, is this how you're looking at the business? I mean, does this really kind of factor into your thinking as you think about the business over the next several years? John T. Gremp: Absolutely. When we think of our company, we define that it's a high return, a high growth company and those -- that's always in the forefront for us, and we're confident that we can return the business to the high teens. But remember, we're coming out of a down cycle. And as the margins improve, as I described in 2014, we'll start to get back to the profit levels we experienced during the last peak, and the unique nature of subsea allows us to run a very efficient balance sheet. There's nothing on the horizon that suggest that won't be the case going forward, and we will, in fact, return to some of those high return numbers that you referenced.

And our next question comes from Jim Wicklund with Crédit Suisse. Jonathan Sisto - Crédit Suisse AG, Research Division: John, it's Jonathan Sisto. Jim had to step to a funeral today, excuse us. John T. Gremp: Oh Sorry, sorry to hear that. Jonathan Sisto - Crédit Suisse AG, Research Division: All good. If I could steer you back to the beginning of the call, you mentioned Marlim and kind of by my count, it's been producing to the top side for three months now pretty successfully. Has your level of confidence go -- gone up over that time frame that you'll expect more orders in the back half of the year from them potentially? John T. Gremp: Well, Jonathan, I don't -- with regard to order expectation, I'm not -- this is Petrobras. There's a lot of steps they have to go to. No, I don't expect orders in the back half this year. But Jonathan, I was in Brazil about ten days ago, and had a chance to meet with Petrobras people that were directly involved in Marlim, and I was very encouraged. They are careful, which I completely appreciate, but they share with me that the Marlim system is operating extremely well, even exceeding some of their expectations. And I was particularly pleased, and I mentioned this in my comments, I was particularly pleased that they're now moving on to the next phase, the assessment and analysis phase, which suggests to me that they are now confident that the technology that was piloted on Marlim is -- it works to their expectations, and they're now going to that next step in figuring out now that we can trust the technology, how do we apply it for the Marlim field and other fields in the campus base. How long will that assessment will take? I don't know. I do know that this is a very, very important technology for Petrobras. And you've heard Formigli and other executives of Petrobras publicly talk about the importance of processing technology to unlock that really trapped hydrocarbons that they believe they can extract in these aging fields in the Campos Basin. So if it's that important to Petrobras, they're going to move as quickly as they can through this assessment and analysis phase so they can start getting on with really the commercialization of this new technology and increasing production of the Campos field. Jonathan Sisto - Crédit Suisse AG, Research Division: Understood. And just if I could, John, it was good to hear your confidence about the back half of the year, I will say. As far as an allocation of capital, are you still reiterating $400 million in CapEx this year? As we think about '14, should that -- will that trail down? Will that go down in so much that you've made the investments in people supply chain? Is that how we should think about it as we model the company going forward? John T. Gremp: I don't expect it going down. I mean, we have a practice of adding capacity ahead of demand. The demand, as I described for the subsea industry, is every bit, if not stronger, than what we anticipated, so we're going to continue our practice of adding capacity ahead of demand. I think, most of our big capital additions to address capacity have been defined, but now it's in the implementation stage. So some of the capital will be -- actually, it'll be spent in 2014, particularly in the aftermarket subsea services side. I think you know that that's an important part of our growth strategy. We need to have the facilities and some of the specialized tools that supports subsea services, so that's going to be ongoing in 2014. But I think the decisions on physical capacity to support the subsea production systems, that's all largely been defined and is in motion. Some of that spending will slip into 2014 and then you add the subsea services investments on top of that, I would imagine 2014 would look similar, maybe a little bit less than what we incurred in 2013.

And our next question comes from Bill Sanchez with Howard Weil. William Sanchez - Howard Weil Incorporated, Research Division: John, I was hoping you could spend a moment just talking about the subsea order outlook here. I know you've been very successful in terms of the magnitude of the nameplate awards in the first half of the year and, frankly, last year as well. I think some look at perhaps the rate of orders slowing here as we go through the back half of '13 and maybe in the early '14. But it still appears to me there's a lot of meaningful name play awards out there to be led. It's just not as clear-cut perhaps that FTI is the front runner on some of these that are pending. Can you just update us on the projects you like, your chances on most from here? And then I have a related follow-up I guess, after you answer that. John T. Gremp: Well, Bill, let's look at where we are in the first half of the year. 405 subsea trees awarded for the industry in the first half, that's extraordinary. Sure, it was driven by the largest subsea award in the industry's history, Egina, but also on top of that, you had pre-salt. So anytime that you have the largest subsea award landing in the quarter plus pre-salt, you're going to have a record or peak quarters. So no question the back half of the year can't compete with that, and it will drop off. The other reason I'd be a little bit cautious about the back half of the year is we start getting projects towards the end of the year in the fourth quarter. If they slip, they now move out of '14 into '13. So as I look at 2013, it seems like the industry is on track for 500-plus trees to be awarded for the industry. I'd be -- again, some of the bigger projects, maybe in West Africa, they're still pending, might slip into 2014. But I'm pretty confident that 2013 will see a record for the industry. Now for FMC, we're at -- with the $2.6 billion in the second quarter and $1.2 billion in the first quarter, we're almost at $4 billion. As I said in my remarks, we should easily exceed $5 billion for subsea inbound for the year. What could take it even higher? Well, it depends on whether the projects, if they really land in 2014 and down to -- or 2013 and down to lay into 2014. So that will be the difference in our own inbound. There are certainly opportunities for us going forward for the balance of this year. We had targeted the Tullow 10% project in Ghana because of our previous work in Ghana. Petrobras was a big quarter for us with Petrobras last year, but -- last quarter, but they still have manifold projects to be awarded. We would expect those to be awarded this year. And then some other projects in the North Sea that could be awarded in the Gulf of Mexico, as I made -- as I alluded to in my remarks, is very strong, and that's where our market position is the strongest. So I think all that bodes well for us to having a strong finish. I just want to be a little careful on some of these projects at the end of 2013 that they don't delay in 2014. But let me talk a little bit about in general, about the outlook beyond 2013. When you look at 2014, we won't have the benefit of pre-salt trees. If you take pre-salt trees out of 2012, out of 2013, out of 2014, and look at non-pre-salt activity in the industry, every year shows significant increase, and I think that'll be the case in 2014 that will -- there are some -- as you pointed out, I think some big nameplate project. Total's Block 32 project, If that happens in 2014, it could be the record subsea award in the industry, that'll help 2014 to be strong. But if we just look at the geographies, Bill, it also supports more strength in 2014. We'll start with Brazil. Now a lot of Brazil has already been awarded, but we were very encouraged that Petrobras is awarding really further original plan. There was some talk a year ago that maybe they would adjust their plan. That didn't happen. The tree awards, the potential manifold awards are all further original plans. So Petrobras remains as strong as we originally anticipated. In Africa, Nigeria had been dormant for almost three years. Now we've had two projects, major projects awarded this year. There's more projects behind that possibly in 2014 or '15. Angola is as strong. I mentioned Block 32, but there's opportunities for BP, there's opportunities for Chevron, Eni and Total that will keep Angola strong. And then new markets. I mentioned Tullow 10 in Ghana. There's other projects in Ghana. And then Anadarko will start awarding equipment for [indiscernible] and Mozambique in 2014. So Africa, 2014 will be -- has the potential to be as strong as its ever been in its history. The North Sea, particularly the U.K. sector, the North Sea, which hasn't been too active. Chevron made an announcement yesterday regarding U.K. sector in North Sea, they were proceeding with major projects and there's future projects possibly still in 2013 but 2014 that would occur. And the Norwegian sector of the North Sea remains active. And then I alluded to Gulf of Mexico. The Gulf of Mexico activity now exceeds that of pre-Macondo levels. And with the development of the lower tertiary by companies like Shell, BP, Chevron, Anadarko, LLOG, Hess, Noble and Exxon, all drive Gulf of Mexico in 2014 probably to record level. So you put all that altogether and I think it bodes well for a very strong 2014. William Sanchez - Howard Weil Incorporated, Research Division: I appreciate that overview. John, my follow-up here would just be, you've talked about the importance of establishing commerciality on your new pump for boosting. I thought perhaps if you could give us an update on that. I know Eni 15/06 has a boosting component. I think it's an award you'd like to win. Just any thoughts there on cordiality or just specific projects related to boosting, please? John T. Gremp: Right. Following the successful qualification of our multiphase pump, the next step was to get in the water. We were qualified on two boosting tenders for this year which we participated in, and we're still hopeful that one of those tenders will be successful in getting the water. But, Bill, there are many projects in 2014 and beyond that require multiphase pumping that will also be qualified to participate in. So I think it's right in front of us around the corner. The market, you can appreciate the market is very supportive of getting another helico-axial multiphase pump in the market. So it's really just a matter of time.

And our next question comes from Angie Sedita with UBS. Angeline M. Sedita - UBS Investment Bank, Research Division: On the second quarter, the subsea delays that you had that impacted the quarter and the cost issue, you mentioned both suspensions on projects and a shift in timing. Is that customer-driven changes or delay suspension? John T. Gremp: Absolutely. The Total Egina that I referenced, that was all customer-driven. BP Mad Dog was customer-driven. So yes, they're all customer-driven. They're not a result of us delaying our -- anything on our side. Angeline M. Sedita - UBS Investment Bank, Research Division: Okay, okay. And then going into the margins for subsea in the second half, how much risk do you think there is to that forecast based on what you see today and bringing down your cost? John T. Gremp: Well, I -- there's always risk in margin. I think the biggest risk for the company is execution risk. We don't -- there's nothing that stands out as an execution risk, but the company is very focused on executing well and making sure we hit our deliveries. But to be more specific, I'll let Maryann comment, to be more specific, the cost adjustments that we're making were well into those and I don't believe there's much risk because those are all within our control. But I'll let Maryann make some comments about the adjustments we're making. Maryann T. Seaman: Angie, so just a little bit more color on the third and the fourth quarter. As I mentioned, we are, again, looking at sequential improvement. We'll make a step change in Q3, and then Q4, as John mentioned, will clearly be our strongest quarter. We had some knowns, and those knowns have been consistent for us as we've been talking about margins throughout the year. And I think John mentioned a bit clearly, we see a stronger back half of the year in terms of our project mix. That's coming from services as we see greater revenues, as well as stronger performance, the absence of the challenges we had in the first quarter and then just strengths coming from other capabilities that we have in our service organization. And clearly, a better mix flowing through as we complete our projects that are lower margin and begin to work through the newer margin projects. Second, again known, as we talked about in the first quarter, we accelerated R&D spending, so we will have the absence of that cost in the back half of the year and we can clearly see how that will happen. So when we talked about these cost reductions, what we're really talking about is really optimizing our organization now. We put the technical talent. If you look the headcount additions that we've made over the last couple of years, you can see even from the last -- from the first quarter to the end of 2012, that headcount reduction is getting smaller. We've been talking about the fact that our headcount growth rate will flow. And so really what we're trying to do right now is look at the scheduling as best as we can see it, and ensure that the support staff that we have is optimal for the project size that we have. So nothing really changes in terms of our outlook for 2013 from the things that we've talked about, and these cost reduction initiatives will only ensure our ability to deliver that back half of the year. Angeline M. Sedita - UBS Investment Bank, Research Division: That's helpful. And then as a follow-up, I mean, I appreciate the color on Subsea margins for 2014 and the mid-teens, John -- both of you, do you see that mid-teens is your normalized margins for Subsea? And then when you think through surface for 2014, can you give us some color there? And where do you see normalized margins for the Surface business? And along with that, can you get back to the high-teens margins without flow control coming back? John T. Gremp: Yes, this is John. I'll let Maryann also comment. When we say mid-teens, remember, we're anticipating pricing improvement industry that we're just at the very beginning of seeing. The subsea suppliers are starting to fill up their backlog. Once they do that, they'll start bidding a different levels, we're starting to see less price intensity. But to call anything above the mid-teens at this point, when we haven't seen the real effects of what we believe will happen, pricing improvement as a result of capacity filling up, I think could be a mistake. So right now, I think we need to say until we see changes, the backlog start to fill up even more and improves the pricing. I think it's best to say with the mid-teens on Subsea. I'll -- obviously, what drives our Surface Technologies' margins is the return of fluid control, and we're not really ready to call that. We said that it's stabilized. There's a potential for the consumables to improve in the second half of the year. We don't -- as we've mentioned in the prepared remarks, we don't see any potential for CapEx in 2013. So margins moving up from what we see in the second half is going to require more CapEx and a higher contribution from fluid control, which if and when it happens, would be later in 2014.

Our next question comes from Ole Slorer with Morgan Stanley. Ole H. Slorer - Morgan Stanley, Research Division: John, just a quick comment on what you said about focusing more on the aftermarkets. I mean, modeling your company historically has been relatively straightforward. It's been a function of subsea awards largely and deepwater well count. But with the growth in your Light Well Intervention and even your heavy well intervention, coupled with your renewed focus on subsea optimization, production optimization, could you talk a little bit about how your business mix is changing going forward, and whether this is part of -- maybe start with that, maybe just Brazil as an example, given Brazil's kind of statement that they are focusing now on reducing technical downtime and also increased recovery? John T. Gremp: Right. Ole, as you know, growing our subsea service business is important part of our strategy. Starting with Light Well Intervention, which you referenced, we're now building our 4 stack, signed a joint venture with Edison Chouest. That seems to be going well. The market reaction is very positive. So our strategy to grow and expand the type of subsea services that we think the market requires and hasn't been provided in the past is being confirmed and validated by customers in the Gulf of Mexico, certainly in the North Sea where we're active and also Petrobras and Brazil. But it's -- as you've, I think, alluded to, it's not one thing. We expect our installation services to grow, we expect our Light Well Intervention systems to grow. As I said, we're on the fourth system. I'm sure it won't be long before we start developing a fifth system in response to market demand. You mentioned production optimization. This is a new technology that we've been successful with several customers, and we expect that to expand beyond the North Sea. You're right, Brazil and Petrobras are very focused on some availability and system uptime, and we're in discussions with them about the application of different kinds of subsea services, including Light Well Intervention. So it's all very positive. It's starting to materialize. I think the question is, how fast will the industry adopt this, and when will we start seeing the revenue mix start to change as subsea services grow. But we fully expect it to change. It's the timing and -- which is in our industry, as you know, it's always a question of how quickly the E&P companies adopt some of these new capability, and that's a little -- that's hard to project. But there's no question that their interest is there and their validating, I think, our strategy, and we're making the investments to be ready. So the mix will change, the timing is probably is what's a little bit uncertain at this point. Ole H. Slorer - Morgan Stanley, Research Division: So when you talk about achieving some of these historic margins and returns on capital, that will be with quite a different amount of capital deployed, because your business used to be quite capital light and now you're deploying more capital in some of these capabilities becoming a little bit more capital heavy. But do you still think that with that mix change, you can still achieve the historic returns to capital? John T. Gremp: We believe we can, because the subsea services create so much value that the margins will be substantially different than what we see on production equipment. Although we don't have value on production equipment, but there's a lot of pass-throughs which kind of suppress some of the margin. But in subsea services, our balance sheet will look different, but the margins will also look very different, and that's what gives us confidence that we can retain the high margin -- our higher return nature of our business. Ole H. Slorer - Morgan Stanley, Research Division: So historically, this was a very small percent of your business. If you look at the back end of the decade or say far enough for you to be not to be held accountable for it, what percentage are your subsea business you think can be this new businesses not tied to the subsea tree count? John T. Gremp: Right. Right now, our subsea service business is about 25% of our total and, of course, we would expect it to grow from there. But, Ole, I'd remind you that, not only are we growing subsea services, we're growing in our subsea production system. So that's going to grow as well, particularly with subsea processing. So it's hard to predict how much as a percent of our total will grow because the equipment side is also going to grow. But right now, it's a 25%, and I'm sure [indiscernible]. Robin E. Shoemaker - Citigroup Inc, Research Division: But including production optimization equipment as part of your new growth initiative? John T. Gremp: Right, right. And I was talking about subsea processing hardware, which will expand the non-services part of our business. But I think, hard to predict. I think you're right in assuming that it will grow, but it's off of base now at 25%.

And our next question comes from Bill Herbert with Simmons & Company. William A. Herbert - Simmons & Company International, Research Division: John, with regard to subsea orders, appreciate the candor and also the realism with regard to second half in relation to the extraordinary inbound first half. I'm just curious so with regard to some specificity, if we can, in terms of tightening the range a little bit here. Do you think that the order outlook for second half of this year looks more like what we witnessed in the first quarter of this year? Or is it something closer to what we witnessed in the middle part of last year? So specifically, $1.2 billion in Q1 of this year, last year kind of Q2 and Q3 shade under $1 billion. What's your best guess at this stage? And then moreover, can you comment on your 1Z and 2Z business as well? It's -- that seem to have dipped a little bit in this quarter, which was obviously more than offset by some of the larger orders. John T. Gremp: Right. As I've said, we're confident we'll exceed $5 billion in inbound for the year and that -- we can all do the math, that's $1 million plus. So sub $1 million per quarter, we'd get to that number. What takes it higher? There are a couple of projects out there that if we're successful in winning and they stay in 2013, might get us to a higher end. But I don't -- those could very easily -- we've seen it in the past, those could very easily slip into 2014. So I think that the safe thing to say, given the timing of some of these projects, the safe thing to say is with the 1Z, 2Zs that we expect to happen in the second half and possibly another project or two and our ongoing increase in service revenue, that sits so well above $5 billion. The 1Z, 2Z level, which was down in Q2, it's nothing unusual there. Most of the 1Z, 2Zs come from call offs in the Gulf of Mexico. As I said in my remarks, the Gulf of Mexico is strong, and I think the 1Zs, 2Zs will make up most of the second half inbound. William A. Herbert - Simmons & Company International, Research Division: So your baseline business was running, call it, $600 million, $700 million a quarter. I think we had it pegged as something like $350 million for Q2. Do you think it looks more like what we were doing $600 million to $700 million for the second half of the year? John T. Gremp: Yes, I think so. William A. Herbert - Simmons & Company International, Research Division: Baseline 1Zs and 2Zs. Okay, good. And then last one for me is, if you had a hazard to guess at this stage, which segment exits with the higher margin this year? Subsea or surface? John T. Gremp: Yes, surface does. I mean, it's -- for lots of reasons, I mean, our fluid control business, the nature of it, not many passes surface carries, historically carries better margin. That will be the case for the second half of this year.

And our next question comes from Jim Crandell with Cowen Group. James D. Crandell - Cowen Securities LLC, Research Division: John, a couple of brief questions. First of all, out of the 405 trees in the first half, how many of those are FMC? John T. Gremp: 117 plus -- 141, I'd add it up there. James D. Crandell - Cowen and Company, LLC, Research Division: Okay. Secondly, apples versus apples, John, the pricing you're looking at on projects today that you're bidding on, how would you compare that with a year ago? John T. Gremp: It's improved, because the backlogs of the other subsea suppliers have filled up over the last -- not completely filled up, but they have strengthened over the last year. So the bidding intensity is less today than it was a year ago. Now we'd like to -- where it goes and we have to see awards as they're made. But compared to a year ago, the pricing environment has improved like we anticipated as a result of all the subsea suppliers backlog's getting full. James D. Crandell - Cowen Securities LLC, Research Division: And John, would it be too much to say on average, the pricing may have improved by 10%? John T. Gremp: That would be too much to say. We don't have that many data points, Jim, right now. I don't know where it's going to end up, so that would be too much to say. James D. Crandell - Cowen and Company, LLC, Research Division: Okay. And my last point is on the awarding of additional subsea separation projects. Could you comment on the outlook there over the course of the rest of this year and for 2014? John T. Gremp: Right. I mentioned, I think, this on earlier calls. 2013 for subsea processing projects was a little bit light. That's not unusual. This is going to be -- as the market adopts this new technology, it's going to be pretty lumpy. So there's about maybe one or two other projects that occur between now and the end of the year. Looking forward to 2014 and even beyond 2015, there's more than a dozen name subsea processing projects in each of those years, so I think it's going to -- the subsea processing market is going to materialize pretty much like we thought it would. But it'll be lumpy certain years will be stronger than others just because of the timing of projects. James D. Crandell - Cowen and Company, LLC, Research Division: So John, you're saying one or two over the rest of this year, and how many for 2014? John T. Gremp: I'm not saying awards, I'm just saying there's a dozen named subsea processing projects in both '14 and '15, a dozen each year. And some of those won't materialize, some will. But it's helpful to see that many named potential projects, because it suggests that subsea processing awards going forward will start to gain momentum and increase.

Our next question comes from Will Gabrielski with Lazard Capital Markets. Will Gabrielski - Lazard Capital Markets LLC, Research Division: Can you talk about within your flowline business, obviously, the commentary since we're upbeat for the second half of the year. I'm wondering if you're seeing any slight changes in the competitive landscape at all? And what your thoughts around pricing are? John T. Gremp: I'll let Bob talk about that. Robert L. Potter: Yes, no real changes in the competitive landscape. We have seen pricing pressure in the flowline side of the business. But again, we see that market stabilizing. The repair and replacement market continues to be reasonably strong. As John mentioned, no CapEx orders anticipated this year. We will probably see things return to what we would consider a more normal state when that begins to occur. Will Gabrielski - Lazard Capital Markets LLC, Research Division: Okay. And then I'll follow up on the Pure deal. How did the bundling of your services going, and what's the market acceptance to that been like so far? Robert L. Potter: Well, first of all, let me just back up and talk a bit about the integration of Pure. It's going quite well. Obviously, as we had indicated earlier, the second quarter was going to be our most challenging market with the integration of Pure because of the Canadian breakup, followed by floods, as you know. However, in the U.S., we have begun to do some things that facilitate the bundling of our surface wellhead and completion services technologies, including co-locating facilities, collaborating in the sales and marketing arena. So those things are still evolving. I wouldn't suggest to you that we've reached the ultimate of bundling strategies, but that's still an important part of what we're trying to do, and we think those opportunities are there. Will Gabrielski - Lazard Capital Markets LLC, Research Division: Okay. And then lastly on subsea. Are you guys comfortable right now with the lead times you're seeing from suppliers and your ability to procure materials and deliver across the industry, I guess, what you are seeing and how are you guys feeling about your own capability? John T. Gremp: So a good question, Will. We've anticipated the supply chain will get constrained as these backlogs fill up and increase in subsea activity continues. And so we've taken -- because that's what we saw in 2007. And to prevent that, we've taken steps to increase our investment in supply chain management. We've signed long-term contracts with some of the -- our key suppliers to ensure that we have capacity. And that's really helping us. We're -- particularly in the area of same large forgings where we know they're starting to get constrained. The fact that we bought two years worth of capacity from large forge shops has really helped us. So we haven't seen yet a big increase in lead times from those supply chain. But we anticipate that, that'll be the case, and we're taking steps and we have taken steps to mitigate it. So far for us, we have not seen a degradation in the supply chain. But we're anxious about it and really redoubling our efforts to make sure that we don't get caught like the industry was caught in 2007.

And our next question comes from Rob MacKenzie of Iberia Capital Partners.

Well, a lot of questions asked and answered so far. What I would like to explore a little bit with you guys is coming back to the surface market and the flow control business. I think John you mentioned or Maryann mentioned, it was up sequentially quarter-over-quarter. Is that correct? And what's the driver there? And how much more do you think we can see of that as we see wear and tear on existing frac in the U.S. and elsewhere? John T. Gremp: Well, as I've mentioned, the fluid control business has stabilized, and we anticipate that consumable portion of that business will increase and we've built that into our forecast, that'll increase in the second half of the year. Even though we said we don't expect the U.S. rig count to increase, we do expect, because of improvements and efficiencies, that they are going to -- to your point, Rob, the wear and tear will increase and the consumables portions of our fluid control business will increase, and we're anticipating that in the second half. What we have been clear on, however, is -- and Bob just mentioned it, is that we don't anticipate any capital orders. And there was a time during the up-cycle where capital orders was as much as 50% of our inbound. That's what's missing, and we don't see that returning until 2014.

Fair enough. Am I correct in my assumption that capital reserves have substantial lower margin than consumables? John T. Gremp: No, the margins are the same.

Okay, great. And going forward, one of the things that stood out, I guess, a little bit this year is days sales outstanding had been higher than in prior periods. Can you comment on efforts to improve that? Maryann T. Seaman: Sure, Rob. It's Maryann. So first of all, hopefully you can see, we made a nice reduction in working capital this year -- or excuse me, this quarter, and we have projections for both Q3 and Q4. We're estimating in a range of about $250 million to $300 million more in further working capital reductions. A big piece of the challenge that we had, as you mentioned, is really the timing of the execution of our projects because or the way we recognize revenue and the milestones. And as we get some of these projects completed, we'll see them move from what we call an unbilled position to a billed position, and that's where we're expecting the back half of the year to see some further improvement in working capital. And again, we made some nice improvement again in this quarter as we've been talking about.

And this will be our last question. We now have Michael LaMotte from Guggenheim Securities on line. Michael K. LaMotte - Guggenheim Securities, LLC, Research Division: Most of my questions have been answered, but I wanted to follow-up on the refurb market and, in particular, traction of the Statoil model of going back and rebuilding trees and upgrading them for a more technology, whether or not other operators are beginning to look at that model as being attractive, and what that means for you over the next year or two? John T. Gremp: Well, Michael, that's exactly what we're referring to when we said the increase in refurbishment. It was with Statoil. We signed a contract with Statoil to provide their refurbishment. We've expanded our physical capacity in Norway to be sure that we can handle the growing requirement for refurbished equipment. So that's exactly what we were talking about, and we think we're ready to proceed with that. I think Statoil is a little bit different in the sense that Statoil has a very large installed base of aging population of subsea equipment. So I think they're really kind of a harbinger bellwether for what the rest of the industry will see in the future. I should mention, Petrobras is very much in a similar situation, and we've got recently expanded our refurbishment capability in Petrobras. So that all sort of make sense. The two largest, oldest installed base of subsea equipment are the first ones to push for refurbishment. And I think it just means that eventually, the rest of the industry will follow that model, as you suggested. And I guess were benefits since a lot of that equipment, of course, is ours. We're gearing up to be sure we can do that refurbishment work. Michael K. LaMotte - Guggenheim Securities, LLC, Research Division: More specifically, are you seeing any interest in the U.K. sector or with any of the operators in West Africa at this point? John T. Gremp: Well, yes, certainly. Historically, FMC didn't have a particularly big presence in the U.K. sector in the North Sea, so a lot of that equipment would not be ours. Typically, the original OEM, at this point, does all the refurbishment. So I'm not so sure about the U.K. sector of the subsea because a lot of that equipment isn't ours. But West Africa, the Gulf of Mexico, absolutely as those basins mature, the equipment gets older and a lot of that equipment is going to be ours, we'll be providing the refurbishment.

And that was our final question. I will now turn the call back over to Brad Alexander for closing remarks.

This concludes our second quarter conference call. The replay of our call will be available on our website beginning at approximately 2 p.m. Eastern time today. We will conduct our third quarter 2013 conference call on October 23 at 9 a.m. Eastern time. If you have any further questions, please feel free to contact me. Thank you for joining us. Vanessa, you may end the call.

And thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.