Watts Water (WTS) 2 Aug 182018 Q2 Earnings call transcript

Good morning. My name is Amanda, and I will be your conference operator today. At this time, I would like to welcome everyone to the 2Q 2018 Watts Water Technologies, Inc. Earnings Call. Thank you. would Mr. turn I to call time, host, your this like the to over At Treasurer VP, MacPhee, Tim and Investor Relations. Please go ahead, sir.

good earnings Thank second and morning, welcome and you, to quarter XXXX conference call. everyone, our

our the results more are will Bob for address Shashank, latest half perspective and Shashank provide Joining me detail the this our year. CFO. second call outlook Pagano, will quarter today Bob our who in and turning of CEO; offer the President second and results Patel, before on to his over

Following the the section Investors accompanied be during Today's prepared related remarks, can we will the is information the of address questions our webcast by to which in covered a website. presentation, covering – found call.

reference of financial the We reconciled in presentation. is the to non-GAAP will slides remarks. reference these appendix information throughout our Any prepared

Before operations, materially to we during understanding subject that statements. actual and uncertainties of this differ everyone a results may could to statements. cause numerous such the risks statements we of forward-looking be course that, better begin, give certain These you to like call, from our to remind I'd are making

disclaims information update intention of For risks see company uncertainties, publicly or filings future events as information, these new with forward-looking The SEC. obligation and available to statements, any or the result revise Watts' whether concerning any a otherwise. or

Pagano. turn Bob Now, to me over let call the

morning, good and everyone. Tim, Thanks,

over XX long-term will efforts believe the at Watts Xylem and our and and a our from began I've speak I brings wealth quarter, be near-term He tenure to Shashank welcome driving he ITT. the team. to Before to experience and a July for Patel of I'd skillset CFO productivity known years strategy. X Shashank instrumental on financial strong and in as like long

time, Americas I'll profitable Now, in We expanded The margin strong operating reform. other which expansion to our as July our In first increases, sales during the surpassed delivered organic the reduction sales, the the driving experienced regions in team quarter. commercial driven and second X $XXX including impressive. for of sales organic The growth and quarterly please impact in The China, platform, margin reflect million and benefits quarterly but quarter, as topped line some growth. strong well and operating tax we and increase quarter. and excellence, top outside delivered from margin The delivered by $X presentation, attributed EPS. was drove fluid through Europe, adjusted another solutions partially underlying sales a turn the solid slide within softness to the operating is results growth on provide APMEA, commitment commentary record favorable growth line pre-buy to Middle EPS. solid margin the East in of top our year-over-year. operational price turn adjusted

We reduce in have pricing Therefore, seen platform, we platform's and decided along that inflation. this of structure. cost pressures impact to have limited continued with growth the

results reductions. head restructuring and cost our be highlighted will currently in finalizing plan quarter primarily are a a recognized count third on We item. as special focused The

The June on solid still quickly markets, continued U.S. is expectations growth and some residential market in Americas, replacement recent growth. both the also markets non-residential as mention and starts end the In housing noted view and the performing repair seeing Now, weakness let me are our are the in markets. the anticipated. Overall, despite permits.

see Further, has softness continue to market recently since For China, the due French and growth residential de-stocking. been for Europe, softness quarters. growth number hindered ongoing to by caveat we pressures. continue which a some soft the market seen APMEA, of moderated has with be a we've the we markets end in expect in And may regions wholesale trade in first will in quarter, in most market

As impact beginning the the inflation enacted of discussed announced to and tariffs. July in that we address at increases of effect price into went April,

quarter price third progresses, these the market able we'll As be reaction to assess increases. the to

and will existing we accept However, believe incremental cost increase. potential market price the pressures the tariffs, given the

continue this monitor very We fluid to will situation. tariff

quarter, second we at the back we approximately $X During May. growth in invested of end for the million high the range initiatives provided

year are continue, second improvements. because to million, performance $XX due investment line than focused investment $X million we comfortable expected and performance. We more Americas strong are the that spend our in made top operational original And will growth be on with increasing our to incremental the Much expect the to added we quarter our and full productivity outlook. of spending and

we raising Shashank sales year will review full for our organic momentarily. which growth Finally, are XXXX,

in organic full year, XX some basis year by to tougher second expand second moderating impact solid points. half should the the margin compared Americas slightly half the general, given of approximately sales in growth expect the And pre-buy We the operating first the half and, of our for we expect as in comps.

Now, Shashank outlook. second I'll on to to our quarter half about more performance call second operating the detail provide talk turn over Shashank? our and

good Thanks, everyone. morning, Bob, and

up like said, team. quarter the sales slide My be years. X% X excited impressions Americas up the community second investor the sales look you in being I'd $XXX with very With joining to months strength to and results. say Europe. Watts. first our that to please Watts are X% with softness partially sales of coming First, I turn how over I all-time for the record to working million forward were were and Asia-Pacific let an in positive, and through am by and and me represented offset Organically, walk quarterly Reported

by mainly stronger by sales million a dollars year-over-year. $XX euro, exchange, increased or driven X% Foreign

points EPS the headwind $XX $X of for record points versus in and Year-to-date, This cash historic of during main year for approximately was drivers primarily and $X to up a the while This the $X.XX second related representing spending. as company. record a tax prior incremental XX half million was cost. XX%. all-time of quarter XX.X%, progress Watts. Adjusted outflow patterns, profit to was of the generation expect increase points the while to growth or Volume, invest an consistent rationalization and basis price margin tax product outlays was million, operating record reform, with the new than cash million half. Operations represented improve year, were in general XX% planned, inflation million payments $X compared XXXX. or drove of $X.XX $XX in the offsetting year The commodity translated exchange expenses $X.XX in mainly million a XXX and margin and, was $X tax an initiatives. the more As non-operating should than that adjusted additional XX than due rate and we The was lower into free better quarter. inventory, operating benefits last reform. of Adjusted last a capital and million, tax outflow basis achieved the continuing provided effective increase, approximately also performance, the foreign productivity of basis higher transportation to our including in lower in made XX.X% seasonal our the quarter first We second total.

set approximately repatriated stock purchased at million. approximately a quarter, our we've in quarter $X.X deployment part returned share million $XX highs repatriated pay $XX about second of our debt. shares cost and as very a and common dividends repurchases that in to in our new million performance In capital Year-to-date, of the of using we Overall, adjusted total XX,XXX second margin of to are we shareholders we majority we balanced million a operating share. $XXX the sales, as per with down strategy. quarter, During cash. earnings pleased of we Year-to-date, have second

saw quarter. of X% on results on and $XXX million number for and of product slide Similar review strength electronics. broad a lines, to plumbing, across reported up the the the X% to a Sales water about were let's Turning quarter, including regions, first quality organically. basis Americas' X, up we

AERCO Our platform growth, heating both lines well. double-digit PVI performing water product hot and and with had

$XX.X growth incremental points the Adjusted pre-buying the growth and approximately a XX driven We increase productivity announced of basis second operating XX% to benefited Operating In prior and increases. year-over-year. from transportation expanded investments. Volume, was Americas and versus million, favorable in growth profit by X XX.X%. in margin customers a by the second point costs also that We price July about our drove realization ahead price comps performance commodity quarter of in the of points year. Strong quarter. continued for Americas organic offset X operating price estimate was quarter. our summary, increased inflation, strong in

reported X. on results Europe's to million but X% turn up Let's on basis, Sales were of a down X% organically. $XXX slide

mainly XX products. second France, products due de-stocking. was margin as product Italy and and to driven in volume, HVAC the within soft was the growth taking to saw solid fixed the XX%, operating drains $X only continued decline about incremental due in were driven mentioned, quarter euro, we partially in down by wholesale inflation Italy In wholesale exit $XX.X a of decrease plumbing sold which saw actions in by of and fluid productivity affected end France, Nordics. the line. platform. customers margin X% into by growth the versus being fluid operating the Europe. platform, sales continued the a degradation quarter down of quarter The And sales platform, driven in metering price. a Germany's strong softness headwinds the driven OEM We in related softness reduced positively by a primarily solutions By solutions and reduce costs exits was the markets. the Adjusted Overall, market of and was are customer exchange, marine our Regionally, year. Europe region, investments translated the Foreign products Germany into our our and water, slower mix, profit with last And some to offset sales heat Bob In by solutions million and in which product were by to million, unfavorable slowdown in points is the softness for quarter. fluid into basis quarter. or drains sales saw a channel.

that the plan. a timing the are issue. that we is addressing should be sales in second proactively, this the of process action case. in We quarter finalizing downturn We the the are not But believe

X. slide to Moving

results. same approximately reported and were a quarter, period up East X% million, Middle organically sales over Africa last Asia-Pacific, basis review $XX on and In up Let's X% year. the the

rationalization, were sales product up organic Excluding XX%.

decreased the commercial than XX% from and demand within reduction which quarter higher HVAC and as rationalization, valves China and decreased FX organically the XX%. demand The East, and softness XX% products Middle data saw our for of by more first sales, in Zealand Asia-Pacific sales Australia excluding $X.X We New to more China under-floor the we million, of our China markets expansion. of margin investments. outside in centers headwinds due outside in products. plumbing translated broad channel continued China. As to our saw than strength Sales Adjusted offset by operating increased heating included was of in X.X%. drivers key quarter, for offset semiconductor the softness our sold into margin transactional incremental operating residential adjusted into profit product for

East As Middle expected, second some the growth and Africa's gained quarter. top momentum line Asia-Pacific, in

We our second in the XXXX, Middle Africa. and expect growth into investments fueled half growth continue to of East by

in and our China mentioned region, our And overall In offset growth tougher markets a growth should the the basis, growth comps. between partially should consolidated half with to of of earlier. year. By back consistent X% impact sales of and up X%. continues Americas expand should easier in from sales we second China to slide healthy driven pricing, the growth, the to up marginally. by by half half outside expect expect On and year, Asia to we the and as for be the relatively comps see the Pacific, second X second half end Europe, flat half pre-buy second pick continued returns and in organic turning business solid Finally, sales outlook

basis the XX first by Our XX.X% half to operating of consolidated adjusted grew XXXX. in points margins

impact expansion due We price half in of the second partially tariffs. offset commodity year-over-year the impact higher of the margin realization, by expect better by higher inflation to driven

during year growth in full to margin approximately increase investments XX.X%. half. expect margin second expansion an be We operating our includes the This

several our about years. $X investment Bob from million $XX We spend we generation expected past total $XX the for in growth to mentioned, spend increased flow have million. in this are investments, with As expect of and our forecasting half second consistent second approximately performance over strong year the now cash we half, million the

still focused achieving flow year. are We on XXX% for conversion the cash free

few regarding over I a to Before third turn call in the keep Bob, quarter. the mind items back to

at quarter should in be growth end line the third the lower half quarter expecting of second with the slightly quarter. full $X.X rationalization Consolidated million tougher be is consolidated second $X.X of third expectations, and quarter, is growth is of with an increase some in to investments third impact organic our which given in in We and to outlook, approximately the pre-buy in are quarter Product the Europe This Americas our during in the be third Asia-Pacific. comps. due expansion primarily below year operating margin may $XXX,XXX expectations. quarter the million our expected

net more inflationary than to price expect offset We costs.

be Europe should the and in partially $X Europe. the by we about in third and in incremental Regarding approximately restructuring Americas, quarter, These million in $X $X offset Asia-Pacific. the each investments, savings, anticipate Americas $X investments $XXX,XXX in million $XXX,XXX in investments million of incremental million

our line outlook expect to rate be our effective full quarter with XX%. of We tax third in year

turn Finally, Bob? call the third Bob we rates, last I With quarter foreign current be of Q&A. to will back that, the year. based compared to translation over neutral on fairly begin the when before exchange should impact

summarize, per which was upside Much to To delivered came quarter. business the the growth half. that we the the and full a the by Americas, record actions continued second our And on adjusted to year sales in and are are picked a address second in and Europe the second we expect earnings operating we into the and expected, in sales, than Shashank. strong Thanks, taking expectations quarter, margin strong continue deliver performance. softer our APMEA to based operating of outlook recent raising driven first up that. half second half. for share most

with please open for that, lines questions. operator, So, the

is the from Stifel. comes of question open. first Jones your line Nathan Nathan, from And line your

everyone. morning, Good

morning, Nathan. Good

you come start like targeted invest kinds Can strong what top I'd should on? How line they off Do a you about to of Well, should gives to Clearly, are those the investments that? this maintain investments some more. increased up things thinking Do kind further? at about we they growth next little down? even go here talk on think just about in they'll the Just investments. opportunity level? we growth the be year? of Do you think how

Yes.

the products, and focused continuous $X expansion East and million Latin through channel Watts going America, incremental So, to are the Performance investments the improvement training be on connected in primarily Middle System.

we are believe to So, take A investments times, we six those months to actions going to help lot realize. three as go. us these of

we're more being the strategic our really continue of now. investment for From we So, at into outwards view – And hope continued are with that. future, seeds point planted we more process an look on invest in of planning look the growth, right midst to future. the to to

and of some early the nature, will future forward. a our them support these in of that; into are lot continue for going a but little So, one-time growth

in yet? So, whether should it or down same the be XXXX on no up, color

to business But able to based what's environment think And prudent growth. seeing at on invest yet. multiples, more on hope I we're in where return I high are it's seeing equal happening spend organic Not because we're in acquisitions investments. great in our or and volumes where to this the be

return. Organic best investments the always have

the first increases second price-cost are price how where you increases July can you price in July, how half? on first equation talked those any the where the out give price-cost implementing you price-cost you market color been half that the think about accepted impact in so month in on front, color the in any the you they've on there, there's were you can On on has if give and in the

Yeah.

think held of I half price-cost, our the second the So, or year. own we in – the first

incremental that think price get going the inflationary more we particular of X the another in look about we costs When offset believe talked I to realizing half, price we Americas. saw. point we're X% about the at second than that in we

the July, us positive are giving indications that And that's confidence. in price. we're So early getting

pressures So, out given that seeing, to are But, it's it's going we believe early to everybody say. inflationary there still the stick. now, that right too is

you said correspond another that that So, of you'll half. point saying price you you could second you with the you're overall? about inflation? are are how Do seeing? see or Does you point to Just inflation another first point more – the same of half in remain less X than or of the relative

cover incremental least the that think We at inflation. X% will

little a be positive. should it maybe So, bit

helps very That lot. Great. a much. Thanks

Thank you.

& Your next the is Ryan line question open. Ryan, comes your Connors from Boenning of from line Scattergood.

regarding on had Great. copper earlier copper. price. brass. wanted obviously, the I is there volatile Nathan's decline year. the I been you there price-cost follow run-up and in about Thanks. a up read we lately, question I just all But to in mean, in big mean, now, has huge

So, not but other the price? headlines the I now. discussions structure, cost going out the are I mean mean, just way how impact there kind tenor does that of around of your own

has going It is been about, all into accelerating very what China China. how depends or whether copper volatile. slowing and and much investment read It's is Well, down. up you on going

to XX%, even now, go on at to that still does the it's believe more these And can all we'll there. through, at still proposed increase. that. to if from going our we And further pass heard the going out we that big we're China hold be go a XX% And that's that tariffs, right new wildcard now right and price So, looking looking we're is price. we

Got it.

near-term how whether that that – basis? channel of regards inventory you X% Americas XQ. for situation on was mentioned effect pull-through is contribution in in on for growth channel customer quarter the just volumes to about was your one to other end you My stuffing side this to pre-buying Okay. Can that talk actual the and and what third the outlook relative leaves demand in

Yeah.

people to I and think trying buy So, were the channel. fill

out strong side, flip On the also. July pretty started

the tell is would that demand the us overall market. that So still in

right we're and America. we're The optimistic in in So, quoting growth. pretty in what the about is is high particular pipeline now, we in seeing the cautiously good North Americas, the full, feel

mean, left we Great. we've the you're if on wrong, here, – several surprised if might – that there's do. of rounds not Europe. you guess years, European comment mean, of over embark last On I the so, of to just left I'm last I risk and rounds – we at be point number – what mean, whether was And that could restructuring I initiative from I are rounds mean, the me restructuring what that couple the few on to I into but last I'm one. of or had, at last – going much cutting one in this table on correct where bone?

I stuff. past We're Yeah. very planned bone our careful think if about looking at into not has and recent this, looking and we're many productivity. Europe growing forecasts in We're overhead. mean, been of And forecasts. in we've as yes, it, our you at looking cutting at But done originally we're about restructuring.

So, I growing keep and on looking are particular electronics, we're European of in in for productivity. drains We're globally. driving productivity platforms investing and our which

tied of and they solutions can at this, where some the work we're know, of of more as So, some of the we're in internally. And business of take this back some more the is you mercy business. fluid the to on OEMs OEM Germany,

as productivity. So, driving we're for we as business our rightsizing see, well volume the

helpful. for your this that's Great. Thanks morning. time Well,

you. Thank

Mike, Your from next from Baird. is line question of line open. Mike comes the Halloran your

morning, Thank everyone. you. Good

Mike. morning, Good

on row hot that. a a what AERCO, talk before How good after you've the bit right a now? PVI, in choppiness of So, some couple could here side? about do landscape obviously, you are you And basis? of forward couple How water you're seeing little a progress last competitive the the on sustainable the seen the you over quarters is? what's looking think at quarters dynamic

Yeah.

new seeing seeing lot a I there. we're product Mike, said our cetera, think we're growth that et product platform in robust in demand. double-digit is we And of – So, with it development, and

year, last pressure. strong. But that – that – We're the some we're share of in still seeing development Some on pricing grabbing products new not as that from and very products aggressive them taking smaller seeing our smaller ones. point the back price we're of come launching from view competitors our were they're are new

will pretty feel we overall, confident. team again, is this the feel active. So, year. through rest continue the pipeline The – of we that And

what then, capital you about from good earlier bit And accretive basis M&A the on what are M&A alluded sense. side, side, to alternatives Talk and high. and makes on the forward deployment returns little push aren't any that side actionability in able still a pretty That balance your you like market a your looks if multiples the Obviously, is on are pipeline sheet shape. a acquisition?

strategy. know But a in that. is And Mike, come Yeah. believe disciplined capital going be potential And relationships. up. pipeline our cultivate continuing so really when we to you balanced a full. we're to deployment never in will We're opportunity M&A

So, you be said off. really as disciplined. And investments to of we're But our paying internal keep earlier, we cultivating. some are going

go to with out decision strategic the the environment made current we've of some given those, faster and there. So, forward

Thank time. the Appreciate you.

Thanks Mike.

next question the from Brian line open. your Lee Sachs. line of Goldman Brian, is from comes Your

peers price Have if year. have Good Hey, is questions. morning. off-cycle Just the wondering for here to This around price pricing. you increase. actions? guys. on take guys taking any as seen reason there your Thanks through similar I guarded guess you move question optimism ticking another an the is

us. this off-cycle, with and right behind just or follow we Yes, have is us seen competitors through

our also, price So, from they're yes, increasing also. intelligence,

Okay. Great.

view a XX outlook. you is stand what with but basis bps The in drivers lower smidge were at the you on around be second don't the you even region-by-region on of the and point the growth missed end some margin to color margin addition the maybe a investments outlook a where guys that's by expansion expansion speak of this. the to organic views. before, I regions. or here is guess know of all making. Those view, if bps for on any just revenue outlook, down you're I could you to positive if may XX regions mix the incremental margin quarter, think here the helpful. each line on region across margin related growth provided of just I in Wondering bit But – question to the said XX have which higher But that growth last I a would the

Yeah.

So, in incremental by investments total, it's impacted the of doing. we're that $X million

part that's Certainly, offset is that. the So, of softer North are story. little should the that margin Europe a America we but probably expecting, improvement on

So, in general, as Shashank commented in is be. the his comments half what in improvement second going the full year second half, going margin we look is at the approximately increase to to

a to So at Europe America Asia-Pacific lower little grow. little continue I'd that. look a will take is higher, and a

Okay. Thanks, guys.

you. Thank

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

in Jeff. just price-cost one side one on of I and Hey, the And filling is the just guys. specifically Brad for This cost – had equation.

to year. expecting bucket transport granularity, I million the it? of cost Can the second price it out you type commodities, half the of in and that'd in be whereas tariffs of think you you've you're helpful. – of relates see If done somewhere that $XX the neighborhood as as

that done not We've Yeah. the in past.

that or impacts. we offset to inflationary going do than the that than of our from seen away general, pricing and about and headwinds with will believe we're But trade we're the in offset aluminum. from cost some on we've seeing XX% particularly get products the equation, increase more But, our transportations, all – the in a that steel equal and from and more detail, of and some Europe, stuff, so, And China stay with price we that.

all for right. me. you. All Thank That's

Thanks.

Stifel. comes next the line Your again. question your open again is line from from Nathan Nathan, of Jones

Hi, again.

Nathan. Hi,

savings on restructuring color missed going are I give the if us guys you it? Europe, do that you're run the to in Could rate what from any expected

a Yeah. it's restructuring the about We a the we early to approximate quarter. payback. It's million think have didn't and $X million $X.X going three-year fourth provide in still We about favorability it. and on, think

the indications. that's this So but still in that's of time. kind Teams working early rough it, estimates at are point

Got love payback don't Europe to on you? periods those restructuring,

That's pressure. understand. I the

So, some some those expected Americas of that just Europe softness, Talk maybe in you drivers the normally would to even lower of you imply these well. in as said be about softer ahead about de-stocking underlying French you a pre-buying Plus, so the channels demand markets European would and what on assume some you what leading Germany, de-stocking there in appear. the they are de-stocking the I the wholesale that would've Europe. talked maybe in increases. price that well, talked about little there would as channel underlying are are in which than over also

Yeah.

more our the increase in April in Europe So, was price timeframe.

dynamics tariff that think so Americas moving don't the inside So The in I there's that, any July there. of was to from the a was increase pricing. in offset in impact

discussions on here, uncertainty de-stocking, equation elections, again, of Regarding the trade. of the lot a with the think Italian you I French in lot second quarter, if recall, there was

people little what was here. to laid a bit happening low think just I So, determine

is looked lot of of again, Europe there. and a as a down slowing because elsewhere does in just might Now, the and everybody July trade markets Europe Asia in right be small said obviously today that thinking earlier, like But, rebound I transactions now. uncertainties,

we're So, a cautious in paying again, Europe. outlook

the I'm done always cost about I've that know high You because that just structure. concerned and

going So, we plan are not incremental how reduce always that on get conservative would if be looking let's at the to costs, there. But And it. great. be we're productivity, volume, we improve

So that's in kind color of Europe. our

Okay. That's helpful.

deterioration really worried about just impacts. some cautious, any those underlying the being So, markets of customers not necessarily, in

on same repair down of question people market. slow new construction's uncertainty a happening, It's and when the and Right. with replacement the – based

hope that strategy. will bounce in knows team is I But, the think some of we quarter. wait-and-see back that the and customers – attitude are third again, my just not a hope

So, going to we're be cautious.

Thanks much. Okay. very

you. Thank

comes line Cowen. the from Giordano question next Joe of from Your

line is open, Joe. Your

Hey, guys. Good morning.

morning. Good

of you like, headline some I losing on the share? they like do if like in side at from Europe, at residential least feel and In France you the you're look okay. guess, Germany, numbers look

So, you this – do product problem? is this a is think

a many, in it reports de-stocking in May we there when because, have case, I believe they get France, was that's particular, wholesale and holidays year-over-year. looks the again, many don't in in particular like

not believe outsourced of So we we A large probably of is which that what given some of OEMs we some second the I talked pulling portion related, our some Germany back Germany believe. saw is that to do business OEM. they do and in in our OEM softness in work quarter. us, about, the that's they've merely see

get We of timing. a a to adjust that's they again, labor pull as we and back, result it So, have our it, that.

point Europe. in a outlook market in don't that of share from our loss we being significant But, cautious we're feel So, view. again,

then – the existing potential okay. like for know, resi the you fringes like, of on the while. negative XX at on And are couple home And the I first for now what in kind trailing a months side, months of inflection last of has sales time something points? Americas, on been kind And over like a the then, in indicators looking

of just So, conversations what to in – incoming as I'm you're terms there. seeing kind curious like of

Yeah.

those we're So, remember, to XX% remodeling remodeling show America We're residential ABI, is seeing of the seeing And continue Dodge is is our Momentum up, side. more business activity things in the up. the and and North repair replace. in

that construction of is so our new and really tied to XX%, numbers XX% XX% so... residential low Our of business

be Would (XX:XX:XX) right? for existing renovation a spend? that home better proxy sales,

report a a came still and be piece still still housing a going to talking there's go that up healthy. morning new that. is of But this again, fairly It's out the about belief

look would fall new seeing that point not you at we're of from residential a construction view. So, off the

well. seeing – of very performing our market very is part that we're So, still

Okay. Thanks, guys.

you. Thank

of Your from Walter, Walter final open. your question from is line Liptak line Seaport comes the Global.

Walt. Hi. is filling Steve This for Friedberg in

Steve. Hi,

much I product of got Asia How question. out of comes the Hi. the segment? actually a manufacturing tariff-related

we some I America? products. U.S. – output our about of it, XX% call supports, again, let's in of their produce we the Asia What mean, factory,

import in China. Now, products the U.S., also, suppliers from some indirect an But remember of that we from they there's of our us give products products that get impact China.

here our North that of we know, you here. in as work our does However, lot a America own have foundry

impacted who So, this less of potential we're to to compared outsource products a some tariff competitors China, to going our be lot that's out of with their new there.

seeing and chains looking round. the We're minimize But et in angles this inventory waiting of all at at we're cetera, accelerating this. buys, supply and all looking to we're again, the on tariffs. next impact alternative So,

Okay. an North dollar guys dollar able based? thought, advantage were better guess, since than you a of manufacturing it is are you increase do a is, North the hard American let's And for them Good. or what follow-up a That's is way there that to have from being pricing more how competitor, versus guys thinking. asking maybe is that, – much prices American we you advantage? how to get I say

just to we believe I'm lead comment any pricing not putting we're pricing prices as leaders, more I in that that pressure. that, out in offset than general. equal leaders believe and going about inflationary or will

versus about comment So, – don't pricing. I competitors' individually, our us each

Thanks. right. All

you. Thank

this closing Pagano like At to back time, Bob for remarks. I would call turn the to

earnings in call time interest Thank to our third you we Take for care, enjoy taking the and forward quarter early summer. of speaking continued your the Watts, with earnings for our quarter join appreciate today your and in again call. rest in second you us November. We to look

Ladies and participation. conference. does you that for today's conclude your Thank gentlemen,

disconnect. now You may