PNR - Earnings call transcript Q3 2017

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Operator

Good morning. My name is Kim, and I will be your conference operator today. At this time, I would like to welcome everyone to Pentair's Q3 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator may conference. you begin Lucas, your Jim

James Lucas

full-year and Thanks, earnings could conference welcome Hogan, to our Investor join is Chief me quarter XXXX Pentair's third Relations of call. President I'm Chairman Lucas, Kim, And Randy Jim with today and us. Vice Treasury. We're and glad you details outlined our as quarter third XXXX this as well Executive Stauch, Officer. release. today's our Chief Officer; and as call, on On fourth XXXX quarter morning's press and our Financial in John we outlook, will provide performance

and me we begin, are you Before future as most made statements today's about subject XX-Q outlined statements Company's let risks results press remind financial release. risks that uncertainties, such Pentair's the any anticipated and to the in forward-looking recent

as could and subsequent are anticipated materially Company the website. such Forward-looking the no update be found Pentair's results herein reflect results. Investors statements webcast presentation obligation accompanied to in section statements Actual differ included of of circumstances. today by to a publicly is which from can Today's or made events undertakes

slides these appendix throughout of presentation. prepared references to remarks. reference non-GAAP in financials the will We the Any are reconciled our

turn reserve opportunity prepared to questions questions ask their to an time call sure answers I after and to and the a now our over one to be will that you We to order remarks. everyone ensure to like would Randy. your I for request limit follow-up will in questions.

Randy Hogan

Thanks Jim. the deck. I'm on of starting Page X

our businesses grow; I for adjusted on discuss progress more year over a preparing quarter margin expectations good we in next strong We on of Electrical and next our separate EPS moment, sales represented year's remain in positive our increase Water teams both making entering commitments. and and core are adjusted track to XX%. expansion, detail separation. results the virtually will delivering and third but met another all quarter in saw Our quarter step the exceeded or XXXX

from are share expectations estimate We EPS third expect momentum approximately to per to and XXXX our of not We another with exit as as should our end this XXXX topline for year. Valves lower as all Controls. raising interest improved for quarter solid $X.XX well benefit the we from benefit out cost to that year our performance initiatives expense & carryover reflecting of we recognize the closing and of solid full-year a in sale our XXXX adjusted on did of April quarter result the

XXXX stand the stated performance We are last positive our As are we our with track right up goals the prepared meeting activity those and two outlook underway expectations. on is commitments. companies quarter, And we in two to XXXX improved year. full-year on third on commitments have our towards XXXX. and separation Deliver quarter this steps that believe

Slide for more third to turn our in X discussion of detail. I'll quarter results Now a little

sales third was growing on increased on expanded X% in basis performance XX.X%. X% better to all in quarter up grew the mentioned, X%. metrics. Adjusted and As quarter and X% sales to nearly core Water Electrical points income the Segment with XXX line return or

headwind, Although productivity to drive impact. we material inflation a help mitigate remains pricing continue the and actions to

the in expense. flow lower slightly anticipated. of to million is expected we and This expense than full-year. income our and exceeded higher grew than high-end Our little free target flow the corporate approximating guidance. helped nearly the adjusted interest for continue XX% cash to quarter $XXX a was offset net EPS cash $X.XX Adjusted Free

a for Water's X Slide performance in to look turn at QX. Let's

continued of XX% basis sales have XXX Water Water Segment quarter in was reflected delivered X% expanded and expanded that strong and on Our improved margins sales overall. adjusted XXX growth to mix. consecutive which the grew productivity segment core growth This excess X% and points. of third basis income points, return

Process by we served again business. the saw Our a vertical dichotomy saw sales Filtration between once & core the but X%, declined business

in continue smaller performance businesses the We to the minimal the and and contributed and strength process industry. Service. improved These see two and The are in global to activity Commercial to business quarter. hampered muted Food spending Residential margin especially continued desal beverage be higher by margin in in

an Although, saw Process we the as Flow improvement we are core quarter. decline we Filtration saw X% which topline have last & year. sales performance easier we been declined disappointed of Technologies the comps with the exit year-to-date, X%, approaching is from

year-to-date. hamstrung a While has seen agriculture, infrastructure topline in performance recovery in the softness pump sales we've our smaller

orders X%. X%, cycle Aquatic of quarter next until the seen Systems growth to see half. likely quarter-to-quarter is we second comparisons expect expect blended half we experienced a than we but faster half, to end to growing to expect year. third In in and not sales. any in which first season strong the meantime, with Residential, the what saw rates healthy infrastructure we the a in exiting strong we longer the to sales the repeat volatility it quarter, third slightly fourth first quarter Similar pool the We Agriculture and in experienced in growth backlog recovery did business, growth the we rate approximately year and core year-to-date the the The before take but remain Commercial, this improve continue to improving have will very topline

largest hurricanes results. near-term has played not any of impact impact Harvey fully not markets U.S. that we the and the Irma We and in in full-year's out will materially has disruption two results. While pool in believe our not of our the

and a performance grew as strengthening in to we businesses. see cost continue headwinds. to continued for sales X% to Electrical's price sales X% on Industrial our XX points was move short Segment not offset income return cycle core to mix grew at look as let's in Adjusted Now enough improved X expanded QX. Slide basis

smaller help Fastening with has broad-based across Electronics businesses at Enclosures tough it topline outlined XX% growth. impact. year grew believe grew to continued core the Solutions, Industrial significant Canada year. & last this to and in poised improved a the Electrical declined business Thermal, While of jobs mitigate quarter and drive specifically we been comparisons that continue this this X% was outset sales headwinds return and inflation Core is is and sales the but we throughout quarter and sales growth infrastructure, in Strength solely three the in sequentially. the to productivity of following in headwind more it to lap material year in the in regions. Electrical pricing energy Within large all to we've actions the and due Enclosures backlog

by first engineered sales sales product a Infrastructure stabilized. jobs, that its strong small the construction strength offset project declines business. into the mix Industrial for benefited The margins side overall we from of product to on structure & business. growth focus large Thermal improved product in decline Electrical by continued Commercial Excluding prefabricated rail. in has higher After It business margin were mixed Thanks sales. business quarter was sales better nicely. Fastening second business flat. both remained dramatically and quarter, the It's strong and these the the our as noting cost its and followed the were this grew year, realigned worth MRO core in of Solutions as particularly in line in with Industrial the as solutions expand

for separation. X, Now update to planned an turn Slide on please our

discuss John outlook an call May. on over Separation I Before to turning made announcement in in the to wanted financial to update first detail, the the more we provide

issued track previously nVent. remains approved spin-off on who of Beth be a CEO. press a that our As it announced to be earnings our We business, morning, Electrical plan the second reminder, a after spined which the this our will name our we second we quarter release Shortly the announcing release Board to of completed in has calling issued XXXX. Wozniak,

coming stands the We who to business, that a hired after successful also McMahan, announced public today CFO Stacy for the us CFO. as company two we've was

other The and XX in nVent Form-XX of Pentair month be of before dates the our investor that anticipate the next hosting key meetings end nVent the we and filed then February slide on will the year. expectation include outlined separate

over demonstrated even our forecast they The companies execution ability increased against focus to that as turn the better raise of performance higher As We our Water believe both for appreciated companies believe leading strength pure Electrical. both should further Both we're the our and and two to well-positioned in scale help be and growth. the are. that long-term now quarter XXXX commitments. in now the throughout can year. excited destinies. become are own We second completed remain and separation stated create to strongly expecting next companies for companies and creation growth their play industry jewels We for execute John. chapters. of next I'll business with our We differentiated call previously, to control the to drive the Pentair's value

John Stauch

turn third quarter Please Slide to the Randy. balance sheet to in position. sheet number titled the solid ended balance and you, flow. X, We Thank cash

Our of balance does include billion, at quarter. $XXX on $X.X ending debt million not cash is over end just the which of hand

we remains flow on comparisons, and for make a progress adjusted million and income to under strong for just cash full-year. to track to flow net was year-to-date. start and but on free generation $XXX due free million tough cash year, continue to good to quarter slow generate remain Our equal $XXX cash With the the the flow

to ended XX.X%. title we Slide and turn XXXX at QX outlook. improve to continued ROIC Our the quarter Pentair XX, Please

adjusted quarter is guidance EPS $X.XX fourth which almost of introducing approximately share, XX% are a We year-over-year. increase per

growth believe expected to marks from the both the represents X% we and grow are and trajectory rate. and segment better have rates still core the increase likely at points income to expect both We on segments to basis adjusted XX% quarter last sales and increased return growth XX fully approximately just This momentum this exceed sales roughly of We to XX%. recovered. increase businesses, which anticipate not over grow

flow million Please end tax to million. interest $XXX be outlook. count the share and full-year expect Pentair around net XX%, year of strong Free turn again. label the to once XXXX cash $XX We rate the should expense XX, to Slide be

for both adjusted growth expect continue year grow We close to the core sales segments to that to with X% rate.

projected in business of we as improvement and tough finally XXXX the continued seen behind have be as should we exit year. We year comparisons base many the throughout the we for face us our

over and XX% to up north points expand sales XX to We to EPS roughly increase to on expect full-year. return income X%, better, of for segment XX% the be or adjusted basis

free net We cash target adjusted continue income. to be XXX% flow to of

As flow previously, fourth seasonal free I we quarter stated cash expect strength.

our we carryover both expense the but XXXX, of XXXX. businesses exit and savings demonstrating are topline strengthening only some interest we not continue lower in have cost to trends, As of

few one about the turn closing to remarks. Q&A, are call XXXX, but better a the after for more you. quarter for questions. have Randy We the exiting to the now open deliver over feel momentum building Thank operator like line Please would we will year. we to for which I have the

Operator

Instructions] comes [Operator first line from the KeyBanc Your question from Jeff Capital Markets. Hammond of

line Your is open.

Jeffrey Hammond

Good morning, guys.

John Stauch

Jeff. Hey,

Randy Hogan

morning, Good Jeff.

Jeffrey Hammond

mentioned you into XXXX? how building challenged momentum and flow are more can that some Hey, support kind about funnels and the so growth talk just of Filtration, XXXX, you would up of businesses shaping Thermal into organically orders

Randy Hogan

and Let me talk talk about processes. about - Thermal you I'll let can

really think performance. a Thermal I So spot is it's bright in is - real

see and the You just servicing The totally on year. this base. are and frankly installed the sales, of smaller product projects, redeployed because the itself, on it occurring business sand oil focused and profitable repositioned numerous, aren't more can't they're on has the just the projects, which which

margins year we the in active mentioned pleased mean I to with as So work overall, expect I building really I not the up balance they're I'm and I despite are you'll doing from see - Thermal. we're sheet the script, a growth decline put going so Thermal's revenue year and am forecast. specific think from next out in the building in next see that the But very progress, backlog, in to

John Stauch

fact on getting the And a less. And therefore, impact in fairly infrastructure basis been better that hampered side, been on the is a and pumps had building Water depleted and infrastructure our we've that those are sequentially, backlog. quarterly pumps backlog the we've by Jeff year-over-year the we businesses,

improving it last at year the Filtration, On the side you versus we in year-over-year QX are look quarterly have business QX, and the called and projects out is as versus QX, comparisons if the and the easing. did on once rate, again QX business we some Process

to that's easier And we think so year. why comparisons overall year-over-year is the next and healthier begins we the rate head growth organic and business are as into the accelerate getting

Jeffrey Hammond

of pipeline? kind early And in then long-term as great. cultivating Water observations Okay, John, you around strategy just organic Thanks. capital develop growth, deployment, the your M&A

John Stauch

of Yes. do We'll in that reason own meeting can the more capital but both is on our so strategies. both certainly allocation we at February, their think be - look talking detail companies part in we spin for analyst that in the

I discipline on M&A way capital have and are both primarily bolt-on think the going using opportunities. because organic focus both growth to great in

Jeffrey Hammond

guys. Thanks

Operator

JPMorgan. question next the comes Steve of line from Your Tusa from

Your line is open.

Stephen Tusa

Hey morning. guys. Good

John Stauch

Steve. morning, Good

Stephen Tusa

What that on headwind for was the year? of price and the updating for talk kind maybe the about the you could pure if cost quarter just bridge

John Stauch

Yes.

So Steve throughout clarify, and the just X% about for is pretty Pentair cost that's steady been to inflation running year. of

So in price believe we and point a we think that is came out but what as primarily QX to side, to increased XXXX. gain the going when It cost, been start strong, pricing the It's around has ability of throughout hit the inflation gate expected end price we're to we that we year. that's been the we been about and the level. QX talk right Electrical challenged pricing the that low on the pretty in see

On points the and it's of some Electrical Steve, recover been that's XX year, right throughout why isolated the price Water really so side, able basis of around to we've we've an explanation. to been been that

Stephen Tusa

think stage on you will the Got of be companies, then capital able balance the the a it. see about when sheet? And you kind bit of kind of at allocation calendar the opine new priorities here, how more event and the what to deploying we

Randy Hogan

companies is flow And these think going difference to it's any - they year businesses bigger weren't right when this make to a these we I cash them intend that beginning that that do through announcing what's now. strategy the sheet. focus with in to that Well, we planning; go so really full XXth the that, gas want and and can the have in we're fighting we're to that's own we're talking downturn both but Pentair's Controls, they're going the And separate & really guess the session both of in what Beth want they're legacy because be. to consistent we're one splitting Company and dividends guiding John, February make describe funded about today comparison in show that a right. as the oil have I of of be need having margins, to strong M&A, we is detail top way cash Valves their But flow. both And we and businesses to that sound both the were difference we us that's - deploy balance with to and reasons also

Stephen Tusa

Okay. Great.

John Stauch

that. I Steve, add would to just

we've as talk we've think to discussed, I about. certainly, started

we're more capital think us I is where companies and sure think and then to products think clear to our both I simplifying are going to swindling portfolios, and each need. they're understand see that internally externally them that's to making about their customers and coming going to portfolios, focusing they why buy going company's what their allocation our giving you're and identified

Stephen Tusa

is I think so What drove consistent, of this somewhat you it deceleration Water but half, X% So in just think deceleration. was the again? I up that to be clear, had was more like pricing first said a

John Stauch

fair now look in of we and basis, pricing but that's Steve, the That's at just our plan we seasonal a businesses. a and we as have type observation, year-over-year where some starts that Yes. generally of are

And that really XXXX. we start better get - so it's see head you'll into to as

Stephen Tusa

Okay. Great. Thanks a lot.

Randy Hogan

you. Thank

Operator

next the from Mike question Halloran comes line from Baird. Your of

open. Your line is

Michael Halloran

guys. morning, Good Hi.

Randy Hogan

Good morning.

John Stauch

Good morning.

Michael Halloran

you basis, for know little those improvement, think just I the highlighted did a a for expected. down you point the I shape in year as quarter, bit So trends looks up the like each. are on segment expectations little a a underlying

quarter how the your trajectory and to relative went curious went the just how So expectations? to

John Stauch

expectations. the obviously externally hit revenue mean the number I

core. both both we in we exchange foreign slides their at their benefit on the look a a revenue for So for some what Water had standpoint. both full-year numbers you take quarter and called the last absolute expectations the and and the Electrical we for have of When quarter, did are expectations achieved

two the heading I both relatively are Randy we and things good in hurricanes So where mentioned are into so QX think as QX. and about we and as to navigate expected. Despite trending exactly feel important states, having

Michael Halloran

project you an And maybe should are so I'm organic what fourth next numbers remind large get add Could just extent there projects assume, the okay, me update, are then just quarter? large no Then large your some projects to we going in type. I'll year? just be to clean assuming

Randy Hogan

is the goal. That absolutely

John Stauch

the on for around Electrical In Yes. QX, headwind would for that be QX million. $X

Michael Halloran

All right. Great. guys. Appreciated

John Stauch

Thank you.

Operator

question comes next RBC Your Deane from from Dray Capital Markets.

open. Your line is

Deane Dray

you. Thank everyone. Good morning,

Randy Hogan

Good morning.

Deane Dray

Desal or on some end Process the is color. lumpy. circle visibility on you and some Maybe CapEx. trend? and have near on beverage, & you give can CapEx always Maybe the market what projects share sense there there Filtration food that back been us of of still to over they've Is a the And the on any some might then loss there? spend sense that hesitant Is term. be

Randy Hogan

in No, forecast zero revenue in a of we of a total of diesel Deane, million roughly those of year both instances diesel I Last into XXXX $XX we mean standpoint have a had projects. projects. major from booking in

just it's So going not on lot that there's a there.

If you and side to up significantly improve wastewater the year. membranes of the throughout double-digit look that's at industrial continuing

So in the food last and side, to and reflect, and the headwinds on what year. the throughout capital right is business. space a year. continuing projects call to doing opportunities due don't again On core some now, investment in year-over-year we're lumpy we're beverage the counting it's well be just revenue very on It and to strength a these the consolidation improve sequentially those want just we're projects project-oriented we we not

Deane Dray

in China, side? you just do some follow-up, the across especially specifically and quarter geographies on this can seeing a as the then Residential of and the dynamics Great, you highlight what then

Randy Hogan

little little market. we the obviously But up we the up well high-teens, I Europe the we forecast primarily is actually the think we in of China it's is that performing bit need more so Commercial better hanging here done go have in bit well. that to being Yes, so It's by year. finish in and a and United way year-over-year we're Thermal and so - more actually challenged. we local in there strong there, being as is despite to in slightly our States basis, as Residential capture there's opportunities a for still Electrical.

Deane Dray

Was overall company? that China high-teens was - that

Randy Hogan

Yes.

Deane Dray

you. thank Great,

Randy Hogan

Thank you.

Operator

comes question next Vertical Walsh Your from from John Research.

Your open. line is

John Walsh

morning. good Hi,

Randy Hogan

John. Hey,

John Walsh

just number, seasonality but nit-pick to model bridge, the mean Hey, pretty know and it's other items anything there this basis that my lift aware cash least that year-over-year all in at any so on normal like gets of the seasonality about think you or a not meaning squiggle QX? or as we are be QX timing that I flow on don't of to to it I cash XXX in free close or is either drives normal tax if

Randy Hogan

slam No, and it of sides number we margin the some cash do as no. this probably we're driven fact looking you what - be a we're headwinds that what dunking the doing there's mean both and it's we're to also are how includes restructuring we well. error that would if error that and the XXX% of optimize I headwinds portfolios the restructuring by restructuring is. margin think at year, I said, giving or mean that you

knew we for set a want also comes but to So companies capital, really we from which want working both we want think strong to delivered successful the free spend. cash up both flow, we to

John Stauch

a solid have has in of cash, is people. built and a what Pentair of part we capabilities bills because managing the focus the have It's in that on record flow the and sent One we incentives. track cash been and we've cash for

cash forecast. I'm So in flow quite our confident

John Walsh

the separation I some to Gotcha, so get then are point were we they should second but think in scale that in the filings I subtraction lines relative and set pretty both of guess of have earlier there probably what could as at might the are term about pruning in to the into as pretty that you the you addition portfolios within static? other question, comments side maybe maybe that? going mean there on now call, I competitors, my Water some product not some portfolios kind here, be starting address think and more full of we're but where the

Randy Hogan

in to the things taking and other we we're portfolio Well, prioritizing to going I earlier John mentioned end spectrum. prioritizing, at going simplifying opportunity by the leave mean the nVest the and and to are look double really streamlining that's of what on and that whole down

than And to so at we'll later take rather do look those and process. this we'd a like that in earlier

we companies the that So new have are on growth. focused can

but So we're I to is priority say that, not a with would it accomplish. done

John Walsh

Thank you. All right.

John Stauch

Thank you.

Operator

from Scott Graham comes question from Markets. next BMO Your Capital

is Your line open.

Scott Graham

Good Hey. morning.

John Stauch

Scott. Hey,

Scott Graham

how I presented of was just are maybe here. it's things understanding hoping you could some us help my

I have jobs So numbers, one for X when representing into have slides maybe we at and tie would those how you sort been of bar the and understand versus number Pages on whereas have that only that of a jobs the the those number I large numbers look large your different and would the kind Page thought XXXX X us help acquisition XX? can just piece. guess you

John Stauch

Sure. I a the mean just shipped you think jobs XXXX, no I right. mean, that first for let given think there, these all, we've XXXX data shipments these we just clear. have make that but reminder, it's and about When large think are as them jobs in sure in of me I I

have and longer large is highlight. And headwind year-over-year on producing down, behind jobs you us, we $XX Electrical is these is But a QX why million been those million-ish roughly Water. as large that an but and in break $XX the in is jobs, remainder we issue. So that's it's it so were in everything not about if XXXX

Scott Graham

divestiture I them actually and the XX, large answered on acquisition the to take together. question and think I and supposed were John, Yes. I just columns we're add get Page that because talking, you think as my I jobs

John Stauch

Right.

Scott Graham

Lack where okay. for that. I kind that's of Right, apologize confusion. this is, of

also and right? absolute X% this Now - on sales say had you an quarter the Is press release, that's there days declined core fewer number. you

John Stauch

correct. That's

less We have one day.

Scott Graham

Okay.

sales decline apples-to-apples apples-to-apples so X% for but job that didn't impact, So days, flat? to organic you what excluding large impact on days the essentially your were was really the [indiscernible],

John Stauch

That's correct.

Scott Graham

Thank just us that this from I know verses plus XXX Okay, this points I margin has basis kind you Could John, of quarter this the tell excellent the kind of improvement you. up your year. was of of great. us alley is been what sort expansion really of wise understand give some were a negative, give maybe restructuring been sort maybe bit and buckets. price what savings might - on sort cost pure but of bit a have cost productivity? us the savings little little

John Stauch

Yes.

So on if we're a at we hinted you out look had we basis, before take a slide where and $XXX are strongly run than we've a on greater cost that million. that rate

And quarter in full of you getting are when QX, we're about where we that. a so here benefit think

so that sold and focusing Controls, $X a resize fact lot for cost what Valves the we $X them billion Scott relative both organizations of when needed on $X are all is company. to billion of a also now here billion out and & the and And company to we a

and the So work effort there nice has after getting cost really a been have lot really side. job a change and the of done

million that and So at least thinking productivity there $XX significant the quarter. is of in

Scott Graham

exactly simply could progressed, the you is looking of that's as progressed was how I Thank question each last tell And And the order segments? the quarter for. in kind us rates you. what

John Stauch

rate steady QX. daily QX QX, improved we but throughout a QX the it where and actually Electrical And orders versus that directionally you order pretty thought on we basis. and strengthening see year would are, give even have been we they I'll in seeing Sure.

related So recovery, the we're gas to mean that's seeing we're recovery seeing oil I of some and setting. probably down of some

Randy Hogan

more stabilizing… think I

John Stauch

well Stabilizing and think volumes, to be Industrial driver Scott. I then continues that as as a

have the the and commercial that slow. On residential year that had side, think people healthy really would throughout Water I thought

We seen the industrial Industrial recovering on not that slowing in side investments. space. and And also seeing we're have the wastewater

are So the and I exiting QX, much think things across now strengthening pretty board. QX right

Scott Graham

Great. Thanks lot. a

John Stauch

you. Thank

Operator

UBS Winoker Your comes next question from Research. from Steven

is open. line Your

Randy Hogan

Steve. back Welcome

Steven Winoker

given sales the Hey. Randy, up Thanks know guys. investment around be from business a just & that. Controls time. I following to allocation, under over your comments meant Listen, a normalization to you versus in and on those the marketing back. in pressure Valves those Appreciate we capital Good question, where but to of kind on stand those you kind times? taken areas maybe pressure standpoint, comment were business investment the now of R&D where the and of across question can under and

Randy Hogan

Well, Controls of focus the crisis but & can't I the because think certainly on I reduced specific on focus we're of amount Valves organic on energy, had number, focus, we growth. give having the a my driving

And so didn't part marketing and still simplification now sales that Water payoff. didn't some that's the make want in to were we in investments and of redirection right And of made the payoff. They just both and Electrical.

So were investments going on. there

Now holding make to businesses their accountable those we are also numbers.

these that together. than better Water told and years, that. If will put point of So that a and at than both specific they to. thing the and businesses to of it any all towards it us the my then board in I they had bleachers probably that we would had that even to is pointing they - wanted didn't considered investment XX have things going the we Electrical which hitting perform the was kind are performance separate we've as one was wouldn't over we of most

Steven Winoker

Have effectiveness, brought investing? back levels are you you're investment I though things what those guys on the you or mean around mentioning payoff

Randy Hogan

in One million just structure. more John talked what cost is than out about; $XXX taken we've out. of our But and taken objectives we've

we've corporates we've only into As collapsed there's collapsed, two now. and - corporate segment

of in We've a Water. in graded putting in number our places. one it We Officers. Chief are marketing Electrical. put in put marketing. actually investing assignments investing We're We Growth We've in high in and we're

in there investing reasons years is fact in we've Filtration the in been doing say. Residential for One I'd that sales two probably Water we're of last well resources in

I'd we've there's do. say but more to So begun,

Steven Winoker

us obviously reminder, this the things around if difference at remind just know cash between Okay. I lot. free are in point? about could. And move if the up two just a not conversion flow you companies a going divisions to stand John, two the characteristics But the

John Stauch

adjusted of are net adds be Steve, now, each I'd amortization. which Right Yes. roughly income, you going as to XXX% that back know say around

both they're those QX. and The both lot have annual in have and throughout an more flow both will year, a we its generators. flow difference QX cash dip the Water Residential of is Electrical but flow are and loads is more our And cash collect its seasonality a generators the So linear as we about XXX%. of only producing in strong basis, on strong in cash

Steven Winoker

Okay. questions. two I'll guys. it with Thanks leave

Randy Hogan

Steve, welcome back.

Steven Winoker

you. Thank

Operator

Robert next Your Instructions] from Susquehanna. question [Operator comes from Barry

open. is line Your

Michael DeLalio

is This morning. Rob. for on Mike Good DeLalio

Randy Hogan

Mike. Hi,

Michael DeLalio

we growth better the expected so back holding there? Enclosures with notable to Anything Hey. be strong, have business macro a industrial data little

Randy Hogan

it's I about a months. business that lags by think generally six

piece So it why build. Electronics, Enclosures, it And of of the part confident other is been Industrial. it part of is parts there's two of is it we've would that's and

growth and the So it overall twice what about projects. think the year. you is to business use more are than well but I don't telecom be has telecom which do want the some drag have we Enclosures, would growing pressure Industrial this that very of large that nothing

Michael DeLalio

you outlook growth had and what of U.S. sense. starting makes to there? market the exposure And some that non-res concerns has can remind us We've Okay your non-res slow?

John Stauch

U.S. loans…

Randy Hogan

from mid seeing versus we're a I seeing still single-digit type contend high slowing, mean Yes, coming but would that single-digit. we're of down projections I

we we call still single-digits. but yes it's would So - mid slowing, little a so are opportunity, relatively I and a around think strong seeing what it's still bit

Michael DeLalio

Okay, you. thank

Randy Hogan

Thank you.

Operator

Stifel. next comes from question from Nathan Your Jones

Your open. line is

Nathan Jones

everyone. morning, Good

Randy Hogan

morning. Good

Nathan Jones

Management, Thermal of you're two this Randy; you've the that going sounded is Process, of like got revenue? if cost for Tech, potentially structure cost growing. have businesses? could you those out to Filtration structure for the I back be some Water to Do you appropriate the It projects. and that think with there the cutting needs that need level Flow to to to expecting Is large that's you businesses back that those year. businesses done, cost be growth cost where Thermal's The down businesses be more been next are in think grow year, just If the think flattening added go you the look just &

Randy Hogan

really new the products. more and margin side, business focus We we the time the the had big projects increased MRO. coverage gas we've expansion structure oil as in Thermal, adjusted a redeployed R&D On our sales and we one from of activities and Industrial Thermal at reasons the on cost large in invested we same have the to

already that's in in and doing and think process we're I so the And Water. well-positioned that of

the all to And in made, there our there forecasts. in plan, out. costs investments virtually there think our I are but are be

Nathan Jones

quarter just then a whatever why And was on wasn't the X; case million about bucket one just Can - improvement this maybe? the you it's last for the Electrical this segment on it versus question there $XX income quarter visible talk little on zero timing, Slide any quarter? bit productivity productivity

John Stauch

would I timing. primarily it's Yes, say

Randy Hogan

Hurricanes But there too. some productivity issues the was because

John Stauch

So and expedited shipping things timing.

Nathan Jones

Okay, would so quarter? that's something fourth that to expect the in you reaccelerate

Randy Hogan

Absolutely.

John Stauch

Yes.

Nathan Jones

right, All very thanks much.

Randy Hogan

you. Thank

Operator

Brian Drab William Your Instructions] Blair. question from comes next from [Operator

is open. line Your

Brian Drab

Thanks for Good morning. questions. taking my

Randy Hogan

Hey, Brian.

Brian Drab

the on and you small I just the more wondering back in on on little are Thermal markets end you're the business customers projects MRO wanted of with there? which from turning detail seeing to strongest business, and that talk could the you demand larger get some elaborate Energy about a just the more business and if business in seeing you regions

Randy Hogan

we're seeing any everywhere. it wouldn't call as like strength - really I stronger. I particular market Yes, mean geographically

gas you the focus oil just technologies than Our and is more Thermal Industrial industries. or some Management other then process on chemicals and and application of

And and really I level product a be helping rise think industry to when opportunities. predictable These giving products, talking that maintenance are there increased think need think focus gas to that that's business and - is stability I we been oil normal attractive about some - and are I - the MRO. about think and may of in our I a more installations spending that's return serviced we're to these we be us. then talk

Brian Drab

going a few step business next you're really chance for the there over these of up projects this see years ramping? to Is some petrochem

Randy Hogan

Well, competing we them. are we have right a in play those and to for

us run want expect will with I positive a and benefit don't forecast. front so that again be market And I that Beth for to our

Brian Drab

don't damage hurricane immaterial, is to - but pool then business Enclosures even? Texas then really said know some Understood, just the I you fourth can or in business in you - and and general see that refineries tailwind or quarter related in to when the damage you

Randy Hogan

pools, Even yes.

John Stauch

Yes.

Brian Drab

is to mean and that…? certain No, of saying, a not that tailwind we're - you're material that the that does Is though not those extent yes? it's we're just

John Stauch

No.

Randy Hogan

- positive something time. as it say it's to it's view over investors We be and hard to like net that

Brian Drab

Okay, understood. Thanks.

Randy Hogan

you. Thank

Operator

from Goldman comes question next Joe of the line Ritchie Sachs. from Your

Your line is open.

Joseph Ritchie

Thanks. everyone. Good morning,

John Stauch

Joe. Hey,

Joseph Ritchie

the drag Thermal XQ. a what's trying sticking in things quarter Hey. the fourth just can activity just I'm on to Maybe and the - for just in are? sense XQ for you X projects quoting that second, large quantify projects large from healthy how for that's the get the to clearly extent maybe

John Stauch

Yes.

million So QX comparisons. that XXXX the still is year-over-year $X shipments about in are of

from the down in had that we QX. significantly So XX-ish

accelerating. the as as dissipating. So And it's in is and far activity backlog headwinds building accelerating year-over-year Thermal, are quoting

Joseph Ritchie

all Okay. restructuring Is any point? next restructuring the through noted be that of for kind separate year de looks gotten that thinking I the in XQ. year Fair your How that on enough. color minimis at about should you've this also we entities? actions two there for like

John Stauch

Yes.

forecast at think So businesses their will tank. be left prioritize a in next we as I over into And bit portfolio opportunities year. QX don't think little head portfolios the be and the what QX I still looking could to we really both we there don't to know, and but simplify

Joseph Ritchie

one, the lag pretty for just it bit the we and I possibility there portfolio John, Maybe that Okay. a piece pricing of some is just shouldn't for that being you are next there difficult on pricing a much expect you tailwind should side mentioned standpoint or a Got we last the is competitive mean pricing get of right it. of across Electrical little guys that moving that from - the markets type forward? more that one Are business is a now business. a year to side expect? on the earlier

John Stauch

what they standard hard get really think on off I increases cycles No, are to through. cycle the price a and that seasonal it's go

I you to be but And I a it was system got gets to hard and think the year against system. that year, that incrementally expecting move than was is throughout I it year. cycle this better think think natural we're next there's price that followed moving with the

Randy Hogan

we when expectation priced earlier and different another… it's and in these to market harder not for pricing a was the get and to growing, businesses Well

Joseph Ritchie

it. guys. Thanks Got Okay.

John Stauch

you. Thank

Operator

no Hogan Randy are back I'll call closing to turn further There questions. now comments. the for

Randy Hogan

Okay, great.

towards improving XXXX. as we our remain you are the believe building deliver & call. Electrical confident after positive and We Controls. the demonstrating growth highlighted questions we're to our year. return in and performance comments divested progress earlier can Both and heard quarter as we step and was in to sum, thrive for And operator we Pentair predictable our double-digit call, and Just conclude third you for exit year. in another our to successful in Water Valves up momentum in business next we the ability separation continued interest nVent EPS as and making great the in both Thank you your standing since be

Operator

number Thank you concludes earnings for be today's is conference call. Eastern for conference The to is beginning ID XXXX-XXX-XXXX. number the replay XXXX. today's o'clock on QX dial conference through XXXXXXXX. the This for available call. participating you. ID The replay, call This for a the is XXXXXXXX; for replay again in November Thank Pentair's Time replay today Eastern PM conference XX, XX at will Time XX:XX

disconnect. You may now

Pentair (PNR) 24 Oct 172017 Q3 Earnings call transcript