RBC - Earnings call transcript Q2 2018 | Regal Rexnord Corporation

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Operator

Good morning and welcome to the Regal Beloit Second Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Rob Cherry, Vice President, Investor Relations. sir. ahead, go Please

Robert Cherry

Good earnings welcome conference operator. second Regal quarter XXXX call. morning, you, to and Beloit's Thank

Joining me Officer; today Officer. Chief our Executive are President Mark Gliebe, Jon Vice our our Schlemmer, Chief Chief Operating and and Rehard, Officer; Rob Financial Chairman and

turning are Mark, would not nature forward-looking remind over historical like in this to statements statements. that in the made call conference the to Before I you call that are

actual in are could not there predicting guarantees, from future expressed differ results difficulties those forward-looking and statements materially Forward-looking statements. in are results, since implied inherent or

helping results For certain to please the actual slide results, measures On a accordance materially provide financial and as information most presentation. into this non-GAAP measures and list appendix and the that please understand this of to projected filings. presenting factors SEC slide and X, non-GAAP compare our that measures regarding are in in we of release could reconciliation for in from and useful the investors believe to earnings financial our results you We cause state refer that these additional today's to comparable periods with for these are differ operating with for financial our same Please measures accounting read measures performance, operating see GAAP. management. insight these manner across we

Mark. to Now, over turn I call the will

Mark Joseph Gliebe

were you move Q&A. quarter the our three performance for solid operations make market's in color comments. Welcome, Regal summarize for I'll quarter end-markets. American of business provide Rehard Climate delivered Jon up opening organic sales a interest and and North organic you joining broad and Thank second your a Thanks, segments. oil were Rob X.X% and generation, Asian At thank earnings performance sales up sales in everyone. up financial Industrial, the In the a We'll second share end-markets, segment I'll provide Commercial level, margin HVAC points and normal up update. basis most strength few Schlemmer North Rob. adjusted with the follow mid-single-digits. in Industrial and adjusted on our XX will segment, up After with American Regal. organic X.X%, Commercial to that, a power in X.X%, our and we'll operating agenda. sales our will gas, call in per XX%. up and with

quarter, a From perspective, Finally, XX PTS in organic handling, with growth the the strong profit back sales year-over-year. recent volume, as oil gas, up adjusted operating up and in XX%. an of operating The coming and commodity increase, but the earnings operating margin XX.X% adjusted with margin were That's from globally. end-markets year-over-year segment, strong tax a and Resulting little points material improved benefited was productivity, benefit per held reform. share by for price robust $X.XX strong was generally incremental a the basis inflation. result

was million that For free used shares net repurchase the $XX to of we cash portion a our the in income XXX% cash of quarter, and flow to quarter.

new quarter share operating improve march to Overall, a $XXX organic was it a with margins. repurchase approved recently authorization our to solid and has growth board Our on progress sales up further strong million.

that as quarter, we the forward, are year-over-year third we order Looking entered encouraged to we strength. continue see

at provide the second will Jon slightly to the year. remainder least and price/cost price/cost regards neutral quarter, we details. Additionally, With in expect of for the positive remain was the more to tariffs,

of offset However, the is we plans, tariffs. impact expect summary to that mitigation with the our

organic For assumes total XXXX, our guidance to up mid-single-digits. be growth year

markets, robust and light benefit pricing. Commercial commercial Industrial We HVAC are growth expecting in to and and our top continued incremental from positive end-markets, line residential

second half, simply year. margin half half improvement modestly comparisons. to lower more We margin difficult the we operating versus On second will rates to growth our to first organic for performance, adjusted continue forecast the expect be the continue that year-over-year due

and accelerating for benefits efforts represents and to strategy to hermetic company's the our a its operations. GAAP volume provide anticipated our this impairment we selectively business. charge Rob of exit We large we the impact see of business components earnings will from intention prune to release, GAAP the on financial down motor leverage that customer quarter, the included our with for details results. portion of Subsequent non-core the focus In a our rest how expect core that the an announced guided revenues the of to our simplification businesses, to wind end our non-core the exit second Aligned are of on they earnings plans residential business. XXXX.

it adjusted per for are share over at earnings increase $X, XXXX earnings. now and guidance year our which narrowing XXXX XX% turn total I in sales to $X.XX adjusted Rob. represents Regal to the a per share and record will to midpoint year over now a both earnings We

Robert Rehard

morning, and Mark, you, everyone. Thank good

I contributed contributing. started, like were of quarter. Acquisitions to up earnings in prior new this get a segments was the the adjusted $XXX.X we and for increased that has year. details. refer in in Please three pension the year. X.X% prior-period the with the a currency the any everyone second the GAAP rules presentation sales XX.X% Before accounting Sales million, into organic of call the X.X% reference all prior beginning went appendix foreign remind year that to solid reflect adoption at X.X% to been from the XXXX comparisons Therefore, positive the would to quarter from effect

was Our XX.X%. adjusted operating the margin in quarter second

slightly points basis the volume productivity quarter. and both prior Our was growth margin was positive from the Price/cost improvements. XX in year. benefited compared to Margins up

the had in growth sequentially and C&I $X second show expense, which was to the segments. summary, million and sales between continued our In split we LIFO operating we addition, and improvement margin organic incurred adjusted quarter, we in Climate In in year-over-year. strong both

were second basis on Our $X.XX. GAAP earnings per There three EPS the GAAP XXXX a to were second quarter. quarter adjustments reported in share

$X.X restructuring was of per costs adjustment million, first share. or $X.XX related and The

adjustment $X.XX The Nicotra related $X.X and the second purchase was of million, transaction per accounting acquisition share. to costs Gebhardt or

from gain the these a the the representing sale closed on the was per were adjustment of third $X.XX prior a Net second a business for XX% increase adjustments, share year. of from quarter assets per The adjusted $X.XX, of earnings share. previously

Now, summarize I will metrics. a financial few key

Our capital expenditures now for in million quarter. second XXXX. the We expect were $XX.X expenditures million $XX of the capital full-year

restructuring related simplification resulted in in the quarter. million $X.X second Our of and activities costs

and in related we annual the of this the guidance The show upper-right earlier quarter restructuring for provided million ETR second XXXX. In rate above slightly the we $X expect year. information. We effective just was tax quadrant, full-year the costs our XX.X%,

our sheet. approximate expect the we present to continue second XX% our We XXXX balance quadrant, the full-year lower-left ETR quarter on to for XXXX. In information

was billion $X.XXX debt Our $X.XXX was total and net billion. our debt

We net of we first Our over income our repurchased net-debt-to-adjusted-EBITDA second X.X just $XX.X present flow. free at have cash XXX,XXX representing shares And lower-right for of we for half quarter. XXXX, Through we for XXX,XXX flow our of ratio repurchased $XX.X the quadrant, quarter, over free In the $XX.X information our XXX.X% total end second million. of shares cash the in of million on quarter. lastly, the in the was million the of second generated quarter. the

to with business and the you to with minutes to to businesses, the its non-core to Mark in business. ago. either I of a Consistent intent company's set of we loss East. sell, would selectively exit the a On this this few of a motor like fix, of XX highlighted residential exit announced in prune primarily percentage this a previously motion large summary Now, a strategy provide business business components plans underperforming over XX next operations the anticipated year, wind hermetic or July the customer due of representing days, Middle down

business of Climate we business. accelerated is were and sales exit to $XXX,XXX this million and result respectively. a operating announcement, reported As the within plans $XX.X our segment. XXXX profit Year-to-date the This

expect begin support to to total XXXX, half of to customers. operations for to a of second the we we exit period approximately to be this time ramp to this current million. down continue estimated business cost are While business $XX operate will The in

While is be XXXX impact costs majority approximately non-cash, future we associated to cash million share. obligations are approximately large EPS $X.XX per the on estimate with of The exit. of GAAP estimated these $X.X the

We EPS. adjusted to no are impact expecting

guidance provide will on XXXX. update I Now, full-year our for an

assumes guidance mid-single-digit growth Our organic sales full year. for the

our margin the We operating the meaningful for in improvement improvement. adjusted XXXX, making this are second expecting a full-year year of

$XXX,XXX over per as closed million EPS impairment to the $X.XX our costs EPS is to or purchase full-year EPS $XX full-year the costs $X.XX $X.XX guidance, to XXXX expected assets EPS or share; $X prior and per or up $X.XX and share; and million guidance slide, an to convert adjustments Our $X of full-year are restructuring our The per at accounting basis, discussed GAAP share; of the the is guidance of to On XXXX GAAP of and per midpoint transaction $X.XX prior adjusted expected narrowed adjusted from million share. summary, of on $X.XX of our per EPS related or we've costs a $X and previously on In exit-related gain share. adjusted sale revised the business the to per share. year. be our $X.XX XX%

Now, I Jon. will turn to over the call

Jonathan J. Schlemmer

Thanks, Rob. everyone. Good morning,

we're impact the segments, taking to the the offset walk and you I impact. I'd our through the like normal tariffs Before update on actions how the to cover business

low tariffs XXX purchased and from steel we it of of on a is aluminum of the from our aluminum, Section most a U.S., relatively portion do steel suppliers. Regarding U.S. outside purchase the while And our has impact. suppliers

on So, overall, impact our a large there direct business. is not

commodity tariffs. and experiencing steel overall on likely We from are resulting inflation both the aluminum,

components impact addition, secondary aluminum. we on steel the are seeing utilize which or purchase imported some In

of categories, a China. type power of number our products. the products first in The of our motor transmission address few products, of manufacture majority of from U.S. not number electric manufactured related include China. a a components $XX XXX and of U.S. tariffs, customers in the sell to are Section used the product On billion imports These of we tariffs I'll the

of directly business For Regal, our roughly is U.S. impacted. X%

tariffs, our similar secondary addition, some there Section In on of a components. to purchase the XXX is impact

actions also evaluating mitigate that XXX of U.S. the being are two impact. to are the taking the main the process We billion There list are we proposed Government. tariffs Section $XXX in are of by

of tariffs. offset in impact price we First, already to are increases, beyond help what implementing executed the we April,

some implementing us manufacture negate we of actions to tariffs. the in China of Second, facilities to Regal these products outside the are to impact of allow

production global investment. in the can Mexico a cases, manufacturing Asia have minimal facilities to we manufacturing some a We and, transfer of these with products footprint other and

impact. these impacted can We chain. by offer opportunities. There help the of cases to In we actions, our customers number addition our alternatives their the them mitigation where them pursuing footprint mitigate supply a with tariff are to are are growth tariffs with

benefit, the their to some quantify to ability business. our early about we are to too serve already it's While talking customers

this dynamic, While is mitigation to of expect the our situation very we plans. the tariffs with robust impact offset

through the third and in America in were and pool In the slightly we were walk the operating a we perspective, In gas, and did distribution business, commercial strength Industrial and and organic HVAC, segments were each X.X% broad-based power our down C&I on Systems, Sales generation, exited prior distribution improve in details million, with the I'll sales entered and year. strong demand give more both organic number Europe. From Commercial motor Now, regional the from pump. see Asia as including C&I business. end-markets, sales we increasing a sales margin and Sales but up of were quarter. sales sales quarter oil across North of performance. quarter, experienced $XXX the

across distribution basis of year. our mix increasing XX residential partially programs In our and headwinds, were quarter. both down up prior margin customers X.X% year. our mid-teens. positive margin million, increasing We've and our strength price, number to motor with in year. XX oil quarter, in and gas, $XXX handling, actions As million, strong the prior across and slightly margins. in the in segment. C&I half integration. progress was we're these hermetic was the expect price/cost a operations year. business, were It in quarter, basis benefits. sales, sales the over a second Transmission year. higher was growth the foreign sales favorable a on basis neutral our with and Adjusted and Price team productivity up headwinds aerospace. up in for April The of had points up XXX were all in end-markets, to slightly a segment, and was prior the positive the simplification quarter sequentially sales and the Price year. up up and quarter. inflation undertaken organic impact is and was the Demand basis prior progress prior Sales and manufacturing solid over Volume, and segment. mid-single-digit the points productivity incremental North impact a points margin XX XXXX. XX.X% Climate sequentially Sales year. $XXX Adjusted in further profitability points of North and from of was refrigeration quarter. number was was on on margin sales, mix first sequentially the After In America, improved flat the and slightly on quarter and with Nicotra sales to basis improvements all on was positive we improve Commodity results, impact beverage, price/cost in was residential sales America strong a components from acquisition and second in mid-single-digits from points in operating we Solutions the experienced We margins. including Climate manufacturing XX, Adjusted on you OEM prior our X.X%from year with sequentially closed a distribution Price volume, up we and prior higher favorable the over pleased HVAC recall, favorable XX.X% currency, from residential XXX from our in operations, the Solutions, relatively and Middle offset The and was material strong our improved good This quarter. operating Solutions up East organic continue prior of year. sales, Gebhardt were food the were prior year. making turning a up in In HVAC to in improvements to particularly was the commercial where were strong Price/cost prior of Power of experienced price XX.X% margins. had the the second see volume, operating to had

OEM headwind a Year-to-date, benefits. was in is and stronger. However, operating year. up offset Mix these basis from XXX mix margin OEM while both and points were partially XX.X%, the up adjusted headwind sales because, was distribution, a was prior

up Mark. be the It's points. our similar the call first solid half with in over of first sales margin We a up basis are turn X.X% segment, expecting XXXX operating second margins for to PTS and half. to to been the XXX adjusted half organic I'll now back

Mark Joseph Gliebe

Thanks, Jon.

Now, remainder remain sales slightly before go expect solid would to We positive neutral highlights. had a quarter, was to we our quarter second like the X.X%. outlook I optimistic. summarize increased we the and briefly our year. price/cost for Price/cost and results remains Organic and at second least Q&A, the in to quarter of

compared $X.XX impact almost to earnings per with XX up as XX% from increase share quarter driven from per up points adjusted year. entirely operating Our prior was operations the reform. margins share were adjusted little earnings tax basis and were our for The

flow cash in $XX to allocation, XXX% and, on million of the free we million our capital was repurchased and Our repurchased income we've $XX shares quarter net year-to-date.

board our up share million. has approved Additionally, repurchase new a to authorization $XXX

mitigation our were expect dynamic, The As we quarter, our is markets the tariff but we orders up offset situation actions that entered third strong. generally tariff impact. year-over-year remained the and will

to on exit residential to core the allow our improve which We us performance. have announced and intent our overall business, better components our hermetic will focus

XX% guidance, adjusted which earnings narrowed per represents at Finally, midpoint. a increase year-over-year our now the annual share we

in record total year Regal and earnings. for reflects sales per guidance a adjusted both earnings Our year share

questions. will take We now your

Operator

Julian come Mitchell from will question first Barclays. of our And

Julian Mitchell

Hi. morning. Good

Mark Joseph Gliebe

morning, Good Julian.

Julian Mitchell

year. the first cash the flow on the expectation question just free Maybe for

You've guidance first got of earnings do in flow flow the much a a sort Free you How growth basis. free on was we'll think half? cash XX% flattish second aspiration see grow an in adjusted cash the half. year-on-year

Robert Rehard

We question. over flow free for exceed year. Rob. Thanks income is Hi, the Julian. net XXX% in continue This to expect the to do cash

fairly So to your relative first are means should that expectation, strong be half. back certainly the which off half that we coming of certainly

Julian Mitchell

And unwind is build-up you quickly? the working there dramatically think that something that some liquidation or accelerates in to first half capital around excess has

Robert Rehard

do see year, in despite have. the the a Well, growth we of trade capital certainly cash projections that we working as source

reduce programs working the throughout levels. capital So, place yes, the we that year. do Also, and to have trade in inventory of in terms remainder have different drive for programs should we both to also and address AR improvements place AP,

Julian Mitchell

And you. business. that second then, of XX bps up performance do year-on-year rate Was QX. think or in increase, I through that that the you margin a well? healthy half there the hold Climate Thank Very question just QX, you increase price of in follow-up very as exceptional on anything strong can a think degree within Solutions

Mark Joseph Gliebe

Julian, know, our we and year tend stronger and the quarters the first be different. in our quarters. third the happens second fourth for relative you and quarters as quarters the to in to Well, margins no tend to what And two those have seasonally is expectation high

Julian Mitchell

Okay.

should we year-on-year half the Climate in in up probably? still So margins see second

Mark Joseph Gliebe

Yeah.

think I fair. that's

Julian Mitchell

Great. Thank you very much.

Mark Joseph Gliebe

Julian. Thanks,

Operator

our Markets. And Scott come Capital of next will BMO question Graham from

Unknown Speaker

for is on Hi. This Katya (XX:XX) Scott.

Mark Joseph Gliebe

morning. Good

Unknown Speaker

were a Can segments? each about of little in talk Morning. how you orders the bit

Mark Joseph Gliebe

the up call, most third as the quarter, were world. of as we we on commented orders year-over-year businesses Well, entered the for across our

our we do of So into way the quarter, going to the optimism color? is entered the any half good for you pretty which felt felt quarter, second drives we Jon, year. the we as the back to add third want similar what

Jonathan J. Schlemmer

change through stable would of that, we second orders progressed would couple I real the through performance a quarter, second as we quarter. I through the the things. the quarter. as somewhat progressed sequentially Just say No as characterize

Unknown Speaker

tariffs? anything by about hear your being demand the from customers you impacted Do

Mark Joseph Gliebe

a Jon impacted Well, as and products, are I tariffs. say very our mentioned, time dynamic by it's would the definitely

a opportunities. with as so we're production on as taking both tariff. with as of global dealing about to headwinds location the of mentioned, going itself the And footprint either our But of price there's those, or potentially lot tariff have customers our with advantage discussions that relocating increases with well and the we a doesn't

Jonathan J. Schlemmer

Mark year. impact I And may the continue quarter, may third strength. that, not entered to about discussion to end-markets, that order from versus as the continue but how an strength see of standpoint, see we prior and as lot we orders add tariffs the A order would or said, we

Unknown Speaker

very Okay. much. Thank you

Mark Joseph Gliebe

you. Thank

Operator

Nigel of is Research. move your Wolfe come We'll Coe, question Jeff And our the KeyBanc next to Coe will is question of Mr. on from from Hammond Capital Markets. line open. which next

Jeffrey D. Hammond

Hey. Good morning, guys.

Mark Joseph Gliebe

Morning, Jeff.

Jeffrey D. Hammond

Hey.

did quantify So, HVAC, any kind you the the you see of ahead And back kind pre-buy any margins, the actions? just in benefit of can pricing quarter? then, of material FX on on

Jonathan J. Schlemmer

So, is Jeff, Jon. this

of would pre-buy don't the increases. have I price pull I to a say that you're On ahead on ahead a from getting price increases that our believe seen. we demand question, And customers created we material any that we whether impact be and would probably referring would think standpoint saw with

Jeffrey D. Hammond

Yeah.

Jonathan J. Schlemmer

Yeah. in for hard always demand. we us significant based believe us but to on is and our in customers, terms talking it's there of don't that, quantify our for And the – to I impact that would say any channel commentary just

Jeffrey D. Hammond

do result? if you tariffs. some you competition just to than speak of capture opportunities guys. choose And just Okay. One, locations, other Any to back maybe the might of more be a or And you then, price really impacted see to foreign of as seems – then it so. just you share maybe to these like moving complexity some can your on

Jonathan J. Schlemmer

Yeah.

any can So one, he'd then Jeff, like I'll and Mark to. take that add comments

of whether $XX you we're look billion the that varies list $XXX when about list. or at competition, think our tariffs on billion it talking the I based

both those We impacted to product a have competition in that degree. are categories but different of

the So where list have we Regal see that it'll with We than believe cases be greater have terms interesting does. and to we of we a impact. see $XXX that actual of competitors in impact what happens have a billion number timing do

as growth While the even even have we're opportunities that list, exactly what's have $XXX would in expect some growth And that that so competitors we're we list. that's more billion billion I And we That's happening a directly would greater we and those mentioned impact. in would we maybe pursuing. creating the happen see the that know opportunities. what impacted, $XX that

difficulty some say on this where to case-by-case some able the to of and motors no of product, of news America we're at terms our that the is advantage for a example in of our and be. and have And I of us that we're larger that transfer modest impact one capacity because, In for large going would basis. North to not capacity what's investment. mitigate we the call take looking I'll And to is, a the relocate, capability knows good industrial with, I that's utilize closely us would watching an be it, operations, a tariffs are really that investment, long-term for course,

to that we trying in we're make. terms much So of would investment manage how appropriately

Jeffrey D. Hammond

about a then, but bit little And then color you finally good just Great. of a maybe a back – into maybe expectations here. mean, it mentioned had just margins, think hiccup Okay. I really was why on it like talk runway more and and just you've more PT seems half little I on the mix,

forward. expectations going about just talk Thanks. So,

Jonathan J. Schlemmer

we Yeah. see it. That how of is kind

XX.X%. OEM looking do for same the was was but margins were strength pretty quarter strength, of said, like – expect the first the had kind we target we're margins. not in much headwind terms with mix PTS that the because second first a We That's bit sales our versus the a at sales at We half. second distribution the of pace. really, half business do quarter believe The of in of the And really little the impact in good a quarter. you for

what half. a we that the second as quarter terms second how of of in And we're seeing saw blend first of kind quarter the in will so in a segment and more of perform

Jeffrey D. Hammond

Perfect. Okay.

Jonathan J. Schlemmer

Thanks, Jeff.

Mark Joseph Gliebe

Jeff. Thanks,

Operator

have Christopher of And from Glynn next we Oppenheimer. a question

Christopher Glynn

question. and thanks morning, Hi. for taking the Good

Mark Joseph Gliebe

Hey, Chris.

Christopher Glynn

Hey.

the continue talk on about to more margin, C&I progress way. the On

would stress characterize a scenario curious that drive markets there? improvement hypothetically. flatter you volume-neutral to runway for kind your to of How XXXX in non-volume-related of in initiatives the Just test

Mark Joseph Gliebe

a take color. then I'll add can any pass and at Jon it

So, would recall, hasn't we on changed. in would efforts I if expect we continue our the a that regardless see our margins, will the benefits continue flat focusing – kind simplification what to that'll been we business improve start effort few be think you and a to but And in I ago had that of if C&I were different, volume we obviously, now, of quarters that that in environment declining, business to commented to happens to restructuring see efforts and an benefits.

Jonathan J. Schlemmer

Yeah. manufacturing we're doing and will with we're actions they The those of help what productivity efforts, three well around volume. All and doing three primary our everything even are without those with going contribute doing what simplification the are in we're operations. through on price

Christopher Glynn

your distribution at on talked and the I runway. then, around about think And trends, penetration distribution Great. past in Investor you've strategies Day

C&I mix quarter the from away light growth little the and the in a in there in think tilted PTS. I it was

higher comment a get you'd how report strategies. distribution to wanted just on level on your card So, issue the

Jonathan J. Schlemmer

I a big distribution. would part execution. was doing to we're scorecard that. Digital drive of well terms the we're how on that, say growth doing, of in of We number strategies a in outlined

PTS clearly on particular, good seen, in had both year. we of in in with wasn't Distribution to of mix distribution as created bit quite coverage quarter, a prior our sales for that some little and distribution. actually pace strengthen growing have to but a deceiving in in quarter team to investments just because the growth commercial those liked distribution at investments it we're actually sales over was in comments headwind, was we we quite and adding all was OEM but distribution for and strong C&I doing were Our Climate, did sales in are PTS We excellence, that but PTS ongoing well. happened little the would HVAC a really up good you and strength our well. our and have have the we at C&I. It specifically organization if mix have for in look of And to

say, distribution So of we about business. our the I around we're the making would feel and strategy good overall, growing progress strengthening

Christopher Glynn

And one. then a last Okay.

With in for and diminution tail the segment the timeframe hermetic exit, we half what we second kind to XXXX you're kind of the as the what impact Climate should think exit sort expecting process? of of about

Mark Joseph Gliebe

thinking I'll how it. about So just we're on comment

operating So first for revenue the and we you for margin business. half outlined the

gives using of We'll a we in for production purposes, looking for them of completely. the through to now business, So, would that early transition. We're sense I terms residential support I the that you sometime XXXX, and we'll kind expect be our in business. scope And talking that customers would out be be would serving of this early facility at potentially hermetic different in but of to XXXX. expect out the

Jonathan J. Schlemmer

now. our going of much would we remainder better have a for handle dependent transition. call, I from We're to in on terms look that's And I like the going expect need the customers time us we'll what XXXX. third get of is the those discussions right quarter be very timing having our would half by to here what that the earnings say on to second in

Christopher Glynn

Great. Thanks, guys.

Mark Joseph Gliebe

Thank you.

Operator

from question Baird. Michael next Halloran comes of The

Mike P. Halloran

Good morning, everyone.

Mark Joseph Gliebe

Good morning, Mike.

Mike P. Halloran

Hey.

guys you that in onto are keeping segment So, just that forward in the guys ops taking basis? a that, Climate or on you disc going report are to

Mark Joseph Gliebe

I tell. to think it's too soon

the the month. happened we this of As mentioned, end just at

for out it call will sure. We

you'll whether yet. where it haven't goes not gotten discontinued into or it that far know exactly So was, ops, we but

Mike P. Halloran

you upped re-upped $XXX there. repurchase million the capital. And for Okay. Makes program, share Obviously, here then to sense. cadence guys

the some to be the Maybe for on like How thinking NG willing How pipeline year. earlier You that. are made around buyback? M&A? aggressive look context guys about are acquisition you forward? you What's this balancing going those just guys give

Mark Joseph Gliebe

Yeah.

following M&A, but allocation, XXXX, wanted capital we and doing repurchased quarters, consistently our be we've what out last and that. of of March both shares. back of not in which in the have we doing we our kind we're buybacks, saying, commented is, simply been doing M&A balanced more to So have five actually Four we been

obviously M&A but in to shape of is interesting being at. our want pipeline strategy. our long-term some with And we approach, so be looking would we're very good our characterize as definitely And that a part balanced I things on

Mike P. Halloran

leave I'll it Thanks. there.

Mark Joseph Gliebe

Thank you.

Operator

we And from Liptak Seaport Walter of question a Global. have next

Walter Scott Liptak

Hi. morning, Good Thanks. guys.

Mark Joseph Gliebe

Good morning, Walt.

Walter Scott Liptak

Some asked, trailing look $XX.X of that discontinued my it questions million year-over-year? you as the year-to-date, have but down is is exit, at off revenue the the been and how ops, much around

Jonathan J. Schlemmer

mentioned we I would the mid-teens. Well, that say it was second quarter – down in that

from would trailing gives we that idea near-term the mark the I with what performed that because have that, big it our general, of really announcement So off to largest be would second what demand is say how customer. answer an we you customers program. question in the transition expect is in is, support it to yet But the might see the of quarter. don't to the

see little is just bit we underlying in of So demand could demand of an that uptick requirement, because but a declining.

Walter Scott Liptak

And Okay. one you in this factory. manufactured is mentioned that

Mark Joseph Gliebe

Yeah.

Walter Scott Liptak

So, presumably, can take related the out all the you to product? costs

Mark Joseph Gliebe

Yes. That's assumption. our

Walter Scott Liptak

And Great. I pools right. to then, wanted All Okay. a ask question.

if I demand showing down? some higher think – market wondered growth. business about what the the other that were it of were distributors and your I around there some of the pools sort was had OEs

Jonathan J. Schlemmer

What was demand OEM talked I had on specifically about up the We pool. in Yeah. aftermarket. side the

in as good a business, did that's business QX, aftermarket that degree we demand to down QX. It was an our pool of see down business, the improve. was have We also in And not same QX. part

quarter pickup the second demand was quarter. like impacted But we that there's factors quarter. also the second inventory through the more a saw entering couple we was that us I in But, a for good said, channel probably the in well the an and weather-related. So bit as a factor and into in early QX our of view news of QX there. third demand particular, saw is that the

So the in a saw more to of issue half. I be we think timing it's going first

Walter Scott Liptak

to for new simplification that work one-off this you're done or do this to of end year. finding year? going a simplification sort to is Okay. are. of Great. me. And for at seems with how different guys follow-up just one like you was stepping discussion It simplification and C&I the programs the looking doing is on be My last the in profitable the understanding about the are by you Are up products

Mark Joseph Gliebe

as to of to to the at the there here is focused know, been on going there XX% the we programs pace, so we still where XXXX you In same we've do. a a more for was do, not and That simplification say money had XXXX, number spent I'm into definitely of is Walt, continued maybe C&I perhaps more at but still space. while.

we so forward. And stream see continued moving a from simplification our efforts benefit

Walter Scott Liptak

right. you. Thank All Great. Okay.

Mark Joseph Gliebe

Walt. Thanks,

Operator

our from next of And Bohra will question Bhupender Wolfe Research. come

Bhupender Bohra

guys. morning, Good Hey.

Mark Joseph Gliebe

morning, Good Bhupender.

Bhupender Bohra

Hey.

just the Climate here. I more into business dig to So Solution wanted

I mentioned think resi North America, was up U.S., HVAC Jon about mid-single.

commercial refrigeration cadence quarter, just did you that on quarter talked you business. and you see about comment think just a the of second entered, there was like, we through or Can weakness demand some I how pull-forward – the commercial in the actually refrigeration? we kind can third guys some the as if

Jonathan J. Schlemmer

Yeah.

versus actually performance prior right, quarter, relative So, was down in in at in the QX. trend you're North look versus QX so our seeing year. the in that is you Commercial refrigeration prior-year quarter, up to improving. Commercial HVAC flat America in The year, was was we're commercial if mid-single-digits. refrigeration refrigeration residential flat relatively prior it

second So of the XXXX from half we're commercial year-over-year growth in expecting growth. refrigeration,

Bhupender Bohra

was anything And it. was weakness just half within it. that during some... Got the first is Okay. market other you there first just give demand if it or underlying can concerns the or any Got in – half the I mean

Mark Joseph Gliebe

refrigeration? commercial the in Well,

Bhupender Bohra

Yes.

Mark Joseph Gliebe

on I in in QX the that the half. our refrigeration, we'll with improving our think, in in QX, benefit caused they're it's us market and be back down customers see in demand and I has commercial and what based flat communicating, their think to it's but discussions the

Jonathan J. Schlemmer

the we're that will wellness improve one that And (XX:XX). sales doing things help is of

help commercial the efficiency new in of improvements some seeing in other are all around and strength customers we'll interest half. strong that's out exciting products really we're some refrigeration, energy our second coming that that'll part have our and see We there, really what in that

Bhupender Bohra

Okay.

price April. actually increase like I And in Okay. the follow-up did my the if price was price/cost. a mean, on actions, dig you into you

mentioned about second mentioned in little historically, bit work XX% you increases the was you should that? mentioned about seems are and neutral? actually about on I a customers of up. you more other some be mean, can like are like contractual, thinking I rest pass-through have You spot. like but How some did in you And quarter? color customers, positive give it half, actually the have of actually contractual back that you the If your just price them coming

Jonathan J. Schlemmer

Yeah.

background give you bit Let little more a me on that, Bhupender.

So We the positive about I'll that ahead were ran for neutral the quarter We a a we of back price/cost it the we bit. first take little the we quarter. would Actually quarter. would just it We slightly by were way the characterize that. in neutral entered second second expecting year is quarter. turn

to are favorable expecting remain neutral, We year. remainder of slightly the to neutral least the at for

increase. is material our If standpoint, is you we'll pricing C&I and a XX% Climate some pricing that with business the of look see the from there price price that's with in There two-way incremental at also pricing April contracted. incremental the formulas from

also that at the some inflation coming have we is there However, business. incremental

it So, to slightly the year. that's why characterize neutral remainder as we remaining would favorable of the for

Bhupender Bohra

C&I you Okay. be mentioned, And Climate, all and which across the would that or price board? the increases

Jonathan J. Schlemmer

about we've at you takings as on business, the characterize it we're the think would how board. as across well as the what I When actions done, tariffs, looking

Bhupender Bohra

Okay.

Okay. all I That's Got it. a had. Thanks lot.

Mark Joseph Gliebe

Thank Bhupender. you,

Operator

like over our to I closing And Gliebe turn back Mark the session. remarks. question-and-answer to concludes any would this for conference

Mark Joseph Gliebe

questions thank you, Regal Just for and have day. and for your interest your in a great everyone,

Operator

concluded. now for attending Thank today's has conference The you presentation.

disconnect. You may now

Regal Rexnord (RRX) 7 Aug 182018 Q2 Earnings call transcript