AOS - Earnings call transcript Q3 2018 | A. O. Smith Corporation

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, ladies and gentlemen, and welcome to the A. O. Smith Corporation Third Quarter 2018 Earnings Call.

As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Patricia Ackerman, Vice President of Investor Relations and Treasurer. ahead. go Please

Patricia K. Ackerman

Ajita Good Officer. for Adam. results and and John call gentlemen, call. Chief Kevin Thank Officer; Executive us morning, on you and are the in joining me Chief quarter Executive our thank Chairman; With Wheeler, Financial you, Kita, participating ladies Rajendra, XXXX conference third

will during that the cause Those comments questions, as that Before limit we follow-up one I forward-looking remarks, question matters this others, to actual the courtesy of be Kevin's constitute call, per results described would like answers be press forward-looking some subject yourself made this to These turn. begin with morning's to to in materially conference please including remind a risks include, in could statements queue, you one have we different. risks and to statements. will to your are among Also, release. that others that question

turn I multiple have remarks questions, you now our X. begin who on If over the slide prepared please queue. to will Kevin, will the rejoin call

Kevin J. Wheeler

gentlemen. and and morning, ladies Thank you, Pat, good

Here net are per of about a in share or We third earnings XXXX. share our higher per earnings XX% than $X.XX $XXX of few achieved sales quarter. comments million, our

plan through XXbX-X review million We pace using continue the shareholders. cash buying to first million We previously annual dedicated months capital return to our stated continued $XXX at portion a nine to the plan. to for back shares repurchased and allocation of a We year. approximately $XXX our our X.X shares of million

to million growth annual dividend down our about nearly rate using floating rate We nine dividend and October. repatriated second this of the XXXX shares $XX We to increase $XXX the compounded first debt. This months of is the million to open The our We of in expect to repurchase is up XX% back year. market during shares proceeds XXXX. in five-year a XX%. opportunistically in the increase announced buy pay our worth

will our water X. Our in now detail describe A.O. more products X,XXX Smith-branded in are slide now John results on nationwide. treatment stores Lowe's beginning

John J. Kita

Sales than the XXXX. quarter quarter $XXX from the the for X% in third Net the million increased were million in of in quarter quarter third $XXX third higher XX% of same XXXX. earnings

compared was to North segment X, China XXXX. steel sales offset freight earnings in approximately a increased of the pricing than with of earnings in boilers compared electric quarter share quarter same Third American of sales segment related sales $X in by quarter of of of and On the and more million compared partially Higher $XXX approximately America North XXXX. were lower million. X.X% local $X.XX the Spending heaters and partially with water by X% with earnings XXXX were water to million heaters Lowe's and products by comprised steel freight heater with growth in our heaters offset segment World water per amounted Sales in year. of America offset sales the third with by XXXX. from unfavorable were million launch The water the reduced higher treatment lower treatment in were treatment same compared quarter water million sales America water segment sales. air in on currency. impact increased and products Hague XX% than Pricing Rest associated to costs our $XXX North $X actions. the segment of X% actions flat with $XXX XXXX. slide were million incrementally lower third in North in quarter at water XXXX. products translation the at decline compared Lowe's, added costs of volumes. quarter treatment China higher water our and Currency prior same sales $X purifiers of recently-launched Aquasana,

North-American of XX% result associated year. compared as of quarter factors, of result segment with in employee a margin third lower smaller with earnings nearly of XX.X% $XX XXXX, programs was of these than World primarily increased As and losses last lower India. a million of expenses incentive Rest

quarter As a result, higher of than significantly third ago. segment XX.X% margin year was one

a Our miscellaneous corporate than year result higher last were expenses several items. as of

during XX.X%. XXXX the income tax year, due Cash with quarter last XXXX share. with third by benefited were lower rate rate was was effective per the federal $XXX Higher the in income XXXX. XX.X% reform. investment effective $XXX $X.XX million a the in XXXX in to capital period of Our lower of taxes during compared income last first The provided of provided compared and lower primarily quarter during months by third working flow same nine earnings drivers earnings smaller higher operations the The cash to primary million tax experienced quarter than year. the was related tax rate third

sheet Our position balance liquidity remained strong. and

Our the debt-to-capital was at ratio the of quarter. end XX% third

net We approximately And located million cash have our balances $XXX of totaling million was cash September. at position offshore. $XXX the end

reduced sales XXXX heater midpoint and Primarily shares share U.S. of XX% first The represents XXXX EPS $X.XX X.X Board adjusted lower we authorization previously total result per remained a $X.XX the repurchased between EPS guidance on by per guidance $X.XX approximately forecasted, China we months than range end compared our our the EPS a of a and for share. our the increase a in million water of adjusted adjusted with $XXX results. approximately with of Approximately of common stock as of million. year, X.X at the During shares September. nine of million existing

closing EPS several turn $X.XX XXXX costs. X Please slide guidance for per to of excludes Our share plant assumptions.

XXXX in expect cash We the our from than significantly $XXX million $XXX is higher generated million, approximately in operations flow XXXX. to be which

lower earnings year. this capital expect working outlays higher We for and

Our XXXX $XX spending capital million. approximately plans are

in depreciation Our million XXXX. expected and to expense $XX be amortization is approximately

in to higher to approximately expected at our higher the spending be are Technology Corporate $XX XXXX, million expenses $XX due slightly XXXX, other and corporate Center. partially in projected Our million than

tax Our due year to is XX% than approximately the the tax expected rate previous effective to reform. U.S. in income lower be XXXX,

the We expect supplement XXXX repurchase million. to shares repurchase under $XX XXbX-X million and amount opportunistic to up a of in to plan approximately share our XXbX-X our with $XXX plan in

average We in outstanding diluted million. our strategy September be remainder the expect XXXX XX. on business the slide of for beginning will summarize our guidance, on shares will growth our approximately Wheeler XXXX and XXX.X assumptions Kevin

Kevin J. Wheeler

John. Okay. Thank you,

includes is XXXX water units be XXX,XXX volumes. we assumption in volumes. forecast a units. a lower following industry Similarly, shipments of September, This XXX,XXX volumes the X% includes our half for we project believe We the in approximately assumption than now down water heater second in our the year-to-date on our U.S. increase assumptions. outlook will XXXX. Our XXX,XXX Based July U.S. This units commercial will residential industry the revised to for decline shipments and in difficult on Based quarter heater forecast fourth comparison, year. tankless we forecast.

significantly products. of higher and water of costs, effective result other our price and prices and we the increase XX% which a a heater freight U.S. inflation in on majority announced steel average June, As approximately early

$XX approximately lower million million $X the full year. year compared China Given a the is currency, translation our million benefit $XX for benefit now than forecasts. XXXX project which recent July approximately of with translation depreciation earnings we is The in sales significant of to

in currency during that quarter fourth translation of current China and XXXX. assumes Our resulting in of quarter $X the rates approximately million appreciate XXXX, detriment will slightly with in to the levels million to compared fourth from $XX earnings a sales projection the

in losses the India expect million loss from million in to We XXXX loss $X.X to XXXX. in approximately $X decline

Lowe's For believe the product China expect issues. is surrounding of over economy, negatively and which the mixed. anxiety The full on stores a replacement in in our primarily filtration in was XXX% slowdown sales treatment launch water we increasing Sales We to China in international by last filters fulfilled housing slowdown X%. to launched month. consumer water driven be by we systems time. grow in portfolio local We year, currency X,XXX trade approximately sales, continue a impacted

$XX to water manufacturing of plant capacity to of our in simultaneously year. The U.S. had is of revenue EPS the terms our guidance our we advance year. volumes ramping revised softener project XX. project Please for We we midpoint to range Lowe's approximately dollar XXXX. last to X% in with be growth issues will double We attempted XX% million up load new than customer. However, as sales slide the higher

segment segment, primarily expect margin project Rest adjusted the a We XX.X%. America forecasts. China North our result weaker World growth approximately of be lower in of to performance We as for the year

with XXXX, housing our growth into project currency expect to middle For inventory World of next remain XXXX local levels the planning the We're with full Rest sales XX%. slower X% XXXX be in to growth. be compared approximately we year in of Preliminarily, we process. year, China elevated as margins

and the to to businesses the water Given full China sales heaters, local to our is. plan expect and currency, Lowe's in update X% XXXX revenue XXXX we the of of over North America projections to it the of for depreciation China with $X stays Combining headwind a $XX a where rate million earnings, currency year full our price a year if X.X% X.X% we on water recent January terms. remaining growing in of call. similarly X% treatment We conference U.S. to business the past, project currency this and growth to in dollar guidance organic million

investments business reputation model we for past in the made in years and in brand, have distribution resulted our has term. to our growth. significant We XX broad have products and for continue reliability and safety long The driven confidence premium China over the innovative in a

the coupled return are When confidence business market. in leadership, and continue through We and again steps in strong for high in protect remarks, market our In The and flow that with our to on we grow we U.S. the profitability water and balance digits. will we'll That housing meantime, and questions. sheet profitability and are we market thrive fundamentals to we well to navigate innovative assets our products us prepared these global of consumer our achieved your and recovers boilers, believe are growth, XX% we once optionality open to bring heaters model, double concludes bodes successfully of cash organic of appropriate the the replacement returns, times. proud for the the taking have volatile market China.

Operator

Sachs. open. first is And from Clark Doug, line Goldman question your your of comes Doug

Doug Clark

taking again for one, thanks curious, heaters. morning, Hey, a I'm at didn't water of for in question. also kind and this had fairly growth looking really morning, of lower and my next year competitor growth competitively this and guys. year-on-year for then My lower and actually just kind just a you China, nice Good year. even mention first growth

that kind could inventory bit might be then also just and there's recently, has So, anything you into levels competitively I'm year like wondering how It of sit heading if today. next headwind changed on you little as think a a if well. sounds of that comment Thanks.

John J. Kita

I'll start, Kevin.

market has year-to-date basically business. water steady in been held so Our share the heater

actually we the saw declining quarter. third in so, And industry some the

tell which competitor the So, to third to I'm same has you're the season, entering year talking because levels highest-selling third online is fourth quarter, percent with cetera. not year-to-date. not about will et quarter and they last elevated our about. for holidays, second sure happens up Inventories from Inventory you, though. are still our as That's quarter steady were the second are market But respect from unusual the the held quarter. fourth share of to evaluate which we talk, we'll kind as we're selling quarter. as I

Doug Clark

with I'm just in the you follow-up. then, on Rest curious Okay. traction of formaldehyde product World. in my believe launched that the Great. XQ I And

Kevin J. Wheeler

winter received the new leaching during well products the of consumer, the by bit. formaldehyde months, summer decline They months. growth about very growing done have The a And were rate. the Chinese during very well will XX%

sales next well. to So, look into we'll benefit to our But year we months we see the were formaldehyde Chinese a products drop consumer, that business overall, has get as the particular We believe the QX. summer and in a with received growing and forward consumer.

Doug Clark

All right. lot. a Thanks Great.

Operator

is Matt D.A. line open. Matt, Summerville your of Davidson. question And your comes next from

Matt J. Summerville

sure I we water third quarter? then, Thanks. And understand, want just Can air you A up John, that go was business granularity basis China XX% did you purification year-over-year? more number the in around can heater overall a water a through... on just What year-over-year correctly. questions. I to business make to have the if the want provide actually do couple just little treatment? of

John J. Kita

purification Air it's off but up a Yeah. low level. very was XX%,

of Kevin as $X quite as up think about which I currency the how And Water were down. million. was were frankly up the the formaldehyde $X flat. was treatment, two heaters So, the into saw really last it about of over you electric then, And million. And out $X said, But months. the we purification Then, a because declining you getting up got we up summer XX%. water we month little million. air was sales, said, negatives, you're it was ended had that's bit

Matt J. Summerville

it. guess, do relative you the the of the have out Got really coming year to in need position that? you're do wait part back the progress in those And sort in I to to China, described for the you down made in guys then, kick of any online Or before second inventory to able you to-date inventories? season quarter of drawing

Kevin J. Wheeler

I'll on the in hand days tell our you, third down Yeah. were quarter.

considering used we a measurement, forecast, have We the volatility. be seasonality – could However, and not some that that's really forward great XX-day the a misleading.

offline, customer, increase, online. measures inventory of we're by percentage product a So, category, by variety using by

stronger are busy And Day season, to inventories quarter, additional necessary, need XX-XX. so, continue we'll bundling sales kind of evaluate promotions if or fourth a through if the overall, and a on Singles' we activity. and promotions And any we'll for take determine, to our look We other elevated. actions

Matt J. Summerville

Thank you.

Operator

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

Jeffrey D. Hammond

morning, Good Hey. guys.

Kevin J. Wheeler

morning. Good

Jeffrey D. Hammond

color the on for Thanks XXXX.

but comment maybe the rate digit. growth China just XXXX the double lower – on about back and hitting to into Just confidence

in long-term the think you rate that some rate? maturity that growth as how that revising long-term thinking of water potentially growth are growth about of Just you kind XX% about heaters in market, and

Kevin J. Wheeler

forward that economies issues that you, so that economy class the to rather the they're to now, as as forward, certainly money and will intertwined consumer spending some economy of Right we facing today than I'll believe that China forth digits a – double and we Well, back. we grow for confidence the we're trade There of slowdown the term, U.S. due rating in the tell – going the and certainly continue. And part as some are to resolved. the go will in long expect uncertainty. growing of firmly far business? the comes middle saving as the is get But

John J. Kita

Yeah.

when we and basically, recovers I And models housing appropriate at been there, a low-double a with to period get once housing done because some digits you felt when economy to pull we China point think, the growth average forward. at Jeff, we've can out. starts back that we where that look modeled, out it's you think modeling weighted And has not down. X% up going entering end about this We just are here growing.

other. I resolved. next a Now, as consultants. Kevin talked said, China and of the the I U.S. thought lot gets to does there is process doesn't, get sometime If it year the possibility thing think need We've at is early-to-mid GXX. mean, each this a resolved it

middle we so, class. certainly Kevin And a you as growing said, think, have

You going on. have the urbanization

once or – is get some we right a And saving. forward, down. company. confidence will, banks is formation. achievable the that of got household But total have hiccup, if so certainly is do because X% you their going this think, You now, consumer from We've we our through

Jeffrey D. Hammond

Okay then.

Kevin J. Wheeler

brand, we would premium again, innovation the future. forward to that I the leverage add, just good can that broad economy our And feel bring into going we turns those distribution, as market, we the around, our

Jeffrey D. Hammond

And Okay. just with XQ help me bridge. the then,

I think X.X%. year-to-date, up you're

growth core saying about should of on for Maybe pieces how the America and we think confused the North But rate XQ I'm You're moving year. currency. China? some X% with growth in

John J. Kita

we would you over tell be industry Well, up so in America, North the XXX,XXX forecasting we're to sequentially.

talk bit. expected. were September proceeding frankly, and But our what was then, August And down residential. quite is kind of mind, really didn't a as we So, in we happened about July quite

we XXX,XXX units. was to so, down close the quarter think And

our where we look we're look back we shipments, our sequentially at October, be. rate, order thought when look to we Now, would we at we getting at

So, about we're the up over to fourth XXX,XXX forecasting over the XX,XXX to but up the quarter. third year, XX,XXX quarter be XXX,XXX to prior

year's but quarter. fourth recall driven the on to XX% quarter third So, we'll move little commercial frankly, that the health the to I a we relatively that's China, prior by Quite year. year-over-year That's was may last we're that's it and quarter – be – up bit fourth see both think fourth fact to as almost you flat, in forecasting certainly residential on really from quarter. up

we So, very there. a have comp difficult

treatment that's to And will water quarter. then but the we relatively a be good in grow continues quarter think So, flat, for them. Lochinvar sequentially fourth

don't I So, know if helps. that

Jeffrey D. Hammond

this Yeah. when are That's make model when destocking. of kind to destock, just last as that whole mean, inventory what way? out you you And is destocking you're progress not like that lot it destocking out, then, do one of the seems it the do or think you going perfect. on destocking. When you I year assuming think of a that

Kevin J. Wheeler

think I its by driven the recovery. economy that be primarily in will

So, And we're down, primary that some inventories drive look the about economy as we continuing we again, be sure, it, some that will XXX% we're is, for returns, now, the right to of down. not use driver to the drive talked us promotions that at but inventories when QX. our in as

Jeffrey D. Hammond

Okay. Thanks, guys.

Operator

And your line Graham of Scott, BMO Capital from now your next open. Markets. question comes is Scott

R. Scott Graham

Yeah. when Hi. Is company, John. understood to take your just your the to as there, sure day of I goal you're X%? that Is saying? statements organic morning. X% Good make down want a what one you, this official I

John J. Kita

modeling think from X%. is is where growth in it a about and the what I we we that's mean, doable, if when, past. is did talked are, objective, think what I we Scott, at you've quite reasonable model obviously. the said then XX%, China And we the grows frankly And certainly

You have XX% billion difficult. now so a business, numbers. of We $X.X have large becomes at law growing

recovers, we X% China as is that achievable. forward, you, we tell economy once And think so look would I the

R. Scott Graham

– you all Right. But Thank very John. that's think you. helpful, then, I

more it that on you putting be I for times, these sort words say in you things you I well want am mouth? organic expect guidance in Is as of of I that I also U.S. which some is period. what this ask heard year your China, during that, about turbulent the in think that, then your as going to kind

John J. Kita

the question. sure not I'm

the goes more we've in I then at will tell addressed. what estimate, two weeks organically become up said starts currency, some in is don't what little trade. our And on about you preliminary, that year, China I the the is you. year, discussions X%. spending, bit We levels And about were see pick X% this look when we at we're China And all turn happens consumer it's that to issues growing to paper saving it's got So, next and you these would ago. think do they're in will and growing and see anything by turn. the if year TV And to local But of there think middle have the best there's say people, but saying China's X%. confidence imputed instead look at X.X% is we next a China trade the year we as is again, as on growing of billion a now X.X are way class they down.

of So, we the look the think much at continue grow but model as more have China into XX%. Lowe's addition have as boilers we year, price increase, next is America is as not as and to we the we North

R. Scott Graham

an consider – in in this side And the why on is It I a frankly you're is organic residential, North maybe heater looks the sides, some that triangulate America to getting that when as were that Got of digit. to to pricing destocking correct if Was close in you. we realizations America, maybe type in well, volumes. particularly – were America? idea down number would if total me on is assumption Yeah. toward sort weak of commercial as North want in see that there volumes the as both On quarter? which just North we it replacement-oriented is water the what low-single

Kevin J. Wheeler

that we we talked then, we And when larger anticipated. very at much indicated as QX, looked that, us it a it into was strong. weaker. And QX, you to was tell was it there as would about, got than what pre-buy we I

going about there. a But will pre-buy to how been poor So, again, very executed balance think into you very which And it's as be how you, be out this can is for October in coming solid predicting and were and in been going look a increase an larger I've initially probably had rebounding attribute we similar. implemented forward it QX, that in is too to We the well. be QX, this QX to adjustment really we a made. a We I there quarters We optimistic. I XX years the always proved think But we had and industry price we adjustment bit and going September. and a see tell we look has thought. at between in in to growth the gap, of any out than difficulty

John J. Kita

is completions the think be up probably with other and thing, are we XXX,XXX, I And to XX,XXX. you're to working still XXX,XXX industry up that Scott, forecasting the are

these the So, the quarter-to-quarter. probably year. strong saw industry XXX,XXX, But plus for quarters. we volumes XX,XXX having I XXX,XXX a XXX,XXX, so a about replacements talk to being couple we're being up as first because mean, fluctuate little we said, can up Kevin saying of are in we- as you optimistic still When completions we're

R. Scott Graham

Understood. Thanks.

Operator

from Charley, line your comes question Brady Robinson next Charley Your Humphrey. is SunTrust of open.

Charles Brady

Pat. and guys morning, Good

Kevin J. Wheeler

Good morning.

John J. Kita

morning. Good

Charles Brady

you on margin in sense, us China, Can one-off permanently rate taken margin expansion was on I of popped a slowed up incentive. of got just some kind of has we've you out there I obviously a had probably because out a you some there? QX, costs or lower really aberration give sort QX the this – that commented see in the the I for XXXX. you employee mean, – you guidance on the

John J. Kita

Well, the at the somewhat third objective, to. the going to fairly that not optimistic quarter for as – to to through be their meet quarter, midyear it they what were year. became point going bonus got But were – obvious was through Charley, at they the we way would prior similar called looked so able China we which that the have is

an was down quarter. there So, made third the the in they at accrual adjustment that had

look have the think to what booked of first quarter third at look you some in we had benefit because quarter. margins, cetera, of year-to-date, of the et to I because kind there at was kind and it second the in

Charles Brady

reversal to I'm a Can what have get for a rate been? margin in trying would volume guess, of to China, I normalized given would that World. Rest you been normalized quantify – QX the what what have in

John J. Kita

close reversal Yeah. a of accrual, the if It was $X will. you million to

So where we stand now pay. quarters to at the end of be the third you quarter is which expect is what where you three should of

Charles Brady

the Thanks it. tried sales much. to you the as XQ Lowe's, where treatment, Got on as U.S. there And out you a been very look or some guess, in in the commented even have I – up market just little rolled we you and you've there ramp was pushed XQ capacity. into upon expand that XXXX? Can disruption bit from to into water

Kevin J. Wheeler

capacity our about The our issues Hague up the That double the labor to we Columbus. But going some there. to in Everything equipment part, facility according – had we we plan. did have in. was talked disruption at most came that for was

quantity to needed Lowe's. unable were we we So, produce really the for that

about on – remarks $XX sell anticipated we'll mentioned million $XX million. – are as be $XX now. at the track we're but we track to on close you're which – million to we And We Lowe's, that back expect looking to I in to

it the centers. stores and ramp one the little get us there's bit that longer took So, in inventory a into to disruption up there. and no their just But for distribution there'll to be

Charles Brady

for you can of you continuing water that of of a Thanks distribution. then, the see water in the M&A made North you there, you're piece in in an track, a And bigger kind you kind just of additional mean, America opportunities got the building Lowe's see area, I on North opportunities a perspective, make up that. terms to that's platform, few America? – in you the talk about just market acquisitions

Kevin J. Wheeler

this From segment. opportunities – entered that we've treatment I are as side, water we've the demonstrated business there think particular on

acquisition back the portfolio. look widens building several acquisitions been other years, ability treatment you and It have certainly didn't that parts business. even with of we've business. recently the look If and for will of we complement And water to lens that Hague, in a the Aquasana the then China our for acquisitions through

is and to lenses to is answer, look – look is forward. Absolutely. for have be again, the continue also to our additional right And for opportunities we'll answer complement for The expand certainly, we'll business companies enhance for those out yes. wider? right that our it the company. So, our I'll acquire and the treatment continuing our But there to right we there look the in for and to business opportunities business, water and our fit return are going capabilities?

Charles Brady

you. Thank

Operator

question next Michael, comes open. Your from line Baird. from is Michael Halloran your

Mike P. Halloran

Good morning, everyone.

Kevin J. Wheeler

Good morning.

Mike P. Halloran

Does and you as growth see to for the forward next you just variable the guys to World lot So, Rest questions. back opportunities, me, a rate? top does spending drive process? impact the come promotional lower margin you Because, one of next of year margin that segment those all at comp. lack year into But from that margin move and the in growth I all as things slower a rate, growth. calculus certainly your understand dynamic a to line change that how magnitude has growth – look leverage incentive the of of obviously, opportunities at around

John J. Kita

our we it next will. right selling take from to our rightsize standpoint closures, – certainly, direct accelerating nonproductive now we look in stores. Mike, example, for hard advertising yes, we the a recovers, at year mean, very going as budgets primarily. are go freeze to which our expect it into very and until market the store closure of a – an the I – SG&A And, hiring we're we're We're putting

Mike P. Halloran

Thanks. That's what I needed. Appreciate it.

Operator

from MacGregor your your line David, And David Research. is next of comes open. question Longbow

David S. MacGregor

you. Good Thank everyone. morning,

Kevin J. Wheeler

morning. Good Hi.

David S. MacGregor

I'm heaters, you and water have just versus ASPs? covered this just it. did I units China may But have you within may about the talk wondering, missed

John J. Kita

I they're pretty think Pat, right? similar,

Patricia K. Ackerman

Yeah.

John J. Kita

The similar, is yeah. decline pretty Yes.

David S. MacGregor

not Okay. all America mean, there. down. it And few the that morning happens, the confidence points that Chinese the then, sentiment, consumer, the with in like, consumer. this familiar the weaker you just the call consumer trades about seems talked But I I'm I typically consumer weaker when a over guess here weaker in

So, just you in this that's wondering, extend over your or if a are that? standpoint, mandate you line sort from require product you that more seeing and market there? them trade competitive just bring for conflict does the structure down and adjust case, sort And kind does of of of I'm to down mid-price point with

John J. Kita

mean, we're in what that that I for you We've necessarily category we ago I you the online moved more X,XXX bringing and don't trade-down, some on are sweet year seeing. that I'll we necessarily think out, the is, market, if especially talked you to I'd trade-up I'll the not that happened spot X,XXX, prices some that it then in say of been raised Well, were them, call seeing previous about products had call the mid-priced of the, calls on but see we're our a RMB out RMB think category. and spot. of in,

would don't that if up. trading from down. So will help But attack as bringing high you some we think next a you us confidence But end said, I of haven't the consumer sales we say which now, see think, products them we're year. probably I back wanes, trading to market, seen

I really than seeing it, is rather they're point. think spending. That's saving what we're

David S. MacGregor

question little second the model the is and just bit. across maybe here And of kind Right. X% slowing just growth if the a X% now

to making looking there's it sounds with at and at lot water the the But water of commitment a a of growth, listings thinking category? kind start Lowe's. heaters you tankless differently for by a progress sort little start about that Thanks. the now maybe like do about certainly treatment. bigger way on platform of think you next potential Congratulations the As in and

Kevin J. Wheeler

tankless market. made have I we new products Well, in so the represents bringing and systems tell tankless And commitment in would X% of them the rack on that U.S., you the about commercial forth. with today, total category a both to and out and

is So, the we look the way are at in hot we water business. it

for is one the to And water to is provide a our other. solutions customers the that a is it, consumer much and is it. towards we or channels. tank solution trying provide so, guiding which And of various technology goal. And tankless again, our various growing, component also component of best hot so Not in

in tankless continue compete, to So tank the out overall, on as products as new that we'll side well the need to technology of and bring invest we business.

of we issue consumer's is need have us it's of for than from to tankless hot go be we rather solving to would a market a water perspective it long both because term. in I the products that as a competitive So, more those more at again, look

David S. MacGregor

very you Thank much.

Operator

Lacayo question comes Alvaro from Alvaro, line is final your open. Gabelli. your And from

Alvaro Lacayo

Good morning.

rate growth the shape bigger didn't to questions. guys how Just in quarter water heaters seeing of long-term you you're guys seeing I sort the are for are was it whether boilers. One, seeing, X% X% incorporated cycle what replacement what up? the in guys in then are you for how question and it two the secondly, for or hear thoughts And and hear it it's the how it's small residential that seeing however Lochinvar U.S. picture, updated you incorporated I on separately and the – quite some in growth level or rate wanted be

John J. Kita

was a we about little $X to Condensing up you driven boilers year-over-year the of X%. of to non-condensing down was tariffs. heater there. also that by down mixed maps and bag China quarter, were directly believe the well. at quarter bit about look portion were – I mean, that the was that for They And water a boilers last Their water compared $X did third their were then, to residential and sales the heater million down. distributor million X% Lochinvar So, whose business, very when year's

When were of we to over the product year whole X% expect at be them up up the portfolio X%. for look we full Lochinvar, they almost at year. the and look So, we

But gotten and And work past, XX We've goes curve. way XX.X very to out data. we've kind all was drop the of to talked is the forward? how you're question replacement done second at assume of you're XXXX going amount elongated replacement fair It bell The modeling is from the to of, do We've I done plus-XX. the really XXXX. talking a as it's the – the in water some about lot what from look in modeling years. X a industry we a about heater. of heater water

over In fact, years. replaced are XX of half over in them

time. I million industry X-plus-percent. water talking you the then X.X industry through an that so about incorporate those is we're when some at then, going of wide spread about that And you houses be very of and heater housing are estimates estimates incorporate XXX So, muted XXXX, a has And and when units, we look think we'll period it's over think and we at BRG – be stock, the to which million of that.

that – that we is growth talking in X% the think reasonable. when So, very were about X%, we

Alvaro Lacayo

you. Thank

Operator

our that turn concludes Q&A today. And Ms. back over now call will I for to session the Ackerman.

Patricia K. Ackerman

today, day. very have you good joining and much us for a Thank

Operator

call. this does And today's conference conclude

may disconnect. You now

A. O. Smith (AOS) 30 Oct 182018 Q3 Earnings call transcript