AOS - Earnings call transcript Q2 2019 | A. O. Smith Corporation

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Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2019 Earnings Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn the call over to Patricia Ackerman, Senior Vice President, Investor Relations, Corporate Responsibility and Sustainability and Treasurer. Ma'am, you may begin.

Patricia Ackerman

Good morning, ladies and gentlemen, and thank you for joining us on our second quarter 2019 results conference call. the Lauber, Kevin Chief in Officer; Chief participating Chuck and Financial me call Wheeler, are Executive With Officer.

release. will of Before I we to comments your some constitute including would remarks, during that the like statements matters to questions conference to be press begin risks remind you forward-looking Those risks that different. this materially have answers include, could with in call, be cause These made statements. Kevin's others, that forward-looking are subject among we this will that described to actual results morning's

a question and yourself As courtesy please to per follow-up the others question queue, one in to turn. limit one

have questions, multiple the rejoin you queue. If please

X. turn I who over begin the Kevin, slide to call will our now will on prepared remarks

Kevin Wheeler

solid good and future steady us be to Excuse several to elaborate heater Pat, in items ladies which performance financial early and you, pleased Chuck heater position despite America one, price our on water operating challenging, moment. North gentlemen. And for of year. August last effective up expected America August, announced increase We China our Thank a remained actions, North highlight success. I compared with Number water am to volumes on wholesale lower and our me, while will particularly X% performance just portfolio, Xst. in margin continues morning August. a help

previously with represent China as our Continuing the branded has wholesale our as transition Hague leverage our customer-facing the been for months. O. channel. portfolio the our moved we the path to channel so which joined more and expectations over elevated treatment customers We sales normalized year, towards back as one XX channel, levels, we launched to together, half inventory the We past in dealer revised discussed, into U.S. our of a in Water-Right distribution strategy quality well. water channel, Smith organization our water gone has and A. that sales

now more detail, beginning slide on will X. our Chuck describe results in

Charles Lauber

million than Thank in quarter of you, XXXX. of in the America second of with to heater in quarter pre-buying declined X% segment compared price North tough our increase due lower in Earnings the the partially of second XXXX. same a the $XXX quarter share Sales XX% driven second were comparison, X% to declined million per residential $X.XX. mid-XXXX quarter quarter earnings second for quarter Kevin. XXXX And the in in XXXX. offset a declined second Sales pricing volumes quarter second X% a $XXX $XXX water million by by the of advance were the Lower actions.

over acquired with compared In the China inventory approximately build, $XX were the added currency repeat did million sales not addition, currency India in the $XXX period of World XXXX grew XXXX. million. by which our sales Rest of primarily local channel $XX in XXXX. constant Chinese related to XX% down in to occurred currency, the of same weaker million recently impacted and translated first unfavorably previously disclosed XX% sales sales with of in compared same sales. The approximately in declined half quarter Water-Right business XXXX. XX%

unfavorable earnings more higher XXXX. than lower in steel heater lower were X, by water actions than impact quarter and volumes segment X% $XXX same the pricing the were mid-XXXX Slide a America of North and from from other in On favorable million segment earnings offset impact costs the costs. The

by more sales Weaker benefit earnings SG&A approximately China lower currency of negatively lower year. same China result, expenses. lower The as XX.X% than impact was translation the sales quarter to the impacted the from last essentially of offset XXXX to $X -- from declined million margin compared the XXXX. As a segment with $XX World quarter of Rest earnings of XX% million. second profits profits second

As of X% a same compared to XX.X% with the in margin quarter the of result XXXX. these segment declined factors,

expenses corporate quarter of lower than were lower year, in compensation. higher quarter Interest early in incentive-based million year Water-Right last were the due to Our costs the acquisition the a ago $X.X primarily to compared in due second April. quarter of with second the

earnings expect working For XXXX in cash the flow a investment year, was the from million. $XXX resulted capital million to than XXXX, in Cash $XX million we half operations the interest period be expense of by lower of during $XXX a of and approximately lower higher lower operations. provided same first

liquidity Our and strong. balance remained sheet

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

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

shares the of for authority a at million existing the remained a half million. total X yesterday, common shares cost we approximately million June. first at stock approximately pace we of $XXX a repurchase X.X purchased of our the X.X end XXXX, a shares Approximately of million approximately During $XXX to of repurchase on Through accelerating valuation. repurchased due million, of our

continue market that China to the us customers they third see headwinds We in appliance inform China. from reduce recent will And the our in quarter. indications prolonged for in orders

the we our XXXX year. EPS $X.XX midpoint compared have revised guidance and $X.XX result, to share, X% per of a between a to decline a As range at last

primarily in million in earnings. XXXX, from to compared due our lower be operations XXXX $XXX cash with expect $XXX We to million approximately flow

amortization plans in are Our spending million is $XX approximately be $XX to XXXX million XXXX. approximately and our capital expense expected depreciation and

XXXX, expected than be other Our due corporate are inflation. year higher slightly to last and in million approximately to $XX expenses

Our expected expected to is effective tax XX%. rate approximately be

of XXXX. shares our We in expect million $XXX to amount repurchase the in

We $XXX be a million. in expect approximately will outstanding XXXX our shares diluted

Kevin, back Kevin? business assumptions XX. to guidance XXXX, I on beginning turn slide call will and for the who summarize will now our

Kevin Wheeler

Okay, great. Thank you, Chuck.

boiler and the heater assumptions. expected project residential We weather first shortages X%. sales be in labor down stable, outlook be industry are Our in new to to units includes but appears lackluster XXXX. due home X% as Commercial to the India sales We up EBIT XXXX XX,XXX delays. in profitable heater and in approximately our water treatment replacement for the following volumes XXXX water expect industry will to for water U.S. growth be XXXX. construction heater North year. positive to XXX,XXX project remained on boiler be of America will in in full Overall XXXX half, we will X% continue India, improvements be to grow we Based water for volumes

in it with and see prolonged year. impact Our first essentially in all last occurred forecast for headwinds where is than FX Chinese channel the in the today weaker XXXX and the the continued XXXX. currency of negative Essentially We in level of half is China. appliance

performance treatment water heater quarter showed second overall X% tankless electric down was to X%. to to down down analysis gas the party of heaters in X% third market X% water systems water the and X% market Our X%,

discussed, XXXX of estimated half previously first XXXX. increased As sales due China to we the in inventory distributor primarily build,

weakness We XXXX. the China demand consumer year are for in continued assuming full the in

our months. We continue level to inventory to to would a two inventories, quantify while improve process three we be seasonality, experienced normal

is current months. four view that approximately inventory the is channel Our

impact three XXXX inventory Based year in expect decline, half currency XXXX year to on channel we of conversations of with decline XX%. the XXXX. is to are and the our channel local the our normal approximately recent Due approach to end with key the be terms. our expected over of of by projecting of build a XXXX sales translation, inventory Combined the points approximately we with expected levels inventory channel currency levels channel to to decline full XX% sales the unfavorable XX% customers, to projection down XX% back inventory

breakeven. XXXX. quarter third channel on will headcount and expect a quarter in slightly margin of sales contribution be XXXX will sales, to We will We compared down decline mid-priced to have lower -- to higher margin of plant we reductions expect Due operating XXXX XX% the third the forecast mix quarter inefficiencies, China weigh margins. third China products in essentially

the expect the fourth declines. quarter similar as quarter strongest year, the be the performance We channel offset continued to expected is inventory typically quarter quarter to by of fourth second

Please advance Slide XX. to

our we grow X% up $XX including continued America water Water-Right expected momentum XXXX, North to treatment -- collectively in to million continued heater, see boiler We and products, in sales. with in water approximately

India Our is profitability also and encouraging. sales growth in improvements

the are for Our and the to business model we in China region is committed long-term. solid,

in navigate economy We as China have challenges the remains near-term weak. through to

stay the X% business. is right-size distribution inventory customers channel our we the down be they structure by We in to projected will dollars currency. project cost in and EPS to and local $X.XX. continue worked revenue to as our We between and decline year close continue to X.X% X.X% to U.S. to $X.XX for to review X%

We approximately XX.XX% of X%. XX.XX% to between be America's segment expect segment to and be margins Rest North World margins and

treatment water us and to water shareholder in stable drivers volumes, solutions approximately Our North XX% India, represent our across the long-term boilers heater balance and of well strong markets, America favorable replacement boiler coupled growth position sheet value. in we which North with and demographics China enhance and America believe

That our remarks. prepared for now And we available your are questions. concludes

Operator

from Our Instructions] question [Operator of line the first with Saree [ph] comes Jefferies.

is line Your open.

Unidentified Analyst

lower price XXXX update and about the Good North into increase the costs? morning. thinking America of Could then half how maybe year cost today in on steel you're in you us price announced second given and your

Kevin Wheeler

about action. talk we been typically offset costs pricing increased I able historically; to been, price. We've say would don't we've with

rest -- increases be Our will assumption year. the of is month steel some in seen level some you steel in or And up. prices be will prices have it last and for that may that on currently steel this our forecast assumption recently the tell that forecast going -- I'll like we we be indication it this

Unidentified Analyst

in right-sized I do this you you then, have conditions? believe Okay. believe the business current China, for the more lower And have given previously would reductions already with done market you but headcount you outlook or reduce

Kevin Wheeler

as to we the have continue to we'll review going aggressive. we're be business, and No, always

first about headcount this that reduction was the in XX%. last first of quarter completed We year. The

there on make to And that that planning SG&A are continue QX. our spending we're appropriately and then scrutinize productive reduction And appropriately. continue stores. in additional the an at going to We look and sure we're investing close to money to X% we

end, will we'll to aggressively it, the to right-size the look current so and and And as adjust the to at we was the as business environment. we at business continues our market evolve,

Unidentified Analyst

helpful. I That was appreciate Thank it. you.

Operator

following Thank G. with you. And Research. Alvaro our comes from Lacayo question

open. is line Your

Alvaro Lacayo

year-on-year that wanted the us see, mentioned you the know of taking But World big for to visibility end maybe of you about to that the -- quarter inventories I of or in step not I in start numbers this towards you you in terms declines your the with you to you just they see be questions. going last if stabilized of volume that from for that's more quarter, may you the what found could highlighted has year. categorize talk and the could change have you could try bottom view about my terms declines? has visibility a normalized and given if Thank believe the forward? maybe Rest And that or

Charles Lauber

is This Chuck.

Let China. me about little just a talk bit

the continues. what is So economy past weak in the and about that we've talked

said conversations telling order be So where channel our remains roughly really and seen elevated in to with has talking assuming of weak call, X% continued that as has that going customers we've are we had inventory since XXXX. is elevated down has that visibility last June changed. the our less X%. The third not outlook inventory changed that to we about see about We've We've we've changed. channel come quarter. in we'd to What's the inventory, out talked they economy also of started talked not assuming really recently, been at or customers, it in us flat June about

the quarter Now, of typically last quarter our on would strongest the in the fourth we strongest and see call typically in inventories we market, this is quarter -- go about up. because talked third call year's

what visibility the What be at in at inventories we clearer out is year, went third least and at we down to our and out of roughly it would by level last of would a -- at. of that of the now scrubbed a and we're clear the we those certainly XXXX think we weeks, couple have an in inventory see come the we've that quarter going looking we start have we'd the and we at assumptions that expect in year, the end picture

channel three two more the end inventory and really, we'd of So into flushed be Kevin to this the to year what out, out really went said, and reversing the that levels months normalized inventory by year. back last

Alvaro Lacayo

you. thank it, Got

Kevin Wheeler

after we previous and I've add And And go the based have watching inventory what -- to to best And additional just visibility our aggressively outlook all to this continue certainly bottom given back believe to in on but you as and going that, had to Chuck and into those needed, sure caller, we've if are to do believe business, to on hope make sit the that we said that adjustments we'll is bottom. right-size we're so. hope the what mentioned the we our hit that still the the business. we're

Alvaro Lacayo

mentioned And in already how you us initiatives that terms the previously; quantify initiatives reduction of can expect for you you taken? the cost from you've much maybe savings

Charles Lauber

Yes.

$XX it's associated have is within So quarter, year-over-year be little half severance SG&A for investments of because a to less approximately headwind The million the some do split that's bit Think back advertising in reductions. for first half half, we that amount. we've the back do of we're costs There savings that's the terms fourth equally. year, -- the with category. would the in got the $XX going and on headcount to that little to back some of the but roughly roughly half as is a million

Operator

comes McCarthy of And our the you. Thank following Stephens. with from question line Robert

Your open. line is

Robert McCarthy

everyone. doing? you're morning, Good How

Kevin Wheeler

Good morning.

Robert McCarthy

Good.

where I to talked range. guided question us margins kind then guide the you the the to full Could the in you year? deleverage for through initial what X% year, Could some So get through of you walk the was flat what's quarter X% kind of your bridge think about thinking think, guess kind there. you XX% you've think volume bridge China sales from third that restructuring, buckets, you what's the just just for XX% because kind in of and in of the first I full are deleverage, a I of us is

Charles Lauber

Yes.

of kind big just I'll bucket. the So take in it

rather bucket. So quarter. the It's the big we coming third inventory in talked that's about pretty down, acute a

the And when comparable the some quarter, that's of then to first got kind that before gets inefficiencies that plant something we're And So through quarter quarter. pretty had down about XX% quite thinking expected year. we looks the level, like quarter us fourth bit the you that is from to meaningful were a not third quarter. we've at find third look have which to last second

of a still we plant. more So higher a little on some back bit inventory, a headwinds to but that get through not bit the we channel volume but little runs normal, have level normalized,

quarter lower the first gets quarter So buckets hit -- kind when hard you of I'm the sorry, second fairly take all together, by just volume.

Robert McCarthy

this a sheet follow-up, the traded I But lifetime of right are Okay. balance about a anticipation of there terms your has given of a cut going And maybe today in an has of your how growth on like you're China terms you then in maybe organic what's intraday. in thinking story. as the fight in mean and nevertheless, now M&A, of how been perhaps considering, stock obviously it looks bit

would If aggressive you in standpoint, terms a you buyback. market you've the you of do redeployment sub-optimal being consider material see from with got a share your fact that a break balance stock, that's may be think sheet cash given very

a business. you might as it, of to you discount business get be If think you in kind do XX at this next your over How the environment? months substantial able about about restructure right-size think this that you

Kevin Wheeler

we I would to is think China, bit mean get expect of inventories Once operating end work we Well, China the we through more back would the change the just through normalized by I that, we'll year. have the that a performance. we

changes China to them work seen in year. the end have of certainly by we through So we're going the and

at of to of our million projected $XXX year. So shares back we're buy this million to going we're thinking balance buy shares or sheet, least of back $XXX

continue do to we're that. going to So

track So repurchase did last to than we year. we're more on

Charles Lauber

a challenging in that little China lifetime. a about to fight environment. are it won't To we I Certainly, bit. categorize of add a a on

come We have gaining end our team organization. we share. through an are that Positively, way mid-price the excellent products strong to these management great that's have we'll challenging work going and as other point times a out some

QX. than higher was QX in share Our

there has So and been is -- there

Kevin Wheeler

you of trading look a We won't business. our to be it, other effect growth. at China the believe middle our look comes when as growth as it place down, noticeable out, to move meaningful I at has still it urbanization, no brand. been we any into to look when the And has still long runway, China really long-term part a class. want No we And the would the than there

So short-term yes, some we have challenges here.

bit how We We're continue do we'll have we a making right of the in come do to believe the the best the know environment be world. advantage current that. markets position moves in place. And the We we one in out We'll company stronger. the in the as we'll then be and team moves take growth that. probably are the and other leaner be to side, of to will

again, we going So challenging under it's believe the this of us team it important our through to have our has way do we're do sight management line to doing. But environment. to things we're for and what manage of I control a

Robert McCarthy

Last question.

has than very to over organic be America? had years stable growth several the the in organic more there is the where growth past in fundamental solid you've see think it, terms forward timing you and -- anything and you've time going give great you've margins could organic long-term been delivered, the of increases still good is or that cycle of has would obviously changing U.S. the obviously you you is obviously But skeptical what Given do this U.S. that slightly for the horizon you negative feel about could that because on been been which market the outlook got you and impact in for pause still, where that's be just North been price margins that great. and going just challenging it some there, I've have and you see you changing growth

Charles Lauber

look and an we we construction. sales certainly of market your the as first, look believe answer is we when in to heaters; look organic look residential to builders May so what units. our a there there a our industry be water a and XXX,XXX in with wet is, forth. still believe out, limited sales down growth it's And at The the June that's of And we question units. think new there. we been about continues another through our What's it, going has stable as at There most were you we on in to going down spring XXX,XXX Yes. if opinion shipments be the shortage the labor impact at

in we have we But American to the very stable lot a believe range. our we no Water as market. think again, So And don't go full range. with go XX% up we there see we still reason North forward, have the growth the XXX,XXX and to labor can somewhere forward, shortages just a it's going will important, We opening the more to grow that replacement make decline said X% X%. that units. We think at a we are heaters at change in our be pattern. comments, XXX,XXX the to we industry is out as what's continue

move the but this just So feel the no, less start become good really long will We the And continue answer, was that labor as is think forward. market issues. is, some weather-related that America. North the answer construction a to new we shortages to in hopefully no, about

businesses. our on either So, of in outlook North our no American change

Robert McCarthy

good seems believing luck. today. you to Well The gentlemen, market be

Kevin Wheeler

Thank you.

Operator

next Summerville Matt comes with Davidson. our And D.A. from question Thank you.

line open. Your is

Matt Summerville

to the Thanks. China? in so you long A. taking O. to Smith Couple the situation either or think do of Why it's inventory questions. react channel

Kevin Wheeler

had We've China. in slowdown prolonged

and a It's been month. we've channel. June level the slowdown. quarters So a favorable appliance month of a typically talking number that for promotion is elevated high the the been prolonged it's about

prolonged customers there said, bit. maybe as level And as prolonged believe in expectations is high just were of I our I some it's June, -- downturn and is, think of disappointment the the a to wasn't came as out what what the in perhaps we de-lever the time base. customer June

channel inventory would I QX with expected it was and data disappointing. year wanted flush you those and those levels So and into know would last pretty little and out say a high went points, the that we

of So looking when in they've start quarter they to decided the looking June historically last maybe front of start points see and customers the look fourth at take when our them, action what -- they in third data back and quarter.

Matt Summerville

out give buckets? as three the in granularity the flush then between can expectation and business, water little actual for you you purification QX a more the for full in year performance year expectation bit is water what and if maybe QX China. and in your So to air treatment those heater business Can

Kevin Wheeler

let and kind heating of out me Well, treatment. water water carve

inventory So year, the you our treatment was over water treatment, XX% channel know for XX%, we largely of look the sales. about business or expect of the quarter, channel flushing on we about down at be water course reduction would to our When water down impacted. treatment the

consumer customer demand If you look X% the at and the about kind sell-out, it's to demand, XX%. of on seeing up probably what we're

the little kind seeing we're a look So of right. mix, got The positive you at heater, bit there. water to

So We We've we've on have new side. mid-range heater priced introduced the products. introduced headwind some water do products.

of XXXX. we Our year see the the back we've is similar of and XXXX to We year be as assuming the But for XXXX the fairly that's consumer half slightly the downtick the rest last consumer for from half of saw what year year first demand. seen of as -- first the to be to demand far year. on outlook we're last half similar

Operator

from Baird. comes with you. Halloran Mike question And our Thank next

Your line is open.

Mike Halloran

everyone. morning, good Hey,

do versus think So the moving And assumption timing here? China the what's as track lot machinations forward you this year lately? just year. [ph], you of relative to market that's well in there's from Performance of continuing when the categories, product are last on guys a as that, core how inventory the just manufacturing

Kevin Wheeler

is the that us share. Knowing market for best tracking

forward, the have products We're of good our our points market. you if exceeded products, acceptance share a of started point couple QX at we look go year we the at in product our in And getting market -- QX. mid-price we categories, new down overall, really so, as but

hold, down but So holding. premium it's as to is channel of channel, points as overall, overall far -- and couple continuing a the the the it's

continuing So as share our with as to we go the as business online momentum the we're fair offline. gain on forward, we our and side believe of we're getting well

look much because think we fair were couple so the down share and we're side in so. sell-in our get on it. share for to of perspective, as possibly back We getting our not our feel continue a move that's overall, that half we categories sellout inventory share So a of fair and up market we we'll a point or

Mike Halloran

Kevin, or So that that the commentary well? to as was exclusive treatment did heater include water business

Kevin Wheeler

It includes both. It includes both.

different have three of the three talk, Chuck in we getting be fair we that comfortable outlined, main As I so but many all those share our categories, categories that categories. we'll feel

Operator

Thank our question Jeff from comes Capital. next with KeyBanc Hammond you. And

Your open. line is

Jeff Hammond`

America Can about share America progressing in North water water plan are share, heater North how on market side? is your just res, Good within treatment? things the to market talk then you commercial relative just morning. holding And how

Kevin Wheeler

very QX. North America levels, were a Well, the let slightly We with up. key all good line commercial share heater take our of back water in market residential particularly actually residential and categories, our on And me question. had our XXXX share

we quarter second and quarter recovered we and see So any in to that's reason going a first soft don't change. we've the -- we had

a outline, we've very -- On Chuck the but had good water front, we've QX. will treatment

Charles Lauber

that Yes. the is happening. be QX incrementally We expect that's better to that -- versus last we and on talked call QX in

business is well. the performing So

well million Kevin Kevin integrating again our track that is -- quarter, as which $XX million, of was Water-Right, were sales the as For it's about mentioned. $XX on

the digits So growth acquisition the core quarter. the rest the Operating us on for for of the kind of in were is business. high-single customer low-teens margins

is we're North So treatment progressing. way with water the America pleased

Jeff Hammond`

give then Thanks. feedback and point or gain just you you're you us price start will really And China, early Okay. it getting on do to on new of product traction? read this kind can when think

Kevin Wheeler

discount Well, it in, product certify. a take it gone the mentioned don't And make products various think past, just and phases; and in a time does mid-price bit I point in price to the have what we it we've point. take

design the category cost We product the with will the actually structure. for right right

do gaps our we half happen it's share to continuing products well introduce a across tankless, the will a continues by still of go And side those have gaining those online and of Gas the do the to of you as second water treatment and new heating, So water our work well. the to residential fill to on few year. we're do business. to bit

the been importantly, products designed acceptance structure the good. that so right have been overall, has the right price could But So more the for with we margins. cost points maintain

we've And in those portfolio a just overall, been balance to well. each So we look out product more few categories. our at of accepted introducing

Operator

you. comes line Thank question And our Research. next MacGregor with from Longbow the of David

is open. line Your

David MacGregor

morning, good Yes, everyone.

where year of price now? that on we're the while give the sense might some from point what be you medium now of Just think mix topic of and can the you a point, us is in terms premium mid-price versus

Charles Lauber

got now, a of back half new. we point year. are A probably the the the lot as work heavier mid-price we're those of Right through products little mix Yes. of

they that they're work new. accepted. product is there said, The inventory, As not well pretty Kevin -- the channel as as is channel down

different. grow points next We to the QX, get be this are this would would price we grow But less just normalize next normalize. but year, And to year. slightly pressure in our it always So the margin, more and will normalized e-commerce lower as expect because expect product, volume. we -- those margins particularly mid-to-mid-price we as we're point we on

us. pressure from it's little to a on be gross margin So

David MacGregor

a are of or talking get some just XX-XX So just proportional from standpoint normalized, when sense proportion? to trying I'm we you say

Charles Lauber

I it to get Off the product top it's But of what dig by than our into going head, I is there more -- and don't change it I'll tell have you for that category. be happy information. to you. would

get that And to of will you. be we that have question, to make so a back it's great what to we a going sure and note -- to take we're sure

Operator

Thank you. comes [ph] question And Nick from Blair. our next with William

is line Your now open.

Unidentified Analyst

outside Good or is cash morning, a U.S. repatriated the the U.S. first much ask the of cash for China in currently quarter? guys. you about and this and maybe hoping half get I how in number repatriation cash a disclosed in if any to sense and from was the

Kevin Wheeler

Yes, did out million half the million we have, and We the or about $XXX of first for repatriated. we've of China it in $XXX year.

to So we and million clear all U.S. did just of $XX the on of that $XXX of of that. cash mentioned million We about China out out in be offshore, that and back we've to repatriated is the

Unidentified Analyst

So million you China the and in is U.S.? is the back said $XX the $XXX from million

Kevin Wheeler

Back U.S., to yes. the

Unidentified Analyst

that. for Thanks Great.

Operator

the line And our last of MacGregor Thank question from comes you. Research. David Longbow with

David MacGregor

two I the a follow-up. I've card. guess get not Thanks going cut been I'm It's row to Christmas quarters taking Yes. for a off.

Kevin Wheeler

not intentional. is It's

Sorry.

David MacGregor

coming well one like down, you're there But understand got starting we noted an question guess been spot material or guys maybe was some just were raw maybe year-over-year I I'd earlier and here, leakage think cost, obviously you contract that buyers, raw you spot materials as on up would are price still and the and that as I to prices market about now indirect supplemental high [indiscernible] that see has part. component by purchases. some

when through? quarter lower the do us the third guess out Do price few but timing? increases help a see question can So have start in seeing sent mills notwithstanding, coming some benefit of for we just the know here the steel I prices is, we the weeks I back, you with letters or asking

Charles Lauber

kind to a what see the in XX of marketplace. you're in We to XXX Yes. seeing lag days

bit that see through of the benefit fourth expect come quarter. third would So little we in a and to

David MacGregor

any Okay. or for there quantitatively? it to us about think quantify way that Is

Kevin Wheeler

from the which No, we'll quarter-over-quarter just go improvement. benchmark, kind is of

David MacGregor

Okay.

to I normalize just a Okay, as a terms we guess markets for discount up pricing distribution that or where play move Do ASPs usually timing opposed as of disparities to play that scale, you how the guess and more that's was distributors also And national your the southern down a does the you for markets. out level does northern of of picked realization? then to something out? our on How were I price the in And people up a national more talk in to acting kind moving on now a are national are they're model. good. it's price pressing kind of national checks of

Kevin Wheeler

detail do pricing implementation of we Matt, so okay? only expected we're company, strategy with to regards not type implement get much or pricing just the things. public on those into And

to keep and so, demonstrated time, the kind years I again, being leave to going to we've able that policy. just going forward. I'm prefer of would it at the is our time at as to over And And address given issues cost appropriate what that. just And inflation

Operator

Thank Summerville have And Matt Davidson. from follow-up with you. another D.A. we

is line open. Your

Matt Summerville

you know can out you're launched wholesale you to of in Lowe's, couple in revenue for the treatment. there. a initiative when target channel A you have Thanks. Do if with first, threw about talk wholesale respect I will? water target a you the this doing follow-ups; what you revenue

Kevin Wheeler

we target -- We right aligned have want channel other into for we it's launched revenue in with that. our What -- for just strategy.

in that growing So water treatment are we're we talk because product excited have our strategy, to into is market at we of the kind range. in will year-over-year XX% looking wholesale to effective about What XX% May. of channel

businesses, look XX% range that throughout grow guiding you portfolio but our water just look to of year-over-year wholesale, XX% of our would in all our, to kind for if -- So at of we whole channels. not

Matt Summerville

If believe XXXX, revenue water I what's for in you've you objective past? business, treatment shared your that's the global aggregate number a your

Kevin Wheeler

Yes. It's XXX. XXX to about

Matt Summerville

Okay. can pause saw with sort of a to Lochinvar and And the what you then longer boiler the to little with of you XX% you X% X% about talk have just growth business, objective you in what gives the target the lastly on maybe QX bit respect of versus term there? side

Kevin Wheeler

start activity remains in wet was talking I the weather the and -- business. side about and with of -- residential it's it side the heating what commercial the over business, side of active. the just The boiler also Yes, market remains the on labor let spilling into shortages in backlog the pretty that. Lochinvar that's our But water me side,

the water the of heater think -- boiler in our be the up labor side of complete business make remains we'll and or to half that solid. the second just So just of shortages business either our It's wet don't weather the because we on able the ground the year.

we market and a coating why X%. our the brought is that's it is to down active. bit But active So

it is the to overall continues forward business U.S. in move -- the So in

Operator

closing now to Thank you. I no call at And I'm Ackerman for like back turn would further this remarks. time. showing questions the Patricia to

Patricia Ackerman

today. on us for you our call Thank joining

in will in We several quarter. participate third conferences the

will Chicago the We York XXst, on New August Chicago XXth, and August on on Oppenheimer the in attend in day. your Conference in Conference Longbow Davidson Conference the XXth. September Enjoy

Operator

you participating a Everyone all gentlemen, disconnect. does great This today's program may day. conference. have thank and conclude Ladies for in and you the

A. O. Smith (AOS) 30 Jul 192019 Q2 Earnings call transcript