Crane Company (CR) Q1 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Crane Co. First Quarter 2015 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference is being recorded. I would like to introduce your host for today's conference, Jason Feldman, Director of Investor Relations. Sir, please begin.

Thank you, operator, and good morning, everyone. Welcome to our first quarter 2015 earnings release conference call. I'm Jason Feldman, Director of Investor Relations. On our call this morning, we have Max Mitchell, our President and Chief Executive Officer; and Rich Maue, our Chief Financial Officer. We'll start off our call with a few prepared remarks, after which we'll respond to questions. Just a reminder, the comments we make on this call may include some forward-looking statements. We refer you to the cautionary language at the bottom of our earnings release and also in our Annual Report, 10-K, and subsequent filings pertaining to forward-looking statements. Also during the call, we will be using some non-GAAP numbers, which are reconciled to the comparable GAAP numbers and tables at the end of our press release as well as the accompanying slide presentation, both of which are available on our website at www.craneco.com in the Investor Relations section. Now, let me turn the call over to Max. Max H. Mitchell - President, Chief Executive Officer & Director: Thank you, Jason. The first quarter unfolded as we expected, with no significant surprises. Depressed Fluid Handling end markets behaved as we discussed at our February Investor Day meeting. Organic growth improved substantially at Payment & Merchandising Technologies paired with solid margin improvement. At Aerospace & Electronics, while aftermarket and defense sales remained soft, we continued to pursue new additional exciting opportunities. However, given the sustained strength of the U.S. dollar, we are reducing the mid-point of our guidance. From an operational perspective, our outlook remains unchanged from earlier this year. As outlined in our press release last night, excluding special items, Crane's first quarter EPS was $0.92, down 12% compared to the first quarter of 2014. Sales of $679 million decreased 5% driven by unfavorable…

Thank you, Max. I'll turn now to segment comments which compare the first quarter of 2015 to 2014 excluding special items as outlined in our press release, slide presentation and the accompanying non-GAAP tables. After the segment comments, I will provide some comments on our 2015 outlook. In the first quarter, Fluid Handling sales of $276 million declined 11% reflecting a 7% impact from unfavorable foreign exchange, a 3% core sales decline and a 1% impact from a 2014 divestiture. Adjusted operating margins were a solid 13.1%, with a 230 basis point decline attributable to lower volumes, negative product mix and unfavorable foreign exchange. Fluid Handling backlog was $304 million at the end of March. Sequentially, the backlog declined 2%, but adjusting for foreign exchange, backlog increased 3% from last quarter. Compared to the prior year, adjusted backlog declined 12% or a 2% decline after adjusting for foreign exchange. As Max discussed, end markets performed largely as we expected. Demand for process valves remains uneven and significant uncertainty persists. We continue to see broad-based reductions in customer capital expenditures, general cautious spending patterns and weaker end market demand in some regions. Anecdotally, we have also continued to hear about project delays related to skilled labor shortages. However, all these factors were incorporated into our original guidance. Importantly, we have not seen any new major project cancellations, although again, customers continue to be cautious and risk remains. We are seeing projects move forward, although generally at a slower pace as projects continue to slip to the right. Chemical markets remain weak overall, in particular in Europe and China, although we saw some improvement in the Middle East and more stable conditions in North America. Power markets improved in the Americas, but remained weak elsewhere, with the sharpest decline in China. We…

Thank you, Max and Rich. This marks the end of our prepared comments. Operator, we're now ready to take questions.

Our first question comes from the line of Joe Radigan from KeyBanc. Your line is open.

Thank you. Good morning, guys. Max H. Mitchell - President, Chief Executive Officer & Director: Joe.

Morning.

Maybe start with Fluid. At last quarter and at the Analyst Day, I think you talked about the expectation that some larger capital projects will begin to convert to orders in the back half. Rich, in your commentary, it sounds like you're seeing stuff continue to slip to the right. Has that view changed at all, or is it somewhat in line with kind of how you're viewing the year earlier?

No, Joe. So, in my prepared remarks, yes, I did say that, but I also made mention that it was consistent with our views when setting guidance at the beginning of the year. So, to answer your question, nothing incremental to what we had previously disclosed in that regard.

Okay, good. And then on the margin piece of Fluid, 13.1% in Q1, that's the lowest margin you've had in a couple years. What was the mix impact specifically, and then, you know, I guess does the backlog support the ramp in margin to get us to kind of where you guided kind of in the mid-teens range for the full year?

Sure. So, margins as they turned out at the 13% – at the 13% or so were consistent with our expectations, frankly. That's what our internal forecast suggested when we initiated guidance or issued guidance at the beginning of the year. So we do expect to see that margin profile demonstrate sequential improvement as we progress through the balance of the year. It's in part due to incremental core growth that we expect as we move through the year as well as our continued focus on productivity as well as executing on the previously announced repositioning actions that we talked about both at the – at the earnings call as well as during our Investor Day. Max H. Mitchell - President, Chief Executive Officer & Director: Joe, I think the other thing – this is Max. The other thing that was encouraging in terms of our expectations, while Fluid Handling on an FX neutral basis orders were down 7% year-over-year, orders were up 4% sequentially. And if I could really kind of look at the process valve side of the business, we saw while on a year-over-year basis orders down 10% year-over-year, sequentially from the fourth quarter we were up almost 17%, 18%. So that was somewhat encouraging, even though down year-over-year.

That's – that's very helpful. Thanks, Max. And then, maybe one last question on Payment & Merchandising. I think you've said in the past MEI typically has unfavorable seasonality in Q1. I mean, you had really strong organic growth there this quarter; it sounds like there was some timing. Just can you help reconcile sort of the cadence you see through the year, and how the growth rate in that business? I think you've guided sort of low – maybe low- to mid-single digit growth there. Can you just kind of talk about what the timing related issue was there?

Sure. So, just consistent with what you just said, we did guide to about a 3% I think year-over-year growth rate. You know, we did see a stronger performance here in the first quarter. This business tends to be a little bit lumpy and aligned with certain projects that are released by our customers. We did experience some of that lumpiness here in the first quarter, and we would expect that to abate. So from quarter-to-quarter it will move here and there, but as we look at our full year projections and aligning to those projects and how they're going to roll out, we feel still pretty good about our overall projection of 3%.

Okay, great. Thank you, guys.

Thanks, Joe. Max H. Mitchell - President, Chief Executive Officer & Director: You're welcome.

Thank you. Our next question comes from the line of Shannon O'Callaghan of UBS. Your line is open.

Morning, guys. Max H. Mitchell - President, Chief Executive Officer & Director: Good morning, Shannon.

Good morning.

Hey, do you have an updated look, you know, at the lag between quote and firm order, you know, that had been an issue in the second half of last year? Max H. Mitchell - President, Chief Executive Officer & Director: Yeah, things have stabilized. You know, I think what we're seeing a project tracker stabilizing. So while we continue to say projects push to the right, they're still booking. You know, they're just been delayed and extended, and as I mentioned, on a sequential basis within the core process valve group of up 17% sequentially, but stable. I think we've reached a point where things have settled down.

And then in terms of the... Max H. Mitchell - President, Chief Executive Officer & Director: What we're seeing anyway.

Okay. In terms of these positive signs in North American power and chemical that you're mentioning, I mean, can you draw any, you know, lessons or anything, or just...? Max H. Mitchell - President, Chief Executive Officer & Director: Shannon, we're learning, you know, we're reading what's occurring for the quarterly announcements just like everyone, and the diversity of results is interesting. I mean, we were one of the first to highlight some potential issues after the Q2 announcement. We discussed the slowdown that we saw in the chemical space and this lengthening of the order velocity. It's interesting to see some that appear to have caught up where we ended the year with what we thought was some clarity and visibility into 2015. We believe that it's playing out as expected. Depending on where you are in the market, depending on what regions are stronger or weaker, it seems to be quite a diverse impact in terms of how this delay of CapEx spending is playing out. Is that – Rich, would you...?

Yeah, I would agree. I think in terms of lessons learned, it's just staying as close to the data as we possibly can, and, you know, I think we've previously discussed the level of detail that we go to with respect to looking at our project trackers, the stages within those trackers, and looking at hit rates and win rates. So I think, yeah, just to echo what Max said, it's – we're learning as well, but we think being deep in the details is helpful.

Yeah, no, I agree. Actually, down 3% was not as bad as I would have thought, and certainly better than what some others have seen. I'm curious though if you – you know, there's anything in the things you're seeing that are actually seem to be moving forward and getting better versus the things, you know, China you mentioned was still very weak. I mean, are there any – is it a geographic difference, or is there anything in sort of the nature of the projects where you're seeing some stuff go forward, some stuff not? Max H. Mitchell - President, Chief Executive Officer & Director: You know, Americas is the greatest cause for some optimism. A solid quarter for orders in power, chemical declines moderated a bit, refining remains fairly weak, but we expect improvement later this year. Europe remains soft overall, as expected. Demand appears to be fairly stable. China is pretty weak, and particularly in power projects for us. Middle East, steady in the first quarter, despite the oil price drop, and Saudi Arabia continues to seem to move forward with various projects.

Okay, great. I'll pass that on. Thanks, guys. Max H. Mitchell - President, Chief Executive Officer & Director: Thanks, Shannon.

Thanks, Shannon.

Thank you. Our next question comes from the line of Matt McConnell of RBC Capital Markets. Your line is open.

Thanks. Good morning, guys. Max H. Mitchell - President, Chief Executive Officer & Director: Hey, Matt.

Hi, Matt.

Could you give a little more insight and maybe just reconcile three quarters of down orders in Fluid Handling and you're reiterating expectations in that business, so I wonder, you know, previously you had talked about process valve orders being down in the first half. It sounds like maybe that's getting a bit better. Is there an expectation that those orders would be up in the back half of the year and that supports the organic revenue outlook, or anything else to maybe give visibility around that expectation for Fluid kind of hanging in there pretty well at just minus 2%?

Yeah, sure. So, as – we did indicate that we would still – we would see continued challenges in the Fluid Handling space as we move through the first half of the year, but we did expect to see things eventually pick up from a revenue perspective. Year-over-year on an FX neutral basis, we are down 10% from an orders point of view, and similarly from a backlog point of view, down about 7% in that process valve space, which is the space that generated the concern for us as we were exiting 2014. As we look sequentially, right, so you look Q2 to Q3 of last year, Q4, and then moving here into the first quarter, and as we set our plans, we had an expectation of a certain order level, a certain backlog level, and we've essentially achieved that level for us here. And as Max pointed out, sequentially in this – in the process valve business on a sequential basis, we're up about 17.5% to 18%. So – but again, it's – it causes us to feel good about our forecast. Max H. Mitchell - President, Chief Executive Officer & Director: It was a difficult Q4.

It was – yeah, it was a very difficult Q4. As we had pointed out at the time, it was worse than Q3. But we feel ourselves as having come off that bottom at this point and gives us confidence into the – some confidence given the cautious outlook for just generally speaking in terms of our guidance outlook for the balance of the year.

Okay, great. Thanks. And maybe then to put some numbers around the EPS ramp through the year, you're looking for $10 million of incremental repositioning savings from Fluid and $9 million from MEI. How much – what kind of benefit did you see in the first quarter, if any, out of that $19 million bucket?

Very little; very little in the first quarter. So most of this starts to come, frankly, in the second half. We do see a little bit in Q2, but it's mainly a second half story, which, you know, consistent with the guidance that I had provided at Investor Day. You know, we're going to have very limited core growth to no core growth in the first half, all the core growth coming in the second half, and then on top of that, a lot of the repositioning and synergy benefits also coming in the second half. I'd also point out that the, you know, we have an assumption on the R&D tax credit being reinstated also in the second half of the year. So as that all rolls out, you know, looking at where we are with $0.92 in the first quarter and balance of year expectations, if I look at what we delivered last year in those last three quarters, what I got to deliver this year in the remaining three quarters, I feel pretty good when I know I have about that $0.20 coming in, or a little bit more than that, in synergies and repositioning, and then topping on top of that the core growth of about 1% at the mid-point. We should also have some mix benefits roll in as some of the aftermarket hits us in the second half in commercial aerospace, in particular.

Okay, great. Thanks, that's helpful. And then, maybe just one last one. That Engineered Materials margin, very strong obviously at 20%. You said that came from volumes, productivity and raw materials. And which of those would moderate over the balance of the year, because it seems like you should probably enjoy all three of those going forward? So why would that margin moderate? I know your guidance is a lot below the 20%, but can you help me with that?

Yeah, so it's nice to – we had a nice performance in the first quarter in particular. On the material cost side, we did see some benefits run in. We would expect to see – you know, from the lower resin prices, we would expect to see some of that abate as the year continues. And RV also continuing versus a building product mix could also be a headwind for us as we look through the balance of the year. You know, overall I would expect margins to perhaps tick-up a little bit versus our guidance, but not sustain at this level. I think the other thing to point out is when you look at the fourth quarter in that business, we come materially down, right, from a seasonality perspective. So I – offhand, I think we're in that 9% to 10% range or something like that. I've got to double-check that from a margin... Max H. Mitchell - President, Chief Executive Officer & Director: Seasonality.

...perspective due to seasonality. So it's really – the next two quarters offset by what we would see as being a deterioration in margins in the fourth quarter.

Okay, great. Thank you very much.

You're welcome. Max H. Mitchell - President, Chief Executive Officer & Director: Thanks, Matt.

Thank you. Our next question comes from the line of Nathan Jones of Stifel. Your line is open. Nathan H. Jones - Stifel, Nicolaus & Co., Inc.: Good morning, everyone. Max H. Mitchell - President, Chief Executive Officer & Director: Good morning, Nathan.

Good morning. Nathan H. Jones - Stifel, Nicolaus & Co., Inc.: Just following on to the last question on Engineered Materials, I would have to assume that a fairly large piece of the margin improvement came from the lower raw material costs. How long do you think it is before your customers start to ask you for them to participate in those lower input costs? Max H. Mitchell - President, Chief Executive Officer & Director: Well, customers are always asking to participate whether the savings are there or not, so that discussion – no, in all seriousness, we partner – we have some great partnerships with our customers, and as some benefits read through, there is an expectation that we will – we will share a bit of those savings as they read through. I think as Rich highlighted already, we're seeing some moderating trends in terms of the raw material prices. The majority – it really wasn't the majority of the read through, Nathan. There was an impact from the volume as well as the productivity. The team has done a fantastic job on an ongoing basis driving our Crane Business System and improved productivity over the long cycle that continue to differentiate ourselves. We've added in the continuous improvement process added colors, added complexity into our lines that the team has on a year-over-year basis driven some nice efficiencies that are reading through as well. So that's impacting us as well. Nathan H. Jones - Stifel, Nicolaus & Co., Inc.: Okay. And then on the Aerospace business, you talked about delayed shipments of commercial spares. Is that something that you're expecting to catch up in the second quarter, or is it later in the year?

Yeah, so we saw, you know, coming into the year a little bit of a lower backlog in commercial aftermarket. It started to pick up I think a little bit later than we expected. March was in particular a pretty strong month for us from an orders perspective. We would expect a lot of that to come through towards the latter part of Q2 and mainly in the Q3, Q4 timeframe. Nathan H. Jones - Stifel, Nicolaus & Co., Inc.: Okay. And then, I think you had commented that orders were down 10% organically in the process valve business. Are you seeing any increased price competition or any changes in the competitive dynamics there? Max H. Mitchell - President, Chief Executive Officer & Director: Not from my previous comments in Q4 and February Investor Day. So that – I had noted a change, I noted a more competitive environment. I don't see it worsening, but I do see a – on large projects, it's a – from an historical standpoint, a competitive marketplace. Nathan H. Jones - Stifel, Nicolaus & Co., Inc.: Okay. But no change from your comments three months ago? Max H. Mitchell - President, Chief Executive Officer & Director: No. Nathan H. Jones - Stifel, Nicolaus & Co., Inc.: All right. Thanks very much, guys. Max H. Mitchell - President, Chief Executive Officer & Director: Thanks, Nathan.

Thanks, Nathan.

Thank you. Our next question comes from the line of Ken Herbert of Canaccord. Your line is open.

Hi. Good morning. Max H. Mitchell - President, Chief Executive Officer & Director: Morning, Ken.

Morning.

Hey, Max and Rich, just wanted to first – you mentioned within Aerospace & Electronics total aftermarket was down 6%. Can you just parse that out between defense and commercial?

Yeah, so overall, it's roughly I would say about a 50-50 split between defense and – between defense and commercial. Max H. Mitchell - President, Chief Executive Officer & Director: It's a little more weighted to commercial.

Okay. Max H. Mitchell - President, Chief Executive Officer & Director: A little stronger...

A little bit more – yeah, a little bit more in commercial.

Okay. And so they were each down sort of roughly the same in the quarter?

Yes.

Okay. And it sounded like from your response to the previous question that a lot of firms saw a relatively weaker January in the commercial aftermarket with things strengthening through the quarter. It sounded like you saw a similar trend?

Yes, we did. Max H. Mitchell - President, Chief Executive Officer & Director: Yeah.

Absolutely.

Okay. And then, just can you provide an update – I know you've got some contract wins on the defense side that should have a meaningful impact, especially on the ground radar side, in the second half of this year. Can you provide any update on or any change to the timing of those, or any changes in your assumptions around these contracts?

No, I think it's pretty consistent. We expect most of that to start to read through late in Q2, if any, and mainly in Q3, Q4. But assumptions largely remaining unchanged in that regard as it pertains to what we've guided.

Okay. Okay, that's helpful. And then, just finally if I could, switching over again on the Engineered Materials side, I mean, obviously again it's the same, but you're not talking about as much, but very good results in the quarter. It sounds like it moderates a little bit as we go through this year, but continues to, at least from my standpoint, surprise to the upside. Has your thinking at all about this business changed in relation to the overall portfolio and maybe is a priority here or an area of focus, or has anything changed from that standpoint? Max H. Mitchell - President, Chief Executive Officer & Director: No, Ken, I wouldn't say anything has changed. It's a great business with a great team. We like it. Incredibly well run. Delivers significant cash flow for us, and we like the business.

Great. All right. Well, thank you very much. Max H. Mitchell - President, Chief Executive Officer & Director: Thanks, Ken.

Thank you. Our next question comes from the line of Robert Barry of Susquehanna. Your line is open.

Hey, guys. Good morning.

Morning, Rob.

Maybe just to start on Aero, I just wanted to kind of reconcile your comments about lack of surprises in the quarter with some timing issues in the business? Max H. Mitchell - President, Chief Executive Officer & Director: Well, one of the things, as Rich mentioned, we did see the spares softness in bookings in Q4, and to our expectations, read through as anticipated in Q1.

Okay. So you feel you're still on track for the 3% growth in the segment for this year?

Yes. I think, you know, if there was any, you know, the comment around – yeah, your point on no surprises, so we expected that softness, just to be clear, on where we were positioned coming out of the fourth quarter, and our expectation for that to rise through the balance of the quarter. I think in the month of March in particular, we saw some nice strength, and we have all indications to suggest that we'll continue to see that at this point as we move through the balance of the year.

Got you, got you. So it's not that anything really deviated from your expectation vis-à-vis timing, it's more that the quarter was weaker?

Not really. Not really. When I look at the segment overall – I'm sorry, Rob. Yeah, not really. When I look at the segment overall, when we look at the segment overall, we didn't expect a heck of a lot of core growth coming out of the A&E segment in the first quarter, so – if any, frankly. So – and it was because of some of the headwinds that we expected here, also some retrofit activity that occurred last year that was going to not repeat this year, so there's a number of elements that within the A&E business we knew we were not going to have strong core growth performance here in the first quarter.

Got you. On the Fluid business, maybe this in some ways follows up on an earlier question about learnings, but you see the process valve business up so much sequentially. I mean, how do you explain that? Was 4Q just kind of shock, and as customers have caught their breath, that things are resuming, or is there really some immunity from the upstream pressure in the mid- and downstream, or just how would you characterize that recovery? Max H. Mitchell - President, Chief Executive Officer & Director: You know, we're not overreacting one way or another. It's difficult to read. Is the timing in Q4 in terms of the way the months played out a little softer than if we look at a different spread of three month averages? I mean, this is what we're trying to really get our heads around and not to overreact one way or another. I would just say that it was as expected in terms of orders that we had planned. I don't know, Rich, if you can....

Yeah, no, I mean, so Rob, as you know, at third quarter, we had seen this coming. We reset expectations for the quarter. We felt like we had a good handle on what was going to happen in Q4 at the end of the year. That played out pretty much as expected, and that fourth quarter was a very difficult quarter for us from an orders and backlog perspective as we ended the year. You know, our plans and our ability to forecast, understanding the data, looking at our funnels and what's going to convert to orders, we felt like we had a decent level of confidence coming out to give the guidance that we did for the full year in 2015. And what we would say here is that the first quarter played out almost exactly where we thought it would as it pertains to orders and backlog. So when asking about the momentum of that, you know, 17%, 18% sequential improvement, it's what we expected when we set the guidance, but still very cautious in terms of uncertainty that's presenting itself here in the market space for us.

Yeah. How much of the op margin decline, the 230 bps, was attributable to the currency?

Oh, jeez. You know, I'd have to get back to you offline on that, Rob. The actual amount of currency impact to margins in Fluid, you know, that's a tough one to give you just right offhand.

Okay. Fair enough.

But I would say that the 13.1% when looking at that versus historical or last year, it's almost all volume. A little bit of mix there as well, because a big part of our business that we enjoy healthy mix on is the chemical downstream part of the business where we have some nice mix profile products which we expect to start to see read through again in the – towards the latter part of the year. But – so a little bit of mix, but mainly volume.

Okay. And then just finally, if you can comment on the appetite for doing more repos going forward.

Oh, uh...

Stock repurchase.

Share repurchase.

Share repurchase. Yes, sorry.

No, that's okay. So we completed the $50 million in the fourth quarter last year. We did another $25 million here in the first quarter. We look at those as being sufficient to offset any expected dilution that would arise from share-based stock comp. You know, we'll continue to evaluate our overall capital position as a business as we move forward. But at this time, we're not going to pre-announce any future share buybacks. But we'll continue to look at our capital structure and monitor all the elements that go into making that decision.

All right. Thank you.

Thanks. You're welcome.

Thank you. Our next question comes from the line of Brian Konigsberg of Vertical Research Partners. Your line is open.

Thank you. Good morning. Max H. Mitchell - President, Chief Executive Officer & Director: Morning, Brian.

Morning.

A couple more questions on Fluid Handling; surprise. The first, maybe talk about just in the context of the guidance, I know at the Analyst Day you were talking about an anticipation of refining turnarounds really to pick up in the second half and that gives you a lot of the visibility and comfort – or the comfort to kind of guide to where you are. I mean, we had been – I guess a couple of refinery owners have talked about pushing out some of the turnaround, just given the margins that some are capturing right now. Maybe just talk about how dependent is the full year guide on that still playing out, and what kind of incremental risk have you seen emerge, if any? Max H. Mitchell - President, Chief Executive Officer & Director: It's a piece, but it's not a – it's not the only factor here in terms of us achieving our guidance. I think the trend is still there in terms of refinery turnaround push-outs. We also actually saw some spot buys and upside on turnarounds that needed to take place due to some downtime that was unplanned, unexpected, in the quarter. And so, you know, we expect some of that to continue to play out as well.

Okay, got it. And then, just coming back to price, so I think you mentioned that nothing incremental has really changed, but you're still seeing a bit of competitiveness on the large project work. I just don't know if you actually kind of quantified what – how much price do you have in the guidance for the year? I'm not sure – I was getting the impression it was fairly neutral, but maybe the commentary was I guess maybe a little bit more aggressive than that. If you could elaborate on that, that'd be good. Max H. Mitchell - President, Chief Executive Officer & Director: No, I think as we view it – the price that I'm talking about – is baked into our guidance expectations. In addition, not only are we – do we take some competitive decisions on price, we're driving productivity in a very, very aggressive manner as well. So offsetting much of price that we see and it's baked into our guidance today.

Okay. So you do have price down?

Yeah, I would say that there's not – we're not seeing and we didn't see in the first quarter a whole heck of a lot of price pressure as compared to what our plan was or our guidance, so very consistent still. We still hear the noise anecdotally that I think everybody hears regarding price, a little bit more perhaps in China. But overall, our price performance in the quarter was fairly consistent or very consistent with what we expected in our Fluid business, which I think is your question.

Yes. Yeah, understood. And actually, just the last one, back to China. So there have been I guess some commentary that some of the Chinese nuclear players are looking to domestically source components and transition away from imports. Just curious, have you seen that impact your business? I don't necessarily think it's a very big piece of the business, but I get the impression it might be fairly high margin. Can you maybe comment on the trends there, and if you see any risks to that kind of coming off. Max H. Mitchell - President, Chief Executive Officer & Director: I think longer term, that's always been a risk for anyone that's playing in this space. That was known from the beginning. It's been discussed. Having said that, it's a very small – it's a small piece for us. It's one that we've been successful with, and actually bidding on some additional content that others are failing at, which are providing some opportunities. So not materially significant for us overall, but not a negative.

If I could sneak one last in, you mentioned building materials in Engineered – I'm sorry, the buildings component in Engineered Materials that was expected to be a little bit weaker. I'm just curious what is driving that, and just generally, we've been hearing I guess the non-res construction component should be getting a bit better?

Yeah, it's more the relative balance between building products. Maybe I missed – I stated it in a way that was a little bit confusing. It's more the relative mix between building products and RV. Building products is doing okay. We'd certainly like to see it accelerate at a greater pace. We see it just sort of moving along at – consistent with what we've experienced in the first – in the last couple of quarters I would say, you know, absent seasonality. So it was more probably relative to the mix of RV and building products.

Got it. Thank you very much.

You're welcome. Max H. Mitchell - President, Chief Executive Officer & Director: Thanks, Brian.

Thank you. Our next question comes from the line of Ronald Epstein of Bank of America Merrill Lynch. Your line is open.

Hi. This is actually Kristine Liwag calling in for Ron. Max H. Mitchell - President, Chief Executive Officer & Director: Hi, Kristine. How are you? Yeah.

When you look at Fluid Handling, the last time you reported similar sales level was in 2009, 2010, so when we think about where sales are today, aside from weakness in the end markets, were there changes in your portfolio product offering or competitive positioning that may have contributed to weakness in the segment? And also, going forward, if oil prices continue to be at current levels, what levers can you pull in your portfolio to reposition for growth?

Yeah, I guess the first comment I'd make is, and I don't have the math in front of me, but foreign exchange is a notable headwind in this segment in this quarter, likely relative to what it was in 2010, but I'd have to go back and do that math. So that's clearly when looking at – when trying to comp it against a quarter like 2011 or 2010 that you mentioned, that has to be taken into account. I think to answer the rest of your question in terms of what our product offering is, you know, we continue since 2011 through today obviously to invest in a number of different new product development initiatives to help drive not only sales, but continued margin expansion into different regions and end markets that we serve.

Sure. And a follow-on to that FX piece. I mean, if you have European competitors who are then euro cost basis, with your current guidance, are you factoring any sort of maybe pricing pressure from competitors, and if that's the case, can you give us an idea of the competitive landscape perhaps of how you could manage that?

I would say the fact that we compete with very similar competitors in a global market space that have similar footprints, I would say from a pricing point of view, we're not seeing a whole heck of a lot of pressure as a result of foreign exchange. I think the other thing that we would point to is that our products are highly engineered, critical components that I think our customers value in a pretty significant way, and therefore price movements associated with FX aren't the driving factor in making buying decisions.

Sure. And lastly for me, if demand is expected to improve sequentially in Fluid Handling, should we then think about 1Q as a bottom in margins for the segment?

Yes. We look at Q1 as a bottom in the segment.

Thank you. Max H. Mitchell - President, Chief Executive Officer & Director: Thanks, Kristine.

Thank you. At this time, I am showing no further questions. I would like to turn the call back over to Max Mitchell for closing remarks. Max H. Mitchell - President, Chief Executive Officer & Director: Thank you, operator. Thank you all. As we discussed, the first quarter started as we anticipated. However, we are operating in uncertain and challenging end market conditions. We are focused on the factors that are within our control, and continue to strengthen and build upon our three large global platforms. Fluid Handling demand played out as expected. We're well positioned for both the short-term and the long-term and continue to execute on new product development as well as repositioning and other cost actions. In Crane Payment Innovations, we're pleased with our progress on the MEI integration and we continue to drive improved growth. And in Aerospace & Electronics, we're executing well on new programs and quoting activity remains very strong. Thank you all for your time this morning and your interest in Crane. I look forward to speaking to you on the next quarter. Have a great day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect.