Good afternoon. My name is Mike, and I will be your conference Operator today. At this time, I would like to welcome everyone to Fortune Brands First Quarter 2020 Earnings Conference Call. [Operator Instructions]I would now like to turn the call over to Mr. Brian Lantz, Senior Vice President of Communications and Corporate Administration. You may begin our conference call.

Good afternoon, everyone, and welcome to the Fortune Brands Home & Security first-quarter 2020 investor conference call and webcast. Hopefully, everyone has had a chance to review the news release issued earlier. The news release and the audio replay of the webcast of this call can be found in the investors section of our fbhs.com website. I want to remind everyone that the forward-looking statements we make on the call today, either in our prepared remarks or in the associated question-and-answer session, are based on current expectations and a market outlook and are subject to certain risks and uncertainties and that may cause actual results to differ materially from those currently anticipated.These risks are detailed in our various filings with the SEC, such as our annual report on 10-K. The company does not undertake to update or revise any forward-looking statements, which speak only to the time at which they are made. Any references to operating profit, earnings per share or cash flow on today's call will focus on our results before charges and gains basis unless otherwise specified. With me on the call today are Nick Fink, our Chief Executive Officer, and Pat Hallinan, our Chief Financial Officer.Following our prepared remarks, we've allowed some time to address questions that you may have.I will now turn the call over to Nick.

Thank you, Brian, and thanks to everyone for joining us today. We hope that you and your loved ones are all staying safe during these extraordinary times. While our teams delivered strong sales and profit growth in the first quarter that were ahead of our expectations. We also took a number of proactive steps in the quarter to begin aggressively managing cash, capital and expenses and to further strengthen our balance sheet as the global economy began to feel the impact of the COVID-19 pandemic.These steps will not only help us mitigate the impact of the near-term demand challenges related to the pandemic but are designed to position us to accelerate share gains and deliver more profitable growth as we emerge from this recession. The COVID-19 pandemic has brought profound change to the world and to our team, and our hearts go out to all of those who have been impacted by it. During this challenging shelter-in-place period, products in our industry have been designated as essential. As we continue to manufacture and distribute our products, we've taken great lengths beyond WHO and CDC guidelines to protect our teammates.I want to express my sincerest gratitude to our Fortune Brands team all over the world, who've worked so bravely and so purposefully to continue to deliver our essential home and security products to our customers and consumers. By continuing to operate through this period, we have fulfilled our critical mission as part of the essential supply chain and have also, with few exceptions, mitigated the deep disruption of full facility shutdowns and subsequent ramp-ups. And hardwired into our DNA, to thrive in the face of diversity and to use challenges to structurally reposition our business, to emerge even stronger and more competitive. Our history and track record demonstrates it.We were able…

Thanks, Nick. As a reminder, the majority of my comments will focus on income before charges and gains in order to best reflect ongoing business performance. As Nick indicated, since the virus crisis began, our focus has been prioritizing the safety of our associates and managing through the crisis in a manner which makes our company stronger. During the last economic downturn, we led by taking aggressive actions to adjust the business to economic realities.We position the business to take share during and after the downturn. Our focus is the same during this period of virus-driven challenge. Among our recent priorities has been assessing liquidity and taking actions to enhance decremental margins should expected sales declines materialize and persist. We entered this period from a position of business performance and balance sheet strength and believe we have the liquidity to navigate this virus crisis, and we have already taken actions to aid margin performance and cash management.I will address these topics in more detail later in my comments. First, I would like to cover our first-quarter results. While we are aware we have much to navigate during the balance of this year, we believe our first-quarter results prove our business' potential and that our strategies and execution are producing exceptional results. For the first quarter, sales were 1.4 billion, up 6% from a year ago.Consolidated operating income for the quarter was 170 million, up 20% or 28 million compared to the same quarter last year. Total company operating margin was 12.1%, up 140 basis points over the same quarter last year. EPS were $0.81 for the quarter, up 29% versus the $0.63 we earned in the same quarter last year. We remain pleased by our team's continued ability to grow sales and earnings ahead of market and plan.Next to segment…

Thanks, Pat. To sum it up, we do not take the challenge that lies ahead of us lightly. It is an unprecedented event in modern times, with more unknowns than knowns. What we do know is that we are well equipped to manage what unfolds in our markets and our business.As an industry, we started from a solid foundation. Our sector is far healthier than it was at this juncture of the global financial crisis. Housing in the US is significantly underbuilt versus household formations, unlike the overbuilding leading up to 2007 and 2008. Home equity levels, almost 50% higher than they were then, and months of inventory levels are 40% lower.Our key customers, builders, retailers and wholesalers are in good financial shape. Our millennial consumers are just coming into their key buying years, and we believe that the pandemic will further drive household formation and R&R activity, similar to the impact of 9/11 on our sector. And while our industry had good real momentum coming into this period, we were still just trying to catch up with the need for housing in the United States. There is no doubt that a recession and a blow to consumer confidence and financial uncertainty will have an impact on our industry.But as the economy recovers, with low interest rates, low inventory, good home equity and high household formation, housing is in a great place to help lead a US economic recovery. And if our industry is well positioned, then our company is even more so. We enter this time, not with hubris, but with the confidence of a business that is demonstrating performance at its highest level. Our cabinet pivot plan, Moen's brand reinvention, Fiberon integration and distribution gains and doors and security performance are all delivering for us in a way…

That concludes our prepared remarks on the first quarter. We will now begin taking a limited number of questions. [Operator Instructions] I will now turn the call back over to the operator to begin the question-and-answer session. Operator?

Thank you. [Operator Instructions] Your first question comes from Phil Ng from Jefferies.

Thanks for all the great color. Can you give us a little more color on how to think about April sales trends? And based on some of the color on the shape of the year, it sounds like the trough 2Q, 3Q sales could potentially be down 30 to 40%. So, just want to get a little perspective if we're thinking about that correctly and how some of the different businesses may perform in this environment.

Hey, Phil. This is Nick. Hope you are doing well. Why don't I start, and then I'll pass it to Pat, he can talk in a bit more detail about some of the trends.I would say, into April, it's been fairly choppy. There have been parts of the market that are down, as you would expect and then other parts that are showing more resilience than we would have expected. And so, our approach is really to be very flexible and nimble, both as we look at cost reduction capacity so that we can capture the parts of the market that are working for us. We're seeing particular strength around the value offerings that we have in cabinets, Moen, decking and doors from a price point perspective, and then I'd say, from a channel perspective, really in retail and e-commerce.And so, if you think about the portfolio, just as a reminder, 24% of the business is US new construction, we would expect -- and we are seeing more resilience in R&R into China and our security business. And then, I think the fact that we've also bolstered the portfolio around that value sweet spot is why we're continuing to see that resilience there. And so, it's tough lead into April, I think, particularly given the stay at home orders, you're seeing weeks that are very strong and then weeks where it falls off and weeks that are strong again, and I think that's just as people kind of move in and out of retail home improvement projects. So, it's pretty early to get a read-through.But as we look at it, we continue our commitment to beat the market, and that's where we think we are. So, I'll hand it to Pat to talk a little bit about your question around forecast.

Yeah. What I would echo in Nick's statement, I would say, across product lines and across channels, we've at least seen, I'd call it a measure of stability. By that, I mean it seems like across the board, irrespective of product line and channel, we're no longer trying to find kind of new loads. Things are either flattening out or recovering.And as Nick said, I'd say, and particularly, showing some strength in retail and e-commerce, I think what's going on in trade-centric channels is less of a problem and more of just there's fewer outlets that are open in that arena, and also those are a lot of privately held companies that have to manage their balance sheet, so they manage their inventory pretty tightly. In terms of looking at the quarter, obviously, we're not giving strong for buying guidance, but I would say a range enterprise life for the quarter of down 10 to 20% seems like the plausible range at this moment in time with what we're seeing in terms of POS inbound orders and shipments. I see more like mid-teens to low teens. Seems like the more plausible realm of that spectrum.Obviously, things change every day in this world, but that seems to be where we are, and we're not seeing anywhere near the 30 or 40% that you referenced in your question that's across the portfolio.

Great. I mean, that's really helpful color. That's far better than I think many people were fearing, especially on the Cabinet side of things. And then, Pat, one more question for -- on the decrementals, that 20 to 30% for the full year, that's quite impressive.Any color on how to think about the impact you're going to see in 2Q and 3Q, appreciating there's probably going to be more costs associated as you kind of manage through some of the supply disruptions? And does this factor in any lower input costs as well?

Yeah. I'd say on the full year, 30 to 20%, that's quite a great achievement that we are targeting to deliver, and we're confident that we're tracking in that direction. Realize our gross profit margin, 36%, roughly enterprisewide. So, that means we're beating our gross profit margin.It does include, to your question, some assumption of some favorable commodities that will start hitting our P&L in the third quarter and fourth quarter as they come off our balance sheet. In terms of the second quarter, you're right. Given the safety measures and capacity rebalancing we're going through and some temporary shutdowns, be they set by government order or on our own safety decisions, we're going through a bit more inefficiencies, I'd say decrementals in the second quarter are probably 40% plus or minus 5 percentage points in either direction depending on how volumes and how choppy the quarter is, but that we would expect the back half of the year to be trailing at the more favorable end of our range.

I would just add in your cabinets reference, now recall that 50% of the cabinets business is now at that value price point. I mean, that's really been the execution of the pivot plan. And so, that's where we're seeing it deliver. And then, as you think about -- particularly about, I'd say, the end of Q1 and into Q2, and the journey we run from a decremental margin perspective, you could almost cleave it into two parts, right? There's the part one, which is keeping people safe.We've been learning that journey. It's not an efficient journey. We think we've been doing it very well. As we eventually move beyond the health-related part of what will be a COVID-19 recession, you then deal with stranded costs and capacity, and that's something we know how to do, and we've done it before, and we'll do it again.And so, it's really -- it gets blended together in a margin, but it's really two parts to the journey. And we're seeing ourselves kind of emerge from that first part now. And I think even if there's a second wave down the road, at that point, we will have put in all the safety procedures. We would have learned how this works, and we'll be in a better place to operate through that health-related portion of it.

Got it. Thanks a lot Nick and Pat. Appreciate the color.

Our next question comes from Justin Speer from Zelman & Associates.

Good afternoon, guys. Thank you. Just a couple of questions. But just -- I don't know if you have any sense that you can give us or provide us with the percentage of your customer base currently or temporarily shut down or disrupted across each of your businesses due to the social distancing measures and stay-at-home-orders.

Justin, I don't know that you could nail a percentage. I mean I think it would be kind of in the pockets where you might expect, as Pat would reference, I mean, you certainly are aware that the large retailers and e-commerce portions continue to function and have been pretty resilient. When you look at some of the trade-related and wholesale channel in cabinets and dealers, you've seen a number of small dealers shut down for the period. And in plumbing wholesale, what we've seen is a lot of counters remain open, but showrooms are closed.On the door side, in the two-step distribution world, a lot of our big distributors have remained open down tier from them. Some of their smaller distributors have been closed. So, I think that's how I encourage you to think about on our actual percentage, but it's kind of the trade-related channels, particularly where you have smaller points of distribution is where you might see closures. And I think that's where you're seeing some of the larger demand hits and probably some of the offset then coming into retail and e-commerce.

All right. And then, another question for me is just the inventories in the channel, particularly at retail to the degree you have any visibility there, to get some sense across your business, how those are faring. And how you expect that will shape this quarter, next couple of quarters?

Yeah. I'd say on the, on kind of the wholesale side, as Pat referenced, we did see destocking inventories weren't inflated coming into this, right, and it has been managing fairly lean. And so, we've seen some advanced destocking ahead of what people anticipate is going to come at us in Q2 and I think the early part of Q3. That seems to have leveled out.Now, we're standing in April. There's a very volatile situation. We'll see what happens in May. But as we look at that today, we kind of saw it in the early part of the month and then it started to level out.In -- on the retail side of the business, I think inventory kind of sits at a fair spot depending on the category. But again, because those channels have been pretty resilient, I think there's probably room to actually build some inventory over time, but we'll see how your consumers continue to act and pros continue to act as they come in and out of those channels.

Interesting. And I guess last question for me is on that DIY versus pro side of the ledger, do you guys have any insights into the behavior, particularly for some of those product categories that require getting into the home? You're noticing any distinction in behavior and demand trends that you can point out?

I've read a lot of conjecture about it, and I think the conjecture is probably fairly accurate where you assume that people can do something on their own. They might have been getting off to those projects and they're where they might have to bring somebody into the house. Perhaps it's been slower, but that's not the read-through that we're getting when I look at the product portfolio. I mean, particularly Cabinet's not particularly DIY -- necessarily DIY-friendly product, but we're seeing a lot of strength there.Now, that might be coupled by the fact that we've also seen a lot of reduction in subsidized Chinese cabinetry coming out of the market. We've got products sitting right at the sweet spot. And so, where there is a need or people need to complete a project, they're getting it done. So, while I've read a lot about what you're referring to, and it does make sense, I wouldn't say that we're necessarily seeing that distinction in our portfolio.

Thank you, guys.

Your next question comes from John Lovallo from Bank of America.

First question is the 10 to 20% sales decline that you're thinking about for the second quarter that would seem to be pretty solidly above market. I mean, am I thinking about that correctly? Or are you guys expecting some pretty significant outperformance? And if so, are there certain segments that would kind of lead the charge there?

I'm going to kick it and then I'll pass to Pat, John. I think it again goes to the fact that we're seeing strength around -- relative to the market around the value offering that we have, and it's not something that just happened. I mean, this is a part of the portfolio. We've really been working hard for the last few years to bolster our position in value Cabinetry, and it's to bolster the power of the Moen brand.Fiberon and decking really plays powerfully at that entry level. And also, we bolstered the offering in doors. And so, we're seeing those hold fairly well. And I think that's why that 10 to 20%, which for us is really a bottoms-up forecast is where we see it.And I think it's pretty tough to get a read on the market. As I said, it's up and then down week-to-week as people move in and out of channels. And so, it's going to take a little while, I think before I can clearly say whether it's a beat or not. But I will tell you, we came into this, if you look at Q1, we're not going to rest on our laurels about Q1 market, but we feel very confident that the outperformance of the business, both on the top and bottom line, carries through, right? I mean we were winning and beating the market and we're doing it for reasons because the products were resonating with consumers and the value that we're providing at the price point was resonating with consumers.That will continue -- we'll continue to beat the market, whatever the market is. And then, the operational excellence that we saw and the leverage through, we're going to express that through the decremental margin as much as we did through the incremental margin and the leverage.

Yeah. Hey, John, what I'd add to that is it's -- we're seeing all of our businesses perform within that range. It's no one business salvaging another. They're all kind of in that range, and there's sources of strength in all the businesses, including some of the one like doors or cabinetry that you might not intuitively expect, given what happened during the last downturn.In cabinetry, we set out a year for a plan that basically, there was some skepticism when we set out the year around could we achieve the planned targeted growth rates, but it was predicated on a high single, low double-digit growth of value price point cabinetry and the rest of the portfolio being flat. Now, obviously, we're not in the planned environment, but we're still seeing strength in entry price point cabinetry, as Nick said, I'm sure in part helped by the absence of subsidized Chinese imports. In plumbing, the POS, both globally and in the US in the quarter was really strong. It was like roughly mid-single digits globally and high single low double digits in the first quarter, and that POS continues to be strong.And plumbing, in China, which was a little bit slow in its initial comeback stages has really accelerated. It's come back. And then, the distribution gains in decking, but I'd say the strength in doors would lead us to believe that builders, because that's largely a new construction product, probably where the most new construction exposure we have from a percentage is they must be stretching out the orders they had from the fourth quarter and the first quarter because we still see stable and respectable demand in doors.

That's helpful. And then, maybe just on the decking side quickly, realizing that there is a distribution gain there. But are you guys getting the sense or is it too early that folks after being stuck at home for five, six weeks here, are looking to make their living spaces, even their outdoor living spaces more livable? And do you think that that's an opportunity, perhaps longer-term for composite decking?

Look, that's the feedback we're getting anecdotally through the channel. I think it'd be early for us to tell you've seen it in the numbers, although what we are seeing is there's a lot of confidence around the forecast. So, what we are hearing through the channel is that there's a lot of excitement that even as shelter at home orders are relaxed, people are going to be more likely to entertain at home and use their outdoor spaces than they are to go out to restaurants or entertainment venues and that the channel itself is feeling pretty confident that outdoor living and that decking will have some tailwind.

Thanks, guys.

Your next question comes from Mike Wood from Nomura.

Hi. Good afternoon. First question, wondering if you can give us some information on whether the glut of Chinese cabinet inventory had cleared before COVID-19 hit and what that current situation looks like?

Sure. I'll kick it off. We -- it's very hard to read. We know there was a big build of Chinese inventory during the course of last year.Our estimate and you could fairly consist on this is that we would see that come out sometime in Q1. Our sense is that's probably happened. I mean, it's hard to nail down exactly, but we think it's largely come out, and we're probably not seeing the benefit of that. If you look at the import data, you are seeing an increase in some Southeast Asian imports.We look at that very, very closely. We know where the capacity is. We use a chunk of that capacity, there is not a ton of it. In fact, some of the countries on the import data likely don't have much cabinet capacity at all, and so as we look at that, we're leveraging out where it benefits us, but we're also monitoring it very closely and working with customs who are proving to be very cooperative around looking at anybody who's not necessarily adhering.So, short answer is, we think it's come off, and we haven't seen it come back and swamp. And if anything, there's been a big pull on the product that we've positioned at that part of the market.

And what are you hearing from dealers in terms of whether they're still able to meet with customers for kitchen design? Or is it being done virtually? Will there be any extension in lead times as a result?

There has been some extension in lead time. And that's been slated. I think there's us and others who have put safety provisions around. We've been able to continue to operate pretty much everywhere, although I don't think that's always been the case.And so, I think some others have had to also extend lead times with respect to that. And I do think some of the dealers, particularly some independent ones, are closed. And so, I think it is more challenging, and I don't know how that design process is advancing. I suspect that we are going to see a period here in Q2 where there is a lull in the custom side of the business as people were unable or unwilling to go in the store and get a design done.Some of that's moved online, but I think a large chunk of it will just be delayed.

Thank you.

Your next question comes from Mike Dahl from RBC Capital Markets.

Just a follow-up on cabinets and also some of your earlier commentary about kind of channel partner health. On the dealer side, in particular, are you seeing anything in terms of either receivables or bad debt? Anything from a customer standpoint with some of those -- some of your channel partners that have actually gotten shut down? Or what are your expectations with respect to that?

It's something we're monitoring deeply across all of our businesses. Many of us were around in the last downturn. So, as soon as this virus spread West, that was among our initial considerations. Right now, we're not seeing things that leave us feeling like we have any kind of big or material exposures, but it's something we are tracking and managing very proactively.We don't anticipate something right now that is material or significant just because we got on it early.

And as a quick follow-up, are you doing anything specific to partner with people to either extend credit or terms proactively?

We're not in the business of being the bank to the channel, not because we're unfriendly. We just -- we have pre-existing relationships, and we're kind of sticking to those pre-existing relationships. And we'll just work with channel partners, respectively, to make them as successful as they can be, but we're not going to be expanding our risk profile in that regard.

OK. My second question just with respect to China plumbing. Can you give us a little more granularity, help us maybe quantify what the magnitude of declines were as you go kind of month-by-month through China and then what the -- and I think you said it was a little slow to start to recover, but now has just give us kind of an update on where you're at maybe on a year-on-year basis at this point?

Yeah. Well, I'll give you some color, and Pat can provide some additional granularity. The starting point is we shut down for six weeks in China. I mean -- and the nature of their shut down was more severe, and that was reflected in the Q1 number for plumbing.As that started to come back, what we initially saw was strength in e-commerce and strength in developers as they got back onto job sites and started to get back to work. And I would say in the first few weeks once the economy started to reopen, was probably tracking at 70th percentile versus what we would have anticipated as with COVID. Over the last couple of weeks, though, it really has started to ramp. You've seen traffic back in the big building products mall, to start see traffic in showrooms, which is positive.And then, our developer partners are kind of closer to -- in the 90, 95% of what we would have expected from a construction standpoint.

Yeah. I mean --

That's great.

It was a seven-point hit in plumbing in the quarter for COVID and FX. About 4 million was FX and the balance was COVID-related, and that was really -- our facility in China that ships product to customers was shut for six of the 13 weeks of the quarter. And when things started opening back up in China, which was late March for them, just as it was hitting us here, some of the really big developers were kind of earliest back to action, and retail was pretty quiet to start. But now, as Nick was saying, retail is starting to come back and developers are kind of in the 90 to 95%, projects back up and running.So, that market is coming back to life nicely, and we do expect them to perform well in the second quarter.

OK. Thanks. Pat. Thanks, Nick.

Your next question comes from Seldon Clarke from Deutsche Bank.

Hey, guys. Good afternoon. Can you just talk about the range on the decremental margin framework that you provided? And kind of just give us a sense of what might cause you to be on the lower or higher end of that range. And whether this includes any cost savings in terms of corporate expenses or production rationalization or anything along those lines?

OK. Yeah, sure. Why don't I -- I'll start out and then I'll pass it to Pat. I'll start with the kind of production standpoint, and I think this is an important -- a very important point, I think, particularly as you look across a variety of different companies and industries.One of the reasons we're setting the target where we've set the target is, for this first, I talked about the kind of two hubs, you have the hub where you're -- it's really about preserving safety and health, and then you've got the demand-driven recessionary side where you got to size the capacity. For the first part, I think a very important point is, from the start, the industry was deemed essential by the federal government, and then we've been working at the local level every single day to keep our facilities open and keep our people safe. We've worked with local health experts, officials, with the plant leadership and really been problem-solving at the local level with really rapid issue resolution. We've learned a lot.We're going to keep adapting. But that has been a key driver versus having to have a total shutdown and then a complete ramp up as you're managing through this, and so that has been really critical. It's been nowhere near the efficiency levels we like. There have been some facilities that are, they may be operating at 60 or 50%.That's a lot better than a zero. And so, that's really allowed us to pursue top priority of keeping people safe but without the giant expense of a shutdown and then a ramp-up. And so, that's for the first part. You then sort of move as we move up beyond that or we get into a group of operating that way to what will be handling reduced demand in a recessionary environment, and that is a set of cost actions that are both -- the easy things, I think you'd expect to be able to go after first, we attacked a lot of that stuff toward the end of Q1.But then really, we're looking at it as a set of actions that we have prepared and are preparing to respond to tier changes in demand as we see them. But all of the actions are designed to make us a stronger company going through this and a stronger company coming out of it. And so, we really want to target best-in-class decremental margins as we move through. We want to target best-in-class leverage as we come out.And so, we're going to look at not just temporary but also permanent changes to the cost structure as we move through this, and we expect to act with a lot of urgency around that.

Yeah. Just to kind of put the numeric stuff around it, during the last economic downturn, over the three years from 2006 to 2009, which is kind of our sales peak to sales trough, our decrementals over that 3-year period, cumulatively, were about 35%. So, our objective is to beat that and beat that handily. It is a challenge, but we're committed to addressing it, right? If we do nothing to address volumes, our decrementals could easily be 50-plus percent.If you just leave stranded costs in production and distribution facilities and don't do anything to your corporate costs, you could easily be 50-plus percent. And then, your question to kind of what puts you at the more favorable end of that 30 to 20% range, it depends on how early the demand headwinds come and stabilize. So, the earlier they come and stabilize, the sooner we can adjust capacity, both in production and distribution facilities, and the sooner we know the magnitude of action in corporate expense and can get that into our run rate. But later in the year those happen, all the more choppy they are, the more difficult the equation becomes.And so, a lot of it has to do with what's the order of magnitude of the demand headwinds, how choppy is it to get to that new normal and when in the year it happens. And then, I'd say there's also -- yes, you're kind of asking, this is not just production facility, distribution facility, cost optimization as we go through this in an incident that is this order of magnitude, everything is on the table. And there will be SG&A reduction. That is already under way, and we'll continue to move with demand reality in order to get us to a decremental margin that is below our gross profit margin.

And so a lot of this is permanent in nature. I mean, there are the variable costs that you size but there are permanent changes that will make us stronger, leaner and better, both going through it again as we emerge, and that is something that we take very seriously. At the same time, we will very strategically make sure that we have the capacity to continue our outside share gains, which we think will actually accelerate through an event like this. And so, that capacity will be there, and we will be able to flex it, to take advantage of opportunities that come our way.And we are seeing our biggest customers coalesce around their strongest suppliers, and so we will look to make changes that really improve us from an efficiency perspective. That's how I think about it.

OK. That's really helpful. And then, just as my follow-up to that, given everything you're looking at and doing on the cost side, as we think about things normalizing into 2021, realize this is a little bit far away and somewhat of an unprecedented situation. But just given everything you're doing on the cost side, is 20 to 30% incrementals as we get into a more normalized year and modest mid-single-digit revenue growth, something along those lines.Is that the right way to think about it? Or given all these cost actions you're taking, you could see something closer to that 30%, into your range?

Well, I would say, part of the way we're going to work on delivering this year is where we can cut back on investment expense without harming our ability to compete for share. I think as we get out of this, you probably more expect the incremental margins coming out of this to be in the 20% to 25% range, which were consistent with our strat plan, was around 25%. There might be a little catch-up because you -- in '21 because you kind of sat on your wallet in some respects. But our longer-term trajectory on incremental margins is -- in a growth mode is about 25%.And I'd say we'd be working to get back there pretty quickly. I mean, there are periods where we get up around 30%, but that tends to be where we're leveraging latent capacity more than anything. Where we're investing in innovation and brand, we tend to be tracking more closely to that 25%.

So I do think if you look at our performance in this quarter now, Q1, it does demonstrate what the business does when volume comes its way -- our way when we're executing well everywhere and driving share gains. You're seeing leverage well north of 30%.

Thank you for joining today’s conference call. You may now disconnect.