Ladies and gentlemen, thank you for standing by. And welcome to the Parker-Hannifin Corporation First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advise that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference to your speaker today, Cathy Suever, Chief Financial Officer. Please go ahead, madam.

Thank you, Joule. Good morning, everyone. Welcome to Parker-Hannifin’s first quarter fiscal year 2020 earnings release teleconference. Joining me today are Chairman and Chief Executive Officer, Tom Williams; and President and Chief Operating Officer, Lee Banks. Today’s presentation slides, together with the audio webcast replay, will be accessible on the company’s investor information website at phstock.com for one year following today’s call. On slide number two, you will find the company’s Safe Harbor disclosure statement, addressing forward-looking statements, as well as non-GAAP financial measures. Reconciliations for any reference to non-GAAP financial measures are included in this morning’s materials and are also posted on Parker’s website at phstock.com. Today’ agenda appears on slide number three. We will begin with our Chairman and Chief Executive Officer, Tom Williams, providing highlights from the first quarter. Following Tom’s comments, I will provide a review of the company’s first quarter performance, together with the revised guidance for the full year fiscal 2020. Tom will then provide a few summary comments and we will open the call for a question-and-answer session. Please refer now to slide number four and Tom will get us started.

Thank you, Cathy, and good morning, everybody, and welcome to the call. We appreciate your interest in Parker. So let me start with the first quarter highlights and I am going to start like I normally do on safety. We had 25% reduction in recordable safety incidents year-over-year, which is a great start to the year. When you look at it from a safety incident rate, so for those who aren’t familiar with this, this is the number of safety incidents per 100 people. We came in at 0.46, which is the top quartile number, top quartile happens to be 0.5. So this is the first time in history of our company that we came in on the top quartile for incident rates. So we are very proud of that. Safety for us is a core value and zero accidents is not an aspirational goal. It’s really an expectation that we are going to operate the business and lead the business in such a way that we are going drive a zero accident culture. And if you have seen, there’s a linkage between safety and business performance, and you can see that if you look at our numbers over the last several years and plot its safety and our financial improvement, you will see they went hand in hand. So switching to financial results, Q1 was a strong quarter on margins and on cash against a challenging macro environment on sales. Sales declined 4% and that composition was a minus 3 organic, minus 1.5 on currency and a plus 0.5 on acquisitions. Total segment operating margin remained level at 17.0% reported. Adjusted segment operating margins increased 10 basis points to 17.3 basis points. On a reported basis, EBITDA margin increased to 70 basis points to 18.4 basis points, and adjusted…

Thanks, Tom. I’d like you to now refer to slide number six. This slide presents as reported and adjusted earnings per share for the first quarter. Adjusted earnings per share for the quarter were $2.76, compared to $2.84 for the same quarter a year ago. Adjustments from the fiscal year 2020 as reported results totaled $0.16, including before tax amounts of business realignment charges of $0.04, acquisition costs to achieve of $0.04 and acquisition transaction related expenses of $0.14, offset by the tax effective these adjustments of $0.06. Prior year first quarter earnings per share had been adjusted by $0.05. The details of which are included in the reconciliation tables for non-GAAP financial measures. On slide seven, you will find the significant components of the walk from adjusted earnings per share of $2.84 for the first quarter of fiscal ‘19 to $2.76 for the first quarter of this year. We have benefited $0.02 per share in operating income from Exotic Metals Forming Company since closing on that acquisition September 16th. For Legacy Parker, a $166-million decline in sales contributed to a $0.15 reduction in operating income. The teams did a great job of controlling costs with lower volume by sustaining a 15% decremental margin for the quarter. Incremental interest expense on the debt borrowed for the two acquisitions resulted in a $0.15 decline in the current earnings per share. Interest income from the pre-acquisition investments of that cash benefited the current quarter $0.09. Lower other expense of $0.13 came from several one-time gains in the current year and by not repeating several one-time losses from last year. Lower corporate G&A contributed $0.01, while fewer favorable discreet tax benefits in current quarter resulted in a higher tax rate causing $0.12 of incremental tax expense. Finally, our lower share count benefited the…

Thank you, Cathy. So we are very pleased with our progress. We are going to perform well with this downturn, as demonstrated by our cash flow performance and raising the floor on operating margins. And we are well on our way to being that top-quartile company we want to achieve and being best-in-class. As just a reminder, where we are trying to drive to, we want to transform the company to achieve targets we have set out in FY ‘23 of growing organically 150 basis points greater than global industrial production growth, segment operating margins of 19%, EBITDA margins of 20%, free cash flow conversion greater than 100% and EPS CAGR over that time period of 10% plus. So again thanks to everybody all the global team members around the world for your hard work. And with that, I will hand it over to Joule to start the Q&A portion of the call.

Thank you. [Operator Instructions] Our first question comes from Nathan Jones with Stifel. Your line is now open.

Good morning, everyone.

Good morning, Nathan.

Tom, it seems like you guys have taken maybe a bit more negative outlook going forward over the next three quarters here than some of your peers have. I think you mentioned you were planning on three more quarters of downturn here. Can you just maybe talk a little bit about what’s going on in the end markets and your expectations around why you are thinking this downturn is as long as you guys have seemed to built into guidance here?

Yeah. Nathan, it’s Tom. And I am sure this is question top of mind for everybody. So let me -- I will start by going through kind of what was behind the guide, then I will finish with a summary of end markets. So it starts first with our Q1 orders and you have seen that minus 2 total company, but in particular, minus 6 North America and minus 10 internationally. And then you got to look at other external indicators that are typically flow-through in our orders, three months to six months out. Those things like the ISMs and the PMIs. So the U.S. ISM had 47.8 for September, that was a 10-year low as everybody knows. Europe’s PMI of 45.7 for September, and of course, Germany, our third largest country at 41.7, obviously, feeling the impact of the trade related uncertainties. Asia PMIs are weak. And so what we look, part of what influenced our forecast was the trend of orders through the quarter. So August and September were about the same, but they were weaker than July. And then as you look at October, while October’s not done yet, we look at October on a daily basis, we saw further softening from that August and September rate. So put those factors into also our bottoms up latest look from the divisions and our view yielded a more challenging macro environment. So I will give you -- I will peel back the organic piece a little bit more, and I will give you some of my thoughts as to why we did what we did. So you have seen organic at the midpoint at minus 6. So that composition is North America at minus 6, International at minus 11.5 and Aerospace at plus 4.5. So the first half,…

I appreciate the transparency and the color there. Just moving away from things that are happening in the short-term here, I am sure there will be plenty of questions for that on you. Maybe you could just talk a little bit about what’s changed in the Win Strategy 3.0 from Win Strategy 2.0?

Yeah. And I’d be happy to do that, because that’s going be very exciting for the company. And obviously, when we have you all together, we will go through this in a lot more detail, but if I would just paraphrase the key points, so underneath engagement, going to continue to expand the whole ownership concept with the idea that the more people we have thinking and acting like an owner the better the company’s going to perform. But a big change on people is Kaizen and we will take you through all the things we are doing on Kaizen as far as our approach to it, who we are working with and the results we are seeing. Under customer experiences, a lot more emphasis on digital leadership, and we will expand what we mean by that ad a new metric, which is not too dissimilar to what we had before, but we have a new metric called composite likelihood recommend, which is going to be a mixture of on-time delivery and feedback from customers and distributors. Earnings and profitable growth, we have this new strategic initiative called strategic positioning, which we will give you more color on. New product blueprinting underneath innovation and two new metrics for innovation, product vitality and mix and gross margin for the product vitality and we will explain more about that when we are in person. And then underneath simplification, a very new powerful concept called simplified design, where we focus on simplifying the design of our products to reduce the building material complexity, the inventory and planning and scheduling complexity, and the ability to produce it, recognizing about 70% of our product costs are tied up in how we design it. So we will talk a lot more about that when we have you all there. We will be somewhat careful on simple by design, because I don’t want to teach my competitors how to do that, but we will give you enough color since you all know that it’s real and there’s some big enhancements to the company both on a growth and a margin standpoint.

I appreciate all the color and all the transparency there. I will pass it on. Thanks very much.

Thanks, Nathan.

Thank you. Our next question comes from Ann Duignan with JPMorgan. Your line is now open.

Hi. Good morning. I am not sure if there were any questions left after all of that color. You gave us global end markets, industrial versus mobile, would you mind breaking those up by region, please, or any notable differences across the major markets that have decline ag, construction, heavy duty, material and handling?

Yeah. Ann, this is Tom. So I will give you the high points by region. So North America was about 3% organic decline, on the positive side was machine tools, heavy duty truck, forestry and lawn and turf, flat was distribution on automotive. And then on the negative side, we had low single digits was mining, telecom and life sciences, mid single-digit decline, these are all declines, refrigeration, mills and foundries and tires. And then switching to the mobile markets, mid single-digit declines was construction and marine and mid-teen declines was ag, material handling and rail. So, again, I had mentioned that distribution fared better North America than any of the other regions as far as how it performed. Then in Europe came in about a minus 7 for the quarter. On the positive side was refrigeration, power, semicon, life science and oil and gas. And then on the negative side, starting with the industrial end markets we had a couple that were greater than 20%, mills and foundries, machine tools, obviously, Europe being more export sensitive feeling the impact of trade uncertainties. Those are very trade-centric type of end markets. Mid-teen declines was mining, tire and rubber, distribution came in around minus 4.5 about the same as it was versus prior period. And mobile, we had low single digit declines in construction and ag and about 10% in heavy duty truck and auto. So, actually mobile fared okay in Europe and the industrial markets suffered worse in Europe. And then in Asia on the positive side, Asia came in a 12% decline for Q1 and on the positive side were oil and gas, mining and marine, although, declines distribution was down about 5.5 and on the industrial space, we had about mid-teen declines out of mills, refrigeration, machine tools greater than 20 on some of those big secular end markets like powergen, semicon and, of course, telecom being somewhat impacted by the Huawei challenges. And then on the mobile side is where we saw some of the steepest declines greater than 20 in construction, ag, material handling and rail. So you can see that mobile feeling the worst in Asia-Pacific. So that’s quick spin to the regions.

Okay. And then just as a follow up, I think you have already answered this, but are you seeing any signs of, I hate to use the word we use every time coming up, but any green shoots anywhere?

Well, what has been nice is that distribution got a little bit better. So we like that the fact that that went into Phase 4 and we had a number of other things moving into Phase 4, automotive and life sciences and oil and gas. So and actually powergen and semicon, even though they are down mid-teens for us, the fact they went into Phase 4, I always like when things move into Phase 4 because guess what the next phase is, accelerating growth. So that’s encouraging. And we still had the ones that were strong and continue to be strong like aerospace, lawn and turf, we are seeing some seasonal help there and forestry with all the paper related goods tied to e-commerce has continued to be strong. So those are what I would say as indicators. Again, for us it’s -- what we are signaling with this guidance is a bottom forming for us. I can’t call it bottom for anybody else but a bottom for us is somewhere in the middle of our fiscal year.

Okay. I will leave it there in the interest of time. I will get back in queue. Thank you. Appreciate it.

Thanks, Ann.

Thank you. Our next question comes from Joel Tiss of BMO Capital Markets. Your line is now open.

Hi. How’s it going?

Hi Joel.

I just wonder on the last discussion and super duper color there. Can you just give us any sense of how you take -- it feels like things are a little worse now or maybe in the next couple of months’ future, because of inventory reductions. How do you take the amplification of that in the near-term out of your forward guidance, I am just curious how to think about that.

Yeah. Joel, it’s Tom again. So the destocking it’s always a tough question. But the one area where we do have good data on is North America distribution and you have heard both Lee and I talk about this in the past that it’s been the destocking has been improving by about 100 bps and that’s actually what happened again. So to refresh people’s memory in Q3 of 2019 it was down 300 bps of destocking, Q4 was 200 bps and now Q1 was 100 bps. So we had guided to that we felt distribution was going to at least North America was going to get into somewhat of equilibrium at the end of the calendar year, so the end of Q2. But we clearly are seeing destocking at the OEMs, especially the mobile OEM’s destocking and how long that takes to play it through is very difficult, because we don’t have the kind of visibility into that that we have with the U.S. distribution. But what we are guiding is very hard to split end-market demand versus destocking, what we gave you is kind of our view all-in of this impact.

And then just like a strategic question and not so much thinking about a forecast, just thinking about how do we think about Parker’s earnings resiliency going forward, like beyond the obvious, okay? Aerospace is a bigger part of the company, but like some of the ways that you guys think about it, if that could help us? Thank you.

Yeah. Joel, Tom. That’s a good question and I am actually glad that you asked it. Because we have been working very hard at this, as you might imagine and there’s a number of factors. First, it would start with some of the portfolio moves that we have made over the last number of years. CLARCOR, LORD and Exotics, so let me give you some for instances. So when we look at our order entry without getting into things that I don’t want to disclose publicly, our filtration platform is holding up much better than the rest of the industrial platform and that was by design, with CLARCOR, with the density in aftermarket. So that is -- it’s living up to its billing and what we had hoped for. LORD is coming in that -- with about a 4% organic growth and that compares to what we just told you or guiding to a minus 6 for Parker. And Exotics’s growth is coming in around 11% and so that’s better than Parker and better than Parker Aerospace. So you have got some portfolio things that are -- that we are doing that drives resilience and enhance organic growth. And then you have heard us talk about what we have been doing on distribution, growing international distribution in particular and we have changed that mix from one, we started with Win Strategy 2.0. We were at 35% international mix and distribution and now it’s 40%. So that doesn’t seem like a lot. But moving that number, 100 bps a year, is meaningful, that enhances margins and it provides more resilience, again, because our channel there is servicing primarily aftermarket. We are doing a lot of things on innovation, which will give you a lot more color with 3.0 when we see it all in March. But the new product blueprinting, product vitality and mix, our gross margin that we are tracking on these products are all designed, because if you look at our innovation growth, it is growing faster than the base business. So it’s going to hold up better in a downturn. The things we are trying to do to drive customer experience are really important because you can’t really grow with a customer if you don’t give them a good experience. And then all the things we have been doing operating-wise, simplification, lien, supply chain, et cetera and now Kaizen to make the company more agile and just a better operating company. So those would be the things that I would say on the topline and then just from operating standpoint, how we are going to get to those FY ‘23 targets.

Great. Thank you very much.

Thanks, Joel.

Thank you. Our next question comes from Jamie Cook with Credit Suisse. Your line is now open

Hi. Good morning. I guess just a couple questions. I guess the first one, just understanding the guide. The international -- or the implied international adjusted margins I guess fall off a little more than I would have expected in the remaining nine months of the year. Understanding there’s a lot of moving parts. But is there any way you can sort of help me -- help us with what the puts and takes are there besides increasing amort? And then, just obviously the cash flow in the quarter was very strong and as we are in sort of a slowdown here, leverage becomes more topical. So just, Tom, how we should think about cash flow for 2020, whether there’s any structural improvements we should be looking for. Thank you.

So, Jamie, let me start. I will have Cathy add on as far as debt and maybe comment on cash flow. One thing I want to try to make sure everybody understands. This new guide has got still some really good decremental margins in it and we have always -- if you benchmark companies, which I know you all do this, a minus 30 decremental is still best-in-class decremental. So I am just going to read to you total decrementals for the company, Q2 through the rest of the year. So Q2 -- and these are approximate, these are at the midpoint, there’s going be a range around these numbers, 27% decremental, Q3 a 28% decremental, Q4 a 23% decremental. So we end up with a full year of about a 25% decremental. So, those are really, I think, very excellent performance given that if you look at industrial, it’s going to be down minus 6 North America and minus 11.5 on international. That’s why international’s is a little bit worse. On its decrementals, North America is coming in around 24 and internationals at 29. And it’s because it’s about a 2x difference on volume and so that’s creating a lot more challenges. And then, in addition to the volume side, international has currency, which we have always struggled to identify currency impact on financials and we have -- we basically decided not to try to figure -- to try to communicate that because you can’t get a consistent number with it. But we do all know that when currency becomes a headwind to us, it becomes a pressure point on margins. So that’s another factor for international. On cash flow, I will hand it over to Cathy. I would just - I would have shareholders rest assured that that 18 years of 10% plus CFOA is going to turn into 19 years, because we have got a proven track record of being able to work with working capital. And these operating margins, like you heard me talk about in the opening comments are 180 basis points better than our last downturn. So we have better operating margins and we will work the working capital like we normally do. Cathy, have you got anything to add on.

Yeah. Jamie, we finished quarter end at a leveraged gross debt-to-EBITDA of 3.6. We did bring in a small amount of additional debt in the form of term loan when we -- to be ready to -- to close LORD this past week and so it’s going to go up slightly. But if you look historically, we do have a great track record of managing the working capital very well during a down cycle. So, we are pretty confident. In addition to that, both LORD and Exotic have a history of very strong cash flow stronger than Parker, so they will be great contributors to it. And we are confident we would be at a level that we have - that we were with CLARCOR when we closed that deal and we brought that down very quickly and we feel that we can do the same, even though we are seeing things slowdown Also keep in mind, we do carry about $1 billion of international cash, so our net debt-to-EBITDA was actually 2.1 at the end of the quarter.

Okay. Thank you. I appreciate the color.

Thank you.

Thank you. Our next question comes from David Raso with Evercore ISI. Your line is now open.

Hi. Thank you. Just looking at the organic growth first half, second half, obviously, the second half, a big change from used to be up 1 to negative 6 now. Can you take us through your thoughts on how you see orders playing out underneath that decline? I mean, it seems like the second quarter, you are expecting the biggest organic decline, but the second half is still pretty healthy at down 6. I mean, healthy meaning a large decline. So, I am just trying to get a sense of how you are viewing the order patterns underneath that negative 6 in fiscal second half?

Yeah. David, it’s Tom. And that’s where the forecast gets far more challenging the he further that you go out. But really we are trying to project some of those macro indicators that I mentioned in my comments. U.S. ISM, Germany’s number, Asia’s PMI, rest of Europe PMI’s, et cetera, recognizing as we plotted those historically, they tend to lag and impact our orders three to six months out. So we know what we saw weakening in October, which that’s going to influence Q2 and then, these other macro indicators three to six months out, starts to impact the second half and so that was the thought process behind that. But it does become more challenging as we try to figure that out, because our backlog doesn’t carry us outside of Aerospace. It doesn’t carry us out that far, so we had to kind of look at historical trends and lagging periods between these macro indicators of what we do.

Yeah. I am just trying to think how you thought about managing your own inventory through the end of the year and that interplay between, okay, the second half’s a lot weaker than what we thought, but we do see some bottoming process and that’s how we are managing, be it not even just inventory but how you are thinking about pricing. That usually gets announced January 1st and so forth. I mean, is it fair to say at this stage you are not thinking of the orders improving much in the back half fiscally and just the comps get a lot easier. So, I think for a lot of people seeing the cut through the organic is obviously not pleasant. But if you felt the orders were improving in the back half to some degree, you can call it temporary. So what you are speaking to the businesses is it’s kind of a temporary macro environment. I know it’s hard to call. I was curious if you had some sense of where you are headed and how you are managing the company for that fiscal second half. It doesn’t sound like you are planning for orders to be say, up in the latter part of the year, is that a fair assessment in how you are trying to manage?

Yes. David, I think that’s fair. We would project that orders would continue to be weak because our orders, organic growth in orders are typically within a month or two of each other when you plot it historically. So for us on inventory, inventory is never good. It’s always it’s a waste when you are running a lean operation. So we are continuously whether we have volume going up or volume going down we are looking to optimize inventory period all the time and the kinds of efforts that we are doing in unity with our Parker lean process we will continue to look work at managing inventories down. Now obviously when orders go down, you need to update all your planning tools. You plan for every part, which is part of our lean system, so we are doing that. And then on pricing, I will let Lee comment on pricing with what we are doing with that.

Well, David, maybe I will put price and costs together. I would say costs inputs, it’s a mixed bag, there’s some going down, some going up. But from a price cost standpoint, as always, we just try to stay margin neutral and that’s what we are planning going forward.

Okay. And just to make sure just to wrap up here, the first quarter organic was in line with your expectations maybe 20 bps even better. I actually thought the orders weren’t even that bad in the first quarter relative to some of the fears out there. But then, obviously, you took a big chunk out of the rest of the year on organic sales and even your thoughts on orders. So the surprise I guess must have really been this last month that you really thought to see at least some beginning of bottoming process. So is that fair, it’s really been the last month that really drove the change in the guide.

David, it’s Tom again. So there’s two things, you are right, October, but then also the sequencing we saw within the quarter. The fact that August and September got worse from July. So we were starting to see a weakening through the quarter then another step down in October. That’s why we have changed the guide.

All right. That’s helpful. I appreciate it. Thank you.

Yeah. Thanks, David.

Thank you. Our next question comes from Andrew Obin with Bank of America. Your line is now open.

Yeah. Hi. Good morning.

Good morning, Andrew.

Just a question on cash flow and it’s not more a question but a lot of companies that do deals have shifted to reporting sort of cash earnings, given a massive discrepancy between your cash flow generation and reported earnings. Have you guys considered moving to reporting cash numbers and what has the feedback been from your investors?

Yeah. Andrew, it’s Tom. It’s good question. We have thought about it and we have reached out to shareholders and it’s been pretty uniform from shareholder feedback saying don’t make that change. I continue to obviously we will adjust for a onetime cost and the things that we would normally be doing but other than that, continue to report on a GAAP basis. And if you think about it, just it creates a more, a bigger hurdle that business needs to absorb to generate returns on behalf of the shareholders and I think that was the feedback I heard from shareholders is we want you to incorporate that bigger challenge into how you run the place. But it’s a good comment, I know there have been good companies that have made that change, at this point we have elected to stay with what we have been doing.

Thank you. And then just a question, as your numbers have decelerated, what has the feedback been from LORD and Exotic, what have they experienced relative to expectations when you announced the deals?

Yeah. So, Andrew, it’s Tom again. So actually they have held up really nicely. LORD and the outlook that we have just given you is coming in at about a 4% organic growth and we had in our model, about 5.5%. That’s what I was verbally said during the announcement that was kind of our five-year CAGR. So if you think of everything that’s going on that’s changed from when we made that announcement to today, that’s pretty good. And again, that 4% positive compares to minus 6% for Parker. That’s why we like LORD so much. It’s why we bought them. It’s accretive from a growth standpoint. And then when you look at Exotic, Exotic’s coming in at a little over 11.5. we -- in our model that we built for the DCF, we had about a 7.5% CAGR, so that’s held up nicely. I would say two things, A, little better F-35 sales and we modeled a more conservative 737 Max. We have modeled Exotic going down to 42, but Boeing has not done that yet with Exotic and probably won’t because Exotic with its long lead time for materials. When you look at what Boeing’s done with their management supply chain, the rest of Parker Aerospace, for the most part, at 42, but as they have managed long lead time type of suppliers, Exotic being one of those, they have kept them at 52 because of obvious reasons. You can’t ramp back up with that kind of long lead time. So that’s part of why they have overproduced on the revenue. So in a nutshell, both acquisitions holding up on revenue, both acquisitions coming in at the EBITDA level that we expected to actually LORD slightly better on EBITDA, margins because we have pulled in the $15 million that Cathy referred to in her comments as the synergies for LORD, we are able to pull them a little bit earlier than we thought.

And if I may squeeze just one in, auto exposure with LORD, you did comment that auto is bottoming, was that referring to sort of the old Parker exposure or was that referring to LORD’s exposure as well, and that will be it for me. Thank you.

That was total Parker. We haven’t -- that was based on Q1 so we didn’t have LORD in Q1. But their auto has held up better than our auto has, so pretty comparable.

Thank you.

Thanks, Andrew.

Thank you. Our next question comes from Andy Casey with Wells Fargo Securities. Your line is now open.

Thanks a lot. I just wanted to go back to the decrementals that you talked about, Tom. Were those all in including the acquisitions over those Parker Legacy?

Parker legacy without the acquisitions and they are trying to do it with the acquisitions as apples and oranges, acquisitions are not in the prior period. We have got the $100 million of intangible amortization. So the MROS is when you look at it all-in versus prior basically nonsensical, you can’t really read anything into it, which is why I gave you the ones without it.

Okay. Okay. Appreciate that. And then, basically over the long-term, you had talked about 30% incrementals. The decrementals you gave were lower than that, which is good. When you embed the two new acquisitions that seem to be a little bit similar to CLARCOR, a little bit more resilient, would the downside over the long-term relative to the mid to high 20% decremental that you gave kind of even shrink further?

Well, I think, there is definitely that potential, because to your point they will be more resilient. Their higher margins as well. So they should help us with that. And we are going to work to make them even better than they are today. The whole goal of these is to take the best of what we do and the best and of course, we is not all of us and the best of what the acquisitions had and to make it even better. So I still think, again, for purposes of bottling, I don’t want to get too far over my skis, I would just encourage you to continue to use the plus or minus 30 as still best-in-class, and of course, our goal is we try to do better than that.

Okay. Thank you very much.

Okay. Thanks, Andy. Joule , I think we have time for one more question.

Thank you. Our final question comes from Jeff Sprague with Vertical Research Partners. Your line is now open.

Thank you. Good morning. Hey. Just two from me, if you don’t mind, just first back on the acquisitions. At the time they were announced, I thought LORD’s run rate sales were about $1.1 billion and Exotic was about $450 million. And when I look at what you laid out here, it looks like they are both actually kind of on an annualized basis tracking flattish, is there something in timing or do I have this basis wrong?

Jeff, it’s Tom. I think the main thing would have -- when we gave it, it was based on calendar year over calendar year. Now these numbers are FY in Parker’s fiscal year, so the prior periods are not comparable.

Those growth rates you gave us though, Tom, were for the year in your plan or just in the quarter, those organic…

Yeah. The growth rates I gave, Jeff, are for our FY ‘20. So it would be comparing the period of time they are in part of Parker in our FY ‘20 and then using the same Parker fiscal year at FY ‘19 for them to go back and kind of reconstitute that, the two acquisitions.

Then just one other question on incrementals, if you don’t mind, and perhaps, it goes to the FX point you were making, Tom, but the decline in the 6% organic growth sales decline is about $650 million in sales, I think, Cathy said $800 million, if I think about it on a core basis, and $1.44 of EPS would gross-up to about $230 million. So that’s a 35% decremental on the core business, if I think about it relative to the walk that you gave us where you showed Legacy Parker versus deals, am I missing something there, or is it FX?

Yeah. Jeff, it’s the FX differential, so the number I quoted was top-line total drop that we had in our guidance for the second, third and fourth quarters. And when you are quoting organic, you are probably correct that it’s closer to $600 million.

Okay. Great. Thank you for that color.

Okay. Thank you. All right. This concludes our Q&A and our earnings call. Thanks everyone -- thank you to everyone for joining us today. Robin and Jeff will be available throughout the day to take your calls should you have any further questions. Everyone have a great day. Thank you.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.