Welcome to the Rexnord Fiscal Year 2019 Q2 Earnings Conference Call. My name is John, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Please note that this conference is being recorded. And now I'll turn the call over to Todd Adams.

Good morning. This is Rob McCarthy, and welcome everyone. Before we get started, I need to remind you that this call contains certain forward-looking statements that are subject to the Safe Harbor language contained in the press release that we issued yesterday afternoon as well as in our filings with the SEC. In addition, some comparisons will refer to non-GAAP measures. Our earnings release and SEC filings contain additional information about these non-GAAP measures, why we use them and why we believe they're helpful to investors and contain reconciliations to the corresponding GAAP data. Consistent with prior quarters, we will speak to core growth, adjusted EBITDA, adjusted earnings per share and free cash flow as we feel these non-GAAP metrics provide a better understanding of our operating results. However, these measures are not a substitute for GAAP data, and we urge you to review the GAAP information in our earnings release and in our filings with the SEC. Please note that the presentation of our operating results is focused on our continuing operations as our VAG operations are reported as discontinued. Today's call will provide an update on our strategic execution, our overall performance for the second quarter of our fiscal 2019 and our outlook for fiscal year 2019. We'll cover some specifics on our two platforms followed by selected highlights from our financial statements. Afterwards, we'll open up the call for your questions. With that, I'm pleased to turn the call over to Todd Adams, President and CEO of Rexnord.

Thanks, Rob, and good morning, everyone. As you saw in our release last night, our second quarter results to continued to solid start to what we believe is shaping up to be both the strong and a record year for Rexnord. With core growth accelerating over the prior year, double-digit adjusted EBITDA growth and by the end of the year record free cash flow. We're seeing steady growth in most of our served end markets and more significantly, our strategic initiatives around innovation, cost reduction and commercial excellence are gaining momentum and we're seeing real benefits of all of those start to compound with a lot more to follow. We’ve updated outlook for fiscal year which includes an unchanged mid-single-digit for our core growth, but we’d steer everyone toward the higher end of that range and we've also raised our expectations for adjusted EBITDA, which we now project to be in the range of $433 million to $443 million. Looking more closely at our second quarter results, sales of $525 million included core growth of 9%, and we're up 16% on a reported basis. Core growth in our Water Management platform, which is currently comprised of our Zurn business increased 12% year-over-year. PMC core growth also accelerated as we expected coming in at 7% delivering mid-single-digit core growth for the first half. We're able to leverage a solid growth in both platforms and a 20% year-over-year growth in our overall adjusted EBITDA, which increased to $115 million with solid operating execution, delivering strong margins in both platforms. Adjusted EPS was $0.46 for the quarter and was up 44% over the comparable prior year figure. Mark will review both the consolidated results and the performance of each platform as part of his comments a little later in the call. Please turn…

Thanks, Todd. Please turn to Slide number 5. Our second quarter of fiscal 2019 consolidated financial results were slightly ahead of our expectations. On a year-over-year basis, our total sales grew, 16% were sales increased 9%. Adjusted EBITDA increased by 20% to $150 million, and our adjusted earnings per share increased by 44% to $0.46. Please turn to Slide number 6. Our outlook for our fiscal 2019 core growth continues to incorporate mid-single-digit core sales growth, but as Todd discussed earlier, more toward the higher end of the range. Our increased outlook for adjusted EBITDA to be in a range from $433 million to $443 million, translates to a 12% to 15% year-over-year growth. As we continue to expect to deliver another year with free cash flow, I had a net income. Turning to Slide 7. We summarize our consolidated results for the quarter. Let's move onto Slide 8 and discuss the first of our two operating platforms, Process & Motion Control. Total sales increased 16% year-over-year in PMC with core sales growth of 7% then benefited from about $5 million of delayed shipments to our aerospace markets that we identified last quarter. Through the first half of the fiscal year, core growth in our PMC platform is a solid 5% and in line with our expectations heading into the year. Currency translation reduced our sales by 1% and the acquisition of Centa added 10% to our topline growth in the quarter. PMC experienced another quarter of solid growth in its process industry and consumer facing end markets and sell through rates in our North American industrial distribution channel. We're also consistent with last quarter. Our sales to aerospace customers were up by a high single-digit year-over-year for the reason I discussed earlier. In the top right corner of the…

Thank you. Now I’ll begin the question-and-answer session. [Operator Instructions] And our first question is from Joe Ritchie from Goldman Sachs.

Hi. Good morning, guys.

Good morning.

So Todd, I wanted to touch on your comments regarding inventory never being lower. Can you maybe just walk through a little bit more color on that specifically as it relates to your end markets, what you're seeing across the channels?

Well, I mean if you look at it between Process & Motion Control and Water Management, I would say that that statement is true in both platforms. The inventory levels are at historic lows with respect to how we look at it. Inventories turning at a very high rate in the channel, and I think, obviously we have a belief that a little bit more inventory in both sides of the business would do us some good as well as our distributor partners. But at this point they're choosing to sort of run it pretty tight and we're obviously doing our very best to fulfill that demand and keeping time short, so that the end customers would be freight service. But I think that's really the only comments we’ll make on it Joe.

Obviously that's a pretty positive as it relates to the growth trajectory for your businesses going forward. But one other things that stood out again this quarter on the process side was really just around like the incrementals that you're putting up. I know that you referenced, Centa being a little bit of a drag moving forward. But the core incrementals 50% to 60% are quite strong. I'm just wondering like is that the expectation for the core business moving forward into the second half of the year?

Well, you may recall last year, we were still going through the final phases of our supply chain optimization program. So the first half we do get a greater benefit on the incremental side of things than we will in the second half. We've always steered people towards the 30% to 35% incremental in Process & Motion Control. I think you'll see that sort of normalized in the second half of our year. Obviously, we do believe that over time Centa, as we anniversary that the incrementals there will be in that 30% to 35% range. What you're seeing now is the initial mid- to high-teens EBITDA margin rolling through the results. But the way we think about Process & Motion Control is 30% to 35% core incrementals. We had a great obviously first half as a result of wrapping up a multi-year supply chain optimization program in the first half of last year. So that's the way I think you should think about it for the rest of the year.

Got it. And then maybe one last question. As you think about the second half also, is there anything that we need to be aware of beyond your comments on incrementals that impacts the second half seasonally? I just take a look at it like your guidance for the year, the implied EBITDA is comparable to the first half usually the second half is a little stronger. Just any comments around that would be helpful?

I think you're spot on. I mean, our fourth quarter is obviously our strongest quarter for Process & Motion Control. You're also – the flipside of that is if you look at our Water Management platform seasonally, the December quarter and March quarter are weaker than the first half of the year just based on the construction season in North America. So the incrementals should still be fine year-over-year, but sequentially water slows a little bit just because of the nature of the products. And PMC is always just a little bit more than our fourth quarter than the other quarters.

Okay, great. Thank you.

Our next question is from Andrew Obin from Bank of America Merrill Lynch.

Yes, good morning. Can you hear me guys?

Yes. We can hear you.

Good morning, Andrew.

Just at PMC, you sort of highlighted improved sell-through through the distribution channel and for awhile, I think last year you were sort of questioning, why we're not seeing this acceleration? Could you just go by end markets and just tell us where are you seeing the increased demand and how much visibility you have in terms of the momentum and the channel?

Well, the momentum really started picking up probably about a year plus ago, Andrew. And we started off at sort of down just a touch and that migrated to flat to up a few percent and now obviously we're seeing it in that mid single-digit range. It's really – I wouldn't say that there's a lot of disparity. I don't think you have something growing, 15% or 20% and something declining. They're all in the low to high single-digit range. Obviously, process industries has been strong. Consumer industries have been steady. I don't think we're seeing a noticeable change in really any of the end markets at this point because you have to remember most of this is MRO activity. So we've reached a point where the inventory is in the channel are very stable. The same number of components failing every day, and so what you are seeing now is really the normalized end market demand with industrial production levels at a relatively stable rate. At any given part of the year, you're going to see certain end markets doing full maintenance as an example. You'll see food and beverage typically better in the second half of our year as they do maintenance over the winter to be ready for the warmer parts of the year. And the flip side is true on process industries, right, you'll see a little more activity over the summer months as they go through and run things at a peak. So I'm not demonstrably different across the end markets, but solidly in the growth category. And I would say very stable given where industrial production sets.

And so your view that this is not restocking, this is just steady state demand driven by MRO? Did I hear you correctly?

It’s not my view. It is the fact. There has been no restocking in our industrial distribution channels.

And just in terms of pricing, it's another concern on the channel. How does the dynamic control of price increases through the channel working for you guys?

Well, for us, we don't have any exclusivity with our distribution channels. So for us we have a relationship that allows us to push price through to the channel, smartly, selectively and in partnership with our distribution customers because we want to protect them as well as really cover the inflation input costs as well as, make the amount of money we need to reinvest to create innovative solutions. But the ability to get price through our channel is fairly understood, mature and has not been an issue whatsoever.

Terrific. Thanks a lot.

Our next question is from Joe O'Dea from Vertical Research Partners.

Good morning.

Good morning.

With respect to cash deployment when you look at leverage where you are now and the trajectory that you're on by the end of the year. And then you marry that with what we're seeing in the equity markets. I think that you've talked to maybe broadening out cash deployment as a next year opportunity or agenda item, but any consideration around accelerating that a little bit given what could be some opportunities there with these moves in the equity market?

Joe, I think our historical cash deployment has been really around debt reduction in M&A. I would say that for the remainder of the year, those are the two that we're going to remain focused on as you pointed out obviously when we get to the end of the year and we end it sort of two times that opens up some additional things for us to think about in terms of capital deployment. But we're not going to get ahead of ourselves. At this point, we want to make sure that we can march the leverage through an area that we think everybody is infinitely comfortable with as well as they very disciplined and do the M&A that we should be doing as we have been doing over the last five years to six years. The acquisitions that we've been able to do our performing extraordinarily well, but we've married that with a balanced approach to making sure that we're marching to leverage through a range that people are comfortable within. Over the rest of the year, I think that's what you're going to see us continue to do. But as we turn the page into the 2020, obviously we'll have some high class challenges to consider with respect to other uses of cash flow.

Got it. And then on digital product and talking a little bit about the retrofit being arguably the biggest near-term opportunity? Can you talk about just how you push that opportunity and is that something that you were collaborating with distributors who are serving some of those customers on the day-to-day basis? Just how you get in there and try to maximize that and accelerate the revenue recognition there on the retrofit opportunity?

Yes. It's a great question. Obviously we're working closely with our distribution partners. We've actually stood up a separate sort of retrofit organization internally, as well as working with key and strategic accounts. Right, I think the greatest benefit that we see is to go to our existing customers who have a large installed base and offer them the opportunity to retrofit their existing fleet and provide enormous productivity for a very, very low initial price point. So that's a three pronged approach where we're leveraging in our key and strategic account resources to go and talk to the people that have those large installed bases or leveraging our distribution partners to do the same for us. And then obviously the organization is going to go out and try to define maybe competitive situations where there's a competitor in there and that competitor is doesn't have a connected capability, and we can come in and really sell the value proposition because those products are remanned and reserviced all the time. And so there's always opportunities to sort of come in and offer a better solution. So it's really a three pronged approach for us. We're seeing the funnels build really across all three of those channels. And as I said in my comments, I expect that you'll see some impact in the topline growth as we move through the balance of this year, but more pronounced when we get to fiscal 2020, but we're really excited about it and so our customers, and I think our distributors are as well because this is a value proposition that is an easy sell for a very low five digit or five figure sort of number. You can take an existing product and connect it to your control system. And the cost of an hour of downtime is a six figure number, right. So it's a no-brainer when you can get to the right people at the right time and we're having great success with it and we're excited about where it puts us.

Thanks very much.

Our next question is from Jeff Hammond from KeyBanc Capital Markets.

Hey. Good morning, guys.

Good morning, Jeff.

Good morning, Jeff.

Just want to go back to the macro commentary on water. Maybe just talk about, you moved the color of the dot next to res, and just where are you seeing specifically some slow in there? And then just on non-res, I mean it sounds like its building momentum, but we had a peer yesterday kind of talk about September seeing some slowing in, in project activity, and just want to see if there's any signs, just given some of the volatility if you've seen any of that? Thanks.

Sure. Just for context, res is 10% to maybe 15% of our water business and it's primarily PEX and PEX-related products. So if think about what we're doing there is we're really highlighting the fact that if you look at housing starts, if you look at interest rates, I think we're just sort of taking a little bit more of a cautious approach on residential. It's the very smallest part of our business. It's the least impact to us in terms of our margin capability. So we're really just sort of flagging it as say the reality is the residential is likely going to slow. Offsetting that really is what we think a very good set of circumstances and background in non-resident. If you think about the cycle, we moved into that institutional part of the cycle where healthcare, education, municipal is all very strong. That's where we're at and we've talked about for years. That's where we're extraordinarily well positioned and that's sort of what you're seeing. So we're not seeing, I would say, the slowing that maybe you referenced. We see really strong backlogs and we feel good about the second half and certainly at this point into fiscal 2020. All things could change, but I think at this point, the cycle is progressing as we expected. I mean it's still very early in the recovery on that institutional side as we've talked about. But that's the context around a little bit of res exposure and why we changed it and how we feel about the rest of the business over the next period of time.

Okay, great. And then Todd maybe just update us on how you feel the execution is going on SCOFR 2. And then just any early thoughts on as you kind of build the thought process and plans around SCOFR 3, where are you going to be focusing et cetera? Thanks.

Sure. SCOFR 2 is a much simpler move, a series of moves. And I think where we are today I think we'll start to accrue the benefits of that really starting in our fourth quarter. Most of the work is wrapped up and we're pretty pleased with what the benefit will be. I mean, it's sort of right in line with what we had communicated. Obviously, we've signaled or flashed SCOFR 3. I think it's probably a little bit early to talk about it. Publicly other than to say, it looks like something probably in between one and two with some length of execution is probably in the one- to two-year timeframe. So I think when we get to, perhaps, we’ll have a little more color when we get to our Q3 call, but for sure by the time we get to our Q4 call, we'll lay out sort of what that looks like. But it's not crazy to think about it as a $20 million save. We will work to see if we can't maximize that into something a little bit more over time.

Okay, thanks a lot.

Our next question is from Mircea Dobre from Baird.

Yes, thank you. Good morning, guys. And I just want to pickup where Jeff left here with this SCOFR discussion. So maybe as the reminder on SCOFR 1, kind of what the incremental benefit was in 2019 and if it is all kind of focused on the first half of the year? And then SCOFR 2, you're still essentially on track and targeting $15 million of benefit, right? So those are still…

All correct, yes.

Okay, good. And then also on Centa, you sound from an execution standpoint, you sound incrementally positive here on a quarter in terms of what you can do in driving the margins. As I remember, you were initially targeting a three year window for improving margins by a 1,000 basis points. I heard you say that you could do that exiting fiscal 2020, and just to be clear here as to what the magnitude of that would mean, that would be – roughly call it a $12 million, $13 million of incremental, EBITDA dollars based on that businesses revenue base. Am I correct?

At a full-year run rate, correct.

At a full-year run rate?

Yes.

So in fiscal 2020…

Yes, so think about it, just to be clear, when we acquired the business, it was in that sort of 12% to 13% range. We felt that we had 1,000 points in margin. What I'm referring to is that, we won't get a full-year of that 1,000 point benefit in 2020, but we'll get there at some point during the year. The first full-year of that would probably be in our fiscal 2021, but I know where you're going in costs?

But yes…

And then lastly, as we're talking about the core PMC business, you’re essentially kind of sticking with that longer-term view of 35% incremental margins excluding the items from sculpture and excluding sentence, correct?

That is correct.

Okay. Then lastly, in Water Management, your organic growth this quarter was – I thought pretty remarkable and I'm essentially trying to figure out what the moving pieces are because when I'm looking at just put in place construction through the quarter and I look at your key end markets. When things were fine but, but there were not as good as 12% organic growth would indicate. So how do we think about either idiosyncratic items that impacted the quarter or essentially the sustainability for lack of a better term of this kind of growth going forward?

Sure. Yes, I mean just to – first of all, there were no unusual items, projects, catch up, otherwise, no channel build or anything like that. If you look at the 12% organic growth, if it comes off of a relatively easy comp, if you remember last year in the second quarter we had the impact of the hurricane and core growth was only up just a touch. That being said, if you look at our second half, we expect very strong stacked core growth. All the absolute percentage in the quarter may not be as high as the 12% we just posted. If you look at the stacked growth over the course of the second half, it will actually probably look as good or perhaps even a little better than the 12% plus the one. So when you go back to – so why – just couple of things. Obviously, we're in a strong part of our end markets, where we have a very high relative share and we are going to outperform any market indices because of that. Second, we've been introducing new products at a great clip or really the past two to three years. We've been driving our specifications share up and we've got a connected strategy that will probably help us, not hurt us as we think about, the balance of this year into next year. And so from our standpoint, it really demonstrates the work that we've been doing, the transparency of the performance that you can see with VAG out of the picture and you know, as we think about Zurn and Water Management going forward and capital deployment, we've obviously would love to do more in and around some of the end markets that we serve here because as you can see, we've just got a terrific competitive advantage with the business and we're excited about where it's positioned going forward.

I see and last question, just picking on this last comment on capital deployment. How do you, how do you sort of think about the cyclicality of Water Management now and are there anything – is there anything that you can do either on capital deployment or maybe organically that way you build the business shifting more maybe towards the retrofit, I don't know, in order to essentially manage this dynamic?

Well, I think that you touched on it, right? Adjacent markets that continue to perform in whatever market, it would be adjacent to a non-res market would be areas that we focused on. Retrofit when we bought the business 10 years ago was virtually zero, it's somewhere between 30% and 35% today. This connected backflow and all these connected products offer us. We think a real opportunity as you go through any sort of non-res cycle to go in and retrofit existing products to the connected version, which is something we never have had before. So I wouldn't be surprised as you think forward, this business looks a lot more like PMC where it's half new, half retrofit. I think that everything we're doing with both organic and inorganic is sort of to get us to that mix and regardless of that we think are high relative share, really protects us as we go through a cycle at some point. We don't see that cycle in the next 12 months. But from a strategic standpoint, we're working to make sure that when it does come we're positioned to really outperform because of what we've done really since we bought the business 10 years ago.

Great. Thank you.

Our next question is from Charles Brady from SunTrust Robinson.

Yes. Thanks. Good morning, guys.

Good morning, Charles.

On the PMC slide, yellow box on Europe not surprising there at all obviously, but one of you just comment a little bit more on some of the geographies and the growth or lack thereof that you're seeing and particularly in the European markets.

Yes, Charlie. The yellow dot is not new. I think it's been there for a couple quarters. I think we're just, as we said, when we made the change, we're just taking a little more cautious outlook on Europe obviously, with some of the noise around things happening in Italy, the Brexit situation, we've just chosen to take a more prudent approach to way that we think about the market. I wouldn't say it's underperforming by any stretch of the imagination. I think it's just, it's certainly lower growth than in North America with some things to keep an eye on just given the political and macro concerns that exist in the continent and in the UK.

Okay. So you didn't down shift in the past three or four months or so. It's just kind of in for that.

No. I mean it's sort of think about it as relative to other regions. That's the one that is probably just from our standpoint as a little bit lower market growth profile, but nothing different in the quarter.

Okay, thanks. And then just on direction, I think at the Analyst Day, you talked about rolling out couplings after the gearboxes, as far as full monitoring ability? Can you just talk about, I guess you have more people signed on to that full monitoring ability on the gearboxes and what's going on in the couplings now rolled out to have that capability as well?

It varies by customer Charlie, but yes, I mean I think the product offering continues to advance. It also includes things like modular flattop belting, and many, many more of our products. So the adoption rate is high, customers are excited about it. I'm not sure I can add any incremental color other than to say, it's differentiated in the marketplace. People are talking about bringing to market connected products, but what they're bringing is products that provide information around heat vibration and temperature without any context. And so if you're a customer, that's great. I'm hot, I'm hot, I'm hot, I'm vibrating, vibrating, vibrating. But it doesn't tell you, why it doesn't tell you what to do and that's, that's a huge differentiation between what it is we have, where the data is provided in context to a control system that tells the customer exactly what the issue is and what to do about it. And so we think, the differentiation between what we've created and it's taken us a long time to do, but it embeds 127 years of application expertise behind it is a pretty big competitive mode. And to be able to do it across a broad series of power transmission components relative to other suppliers, you could do it, perhaps across one product category. It's a very differentiated approach. And so, obviously we're excited about what's been done, but we're getting into the phase where we’re more excited about what it does for growth and margin standpoint.

Yes. And just to that point, I mean, can you quantify what revenues are you getting from DiRXN and kind of where that's going to be over the next 12, 18 months?

Well, last year, the first year of launch or first partial year of launch, we did about $20 million in fiscal 2019, which we're in right now. It will probably be closer to $50 million and it'll grow from there.

Great. Thanks. Appreciate it.

And our next question is from Bryan Blair from Oppenheimer.

Good morning, guys. Thanks for taking my question and nice quarter.

Thanks.

Hoping to circle back quickly on Centa, the original EBITDA guidance that you put out contemplated, I think it was $13 million in incremental M&A contribution, $0.11 to World Dryer. With Centa strong year-to-date performance, where is that number shifted in terms of the current guide?

Well, it's probably a little bit better than that. I don't know that we're going to get into specific contributions to EBITDA. We can tell you from a growth standpoint, it's growing nicely as you can see in the reported versus corn numbers. And from an M&A standpoint, it’s probably a little bit ahead of what we had included in our initial guidance.

Okay, fair enough. And then on the Zurn side, you highlighted at the Investor Day the expansion into adjacent fire and site works markets seems like a very interesting longer term opportunity. Can you provide a quick updates on those initiatives? Maybe size, run rate exposure and where those revenue streams may scale over the next couple of years?

Sure. I think the – starting with fire protection, we've identified about a $300 million segment of the market that we think we can really exploit by leveraging the Zurn brand as well as essentially all the components that a contractor needs to provide a quench fire protection system. Whereas today they have to go to a number of providers, and as a result of that, the general contractor has a very limited ability to value engineer solution for a building owner. The lead product, if you will, but the most important product in that is the backflow prevention device. And so what we've done over the course of the last, call it nine to 12 months, is build out the family of SKUs that allow us to go to a general contractor, and help them value engineer solution for a customer, so that they can provide the entire system to the end user with sort of the one invoice, one Zurn benefits and everybody makes a little bit more money. And it's so much easier to do. And so we're having great success there. But we started with having the Trojan horse of the product into that end market and the very best brand in that part of the market which is Zurn backflow. Site works, we got into site works a little bit through an acquisition. We made a Green Turtle four or five years ago. Aside from that, as we look through these growth adjacencies, the Water Management in and around commercial buildings as well as on highways, airports is a terrific sort of growth market for us. We're thinking about that, it’s about $150 million to $200 million market and we've been aggressively pursuing building a rep channel to get to that. So what these are? These are products that are replacing poured-in concrete, right, which is expensive, difficult to manage, and these are drop-in solutions. And so in both cases, we're starting with great products, a differentiated go-to-market because we have a broadest portfolio with one brand and now attacking these two markets. And I would say, it's still early, but if you look at our relative share in any other market we serve, it's 25 at the low end, 50 plus at the high. We're coming into these markets with very low share. So we would expect the trajectory on that share game over a number of years to sort of track to that 25% plus range. So you can sort of see the magnitude of the opportunity that was probably $100 million opportunity over the next three to five years.

Okay, very helpful color. Thank you.

[Operator Instructions] Next question is from Julian Mitchell from Barclays.

Hi, good morning.

Good morning, Julian.

Good morning. Just one question from me, I think just circling back to the EBITDA, guidance for the second half, relative to the first half, understood that water seasonally is a bit of a dampener in the second half. So maybe just trying to understand within PMC, would it be the case that some terrific impact and higher investment spend? That's what is maybe weighing on the increase in EBITDA in the second half? And maybe just help us understand, what you think the gross tariffs impact will be over the next sort of 12 months. I'm assuming list three, a fully gets enacted early next year?

Well, I'll try to unpack what you asked. And so the tariff situation for us with a fully implemented lists three and the fiscal year would be about $20 million of which through material substitution, alternate supply chain, selective price increases, we think results in absolutely no impact to our earnings and in fact results in a margin that's probably in the 20% to 30% range in EBITDA. So that's step number one. We don't have a tariff concern. We will worry about what it does to long-term demand, but in terms of a headwind to our business at anyway shape of form we just, that's not in our second half and we don't see that being the case even if there is a fully implemented lists three. With respect to seasonality, obviously we're expecting a better second half of earnings in our PMC business than our first. As I said, we don't see any headwinds from tariffs. And obviously we see earnings in the second half, a little bit less and our Water Management platform as a result of the normal seasonality. And so again, Juliana knows that answering your question as fully as you may like, but the tariffs are not the issue. And if you're poking around that, hey, maybe the run rate could be a little bit greater. Again we're sort of balancing that with, hey, we've got six months to go in our fiscal year. We've had a really nice first half. The trajectory of the business is strong. All the things that we've done internally are bearing fruit. And we'll just watch how the year plays out. But at this point, we felt comfortable taking it up to where we did. And, you know with any luck, we'll be back here and a little bit – and give you the real fourth quarter number at that point because we'll have nine months behind us. But at this point we feel good about, the year and where we're positioned heading into our fiscal 2020.

That's very clear. Thank you. End of Q&A

At this time, we have no further questions.

Thanks everybody for joining us on the call today. We appreciate your interest in Rexnord and we look forward to providing our next update when we announce our fiscal year 2019s third quarter result in early February. Have a great day.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating, and you may now disconnect.