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EVP & CFO Daniel Hopgood explained the backlog decline was a function of strong Q3 shipments and that underlying order intake remains stable. President & CEO Sundaram Nagarajan provided a segment overview, noting steady orders in Industrial Precision Solutions (IPS) except for polymer processing, a return to growth in Medical and Fluid Solutions (MFS) as destocking normalizes, and continued strong momentum in ATS, which he described as being at the beginning of a multi-year growth cycle.

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CFO Daniel Hopgood confirmed the sales and EPS outlook, pointing to strong operational and cost management as demonstrated in Q1. CEO Sundaram Nagarajan added that strong decremental performance in ATS and IPS, along with solid core MFS performance excluding the Atrion mix, provides confidence. Regarding medical margins, they explained the dilution was from Atrion's lower margin profile, while core business decrementals were in line with expectations. Nagarajan also noted the MFS organic decline was half from destocking and half from a now-complete strategic program repositioning.

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CEO Sundaram Nagarajan noted that backlog normalization has primarily impacted large system businesses like plastic processing and industrial coatings. He attributed polymer processing weakness to tough comps and reduced investments in recycling and virgin polymer. CFO Daniel Hopgood described the interventional destocking as being in the 'middle innings,' with an expected resolution in another quarter or two, while highlighting a strong long-term project pipeline.

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EVP & CFO Anselm Wong explained that customers are currently prioritizing the completion of existing new construction projects, though the R3 pipeline is building. He attributed the unchanged guidance to market uncertainty around interest rates. On the follow-up, CEO & Director Ramey Jackson confirmed that Janus has been taking market share over the past three quarters. Wong added that the R3 pipeline is increasing as customers look to upgrade facilities to improve occupancy in a more competitive market.

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CFO Anselm Wong noted steady, small growth in both the pipeline and backlog. CEO Ramey Jackson added that project churn rates have extended to around 500 days from a pre-pandemic 300 days, but confirmed that both orders and the pipeline have been on an uptick since the start of the year. Regarding pricing, Mr. Wong explained the Q1 impact was less severe due to the timing of older, higher-priced projects bleeding off. He clarified the 2025 tariff impact is minimal due to existing inventory and mitigation efforts, whereas the larger $10-12 million future figure represents a potential impact before any new mitigation actions are considered.

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CEO Ramey Jackson explained that the guidance was cut because projects expected to be released after a recent interest rate cut remained on hold, as developers now anticipate further rate cuts. He noted that while REITs continue business as usual, non-institutional operators are delaying projects. Jackson also mentioned that the company is in Phase 2 of its cost adjustments and that a $6.5 million bad debt expense from a customer bankruptcy significantly impacted adjusted EBITDA in the quarter.

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CFO Shashank Patel explained the tariff estimate changed due to a reduction in China tariffs being partially offset by new tariffs on copper and from Europe. He quantified Q2 price realization at approximately 3%, expecting it to rise to mid-single digits in the second half. CEO Robert Pagano added that acquisition synergies are ahead of schedule across the board, driven by cost focus, 80/20 initiatives, and top-line gains.

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CEO Robert Pagano confirmed seeing a $5 million pre-buy impact in Q1 and a solid April, stating the company is controlling order input based on customer history to manage pull-forward. He attributed the weaker Europe outlook to a slowdown in new construction and greater-than-expected destocking. Regarding acquisitions, Pagano reported that all three businesses are performing well, with synergy tracking ahead of schedule.

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CEO Robert Pagano stated that European heat pump destocking is expected to continue through at least Q1 of the next year. He noted that U.S. wholesale destocking is now largely complete, but softness in multi-family construction began to appear in Q3. For 2025, he pointed to the stability of the repair/replace business, which is 60% of sales, and a general pause in new construction pending resolutions of economic and political uncertainties.

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CFO Robert Rehard quantified the Q2 rare earth impact at approximately $6 million on profit, representing two-thirds of the AMC margin miss, with a full-year impact of about $5 million. CEO Louis Pinkham added the sales impact was about $10 million in the quarter. Pinkham explained the 'rest of world' tariff increase relates to manufacturing in India and Thailand, noting the company can mitigate this by shifting production. Rehard stated that while there's a modest cash tax benefit from tax law changes, it's offset by tariff-related timing, so the $700 million free cash flow guide (excluding the AR securitization) is maintained.

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CEO Louis Pinkham outlined the tariff mitigation plan, ranking the drivers as supply-base realignments, followed by production relocations and productivity, and finally pricing actions, while reiterating confidence in achieving EBITDA neutrality. CFO Robert Rehard explained that the Q1 to Q2 margin change in IPS is primarily due to business mix. He and Pinkham clarified that the improved PES margin outlook is a result of flowing through the strong Q1 performance, supplemented by expected cost savings and pricing improvements later in the year.

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CEO Louis Pinkham explained that the HVAC demand surge was sudden after two years of weakness and that OEMs had been discreet about their pre-buy plans. He also highlighted that the pre-buy was concentrated in smaller systems where Regal Rexnord has less exposure. For discrete automation, he noted that while short-cycle orders are weak, strong long-cycle project wins provide confidence for 2025.

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CCO Steve Spittle provided the tariff impact breakdown: Commercial Foodservice (60-65%), Residential (20-25%), and Food Processing (10-15%). CFO Bryan Mittelman confirmed that Food Processing has a book-to-bill above one and a growing backlog. CEO Timothy FitzGerald highlighted the active M&A pipeline for Food Processing as a key rationale for its planned spin-off.

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Executive Timothy FitzGerald explained the buyback was driven by a belief that the stock is undervalued, coupled with strong cash flow and a deleveraged balance sheet. He also noted M&A has been focused on Food Processing, freeing up capital. Regarding tariffs, FitzGerald stated Middleby is confident in offsetting the costs and sees it as a competitive advantage due to its U.S. manufacturing footprint in categories like light-duty cooking and induction. For the grill business, he highlighted that premium outdoor products are made in the U.S., and they have action plans to navigate tariffs for other sourced products.

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Executive Timothy FitzGerald indicated that the Food Processing business will likely carry less leverage post-spin to facilitate its M&A strategy. He described Ed Garden's appointment as part of an ongoing board refreshment process, noting the cooperation agreement has standard terms and that discussions have been constructive and aligned with the company's strategic direction.

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Executive Timothy FitzGerald attributed project delays to a combination of factors, including permitting, traffic uncertainty, and interest rates. CFO Bryan Mittelman identified inventory reduction as a key working capital focus, with an opportunity of over $100 million. Regarding the convertible note, he outlined several options including using the credit facility, cash on hand, or accessing other debt markets, stating they are not in a hurry to refinance the low-rate debt.

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CEO Paulo Ruiz stated that strong order growth is expected to continue, supported by a robust negotiation pipeline. He highlighted that for the acquired Fiberbond business, Eaton had already planned for expansion investments due to high demand. He reiterated that capacity additions will continue through next year, plateauing in 2026.

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President, CEO, & CFO Sean Bagan highlighted recovery in the health and wellness and European agriculture markets, with an expected acceleration across all businesses in the second half. He explained the CFP divestiture was a strategic move to improve margin profile and focus on core products, using proceeds for debt reduction. Bagan stated that while the portfolio is under continuous review, no other divestitures are imminent. The primary plan for manufacturing capacity is to grow into the existing footprint, leveraging expected revenue growth.

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CEO Sean Bagan stated the company intends to cover the dollar impact of tariffs through a combination of price increases, leveraging its global manufacturing footprint, and pursuing volume growth. Regarding the portfolio, Bagan confirmed they are open to all options, including divestitures, but are focused on debt reduction before considering any significant M&A, which is unlikely until next year.

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Sean Bagan, Interim President, CEO, and CFO, confirmed continued progress on system wins, noting a new Electronics subsystem win will be announced shortly. He explained that the $10 million in lost hurricane revenue is unlikely to be caught up in a single quarter due to capacity constraints and high distributor inventory, but will return as market conditions improve. Bagan identified the marine and powersports space as a market that could be among the first to recover, driven by potential interest rate cuts and low comps.

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EVP & CFO Joe Bruderek clarified the nuclear order timing was due to a strong prior-year comparison and shifts between Q1 and Q3 of this year. He quantified the transactional FX headwind as $1.9 million in Sealing and $2.8 million in AST, primarily from the weakening U.S. dollar against the Taiwanese dollar. He noted that AST margins would be in the mid-22% range without FX and that leverage should improve as growth investments mature. President & CEO Eric Vaillancourt attributed the improved Sealing outlook to new OEM commercial truck wins, significant new space program contracts, and continued strength in general industrial markets.

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President and CEO Eric Vaillancourt explained that tariff exposure is minimal as most production is 'in region for region,' with the main exposure being bearings from China, for which they have secured alternative sources. He noted the supply chain's agility and stated he feels 'equally good' about all markets, with commercial vehicle weakness being in line with expectations. EVP and CFO Joe Bruderek added that the current guidance range accounts for a variety of potential economic outcomes in the second half of the year. Eric Vaillancourt concluded that the company's focus on developing agile leaders allows it to thrive and find opportunities in uncertain environments.

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President and CEO Eric Vaillancourt, along with executive James Gentile, clarified that AST's growth is primarily driven by outperformance in leading-edge applications and market share gains, not a broad market recovery. They anticipate a choppy first half for AST with a stronger second half. Vaillancourt added that potential tariff impacts are considered immaterial, as most sourcing is in-region or customer-directed, and the company has pricing and surcharge mechanisms ready to offset any exposure.

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CEO Eric Vaillancourt described the semiconductor market as "choppy" with a slow rebound, noting customer caution and destocking. He stated the nuclear business is about 7% of sales and provides steady, profitable growth but will not be a primary driver of double-digit growth for Enpro. Regarding M&A, Vaillancourt called the AMI acquisition a "home run" and confirmed the company has a robust pipeline but will remain disciplined. Executive James Gentile added that M&A activity has picked up and the company is actively looking at opportunities.

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CEO Beth Wozniak noted that while Avail EPG's core business was utility-focused, the data center opportunity is growing significantly. She confirmed opportunities to apply nVent's integration playbook and that there is flexibility in applying resources across the combined Avail and Tracte footprint. She stated capacity expansion is needed for both liquid cooling and the newly acquired businesses to support overall infrastructure growth.

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CEO Beth Wozniak stated that nVent continues to grow content with existing liquid cooling customers while adding new ones, with the NVIDIA partnership being a positive factor for certain clients. She highlighted a strong 2025 new product pipeline to expand applications. On capital allocation, Wozniak described the M&A pipeline as robust but noted timing is uncontrollable. CFO Sara Zawoyski added that the 2025 outlook includes roughly $200 million in share buybacks and that the company's leverage is below 1x, providing ample capacity for deployment.

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CEO Beth Wozniak reiterated that growth is the top priority for capital but confirmed buybacks remain an option, especially if M&A timing is uncertain. She stated the utility growth was a genuine reacceleration after first-half challenges and confirmed that the quarter's order growth was broad-based across both the Enclosures and EFS segments.

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CFO Emmanuel Caprais clarified that current project orders provide visibility into 2026, with Q3 and Q4 organic growth expected in the low-to-mid single digits. CEO Luca Savi defined an 'acquisition of size' as a company with revenues between $200 million and $400 million, noting this is the range for the bulk of opportunities in ITT's current M&A funnel.

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CEO Luca Savi explained the $50-$60 million tariff impact would be fully offset through a combination of sourcing changes and targeted price increases on non-USMCA compliant products, resulting in no net impact to EPS guidance. He also affirmed that despite macro uncertainty requiring more granular diligence, the M&A pipeline remains active and the company is focused on cultivating long-term strategic acquisitions.

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CFO Emmanuel Caprais clarified that the temporary intangible amortization was ~$0.17 in 2024 and is guided to be ~$0.16 in 2025, offering no significant net benefit from amortization roll-off. He highlighted strong underlying Q4 incremental margins for IP at 64% (excluding acquisitions) and noted that for 2025, Motion Technologies' margin is expected to reach 20%, with strong incrementals also continuing in IP and CCT.

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CEO Albert Nahmad and EVP Paul Johnston confirmed the 'flattish' comment applied to overall sales. Regarding inventory, Nahmad stated his long-term goal is to achieve five turns, up from the current 3-3.5x. He introduced 'Dream Plan 2,' which targets $10 billion in revenue, 30% gross profit, and five inventory turns.

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Executive Paul Johnston noted that motor sales were up 7%, a positive sign, but it was too early to declare a definitive 'repair versus replace' trend. Executive Barry S. Logan added that energy efficiency mix actually improved and that Watsco's product variety provides a competitive advantage if consumers do trade down. The team confirmed their strategy was to avoid the long-term obsolescence risk of 410A for short-term Q1 gains.

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Executive Rick Gomez explained that the growth was not just due to easy comps, as 2-year stack growth was up 12%, and saw no evidence of significant contractor pre-buying. Executive Barry S. Logan added that while there was some recovery from a supplier issue, the primary driver was new customer growth. Regarding M&A, Logan noted the environment is more 'business as usual' with a strong pipeline of family-owned businesses.

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Executive Paul Johnston confirmed OEMs are ready for the A2L transition, with pricing expected to be in the 8-10% range. He noted the transition will drive sales of complete systems, not just components. CFO Rick Gomez and President Aaron Nahmad addressed M&A, stating that while private equity activity has subdued, Watsco's focus is on finding cultural fits with entrepreneurs. They highlighted that Watsco's technology platform is now a key differentiator and a central part of M&A discussions.

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President and CEO Kevin Holleran stated that channel inventory days-on-hand are well-positioned for Q3 and the upcoming early buy season. He confirmed that the remodel market remains tempered due to its discretionary nature but will likely improve with the housing market. Holleran also acknowledged a "repair versus replace" trend, noting that parts sales as a percentage of revenue have increased meaningfully year-over-year, suggesting some customers are opting to repair equipment rather than replace it entirely.

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CFO Eifion Jones projected a step-up in Rest of World margins in Q4, with a long-term goal of over 40% driven by operational improvements. CEO Kevin Holleran stated that while the aftermarket remains resilient, new construction is weak and requires further interest rate cuts to stimulate demand. Regarding hurricanes, Holleran noted the company is prioritizing disaster relief orders and expects demand to occur in waves, from initial water treatment to later equipment replacement.

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CEO Ivo Jurek noted that the industrial replacement market showed positive growth in Q2 for the first time since Q1 2023 and that PMIs are stabilizing. CFO Brooks Mallard described a balanced capital allocation approach between debt paydown (to get gross debt below $2B) and share buybacks, as the stock is considered undervalued. He also expressed confidence in the 90% free cash flow conversion target, citing improved working capital management.

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CFO L. Mallard explained that the $40 million in pricing to offset tariffs effectively comes out of the volume assumption in the core growth guide, reflecting weaker OEM demand. He noted the FX headwind is now about 100 bps less than initially forecast. Regarding Mexico, Mallard stated that the company has flexibility to leverage its U.S. footprint to offset tariffs and improve USMCA compliance, which is a key part of the operational mitigation plan. CEO Ivo Jurek added that the company has a full product footprint in Mexico, mirroring its U.S. capabilities, with the exception of mobility products.

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CFO L. Mallard confirmed the high drop-through rate is due to a combination of translational and transactional FX impacts from 2024 that are not modeled to repeat in 2025. CEO Ivo Jurek addressed inventories, stating that levels in the Automotive replacement channel are not out of line and the business is performing well. For Industrial replacement, he believes destocking is very near the bottom and expects performance to improve progressively through 2025.

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CEO Ivo Jurek explained that the company is mitigating margin pressure through its enterprise initiatives, including 80/20 execution, material cost reductions, and factory productivity, which have successfully expanded gross margins despite soft demand. Regarding China, he credited the local team's execution of a 'region-for-region' strategy and their focus on expanding market share in industrial applications, noting they expect mid-single-digit growth for the full year in the region.

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President, CEO & Chairman Todd Adams stated that year-over-year price realization was approximately two points in the quarter. He also noted that Dodge start data remains 'clearly still positive' and hasn't changed meaningfully, which, combined with the company's own share gains, supports a positive outlook for growth in 2026.

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Todd Adams, Chairman and CEO, confirmed an acceleration in sourcing to the U.S. and Mexico, in addition to Southeast Asia. David Pauli, CFO, and Todd Adams clarified the tariff cost is a bottom-up calculation based on specific HTS codes. They explained that a significant portion of imports from China, such as steel and aluminum products, are subject to much lower tariff rates than the 145% headline number, resulting in the $45M-$55M impact.

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CEO Todd Adams explained that the institutional growth outlook is an aggregate figure based on prior construction starts, with improving 2025 starts potentially boosting 2026 growth. Regarding tariffs, Adams detailed the company's supply chain evolution, stating China exposure has been reduced from a peak of 70-75% to less than 25% currently, with a target of under 10% by 2026. He emphasized that they have built flexibility to shift sourcing between China, Southeast Asia, and North America, allowing for a measured, strategic response rather than a reactive one.

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CFO York Ragen quantified a modest sales pull-forward of approximately $20 million in Q1. President and CEO Aaron P. Jagdfeld added that IHCs remain strong in regions with recent outages like the Southeast, but noted that California, being a less mature market, showed a lower IHC-to-outage ratio than expected, while regions with fewer outages saw lower IHCs.

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CEO Aaron P. Jagdfeld explained that the storms were regionally concentrated, inundating dealers in those areas and causing a temporary compression in close rates. He noted that project lead times mean activations from these events are just beginning to ramp up in Q1 2025. He contrasted this with quieter regions and emphasized the importance of the 9,200-strong dealer network in capturing this localized demand and establishing a new, higher baseline for the category.

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President and CEO Aaron P. Jagdfeld highlighted that the PowerCell 2 is a ground-up redesign focused on resiliency, offering market-leading capacity and power output. He stressed the key differentiator is the broader 'personal microgrid' ecosystem centered on the ecobee Smart Home Energy Hub, which optimizes energy assets for savings and resiliency. He noted a slight delay for PowerCell 2, now shipping in early Q1 2025, with the microinverter still on track for the second half of 2025.

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CEO Stephen Shafer confirmed the assumption that competitors likely fulfilled more pre-buy demand, leading to A. O. Smith's relative share performance in H1 vs. H2. He addressed new entrants by emphasizing the high barriers to success in the market, which require a full product portfolio, immediate availability through channel partners, and the ability to navigate a complex regulatory landscape.

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CFO Chuck Lauber stated that the 2025 assumption is for pricing to be EPS-neutral, covering costs, with a potential margin headwind in Q2 before pricing is fully implemented. He noted that the stable replacement nature of the water heater business (80-85%) mitigates demand destruction risk. Lauber clarified that the 6-8% tariff impact is separate from steel cost assumptions and is primarily driven by imports from China, with tankless products being the largest component.

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President and COO Steve Schafer identified three key opportunity areas: expanding the A.O. Smith operating system to drive waste elimination, leveraging IT investments for greater value, and continuing to refine the business portfolio. CEO Kevin Wheeler stated that A.O. Smith is well-positioned for potential tariffs due to its flexible manufacturing footprint, including two large U.S. plants and a unique Canadian facility. CFO Chuck Lauber explained the corporate expense increase is primarily due to lower interest income and incentive compensation returning to target levels.

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CEO Kevin Wheeler affirmed the price increase was executed as planned and that the market remains competitive but stable. Regarding China, he reiterated a strong long-term commitment, viewing it as a core market alongside the U.S. and India, despite the current "tough patch." He emphasized that the long-term demographics and economic potential justify their continued investment and presence.

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CEO Alok Maskara explained that A2L conversion costs and pricing were in line with expectations, with margin benefits driven by factory productivity and headcount reductions. CFO Michael Quenzer noted that tariffs are expected to increase slightly in the second half but are factored into the guide, which assumes HCS volumes down ~8% and BCS volumes down ~4% with continued strong price/mix.

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CEO Alok Maskara explained that residential destocking was not significant in Q1 because Lennox still had R-410A inventory to sell, pushing the expected impact into Q2. CFO Michael Quenzer added that the Q1 tariff impact seemed higher due to LIFO accounting, which expenses costs as incurred, and was primarily from tariffs on copper, aluminum, and steel coming through Mexico.

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CEO Alok Maskara estimated about 20% of Lennox's output is from Mexico, slightly below the industry average. He noted that recent record HCS margins reflect progress on the distribution initiative, though it remains a long-term journey. He stated that parts and accessories still constitute about 20% of sales, well below an entitlement he believes is twice that level.

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CEO Alok Maskara projected the residential end market to be flat to slightly up, while the commercial market is expected to grow in the low single digits. He noted that Lennox's exposure to the education market is less than some competitors but sees it as a growth opportunity and is not currently observing any slowdown in that vertical.

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President and CEO John L. Stauch characterized the pool volume environment as modestly more challenging than initially hoped but generally in line with expectations. He affirmed that channel inventories are at normal historical levels, with good visibility into sell-through. Regarding future tariffs, he stated Pentair would react as needed, treating them as commodity inflation and working with channel partners to recover the impact within the year.

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CEO John Stauch stated that products sourced from China represent just under $100 million in costs, down from approximately 2.5 times that amount 3-4 years ago, a result of transformation initiatives. He noted that while they are evaluating future actions, any major supply chain or factory repositioning would likely yield benefits in 2026 and beyond. CFO Bob Fishman added that the transformation project funnel provides flexibility to accelerate if needed.

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President and CEO John Stauch projected that the Pool segment would contribute around 100 basis points of ROS expansion, with Flow and Water Solutions contributing roughly equally to the remainder. He explained that residential Water Solutions is impacted by higher interest rates affecting rural home construction and consumer financing for water softeners. For commercial Ice, the primary headwind was a tough comparison to a large China project in the prior year, with the core North American market performing well.

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President and CEO John Stauch stated the goal is to eliminate addressable costs from discontinued 'Quad 4' products, with savings appearing in transformation results. He described the current Pool early buy as 'completely normal' and said it was too premature to call a recovery in new pool builds, with more clarity expected on the Q4 call.

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CEO Scott Barbour stated that the pace of quotes and orders is consistent and has improved over last year, though not radically, and they have not seen a meaningful change in project cancellations. Regarding capital allocation, an executive reiterated that reinvesting in the business is the top priority, followed by M&A. Share buybacks are continually evaluated as a use for excess cash after funding internal growth and considering the macroeconomic backdrop.

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CEO Kim Ryan explained that the current environment differs from the COVID era due to lower demand, which constrains pricing power, particularly in the MTS segment. During COVID, extremely high demand and backlogs enabled more significant price increases. She contrasted this with the APS segment, where long-term contracts allow for building in future cost contingencies. She also highlighted that the company's 'in region, for region' supply chain strategy has already reduced direct tariff exposure. CFO Bob VanHimbergen added that the annualized tariff impact is likely in the mid-$20 million range and that he expects most of it to be mitigated within the next year through various actions.

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