Margin Outlook
Q: Is 24% a new baseline for industrial margins?
A: Management emphasized their commitment to margin expansion, aiming for a 25% segment operating margin. They haven't reached it yet but are confident they will through continuous improvement and the Win Strategy.

Capital Allocation and M&A
Q: Will you pursue M&A given improved balance sheet?
A: With net leverage expected to reach 2.0x by fiscal year-end, they plan to keep the M&A pipeline active. They're open to leveraging up similar to previous deals like Meggitt, noting they can deleverage quickly.

Meggitt Synergies and Aerospace Margins
Q: Are synergies from Meggitt coming ahead of plan?
A: They increased expected synergies by $50 million, now totaling $200 million cumulatively. This is a pull-forward, and they're still committed to $300 million by FY'26. Aerospace margins benefited from strong 15% organic growth and a favorable 47% aftermarket mix.

Industrial Orders and Outlook
Q: What's the outlook for North America and international orders?
A: North America saw a 1.5% organic decline in Q2 due to continued destocking, expected to persist into 2024. International orders improved from -8% to -5%, with Europe showing 0.7% organic growth and Asia-Pacific orders picking up.

EPS Guidance
Q: Why does EPS guidance imply a second-half step-down?
A: EPS is expected to be evenly split between first and second half, with Q1 and Q2 being record quarters. Softness in North America and a cautious outlook led to conservative guidance, still at record levels.

Backlog Stability
Q: Is the backlog holding steady at high levels?
A: The backlog remains twice the normal levels and is holding steady. Management feels good about its quality, with no major cancellations or pushouts.

Distributor Sentiment
Q: How has distributor sentiment changed recently?
A: Distributors remain positive and bullish on the future. They anticipate a return to acceleration, with some involved in large CapEx projects.

Pricing and Inflation
Q: What are expectations for pricing and inflation?
A: They've returned to regular pricing cadence with modest increases. Despite ongoing inflation, they will continue using their established pricing tools.

Gross Margins Upside
Q: Is future margin improvement from gross margin or SG&A leverage?
A: Management sees upside in both areas. Initiatives like Simple by Design and Zero Defect are driving cost reductions across the board.

International Distribution Margins
Q: How much upside is there in international distribution margins?
A: Sales through distribution have 10 to 15 margin points more than direct shipments. They aim to increase distribution mix internationally, expecting it to drive future margins.

Second-Half Aerospace Margins
Q: Why are second-half Aero margins guided flat to down?
A: After a strong first half with a 47% aftermarket mix, they're cautious about the second half. Some one-time benefits may not repeat, but they still anticipate record numbers.

M&A Focus
Q: Are you looking beyond the 8 core technologies for M&A?
A: They prefer to focus on the 8 core technologies they excel in. While they've expanded in Aerospace, they target markets, customers, and technologies familiar to them.

Industrial Margin Sustainability
Q: Will cost savings reverse with volume recovery?
A: Normal incremental margins are expected with acceleration. Margin expansion is structural, driven by effective use of the Win Strategy.

Asia-Pacific Order Improvement
Q: What drove the sequential improvement in orders?
A: The improvement from -8% to -5% was due to better orders in Asia-Pacific.