A.O. Smith Corporation

Ladies and gentlemen, thank you for standing by and welcome to the A.O. Smith Third Quarter 2019 results. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference to your speaker today, Patricia Ackerman. Ma'am, please go ahead.

Thank you, Victor. Good morning, ladies and gentlemen, and thank you for joining us on our third quarter 2019 results conference call. With me participating in the call are Kevin Wheeler, Chief Executive Officer, and Chuck Lauber, Chief Financial Officer. Before we begin, I would like to remind you that some of the comments that will be made during this conference call including answers to your questions, will constitute forward-looking statements. These forward-looking statements are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters that we have described in this morning's press release. As a courtesy to others in the question queue, please limit yourself to one question and one follow-up per turn. If you have multiple questions, please rejoin the queue. I will now turn the call over to Kevin, who will begin our prepared remarks on slide three.

Thank you, Pat, and good morning, ladies and gentlemen. I'm pleased to review several items regarding our third quarter performance. Sales in our North America segment increased 6%, and operating margin performance in North America improved approximately 200 basis points over last year. Our North America water heater and boiler operations continue to perform well, I'm particularly pleased with our commercial water heater performance, where we continue to outperform the market. Productivity within North America water treatment, manufacturing, and the effectiveness of our direct-to-consumer channel continue to improve, and water rights performance is right on track with our expectations. We announced a 9% increase to our quarterly dividend rate in early October to $0.24 per share, which represents a five-year CAGR of 24%. In China, while the third quarter came in where we expected, we are disappointed to see further weakness in demand and expect that to continue in Q4. Moving to slide four, please. As weakness in our end markets in China persists, we have implemented further cost reduction actions. Over the course of the last 10 months into Q1 2020, we are targeting a 20% reduction in headcount from December 2018 levels. We continue to review and rationalize brand building and advertising spend, selling expenses, travel costs, and other SG&A spend. By the end of the year, on a net basis, we will close over 700 non-productive stores. We are continuing our aggressive cost reduction programs in both manufacturing processes and product costs, and we'll continue to work with our distribution customers on programs to reduce their inventory. Total annualized savings as a result of these actions is estimated to be $38 to $40 million, of which approximately $28 million will be realized in 2019. I will now turn over the call to Chuck, who will review our third quarter results in more detail.