A.O. Smith Corporation

Ladies and gentlemen, thank you for standing by and welcome to the AO Smith 2019 Results 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. To ask a question during the session, you'll need to press star 1 on your telephone. If you require any further assistance, please press star 0. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Patricia Ackerman, Senior Vice President, Investor Relations, Corporate Responsibility and Sustainability, and Treasurer. Please go ahead, ma'am.

Good morning, ladies and gentlemen, and thank you for joining us on our 2019 results conference call. With me participating in the call are Kevin Wheeler, Chief Executive Officer, and Chuck Lauber, Chief Financial Officer. Before I 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. In order to provide improved transparency into the operating results of our business, We provided non-GAAP measures, adjusted net earnings, adjusted earnings per share, and adjusted segment earnings for 2018 that exclude the restructuring and impairment costs associated with our plant closure in Renton, Washington. Reconciliations from GAAP measures to non-GAAP measures are provided in the appendix at the end of this presentation and also on our website. Also, as a courtesy to others in the question queue, Please limit yourself to one question and one follow-up return. 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 four.

Thank you, Pat, and good morning, ladies and gentlemen. I'm pleased to review several items regarding our 2019 performance. Sales in our North America segment increased 2%, and operating margin performance in North America improved 50 basis points compared with 2018. Our North America water heater operations continue to perform well. I'm particularly pleased with our performance despite a 1% decline in residential industry volumes. Productivity within our North America water treatment manufacturing and the effectiveness of our direct-to-consumer channel continue to improve. We expanded our North America water treatment platform with the acquisition of Water Right and performance is right on track to our expectations. We announced a 9% increase to our quarterly dividend rate in early October to 24 cents per share, which represents a five-year CAGR of 24%. In China, the fourth quarter came in where we expected, with channel inventory declining by more than one month. Channel inventory ended 2019 within the normal range of two to three months of sales. I will now turn the call to Chuck, who will review the results in more detail on slide five. Chuck?