Good day ladies and gentlemen, and welcome to A. O. Smith Corporation First Quarter 2014 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we'll conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions). I'll now introduce your host for today's conference, Pat Ackerman, Vice President Investor Relations and Treasurer. You may begin.

Thank you, Ashley. Good morning, ladies and gentlemen and thank you for joining us on our first quarter 2014 conference call. With me participating in the call are Ajita Rajendra, Chairman and Chief Executive Officer; and John Kita, Chief Financial Officer. A note this morning to you all, on the conference call, is that the slide deck is viewer control, so you will have to advance the slides as we go along. That's just a little hiccup we have this morning. So just be aware of that that you will need to advance your own slides. The next slide, before we begin with Ajita's remarks, 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 states 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. The next slide. In order to provide improved transparency into operating results of our business, we are providing non-GAAP measures, adjusted earnings, adjusted EPS and adjusted segment operating earnings that exclude certain items, as well as non-operating pension costs consisting of interest costs, expected return on plan assets, amortization of actuarial gains and losses and curtailments. Prior year results are provided on a comparable basis. Reconciliations from GAAP measures to non-GAAP measures are provided in the appendix at the end of this presentation and also on our website. Ajita, I will now turn the call over to you.

Thank you, Pat. I'm on slide four, which says first quarter highlights. 2014 is off to a great start. We continue to see the benefits in our performance from the housing recovery in the U.S. and our expanding consumer product business in China. Here are a few highlights. Our organic growth drove sales 8% higher to a first quarter record of $552 million. China sales growth of 25% exceeded our expectations, and growth was across the board with gas tankers, water treatment, and renewable energy products growing faster than the business as a whole. Our adjusted earnings of $0.54 per share was 13% higher than the $0.48 per share recorded last year primarily driven by higher sales. We continue to allocate a portion of our capital to returning cash to our shareholders. During the quarter, we announced the 25% dividend increase and repurchased $21 million of stock. To allow us to continue to repurchase our shares, our Board increased its authorization by 1.5 million shares in April. John will now describe our results in more detail.

Thank you, Ajita. Slide five. Sales for the first quarter of $5.52 million were 8% higher than the previous year driven by higher volumes of water heaters in the U.S. and China. Adjusted earnings of $49.7 million improved 11% from 2013. Adjusted earnings in 2014 excluded after tax non-operating pension cost of $3 million. Adjusted earnings in 2013 excluded after tax non-operating pension cost of 3 million, an after-tax gain of 6.8 million related to a settlement with the supplier, and an after-tax restructuring and impairment expenses of $9.5 million. On slide six, adjusted earnings of $0.54 per share improved 13% compared with $0.48 per share last year. The effective income tax rate of 28.8% associated with first quarter adjusted earnings was approximately 1 percentage point lower than in the first quarter last year providing a $0.01 per share benefit to first quarter 2014 adjusted earnings per share. Reconciliation from GAAP EPS to adjusted EPS is included at the end of this presentation and covers the previously discussed items. Slide seven. Sales in our North America segment of $389 million increased 3% over last year driven by higher sales of residential and commercial water heaters in the U.S., which were partially offset by lower Canadian water heater volumes and a weaker currency in Canada. The unfavourable sales impact from Canada amounted to approximately $5.5 million. Rest of World segment sales of $173 million increased 25% compared with last year driven by increased demand for water heaters and water treatment products in China, market acceptance of our newer higher value water-heating products in China, and new store additions. After examining buying patterns by our top seven customers during the quarter compared with the prior year, we believe a change and inventory levels favourably impacted our sales in China by approximately $10…

Thanks, John. I'm on slide 11 which has a heading that says, "2014 Outlook and 140-year anniversary." As John mentioned, the midpoint of our updated 2014 guidance implies growth of 10% in adjusted earnings per share over last year. Our outlook for 2014 includes the following assumptions. First, we continue to see strong growth in China. As many of you know, we operate as the consumer product business in that region and have invested significantly in innovation, safety, reliability, and quality to sustain and enhance our position as the leading premium water heating brand. The return on our investment in engineering and innovation together with distribution expansion and market share growth are the key drivers of our success in China. The macro-environment tool provides three important tailwinds for our business. First, our premium consumer products, with a highly recognizable brand are in the sweet spot of the government's desire to grow the consumption part of China's economy. Second, China recently set a goal for the population to be 60% urban by 2020. This push for urbanization equates to 10 million to 15 million people per year moving to the cities, and many of whom may buy apartments and water heaters. Third, rate inflation has been increasing recently, and this adds the expansion of discretionary income. Combining all of these factors gives us confidence that we will continue to at least grow at two-times China's GDP rate. Second assumption, we expect the Lochinvar brand to continue to benefit from the transition from lower efficiency non-condensing boilers to higher efficiency condensing boilers to higher efficiency condensing boilers and also from strong market acceptance FTXL boiler. Both of these products are expected to be introduced in the second half of this year. Lochinvar branded condensing boilers continue to offer a compelling feedback in…

Thank you. (Operator Instructions). Our first question comes from William Bremer of Maxim Group. Your line is open. William Bremer – Maxim Group: Good morning.

Good morning.

Good morning.

Good morning. William Bremer – Maxim Group: Nicely done. I love the consistency.

Thank you. William Bremer – Maxim Group: All right. Let's first start off with Lochinvar. Could you give us a sense of how it’s contributed to the quarter? And more importantly, what did you see on the aftermarket there?

Well, it was an interesting quarter for Lochinvar. They were up about 7%, and we feel they were affected pretty significantly by the weather. The contractors we talked to said that they were basically so busy that they only had time to repair versus replace, which can take two to three days. We saw that in our parts business. Our parts business was up almost 20% year-over-year and was actually as strong as the fourth quarter, which is very unusual for them from a parts standpoint, so they were affected by the weather. We're still very comfortable that coming out as Ajita talked about two new products in the last half of the year. We are incurring some engineering and expenses to get those to market, but we're very excited about the products that we're bringing, and we're comfortable at this point that they can still achieve their 10% growth. William Bremer – Maxim Group: Okay, John. Thank you. And can you give us an update on how you're considering rolling out the residential end to that abroad?

You're talking about Lochinvar in China? William Bremer – Maxim Group: Yes, I am.

So I think there's not much of an update. We'll have the residential boiler there relatively soon. We're still running into some headwinds with respect to the commercial boiler in getting the approvals. We're looking at a couple of different strategies with respect to that right now. We're still comfortable long term that the boiler business will be a good growth opportunity in China, but it's taking longer than expected, but we're looking at a couple of different strategies with respect to commercial.

Let me jump in here too, Bill. This is Ajita. We are seeing some signs in China where the government is starting to talk about cutting back on coal consumption and increasing natural gas in the country, and all of those signs are very positive signs from the point of view of these types of very highly energy efficient products. So again, as John said, it's going a little slower than we'd like, but the long-term prospects are right in line with our expectations. William Bremer – Maxim Group: Great. And then just a quick follow-up here. Can you give us an update on India, how that's progressing and what your strategy is throughout '14?

India is going well. Right now, the economy is kind of at a standstill, and the depreciation of the Rupee has hurt us as we have said in the past, but if you look at what's happening with the business in local currency in India, it's right on track. We are increasing market share slowly, expanding distribution, and the business is growing. We don't see it in dollars, because the depreciation of the Indian Rupee essentially almost offsets the increase in volume that we're seeing. So we are happy with the business in local currency. We are not quite as happy when you translate it back to U.S. dollars. But again, the longer-term trends are very positive. There is a lot of anticipation that after the election and once they -- the issues with the election die down and there is a definite result that the economy will pick up again. William Bremer – Maxim Group: Great. Thank you for the time.

Thank you. Our next question comes from Matt Somerville of KeyBanc. Your line is open.

Good morning guys. This is John for Matt. Just first a couple of questions on the price increase, is that May 1st price increase across the board and North America, both residential and commercial, kind of similar mid-single digit range? And then a follow on to that, I mean obviously steel costs have increased over the last few quarters, but I believe Caldwell was still low where it was the last time you raised prices, in I think it was mid-2012. So how confident are you that that's going to stick? Are you the first mover here or are you following kind of industry price increases or just maybe talk to the confidence level that you're going to see stickiness in that price increase?

We are pretty confident about the price increase. And I am not sure about the steel data. We'll have to check on that, but my perception is that steel prices were in fact lower at that time, although I'm not sure about that. Okay? We’ll have to check on that.

Okay.

But the indications in the marketplace are pretty good. There was not a lot of pushback, a very little pushback from our distributors, and so we feel pretty good about the price increase.

And just given the timing, I mean, it's May 1st. So, since it's mid-quarter, we shouldn't see – there was no pull forward into the first quarter. There shouldn't be any impact, I wouldn't think, on a quarterly basis.

Not in the first quarter. No, there was almost -- I shouldn't say almost. There was no buying in that we saw in the first quarter. We'll see a little bit of impact in the second quarter, but not much.

Yeah. Okay. And then on the commercial side, commercial volumes -- you said commercial volumes were up in the quarter that was against the pretty tough double-digit comp, and I think there was pre-buy in California last year. You've increased your commercial industry outlook slightly, it looks like. So, are you seeing signs that non-res activity is starting to improve or what gives you -- how do you explain kind of the commercial bump?

Yeah, we see non-res activities starting to improve and feel pretty good about that, which is why we bumped it up.

Okay.

It started out relatively slow. I'd say, it shows that January and February were pretty weak, but we saw a very strong March. So, that's what gave us the comfort level to raise it up some.

Okay. And then lastly, John, you mentioned the 10 million inventory benefit in China. Did something drive that? Is that a pull forward into the first quarter? Is it just your customers willing to kind of have higher inventory levels because of the consumer demand they're seeing? Just a little more color on that please.

I mean, part of it is the delta last year in the first quarter our major customer ship out of inventory. So the inventory's levels went down about $5 million. This year in the first quarter, our customers built their inventory levels about $5 million. So that delta is about $5 million. We're not really uncomfortable with the inventory level. It was just kind of a quarter-to-quarter comparison.

Right. The $5 million up and down month by month per quarter is not unusual, as John said. But we try to -- when we do have inventory data, we try to look at it to make sure that we give you an accurate picture of what's going on.

Great. That's very helpful. Thanks guys.

Thank you. Our next question comes from Scott Graham of Jefferies. Your line is open. Scott Graham – Jefferies LLC: Hey, good morning.

Good morning.

Good morning. Scott Graham – Jefferies LLC: Ajita, I just want to understand your market assumption for the U.S. res tankless. Are you using 4% for tankless as a percent of the market or 5%?

It's about approximately 4%.

About 400,000 units.

Four hundred thousand units. Scott Graham – Jefferies LLC: Four hundred thousand units. So essentially you're lifting your assumption in North America non-tankless by about a point, right?

Yeah, by about 100,000 units. Yeah. Scott Graham – Jefferies LLC: Right, right. Okay. I just want to kind of get that math right. So you're up by a point even though first -- January and February which I think you allude to as being weather affected were up five.

Well, yeah. So on the residential side, January and February we're up 5%, okay? And we think that March was very similar. So we think the first quarter industry is up about 5%. What I was alluding to earlier was commercial was down January and February. But up significantly in March. Scott Graham – Jefferies LLC: Well, I guess I would have to believe that the weather affected January and February numbers of residents as well though, right?

Possibly.

Yeah.

That's possible. Scott Graham – Jefferies LLC: Okay.

Again, we saw a very strong quarter as it was. We think about 5% for the industry. Scott Graham – Jefferies LLC: Understood. But even with that, let's say it didn't affect your 5% in the first quarter and your estimate is about -- you're assuming 4% for the year.

Right. That's right. That's about right. Scott Graham – Jefferies LLC: Okay. All right. Next question kind of related to China, and I don't think we've ever asked this question before, could you guys separate out in total what your new distribution points impact on sales were versus the rest of the business if only versus the same store stuff?

That's very difficult to do. We really have not thought -- we don't look at it separately because when distribution points change, there's always a change going on in terms of less efficient distribution points shutting down and new ones opening up. And so hopefully the mix is always getting a little better. And so because of all that change, we don't really look at to try to separate it out in that manner. Scott Graham – Jefferies LLC: (Indiscernible) gets at least. The reason I'm asking is that obviously your two largest customers there are more than half of the sales. So I was hoping that maybe at least we can get one-third, two-thirds.

I don't know if I can give you that, Scott. But our two largest customers are about 40% of our business. Scott Graham – Jefferies LLC: Forty percent, I'm sorry.

And why it gets really difficult is we're adding primarily distribution in tier two, okay? We're closing -- and the phenomena we talked about the end of, I think it was '12, continues. There's a significant amount of closures of new stores and opening of new stores with the net increase being -- the net being an increase. So it's a real struggle to try to get even same store sales and some of that data. Clearly, I'll tell you this, quarter-over-quarter, I think new store additions help us year over year. We have had a net just from the fourth quarter, third quarter, we added probably a net of 150 to 200 stores. But again, most of those are in tier two, tier three setting so that they don't have the same per volume throughput after tier one starts happening.

Another thing that's impacting us is the growth in online sales, which doesn't really have a correlation to number of those. And our online sales last year were on $16 million, and we hope that we'll double that this year. And when we look at the first quarter, it's suddenly on track to do that. Scott Graham – Jefferies LLC: Okay. So let me ask the question maybe a little bit differently here. If we look at the sales growth number, X out the inventory impact. Your sales were still kind of 15% plus op, right? I'm sorry, the inventory impact.

Right. Scott Graham – Jefferies LLC: Where I'm trying to get at here is that off of my past calculations, I have always assumed 5%-ish type of new distribution add to sales. Would it be fair to say that even if you don't want to get that granular, do you think that your same store sales are still outperforming China GDP?

I would say that same store sales are probably not outperforming.

I don't know that we have.

Yeah. But it's a combination. As we've said, we're growing differently. We have a higher average price, okay, year over year. And as of new products, we have a change in mix. We have new distribution. We have answerably product line like water treatment, commercial combi growing much faster than the average. Then we have the inventory build. So I think that's a pretty consistent story in that. We continue to grow a lot of different ways, and that's why we're comfortable saying that on average we're going to grow 15%. Scott Graham – Jefferies LLC: I got you. That helps. Thank you. My other question is about the acquisition environment. And I don't know if this means anything, but your corporate expenses were a little bit higher than what I was expecting. Was there an acceleration in due diligence work in the first quarter on M&A?

I think we've talked about corporate in our last conference call and we spent traditionally our first quarter because of LTI grants and the way we have to amortize them much quicker because some of the executives are getting retirement eligible. I think we highlighted that that the first quarter was going to be the highest corporate expense. We're still comfortable. When we said at the end of the year of 49, we think we can probably have corporate come in around 48 or so. Scott Graham – Jefferies LLC: Okay. So, I guess the bottom line to that question would be really squarely for you Ajita. Could you access any type of probability that you’ll get a deal done in 2014?

That’s almost an impossible question because like I said we are looking – I’m happy with what we see in terms of the pipeline and potential. Like we have said that when we layout our financial criteria the price that we’re seeing becomes a concern especially given today’s interest rates and competition from P/Es etc. who are essentially looking at a slightly different math. And we will continue to be a very disciplined acquirer to make sure that when we do make an acquisition that it would be where we see value creation, and it adds value to our shareholders. So, to be able to predict whether we can do or not, I wouldn’t go there at this point.

Thank you. Our next question comes from Aditya Satghare of FBR. Your line is open. Aditya Satghare – FBR Capital: So two questions. First on the China market here, how should we think about your growth in China in the context of overall water heater growth in China? How should we think about the utilization level of this factory as we go forward?

Why don’t I jump in and then John maybe you should add some color to it? In looking at the water heater factory, obviously we just started – I mean we started our production little after midyear last year and it’s building as the volume builds. So, it’s nowhere near in terms of being fully utilized and we didn’t expect it to be. So from that perspective it’s adding cost as we’ve indicated and that’s in our guidance. I mean it’s in line with what we expected and what we’ve seen. And the teams are working on productivity improvements and all the rest of things to mitigate that as much as possible again all in line with our expectations and guidance from when we opened the factory. So, not much change there. What is the first question – oh, the water heater market in general. If you look month by month things go up and down, okay? But overall, Aditya, if you look at the last six months and our anticipation going forward is that we have gained market share and we continue to gain market share over an extended period of time. Month by month things go up and down. Usually in the first quarter we go down a little bit in market share because we pulled back with spring festival etc., we pulled back a little bit on our promotion and you’ve seen that in the past. But overall the trend has been a slow increase in market share. We expect that over time to flatten out because obviously you can’t – it’s not an unlimited thing to go in terms of market share. Overall, we expect that to flatten out. Aditya Satghare – FBR Capital: One more question on China then, so you mentioned three products which contributed strongly for China growth, you mentioned the gas products, the renewable products and I missed the third one. But how can we think about your market share in some of these high-end differentiated products and maybe sort of broadly touch on what are some of the key factor, the key differentiating points customers are willing to pay for in terms of your products?

I think the best way to look at it, Aditya, is that we have a team there really spends a lot of time and money and effort understanding the consumer and consumer trends. And combining that with our product development capability and speed to market, we stay ahead, we have in the past and we continue to stay ahead of the trends in terms of where the market is moving and come out with the products with the features and benefits and become first [ph] to market with key features and benefits at the high end that people are prepared to pay for. And so our portfolio and mix of products is always changing. If you go back a few years, our product line was essentially electric tank type water heater and when we saw tankless as being a market we wanted to get into, we made a big push-in to tankless and we’re now the leaders in tankless in China. And similarly we’re growing in renewable energy products. And also when we made, the based on our strategy and getting into adjacencies to leverage our core competencies in China like our brands, like our channels and access to market, we went into water treatment for a number of reasons, again to expand our customer base and bring them high quality products that live up to our brand positioning. And also we wanted to get into a business that has a much faster replacement cycle from the point of view of replacement filter. Now, we haven’t seen the impact of that yet in water treatment, but we expect to see that soon. So, we’re constantly changing our product line, our portfolio products to stay ahead of the market and market trends. That’s a long answer I know, but that’s the approach that we have in China and have been taking for some time now. Aditya Satghare – FBR Capital: Last question from my side coming back to the U.S. here. If we try to sort of strip the weather impact aside, is there anything in the U.S. market or any change in customer buying patterns or mix, which would suggest that consumers are replacing at a rate, which is higher than what you have seen over the last couple of years?

I don’t think so. I think what we’re seeing is that they have been last year and this year in addition to new construction coming back as there has been a pent-up demand for remodelling and the discretionary replacement component of residential water heaters and we see that coming back.

Thank you. Our next question comes from Ryan Connors of Janney Montgomery Scott. Your line is open. Ryan Connors – Janney Montgomery Scott: Great. Thank you. First, I just had a quick kind of housekeeping question on a couple of bigger picture items. Just in terms of the buyback you mentioned that authorization has been up in the press release there. Can you give us some color around what your assumptions are in terms of the buyback and share count within the guidance?

We’re assuming kind of for the year probably low 91 million shares outstanding, so 91 million to 91.5 million somewhere in that range. Ryan Connors – Janney Montgomery Scott: And then two other things from my end, just first off on this you mentioned as FTXL boiler rollout for Lochinvar, our understanding is that that’s somewhat of a true step change in terms of applying that type of technology to a broader set of applications. So I’m curious what, how that rollout is proceeding and what the reception has been both internally and among your distribution in terms of that particular product?

It’s been very high. Internally certainly, I happened to have dinner with and speak to over a hundred of our Lochinvar distributors and buy/sell reps really in the last week and the excitement level is very high. That’s when they really saw the product we introduced with in addition to actually they went in and had a training, etc. and the excitement level is very high. So, there is a gap here in terms of fire-tube type boilers and what’s in the market. So, this goes from about 400,000 BTU to 850,000 BTU range and bringing in introducing fire-tube boilers of this quality with these type of controls, etc. into that space is seen as a very positive move in the marketplace. Ryan Connors – Janney Montgomery Scott: Okay, and will that product price –

We’re moving [ph] the product. They’re just starting to ship. So, we haven’t really seen the impact of sell through, third quarter we start to ship the product. So, again this is excitement level we’re seeing. It’s, we haven’t really seen numbers yet though -- impacting our numbers yet. Ryan Connors – Janney Montgomery Scott: And is the intent to price that product at a premium I would assume?

It will be in line with Lochinvar pricing, which is the premium price product in the marketplace. Ryan Connors – Janney Montgomery Scott: Okay. Great. And then just a final question from me. You mentioned – John, I think you mentioned a nice acceleration in commercial market in March. Does your data give you any insight into what particular niches of the market are picking up there?

No. We wished it did but it does not.

Thank you. Our next question comes from Charles Brady of BMO Capital Markets. Your line is open.

With respect to the China and the water treatment business in your release talk -- you cited the margin in Rest of World as being largely attributable to better profitability on that business. Can you just speak a little bit in – are you seeing a growth trajectory in that water treatment that’s picking up a little bit quicker than you expected or is it just a function of as we go forward in time the volumes get better and the profitability gets better there?

With respect to the China and the water treatment business in your release talk -- you cited the margin in Rest of World as being largely attributable to better profitability on that business. Can you just speak a little bit in – are you seeing a growth trajectory in that water treatment that’s picking up a little bit quicker than you expected or is it just a function of as we go forward in time the volumes get better and the profitability gets better there?

Well. I think we’re seeing volumes pick up nicely especially on the AO Smith branded portion of it, I think, it was up almost 70% quarter over quarter and so we’ve seen nice improvement in profitability mainly because of the volumes coming through, etc. where in most of our outlets [ph] which means a little more SG&A etc., but again the volume certainly helps. And what we saw for the first time has really even after amortization of customer list, etc., which is almost $3 million on an annual basis we saw it was very slightly profitable even after that, so compared to year ago there was a fairly significant loss.

Alright. Okay. And then just on Rest of World, you previously commented for the margin for the full year expected just under 13% EBIT margin. Is that still kind of in line with your expectations, has that moved it all?

Alright. Okay. And then just on Rest of World, you previously commented for the margin for the full year expected just under 13% EBIT margin. Is that still kind of in line with your expectations, has that moved it all?

No. I think as part of raising our range, we got a little more comfortable with that. I think last year was about 13.2% EBIT margin and even with the full year the new plant we think we can achieve those sorts of levels this year.

Correct. Alright.

Correct. Alright.

All in total.

Just one more from me. When you talked about the M&A strategy one of the comments you talked about, you walked away from some stuff and some stuff had been added to the acquisition pipeline and I guess, Kita [ph] on that particular comment, I don’t know if that was an offhanded comment, obviously things moving in and out, but I am wondering if that speaks to an expansion of kind of the areas you’re looking at, or what would have driven adding companies to that potential pipeline that maybe weren’t on that list before?

Just one more from me. When you talked about the M&A strategy one of the comments you talked about, you walked away from some stuff and some stuff had been added to the acquisition pipeline and I guess, Kita [ph] on that particular comment, I don’t know if that was an offhanded comment, obviously things moving in and out, but I am wondering if that speaks to an expansion of kind of the areas you’re looking at, or what would have driven adding companies to that potential pipeline that maybe weren’t on that list before?

I think we really have not expanded what we are looking at in terms of water technology companies, and companies and businesses that would leverage competencies in China. So from that perspective, the lens has not really expanded. But we discover new companies or potentials or find areas in which maybe there is value creation that we didn’t see before, while we may see potential with private companies that are not in the market but we started discussion. So it’s a combination of all those things.

And I think companies are coming up for sale that weren’t – sale that was unavailable.

Right, they have become more actionable. So it’s a – it wasn’t anything, it was perceptive for you to pick up that comment but it wasn’t anything unusual happening. It’s the ongoing evolution as we are very actively looking for potential companies in this space.

Thank you. Our next question comes from David Rose of Wedbush. David Rose – Wedbush Securities: I may be a little bit late on this because I was on another call. But I don’t believe you mentioned it. If you could touch upon and I know it’s small, maybe your progress on India’s water treatment business, and then secondly, I had a question on the ERP.

We talked about India a little earlier. The business in India itself is going – we’re happy with the business in India. We are expanding our market share slowly. We are expanding our points of distribution and the product is very well accepted in the marketplace. The Indian market is kind of stagnant right now, especially with the elections going on, and there is a lot of anticipation that once the election is done that the market will pick up again. When we translate our results into U.S. dollars, the results are disappointing, because a unit volume growth is essentially offset by the depreciation of the Indian rupee. And so from that perspective, the revenue and the profitability we see is disappointing. David Rose – Wedbush Securities: I am sorry, I actually – I can’t – what I was asking is about the initiatives on the water treatment side, I am sorry, maybe I wasn’t clear.

Oh, I am sorry, go ahead, John.

Well, I mean we talked about on the last call that we’re going to enter the water treatment market, and I think the intent really is to do it on a pilot basis, test the product out in certain regions. So we did not – we will have a decent amount of advertising et cetera but it will be more on a pilot basis we believe this year with more of a larger rollout next year. David Rose – Wedbush Securities: Okay. So we’re still on track.

Yeah. The water treatment market in India is about 3 times the size of the water heater market in India. And it’s an established market with some strong players and what we want to do is to make sure that we have the products that live up to the brand positioning and can go in and make a really good impression and compete in that space. If we had to say things on track, I would say we are slightly behind. But we anticipate that, that’s an exciting opportunity for us just like in China to be able to leverage the infrastructure that we are building in the market. David Rose – Wedbush Securities: And then on the ERP side, it was a headwind last quarter, this quarter and as we think about next year, have you been able to quantify the benefits better now that it’s underway and does that provide a tailwind, not just the lack of the headwind for you next year? And then on the CapEx side, you’ve commented the impact on the CapEx for ’14, does that all go away for ’15 or is there some carry on in ’15?

Well, we should talk about – we’ve talked about the fact that expense is about $10 million incremental, i.e. about $15 million for the full year. The biggest portion of that expense ends up being in the last half of the year. We are right now in the testing phase and much of that cost et cetera gets capitalized. So we saw $1 million plus expense hit in the first quarter. We will probably see a couple million in the second quarter but the majority of the impact from an expense standpoint will be the last half of the year. And we are pretty much right on track with what we thought it would be. The first rollout will be in August, then we will start rolling out next year at the remaining sites. So we never anticipated that in ’15 there was going to be significant efficiency improvement, again because the majority of the rollout happens in 2015. So you will start seeing the benefits we think more in 2016.

Thank you. I am not showing any further questions in queue. I would like to turn the call back over to management for any further remarks.

Thank you all for joining us this morning to discuss our first quarter results. Happy Earth Day to all and enjoy the rest of your day. Thank you.