Generac Holdings Inc. (GNRC) Q2 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Generac Holdings, Inc. Second Quarter 2015 Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, York Ragen, Chief Financial Officer. Sir, you may begin. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Thank you. Good morning and welcome to our second quarter earnings call. I'd like to thank everyone for joining us this morning. With me today is Aaron Jagdfeld, our President and Chief Executive Officer. We will begin our call today by commenting on forward-looking statements. Certain statements made during this presentation as well as other information provided from time to time by Generac or its employees may contain forward-looking statements and involve risks and uncertainties that could cause actual results to differ materially from those in these forward-looking statements. Please see our earnings release or our SEC filings for a list of words or expressions that identify such statements and the associated risk factors. In addition, we will make reference to certain non-GAAP measures during today's call. Additional information regarding these measures, including reconciliation to comparable U.S. GAAP measures, is available in our earnings release and SEC filings. I will now turn the call over to Aaron. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Thanks, York. Good morning, everyone, and thank you for joining us today. Net sales in the second quarter of 2015 were $288 million as compared to $363 million in the prior year, primarily due to a decline in shipments of both residential and commercial and industrial products. Residential products were impacted primarily due to a power outage severity environment that year-to-date, is well below normalized levels and significantly below the prior year, resulting in a decline in shipments of home standby generators and to a lesser extent, portable generators. C&I product sales were impacted by lower shipments to oil and gas markets as well as reduced shipments to telecom national account customers. These declines were partially offset by gains in the industrial distribution channel, improvements in Latin America and contributions from recent acquisitions. Specifically addressing the lower residential sales, residential products historically experience a sequential sales improvement from the first quarter to the second quarter due to pre-season buying ahead of the summer storm season. However, that was not the case during the second quarter of 2015, as demand for home standby generators was impacted by an extremely low power outage environment in the first half of the year that led to excess field inventory levels entering the second quarter. As a result, our normal pre-season sales, marketing and promotional programs were not as effective in the current quarter. The first half of 2015 outage severity was the lowest we have seen since we began tracking this data, as outages were over 40% below the prior-year period and were 20% lower than the last ten-quarter below normal trend that we have witnessed. In addition to reduced home standby generator demand, the extended low period of outages has also significantly reduced demand for portable generators and slowed the expansion of our residential dealer base during the current year. All of these factors negatively impacted the year-over-year comparisons for residential products during the second quarter. As we've commented in recent quarters, over the course of our long history in this business, we have observed that power outage activity runs in cycles. We believe the current down cycle is temporary in nature and we remain optimistic on the long-term growth opportunities for residential standby and portable generators. In the meantime, we will continue to focus on a variety of strategic initiatives to increase the awareness, availability and affordability of home standby generators. We have discussed several of these initiatives at length over the past several quarters, including specific projects and activities targeted towards generating more sales leads, improving close rates and reducing the total cost of home standby products. From a longer-term perspective, we continue to expect the trend of an increasing level of power outages to remain in place, driven by an aging and under-invested electrical grid and the frequency of severe weather, which we believe will continue well into the future. With only approximately 3.5% of U.S. households owning a stationary backup generator, we believe there remains a substantial opportunity to grow this market over the longer term. Turning to the C&I portion of our business, the significant decline in oil and gas prices that began in the second half of 2014 continued to have a notable impact on capital spending for mobile equipment that is primarily used in upstream oil and gas applications. We are also seeing the negative effect that the weak oil and gas markets are having on the broader general rental markets, as our key national rental customers are repositioning the under-utilized equipment from oil and gas related activities to other applications. This is resulting in a deferral of new equipment spending and magnifying the decline in overall demand for mobile equipment. We continue to believe in the long-term opportunity related to domestic energy production and the need for our mobile products that are essential at oil and gas drilling and production sites. However, the adverse impacts from the drop in oil and gas prices is having a greater negative impact on industry fleeting than we'd anticipated. Accordingly, we are taking an even more conservative approach to our outlook for this end market for the remainder of 2015, as we gain further evidence of the impact of the recent move lower in energy prices on the demand for capital equipment. We commented during recent calls that we expect the telecom capital spending environment to remain soft throughout 2015, particularly during the first half of the year, with an assumption for a modest improvement in the second half. As we moved through 2015, however, capital spending by certain of these customers has remained weak and as a result, we have become more cautious on the outlook for the remainder of the year relative to our previous guidance. However, we believe the longer term secular penetration opportunity for backup generators at cell tower sites remains firmly in place due to the need for wireless providers to protect their revenue streams as well as the increasing competitive and regulatory pressures they face to harden their networks. With backup generators only installed on one-third of all cell tower sites today, we believe there is significant runway as the leader in this end market vertical to continue to grow penetration in this market. Shipments within our industrial distribution channel grew during the second quarter 2015 as compared to the prior-year quarter, and we are anticipating solid year-over-year growth of products sold through this channel during the second half of the year. As we have commented over the past several quarters, we continue to make progress in building out and expanding our capabilities for larger industrial generators. This includes significantly expanding our product line to include larger output systems as well as improving our distribution capabilities by increasing distributor product knowledge and sales bandwidth to better enable them to sell these larger, more complex products. We also continue to pursue a number of initiatives during 2015 to improve our specification and closure rates that we believe will provide greater opportunities for future growth in this market. Our latest outlook for C&I products continues to include the expectation of a favorable nonresidential construction environment, which should provide more sales opportunities for our distribution partners to increase their interaction with the engineering firms and the electrical contractors responsible for specifying and selecting our products. Our Ottomotores business, which serves the Latin American market through operations in Mexico and Brazil, once again experienced solid growth in shipments during the second quarter of 2015, which follows a similar level of year-over-year growth experienced during the last two quarters. We believe the improved results at Ottomotores are primarily due to the progress we are making on a number of initiatives targeted at improving the performance of this business. These included a change in leadership during the past year, the realignment of our Latin American commercial sales team, operational improvements and the realization of certain cross-selling opportunities. Despite projections for modest overall economic growth in the Latin American region in 2015, we believe Ottomotores will continue to outperform the broader market as we further execute on these initiatives. The Ottomotores acquisition remains an essential platform for our international expansion efforts by providing a local manufacturing presence and access to the important Latin American market for power generation and other engine-powered products. As announced earlier this week, we acquired Country Home Products, which was founded in 1985 and employs over 200 people at its facilities located in Vermont. Country Home Products is a leading manufacturer of high quality, professional-grade engine-powered equipment used in a wide variety of property maintenance tasks for larger acreage residences, light commercial properties, municipalities and farms. The company's broad product line of chore-related engine-powered tools are largely sold in North America through catalogs, outdoor power equipment dealers, and select regional retailers, primarily under the DR brand name, and include field and brush mowers, chippers and shredders, trimmers, leaf vacuums, stump grinders and log splitters. The acquisition of Country Home Products provides additional scale to our existing platform of engine-powered products, which we have been building since our reentry into the portable generator market in 2008 and our subsequent move back into the power-washer market in 2011. Additionally, this year we have launched several new engine-powered products including a line of clean water and semi-trash pumps. And in the third quarter, we expect to begin shipping our ultra-quiet IQ inverter generator, targeting the recreational market. We anticipate the acquisition of Country Home Products should create meaningful cross-selling opportunities with our existing distribution, most notably with our existing national retail customers. And we believe that we can also generate significant cost synergies as we leverage our global sourcing and manufacturing capabilities. And lastly, as announced this morning, the board of directors has authorized the repurchase of up to $200 million in common stock over the next two years. Given our strong free cash flow generation and the current valuation of Generac shares, we believe initiating our first ever repurchase program at this time represents an attractive use of capital. The authorization of this program does not signal a change to our prior uses of cash. We still intend to use our free cash flow to invest organically, pay down debt to achieve our leverage target of two to three times debt to EBITDA, accelerate our strategy through M&A, and finally, return excess capital to shareholders. That being said, having a share repurchase program in place will allow us to ensure that as we step through these priority uses of cash, we are deploying capital in the most beneficial way on behalf of our shareholders. We remain committed to our Powering Ahead strategy and we're confident we will continue to have the financial flexibility to pursue future growth opportunities, both organically and through acquisitions. I'll now turn the call back over to York to discuss second quarter results in more detail. York? York A. Ragen - Chief Financial Officer & Head-Investor Relations: Thanks, Aaron. Net sales for the second quarter of 2015 were $288.4 million as compared to $362.6 million in the second quarter of 2014. Looking at net sales by product class, residential product sales during the second quarter of 2015 were $133.5 million as compared to $179.6 million in the prior-year quarter. As Aaron previously mentioned, this decline was primarily driven by a power outage severity environment that year-to-date, continues to remain well below normalized levels and significantly below the prior year. This challenging environment resulted in the slower than expected draw-down of home standby generator field inventories and as a result, reduced the impact of our normal pre-season sales promotions, as our distribution partners were reluctant to invest in additional inventory levels. These factors had a significant impact on home standby generator shipments when comparing to prior-year second quarter. In addition, to a lesser extent, the low level of power outages also resulted in reduced sales of portable generators compared to prior year. Partially offsetting the overall decline in residential products was a modest contribution from the Powermate acquisition. Looking at our commercial-industrial products, net sales were $134.6 million in the second quarter of 2015 as compared to $163.5 million in the prior-year second quarter. The decline was primarily the result of reduced sales of mobile equipment going into oil and gas markets, given the significant decline in energy prices experienced thus far in 2015. Again, as Aaron discussed, the sharp decline in energy prices has caused certain of our customers in the rental channel to reduce capital spending for this type of equipment more than originally expected. Additionally, recall that starting in the second quarter of 2014, we experienced a notable increase in demand for mobile equipment used in oil and gas applications, and this strength carried through the end of the prior year. The contrast of heavy oil and gas demand in the prior year and the significant pull-back in the current year has created a very challenging year-over-year comparison for our C&I products. In addition, but to a lesser extent, the year-over-year decline in C&I product shipments was also a result of ongoing weakness in capital spending by certain of our telecom national account customers. Partially offsetting these declines were gains in the industrial distribution channel, improvements in Latin America and contributions from recent acquisitions. Net sales for the other products category were $20.3 million in the second quarter of 2015 as compared to $19.6 million in the prior year. This modest increase was primarily driven by additional service part sales resulting from our growing base of stationary and mobile products in the market and to a lesser extent, the addition of after-market sales from recent acquisitions. Gross margin for the second quarter was 33.3% compared to 35.3% in the prior-year second quarter. The decline was driven by a combination of unfavorable absorption of manufacturing overhead related costs, a lower mix of residential products and the impact from recent acquisitions. Lower production levels compared to prior year and certain transitory overhead costs that carried over from the first quarter were the drivers of the unfavorable absorption, while reduced sales of higher-margin residential products and the additional sales from recent acquisitions caused the unfavorable mix impact versus prior year. These declines were partially offset by more favorable pricing along with the favorable impact from lower commodity costs and benefits from overseas component sourcing due to a stronger U.S. dollar. Operating expenses for the second quarter of 2015 increased $6.6 million or 13.2% as compared to the second quarter of 2014. The prior-year quarter included a $4.9 million gain relating to a remeasurement of a contingent earn-out obligation from a previous acquisition. Excluding this gain, operating expenses increased $1.7 million or 3.1% as compared to the prior year, which was primarily driven by the addition of recurring operating expenses associated with recent acquisitions. Adjusted EBITDA was $52.4 million or 18.2% of net sales for the second quarter of 2015 as compared to $84.5 million or 23.3% of net sales in the same period last year. This decline in adjusted EBITDA margins compared to prior year was attributable to the 200 basis point decline in gross margins along with the increase in operating expenses as a percent of net sales, given the reduced leverage on a lower net sales base. GAAP net income for the second quarter of 2015 was $14.8 million as compared to $54 million for the second quarter of 2014. Included in the current year other expense income section is a $3.4 million loss on extinguishment of debt, which resulted from the pay-down of term loan debt during the current year quarter. Included in the prior-year other expense income section is a $16 million gain on change in contractual interest rate as a result of a reduction in our term loan interest rate spread of 25 basis points in the second quarter of 2014. GAAP income taxes during the second quarter were $8.6 million, reflective of a 36.8% effective tax rate, as compared to $28.4 million or a 34.5% rate for the prior year. This increase in GAAP effective tax rate is driven by a higher contribution from the R&D tax credit in the prior year versus the current year. Adjusted net income, as defined in our earnings release, was $35.3 million in the current year quarter versus $57.1 million in the prior year. This decline over the prior year is the result of the overall decline in operating earnings as previously discussed, partially offset by $10.8 million in lower cash income taxes and $665,000 in lower interest expense. Diluted net income per share on a GAAP basis was $0.21 in the second quarter of 2015 compared to $0.77 per share in the second quarter of 2014. Adjusted diluted net income per share, as reconciled in our earnings release, was $0.50 for the current year quarter compared to $0.82 per share in the prior year. With regards to cash income taxes, the second quarter of 2015 includes the impact of a cash income tax expense of $900,000 as compared to $11.7 million in the prior-year quarter. This year-over-year decline in cash income taxes for the quarter was primarily the result of lower pre-tax earnings along with a notable reduction in the expected cash income tax rate relative to the prior year. Relative to our previous guidance, our cash income tax rate for full year 2015 is now expected to be approximately 6% versus a previous expectation of approximately 17%, primarily due to the reduced full year outlook that we're reporting this morning. As a reminder, our favorable tax shield through annual intangible amortization in our tax return results in our expected cash income tax rate being significantly lower than our currently projected GAAP income tax rate of approximately 36% for 2015. As we drive profitability over time, cash income taxes can be estimated by applying a projected longer-term GAAP income tax rate of 36% on pre-tax profits going forward and then deducting the approximately $49 million of annual cash tax savings from the tax shield each year through 2021. Free cash flow, defined as net cash provided by operating activities less capital expenditures, was $8.6 million in the second quarter of 2015 as compared to $40.5 million in the same period last year. The year-over-year decline was a result of lower operating earnings along with higher working capital investment, driven primarily by an increase in finished goods inventory due to softer than expected demand during the quarter. During the second quarter of 2015, we amended our term loan and ABL revolving credit facilities to reduce our overall borrowing cost and give us more financial flexibility in executing our strategic plan going forward. As part of these amendments, we increased the borrowing capacity on the ABL revolving facility from $150 million to $250 million and reduced the interest rate spread applicable to the ABL facility by 50 basis points across all tiers. And currently with these amendments, we borrowed $100 million from the ABL facility and used these funds to make a voluntary prepayment on the term loan facility of the like amount. Given the lower interest rate on the ABL facility relative to the term loan, the transferring of $100 million of debt between facilities will result in annualized interest cost savings of $1.5 million based on current interest rates. As of June 30, 2015, we had a total of $1.04 billion of outstanding debt, net of unamortized original issue discount, and $155.6 million of consolidated cash and cash equivalents on hand, resulting in consolidated net debt of $883.1 million. Additionally, at the end of the second quarter 2015, there was approximately $133 million available on the ABL revolving credit facility. Our consolidated net debt-to-LTM-adjusted EBITDA leverage ratio at the end of the second quarter 2015 was 3.1 times. Our term loan credit agreement includes a pricing grid whereby we pay LIBOR plus 250 basis points when our credit agreement leverage ratio is below 3.0 times, and we pay LIBOR plus 275 basis points when the credit agreement leverage ratio is above 3.0 times. As a result of our increased leverage ratio as of June 30, 2015, our term loan interest rate will increase by 25 basis points during the third quarter of 2015. Updating our interest expense guidance for 2015 as a result of the credit facility amendments and the pricing grid spread change, we now expect total interest expense to be in the range of $44.5 million to $45 million, which includes $38 million to $38.5 million of cash outflow for debt service costs, plus approximately $6.5 million of deferred financing cost and original issue discount amortization for our credit facility. This interest expense guidance assumes no additional debt prepayments during 2015, our existing interest rate swap contracts remain in place, and that LIBOR rates do not increase beyond our current LIBOR floor of 75 basis points. With that, I'd now like to turn the call back to Aaron to provide additional comments on our revised outlook for 2015. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Thanks, York. As a result of current end market conditions, we are revising our prior guidance this morning for full year 2015 revenue growth and adjusted EBITDA margins. Assuming the record low power outage environment we experienced during the first half of 2015 continues into the second half of the year, net sales for 2015 would be expected to decline approximately 10% for the full year, as compared to the previous downside case expectation for net sales to decline between 2% to 4%. This reduced outage assumption is expected to significantly impact year-over-year comparisons for residential products and is the primary driver for the overall lower guidance. To a lesser extent, our revised sales guidance also reflects a reduced outlook for shipments to oil and gas markets and telecom national account customers during the second half of 2015. Partially offsetting this reduced sales guidance is a modest contribution from the Country Home Products acquisition that closed on August 1. Should the baseline level of localized outage activity return to more normalized levels during the second half relative to the record low levels assumed in our guidance, this could add upwards of $30 million to $50 million of residential product sales with an incremental contribution margin of between 35% to 40%. In addition, when considering our current elevated levels of home standby and portable generators, we believe we would be in an ideal position to quickly meet an increase in customer demand driven by a major power outage event, which historically is more likely to occur in the second half of the year. Looking at our guidance by product class, for residential products, we now expect net sales for 2015 to decline approximately 11% as compared to the prior year as a result of the challenging outage environment. This sales guidance for residential products includes the contribution from the Country Home Products acquisition. With regards to C&I products for 2015, we now expect net sales to decline approximately 10% as compared to the prior year on an as-reported basis. Strong and incremental headwinds in the oil and gas and telecom markets, together with a modest foreign currency impact are expected to be partially offset by gains in our industrial distribution channel, improvements in Latin America and contributions from the MAC acquisition. With regards to the seasonality of net sales in the second half, we anticipate fourth quarter shipments to be marginally higher than the third quarter. Specifically by product class, we are projecting residential product sales to improve sequentially in the fourth quarter due to expected seasonality and a full three-month contribution from the Country Home Products acquisition. We expect a sequential decline for C&I products in the fourth quarter, primarily due to seasonally strong shipments of mobile heating products during the third quarter. Gross margins for 2015 are now expected to be approximately 35%, which is relatively flat as compared to the prior year. This compares to the previous expectation for gross margins to improve approximately 75 to 100 basis points over 2014. The revision from prior guidance is primarily the result of a lower mix of residential products due to the change in power outage assumptions previously discussed and to a lesser degree, more unfavorable manufacturing overhead absorption due to the reduced sales outlook. Operating expenses as a percentage of net sales, excluding amortization of intangibles, are now expected to increase between 200 to 225 basis points over the prior year as compared to our previous expectation of an increase of approximately 75 to 100 basis points. The increase from prior guidance is primarily the result of the reduced leverage of fixed operating expenses on a lower expected sales base, along with the addition of recurring operating expenses associated with the Country Home Products acquisition. These increases are expected to be partially offset by the planned consolidation of the Powermate operating footprint together with certain cost control measures related to SG&A expenses. With the assumption that power outages during the second half of 2015 not improving from the very low levels experienced during the first half, we are revising our adjusted EBITDA margin guidance for full year 2015 to approximately 21%. This compares to our previous margin expectation of approximately 23%. With regards to the seasonality of adjusted EBITDA margins in the second half, we anticipate fourth quarter adjusted EBITDA margins will be slightly higher relative to the third quarter. This expectation is primarily the result of a higher mix of residential products and lower mix of C&I products anticipated during the fourth quarter, along with a modest improvement in fixed operating expense leverage. Free cash flow generation during the first half of 2015 was impacted by higher than expected inventory levels as a result of lower demand in some key areas of the business, along with the impact of the West Coast port congestion issues earlier in the year. However, we expect to monetize a portion of this inventory investment during the second half of the year and anticipate that we will generate over $100 million of free cash flow during the period. It's important to note that looking at the seasonality of our cash flow generation over the past several years, it's very common for the company to generate a significant amount of the year's total free cash flow during the second half of any given year. In closing this morning, although market conditions were below our expectations in the second quarter of 2015, we view the current down cycles being experienced in certain of our end markets to be temporary in nature and we remain optimistic on the long-term growth prospects for our business. With our strong free cash flow, we have the flexibility to continue to drive our Powering Ahead strategic plan forward, including the continued execution of our diversification and international expansion strategies. The announcement of our share repurchase program this morning further demonstrates our confidence in the long-term growth opportunities for Generac and better aligns our capital priorities to maximize shareholder value. This concludes our prepared remarks and at this time, we'd like to open up the call for questions. Operator?

Thank you. Our first question comes from Jeff Hammond of KeyBanc Capital Markets. Your line is open.

Hey. Good morning, guys. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Good morning, Jeff. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Good morning, Jeff.

So just to understand a little bit better, I think you had said last quarter that if you kept this low level of storms, you thought sales would be down 2% to 4%. Now you're kind of saying 10%. So what's changed in your thinking there over the last quarter? York A. Ragen - Chief Financial Officer & Head-Investor Relations: Yeah, I think the – so that 2% to 4%, when we rolled that 2% to 4% up, we were looking at prior year sort of as a baseline. Last year we talked a lot about how prior year was below normal. So, when we rolled up our 2% to 4% for 2015, we were assuming a below-normal outage scenario, similar to prior year, and rolled up our residential results given those assumptions, using sort of prior year as a baseline. What we're finding, Jeff, as you see from our second quarter, the first quarter outage environment was record low, as we talked about; April, May continued to be low; July continued to be low. So, really the difference between last quarter's 2% to 4% down and our guidance that we're really issuing today really assumes that record low outage level from the first half continues in the second half, which is really a lower assumption than what we thought when we rolled out that 2% to 4%. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: The outage environment just – it's been a lot lower than even we were thinking – and so I think that prior 2% to 4% guidance that we issued, 2% to 4% down, was kind of predicated on what we were seeing. And actually, as the first half kind of finished out, it came in a lot lower than even we were expecting for a low environment. So it's just been very quiet in terms of outages. York A. Ragen - Chief Financial Officer & Head-Investor Relations: We felt it prudent to run rate that record low outage from the first half into the second half as an assumption. And then I guess the other piece of that is – a smaller piece – that's the main driver, Jeff, and then a smaller piece of that is just looking at oil and gas and really taking a hard look at what the second half of the year looks like and bringing that down a bit. And then telecom, we had it weak in our guidance from last quarter, but we thought we saw some level of pickup in the second half, which really as we go into the third quarter here, we're not seeing that. So a small piece of the change is telecom as well. So it's mainly the resi side is the main driver with a small piece of oil and gas and telecom.

Okay. And then – okay – so inventories are up about $100 million year-on-year, $30 million sequentially, and I know you talked about kind of a de-stock. So can you maybe talk about, one, where are channel inventories? Two, what do you think is the right inventory level by year-end versus the $385 million you came out of 2Q? And then of that $100 million year-on-year, how much is kind of acquired inventories versus a core increase? Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Yes. So, Jeff, I'll speak to the field inventory piece. Field inventories, and again part of that revised guidance downward was the fact that the field inventories with that record low outage environment just have not drained as quickly as we anticipated them to do in the second quarter – and that actually led to a chunk of the mix in the second quarter on the top line was related to excess inventory. Right now, channel inventories as we go into third quarter here, actually year-on-year are, in just kind of gross numbers, are actually about where they were a year ago. So, now, the problem with that is the backdrop it's still a weak power outage environment, so on a kind of a turns basis at retail, if you will, they're not turning as quickly. So arguably, our guidance includes the assumption that there's a little bit more de-stocking to occur here in the third quarter as a result. We didn't kind of get through it all in the second quarter as we had originally anticipated, and that's going to continue on. As far as the $100 million of inventory that (32:55) balance sheet... York A. Ragen - Chief Financial Officer & Head-Investor Relations: You mentioned $385 million of inventory of as June 30. The way we've modeled in our planning is probably about a 10% reduction from there. As we talked in the prepared comments, we're going to monetize a portion of that buildup into the second half. And that typically happens, it's just that the run up in the first half was more than expected given the lower-than-expected demand. But we anticipate monetizing a portion of that here in the second half.

And how much of that inventory increase is acquired inventory versus your base? York A. Ragen - Chief Financial Officer & Head-Investor Relations: Yeah, well, that $385 million, when you say – I guess the $40 million was exclusive of any – there might have been $10 million of acquired inventory – but that $40 million that I spoke of in terms of reduction wouldn't include any acquired inventory.

Okay. Thanks, guys. I'll get back in queue.

Thank you. Our next question comes from Mike Halloran of Baird. Your line is open. Michael P. Halloran - Robert W. Baird & Co., Inc. (Broker): Hey. Good morning, guys. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Hey. Morning. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Good morning. Michael P. Halloran - Robert W. Baird & Co., Inc. (Broker): So just staying on that then, it sounds like at the current revenue run rate, even in the weak environment, the hope is that the de-stocking can be worked through by the time you get to the third quarter, and that maybe by the fourth quarter you get more normalized pull through. Is that the thought process, then? Aaron P. Jagdfeld - President, Chief Executive Officer & Director: I think that's probably a proper way to state it, Mike, is that third quarter's still going to be somewhat impacted by the de-stocking, so fourth quarter should be clean relative to not having that. That's the plan at this point. Michael P. Halloran - Robert W. Baird & Co., Inc. (Broker): Okay. Thanks for that. And then on the buyback side, could you just help me in two respects? First, maybe just talk a little bit about what the buyback signals from your perspective, from a long-term opportunity perspective and what it means for your capital deployment plans in the near-term? And related, how quickly do you guys plan on executing on that buyback? Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Yeah, so I think from an execution standpoint, I'll deal with that first, we're going to begin looking at that right away. I mean, the intent was to get the program authorized and then get it up and running. In terms... York A. Ragen - Chief Financial Officer & Head-Investor Relations: It'll get phased in as our... Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Of course. York A. Ragen - Chief Financial Officer & Head-Investor Relations: ...as we generate liquidity and cash flow throughout the second half, depending opportunistically, we could do something quickly here. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: I think if you step back though, Mike, just in terms of what it means and kind of how we think about it, or how I think about it in particular. When you look at our free cash flow generation, we set out in our IR day back in May – we had our Investor Day – we said we are going to generate over $1 billion worth of free cash flow from 2015 to 2018. And so, we're in a fortunate position that the business generates a high amount of cash flow and we've been very successful, I believe at, up to this point, deploying that through a number of different ways: through acquisitions, we've paid down some debt, obviously organic expansion. All the priority uses of capital that we talk about, we stepped through pretty successfully. And as we look to the future, it just felt like we needed to have a share repurchase program in our arsenal because when you think about, as I think about, a couple of things – paying down debt, maybe not the best use of capital in terms of return, right, just in terms of raw shareholder return. M&A deals, the cycle for M&A is getting a little long in the tooth, and deals that we've been looking at, things have become more expensive. So as we think about the near-term impact, we did the CHP, Country Home Products acquisition, here. We've got a robust pipeline of things that we've been looking at and have been talking about. We wanted to make sure that whatever program we put in place did not impact our ability to do acquisitions. So, we look at this as another tool, a way to enhance shareholder value. Michael P. Halloran - Robert W. Baird & Co., Inc. (Broker): And that makes sense. And then one last question, is it fair to say that that call it, $30 million or so sequential move on inventories, maybe a little higher than that, is about what the impact was for you guys from a de-stocking perspective in the second quarter? Or should we be thinking about that a little bit differently? Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Probably not all of it. Certainly a portion of it is related to that. I don't know that I could directly tell you exactly what it is. But it's certainly encompassed in that number. Michael P. Halloran - Robert W. Baird & Co., Inc. (Broker): Okay. Great, guys. Appreciate it. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Thanks, Mike.

Thank you. Our next question comes from Jerry Revich of Goldman Sachs. Your line is open. Jerry D. Revich - Goldman Sachs & Co.: Hi. Good morning. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Morning, Jerry. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Morning, Jerry. Jerry D. Revich - Goldman Sachs & Co.: Aaron, I'm wondering if you could just talk about the impact of your dealer inventory reductions on your sales this quarter. Clearly, you under-shipped on demand. Can you just give us an order of magnitude? I appreciate some of that is your own inventory, but just in terms of what impacted your top line, what was the magnitude of that headwind? Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Yeah, I think, Jerry, I mean it certainly had an impact. We didn't quantify it. It's a little hard to kind of get our arms around completely but it's certainly has had – it had a larger impact, put it that way, than we anticipated because – and really primarily driven by the fact this ultra-low power outage environment is just not creating the pull-through. And really that had a pretty significant impact. And normally Q2 is a robust quarter for us ahead of the season. The effectiveness of our kind of promotions and marketing and our normal sales programs, our normal pre-season stuff that we do every year just didn't have the kind of effectiveness this year as a result of higher inventory levels which were the result of the low power outage environment. But it had a significant impact on the Q2 home standby business in particular. Jerry D. Revich - Goldman Sachs & Co.: Okay. And then, can you just help us understand the revenue guidance back half versus first half? It looks like the guidance was for a 20% sequential increase. It looks like 7% of that or so should be from the new acquisition. Can you help us with just the other pieces, how much is typical seasonality and how much visibility do you have on that now that we're a month into the quarter? York A. Ragen - Chief Financial Officer & Head-Investor Relations: Hey, Jerry, this is York. Yeah, when you look at that sequential increase really from Q2 to Q3, there's really three big pieces to that that you can explain. And one of them we just talked about in the last two questions was this sort of this field inventory de-stock impact on Q2. That should normalize to some extent in Q3 into Q4. So, I mean, that quantity that we're talking about or that significant impact that we're talking about should alleviate into Q3. In addition to the normal seasonality that we see from Q2 to Q3 in the residential product category, and you can go back in time into history and look at seasonal trends on the residential side and see the summer storm season, the heart of it, is the third quarter and that's typically our largest, between Q3 and Q4, those two are our largest quarters, definitely from a seasonal standpoint. So that's the resi side. And then another big pack on the C&I side is our MAC business. So, we bought the MAC heater company C&I business effective October 1. And their season is the third quarter. So, we anticipate selling a good amount of heat product in the third quarter, which won't really annualize from an organic standpoint until October 1. But you should see a large sequential increase from the second quarter to the third quarter just because of the MAC business turning on from a seasonal standpoint. And then your point about the Country Home Products acquisition, that gets layered on. That acquisition from a top line standpoint is very similar to the last number of deals we've done from a bolt-on standpoint, and will contribute effective, really August 1 is when that deal was effective this year. So those are the three main buckets if you're trying to figure out how do you get from Q2 to Q3 in our guidance. Jerry D. Revich - Goldman Sachs & Co.: Okay. Thank you.

Our next question comes from Christopher Glynn of Oppenheimer. Your line is open. Christopher D. Glynn - Oppenheimer & Co., Inc. (Broker): Thank you. Good morning. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Hey, Chris. Christopher D. Glynn - Oppenheimer & Co., Inc. (Broker): Hey. York, Aaron, good morning. The $40 million inventory reduction, that's what we view as higher levels than you've been at historically, even acquisition adjusted, I would guess. Is that just being appropriate stewards of margins or would it make sense to get it down more and just sacrifice some near-term margin? Aaron P. Jagdfeld - President, Chief Executive Officer & Director: So the way I think of that, Chris, is in particular, when you look at where a good chunk of that inventory is on the finished goods side, I mean that's all dry powder for a season. Now if we get through the season and we don't see anything happen – and our assumptions are that we're not going to see power outages in the second half – we may have to take a more aggressive position on that. Right now, the assumptions, the reduction that York spoke to that we're anticipating in the back half is kind of baked in with that ultra-low power outage assumption. So, could it be greater than that, I guess would be the question you're asking, if we would get a more aggressive position on it. But the fact of the matter is you don't want to start discounting that ahead of the season or before the season's done because you're leaving money on the table in our viewpoint. So in particular, I think it's just prudent to wait out the season and see kind of where things end up. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Things happen, and we'll be able to react to it because we'll have the inventory. I think, that doesn't bother us having, being on the ready for an outage. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Now where I see us being probably far too heavy is still on the raw materials side and that's really – the backup of the West Coast port issue that we experienced earlier this year caused us some consternation and then obviously, as we've adjusted our production levels here to better match the demand and slow down the build of our finished good inventories, the raw materials have come at us at a higher rate, as we were anticipating a higher level of sell-through and production rates for the year in total. So, we have long lead time components, and so some of that stuff is stacked up here at a rate that's faster than we had originally anticipated. So those things will de-stock out of raw materials throughout the year as we shut down supply chain and as we've adjusted accordingly. Christopher D. Glynn - Oppenheimer & Co., Inc. (Broker): Okay. Yeah. That makes a lot of sense, the readiness for a potential event. And so the thought is if you don't get anything like that, then the $40 million could go up basically? York A. Ragen - Chief Financial Officer & Head-Investor Relations: Hypothetically, if we wanted to take a more aggressive stance on the finished goods side, certainly I think – but again, the guidance we're giving today and the numbers we're kind of quoting here are all built around that very low, extremely low power outage assumption, so they don't take a – they don't take the viewpoint that we would discount further. We haven't put anything in the model for that in terms of our guidance. But could we do that if we ended up without a storm season that didn't materialize and we wanted to get more aggressive? It would be available to us. We'd have to make that decision after the season's done. Christopher D. Glynn - Oppenheimer & Co., Inc. (Broker): Okay. And did you update the CapEx guidance? York A. Ragen - Chief Financial Officer & Head-Investor Relations: Yeah, I think it's still going to be in the low $30 million range, $30 million to $32 million-ish range, $31 million to $33 million. Christopher D. Glynn - Oppenheimer & Co., Inc. (Broker): Sounds good. Thanks.

Thank you. Our next question comes from Brian Drab of William Blair. Your line is open. Brian P. Drab - William Blair & Co. LLC: Good morning. Thanks for taking my questions. I was wondering... York A. Ragen - Chief Financial Officer & Head-Investor Relations: Hi, Brian. Brian P. Drab - William Blair & Co. LLC: Hi. First, I don't know, York, if you could be a little more specific on the Country Home acquisition in terms of revenue? Is this closer to a Magnum size level of revenue? Or any more specifics there? Aaron P. Jagdfeld - President, Chief Executive Officer & Director: No, it's really – Brian, it's – this is Aaron. It's a little – it's closer to some of the more recent transactions that we've done in terms of size. We're not disclosing it because the seller requested that we not do that. So, we're not giving the specifics, but again, it's about 200 people and the transaction – the sales revenue for that business is – it's more like the companies we've bought recently. So it is seasonal as well. It's a seasonal business, so you can imagine their products tend to be more second quarter oriented and into the third quarter here. Brian P. Drab - William Blair & Co. LLC: Okay, that's helpful. And then I asked a similar question on the last call, I think, but as I'm looking at the slide that you showed at the Analyst Day, slide 10 where you showed your outage data over the last five years, at this point, I'm wondering, Aaron, if your philosophy or your thoughts around where is that real normal baseline level of outage activity over a much broader timeframe, if that's changing? But when we get to 2020 and we're on this call, are we going to look back potentially and see that the 2010 to 2012 time period was actually abnormal? Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Yeah, I think, Brian, that's a great question and one that obviously we've been spending a lot of time understanding. I mean, the data we presented at the Investor Day, we've been tracking outages in pretty great detail since 2010. And this is by far and away the lowest recorded values that we have for the first half of a year. In fact, the first quarter was incredibly low. The last 10 quarters have been really, really low. To answer your question, though, do we see anything kind of fundamentally changing, how do we view this? I've been with the company over 20 years and I – and we're – at the core of what we do, it's all about power generation. We've done a nice job diversifying the company, I think, organically through the addition of some new product categories and then obviously, through acquisitions, which has been helpful to kind of lessen some of the impact of this, but by and large, the core of the company is still about generators. And as a core about generators goes, power outages are an important driver of demand in terms of just the – in particular, on the residential side. Over my course of my career here, I have seen three very up distinctive patterns and three very down distinctive patterns – or flat. I shouldn't say down. It's really more flattish. And that's – we view where we're at right now as really kind of in the flat part of a step. It's very much a step function business, especially on the residential side. Power outages will happen again. It's just – right now, it's just for whatever reason, we're not meteorologists, it's just in fact, most power outages are caused by weather. The weather patterns have been somewhat quiet, El Nino, things like that, that just run in cycles and we're just in one of those down cycles. But every time we get into one of these cycles, we're mindful at the company of continuing to invest in the future because we know the next leg of growth up, the next catalyst is going to happen to bring that awareness level up, expand our distribution and expand that residential market opportunity for us. It's really just – the penetration rate slows down when you get into periods of time like this – and then it accelerates when you get into periods where you see more outages. So I don't think – I personally don't think anything's fundamentally changed – it feels like past patterns. We haven't been a public company in one of these patterns, so I mean, I think that's a little bit painful. Obviously, you can see the challenges in trying to predict this business and in particular, on the residential side from quarter to quarter. We don't like to provide quarter-to-quarter guidance. We've tried to stick to yearly guidance, and even that's been challenging. But the impact from quarter to quarter over the outage environment does move the needle one way or the other. Conversely, it can go completely the other way. If we were to get some kind of event here in the back half of the year, you could see a material increase in the residential business. It's just – it's a difficult business to forecast which makes it a difficult business to operate sometimes – but we're skilled at doing that. We have a flexible operating environment as a result of that and we try to react quickly, both up and down, when changes in the demand profile happen. Brian P. Drab - William Blair & Co. LLC: All right. Thanks for talking through that. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Thanks, Brian.

Thank you. Our next question comes from Stanley Elliott of Stifel. Your line is open. Stanley S. Elliott - Stifel, Nicolaus & Co., Inc.: Hey, guys. Good morning. Thank you for taking my questions. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Good morning, Stanley. Stanley S. Elliott - Stifel, Nicolaus & Co., Inc.: Quick question. This is kind of a refresher. How much of the product is sold through the rental channel? Is that kind of a 15% to 20% sort of a number? Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Yeah, we haven't disclosed sales by channel, but it's an important part of the mobile business, and the mobile business represents roughly – it's not quite half of our industrial business. It's a little less than half of the industrial business, but it's a – within that mobile business – a good portion of that mobile business is transacted through rental, both specialty rental and then of course, the large national rental. I think it's probably appropriate to say that exposure could be somewhere in the mid-teens in terms of total revenue impact through rental, if you want to think about it that way. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Yeah. Stanley S. Elliott - Stifel, Nicolaus & Co., Inc.: That's great. And kind of switching gears, but kind of staying on the C&I business, can you guys talk about what you're doing to help improve the close rate on the C&I products, more on the commercial side, now that you have such a wider, more expansive product portfolio? Thanks. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Yeah. Great question, Stanley. We've – kind of buried in all of this bad news today was the fact that our industrial distribution channel – which is really the channel you're talking about, has been growing. I mean, we've been, here in North America and frankly, in Latin America, we've seen really nice improvement in that business. We see good momentum in that business. That's kind of reflective of our guidance for the balance of the year here. We're calling out nice solid continued growth in the industrial distributor channel. In terms of focusing on close rates specifically, it all kind of starts with making sure we're specified. So we start kind of upstream and you look at the sales process there and how those products are transacted in the market, a lot of that is bid-spec type of opportunities, as we refer to them, nonresidential construction driven. The engineering firms that specify those pieces of equipment are generally electrically-oriented and they're specifying a – if you're building a hospital, or a supermarket or a manufacturing plant – there's usually a specifying engineering firm involved that works to specify the building's electrical infrastructure. And if a generator is required, either it's code-driven or the business operating parameters require a generator, you have the opportunity at that point to, if you've engaged with that engineering firm, you have the opportunity to be listed in the specification by name. And that's really been a huge focal area of ours over the last, I would say, five or six years in particular. That's kind of where it starts. Improving the close rate then, in our mind is about, as you mentioned, one, it's about having an expansive product line so that you can basically quote a wider market, your total available market. And in this case, our total available market nearly doubled with some of the acquisitions and expansions of product line that we've done here over the last couple of years for that business. And in doing so, we've become, we've positioned ourselves, we think, as a qualified Tier 1 supplier to the market of all industrial back-up systems. And so, that positioning has improved our close rate simply by the fact that we've, in the eyes of specifying engineers and in the eyes of the customers and electrical contractors who purchase that equipment, we're viewed as a competent supplier. And so that's a big part of it. Also, a lot of focus on distribution and what we can do to improve distribution's knowledge of our product, to improve distribution's orientation towards value-engineering solutions. We've spent a good amount of time doing that here, I would say, in the last 6 to 12 months. We've talked a lot about value engineering and that obviously is having, for us, it's having an impact on close rates. Expanding the sales bandwidth, with the addition of all the new products that we've had, is another area that – distributors are independent businesses, so we don't own those businesses – so there's a bit of a convincing to do in terms of convincing a distributor to add sales force, kind of betting on the come that sales will grow. But adding those – increasing that bandwidth for sales – has also helped us with our close rates. And it's kind of a multi-pronged approach to doing that. We're pretty happy with the results at this point. We think there's actually quite a bit more runway there. We're still a smaller, a much smaller market share player in the industrial stationary market. We really view ourselves as kind of in that number three type of slot here in North America. And the number one and two guys are quite a bit bigger and we think there's a good amount of opportunity there to grow our share. Stanley S. Elliott - Stifel, Nicolaus & Co., Inc.: Okay, guys. Thank you very much. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Thanks, Stanley Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Thanks, Stanley.

Thank you. Our next question comes from Ross Gilardi, of Bank of America. Your line is open.

Good morning. Thanks, guys. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Hey, Ross. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Hey, Ross.

I'm still – York, I'm still trying to understand the sizable EBITDA implied ramp in the second half. You went through the revenue drivers and that was helpful. But I'm still trying to get that in the context of what you're saying. You're assuming a continued soft power outage environment. But just given where you're inventories are and the demand environment, I mean, I think your guidance implied like a 50% increase in EBITDA in the second half of the year, and I would think that some of the Country Home would be probably a little bit lower on the margin side, as well as MAC. I don't know if that's necessarily right. But can you run us through the EBITDA ramp a little but more? York A. Ragen - Chief Financial Officer & Head-Investor Relations: Absolutely. Looking at like I did talking about Q2 to Q3 on the top line, on the bottom line EBITDA margin, you should see a favorable mix impact. In particular, on the mix side, we will sell more home standby, which is our best margin products. The MAC heat products actually are very good margins, so as I mentioned, seasonally, Q3 is a strong quarter for that business. And that, from a mix standpoint, should improve. Seasonally, power washers, going into the second half of the year, that volume declines. Those are lower margin products. So just from a mix standpoint alone, we should see a couple hundred basis point improvement in mix, just from the second quarter to the third quarter. So then you get to price/cost, price is probably a small impact, a favorable impact on price. We did roll out some pricing, really in the first quarter that got phased in the second quarter, so assuming a small impact on price, not a lot. But then on the cost side, that's where, actually, where we should see some improvement from first half to second half, maybe 100 bps. Commodity levels and currencies are at lows, at significant lows, so favorable PPV will be coming through. Some of the transitory costs that were in the first quarter that leaked into the second quarter, we don't expect those to occur. So those are the things that we'd see costs improving in. And then just normal, normal just, engineered and our strategic global sourcing team working on initiatives to bring costs down. Those are all things that will improve costs from first half to second half, maybe 100 BPs. And then on the higher volume that I noted in my bridge on the topline, that will just, that will just leverage our fixed cost infrastructure on the SG&A line, and that'll be about 150 bps so that's – you add all that up, it's about 500 basis points from the first half to the second half to get to you the 21% overall for the year.

Got it. York A. Ragen - Chief Financial Officer & Head-Investor Relations: You bet.

Thanks, York. And then, Aaron, I'm just wondering if you could talk a little bit about your dealer network and the health of your dealer network right now, and include maybe what your dealer count was. And just wondering like if you have any sense what portion of your dealer network rely just largely on home standby generators as their primary source of revenue, and therefore is there a risk of them departing from the category just as you see this ongoing soft environment? Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Yeah. That's a great question. I mean the dealer network actually has been, I think, pretty resilient. We've held kind of in that 5,200 dealer count range. We kind of ended the quarter kind of close to that. Things seem to be – the trending here over the last several months has actually been pretty positive. So we feel good about the dealer count and the fact that that's been hanging in there. Now, there is a fair amount of churn and there always has been, right? These are small electrical and HVAC contracting businesses so there's a – we have a significant effort that is constantly qualifying new contractors into that network – and then obviously as you say, if contractors leave, we talk to those contractors to understand why they're leaving. We talk to them to see if there are ways for us to improve their success rate in their markets either through improved sales tools or improved training. So we don't like to see people to leave the network because we spend a lot of time acquiring them. We spend a lot of effort once they are acquired to develop them. But as far as the percentage of those dealers that are dependent solely on home standby generators, there are a few in the network, don't get me wrong; a lot of where dealers come from is they start out as contracting firms and then as maybe the home standby business develops over time, they may split the business – their business – we see this quite a bit where they end up with two businesses. They keep their contracting firm and they develop a specific generator-focused business entity. They hire salespeople, they hire technicians and they kind of operate kind of as two entities. Some of these contractors actually will get out of the contracting business altogether. But oftentimes they'll keep their contracting business because, as you can imagine, in the installation of these products, having the electrical contracting technical capabilities is important. So there are a few of them that are solely focused on home standby, but most of them have broader businesses. That is – certainly the ones that are solely focused on it, they tend to be the ones who also are the most forward thinking about how can they continue to grow. So they're very focused on the market. They tend to be our better dealers if we get 100% mindshare, if somebody is focused on the category solely. But they also, as you note, could be in a particular situation where that could get even more challenging. But again, the dealer count overall has remained very resilient. I think it's, in fact, we're really pleased with that because it's representative, I think, of the long-term health of the category overall. And I think our share of the category, which continues to – it's been growing – and we think we've got a great formula there for contractors who sign up to be dealers, for them to be profitable.

Thank you. Our next question comes from Jeff Hammond of KeyBanc Capital Markets. Your line is open.

Hey, guys. Just a couple of quick follow-ups. I think telecom and energy you were talking about down 20%; what's kind of the new look? And then just on telecom, as you talk to those customers, what's kind of the interest or sense of urgency, or the risk that that wanes as we kind of move away from Sandy and Irene? York A. Ragen - Chief Financial Officer & Head-Investor Relations: Yeah, Jeff. The update on the oil and gas and telecom, like you said, was we previously had been guiding down 20%. I mean, with that current view, it's the combined category, actually between the two of them even, we're looking at down 35% now, 35%. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: On the telecom customers, and kind of as we talk to those customers, Jeff, clearly, in terms of sense of urgency, when you don't have a strong power outage environment, I think the sense of urgency somewhat relaxes. But I will tell you that all the major accounts that we serve there, have a deployment strategy for product now that includes, is inclusive of, generators on new-build, on new site builds. Where I think the sense of urgency plays out, or lack thereof, is on kind of retrofitting sites that don't have power generation. And that's where maybe that can slow down because you just don't have a burning platform from which to work from. In particular, as we went through Sandy and Irene, some of the events out in the Northeast, clearly there were markets there that were disproportionately impacted by sites not having back-up power. And those sites, there was an initial kind of demand curve there to satisfy some of those areas, to harden those networks first in those regions. And some of that has backed off, obviously, but I think, frankly, I think it's more about just the way that CapEx is being kind of deployed within some of those customers as we talk to them. Some of those dollars are being used for other things, whether they be acquisitions or you know – I just think that there's a bit, too, of this – just in terms of the impact on some of the recent regulations in the marketplace around their appetite maybe for continuing to spend on their networks at this stage of the game until they understand what the ground rules are in terms of who ultimately can traffic across their network and who might end up actually owning the network. So there's a number of factors that play into that, but we think it's just a low point in the cycle. As we said in our prepared remarks, only a third of all cell towers have backup power today. We think that there's going to have to be – so much critical communications and data is going across these networks – that to think that we wouldn't harden that as part of a broader critical infrastructure strategy, whether the telecom companies take that on themselves, and a lot of them have, they're responsible entities that way. But there could become a point in time in the future where that critical infrastructure is viewed in a way that there's a requirement to harden those sites. So, we've heard talk about that over the years. Nothing's come to pass. I think that also relaxes in a low outage environment, the talk around hardening those networks from a regulatory standpoint, kind of also passes as outages have become a little bit in a down cycle here.

Is it fair to say the retrofit market on telecom has pretty much dried up this year, so you have a – as anything kicks in there, you get a pretty easy comp? Aaron P. Jagdfeld - President, Chief Executive Officer & Director: That's our viewpoint on it and that's kind of how we modeled the back half of the year. So it's really, we're down to kind of new site builds that we have visibility to that we know of. In fact, there are some new site builds for some of these customers have been pulled back as well, so we've adjusted for that. So it's not just retrofit as it relates to the back half of the year, the guidance we've given, it's also some new site builds being pulled out.

Thank you. This concludes our question-and-answer session. I would now like to turn the call back to Aaron Jagdfeld, President and CEO, for closing remarks. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: We want to thank everyone for joining us this morning and we look forward to reporting our third quarter 2015 earnings results, which we anticipate will be in late October. So with that, we'll bid you a good morning. Thank you.