Ladies and gentlemen, thank you for standing by and welcome to the Parker Hannifin Fiscal 2020 Third Quarter Conference Call and Webcast. [Operator Instructions] I'd now like to hand the conference over to your host Chief Financial Officer, Cathy Suever. Madam, please, go ahead.

Thank you, Latif. Good morning and welcome to Parker Hannifin's third quarter fiscal year 2020 earnings release teleconference. Joining me today are Chairman and Chief Executive Officer, Tom Williams; and President and Chief Operating Officer, Lee Banks. Today's presentation slides, together with the audio webcast, replay, will be accessible on the Company's investor information website at phstock.com for one year following today's call. On slide number 2, you'll find the Company's Safe Harbor disclosure statement, addressing forward-looking statements as well as non-GAAP financial measures. Reconciliations for any reference to non-GAAP financial measures are included in this morning's materials and are also posted on Parker's website at phstock.com. Today's agenda appears on slide number 3. We'll begin with our Chairman and Chief Executive Officer, Tom Williams, providing comments on the current environment and related actions we've been taking. Tom will then discuss highlights from the third quarter. Following Tom's comments, I'll provide a more detailed review of our third quarter financial performance. Tom will then provide a few summary comments and we'll open the call for a question-and-answer session. We'll do our best to take all the questions we can today. Please refer now to slide number 4 and Tom will get us started.

Thank you, Cathy. good morning, everybody. Thanks for your participation today. Before I get into Slide 4, I just want to first extend our thoughts to all those that have been affected by the crisis and our deepest sympathies go out to those that have lost loved ones as a result of the virus. A special thank you to all the health care professionals for their courageous efforts around the world and I'd also like to thank all the Parker team members for their dedication and their support and what we have done in really, in our own small way to help society through this crisis. I'll elaborate more about that later on in the presentation. So this is unprecedented times and that's a word that's probably overused but very appropriate given the uniqueness of having a combined health and economic crisis. So on Slide 4, our performance and our strength for both of these crises really comes from The Win Strategy, which is a proven operating system and we're now in our third and very powerful revision of that. A portfolio of products and technologies that are needed and this has never been more evident and important in today's climate. We make things that the world absolutely needs. Our culture and our values, which is why people join and stay at Parker and our purpose, which has been our North Star, and I'll talk more about the connectedness of our purpose to our actions later on. And we have an engaged team of people. We have top quartile engagement scores and you couple that with our decentralized divisional structure, that is what has enabled us to move at the speed and agility that you've seen during this crisis. So on Slide 5, our crisis management strategy is really threefold.…

Okay. Thanks, Tom. I'd like you to now refer to Slide number 24, and I'll summarize the quarter. This slide presents as reported and adjusted earnings per share for the third quarter. Adjusted earnings per share for the quarter were $2.92 compared to $3.17 last year. Adjustments from the current fiscal year as-reported results netted to $0.09, including before tax amounts of business realignment charges of $0.10, acquisition costs to achieve of $0.06 and acquisition transaction expenses of $0.14. These were offset by the tax effect of these adjustments of $0.07 and the result of a favorable tax settlement of $0.14. Prior year third quarter earnings per share has been adjusted $0.03, the details of which are included in the reconciliation tables for non-GAAP financial measures. On Slide 25, you'll find the significant components of the walk from adjusted earnings per share of $0.17 for the third quarter last year to $2.92 for the third quarter of this year. Starting with the net decrease of $0.07 in segment operating income. For legacy Parker, a $329 million decline in sales resulted in only a $54 million reduction in operating income or $0.31. The Parker teams did an excellent job of controlling costs on the lower volume, resulting in a legacy Parker decremental margin of 16% for the quarter. The LORD and Exotic acquisitions contributed $0.24 in operating income. Lower net corporate G&A and other expense contributed $0.03 this quarter as a result of currency gains on forward hedge contracts. We incurred incremental interest expense of $0.19 year-over-year. And after adjusting out the benefit of a favorable tax settlement, a higher tax rate from continuing operations and less favorable discrete adjustments resulted in a $0.04 reduction from income taxes. On Slide 26, you'll find the significant components of the walk from the…

Thank you, Cathy. We are confident in our ability to emerge stronger than we’ve ever been before. And that confidence and that hope really comes from a couple of factors: The Win Strategy, the portfolio we have of needed products and technologies, our culture and our purpose, and probably most importantly, is the last page, our team of people, fantastic team of people, which we try to show as many as we could here on this page from all around the world. And what this crisis has clearly exposed and shown is just how – what an important role everybody plays within the company. I would just like to again thank the global team for an extraordinary job, thanking what they’ve done to date and thank them for what we’re going to do in the future. And with that, I’ll turn it over to Latif to start the Q&A.

Thank you, sir. [Operator Instructions] Our first question comes from the line of Nigel Coe of Wolfe Research. Your line is open.

Thanks. Good morning. Can you hear me?

Good morning, Nigel. We can hear you well. Yes.

Okay. Great. So Tom, you mentioned that you’re planning on analysis recovery. And I’m just wondering what that means in terms of balance sheet liquidation inventories and it suggests that you’re going to be very aggressive in terms of liquidating the balance sheet. So my real question is, 4Q guidance obviously being withdrawn, but do you have confidence that you could still generate $1.8 billion of free cash flow versus the $1.3 billion year-to-date?

Nigel, yes. Because we – typically, our fourth quarter, even in tough times is always a very strong quarter for us, and we will have the advantage of working capital generating a lot of cash for us in Q4 and that should help us quite a bit. And so we still see that, that 10% or greater CFOA as a percent of sales is going to continue, and we’ll do a good job in Q4. I think what I want to emphasize is we’re planning for an L to be conservative, but we have the flexibility with whatever shape, letter it turns out to be. And of course, nobody knows at this point, but we have the supply chain flexibility. We have the people flexibility to respond in whatever direction it works.

Great. Thanks, Tom. And then my second question is on the decremental margins. You’ve obviously done a fantastic job, especially on the legacy Parker businesses. Your comments on the 4Q seems to suggest that there’s going to be some deterioration in the run rate given the volume drop-off that you’re expecting. But given the cost countermeasures you’ve put in place, a little bit surprised that maybe decrementals can’t be managed below 30%. So I’m just wondering what you’re expecting in terms of decremental margins based on your scenario planning?

Well, like I have on that slide that I outlined all the cost reductions, we’re targeting a 30% decremental. A 30% decremental is still best-in-class, if you benchmark other companies. And doing a 30% decremental approximately in this kind of climate is really, really good performance. Who knows what the quarter is going to turn out to be, I would suggest to the folks listening, that April is probably our low point and that we would see May start to improve a little bit and then improve a little bit after that with June. But if you can do decrementals like this in this kind of environment, that’s really outstanding performance.

Great. Thanks, Tom. Good luck.

Thanks, Nigel.

Thank you. The next question comes from the line of Mig Dobre of Baird. Your line is open.

Thank you. Good morning, everyone. I’m glad to hear you doing well. I’d like to ask a question on aerospace. The color that you’ve given us on April is quite different than the orders prior to coronavirus becoming an issue. And I just – I guess I’m wondering, how should we be thinking about this softness in orders playing through to fundamentals next quarter and over the next couple of quarters? How does it flow to revenues and how should we think about decremental margins in this segment specifically?

Mig, it’s Tom. So I think, obviously, we never disclosed – haven’t disclosed until this time, aerospace on a 112 because it is lumpy, and there’s a lot of multimonth, multiquarter, multiyear type of orders that get in there. So it can sometimes be misleading, either on the positive or the negative side when you look at it. But aerospace, what we’re planning for is a significant change to aerospace. It’s going to go through a tough time. And you’ve got the commercial side, it’s going to come down very strongly, but we have a really great military business. So we’re basically two-thirds commercial, one-third military and that military business is growing very nicely. So our 20% reduction in force will be in addition to those discretionary things for aerospace. So we’ll do the 20% reduction in force, that’s a permanent SG&A challenge to kind of reshape aerospace for this new normal, but we will continue the reduced work schedules, the salary reduction of the things I have on the discretionary page that I outlined so that aerospace can flex as well. And we feel very good that aerospace will be able to do well in this new environment. The Exotic team that’s come on is performing well. They’re performing better than legacy Parker and it has over 60% military business. So aerospace long term, long, long-term is still a great business. It’s going to have a couple of years here of challenges, and we’re reshaping the portfolio to win in this new reality, and we’re doing it very quickly.

Understood, Tom. But is there a way to maybe talk about this business sequentially from a revenue standpoint? Just trying to make sure that we have our expectations properly gauged there.

Well, we’re not guiding. So I’m not going to start spouting off what I think Q4 is going to be. But I think you can look at order entry there. And you can also recognize that we do have very strong backlogs in this business. So we had the ability to continue to work backlog. And actually, the backlogs have held up fairly well. When I look at backlogs going from March to April to date, commercial OEM is at about 11 month backlog and military OEM is almost two-year backlog. Commercial MRO, if you remember at IR Day, we talked about at 2.5 months, it’s still about 2.5 months. And military MRO is at about a 16-month backlog. So the backlogs are holding up. I would tell you what customers are doing is they’re more rescheduling quantities. And that’s what we’re doing is we’re reshaping our supply chain demand and our people to that new reality.

Appreciate the color. Thank you.

Thanks, Mig.

Thank you. Our next question comes from Andrew Obin of Bank of America. Your line is open.

Can you hear me? I apologize.

Yes. Good morning.

Good morning. Just a question. Can you just talk maybe about region-specific trends on orders? You provided great granularity on orders by segment in April. But maybe just compare and contrast how Asia, Europe and U.S. – well, U.S., you have, but how the pace of recovery in Asia and what do you see at the end of the tunnel in terms of your China experience?

Andrew, it’s Tom. So I’ll address that. Let me start with – I’ll give you the Q3. I recognize maybe a lot of you won’t need Q3 but I just – I’ll give it to you for context. And then I’ll go into April and China, your specific question. So you saw the orders on Q3 and the improvement that we saw before middle of March was really international. It was both EMEA and Asia. And you saw aerospace orders stay level, and that was because we had very strong military OEM orders. When you look at it by kind of subsegment, and this is organic, and you’ve already seen total Parker minus 7.5%, aerospace at minus 2.5%. But distribution was down about mid-single digits, pretty much steady versus the prior quarter. Again, this is a Q3 market summary. Industrial was down mid-single digits, a slight improvement of about 200 bps improvement versus Q2. And then mobile was down low teens. And it had a slight improvement versus Q2. The markets that were positive, we had some very strong end markets that were positive in Q3. Greater than 10% was power gen and semiconductor. We had two markets that were positive, low single digits, marine and mining. And then on the declining markets, I’ll just give you in various buckets, low single-digit decline was mills and foundries, mid-single-digit declines, refrigeration, oil and gas wanted tariff on distribution, high single-digit declines in life science and automotive. And then that 20% to – and that 10% to 20% decline was tires, telecom, construction, heavy-duty truck, agriculture and rail. Now to April, Andrew. So what we saw in April so far, now – so you saw the segments. So let me give you color on international. So in a page, Slide 14 in…

That is incredibly helpful. And just a follow-up question. How do you gauge the financial health of your distributors, the ability to access capital, the ability to access in this environment? And where do you think financial health for your distribution stands right now? Thank you.

Yes. Andrew, this is Lee. So I mean, as you know, we’ve got incredibly close relationships with all our distribution. And we have constant health checks with them, very current on receivables. Just very frank conversations on credit and we don’t have any issues looking through the channel right now to speak of.

That’s was helpful. Congratulations and thank you. And congratulations on a great quarter.

Thank you. Our next question comes from David Raso of Evercore ISI. Your line is open.

Hi, good morning, I’m trying to think of a setup exiting this calendar 2Q. I mean, it looks like the way the revenues are playing out the orders with your decrementals, it seems like your sort of wide range EPS for the quarter is like $1 to $1.50 or so. But typically, the next quarter, you have sales down mid-single digit. I would think just given what’s happening here, it should be the opposite. They should be improving from calendar 2Q to 3Q? But I’m trying to understand the setup. When you’re saying stabilization, are you getting any indication, is this – distributor inventories low enough that they’re restocking, OEMs were not stocking up before they’re shutdown, so they have a catch-up? I’m just trying to get a better sense of how comfortable can we be that the first quarter of fiscal 2021 can really leverage off that, say $1 to $1.50 range. I think people are just trying to get a sense of what’s the earnings power after what could be obviously difficult calendar 2Q?

So David, it’s Tom. So I probably won’t surprise you. I’m not going to comment on Q1, but I’ll give you maybe some thoughts on the other parts of your question. So when I make comments about being more stable, it’s the daily rate stabilizing for the last two weeks. And our distributors are smart business people and they’re conserving cash just like everybody else. So they are pretty much being very careful with what kind of things they’re going to do on inventory and they’re managing inventory very appropriately. I think our Q1 is going to have an advantage because our cost structure is going to be extremely lean going into Q1. What I can’t predict is what’s going to happen on the top line. I do think that we will progressively improve April to May, May to June. But I can’t guess necessarily what the year-over-year is going to be because the pandemic, you have to cycle the pandemic before you start to show really positive gains. But I think sequentially, you’re going to start to see improvement. The big question is just the rate of improvement. Is this an L? Is it an L where the bottom of the L starts to move up more aggressively than a traditional L? Is it a U? We don’t know. That’s why we’ve designed our ability to flex to that demand if it happens, but have a cost structure that can be there, if it doesn’t happen as well.

That was sort of the genesis of the question. So if there’s any reopening that can be stabilized at all, you would think your revenue sequentially would go against the historical norm. It won’t decline mid single, it should improve. But from your answer, it sounds like it’s more OEM right now than it is distributor. And to your point, I’m just trying to figure out the incrementals coming out because if it’s OEM over a distributor, you’d argue you’d rather have distributor. But to your point, you’re going to have cost-outs that should not automatically come back. Right? You should have some leaned out costs. But again, it’s more OE improving from here, stabilizing, let’s say, then I should think it’s the distribution. It’s more OE. Right?

Okay. So I get your question more, David. So I think you’ll see improvement – marked improvement across both channels, OE and distribution because those order rates that we showed you on that slide for April are pretty equally representative distribution and OEM, maybe slightly better in distribution, but they’re pretty much the same. So you’re going to see both of them come back. It won’t be like, hey, we’re just going to rebound in OEM and distribution stays the same. You’ll get both coming back.

Okay. That’s helpful. I appreciate it. And lastly, anything about how you’re viewing the world now, that changes how you feel about what leverage you want to come down to before? And I know it never was imminent anyway, but we used to talk kind of 12, 18 months. Have you rethought at all what you are comfortable with on leverage before you would lean back forward, be it M&A or repo?

David, it’s Tom again. So we would – we still feel strongly we want to get back down to that approximate 2.0 level on a gross debt to EBITDA. That was our feeling before the crisis, it’s still our feeling.

Okay. Thank you very much.

The next question comes from Nathan Jones of Stifel. Your line is open.

Good morning, everyone. Just a question on the decrementals first. You guys have some noise going on in the decremental margins with the acquisitions folding in. Is that 30% decremental that you’re targeting, including the acquisitions, excluding the acquisitions? How should we think about that?

Nathan, it’s Tom. That would be excluding the acquisitions, the legacy business. But I would just tell you, the two acquisitions are doing extremely well. And I would just want to make one quick comment in case there’s – people have more – might have more questions in acquisitions. Part of why you see the improvement in North America is our synergies on LORD have accelerated. We’ve gone from what we told you last quarter at $18 million in FY2020 to $30 million. And we’ve been able to accelerate our SG&A on LORD. And so we look for that – the decrementals on legacy, but we look at the two acquisitions. Both acquisitions, as you saw, are coming in at a really nice – LORD is significantly beating where we thought they’d be on EBITDA. They’re on approximately 27% EBITDA for Q3 and Exotic was in the mid-20s. And both of those businesses are executing the same kind of cost reductions and cash actions that the rest of the business is doing. So they will continue to be helpful. Their top line is holding up better than legacy Parker and our margins are better. So they will continue to help. But that decremental-like quote, it was on the legacy business.

Okay. And then on the cost out numbers, the $250 million to $300 million, it sounded like that was in place on April 1. Are you already at the run rate there? And then the $25 million to $30 million that’s structurally coming out of the aerospace business, how long does that take before that falls into your cost structure?

The numbers that are on that page are what we will feel in Q4. So that’s for a full quarter, you’ll feel it. And it’s more than just aerospace and the structural, there’s oil and gas, things we’re doing. And there’s things really across every group that we’re doing as well. But clearly, a lot of it is aerospace driven.

And then just one quick one on the Exotic synergies. You talked about the LORD synergies there. Does the – the large drop in the expectation for aerospace here reduce the expectation of the amount of synergies that you can get out of Exotic over the next year or two?

Yes, for Exotic, we’ve had a pretty minimal amount of synergy, if you remember, it’s $30 million. And we recognized that with material savings for Exotic, you’ve got long supply agreements, and they really weren’t going to start to kick in until year 2022 and 2023. And most of Exotic’s synergies were productivity and The Win Strategy, which we feel very good about. So the $50 million, the short answer is we feel good about that. That’s not changing. And I would just highlight again for Exotic, their top line in Q3 was still significantly better than legacy Parker. We’re clearly fortunate that over 60% of that business is military. And we’ve been able to pull in and accelerate our F135 work to kind of help cushion what’s happening on the commercial side. And so for Exotic to deliver mid-20 EBITDAs, given what’s going on, it’s just really fantastic performance by them.

Okay. Thanks for taking my questions.

Thank you. Your next question comes from Jamie Cook of Credit Suisse. Your line is open.

Good morning and nice quarter. I guess, two questions. Tom, you kept talking about the resilience of Exotic and LORD through the third quarter. Can you sort of talk about trends that you’re seeing in April for those businesses? And then my second question was with regards to the 30% decremental, I assume that’s specific to the fourth quarter. And my question is, if we’re in a prolonged sort of downturn, how confident are you with decremental margins because of some of the actions you’re taking seem like more short-term versus like salary cuts and stuff like that, versus long term? Thanks.

Okay. So let me start with the second part. So the 30% decremental in Q4, that will continue going forward. We’ll continue to do the things we have to do to flex the business to deliver that. And again, I’m saying approximate 30% regardless of what’s happening with the top line. I believe that this will eventually start to turn, so you had to be careful that you don’t do too many permanent structural actions and prevent your ability to respond. So we will watch that. We obviously won't let the temporary things go on forever because that would be unfair to people and we would then have to turn them into permanent. But we will look at that quarter-to-quarter and make those decisions as a team. But I think you can expect the detrimental and the resilience. Remember, the resilience you're seeing now is five years in the making. Its work we've been doing on – and I would say it's even before that. That stair steps on those margins happen because of all the actions we've done over the last 20 years. We've been building a more resilient business model for 20 years now. So this is why we're able to perform here. But specifically, you've seen the margins significantly increase the last five years and that you could point directly to Win Strategy 2.0 for that. The trends on – in April for LORD and Exotic. So I don't really want to go into too much detail on this. I would just say that LORD would be probably half as better than what you saw for legacy Parker, at least half better, I mean, less – half less bad. That's a way to say that in English. And I would say the same thing for – and even better for Exotic because Exotic is probably going to be able to hang in there at a high single-digit type of decline because of their very strong military business. And that's what's really helping that. We've been able to pull forward and our customers have approved this, the F135 work, and we just happened to be very fortunate and thank you to the Exotic team for having such a big bill of material on one of the premier military programs really in our history.

Okay. Thank you. I appreciate it.

Thanks, Jamie.

Thank you. Our next question comes from Nicole DeBlase of Deutsche Bank. Your line is open.

Yes, thank you. Good morning guys.

Good morning, Nicole.

So I just wanted to talk a little bit more about distributor imagery levels. If you could just comment on, do you think distributor inventories have rightsized for the current level of demand? Just trying to gauge how much restocking would be required as we come out of this and end-user demand increases?

Nicole, this is Lee. My sense is that inventories are in line with demand. They're not buying anything, they're conserving cash. So what I think you would see is a pull through on real demand through the channel back to Parker-Hannifin.

Okay. Got it. Thanks, Lee. That's helpful. And then on the leverage, is the expectation that you guys have more opportunity to continue paying down debt in the fourth quarter? Or is the next tranche of that likely to be coming in 2021?

Yes, Nicole, this is Cathy. We'll watch how things are going through the fourth quarter, but if you look at our expectation for cash flow, we will have some flexibility I believe to pay down additional debt during the quarter. And if we're comfortable going into next year in the position that we are then I think we will definitely do that.

Got it. Thanks, Cathy. I'll pass it on.

Thanks, Nicole.

Thank you. Our next question comes from Ann Duignan of JP Morgan. Your line is open.

Hi, thanks. This is Bill McMullan on behalf of Ann. Her question is, can you provide a little bit more of an update of a lower discount rate environment and weaker equity returns on your pension plan funding?

Sure. This is Cathy. The discount rate that we're currently booking expense to was set last June and we set it once a year at our June 30 timing, and we're at a discount rate of 3.28%. As we disclose in our queue, if the rate drops 50 basis points, that'll have an impact of about $15 million to our expense. We're watching it. We in as of the June rating last year, we had no required pension contribution due until fiscal year 2023. As the rate will likely drop and will have some impact on the need to fund, we don't anticipate it being any sooner than fiscal year 2022. And so we have a good year plus before we have any and that repayment we think would be a pretty minimal amount required. So no funding requirements we don't think for the rest of this year and fiscal 2021.

Great. Thank you. That's all I have. I’ll pass it on.

Thank you.

Thank you. Our next question comes from Steve Volkmann of Jefferies. Your line is open.

Great. Maybe I could do a couple of longer-term questions here, and I'll just sort of take them together. I'm wondering, it's probably too early to answer a lot of it, but I'm wondering if there's any change in your long-term margin expectation as you have laid out recently? And second to that, given that things look like they could be a little bit different going forward for some of the end markets like you mentioned, aerospace and oil and gas. Does that potentially free up some businesses that might be candidates for divestiture going forward? Thanks.

Steve, its Tom. So the margin targets that we gave you at Investor Day are still the targets and we're not moving off of those. We're still what we're striving to get to for FY 2023, and we still think we can do that. From the divestiture side, oil and gas and aerospace are still great businesses. And we are able to perform well in those end markets. And we use all eight of the technologies into those end markets. So they meet all the performance criteria to stay part of the team and we'll get through this near term challenges and we're going to reshape those businesses to win in this new market. But these are really strong businesses for us, have all the right kind of returns. So yes, they will stay part of the portfolio.

Thank you. Good luck.

Thanks, Steve.

Thank you. Our next question comes from Julian Mitchell of Barclays. Your line is open.

Hi. Good afternoon. Maybe just a quick question around aerospace again. So you've taken some fixed costs measures in that business. So the assumption understandably is for a prolonged downturn. Maybe just help us understand what you're thinking about aerospace aftermarket within the commercial side specifically? And is it fair to assume similar to peers that decremental margins on that aftermarket decline will be very, very severe? And then sticking to aerospace, one of the large defense contractors talked about some production choppiness for the F-35 program. Just wondered if you'd seen any of that or expecting any type of slow down or disruption on that program on the military side? Thank you.

Okay. Julian, its Tom. I'll start with that one. On the F-35, no, we've not seen any choppiness. As a matter of fact we are accelerating our deliveries. So everything has been fine on that. And then the commercial MRO, you're right. As you might expect, that's feeling a very sharp decline. It's probably in the greater than 50% type of decline area. And that will take a while to heal. You'll need the public to want to get back and airplanes. But they will if you think about it over time here, I think the leisure traveler wants the right kind of safeguard and comfort are there. Will come back, and who knows how long that takes, but they will come back. And the business traveler will come back, but probably not the levels that you've seen because we've all learned that there's a lot of digital productivity that you could do. And that's why we're designing structure of aerospace to be able to win because it might take a little while for this to heal. Nobody fully knows, but I think you'll see the leisure side heal faster. The business travel will come back – will probably not come back to 100%. But then you'll have the demographics that were there before is that aerospace tends to follow GDP historically and tends to follow GDP at 2x GDP. So once you get through this kind of reshaping of aerospace, it will start to then follow that kind of growth rate, which is a nice growth rate, and we will continue to have this business perform well. We will do the things to make aerospace as creative business as it is now, be great in a tough environment.

Great. Thank you.

Thanks, Julian. Latif, we have time for one more question.

Yes, ma'am. Next question comes from Andy Casey with Wells Fargo Securities. Your line is open.

Thanks so much, and hope everybody is well.

Hey, Andy.

I just was looking for a little bit more color on the – what you may be seeing on the distribution inventory actions. Going into the quarter, it looked like those might be stabilizing a little bit. Clearly, April, they probably fell off. But is the pattern kind of stabilization and then reacceleration?

Andy, I think the way I would characterize it, you're right. They were declining to stabilizing in March. I think the second half of March, there was – the channel saw what was coming, there was a conservation of cash, really not buying anything. We saw a direct impact through our divisions from distribution. I would tell you in April, as Tom characterized, they're down about as much as the OEMs are down right now. So I think any kind of rebound we get in demand will facilitate a rebound in demand directly to our divisions.

Thanks, Lee. And then should we kind of look at the distribution in terms of regions as similar to what Tom had laid out in terms of China getting a little bit better, down less, maybe getting better? And then the other regions, still down?

Yes. I think the way to think about distribution is really the reemergence of the manufacturing base. So a lot of our distribution is dealing with MRO activities inside the manufacturing space. And when they're closed, they're not buying anything. So we've seen a rebound in distribution in Asia, China specifically, Europe has been incredibly soft along with North America and Latin America.

Okay. Thank you very much.

Okay. Thanks, Andy. This concludes our Q&A session and the earnings call. Robin and Jeff will be happy to take your calls should you have any further questions. Thank you for joining us today. Stay safe and enjoy the rest of your day.

Ladies and gentlemen, that concludes today's conference call. Thank you for participating. You may now disconnect.