Good morning. My name is Angie, and I will be your conference operator today. At this time, I would like to welcome everyone to Pentair's Q1 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Jim Lucas. Please go ahead, sir.

Thanks, Angie, and welcome to Pentair's first quarter 2018 earnings conference call. We're glad you could join us. I'm Jim Lucas, Vice President of Investor Relations and Treasury. And with me today is Randy Hogan, our Chairman and Chief Executive Officer; John Stauch, our Chief Financial Officer and future President and Chief Executive Officer and Mark Borin, our future Chief Financial Officer. On today's call, we will provide details on our first quarter 2018 performance, as well as our second quarter and full-year 2018 outlook, as outlined in this morning's press release. There will be a second conference call this morning immediately following this one to discuss the Electrical segment, first quarter performance and second quarter and full year outlook for nVent. There is a separate dialling required for that call. Before we begin, let me remind you that any statements made about the Company's anticipated financial results are forward-looking statements subject to future risks and uncertainties, such as the risks outlined in Pentair's most recent 10-Q and today's press release. Forward-looking statements included herein are made as of today and the Company undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances. Actual results could differ materially from anticipated results. Today's webcast is accompanied by a presentation which can be found in the Investors section of Pentair's website. We will reference these slides throughout our prepared remarks. Any references to non-GAAP financials are reconciled in the appendix of the presentation. We will be sure to reserve time for questions and answers after our prepared remarks. I will now turn the call over to Randy.

Thanks, Jim. And good morning, everyone. We’re very pleased to report that Pentair started 2018 on a very positive note with solid core sales growth in both of our reported segments, Water and Electrical, and also strong segment income and adjusted EPS growth. The next two slides are standard presentations reported results in the balance sheet. But given the expected imminent separation of the Water and Electrical businesses, we wanted to concentrate on this particular call on a new Pentair where the water business excluding electrical. Before I turn the call over to John and Mark to discuss the first quarter water results in the outlook for the remainder of 2018 for the new Pentair, I wanted to provide an update on the planned separation of electrical for nVent. As you may have seen earlier this week, nVent began to trade on a when issued basis. nVent has its management team and board in place and there will be a separate call following this one to discuss the results and outlook as Jim just said. This is the last earnings call for Pentair as it is constructed today. It's also my last earnings call. For over half a century Pentair has gone through many changes and the results have been stronger company with successful long-term track record. While our history has been around transformation and create shareholder value, we're excited for Pentair’s next chapter, as we create two industry leading, pure-play companies in Water and Electrical. I believe the excellent performance in the first quarter demonstrate the quality of both these businesses. For the consolidated company overall sales grew 7% and were up 4% on a core basis. Segment income of $211 million represented 13% growth and adjusted EPS of $0.88 per share was up 35% versus the comparable period a year ago and was a full nickel [ph] above the high end of our first quarter guidance. Thus, both companies have a strong foundation from which to build. And I feel confident that both companies have strong leadership in place to drive more shareholder value and they focus on their respective strategies. It's been my honor and privilege to lead Pentair for the last 17 years and I feel that Pentair and nVent will continue to be successful under John and Beth’s leadership. I'll turn the call over to John, who will focus on first quarter Water segment performance and the outlook for the full year for the new Pentair.

Thank you, Randy. Not only for your 17 years or 68 quarters of distinguished leadership as CEO, but also thank you for the opportunity to lead the new Pentair. Please turn to slide number eight, titled New Pentair Executive Summary. As a reminder, Mark and I will be discussing the results, outlook and strategies for the new Pentair or the Water business, excluding Electrical. We reported core sales growth of 4% with all three of our businesses contributing. Return on sales showed solid expansion of 180 basis points to 16%. For the full year for the new Pentair, we have narrowed our guidance to core sales growth of 3% to 4%, ROS expansion of approximately 50 basis points to 18% and adjusted EPS is now expected to be $2.25 to $2.30 as our strong start to the year gives us confidence to raise the lower end of the range. I would now like to turn the call over to Mark to discuss the first quarter results and update you on our full year 2018 outlook.

Thank you, John. Please turn to slide nine, labelled Q1 ‘18 New Pentair Performance. Core sales grew 4% with Aquatic Systems leading the way with 8% percent growth Filtration Solutions core sales increased 4% and Flow Technologies core sales grew 2%. Segment income was up 21%. And as John mentioned previously, return on sales expanded to 180 [ph] basis points to 16%. Please turn to slide 10, labelled Q1 ‘18 New Pentair Business Performance. We wanted to give some additional color on how all three of our business has performed in the quarter. We expect that these three businesses will be our reporting segments after the separation. Aquatic Systems despite a tough year-over-year comparison delivered 8% sales growth, driven by strong demand for existing and new products in addition to continued dealer gains Filtration Solutions saw 9% overall sales growth and core sales grew 4%. The strength within the core residential and commercial offerings, as well as China, but equally important we saw stabilization in our industrial businesses. Segment income grew dramatically and ROS expanded significantly as we improved in many of our cost actions last year to remove complexity in the business are reading through. Flow Technologies grew its top line 5% with core sales up 2%. This marked the second consecutive quarter of core growth for Flow Technologies. Segment income grew 17% and ROS expanded over 150 basis points to 16.1%. Specialty sales, principally precision spray enjoyed strong growth in the quarter. We also saw continued gains in North America and further stabilization in our long cycle backlog. Please turn to slide 11, labelled 2018 New Pentair Outlook. Given the solid start to the year, we wanted to update the revenue and segment income walks that we provided in our Investor Day in February. We raised our core…

Thank you, Mark. Please turn to slide number 14, titled The New Pentair Strategy Summary. This is slide that we introduced at our Investor Day in February that was designed to frame our vision for the new Pentair and prioritize our path to achieving our vision. As you can see on the left hand side of the page, we want to be the leading Residential & Commercial water treatment company. While we are organized around three businesses that we expect to be our reporting segments after the planned separation, roughly 80% of our sales of the Residential & Commercial verticals. From a geographical standpoint, we are more weighted toward the U.S. today, but we see opportunities in other parts of the world, particularly China and Southeast Asia. The middle section of the page starts with who we plan to be, a pure-play water company with healthy profitability and strong cash flow, and with annual sales of approximately $3 billion. The next areas are focused strategies, which I'll expand on in the next slide, but want to spend a moment discussing. Historically we have sometimes been distracted by doing too many things and trying to be everything to everybody. We believe focus is the key to driving long-term sustainable and predictable growth. While all of our businesses have a purpose, we have identified three key areas to focus on, advanced pool growth, accelerate residential & commercial filtration and expand in China & Southeast Asia. We intend to accelerate investments and efforts in both digital transformation and technology innovation, focused on the end consumer to accelerate these three prioritized growth strategies. Our foundation of win right values and our Pentair integrated management system gives us the tools to successfully and continuously deliver for our customers and our shareholders. The right hand side…

Certainly. [Operator Instructions] Your first question comes from the line of Steve Tusa with JPMorgan.

Hey, guys. Good morning.

Morning, Steve.

Congrats on getting through the - getting to this point of the spin. Just on the free cash, you know anything in there that was related to the separation? I mean, it was - you know, it's usually - first quarter is usually weak, but it was definitely a little weaker than I was expecting?

Yes, Steve. Certainly there is some in there in the first quarter related to separation and then you know, comparing to last year, we were down a little bit, but really when you look at it historically around down $150 million - is a little bit more of the norm. So last year was a little bit better than normal this year, is a little bit more in line with historical levels. And you know, we're not seeing any major concern through the remainder of the year with respect to hitting the target of 100% of adjusted net income.

How much in there was from the spend from - I notice you know, working capital is particularly weak, what was in there from the spend exactly. Can you quantify that?

Yes. $20 million, $30 million probably now and then there'll be more of that, that will have additional separation related cash outflows in the second quarter as well.

How much?

Another $20 million to $30 million.

Okay. On the Ops, on price costs, you talked about a little more inflationary pressure. Can you maybe talk about what you're doing to perhaps offset that and you know, how the channel is saving [ph]

We've got a strong funnel of material productivity actions that the team's been building and there's a high level of confidence that through the remainder of the year, through the productivity actions we'll be able to offset that increased inflation. So we still view productivity and price offsetting inflation…

Okay. And then one…

If you look at water quality real quickly, on the full year you'll notice that inflation is slightly higher than when we gave our guidance in February. And also though embedded in there productivity is a little better and then just assuming the productivity column and we might have a little contingency as we work through the rest of the year.

And then John, I think you guys bought back some stock in the quarter, was that you know, how do we think about the next kind of nine months as far as your capital allocation priorities. And then also interest is a little bit higher and anything going on there in that, that's it?

Yeah. So we bought 150 back in the quarter and we think that was prudent. And you know, as we look forward I mean, as we mentioned, first of all we want to drive the cash and we do think we're a strong cash generator and then we want to continue to work on organic growth and maintain investment grade. And then really choosing wisely between you know, incrementally more buybacks or doing tuck-in acquisitions and that's how we think we can drive value and our capital is precious and we want to use it wisely.

And Steve, on the on the interest question, we did see - for the full year we've increased the estimate for interest expense, think of that is higher interest rates. The timing of when we'll use or be able to use the dividend back from nVent in the separation to pay down our existing debt and then its really just you know, the imprecision in our original estimate as we were trying to balance all the moving pieces as we were heading into separation.

Great. Thanks a lot guys.

Thanks, Steve.

Your next question comes from the line of Jeff Hammond with KeyBanc Capital Markets.

Hey, good morning, guys.

Morning, Jeff.

So just on capital allocation, can you one, just talk - I mean, you mentioned investment grade, but what you think the right leverage profile is for the company and how fast you think you get there through bolt-on M&A and buy backs? And just on the M&A the pipeline, can you just talk about how you’ve been building the funnel, where the opportunities lie and kind of how those align with what you talked about, John on the focused strategies? Thanks.

Yeah. I mean, it is long-term, I mean you know, 2 to 2.5 times leverage is you know, probably the appropriate place to be, but we're no rush to get there. We’ll be slightly under levered. And I think we want to continue to focus on organic growth capabilities and preserve and manage our potential funnel focused on areas that have historically organically grown, which you know for us is our Aquatic Systems business. And you know just continue to add value where we can. So I think - you know, I think for modeling purposes that's a good place to be, but I wouldn't certainly think we feel any urgency to get immediately up to that level. Right now I think we're really encouraged by the work we're doing to build the growth culture internally. These three strategic priorities have really got the focus of the organization and we're getting good tack and execution plans are below them and I think we're all excited about the opportunity that we can drive an organic growth.

Okay. And then just back on price cost, can you just talk about any - you know, what price actions you've taken, what you've announced, maybe across the different businesses to kind of get to that one point of price for the year? Thanks.

Jeff. I mean, the price actions that we've taken so far this year, nothing out of the ordinary. So it would be our normal activities that we would do heading into the season and I mean, have not done anything unusual that those actions have been taken and really nothing planned incrementally going forward. I mean, just to the inflation that you see there is a combination of wage inflation and also material inflation and you know, wage inflation was a little larger this year and the material inflation you know, we're working on to offset that with productivity as Mark mentioned earlier and you know, right now we're not overly concerned about it as we look forward.

Great. Thanks, guys.

Thank you.

Your next question comes from the line of Scott Graham with BMO Capital Markets.

Good morning, all.

Hey, Scott.

So what does price cost, if we look at it plus one and then minus two point for the first quarter. What are those numbers look like based on today's commodity prices? Because I assume you know your labor inflation. What are those numbers look like on an exit rate basis in ’18?

I think you know, we mentioned this that the total full year ‘18 is out there, but it is a $58 million, I think…

The inflation for the year…

Inflation for the year and think of that is - roughly half of that is related to labor and the other half of it roughly material and that's what we think and that includes the current work and what we're seeing in all the commodity prices Scott.

Right. And I do see that, I guess I was just sort of wondering we had a pretty heavy dose of steel inflation in the second half of the first quarter. And I know you want to do your best here to kind of make sure that everything looks square versus what you've talked about previously. But I guess I was just assuming that price would be a little bit better than that on a full year basis or certainly as we exit the year end, it sounds like you're not saying that?

That's true on price. And the steel side you know, really when you look at our overall purchase steel is not that significant of a component of our overall spend. And so the steel inflation that you know, maybe you've seen on the other side of the business, we haven't seen that impact us in the same way.

Got you. Fair enough. The other question I had is about you know, tariffs, obviously a lot going on both in the headlines and being executed to U.S. and China or maybe I should say U.S. versus China, even Russia a little bit here. Did you talk about - you know, have you analyzed how this could affect your business going forward?

We have looked at it and we’ve really looked at it really in the two components, so the initial announcement focused on steel and aluminum. And as I mentioned earlier that that has a very limited impact on us for the year, so not even something that is worth mentioning. Kind of the second round, the more recent round of announced tariffs. The team has been diligently working to evaluate what that looks like for us. As I'm sure you know there's a host of product codes that have been announced are being impacted, but at the same time you know, this is – it’s evolving every day and there's a lot of ongoing review and comment that's coming in. So it's really too early to be able to tell you know, what that's going to look like and how that's going to impact us. But rest assured that the team is on top of it and looking closely to understand what the implications are, as we get closer to a timeline where it's finalized and it's more clear what it may or may not look like when it's actually put in place and we'll be able to talk a little bit more specifically about how we think that might impact us.

Understood. Thank you and nice quarter, amid a lot of moving parts in the quarter. Thanks.

Thank you. Appreciate that.

Your next question comes from the line of Deane Dray with RBC Capital Markets.

Thank you. Good morning, everyone.

Morning, Deane.

Hey, to just start off, Randy congrats. I remember the first transformational move you made way back when you pivoted Pentair out of the woodworking tools business and into water. So the company and you have come a long way.

Thank you.

And then a question for John, and we saw the slide on your Investor Day, on page 15, the new Pentair Focused Strategies and look it makes a lot of sense to us to have you go down the path of your biggest strengths in Commercial & Residential and you said 80% of the business already are in those focus areas, but it still begs the question about that other 20%. And I'm not sure, you may not be in a position to disclose exactly how you're going to approach this. But just share with us your thinking, what's on the table here, because you had some really strong brand and they are valued and maybe a lot of people interested in them, but maybe you want to keep them in some sort of a run-off for a no-core segment. But just what's the thinking there in terms of how that value might get unlocked?

And so half of that - half of that you could classify as more industrial facing opportunities, which is our food and beverage and our ex [ph] flow membranes play in there, Deane, and they're very important not only to our short term value creation, but also into our long-term value creation and coming back into the residential, commercial markets. Because I think you know that technology starts with the applications of the municipal side and the industrial side and then usually get scaled and gets then some traction in the commercial and residential, so very key. The other half of that would be our municipal products, primarily our pumps. And again you know, technology and the partnerships we have with different municipalities and the APCs help create some value and translate in the rest of the business. So right now it's really more about, they’re important businesses and they need to continue to grow and continue to drive cash. But the incremental investment will be geared to the 80%. That's what our messaging is both externally and internally. And I think it's resonating.

Got it. And. Just to clarify, would those be in separate segments or separate business lines that we might have some clarity as to how they're doing?

They're in Flow Technologies and they'll also be in the segment called Filtration Solutions. And we'll be sharing that on an annual basis kind of what are you know, percentages of revenue are and sure as you ask us we'll be able to tell you how those market segments are doing.

Got it. And then a question on Aquatics. This is an important quarter for you always because there is elements, at times where there's an early buy. You highlighted new products. What kind of expectation are you looking for contribution from new products and is there anything baked in for all the rebuilding and replacement from the hurricane damage in Texas and Florida. Is any of that included in your assumptions?

Yes, that's included and you know, all in, we are having new product introductions this year like we usually do. It's all of that is included in the expectations for the year Deane. And you know, as you mentioned, Q2 is a very important quarter, right now all indications are it's going to be another great season and we're going to participate in that.

Was there any early buy that was a factor in the first quarter or is that comparable to last year?

Nothing unusual from an early buy perspective in the first quarter.

Excellent. Thank you.

Thank you, Deane.

Your next question comes from the line of Mike Halloran with Baird.

Morning, everyone.

Good morning, Mike.

So just on the filtration and the flow tech side, two questions for both actually. So one, top line was pretty healthy on both sides. You know, obviously just got the color on what that looked like last year with the backdated information you guys gave us. But maybe talk a little bit about what the sustainability of those healthy trends look like, anything that you thought was unique to the quarter? Because we're certainly encouraging to see the revenue start coming through there?

Sure. Really I think the story in both places is stabilization, as I as I talked about a little bit. So both businesses continue to focus on the things that will improve and reduce some of the variability and stabilize both topline and bottom line, removing and reducing the complexity in the businesses and focusing on the areas where we can profitably grow. So we're cautiously optimistic that in both cases we're going to see that those trends continue and see the return to topline growth and see improve profitability.

So that the second question for both is just on the profitability side, very healthy year-over-year gains in both segment. The expectations for the year seem pretty healthy as well. Any way you can parse out what directionally what's internally driven, what’s price cost, what volume related just to help understand what the sustainability looks like and then also understand what the drivers are, specifically…

Yeah. As Mark mentioned, there's a big mix benefit here. I mean, when we - when we go after the large projects in filtration which have been a nuisance to you guys, as well as us, they don't bring any real value to the bottom line. So by not growing those areas we actually do get a mix pick up like. The second one inflow, I mean, the reducing of the complexity as well, I mean, we had a lot of under scaled product lines globally and by exiting those and you know, optimizing the portfolio we're seeing the benefit of what the residential, commercial drop-throughs are. So I think it's a focused portfolio on both around the things that we really honestly think we can differentiate against competition and differentiate our consumer’s eyes. And then we're benefiting from that growth.

Make sense. And then last one here, just making sure I understand the impact from the divested businesses that you guys talked about or the product launch shutdowns. What's the segment income impact? I'm guessing relatively negligible otherwise you would have pointed it out, but just curious and how that flows through?

That's right. The segment income impact is small, so it really did reference back to what John just said, it's part of a focused optimization strategy to really exit the things that are - that are unprofitable and we don't believe we can be successful and so that's why we didn't call it out separately.

Make sense. Thanks, guys. Appreciate it. Congratulations.

Thank you, Mike.

Your next question comes from the line of Steven Winoker with UBS.

Thanks. Good morning. Congrats on the separation guys.

Thanks. We’re getting there.

You're always there. So listen, just first on flow tech, why 1% to 2% on the guide given you had the uptick to 2% I mean, maybe it's just so close. I shouldn't worry about it. But is this any kind of deceleration though for the rest of the year. I looked at the comp, I don’t think that really explained it, just little color for that, just conservatism?

Yeah, there's no there's no messaging there, its no - there's no deceleration. It's just as I said earlier cautiously optimistic and you know, trying to stay, not get too far out over our skis and we'll see how the rest of the year plays out before we call it a success.

And you mentioned long cycle backlog improving, a little color there would be helpful?

The point there is that after years of kind of bouncing around and declining, it's stabilized, we're seeing a relatively strong order rates and the backlog stabilizing as we look forward.

Okay. And restructuring $6 million in the quarter I think, but no more for the rest of the year. I wasn't sure if that was total anyway, but just maybe a little perspective you know, given kind of what you're seeing, given the separation all these other things going on that you think there's no more restructuring for the rest of the year or is this just kind of you know, a little color there would be helpful?

Sure. So think of the restructuring is all being tied into the optimisations and some of those the product lines of business exits that John referenced earlier. And so while we didn't necessarily indicate that we've guided to any more restructuring in Q2, I do anticipate there will be some in Q2. But what we're really focused on - and that restructuring again it's associated with the separation and the activities around setting up the two separate businesses to be successful going forward. So I see some more in Q2 but then after that we can expect that to taper off and not anticipating anything in the second half of the year.

Okay. And John, one for you on Aquatics, you know, another great quarter in terms of growth here from the business, but if you – you know, a lot of other businesses who have focused tended to kind of under-invest in various pieces and finally find these great opportunities when they start investing again. Your point around focus here in advancing growth in aftermarket and automation, I mean, were there as great as it's been in terms of performance as much as this kind of contributed to helping the other businesses when they've had troubles for recent years. Have there been areas where you would have liked to have seen more dollars flow that are kind of pent up and now you're getting to do that. Or is this just a case of normal course of focusing growth?

Well, I think, first of all the former, right. I mean, we have our best business that often is - unfortunately became the cash cow for funding some of those non-prioritized areas of business that we’re talking about. So is allowing them to invest where they think the opportunities are. On the automation side, we are - we have a great product on the high end of the market, but not everybody can afford the high end automation products. So it's about serving the mid-market and the entry level of automation and we think we've got a great product there, that's going to be introduced in the short run. And then also making sure we got a high efficiency heater, which we just launched this year. So both the technology and a new product introduction, as you know those things need to be nurtured in the early quarters of launch and we also think that we have to build our brand at the consumer level, we're really well-known at the dealer level. And we like to market ourselves direct to the consumer to make sure we're taking advantage of all the different aftermarket opportunities that we would have.

Okay, great. I’ll let it go. Thanks.

Thanks, Steve.

Your next question comes from the line of Nathan Jones with Stifel.

Good morning, everyone.

Morning, Nathan.

The question on operating leverage and so I'm looking at slide nine here, you got $24 million of volume growth and then $20 million of income growth from growth price acquisitions. So if I knock [ph] the $5 million of price out, there you've got $58 million on $24 million of volume or incrementals that are in the low 60s. Is that the right way to think about it? Just on volume growth how much did mix impact that and how should we be thinking about that kind of incremental over the longer term?

I think the long-term incremental is closer to 45 days and all in. And I remind you guys that you know, we had a tough project challenge last year and we call that out last year and that was a help this year. But beyond that you know, 45-ish to 50 that's our drop-throughs. And then how do we invest wisely goes into the productivity bucket.

Okay. That's helpful. Then on the product line exits business divestitures. How much of that is - I'm just getting out of these businesses - I can actually sell this for some cash. Is there going to be much of cash flow back to you from here or is this just exiting markets and can you give us any detail on what kind of marketing products –product launch that you're going to be exiting?

Sure. It's really the focus is getting out of product lines or markets that are underperforming. So I wouldn't anticipate that there's any significant cash that comes in. We're certainly not giving the businesses away by any means. But you know, given the nature of the businesses and the size it's not it's not something that we're seen as a big uptick in cash. For us it's small geographies that we don't feel that we can - that we've got the scale to be able to be competitive, so exiting businesses in Brazil in Russia in South Africa, places like that and then small product line, product line in Australia, a few other smaller product lines, things that we wouldn't have talked about before. But think of them as distractions that you know, pulled resources away from the focus on what are the priorities in the areas that we think we can really double down on and do better. And so the intent was to get those behind us all again as part of this process of separating and standing up to new businesses and creating a water business that we feel can be successful going forward. So - and those things are all underway and we anticipate that they'll be completed over the course of the next couple of quarters.

Okay. That's helpful. Thanks very much.

Your next question comes from the line of Brian Drab with William Blair.

Hi. Good morning. Brian Drab from William Blair. Two questions. One, basically the same question one for the Aquatic segment and then same question for Filtration. The growth in Aquatic obviously off to a very strong start, you're forecasting you know, its bit about 8% growth again 7.5% growth for the second quarter within 5.5 for the year. So you know, it implies a deceleration from 8% growth in the first half to about 3% in the second half. So I wonder if you could talk about why that would be?

No real reason. I mean, if we continue trends it will be better, but we’ve got to see how Q2 comes out and then we'll adjust accordingly as the year unfolds.

Okay. So sort of a similar mentality to what you're forecasting for the flow tech, it seems like the theme here is that there is some conservatism in the in the second half guide?

Well more we have to see to make a determination.

Okay. And then on the filtration side you know, just doing that same exercise looking at what you know first quarter results, second quarter guide, here you’re going from 4% growth down to 1.5 and then you know, if you take the full year guide into account then it reaccelerates back to you know 3 plus in the second half of the year. You know what's happening in the second quarter. And then you know, what drives that rebound in the second half of the year? Thanks.

Right now it's just year-over-year comparisons in Q2, Q3 and Q4. We generally took the Q1 upside and moved it the year and we haven't adjusted anything yet in Q2, Q3 and Q4 until we see how the seasonality unfolds in Q2.

Okay. John, than you very much.

Thank you.

Your next question comes from the line of Julian Mitchell with Barclays.

Hey. Good morning, guys, Its Ronnie Weiss on for Julian.

Hi, Ronnie.

Of the $25 million of growth investment, how much of that came in Q1 and then can you walk through how that trends through the year and what the payback timing on that investment spend looks like as we go forward here?

Yeah, if you were to put it linear by quarter, we spent a couple million less than that linearization in Q1 and it ramps up as we head into Q3 and Q4.

Okay, great. And then going back to the inflation point, I was wondering if you could quantify or bucket out you know, what came from raw mats, what came from labor inflation, maybe there were some great inflation there as well. And you know, how those three buckets look for the year?

Think about it by half - half of that inflation is labor, half is material. No real significant change in freight. And then think of that consistently throughout the year.

Okay. That’s all I had. Thanks, guys.

Thank you.

Your next question comes from the line of Robert Barry with Susquehanna.

Hey, guys. Good morning.

Hey, Robert.

Morning.

Just curious another take on the tariff question about what you're seeing in the ag end market any impacts there from kind of uncertainty around tariffs?

Yes, so as Mark mentioned, I mean, there's tariff one which is steel aluminum, is really nominal impact to us for the year and that's focused into this forecast or factoring in this forecast. As far as the next round of tariffs as Mark mentioned, we're grinding through all the different codes and the products and you know, trying to explore what the impact to us would be and the actions would be and we're not prepared to share anything on that at this moment.

I think, the thinking of it from a market perspective, we have a global ag business, so if the market moves from one place to the to the other the business can pick that up, regardless of whether it's here or in other geographies.

Got it. You also had called out precision spray. Can you just remind us how big that business is and what in particular caused it to outperform this quarter?

We've got about a $100 million of revenue annually in which we create precisions spray. We have an OEM relationship where we've been really driving our nozzles onto the OEM side and then we also are getting good aftermarket lift in that business. So it's a share and creating new products and those new products create value to the farmers.

Got it. And then just finally the divestitures, is that having a material impact on one mix in helping the ROS this year or will it?

As John talked about that, that's part of the reason why we've mixed up is because we’ve exited through divestitures of product line exit, so some of the lower - lower performing parts of the business.

The 10 basis point change since the Analyst Day is that…

Basically think of really no income impact on the revenue that is highlighted there.

Got it. Got it. Okay. Thank you.

Our final question comes from the line of Walter Liptak with Seaport Global.

Hi, thanks. Good morning. Congratulations, guys.

Thanks.

I want to ask about, you know, on the growth strategies slide 15, should we think about you know you've got more in - more focused programs in filtrations, I mean, you've got more spending on new products going on there are these you know, somehow weighted by segment?

I think in the filtration side take that as a global business and a global opportunity, so yes there is more innovation and technology required there. There's also today we don't go to the consumer with our brand. So there's some brand investment required. So I think you're thinking about it correctly.

Okay, great. And then if you can just refreshes on timing of when you think you'll get benefits from the incremental spending and how will that look in terms of growth rates?

I think, we’ll start to get benefits here in the second half. But I mean, will - it will be generally rounding error as you think about differentiated growth and we hope to build over time to getting a predictable and consistent incremental 1% to 2% of differentiated growth over the long haul from these three activities.

Okay, great. And then just a couple of kind of housekeeping things. What's your expectation for R&D spend this year and corporate expense?

$55 million for corporate and roughly 3% of sales for R&D.

Got it. Thank you.

Thank you. Randy Hogan Okay. Thank you for joining us today and I hope you have heard our excitement for the new Pentair that is expected to be completed by April 30th. As a pure-play water company we believe we'll be well positioned to benefit from strong secular trends. We are driven by the Pentair integrated management system and we have a proven and capable management team in place. One of the things we like most about our portfolio of businesses is our large and installed base. This allows us an opportunity to drive differentiated offerings for our customers across all of our businesses. Finally, we have a strong capital structure. Our free cash flow generation is robust. We plan to continue to be disciplined with our precious capital. Thank you for your continued interest. Angie you can conclude the call.

Certainly. Thank you for participating in today's conference call. You may now disconnect your lines at this time.