Pool Corporation (POOL) Q2 2016 Earnings Report, Transcript and Summary

Hello and welcome to the Pool Corporation Second Quarter 2016 Conference Call and Webcast. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mr. Mark Joslin, Senior Vice President and Chief Financial Officer. Please go ahead, sir. Mark W. Joslin - Chief Financial Officer & Senior Vice President: Thank you, operator. Good morning, everyone, and welcome to our Q2 2016 earnings call. I'd like to remind our listeners that our discussion, comments, and responses to questions today may include forward-looking statements, including management's outlook for 2016 and future periods. Actual results may differ materially from those discussed today. Information regarding the factors and variables that could cause actual results to differ materially from projected results is discussed in our 10-K. Now, I'll turn the call over to our President and CEO, Manny Perez de la Mesa. Manny? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Thank you, Mark, and good morning to everyone on the call. Our team managed to navigate stops and starts of the season to realize 21% earnings per share growth year-to-date and 13% earnings per share growth in the quarter. While generally favorable industry conditions contributed to our results, it is our execution derived from the commitment of our people that make it all happen. Looking at sales, our domestic blue base business sales were up 8.6% year-to-date, including an increase of 5.1% in the quarter. The lower second quarter sales growth was related to the early start of the season as communicated last quarter with our sales as projected in the second quarter. We believe that we continued to grow market share, especially in targeted product categories, like building materials and commercial, consistent with our history. Building materials realized 11.6% sales growth year-to-date and 9.4% in the quarter. We continue to gain share with building materials as well as expand the market working in conjunction with our customers and our suppliers. Equipment sales increased 11% year-to-date and 8.1% in the quarter reflecting both the gradual recovery of replacement activity and an improved mix with higher-priced, more energy-efficient products. Commercial product sales were up 18.4% year-to-date and 17.9% in the quarter, as we continue to capture share in this product category. Base business retail product sales increased 7% year-to-date and 3% in the quarter reflecting our acceleration of early buy shipments in the first quarter. Within retail, chemicals, by far the largest product category sold in the retail channel, our sales were up 6% year-to-date, which is greater than the industry as we, together with our customers, continue to gain market share. Separately, we estimate that industry-wide Internet retail sales were up 10% to 12% year-to-date maintaining the trend of the past five years to seven years with sales growth a bit greater than storefront retail but with growth not as significant as was taking place 10 years to 15 years ago. An estimated 5% of the domestic blue industry activity is via the Internet channel. Staying within the blue business, our international sales were up 9.9% in U.S. dollars year-to-date and 9.7% in U.S. dollars in the quarter with a modest adverse currency impact as we continue to grow share. Turning to our green business, our base business sales were up 6.1% year-to-date and up 9.6% in the quarter. Here the results are due to the slower start to the year in the Western markets where our business is weighted with a seasonal recovery in the second quarter. In addition to our base business, we also closed on the acquisition of a regional irrigation distributor early in the quarter that contributed $8 million in sales and $1 million in operating profit. Our gross margins were up slightly due to improved purchasing and logistics execution. Base business expenses were up 5.6% in the quarter and 4.2% year-to-date due primarily to volume and performance-based costs. Our base business operating margins increased by 90 bps to 12% year-to-date and by 35 bps to 15.5% in the quarter. Our year-to-date base business contribution margin on sales was 22.6% and 72.3% on gross profits. In the second half, we expect to see sales growth more like the second quarter on a base business level together with comparable gross margins and the usual disciplined expense controls. Altogether, we should have another year of solid operating profit and earnings per share growth as reflected in our updated annual earnings per share guidance of $3.30 to $3.45 per diluted share. Our results and our success are founded on the commitment of our people. It is their dedication, their engagement and their use of the tools and resources uniquely available to them that enable us to provide exceptional value. Now I'll turn the call over to Mark for his financial commentary. Mark W. Joslin - Chief Financial Officer & Senior Vice President: Thank you, Manny. At the midpoint of the year, I'm very happy to report that we are on track with our financial objectives for the year pretty much across the board. Our sales and gross profit growth, which Manny just provided some additional color on, are doing well so far for the season with base business gross profit up 9% year-to-date. Operating expenses are growing to support our expanding business. But by focusing on efficiencies and leveraging our existing infrastructure, we're growing expenses at a rate well less than gross profit growth, which is 4% year-to-date, resulting in base business operating income growth of 17% year-to-date. Working capital is also right in line with expectations for the year as both inventory and receivables balances are adequate to support our business growth but not excessive. As a result, our seasonal cash use is moderate and we are on track towards meeting our annual goal of generating cash flow from operations exceeding net income for the year. With our earnings growth, strong working capital management and limited cash usage, we were able to pay down debt, resulting in low leverage at the end of the quarter. On a trailing 12-month average debt to EBITDA basis, our leverage at June 30 was 1.5 times, which is right at the low-end of our targeted 1.5 times to 2 times range. With our strong start to the year, and assuming we are able to post a solid second half, we have a shot at achieving a double-digit operating margin for the year for the first time, and exceeding 20% return on invested capital, both milestone operating performance metrics for us. I'll also take a moment to note that this, the second quarter, marks our 25th consecutive quarter of year-over-year growth in sales, gross profit and operating earnings. Before beginning our Q&A, let me provide you with an update on our share repurchase program. We continue to buy back shares on the open market in the quarter, adding 166,000 shares repurchased at an average price of $88.11, which used $15 million in cash, bringing us to 988,000 shares repurchased for the year at what is now a bargain average price of $78.74, for a total use of cash of $78 million. That leaves us with $144 million under our existing authorization for additional repurchases. At this point, I'll turn the call back to the operator to begin our question-and-answer session.

Thank you. We will now begin the question-and-answer session. And the first question comes from Matt Duncan with Stephens, Inc.

Hey. Good morning, guys. Nice quarter. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Thank you. Mark W. Joslin - Chief Financial Officer & Senior Vice President: Good morning.

Hey, Manny. Can you talk a little bit about, on the discretionary spending that you say you think you guys are benefiting from right now, how much of that is – how much is it, first, helping your sales growth? And is it manifesting itself more from additional refurb, remodel activity? Is it more construction? Are you seeing a mix up effect where people are opting for higher-end items? Just how is that discretionary spend increasing showing up in the business? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: We see it in two areas, Matt. First – and, by the way, this is all within the context of remodel and replacement activity. Obviously, maintenance and repair is not affected. And new construction, the impact there has been very modest. So really the biggest component of the increase has been within the context of remodel and replace. And particularly apartment and (11:16) the product areas that are more discretionary, if you go to the equipment pad, it would be in items like heaters and lights and controls. And obviously, in terms of the remodel, it would be the remodeling of the pool itself, replacing the plaster finish, and associated tile and coping. The other element, which you touched on, is that, as part of that process, there has been a gradual migration to higher-end products. If you go to, for example, plaster, we have several brands of a proprietary Pool finishes, and the highest end of those brands, JewelScapes, which is a glass bead finish, is capturing progressively a bigger share of the pie. And we just launched that a few years ago. And that's, again, gaining progressively more traction every year. And the same thing applies when you go to the equipment pad, the replacement, the enhancements, given the investments and developments, part of manufacturers in those product categories. They develop new tools that make the equipment either more energy-efficient or providing more value in terms of, for example, I'll call it the light show that you can create in your pool, increasing aesthetic appeal all the way around. All those kinds of investments and developments on their part have also increased the mix in terms of, well, again, within remodel and replace, to a higher-end product line, more higher-end products.

Very, very helpful. I'm going to nitpick just for a second here. The SG&A cost as a percent of sales were flat year-over-year despite pretty good sales growth. Is that a catch-up on incentive comp accrual or is there some other cost that was added there? Mark W. Joslin - Chief Financial Officer & Senior Vice President: Yeah. Matt, just recall that, in last year, we had a relatively weak second quarter and, therefore, our incentive costs for the year were low. So looking at the year-over-year, in incentive, they are up about $4 million due to better performance this year relative to last year, so.

Got it, makes sense. Okay. And then last thing just on the guidance. So you beat by $0.05 in the quarter and it sounds like the acquisition that you did is profitable. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Yes.

Just curious why maybe the guidance didn't move up a little bit more than the $0.05. Is it just a little bit of conservatism as we wait to see the year play out? Mark, you made a comment that there's a chance you could put up a 10%, a double-digit operating margin for the year. It seems like if you did, you would be at the high-end or above the guidance range. So, just curious sort of what the thought process was on the $0.05 increase. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Well, two parts. One is the $0.05 is what we've realized in the quarter. The benefit from accretion standpoint for most transactions happen in fact in the second quarter with the contribution in the balance of the year being either very modest or non-existent. And we're shooting for 10%. That's our goal to achieve. And, again, that's on the high-end as you well note. And it's something we're striving for, but not something that may very well be realized this year, but certainly next year.

Okay. So basically we're treating it like the 10%, not a layup. It's a good stretch goal. You think you can get there and if you got there you'd be at the high-end of the range is what we should interpret that? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Exactly. Mark W. Joslin - Chief Financial Officer & Senior Vice President: Right.

Perfect. All right. Thank you, guys. I appreciate it. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Thank you.

Thank you. And the next question comes from Ken Zener with KeyBanc.

Good morning, gentlemen. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Good morning, sir. Mark W. Joslin - Chief Financial Officer & Senior Vice President: Good morning.

So I wonder – I apologize if I missed it in the first few minutes. But last year in the second quarter – last year you had a rare lowering of estimates tied to lower flat sales, I believe, specifically in Texas and California. Did you comment on those states at all today? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: I did not comment on the – by states.

Would you mind giving that? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: No, no. You'll have to bear with me a second. But, first, last year in Texas, we had very high levels of rainfall. This year the impact was still high levels of rainfall, but not as bad as last year. So Texas, in our blue business, which is obviously the biggest part of our business, was up 4%. Now, again, that 4% means that it wasn't particularly great either. So Texas was again relatively modest, a little lower than our 5% overall growth in the domestic blue business. Mark W. Joslin - Chief Financial Officer & Senior Vice President: That's for the quarter. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: For the quarter. Yes, for the quarter. In terms of California, California was a bit cool last year. This year, the weather was frankly nicer. You live there yourself, so you experienced it. And in that particular case, our domestic blue business sales quote for the quarter there was just over 10%. So California lifted our average up a little bit. Texas brought it down a hair, again, in terms of our 5.1% that we realized in domestic base business for the quarter.

Now if I could, because last year California drought, Texas obviously the rain, but in California specifically, do you think it was up 10%? And what was that year-to-date? Was that because of the weak comp last year or are we seeing the strong home prices at the state scene really driving a lot more? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: No. I wouldn't read too much there.

Thanks. What's the dynamics there? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Yeah. I wouldn't read too much into it because for the total year last year California was up 7%. So it was fine.

Thumbs again (17:52). Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Exactly. And this year, on a year-to-date basis, California is up 9%. So, again, not enough shaking one way or the other.

Understood, understood. Because last year it was – seems like an anomaly when you had that weakness and adjusted your estimates. The deals that you've done in the last year and even including the recent irrigation company, did those things – had you been working on that? Do they just show up at your door? Is that something that perhaps might accelerate? What - Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: No, they don't show up at our door. Well, it's tough to get to Covington without directions. So, therefore, that's highly unlikely to happen.

Even with instructions it's hard. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Yeah. With – let me see. We have ongoing contact within the domestic and international pool business and within the domestic irrigation business with distributors, period. And there is an open – call it an openness that we try to convey in terms of knowing who they are and knowing what their objectives are. And within that context to the extent that a particular distributor falls into our target geography, we try to cultivate a greater relationship to see if they want to be part of the organization. And that sometimes takes a year or two years to come to fruition and sometimes it's taken more than 10 years to come to fruition. We are, Ken, as you know, very deliberate and patient in our approach in terms of building our business. And we're not going to run and try to do 20 transactions in one year because, first of all, integrating those is a nightmare. And, secondly, our key is building value over time for shareholders. And that's not going to happen if we try to rush and do too many things at one time. So it's a very deliberate process and it's looked at on a market-by-market basis looking at the attributes of the market and whether an acquisition makes sense. We've also opened up over 100 of our own locations where an acquisition didn't make sense and we just decided to do it ourselves. So we look at, it's – and elsewhere – you also know our markets are very unique. So, our customers are unique to the market and in many cases our products are unique to the market. That applies whether it's blue or green or teal or brown. And therefore given that uniqueness of each market we look at the dynamics of the market, the attractiveness of the market long-term, how that market is currently being served and by who and whether an acquisition or new opening is best. And if it's an acquisition being best, then we look at who the best one or two alternatives should be to fill that void for us.

Thank you.

Thank you. And the next question comes from David Mann with Johnson Rice. David M. Mann - Johnson Rice & Co. LLC: Yes. Thank you. Good morning and nice quarter. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Sure. David M. Mann - Johnson Rice & Co. LLC: Could of questions. Just curious if you can give us the domestic blue comps by months. And given the warm weather, the heatwave, what are the trends looking like July to-date? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Okay. In terms of the comps by month, I don't have it readily available, but I will tell you that May was the softest of the three months. And particularly in the seasonal markets in the Sun Belt, it was largely the same, or very close to the same, each one of the three months, adjusted for the sales days of the month. But in the seasonal markets, Snowbelt basically, May was soft and then June got back to normal. In terms of July, pretty much as expected, pretty much as we expected to be happening for the first, whatever, 13 business days. David M. Mann - Johnson Rice & Co. LLC: Okay. In terms of the acquisition, can you give us a sense of what the sales and EBIT contribution would look like for the year? And also, what kind of multiple did you pay for that acquisition? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Sure. First of all – and just for context and color, we highlight the acquisition in Texas that we did on the irrigation side, but we also did a couple of smaller acquisitions on the blue side – well, blue and the brown. The blue was a three location distributor in the Northeast that closed at the end of last year. And, by the way, all those are referenced in our schedule that we have for base business in our release. As well as a two-location distributor on what we call the brown side, the NPT side, in Arizona and California, one location in Arizona, one location in California. Altogether, those acquisitions will contribute somewhere in the neighborhood of $0.03 a share of accretion this year, basically, with probably $0.02 of those $0.03 coming in the second quarter, and basically that $0.01 would be over the other three quarters of the year. In terms of valuation and multiples, different dynamics in each particular case. We typically don't disclose that, but to the extent that it makes sense and there was goodwill paid, that would have been typically in the, call it, six to seven range, whereas in most cases, it averages more like five. David M. Mann - Johnson Rice & Co. LLC: Manny, you talked a little bit about the industry and the Internet and how it's changing. I guess recently, Leslie's has moved to become a more active omni-channel retailer. I'm curious if you give some thoughts on how you think that will possibly affect your business, either more business with them as a customer or impact on some of your smaller retail customers, as they become a more active omni-channel retailer? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Sure. Okay, two parts. As we all know, Internet has been around for 20 years. It was – I can't say disruptive is the proper term, because that would be exaggerating the impact. It was a factor – started becoming a factor in the late 1990s and early 2000s. And that's really moderated over the last five years to seven years in terms of its impact. Having said that, it still continues to grow at a rate a little bit faster than storefront retail. A lot of that, David, perhaps in contrast with all other retailers that you follow, is given the nature of the products that we sell, in that the great majority of them are not friendly to the Internet channel. Leslie's has had an Internet presence for at least 10 years, if not 15 years. And over the past several years, they've acquired individual Internet retailers or companies that had a weighting of their business towards Internet retail, in part because those businesses – the growth of those businesses were moderating, and the attractiveness that those principles had, in terms of increasing the value of the business, was virtually non-existent. So Leslie's opportunistically stepped in and has acquired several of them, again over the last, I think, like four years or so. And that really complements their store network. As a result of that, they are doing what any good retailer is doing, which is complementing their store network with Internet presence, the so-called omni-channel, not a new concept. And that's something that we've been encouraging our retail store customers to do to better serve the local markets that they are in, the different. But Leslie's given their largely national footprint is that they can be a little bit more efficient in that regard than perhaps a local or regional retailer could be. In terms of our business with Leslie's, certainly, as they continue to grow, we continue to support them in terms of – they buy more from us. And, secondly, in terms of the fact that being on the Internet the breadth of offering may not be all that they carry in their DCs. We can be a further – serve them further as a customer and else being their vendor to the extent that makes sense for them and for us. David M. Mann - Johnson Rice & Co. LLC: Manny, thank you for all the insight. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Thank you, sir.

Thank you. And the next question comes from David Manthey with R.W. Baird. David J. Manthey - Robert W. Baird & Co., Inc. (Broker): Hi. Good morning. First off, Manny, in your slide deck you often talk about the aging of the installed base of pools. And I'm wondering just as we're looking at that and thinking about how that plays out, do you have an assumption for the average life of a Gunite pool? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: That's a very good question, David. Properly maintained, the Gunite pool can last somewhere between 1,000 years to 2,000 years. And the caveat is properly maintained. Just like a house needs the roof to be replaced every so often and painted, the same thing applies to a pool. So the actual structure itself again properly maintained can last virtually forever, at least longer than our lifetimes. The caveat is the individual products, right. So, for example, let's take the pool surface itself, not the structure, but the surface. The surface is analogous of the paint on a house or on a wall. And typically the challenge there is the water and how well-balanced the water is not. If the water is well-balanced, the pool surface can last 15 years, 20 years and not have any real significant discoloration or impairments. On the other hand, if the water chemistry is not properly balanced, that life could be shortened to maybe as little as seven years or eight years. So the big variable there is the water and how well balanced the water is or not. When you turn to the equipment, there's some degree of impact there in terms of how the equipment is run and how often it's used and how it's used. But, typically, of the equipment pad items, the pump is usually the first one to breakdown. And, historically, the average life on a pump is something in the neighborhood of seven years to eight years. That may change a little bit over time with variable speed pumps that are not stressed as much as what I'll refer to a single speed pumps and then the other items on the equipment pad tend to last a little longer whether it'd be the filter or the heater or the controls. David J. Manthey - Robert W. Baird & Co., Inc. (Broker): Okay. That's great. Thank you. And as you're discussing e-commerce and online purchasing, that sort of thing, you mentioned that the influence of that channel has declined over time. I'm wondering if you can talk a little bit about your, the Pool360 app. And what your – so it's not really online purchasing by consumers, but maybe more the trade, doing research, looking up things. I mean what has been the impact of that app relative to your business and do you see that continuing to grow? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Great question, David. Thank you very much because it's important to distinguish B2B versus B2C. And, as you all know, we don't deal in B2C, but we are very active in B2B. Pool360 is a tool that we launched a number of years ago, which is a further enhancement of previous versions of a tool since we launched B2B back in the year 2000. When you look at the comprehensive nature of Pool360 in terms of all the functionality that's provided and you talk to and I talk to all the time to, for example, retail store customers that tell me that they run their business around Pool360. You talk to service guys that how that, particularly the mobile version of the app on their phone or on their iPad and the fact that they use that and carry it with them religiously all the time as they look up products and try to find solutions, try to see the schematics online that we provide. I mean it's invaluable and really endears us to the customers because it helps them run their businesses far better than they otherwise could. And it's something that while we launched it, I think it was like six years ago now, what we now coin Pool360, we have two releases per year of upgrades. And we have, call it, high use customers throughout the country that are constantly providing us insight to help further enhance the tool. And, again, our software engineering team have that as well as a number of other projects that they work on, but has that as one that they upgrade every six months or so. David J. Manthey - Robert W. Baird & Co., Inc. (Broker): Okay. Thank you very much. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Thank you, David.

Thank you. And the next question comes from David Mandell with William Blair. David M. Mandell - William Blair & Co. LLC: Good morning. Can you provide a little more color about the gross margin improvement in the base business? What kind of initiatives do you have going on there? Are they new? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Yes. Let me see there's two parts to that. One is, when we look at our business, the highest leverage growth opportunity is selling more of the same to the same type customers or the same customers. And to that end, initiatives are focused on even further refining and improving our service levels as well as our sales execution to drive awareness and further integrate ourselves with the customer using tools like Pool360 that I mentioned earlier, as well as a plethora of other tools, marketing and technology tools that we have to, again, help our customers sell more, so we in turn sell more to them, as well as gaining share of existing customers. So, more of the same to the same is a big driver, highest leverage item, overall, given the leverage priority number one. Part two is selling more products to existing customers. And, again, second highest in leverage, selling more products to existing customers. For example – best example of that is, order of magnitude, is building materials. As we have broadened our offering and brought that offering to more and more individual markets, that's enabled us to grow our share of customers' pie for product they may have been buying from other sources, because, frankly, we did not offer those products in that market. So, as we run that – brought those products to market in those markets, it's enabled our customers also to be much more efficient, dealing with one supplier that provides, again, a much higher level of service than the marketplace does, as well as all these tools and all these programs that we have to help them grow their business. Third in that spectrum of order is selling the products that we sell to a broader array of customers. And that's finding tangential opportunities. For example, we touch on commercial products. There is a crossover opportunity with distinctive customers in the commercial space that focus on commercial pools. These are usually the competitive pools, and greater from a vessel size standpoint. And, again, we have a number of individuals that have the technical expertise and are more astute in the longer sales cycle process that's involved with commercial, particularly larger commercial, that cater to that customer base, selling products that, in many cases, are the same as existing products that we sell in the residential space, and in other cases, they are distinctive products. So that's the third highest leverage, but another one that's very complementary to the overall base. Within everything we do, it goes without saying that we are constantly challenging how we do it, in order to drive a higher service level, higher value-add to the customers more efficiently. And in that regard, we're constantly trying to ferret out what best-of-breed do in multiple areas, looking specifically at the better distributors in other – hat served other customer segments or other channels, and trying to learn from them so we can adapt and deploy within our organization, to the extent it makes sense. David M. Mandell - William Blair & Co. LLC: All right. Thanks for the color. And then, for the full year, do you still think operating expenses can grow at half the rate of gross profit dollars? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Yes. David M. Mandell - William Blair & Co. LLC: Thanks for taking my questions. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Thank you, David.

Thank you And the next question comes from Garik Shmois with Longbow.

Hey. Good morning, guys. This is Mark Zikeli on for Garik today. Manny, in your prepared remarks, I think you said it was a quote, "start-stop type of year." After a good 1Q, I'm just kind of curious what you meant by that, and were there any weather headwinds in the quarter? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Yes. Great that you picked that up. As I mentioned earlier, I think in a question from David Mann on bi-monthly, what happened in the quarter, basically the season got off to a really strong start because of the, relatively speaking, milder winter. And so guys that were involved in remodeling pools started working earlier than they otherwise would, or certainly earlier than they did last year, as one example. Retail stores, because of the mild winter, were stocked earlier than they otherwise would have been. But what happens is, once you got to like the third week of April – and this is more in the Snowbelt – third week of April, it got cold. And for the better part of a month or so, it was a lot colder than normal. So basically, the season got off to a very strong start. And then it kind of like stopped and then, just before Memorial Day, it got warm again and then it got back to normal the balance of the quarter. So the impact there and maybe, given the weighting that the Snowbelt has to our business, particularly in the May, June months – May, June and July months, the fact that it started, stopped and started again is the point I was making. And the impact again is what I described.

Okay. As far as the M&A goes of the irrigation business and its impact for this year, you said it was $0.03 for the year. Is that included in your new guidance? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Yes. Well, $0.02 is already in the bag of sorts and the other $0.01 is factored in, yes.

Okay. And any change to the share count assumption? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: I believe that's nothing significant because our second quarter share repurchases were pretty modest in the big picture. So no changes of note there.

Okay. Best of luck. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Thanks you, sir.

Thank you. As there are no more questions, I would like to return the call to management for any closing comments. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Thank you, Keith, and thank you all for listening. Our next earnings call, mark it on your calendars, is scheduled for October 20 – Thursday, October 20 same time, 10 AM Central, 11 AM Eastern, 8 AM Pacific when we'll discuss our third quarter results. Have a great day.

Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.