Good morning. My name is Lauren, and I will be your conference operator today. As a reminder, this call is being recorded. At this time, I would like to welcome everyone to Timken's first quarter earnings release conference call. [Operator Instructions] Ms. Chadwick, you may begin your conference.

Thank you, Lauren, and welcome everyone to our first quarter 2016 earnings conference call. My name is Shelly Chadwick, Vice President of Treasury and Investor Relations for The Timken Company. We appreciate you joining us today. If after our call you should have further questions, please feel free to contact me directly at 234-262-3223. Before we begin our remarks this morning, I want to point out that we have posted on the company's website presentation materials that we will reference as part of today's review of the quarterly results. You can also access this material through the download feature on the earnings call webcast link. With me today are The Timken Company's President and CEO, Rich Kyle; and Phil Fracassa, our Chief Financial Officer. We will have opening comments this morning from Rich and Phil, before we open up the call for your questions. During the Q&A, I would ask that you please limit your questions to one question and one follow-up at a time to allow everyone an opportunity to participate. During today's call you may hear forward-looking statements related to our future financial results, plans and business operations. Our actual results may differ materially from those projected or implied due to a variety of factors, which we describe in greater detail in today's press release and in our reports filed with the SEC which are available on timken.com website. We've included reconciliations between non-GAAP financial information and its GAAP equivalent in the press release and presentation materials. Today's call is copyrighted by The Timken Company. Without expressed written consent, we prohibit any use, recording or transmission of any portion of the call. With that, I'd like to thank you for your interest in The Timken Company, and I will now turn the call over to Rich.

Thanks, Shelly, and good morning, everyone. We appreciate you joining us today. Phil and I plan to reference several slides from the deck that we posted on our website earlier this morning. We'll start on Slide 4. Quarter was in line with expectations with revenue declining both sequentially and year-over-year. The 5% revenue decline was driven by multiple weakened markets as well as currency, partially offset by our outgrowth initiatives including the benefit of acquisitions. From an in-market perspective, there were no real surprises, positive or negative, in the quarter from what we've built for 2016 plans around. Automotive and wind remain bright spots for us, while most of our other markets weakened from 2015, as we expected. Particularly in heavy industries, like oil and gas, agriculture, mining and metals, we saw a weak demand at OEMs as well as in the aftermarket. We performed reasonably well, given the environment, with earnings per share down 8% from 2015, positive cash flow of $23 million, which is seasonably strong for us and adjusted EBIT margins of 9%. The EBIT margins were below our target ranges for both business segments, with volume, mix and currency continuing to offset our cost reduction and outgrowth actions. Process Industries margins were particularly weak with challenging mix and low volume. We do expect margins to improve sequentially from the first quarter for both Process Industries as well as the corporation, as volume stabilizes, mix improves, and we see the full benefit of cost reductions. We saw benefits from all three of our major focus areas, outgrowth, operational excellence and capital allocation in the quarter, and we expect to see more benefit through the rest of the year. I'll expand briefly on each. In regards to outgrowth, the topline benefited 4% in the quarter from the net…

Thanks, Rich, and good morning, everyone. I'm going to start on Slide 10. For the first quarter, Timken posted sales of $684 million, down 5.3% from a year ago, with currency reducing our sales by $20 million in the quarter. Excluding the currency impact, our sales were down around 2.5%. As Rich indicated, the first quarter played out much as we expected with continued weakness across the industrial end-markets, especially in the commodity related sectors. This was offset partially by growth in automotive and the net benefit of acquisitions. Organically, sales were down about 6% in the period. If you look at the bottom-right of this slide, you'll see our geographic performance. Sales in North America were down 1% from last year, but this includes the recent Belts acquisition. When you kick out the net impact of acquisition, sales in North America were down roughly 7% organically, driven by soft industrial and aerospace end-markets, offset partially by growth in automotive. Excluding currency, sales were roughly flat in Europe, down 12% in Asia and down 1% in Latin America. I'll touch on each of these briefly. In Europe, growth in wind energy was almost completely offset by lower automotive and heavy industries demand. In Asia, while we continue to see good growth in India, this was more than offset by sizeable year-on-year declines in China. And Latin America's results reflect the continued weak economic conditions in that region. On Slide 11, you can see that our gross profit in the first quarter was $181 million or 26.4% of sales, down 160 basis points from last year, as lower volume, unfavorable price mix and currency were only partially offset by lower raw material and operating costs. SG&A expense in the quarter was $118 million, down $10 million from last year. The decrease…

[Operator Instructions] We'll take our first question from Eli Lustgarten with Longbow Securities.

Can we talk a little bit about, as you went over the numbers, I mean you did tweak some stuff. In Process, mainly, actually your organic is down 5%, it was 6%, your acquisition is 3%, it was 4%, and the profitability was a little bit disappointing. So can you talk about what you know that changed there? And really what we should expect for profitability, as we go 12%, can you get here 15% target for the year or something like that? And do the same thing for Mobile Industries, I guess, it's a little bit weaker, I think you said because of some heavy markets. And what can we expect for profitability there as we go forward for the rest of the year?

Let me start with some of that, Eli, and then Phil can add some color to it. Starting with, well, let me just make comment on process in mobile. Two businesses have different seasonality from a revenue and margin standpoint where process tends to strengthen in the second half. Mobile tends to weaken in the second half. Within process, the industrial services business has a significant delta in both revenue and margins from the first quarter to the fourth quarter. And that has been true to that business for many years. It's just that if you go back in years, it was such a small part of the corporation, but it wasn't as material as it is today. Today, it's 10% of the corporation, a sizeable part of Process Industries, and certainly it swings that. So that when we talk about seasonality and mix, and that business does mixes up, but when we talk about seasonality and mix within process, that's one part of it. The second part of it on process is industrial distribution, which tends to be strongest second and third quarter globally, but not too different between second through fourth quarters, but generally lowest in the first quarter as well. So we have all those phenomenon happening certainly within the year. And, I'll let Phil talk about tweaks.

So just to clarify on the outlook. So for process, I'd say, that was more rounding than anything else. We tend to round those numbers to provide directional indicators. So the rounding of acquisitions to 3%, it was probably more a round down and a round up and not a major or material change in the outlook from that perspective. The real change was really in mobile where we did take it down organically to reflect softness we're seeing both in rail and in our highway. And then I think, Rich hit it, from a margin standpoint in process in the first quarter, keep in mind the currency was a headwind in the quarter, more in process, really didn't see as much in mobile. And then also from a production standpoint, we're working to control inventory and obviously cash flow. And we typically build inventory in the first quarter, didn't really do that in the first quarter. And that actually affected process margins to the tune of around 100 basis points as well. So that really explains a little bit of margin. Most of the margin decline, you can almost attribute to those two items. And as we progress throughout the year, keep in mind that process margin should improve with the sequential volume improvement, as well as the impact of cost reduction initiatives seasonally as we sort of did last year. And from a mobile standpoint, I think you got to keep in mind that the new business we won in 2015 will lap in the middle of the year and we'll see some year-on-year declines from a volume standpoint in mobile, which will put those margins under a little bit pressure, so we'd definitely expect process margins to improve. Mobile margins, I would expect them to hold or maybe be slightly down as we progress through the year.

And Eli, you did specifically asked about 15%, and I think that would be a good number for us to be, looking at in those guidance, to get back to it through second half of this year. And Process Industry is short of our low end of our target range, but definitely in the mid-teens.

And can we just talk a little bit about pricing going on, and of course, the marketplace, I mean, somewhat of a competitive market that we know at this point?

Yes. It's definitely a challenging pricing market for us. And as you know, Eli, we have a lot of different pricing mechanisms between our various channels, markets and geographies. Came into the year, including a lot of our OEM business, is fixed pricing for years, sometimes more than that. And we came into the year with the expectation that we can manage price in the 2.5% down for the year, which is certainly not a number that we will like to have, but given the dynamics, thought that was a reasonable number that we could manage and hold and outgrow our markets and we still believe that's the case for the year.

We'll take our next question from Stanley Elliott at Stifel.

Just quick question with all of the kind of the new plants and some of the closures, do we think of this as more as a kind of net reduction in square footage or manufacturing capacity or should we think of this more as kind of cost saving shifting to kind of lower cost manufacturing?

I would say, yes, and yes, and also a shift in our portfolio from what's happened over many years of smaller, higher volume automotive bearings to generally lower volume, larger industrial bearings. So the plant we're closing in U.S. is one of two plants we have globally that essentially exclusively and automotive plants, so the plants shrunk quite a bit. Over the last several years will be consolidated into what's a hybrid automotive/industrial plant. And obviously, the reduction of overhead that's associated with that. It's a fairly large plant in terms of square footage and historical capacity and output, but again we've been downsizing that for plus five years now. So it's really not any longer a huge plant. Definitely a shift where most of our capital has been going into lower cost production areas, also a trend with new assets we're introducing, particularly in the remaining facilities from new process technology that we'll give some advantage over some of our existing assets. And then also some expansion, I would say of our product capabilities. And then the most of the newer assets are going to really targeted around late 2017, 2018 for growth. And how much that's growth versus cost reduction will obviously depend on where our markets are at during that timeframe.

And just a point of clarification, when talking about the process margins did I hear correctly about 100 basis points was from FX and then 100 basis points was basically from kind of not building inventory, is that correct? And then, if that's the case, kind of how should we think about the decrementals as it would be in the coming year?

So I think you did hear it, correct. So currency was around 100 basis points year-on-year in the quarter. And then the production volume, we built inventory little bit last year, didn't build this year and really kept inventory flat at the corporate level excluding currency. And that changed shift in production has an impact on absorption and manufacturing performance. And that was roughly another 100 bps in process in the quarter. So that obviously hurt the decrementals year-on-year. And we'd expect to control inventory, and obviously build what we need, but try to keep it under control through the year. So would not expect that kind of a year-on-year impact as we move through the year.

We'll take our next question from Schon Williams of BB&T Capital Markets.

Just the increase in the free cash flow guidance, is that purely attributable to the CDSOA or was there any, I don't know, internal operating improvements on working capital or anything that we could point to?

Yes, Schon, it's primarily the CDSOA, probably a little bit better on the working capital, but it was predominantly layering the CDSOA. Obviously, the restructuring was in there at the beginning of the year, so the $210 million includes both the CDSOA as well as the any cash for restructuring and 135% of adjusted net income. And obviously we'll work to continue to generate as much cash as we can as we move through the year.

And is there a preference on kind of the debt pay down versus share repurchase at this point?

Yes, I'd say, as we look at our debt levels at the end of the quarter, we were near the low end of the range. So I mean, obviously, we're going to continue to look to deploy our capital sort of across the spectrum of items we've talked about in the past between organic growth, but really look at the M&A and the share buyback, and make the appropriate determination. Would expect us to continue to buy some shares in the second quarter. So kind of keep moving on that, obviously since the CDSOA cash came in. Wouldn't expect us to still look to pay down debt significantly. Obviously, quarter-to-quarter, it's going to depend on the timing of opportunities and how we choose to execute on the share buyback, but structurally or looking longer-term, I wouldn't expect this to reduce debt significantly.

I'm going to try to sneak one more in if I may. It doesn't seem like, despite the ForEx kind of moving a little bit more favorably, it doesn't seem like a lot of companies are kind of adjusting their guidance just yet. I'm just wondering if we kind of maintain at current levels on some of the ForEx, I mean does those -- you're talking about kind of a 200 basis points headwind at the topline. I don't know, does that look a little bit better if we kind of hold at current rates as we kind of enter the back half of the year?

No, I think it's a great question and I'm sure others are probably thinking the same thing. I mean, I think you're thinking about it correctly. So we came into the year, guiding to a 2% headwind. As we sit here today, we are seeing better than that. We didn't feel comfortable adjusting to that level just given all the views out there relative to where we might end the year. So we thought the prudent approach was to kind of keep the 2% in the guide. If currency rates stay at this level, I think it's fair to say there'd be a little bit of upside to the forecast. I wouldn't say a lot. We guided to negative 2%. As we sit here today, it's probably closer to the 1.5%, maybe a little bit less than that range, so it wouldn't be a lot, but certainly could be some upside if we hold at these levels.

We'll take our next question from David Raso with Evercore ISI.

My question is on the process margins moving forward. I'm just trying to think through the rest of the year, you're implying decrementals of about 25%. And obviously, the first quarter was tougher than that at 50%. And the currency comment was interesting. I'm not trying to nickel-and-dime here, I'm just trying to think about the, hopefully, less of a drag from currency and the rest of the year, but the numbers you gave us for the first quarter it implies the currency drag came in at a 33% decremental. I mean, I'm just trying to understand why would the currency come in at such a drag, because again, you're saying 2.8% process currency drag, a 100 bps hurt to the margin from that. And usually, most companies have a currency hit and it comes at 10%, 12% margin. Is this just a translation comment you're giving us in currency or are you baking in some transactional issues with maybe where your footprint is manufacturing wise. I'm just trying to digest a bit, I mean it can be positive [indiscernible], it's that big a drag on the way down, both on the way up, but I'm just trying to think that through.

I think its fair question, David. I think it's both. And remember, we do have a lot of cross-border activity, the bearing businesses, a capital-intensive bearing -- we can't have a bearing plant everywhere we sell products. So we do see more cross-border activity in process than we do generally, generally speaking in mobile. And I would say, in the quarter -- and it fluctuates, and we wouldn't expect that for the year, wouldn't expect that kind of decremental for the year. But if you recall last year, the decrementals on currency were in that 25% range at the corporate level. And I think what we saw in process in the quarter was specific to the mix of what occurred in the quarter. Also, we do have transaction gains and losses come through as hedges get marked mark-to-market, et cetera. And I think that was in the quarter a little bit of a drag. It generally smoothes out through the year, but in the first quarter, it was a little bit of a headwind. And that did hit process a little bit disproportionately to the rest of the company.

So that's not just a translation comment, 100 bps drag, there is some transactional aspects to it?

Correct.

And then again, say, the currency plays out, but that lets the drag as the year goes on --

Yes, we expected the first quarter to be a tough -- it would be a tough comp for currency, and given the way the currency has trended we would expect that to moderate as the year progresses, and certainly from a margin impact standpoint would expect as well.

We'll take our next question from Michael Feniger with Bank of America Merrill Lynch.

Just first question. I mean, organic growth was down around roughly 6% this quarter, you're guiding for organic growth down 6% for the full year. With easier comps as we go, why shouldn't we see that improved? Is it because of the mobile and the rail, like why wouldn't that minus 6% really get, less bad, as we move to the year.

I'll comment and see if Rich wants to add anything. But as I think about it, big pictures, I think about mobile. We've been benefitting from the new business we won in 2015. Now that will lap in the middle of the year, so we won't see the year-on-year improvement from that obviously anymore, it will get baked into the base, so comps get tougher from an automotive standpoint if I look at it that way. And then in rail and off-highway we are seeing markets weakened. On the second half of last year, we actually had some pretty important share gains in rail outside the U.S., we're not expecting that to recur. And frankly, some of those markets are under significant pressure when you talk about China and Russia in particular. So we're going to feel the effects of that. And then I just think with the off-highway markets continuing to decline, we will see year-on-year declines in mobile organically, obviously pickup through the year. But in process, I think your point is fair that as we get to the second half of the year, the comps do get a little bit easier. We don't have those anomalies of kind of big new business wins coming in. And we'd expect year-on-year performance of process organically to improve as we go through the year.

I would just add. Obviously, we try to triangulate a lot of different data points. And we didn't really see sequential improvement from beginning of the year, as we sit here today, to say that we really expect any sizeable strength in the second half, doesn't mean it couldn't happen if it does. We'll do very well with it. But we did see netted all out, while there's some pluses and minuses, that there's some pretty good case to be made for stabilizing off where we came of the first quarter. And that's really what our midpoint of our guidance would imply is flattish revenue through the rest of the year in the first quarter.

On that, I remember in Q4, you guys were talking about how you finished the year with backlog was trending down year-over-year and quarter-over-quarter. So how does that actually play out through Q1? And indications of April are you starting to see that stabilize?

Yes. Yes, I would say stable is a good word. First quarter to second quarter or from end of year to the end of first quarter, we'd typically see some improvement in parts of the business. They were not quite as strong as we'd like, but again, it's certainly enough to support for as far as we'd see this flatness of flattish sales trend. And that's a net statement, right. We've got, as Phil said, some markets like rail and ag still declining, but others like automotive improving.

And then just my last question. How should we be feeling about your own inventories. I know, you made the comment about process, do you feel like your inventories right now are in line with your current guidance? And I'd love to hear any comment how you feel about your customer base, the distributors? Do you think their inventories now are in line with end user demand?

On our own, we obviously are always trying to improve our working capital turns and have a lot of emphasis there. But as you look at for our capabilities today and where we sit in the markets, not looking for any major moves in inventory. With a flattish revenue outlook, we're looking to take a little bit of inventory out through the course of the year, which obviously puts a little pressure on margins. On the customer base, specifically on distribution, there were some variations around the world, but in North America, we might see, with a strong finish we had at the end of year some reductions in the first quarter and didn't see that, so that certainly was a positive sign for us and some pluses and minuses around the rest of the world. But a general statement, obviously with where revenue is at, at a levels off, I'd say inventory is pretty close to where it's at. I think we've probably got some inventory come out of our customers, supply chains still in ag and rail.

We'll take our next question from Steve Barger with KeyBanc Capital Markets.

I wanted to go back to your auto comments. I think you said your auto is improving. Is that all share gain or other production schedules moving mp and how does the auto plant consolidation affect your capacity?

Our auto business in North America is heavyweight truck, in Europe its pass car, and we're very small player outside of those two markets around the rest of the world. And I would say the automotive light truck outlook for the year today is probably a little bit stronger than what it was at the start the year. So that's really where my comment was based on. And these are relatively small percentages that we're talking about, but good. So that was the automotive market comment.

And your auto plant consolidation, does that affect your capacity to serve the markets?

Yes. It is a capacity reduction, but we've been running very low utilization levels across those bearing sizes. And it certainly would no preclude us from being able to grow that business going forward.

And more of the big picture question. As you've try to tightened up your forecasting process over the past few years, is there a specific indicator you go to first to help you guys gauge or maybe prepare for changes in customer activity?

And there I would say there isn't one. I mean, we have a lot that we're looking at. When you look across the markets, when you have the OEM versus distribution, and then you look at the geographies, there's quite few different. I think if you had to look at one metric, certainly industrial production globally drives a lot of our markets. But when you look out three to six months we're in touch with all of our customers, we're looking at our inventory levels, their inventory levels, their orders, and beyond that generally using lot of industry data on how many wind turbines are going in, how many cars are going to be built, et cetera, et cetera.

And just one more, quick one. Thinking about your CapEx expectation for the year, how much is targeted for internal efficiency improvements that can drive higher returns from an existing process? Do you still have a full slate of kind of wish-list projects there?

Good question, Steve. I think as we think about the CapEx forecast for the year, I mean it's a mix bag as we've talked about. We typically run maintenance CapEx, generally I'll call it 1% year for maintenance, then the remainder would be targeted toward either growth initiatives or margin improvement initiatives. And actually it's a mix bag. We've got the new plant in Romania, which is coming in, that has taken a significant portion of CapEx. We've got new wind gearbox capacity that we're adding in India to really serve that market, which is growing a lot for us over the years. So I mean, those are couple of examples, where those are going to add capabilities, reduce costs, position us well for the future. And then in our existing plants, we constantly work at improving the productivity by employing the latest technologies, et cetera, to increase margins and reduce volatility or cyclicality, where we can. So I'd say it's a mix bag. Do we have a wish-list beyond within the guide? No, there is always a list of things that are on the priority list, but I think we feel comfortable with the CapEx outlook as it sits today and feel like we can advance the initiatives that are important to us and really strike a good balance between growth and pushing strategic initiatives, but also managing the balance sheet and cash flow well in this environment.

You're obviously not cash flow constrained. So when you think about that slated projects, has it really come down to really bandwidth in terms of being able to do things with the right focus and then move on to the next?

Yes. I think that's a good point. I mean, that's a good way to look at it as well. I mean, obviously, it takes people to run these projects, big CapEx projects they require teams of people across the organization. Obviously, there is a limit on the number of projects we can work on any given time. And there is a cadence involved particularly when it comes to big projects, so we do take that into account as well. You're right, we're not cash constrained per se, but obviously, we're going to look at all the capital allocation options that are available to us, not just CapEx, but M&A and share buybacks as well. So we look at all three, we look at the relative returns and make the appropriate judgments. Rich?

No. You covered it well, Phil.

We'll take our next question from Larry Pfeffer with Avondale Partners.

So quick in market question. Looking back at the fourth quarter presentation, you guys had aftermarket heavy truck in the stable category. Noticed that was absent in this quarter's presentation. Was that just kind of an omission or did you actually see a little bit softening in trends there?

I'd say, the North American market has been a little softer business. Our business in heavy truck is relatively heavy aftermarket and fairly global. So I think we are holding up better than certainly the North American truck OEM build rates. But the North American side has been a relatively soft market.

And then just on China more generally, obviously we saw some of the heavier industry stats and equipment orders improve in the first quarter, but it doesn't sound like you guys really saw a lot of improvement in activity. Just kind of curious how you're seeing things transition into the second quarter?

As we head on the, one of the slides that Phil went through, our Asia-Pacific numbers were pretty bad, first quarter '16 as compared to '15. And that's with our two biggest market there, China and an India. And India is doing pretty well. So obviously that implies some pretty rough numbers in Asia. Our big markets there metals, construction and heavy industries; there have been some signs from some customers there certainly that we could be bottoming and see some improvement. But we certainly expect for at least next couple of quarters that to continue to be a challenging market for us sequentially.

And then I appreciate the comments on CapEx into looking potentially for some growth investments in '17 and '18. Just curious on an update on the DeltaX pipeline and other initiatives on the market share side?

To talk generally, most of our wins don't come in the form of gear drives for the navy and significant platforms per se. They come more in the size of a few hundred thousand dollars to a couple of million dollars. I think when you look at our Mobile Industries' revenue numbers the last couple of quarters and reflect into that the heavy mix that we have in construction, agricultural, et cetera, I think our numbers are stacking up very well there, when you look at our large OEM basis. And again, with DeltaX, we're looking to outgrow the market 1%, 2% a year, not 5%, 6% and I think that our numbers would support that currently. On a process side, a little tougher with the fragmentation of the general industries markets, but again when you look at our distributors reporting, I mean look at some of the tough comps with oil and gas, et cetera, I think organic numbers are stacking up well and I think we're on pace to outgrow our end markets this year. Again, not a sizable number, but slightly. And doing so, while managing price in a very challenging market.

And Phil, just a quick housekeeping question. What are your currency cross assumptions in the guidance range?

I'm not quite sure I understand the question. Can you just --

Just if you had an assumption for the euro and/or the yen that were built into the range?

We went with the yearned 2015 level, so it really didn't change that relative to the guide. So the euro, I think back then was around 1.09, if I'm not mistaken. And so I think if you looked at yearend 2015 levels that would be basically what's embedded in the guidance.

Our next question comes from Justin Bergner with Gabelli & Company.

A couple of quick questions here. First off, does your guidance continue to assume no further repurchases or benefit from capital allocation during the year?

I would say, our guidance would assume nothing beyond what we've done in the first quarter, intellectually.

And the comment was made earlier that EPS should increase sequentially as the year goes along quarter-to-quarter, is that correct?

I would say, quarter-to-quarter. We said that first quarter would be the low. I think it came into the year saying model it fairly closely to last year. Last year's fourth quarter was probably little bit abnormally high on the EPS side. But to hit the midpoint of our guidance, we have to pickup $0.04, $0.05 a quarter of the first quarter run rate. And I think with flattish sales, we would be seeing numbers like that through the rest of the year.

It seems like all the currency transaction headwinds are in your process segment, is that essentially accurate?

I'd say it was relatively accurate in the first quarter, but it's not accurate generally. It does vary quarter-to-quarter based on where currencies are, based on the level of activities. So there are a lot of moving pieces, so I wouldn't view that as a rule. I view that as kind of the result in the first quarter, but would expect it to hit mobile as well. But again, it all depends on where the currencies go from here and the activity that we see in the quarter.

And just to clarify an earlier comment, I guess the incremental weakness on the mobile side was in rail and off-highway. Are you seeing any incremental weakness in aerospace and rotorcraft or is that sort of what you expected a couple of months back?

I'd say, it's generally what we expected. Maybe a tad a little bit better, but I'd say generally in line with what we would have expected back in February.

And it wouldn't be complete, if I didn't ask the question about the wind business. Is your outlook for wind similar to what it was three months ago, a little better, a little worse?

I would say same, but a little better or maybe building confidence in what we were saying before, because we had some outgrowth baked in there in a stable-ish market. And I think our confidence on that happening is increased over the last three, four months.

We'll take our next question from Sam Eisner with Goldman Sachs.

So on the topline there and maybe also on the EBIT walkthrough. You call out $44 million of organic headwinds and $34 million of volume price and mix on the EBIT line there. Is there a way to parse out the differences between volume and then also price and mix?

I mean, I think it's a split there, Sam. I think it's the right way to think about it. I mean, volume would tend to come through at a typical gross margin level, if you will. Then, obviously, the price and mix would be additive to that. So I would say, it's a relative, call it a relatively even split between the two.

We did say that prices looking at a 0.5%-ish for the full year, and it's an okay number for the first quarter as well. And as you look at our margin compression over the last year, mix has been a big factor, and the automotive and wind OEM businesses are good businesses for us, but mix is down. Mobile is now higher on topline and Process as a general statement that mix is down. So mix is a big factor in that, because we're doing a good job of getting the cost out, trailing it somewhat with the volume, but we're getting the cost out long-term, protecting the pricing, and mix is a big factor in there.

And when you talk about the 100 basis points of under absorption, that's roughly, let's call it $7 million of EBIT hit in the quarter. When you do your EBIT walk from first quarter '15 to first quarter '16, the different buckets, which one is that embedded in? Is that in volume? Is that in cost of production as an offset? Just want to better understand how you guys are accounting for that.

That would generally be netted in cost of production.

And I realize, this is more of a housekeeping question, but what our current utilization levels and what were they in the first quarter? Can you talk a little bit of how they trended throughout the course of the first quarter? What are they in April and how do you anticipate them looking throughout the course of the year in your guidance?

They are certainly lower, I would say, than the topline implies, obviously because of the acquisition benefit that we have in our topline. So again, volume down sizably organically in the plants, and then no inventory build and expecting some inventory reductions through the course of the year. We don't generally add up all the apples and oranges and give you one utilization number because of the variation in that. Generally, on smaller bearings that would have a lot of automotive presence, our utilization remains relatively well from where we've been over the years. You into the largest bearings we make for wind turbines, and specifically for that market runs relatively high, aerospace relatively low, and I'd say depending on the mixes there between 50% utilization and 90% utilization.

And it appears there are no further questions at this time. I'd like to turn the conference back to our presenters for any additional or closing remarks. End of Q&A

Thank you. This is Shelly Chadwick, again. Thank you for joining us today. If you have further questions, please call me at 234-262-3223. And with that, we'll conclude our call. Thank you.

And once again, that does conclude today's conference. We thank you for your participation.