Good morning, ladies and gentlemen, and welcome to the Fourth Quarter Watts Water Technologies Earnings Conference Call. My name is Karen, and I will be your event manager for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of the conference. Just as a reminder, the call is being recorded for replay purposes. I have a Safe Harbor, which the company has asked me to read out to you. Please be aware that remarks made during today's conference call about the company's future expectations, plans and prospects constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various factors, including those discussed under the heading Risk Factors in the company's Annual Report on Form 10-K for the year ending December 31, 2013, and other reports the company files from time to time with the Securities and Exchange Commission. In addition, forward-looking statements represent the company's views only as of today and should not be relied upon as representing its views of any future date. While the company may elect to update these forward-looking statements, it disclaims any obligation to do so. During the call, the speakers may refer to non-GAAP financial measures. These measures are not prepared in accordance with Generally Accepted Accounting Principles. A consolidation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in the press release dated Tuesday, February 17, 2015, relating to the company's fourth quarter 2014 financial results, a copy of which may be found in the Investor Relations section of the company's website at www.wattswater.com under the heading of Press Releases. And now, I would like to hand over to Tim…

. Your first question comes from Kevin Maczka of BB&T Capital Markets. Please proceed. Kevin R. Maczka - BB&T Capital Markets: Thanks. Good morning. Robert J. Pagano - President, Chief Executive Officer, CFO & Director: Good Morning. Timothy M. MacPhee - Treasurer & Vice President-Investor Relations: Hi, Kevin. Kevin R. Maczka - BB&T Capital Markets: Can I ask a couple of questions on this sales elimination. I guess first question is, you are going to do $80 million to $100 million this year. Did you say you'll be at that first – that full run rate in Q1 or is this something that gets phased in over the course of the year-on-year and it's more backend weighted? Robert J. Pagano - President, Chief Executive Officer, CFO & Director: I think it's going to be phased throughout the year. What we did say is, of that run rate, we know that we've already rationalized $23 million of that already. Kevin R. Maczka - BB&T Capital Markets: Okay. And then I, I mean, I would assume that these are lower margin products that you don't make much if any money on, but I think I heard you say, expect 15% to 20% decremental on those sales which would mean this is about a $0.30 or so earnings hit this year. Can you just talk about why those – why those decrementals would be as much as 20%? Robert J. Pagano - President, Chief Executive Officer, CFO & Director: Sure. I mean, you're right that it's low margin business in the start, and we exited 100% of it immediately and all the costs associated with it, you know, it would drop much less. But what's happening is, because of the timing of when we can shed the fixed cost as well as support…

Thank you. Your next question comes from Jeff Hammond, KeyBanc Capital Markets. Please proceed.

Hey. Good morning guys. Robert J. Pagano - President, Chief Executive Officer, CFO & Director: Good morning Jeff. Timothy M. MacPhee - Treasurer & Vice President-Investor Relations: Hey Jeff.

Hey. So just to follow on the sales transformation. Why not sell the business versus kind of exit? And, it looks like your – I was kind of just going through the math, you are losing kind of $15 million in op profit as you transition out. How do you see yourself replacing that through other means? Robert J. Pagano - President, Chief Executive Officer, CFO & Director: Well, yeah, we've looked at all alternatives, and we're continuing to look at it. It's a low margin business, and when you look over the history, we look for the last five years, and what we've seen in this business and margins continued to deteriorate. So, we made the strategic decision to take the action now. And we'll look at all alternatives, but given the disparity of the business in all the different locations, we believe that maybe difficult to do that. So we may be selling assets at that point in time, Jeff. When we look at replacing that certainly through acquisition such as AERCO as well as really focusing the team internally on organic developments and leveraging our talent to look on creating our own differentiated products, which was really the core of our business. So, we'll continue to do that, but now is the time to exit this business where we could take control of it, make the decisions and drive the changes in our organization. And as I said, it was critical for us to make the strategic decision on which businesses we wanted to be in, because once you do that, you then can now begin optimizing your footprint in distribution channels.

Okay. Great. And then just on FX, struggling a little bit with the drop through the earnings impact. Can you just walk through what you think the revenue headwind is? And then maybe how to think about translation versus transaction? Timothy M. MacPhee - Treasurer & Vice President-Investor Relations: Yeah, sure. The way we're looking at it Jeff is, from an EPS perspective, maybe it's an easy to way look at it is, with the euro, right now we think we have about a $0.20 headwind and that's a difference between – the current rate that I use was about $1.14 versus our average rate in 2014 was about $1.34. So to us, as we mentioned before, it's about – for every one rate – one point movement in the rate, it's about $0.01 to us an EPS. So it's about $0.20 on the euro. It's probably another $0.03 to $0.04 relating to the Canadian dollar year-over-year. And then finally, within the $0.25 to $0.30 is transaction effect year-over-year. We think we'll have some transaction affect to the tune of a few pennies year-over-year. So that's why we're in the $0.25 to $0.30 range from an EPS perspective.

So, what's kind of the – what do you think is the FX revenue headwind on? Timothy M. MacPhee - Treasurer & Vice President-Investor Relations: Probably – from a percentage perspective, probably 13%-14% year-over-year.

On the Europe business? Timothy M. MacPhee - Treasurer & Vice President-Investor Relations: Yeah, on the Europe business.

Okay. And then just finally back to Kevin's question on sourcing, can you just maybe, Bob, let us know what all in, as you look at kind of the three ways you've kind of gone after sourcing? What kind of the total savings is as you kind of incorporate this new $10.5 million piece? Thanks. Robert J. Pagano - President, Chief Executive Officer, CFO & Director: Well, all in, we don't give specifics in total by each commodity in every item because it's a net cost number. One of the things I will tell you though that from a copper perspective, we are seeing favorability there, especially in the Americas offset by steel a little bit. But the unique thing of copper inside of our EMEA is actually a slight headwind, in that, each, the copper commodities done in U.S. dollars and with the, copper has come down but the euro has come down even further. So it's actually a small tailwind or a headwind for them. So when you look at overall, we shoot for world class purchasing savings inside our organization that's what our teams are driving for and we'll continue to drive for those gross cost savings offset by the net inflation.

Okay. Thanks, guys. Robert J. Pagano - President, Chief Executive Officer, CFO & Director: Thanks. Timothy M. MacPhee - Treasurer & Vice President-Investor Relations: Yeah.

Thank you. Your next question comes from the line of Joe Giordano from Cowen. Please proceed. Joseph C. Giordano - Cowen & Co. LLC: Hi, guys. Thanks for taking my question. Just one quick clarification on the one you said on euro. Is it every $0.01 of euro decline is a $0.01 of EPS or is it like 1% decline is a $0.01 of EPS? Timothy M. MacPhee - Treasurer & Vice President-Investor Relations: Every $0.01 of euro decline is a $0.01 to our EPS. Joseph C. Giordano - Cowen & Co. LLC: Okay. Okay. That's what I thought. Okay, great. And then can you guys kind of talk a little bit about management bandwidth to handle? I mean there is like four programs going on now, you still – you're looking for a full time CFO. How do you guys look at handling everything that's on the plate right now? Robert J. Pagano - President, Chief Executive Officer, CFO & Director: So Joe, we look at that before we start any initiative. The EMEA team is well staffed to handle their transition and transformation. We have strong project management capabilities. We've even relocated the project management PMO officer from EMEA to lead our North America efforts. So we're bringing in outside help where we need it, but we believe we're fully staffed to do this. We have brought in a new supply chain person on board. He has been on for almost a year now, and he's developed a new team to implement our global sourcing initiatives and/or on the world. And finally on the CFO search as Tim alluded to, we're real close to finalizing our search. We hope to have someone on board in the next couple months, and I think you guys will be pleased with…

Thank you. Your next question comes from the line of David Rose, Wedbush Securities. Go ahead, please.

Good morning. Just couple housekeeping items. Should we expect any inventory obsolescence going forward? I mean, did you have any write-down in Q4 for the product rationalization and should some of that go into 2015? Robert J. Pagano - President, Chief Executive Officer, CFO & Director: So, when we look it, we had some small E&O write-offs inside of Q4, I think Tim talked about that. As we look in our overall rationalization approach, we've covered some feeling of some E&O inside of the numbers we've provided, but our goal is to sell all of it as much of it as we can during the process or sell it as part of a product or asset sale.

Okay. That's helpful. And then, it sounds like we're pretty much finished on the foundry, but what are the remaining challenges you have left on the foundry, shall we all talk about it anymore? Robert J. Pagano - President, Chief Executive Officer, CFO & Director: Well, I was hoping to get away again, another meeting without talking about the foundry, but I must tell you, the fourth quarter was our best performance of the year, it's stabilized. I really think the next step of the foundry is really beginning to add volume and continue to drive future growth inside of there. So, the teams are working. Now that we've stabilized the process which we've done for several months now, just we've seen the steady improvement. We can throw more volume inside of that and start leveraging it. But again, we're doing it slowly and cautiously because we don't want to disrupt what we've already accomplished. So we've stabilized that, we have backup capabilities now in all our processes and the teams moving slowly but surely, and I think that's what it's going to take. Anytime we throw large volumes in it, it disrupts the process. So we are slowly gearing it up and that's what we'll continue to do for the rest of the year. So as far as we're concerned, that's a non-issue. Let's hope at least internally for us, we're just focused on the continued improvement – more of a continuous improvement process.

Okay. And then – that's helpful. And then lastly, can I assume the byproduct for this rationalization apart from enhanced margins is better working capital? Robert J. Pagano - President, Chief Executive Officer, CFO & Director: That's all part of the whole structure. The whole structure – again, as we move into Phase 2, that's another part of how we distribute our whole distribution strategy. And yes, inventory – inventory turns is a key focus of our initiative as we drive and grow our ROIC.

So do you have a goal for us for 2015 or 2016 on that front? Robert J. Pagano - President, Chief Executive Officer, CFO & Director: Stay tuned, because I really want to talk about Phase 2 and the impact of that on it. So, certainly we have our stated goals that you're well aware of 12% and 12% operating margin and 12% ROIC on an adjusted basis, but our goals are certainly north of that.

Okay. Great. I'll stay tuned. Thank you. Robert J. Pagano - President, Chief Executive Officer, CFO & Director: Thank you.

Thank you. Your next question comes from the line of Jim Giannakouros from Oppenheimer. Please go ahead. Jim Giannakouros - Oppenheimer & Co., Inc. (Broker): Good morning. Robert J. Pagano - President, Chief Executive Officer, CFO & Director: Good morning, Jim. Timothy M. MacPhee - Treasurer & Vice President-Investor Relations: Hi Jim. Jim Giannakouros - Oppenheimer & Co., Inc. (Broker): Just not to focus too much on the near-term earnings reset as you transition what appears to be primarily your retail exposure, I know you don't give guidance Bob, but can you speak to your longer-term vision whether it'd be a three-year or five-year plan as far as the sales margin, earnings, target? Basically thinking – just trying to think about where you think the underlying earnings power of what you're trying to create at Watts will be appreciating of course that you've captured some of what – some of that in your Phase 1 detail? Robert J. Pagano - President, Chief Executive Officer, CFO & Director: Yeah. Well, David just asked that question in a different way, but really look at – we're a premier company, we're number one or two in most of the markets and brands we serve. And I believe we need to command a premier operating margin and ROIC. So that's our focus, that's our goal and this is a critical step. This business that we're exiting has been an anchor on us and it's been slowly eroding and it's really had – it's really deep focused our organization on our core and what makes us great. So we want to refocus on that core. I said our 12% operating margin goal that we talked about, we see that in the future very soon, and we believe we should have the opportunity to significantly increase…

Thank you. Your last question comes from the line of Kevin Bennett of Sterne, Agee. Thank you. Go ahead please. Kevin Coogan Bennett - Sterne, Agee & Leach, Inc.: Hey good morning guys. Robert J. Pagano - President, Chief Executive Officer, CFO & Director: Good morning, Kevin. Timothy M. MacPhee - Treasurer & Vice President-Investor Relations: Hey Kevin. Kevin Coogan Bennett - Sterne, Agee & Leach, Inc.: Bob, first question, I want to ask about your EMEA guidance for a sales decline of 1% to 3% . We've been down 5% I guess the last couple of quarters, and I'm just wondering what gives you confidence that it will only be down 1% to 3% next year? Robert J. Pagano - President, Chief Executive Officer, CFO & Director: Well, I think because it was down 5% in Q3 and Q4, the team is really, I think we're going to have a tough Q1 and Q2 comps, because really what we saw at that point in time was a lot of building of inventory for an assumption of a growth inside of the third quarter and fourth quarter, which never materialized. So I think there are inventory adjustments going on. I think some of the inventory adjustments happened in Q4 in particular. So I think now that – I think we'll probably see that in Q1 again this year, but the goal really here is, we believe that there are opportunities to grow. Internally, we're assuming a conservative marketplace, so we don't get our cost structure and that's why we took the additional actions just in case it doesn't materialize. So we're watching it closely. I'll tell you we feel good about our drains business, that's starting to grow. We see orders in the pipeline. Some of our emerging markets stuff…

Thank you ladies and gentlemen. I would now like to turn the call over to Bob Pagano for closing remarks. Robert J. Pagano - President, Chief Executive Officer, CFO & Director: In closing, I'd like to thank you for taking the time to join us today for our Q4 earnings call, and we very much appreciate your continued interest in Watts Water. We look forward to speaking with you again during our Q1 earnings call. Thank you very much.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a good day.