Thank you very much, Denise. I am joined today by David Farr, Chairman and Chief Executive Officer; Frank Dellaquila, Senior Executive Vice President and Chief Financial Officer; Bob Sharp, Executive President, Commercial & Residential Solutions; and Lal Karsanbhai, Executive President, Automation Solutions.

Welcome to Emerson's second quarter 2019 earnings conference call. Please follow along in the slide presentation, which is available on our website.

I'll start with the second quarter summary on slide 3. Sales in the quarter of $4.6 billion increased 8%, with underlying sales up 4%.

Automation Solutions was up 7% underlying with broadly, healthy and stable trends in most markets. Commercial & Residential Solutions underlying sales were flat as strong North American HVAC markets were offset by a decline in Asia and the Middle East, and the impact of distributor inventory destocking and slower consumer and certain other residential markets.

Trailing three-month underlying orders growth remained in the 5% to 10% range in the first two months of the quarter and moderated to 4% in March. GAAP earnings per share was at $0.84, up 11%.

In the first half, we returned $1.6 billion to shareholders and completed our $1 billion 2019 share repurchase target. Turning to slide 4, second quarter gross margin was down 70 basis points and EBIT margin was down 50 basis points.

EBIT margin was up 50 basis points excluding the Aventics, Tools & Test and GE Intelligent Platforms acquisitions. Tax rate of 22.3% benefited from several favorable discrete items in the quarter.

Slide 5: Second quarter underlying sales growth was led by the Americas, up 7% with solid growth at both platforms. This result, while strong, was approximately 2 points lower than we expected due to moderating upstream oil and gas demand and the slowdown in global discrete automation market.

Europe growth was stable across both platforms and Q2 marked the fourth quarter of steady growth at Automation Solutions in Europe and the 10th quarter for Commercial & Residential Solutions in Europe. The Asia, Middle East and Africa was flat and was also approximately 2 points lower than we expected due to the Commercial & Residential Solutions climate business, which improved in line with our expectations in China, but was slower in Southeast Asia and the Middle East.

Turning to slide 6. Total segment margin was down 160 basis points and was down 70 basis points excluding recent acquisitions.

This was below our expectations, primarily due to slower-than-expected sales. And we are taking actions to adjust investment spending and cost structure to deliver strong leverage on growth in the second half.

Capital expenditures were up as we made progress on previously announced facility expansions and upgrades in our climate technologies, final control and measurement and analytical instrumentation businesses in the U.S., China and Southeast Asia. Because of these expansions, CapEx spending in 2019 is more first half weighted compared to 2018.

Our full year CapEx expectation is unchanged at $650 million. Trade working capital improved 20 basis points, driven by receivables and payables performance.

Turning to slide 7, Automation Solutions' underlying sales was up 9% in the quarter and up 7% on an underlying basis. March trailing three-month underlying orders were up 7% and backlog continued steady growth driven by long cycle project wins.

Underlying sales trends in the quarter remained broadly stable as follows. Strong demand continued across our three kinds of business; MRO spending, brownfield, and greenfield projects.

All world areas remained positive and growth continued across our world areas stably. We continue to see healthy progress in our long cycle project outlook, a strong project funnel, steady orders conversion, and a growing backlog.

There were two key areas that missed our expectations and primarily impacted growth in North America. First, upstream oil and gas was slower as Permian customers pause to assess full year investment plans in light of oil price volatility late last year and development in the Bakken region was somewhat delayed due to unfavorable weather.

We expect growth to recover modestly in these regions through the second half. And secondly, global discrete manufacturing end markets were slower.

The impact of this was exacerbated in the U.S. by some rebalancing of channel and inventory from last year's tariff impact and price increases.

For the full year, we are lowering the high end of Automation Solutions expected underlying sales range from 5% to 8% to 5% to 7% which embed somewhat slower second half growth in North America and softer global discrete markets. For North America, we expect to low single-digit growth in Q3 and mid-single-digit growth in the fourth quarter supported by improving takeaway capacity in shale regions and stronger growth in our long cycle businesses.

Segment margin decreased 90 basis points and was down 10 basis points excluding the Aventics and GE Intelligent Platforms acquisitions. This result was below expectation due to timing of expected software-related revenue which we expect to largely recover in the second half of the year; the impact of foreign exchange losses recognized in the quarter; and slower than expected growth in North America.

We are adjusting our investment spending plans and accelerating some cost action to protect our full year profit margin and deliver incremental margin of 30% excluding the Aventics and GE deals. Full year segment margin is expected to be approximately 16.5% within the range discussed at our February investor conference.

Turning to slide 8, Commercial & Residential Solutions underlying sales were flat in the quarter as were March trailing three-month underlying orders. North American residential and commercial air-conditioning markets were strong and our global professional tools markets were favorable.

These positives were somewhat offset by the impact of distributor inventory rebalancing and slower pace in certain consumer and residential market. We continue to see improvement in China through the quarter in line with the plan we discussed at our February investor conference.

However, Southeast Asia and Middle East markets were slower than expected, putting our expected Asia recovery two to three months behind plan. Given the slower than expected start to the year, we are lowering our 2019 underlying sales target to approximately 2% which embed second half underlying growth of 3% to 4%.

Through the second half we expect China trends to continue to improve and markets across the rest of Asia to follow. Margin decreased 150 basis points excluding the Tools & Test acquisition.

Compared with the first quarter, price/cost trended favorably and helped the business deliver over 40% sequential leverage on incremental sales in line with our expectations. We expect the price, cost tailwind and leverage on higher sales to drive strong sequential and year-over-year leverage in the second half.

Full year segment margin is expected to be approximately 22%, consistent with the plan we laid out at our February investor conference. Turning now to slide 9.

Our 2019 guidance framework is updated to reflect underlying sales growth of 4% to 5.5%, reflecting lower growth expectation for Automation Solutions in North America and for Commercial & Residential Solutions in Asia and the Middle East. By quarter, we expect approximately 4.5% underlying growth in Q3 and 5.5% underlying growth in Q4.

Modest acceleration in the fourth quarter growth reflects improvement in our Automation Solutions long cycle businesses and upstream markets in North America. The high end of the EPS guidance range has decreased $0.05 to $3.60 to $3.70 with Q3 at approximately $0.94 and Q4 approximately $1.13.

We expect the full year tax rate to be approximately 23%. Please turn to slide 10, which bridges our second half 2019 GAAP EPS guidance.

In 2018 we had favorable discrete tax items in the second half, somewhat offset by $0.09 of one-time charges in Q4, 2018 including $0.06 of acquisition accounting charges and $0.03 of one-time 401(k) contribution charge. Together these items net to more than $0.20 headwinds in the second half.

Strong operational contribution is weighted toward the fourth quarter, and is supported by expected volume leverage, a strengthening price, cost tailwind, lapping of the section 301 tariffs impact and actions we are taking to right size investment plans and other spending. Additionally we are increasing our full year restructuring spend to accelerate approximately $8 million of actions into the third quarter.

Total 2019 restructuring has increased from $72 million to approximately $80 million and sets up a strong cost structure across both platforms in Q4 and heading into 2020. We expect the fourth quarter to deliver particularly strong sequential and year-over-year operating leverage as the benefits from the price/cost tailwind and reduced investment and discretionary spend build through the second half.

In the fourth quarter these items together with a modest benefit from aforementioned accelerated restructuring are expected to contribute $0.08 to $0.09 of operational EPS. On the right we've shown our expected sequential profit cadence by business in Q3 and Q4, excluding recent acquisitions.

Both businesses will deliver strong results, reflecting operational execution improving price, cost tailwinds and reduced investment spending. Please turn to slide 11 and I will hand the call over to Mr.

David Farr.

Thank you very much, Tim. I want to thank everybody for joining us today.

I truly appreciate it. As we look at what's happened in the second quarter and what's going on as we've seen the second half, we really want to make sure everyone understands what we've seen and where we're going to go.

Clearly, the cycle is still intact. We feel very strong about the cycle.

But as I've said in February and I've said a couple of times as I've had investor meetings throughout the last several months the tapping of the brakes is truly happening in many of our marketplaces. We can feel it.

However we've had to adjust to deal with that. As I look at the capital spending of our customers, it's still intact.

We've been checking everyone's reported from a quarter standpoint and their capital allocation standpoint for the year and all their – in our discussions with the customers. They still have the capital program set in place, how they spend the timing, these things are moving, but they still feel very strongly about this cycle and I feel good about this cycle.

Both Bob and Lal will comment on this as they go through their presentation, but thankfully we want to give you some insights about the Q2 and also what we see in the second half. Before we talk a bit more, I do want to thank the global Emerson team.

They worked hard through this quarter as we see in the quarter unfold, the shifting of the demands, the shifting of the sales and the actions necessary to deliver what we could deliver from a sales and profitability and cash flow. It wasn't what we expected when I sat here on the phone in February and what we – and we talked in New York in February.

Clearly, as Tim recognize, the U. S.

was an area that we saw the weakness, in particular around Lal's business, which we'll give you some insights, but around the short-term oil and gas and also around the distribution. Clearly, we underestimated the impact of distribution pipe being filled with price actions that unfolded in late 2018 from us and from other people, as we dealt with the tariffs, as we've dealt with the material inflation.

Clearly, people decided to put the inventory in place, the voice on the pricing and then now have to work that off. The timing of that work off is, I still has to be -- still has to unfold, we firmly believe they will be more closely aligned in early – our early fourth quarter or the early third quarter of the calendar year.

In particularly around Lal's business. I'll let Lal talk about that.

In Bob's, business we talked, incrementally margins were key for Bob and he delivered that. And he delivered over 40% incrementally.

The big issue we miss, and Bob will talk about that, really was around the Southeast Asia business -- I believe, in Southeast Asia and the Middle East business. Yes, China was down.

But I think we had that pretty well intact and really shaping, and Bob will talk further about that. But there are pockets of areas that we could not overcome and pockets of areas that we missed, but the tapping clearly happened.

We still feel that as we go through this third quarter, there is clearly, as I would say, we're going through two big mountains here. We're going through a gap right now and I still feel good about how come out of that gap.

And that's why we give you very specific forecast around the quarters, as we see this mapping out. We spent a lot of time -- I brought the teams in, both from the OCE in and then also Lal's team and Bob's team at the highest level and we sat down, we spent many, many hours several times.

What's going on? What do we need to know?

What do we need to do adjusting and what do we have to do? We've also taken actions, both Lal's and Bob's business taken actions and ensure we deliver the profitability with the uncertainty in case business does not come back for the second half.

How do we deliver that profit margins? In addition, we've also increased our -- what I would call, restructuring charges.

We're going to go after areas that we feel that we can integrate faster and with a slowdown in the decision and focus on the most profitably. Both Lal and Bob continue to look at areas and Lal in particularly has already accelerated some areas and a lot around acquisitions we've made in recent years.

A couple of callouts, I want to call out. And I want to from call of the Final Control.

Final Control had a very strong second quarter, both in sales, profitability, bookings, cash flow. They've continued to outperform their key North America competitors.

Also I will make a special call out to my Latin America team, who I abused for a couple of years and for the second quarter they had double-digit over 10% plus growth, that’s more than 10% growth across their business. That's very good.

And I guarantee these guys are focused very hard in delivering that for the whole year and it's very, very important. As I look at the cost actions that these guys are undertaking, Lal's business still going to grow, very strongly.

He's still going to grow 5%, 6%, 7%. I see Bob's business coming back in the second half.

But clearly, that 3% to 5% range was what we thought it will be the whole year. But with the miss, in particular, around international, it's clear that's not going to happen with the whole year.

But we want to make sure we have our cost aligned as we leave in this year and as we move into that second half – in the first half of 2020. And I applaud the guys for taking these actions and even when you're growing, we got to take these actions and make sure we do the right things as we focus on what's right for the long-term cost structure of this company.

From the cash flow, we had a good second quarter. I think our balance sheet, and Frank would agree with that, the balance sheet Frank talked about this at the Board today.

We're in a very good shape with the balance sheet. I think our working capital, we got in line, after the first quarter, it’s a little bit high, but we got it back in line.

And I feel very good about the cash flow for the year. If the business slows down a little bit more, it's easier for us from a working capital standpoint, but obviously, we lose the earnings side of that.

So I feel good about approximately $3.2 billion. I feel good about the free cash flow around $2.5 billion, which is very important to us as we look at the total company from a capital allocation standpoint.

But as we look at that second half of the year, I think we haven't focused right now what's going in the marketplace. I think we have a cost structure in place.

I think feel that we -- the organization globally is focused very hard on delivering the second half. We had a good start with April.

And if you look at order trend chart, from the standpoint, Bob's business kicked back up a little bit in April. He went positive on a three-month roll.

Lal's business, as we expected in April, dipped down a little bit further. We're still right in that range where we were in the March three-month roll.

We firmly believe that as we look at this forecast, we will be back in the 5% to 7% range on three-month roll as we leave June, and that's key. And from the standpoint of positioning ourselves for a stronger fourth quarter, a couple of things happened.

Obviously, easier comparisons, but clearly, we see the pace of business picking back up. And that's what you're going to obviously watch as we look at the order trends and we communicate to you on the order trend charts.

And that's what's so good about us doing this from that perspective. But I want to thank the organization out there.

It was a quarter that unfolded a lot different than anyone thought. These guys reacted very quickly.

As you know, I also referred to this, I have my hands in the reigns right now. I put the horse up a little bit.

I got to reigns a little tighter and I think Bob and Lal are reacting, his team are reacting to that. And we have made commitment to the Board.

We've made commitments to our shareholders. And we are focused very hard in committing that second half to below the year we laid out.

And I want to thank everyone for doing that. I'm going to turn it over to Bob to go first, and then Lal will follow and then we'll do a Q&A.

But again, I want to thank everyone for joining us today and I look forward to the Q&A and talk about what's happening. So, Bob, it's all yours.

All right. Thanks, Dave.

You saw the derby over the weekend, Dave pulled the reign, but the stayed in the lane as well. As you've seen, the March underlying was around flat as well as underlying with our expectation, which is in mid-February in the investor conference, we thought we'd be moving up by now.

As you did see with the margins, we reacted quickly to that on the cost side and now we got the sales play out. Two key indicators to really watch, especially this time of year in these conditions.

USAC was very strong, as expected. And the China recovery is playing out as expected.

I'll show you that in the next chart. The key challenges we had were, as Dave mentioned, the rest of Asia, which a lot of our customers in the rest of Asia are then selling to the Middle East and a lot of it Middle East oriented.

Yes, it stayed down in the 15% kind of territory, which we were not looking for. And we have some pockets of weakness, as Dave mentioned.

In addition to some of the discrete products, some of the U. S.

consumer-oriented stuff, disposers backs, some thermal disc kind of general product clearly saw both some inventory destocking dynamics playing out as well as some weather impact. So, again, that's really kind of what played out in March real quickly against us.

April, as Dave mentioned, has ticked back to the positive. We continue to expect upward movement to support that 3% to 5% sales in the second half that we talked about as well.

We look at chart 13, again the China update specifically I showed last time the verticals between heating and cooling, coal chain and tools own products because there are very different dynamics playing out. Starting from the bottom, Tools & Home Products, not a big business in Asia for us, but a solid amount especially of disposers and Ridge pro tools and you can see a very strong quarter 77% on top of a very big one in the first quarter.

Cold chain, a little lighter, but there is some volatility here as you can see by the way the quarters go and still staying solidly positive. And we continue to have a good outlook for cold chain in total in Asia, especially in China as we continue to do more and solutions activity.

And then Heating and Cooling which is the big trend line driver here. We mentioned it was down 40 plus percent in the first quarter improved to a 20% in the second quarter.

And is on the trend we're looking for. So, China in total Q1 was down 30, Q2 was down 16%, and we do see this playing out into the positive in this quarter, in Q3, and then continuing to play out.

Q4 is going to be largely driven by what happens with the heating activity that comes out and so we'll be watching that as well. If you go to chart 14, if you look across the key verticals in the geographies, again, overall some really solid strength and we're confident about the second half.

First of all, North America, again, good dynamic high single-digit sales in the quarter. You hear our customers speaking very positively about how things are going and how it looks.

It's always weather-dependent, of course, in the summertime, but right now, it's looking very solid. North America Cold Chain, there is a little mixed activity here and I think again when you start getting into the general industrial activity and destocking and stuff we see some of that.

But overall, solid activity and some good uplift continues from some of the acquisitions we did, especially the Cargo and now the Cooper-Atkins acquisition. Global ProTools had another very solid quarter very strong quarter on 5% underlying for sales.

It's quite broad. Europe was up around 7% and you saw the China numbers reflected in tools and home products very good.

And -- so overall -- again some weather in labor kind of impacts in the U.S. and we'll continue to watch the construction indicators certainly.

China, as I mentioned in the previous chart, Cold Chain Tools & Home Products continued strong. AC and heating -- and again, we -- this is the time of the year when the AC products are developing.

Last year the customers -- our OEM customers bought into that because they expected very rapid activity once the season started. Frankly, they got stuck with some inventory when that happened when the market turned.

So, they're being more shy about that. I'll say it right now; their quotation activity is substantially higher for their customers right now.

It's just that they're not going to release anything until they've got the clear signal from their customers. So, this also relates to their financing capability right now.

Outside of Asia, again, first half did not develop as we're looking for. We are looking for improving trends.

We'd like to get even territory in the second half. But certainly the Middle East in particular has continued to have some challenges, partly probably because some of the dynamics, competitive dynamics that are playing out because of challenges elsewhere and people looking at new spaces.

Europe again continues on a steady growth for us. It continues to be a story of our good solutions activity and programs in what is otherwise a relatively low growth market in Europe with the some of the dynamics.

Latin America I'll give a shout out to Rafael and the team. They did double-digit this quarter.

We always say we'll give them a shout out if they did that. And Canada also for us was double-digit in the quarter.

So again we are watching very closely, especially rest of Asia and Middle East and some of this inventory activity. But even April has turned out in line or I'd say a little above our expectations in orders.

So we're confident about how the second half is going to play out. Profit as Dave mentioned has developed as we said it would.

We got in this very quick around late February and March when we saw what was going on. We saw the sequential margin.

We're going to see that again in the second half. And we have a rather healthy tailwind in the second half on price, cost, which gives us some confidence.

I'll turn it over to Lal now for Automation Solutions.

Thanks, Bob. Good afternoon.

Let's turn to slide 15. As David said earlier, the investment thesis in Automation Solutions has not changed and the cycle is intact.

The long-term KOB1 greenfield opportunities in front of our business continue to be very robust. We have, however, experienced a slowdown in our short cycle business in a couple of markets that I will discuss on the next chart.

So on chart 15, the KOB1 greenfield project funnel remained strong. It has actually increased to $7.7 billion, an additional $100 million since we met in February.

So very robust. We have booked an additional $100 million since February for total booked of $450 million and have an additional $850 million committed to Emerson.

The funnel remains relatively intact with very few minor movements related to timing. The bulk of the major international oil company projects are holding as evidenced in their affirmation of capital plans in this quarter's earnings announcements.

Let's turn to slide 16. There are two fundamental market changes that from what we discussed in February both impacting that short cycle business.

The North America upstream oil and gas markets, and the global discrete industrial distribution market. Let's first talk about upstream oil and gas in North America and it's really related to three areas.

First is the Permian basin, in which we continue to see good, well drilling activity. However, the wells are being capped and not completed.

It is in this completion process of that our instrumentation and equipment is utilized. There are three reasons for this.

One there was a pause given to lower oil prices, sub $45 in December; two, a lack of takeaway capacity. The current pipeline capacity utilization is running north of 96%.

Although this has been an area of significant investment in the construction and expansion of two key pipelines, Sunrise and the EPI crude we'll take capacity utilization down to 88% by our Q4; and thirdly, consolidation of players. They are less independents and more of the integrated oil companies that have better capital management and cost controls.

The second area on upstream oil and gas is the Bakken field in North Dakota, which has suffered from a very difficult winter in the Northern Midwest in which very little new activity took place. And thirdly, Western Canada, which have suffered from both political hesitation around oil and gas infrastructure investment and multinationals exiting.

The U.S. refineries on the Gulf Coast need the Canadian heavy oil, but there's a little takeaway capacity to get it there.

And today, predominantly rail is being used. There are needs for pipeline such as the Keystone XL.

However, none – there's doesn't seem to be a whole lot of movement on any of these. So I believe that the second half will be very positive, more positive in two out of these three regions, as majors continue to support investment and takeaway capacity issues are solved.

The second impact in the margin was the global manufacturing end markets that slowed and have negatively impacted the industrial discrete distribution channels. The slowdown is predominantly the automotive and the semiconductor sectors.

And the channel took aggressive restocking actions in the first calendar quarter with concerns over tariffs and price increases in January. This above -- what I call, above normal levels of inventory in the channel has extended the burn rate and resulted in slower-than-expected distribution activity, which we expect to recover in this current quarter.

We believe the discrete distribution channels have started to stabilize. And as we went – as go through the quarter and expect a relatively more stable second half.

A quick comment on the other world areas. Europe is stabilizing from an Industrial Automation perspective and the process automation activity in Europe remained strong, driven by KOB 3.

Asia continues to be very strong, including China and India. The Middle East and Africa orders are strong, although we do have a concern around sales conversion as customers have pushed back some deliveries on key projects that we have won.

And then, as Bob and David alluded to earlier, Latin America is very strong, driven by Mexico, pipeline and terminal investment and Argentina shale gas in the fields. Let's turn to slide 17.

The first half growth was -- underlying growth was 7%, which is 1 to 2 points lower than we planned coming into the year, in which we assume the 7% to 8% for the year and are looking in the 6% to 7% band. The first half EBIT margins were 14.7%.

We do maintain our guidance for the full year EBIT in the 16% to 17% band as discussed in New York City in February. The second half improvement is supported by volume leverage, driven by three factors.

One, our backlog has increased by $400 million since August of 2018. The volume will be driven by backlog conversion in our longer cycle businesses, Final Control and systems.

A number of positives in these longer cycle businesses will continue to benefit from -- that have continued to benefit from greenfield and modernization activity and grew orders in the first half. The systems business run by Jim Nyquist continues to win, with first half orders above 10%, driven by large KOB1 projects in Asia and the Middle East, modernizations and systems upgrades around the world and our modular control product families, the PK and the OCC controller have booked $120 million since launch.

And year-to-date bookings represent an annualized run rate of $180 million. The Final Control business also grew orders over 10% in the first half, led by Ram Krishnan and his team and continues to outperform.

We continue to invest in key capacity regionalization in North America and Asia and global service center infrastructure. The business is outpacing competition, as David mentioned.

Our first half goal was 8 points greater than our largest North America competitor. Secondly, we have modest -- we see modest improvement in North America growth in the short cycle businesses, recovering upstream.

Well completions as well as takeaway issues are solved and improved weather conditions in the Bakken. And thirdly, we say we expect a strong turnaround season in the North America refineries and petrochemical complexes.

From a P&L standpoint, price/cost will be more a favorable tailwind in the second half of the year. Spending was originally geared at a higher growth level and our management teams around the world have responded quickly to reset priorities and cost structure and keeping us in the 16% to 17% EBIT band for 2019.

Three specific set of actions: Cost-containment actions across the business, managing the pace of the remaining investments for the year and pulling up approximately $6 million of incremental restructuring in response to two opportunities, more quickly integrating the recent acquisitions and rightsizing our cost structure for 2020. On a positive note, we're happy with how April came in from an orders perspective and we believe we are well set here to deliver the second half.

Thank you.

Thank you very much, Lal. With that, I'd like to open the floor for Q&A and take some questions from the participant there.

Thanks. Good afternoon, everybody.

Good afternoon, Joe. Good to hear from you.

Yes, thanks for getting me on. So, I guess, my first question, Dave.

Maybe provide a little bit more color on what you're seeing in the channel. We heard a little bit around channel inventories being built up in Cold Chain, discrete automation.

I'm assuming on the upstream side as well. I just wanted to get a bit more color about where you think we stand on that specifically and what gives you the confidence that we're going to get through that in the next quarter or two?

Yes. For the standpoint, when we say I think most of the channel relative to the short-term products via discrete automation are Bob's business or -- and Lal's business relative to some -- for the small instrumentation that go through a channel.

From my perspective, it built up late last year, as the market -- as our customer base slowed down in the short term, they had a certain burn rate, which did not -- has not happened yet. As we look at this model and talking to the channel because we spent a lot of time now talking to the channel, it looks to me like this burn rate will be done by the end of our, what I would say our third quarter, which will be the second calendar quarter.

So it's going to help us more in the fourth quarter. I mean we do the projection.

What we see from the standpoint of our order pace and the demand out there based on the inventories. It looks to me like there will be more in our fourth quarter -- or the third calendar quarter, and that's how we built this quarter out.

Clearly, a lot of assumptions relative to the business environment, but that's what it looks like and we've gone out and done a lot of channel checking to make sure we understand that, both in the tools standpoint or the consumer side and Lal's businesses, as you look at the distribution channel here. So that's how we see it right now, Joe.

And by the way, I want to make a call, out to you. Your report on HVAC, the report was very good.

I think you and your team did a good job there. It would have been nice if you would to talk to us.

But you did a very good job there. I do understand that market.

I do understand that market a little bit, Joe. We're going to talk to you.

We'll give you a call. I just had to take a shot.

I had to take a shot, come on.

Hey, look, I appreciate the positive feedback, Dave. If I could follow-on maybe just one follow-on question just on.

Look, it sounds like the project funnel still remains a good. It sounds like you're winning some awards, KOB1 awards.

I guess maybe talk to us a little bit about what’s pricing been like on the project side? And then also, as you're thinking about kind of mix for the rest of this year and into next year, should we just expect the project mix to be coming through in a little bit of lower margin on the ANS side?

I'll answer first, and I'll let Lal. It's a big issue right now because that's where we are.

Our backlog has been building on the project. The price of the project hasn't really changed or hasn't been an increase or a decrease from the standpoint of a competition standpoint.

It depends on what the project going after, is it Yokogawa, is it Honeywell, is it Rockwell, or is it the ABB. So, from that perspective, it hasn't really changed.

The projects, I would say, are starting to shift a month or two relative -- not awarding, but what I would say execution around the projects. And what we're seeing right now with the buildup of the backlog, we're going to start seeing some initial phases of projects these guys won late last year, early this year, and that will start coming through in that fourth quarter.

So, as Lal looks at his mix in the fourth quarter, he's banking on some of the short cycle stuff coming back. He's got some project work coming in that will hurt his margins.

But that's also why he's accelerated some of his cost actions. Because he sees that the growth wasn't there in the KOB 3 to cover the initial phase here.

So, now he's got to get the cost structure right. So, let me -- I think we're in good shape.

I'll let Lal comment on that, but that's moving dynamic we have right now, ignoring the distribution side, how we play this out as we move forward. Lal, do you have anything you want to add?

Yes, thanks David. I think nothing fundamentally changed around pricing and margin expectations on projects from what we discussed in February.

Clearly, project margins are dilutive to a total, but that puts the emphasis on driving the KOB 2 and 3 and adjusting the cost structure. The functionality of pricing is really around the number of jobs available in the market and the EPC capacity.

And as we see that increase, we'll see less tension on pricing. But at this point, clearly, at the beginning of the way, midway through -- at the beginning of the way, I say you call it the pricing is aligned with expectation that we've had and planned.

Yes, I think Joe, I think one of the key things that Lal -- I want to call out Lal and his CFO, Dave Baker have done a great job is a team of trying to lay out as the sales unfold, the next six or next two quarters, how does that mix change? And I think they've got -- I think right now I look at it and they've got it pretty well balanced.

Now, obviously, something can change the assumption. But they laid it all out and that's where the cost actions came from.

We said we need a little coverage here and you need to get the costs out. In fact you need to get a little bit more than extra out in case things don't come in a distribution channel.

So, that's how we -- and I give a really special callout. A quick work on this because this is a midstream change for us, but that's Emerson, that's what we do.

And then if I may David, Joe, one additional point. We look at all these jobs.

We look at our success rate probability, our intimacy with customers where we can best place our technology and gain share will be three opportunities. All those go into the decision factor and our competitiveness on these of each jobs.

Yes, good. Thank you very much Joe.

Take care. Look forward talking to you.

Make sense. Thanks guys.

Hi, good afternoon.

Good afternoon Julian.

Maybe a first question just around margins. Margins have been flat in both businesses for three or four years now if we include the 2019 guidance.

So I just wondered when you're looking out at those goals for 2021 if you thought there was a need for a lot more urgency around extra restructuring perhaps to push those margins up in the medium term. I noticed the restructuring had gone up I think $7 million or $8 million for the current year.

But wondered if you were kind of dusting off more aggressive restructuring perhaps to make sure the margins can move up next year.

At this point in time, Julian we're not -- we still firmly believe you can get back to that 19% top arrange. I think clearly we have a -- getting back for a full year into that 16% to 17% range.

I'm assuming you talk about Automation Solutions here. That's going to be very key.

At this point in time, we're looking at that. But if we see things not progressing from a business standpoint or mix standpoint, we can -- we have actions out there we can go after.

But at this point in time, we still feel pretty good about that and we're going to go with the Board in June over the strategy both -- over the next couple of years through 2021 for both businesses and the total company and that will push us again to see what kind of restructuring we need to have. But if we have to restructure to get the margin we'll do it.

So right now I don't think we’ll see fundamental change. We'll just do a little bit more this year because of the mix change and the slowdown to growth and we got ahead of spending.

And so acquisitions are no different. We knew acquisitions are coming.

And so I think that right now we feel good about. But three or four months, we might change that course again.

Understood. And maybe just following up.

You mentioned that positions there and you've mentioned several times in the prepared remarks accelerated integration particularly of the ones in Lal's business, but also perhaps Tools & Test in Bob's. Maybe just give an update.

If you look across Aventics, Tools & Test, GE Intelligent Platforms, how happy are you right now with the organic growth in those businesses and that pace of acquisition integration?

Bob do you want to comment on that?

Yeah. Let me start with Tools & Test.

We are very happy with the way things are playing out. We have the North America sales organization together between electrical and plumbing.

We are working now on the European, bringing that business close together, which is also a very big piece of business for us that will be playing out soon. From a cost standpoint, now obviously there was a lot of group cost, the Tools & Test had as a group and -- that we basically didn't even come with the business by the time we were done.

We talked at the time about getting away from some of the noncore stuff communications business out in California, some hand tools stuff in China that frankly was losing a lot of money. And there's another piece right now that's playing out.

So I would say everything we identify there's opportunities. We are running ahead of that right now.

I think I mentioned ProTools was around 5% underlying growth in this quarter. So we're happy with the way the growth is playing out.

And it's really strengthened on both sides. A lot of cost improvement of the Tools & Test side and healthy sales activity on the Ridge side, which is a good combination with Ridge profitability.

I think as I look at Mike, as we had organization session with them Julian, I like the progress – they’re ahead of plan. I don't see any acquisitions in Bob's business right now, in the near term – outlook.

We were out looking, I don’t see anything at this point in time. But he's got his team very highly focused and there are also unique growth opportunities within his business.

I feel good about that side.

Yeah. I'll comment on three deals actually.

Aventics, very happy with Aventics, Julian. Significant integration effort by the -- our business unit with that reports in, Manish Bhandari leads that business for us.

And clearly impacted by the distribution channel comments that I made earlier in – on chart 16, as that slowed up and that forced us to drive some of the integration a little bit harder. But a lot of good work there.

And I believe a fundamental part for our fluid power business in that discrete space. And second, Machine Automation Solutions.

A lot of work there. We've touched the entire global channel over the last 90 days as we've gone around the world and net that very important channel for us.

I've been personally engaged with the team twice. I took David to Charlottesville to engage with that team.

And we are now exploring multiple synergies around the KOB 1 waves what we see around the world, where the PLC can come in and add value to our offering.

I would say that, that business is growing, better profitability. It’s coming really good..

It looks very good early. And then last, I'll just, again, I mentioned it earlier, but the work that Ram Krishnan and the team have done around the VMV&C is just phenomenal and well ahead add of our plan and it continues to outperform.

The acquisitions we're looking at in Lal's business right now are very much – we took one to the Board this morning. It's around software.

And so, another software acquisition. We've done a couple already this year.

So nothing big. But again, these are coming in and adding some opportunities for us.

But so far, the integration of the GE business is doing really well and especially with the timing of the OCC and the PKS our own PLC, which has actually taken off and we're starting to utilize them across the board. So -- and Julian, I'm very pleased right now.

The guys got their work cut out for them. Clearly, the downturn in Europe and the distribution of discrete business, automotive was not a great timing for us.

But we also step back and get a chance to do things faster, so they will bounce back. And so I feel good about them right now from that perspective.

Thank you. And thanks for the extra color in the slides like chart 10.

Well, we try to help you guys out, just to make sure that you clearly understand Emerson. I understand it.

I just want to make sure that you guys understand it so...

All right.

Next.

Hey, guys. Good afternoon.

Good afternoon. And are you getting double time today, because you’re in different time zone here, Steve.

Good morning to you. Money never sleeps, Dave.

Money never sleeps.

Well, that’s got to be quote of the day. Money never sleeps.

Okay. Go ahead.

Sorry.

But on this final one, it gets kind of silly to kind of delve into quotation activity and orders. And going back, you guys put the $850 million in kind of committed but not booked number in there.

I mean how did that compare to where you were last year? Is that number like at all relevant?

Or is that pretty steady as she goes?

It's relevant. It's relevant.

Last – in February that number was 750, wasn’t 750? 800?

$800 million, that should, stay pretty stable, about 800 in December basically about 12 million higher.

It's up versus last year for sure. But that's the key number for us as look at it, because we know those bookings are coming at us and we know those bookings will either happen this quarter or next quarter.

If that number keeps growing and stay steady that's a good sign for us, because that means the funnel is maturing and happening. So the reason we track that and share that with you is it tells us the confidence, relative to our growth and opportunity in the second half of the year in bookings and more importantly for the first half of 2020 in sales.

That's a relevant number for us and that's why we track it and give it to you.

And the KOB. Steve, sorry, go ahead.

Go ahead, Steve.

Can those ANS bookings in at any point, over the course of the second half kind of migrate towards the double-digit range, or is that, you know, too high of a hurdle coming out of this lull?

Right. From my perspective, I'd say we stay within the band of that 6 to 8.

Yes. And I mean it's possible you can have a three month roll with a couple of big bookings in the month and how we look at the three months roll, so it's possible.

It t is going to definitely move back up towards 8%, 9% range. There are some big projects out there that are being worked on right now.

They are definitely going to come. So, yes, I mean our booking pace, we like what it is right now.

So I think the opportunities are still there.

We got a few other in that committed bucket, Steve, if they do trigger will pull us up into the double-digit.

Okay. And then one last one for you, Dave.

So this kind of lull here? And I guess your outlook, is that enough to kind of knock you off your – off the long-term, 2021, I think it was like 450 or something like that.

Does this trajectory or at least maybe this is like a flattening in trajectory or is – do you think that, that’s still an achievable target in the out years.

Right now, we're going to debate this. Because I still feel so very good about it.

Frank and I haven't talked about that. It might come differently.

There might be less acquisitions. There might be different capital allocation on it, Steve.

But I still feel good about it because the cycle is still there for both -- for Lal's business and Bob's business is starting to come back. So I still feel good about that at this point in time.

I'm not ready to come off that at this point, at all. And Frank and I are debating that because we've got to in front of the Board next month and talk about the next three years, which includes, obviously, 2021.

So I still feel good about it.

Okay. Thanks a lot, guys.

I appreciate it.

Steve, thanks for calling in from China. Good luck with Jamie tomorrow, okay, be nice to him.

Thanks. I’ll tell him, you said, hi.

Okay, appreciate it. Thanks.

Hi. Good afternoon.

Good afternoon, John.

Wanted to have a little conversation around the 5 to 7 underlying growth here for Automation Solutions, kind of what could put us at the lower end of that range and then, obviously, you kind of have already discussed the high end of the range.

I will take a shot. I think the one key issue at the lower end of the range is the channel.

If the distribution channel does not come back and it takes all the way to the end of fiscal year, they work off the inventory that would cause that lower range that would put a lot of pressure on us clearly. That's the one area that we see right now.

I would also say that it could be some of the projects we have booked and won that we're building on right now, get pushed out a couple of months. So those are the two things, I would see that push us back out but it – we’ve done a lot of work in this right now.

We feel good about it, but we're going to push and shove around the world and make sure we stay within that range. Lal, anything you want?

I agree, David. I think I have more confidence in the stabilization and improvement in the North America upstream market in the second half versus the first half.

We could slip into the discrete channels. We're watching carefully.

We miss that call, it slides to the lower range. I have confidence, however, in the strong turnaround season based on what I see today.

That puts us – moves us to the upper end as well as the shippable backlog that we have in our longer cycle businesses that will impact the second half.

Okay. John?

Yes. And then just thinking about the April orders commentary.

In December, you kind of broke out a bunch of different markets for your automation business. Obviously, you've talked about upstream oil and gas.

You've talked about discrete. But if we were to think about those other buckets is there kind of just the general deceleration?

Or are parts of those you talked about the turnaround season and how you think that plays out? I mean is refinery accelerating?

Is midstream accelerating? LNG kind of maybe some color on those submarkets there for us.

Yes, we’ll try the best we can. We did not do that same initial launch out there.

I tell you, it’s a lot of work to break it down that way. But if I look at it, definitely refining, we see the petrochemical guys picking back -- spending back up.

We now see the LNG products coming and being worked at this point in time. The early stages of some initially, they are brownfield expansion and the big projects will hit us more in 2020 and 2021.

We're seeing a general pace of investments just from our companies. We see the power business which had a very strong lull in the first half.

The upgrades -- their bookings have been better than their sales and so therefore, we're looking at better second have in the power area. So, we feel a little bit better pace of spending and just upgrading in the business we're seeing around the world.

But that's about the only color we have at this point in time.

I'll add one, Dave, around the midstream reach we have seen an uplift in activity over the quarter versus the wellhead. Clearly, as the pipelines are being built, that takeaway capacity is being built we see that.

Obviously, there's less of our instruments and equipment on that pipe than there is at the wellhead, but we have seen that midstream activity strength, particularly, in North America. But I echo Dave's comments.

The LNG markets are strong. We see the projects moving into FID and we're working across the confidence right now very aggressively.

Thank you, Johnny.

Thank you for the color.

Hello Andrew.

Good afternoon guys. How are you doing Dave?

Not too bad.

Excellent, just a question probably for Bob. What do you think is going on in the Middle East market because oil prices only looked down for a brief period at the end of the last year?

I think you mentioned competitive dynamics. If you could elaborate there and can you give us some more commentary on why you think the market along with Southeast Asia can come back over the next few months.

Okay. I think the big thing we see in Middle East especially if we get into Saudi.

The spending activity is driven by the government releasing stuff and also the government paying for the projects. And frankly that's kind of been tightened up pretty heavily to where our customers in the Middle East, they're kind of c aught in a little bit of a crunch, if you will.

And then there's a lot of Chinese companies out there right now. The China market is very difficult.

They're looking for aggressive places to find some business and they're going in. And with some other rotary and other kind of products and disrupting some of the, I would say, the normal space or the normal technologies and things.

So, it's a combination of those two. We were there back in January and frankly, I mean it felt like it was quite stabilized and everything and we were looking for it to start moving up.

It just hasn't really started moving up. In the Southeast, again, a lot of the Southeast Asia business we have is OEMs other than shipping in the Middle East.

So, its -- I'd say the two are really quite closely connected. And we're not calling for any major upturn in the second half.

It's really just a stability. And it's been down for awhile.

So the comps just start getting easier in the second half more than anything.

And we see the money starting to free up in the Middle East. And we're getting a lot of bookings as Lal said, but the question is now will they start spending it.

And so I think that our initial feel right now that money seems to be freeing up and that's why we feel a little bit more positive about it being a reasonable better second half than the first half, Andrew.

Thanks for that Dave. And then I wanted to ask you about, you said you watched KOB 3 very closely in the past, obviously, a bit of a slowdown here.

What do you think the slow down means for the cycle itself both in terms of the larger projects and actually margin mix for your businesses? Obviously, KOB1 is a little lower margin than KOB 3.

How do you offset that mix impact? And do you worry that project can move to the right as you see that KOB3 start slowing down a bit?

Yeah. I'll answer first and I'll let Bob.

The KOB 3 from our perspective, clearly, we've had a very solid work. It’s still very good.

We had a very good month, again this month. I think the key issue for us is as they tap the break on spending in certain areas in particular in the U.S.

and Canada. That's clearly hurt us from a profitability standpoint.

Therefore, that's why Lal has taken -- and his teams are taking the unique cost actions right now, to assume okay, guys, KOB 3 will not be as strong in the third quarter. We may have a weaker in the fourth quarter.

So what does that mean relative, how do we protect our profitably and improve our profitability in the second half if KOB 3 does not come back to a level we want. And, therefore, that's why we're taking the cost actions right now.

And if it does change as we move into the first half of next year then we're going back to the question I think that Julian asked us, we're going to have to actually take additional cost actions because that means that mix is changing. We don't believe the fundamentals story that we laid out, the strategy we laid out is changing.

The fact that our Final Control business has been able to grow 10%, way above our competitors Final Control business in North America, tells me that we are still gaining and I still feel good about that. But any quarter or two quarters you could have that tapping and that's what we're watching right now.

That's why I'm still watching it. I'm going to watch it very closely how Lal’s business unfolds in this third quarter, because if it doesn't come back a little bit then he's got a lot of pressures coming at him in the fourth quarter and the first quarter of next year.

So Lal do want to?

Yeah. No, just very quickly, watch that 50% number in KOB3 very, very aggressively; we work it with structured organization and programs around the world, around service MRO, service as – software as a business, service as a business for a models.

But I also mentioned that the KOB 2 business is also equally important. The modernization, and we continue to see modernization programs moving forward.

And those are very -- they're relatively margin accretive as well.

I think going back to the project pushout, going back to this question you asked, Andrew and then also going back to what Steve asked. If you -- when we put our orders out again, of which we do from time-to-time, if you don't see a movement up towards the higher end of that 6% to 8% for Lal, that tells us that we're seeing a percent of KOB 1.

And, therefore, that's going to be a concern for us. So watching the orders and our communication around that will tell you if it’s unfolding or not unfolding.

That's what we're going to be watching now. I think KOB 3 we have pretty well set.

KOB1 now and the timing of that's going to be important. We'll watch it real hard.

Appreciate it guys.

Thank you. Take care.

All the best to you. Be safe.

Yeah, thanks. Good afternoon.

Good morning, Nicole.

So maybe we could talk a little bit about the cost actions that you guys are taking. Is it possible to parse out what you're doing with respect to costs versus paring that growth investment?

And how should we think about growth investments into 2020? It seems to me that this would probably be a push out investments rather than a cut of investments.

Yeah. From our perspective, I don't want to break out too much information from a competitive standpoint.

But it's -- we were clearly running our investments at a, say, a 7% 8% 9% underlying order pace and therefore we've had to dial it back to be more in that 6% to 7% range. And I think that -- to your timing is, yes.

Priorities from the standpoint that will be -- push them back -- we'll push them out a little bit more into 2020. I would not say, they'll go away, these are important programs, but we try not to get ahead of the growth curve and we clearly have in the last two quarters here.

As you look at the acceleration of the investments that Lal's teams done. And therefore, we know are tracking to bring them back into line.

We're not going to kill them, but it's just more of a timing of how this goes. On the restructuring side, that's a little bit different.

That just goes back to, okay, we know the cost structure, needs to be -- we need to do this restructuring. We were talking about doing it in 2020.

We now feel like we need to get ahead of this and that's why we pulled about $10 million, both in Bob's business and Lal's business. And that's how we are, Nicole.

I don't want to break it out. But I think that you're reading is right.

We're just slowing it down right now. We're pushing it, slowing it, so we get our growth investments in line with our actual growth.

And I think that's what we do and that's what you've done with your team

That's right, David. And we look at this, as you know, this is how we run the business, aligning a point less, as we think around the top line today than we did back in February, required us to look at the investment pacing and pull back in a few spots, some of it will be timing.

We'll see how the year develops.

Yeah.

And then, obviously, we do have opportunities around the acquisitions and around getting the cost structure for the -- right going forward on the restructuring side.

If you can imagine, it's pretty significant numbers, given the size of this business.

Yeah. That was really helpful actually.

Thank you for the color. And I guess just the second one on capital allocation.

You guys finished with the $1 billion repurchases that you expected for the full year. Does that mean we're done?

Or is there scope to increase that $1 billion target for 2019?

At this point in time we are set at $1 billion. As the Finance Committee met last night, we did discuss if the situation arise or rose that we had to do it, we'd go back in.

But right now we are set up to $1 billion and we're not going to move it at this point in time. But again, that will be a topic of our whole strategy review and capital allocation review with the full Board in early June.

But I would say, right now, it's set at $1 billion unless something major happened.

Okay. Thanks, Dave.

Okay. Take care.

Thank you very much. Hi, Dave.

Hi, everybody.

Good afternoon, John.

Afternoon. So I wanted to ask you, if we get a trade deal with China depending on the form, do you think this leads to more orders for Emerson?

I guess, in the corollary, if we don't get a trade deal, what do you think the implication is, specifically for Emerson?

I think it's more – from our perspective, right now, we don't see any change relative to a growth investment opportunity. It would be more of a cost issue for us.

We have a cost reductions and then, clearly, over time that would impact our pricing too. But we would, obviously, get an advantage.

But I don't see any fundamental change. I think it would solidify confidence in some of the markets that Bob serves in China, so I would say, his business will get better, because we hear that, not as much on Lal's side.

No. I think, definitely the consumer confidence, if you're in China, you – it's notable that people are more cautious right now on investing in homes or autos and other things.

And I think the trade deal, depending on what shape it’s in, or what form it’s in, but with a positively viewed trade deal from China from a consumer side, I think definitely would help.

Lal, you're pretty agnostic then as to whether we get a deal or we don't in terms of the way you're planning for the business, I suppose. Is that….

Absolutely. John, from an order perspective, yes.

From a cost perspective, as David stated, it will hurt us if we don't get a deal done.

Got it. And then, Dave, just as a follow-up here.

Emerson, you're a pioneer in China, but you are still an American company. I'm just wondering given all of this, you can see the context of my question is, just trying to understand what's going on over there.

Do you get a sense of any kind of a growing bias against US firms maybe on the part of the government or quasi- government customers or is there anything like that, and how are you dealing with that?

Well, I was just there. And on the front page of this report, that's the number two person at Mascom, a couple of years she came to our grand opening, we have a new tech innovation center.

I was in Beijing meeting with certain government officials and customers. From our perspective, we've had a long, long relationship.

We're celebrating our 40th year there as an American company. We have not seen any.

Does it mean we maybe had a few more checks by government officials and reviews and things like that, yes. But I have not seen anything from our perspective.

As you know, we are very, very localized, about 90% of what we sell in China, we design in China and we manufacture in China. So they treat, from that perspective, we're treated differently, but it's something we have our ears and eyes open.

And just want to make sure. So I feel good about it right now.

But again, the trade deal is something we do, all want to get done including from Chinese perspective, and the U.S. perspective.

But I applaud our government. I'm sure to do what's right for us as a country.

And I wish him well and same thing with the China as we talk with Chinese officials. There are working for the best of their constituents and I think we'll come out with an appropriate deal.

Perfect. Good to hear.

Thanks, Dave. Appreciate it.

Take care, John. All the best.

Hey, Jeff, how are you doing?

Good afternoon, everyone. Good Dave.

How are you doing?

Not too bad. What time zone you are in right now?

What time zone you in?

In Munich.

Munich, oh, that’s good place.

Yes, thing is that, they got a power business, so if you are interested.

You know I can’t believe you’re trying to sell me Siemens power business.

[indiscernible]

Okay, get the questions, not the BS.

Well, last quarter, Dave, you are looking for baseball players. You need a hockey player, right, with this Q4?

I need some more bats right now, José. I need some bats.

I got some rally monkey out. I got the bats out.

I'm probing everybody right now. It's a little bit more contact sport, as we say.

Yes. Can you help us a little bit, though, with the specifically what's going on in price/cost for you in the fourth quarter and kind of the tariffs tailwinds that you're expecting to feel there in those results?

It's going to be positive for us. I'll let Frank -- first half, obviously, was negative.

And now as you look in the second half of the year, we -- both Bob's business and Lal's business have helped us. And so we're flipping over significantly in the second and the fourth quarter.

In the first -- we have a little bit help in the third quarter, but really helps us a lot in the fourth quarter.

Yes, we would expect ...

Is that $0.08 mostly price/cost, or is it evenly spread between those three buckets, that $0.08 delta in Q4?

We had an $0.08 on the bridge.

Yes. Yes, it's heavily price/cost.

I mean we expect to get a pretty – hi Jeff, this is Frank. We do expect to get a pretty good tailwind that accelerates out the third into the fourth quarter in price/cost in both of the businesses.

And we have pretty much all covered. If there's additional tariff -- not everything but pretty close to it.

Lal's business, Bob has a little bit more. I think we are all still trying to work through that so if the President puts that additional tariff in there, we have some of that covered.

We don't have it all covered and you don’t have it all.

Yes, well, for total price cost, it's more than covered, but we've got -- for Commercial & Residential, it was pretty neutral in the first half in total and significantly positive in the second half. Yes.

Yes, so, a big chunk of that $0.08 comes from this and it's set. I mean that's obviously -- the inventory work out there hurt us a little bit in the first two quarters or the second quarter in particular.

But now we're starting to get the profit margin here in the second half.

Yes, from our perspective -- from our perspective the price/cost impact is nearly 2x second half to first half.

Okay, great. And Dave do you -- I mean you hit this KOB3 a couple times.

Do you think KOB 3 spending is kind of being preemptively squeezed out by the wave of KOB 1 that's coming? And can your internal efforts like PK and other things offset that?

Is that a factor?

So, let me give you the way I think about it from a CEO perspective. Word comes out from top of the organization, “Guys, we need to slow down.

We need to tap the brakes on spending.” The first place you go is you got a budget or a global budget say $100 billion and you’re going to -- you got to take a little bit out of the first quarter and say, let’s slow it down and see what happens.

The first place you go is in the United States because you can control United States. It's the same thing if you look at all cost reductions all cost actions.

The first place you go in the United States because we have the flexibility in the organization. So, what we saw in the last three months is as I talked about in February a little bit I was concerned about this.

The word came out, let’s slow things down a little bit and they tapped. And where they tap is that they tapped in the U.S.

markets. So, if you look at other than Saudi Arabia, where we saw the biggest pullback in KOB 3 was in the United States and on top of the distribution.

So, my fundamental belief is, the capital allocation held in the communication in the quarter if it continues to hold that KOB 3 will build back up in the late summer early fall time period and that we’ll benefit from that. We're seeing KOB 3 strong in Asia.

We're seeing KOB 3 strong in Europe. We're seeing KOB 3 strong in Latin America where we saw the back-off in the U.S.

and that’s typically how it unfolds. If you ever watch of this, we're more volatile in KOB 3 in the U.S.

because that's how the CEO’s control it for my customer base.

Right. It's going to be 3, because KOB 1 isn't going to be paying this year anyway.

Yes. So exactly right.

It doesn't save money this year.

Yes. That's how I see it Jeff.

Thanks.

Jeff, you take care. Be safe.

And I do not want to buy Siemens Power business. I'll take their -- if they want to buy controls systems, I'll gladly do that, but that's

Yes, thanks good afternoon guys.

Good afternoon Gautam, how are you doing my friend?

I am doing well. A lot of questions asked and answered.

I wanted to just make sure I understood. Just putting it altogether on the Automation Solutions side, Do you still have confidence in kind of 30% plus incrementals in 2020-2021 as we move through given all the moving parts.

Project timing KOB 3 what have you, integration opportunity with the recent acquisitions, do you still feel comfortable that we're going to net to 30% plus incrementals as we move through?

Yeah. This is Lal, Gautam.

Yes. Part of the rationale around the cost containment that we put in place during the second half and the incremental restructuring that we're executing in the businesses within the next four, five days, very important programs are a little bit of insurance policy around what's going on in the end markets and the recovery in the second half.

And as we do -- as we execute those we get right in that 30% band that we've been talking about on EBIT leverage.

We issue for us goes back to the question. I think Julian asked earlier, Gautam.

If you don't see the margin come in the second half of the year, we're going to have to take action. And Lal knows that because we laid out a plan.

We’ve got a plan for acquisition. We got a plan for the core business to get back to profitability.

And if we have to -- we can't get there then we're going to have to figure out how to adjust the cost structure. Lal and his team understand that.

They understand the margin business, but they also are working with the fluidity around the KOB 2 and 3 and 1 business. So I think we're pretty fluid here and understand our jobs.

That's one thing we are good about. And this team sits here the same flow.

We're all here together now. Lal’s got his CFO and Head of HR as Bob does right here in the same floor with us and with Frank.

So we can talk openly about what's going on. And we'll have to adjust if we can't get there.

But I feel this guys have a focus right now with Lal and his team.

And as you said David earlier on, we’re having a good year. We're having good year as an organization as a business.

It's shape of the year has changed a little bit on us, and the short cycle, the pressures we felt in the second quarter has pressured the margins.

Correct.

And we took actions there. And we do have some second half recovery based on what we saw in the second quarter.

And as that unfolds we'll be watching it month-by-month very, very careful. But at least based on what we saw in April that's positive.

The fluid situation, Gautam, but we fully understand what we have to do as shareholders.

No, I get it. Just philosophically, Dave I’m just curious how you and the Board think about that 450-ish target in a way out there, obviously, you could toggle up the buyback if you wanted to backfill.

I'm just curious how you guys set the priority in terms of that financial target? Is it a goal come hell or high water?

Or is it something that you'll be a little bit more flexible around. I'm just wondering if that’s something you might – we consider as early as the June Board meeting?

Well, yes, we're going to talk in the June Board meeting about it. But it's definitely going to unfold differently right now based -- let's say the underlying growth rate this year is a little bit less.

If we see the underlying growth rate in 2020 and 2021 then obviously we adjust. If we don't see the acquisitions then we have to do a share repurchase on this.

From my perspective 450 was a realistic target when we said it last year or this year. I still believe that is the case.

And the question is now as Frank and I, with the business leaders have to -- on a platform they just I have to look at this and say, okay what's a realistic being? For me it's many ways we can get there.

Acquisitions or no acquisitions, share repurchase, better margins. So we're going to look at that and we'll see that unfold.

We know how important that 450 is relative to our long-term valuation and it's something that we take seriously as we unfold it. So we will see what happens as we build it up here the next 30 days.

Appreciate it. Thank you guys.

Thank you, Gautam. Good to see you and talking to you again.

Thank you. Good afternoon, everyone.

Good afternoon, Deane. How are you doing my friend?

Very well. Thanks.

Just I know we covered a lot of territory here. For Bob I had a follow-up.

Just a clarification. When – Bob, you commented on the fourth quarter.

A lot depends on heating activity in China. But aren't you facing a tough comp on the whole government heat pump program?

And so, how do you think that plays out?

Well, for the fourth quarter, I guess, it's good now. But no, we don't have a tough comp.

It was last spring, May, June kind of timeframe when the heating market really collapsed, for lack of a better word, in China. So the comparisons are not that difficult against that.

And we're not – again, on AC and heating we're talking single-digit growth in the fourth quarter, not some dramatic recovery. The last time we came out of a cycle, it grew 40% or so pretty quickly.

So I'm not -- it's not reliant on something dramatic. It's really just more a matter of the normal project, the activity happening.

There's still high emphasis on the Blue Sky initiative. This is more industrial oriented.

So it's less about the government releasing neighborhoods like the residential stuff around Beijing was for a while. So it really comes down to the companies having funding for this and in some cases a little nudging in some areas where the government will say, “You know, you're in a zone where you got to stop using a boiler.”

And if they're told that, then they either change to a heat pump or they don't have heat. It's pretty cut and dried.

Got it.

And the problems. Again, the -- so there's – those customers or like the power companies in a region who are working with our OEMs, because they're doing a full implementation, a lot of times retrofitting a boiler investment.

They are asking for heavy quotations right now from the OEMs. We see that.

Again, the OEMs are just not going to buy a compressor until they know for sure that project's funded.

Got it. Yeah.

Just, Dave, I would be interesting in hearing your take on the latest turn in the trade negotiations. And just clarify the last update tariffs were going to hit you $125 million.

Where does that stand today?

Tariff numbers, still good. As you well know, if you go back, already said this thing was going to take a little longer.

I've always felt July, August was the appropriate timeframe. And so, I've never been the guy that said, this thing in May, as I publically said this and I said it on the call here.

I still believe we'll get a deal done. I think the issue really boils to I think both parties are testing each leader and – on the give-and-take.

And I'm glad to hear the – they are going to be meet – go ahead and meet this week. But I think this is going to take -- go back and forth a couple more times.

And I still don’t believe we'll -- anything will happen until the August time period. And so -- but I do believe that it will get done and I do believe that the cost will be passed through eventually.

But it's something we have to manage. I can't sit here and cry and hold my breath.

I got to deal with them. And so, I think, as a company, we’ll be on with it and from a standpoint of the country, I'm glad we're addressing this issue now than – and waiting.

We need to get on with this issue.

Got it. Thank you.

Thank you, Deane.

Good afternoon, everyone.

Good afternoon, Rob.

So I got two questions. One is of form and one is a substance.

So I'll ask the one of substance first, maybe your business leaders could just walk through the opportunity, particularly in the context of a long-term target for EPS around cash conversion? And is there a way for you to just have superior cash conversion above what you are historically have been?

And maybe talk about the acquisitions of the businesses, the opportunities. So that could support a very high-quality number even as you fall $0.10 to $0.15 short, you might have a really strong, high-quality cash number.

You guys want to take a shot?

Well, I mean for the Commercial & Residential side from working capital standpoint, we run in the single digits. The margins are obviously very strong.

Your acquisitions would be the place you work.

Acquisitions, I will say from a working capital standpoint with Tools & Test, we are well ahead of working capital right now. And that's a combination of payable terms more in line with what Emerson pays to buyers versus what Textron is paying.

Inventory, significant change. DSO is not a dramatic change at this point.

So I would say it's cash conversion, you would say for commercial/residential has been outstanding and will continue to be outstanding.

I think work in the acquisitions you've done in the recent years is your bullet point. I think Lal’s got the one that’s got the biggest opportunity.

No. I agree.

But as we will be a run at very high levels of cash conversion across our automation. The acquisition do present us the opportunities to drive more of that, no doubt about it, Rob, as you pointed out and we continue to press those buttons.

Rob, this is Frank. We can always do better.

But I mean we consistently run well above 100% of cash flow, free cash flow conversion, and we expect we'll continue to do that. We'll take advantage of the opportunities we get from the acquisitions.

But I think we run that pretty efficiently right now and we'll just continue to look for ways to improve it.

Well, thank you for that and thank you for all the substance on this call. I have a question on form, though.

Obviously, Dave, this is a little different kind of call. You put your business leaders to the forefront.

You put a lot of detail in about cost takeout, restructuring and then positioning for growth. Given its last season of Game of Thrones, are we seeing kind of a bake-off happening here, or how would you...

No. I ain’t going anywhere.

There's no bake-off going on? Rob what kind of bull?

I am not going anywhere, there no bake-off. No, there's no bake-off.

But I guess in all seriousness, was this prompted by the environment and you felt you needed to get your leaders on the phone, or is this just something to raise the aggregate profile?

No. There's two reasons we did this.

One, I felt very importantly, given that what we were there in February talking to investors and talking to the sell side also and investors, we laid out a plan. And I felt the plan’s changed.

I thought it was very -- it's one thing I can sit here consider and communicate this, you know I can sit here and communicate this, but I think it’s very important for the comfort of the investors to know that the business, the two platform leaders, Bob and Lal, are engaged and they're working this thing in unison with both Frank and myself to deliver what we're trying to deliver for the whole corporation, for the company and for their shareholders. It's important for me to engage them.

It's also important for me to give the -- everyone a chance that at a leadership level like Lal and Bob’s at, they have a chance to interact and explain and have this experience that we go through, that we're sitting here under the microscope at both at the board level. I did the same thing with the Board today and then also from the standpoint of the investors These two guys have been operating businesses at Emerson.

They don't need to be baked-off. I know how they perform.

And they perform extremely well. So it was all about trying to help you all to have information to make a better decision on the value, long-term capabilities of Emerson.

And by the way, it's not 2021 yet, José. It's still 2019.

Understood.

Take care my friend. And I want to thank everyone for joining us.

I want to thanks Lal, I want to thank Bob, Frank, and Tim. It was a different approach and we wanted just, as I said earlier, just to give a chance – everyone have a chance to see what's going on and I want to thank the organization and I look forward to a very strong Q3 as we execute.

So, thank you very much everybody.