Oct 20, 2011
Executives
Janet Pfeffer - Vice President of Business Development and Investor Relations Michael W. Lamach - Chairman, Chief Executive Officer and President Steven R.
Shawley - Chief Financial Officer and Senior Vice President
Analysts
Robert F. McCarthy - Robert W.
Baird & Co. Incorporated, Research Division Joshua C.
Pokrzywinski - MKM Partners LLC, Research Division Nigel Coe - Morgan Stanley, Research Division C. Stephen Tusa - JP Morgan Chase & Co, Research Division Jason Feldman - UBS Investment Bank, Research Division Julian Mitchell - Crédit Suisse AG, Research Division Terry Darling - Goldman Sachs Group Inc., Research Division David Raso - ISI Group Inc., Research Division Steven E.
Winoker - Sanford C. Bernstein & Co., LLC., Research Division
Operator
Good day, everyone, and welcome to the Ingersoll-Rand Third Quarter 2011 Earnings Call. Today's conference is being recorded.
At this time, I would like to turn the conference over to Janet Pfeffer. Please go ahead.
Janet Pfeffer
Thank you, Robert. Good morning.
Welcome to our third quarter 2011 conference call. We released earnings at 7 a.m.
this morning, and the release is posted on our website. We'll be broadcasting in addition to this call through our website at ingersollrand.com where you will find the slide presentation that we will be using this morning.
If you would, please go to Slide 2. Statements made in today's call that are not historical facts are considered forward-looking statements and are made pursuant to the Harbor Provisions of federal securities laws.
Actual results may differ. Please see our SEC filings for a description of some of the factors that may cause results to vary from anticipated.
In addition, please refer -- now I would like to introduce the participants on today's call. We have Mike Lamach, Chairman, President and CEO; Steve Shawley, Senior Vice President and CFO; and Joe Fimbianti, Director of Investor Relations.
With that, please go to Slide 3, and I'll turn it over to Mike.
Michael W. Lamach
Thanks, Janet. Good morning, and thanks to all of you for joining us on today's call.
During the call today, I'll discuss our third quarter results as well as discuss the recalibration of our guidance as we continue to manage against the very real headwinds of this economy. Steve will dive deeper into some of the quarterly results as well.
In the third quarter, we delivered revenue growth of 5% and 7%, excluding the Hussmann refrigeration business that we sold on September 30. Third quarter earnings from continuing operations were $0.81 per share, that's $0.04 above our revised midpoint guidance range.
The sectors were essentially on a revised forecast, and the positive variance above the revised range was principally from lower corporate costs and positive foreign exchange gains, and market activity was mixed across the business. During the quarter, we continued to see strong bookings in Industrial, Air and Productivity.
We had healthy bookings in commercial HVAC, although we did start to see equipment orders in Europe and North America tempered toward the end of the quarter. Transport demand moderated in the quarter.
Global Security orders in the quarter were up 4% led by strong bookings in Asia. However, North American Security orders were flat as the commercial construction recovery, which was expected originally to be in the back half of 2011, has clearly pushed out especially for our key institutional markets.
Residential orders, impacted by a stagnant U.S. housing market and lack of consumer demand.
R-410A replacement systems were down year-over-year. The company orders were up 4% and 3%, excluding currency.
Hussmann orders were down versus last year and depressed total order growth by almost 2 points. Operating margin for the quarter was 11.3%.
That's up 30 basis points. The improvement was significantly below the margin improvements we have achieved in the past several quarters and look to achieve in the future.
While the margins improved from pricing and productivity, they were depressed by a year-over-year decline in revenues in Residential HVAC, Club Car and Hussmann and further by adverse mix in Residential HVAC and commercial security. We continue to realize price across all businesses.
In the third quarter, our pricing outpaced direct material inflation for the second consecutive quarter. On September 30, as expected, we closed the sale of a majority stake in Hussmann to CD&R for gross proceeds of $370 million.
The proceeds are being used towards our share repurchase program, and available cash flow is expected to be about $1 billion for the year. We continued our share repurchase program and have repurchased over 17 million shares as of September 30, and about 22 million shares as of yesterday.
Revenue and profitability performance in Residential HVAC had a significant impact on the quarter, so I want to take a few minutes to update you on the market and our actions to address our market position and profitability. The R-22 dry-ship loophole continues to have a significant impact on the residential HVAC industry.
And as a result of the loophole, R-22 units made up 25% of the markets out or units shipped in the quarter. 410A demand softened significantly in the third quarter.
Industry motor-bearing unit 410A shipments were down over 15% in the quarter versus the prior year. Based on our discussions with the EPA, we believe the loophole will likely stay in place through 2012 and therefore, we began producing R-22 units in mid-August.
We were able to quickly bring production to the needed run rate. Given the timing of the season, however, R-22 shipments will have a minimal impact on our revenue until we are -- through next year's cooling season.
The impact on our business was further exacerbated by the continued downward mix shift by consumers to lower SEER, lower cost, less-featured systems. Our Trane business model has traditionally been built around providing premium products, customer support and efficiency levels.
We believe this is a medium- to long-term shift in consumer behavior and are making the necessary adjustments to adapt our products and business model to this trend. Given lower 410A volumes, we made a conscious decision to bring down 410A inventory levels by more than 20 days by year end through reducing build rates in the factories, which resulted in unabsorbed costs, impacting margins in the third quarter.
This will continue in the fourth quarter. We've been executing to our operational plans on the new residential projects as outlined in July.
All production lines are able to run at rate. The material cost reduction plan is going as scheduled, which means we will be through about 80% of the parts by year end.
And now, let me turn it over to Steve for a discussion of each of the businesses.
Steven R. Shawley
Thanks, Mike. Please go to Slide #4.
This slide gives a summary of our quarterly orders -- order rates for the past 7 quarters. Orders for the third quarter 2011 were up 4% overall and 2% excluding currency.
We had strong bookings growth in Industrial at 16% and a solid increase in bookings in commercial HVAC equipment and services. Climate orders were up 3% on a reported basis and 6% excluding Hussmann, as transport orders slowed in the latter part of the quarter, particularly in marine.
Residential orders declined 8% in the quarter, and Commercial Security orders were up 4%. Please go to Slide #5.
Here is a look at the revenue trends by segment. We think revenues excluding currency, shown on the bottom chart, give a better view of our organic growth.
As you can see on the bottom chart, third quarter revenues were up 3% excluding currency. Industrial had a strong quarter of growth at 9%.
Climate also had 8% growth when excluding Hussmann. Residential was down 12%, and Commercial Security revenues were up 4%.
On a geographic basis, revenues were down 1% in the U.S. and up 10% in the international markets.
Please go to Slide #6. This bridge analyzes the change in third quarter segment operating margin year-over-year.
Third quarter operating margins were 11.3%, an increase of 30 basis points compared with 2010. Volume mix and foreign exchange reduced margins by about 120 basis points.
Volumes were about flat in aggregate, with growth in Climate and Air and Productivity offset by volume declines in Residential and Club Car. Almost half of our total revenue growth was from FX, which flows through at a lower margin and depresses leverage somewhat.
A remainder of the margin in fact is from adverse mix in Residential and Security. Price netted against direct material inflation was positive in the quarter at about 80 -- about 60, I'm sorry, basis points as price increases continue to hold.
Productivity netted against other inflation increased margins by 150 basis points. Margins were negatively impacted by the productivity shortfall at Residential.
Investment spending focused mainly on new product development and growth of our service businesses was higher than last year, impacting margins by 60 basis points. Please go to Slide #7.
The Climate Solutions segment includes the Trane Commercial HVAC and Thermo King transport refrigeration businesses and through September 30, included the Hussmann retail refrigeration business. Total revenues for the third quarter of $2.3 billion were up 8% and 5% excluding currency.
For the Trane and Thermo King businesses, revenues were up 11%. Trane's global commercial HVAC third quarter revenues were up 9% versus prior year.
HVAC revenues in North America increased high-single digits. Revenues in other regions were up 13%.
Global commercial equipment revenues increased 15% with year-over-year improvements in all regions. Global parts, services and solutions revenue increased by 2%.
Global commercial HVAC orders were up 9%, with 7% growth in global equipment and double-digit order growth in parts, services and solutions. For the global Thermo King transport business, revenues increased almost 20%.
Our worldwide refrigerated truck and trailer revenues were up over 20%, with strength in North America and Europe. Global APU, marine container and aftermarket revenues showed strong growth in the quarter.
Thermo King orders were flat in the third quarter as increases in APU and truck trailer were offset by significant decline in marine bookings. The operating margin for Climate Solutions was 11.5% in the quarter, a 110-basis point improvement versus third quarter 2010, driven by pricing, volume gains and productivity, partially offset by higher commodity costs.
Excluding Hussmann, Climate's margins improved by 150 basis points in the quarter. Please go to Slide #8.
Industrial Technologies' third quarter revenues were $697 million, up 12% on a reported basis and 9% excluding FX. Industrial markets continued to be strong in all regions.
Air and Productivity revenues increased 17% versus last year. Air and Productivity orders were up 16% with strong improvements in all regions.
Club Car revenues were down more than 10% in the quarter from weak markets in both golf and utility vehicles. Industrial's operating margin of 13.8% was up 1.1 percentage points compared with last year from higher revenues, pricing and productivity, partially offset by lower Club Car volume and inflation.
Please go to Slide #9. In the Residential Solutions sector, which includes Trane and American Standard HVAC product lines and the Schlage security residential business, third quarter revenues of $570 million were down 12% compared with last year on both a reported basis and excluding foreign exchange.
Bookings were down 8%. Revenues for the Residential Security portion of the sector were flat, with slight increases in the new builder channel offset by a decline in Big Box customer volumes.
Our Residential HVAC revenues were down 15% as the continued sluggish housing market resulted in very soft replacement and new builder markets as Mike discussed earlier. Sector operating margins of 3.8% were down 6.2 percentage points compared with 2010 as improved pricing was more than offset by lower volume, adverse mix and inflation.
Please go to Slide #10. Revenues for Security Technologies were $438 million, up 7% and up 4% excluding currency.
Americas revenues were up slightly from price improvements. Revenues in our European Security business were up on a reported basis but flat excluding currency.
Asia revenues increased over 50%. Global bookings were up 4%.
Americas and European orders were flat. Asia orders were particularly strong as large -- as several large projects were booked in the quarter.
Operating margin for the quarter was 20.2%, down 1.9 percentage points from last year as productivity and price realization was offset by geographic mix and material inflation. Please go to Slide #11.
We continued to advance our operational excellence initiative, which is our long-term approach to a lean transformation in the company. This is a multi-pronged effort to reduce costs and improve efficiency and customer satisfaction throughout the company.
We have continued to restructure and decrease the size of our manufacturing footprint in 2011. To date, we have restructured or divested 22 manufacturing facilities and reduced square footage by over 30%.
Direct material makes up about 40% of our cost base, and progress continues in our direct material cost reduction programs. We are centralizing managemental spend and consolidating our vendor base to better leverage our strategic sourcing resources.
We are also reducing costs and improving quality through value engineering activities in all of our businesses. Climate Solutions' war on copper is an example of the progress we are making.
This effort represent over 100 individual projects that will reduce copper usage by almost 12%, a 7 million-pound annual run rate savings. Year-to-date, we have held over 135 Rapid Improvement Events or RIEs.
The RIEs are focused on making meaningful improvements in processes and activities within our 19 selected value streams. Each RIE involves 4 weeks of planning effort, a 4.5 day event involving shop floor changes and 4 weeks of follow-up-to ensure process sustainment.
We have had some notable gains during the year. For example, the value streams have had a 25% reduction on average in-cycle time and a 48% reduction in the cost of poor quality year-to-date.
We are starting to see a clearer separation between the results of the value streams and the average company performance. We are planning to stay focused around these initial 19 value streams to ensure that the improvements are sustainable before expanding our efforts.
But this doesn't all happen in the supply chain. We are embarking on a long-term program to reduce our functional cost in IT, finance, HR and legal that currently total over 5% of our revenues.
Over the next 3 to 4 years, we will be reducing our functional costs to move toward top quartile metrics of approximately 3% of revenues. These activities will be anchored by implementing common systems and processes across the enterprise, including a common ERP platform.
Please go to Slide #12. Let's move to the balance sheet.
We finished the third quarter with working capital at 3.7% of revenues, down from 5% at the end of the first quarter. We expect to maintain working capital for sales in the 3 to 4 percentage point range on a full year basis.
Please go to Slide #13. Our balance sheet remains in good shape, and in the quarter, we continued buying shares under our share repurchase program.
We ended the quarter with $1.4 billion of cash on the balance sheet and net debt of $2.2 billion. We repurchased 16 million shares by the end of the quarter and anticipate purchasing in excess of 35 million shares by year end.
We generated $360 million of cash flow in the third quarter. We are targeting available cash flow of $1 billion for the year.
With that, I will turn it back over to Mike.
Michael W. Lamach
Thanks, Steve, and with that, let's go to Slide 14. I wanted to touch on innovation performance before moving to the forecast.
We steadily improved the flow of new products and services to the market. About 13% of our 2008 revenues were generated from new products and services and produced in the last 3 years.
Our initial target for 2011 was 19% of revenues, which we are forecasting to exceed by a few points, ending the year at almost 22% of revenues. And pictured are a few of the new products and services we launched in the third quarter.
I'll highlight just 2 of them. Thermo King launched the ColdCube, which is a new portable refrigeration unit designed for entry-level or small business customers such as caterers and florists for whom it is impractical to invest in a large temperature-controlled delivery truck.
Feedback has been extremely positive. In Security Technologies, we continue to realize strong gains in the healthcare market, particularly in the Europe and Middle East region, leveraging solutions customized for the healthcare industry as Security Technologies team recently landed 2 significant wins valued at $7 million.
Please go to Slide 15. Up here, the revenue forecast for 2011 is based on varied levels of activity in our key end markets.
We believe the activity levels indicate continued strength in industrial markets. Commercial HVAC equipment has remained strong in emerging markets.
The North American market, still driven mainly by replacement, is growing but at a slower pace than we've seen in the past few quarters. Transport markets, known for being very cautious, appear to be moderating, and we expect to see low-teens revenue growth in the fourth quarter.
We expect to see a continuation of challenging conditions in the U.S. non-residential new construction market for the remainder of the year.
We also see a continuation of depressed conditions in residential markets as single-family housing starts and consumer confidence remained at very low levels. So based on this backdrop, our revenue range for full year 2011 is $14.85 billion to $14.95 billion, up 5% to 6% compared with 2010 reported revenues of $14.1 billion.
Excluding Hussmann from the comparison in order to give a view on the ongoing businesses, revenues would be up 8% to 9% versus 2010. This compares to the preliminary revenue guidance range issued on September 30 of $14.85 billion to $15 billion.
Climate Solutions' revenue are expected to be up 11% to 12% excluding Hussmann. Based on continued strong bookings in industrial markets but a slowing golf market, we expect Industrial to show gains of 14% to 15%.
We're lowering our Residential revenue forecast based on the negative impact of the continued growth of R-22 units and a continued downward mix shift to lower SEER products, now expecting the sector's revenue to be down 3% to 4%. Commercial Security is expected to show a 3% to 4% year-over-year improvement in revenue.
Let's go to Slide 16, and now we'll turn our attention to full year guidance. You notice, this is a change from 3 weeks ago.
Our full year EPS guidance range is now $2.70 to $2.76, based on what we learned over the last 3 weeks about September and October bookings, which were light, particularly in the European and North American Climate Solutions businesses. We believe it's prudent to flag this as a risk and reflect its impact on our Q4 earnings guidance.
Versus the preliminary guidance issued on September 30 of $2.70 to $2.80, this reflects earnings impact by taking the top end of the range down by $50 million. This EPS guidance reflects an average share count of 340 million shares and a tax rate of 24%.
We expect to generate available cash flow of about $1 billion, which excludes proceeds from Hussmann. Fourth quarter revenues are forecasted to be $3.525 billion to $3.625 billion, down 2% to 5% on a reported basis.
And recall that beginning in the fourth quarter, the revenue from the divested Hussmann business goes to 0 as its results will be reported in other income. Revenues on a comparable basis, excluding Hussmann, are forecasted up 2% to 5%.
Reported EPS from continuing operations for the fourth quarter are projected to be approximately $0.64 to $0.70. Let me take a moment now and share with you the way we're dealing with an economy that continues to produce strong headwinds and for some of our businesses, has not yet resulted in the kinds of tailwinds we had hoped for.
It's clear given the economic backdrop, coupled with the challenges we're facing in the Residential business, it's time that we calibrate our long-term earnings targets. In particular, our targets that we have set for 2013 are out of reach in that time frame.
We continue to believe in the fundamentals of our business. We have adjusted expectations to account for the economy.
Despite the adjustment in time frames, we will continue to execute on our strategic goals. While I looked at our assumptions for the initial targets and reflected on what's changed in those 2 years, I feel it's essential that we make these adjustments.
To be more specific, we have not seen a residential or non-residential construction recovery in the U.S. or Europe.
Commodity inflation has been higher, refrigeration phase out in residential HVAC has essentially been reversed by loopholes and regulations, and these are just to name a few. We've seen choppiness across several of our varied end markets.
And while we don't see a sustained across-the-board declining activity, we do expect the variability and demand trends to continue for the short and medium term. Some businesses will have strong growth, while others will be more sluggish.
While we are seeing a downward shift in demand patterns, we're triggering those plans to react to the changing volumes. It's disappointing not to reach targets on the original timeline.
I knew when we established our framework the progress would be uneven given the starting point and aggressive targets that we set. But I continue to believe that long term, this company can meet those goals.
I hold myself and our leadership team accountable for succeeding. My confidence is based on the accomplishments and commitment of our employees over the past 2.5 years.
We've had a number of quarters in which we achieved 200-plus basis points in margin improvement as an enterprise. Two sectors will shoot 200-plus basis points of improvement again this year.
We significantly advanced our pricing capability. New products and services continue to fill the innovation pipeline.
We divested several noncore underperforming businesses. Productivity progress has been real.
The cash story has been great, and we'll enter next year with a significantly reduced share count. Our goal to size the company are unchanged: to increase margins, drive innovation and pricing excellence and generate significant cash flow for reinvestment, share buyback and dividends.
What this means is that we will continue our lean transformation, engagement of people and investment innovation. And with that, Steve and I will be happy to take your questions.
Operator
[Operator Instructions] Our first question comes from Steve Winoker of Sanford and Bernstein.
Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division
Maybe I could just start then on the last point around that long-term guidance that you're describing. So what are you thinking then in terms of how much further you're pushing it out, what kind of adjustments have you made internally so that -- where are people headed?
How are you thinking about the -- a little more specificity on that front?
Michael W. Lamach
Yes, Steve, we've made great progress in 2.5 years. It's just clear as we had to reassess where we were and particularly taking guidance down for the quarter and for the year.
In fact, we're just not seeing that recovery taking place as we hoped in 2011 late and certainly, no Res recovery that -- it's out of any time frame that we indicated with the framework. What I'm not going to do is issue any new framework.
I think that what I'd like to do is just sort of year-over-year, tell you through guidance what we expect to do in terms of performance of the company. I think that structurally and ultimately, we will get to where we wanted to go.
I'm not going to predict the time line because I just can't predict which way this economy is going to go or what pace it's going to recover in the areas that we need to recover. But you can expect that we're going to focus on significant improvement across the company, give you good guidance, transparency around what we're telling you and take it one year, one quarter at a time.
Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division
Okay. I can understand that.
Let me move to then a little bit more on the quarter. The productivity number, the net productivity, net of inflation, if you excluded Residential Solutions, instead of 150 basis points for the whole company, what might that have looked like?
And is Hussmann in there also?
Steven R. Shawley
Yes. It's all in, Steve.
Gosh, it's definitely been higher.
Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division
Right. I'm just trying to get a sense of -- I mean, it sounds like a lot of progress, at least in Climate and Industrial, so I...
Michael W. Lamach
I'll tell you, Climate continues to do very well and increased, I think, 150 basis points in the quarter when you pull Hussmann out. Industrial continues to do the same and gain significant leverage.
We hold the Security team to a different set of goals and objectives. Here, we're really looking to grow this business and really asking that team to maintain, incrementally grow the margins based on the volumes and depending on where those volumes are, different expectations for the Security business.
In the Res business, clearly, that's eroded, our ability to hold through the original guidance that we had for the year. But I'll tell you, the last 2 or 3 months, as you interact with that team, as you talk through the business and their approach to dealing with what they've got in front of them, I think they understand the issues very well.
And I think they've got plan for what they need to do and how to execute. And I think they've got a management cadence to keep on top of performance.
So you got 2 sectors doing very well. You've got Security, which we're asking really to grow and kind of hang on to those excellent margins that they have, and we've got all the known issues in Residential that we've talked about through the past quarter till now.
Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division
Can you describe that Residential turnaround, I guess? Is that how you're positioning it internally?
Or is it -- are you saying this is more the market doing this to you? And/or is this a set of actions that you have going on inside of Resi, Residential right now?
I mean, what's the environment like? What's the set of initiatives or key, 2 or 3 things that we should be thinking about as investors?
Are you going to turn this ship around short of the residential market tailwinds coming back?
Michael W. Lamach
Yes, Steve. In quarter 2, if you reflect back, I explained that I thought -- you could sort of break the performance down into 2 50% chunks.
So first was really market and mix, and the second had to do with 2 issues, pretty well evenly split. One was R-22 not being in the market.
Second was issues with new product launches. And we had 2 tests, if you will, in Q3, internal execution tests around the business.
One was how quickly can we get into the R-22 business, increase production -- create production and meet demand in the marketplace. And we had set a very aggressive goal to do that very quickly.
And I will tell you that we've exceeded that goal inside the company, and that's a testament to that team's tenacity around winning. The second piece of that outline is saying that it's a monthly view toward actual purchase price, reductions on each material component with the product launches that took place at the beginning of the year and that each month, we've got the capability of tracking that and understanding it we're on or off performance.
And we've maintained our sales to be on plan, with performance that matched that plan through the quarter. And I have no reason to believe that anything is going to fall off track.
We'll get to the end-of-year plan in that business. And that's going to leave us really with market and mix.
And in here, the focus has been to aggressively look at the 13 and 14 SEER product and make sure that we've got a cost position in those products, second to none. We know we'll get a premium for those products but to really make sure the cost position is exactly right.
So we're focused heavily on the reality of that, 75% of the business will be 13 SEER. And if you include 14 in that, it's going to be 80%, 85% of the market.
We'll be at that low-end efficiency, and I think that that's going to be here for a while. And we've got to get competitive in that part of the market to make a difference.
And so as we entered back into the market, if you will, for R-22 in the quarter, we got about 3 quarters of our due share back in that segment pretty immediately. If you think about that, that's remarkable when you got to build it, fill the channel and give the dealer base the opportunity to quote that, it was a pretty remarkable turnaround.
And I'd expect that as we enter into next year, we're going to be armed, not have one arm behind our back. We'll have complete complement of R-22 cost-competitive products, a complete complement of effective R-410A product.
And based on customer demand, we're going to adapt demand plan as we see it evolve.
Operator
And we will take our next question from David Raso of ISI Group.
David Raso - ISI Group Inc., Research Division
I think you mentioned September and October, the order weakness in Climate Solutions was the biggest driver of the delta from 3 weeks ago. Can you detail that a little bit more?
Thermo King, HVAC? You mentioned geographically Europe in particular, but can you please breakout Thermo King from HVAC?
Steven R. Shawley
Yes, Dave. The big swing was we saw a remarkable -- in a very short period of time in late September, a big swing between what was going in bookings in the first part of the quarter versus the second part.
It affected European Trane commercial to a degree. I would say that the transport markets in North America flattened, okay?
I mean, it wasn't dropping off of a cliff, but it certainly flattened relative to previous growth rates that we've seen. We're still seeing pretty good bookings in the truck trailer piece of it.
The piece that probably went the further south was bookings in the marine business. And that was expectations of several large orders coming in that we just don't see coming in at this point in time.
David Raso - ISI Group Inc., Research Division
Okay, I'm just trying to get a feel for the interplay on Thermo King margins, globally are higher than the HVAC, but it sounds like it's a little bit of cross currents of both. HVAC, Europe, North America truck flattening out, obviously not positive for margins but...
Michael W. Lamach
David, I think the big theme actually was Europe. Just in general, Western Europe.
And for a while, there was this very really almost a divergence between order rates and customer sentiment. And I think what you've got really here more is more convergence around those 2.
And you see it in the buildings business where both the Security European business and the TCS business were actually down in bookings on a quarter. Slightly negative, but it's a trend.
And you had transport. Transport dipped a bit as well, negative.
I think that what you'll see in Q4 will be more of a continuation of the trend around the buildings theme and more of a moderation around the TK business as opposed to any kind of negative year-over-year, quarter-over-quarter results.
Steven R. Shawley
I think, David, to be clear, the U.S. order rates have flattened.
Truck trailer is still -- it's definitely slowed, but trucks are a little still slightly positive in the quarter. The issue for Europe, because we count the marine business of Thermo King in Europe, the down orders we saw in Europe for TK were really driven by marine.
As you know, marine is -- it doesn't leverage us well within Thermo King as truck and trailer for us, so that's kind of the thumbnail sketch there.
David Raso - ISI Group Inc., Research Division
Yes, that's what I'm looking for, just given the x currency, total company orders were up only 2 for the quarter, and your revenue guidance for the fourth quarter for the company implies revenues year-over-year down slightly to up 2.5. I'm just trying to get a feel for if we did see a little more slippage in the revenue for the quarter.
Is it coming from those businesses particularly of high downside leverage, so to speak? And something [indiscernible] of a mix really.
It's not...
Steven R. Shawley
Yes, I would say that if you look at -- when we took out off of the top of the range, it would be -- some stuff would be producing on a higher margin.
David Raso - ISI Group Inc., Research Division
Okay. And lastly, for the long-term targets, obviously Residential, I mean, the target of 15% to 17% of the margin, given we're mid-single digit lower right now, it's probably one of the numbers that come down the most.
But when I think about the adverse mix, and maybe correct me on that, but I'm assuming the incremental R-22 ship and away from the 410A is a negative for your margins. I think that's a safe assumption, correct me if I'm wrong.
How should I think about margins in Residential next year in kind of in a context at '13, 15% to 17% number? Is that where you'd kind of cut that margin in half?
I mean, the mix can't be a positive, I would think.
Michael W. Lamach
Yes, David. Actually, for the industry, the change between R-22 and 410A is really dramatic I think in the industry in terms of the margins.
410A just had more of a systems component, both [ph] system sale. And so in terms of driving revenue and absorption in the factories and plants, it's certainly a more profitable proposition for the entire industry.
We saw 13 SEER itself, sometimes with the most minimum, 13-SEER efficiency. Not saying 13 to 14, but 13 alone went from about 65% of the market in the first quarter, grew 10 points to about 75%, 76% in the third quarter.
So again, you see the shift down to 13 SEER. And then within that, you could make that in 410A or you can make that in R-22.
And you really saw a doubling of the R-22 mix over that same Q1 to Q3 period. I think that what'll happen here, and I don't think it'll happen in 2012, is ultimately 2 things will happen.
One is you'll see minimum SEER requirements increase. You'll see that at the end of 2012.
2013 will be in parts of the country will be up to a 14-SEER unit. I think you'll also see the EPA at some point in time working to close all or part of that loophole.
And that'll be an impetus for us and for the industry at large. And so short of that, it's going to be really self-made help in terms of being able to drive down the cost structure of the 13 to 14-SEER product and just really obsess how it is we can become more competitive in that new reality.
Operator
We'll take our next question from Julian Mitchell of Credit Suisse.
Julian Mitchell - Crédit Suisse AG, Research Division
Yes, I had a question I guess on the -- when you're talking about reevaluating sort of targets and cost and stuff. I mean, until recently, it sounded like your manufacturing footprint efforts you felt was sort of drawing to a close.
You took down square footage 32%, and the focus is switching a lot to the functional cost program where you talked about 200 points plus of margin benefit over time from that. I guess, given what's going on in order intake, given the moderating outlook on the volumes, how do you feel about the footprint today?
I mean, when you talk about measures have been triggered by the softer sales environment, does that mean a renewed emphasis on attacking manufacturing footprint simultaneously with the functional cost approach?
Michael W. Lamach
Well, I mean you kind of gave sort of 2 thoughts here around how we're attack it. There's really 3.
I mean, one has been the structural cost of footprint of the business. And I think you're right to say that, that's largely run its course.
We'll continue to always look at capacity and move that and adapt that as we need to. But that's not really the story going forward.
You mentioned functional cost area, and that's something that we kicked off earlier in the year, and we'll be working aggressively on that over the next few years. But in the middle of that, there's the real opportunity around what we're doing with the whole sourcing team, separating materials planning from the sourcing and centralizing that sourcing with commodity teams and where we've done that.
We've got great benefit. We want to do it faster and build capability in that area.
And then second from that, on the labor component, on the value stream work we're doing around the lean transformation is probably the most exciting long-term thing that we could be doing because it really affects the customer in a positive way. It's an opportunity not only to reduce cost, if you will, but really, ultimately, it's to provide better operating leverage and hopefully take some share through better operating performance.
And so to me, it's that middle part that I think has got the longest legs to it. And it's one of the hardest things to do because it's a long-term evolution of how we want to run the operational part of the company, and that takes a bit of time.
Julian Mitchell - Crédit Suisse AG, Research Division
And then I guess if you think about sort of the different businesses, kind of the leverage, the incremental, the decremental, I mean, obviously, the decremental that you'd had was a lot bigger, I guess, than the incrementals in Climate and Industrial. So how you -- when you're thinking about sort of going forward, how you -- aside from, I guess, the value stream, how you're thinking about closing that gap?
I mean, is your view that in the decremental margins, it's really a mix effect, and that will normalize sort of by itself, and then you have some self-help on your own side? Or what are you doing to make sure that, that sort of steep decremental which you had in Q3 doesn't replicate itself because you had a residential decremental of 50% or something.
How do you make sure that if in the other businesses, you get a softer top line, the decremental is nowhere near that bad?
Michael W. Lamach
Yes, 2 things. First of all, the Climate, Industrial incrementals were pretty good for us.
And then if you look at Security, it's much, much more of a geographic mix. It's driving up really the growth in the Asian business.
And here, you saw us at 55%-type growth rates in Asia for the quarter, and that's what we want to be doing there. So that really is still solid performance within the Security team.
It really puts the focus back on the Residential business and why the large decrements in the quarter and what does that mean for quarter 4. And in my comments earlier, I talked about taking 20 days of inventory out of that business.
And I'm really talking about taking 20 days of the R-410A product out of the business. And when you do that, it's worth something like $80 million, $85 million in inventory and probably something like $20 million, $25 million of lost absorption that we would see in the fourth quarter.
So I mean, what we're trying to really do here is make sure that -- and you seeing these decrementals, as we really takedown both demand rates and inventory levels in that product line and, if you will, getting the organization in shape for the next season, which is really the next, I would say, litmus test around our capability and how that's changed from year-to-year, will be next July as we're talking to you about how quarter 2 went for us. So you'll consider -- you'll continue to see those large decrementals in Residential as we adjust mainly at the inventory level going forward.
Now in Industrial, we'll -- and Climate, we're going to moderate somewhat in Industrial overtime. Climate, we flagged some weakness in Europe and in North America here.
And this has been the most active team that we've had around setting up scenarios and setting up a playbook around reducing over time, and they've been doing that for the last couple of quarters, parts of the cost structure to adapt to that. So I feel good about the playbook at Climate to adapt.
I feel good about the playbook at Industrial to adapt as well. And with Res, we're just going to have to get through this quarter 2, quarter 3 and next quarter and getting ourselves kind of back into fighting shape.
Operator
We will go next to Nigel Coe of Morgan Stanley.
Nigel Coe - Morgan Stanley, Research Division
I don't want to sort of hop on too much about 2 dozen themes [ph] targets. But if you go back to March 2010, I think you put out a $4 number with 0 volume growth.
Do you still think that's achievable based on the sooner we get no volume help in the next 2 years, is $4 still a good number?
Michael W. Lamach
That goes back to the original framework. And if you look at that framework, it wasn't just the growth, but it was where that growth was going to occur.
And if it occurred in places where we were typically laden with business in North America, Western Europe, I mean, that had a different effect on the ability to grow the market of the company that would be in emerging markets or developing markets for us. So it's not just the growth rate, but it's also that aspect of it.
You're also seeing that, I think, in more businesses than the Res, a tendency for the consumer and the customer to move more towards value offerings. And we are seeing that in our Industrial business as we have watched our value brand for air compressors grow dramatically over this period of time.
And that will continue as well. So I really can't talk about that framework and kind of relate that back to what the margin potential would be in sort of a 0 growth rate.
We're working on right now a plan and a set of scenarios for 2012. And the intent would be, next quarter, lay that out for you in a way that I think looks at the reality of what we've got in the marketplace.
And that's the intention going forward.
Nigel Coe - Morgan Stanley, Research Division
Okay. So you're not yet at a stage where you can give some feel for the benefits from just pure manufacturing on a functional rationalization?
Michael W. Lamach
That's the point where we want to begin to talk about that, that's right.
Nigel Coe - Morgan Stanley, Research Division
Okay. And then on the Resi margins, I mean, is there any way you could perhaps give us a walk, similar to what you did for the overall company in terms of impact of volume price and productivity?
Because I guess my key question here is, did you cut price? Or did you still get price as you struggled to maintain market share given the R-22 headwinds?
Michael W. Lamach
We actually realized prices of nearly 6% in the quarter in Res. So it was 5.9 to be exact against a material number, which was kind of in the 4% range.
The biggest driver there, 7.5 points of a degradation in margin were from volume and mix.
Nigel Coe - Morgan Stanley, Research Division
Okay. And then just finally, I might have missed it, but what is the impact of margin in Resi here as you work through those inventory, the excess inventory?
Michael W. Lamach
I think we said about $20 million to $25 million, and the bulk of that is going to be in the fourth quarter, Nigel.
Nigel Coe - Morgan Stanley, Research Division
Okay. And that's the margin impact?
Michael W. Lamach
Yes, the inventory reduction impacting absorption. Nigel, I mean, clearly, the industry itself is forecasting something in the neighborhood of down 7% for the industry.
I think we're going to do a bit worse than that in the fourth quarter. A couple reasons.
I mean, one is just getting our cost structure in line for the 13-, 14-SEER products that are being sold into the marketplace. So I don't expect to be a sharetaker in that process in the fourth quarter.
And so you really run into a fourth quarter that between the volume drop, sort of the industry drop, the mix that we're seeing, that you're looking at something that could be in the 1% operating margin range for the quarter. And although that's going to be an awfully low number, it would not alarm us relative to what we see in the plans that we're trying to do to improve the business.
Operator
And we will go next to Steve Tusa of JPMorgan.
C. Stephen Tusa - JP Morgan Chase & Co, Research Division
I just wanted to ask a little more of a theoretical question because clearly, with your stock performance, there's kind of a credibility issue that's developed here, which, for a new CEO who has a lot of promise and has been doing a lot of good things internally, I think is very frustrating for investors. It kind of starts with what happened in August and you guys are selling Hussmann and you had a conference call.
Just curious as to -- through this last couple of months of events, whether it's the Hussmann conference call, what happened on the second quarter call, following up with the Hussmann call where there was comments around some softening in key end markets and then obviously the preannouncement on the last day of the third quarter, what was your mindset? And I'm just curious as to whether it's a communication issue?
Do you understand investors' frustration with kind of the way this has all happened? And I hope that your viewing this is kind of a potential ditch and sink event where you can kind of bottom out on the credibility -- on a credibility basis and move forward?
I'd just want to kind of get your take on how you see this playing out from an investors' perspective?
Michael W. Lamach
Well, I mean, a couple of things, Stephen. One is if you look at sort of the operating performance of the company over the last couple of years, it's been really a good story around -- I'm going to take the stock price out for a second, you can clearly see that there's been a lot of improvement around the areas we've been focusing on, around margin expansion and the degree of innovation coming into the business.
And at the end of the day, we feel good about that. We've tried to be very transparent in what we are doing.
I mean, I even go back to thinking about, I guess, the June or July time frame, indicating at one of the conferences that I'm picking up vibes that even the long-haul truckers are feeling that there is anxiety in terms of what they see going forward and that there's a nervousness in that group as well and how that might portend for something that we're seeing now, which is really a flattening of -- moderating of that business. So we're trying to communicate that.
I think that what we're trying to do here is really sort of shed this framework, if you will, because there's very little to that framework that's materialized economically. And frankly, what's happened to me in the last couple of weeks, really 3 weeks even, is just sort of watching what's transpiring in Europe for us and then trying to communicate through to you now that -- I think I need to take the top of that range away.
Unfortunately, mathematically, it means that the median goes -- the middle goes down, the average goes down, but what I'm really trying to communicate to you is I think that the problems in Europe are a bit more serious. And I think it's beginning to show in that convergence between sentiment and the order rate.
And so again, I hope you'll take what we're trying to do here around reducing the fourth quarter as in understanding that we are trying to tell you what we are seeing and lay out guidance that we're seeing at that point in time.
C. Stephen Tusa - JP Morgan Chase & Co, Research Division
But I guess, back to Nigel's point on the guidance for no growth and a no share count reduction, which is kind of the share count reduction has happened, and I just hear you blaming it on the economy and there doesn't seem to be any kind of mea culpa here at all, and again, I don't mean to kind rake you through the coals, but I think it is, for a new CEO who's trying to do big things, I just think it's something that needs to be addressed over time, and I think you need to be somewhat aware of the investor frustration around that, because everybody's dealing with a tough economy. The R-22 thing was -- quite frankly, it looks like it was just missed, and it's just missed execution on that front.
So I'm just struggling with drawing a straight line from the economy to what's going on here. That's all.
Michael W. Lamach
Steve, appreciate the comments. I can tell you I'm talking to our shareholders directly on a constant basis.
I'll continue to do that, in taking that feedback and trying to adapt any communication issues going forward here. I mean, clearly, we don't want that to be your feeling, and we'll look to go forward and try to improve on that.
On the flipside of that, Steve, I don't think that the organization can apologize for great performance over the last couple of years. What I got to tell you here is I just don't see the moon and the stars lining up for us to be able to hit that original framework.
And what I'm trying to tell you today, a mea culpa as anywhere, it's look, we're not going to be able to achieve that framework in the time frame that I outlined, and I'm telling you that today.
Operator
We will go next to Josh Pokrzywinski of MKM Partners.
Joshua C. Pokrzywinski - MKM Partners LLC, Research Division
Just want to dig in, and not to belabor the point on Residential, but shifting into the fourth quarter. Obviously, air conditioning and R-22 kind of moved to the sidelines as a driver.
Are we just looking at tough furnace comps piling on top of the manufacturing variance to take down inventory? I guess I'm just struggling with your comment that the industry expects to be down 7, and you expect to underperform that.
It seems like kind of the areas of logical underperformance with the share and R-22 kind of moved to the sidelines. I just want to make sure I'm not missing anything.
Michael W. Lamach
No. I think, Josh, perhaps -- maybe it won't be as bad as that.
We really committed though. I mean, we've got a lot of momentum here in the pricing area, and so I think that our price realization has been relatively high in the industry, and perhaps that's got something to do with that.
I don't want to sort of be a leader in taking prices down across the industry. But no, we're not forecasting anything horribly bad in terms of the furnace season at all.
Joshua C. Pokrzywinski - MKM Partners LLC, Research Division
Okay. And then just shifting over to TK.
I would imagine that's one of the tidier businesses in the portfolio at this point, maybe less room for restructuring should things soften further. How should we think of decrementals there should that business turn negative in 2012?
Michael W. Lamach
Well, I mean, read in that. We're not talking about it turning negative in 2012...
Joshua C. Pokrzywinski - MKM Partners LLC, Research Division
Right, I just want to be kind of prepared for the "what ifs" should things soften further, just so there's isn't a missed expectation on maybe the margin potential?
Michael W. Lamach
Yes, Josh. Let me deal with that in terms of guidance we give you next quarter.
And what we'll certainly try to do is, as we look at the scenarios like that, we'll be clear about how that would maybe look toward more the bottom of the range of the range we give you, and maybe give you some sensitivity around what would move our guidance up to the top of the range or down at the bottom of the range. We'll give you some sensitivity around those sort of things.
Joshua C. Pokrzywinski - MKM Partners LLC, Research Division
Got you. And maybe just remind us, sorry to sneak one last one in here, when should we start seeing copper with a 3 handle or kind of a mid-3 handle flow through the P&L?
Should that be kind of a first quarter dynamic or -- because I know there's -- obviously, you don't hedge. You kind of hedge through the supply base.
How should we think of the timing of lower copper realization?
Michael W. Lamach
You're exactly right. It starts in the fourth quarter.
Third quarter was a little bit above 4, and 4 could be a little bit below 4.
Steven R. Shawley
Josh, I don't -- just want to make sure we're clear here. We do hedge copper through our supply base, okay?
And we have a...
Joshua C. Pokrzywinski - MKM Partners LLC, Research Division
Right, no, that's what I'm saying. You hedge it through your supply base, not directly.
Michael W. Lamach
Right. And we have extended that a bit into first and second quarter of next year to try to take advantage of the current spots.
Operator
And we will go next to Terry Darling of Goldman Sachs.
Terry Darling - Goldman Sachs Group Inc., Research Division
Mike, Steve, wondering if you might provide a little color on the 4Q margin expectations for the other business? I think you've talked about Resi around 1% already.
Talk about some of the others.
Michael W. Lamach
Yes, I think Climate I think will continue to perform well. I think you could probably look at that as being somewhere in the 9.5% range, and you could probably vary off that 20, 30 basis points either way.
Industrial, probably in the 15% to 15.5% area in a quarter for us. Security, actually, relative to last year, we'll do fairly well.
I mean, I don't think anything here is going to take that business down, say, below 19% in the low end, maybe 19.5% on the top end, which would be an improvement over last year. We were just a little bit under 18% in the fourth quarter there.
In Resi, I'm thinking if we skewed fully on the inventory reduction piece of this thing, it's likely to be in the 1% range.
Terry Darling - Goldman Sachs Group Inc., Research Division
Helpful. And then the corporate number, what are you thinking for that?
It was substantially below run rate here this quarter. Any one timers in there?
And what are you thinking about for 4Q?
Michael W. Lamach
Yes, I'm going to defer to Steve here on that, Terry, but there really weren't any one timers per se in there. But Steve, I don't know if you have any comments on...
Steven R. Shawley
Yes. We'll see the enterprise somewhere around 10% in the quarter, Terry.
Terry Darling - Goldman Sachs Group Inc., Research Division
10%. 10% of sales, you mean?
Steven R. Shawley
Yes, 10% of revenue ex Hussmann. Okay?
Terry Darling - Goldman Sachs Group Inc., Research Division
At the corporate line you're saying? You're saying the total company margin around 10%?
Michael W. Lamach
Right. That's total company performance.
Right.
Terry Darling - Goldman Sachs Group Inc., Research Division
Okay, I can follow up on that. And then Mike, I'm wondering if it's possible to quantify -- I mean, if you were to assume that the resi market is flat in 2012 from a units perspective but you're picking up your fair share, what would that revenue delta -- revenue opportunity if we want to think about that way be?
Michael W. Lamach
Terry, I'd tell you, and this is similar to what -- Steve's question. I really don't want to get drawn into that until I've got the facts and I can communicate that to you.
So I don't want to speculate on that without really going through the work we're going through right now and coming out and telling you what I think it will look like for us.
Terry Darling - Goldman Sachs Group Inc., Research Division
I mean, I think otherwise, we would think -- assume the R-22 market continues at 25% of total and you have your normal share, which has been, what, 20% plus or minus there? Is that the parameters we might operate with?
Michael W. Lamach
Our share of kind of like the 13-SEER market historically was around 10%, 11%. And then as you move up through the various efficiencies, it goes up.
But no, we're 10%, 11% at that point in time. Is that your question, Terry?
Terry Darling - Goldman Sachs Group Inc., Research Division
I just wonder if I could shift gears and ask you about your view of the Carrier strategic move here to combine fire and security with Carrier and what the implications for you might be?
Michael W. Lamach
Well, I mean, I think from sort of an overall management of the company, it's a large unwieldy company with a lot of spare parts, so it makes some sense to put your building businesses together. Obviously, they didn't put Otis in there, but it makes some sense to put those things together and probably gain more efficiencies in doing that than probably any sort of growth upside.
There really is more of a trend in the market. In fact, we survey constantly on this, and we find 97%, 98% of building owners, kind of look at what we do and -- as best in breed.
And they'll think that way about fire systems, they'll think that way about security, around HVAC, control systems, and there's a lot less of a -- there's no momentum around changing that. Frankly, that particular question has been around for 25 years in the intelligent building world, and that mix hasn't changed much.
So that's sort of how I feel about it, and then we keep an eye on that integration aspect of putting businesses together. We occasionally will go to market together with HVAC and Security when a customer wants to that, but it's not as common as one might think.
Operator
And we will take our next question from Jason Feldman of UBS.
Jason Feldman - UBS Investment Bank, Research Division
So you I think commented earlier that the easing commodity costs could struck client trend the first quarter. You've had a lot of price increases this year.
Have you been getting any incremental push back or risk that some of those get rolled back as commodities have come down?
Michael W. Lamach
Well, they're awfully tough to get. As you can imagine, we're pretty pleased to see 2 quarters in a row, and we have put a lot of work into, I would say, the systems, the processes, the methodology across the company to do that.
I think the level of sophistication around how we think about price is very different than it was 1 year, 1.5 years ago and how we segment pricing for the various customers that we work with. And so we're going to continue to do that, sort of independent of what happens with falling commodity prices.
I think that you'll see us not leading in those efforts clearly. I think that there's probably a quarter or 2 where you look at sort of the "backlog" purging through with hopefully a little lower commodity cost coming through as well.
And so I think there's an opportunity here probably to further that spread. But these things change pretty quickly.
We particularly watch that with steel and how steel changes relatively quickly. And for us, it's a lot more impactful as to what happens with steel pricing than it does with copper.
Jason Feldman - UBS Investment Bank, Research Division
And also it's early to talk about next year, I understand that. But 2 areas.
Based on discount rates and asset returns recently, do you have any thoughts about pension headwinds from an earnings perspective and contribution that might be necessary next year? And kind of how you're thinking also now that you're almost done with the repurchases for this year, how that might play out next year as well?
Steven R. Shawley
Yes, we would expect some headwind next year, probably in the $35 million to $40 million range incremental cost for pension versus this year. The funding will be about the same, somewhere in the $50 million range, which has been consistent with the -- I mean, we funded the pension significantly in late 2010.
So we were able to thwart some of the headwinds that would've been expected this year, but will be back on a laddering next year of about, like I said, $40 million of costs and about $50 million of funding. So it's not overbearing.
We've done a lot of work in the past few years to shift our investments away from equities and our big funds, and we're continuing to do that. So we're trying to manage that liability that way.
Operator
We have time for one more question, that will come from Robert McCarthy of Robert W. Baird.
Robert F. McCarthy - Robert W. Baird & Co. Incorporated, Research Division
Actually I'm going to ask you 2 though. When you talk about the slower order booking activity in the Climate Solutions business, one of the things that I see is the 2% revenue growth in the third quarter and the aftermarket business within commercial HVAC parts, services and solutions.
That was a business that you originally were targeting something like a high-single digit growth rate for the full year. Is this part of the slowdown that you're talking about?
Or is the slowdown that you're talking about focused on the Unitary business?
Michael W. Lamach
Actually, Robert, it really reversed itself nicely in bookings that we've seen where we'll be up really light double digits in the quarter. We had a very large couple of contracts, performance contracts that we executed last year at this time, and we get a little bit of lumpiness here just in comparability between a really good quarter last year and this quarter.
But I'd expect that business to be high-single digit sort of overall rates for the end of the year, and I would tell you in the fourth quarter, we're trending something north of 10% bookings growth. So I don't think there's anything going on in that business other than a pretty tough comp last year in Q3.
Robert F. McCarthy - Robert W. Baird & Co. Incorporated, Research Division
Okay. So to the extent that something has changed, or is in a process of changing within Trane commercial, again it's primary European Unitary business that you're identifying?
Michael W. Lamach
Well, the European business is going to be Applied for us more than Unitary by a long shot, okay? So it's really Applied business there, and it would be both Unitary and Applied in North America moderating.
Robert F. McCarthy - Robert W. Baird & Co. Incorporated, Research Division
Okay. The other question I wanted to ask you is a little bit of a technical question but relates to Table 7 at the end of your press release where you provide Hussmann results for the first 3 quarters of this year.
Unless I'm mistaken, these are numbers that also include this North American service operations, which you had retained. I say that of course because the indication had been that restoring Hussmann to the first 9 months' numbers would add about $600 million to revenue, not the $781.7 million that's shown in this exhibit.
Do I have that correct?
Steven R. Shawley
Yes, you have it correct, Robert. We had to do it this way because we had to put all of Hussmann back into continuing operations.
We tried to give this to everybody so we could reconstruct the history correctly.
Robert F. McCarthy - Robert W. Baird & Co. Incorporated, Research Division
Does that mean that the service operations had been taken out previously? I thought they have not?
Steven R. Shawley
No, they have not, okay? We just wanted to make sure that everyone knows still what the Hussmann impact was in the overall numbers.
We can give you an adjustment for the branches to correct that, but we just wanted to make sure we understood what the total Hussmann impact was in the numbers.
Operator
This concludes our Q&A session. I'll turn the call back to our moderator for any closing remarks.
Janet Pfeffer
Thank you, Robert. Thank you, everyone, for joining today, and Joe and I will be available for follow up today.
Thank you.
Operator
And this does conclude today's conference call. We thank you for your participation and have a wonderful day.