Financial Data and Key Metrics Changes - Record adjusted segment operating margin of 26.3%, surpassing 26% for the first time [8][16] - Record adjusted EBITDA margin of 27% [9][16] - Year-to-date cash flow from operations reached $2.3 billion, an increase of 8% year-over-year [27] - Adjusted earnings per share (EPS) increased by 7% to $6.94, despite a 2% decline in sales [17][18] Business Line Data and Key Metrics Changes - Aerospace segment achieved record sales of $1.6 billion, up 12% year-over-year, driven by aftermarket strength [25][26] - Industrial North American sales were $2 billion, with organic growth down 3% [22] - International businesses saw order rates improve to 11%, with Asia Pacific up 2% and Latin America robust at 8% [24][25] Market Data and Key Metrics Changes - North American order rates remained positive at 3%, marking the second consecutive quarter of positive order entry [23] - EMEA region faced challenges with a 7% decline, while Latin America showed strong growth [24] - Aerospace orders increased by 14%, contributing to a backlog of $7.3 billion [26][46] Company Strategy and Development Direction - The company emphasizes a decentralized structure and the use of the Win Strategy to drive performance and margin expansion [10][12] - Focus on acquisitions to enhance interconnected technologies and maintain a competitive edge in the motion and control industry [11][75] - Commitment to mitigating tariff impacts through pricing, supply chain actions, and cost reduction strategies [14][47] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving positive industrial growth in FY 2026, supported by long-cycle orders [44][106] - The company anticipates continued strength in aerospace and defense markets, with a focus on aftermarket growth [29][55] - Management acknowledged ongoing macroeconomic uncertainties but remains optimistic about future performance [106][107] Other Important Information - The board approved a 10% increase in the quarterly dividend, extending the record of increasing annual dividends for 69 years [27] - Share repurchases totaled $650 million for the quarter, with year-to-date repurchases at $750 million [28] Q&A Session Summary Question: Can you elaborate on the longer cycle orders and their conversion to revenues? - Management indicated that longer cycle orders are expected to contribute positively to revenues in FY 2026, with strong order rates in aerospace and HVAC [44][46] Question: What are the risks associated with tariffs and cost management? - Management is confident in fully mitigating tariff impacts through pricing actions, supply chain strategies, and ongoing cost reductions [47][48] Question: How sustainable is the growth in Latin America? - Latin America continues to show robust growth, driven by filtration and motion systems activities [133] Question: What is the outlook for European defense budgets? - Management noted potential positive sentiment regarding future defense spending in Europe, despite current market softness [92][93] Question: How is the company managing operational improvements? - The company is leveraging enhanced demand and capacity tools to improve operational efficiency, even in a challenging volume environment [71][72]

Financial Data and Key Metrics Changes - Record adjusted segment operating margin of 26.3%, surpassing 26% for the first time [6][15] - Record adjusted EBITDA margin of 27%, an increase of 150 basis points [15] - Net income at 9.4% with an 18.2% return on sales, both records [16] - Adjusted earnings per share (EPS) increased by 7% to $6.94 despite a 2% decline in sales [16][25] - Year-to-date cash flow from operations reached $2.3 billion, up 8% year-over-year [25] Business Line Data and Key Metrics Changes - Aerospace segment sales reached a record $1.6 billion, up 12% year-over-year, driven by aftermarket strength [23] - Industrial North American sales were $2 billion, with organic growth down 3% [20] - International businesses saw order rates improve to 11%, with Asia Pacific up 2% and Latin America robust at +8% [22] - Adjusted segment operating margins for international businesses expanded by 160 basis points to 25.1% [23] Market Data and Key Metrics Changes - Orders increased by 9% overall, with North America showing positive order entry results for two consecutive quarters [19][20] - EMEA region faced challenges with a 7% decline, while Latin America remained strong [22] - Tariffs accounted for approximately 3% of cost of goods sold, equating to $375 million annually, fully offset by mitigation actions [13][35] Company Strategy and Development Direction - The company emphasizes a decentralized structure and the use of the Win Strategy to drive performance and margin expansion [8][10] - Focus on maintaining a strong position in the motion and control industry through acquisitions and a resilient portfolio [9] - Commitment to being a strong generator and deployer of cash, with a focus on shareholder value [37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in mitigating tariff impacts and maintaining margin expansion despite macroeconomic uncertainties [13][35] - The outlook for FY 2025 includes a forecast of approximately -1% reported sales growth, with organic growth expected at +1% [31] - Management remains optimistic about positive industrial growth in FY 2026, driven by longer cycle orders [42][100] Other Important Information - The company approved a 10% increase in quarterly dividends, extending a record of increasing annual dividends for 69 years [25] - Share repurchases totaled $650 million in the quarter, with year-to-date repurchases at $750 million [25] Q&A Session Summary Question: Orders and their conversion to revenues - Management indicated that positive industrial growth is expected in FY 2026, with long cycle orders contributing to this outlook [42] Question: Risks related to costs and tariffs - Management is confident in fully mitigating tariff impacts through pricing, supply chain actions, and ongoing cost reductions [45] Question: Strength in aerospace margins - Management noted strong aftermarket performance and confidence in continued margin expansion despite potential headwinds from OEM recovery [50][54] Question: Disconnect between industrial orders and sales - Management explained that the connection between orders and shipments has extended due to the transformation of the portfolio, with longer cycle businesses affecting this dynamic [61] Question: European market outlook - Management acknowledged broad-based softness in European end markets but noted positive sentiment regarding proposed stimulus and future defense spending [88] Question: Corporate G&A cost containment - Management indicated that cost containment measures are expected to remain in place, with no significant rollback anticipated [127]