Financial Data and Key Metrics Changes - The company reported first-quarter sales of $1 billion, a decrease of 7% compared to Q1 2024, or down 5% organically when excluding the impact of China and foreign exchange [20][36] - Operating income was $135.8 million, down 19%, with an operating margin of 13.1% [37] - Earnings per share (EPS) for the quarter were $0.66 [21][37] Business Line Data and Key Metrics Changes - **Water Innovations**: Sales decreased by 10% or 7% organically, with operating income of $113.2 million, down 20%, and an operating margin of 20% [27][37] - **Outdoors**: Sales decreased by 3%, with operating income of $31.7 million, down 16%, and an operating margin of 10.4% [29][38] - **Security**: Sales decreased by 4%, with operating income of $23.2 million, down 13%, and an operating margin of 14.2% [32][39] Market Data and Key Metrics Changes - The company noted a soft demand environment, with point of sale (POS) excluding China down low single digits and reductions in wholesale inventories [20][21] - The spring selling season was slower due to cautious consumer behavior, particularly in the repair and remodel sector [19][20] Company Strategy and Development Direction - The company is focused on mitigating the impact of tariffs through supply chain opportunities, cost reduction activities, and strategic pricing actions [10][11] - A significant portion of the company's cost of goods sold (COGS) is sourced from the U.S. (60%) and North America (70%), providing a competitive advantage [14][42] - The company is consolidating its U.S. office associates into a new campus in Deerfield, Illinois, to enhance collaboration and innovation [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the current uncertain environment and emphasized the importance of strategic priorities [10][47] - The company will not provide detailed full-year financial guidance due to uncertainty around consumer demand but will outline a framework for potential EPS scenarios [12][43] - Management expects to fully offset the anticipated $200 million tariff impact in 2025 through various mitigation strategies [12][44] Other Important Information - The company has made significant progress in reducing its reliance on China, with expectations that COGS from China will be around 10% by the end of the year [14][86] - The digital business is expected to generate around $300 million in sales in 2025, with strong momentum in the Flow business [23][24] Q&A Session Summary Question: How does the transformation effort and headquarters move progress? - Management described the transformation as being in its third phase, focusing on co-location to drive innovation and performance acceleration, with positive talent relocation outcomes [50][56] Question: How is the company planning to mitigate the tariff impacts? - Management expects to fully offset the $200 million in-year tariff impact through supply chain moves and pricing actions, with a significant portion of the annualized $525 million impact related to China [59][63] Question: How confident is the company in achieving $300 million in digital sales? - Management expressed confidence in the digital business's performance, highlighting strong growth in the Flow segment and new partnerships [68][70] Question: What is the strategy regarding e-commerce pricing and market share? - Management acknowledged a transition to a firmer pricing strategy in e-commerce, which may have temporarily impacted share but is aimed at long-term brand health [80][81]

Financial Data and Key Metrics Changes - The company reported first quarter sales of $1 billion, a decrease of 7% compared to Q1 2024, or down 5% organically when excluding the impact of China and foreign exchange [20][38] - Operating income was $136 million, with an operating margin of 13.1%, and earnings per share (EPS) were $0.66 [21][38] - The company expects to fully offset the anticipated $200 million tariff impact in 2025 through supply chain opportunities, cost reduction activities, and strategic pricing actions [12][44] Business Line Data and Key Metrics Changes - **Water Innovations**: Sales decreased by 10% or 7% organically, reflecting lower point of sale and inventory destocking [28][38] - **Outdoors**: Sales decreased by 3%, driven by low single-digit point of sale declines, but double-digit growth was noted in decking [30][39] - **Security**: Sales decreased by 4%, primarily due to soft point of sale and inventory reductions [31][40] Market Data and Key Metrics Changes - The company noted a softer market environment, with cautious consumer behavior impacting demand, particularly in the repair and remodel sector [19][20] - Inventory reductions were observed across channels, particularly in wholesale, as partners prepared for a softening environment [20][81] Company Strategy and Development Direction - The company is focused on mitigating the impact of tariffs, controlling costs, and driving strong brands and digital initiatives [33][34] - A significant consolidation of headquarters is underway to enhance collaboration and innovation, expected to be completed by the end of summer [8][58] - The company aims to leverage its North American manufacturing footprint to gain a competitive advantage, particularly against competitors sourcing from China [14][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the current uncertain environment and emphasized the importance of strategic priorities [34][47] - The company is not providing detailed full-year financial guidance due to uncertainty around consumer demand but has outlined a framework for potential EPS scenarios [12][44] - Management highlighted the potential for market outperformance despite external challenges, driven by strong brand positioning and supply chain advantages [34][47] Other Important Information - The company has reduced its spend from China by over 60% since 2017 and expects to have only 10% of its cost of goods sold (COGS) from China by the end of the year [14][85] - The digital business is expected to generate around $300 million in sales in 2025, with significant momentum in the Flow product line [23][70] Q&A Session Summary Question: How does the transformation effort and headquarters move progress? - Management indicated that the transformation is in its third phase, focusing on co-location to drive innovation and performance acceleration, with positive talent relocation outcomes [51][56] Question: How is the company planning to offset the tariff impacts? - The company expects to fully offset the $200 million impact in 2025 through supply chain moves and pricing actions, with a significant portion of the annualized $525 million impact related to China [59][63] Question: What is the confidence level in achieving $300 million in digital sales? - Management expressed strong confidence in achieving the digital sales target, highlighting significant activations and new partnerships that drive value [68][72] Question: Can you provide more details on the e-commerce pricing strategy and share shifts? - The company is transitioning to a firmer pricing strategy in e-commerce to maintain competitiveness, acknowledging some short-term share loss for long-term brand health [79][80]