Watsco Inc (WSO.B) 2009 Q1 法說會逐字稿

Good morning. My name is Christy and I will be your conference operator today. At this time, I would like to welcome everyone to the Watsco first quarter earnings release call. (OPERATOR INSTRUCTIONS.) Thank you. Mr. Nahmad, you may begin your call.

Good morning, everyone. Welcome to our conference call. This is Al Nahmad. I'm President and CEO. And with me today is Barry Logan, Senior Vice President, and Paul Johnson, Vice President.

Before we get started, let me make the traditional statement, a reminder that this conference call has forward-looking statements as defined by SEC laws and regulations that are made pursuant to the Safe Harbor provisions of these various laws. Ultimate results may differ materially from the forward-looking statements.

Well, this is an important and exciting time for us. I would describe the transaction that we've announced as transformative, a game changer for Watsco. And more importantly, it's terrific for everyone. It's good for our customers, good for our shareholders, good for our employees and good for our vendors.

First, I'm going to focus on the transaction, our joint venture; and secondly, we will then go into the first quarter results.

This, of course, is the most significant transaction in our company's history. As most of you know, Carrier's the largest provider of HVAC solutions in the world, with a history dating back 100 years. And Watsco, now over 60 years old, operates as the world's largest independent distributor of HVAC products.

This is truly a partnership between two great leaders in our industry. I would guess that the transaction at the distributor level of this $25 billion market, this is the largest ever since the industry began.

Now, let me tell you some of the basics about the transactions. First, the joint venture will be named Carrier Enterprises. It'll be owned 60% by Watsco and 40% by Carrier. Watsco has options to purchase additional ownership of the joint venture in future years.

Carrier Enterprises will operate to expand and grow Carrier, Bryant and Payne products in many of the largest HVAC markets in the United States, as well as markets in Latin America and the Caribbean.

Now, Carrier's contributing 95 locations in 12 Sunbelt states and Puerto Rico, and additional sales in the Caribbean and parts of Latin America. Watsco's contributing 15 locations in 8 states, which had revenues of $96 million in 2008. These locations have been dedicated to selling Carrier, Bryant and Payne products for many years.

Combined, the joint venture will have 110 locations in 20 states and Puerto Rico, serving approximately 19,000 customers and 1,400 employees. Pro forma revenues in the joint venture for 2008 were approximately $1.4 billion.

The current product mix for the joint venture is 80% equipment manufactured by Carrier under the three brands I've mentioned, Carrier, Bryant and Payne, with the remaining sales in parts and, to a lesser extent, supplies. That's HVAC supplies.

With respect to the business opportunities, Carrier Enterprises will provide Watsco a significant opportunity to expand into the premium brand equipment of the market. This is a major effort for us. We've been trying to find a way to participate in the premium brand market and we are now in it in spades.

We currently have a very small market share for the premium brand, and opportunity to sell products with state-of-the-art technology in highly recognizable consumer brands will complement our existing sales very well.

Another opportunity is expansion into the light commercial market. Today, we have a limited presence in this market segment and, through Carrier Enterprises, we will expand into part of the market -- into that part of the market that has been largely unavailable to us before.

We also see opportunities to add more products to the joint venture network. As you know, half our (inaudible) not equipment. These are HVAC products that complement the equipment part of our business.

Today the product mix of the joint venture is comprised primarily of Carrier, Bryant and Payne equipment. Increased penetration of those anchor brands will continue to be the primary focus. The customers need more and more non-equipment products every day to get the job done. We see this as an opportunity to expand product offers into additional lines of parts and supplies, adding sales growth, service and convenience for our contractor customers.

This enhanced product offering could lead to additional sales of equipment and more contractors will be attracted to each location, saving them time and effort as a result of the added convenience. This is consistent with our stated goal of building a nationwide network of branches that offer great service and convenience to our contractor customer base.

Carrier Enterprises will not only expand our network but, more importantly, will add new opportunities to the markets we presently serve. It will also provide access to the Latin American and Caribbean markets.

I'd like to comment on our Watsco culture. As many of you know, Watsco is a family of distribution companies conducting business under their original flagship names. Our operating subsidiaries, such as Gemaire and Baker, among others, operate in a way that maintains long-standing legacies and relationships. Our employees and customers have established these relationships over many decades and our dedication to preserve these relationships will not change. This is really a very strong part of our culture. We know these relationships exist when we get involved with these companies and we want to maintain and enlarge them.

Our mission at Watsco is to support our management team's growth, strategies and reward performance in ways that other companies cannot or do not do. Diversity is important to our strategy; diversity of products, price points, geography, sales, mix, customers and end markets.

Maintaining strong vendor relationships is crucial to the diversity and we remain committed to be the best partner available in the vendor community. Our mission, along with those product and partner relationships with both customers and vendors, has produced substantial long-term value for our suppliers, employees, customers and shareholders.

In terms of our shareholder scorecard, the value of the Company has grown more than 60-fold since we entered the distribution segment of the HVAC industry in 1989. And as I've said many times, we are conservative by nature. The mindset has allowed us to consider an opportunity as meaningful as Carrier Enterprises in the most adverse economy in recent history.

Our approach to this joint venture is no different. Once the transaction is consummated, which we expect will take 30 to 60 days, Carrier Enterprises will represent a significant new platform for growth. It will remain distinct and separate with a singular focus -- to produce substantial revenue and earnings growth under its own flagship name -- that's flagship name and family of brands. We believe our focus, entrepreneurial spirit and know-how will greatly benefit all stakeholders.

Now, some of us here and some of us on the call will wonder what's this do to our financial balance sheet. Well, we will maintain our financial strength to execute our strategy over the long haul. We approached this transaction with a simple point of view -- remain conservative. We wanted to allow room for additional growth and keep the balance sheet strong. I believe we have successfully retained those principles as we highlight the details of the transaction below.

Now, regarding the details of the transaction. Watsco's share of the purchase will be paid through a combination of stock, cash and a contribution of our locations that distribute Carrier, Bryant and Payne products.

The structure has several important outcomes. First, Watsco will maintain its focus on growing its existing network and expanding its current relationships well beyond where they are today. Borrowings will be kept to a minimum to allow for further expansion.

Second, with the issuance of equity to finance the transaction, Watsco's overall financial position will strengthen and our debt-to-cap ratio will remain low. Carrier's equity position in Watsco is expected to be right around 10%, and cannot under any circumstances exceed 19.9%. Cash flow generation and the continued payment of dividends will remain important objectives for Watsco.

Third, our increase -- we can increase our stake in Carrier Enterprises over time with a measure of flexibility. We have options to purchase additional interest within the next three to five years as a means to further growth in value.

Lastly, and more importantly, we welcome Carrier as a partner in the joint venture. We believe this is an important demonstration of confidence and an important sign of commitment to the long-term success of the relationship.

At this point I want to reemphasize the key fundamentals of what has made us successful in building our company, all of which will apply in this transaction.

First, we offer more to customers, more locations -- that's more locations, more products and more know-how.

Second, encourage and support the existing leadership team and employees, and empower them at the local level to grow and better serve customers every day.

Third, we reward success through aggressive pay-per-performance programs, including equity. Our entrepreneurial spirit has proven valuable in maintaining what we believe is the strongest leadership in the industry.

Fourth, we provide opportunities for employees that others cannot. HVAC distribution is all we do. And Carrier advancement -- pardon me -- and career advancement based on performance provides immense professional growth given our company's size and geographic reach.

And last, we maintain a culture that provides innovation and continuous improvement in performance, higher market performance. Higher margins over time have been a result of our continuous focus on performance.

In summary, once the transaction is complete, Carrier Enterprises will become a distinct entity, a substantial new member to the existing Watsco family of distribution companies, and will benefit greatly from our strategy of buying small -- I shouldn't say small -- strategy of buying well-established companies and building on their product brands and relationships.

This is a great opportunity to expand our network with new products, namely a strong premium brand offering as well as a full family of like commercial products. It also provides an entry into the new markets of Latin America and the Caribbean.

Given our culture and the needs of our customers, we will maintain an ongoing dedication to all of our key suppliers with a strong commitment to grow the products we sell, with a distinct and a focused approach.

I am sure you will have many more question about Carrier Enterprises, which we'll be happy to answer at the end of the comments. However, before then let's talk about the first quarter results. I'm going to take a minute to sip a little water.

First quarter results. The effects of the economy, especially during this slower seasonal period -- don't forget, fourth and first quarter are always slow periods for us; they're not in season -- certainly proved to be a challenge. Sales were $291 million and reflect a 23% decline over last year's sales of HVAC equipment. Over last year's -- a 23% decline over last year. However, our equipment sales declined 22% and non-equipment HVAC product sales declined 26%, while our refrigeration business declined 18% during the quarter.

This quarter, lower commodity prices affected certain product lines, lowering price and selling margins on products such as copper tubing, sheet metal and refrigerant, representing only 13% of our overall sales. But it cost us, this deflation in commodities, $0.15 during the quarter; $0.15 of earnings per share. Excluding this impact, our gross profit margin actually rose 30 basis points.

About 20% of the sales change relates to the commodity-based products. Our locations out West have also especially been hit hard since the Western market, along with -- the Western market, along with the commodity impact, represented 42% of the quarter's sales decline and combined to account for approximately $0.23 of the variance in EPS over the quarter. Or in different words, the deflation in commodity plus the softness of the markets on the West Coast cost us $0.23 in earnings per share in the first quarter. It doesn't mean we're not going to continue our focus, and we will, on cost reductions and operating efficiency, while maintaining the highest of all customer service levels.

During the quarter our SG&A declined 11%. We are reacting to this revenue decline by executing additional measures to further lower our costs in response to the top line. As we have said before, the initiatives are too numerous to mention, but we will continue to lower costs in a meaningful way without sacrificing the service our customers need. We expect to realize another $25 million to $30 million of cost reductions in the next 12 to 18 months.

We had an operating loss of $1.6 million and earnings per share was a loss of $0.04.

We did experience a richer sales mix of high efficiency and environmentally friendly products this quarter. This is a very positive for the future. Customers are recognizing the impact of high-efficiency equipment, as well as the changes that we are selling, the products that we sell regarding the environment.

We expect this trend to continue throughout the year as the phase-out of R22 equipment takes effect in January of 2010, and more consumers take advantage of the recently passed American Recovery and Reinvestment Act of 2009, which provides opportunities through tax credits to folks, especially that consumer choosing more efficient air conditioning and heating systems.

Cash flow was $13 million during the quarter and our balance sheet continues to strengthen. We finished the quarter at a net positive cash position with debt of only $20 million, which is long-term debt, and cash on hand of over $45 million; so therefore, a net cash position.

Our $300 million revolving credit agreement, which is in place through 2012, currently has a cost, if we should borrow, of less than 1%. And that remains intact for funding whatever we need for the Carrier Enterprises transaction and -- as well as for continued investment in our existing network.

We are going to wait to give our full-year earnings outlook until next quarter. There's just not enough visibility right now. And we are entering the selling and replacement season, which is the most significant part of our year. It would also give us more time to judge the timing and extent of the contribution to '09 from Carrier Enterprises.

And lastly, just to revisit the Watsco track record, I do want to go back and reiterate some of the earlier points that we made. Since our distribution strategy began in 1989, the revenues have grown from $64 million to $1.7 billion in 2008 and our market cap has grown more than 60-fold. We have remained -- we have -- pardon me, we have reminded many of you that we consider our strong financial position a great asset, one that will allow us to consider almost any opportunity.

We are certainly excited to be able to take advantage of an opportunity the size and breadth of Carrier by forming Carrier Enterprises. It will add substantial growth potential and long-term opportunities for our company and shareholders.

The best news is that we will continue to have substantial resources to continue our growth strategy (inaudible) entire family of distribution companies -- with our entire family of distribution companies as we continue to look for additional opportunities to grow our company. Or in other words, this transaction is really transformational. It's a game changer. We're really excited about it and we're going to have a lot of fun going forward.

Now, I'm ready for your questions.

(OPERATOR INSTRUCTIONS.) Our first question comes from the line of Michael Cox from Piper Jaffray. Your line is open.

Good morning, Michael.

Good morning. Congratulations on the transaction.

Thanks very much.

Could you provide some details on margin profile of the Carrier Enterprises, perhaps just on a pro forma basis for 2008?

I don't think we're going to provide that detail until the closing. But I can say, Michael, to be a little helpful, that historically our margins are higher. So therefore, we see an opportunity in revenue growth, as well as margin growth, with Carrier Enterprises.

Okay. That's helpful. And in terms of the valuation for your 60% ownership stake, I guess who would this compare to historical valuations for acquisitions you've completed in the past?

Well, since Barry Logan has done a few of these for me in the past, Barry, you want to comment on that?

Sure, Michael. Good morning. Well, first, the definitive agreement that we sign will be filed sometime later this week as part of our filings. So, it's something where the transaction details will certainly be in the documents that we'll file.

The profile of the transaction, through, from a valuation point of view, again, our cornerstone was to keep our balance sheet strong and flexible in the way that it is now. So, we'll accomplish that. It's roughly $172 million of consideration for the interest that we're -- we will own in Carrier Enterprises. And it's being paid for through a combination of stock and cash and contribution of an operation that we currently operate as part of Watsco that distributes Carrier-based products. And between the three parts of the consideration, it pays for, again, the 60% interest.

Okay. That's very helpful. And my last question is on the quarter. I was wondering if you could provide any detail of the progression of sales trends through the quarter. Did they change much as the quarter moved into a seasonally better period? And then what are you looking at here thus far, I guess through the month of April?

Well, the rate of decline during the first quarter -- the rate of decline seemed to be declining as we went from January to March. However, that did not continue in April. April rate of decline appears to be the same as the first quarters of old.

Okay. Thank you very much.

Our next question comes from the line of Matt Duncan with Stephens. Your line is open.

Good morning, Matt.

Good morning, guys. And congrats on the transaction.

Thanks.

Just a couple more questions on the transaction, if I may. It sounds like you guys are going to keep your debt balance pretty low. I mean, I don't know if you want to put some brackets around that, just to help us kind of get some idea of how much Watsco stock you're going to issue for this just so we can maybe try to come up with some accretion estimate for this deal for you guys.

Well, I think it's going to be pretty hard for you to measure that until we've got our closing. But I would say that most of our purchase price will be in stock at this point. It sort of depends on where the stock is as we get closer to the closing.

And I assume you guys do anticipate that this would be accretive. Is it immediately accretive?

Well, as I said, I think it's too early to tell you that. I think what's important, the way we look at things, is long term. Long term you've got a $3 billion powerhouse and we think we can grow that at double-digit rates, and eventually grow the margins also to double-digits. So, if you look at this that way, this is really very helpful to building this national network with that sort of financial performance.

Absolutely. And then will you guys, just for accounting purposes, is this going to flow 100% through your P&L? I mean, you'll pay out a minority interest to Carrier?

Well, I agree with everything you said except the pay out. We will show a minority interest, correct.

Sure. Okay. Alright, that's helpful. And then moving on to the first quarter (multiple speakers) that you guys saw at the gross margin line, how -- do you anticipate that the copper and steel and sheet metal and all that stuff, is that going to continue to weigh on your gross margins for the next few quarters until that kind of phases through?

Why don't I ask Paul Johnston to comment. He's got his finger on the market.

Yes. I think we're not out of the woods completely as far as the gross margin percentage that we're seeing on copper and steel, in particular. Refrigerant I think is pretty much behind us right now. But as you remember, copper went from $4 a pound last July and dropped down to $1.20 the beginning of the first quarter. So, it's recovered now back up to $2. So, we still are halfway to where we were last July.

What you're going to see is you're going to see that the dollars of sales will be down. I think the -- just because the commodity price is so much lower. But I think the gross margin as a percent will start -- we'll start seeing some improvement in that in the second, third and fourth quarter.

Okay. And then can -- I may have missed it, but did you guys quantify the revenue impact of the lower price this quarter?

I believe we commented, Matt, it's about 25% of the total revenue decline came from that -- those limited product lines.

Okay. And the last thing here and I'll jump back in queue. Do you have the breakout in terms of how much replacement sales were down versus new construction sales?

It's not something that's easily measured this time of year. But overall, I think the new construction market was down about 40% in our markets. And it's been about between 10% and 15% of our sales coming into the year, so that would give you an idea of the range of impact.

Thanks, Barry.

Our next question comes from the line of David Manthey from Robert W. Baird. Your line is open.

Hi, David.

Thank you. Good morning, guys. So, am I understanding this correctly that the $172 million is purely the cash plus any stock consideration?

That's correct. Plus the contribution of our Carrier subsidiary.

Can you give us a number of just what the cash plus stock will be?

I don't think we're going to make that breakout now, are we Barry? We really don't know because a lot depends on stock price as we get towards the end.

That's correct, David, though you'll see in the documents there's a range of shares that may be issued. And then that becomes based on ultimately our discretion in terms of how we wish to finance the deal at closing. So, it's again, flexibility that lets us kind of think up until the closing date how consideration will be paid.

Okay. So, the sliding scale between cash and stock is at your discretion. It's not related to the stock price?

It is, David. And I believe we're going to use mostly shares.

Okay. And then the second, just strategically it sounds from what you're saying the key opportunity here is to take this from 80% equipment and broaden the mix out, sell other products.

Correct. Correct.

Okay. Is there any other -- as you look at these locations, are there any other opportunities in terms of consolidation with your existing locations, or selling other equipment through them? Or are these purely via Carrier --?

That's a good question because it cuts to the core of our philosophy. And the answer first is no, we will not consolidate Carrier Enterprises branches with existing branches. Carrier Enterprises, as are the other Watsco subsidiaries, distinct. And it will be focused solely on Carrier products plus the additional non-equipment products it will bring to those branches.

Okay. And then finally--.

We may add more Carrier Enterprises branches, and fully anticipate that, and help them grow.

Okay.

Where they need --.

Got it. Okay. Alright. And then the final question on the mix of R410A versus R22. If you could just paint some numbers around that for us. And then the 14 and higher SEER equipment, just any kind of metrics you can give us to give us an idea of --.

Paul?

Yes. What we've seen on the mix between R22 and 410 is basically balanced right now, 50/50. So, that's a material change for us. And that's approximately the way the market shakes out right now, is approximately 50/50. The shipment numbers that you'll see from AHRI are that, there are shipments, ours are movements. So, we're taking in more 410A equipment right now than we are R22.

As far as any trends we're seeing on the 13 SEER and above, the 14 SEER, we've seen some good news there as far as we're seeing our sales actually up slightly from prior year on the 14 SEER and above equipment. We don't know yet how much of an impact the American Recovery and Reinvestment Act will have on this. We're hopeful that, as the year progresses, we'll start seeing more and more activity around the $1,500 tax credit that the consumer would receive for putting in 15 SEER product and 16 SEER product in their homes.

David, just to be helpful to what Paul said, the 14 SEER and above was about 20% of our equipment business versus 15% last year. And overall pricing and margin is up on our equipment business in the first quarter. This is a soft period for those statements to be made. So again, looking forward, it's a good thing for the future.

Got it. Alright, guys. Thank you.

And our next question comes from the line of Jeff Hammond with KeyBanc Capital. Your line is open.

Good morning, Jeff.

Hi. Good morning, guys. Just in terms of -- you talked about additional ownership over time. What could your stake increase and how is that determined?

Okay. We have options -- two different options, really, Jeff, over a period of years to go 10% increase at a time. So, we could go to 80%. What is it, over a period of five years or six years, Barry?

It's -- the first option period begins in three years and the second one in five years.

So actually, Watsco would own 80% of the Carrier Enterprise.

Okay, great. And then what was the rationale -- it looks like parts like the Northeast and California aren't included. What was the rationale behind that?

We'll, I'm a pretty -- our philosophy, Jeff, as you know is very conservative. And I don't want to ever bet the ranch on any transaction. So, to put -- this is Watsco's point of view. I can't answer for Carrier. But Watsco's point of view was that we did not want to load our balance sheet with debt. So, we wanted a smaller transaction. A small -- I shouldn't say a smaller -- I should say we wanted a transaction we were comfortable with regarding our balance sheet.

Now, those two -- those three areas, Canada, the Northeast and California, they stay within the ownership of Carrier. And what will happen in the forte, I don't know and cannot predict. But from our perspective, we wanted to have a transaction that would not stretch our balance sheet.

Very good. And then, just back to the enterprise value of the -- is there a way to value the 15 locations, or what are you assuming the 15 locations you've contributed?

Oh, that was a long, negotiated thing. We're not going to write that down in terms of values. When we close, we'll probably -- probably provide all you want. But right now, I think it's a little early.

Okay. But the -- to get to the $172 million, it's three buckets. It's some amount of --.

Well, no, it's the other way around. The value was $172 million and we had to find a way to fund it and that's how we did it.

Okay. So, to fund the $172 million is, is the locations, some amount of stock and the small amount of cash itself.

Yes. Yes.

Okay.

That's the way I hope it turns out.

Okay, perfect. And then lastly --.

By the way, it's not just location. That's a going concern with revenues and profits.

Oh, absolutely.

The 15 locations. Yes.

And then -- so, United Technologies is going to own a certain percentage of your company. What, if any, restrictions or lock-ups do they have from selling that stake over time?

Barry, is that something we're going to disclose in the purchase agreement? Do you know?

Yes. It will be eventually, Jeff. I mean, the core value here again was to have a shareholder that was going to think and act long term. We can't necessarily mandate that through an agreement, but in the spirit of having shareholder agreement in place, I think we've accomplished that. But the document speaks for itself and it's something that will be eventually filed.

Yes. But I can give you a preview, which I just did. Under no circumstances can they exceed 19.9%, unless we put the Company up for sale or something like that. But -- and more importantly, the concept is that Watsco remains completely independent of Carrier Enterprises.

We have an obligation to the other OEMs and we're not going to shirk that responsibility (inaudible) brands as we have in the past and we're free to do it. And I would never give up that freedom, that Watsco is a separate, independent business that's dedicated to not only represent and work Carrier Enterprises, but also the other subsidiaries which sell different brands to the market. We own them a lot and we plan to continue doing it. Strength (multiple speakers).

Yes. And that was kind of my final question. As you consider these other vendors, have you had any chance to dialogue with them in response. Certainly this becomes -- Carrier becomes a bigger piece. I mean, any risk you see that they change their stance or view on partnering with Watsco?

I don't think so because, as I say, the assurance is that Carrier Enterprises is independent of Watsco. Carrier and United Technologies do not govern Watsco. Watsco's not in the business of entering the Carrier Enterprises translation for purposes of replacing sales; it's for the purposes of we're expanding sales. So, we would never be a partner to, let's say, replace one of our existing brands with Carrier brands. That's not even in our thought process.

Now, that doesn't mean we won't both go against other brands that we don't presently distribute. So, not at all. I expect our relationships to be stronger than ever with everyone else because we don't have any intent to do anything to harm them; just the other way around, is to build them.

Okay. Great color here. Congratulations, guys.

Thanks.

Our next question comes from the line of Keith Hughes with SunTrust. Your line is open.

Thank you. On the transaction, and I know you've talked about we'll see some more margin information when you file the agreement, but as Carrier Enterprises adds on the $1.4 billion you discussed, is that profitable at this--?

Yes.

It is profitable. On an EBIT basis would be my question.

Yes.

Okay. And on the results in the quarter --.

Keith, you know us. We would never try to do something that isn't profitable.

Just making sure. On the results in the quarter, you talked about April looking like March in terms of demand. Was March down in this 22%, 23% range?

Yes.

Okay. And has that been weather affected, you think, or is that more just --?

Well, it's a very good question. We're unable to tell that because April was not necessarily a -- we're going into in-season. But I don't know whether it's weather or the economy, Keith. It's just too early to know.

But what I'm counting on is that, as we enter into the hot weather, which is I think your point, we will be fine for the year.

Alright. That's all for me. Thank you.

And our last question comes from the line of Dan Whang with B. Riley & Co. Your line is open.

Hi, Dan.

Hi. Good morning. Just wanted to clarify. So, in terms of the -- now that you've transferred -- or will be transferring 15 locations to the JV, your other locations, would they be carrying any Carrier products or --?

No. Right now, we're -- I mean, that could change in the future, but right now we're contemplating Carrier Enterprises to be the sole distributor of Carrier products.

Got it.

Although, there are some other products that Carrier manufactures under their brand name ICT. So, we've had a relationship with Carrier for a very long time. But the principle purpose of Carrier Enterprises are the Bryant and Carrier and Payne brands. I mean, they do private label for us. They do other things for us as well.

And is it your understanding, I mean, do you think there could be some more sort of transactions by some of the other OEMs out there? I mean --.

Well, I hope so. We have, as Barry has said and as I'm repeating, a very strong balance sheet. And we are very ambitious and we would invite the other OEMs to participate with us in any way they want to to grow the relationship, either a joint venture or just in outright sales of their distribution assets. We certainly have the capability and the desire for that.

And I don't know if you mentioned about kind of the expected (inaudible) at the time of close. I mean, just ballpark if things proceed as expected.

It's a customary thing. I mean, this 30 to 60 days is our best estimate.

Okay. Great. Thank you.

We'd like to get it done sooner rather than later because we're entering the market -- the season now.

Alright. Okay. Thank you very much.

You bet.

(OPERATOR INSTRUCTIONS.) Our next one comes from Karthik Srinivasan from Giovine Capital. Your line is open.

Hi. Good morning. I had a question just on Carrier Enterprises in terms of your equipment sales. What percentage are going to come from the commercial segment?

Barry, do we have those breakouts?

Yes. It's ultimately in the whole mix (inaudible) it will be about 15%.

Okay. So, it's 15% for the total company?

Yes.

Pro forma. Okay.

From a pro forma basis, yes.

Do you have the number for Carrier Enterprises separately?

No. It's not something we'll disclose now.

But I have to say that this is a major move towards giving us much more share of market on light commercial.

Yes. Appreciate it. Thank you.

Yes.

Just to add to that, it's -- that percentage is probably representative of the overall industry, where we've been much less than that in probably low single digits at best in that segment prior. So, it really establishes a presence that kind of mirrors the overall market, which is good.

(OPERATOR INSTRUCTIONS.) We have no further questions.

Well, thanks a lot. We're very excited. This is a wonderful day for us and we look forward to bringing you updates as the transaction and the rest of the Watsco story unfolds. Bye-bye.

This concludes our conference call for today. You may now disconnect your lines.