Q3 2019 Earnings Call

October 24, 2019

Now turn the call over to the Vice President of Investor Relations Dennis Slaying. Mr. Line, you may begin.

Thank you Shannon good morning, everyone and thanks for joining us for Stanley Black <unk> Decker's third quarter 2019 conference call on the call. In addition to myself as Jim Loree, President and CEO , Don Allen Executive Vice President and CFO , and Jeff Hansel Executive Vice President and President of global tools and storage our earnings release, which has issued earlier.

This morning, and the supplemental presentation, which we will refer to during the call are available on the IR section of our website a replay of this morning's call will also be available beginning at 11 am today, the replay number and the access code are in our press release.

This morning, Jim Don and Jeff will review, our third quarter 2019 results and various other matters followed by a <unk> session consistent with prior calls we're gonna be sticking to just one question per caller and as we normally do we'll be making some forward looking statements. During the call such statements are based on assumptions a future events that may not prove to be accurate.

And as such they involve risks and uncertainty. It's therefore possible that the actual results may materially differ from any forward looking statements that we might make today, we direct you to the cautionary statements in the 8-K that we filed with our press release and in our most recent 34 Act filings I'll now turn the call over to our President and CEO , Jim Lorraine Okay. Thanks.

Dennis and good morning, everyone. Thank you for joining us.

As you saw from this mornings release, we delivered a strong third quarter successfully overcoming $90 million of currency and tariff related pressures as well as weak end markets conditions in some industrial in emerging markets. Fortunately the U.S. construction and de iwai markets continue to be supportive.

Help of our growth catalysts, we once again achieved above market organic revenue growth and at the same time protected our earnings base revenues were $3.6 billion up 4% with organic growth of 4% and acquisitions and adding three points that solid organic and inorganic growth was partially offset by a 2% <expletive> .

Klein from currency and the point from divestitures tools and storage achieved strong 5% organic growth with craftsman, new product introductions and ecommerce contributing [noise] North American retail Pls continued its strong double digit levels with the second week of October marking the 20 seconds.

Second a week and double digit territory.

Industrial total revenues grew 13% with a 16 point contribution from the I, Yes attachments acquisition.

The U.S. integration and targeted cost synergies remain on track segment organic volume was down modestly 2% as global light vehicle production continues to be in deep contraction and general industrial markets are on a slowing trend across the globe.

Currency also shaved a point off the industrial revenue line.

Security made progress on its value creation plan, reaching an important milestone in Threeq you with the generation of positive organic growth [noise].

Our investment in digital talent, the rapid commercialization of new technology based solutions and our activities in the small and medium business segment are starting to gain momentum electronic security achieve mid teens order rates during the quarter and is now working to convert a strong backlog into future revenue.

We are confident that there is a significant value creation opportunity on the horizon as we execute this transformation in this regard we reiterate our commitment to update investors on our security portfolio review no later than the first half 2020.

For the overall company, we delivered 2% adjusted EPS expansion and a consistent operating margin rate versus prior year.

2% EPS expansion seemingly modest accomplishment, but impressive when taken in the context of $90 million of external headwinds. It was our pricing cost control and margin resiliency actions that enabled us to overcome and escalating tariff regime.

Persistent dollar strength and the unfavorable impact of which grew by $15 million as the quarter proceeded.

As we look ahead to the fourth quarter end the year 2020, our view now assumes a continuation of the current demand environment across our markets as well as some carryover tariff and currency related headwinds into 2020.

We continue to swiftly respond to the volatile external environment with price recovery supply chain adjustments and acceleration of our margin reserve resiliency initiative.

As a testament to the strength of our team in our enterprise that we have produced above market organic growth and a 9% CAGR.

EPS expansion over the past three years, while simultaneously absorbing $900 million in commodity tariff and currency related cost inflation.

To preserve our ability to deliver continued earnings and cash flow growth in 2020 and beyond we are taking new cost reduction measures that will result in approximately $200 million of annualized savings. This is in addition to the previously announced margin resiliency actions, which will also contribute materially to 2020.

When taken in combination with our robust growth pipeline. These cost slash margin actions position us for a solid 2020 setup for EPS and cash flow, so with that and with our balance sheet in great shape. After deleveraging. This year, we are ready to tackle whatever market conditions come our way in 2020 and beyond.

Here are some specifics, which will continue to drive growth as we look ahead.

The Craftsman brand rollout continues to be a fantastic story by the end of the year, we will have grown cressman into a $600 million business net of cannibalization just three years. Following the acquisition that is $500 million of pure organic growth. The Crescent program includes several top tier retail partners and by year end 2020.

We'll have over 10000 retail outlets with $1 billion of revenue by 2021.

Six years ahead of our original plans. It's also clear that our innovation machine is stronger than ever Flexvolt is now nearing $400 million an annual revenue and continues its double digit growth trajectory, our latest breakthrough innovations to Walter atomic energy and extreme power tools.

For the highest power to wait ratios available in the market. This time in the compact and subcompact segments.

These two product lines are quickly, adding hundreds of millions of dollars of growth and the positive end user reception demonstrates that these products are going to be winners in the marketplace.

Commerce is also a powerful growth driver in our emerging markets and developed markets, where the industry leader by a wide margin with $1 billion in global revenue growing consistently at double digit levels and then there are the revenue synergies from our recent acquisitions, we're well underway to broaden our distribution of the Irwin and Lennox brands around the world and by next.

Year, we expect to generate a cumulative 102 $150 million in revenue synergies. Additionally, we are exploiting the revenue potential from the yes attachments and Nelson fasteners acquisitions, and then finally with our MTD partnership. Our teams are now working together on multiple opportunities to generate operational efficiency and.

Revenue growth.

With this relationship we've gained entry into the $20 billion lawn and garden market in a financially prudent way and beginning in July 2021, we have the option to purchase the remaining 80% of the business with the potential to add approximately $3 billion.

Revenue at an all in EBITDA multiple in the range of seven to eight times.

These programs position us for a strong multi year revenue growth and share gain outlook. However, we are not singularly focused on growth to support margin expansion and create a buffer for future external volatility, we're making progress with our margin resiliency program. This is a major transformational initiative, which will provide the 300 million to.

$500 million of cumulative operating margin benefit by 2022, most of the benefit derives from systematically applying digital technologies, such as AI and machine learning advanced analytics robotics and connected factories, among others to create value across our entire enterprise.

So as you can see there is a lot to be excited about as we look ahead as we make cost structure adjustments in the near term we continue to feed the commercial and innovation machine that has created this powerful growth story. So thank you and now I'll turn it over to Don Allen, who will walk you through more detail on segment performance overall financial results and guidance.

Don.

Thank you Jim and good morning, everyone I will now take a deeper dive into our business segment results for the third quarter tools and storage delivered 4% revenue growth with a strong 5% organic growth offset by one point of currency.

I am growth contributed four point and price delivered one point of growth.

Operating margin rate was 16.6% flat versus the third quarter 2018 as benefits of volume leverage pricing.

And cost control were offset by the impact from currency and tariffs, which totaled approximately $90 million the entire company.

However, 95% of that impact was in tools and storage.

Share gains were experienced across each tools and storage region and SBQ.

Looking at the geographies North America was up 7% organically.

US retail has strong momentum and delivered low double digit growth in the quarter.

The U.S. commercial channels posted low single digit growth.

While the industrial tools and storage business was down mid single digits due to the ongoing customer inventory corrections we've been experiencing.

And then the audit automotive repair channel had growth of low single digits.

As John quarter in North America was fueled by our growth catalysts, namely the Craftsman brand rollout and an ongoing stream of Nucor and breakthrough innovations such as dewalt Flexvolt atomic and extreme.

The shipments were supported by continued strong sell through as evidenced by the double digit Pos growth in North American retail.

The growth catalysts had been a steady source of outperformance, which has helped us to navigate slower growth in industrial and the industrial and emerging markets.

Now moving on to Europe , Europe delivered 4% organic growth from the quarter. This was led by the UK, the Nordic essential Europe , Greece, and Iberia more than offsetting some softer markets, including Germany and France.

Overall, the team continues to gain share leveraging new product innovations and commercial actions to produce above market organic growth.

This will be the six year in a row that our European team has demonstrated mid single or high digit organic growth a truly outstanding performance by that team.

Finally emerging markets declined 1% the ongoing benefits from price new product launches, Andy Commerce expansion were more than offset by market contractions in Mexico, Turkey and China.

We continue to see share gains across the region with Brazil, Chile, India, Taiwan, and Korea, posting mid to high single digit growth.

And then Russia, delivering double digit growth in the quarter.

The emerging markets team continues to contend with currency volatility and is delivering pricing actions to protect our margins and leveraging our growth catalyst to deliver share gains.

Now looking at the tools and storage at views.

Power tools and equipment delivered 6% organic growth benefit benefiting from commercial execution and new product introductions.

We are benefiting from the strong craftsman performance as well as expanding our leading to wall power tools system with new innovations are trio breakthrough innovations flexible atomic an extreme deliver on key user needs for more power with smaller formats. They clearly are generating share gain for us and our customers.

Moving to hand tools accessories, and storage, we delivered 5% organic growth driven by new product introductions and the ongoing craftsman rollout.

Our national Big box partner is now fully set across all locations with a successful launch of 1200, new Craftsman products.

The broader rollout for our e-commerce , and other retail partners as well underway.

Sell through remains strong and we continue to convert new users, which will represent significant share gain opportunities as we head into 2020.

So in summary, another excellent quarter for tools and storage. This team continues to act with agility to react to the changes in the external environment, while positioning the business for future growth and margin expansion.

Looking at the industrial segment the segment delivered 13% total revenue growth with the I guess attachments acquisition contributing 16 points.

Partially offset by a volume decline of 2%.

One point headwind from currency.

Operating margin rate declined year over year to 15% as productivity gains and cost control, where more than offset by the impact from lower engineered fastening volume.

And the externally driven cost inflation, we experienced.

Engineered fastening organic revenues were down 4% as fasteners share gains were offset by inventory reductions and lower production levels within the automotive and industrial customers.

The market environment for for this business remains challenged with underlying automotive production declining for the fifth consecutive quarter.

And our industrial markets are showing signs of inventory reductions and slowing trend.

Despite this though our auto fastener business showed positive organic growth in the quarter, demonstrating 300 basis points of content penetration gains relative to the underlying market.

The systems business within automotive, which is capex driven as we know showed low double digit decline and despite gaining share the industrial fasteners business was down in the mid single digits.

The infrastructure business delivered 4% organic growth due to stronger onshore pipeline project and inspection activity in oil and gas.

This was partially offset by lower hydraulic tools volumes, which was impacted by difficult scrap steel market.

And then finally as Jim mentioned, the is business and the related integration continues to hit all key expectations.

So wed be turning to security the segment delivered organic growth of 1% in the third quarter.

North America was up 3% organically driven by higher volumes within healthcare automatic doors and electronic security.

Europe was down 1% organically as strong growth in France was offset by continued adverse market conditions in the nordics and the UK.

In terms of profitability the segment operating margin rate was 10.9% down 20 basis points versus the prior year as organic growth and cost containment were offset by a 50 basis point impact from the Sargent Greenleaf Doug divestiture.

As well as investments to support the business transformation and commercial electronic security.

The modest growth achieved in the quarter was another encouraging step as a security team began delivering on the targeted investments we've made in digital commercial talent and field technicians.

These talent investment support the commercialization of new technology enabled solutions focused on delivering customer insights through data analytics.

And in App based solution for our small to medium enterprise customers.

The forward looking indicators remain positive as we continue to see mid teens year over year improvements in orders and backlog.

We are optimistic the team can continue to build upon their early wins to deliver consistent organic growth going forward.

So now, let's turn to guidance looking at page seven.

We are revising our 2019 adjusted earnings per share guidance to 835 update 45 from our previous range of 850 date 70.

This new EPS guidance represents an increase of approximately 3% versus prior year at the midpoint.

Compared to our prior range of 750 to 770.

In addition to the items impacting quarter guidance. The changes primarily attributed to additional an additional $150 million of restructuring charges associated with the cost reduction program announced today.

Now, let's dive into a little more detail in our 2019 adjusted EPS outlook.

You can see on the left hand side of the chart, we estimate an incremental 55 million an external headwinds related to terrace, and foreign exchange since providing guidance in late July .

Additionally, we are modestly reducing our expectation for organic growth, which reflects the slower growth environment, we have been experiences within our industrial channels and emerging markets.

Total growth is expected to be positive, including the contributions from our acquisitions.

And then finally in our security segment, we expect positive organic growth and operating margin rate in dollar expansion year over year as the team remains focused on realizing the benefits from our transformation strategy.

So as you start to think about to set up for 2020 I would like to provide you. Some insights as Jim indicated earlier, we are taking cost actions to help counteract the carryover effect of currency and likely tariff headwinds as well as softness in the industrial and emerging markets.

The cost savings will come from headcount actions across the company as well as executing some footprint routes rationalization opportunities.

As we approach this cost reduction we are focused on ensuring our commercial and innovation organizations have ample resources to continue growing above market.

And look toward areas, where we can rationalize leadership structures or organizations to serve the businesses more efficiently.

In some cases this meant accelerating existing organizational efficiency and plant footprint rationalization plans capture within the margin resiliency program.

However, even with these cost actions announced today, we firmly believe we can achieve additional margin resiliency benefits in 2020 to ensure we are prepared for any potential new headwinds.

So even with the likely carryover headwinds presume previously mentioned and expected higher tax rate next year of approximately three points. We feel we have positioned the company for continued adjusted EPS and free cash flow growth next year.

So in summary for the whole company, we expect three and half to 4% organic growth for 2019.

Low single digit EPS expansion, which is overcoming $445 million of commodity currency and tariff related headwind.

These headwinds equates almost $2.50 of earnings per share in.

The organization remains focused on executing our playbook to generate above market growth.

With that I would like to turn the call over to Jeff to provide some additional color on tools and storage Jeff.

Global tools and storage delivered strong performance in Q3 led by strength across North American retail in Europe .

We've just completed the rollout of our impressive craftsman range across hardware wholesale home center and ecommerce channels.

Yes user reviews and endorsement of our more than 2500 Craftsman products is unprecedented.

We also see the opportunity to expand across industrial and automotive channels into the future.

New product launches across the water topic, and extreme ranges and 20 bolt and 12 volt applications respectively.

Finally, our expansion of Stanley and Stanley Fatmax will exceed 100 products. This year and continues to serve as a share gain enabler consistent with our ambitious expectations.

This continues to require execution of price optimization cost control and margin resiliency in response to the external cost pressures, which for 2019 are now $125 million higher than our January guidance. Nonetheless, we will deliver in 2019, a respectable finance.

As we close up the year, we remain focused on day to day execution operational excellence. This includes continuing to leverage our organic growth catalysts. Realizing the initial benefits from our margin resiliency program successfully integrating our recent acquisitions and generating strong free cash flow.

Thank you.

We ask that you. Please limit yourself to one question. Please stand by only composite kewaunee roster.

Our first question comes from Nigel Coe with Wolfe Research Your line is open.

Thanks, Good morning.

Good morning, Nigel great detail as always.

Just wanted to.

Dig into the tournament on a cost reduction program.

I'm a bit deeper than we had maybe expected and I know you've been dancing around this positioning growth investments and making sure you don't Hum.

Potential, but equally one to reduce cost well I'm just wondering what this tells US about how you view the world in 2020, how you possessing the growth investments and maybe addressing the any overlap between the margins you didn't see pro program and what Youre focusing for 2020.

Now I'll have done comment on the overlap as it relates to the numbers the.

Is a.

Compromise between what the order the possible and.

Growth, we want our how much cost we wanted to take out like like any cost reduction program and we were fortunate for a couple of reasons number one we've had a few structural ideas percolating for a while here that have enabled us to.

Six years ago.

In order for us to focus more on the emerging markets or provide more.

So we have also establishing an infrastructure in the emerging markets, which is really solid now and the focus has produced that and so now we can combine that with the.

Communications.

Those are a couple of the elements. Another another one is that.

Several of them are actually concepts that we had.

Above and beyond what we're talking about even with maybe 60 to 70 million of that being consumed because I just think the opportunity is very significant.

We also brought in certain.

Consulting resources on a minimal basis as well to ensure that.

We hit this objective over the next three to four years, but my confidence level actually goes up as each month goes by.

Given the amount of effort and focus we have on it and the opportunity that we see.

Thank you. Our next question comes from Tim lows with Baird. Your line is open.

I guess, maybe just thinking about craftsman.

$600 million kind of ending the year and the target for $1 billion in 2021, I guess, how should we think about the phasing of that incremental 400 million over the next couple of years and then.

What's the opportunity for Krasney beyond the billion dollars as you look out even even further beyond 21.

Yes, I think the question.

And we still have opportunity beyond that.

But on that attainment plan of 200 million of the over a year for the next two years to reach a billion and growth beyond that clearly so high level of confidence and endorsement of the craftsman growth plant.

Thank you. Our next question comes from Deepa Raghavan with Wells Fargo Securities. Your line is open.

Good morning.

I have the margin question I apologize if that's a couple of parts to it but I guess I could use a priority.

How does that too.

The 200 million in new cost actions different from the margin tendency measures.

We will do those costs come back once the environment improves.

Hey, that's one part of it the second part is.

Can you talk about your updated thoughts on that 300 to 5 million in cost actions.

Range so missions.

Given deepening bags.

Our it's been a majority of those cost actions are Steve Steve pulled forward well before 2022, if machlis weaken further.

The gestation period, our segment maybe into these cost actions and they just cannot be pulled forward before 20. Thank you. Thanks.

Yes, I will.

As I mentioned in response to Nigels question.

Of the $200 million, yes about a third of it we basically what we've done as we've.

We've accelerated some margin resiliency initiatives and Jim gave some good examples of what those were.

When he responded to a portion of that question.

Such as merging markets and core tools coming back together, combining our three industrial businesses and running them at one platform.

Et cetera. So those were pulled forward it as an acceleration, but what I also said was that I felt confident even with that pull forward that we still can achieve 305 $3 million to $500 million of margin resiliency, starting next year and beyond in addition to that and so we don't feel like we've done anything here.

Or that significantly changes our view on that $3 million to $500 million and that will commence in a significant way starting next year as a way for us to build contingency against new potential headwinds.

And I've said publicly before that we think Thats about 100 250 million per year, starting next year and then we'll have a subsequent a few years after that to achieve the number that I just or the range that just described I think thats. The best way to think about it we have not done anything to minimize the potential impact of that $3 million to $500 million, which may.

Means if you're.

Thank you. Our next question comes from Julian Mitchell with Barclays. Your line is open.

Hi, good morning.

Hi, Good morning, maybe just.

My clarification around.

If we think about the overall external headwinds into next year.

Was that the hundred all at 150 million.

Or is that a slightly different numbers you see it today versus the full full five for this year and when we thinking about.

Okay and heavily cost reduction plans.

The stuff in May and what you've announced today and those scaled with a view to still being able to hit maybe the low end of the medium term EPS growth.

Yes, so as it relates to the headwinds as we go into next year. If you just look at what the headwinds that are in place today, which would be list one through three and then list for a.

You know the carryover effect of that is.

About $100 million.

And then if the second lists for happens in December which is lists for b.

Which would be the remainder of items that come from China that have not do not have a tear on it today that would be another 125, another 25 million of carryover impacts. So the total of those two would be $125 million.

Assuming that second list for happens.

It does not that does not encompass if there is a.

Increased to any of the tariffs going like there was things being discussed so going from 25% to 30%.

If that occurred on list one through three that would be another $55 million. So you're getting to a number of around 210 to 15 roughly at that point in time.

And so.

The likely or possible.

Increase in some of these tariffs as we think about that going into 2020.

On the second part of the question.

I think at this stage, we feel like we've positioned ourselves to grow our Lps and as we close out the fourth quarter and we give guidance in January will give more specifics in details but.

This is a little bit different than in the past because in the past weve.

Historically last couple of years any way, we've averaged about 40% price recovery on these tariffs.

Significant cushion in this in the event that the economy takes a turn for the worse, we were not predicting that.

We don't see it we see it in industrial and we see it and some of the emerging markets and so on but we don't see it in the in the in the core of our business, which is the North American retail in Europe , we see a little slower, but but still not.

Terribly negative on the construction deal.

Hi, Thanks.

Wondering first question I just wanted to get appreciate all the detail.

And I guess just.

Yes, a couple of the remaining pieces of the puzzle leasing people are trying to do some of the math around 2020 .

You hit on the carryover from Harris.

There is an FX.

Just curious at this point in time, if you had about.

Warm materials and.

If you know we've had another company started talking about it being a slight tailwind next year.

If we just froze today time.

How that might flow into.

2020, and also on the margin I'm, sorry on the cost cutting initiatives cost reduction initiatives. The 200 million should we be expecting that too.

Fully be realized in 2020, or maybe even partially be realized in the fourth quarter and the bulk.

As it relates to commodity inflation as we sit back and the July earnings call, we expected a little bit of moderation of that in the fourth quarter and this year, we're still expecting that is still baked into our guidance assumption as it wasn't July not a significant number but we are seeing a little bit of positive trend there.

Some deflation in that particular area, which is just another area that allows us to build contingency as we think about some of the any new headwinds or as Jim mentioned, a more difficult a market that might evolve.

The second part of the question, which was.

Related to what Dennis over the second part how much cost savings heading into next so cost savings at the vast majority of the 200 million is next year to very small impact here in the fourth quarter and.

Thank you. Our next question comes from Joe Ritchie with Goldman Sachs. Your line is open.

Thanks, Good morning, guys.

But then if I looked at the yen lift one through three care. If there were supposed to increase than October 15th that seem to have gotten delayed and so is that is the increase embedded in your Fourq you guide or.

Well the increase that happened in the third quarter.

Is embedded in our guide related to list for a.

The change from not going to 30%, which was what was kind of the relief that was given a few weeks ago, where with one through three was going to go from 25% 30%.

That is not factored into our guide.

You probably up the thing I assume that for you're talking about other cost actions that we've taken throughout the year.

Thank you. Our next question comes from the Cold Lake with Deutsche Bank. Your line is open.

One question isn't around Terra sort restructuring.

There will be some plant things that are a little bit delayed, but frankly, the magnitude of that's not going to change that cadence dramatically.

Down significantly because that was really the biggest quarter of head headwind just looking at an individual quarter for this year, but.

That that trend has changed in the second quarter in a big way, we saw some new headwinds.

Evolving growing headwinds during the year I think for a us to drive that margin story and most of those were and tools. So for us to be able to perform at the margin rates that we have under the circumstances I think it's been a fairly impressive story.

In the face of pretty significant adversity.

That rolled into this year and another 200 million next year and then you also talk about the 300 to 500 million I'd like to kind of maybe parse out where that falls, where you think thats going to shine in the margin structure and then lastly, if tariffs are are removed how do you think your margins respond and that scenario.

Good case scenario that we find resolution. Thank you.

The impact of them, we'll be spread across all those different categories based on the magnitude of spend so you could you could probably easily do the math given the level of SGN a that we have in each business at corporate and just kind of apply that percentage against the total last you named for the company and that's pretty much but it's going to do.

For next year.

That again will benefit every business I mean, I think the magnitude from a dollar per se.

Welcome.

So im going to enjoy it but.

Impact I think built in at this point is $425 million annualized and as I mentioned earlier.

I mean, we've been recovering.

Through price about 40%.

The price elasticity of of the on products and end markets, but in reality Theres, a pretty significant chunk of tariff impact headwind that would would not be given back.

Or at least we'd have the flexibility to do what we want with it and frankly would be nice to see that drop through to the.

And the Fourq just to clarify the for 25 would assume all of lift for happens and list 123 gets another 5% on it.

So that would kind of be that this scenario that I laid out where all these things went in a negative way would be for 25 on an annualized basis based on what we know today that number would be 345.

Okay.

Good morning, everybody.

It can take him.

Do.

And your actions are attempting to.

Address all the inflation through your own actions not through the market pricing.

Tsum robustness of the or the retailers willing to so far to accept more price increases and or.

How your competitors are getting impacted as these terrorists impact.

Product that's fully assembled thank you.

Yes, I mean, obviously, we can't get into a detailed discussion of competitive dynamics, we have our general counsel sitting at the end of the table here looking at us, but we've never do that.

However, I will say that the that 40% that we've recovered.

We were unfairly in my opinion.

With tariffs on componentry for products that we made in the United States, which is pretty significant for us relative to competition and up until list for.

Our competitors were not.

Feeling that same impact so we were in a position for a while until list for came about that we were competitively disadvantaged now with list for.

It changes it changes the playing field and at least levels that you could even argued.

Somewhat in our favor now.

So.

I think what happened over time was that the competitors did some pricing actions.

Probably not to the extent that we did and so.

It's interesting when you look at the volume performance of Stanley Black <unk> Decker vis-a-vis the competitors were doing pretty well.

So I don't.

We have I think through our value propositions in some of the products that Jeff Insel talked about.

Whether its craftsman, whether its extreme flexible.

Tom.

Or.

In our scale in our global reach et cetera have enabled us to.

Gainshare and to avoid the elasticity of elasticity trap of.

Some of what we otherwise would have experienced so.

It's a real testament to the strength of our value proposition in our commercial execution that we've been able to put numbers on the board in organic growth at the level we have been.

Thank you our last question comes from Rob. Furthermore, with Ma'am your line is open.

Hey, good morning, and thank you it's over 100 production.

Just on the faster side, obviously, the entire industrial economy has a little bit of excess inventory probably trade will related.

Is that sort of excess inventory correction done in next year, you get a chance to write up and down with the markets or is there a little bit more and then related Lee I don't suppose there is excess inventory in the big box channel, but just to sort of checking on that question. If that's any kind of a risk. Thanks.

Let me take the industrial piece now then handed over to Jeff on the Big box side. So on the industrial side I wouldn't call. It excess inventory I would call. It a combination of mark the manufacturing markets are slowing and so you're seeing a little bit of an EMV impact to that and then you're just seeing what I would call Martin on.

Tory corrections that occur at this stage of a slowdown and so we've seen this slowdown starting the second quarter and continue to the third quarter likely will continue for at least a portion of the fourth quarter and so what we're just seeing as our customers really just focused on tightening their inventory levels, but I wouldn't I wouldn't have described as excess inventory.

Jeff regarding the second part of the question.

The Pos that said, Jim and Dot of referenced has been incredibly positive.

All year and accelerated over the last 22 weeks.

But it's the Pos double digit Pos that we have achieved year to date and continues as we speak.

Has been in balance with inventory. So we don't see any excess inventory to aggregate across to home Center channel and Pos continues to be a really robust story for us across all the brands we've referenced.

So all in all things are holding together really well and share gain continues to be in our favor.

Thank you. This concludes the question answer session I would now like turn the call back over to Dennis Lang for closing remarks, Shannon. Thanks, we'd like to thank everyone for calling in this morning and for your participation on the call. Obviously, please contact me if you have any further questions. Thank you.

Ladies and gentlemen, this concludes today's conference.

Thank you for participating you may now disconnect.

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