Q1 2024 Stanley Black & Decker Inc Earnings Call

Yes.

Operator: Welcome to the Stanley Black & Decker earnings conference call for the first quarter of 2024. My name is Shannon, and I will be your operator for today's call. At this time, all participants are on a listen-only mode. Later, we will conduct a question and answer session. Please note that this conference is being recorded. I will now turn the call over to the Vice President of Investor Relations, Dennis Lange. Mr. Lange, you may begin

Shannon: Welcome to the first quarter of 2020 for Stanley Black <unk> Decker earnings Conference call. My name is Shannon and I'll be your operator for today's call. At this time all participants are in a listen only mode.

Dennis Lange: Thank you, Shannon. Good morning, everyone.

Later, we will conduct a question and answer session. Please note that this conference is being recorded I would now.

Shannon: I will turn the call over to the Vice President of Investor Relations Dennis Lange, Mr. Lang you may begin.

Dennis Lange: And thanks for joining us for Stanley Black & Decker's 2024 First Quarter Webcast. Here today, in addition to myself, is Don Allen, President and CEO, Chris Nelson, COO, EVP, and President of Tools & Outdoor, and Pat Hallinan, EVP and CFO. Our earnings release, which was issued earlier this morning, and a supplemental presentation, which we will refer to, are available in the IR section of our website. A replay of this morning's webcast will also be available beginning at 11 a.m. today.

Dennis Lange: Thank you Shannon good morning, everyone and thanks for joining us for Stanley Black <unk> Decker's 2024 first quarter webcast here today. In addition to myself is Don Allen, President and CEO, Chris Nelson T O O EVP and president of tools and outdoor and Pat Hallinan EVP.

Patrick D. Hallinan: And CFO.

Patrick D. Hallinan: Our earnings release, which was issued earlier this morning, and a supplemental presentation, which we will refer to are available on the IR section of our website. A replay of this morning's webcast will also be available beginning at 11 a M. Today. This morning, Don Chris and Pat will review, our 2024 first quarter results and various.

Dennis Lange: This morning, Don, Chris, and Pat will review our 2024 first quarter results and various other matters, followed by a Q&A session. Consistent with prior webcasts, we are going to be sticking with just one question per caller, and, as we normally do, we will be making some forward-looking statements during the call based on our current views. Such statements are based on assumptions about future events that may not prove to be accurate, and as such, they involve risk and uncertainty.

Patrick D. Hallinan: Other matters, followed by a Q&A session consistent with prior webcast, we are going to be sticking with just one question per caller and as we normally do we will be making some forward looking statements. During the call based on our current views such statements are based on assumptions of future events that may not prove to be accurate and as such they involve risk and uncertainty.

Dennis Lange: It's therefore possible that actual results may materially differ from any forward-looking statements that we might make today. We direct you to the cautionary statements in the 8K that we filed with our press release and in our most recent 34 Act filing. I'll now turn the call over to our President and CEO, Don Allen.

Patrick D. Hallinan: 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.

Patrick D. Hallinan: And in our most recent 34 Act filings I'll now turn the call over to our President and CEO Don Allen.

Donald Allan: Thank you, Dennis, and good morning, everyone. Our first quarter performance was the result of consistent, solid execution, and we are making progress against our key operational objectives. We continue to see significant value creation opportunities tied to our strategic business transformation, and the entire company is focused on the disciplined execution of this strategy. We are encouraged by the momentum that is building across the organization. Two of our primary areas of emphasis are free cash flow generation and gross margin expansion.

Donald Allan: Thank you Dennis and good morning, everyone. Our first quarter performance was the result of consistent solid execution, and we are making progress against key operational objectives. We continue to see significant value creation opportunities tied to our strategic business transformation and the entire company is focused on the disciplined execution of this strategy.

We are encouraged by the momentum that is building across the organization two of our primary areas of emphasis our free cash flow generation and gross margin expansion. We are focused on what is within our control and are pleased with the momentum behind our gross margin. This is particularly notable considering a significantly worse negative macro environment.

Donald Allan: We are focused on what is within our control and are pleased with the momentum behind our gross margins. This is particularly notable considering a significantly worse negative macro environment and corresponding revenue performance in 2023 and 2024 versus our initial expectations at the outset of our transformation in mid-2022. Our Global Cost Reduction Program remains on track for expected run rate savings of $1.5 billion by the end of 2024 and $2 billion by the end of 2025. As we hit the halfway point of our journey, our decisive actions are delivering quantifiable results. Specifically, we have captured $1.2 billion of run rate savings program to date.

Donald Allan: And corresponding revenue performance in 2023, and 24 versus our initial expectations at the outset of our transformation in mid 2022.

Donald Allan: Our global cost reduction program remains on track for expected run rate savings of $1.5 billion by the end of 'twenty 'twenty, four and $2 billion by the end of 2025.

Donald Allan: We hit the halfway point of our journey, our decisive actions are delivering quantifiable results. Specifically, we have captured 1.2 billion in run rate savings program to date, we remain confident this will support 30% gross margins in 2024 consistent with our guidance. We are encouraged that approximately 80% of the companies.

Donald Allan: We remain confident this will support 30% gross margins in 2024, consistent with our guidance. We are encouraged that approximately 80% of the company's revenue is expected to carry 2024 adjusted gross margins in excess of 30% and exit this year at or ahead of initial expectations. We believe these product lines will continue to improve upon their current adjusted gross margin profiles over the next 18 to 24 months. As it relates to the rest of the portfolio, or that 20%, which is predominantly our cyclically depressed outdoor business and the rapidly recovering aerospace fast-growing industry, we believe that the company will continue to improve upon its current adjusted gross margin profiles over the next 18 to 24 months.

Donald Allan: <unk> is expected to carry 2024, adjusted gross margins in excess of 30% and exit this year at or ahead of initial expectations. We believe these product lines will continue to improve upon their current adjusted gross margin profile over the next 18 to 24 months as it relates to the rest of the portfolio or.

Donald Allan: At 20%, which is predominantly our cyclically depressed outdoor business and a rapidly recovering aerospace fastener business. We are actioning significant cost efficiencies to make necessary improvements to the profitability of outdoor and response to the current market demand and refining the aerospace fastener product line cost base to drive significant.

Donald Allan: We are implementing significant cost efficiencies to make necessary improvements to the profitability of Outdoor in response to the current market demand and refining the aerospace fastener product line cost base to drive significant growth leverage as wide body plane production continues to recover.

Donald Allan: Gross leverage as wide body plane production continues to recover.

Donald Allan: Our long-term success will be driven by improved profitability, coupled with consistent market share gains. We believe our share position in tools is now stable to increasing. For example, our 2023 point-of-sale data in tools performed better than the category average across North American home centers, which was led by our iconic DeWalt professional brand.

Our long term success will be driven by improved profitability, coupled with consistent market share gains. We believe our share position in tools is now stable to increasing for example, our 2023 point of sale data and tools perform better than the category average across the North American home centers, which was led by our iconic dwarf professional brand.

Donald Allan: We are also serving our customers better by delivering improved fill rates, earning the right to more activity across our brands. Retailers are recognizing this performance. For example, in 2023, ACE Hardware named Craftsman as Vendor of the Year, and Grainger recognized Stanley Black & Decker with their Partners in Performance Award.

Donald Allan: We are also serving our customers better by delivering improved fill rates, earning the right for more activity across our brands and retailers are recognizing this performance for 2023 Ace hardware named Craftsman as vendor of the year and Grainger recognize Stanley Black <unk> Decker with their partners and performance award congratulations to our organization. This.

Donald Allan: Congratulations to our organization. This is a testament to the team's efforts, and as we work to get closer to our partners, it's an early indication that we are on the right track. As we report our first quarter performance, we are energized by how our transformation efforts are taking root. I am confident that by executing our strategy, we are positioning the company to deliver high levels of organic revenue growth, profitability, and cash flow to drive strong, long-term shareholder returns.

Donald Allan: As a testament to the team's efforts and as we work to get closer to our partners is an early indication that we are on the right track.

Donald Allan: As we reported our first quarter performance, we are energized by how our transformation efforts are taking route I am confident that by executing our strategy. We are positioning the company to deliver high levels of organic revenue growth profitability and cash flow to drive strong long term shareholder return.

Donald Allan: Turning to the first quarter, our top line showed signs of stabilization, with organic revenues down a point. Excluding the now-divested infrastructure business, organic revenue was flat, as engineered fastening and the walled growth were offset by muted consumer and DIY demand. Adjusted gross margin was 29%, up 590 basis points versus the first quarter of last year and 30 basis points above the second half of 2023. Adjusted diluted earnings per share was $0.56.

Donald Allan: Turning to the first quarter results our top line showed signs of stabilization with organic revenues down a point.

Donald Allan: Excluding the now divested infrastructure business organic revenue was flat as engineered fastening and award growth was offset by muted consumer and DIY demand adjusted gross margin was 29% up 590 basis points versus the first quarter of last year, and 30 basis points above the second half of 2023.

Donald Allan: Adjusted gross margin expansion and EPS growth were both supported by lower inventory destocking costs, supply chain transformation benefits, and reduced shipping. We are reiterating our 2024 full-year adjusted diluted EPS guidance range of $3.50 to $4.00, as well as our expected free cash flow of $600 to $800 million. Pat will provide more color on this later in our presentation. On April 1st, we completed the sale of Stanley Infrastructure to Epiroc.

Donald Allan: Adjusted diluted earnings per share was 56.

Donald Allan: Adjusted gross margin expansion and EPS growth were both supported by lower inventory destocking caused supply chain transformation benefits and reduced shipping costs. We are reiterating our 2020 for full year adjusted diluted EPS guidance range of $3 50 up to $4.50 as well as our expected free cash flow.

Donald Allan: $600 million to $800 million.

Pat will provide more color on this later in our presentation.

Donald Allan: April one we completed the sale of Stanley infrastructure type of rock, we have already deployed net proceeds from the transaction to reduce short term debt demonstrating our commitment to further strengthening our balance sheet.

Donald Allan: We have already deployed net proceeds from the transaction to reduce short-term debt, demonstrating our commitment to further strengthening our balance. Looking forward in 2024, we expect mixed demand trends to persist across our business, and we are driving supply chain cost improvements to expand margins, deliver earnings growth, and generate strong cash flow. At the same time, we are funding investments designed to fuel targeted long-term growth and market share gains across our business.

Donald Allan: Looking forward in 2024, we expect mixed demand trends to persist across our businesses and we are driving supply chain cost improvements to expand margins deliver earnings growth and generate strong cash flow at the same time, we are funding investments designed to fuel targeted long term growth and market share gains across our businesses.

Donald Allan: I want to thank our team members around the world for their contributions to the progress that we have made on our transformation journey and for their energy and focus as we continue to charge forward. I will now pass this to Chris Nelson to review the business segment.

Donald Allan: I want to thank our team members around the world for their contributions to the progress that we have made on our transformation journey and for their energy and focus as we continue to charge forward I will now pass it to Chris Nelson to review the business segment performance.

Christopher John Nelson: Thank you, Don, and good morning, everyone. Beginning with tools and outdoor, first quarter revenue was approximately $3.3 billion, down 1% organically versus the prior year, as growth in DeWalt was more than offset by muted consumer and DIY demand, which pressured volume. Pricing was relatively flat, consistent with our expectations. Adjusted segment margin was 8.5% in the first quarter, a 550 basis point improvement compared to the first quarter of 2023. This was achieved through lower inventory destocking costs, supply chain transformation savings, and shipping cost reductions, which were partially offset by targeted investments designed to accelerate share gain and organic growth.

Christopher John Nelson: Thank you Don and good morning, everyone, beginning with tools and outdoor first quarter revenue was approximately $3 $3 billion down 1% organically versus prior year as growth into Walt was more than offset by muted consumer and DIY demand, which pressured volume.

Christopher John Nelson: Pricing was relatively flat consistent with our expectations.

Christopher John Nelson: Adjusted segment margin was eight 5% in the first quarter of 550 basis point improvement compared to the first quarter of 2023.

Christopher John Nelson: This was achieved through lower inventory destocking costs supply chain transformation savings and shipping cost reductions, which were partially offset with targeted investments designed to accelerate share gains and organic growth.

Christopher John Nelson: Now, turning to the product line. Power Tools was up one point organically, led by pro-driven growth in DEWALT and international sales. We are also seeing benefits from a return to historic promotional levels on high-margin DEWALT core vendors. However, organic revenue for hand tools declined 7%, pressured by lower DIY demand.

Christopher John Nelson: Now turning to the product lines power tools was up one point organically led by pro driven growth into Walt and international sales. We are also seeing benefits from a return to historic promotional levels on high margin to walk cordless organic revenue for hand tools declined 7% pressured by lower DIY.

Christopher John Nelson: Outdoor product line organic revenue grew 2% in the quarter driven by strong demand for handheld cordless outdoor power equipment and an incremental retail product list. We are encouraged by US retail point of sale data, which showed an early start to the season versus the prior year. We are cautiously optimistic that demand can be better than the last two years. Our visibility will improve as we move through the second quarter and hit key US holidays.

Christopher John Nelson: Dan.

Christopher John Nelson: Outdoor product line organic revenue grew 2% in the quarter driven by strong demand for handheld cordless outdoor power equipment.

Christopher John Nelson: And incremental retail product listings, we are encouraged by U S. Retail point of sale data, which showed an early start to the season versus prior year. We are cautiously optimistic that demand can be better than the last two years, our visibility will improve as we move through the second quarter and at key U S holidays.

Christopher John Nelson: The independent dealer channel continues to work through significant on-hand inventory, which pressured shipments in the quarter. We are monitoring POS trends in this channel and currently expect that they can clear their inventory during the 2024 season to set up a stronger 2025.

Christopher John Nelson: The independent dealer channel continues to work through significant on hand inventory, which pressured shipments in the quarter we.

Christopher John Nelson: We are monitoring Pos trends in this channel and currently expect that they can clear their inventory during the 'twenty 'twenty four season to setup a stronger 2025.

Christopher John Nelson: As Don alluded earlier, the outdoor market remains soft versus 2019 volume levels. However, we are not standing still and are moving with speed to improve profitability by continuing to optimize our cost structure. Consistent with our overall strategy, our intent is to focus resources towards capturing targeted share gain opportunities in the most profitable and attractive growth segments, such as electric handheld outdoor power equipment. Turning to tools and outdoor performance by region, North America was down 2% organically, driven by factors consistent with the overall segment. In Europe, organic revenue was down 3% as declines in France and Germany were partially offset by growth in the Nordics and the UK.

Christopher John Nelson: As Don alluded earlier, the outdoor market remains soft versus 2019 volume levels. We are not standing still and are moving with speed to improve profitability by continuing to optimize our cost structure.

Christopher John Nelson: Consistent with our overall strategy, our intent is to focus resources towards capturing targeted share gain opportunities and the most profitable and attractive growth segments, such as electric handheld outdoor power equipment.

Christopher John Nelson: Turning to tools and outdoor performance by region, North America was down 2% organically driven by factors consistent with the overall segment in.

Christopher John Nelson: In Europe organic revenue was down 3% as declines in France, and Germany were partially offset by growth in the Nordics and the U K we.

Christopher John Nelson: We are making targeted investments in the region to expand professional product offerings and activate these innovations in the market to capture share. In aggregate, all other regions were up 7% organically in the quarter, driven by mid-teens growth in Latin America. Brazil, Mexico, Central America, and the Caribbean led this performance for the quarter.

Christopher John Nelson: We are making targeted investments in the region to expand professional product offerings and activate these innovations in the market to capture share.

Christopher John Nelson: In aggregate all other regions were up 7% organically in the quarter driven by mid teens growth in Latin America, Brazil, Mexico Central America, and the Caribbean led this performance for the quarter.

Christopher John Nelson: In summary, for Tools & Outdoor, we are acutely focused on successfully winning with our customers and winning with the professional while making profitability improvements. We are navigating mixed market conditions with the goal to capitalize on the areas of strength. We are making deliberate investments in our brands, market activation, and innovation to capture the growth and margin opportunities that will contribute to long-term shareholder returns. I will now discuss our industrial segment performance. First quarter industrial revenue declined 5% versus last year.

Christopher John Nelson: In summary for tools and outdoor we are acutely focused on successfully winning with our customers and winning with the pro while making profitability improvements. We are navigating mixed market conditions with the goal to capitalize on the areas of strength, we are making deliberate investments in our brands market activation and innovation to capture the <unk>.

Christopher John Nelson: Growth and margin opportunities that will contribute to long term shareholder returns I will now discuss our industrial segment performance first quarter industrial revenue declined 5% versus last year price realization of 1% across the segment and engineered fastening volume growth was more than offset by infrastructure volume declines and a point of <unk>.

Christopher John Nelson: Price realization of 1% across the segment and engineered fastening volume growth was more than offset by infrastructure volume declines and a point of currency pressure. Within the industrial segment, engineered fastening organic revenue growth of 5% includes aerospace growth of 30% and auto growth of 4%. We believe we are outpacing customer production levels as a result of targeted share gains, particularly in EV automotive. However, this growth was partially offset by market softness in general industrial fastening.

Christopher John Nelson: Currency pressure.

Christopher John Nelson: Within the industrial segment engineered fastening organic revenue growth of 5% includes aerospace growth of 30% and auto growth of 4%. We believe we are outpacing customer production levels. As a result of targeted share gains, particularly in EV automotive. This growth was partially offset by market softness in general industrial.

Christopher John Nelson: Industrial's adjusted segment margin was 12.1%, an improvement of 110 basis points versus the prior year, driven by price realization and cost actions taken to improve productivity. This was a strong performance considering the infrastructure volume decline that the team faced. The quarter was a result of focused execution by our industrial business associates. On behalf of the entire leadership team, I'd like to thank our colleagues around the world for delivering another solid quarter of results and a strong start to the year.

Christopher John Nelson: Fasting Industrial's adjusted segment margin was 12, 1% an improvement of 110 basis points versus prior year, driven by price realization and cost actions taken to improve productivity. This was a strong performance considering the infrastructure volume decline that the team faced.

Christopher John Nelson: The quarter was a result of focused execution by our industrial business associates.

Speaker Change: On behalf of the entire leadership team I'd like to thank our colleagues around the world for delivering another solid quarter of results and a strong start to the year.

Christopher John Nelson: Now turning to the next slide, I would like to highlight a few of our recent DeWalt product introductions, which are the result of our investments in innovation. The new DEWALT 20V MAX XR Cordless Framing Nailer is engineered for enhanced productivity and performs applications that are traditionally served by pneumatic tools. It is designed to allow the end-user to sink framing nails consistently sub-flush into the LVL material, and when used in rapid sequential mode, ramp-up time is eliminated between shots.

Speaker Change: Now turning to the next slide I would like to now highlight a few of our recent to wall product introductions, which are the result of our investments in innovation.

Speaker Change: The new to wall 20 volt, Max XR cordless framing nailer is engineered for enhanced productivity and performance applications that are traditionally served by pneumatic tools. It is designed to allow the end user to sink framing nails consistently sub flush into LVL material and when used in rapid sequential mode ramp up time is eliminated.

Christopher John Nelson: DeWalt is also introducing the world's first 20-volt max cordless 2.25-peak horsepower dedicated plunge router. It provides power like a corded mid-sized router with the convenience of a cordless tool, a prime example of how we continue to help our pro users transition to a cordless job site. Additionally, our Tufts System 2.0 DXL workstation is the industry's first portable storage solution with a 30-inch platform that helps pros maximize their productivity. This all-in-one workstation delivers customizable mobile storage and a functional worktop that is, unlike anything else, currently available for commercial construction jobs.

Speaker Change: <unk> shops.

Speaker Change: So Walt is also introducing the world's first 20 volt Max cordless two in a quarter peak horsepower dedicated plunge router. It provides power like accorded mid sized router with the convenience of a cordless tool a prime example of how we continue to help our pro users transitioned to a cordless job site.

Speaker Change: Additionally, our tough system 2.0, Dx al workstation is the industry's first portable storage solution with a 30 inch platform that helps pros maximize their productivity. This all in one workstation delivers customizable mobile storage in a functional work top that is unlike anything else currently available for commercial.

Christopher John Nelson: These are just a few examples of how we continue driving our innovation engine in a manner that is centered on the professional, with the intent of making our users more productive. We believe these innovations, coupled with our investments in brand and market activation, will stimulate share gains. As we celebrate the DeWalt 100th anniversary, we also reflect on a responsibility and commitment to serving the tradespeople around the world with brands like DeWalt, Craftsman, and Stanley. Thank you, and I'll now pass the call over to Pat Hallinan.

Speaker Change: Trucks and job sites. These are just a few examples of how we continue driving our innovation engine in a manner that is centered on the professional with the intent of making our users more productive. We believe these innovations coupled with our investments in brand and market activation will stimulate share gains.

Speaker Change: As we celebrate that the Walt 100 year anniversary, we also reflect on our responsibility and commitment to serving the trades people around the world with brands like to Walt Craftsman and Stanley.

Speaker Change: And I'll now pass the call over to Pat Hallinan.

Patrick D. Hallinan: Thanks, Chris, and good morning. Turning to the next slide, I would like to highlight the progress we've made on our transformation journey in the first quarter. We achieved approximately $145 million in pre-tax run rate cost savings in the period, bringing our aggregate savings to approximately $1.2 billion since program inception. As we focus our portfolio, streamline our business structure, and transform our operations, our teams are actively identifying and prioritizing opportunities to further optimize our costs. Given the dynamic macroenvironment, we continue to refine and mobilize plans to deliver targeted savings. We are confident in our ability to execute those plans.

Patrick D. Hallinan: Thanks, Chris and good morning.

Patrick D. Hallinan: Turning to the next slide I would like to highlight the progress we've made along our transformation journey in the first quarter, we achieved approximately $145 million pretax run rate cost savings in the period, bringing our aggregate savings to approximately $1 2 billion since program inception as we.

Patrick D. Hallinan: <unk> focused our portfolio streamline our business structure and transform our operations. Our teams are actively identifying and prioritizing opportunities to further optimize our cost structure given the dynamic macro environment, we continue to refine and mobilized plan to deliver targeted savings we are.

Patrick D. Hallinan: Confident in our ability to execute those plans, we continue to target $1 $5 billion, a pretax run rate savings by the end of 2024 and $2 billion pre tax run rate cost savings by the end of 2025.

Patrick D. Hallinan: We continue to target $1.5 billion of pre-tax run rate savings by the end of 2024 and $2 billion of pre-tax run rate cost savings by the end of 2025. Strategic sourcing remains the largest contributor to our transformation savings to date. We are leveraging savings on the $5 billion of addressable spend across areas such as materials and components, finished goods, and indirect expenditures.

Patrick D. Hallinan: Strategic sourcing remains the largest contributor to our transformation savings to date, we are leveraging savings on the $5 billion of.

Patrick D. Hallinan: <unk> spend across areas, such as materials and components finished goods and indirect expenditures our operations Excellence program, which leverages lean manufacturing principles is driving productivity improvements the scope of this work stream improves the efficiency and effectiveness within our production and <unk>.

Patrick D. Hallinan: Our operations excellence program, which leverages lean manufacturing principles, is driving productivity improvements. The scope of this work stream improves efficiency and effectiveness within our production and distribution facilities. The pipeline of projects is robust, with initiatives lined up to deliver efficiency gains in 2024 and beyond. Footprint-related projects and product platforming, which are more event-driven, will become increasingly important throughout the remainder of our transformation. We are optimizing our distribution footprint as well as redesigning our manufacturing network to leverage centers of excellence and optimize our operations.

Distribution facilities, a pipeline of projects is robust with initiatives lined up to deliver efficiency gains in 'twenty 'twenty four and beyond.

Patrick D. Hallinan: Foot print related projects and product platforming, which are more event driven will become increasingly important throughout the remainder of our transformation. We are optimizing our distribution footprint as well as redesigning our manufacturing network to leverage centres of excellence and to optimize our operations. This multi year endeavor as axa.

Patrick D. Hallinan: This multi-year endeavor is accelerating in 2024 as we plan to exit or transform a number of facilities across the globe during 2024 and 2025. The manufacturing sites we previously announced for closure have ceased production, and we expect to exit these sites in the near future.

Patrick D. Hallinan: <unk> in 2024, as we plan to exit our transform a number of facilities across the globe during 'twenty 'twenty four and 2025 the.

Patrick D. Hallinan: The manufacturing sites, we previously announced for closure have ceased production and we expect to exit the sites in the near future. We continued to execute manufacturing footprint changes during the first quarter, which affected five sites with the goal to complete the site modifications this year rich.

Patrick D. Hallinan: We continued to execute manufacturing footprint changes during the first quarter, which affected five sites, with the goal to complete these site modifications this year. Regarding product platforming, this initiative will unlock value by reducing complexity across our value chain. For example, this savings initiative identifies various parts and components that can be standardized across a product family, which eliminates complexity and improves procurement scale.

Patrick D. Hallinan: Guarding product platforming. This initiative will unlock value by reducing complexity across our value chain. This savings initiative identified various parts and components that can be standardized across our product family, which eliminates complexity and improves procurement scale.

Patrick D. Hallinan: In aggregate, our supply chain transformation initiatives are expected to generate approximately half a billion dollars of savings in 2024, improving margins, and generating resources for additional growth investments in our core business. We remain confident that our transformation can support the sustainable cost structure and efficiency needed to return our adjusted gross margin to 35% or greater, while enabling targeted growth investments. Moving to the next slide.

Patrick D. Hallinan: In aggregate our supply chain transformation initiatives are expected to generate approximately half a billion dollars of savings in 2020 for improving margins and generating resources for additional growth investments in our core business. We remain confident that our transformation can support the sustainable cost structure and efficiency.

Patrick D. Hallinan: <unk> needed to return, our adjusted gross margin to 35% or greater while enabling targeted growth investments.

Patrick D. Hallinan: We continue prioritizing free cash flow generation and gross margin expansion to support long-term growth and value creation. First quarter free cash outflow was in line with typical historical trends due to seasonal account receivable increases. This quarter, our inventory control includes a working capital build to approximately $360 million, where we've traditionally averaged a roughly $700 million increase in the first quarter of the year. Days of inventory are now approximately 150 days, an improvement of 10 days versus the prior year and moving toward our long-term target of approximately 120 to 130 days.

Patrick D. Hallinan: Moving to the next slide we continue prioritizing free cash flow generation and gross margin expansion to support long term growth and value creation.

Patrick D. Hallinan: First quarter free cash outflow was in line with typical historical trends due to seasonal account receivable increases this quarter, our inventory control contain the working capital build to approximately $360 million, where we've traditionally averaged a roughly $700 million increase in the first quarter of the year.

Patrick D. Hallinan: Days of inventory is now approximately 150 days, an improvement of 10 days versus the prior year and moving toward our long term target of approximately 120 to 130 days.

Patrick D. Hallinan: We used the net proceeds from the infrastructure sale to reduce our commercial paper balance at the beginning of the second quarter. Because this occurred subsequent to the first quarter close, it is not reflected in the first quarter balance sheet.

Patrick D. Hallinan: We used the net proceeds from the infrastructure sale to reduce our commercial paper balance in the beginning of the second quarter.

Patrick D. Hallinan: This occurred subsequent to the first quarter close it is not reflected in the first quarter balance sheet. We remained focused on working capital optimization and profitability improvement to generate strong free cash flow in 2024 for the full year 'twenty 'twenty four we plan to reduce inventory by 400 to 500 million.

Patrick D. Hallinan: We remain focused on working capital optimization and profitability improvement to generate strong free cash flow in 2024. For the full year 2024, we plan to reduce inventory by 400 to 500 million dollars as we continue prioritizing working capital efficiency. CapEx is expected to range between $400 to $500 million, which includes support for the Footprint-Related Transformation Initiative. These items, combined with organic cash generation, support our full-year free cash flow range of $600 to $800 million, which is unchanged from our guidance communicated earlier in the year. Our capital deployment priorities will remain consistent.

Patrick D. Hallinan: As we continue prioritizing working capital efficiency Capex is expected to range between $400 million to $500 million, which includes support for the footprint related transformation initiatives.

Patrick D. Hallinan: These items combined with organic cash generation support our full year free cash flow range of $600 million to $800 million.

Patrick D. Hallinan: Which is unchanged from our guidance communicated earlier in the year.

Patrick D. Hallinan: Our capital deployment priorities remain consistent investing in organic growth and our transformation.

Patrick D. Hallinan: Investing in Organic Growth and Our Transformation, Funding our long-standing commitment to return value to shareholders through cash dividends and further strengthening our balance. Now, turning to profitability. Adjusted gross margin of 29% in the first quarter improved 590 basis points versus the prior year, driven by lower inventory destocking costs, supply chain transformation benefits, and lower shipping costs. We expect to increase Adjusted Gross Margin sequentially in each half of 2024, and we are planning for total company Adjusted Gross Margin to approximate 30% for the full year.

Patrick D. Hallinan: Funding, our longstanding commitment to return value to shareholders through cash dividends and further strengthening our balance sheet turning to profitability.

Patrick D. Hallinan: Adjusted gross margin of 29% in the first quarter improved 590 basis points versus prior year, driven by lower inventory destocking costs supply chain transformation benefits and lower shipping costs.

Patrick D. Hallinan: We expect to increase adjusted gross margin sequentially in each half of 'twenty 'twenty four and we are planning for total company adjusted gross margin to approximate 30% for the full year, we continue to expect to exit the year at an adjusted gross margin rate in the low thirties.

Patrick D. Hallinan: We continue to expect to exit the year at an Adjusted Gross Margin rate in the low 30s. We are off to a solid start in 2024, and the hard work we've done to make Adjusted Gross Margin progress allows us to fund incremental investments to accelerate long-term organic revenue growth. Now, turning to the 2024 guidance and the remaining key assumptions.

Patrick D. Hallinan: We are off to a solid start in 2024 and the hard work we've done to make adjusted gross margin progress allows us to fund incremental investments to accelerate long term organic revenue growth now turning to the 'twenty 'twenty four guidance and the remaining key assumptions in.

Patrick D. Hallinan: In addition to the free cash flow guidance I just covered, we are reiterating the GAAP earnings per share range of $1.60 to $2.85 and an adjusted earnings per share range of $3.50 to $4.50. We are maintaining the range of organic revenue assumptions to be plus or minus low single digits. We believe the most likely outcome for organic revenue is to be flat to down 1%.

Patrick D. Hallinan: In addition to the free cash flow guidance I just covered we are reiterating GAAP earnings per share range of $1 60 to $2.85 and an adjusted earnings per share range of $3 50 to $4 50.

Patrick D. Hallinan: We are maintaining the range of organic revenue assumptions to be plus or minus low single digits. We.

Patrick D. Hallinan: We believe the most likely outcome for organic revenue is to be flat to down 1% at this level, we expect to achieve the midpoint of our adjusted EPS range through cost controls our view incorporates modest headwinds in aggregate for our markets and we remain focused on gaining share in this environment.

Patrick D. Hallinan: At this level, we expect to achieve the midpoint of our adjusted EPS range through cost control. Our view incorporates modest headwinds in aggregate for our markets, and we remain focused on gaining share in this environment. We are maintaining a disciplined approach to cost management and remain committed to funding investments for long-term organic growth. Turning to the segments, tools and outdoor organic revenue is expected to be plus or minus low single digits, most likely below flat, consistent with the total company. The industrial segment's organic revenue is expected to be relatively flat to slightly positive. Infrastructure's first quarter decline will impact the segment's full-year organic growth.

Patrick D. Hallinan: We are maintaining a disciplined approach to cost management and remain committed to funding investments for long term organic growth.

Patrick D. Hallinan: Turning to the segments tools and outdoor organic revenue is expected to be plus or minus low single digits, most likely below flat consistent with the total company. The industrial segment organic revenue is expected to be relatively flat to slightly positive.

Patrick D. Hallinan: Infrastructures first quarter decline will impact the segment's full year organic growth and now that the deal is closed we will report the divestiture revenue impact quarterly our planning assumption for growth investments is approximately an incremental $100 million in 2024.

Patrick D. Hallinan: And now that the deal is closed, we will report the divestiture revenue impact quarterly. Our planning assumption for growth investments is approximately an incremental $100 million in 2024. These are designed to accelerate innovation, market activation, and to support our powerful DeWalt, Craftsman, and Stanley brands.

Patrick D. Hallinan: These are designed to accelerate innovation market activation and to support our powerful the wall Craftsman and Stanley brands. This should result.

Patrick D. Hallinan: This should result in 2024 SG&A as a percentage of sales in the mid 21% zone for the full year. We will remain agile with the pace of investments should the demand outlook swing in or out of our favor. Turning to profitability, we expect total company adjusted EBITDA margin to approximate 10% for the full year, supported by the benefits of the transformation program. Segment margin in tools and outdoor is planned to be up year-over-year, also driven by continued momentum from our ongoing strategic transformation.

Patrick D. Hallinan: <unk> and 'twenty 'twenty four SG&A as a percentage of sales in the mid 21% zone for the full year, we will remain agile with the pace of investments should the demand outlook swing in or out of favor.

Patrick D. Hallinan: Turning to profitability, we expect total company adjusted EBITDA margin to approximate 10% for the full year supported by the benefits of the transformation program.

Patrick D. Hallinan: Segment margin and tools and outdoor is planned to be up year over year also driven by continued momentum from our ongoing strategic transformation.

Patrick D. Hallinan: The industrial segment margin is expected to be flat to slightly positive versus the prior year as operating improvement in engineered fastening is offset by the dilution from the infrastructure business divestment. Our adjusted EPS range remains $1, with variability and market demand being the largest contributors. We will work to optimize, adjust the gross margin, and manage SG&A thoughtfully throughout the year to balance macro uncertainty while working hard to preserve investments to position the business for longer-term growth. Turning to other elements of guidance

Patrick D. Hallinan: The industrial segment margin is expected to be flat to slightly positive versus prior year as operating improvement in engineered fastening is offset by the dilution from the infrastructure business divestiture.

Patrick D. Hallinan: Our adjusted EPS range remains one dollar with variability and market demand being the largest contributor we will work to optimize adjusted gross margin and manage SG&A thoughtfully throughout the year the balance the macro uncertainty, while working hard to preserve investments to position the business for longer term growth.

Patrick D. Hallinan: Turning to other elements of guidance.

Patrick D. Hallinan: Gap earnings include pre-tax non-gap adjustments ranging from $290 to $340 million, largely relating to the Supply Chain Transformation Program, with approximately 25% of these expenses being non-cash footprint rationalization costs. Our adjusted tax rate is expected to be 10% for 2024, with the 2nd and 3rd quarters in the low 30s. Discrete tax planning items are expected to reduce the full-year rate and primarily impact the 4th quarter.

Patrick D. Hallinan: GAAP earnings include pretax non-GAAP adjustments, ranging from $290 million to $340 million largely relating to the supply chain transformation program with approximately 25% of these expenses being noncash footprint rationalization costs.

Patrick D. Hallinan: Our adjusted tax rate is expected to be 10% for 2024 with the second and third quarters in the low thirties.

Patrick D. Hallinan: Greek tax planning items are expected to reduce the full year rate and primarily impact the fourth quarter, Although 2024 guidance assumptions at the midpoint are noted on the slide to assist with modeling.

Patrick D. Hallinan: Other 2024 guidance assumptions at the midpoint are noted on the slide to assist with modeling. We expect the second quarter adjusted earnings per share to be approximately 21% to 22% of the full year at the midpoint. Adjusted EBITDA for the second quarter as a percentage of the full year is expected to exceed 25%, with EPS contribution lower due to the quarterly tax profile.

Patrick D. Hallinan: We expect the second quarter adjusted earnings per share to be approximately 21% to 22% of the full year at the midpoint adjusted EBITDA for the second quarter as a percentage of the full year is expected to exceed 25% with EPS contribution lower due to the quarterly tax profile in summary.

Patrick D. Hallinan: In summary, we continue to make progress on our transformation journey, with an unwavering focus on gross margin expansion, cash generation, balance sheet strength, and share gains in a soft market. We are confident that successful execution of our strategy can position the company for long-term growth and value creation. With that, I will now pass the call back to Don. Thank you, Pat.

Patrick D. Hallinan: We continue to make progress on our transformation journey with an unwavering focus on gross margin expansion cash generation balance sheet strength and share gains in a soft market. We are confident that successful execution of our strategy can position the company for long term growth and value creation with that I will now.

Donald Allan: As we report another quarter of progress, our consistent execution against our plan is building momentum and energizing our team. As our profitability continues to improve, we are focusing organic growth investments behind our most powerful brands, particularly DeWalt, Craftsman, and Stanley. We believe these investments can enable organic growth to outpace the market by 2 to 3 times. Stanley Black & Decker continues to become a more streamlined business, built on the strength of our people and culture, with an intensified emphasis on our core market leadership positions in tools, outdoor, and engineered. We are focused on consistent execution while positioning the company to deliver higher levels of sustainable organic revenue growth, profitability, and cash flow to drive strong long-term shareholder value.

Patrick D. Hallinan: Pass the call back to dawn. Thank you Pat.

Dawn: As we report another quarter of progress are consistent execution against our plan is building momentum and energizing our team as our profitability continues to improve we are focusing organic growth investments behind our most powerful brands, particularly to Walt Craftsman and Stanley.

Dawn: We believe these investments can enable organic growth to outpace the market by two to three time Stanley Black <unk> Decker continues to become a more streamlined business built on the strength of our people and culture with an intensified emphasis on our core market leadership positions and tools and outdoor and engineered fastening, we are focused on consistent execution whilst.

Dawn: Additionally, the company to deliver higher levels of sustainable organic revenue growth profitability and cash flow to drive strong long term shareholder return with that we are now ready for Q&A Dennis.

Dennis Lange: Great. Thanks, Don. Shannon. We can now start the Q&A, please. Thank you.

Dennis Lange: Great. Thanks, Dan Shannon, we can now start the Q&A. Please thank you.

Operator: Thank you. To ask a question, you will need to press Star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press Star 11 again. We ask that you please limit yourself to one question. Please stand by while we compile the Q&A roster. Our first question is from the line of Julian Mitchell of Barclays. Your line is now open.

Speaker Change: Thank you to ask a question you will need to press star one on your telephone.

Dennis Lange: Inherent automated message advising your hand is raised to withdraw your question. Please press star one again, we ask that you. Please limit yourself to one question.

Speaker Change: Standby, while we compile the Q&A roster.

Speaker Change: Our first question is from the line of Julian Mitchell of Barclays. Your line is now open.

Julian C.H. Mitchell: Hi, good morning. My question would be about the second quarter. Just homing in on that a little bit. In one respect, I guess, just to make sure, based on the seasonality comment and I think the low-30s tax rate, are we sort of thinking it's flattish sequential revenue in Q2 and then a kind of 9% operating margin? Just wanted to make sure that's the broad assumption and to check what you're assuming for outdoor and also for Q2. What do we think about free cash? Is that sort of flattish year on year or still down year on year like in Q1? Thank you.

Julian C.H. Mitchell: Hi, good morning.

Julian C.H. Mitchell: Good morning.

Julian C.H. Mitchell: Good morning, maybe just my question would be around the <unk>.

Julian C.H. Mitchell: Second quarter, just homing in on that a little bit.

Julian C.H. Mitchell: One respect I guess just to make sure.

Julian C.H. Mitchell: Based on the seasonality comment and I think the low thirties tax rates are we sort of thinking is flattish sequential revenue in Q2, and then kind of 9% operating margin just wanted to make sure thats the <unk>.

Julian C.H. Mitchell: The broad assumption and to check what you're assuming for outdoor.

Julian C.H. Mitchell: And also for Q2, how do we think about free cash.

Julian C.H. Mitchell: Is that sort of flattish year on year.

Julian C.H. Mitchell: Or still down year on year like in Q1. Thank you.

Unknown Executive: Yeah, Julian. I'll try to unpack all those, see if I can remember them. I think he started with sales. I think sales will be flat to slightly down, fractionally down. [inaudible] Consistent, broadly, with the consensus from our original guide, and so I think that's all in the zip code.

Speaker Change: Yeah, Hey, Julien.

Julien: I'll try to unpack all of those see if I can remember them I think you started with sales.

Speaker Change: I think sales will be flat to slightly down fractionally down.

Speaker Change: I don't I don't think.

Julien: There'll be the <unk>.

Julien: First quarter was down about a point.

Julien: It probably won't be that steep.

Julien: And your AUM margin of nine ish percent youre in the Zip code.

Julien: I think I think the.

Julien: First half of the year seems to be playing out.

Julien: Manner that's.

Julien: Consistent broadly with the consensus from our original guide.

Julien: So I think thats all in the Zip code.

Unknown Executive: In terms of cash, yeah, I think cash will be up, flat to slightly up for the quarter. But, you know, what I'd remind everybody about cash is this year, our cash output is going to be driven differently than last year. Last year, we took out a billion plus of inventory, and that was a massive driver of 23 cash flow. We'll still be using inventory to drive cash flow this year, but it'll be more like 400 to 500 million. Income expansion through margin expansion will drive the balance.

Julien: In terms of cash I think cash will be.

Julien: Up.

Julien: To slightly up for the quarter, what I'd remind everybody about cash is this year.

Julien: Our cash output is going to be driven differently than last year last year, we took out $1 billion plus of inventory and that was a massive driver of 23 cash flow, we'll still be using inventory to drive cash flow this year, but it'll be more like $400 million to $500 million.

Julien: And then.

Julien: Income expansion through margin expansion will drive the balance and so we will have.

Unknown Executive: And so we'll have the producers of cash this year be roughly the same order of magnitude, but disproportionately driven by operating profits this year. And so obviously, those operating profits are going to flow the way the quarterly revenue and the margin expansion flows. And, and so I think that's what's being observed here in the first quarter is that we had a really nice organic cash flow in the first quarter, but we had, as expected, less inventory reduction.

Julien: The producers of cash this year be roughly the same order of magnitude, but disproportionately driven by operating profit this year.

Julien: And so obviously those operating profits I got a flow the way the quarterly revenue and the margin expansion flows.

Julien: And so I think that's what's being observed here in the first quarter as we had a really nice organic cash flow in the first quarter, but we had as expected less inventory reduction and that's the net delta.

Unknown Executive: And that's the net delta year over year in the first quarter. But I think it'll be more like flat to slightly up when we get to the second quarter versus last year. In terms of outdoor, you know, as Chris mentioned in his comments, we've seen a more traditional timing in order of magnitude start to the outdoor season, which is certainly welcome and we hope carries throughout, but it's early in the season, and we'll see where that plays out through the balance of the season, but coming off of two pretty tough seasons, we would welcome that. And so obviously, if that continued, that would put outdoor on a growth trajectory.

Julien: Year over year in the first quarter, but I think there'll be more like flat to slightly up when we get to the second quarter versus last year.

Julien: In terms of outdoor.

Julien: Yes.

Julien: Chris mentioned in his comments, we've seen a more traditional timing in order of magnitude start to the outdoor season.

Julien: Which is certainly welcome.

Julien: And we hope carries throughout but it's early in the season, and we'll see where that plays out through the balance of the season, but coming off of two pretty tough seasons, we would welcome that.

Julien: And so obviously if that continues that would put outdoor on a growth trajectory.

Timothy Ronald Wojs: Our next question comes from the line of Tim Wojs with Baird. Your line is now open.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Tim Welsh with Baird. Your line is now open.

Timothy Ronald Wojs: Hey, everybody. Good. Good morning. Morning. I was just hoping maybe. You could expand a little bit on the DeWalt growth, just maybe some color on the underlying drivers of growth there, just whether it's kind of organic user, you know, kind of growth and expansion or just, you know, inventory availability or outdoor, just some color there and maybe the sustainability of the growth trajectory. And then maybe just as you think about SG&A reinvestment this year, just how much are you specifically looking at kind of, you know, reinvesting, you know, back into DeWalt specifically versus some of the other

Tim Welsh: Hey, everybody good morning.

Tim Welsh: Good morning, I was just hoping maybe you could expand a little bit on the Walt growth just maybe some color on the underlying drivers of growth there.

Tim Welsh: Just whether it's kind of organic user growth and expansion or just inventory availability or outdoor.

Tim Welsh: Just some color there and maybe the sustainability of the growth trajectory.

Tim Welsh: And then maybe just as you think about SG&A reinvestment. This year just how much are you specifically looking at kind of.

Tim Welsh: Reinvesting back into the wall, specifically versus some of the other brands.

Christopher John Nelson: Well, thanks a lot, Tim. This is Chris.

Speaker Change: Well thanks, a lot Tim This is Ed. This is Chris So first of all I'd say that where we.

Speaker Change: We are encouraged by what we're seeing from from the Walt on the growth side and.

Speaker Change: It was something that it's been continuing bright spot in the portfolio and we expect it to continue to gather momentum if I would think about where the sources of growth are coming from I would say that first and foremost.

Speaker Change: <unk> that we've made as a part of our supply chain transformation and allowing.

Christopher John Nelson: So first of all, I'd say that we are encouraged by what we're seeing from DeWalt on the growth side. And, you know, it was something that has been a continued bright spot in the portfolio, and we expect it to continue to gain momentum. If I think about where the sources of growth are coming from, I would say that, first and foremost, the progress that we've made as a part of our supply chain transformation and allowing higher fill levels and service rates for our customers is certainly driving more momentum there.

Speaker Change: Higher fill levels in service rates for our customers is certainly driving more momentum there.

Speaker Change: Secondarily I think if we think about the ongoing sustainability and trajectory of that growth as we have been pivot.

Speaker Change: Pivoting, our dollars and investments into more of the pro driven end user not only product development, but also engagement in the marketplace and really highlighting the Walt brand I think that that is something that we see as a long term sustainable trend actually something that we're going to continue to.

Christopher John Nelson: You know, secondarily, I think if we think about the ongoing sustainability and trajectory of that growth, as we have been pivoting our dollars and investments into more of the pro-driven end user, not only product development but also engagement in the marketplace and really highlighting the DeWalt brand, I think that that is something that we see as a long-term sustainable trend and actually something that we're going to continue to put a lot of those investments into. And, you know, while I'll turn it over to Pat for the specifics, what I'd say as far as the investments and where they're going, really, if you think about it, the majority of it is going into development, product development, and activation, where we say we want to be making sure that we're developing innovative products for our professional end users, specifically driving a lot of innovation in DeWalt, and then also, you So, we feel very good about the sustainability, and we're encouraged by the progress we're making with the way we're prioritizing here. I don't know, Pat, if you want to add anything there.

Speaker Change: Sure.

Speaker Change: Put a lot of those investments into and I'll turn it over to Pat for the specifics, what I would say as far as the investments and where they're going.

Patrick D. Hallinan: Really if you think about it we're the.

Patrick D. Hallinan: Majority of it is going into development product development in activation, where we're saying we want to be making sure that we're <unk>.

Patrick D. Hallinan: Developing the innovative products for our professional end users specifically driving a lot of innovation into Walt.

Patrick D. Hallinan: And then also.

Patrick D. Hallinan: Having a significant amount of that investment going into activation resources.

Patrick D. Hallinan: Can work with our end users and our partners in the field to make sure that they are able to understand launch and drive the success of those of those products as well. So we feel very good about the sustainability and we're encouraged by the progress we're making with this with the way that we're prioritizing here I don't know Pat if you wanted to add anything there.

Patrick D. Hallinan: Yeah, I mean, in terms of SG&A for the year, Tim, I think if, you know, 21% and kind of the middle fractions, 21 and a half-ish plus or minus 20 basis points is kind of where SG&A is for the year. And as our opening comments mentioned, that's about 100 million of incremental investment. You know, I'd say 60 to 70 of that in the tools and outdoor business. And as Chris mentioned, a lot of that is for innovation, and therefore, a healthy portion of that goes to DeWalt. And a lot of it is on field activation. And so, again, because DeWalt's the biggest brand out in the field, a lot of that ends up going to DeWalt.

Patrick D. Hallinan: I think in terms of SG&A for the year, Tim I think as <unk>.

Patrick D. Hallinan: 21% and kind of the middle fractions, 'twenty, one and a half ish plus or minus 20 basis points is kind of where SG&A is for the year.

Patrick D. Hallinan: And as our opening comments mentioned thats about $100 million of incremental investment.

Patrick D. Hallinan: I'd say, 60% to 70 of that in the tools and outdoor business and as as Chris mentioned.

Patrick D. Hallinan: A lot of that is on innovation and therefore, a healthy portion of that goes to the wall.

Patrick D. Hallinan: And a lot of it is on field activation.

Patrick D. Hallinan: And so again because of the what's the biggest brand out in the field a lot of that ends up going to the wall.

Jeffrey Todd Sprague: Our next question comes from the line of Jeffrey Sprague with Vertical Research Partners. Your line is now open.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Jeffrey Sprague with vertical Research partners. Your line is now open.

Jeffrey Todd Sprague: Hey, thank you. Good morning, everyone.

Jeffrey Todd Sprague: Okay. Thank you and good morning, everyone.

Jeffrey Todd Sprague: A big picture question for Don and then maybe just some loose ends for Pat. But first, just sorry if I missed it at the beginning, but the after-tax proceeds on infrastructure and then Pat also, can you just address what that other was in a cash outflow of $250 million-ish in the quarter? And Don, I'm just wondering if you could speak maybe to the portfolio now more broadly. With infrastructure, Don, is kind of the portfolio simplification in your view behind the company now? And we're, you know, focused on these operational elements that remain central to the margin improvement plan. Or, you know, are there other things that maybe could happen here as you chart the path forward?

Jeffrey Todd Sprague: Hey.

Jeffrey Todd Sprague: Picture question for Don and then May be just some loose ends for Pat but first.

Jeffrey Todd Sprague: Just sorry, if I missed it at the beginning but the after tax proceeds on infrastructure and then also can you just address what the other was in cash outflow of $250 million ish in the quarter and Don I was just wondering if you could speak maybe to the portfolio now more broadly with infrastructure done is.

Jeffrey Todd Sprague: The portfolio simplification in your view behind the company now and where we're focused on these operational elements that remain central to the margin improvement plan or.

Jeffrey Todd Sprague: Are there other things that maybe it could happen here as you chart the path forward.

Donald Allan: Sure, Jeff. Pat, maybe you can take those questions, and I'll answer Jeff's second question.

Jeffrey Todd Sprague: Yes.

Donald Allan: Sure Jeff.

Donald Allan: Pat maybe you can take those questions.

Patrick D. Hallinan: The answer to Jeff's question second question.

Patrick D. Hallinan: Jeff, the after-tax proceeds on the infrastructure deal, the pre-tax are in the $7.30 range, $7.30 is as big as $7.29 in a fraction, and the tax impact on that will be de minimis, probably in the $10 or less range when it's all said and done, and that all went down to pay the commercial paper balance down, and that all happened in the front of the second quarter, so it's in the second quarter In terms of other cash outflows, that is driven predominantly by two things. There are many things in that bucket. One is a return to normal MICP or annual compensation, and variable compensation payments, which go out in the first quarter.

Patrick D. Hallinan: Jeff the after tax proceeds.

Speaker Change: Uh huh.

Speaker Change: On.

Speaker Change: The infrastructure deal.

Speaker Change: I'd say, the pre tax and that too.

Patrick D. Hallinan: 730 ish range, $737, 29, and a fraction and the tax impact to that will be de minimis as probably in the 10.

Patrick D. Hallinan: 10, or less range, when it's all said and done.

Patrick D. Hallinan: And that all went down pay the commercial paper balance down.

Patrick D. Hallinan: And that all happened in the front of the second quarter. Therefore, it's in the second quarter financials that Youll see.

Patrick D. Hallinan: Yes.

Patrick D. Hallinan: Days down the road in terms of other cash outflows.

Patrick D. Hallinan: That that.

Patrick D. Hallinan: Is driven by two things predominantly theres, many things in that bucket.

Patrick D. Hallinan: One is a return to normal.

Patrick D. Hallinan: <unk> or annual compensation variable compensation payments.

Patrick D. Hallinan: You can imagine 2022 was very, very low by traditional standards. And so the payout for 22 that happened in 23 was very low by traditional standards. And the payout that happened in the first quarter of this year for 23 was kind of back to normal standards, and then cash taxes. Those are the two big drivers of that outflow in the other bucket. Thanks, Pat.

Patrick D. Hallinan: Which go out in the first quarter you can imagine.

Patrick D. Hallinan: 2022 was very very low by traditional standards and so.

Patrick D. Hallinan: The payout for 'twenty two that happened in 2003 was very low by traditional standards and the payout.

Patrick D. Hallinan: That happened in the first quarter of this year for 2003 was kind of back to normal standards and then cash taxes. Those are the two big drivers of that outflow in the other bucket.

Donald Allan: Thanks, Pat. And so on the portfolio question, as we all know, we've done a fair amount of work of pruning the portfolio of businesses here at Stanley Black & Decker, in particular the security segment, which has two businesses. And then in industrial, we did some things related to not only infrastructure but oil and gas a little while ago as well. We will continue to evaluate other things to cut going forward based on, you know, value creation opportunities.

Speaker Change: Thanks Pat.

Speaker Change: So on the portfolio question.

Patrick D. Hallinan: As we all know we've done a fair amount of work.

Patrick D. Hallinan: Of pruning the portfolio of businesses here at Stanley Black <unk> Decker and particular, the security segment, which had two businesses.

Speaker Change: And then in industrial we've done some things.

Speaker Change: Related to not only infrastructure, but oil and gas a little while back as well.

Patrick D. Hallinan: We will continue to evaluate other things to prune going forward based on.

Donald Allan: I think we've gotten ourselves down to a place where we have some very high-quality assets in our portfolio, and there's not an urgent need to do anything at this stage. As we look at the portfolio going forward, there will be, you know, more opportunities in the next 18 to 24 months to do a little bit more pruning. Some of it could actually be in tools and outdoor as we put more and more emphasis on the three big brands that Chris has talked about in a couple different settings over the last six months.

Patrick D. Hallinan: Value creation opportunities I think we've gotten ourselves down to a place where we have some very high quality assets in our portfolio.

Patrick D. Hallinan: There is not an urgent need to do anything at this stage.

Patrick D. Hallinan: As we look at the portfolio going forward, there will be more opportunities likely in the next 18 to 24 months to do a little bit more pruning some of it could actually be in tools and outdoor as we put more and more emphasis on the three big brands that Chris has talked about.

Patrick D. Hallinan: And then a couple of different settings over the last six months and we will look at some of the smaller assets, we have and decide whether those.

Donald Allan: And we'll look at some of the smaller assets we have and decide whether those make sense for them to be part of the portfolio over the long term. And so we will continue to be active. I think we've demonstrated over the years that pruning the portfolio is something that is important to do, but you need to do it in a way that creates value for your shareholders.

Patrick D. Hallinan: It makes sense for us to be part of the portfolio over the long term and so we will continue to be active I think we've demonstrated over the years.

Patrick D. Hallinan: The portfolio is something that is important to do it.

Patrick D. Hallinan: But you need to do it in a way that creates value for your shareholders.

Michael Jason Rehaut: Our next question comes from the line of Michael Rehaut with J.P. Morgan. Your line is now open.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Michael Rehaut with Jpmorgan. Your line is now open.

Michael Jason Rehaut: Thanks. Good morning, everyone.

Michael Jason Rehaut: Thanks, Good morning, everyone. Thanks for taking my questions.

Michael Jason Rehaut: Thanks for taking my question. I wanted to just kind of dial in a little bit more on how you're thinking about the demand trends playing out for the rest of the year in tools and storage. You know, you have 1Q organic revenue growth down 1%. You're talking about the full year being flat to maybe down a little bit as the most likely scenario. So are we to assume a kind of current trend, more or less persisting through 2Q and the back half?

Michael Jason Rehaut: I wanted to just kind of.

Michael Jason Rehaut: Dial in a little bit more on.

Michael Jason Rehaut: How youre thinking about the demand trends playing out for the rest of the year in tools and storage.

Michael Jason Rehaut: You have <unk> organic revenue growth down 1% you are talking about the full year flat to maybe down a little bit is the most likely scenario. So.

Michael Jason Rehaut: Are we to assume kind of the current.

Michael Jason Rehaut: Trend.

Michael Jason Rehaut: More or less persisting through <unk> and the back half.

Michael Jason Rehaut: And I'm also curious about how, you know, in the first quarter, you had the 7% drop in hand tools and storage if there was any, inventory destocking or anything going on that that drove that, you know, adjustment, you know, separately, you know, if I can sneak in another one on the mid 21% SG&A, if that's something where, you know, just given the backdrop and your goals around, you know, share games over the next couple of years, if we should think about that as a sustainable rate over the next, you know, 12, 18, 24 months.

Michael Jason Rehaut: And I'm also curious about how in the first quarter.

Michael Jason Rehaut: The 7% drop in hand tools and storage if there was any.

Michael Jason Rehaut: Inventory destocking or anything going on there that drove that.

Michael Jason Rehaut: Adjustment.

Speaker Change: Separately, if I can sneak in another one.

Michael Jason Rehaut: On the mid 21% SG&A, if that's something where just given the backdrop and your goals around <unk>.

Michael Jason Rehaut: Share gains over the next couple of years, if we should think about that as a sustainable rate over.

Michael Jason Rehaut: Over the next 12 to 18 to 24 months.

Patrick D. Hallinan: Hey Mike, this is Pat. I'll take your kind of balance of the year revenue flows in SG&A, and then I'll let Chris expand on a few things. I think as you think of year-over-year revenue for the balance of the year, you know, I think any given quarter is going to be in that down 50 to down 200 basis points across the quarter, you know, probably averaging down one-ish, you know, for the year, if I had to kind of point you in a direction for the balance of the year. And any one of those quarters, the difference probably has more to do with year-over-year comps in promotional activity or currency than some really noteworthy demand dynamic that we're expecting to change from one quarter to the next.

Michael Jason Rehaut: Hey, Mike This is Pat I'll I'll take you kind of balance of the year revenue flows in SG&A and then I'll, let Chris expand on a few things I think as you think of.

Patrick D. Hallinan: Year over year.

Patrick D. Hallinan: Revenue for the balance of the year.

Christopher John Nelson: Any given quarter is going to be in that down 50 to down 200 basis points across the quarter.

Patrick D. Hallinan: Probably averaging.

Christopher John Nelson: One one ish for the year, if I had to kind of point you in that direction.

Patrick D. Hallinan: For the balance of the year and any one of those quarters the difference probably more to do with.

Patrick D. Hallinan: Year over year comps in promotional activity or currency than some really noteworthy demand dynamic that we're expecting to change from one quarter to the next.

Patrick D. Hallinan: I'd say in terms of SG&A at, you know, kind of 21.5-ish percent, I think that's likely where we are in a year like this, where we're being thoughtful to manage expenses across our enterprise while preserving growth investments to still deliver profit and cash on our transformation journey. And I certainly think, as you look longer term, that could be a sustainable percentage as well. I, you know, we have talked about in a number of forums over the last year or two that, once we start seeing market growth and we're a bit farther down the AGM journey, we may choose for a period of time to take that percentage to 22 or potentially even a little above 22% for a while.

Patrick D. Hallinan: I'd say in terms of the SG&A at kind of 'twenty, one and a half ish percent I think.

Patrick D. Hallinan: That's likely where we are in a year like this where we're being thoughtful to manage expenses across our enterprise, while preserving growth investments to still deliver.

Patrick D. Hallinan: Profit in cash on our transformation journey.

Patrick D. Hallinan: And I, certainly think as you look longer term that could be.

Patrick D. Hallinan: Our sustainable percentage as well.

Patrick D. Hallinan: We have talked about and a number of forums over the last year or two that.

Patrick D. Hallinan: Once we start seeing the market growth and we're a bit farther down the AGM journey, we may choose for a period of time to take that percentage to 22 or potentially even a little above 22% for a while.

Patrick D. Hallinan: As we invest for growth on the backs of a little more gross margin and macro demand, we're not quite there yet. So I think kind of managing in that 21 and a fraction range for this year and for the long term is probably a decent modeling assumption. But like we've said, we may choose that period of time to go to 22 plus when we feel that there are good returns on those growth investments.

Patrick D. Hallinan: As we invest for growth on the backs of a little more gross margin and.

Patrick D. Hallinan: Macro demand, we're not quite there yet so I think kind of managing in that 'twenty, one and a fraction range for this year and for the long term is probably a decent modeling assumption, but like we said we may choose at periods of time to go to 'twenty two plus when.

Patrick D. Hallinan: When we feel that there's good returns for those growth investments.

Christopher John Nelson: Yeah, so if I take a step back and talk a little bit about where we see the markets from a macro perspective for the year, I think that, you know, what we're talking about is, you know, within a very tight range, you know, up a point, down a point, and we're kind of thinking that we're trending towards. And there are specific areas that remain, you know, tepid, specifically if we think about, you know, we've talked about the challenges in the outdoor market. We're encouraged by what we're seeing early, but, you know, we haven't hit the season yet, for really any of our businesses, and specifically in outdoor.

Speaker Change: Yes, so if I take a step back and talk a little bit about where we see the markets from a macro perspective for the year I think that what we're talking about is within.

Speaker Change: It's a very tight range up a point down a point that we're kind of thinking that we're trending towards.

Speaker Change: And there are specific areas that remain tepid, specifically, if we think about we've talked about the challenges in the outdoor market. We're encouraged by what we're seeing early but we haven't hit the season, yet for really any of our businesses and specifically in outdoor and then.

Christopher John Nelson: And then, as it is widely understood, the DIY and, in some areas, general construction remains a little bit muted as well. That being said, we do see some bright spots as we look at the professional markets, and as we discussed in the earlier conversation, as we hone in on where we're going to really look for driving share and investments, a lot of our opportunities are there, so we remain optimistic there. You know, I would just say, although there are certainly scenarios that you could see some level of the back half.

Speaker Change: Widely understood the DIY and in some areas general construction remains a little bit muted as well.

Speaker Change: That being said, we do see some some bright spots as we look at the professional market.

Speaker Change: As the earlier conversation as we as we hone in on where we're going to really look for driving share and investments a lot of our opportunities are there. So we remain optimistic there.

Speaker Change: Yes, I would just say, although there are certainly scenarios that you could see some level of a back half acceleration, we think it's prudent to be looking at.

Christopher John Nelson: We think it's prudent to be looking at the outlook that we discussed earlier, you know, because really, if you think about it, a lot of our businesses are fairly interest rate sensitive, and with the current environment and how we're thinking about what we see for residential construction as well as renovation, there certainly will be an unlock. I think it's just a matter of timing, and we think it's prudent to be looking at more of that flattish revenue environment for those reasons.

Speaker Change: The outlook that we discussed earlier.

Speaker Change: Because really if you think about a lot of our a lot of our businesses are fairly interest rate sensitive than with the current environment and how we're thinking about what we see for residential construction as well as renovation.

Speaker Change: There certainly will be an unlock coming I think it's just a matter of timing and where we think it's prudent to be looking at more of that flattish revenue environment for those reasons.

Nigel Edward Coe: Thank you. Our next question comes from the line of Nigel Coe with Wolf Research. Your line is now open.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Nigel Coe with Wolfe Research. Your line is now open.

Nigel Edward Coe: Thanks, guys. Good morning.

Speaker Change: Okay.

Nigel Edward Coe: Thanks, guys. Good morning, Thanks for the question.

Nigel Edward Coe: So just wanted to come back to the.

Nigel Edward Coe: Thanks for the question. So I just want to come back to Jeff's question about the portfolio. I'd assume that perhaps the remaining industrial businesses, the fasting businesses, were trending as more non-core. But it doesn't sound like that's necessarily the case. So that's my primary question. But if I could just add on to that, I just want to confirm that the infrastructure businesses are in the guide for 1Q, and then the strategic costs from the infrastructure businesses, is that impacting the margin progression or advance per year? Is that material, do we need to consider that?

Nigel Edward Coe: Just a question on the portfolio.

Nigel Edward Coe: That perhaps the industrial businesses with the remaining industrial businesses the processing businesses were trending as <unk>.

Nigel Edward Coe: More non core it doesn't sound like that's necessarily the case. So that's my primary question, but if I could just add onto that.

Nigel Edward Coe: Just want to confirm that the the infrastructure businesses have been the guide for <unk> and then the stranded costs from that from the infrastructure businesses is that impacting the margin progression with bumper yet is that material.

Patrick D. Hallinan: Hey Nigel, this is Pat.

Speaker Change: Consider that.

Nigel Edward Coe: Hey, Nigel this is Pat I'll take the infrastructure and then pass it back to Don on portfolio.

Patrick D. Hallinan: I'll take the infrastructure and then pass it back to Don on portfolio. The infrastructure sale in April was always in our guide. And so our original guide and our current guide account for a very early April sale of infrastructure, which we always assumed was going to be in our Q1 results as a continuing operation and then out of our results effectively from April 2nd or thereabouts on. And so there's nothing to adjust in the guide.

Patrick D. Hallinan: The infrastructure sale.

Patrick D. Hallinan: In April was always in our guide.

Patrick D. Hallinan: And so are our original guide in our current guide.

Patrick D. Hallinan: <unk> account for a very early April sale of infrastructure, which we always assumed.

Patrick D. Hallinan: I was going to be in our Q1 results.

Patrick D. Hallinan: As a continuing operation and then out of our results effectively from <unk>.

Patrick D. Hallinan: The guide is the guide, and we planned our cost structure this year to deal with the fact that there would be fixed costs in the industrial business that had previously been supporting that business. And the industrial team has been doing a great job both gaining share in the remaining businesses they have, especially in auto and aero, and managing their cost structure proactively to deliver roughly flat margins on the year, maybe slight improvement, even though they had a sizable business to part with this year.

Patrick D. Hallinan: April 2nd or thereabouts, and so there is there is nothing.

Patrick D. Hallinan: To adjust in the guide the guide is the guide.

Patrick D. Hallinan: <unk>.

Patrick D. Hallinan: The.

Patrick D. Hallinan: We planned our cost structure this year to deal with the fact that there would be.

Patrick D. Hallinan: Fixed cost and the industrial business that had previously been supporting that business and.

Patrick D. Hallinan: The industrial team has been doing a great job.

Patrick D. Hallinan: Both gaining share in the remaining businesses they have specially in auto and Aero and managing their cost structure proactively to deliver roughly flat margins on the year, maybe slight improvement, even though they had a sizable business to part this year.

Donald Allan: Yeah, and the question about the portfolio, Nigel, is specifically around industrial. So you know, what we're left with after the sale of infrastructure is the engineered fastening business that we acquired with Black & Decker, and a few other fastening businesses we acquired since then. And then, of course, CAM, the aerospace fastener business, is in there as well.

Patrick D. Hallinan: Yes.

Speaker Change: The question on the portfolio, Nigel and specifically around industrial so.

Donald Allan: When we look at the different portions of that, one, there are pieces that certainly could be evaluated for the word I use pruning in the future, in the next 18 to 24 months. And we will continue to look at that. The overall platform of Engineered Fastening is still a very substantial portion of Stanley Black & Decker. It contributes a significant amount to the EBITDA and the cash flow of the company. And as the tools and outdoor portion of the business, or the company, continues to improve, and EBITDA continues to grow as we improve our gross margins back up to 35% or more, as we get back to gaining market share and organic growth in a much more substantial way, it'll provide us with more flexibility further down the road to decide, ultimately, what we do with the entirety of the engineer fastening business.

Nigel Edward Coe: So what we're left with after the sale of infrastructure is the engineered fastening business that we acquired with black and Decker a.

Nigel Edward Coe: A few other.

Nigel Edward Coe: Fastening businesses, we acquired since then and then of course can the aerospace fastener business in there as well when we look at the different portions of that one.

Nigel Edward Coe: There are pieces that certainly could be evaluated for the word I use pruning.

Speaker Change: <unk>.

Speaker Change: In the future in the next 18 to 24 months and we will continue to look at that the overall platform of engineered fastening is still a very substantial portion of <unk>.

Speaker Change: Stanley Black <unk> Decker it contributes a significant amount to the EBITDA to the cash flow of the company.

Speaker Change: And as the tools and outdoor portion of the business or the company continues to improve and EBITDA continues to grow as we improve our gross margins back up to 35% or more as we get back to gaining market share in organic growth and a much more substantial way.

Speaker Change: It will provide us more flexibility further down the road to decide ultimately what do we do with the entirety of the engineered fastening business, but I think if you think about it in chunks of time in the next 18 to 24 months Theres, probably opportunity to do a little pruning in industrial and then beyond 24 months. It's a question of do you do something more substantial.

Donald Allan: But I think if you think about it in chunks of time, in the next 18 to 24 months, there's probably an opportunity to do a little pruning in industrial. And then beyond 24 months, it's a question of, do you do something more substantial from a capital allocation point of view? Time will tell.

Speaker Change: From a capital allocation point of view.

Jim: Jim will tell.

Adam Michael Baumgarten: Thank you. Our next question comes from the line of Adam Baumgarten with Zellman & Associates. Your line is now open.

Jim: Thank you. Our next question comes from the line of Adam Baumgarten with Zelman and Associates. Your line is now open.

Adam Michael Baumgarten: Hey, good morning everyone. Just a question on the POS, what you saw throughout the quarter and into April at this point.

Adam Michael Baumgarten: Hey, good morning, everyone.

Adam Michael Baumgarten: Just a question on media pass what you saw throughout the quarter and into April at this point.

Christopher John Nelson: So, PLS was, I'd say, in Q1, it was, it was... negative, but in line with our plan, or largely in line with our plan. And, you know, we remain fairly confident in supporting the outlook that we have for the balance of the year. As noted, we have seen some progress and pick-up with a little bit earlier start to the season from the outdoor perspective, which as of late has given a little bit more strength to the POS.

Adam Michael Baumgarten: So Pos.

Adam Michael Baumgarten: POS was I'd say in Q1 it was it was.

Adam Michael Baumgarten: Negative, but in line with our plan.

Adam Michael Baumgarten: Are largely in line with our plan.

Adam Michael Baumgarten: And we remain.

Adam Michael Baumgarten: Fairly fairly confident in supporting the outlook that we have for the balance of the year. As noted we have seen some some progress and pick up with a little bit earlier start to the season.

Adam Michael Baumgarten: From the outdoor perspective that as of late has given a little bit more strength in Pos and what we're trying to see now is how much of that carries through and how that continues to ramp up as we get further into the season, but.

Christopher John Nelson: And what we're trying to see now is how much of that carries through and how that continues to ramp up as we get further into the season. But the highlight would be that we're fairly in line with projections for what we're seeing with POS, and we're encouraged with the areas of progress we're seeing from some nice movement on growth with some of our key brands.

Adam Michael Baumgarten: The highlight would be that were fairly in line with projections for what we're seeing with Pos and we're encouraged with the areas of progress we're seeing from from some some nice movement on growth with some of our key brands.

Joseph Alfred Ritchie: Our next question comes from the line of Joe O'Day with Wells Fargo. Your line is now open.

Speaker Change: Thank you.

Our next question comes from the line of Joe O'dea with Wells Fargo. Your line is now open.

Joseph Alfred Ritchie: Hi, good morning. Thanks for taking my question. I just wanted to ask about outdoor and, as you see a more traditional start to the season, just any context on how you're thinking about 2024 demand and outdoor relative to 2019, trying to understand whether this is a return to a more normal demand environment, and then also thinking about what a normal environment means for outdoor margins relative to where we are today, to appreciate how much margin upside there could be there on just volume coming back.

Speaker Change: Hi, good morning, Thanks for taking my question.

Speaker Change: Just wanted to ask on outdoor and as you see it more traditional start to the season, just any context on how youre thinking about 2020 for demand in outdoor relative to 2019.

Joseph Alfred Ritchie: Trying to understand whether this is a return to a more normal demand environment and then also thinking about what a normal environment means for outdoor margins relative to where we are.

Christopher John Nelson: Today to appreciate how much margin upside there could be there on just volume coming back.

Donald Allan: Yeah, so there's a lot of good questions in there related to the outdoor business. And as for the comments, they are on the margin, so I would say that.

Christopher Nelson: Yes.

<unk>.

Speaker Change: A lot of good questions in there related to the outdoor business and is the comments around the margin.

Donald Allan: <unk>.

Christopher John Nelson: In my presentation, we talked about 80% of the company being above kind of a line average right now, at or above, and the other 20%, which is really made up of outdoor and, http://TheBusinessProfessor.com. The outdoor portion of the business, yes, it is below line average, but there's an opportunity to do a couple things. One, right now, we're really adjusting the cost base for the new demand environment of what we've experienced over the last, you know, 12 to 15 months with dramatically lower demand and outdoor.

Speaker Change: I would say that.

Joseph Alfred Ritchie: In my presentation, we talked about 80% of the company.

Speaker Change: Being above kind of line average right now at or above and.

Pat: The other 20%, which is really made up of outdoor and.

Christopher John Nelson: Cam our aerospace fasteners.

Nigel Coe: The outdoor portion of the business, yes. It is below line average.

Patrick D. Hallinan: But there is an opportunity to do a couple of things one.

Christopher John Nelson: Right now, we're really adjusting the cost base for the new demand environment.

Christopher John Nelson: But what we've experienced over the last 12 to 15 months and dramatically lower demand in outdoor.

Christopher John Nelson: That will take place over the next quarter or two. The second phase of this will really be looking at some of the pruning activities that I described, what portions of the business do we want to be in, and which portions do we not want to be in. We think there's a path to continue to improve the profitability of outdoor, and that's something we'll continue to focus on over the coming quarters and into next year. As far as the more detailed questions, I don't know if Pat or Chris would want to take that.

Christopher John Nelson: That's taken place over the next quarter.

Pat: A quarter or two the second phase of this will really be looking at some of the pruning activities that I've described what portions of the business do we want to be in which person is doing that wanted to be in.

Christopher John Nelson: There is a path to continue to improve the profitability of outdoor.

Christopher John Nelson: We will continue to focus on over the coming quarters and into next year.

Speaker Change: As far as the more detailed questions on a pad or Chris if you want to grab that.

Patrick D. Hallinan: Yeah, I'd say on volume, this year is certainly still going to be down substantially versus 2019. Even if the shape of the trend line starts and starts to look more like a normal trend line, the absolute volume in dollars will be down substantially from 2019. And I would still say that, most likely, next year would be below 2019 as well, but starting to recover. And, you know, to Don's comment, you know, the big headwind in this business has been the volume retrenching more than we would have anticipated a year or two ago. And so a lot of our actions are both around the fixed cost base and what we can do with the product cost structure to drive profit improvement in that business.

Patrick D. Hallinan: On the volume.

Patrick D. Hallinan: This year is certainly still going to be down substantially versus 2019.

Patrick D. Hallinan: Even if the.

Patrick D. Hallinan: Shape of the trend line starts and starts to look more like a normal trend line, the absolute volume and dollars will be down substantially from 2019.

Patrick D. Hallinan: And I would still say that most likely next year would be below 2019 as well.

Patrick D. Hallinan: But starting to recover.

Patrick D. Hallinan: And.

Speaker Change: And to Don's comment.

Patrick D. Hallinan: The big headwind in this business has been.

Patrick D. Hallinan: The volume retrenching more than we would've anticipated a year or two ago.

Patrick D. Hallinan: And so a lot of our actions are are both around the fixed cost base and now what we can do with product cost structure.

Patrick D. Hallinan: To drive profit improvement in that business.

Nicole Sheree DeBlase: Our next question comes from the line of Nicole DeBlase with Deutsche Bank. Your line is now open.

Nicole Sheree DeBlase: Thank you. Our next question comes from the line of Nicole DeBlase with Deutsche Bank. Your line is now open. Yeah, thanks. Good morning, guys.

Speaker Change: Thank you.

Patrick D. Hallinan: Our next question comes from the line of Nicole <unk> with Deutsche Bank. Your line is now open.

Nicole Sheree DeBlase: Yeah. Thanks, good morning, guys.

Nicole Sheree DeBlase: Good morning.

Nicole Sheree DeBlase: And maybe just focusing on pricing a little bit I think the original expectation was for price to be kind of slightly negative in tools and outdoor in the first half and it looks like maybe it came in a bit better than that in the quarter. So can you just talk about the expectation for price for the rest of the year as well as what you guys are seeing from a competitive perspective. Thank you.

Christopher John Nelson: Yes, this is Chris. So I think I'd say overall, what we're looking at for the year is price cost neutral. And if we look at all the, you know, we try to sum up all the basket of goods and input costs we have, I'd say that we're looking at what would be a very, you know, mildly inflationary environment. But we're going to be price cost neutral in that environment.

Nicole Sheree DeBlase: Yes. So this is this is Chris.

Christopher John Nelson: I would say overall, what we're what we're looking at for the year is price cost neutral.

Christopher John Nelson: You know, and as I take a little bit of a broader lens on that, from a price and cost perspective, I think it's important to remember that, you know, we had a pretty unique set of circumstances in 2022, where we were really hitting the peak of some historically high inflationary environments as, and those input costs were going up significantly as our volume was peaking and starting to retrench. So if I take a broader look and a longer duration, we've still kind of only recouped 85 ish percent of that overall cost that we've absorbed.

Christopher John Nelson: And if we look at all the.

Christopher John Nelson: Try to sum up all the basket of goods and input costs. We have I would say that we're looking at would be what would be a very.

Christopher John Nelson: Mildly inflationary environment.

Christopher John Nelson: But we're going to be price cost neutral in that environment.

Christopher John Nelson: And as I take a little bit of a broader lens on that from a price cost perspective, I think it's important to remember that.

Christopher John Nelson: We had a pretty unique.

Christopher John Nelson: Set of circumstances in 2022, where we were really hitting the peak of some historically high inflationary environments as and those put costs were going up significantly as our volume was peaking in starting to retrench. So if I take a broader look and a longer a longer duration, we've still kind of.

Christopher John Nelson: Only recouped 85 ish percent of that overall cost that we've absorbed.

Christopher John Nelson: So, you know, we're certainly working on making sure that we can improve our pricing processes to be more, you know, more quickly reactive to inflationary environments, as well as, more importantly, driving innovation so that we can, you know, be putting products in there that earn, because of their differentiation, accretive margin rates. So and then as I think about the competitive environment that we're seeing, you know, thus far, we're seeing a stable environment, you know, we're, we're, we're continuing to, you know, look at getting back to and are more back to historical promotional levels. But that's healthy.

Christopher John Nelson: So we're certainly working on making sure that we can improve our pricing processes to be more.

Christopher John Nelson: More quickly reactive to inflationary environments as well as more importantly, driving innovation so that we can.

Christopher John Nelson: Be putting products in there that earned because of their deferential differentiation accrete.

Christopher John Nelson: Accretive margin rates so.

Christopher John Nelson: And then as I think about the competitive environment that we're seeing thus far I mean, we're seeing a stable environment.

Christopher John Nelson: We're we're continuing to.

Christopher John Nelson: Look at getting back to and are more back to historical promotional levels, but that is healthy and we're looking at those promotions and some important categories to us specifically, we've talked about the importance of being able to be.

Robert Cameron Wertheimer: And we're looking at those promotions and some important categories to us. And specifically, we've talked about the importance of being able to be, you know, promoting our core list of Walt products. So we feel comfortable where we are, and we think that the environment remains stable. Thank you. Our next question comes from the line of Rob Wertheimer with Mellius Research. Your line is now open. Hi, I have another question on the outdoor side. I think you made positive comments on market share for DeWalt, but I suppose more on the

Robert Cameron Wertheimer: Promoting our cordless to Walt.

Robert Cameron Wertheimer: Products. So we feel comfortable where we are and we think that the environment remains stable.

Robert Cameron Wertheimer: Yes.

Robert Cameron Wertheimer: Our next question comes from the line of Rob Wertheimer with Mellius Research. Your line is now open.

Robert Cameron Wertheimer: Thank you.

Robert Cameron Wertheimer: Our next question comes from the line of Rob Wertheimer with Melius Research. Your line is now open.

Robert Cameron Wertheimer: Hi, I had another question on the outdoor side I think you made positive comments.

Robert Cameron Wertheimer: Market share for duals I suppose more on the tool side I wanted to hear how you think you're positioned on breadth of portfolio and extensive innovation et cetera on out or will you need more investment.

Robert Cameron Wertheimer: Kind of achieve the same share gain.

Robert Cameron Wertheimer: Thank you <unk>.

Robert Cameron Wertheimer: And then it may be very early for the second part of the question, but any split on big ticket versus small ticket outdoor just.

Robert Cameron Wertheimer: Budget sensitivity among your customers. Thanks.

Christopher John Nelson: So, I think that we feel well positioned with our outdoor portfolio, and I think, as I've stated previously, what we're really wanting to do is make sure that we're driving the prioritization of our innovation dollars into the categories that we think that we have the biggest opportunity for share gain, as well as, you know, that are margin accretive. And, you know, specifically, we've been really looking at growing our presence in the outdoor handheld electric market. And that's showing great lines of progress.

Christopher John Nelson: So I think we feel we feel well positioned with our with our outdoor portfolio and I think.

Christopher John Nelson: As I've stated.

Christopher John Nelson: Previously is what we're really wanting to do is make sure that we're driving the prioritization of our innovation dollars into the categories that we think that we have the biggest opportunity for share gain as well as that are margin accretive and specifically we've been really looking at growing our presence in the.

Christopher John Nelson: Outdoor handheld electric market, that's showing great lines of progress and I would say that were year to date, we're feeling good about where we are from a market perspective.

Christopher John Nelson: And I would say that, you know, year to date, we're feeling good about where we are from a market perspective. And with some of the listings that we've picked up, we feel good about where we are trending from a share perspective as well. You know, as far as bigger ticket versus small ticket, certainly in today's environment, we've seen that, you know, there are some levels of hesitation from the consumer and from any end user when it comes to bigger ticket items.

Christopher John Nelson: With some of the listings that we've picked up we feel good about where we are trending from a share perspective as well.

Christopher John Nelson: As far as bigger ticket versus small ticket certainly in today's environment. We have seen that there are some levels of.

Christopher John Nelson: <unk> from the consumer and from any end user in the bigger ticket items, and we will continue to monitor that but like.

Christopher John Nelson: And we'll continue to monitor that. But, you know, like I said earlier, we're cautiously optimistic about how the season is starting. And we're going to continue to make sure that we're driving innovation into those areas that we believe are going to be important and accretive for us in the future.

Christopher John Nelson: Like I said earlier, we are cautiously optimistic with how the season is starting and we're going to continue to make sure that we're driving innovation into those areas that we believe are going to be important and accretive first in the future.

David McGregor: Our next question comes from the line of David McGregor with Longbow Research. Your line is now open.

David McGregor: Thank you. Our next question comes from the line of David McGregor with Longbow Research. Your line is now open. Good morning, everyone. Thanks for taking the question. I guess I just wanted to ask

Speaker Change: Thank you.

Christopher John Nelson: Our next question comes from the line of David Macgregor with Longbow Research. Your line is now open.

David Sutherland MacGregor: Good morning, everyone and thanks for taking the question.

David Sutherland MacGregor: I guess I just wanted to ask a question relating to the progress on supply chain transformation and specifically tariffs and can you just talk about what's changed in your sourcing and procurement operations since the.

David Sutherland MacGregor: Around on tariffs.

David Sutherland MacGregor: Politically I guess, if all of the import tariffs that were imposed back in I don't know 2017 2018, when all that was going on.

David Sutherland MacGregor: They were all reimposed tomorrow, how much different would your total tariff expense be versus what you reported last time around.

Donald Allan: Sure. So, um...

David Sutherland MacGregor: Sure so.

Donald Allan: I'll probably have a little PTSD thinking about terrorists back in 2016, but if we go, maybe do a little bit of history here. So we experienced about $300 million in terrorist attacks back in that time frame and made substantial production moves in response to that, which mitigated it down probably to about $100 million, maybe a little less than $100 million. And that $100 million or so was offset by price increases in the marketplace. Those tariffs are still in place today and have not changed even under the new administration or the Biden administration.

David Sutherland MacGregor: I'll, probably have a little PTSD thinking about tariffs back in 2016.

Donald Allan: If we can maybe do a little bit of history here, So we experienced about $300 million.

Donald Allan: If tariffs back in that timeframe.

Donald Allan: <unk> made substantial production moves in response to that.

Donald Allan: Which mitigated it down probably to about $100 million, maybe a little less than $100 million and 100 million or so was offset by price increases in the marketplace.

Donald Allan: Those tariffs are still in place today.

Donald Allan: As we think about potential changes in the future that could occur if there's a change in the administration in early 2025, the landscape for us has changed. So back in that timeframe, you know, things that came in and that were sold in the US that were made in China accounted for about 40% of US revenue. Today, it's closer to 20-25%. So it's substantially lower.

Donald Allan: We have not changed.

Donald Allan: Even in the New administration are Biding administration.

Donald Allan: As we think about potential changes in the future.

Donald Allan: That occur if there is a change in the administration in early 'twenty five.

Donald Allan: The landscape for US has changed so back in that timeframe things that came that were sold in the U S that were made in China was about 40% of the U S.

Donald Allan: Revenue today, it's closer to 20%, 25%, so it's substantially lower.

Donald Allan: And as we continue to drive our supply chain transformation.

Donald Allan: And as we continue to drive our supply chain transformation. I mentioned on the call last quarter that we continue to build out what we call Centers of Excellence for Manufacturing that are in different geographies around the world. Some of them will be in Asia, not necessarily in China, but in other parts of Asia.

Donald Allan: <unk>.

Donald Allan: Call last quarter that we continued to build out what we call centers of excellence for manufacturing that are in different geographies around the world. Some of them will be in Asia, not necessarily in China, but in.

Donald Allan: Some are being built or have been built in the Americas and some in Eastern Europe, and we will continue to build upon that to try to, if something changes, we'll clarify. In 25 or beyond, we will be able to mitigate that through supply chain moves or actions. At the same time, we likely, if that occurs, we likely have to do some, you know, surgical price actions as well as another lever to address.

Donald Allan: Other parts of Asia, some are being built or have been built in the Americas and some in eastern Europe, and we will continue to build upon that.

Donald Allan: Try to if something changes with tariffs in 25 or beyond we will be able to mitigate that through supply chain moves our actions at the same time, we likely if that occurs we would likely have to do some.

Donald Allan: Surgical price actions as well.

Donald Allan: So we continue to build on the plans of what we could do or would do as we head into 25. We started that planning about three months ago, and we will continue to work on that. The good news is it's really embedded more into the supply chain transformation program than it is some separate activity that we're looking at. Thank you. Our next question comes from the line of Eric Bosshard with Cleveland Research. Your line is now open. Thanks.

Donald Allan: Another lever to address so.

Eric Bosshard: Continuing to build on the plans of what we could do or would do.

Eric Bosshard: As we head into 'twenty five we've started that planning about three months ago, and we will continue to work on that.

Eric Bosshard: The good news is it's really embedded more into the supply chain transformation program than it is some separate activity that we're looking at.

Eric Bosshard: Thank you. Our next question comes from the line of Eric Bosshard with Cleveland Research. Your line is now open.

Eric Bosshard: Thank you. Our next question comes from the line of Eric Bouchard with Cleveland Research. Your line is now open.

Eric Bosshard: Thanks.

Eric Bosshard: A follow up if I could hand tools down 7% I'm just curious.

Eric Bosshard: A little bit more color there and then also as you think about where retail inventories are now in the path forward what retailers mindset is about inventories and what the Oregon relative to what they are solid.

Christopher John Nelson: So I'll start with the second question first. And I, you know, as far as our inventories and the retail channel are concerned, we're essentially at historical levels, if not in some areas a little bit below. So we're seeing a pretty good direct read on the correlation between what we see in POS and what we see going in from sales. And I think that's a good position to be in.

Eric Bosshard: So I'll start with the second question first.

Christopher John Nelson: As far as our our inventories in the retail channel we're at.

Christopher John Nelson: Essentially at historical levels, if not in some areas a little bit below.

Christopher John Nelson: So we're seeing a pretty good direct read on the correlation between what we see in Pos and what we see going from sales and I think that's a good position to be in.

Christopher John Nelson: And like we said, we're relatively on plan for what we're seeing from POS. As far as hand tools go, I would say that there's nothing that's a tremendous outlier there. I would say that there are some parts that are in the hand tools and storage business that are, to the earlier comments, some larger ticket buys, and those have been more sensitive in the short term to some of the consumer environment. But overall, we feel good about where that business is tracking, and good about the POS as well. And, as a result, the inventory levels are similar to what we've seen across the business.

Christopher John Nelson: We're.

Christopher John Nelson: Like we said we're on relatively on plan for what we're seeing for Pos as far as hand tools I would say that there's nothing nothing thats a tremendous outlier there I wouldn't say that there are some parts that are in the hand tools <unk> storage business that are that are to the earlier comments from larger ticket buys and those have been more.

Christopher John Nelson: Sensitive in the short term to some of some of the kind of the consumer environment, but overall, we feel good about where that business is tracking good about the Pos as well.

Christopher John Nelson: And as well as the inventory levels are similar to what we've seen across the business.

Dennis Lange: Thank you. I would now like to hand the conference back over to Dennis Lange for his closing remarks.

Christopher John Nelson: Thank you I would now like to hand, the conference back over to Dennis Lange for closing remarks.

Dennis Lange: Thanks, Shannon. We'd like to thank everyone again for their time and participation on the call. Obviously, just please contact me if you have any further questions. Thank you.

Dennis Lange: Thanks, Shannon wed like to thank everyone again for their time and participation on the call. Obviously, please contact me if you have any further questions. Thank you.

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Operator: This concludes today's conference call. Thank you for your participation you may now disconnect.

Operator: Okay.

Operator: [music].

Operator: [music].

Operator: Okay.

Operator: Yes.

Operator: [music].

Operator: Okay.

Operator: Okay.

Operator: [music].

Operator: Yes.

Operator: [music].

Operator: Okay.

Operator: [music].

Operator: Okay.

Operator: Yeah.

Operator: [music].

Operator: Okay.

Operator: Yes.

Operator: Sure.

Operator: Okay.

Operator: Okay.

Operator: Okay.

Operator: Yes.