SWK
#This is <UNK>.
I'll take that one.
As <UNK> mentioned, we did have a large order in the second quarter associated with equipment, which does happen occasionally in this business.
In particular, in the Far East, we do get an occasional situation, where there's a large pipeline being constructed, and we're just primarily selling equipment, and then training them on how to use the equipment effectively in the construction process.
Those things range from occurrence, from anywhere, from six to 12 months on occasion they happen, but they are very sporadic and we don't tend to plan for those types of sales.
And it just happened to occur in the month of June, which we were all very pleased to see.
As far as our outlook of oil and gas, I mean our outlook continues to be similar to what we've been saying for the last almost year now, where the level of activity of construction of pipeline is really- onshore is really non-existent at this stage.
There continues to be a lot of activity, within the industry, about a potential kind of ramp up of activity in 2016.
We have not seen specific orders or quotes or things that are of that nature at this stage, that would give us a high level of confidence.
But then we've also seen a downturn lately in oil prices as well.
So there's still volatility in this space, but ultimately we do feel that we are going to see some type of ramp up in activity in the next 12 to 18 months of pipeline construction, because there's a great deal of pent-up volume that needs to be dealt in that particular space.
We're also seeing, on the oil and gas onshore ---+ it's the onshore business that looks like it might get some legs next year, because we're doing a lot of prep work with specifications right now.
Our concern is, and the reason <UNK> is very circumspect about it, is because there's a good chance that these types of projects will get delayed if the oil prices don't recover.
And again, the gas prices are also a factor here, because the onshore market is about 70% gas.
The offshore market, which is another big piece of our business, doesn't look to be too favorable any time soon.
So it's kind of a mixed bag, and we expect probably double-digit declines in the oil and gas for the next couple of quarters, and then we'll see what happens when the comps get easier, and the activity picks up.
The other thing I would want to, just go back to in the first part of the question, just to make sure people don't get a view that this order was a huge impact for the second quarter.
The impact at margin, or at profit for EPS, was less than $0.02 of EPS in the quarter.
Thank you.
Well, when you say which market.
I mean, generally ---+
Yes, geographically, okay.
So ---+ we're generally outpacing light vehicle production wherever we're operating geographically.
I will say, that I think the North America and European markets were a little stronger than the Asian markets in this particular quarter, but it's all over the map in terms of quarter to quarter.
So I would say that our growth is less market related, and more just penetration of platform, auto platforms as we go here.
But the overall production was about flat for the global light vehicle, so it wasn't a particularly strong quarter at all for the market.
And our long term view of that business, in answer to the second half of your question, is we think it's a business that fits into our long term organic growth vision of 4% to 6%.
And it's demonstrated a good track record to be within that range, and as it adopts more of the commercial excellence activities, and innovation activities of SFS2.0, we think that will only assist in that ability to continue that on a long term basis.
I'll make it very clear.
It was $7 million of revenue, and $3.5 million of operating margin.
Which translates to less than $0.02 a share, due to the large, relatively large for oil and gas.
It's less than a $300 million business.
So when you get a $7 million order shipped in a quarter, that's large on a very small base.
On our $2 billion-plus Industrial segment base or $1.7 billion engineered fastening base, however you want to look at it, but within oil and gas, it was large, within the segment it was tiny.
And just for analytical purposes, we understand why you're trying to get to a run rate.
But please don't think about it as a one-time item because it's part of the ongoing piece.
As we said many times as it relates to oil and gas, it's one of our few businesses ---+ infrastructure in general, and oil and gas in particular, where it's a long cycle business with large lumpy orders, unlike our Global Tools & Storage business ---+ and even the Security business the way we install and recognize revenue, you get large orders, and depending on when they're fulfilled in a quarter has tremendous variation.
So it's one of our few businesses where quarter to quarter, the numbers can vary dramatically due simply to timing.
And as I said earlier, in answer to the first question, we've seen this ---+ roughly every six to nine months we have some type of large order like this.
So it's not a one-time item.
It's maybe one-time in a specific quarter.
But when you look at a year, you can have one to two of these, and even occasionally three that happen every year.
Well, the markets have generally been good.
In terms of Mac tools end markets, as you looked at some of the numbers that come out, they've been very good.
The statistics very recently published, in the last 10 years in the US, which is overwhelmingly where Mac tools is, of course, car ownership, the average age of cars on the road, has gone from slightly under 9 to slightly over 11 years, which means cars are being built better.
But it also means they're on the road longer, so, there is a generally healthy environment for automotive repair and automotive after market.
That's clearly helping Mac.
But what's also helping Mac is just the benefit of it being part of our Global Tools & Storage business, with a great product development, product introduction, good sales rhythms, good forecasting.
A lot of the newer cars, of course, require a lot of diagnostics.
It's something where we're relatively underdeveloped, compared to some of the competition.
But in general, <UNK>, those markets are healthy, and we've benefited from that, but we clearly believe we are growing faster than those end markets which implies share gain, of course.
And then on the Industrial side, clearly, there is a big differentiation within the Industrial markets by segment, and so the oil and gas issues within the Industrial marketplace are weighing on growth.
You've got Ag weighing on growth and mining as well, and hydraulics, so mixed bag in Industrial.
I'd say the MRO channel is a little weaker than it has been, maybe inventories are a little higher.
We aren't sure about that, but it feels that way.
We don't have great data on the MRO channel.
It seem like there might ---+ won't call it a correction, but sort of an inventory build may be going on there.
So in general, the Industrial markets are a little weaker than they have been over the last year or so.
I'll take that, this is <UNK>.
I think the ---+ if I look at our organic growth, it was about 2 points better in the second quarter, versus our beginning of the quarter expectation.
And most of that was driven as you might imagine in Tools & Storage, and a little bit in engineered fastening.
At EPS level, what, how does it play out [$0.20] versus [$0.15].
The way, my view would be, Security was about $0.03 to $0.05 off expectation in the second quarter, and you can do the math the rest of the way.
But clearly, Tools & Storage helped performance.
If you ---+ depending on how you look at our outperformance as a Company, we look at vast majority of that $0.10 as operational outperformance, and a lot of that being driven by Tools & Storage.
There is some pluses and minuses below operating margin, but the bulk of that nets to zero.
And really what you're looking at is a $0.05 to $0.08 operational outperformance, that if you factor that $0.03 to $0.05 in, then Tools & Storage was somewhere around $0.08 to $0.10, a $0.12 outperformance.
Tools & Storage, plus Industrial.
Plus Industrial, thank you, <UNK>.
This is <UNK>.
I'll take that one.
We actually, when you look at the second quarter, we saw a pretty balanced level of growth across the quarter, especially in tools, actually in all our business.
If you look at all our businesses, you saw relatively healthy growth in all our businesses in each one of the months across the quarter.
And so, we didn't see an accelerating trend or a decelerating trend in the month of June.
Our guidance is reflective, obviously, we feel good with what we've experienced in the first half of the year and the momentum as we exited the first half of the year, which allowed us to increase our organic growth assumption from 5% to 6%.
So we're clearly seeing trends that make us feel at least reasonably good about the markets.
Now we will be the first ones to admit there's a lot of conflicting data and information out there, across the construction and industrial space, as to what might happen in the back half of the year.
And as a result we've evaluated that, combined with a very healthy organic growth performance in the first half, and think we put forth a very balanced view of the full year.
Yes, and just to add briefly to that, I think as <UNK> pointed out in his piece of the presentation, our largest business obviously, is GT&S, Global Tools & Storage, where we have the best data.
Inventories are at or slightly below normal levels.
That bodes well for the future.
That's partially offset by relatively weak industrial markets, compared to what we would like to see.
But simply said, a very smooth quarter, and a very good position in terms of inventories at the customer level, which has led to our guiding the second half of the year the way we have, versus importantly, if you look at the details, some very very steep and difficult comps.
So keep that in mind as you look forward.
So as far as Europe goes as <UNK> mentioned at a nice level of detail, the business continues to progress forward.
It\u010f\u017c\u02dds turned the corner in the sense of organic growth over the last two or three quarters.
We're starting to demonstrate a modest level of 3% in the second quarter, which we were pleased with.
The profitability continues to improve.
It's still in the range of mid to high single-digits.
And as it exits this year, it will certainly be at the high single-digit level as it continues to progress in the back half of the year through its transformation.
So we really- and that's really what we've communicated in the past.
So it's consistently performing with our expectations.
As far as our view, as to our decision associated with the fit in the portfolio, it will be a combination of factors to evaluate.
And certainly, the one that probably drives the most ---+ the largest part of the decision will be valuation.
As the valuation improves, based on a certain outcome that we make related to that decision, and ultimately, we believe we're here to drive shareholder value over the long term.
And if we think ---+ whatever decision we make is going to achieve that result, that will be the big driver of the decision.
Certainly, evaluating how it's performing is a factor, but I don't think it's the primary factor.
Yes, this is <UNK>.
Let me just add to that.
I certainly agree with everything <UNK> said, but as we've had a lot of focus again, on the 15% of our business that's performing slightly below our line average specifically, I think <UNK> pointed out European Security and North American convergent.
We're focused on improving the performance, but I think it's fairly important just to note that while it's ---+ that subsegment of that segment are performing at a level slightly below our OM average, they're performing right in the middle of the fairway, relative to their peers.
This is not a broken business.
It's a business that's performing not as well as it has in the past.
There is some industry trends, as well as some internal executional issues that <UNK> spoke about I think in great detail.
I guess, I just, we need to be on record, this is not a broken business.
It's a good business.
It\u010f\u017c\u02dds been better and it will be better going forward, and our assessment of it will be based on both the trends.
And as <UNK> said, we're here to create shareholder value.
That's ultimately going to be driver this time next year, as we zero in on its fit in our portfolio relative to elsewhere.
Amanda, thanks.
We'd like to thank everyone again for calling in this morning, and for your participation on the call.
Obviously, please contact me, if you have any further questions.
Thank you.
