ITW
#I wouldn't say, <UNK>, it's necessarily a slowdown, I think again, if you go back and look service in North America was up 4% in Q3 last year, we're up 2% this year.
That's pretty solid.
But we've also talked about the fact that we think there is more potential here for organic growth, that's probably closer to what we're seeing at least on the equipment side.
No, that's not it at all.
I think if you go back and look, I don't we've put up 4% to 5% in service since 2014.
But I think that going forward, that's not an unrealistic expectation.
Service is stable here.
We had, we talked about this last quarter also, a little bit of PLS in some parts of the business, but overall in this low single digit is a pretty good way to think about the business on a go-forward basis from a growth standpoint.
And then obviously as you know, this is a very profitable part of the business, more profitable than the equipment side.
Yes, that's exactly it.
So it's really a product mix issue.
So 25.5% in automotive, pretty solid margins.
And you're right to point out that the volume leverage really here is the reason why it didn't show up is a product mix issue.
It might be.
It's hard to forecast at that level of detail, but what is going to be with us on a go-forward basis are these core margins in the mid 20%s.
Yes, I think rather than go through the individual pieces here, <UNK>, I'd rather wait until we can give you the complete picture also and include in that the guidance here for next year.
What I will tell you is that the business is actually performing a little bit better than what we thought from an operational standpoint.
The operating margins are right where we thought they were going to be, there were no surprises from a purchase accounting standpoint, and like we said there was no EPS impact here in the quarter.
Which in fact means that the charges basically ate up what the business earned for the next couple of quarters.
That's exactly right.
So that's the way to think about it.
And we've talked about this, <UNK>, when we give you guidance for 2017, we'll give you a complete picture.
Yes, I think automotive aftermarket was pretty stable here again, flat to slightly positive.
The decline is really tied to the maintenance, the industrial MRO side of that business.
So some of the industrial lubricants and consistent with what we've seen in prior quarters, that is still somewhat challenged, the industrial MRO side.
Good morning.
I think Europe was pretty good this quarter, up 2%, pretty steady and really nothing unusual as we went through the quarter or nothing really material to point out on a country level.
So pretty steady state, feel pretty good about the demand levels obviously up 2% and feel good about it going into Q4.
Not at this point.
No, overall UK, as you know, our UK business overall not talking construction is about 4% of sales, and it was actually positive in the quarter.
Like we talked about before, the impact right now what we're seeing is on the currency side really on the translation side of things, but we haven't seen anything other than that that's worth mentioning.
We're producing and selling in the UK.
The impact is really on the translation side, so we are ---+ we have run profitable businesses in the UK.
And when we bring those, we translate those British pound earnings into US dollars, there's a headwind.
So that's really what we are talking about.
Yes, what we are talking about is product mix I think in North America.
And so depending ---+ our content per vehicle might be slightly different by product line, and that's really what we are talking about.
Yes, that's correct, yes.
Well I think what I would prefer to do is wait till we go through this planning cycle that we just talked about.
We will give you a good update on the end of December.
But I think before we do any speculating, we'll let our businesses run their plans for 2017 through and then we'll have a better picture there.
Clearly at some point, it will start winding down.
I would also argue on the other side that we have ---+ this is activity that is very healthy from the standpoint of profitability and focus.
So to the extent that there's continued activity there, we're going to continue to support it until we get all the stuff out of here that we think needs to go so we can really focus on the highly profitable parts of our business that we think have long-term growth potential.
So we're not ---+ so we'll see what happens.
I would expect that certainly things start to at least stabilize there, if not start to slow down.
But until we go through the actual details of what our businesses have in mind for next year, it's hard to comment.
Yes, pricing is not a big margin driver for us here, as really the big margin driver is and has been I think <UNK> mentioned 12 quarters in a row of the enterprise initiatives, and that's really what's driving the margin expansion.
And the incremental margins, if you go back and look historically, that's where the Company has been for a long time in that 30% to 35% range.
And really on the pricing side, all we're trying to do is to offset some material cost inflation, but it's not the key driver of our growth or of our margin expansion.
No, there's really nothing interesting to report.
I think I said, all we're trying to do is offset to the extent that there is material cost inflation, we're trying to offset that with price.
We've been in this 10 to 20 basis points range for a number of quarters here, actually longer than that, and we expect it to stay in that range on a go-forward basis.
We're not seeing any material cost inflation at this point.
And when we do, we will react, like I said, and do our best in the divisions to offset that with efficiency and with price.
I think on the free cash flow, like I said, on a year-to-date basis, we're exactly where we were last year.
So there is ---+ things can move around a little bit on a quarterly basis.
For example, our CapEx number is up a little bit this quarter, but year to date it's exactly in line with last year and then maybe some larger payments that go out one quarter versus another.
We fully expect we'll be at above 100% for the year, which would imply a strong Q4 which seasonally that's what we usually do.
So other than that, feel very good about the free cash flow performance.
And on the construction side, I'd just add similar to what we said earlier, demand is pretty steady state.
There's some comp issues that we're dealing with, but we feel good about the using current run rates to model the fourth quarter and we're not expecting any big changes from where we are right now.
Very good.
Thank you very much and have a great day.
