ITW
#Yes, <UNK> so price/cost like I said was 20 basis points for the quarter, right in line with our planning assumption, right in line with what we saw last year.
And that remains our assumption for the rest of the year.
Nothing unusual again this quarter by segment, everything is on track.
So that's the color I can give you.
The payback is on these projects is typically less than a year.
This one is actually quite a bit better than that.
It's primarily focused on North America.
And we do disclose, the last page in the press release lays out restructuring by segment.
And you can see the most significant one was welding this quarter.
Like I said, there will be another series of restructuring here in welding in Q2, and then we will update you as we go through the year.
This is actually all cash.
But not significant.
I mean you look at how much cash we generate this does not ---+ don't think of it as having an impact on our capital allocation strategy.
No, I wouldn't say there was any pull forward in demand.
I mean the reason for the sequential decline is essentially all welding.
Typically in Q1 versus Q4 like we said, we would expect our welding business to be up 3%, and it was actually down 3%.
Test and measurement, which is the other segment in here, was essentially stable from Q4 to Q1.
So it's all welding driven, <UNK>.
Well I think, as <UNK> said earlier, other than welding everything is favorable and feels pretty firm as we start the year here.
In welding we continue to see the impact from energy, oil and gas, which accounts for the decline on the international side.
General fabrication is still challenged, especially going into mining, agriculture, heavy equipment.
So the demand environment in terms of capital equipment going into the industrial economy, we would describe as still sluggish.
And as <UNK> said, we have not seen any sign yet that ---+ of improvement at this point.
That's purely a comparison.
Current run rate.
So current run rates, if you run those out and you look at on a year-over-year basis, that's when you get 9% decline organic in Q1, you'll get another decline in Q2, and then stable to up in the second half, a bit flat to up in the back half of the year.
At current run rates; that can obviously change, but at current run rates given the comparisons year over year that's what we would expect to see.
Yes, <UNK>, we feel very good about the first quarter, particularly if you look at North America, up 5% on the equipment side, up 4% service.
From a product line standpoint, refrigeration and cooking are the big drivers this quarter.
And then by end market it's really healthcare and lodging continued to be solid for us.
But really across the board we feel very good about the outlook for the year.
We have a number of new products coming in here in Q2, and so we would expect that business to be up similar to last year in that 3% to 4% range as we talked about on the last call.
Yes, what I would offer on polymers and fluids is it's basically an MRO business, two-thirds of it, the other one-third is the automotive aftermarket piece.
The automotive aftermarket side of it had a pretty solid quarter, up 2%.
I think largely how I would characterize the overall growth performance during the quarter is they've gotten to the end of a pretty extensive PLS process and are starting to now ---+ the pipeline is much more stable than its been over the last eight quarters, and they are starting to now turn their attention more to growth.
And so very pleased to see positive overall organic out of that segment in the quarter.
Salary increases.
I'd say very consistent.
<UNK>, you're seeing a little bit of seasonality in Q1, but if you look at the first quarter relative to the first quarter last year, really solid working capital performance and nothing unusual.
And just look at the free cash flow number, 90% the average is about ---+ the last few years has been 65%.
So really strong cash flow performance again in the first quarter.
And keep in mind that we typically ramp up from here.
So from a conversion standpoint, this is typically our lowest quarter and then we will go up sequentially as we go through the year; just typical seasonality.
So nothing unusual in terms of working capital; continued strong performance.
Well, what I said was that incremental profit from every dollar of incremental ---+ dollar of organic revenue was the highest value opportunity that we had and really what we were focused on leveraging to its full potential, not the percentage.
We've talked about incremental margin, so our target is roughly 35% going forward in terms of conversion to the bottom line from every incremental dollar of organic growth.
That will vary up or down a little bit depending on the segment.
And if anything I would expect we would comfortably do that or be even a little bit better given the elevated levels of profitability that we're now operating at.
What I'd say is 15.5% operating margin includes, as you point out, the 420 basis points of non-cash amortization expense.
So you add that back, it's about 20%, it's still on the lower end inside of ITW.
We expect all of our businesses to continue to improve margins.
Some will do so more than others, and I would probably put test and measurement in that category of more margin potential than some of the other segments.
So we expect that segment to continue to improve on the margin side including in 2016.
As these amortization charges also bleed off over time.
Amortization charges as well as the enterprise initiatives.
Underlining operating performance improvement.
Exactly.
Like I said, I think we expect all of our segments to improve including food equipment.
Certainly good progress, but also more to come.
And I think we'll give you ---+ if you look at the schedule on the back of the press release, you can see the various components.
And so the margin expansion now is half is operating leverage and the other half approximately is the enterprise initiatives.
You're talking about within food equipment.
Within food equipment specifically, yes.
We expect that to ---+ we would expect that business to continue to improve.
We're not going to parse it much more than what we did in the prepared remarks and what you can see on page 6.
And the outlook for the rest of the year in Asia-Pacific is growth rates very similar to what we saw here in Q1.
Certainly encouraged by China automotive of 6% as well as continued progress in construction products, which as you may know is primarily Australia based.
So that's how we'd described that.
Europe for the year we expect very similar again to Q1, so up in the very low single digits based on current run rates.
Well on the first question, that growth target we talked about does not include the acquisition.
That's core organic and that's our expectation both for 2016 and our longer-term growth target for the auto OEM segment.
With respect to the balance of the year, <UNK> talked about it before.
The currency is there is no win in trying to forecast where currency goes.
So we've always used current run rates on currency.
We use obviously at the quarterly level they move around, so we're not going to forward forecast where currency is going to be.
<UNK>'s comment was that if everything stayed exactly where it was ---+ two comments that I'll repeat.
One is that we're impacted by more than just the euro; Aussie dollar, Canadian dollar also reasonably material factors as is the pound.
And then the other part of that is if everything stayed exactly where it is, I don't know if you're marking the market today, <UNK>, but around right now that there's probably a few pennies of upside on a full-year basis.
That's exactly right.
Who knows if that will happen.
And it may go the other ---+ may be a headwind.
Well, I think generally speaking we're feeling like the first quarter was pretty solid, pretty firm.
We've talked about this before.
We are basically taking current run rates and projecting those through the year, and that's how we derive our growth and earnings forecast for the year.
So if things stay where they are today, we are in pretty solid shape.
Good morning.
Well the drivers would be a variance from current run rates, either better or worse than what we see today.
So that would be the primary driver.
I think on the things that are within our own control in terms of the so-called self-help enterprise initiatives, we feel very good about continuing to execute the way we have for the last ---+ since we embarked on the enterprise strategy.
So I think those are on the margin side very solid.
The delta is the demand side.
Right.
I think ---+ here is what I'd say.
I'd say one of the real strengths of the Company, and we talked about this, is this really well balanced, diversified, high quality portfolio of businesses.
And so if certain things are better than run rates in one part of the Company, it will offset in other [pre-existing].
So I wouldn't ---+ I can't go down the path of by segment how we think about this.
Well, I think like we said earlier, welding did decelerate in Q1 versus Q4.
And when you look at the year-over-year decline, more than half of that organic decline is oil and gas.
So that is the main driver.
And like we said earlier, we haven't seen any signs that things are getting better there yet.
Those are fairly stable.
The decline is primarily on the oil and gas side.
Well, I'm not sure how I'd answer it other than what I said earlier in my prepared remarks and in response to <UNK>'s question.
Price/cost was favorable 20 points, no change, and we expect it to remain at 20 basis points as we go through the year.
And if that changes we'll let you know on the next earnings call.
But we don't expect it to.
If you look at our historical performance and what I just said, that would be the conclusion, yes.
Well the base cases take the order rates we are getting today on a daily basis and project them through the end of the year.
The comps get easier, as <UNK> said, but we are projecting no acceleration or further deceleration from here.
And we've talked about that before, we are a fast reactor.
We're not a predictor of the future.
So embedded in both our organic numbers and our EPS forecast is an assumption that demand stays exactly where it is today across all seven segments projected out through the rest of the year.
Maybe.
Close.
Great.
And that takes us to the top of the hour.
We appreciate everybody's time this morning, and have an outstanding day.
