Thank you for holding. All parties will be on a listen-only mode until the question and answer session of today's conference. [Operator Instructions] The conference is being recorded. And, I’d now like to turn the call over to Mr. Aaron Hoffman, the Vice President of Investor Relations.

Thanks very much. And good morning and welcome to ITW’s First Quarter 2015 Conference Call. Joining me this morning are our CEO, Scott Santi and our CFO Michael Larsen. During today’s call, we will discuss our first quarter financial results and update you on our earnings forecast. Before we get to the results let me remind you that this presentation contains our financial forecast for the 2015 second quarter and full year as well as other forward-looking statements identified on the slide. We refer you to the company’s 2014 Form 10-K for more details about important risks that could cause actual results to differ materially from our expectations. Also this presentation uses certain non-GAAP measures; a reconciliation of the non-GAAP measures to the most comparable GAAP measures is contained in the press release. So with that, I will turn at this time over to Scott.

Thanks, Aaron and good morning. Overall, a solid start to the year for the company as we delivered earnings per share at $1.21, an increase of 20% over the last year and $0.04 higher than the midpoint of our forecast. And that was despite an additional $0.03 of currency headwind versus where rates were when we issued our Q1 guidance on January 27. In the quarter we were able to deliver stronger performance despite a challenging macro environment. We continued to focus on executing and the things that are within our control and our business teams around the world continuing to do a very good job of doing just that, as evidenced by the 220 basis point operating margin improvement that they delivered in the quarter. Q1 operating margin of 20.9% matched the all-time record high for the company set in Q3 of last year. Enterprise strategy initiatives, good tactical cost management and favourable mix as a result of our product line simplification program drove the bulk of the margin increase. Organic revenue growth for the quarter was 2% gross, 1% net including the impact of the product line simplification. This was below our 2% to 3% forecast as weaker capital spending generally and the oil and gas sector specifically resulted in modest year-on-year revenue declines in our welding test and measurement in electronics and specialty product segments. Despite the current macro challenges we are continuing to invest aggressively in support of our strategy to position ITW to deliver solid organic growth with world class margins and returns on capital. In the quarter we invested more than $150 million in capital expenditures restructuring and innovation programs. As you likely saw on our press release, we are taking our full year EPS forecast down by $0.15 to reflect foreign exchange rates. At the new midpoint of 510, full year EPS growth is 9% despite a translation impact of $0.40 negative. On a constant currency basis 15 EPS gross would be 18%; so overall a strong start for the year in a challenging environment. ITW is well positioned for another year of progress in 2015 and we remain solidly on track. The meter exceed our 2017 performance goals. I'll now turn the call over to Michael.

Thank you, Scott and good morning. Starting with the financial summary on page 4 and Scott mentioned first quarter EPS was a $1.21, an increase of 20% versus prior year and $0.04 above the midpoint of our guidance. As expected Enterprise initiatives drove 100 basis points of margin expansion, which contributed to first quarter operating margin of 20.9% and operating income of 697 million. Also, good progress and after tax return on invested capital with an improvement of 210 basis points to 19.3%. Revenues were 3.3 billion, up 1% organically after the expected 1% impact from product line simplification. Foreign currency translation reduced revenues by 7% resulting in total revenues declining 6%. Pre-operating cash flow was strong at 359 million, more than a $100 million higher than last year. Also, during the quarter we were able to efficiently act as about 1.1 billion of cash outside of the U.S., which helped funding buyback of $1.6 billion. Overall; solid execution in a more challenging environment and stronger margin performance offset currency and lower revenues in some of our equipment businesses. Turning to revenue by geography; organic revenue was up 1% with growth in all major geographies except South America, which as a reminder represents less than 3% of our sales. North America was at 1% as a result of strengthened food equipment of 7% and automotive OEM of 3%. Welding and Test & Measurement and Electronics were flat, while the specialty product was down 7%. International growth was up 1%. Q1 had a tough comparison. You may recall that last year international was up 6% in the first quarter. Europe was up 1% this quarter driven by automotive OEM up 13% partially offset by declines in welding, polymers and fluids and specialty products. Asia-Pacific was up 1% from strength in automotive…

Thanks Michael. We’ll now open up the call to your questions. Please be brief to allow more people the opportunity to ask a question and remember our policy of one question and one follow up question.

[Operator Instructions]. The first question is from John Inch from Deutsche Bank.

I just want to ask about -- kind of do a fine point on the guide. You basically sort of suggesting that the bulk of the reduction is currency and if you look at the way this sort of plays out that would proportionately hit mostly in the second quarter, but you did take organic growth for the year down and so my question is really if you could parse between what you’re seeing in terms of end markets and the context of reducing guidance second quarter versus the rest of year. Like for instance, why doesn’t the rest of the year come down further if you’re seeing systematic weakness as many companies are, so I’m just trying to understand the moving parts here?

Yes so John let me try to answer that, so the way we’ve modeled the rest of the year is based on current run-rates. And so based on what we’re seeing in terms of revenues and orders in our businesses today. So we’re not assuming that things improve from here or deteriorate from where we are today. The other point around the guide, the adjustment that we’ve made is $0.15 reduction just for currency. Here we are considering the lower organic growth rate but given the performance in the first quarter and the positive momentum on margins as well as a slight benefit from the lower share count we’re projecting that we’ll be able to offset those lower revenues with better margins, we’re guiding to 21% plus operating margin today which is an improvement from where we were in January and we’re getting a little bit of benefit from the accelerated share repurchase program in the first quarter.

Okay so better execution really is offsetting the lower organic I think that’s what you’re --

Yes.

I think that's more or less what you’re suggesting.

That’s correct.

And then Michael, the share repo for the year had been tagged last quarter to 1.5 billion you actually did 1.6 billion this quarter. So the question is sort of like how are you thinking about share repurchase for the rest of the year? Are you going to be sort of front loading that and then seeing how the rest of the year plays out or would do you think consider raising some financial leverage? I’m just curious, because you obviously want to keep powder dry and I’m just curious how you’re thinking about share repo particularly against the backdrop of what clearly has been some economic softening and that just may present more favorable entry points sort of purchase your shares in future quarters that’s all?

Yes so John we’re in line with past factors, we’re not going to comment specifically on the timing of these share repurchases, but we’ve said before that our goal is to remain opportunistic as we go forward. I’d say in the first quarter the ability to access the foreign cash to the tune of about 1.1 billion is what helped fund the 1.6 billion of repurchase in the quarter which was essentially the guide that we’d given for the year. We expect to do approximately 2 billion for the year and the balance we’ll be opportunistic and we do not expect to increase leverage from here, certainly not to achieve the $2 billion. But as you know we have a strong balance sheet we generate a lot of cash with the ITW business model and given the diversity of our businesses, and so certainly we are open. But given what we’re seeing today we’re not expecting to increase our target leverage ratio beyond the 2.2 to 2.3 which is where we are right now. And we would like to be more opportunistic as we go forward for the balance of the year on the share repurchases.

Sorry Michael just as a clarification you took your repo for the year from 1.5 to 2. You’re sort of suggesting based on that was driven by the success [audio-gap] to repatriate 1.1 billion, does that imply that you had thought you’re going to repatriate 600 but you’re able to do 500 or excuse me but you’re able to do 1.1 billion and that’s the difference or is there something else?

No that’s about right John, that’s about right.

And did you pay tax on that repatriation?

So our tax rate for the quarter at 31% as well as for the year we’re still guiding to 30% to 31%, so we were able to do this in an efficient manner from a tax standpoint.

Your next question is from Mig Dobre from Robert Baird.

Looking maybe for a little more color on your CapEx comments I mean we know that mining and now there is energy CapEx is under a lot of pressure. But how do you think about CapEx trends more broadly outside of these three specific end markets?

I think we saw certainly soften up a bit in the quarter. I don't think it was anything overly dramatic but if you look at test to measurement and specialty in particular I think welding was largely impacted by oil and gas, there was other two segments. What I would say is in general we saw customers become a little bit more tentative about moving forward on capital expenditures again nothing overly dramatic, nothing that we can't we don't think we can power through, we go through the air, but right now the environment is certainly little choppy than it was as we ended the year.

Is it fair to say that you are starting to see hesitancy beyond these 3 end markets?

I think actually surely not in for the equipment. So I think it's more for the industrial CapEx the food equipment business is much more tied to the consumer end the economy. They continue they saw there was else in the quarter continue to accelerate. There are also reaching a place from the stand point of their work through the enterprise initiative where they are how we focused on driving organic and I think you are seeing some of that progress show up. So I think we're again talking about test the measurement specialty in terms of more generalized CapEx spending softness and welding in particular which related to oil and gas.

Alright, that's great and sticking with food equipment here, as I understood from your comments you hint that potentially some share gains in North America any color their and really kind of what drove very good results their this quarter will be helpful.

We didn't hint in the share gains but sales were up 7% in the quarter in North America through a combination of as I said some continued 7% -- with the equipment are 10. Equipment up 10. overall up 7, thank you Michael and combination of continued mid product pipeline things in the market as well as a reaching the position they said earlier where they are much there in a position that really focus on driving organic.

The next question is from Andy Casey of Wells Fargo Securities.

On the industrial CapEx comments you described what you saw in North America during the quarter outside of the oil & gas sector. Specifically was there any improvement through the quarter or did it just remain choppy?

I think in general that was pretty flat through the quarter. Actually, no better or no worse in terms of January, February, or March. Right, I think this quarter was pretty—the challenges we are talking about on the capital equipment side in oil & gas showed up fairly early in the quarter and we were able to take some cost actions here as we prepare for not just the quarter but for the rest of year. But you can't certainly the price that didn't accelerate in the quarter and didn't improve in the meaningful way from the run rate that we saw earlier on.

Okay, thank you Michael and then is the same true of Europe and then let in somebody else ask.

You broke up a little bit. But I think this we saw the same trends essentially in Europe. Europe was a little bit weaker on the equipment side down slightly. But I think again the comps were pretty challenging. Europe was up 5% in the first quarter last year. So would be too much into that at this time. But also Europe, Asia-Pacific was really consistent as we went through the quarter.

Thank you very much.

Sure.

Next question is from David Raso from ISI Research.

Hi, good morning. On the second quarter question of the margin and also sales, on the sales it looks that the organic growth you are expecting to accelerate a little bit. I'm just trying to figure out, is that simply because comps get a little bit easier or is there something you are saying to suggest the organic could accelerate a bit?

We are sequentially, we historically we typically see an increase through the seasonality from Q1 to Q2. If you look year-over-year, we are guiding to 1% to 2% which is a little bit higher than what we saw here in the first quarter, but not significantly higher. Maybe the other way that was kind of what you’re trying to get at is if you look at our EPS for the year this positions us at the first half earnings per share at about 48% of the year and 52% in the back end of the year so not a back-end loaded plan and very consistent with what we’ve been able to deliver historically. So again we’re not counting on acceleration here in terms of organic growth other than what we typically see, we’d love to see one. We’d love to take one, we’d certainly take it, we’re ready if it comes, but typically Q2 represents an improvement from Q1 on the top-line.

Yes I was referring more to year-over-year and I know it’s modest, but I was just curious…

And what I would add to that is go back to what Michael said before the comps move around, so we were plus 5 last year in Q1 and plus 1 in Q2.

Yes I thought that as far as probably little more comp than it is you’re not seeing the acceleration on organic. And then last one on the profitability, the last couple of quarters you have posted negative sales year-over-year but you’re able to grow EBIT year-over-year. The second quarter you’re implying sales down 7.5%, but EBIT does fall at detrimental call it 12%, 13%, 14% which still would be a good performance but just trying to understand what’s the switch from now of sales decline pushes EBIT down when the last two quarters you’re able to grow EBIT on sales decline just if there’s something changed?

Yes no I think nothing fundamentally is really changing other than this is the toughest quarter from a currency standpoint, so if you look at the impact from currency on revenues and margins as well as EPS, Q2 is the bulk of it. When you translate this into earnings per share we have $0.15 of headwind here in the – 10 in the first quarter, 15 in the second quarter and then the balance 15 remaining for the second half of the year for a total of 40, so that’s really what’s driving the outlook here for the second quarter.

Our next question is from Joel Tiss from BMO.

A lot have been answered. I just wondered looks like the margin progress in the second quarter that you imply seems to slow down a little bit and I just wondered if you’re seeing any challenges on really driving the kind of margin improvement going forward just because the low hanging fruit has been harvested already or is it more just currency and comparisons and shaky economy?

Actually on operating margins the things that are within our control I think the teams continue to do a really good job and we expect as we said a 100 basis points from the initiatives in the second quarter which is in line with the first quarter and in line with our expectations for the year if anything on the more technical cost management if you like so responding to what we’re seeing in some of the equipment businesses I think we’re doing a better job maybe on the discretionary cost side but I also think it’s important to point out that we’re not reducing our investment in terms of new products and restructuring and CapEx so we’re continuing to move forward with those investment plans. So it’s really I wouldn’t say that we are performing at any different on the margin side in the second quarter and the balance of the year than we have in the past and certainly if anything the progress we’ve made so far on margin expansion and we showed you the data for the last two years gives us a lot of confidence in our ability to deliver the 23% target for 2017 so continued progress and driven by strong execution by the business teams that are focused on the things that are within our control so….

The next question is from Andrew Kaplowitz from Barclays.

Can you talk about your relatively strong performance in construction you’ve talked about expecting overall low single digit organic growth for the year which you delivered in the quarter but European construction turned positive I think for the first time in the year and U.S. commercial construction seems to be waiting through energy weakness, so can you talk about what you’re seeing in both the U.S. and Europe?

Yes I think overall this has been certainly what we’re seeing over the last let’s say three quarters or four quarters there’s been kind of an up and down track record both geographically and also in terms of residential versus commercial versus remodel and I think first quarter overall was pretty good. We continue to be very focused on margin improvement in construction but I think what I would say and I swore we won’t going to talk about the weather but given some of the weather in North America I think Q1 was actually a pretty solid quarter for our construction business and hopefully it sets up for some continued progress in terms of overall market demand as we move through the year.

And then I would just add a comment on Europe. I mean I think you’re right we did turned positive in the first quarter and a lot of positive momentum in certain regions particularly in the UK where we have a strong position. And then our upstate as you’d expect by regions in some of the other parts of Europe maybe France, but overall good progress on margins as well on the construction side.

And then last quarter you talked about some execution of price cost getting better given lower material and oil cost and price cost did improve by 10 basis points can you talk about your ability to hold price in the current environment and then whether you expect the tailwind from lower raw material cost increase as the year continues?

Yes so I think on price really nothing unusual in terms of our ability to realize price increases as well as announce according to the schedule we’ve set out, so nothing has really changed on the price side. On the potential savings from the lower oil prices on the direct material side and also on the indirect transportation cost I think our business teams are working on it really hard. We saw little bit of benefit here in Q1 particularly in chemicals and resins, but I think it may take a little bit of time to fully play itself out here and so little too early to call what this maybe for the year but we did 20 basis points in the first quarter that’s our assumption for the balance of the year and in line with what we’ve seen over the last three quarters or four quarters or so. So no change, optimistic and we’ll get more on the deflation side, but little too soon to call out a number at this point.

Your next question is from Evelyn Chow from Goldman Sachs.

I guess first of all I just wanted to explore further your thoughts on some of the buybacks. I think I understand why you accelerated the share repurchase in 1Q, but looking for the rest of the year beyond what you have in free cash flow, I don’t understand the toggle around the decision to repatriate versus potentially lever out through buybacks?

Yes so like I said we’re -- given our business model and given our balance sheet and how much cash we generate, the current leverage ratio of about 2.2 times on a gross basis. We enjoy a solid credit rating [indiscernible] A, 2A plus, it gives actually as to credit markets on very favourable terms so we’re very comfortable with our current leverage ratio we’re not looking to go any higher from where we are today. The decision on what to do with available cash flow is we really go through a thought process that’s in line with the capital allocation framework that we’ve discussed on several occasions, so our number one priority which consumes about 25% of our total cash flow is to invest in the business for organic growth and for productivity so this is new products restructuring CapEx and we spend more than $150 million on that in the first quarter. We’re committed to [indiscernible] an attractive dividend and so our dividend yield is competitive or in the 2% range at this point, that’s approximately 25% of our total cash flows and so that leaves the balance which is a pretty big number for external investments and there are still acquisitions which we’d love to do under the right conditions. We’ve talked about what those are in the past and or share repurchases and some combination thereof and the decision is really made based on where we can get the best risk adjusted returns. And if you look at our share repurchase program over a long period of time we generate 12% to 13% returns with very low risk and given the visibility that we have into the performance of the company and given what we think overtime, we’ll be able to deliver in terms of total shareholder returns and so that’s really what drives that decision we committed in December to approximately 1.5 billion and we were able to do that a little bit sooner because we were able to access some of this overseas cash and we'll continue to look at opportunities to do that. We are saying approximately 2 billion for the year and let's see how it plays out and we'll keep you posted on the earnings call as we go forward.

Okay, understood and then I guess just turning to welding for a second. Drilling down into your performance in the quarter down 3% organically, I think you said oil & gas on 30%, it's easiest comp of the year. Could you just provide maybe a little bit more clarity on your thoughts on the trajectory for the segment for the year?

Yes, I mean we don't get too fancy in trying to forecast too much. Like we said we were doing current run rate basis and so if in the first quarter we were down 30% we expect that to continue throughout the year, maybe a little bit better in the second half of the year in terms of the declines on the year-over-year basis. But not really counting on things getting a lot better or deteriorating significantly from here, I think the 30% decrease is pretty significant and maybe a little bit of reaction to the changing environment on the oil & gas side and I might just that following a very strong fourth quarter in that business and so fairly maybe a little bit faster we action than what we expected and a little bit more than maybe expected. But this is our assumption for the rest of the year that this run rate will continue.

[indiscernible] businesses up 3 in the quarter.

Yes, on the commercial side we continue to see solid demand which in North American was enough to offset the decline in oil & gas.

Great, thank you so much guys.

The next question is from Rob Wertheimer from Vertical Research.

Hi, good morning. Just a follow up. I wanted to see if I can understand the oil & gas better. Is international down lot more in North America and if you are giving the North American oil & gas number, isn't international more upstream obviously [0:02:24.7] [prices] down just given the mix is in all that upstream, it's a lot bigger than we talk.

Yes, you are talking about the walling business specifically?

Correct.

The difference in the percentage is largely because most of our international sales in welding and oil & gas related. They are much more balanced portfolio in terms of their market exposure in North America. Participating in the same parts of the industry overall.

Okay. So the mix international would be most mid stream downstream than upstream?

Correct. We just like to higher concentration of our international welding in international welding revenues are tied oil & gas.

Perfect and then if I may, is there any risk of an inventory build of the equipment or what not as the oil gas side of welding was down or is it contained with an oil & gas?

I don't think there is much risk. Our part of let's go to our methodology is for 98% of our loving product portfolio, our customers ordered today and we ship them tomorrow. So in terms of their sort of reaction to the current market environment and the changes that has in terms of the demand back to us, I think it's a pretty efficient system. So I don't think we're seeing much risk around inventory build.

The next question is from Steven Fisher from UBS.

Thanks, good morning. I'm wondering in which segment you expect to see the biggest impact from the increase internal focus on growth this year and even if that the segment that negative, where do you expect the biggest impact to be?

I think we are we talked about this before and lot of the work that we've done over the last 2 years plus is really about positioning ourselves internally totally drive and focus in a very efficient way and organic growth. So in terms of the organizational structure of the company in terms of product line simplification work we're doing right now that's largely about cleaning the clutter out and eliminating the distractions associated with product positions that are either not as differentiated as we want to focus on are ultimately too small to matter. So I would point to automotive and food equipment as the businesses that further down the path. I think the welding business certainly met up some of the current challenges in oil & gas is very well positioned. That's been a business that's growing organically at 9% plus for us since the mid 90's when we got in the business. So certainly we expect that one to start to accelerate as we go forward and then all of the others are at various stages on the path in terms of the [indiscernible] work needed to focus on driving organic. Constructions continue to make progress, build some big restructuring going on in Europe there, polymers and fluids was probably the most fragment that complex structure where I think getting to the back side of what they use to do really get in position to drive organic growth. So I think come a long as we've talked before this is the transition year, 16 to POS impact starts to drop considerably and I think we are in a position to but having in the next year. That's the plan.

Great and then automotive your business tour you have bit more with this facility and so the 14% growth in China in the quarter. I know you said few times that thinking about the rest of year I knew the run rate. But increase visibility and how do you think that 14% in China and goes rest of the year?

Hey, Steve. Could you re-ask that question? You dropped out in the middle of it and I just want to make sure we hear your question properly to answer it properly.

Sure. Sorry about that. I was just saying that your automotive business tends to be one where you have a bit more visibility and the 14% growth in China in quarter and I know you've said a few times today that as you think about the rest of the year for you businesses you tend to sort of just run rate. But because you have that more visibility in automotive and how do you think about that 14% growth in China over the rest of the year?

I think we are well set up there, as you describe that the automotive business. What we are selling today really across the world are is a function of penetration gains that we engineered and invented and sold in going back 2 and 3 years. So I think the run rate is really solid running going through rest of this year, the pipeline is terrific in terms of future years and we continue to be very boyish and what we think we can do with this business long-term.

The next question is form Jamie Cook from Credit Suisse.

Hi, good morning. Just two quick questions. One, I mean I know the focus largely has been more on internally igniting organic growth and share repurchase. But can you talk it all about just sort of the deal pipeline it all becoming more attractive your interest in larger versus smaller deals and what you are seeing in terms of evaluation and then I'll get back in queue.

Nothing is really, I think we're pretty clear in our December Investor Day meeting around where we see M&A fitting in terms of our overall enterprise strategy largely focused on building on businesses to our existing segments that we think can either help, support or further accelerate the organic growth rates. No magic from the side standpoint but certainly something that's comfortably in a $100 to $500 million range, in that regard. So ultimately that's opportunistic. We will access those opportunities as we find M&A come available to us. We are certainly focused right now on getting this product to organic growth firmly in place. So from the standpoint of pipeline it's we got a few things out there that are absolutely fits that we are working in terms of both answers to some of our existing businesses. But I don't expect that particularly robust from the standpoint of overall deals done.

But just to clarify, do you feel anymore I guess pressure look distort you've far exceeded I think everyone's expectations on margins and how successful you've been and the macro obviously has been a bigger head wind to more strong companies and you've done a great job. But do you feel like you could be more opportunistic? I mean to help the organic growth by doing deal at this point.

I don't think there is any change in past year or aggressive it's ultimately about how does it fit, how does it help us do what I just described and once we really not going to react on a short term basis. This is as we've laid out a 5 year plan to position the company to generate 12% to 14% TSR on a consistent basis and the big [indiscernible] is really driven by an organic finance. So that remains our focus right now. This is also 5 year plan, not a 5 quarter plan. It's all about positioning the company coming out of 2017 could be able to perform like we think again and so we're focused on making that happen and we made a lot of progress and you are kind of note that we've got lot more work to do to get where we think we can get over the next 2.5 years.

The next question is from Ann Duignan from JPMC.

Hi, good morning. I'm from JP Morgan. Most of my questions have been answered. Maybe just back to your comments on CapEx spending and been kind of whole through the course of the quarter. Are any of your customers and any of the segments growing concerned about the strong dollar and what's that doing to export or do you think it's just general uncertain, any color you could give us will be great?

I think the impact and export competitiveness is in my view probably driving some of the softness in CapEx particularly obviously in North America. I think there are some shifts and some adjustments that our customers are making around how this change in relative currency rates are impacting their competitiveness from an expert standpoint. So I think if they are sorting out what is likely to happen to whatever business they are exporting from North America given this change in structure geographic competitiveness. I think that's in large part driving some of the softness around CapEx.

And now you are seeing that any specific segment?

I think as we go back to TNM probably little bit on the industrial side of welding in our specialty business where which is the equipment that was largely packaging or maybe the packaging equipment.

Okay, that's helpful. And then just on share repurchase I mean your stock is trading at a significant premium to the S&P and trading inline with the large capital [consumers]. What kind of analysis do you do internally to either decide to accelerate through the purchases or hold under the cash for better opportunity?

I think I'll go back to what I said earlier is that these are long term decisions that we make and they are really based on highly disciplined approach and being very returns focused. This share repurchase program has been a terrific program for the company and certainly for the shareholders. The alternative which is holding under the cash as you know is not very attractive today and certainly relative to the share repurchase program given our recent performance and given where we believe the company is headed which we've been very public about in terms of the goals and we rate out for 2017 and beyond. We are confident that this continues to be a great way for us to allocate capital and so we're committed to the share repurchase program and we expected to continue be an active program going forward.

I was there that better than the target leverage ratios we talked about earlier there is plenty of flexibility in there, opportunity come along.

Correct, yes.

Okay, I guess I was saying the more whichever consider a special dividend rather than share repurchases.

I think we look at all the options and we have not in the past done special dividends. But we'll certainly continue to look at all the options.

Okay, thank you. I leave it there. Appreciate it.

The next question is from Steve Volkmann from Jefferies.

Hi, good morning. Just one quick, you guys mentioned that the BSS headwinds should start to go in 2016. But I guess I'm assuming that's not really like a cliff event. So when do we really start to see that phase? Could it be in the second half of this year and then accelerate in '16 or might just being little optimistic there?

I think the question was wrong and then correct me if I'm wrong. Either BSS or PLS headwinds I'm not, can you just let me…

Whatever headwinds you got of from and together?

I think the game plan, there is a lot of planning around this as we've got a full year of TLS activity in 2015, it's going to represent a 1% headwind to our organic growth rate. We are not in the 16 planning but magnitude it probably drops up by half in '16 and then fully done in '17 and beyond. This is a pretty big one time event it really is linked to our portfolio strategy. So we did a lot of work. At the front of the strategy around really building the portfolio that can sort of deliver this organic growth front end that we've talked about. So 30 businesses, the best that we've 3.5 billion of revenue. This is really stage 2 of that which is now working inside all of our divisions to basically take the same approach from a product line standpoint. So we're not pruning product lines that don't need our differentiation standards or that are too small to ultimately matter. So that's this is sort of phase two of portfolio management. But we work really hard on the last year, we can work hard on this year. I think we're going to start to truly get on top of it and it will be a lesser issue certainly in '16 and should be fully completed by '17.

The next question is from Walter Liptak from Global Hunter.

Hi, thanks and congratulation guys on getting the margin. I've got a couple of follow on, one it is just I want a little clarity on the oil and gas in North America. Basically how much is that down you think you could be down 30%, but doesn't sound like it is and second thing is on pricing. Are the own G customers looking for price declines your margin don't suggest it. But are you trying to help your customers with lower pricing?

Yeah. Oil and gas in North America was down at the rate we talked about earlier in the 30% range and from a pricing standpoint, we are not really planning that space and that's we're big enough sort of component of what they are having to buy. We're not really seeing a lot of pricing pressure, it's more a big slow down in actually the project work their that's impacting their demand for welding products.

Okay, got it. And then follow on to the construction question. Is North American construction trending ahead of where you thought it was through the first quarter or is this inline I mean your comments of....

Yes, I think largely inline. The business was flat. We'll see how that plays out in the second quarter depending on whether remodel was up 3 and commercial was up 2 to 3 in North America. So reasonable better growth there, but I'll tell you largely inline with expectation.

There are no further questions from the phone.

Great, thank you all for joining us this morning. We appreciate that very much and we look forward to speak with everyone again soon.

That concludes today's conference. Please disconnect at this time.