Welcome to the Q3 2016 Stanley Black & Decker, Inc. Earnings Conference Call. My name is Nicole and I will be your operator for today. At this time, all participants are in 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 and Government Relations, Greg Waybright. Mr. Waybright, you may begin. Greg Waybright - Stanley Black & Decker, Inc.: Thank you, Nicole. Good morning, everyone. And thanks for joining us for Stanley Black & Decker's third quarter 2016 conference call. On the call, in addition to myself is Jim Loree, our President and CEO, and Don Allan, our Senior Vice President and CFO. Our earnings release, which was issued earlier this morning, and a supplemental presentation, which we will refer to during the call, are available on the IR section of our website, as well as on our iPhone and iPad apps. A replay of this morning's call will also be available beginning at 2:00 PM today. The replay number and the access code are in our Press Release. This morning, Jim and Don will review our third quarter 2016 results and various other matters followed by a Q&A session. And consistent with prior calls, we are going to be sticking with just one question per caller. As we normally do, we will be making some forward-looking statements during the call. Such statements are based on assumptions of future events that may not prove to be accurate, and as such, they involve risk and uncertainty. It's therefore possible 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…

Thank you. We will now begin the question and answer session. Our first question comes from the line of Rich Kwas of Wells Fargo Securities. Your line is now open.

Hi. Good morning, everyone. Greg Waybright - Stanley Black & Decker, Inc.: Good morning. James M. Loree - Stanley Black & Decker, Inc.: Morning.

Going to squeeze in a couple here but just one for Jim, one for Don. Jim, in terms of future M&A, obviously the Newell deal announced and we're going to get some kind of resolution with Security here relatively soon. What's the appetite to do further M&A as you go deeper into 2017 and is this more of a function, a barometer around ability to execute versus opportunities out there? And then, for Don, as we think about 2017 in terms of margin expansion and how you're thinking about that preliminarily, what are the puts and takes? You've had a pretty good year here in 2016 and would seem like with commodity prices moving up a bit that maybe some more headwinds as we think about 2017? Thanks. James M. Loree - Stanley Black & Decker, Inc.: Okay. Well, I'll start. This is Jim. As far as M&A goes, we're – historically, if we go back 15 years or so, and we look at the capital allocation of the company, we've taken almost exactly 50% of our excess capital and allocated it to M&A, and the other 50% we've given back to the shareholders in the form of dividends and repurchases. And during that timeframe, we more than quintupled the size of the company and gave back a lot of cash along the way, and returns to shareholders were very, very solid, 400%, 500% over that timeframe. So we like that formula, and when we took the break it really was an opportunity to digest many of the acquisitions that we did over that timeframe. And now, we're back and we intend to kind of continue with that 50% allocation of excess capital to M&A and it's not an organizational bandwidth issue. I think Newell, despite it's relatively significant size,…

Thank you. And our next question comes from the line of Jeffrey Sprague of Vertical Research Partners. Your line is now open.

Thank you very much. Just a little bit more color on FLEXVOLT if you can or if you're willing. Just wondering if you've achieved full channel fill at this point? And anything else you could tell us about kind of promotional costs and how those could influence margins not only in the fourth quarter but maybe into the early part of next year as you continue to push forward? James M. Loree - Stanley Black & Decker, Inc.: Yeah, this is Jim. The channel fill has been fairly comprehensive. It's still in process. So it continues, but it's on track. And as Don said, we'll be in the $100 million range for the four months, September through December, which meets our expectations. And I'd say there's probably more customer demand growing as we fill the channel and they start to see the early signs of their end-user pull. And so, we're expecting a pretty good growth as we go into 2017, as Don mentioned. And as far as the margin elements, I'll have – Don, you can tackle that one. Donald Allan - Stanley Black & Decker, Inc.: Yeah. So as we initially discussed, I think back in July, the second half definitely has a little bit of margin pressure related to the launch of FLEXVOLT, both on the gross margin side and then some of the activities we're doing in SG&A around the digital marketing programs and commercialization activities. That's going to continue most likely into the first quarter. We don't see that as a major pressure point. As you see the business had 17.4% margin in the third quarter, very strong and up 70 basis points year-over-year. And so, we don't see it as a major drag, but it's certainly-- when you look at it sequentially versus Q2, as an example, it's one of reasons why we're at 17.4% versus 18.8% in the second quarter. But as we enter the back half of next year, margins will regulate and we get to more line averages or above, depending on which FLEXVOLT product category.

Thank you. Our next question comes from Nigel Coe of Morgan Stanley. Your line is now open. Nigel Coe - Morgan Stanley & Co. LLC: Hi, good morning, Gents. Donald Allan - Stanley Black & Decker, Inc.: Hi, Nigel. Nigel Coe - Morgan Stanley & Co. LLC: Yeah, so, Don, great color on 2017, and I'm just wondering if you're factoring anything into your sort of 2017 EPS, sort of math regarding any potential dilution from a potential Security portfolio decision. And then just a calculation on that, that would be great. And then on the Industrial – lots of moving parts there. Oil & Gas you've alluded that that starts to weaken in 4Q. Hydraulics you said is stabilizing, and your Apple is forecasting growth in 4Q. So, I'm just wondering if maybe you could give us a little bit of a roadmap on how you see the moving parts for Industrial tracking into 4Q and 2017? Donald Allan - Stanley Black & Decker, Inc.: Yeah, so let me start with thoughts about 2017 as it related to Security. In those comments that I made, we are not factoring in any decision related to Security because obviously there are different things that are being evaluated. However, if you look at the three options we discussed, one is obviously keeping the business, which would have no impact. The second option was to do something with the entire Security business, which would obviously have a significant impact to what I described. And then the third option was an evaluation of our mechanical lock business and determining potential divestiture of that. If that was the choice that we chose, then there would be, what I would say, a modest dilutive impact to that. However, the proceeds of the money we received could…

Thank you and our next question comes from the line of Jeremie Capron of CLSA. Your line is now open.

Thanks, good morning. Question on the Security business. I see you had a small acquisition here. Can you remind us what's going on exactly? I think you referred to buying some of the franchises in the Electronics Security business. So any color on that is appreciated. Thanks. James M. Loree - Stanley Black & Decker, Inc.: Yeah, there's an element in growth in the Security business, which is supplementing our RMR portfolio, our recurring monthly revenue portfolio. And, so we will buy small bolt-on acquisitions, typically in the $20 million to $50 million kind of range. It's almost like CapEx. It's a bit of a steady state but it helps supplement the recurring revenue growth because, as you can imagine, when you have a recurring revenue portfolio and there's attrition in the 7% to 12% range, depending on the type of portfolio that you have to originate all that just to keep the recurring revenue portfolio even, and then you have to originate more to grow the recurring revenue portfolio. So growing the recurring revenue portfolio is assisted by supplementing it with small acquisitions but it's really not a very material amount of money to the overall corporation that we're spending on them.

Thank you. Our next question comes from the line of Shannon O'Callaghan of UBS. Your line is now open.

Good morning, guys. Donald Allan - Stanley Black & Decker, Inc.: Good morning.

Hey, Don, you talked a little bit about the FLEXVOLT being part of the sequential step down in margin this quarter, but as it applies to sequentially into 4Q what accounts for maybe a further step down in margin, and I mean you're launching FLEXVOLT around the holidays. It doesn't really seem like much of a holiday item, but how do I think about the kind of the 4Q sequential margin dynamics relative to what we just saw in 3Q? Donald Allan - Stanley Black & Decker, Inc.: Yeah. The fourth quarter normally has a sequential decline because there is a significant mix shift that does happen in Tools & Storage in Q4. Because of the holiday season, you do have a higher level of Black & Decker-branded products that are being solid, a little bit of promotional activities. And that historically has been, depending on the year, it can be anywhere from 40 basis points to 80 basis points of a drop when you look at Q3. If you factor in the FLEXVOLT activities, that most likely would be another 30 basis points to 50 basis points on top of that. So, the other thing that we're seeing is that we are seeing a little bit of modest commodity inflation as we exit the year. It's not dramatically impacting the rates, but that could be a 0.10 point as well with our 10 basis points. That kind of gives you a little bit of granularity around that.

Thank you. Our next question comes from the lined line of Michael Rehaut of JPMorgan. Your line is now open.

Thanks, good morning, and thanks for all the great detail, as always. James M. Loree - Stanley Black & Decker, Inc.: Good morning. Donald Allan - Stanley Black & Decker, Inc.: Good morning.

Just wanted to dial into FLEXVOLT just a touch more. I know obviously it's very early on in the launch and that launch continues in 4Q, but I think earlier you said that you kind of referenced to the $200 million sales impact for next year without commenting on cannibalization. But as you're starting to see the orders at least coalesce at this point, I was just curious if you had any updated read on what the revenue impact would be in 3Q, 4Q, and if there's any upside. I think you said there was possibly some upside to the 200 next year. And also any sense potentially of that, any cannibalization? James M. Loree - Stanley Black & Decker, Inc.: Okay, well, I'll let Don comment on quarterly revenue splits, but I don't think I'll say too much. But I'll talk about next year and the possibilities related to FLEXVOLT. And again, we don't know about cannibalization, so that is the big unknown. However, we feel like the order momentum is pretty good and the receptivity of the end users is excellent. So we are really paying attention to how much capacity do we have if this does become a much bigger program than $200 million in 2017. And right now we're hovering in the $400 million range for total capacity, and we're working to ensure that if it were even stronger than that that we could deal with the bottlenecks, but I don't imagine we could go too much beyond that. So, I think we're probably ring fencing it in the $200 million to $400 million sort of range. Donald Allan - Stanley Black & Decker, Inc.: Yeah. And as far as this year's third and fourth quarter, we don't really like grind into that detail, but as we said, it's a $100 million for this year, slightly under $100 million. I think you can reasonably assume that the split is pretty close to 50/50. It's not dramatically different than that. It's a little bit more in fourth quarter, a little less in third quarter.

Thank you. Our next question comes from the line of Mike Wood of Macquarie. Your line is now open. Michael Wood - Macquarie Capital (USA), Inc.: High, congratulations continuing to drive the outgrowth. James M. Loree - Stanley Black & Decker, Inc.: Thank you. Michael Wood - Macquarie Capital (USA), Inc.: I wanted to ask you on the 3% hand tool decline. Just some more color there on how much is explained by the declines in Industrial Tools, what the sequential trends have been there and when you're anniversarying that weakness. And is this primarily on the CRC-Evans business, I'm guessing? Just more data on the Mac Tools growth, as well. Thank you. James M. Loree - Stanley Black & Decker, Inc.: Yeah. So when you look at our hand tool business for Tools & Storage, it's – as I mentioned, it's pressured. It was down 3% organically in the quarter. The pressure is coming from what we call the Industrial Tool business, which are the brands of Proto, Facom, our Storage business, which is under Vidmar and Lista, and then the Mac Tool business is in that category; however, they're serving primarily the automotive aftermarket and they continue to demonstrate kind of low to mid-single digit organic growth. And that's been a trend that they've been on for a while. So we're seeing pressure in those tool channels that's been since it started in probably the early part to the mid-part of fourth quarter of last year that pressure continues. It anniversaries, obviously, in the fourth quarter. We're not expecting to see growth in that profile in the fourth quarter, but certainly the amount of retraction should be much smaller. And hopefully we can move beyond that into next year and it doesn't become a pressure point. It's more of can it go beyond flat and how do we gain share and maybe demonstrate some modest growth in that space.

Thank you and our next question comes from the line of Robert Barry of Susquehanna. Your line is now open.

Hey, guys, good morning. James M. Loree - Stanley Black & Decker, Inc.: Good morning.

How should we think about the price cost spread given you're starting to plan for some inflation next year? Which, I guess, is really a question on being able to raise price here, since I think you indicated earlier that you're planning for, what, $20 million to $30 million of commodity inflation next year? Thanks. James M. Loree - Stanley Black & Decker, Inc.: Yeah. So this year we're going to show about a point of positive, and that was in a market that was primarily, a good part of the year was more of a deflation commodity situation, although the amount was not really significant, so we don't -- we were able to -- I get a lot of this price from two different areas. One, we certainly are getting a lot of price benefit to offset the currency pressure that you're seeing primarily in emerging markets. That was by taking those price actions. That's a big part of what that 1% is. And then there's what I would say the normal ongoing activity that we do in all our businesses and have been doing for quite some time, which is around what I typically call surgical or strategic pricing actions, which is really looking at different products, different product categories, looking at the competitive pricing dynamics, look at the value proposition and the differentiation we might have in these categories, and then really setting a pricing that we think is more appropriate for the value that we provide to the consumer or the customer. And we've been doing that, we continue to do that, and that's something that I think even in a modest commodity inflation environment next year -- and it will be modest. Remember, my comments were not – our expectations are that this is not something that's going to be a significant commodity inflation market. I just don't think the demand is there to really stimulate that type of activity. But that being said, these surgical marketing or pricing approaches are things that we will continue to do. And so, although we'll probably see a little bit of price pressure here and there on certain products because of what we experienced with commodities this year, having a modest inflationary environment actually is helpful when you're having some of these surgical price initiatives.

Thank you. Our next question comes from the line of Joshua Pokrzywinski of Buckingham Research. Your line is now open. James M. Loree - Stanley Black & Decker, Inc.: Hello?

Again, Joshua, your line is now open. James M. Loree - Stanley Black & Decker, Inc.: I guess we answered his question. Just move on the call. Thanks.

No problem. Our next question comes from the line of Liam Burke of Wunderlich. Your line is now open.

Thank you. Good morning, Jim. Good morning, Don. James M. Loree - Stanley Black & Decker, Inc.: Good morning. Donald Allan - Stanley Black & Decker, Inc.: Good morning.

Jim, on the Newell acquisition, would you be picking up additional distribution or is there a lot of overlap in the channel? James M. Loree - Stanley Black & Decker, Inc.: There is definitely some incremental distribution that we're picking up, particularly in the plumbing and trades and electrical trades, and we really like that kind of distribution. It's very dependable kind of favorable type of both end market and end channel. So, that would be in the, kind of in the (44:47) channel and some of the other – those types of channels outside of the home centers and mass merchants. But then, there's a lot of overlap too. So it's kind of a nice balance. We pick up some incremental distribution, but we also have the ability to consolidate within our existing channels and gain synergies and so on.

Our next question comes from Saliq Khan of Imperial Capital. Your line is now open.

Hi, good morning, guys. James M. Loree - Stanley Black & Decker, Inc.: Good morning. Donald Allan - Stanley Black & Decker, Inc.: Morning.

Yeah, one quick question for you is: with your increasing presence within the emerging markets, what are you hearing right now from your distributors and the channel partners, both about the state of the economy over there? But also, what it is that you can do to improve the relations that you have with them to be able to better penetrate the market? Donald Allan - Stanley Black & Decker, Inc.: Okay, well, I'll take that one. We have excellent, excellent coverage of the emerging markets. I think the Stanley Black & Decker merger positioned us to be able to really blanket the markets with distribution coverage. And in addition to that, we've organized in a way that enables us to both get intimate local market knowledge and coverage, and at the same time be able to introduce products and make marketing moves across the entire universe of the emerging markets. So an interesting walk around them, Latin America, which is pretty significantly over-indexed for us and has been pretty difficult over the last few years for reasons that relate mostly to political instability and also the commodity bust, and the impact that that had on those markets, and of course, the FX that came along with those problems, the currency pressures. But in any event, what we see in Latin America in general is some pretty positive indications. Nothing robust at this point of time, but I would – if I were betting, I would bet that the Latin American markets are going to be, in general, better in 2017 than they have been in recent years. In the sense that Argentina with Macri and some of his reforms are starting to take root, and then you have the long drawn out Brazilian political drama with the scandals and…

Thank you. Our next question comes from the line of David MacGregor of Longbow Research. You're line is now open.

Yes, good morning. Thanks for taking the question. James M. Loree - Stanley Black & Decker, Inc.: Morning.

I guess, I wanted to ask you about Europe and the 11% organic growth, pretty impressive as you pointed out against the year ago compare. Can you just unpack what's going on there for us and help us understand some of the drivers behind that? And also, maybe just talk about the extent to which expanded distribution is growing that versus same-store sales? Donald Allan - Stanley Black & Decker, Inc.: Sure. Excuse me, I'll take that one. As both Jim and I mentioned in our comments, we're very, very pleased with the organic growth profile that we've seen in Europe. And frankly, this is a trend that's been going on for almost three years now. We've seen really consistent anywhere from mid to high-single digit organic growth. This quarter was 11%, so even better, and low double digits. And, I think when we look at it, it started out as some revenue synergies that came out of the Stanley and Black & Decker merger that we really were leveraging and having a positive impact in that region. Then we started getting deeper into SFS2.0 and some of the commercial excellence efforts, now we're getting into the digital components of that with digital marketing and more E-commerce activities over there. And then, you combine it with the fact that with new technologies, like Brushless as an example in the cordless power tool space, innovation that we brought to the marketplace, we've created an opportunity to fill a lot of white space within certain base of our customers. And so, we've been able to fill that white space and put forth different products. Now, the other item that I did mention was also putting the Stanley FATMAX brand on mid-price point power tools in Europe. And so, that was another opportunity that was leveraging the effect of synergies of the two companies. And Europe is probably the best example, and then maybe emerging markets after that, of a combination of the revenue synergies from the merger and then the great benefits that we're starting to see in the first couple of years from SFS2.0. James M. Loree - Stanley Black & Decker, Inc.: And also, the talent. The talent that we've picked up when we did the merger with Black & Decker. I'd put my European team in Tools up against any team in the company in terms of just their passion, their commitment, their competency, and their ability to perform. So, that's a – human element is part that too.

Thank you. Our next question comes from the line of Dennis McGill of Zelman and Associates. Your line is now open.

Hi, good morning. Donald Allan - Stanley Black & Decker, Inc.: Morning.

I was hoping if you guys had a chance, on the Security side, I guess maybe particularly electronics just give us an updated view on where you think you are on some of the operational improvements, good margin this quarter and I think a good trajectory. But not sure, Don, if you kind of want to just think through not necessarily to next year but over the next couple of years. How far into the operational improvements are you? And then, if you can maybe split the comments between North America and International that would be helpful. Donald Allan - Stanley Black & Decker, Inc.: Sure. So, I think we're – if you equate it to a baseball game, I think we're probably still in maybe the fourth inning at this point, related to our progress. We're very pleased, as we mentioned in our comments, mine in particular, about the progress that we're seeing in North America. Europe made great progress over the last few years, but now Europe's kind of hitting the threshold of being close to 10% profitability, and then taking it to the next step, which is closer to the low to mid-teens. That's hard to work and it takes more effort and you also have to have a continued top-line organic growth performance to get some leverage effects as well. But I think each region has made great progress. The Europe journey, the improvement has been going on a little bit longer than in North America, but I still see at this point we're probably going to end the year close to 13% profitability for the segment. Probably just under 13%. And at this stage, we still see a path for it to get to close to 15% as we communicated back at our Investor Day in May of 2015. And we're probably two to three years away from achieving that objective because we're continuing to do a lot of heavy lifting and one of the value proposition items that we see in electronics Security is the ability to really differentiate with customer service and that's what the teams have been focused on for the last year or two. But we still see a world of opportunity in that space to make it better and better, which is only going to enhance our productivity as time goes on.

Thank you. And our next question comes from the line of Josh Chan of Baird. Your line is now open. Josh K. Chan - Robert W. Baird & Co., Inc. (Broker): Hey, good morning, Jim and Don. James M. Loree - Stanley Black & Decker, Inc.: Good morning. Donald Allan - Stanley Black & Decker, Inc.: Good morning. Josh K. Chan - Robert W. Baird & Co., Inc. (Broker): Morning. Just wanted to ask about the retail sell-through at the Tools & Storage business, maybe excluding the FLEXVOLT launch. Some of the companies that kind of sell to the same customers have kind of noted a slower July and then trends improving as the quarter progressed. Just wondering what you saw in terms of POS and if you have any comments into the first couple of weeks of October? That would be great. Thank you. James M. Loree - Stanley Black & Decker, Inc.: Sure, well, our POS at large retail has literally been spectacular in the beginning of the year. Close to the 10% kind of zone for a period of time. And then as the year went on -- so let's say beginning sometime in the second quarter started to sequentially get lower, and it never really got really low and it was always positive, but it was definitely trending sequentially lower up until the FLEXVOLT launch. And at that point we've seen it begin to track sequentially higher. And where we stand on weeks of sale in total is the weeks of sale are substantially lower right now than they were last year. And, I think part of that has to do with good sell-through and increasing sell-through, maybe even beating expectations of the retailers. But, I think also there is an element of structural change that's going on with supply chains at some of the major retailers. So hopefully that gives you some color on POS and sell-through.

Thank you. And I'm showing no further questions at this time. I would like to hand the call back over to Mr. Greg Waybright for any closing remarks. Greg Waybright - Stanley Black & Decker, Inc.: Nicole, thank you. We'd like to thank everyone again for calling in this morning and for your participation on the call. And obviously, please contact me if you have any further questions. Thank you.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.