Welcome to the Fourth Quarter and Fiscal Year 2018 Stanley Black & Decker Earnings Conference Call. My name is Shannon, and I will be your operator for today's call. [Operator Instructions]. Please note that this conference is being recorded. I will now turn the call over to the Vice President of Investor Relations, Dennis Lange. Mr. Lange, you may begin.

Thank you, Shannon. Good morning, everyone, and thanks for joining us for Stanley Black & Decker's Fourth Quarter and Full Year 2018 Conference Call. On the call, in addition to myself, is Jim Loree, President and CEO; Don Allan, Executive Vice President and CFO; and Jeff Ansell, Executive Vice President and President of Global Tools & Storage. 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. A replay of this morning's call will be available beginning at 11 a.m. today. The replay number and the access code are in our press release. This morning, Jim, Don and Jeff will review our fourth quarter and full year 2018 results and various other matters, followed by a Q&A session. Consistent with prior calls, we're going to be sticking with just one question per caller, and as we normally do, we'll 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 that 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 with our press release and our most recent '34 Act filing. I'll now turn the call over to our President and CEO, Jim Loree.

Okay. Thanks, Dennis, and good morning, everyone, and thanks for joining us. As you saw in today's release, we delivered a respectable fourth quarter, continuing our trajectory of above-market organic growth and delivering strong EPS growth and solid free cash flow dollars and conversion. As many of you know, in 2018, we faced an unusual and sudden onslaught of large and volatile external headwinds, most of which developed during the course of the year, specifically pressure from input cost inflation, FX and tariffs had, by fourth quarter, grown from our initial January guidance of $150 million pretax to $370 million, which at the EPS level, would have been about 25% dilutive to prior year EPS had we not managed to offset all but $50 million of that with additional price/cost management and other actions. The fact that we ended up delivering 9% adjusted EPS growth in 2018 on 8% revenue growth, which included 5% organic, is quite remarkable. It speaks volumes as to how agile experience - agile our experienced management team deals with short-term adversity and operating environment challenges while continuing to pursue above-market growth and moving the company forward strategically. More on that in a few minutes, but first, a few words about the fourth quarter. Revenues were up 5% to $3.6 billion with organic growth of 6%. Tools & Storage delivered 7% organic with strength in all major geographies and business units. The Tools growth was driven by the continued rollout of the Craftsman brand, price realization and leveraging our portfolio of growth catalysts. Industrial delivered 14% total revenue growth inclusive of the Nelson Fastener acquisition, and organic was up 4% for Industrial. The Oil & Gas business exceeded our plan this quarter and delivered a robust 27% organic growth derived from increased pipeline project activity in…

Thank you, Jim, and good morning, everyone. I will now take a deeper dive into our business segment results for the fourth quarter. Tools & Storage delivered 4% total revenue growth, with 7% organic growth and a 3-point headwind from currency. Organic growth included 5 points of volume and 2 points from price. We continue to see sequential improvement in our price realization, which represented a full quarter benefit from the price actions we executed during the third quarter. The operating margin rate for the segment was 15.4%, down from the prior year as benefits of volume leverage, pricing and cost control were more than offset by the impacts of currency, commodity inflation and tariffs. The impact of these headwinds amounted to $135 million for Stanley Black & Decker. Approximately 90% of this figure impacted Tools & Storage in the fourth quarter. The strong organic growth and related share gains were experienced across each Tools & Storage region and SBU. First, on a geographic basis, North America was up 10% organically with strong performances across all channels. U.S. retail and U.S. commercial markets both posted low double-digit growth, and our industrial and auto repair markets generated mid-single-digit growth. North America's growth continued to be fueled by new product innovations, including FLEXVOLT, the Craftsman brand rollout and price realization. The Craftsman rollout is continuing to be well-received by end-users and our customers. For the year, it drove close to 2 points of revenue for Tools & Storage, net cannibalization. We are excited and encouraged by the success we are seeing as we continue the rollout in 2019. More on that from Jeff a little bit later. Europe delivered 4% organic growth in the quarter. 9 out of 10 markets grew organically, an impressive performance as we did see some weaker market…

Thank you, Don. I would like to provide a few more points on the Tools & Storage performance for the year, including updates on our strategic brand partnerships for Craftsman and Stanley. We closed 2018 with high single-digit organic growth enabled by record-setting new product launches, best-in-class commercial partnerships and integration excellence. As evidence, Irwin, Lenox and Waterloo have delivered double-digit organic growth since becoming part of Stanley Black & Decker. Adding to the strong acquisitive performance is Craftsman, which is exceeding both our and our customers' expectations. We're on track to $1 billion in revenue growth by 2021, 7 years ahead of schedule. This progress is being driven by strong user acceptance. As such, we have achieved a 4.6-star rating across well over 1,000 products and outstanding in-store execution by both Lowes and Ace. We also announced last quarter that the Home Depot will now be the exclusive home improvement retailer for Stanley and Stanley FatMax Hand Tools & Storage product portfolios, both in-store and online, beginning this year. The product will begin to ship in the front half of 2019. Now I'll turn the call back over to Jim to wrap up today's presentation.

Thank you, Jeff. In summary, 2018 was a year of solid performance despite the volatile external environment. As we said, we delivered 8% total revenue growth, including 5% organic; net OM rate remained robust at 13.6%; and adjusted EPS grew by 9%. Our teams acted with speed and agility while facing into and overcoming an unprecedented impact from currency, commodity and tariff headwinds. And while these headwinds will gradually abate as 2019 unfolds, they will be with us for a while, and the economic growth backdrop also looks to be slowing as well. So with that as context, we are pleased that our 2019 outlook calls for 4% organic growth with a 4% to 6% EPS expansion, and we feel good about that. We remain focused on delivering above-market organic growth with operating leverage, reenergizing our focus on margin expansion, continuing to successfully execute our recent acquisitions and generating strong free cash flow. And as always, our seasoned leadership team will act with agility and leverage SFS 2.0 and all available avenues to maximize our value creation for shareholders. In other news today, we are announcing that Stanley Black & Decker was named to the Carbon Disclosure A List for both climate change and water. This great recognition is an honor, and it underscores our commitment to continue to conduct ourselves in a socially responsible manner. I would like to thank my senior management team and all of our Stanley Black & Decker associates around the world as well as all our stakeholders, including the investment community, for your support. We are looking forward to another successful year in 2019 and continuing our pursuit of strong financial performance, pervasive innovation and social responsibility. Thank you. And with that, we are now ready for Q&A. Dennis?

Great. Thanks, Jim. Shannon, we can now open the call to Q&A, please. Thank you.

[Operator Instructions]. Our first question comes from Rich Kwas with Wells Fargo Securities.

Jim, Don. First, on Jim, so focus on deleveraging here, kind of base level for capital deployment, doesn't seem like this is going to be a year of meaningful M&A. What would you characterize, given where we are in the cycle, of the puts and takes, consideration, in terms of additional M&A? And then, Don, real quick on the free cash flow conversion and the over - underlying conservatism in the guidance. If you could make some comments on conservatism. And then second, on FCF, is there any working capital headwind with regard to the transition of the Stanley brand to Home Depot?

Okay. It's Jim, I'll start. At this point in the cycle, our plan is to kind of go in strong, stay strong and emerge stronger. And that's exactly what we did in '08, '09. If you recall, those that followed us for a long time. When we went into this, the cycle, we actually had our balance sheet in great shape and we continued to maintain as much operating margin and cash flows we could squeeze out of the company even though the revenues were down a little bit. And in '09, at the tail end of all that chaos, we actually negotiated the Black & Decker transaction and transformed the company subsequently. Now I'm not suggesting that we have any plans to do that, such a transaction, again. But what I will say is that it's really amazing when you come out of the end of the cycle and look at all the opportunities that are out there, large and small, that derived from others who had not maintained themselves in the same manner during that downward part of the cycle. So with that, debt-to-EBITDA right now is about 2.6x, and we are deleveraging this year. We may do 1 or 2 very small emerging market transactions, but that would be about it. And I'd say by the end of '19, we're going to be in really great shape from a balance sheet perspective. We are already, but even better shape, and then we'll see where we go from there.

So to your second question, Rich, on free cash flow conversion for 2019 guidance. I mentioned the two items that are resulting us being in 85% to 90%, with one being the total charge and then the other being M&A or restructuring-related payments associated with the fourth quarter charge that we took of about $100 million. So most of that cash outflow will happen in 2019. On the working capital front, we don't actually see a dramatic improvement in working capital turns in 2019 because we do have to continue to work through these brand transitions that we've discussed throughout the last year related to Craftsman, but now also related to what's happening with Stanley and Stanley FatMax in the Home Depot. And we have to make sure that we have the right level of inventory to meet the needs of our customers. And we're not going to get overly aggressive in our supply chain until we work through those transitions. So we're not counting on a dramatic improvement in working capital turns in 2019. But as I mentioned, once we work through that, we can regulate and moderate to the levels that are more historical for us and begin to work our way back to 10 turns over the next few years.

Our next question comes from Tim Wojs with Baird.

I have a quick two-parter. I guess, first, could you just talk about within the Tools growth guidance, what is embedded in there in terms of accretion from Craftsman and the Stanley Hand Tool changes? And then secondly, I was just - the cadence of Q1 margins being lower, is the implication that Tools' margins be positive through the remainder of 2019? Just want to clarify that.

Yes. So if you think about Tools & Storage organic growth, we said mid-single digits. So you interpret what that, but it can range anywhere from 4% to 6%. So it's probably leaning towards, closer to the high end of that range. Within there, we see Craftsman performance net of cannibalization. So when we talk Craftsman net of cannibalization, we're including the impacts of what's happening with Stanley and Stanley FatMax and Porter Cable coming out of Lowe's. We believe that impacts probably 2 to 3 points in 2019. And so that kind of gives you a gauge of where we think it is. So it's relatively close to what we experienced in 2018, maybe a little bit better. The second question was related to - what was the second question, Dennis?

First quarter margins.

First quarter margins. So yes, what it does imply, as we look at the second, third and fourth quarter, we would expect to start to see, in the Tools business, margin rate and dollar expansion year-over-year. So the first - as I mentioned, a significant amount of that net headwind of $170 million, $125 million to $135 million is happening in the first quarter. So that's a dramatic impact to the first quarter, which makes sense, given the timing of the headwinds last year.

Our next question comes from Jeffrey Sprague with Vertical Research Partners.

Jim, I was wondering if you could elaborate a little bit more on what the kind of other margin enhancement actions you are taking. I assume those are above and beyond the Q4 restructuring. And then also, just maybe as a follow-on to that last question. It would seem you would still expect actual adjusted EPS to probably be down on a year-over-year basis in the second quarter. Is that correct?

You take the second part.

Okay, yes. Yes it's not true, Jeff. We actually expect adjusted EPS to grow because we do have a low tax rate again in the second quarter, and we had one last year, so that's - it's a bit of a headwind, but it's not a significant headwind. And we do expect OM dollars to grow year-over-year.

Okay. And on the margin enhancements, I'll give you a little appetizer. I think the main course, we'll serve up at the Analyst Meeting. But essentially, we've - as soon as we completed the work in the fourth quarter on the cost takeout, the near-term cost takeout, we said to ourselves, "Our margins are under attack from these headwinds. We need to get back what we've lost already, so that $250 million will help. But what if we get more of the same? What if we, the down - what if we go into a downturn in back half of '19 or in '20?" And so we said, "We really need to basically create some protection for, call them black swans or economic cyclical aspects." And also, our objective here is to grow our operating margins by 50 basis points a year. Obviously, that didn't happen in 2018, and we're committed to do that. So we need a way to get there. And we thought about this, and we said, "22/22, we're two years in. We've done enough deals now, and they're - every one of them is a deal that we'd do over again if we could. We love these deals. We've done enough so that we can actually see our way pretty much to 22/22 from a revenue point of view. Now let's figure out how we can make sure that we get the margin to go with it to create operating leverage so that we really get that double benefit of lots of revenue growth and margin expansion at the same time." And so we've been working a lot on different elements of digital technology and how that can be used to create value in our company, both from a value proposition point of view, in our…

Our next question comes from Julian Mitchell with Barclays.

Maybe just a quick update on what the sort of delta is in your earnings guidance versus previously the commentary around high single-digit growth. Is it simply about a point or so less volume growth assumption? Or has anything changed in terms of your confidence around pricing initiatives, particularly in Tools?

Yes, I would say that there's certainly a point difference in growth, as you mentioned, versus just looking at the markets as they play out in the fourth quarter, and the view of U.S. housing and the automotive space for production just feels like there's still growth there, but it's slowing. So that's certainly one factor. We do have a little bit bigger tax headwind as well because we did come in lower for 2018. So that's a little bit of a headwind in addition. And then the third thing is we need to continue to monitor the impact of all the price in the markets. And like we said in October, we're putting a fair amount of price actions into the market. We're going to manage this both looking at what's the right thing to do for price and what's the right action to ensure we have the right level of volume. And we're going to manage those in concert with each other to achieve the right outcomes. So as we continue to do that, there will be a little bit of pressure probably in the margin rate versus previous expectations, and we saw that play out in the fourth quarter. But those are really the three main factors.

Our next question comes from Michael Rehaut with JPMorgan.

Just a little bit more detail, if possible, around some of the moving pieces of '19 guidance. And obviously, appreciate all the help so far. First, on the margin - I'm sorry, quarterly cadence, with the biggest hit of the commodity inflation being in the first quarter, are we to understand that the reason you have the confidence that you'll switch to operating margin positive in the remaining quarters is because of the cost actions that have already been put in place? Or is there some amount of price realization as well that you're still expecting? And secondly, also on the deleveraging, how are we to think of share buyback for '19 when you talk about the benefit that you expect from lower shares? Is that just the flow-through from what you've done in '18? Or is there anything incremental in '19?

Yes. So the cadence of the quarter is - clearly, the biggest impact in the second quarter is going to be the headwinds going down dramatically year-over-year as we begin to annualize those headwinds in the second quarter. If you remember, in 2018, we certainly vividly remember the timing of all this. But as we went into March and April, we began to see commodity prices increase. We got into May and we saw FX shift dramatically. And in then June, we saw tariffs come onto the scene. So in the second quarter, we saw significant ramp-up of the headwinds, and that continued into the third quarter. So as we get to the end of the second quarter and into July, we will have comped a lot of those headwinds. And so you look at that aspect and then you look at the impact of the cost reductions, which the impact is relatively even across the four quarters, and so it's about $60 million per year - per quarter, I'm sorry. And therefore, you got that impact, combined with a lower level of headwinds year-over-year because of that comp issue is really why we believe we can grow our operating margin in the second quarter.

And also the fact that the pricing actions are kind of accumulating over time and getting bigger every quarter sequentially. And so that has a benefit, too, especially as we get into second quarter of 2019.

Our next question comes from Nigel Coe with Wolfe Research.

Just want to just unpackage your outlook for 4% to 6%, so let's call it 5% Tools & Storage growth in '19. Roughly, how does that shake out between North America, Europe, rest of the world? And what would your estimate be for market growth in North America in '19?

I think the actual range Don provided was probably 4% to 6%, said it was probably going to be a little bit on the - more towards the high side of that. So I think that's what we're looking at for the - over the course of '19. And I think you'll see that we're absolutely committed to growth in all markets. So you look at growth, we'll have growth in North America, we'll have growth in Europe, we'll have growth in the global emerging markets consistent with what we had this year. Of those 3, probably, the leading growth contender will be North America as it was in '18. But we're getting growth in both of those other places as well. And we think with that estimate, we'll grow above the market, therefore, representing market share gain again in 2019, consistent with what we had in '18.

Yes. And I think we all know that the European economy had slowed quite a bit. Germany went negative, the U.K. is in chaos and confusion with Brexit, Italy is a disaster. And despite all that, our European outlook for Tools is going to decent, it'll be probably 2% to 4% kind of growth. So it's still continuing to forge ahead in Europe. And then emerging markets, we have some specific markets that are challenged right now, as almost - as we almost always do. I think in this case, Turkey is tough, Argentina is really difficult. And we had major currency devaluations in those markets, but also just the economies themselves are really difficult. So we might see a little bit slower growth in emerging markets this year than we did last year. But still, we're going to be significantly positive, and we'll be running at least 3x higher than the overall market growth.

Our next question comes from Susan Maklari with Crédit Suisse.

I just wanted to get a little bit more color on what you're thinking in terms of some of the commodity inputs. We've seen some of those pull back in the later parts of 2018. What's embedded in the forecast from that perspective for 2019?

Yes. So I talked about net headwinds of $170 million. If you break that down a little bit, the gross headwind is about $320 million and you have an offsetting price impact of $150 million. Of that $320 million, approximately 1/2 of that is commodity inflation, so it's a significant number. We have seen positive trends around certain commodities, for sure. But we do have to remember that a lot of the commodities that we get are really engineering-grade commodities, and we haven't seen as much of a movement in those commodities versus some other more straightforward commodities, in steel in particular. So we've seen a little bit of benefit since December. And as we continue to look at this, it may continue to trend in the right direction, and it could result in an opportunity for us as the year goes on. But at this stage, we actually have not seen a dramatic movement in the commodities that we buy because we tend to buy at the higher end of the grades. And as a result, that hasn't moved as much as some of the other commodities. But the trends are positive, which we feel good about right now.

Our next question comes from Josh Pokrzywinski with Morgan Stanley.

Just a question on the bridge. I know that there's kind of a lot of moving parts here, and maybe with the outstanding numbers from 3Q, could use a little bit of an update. I guess the real delta here would seem that a normal organic growth, if the right number is kind of a 20% incremental margin, you guys seem to be closer to 10%. And there looks like there's been, at least on the surface, some slippage in that $250 million of cost reduction, and a lot of that soaks up the relief that you've gotten on tariffs or baking in List 3 at 10%. Is that kind of the rough math of it? Because, I guess, both of those numbers, both the headwind and the tailwind, seemed a little bit lower than what I would have thought on the surface just to start out.

Yes, I think on the leverage front, you probably have to really look at it on a volume basis versus total organic. So if you look at volume, you can use an assumption like 20%, 25%. That kind of gets you to the numbers that we're talking about. And then there's a separate price benefit that's netted in the headwinds that we've laid out for guidance and for actual results. Because we really dissected that because pricing can kind of mute the leverage numbers or change the leverage numbers quite a bit. And as a result, you're better off looking at them in those separate categories.

Our next question comes from Nicole DeBlase with Deutsche Bank.

So I guess just a couple. One is kind of a box-ticking item. On the margin enhancement initiatives, could that possibly give upside to second half with respect to payback? Or is that more of a 2020 payback? And then if you could just talk about the impact of what's going on at Sears on your Craftsman rollout expectations.

Okay. Well, it's Jim. I'll have Jeff handle the second question. And on the margin enhancement initiative, the benefit that we're going to see from that is going to be recognized over a 2 to 3 year period. We're going to do everything we can. We're going to work really hard to try to bring some benefit into 2019 as an insurance policy. And it's not clear that it's going to be a huge number. But I think it's - there's probably something there, and we'll go after it.

Regarding the question relative to Sears. I think it's really, based on everything that has just occurred in the last two weeks, you'd say it's very much business as usual. If you look at the trend over the last, at least 36 months, that company would typically announce a closure plan following holiday sales, and that would be updated over the course of the year to include more and more stores. This year, it's not much different. So the fact that those stores will remain in operation at a lower count than the prior year, et cetera, is very consistent with what's happened in the prior years. So we expect that our Craftsman rollout will continue to take share as that presence atrophies in the marketplace. So not that different than any other prior year.

Our next question comes from Michael Wood with Nomura Instinet.

If we take into account Craftsman accretion to growth and what - where we think you're running at for price, it seems like there's not much organic growth outside of Craftsman in Tools & Storage volumes. You seem to be tracking well above that currently, so I'm curious what is explaining the deceleration in that lack - in the business ex Craftsman. And does that concern you?

Well, I think that we try to make it very clear that the economic backdrop is one of slowing growth, it's nothing to do with our market share. Our market share continues to outperform the market. And I think the reality is setting in, hopefully not just us, but most industrial companies are facing slower economic growth in the United States, in China, in pretty much most parts of Europe and the emerging markets. I mean, essentially the whole world except for a few bright spots like India, for example. But the reality is that economic growth that we see for 2019, and - is pretty - is probably a good point lower than it has been in the recent couple of years. And then on top of that, it's no secret that the construction markets in the United States have slowed as well. So baked into our guidance is a reality check on the slowing markets. It's not catastrophic. It's nothing that we can't handle. But our long-term growth objectives are 4% to 6%. We're putting 4% out there at a time when economic growth is slowing. Makes perfect sense to me.

Yes. And at the end of the day, we think that's the right thing to do for all the reasons that Jim articulated. But any chance we're wrong, the markets are a little better, then we'll all be happy. But this is the right approach, given the signals that we've seen in housing, the signals that we've seen in the automotive production space. They're all showing growth for the most part except for auto production. Looks like it's going to be down next year. But they're slowing, and we have to be realistic about what the trends are right now.

Maybe one last addition would be if you look at 2018, our growth was 6% to 7% in Tools in a market that grew slower than that. That market, we think, is going to be compressed by about a point this coming year, and our growth looks pretty similar to that, 5% to 6%. So our growth rates will still be accretive to market growth although the market's growing just a little bit slower. That's kind of it.

Our next question comes from Joe Ritchie with Goldman Sachs.

Just maybe following up on that a little bit, Jim, and the slowing that you saw - that you're expecting to see in the U.S. I mean, Tools & Storage still put up 10% organic in North America. And so can you talk about whether you started to see slowing in 4Q as the quarter progressed? And then I guess my second question for Don, in talking through that $250 million cost benefit number, did you recognize any of that in 2018? And what's the cadence of that number as we progress through 2019?

Okay. I'll take the first part. The slowing in the tools market, I think, started in the third quarter, concurrent with the interest rates increases that were being implemented by the Fed. And we saw the same thing in automotive as well, the interest rate sensitive type markets, housing, automotive, impacted by rising interest rates. And it continued in the fourth quarter. We were thinking, well, maybe it's an anomaly in the third quarter. Sometimes, you get those for a couple of months or a couple - yes, a couple of months. And it really did continue into the fourth quarter, pretty steady in the sense that it didn't get worse, it's just kind of felt a little bit more anemic in the third quarter and fourth quarter than it did in the beginning - of the first half of the year.

And on the cost takeout side, we did get a modest benefit in the fourth quarter just because some of them were implemented through the November time frame, but it wasn't significant. And the cadence is really, as I mentioned earlier, pretty equal across the year. So it's roughly $60 million to $65 million per quarter.

Maybe one other addition to what Jim just highlighted is that we said for '18, that North America outpaced Europe and global emerging markets. That is also true for '19. And in that, retail - North American retail and North American commercial, therefore, will be accretive to the overall rates we just described. So it's very consistent with 2018.

Our next question comes from Justin Speer with Zelman & Associates.

I had a couple of questions, first being on channel inventories across your core end markets and your customers. Was there any pull-ahead risk, particularly in slowing traffic and some of these customers that we're seeing? Any potential pull-forward risk into the quarter from tariff-related price increases in your core Tools businesses?

Yes. I wouldn't say - we don't really know if anybody pulled anything ahead for tariff reasons. So our customers don't necessarily tell us that they're doing those types of things. I would say that the inventory levels did modestly increase as we exited the year versus the previous year end, but frankly, they're not significant. It's not something that we view as a major concern as we go into the first quarter and the year.

Maybe additionally, the POS, as we exited the holiday season continued to be quite strong. So what Don described was we did have a little bit of inventory build in the course of the quarter. Most of that was gone by the end of the year, very, very consistent with where we wanted to be at the end of the year and where we ended last year. Secondly, in terms of pull-forwards, the retailers and so forth have gotten so sophisticated, system-driven, that there's very little pull-ahead these days when you announce pricing. So that was not a big impact to the quarter.

Our next question comes from Robert Barry with the Buckingham.

Just a couple of things. One is a follow-up on an earlier question on commodity. Did that headwind actually go up versus that 3Q? Because I thought it was $100 million. Now you said - I think you said 50% of $320 million. And then on the tariffs. Is that now, in the walk, $100 million headwind? I'm just curious to the extent to which the change in the value of the renminbi might actually be able to help you offset that.

Yes, the commodity number has gone up primarily because of just some accounting dynamics on how certain things get accounted for. There's a number that's kind of hung up in inventory as we go into this year that will impact the numbers. So it's up by $40 million to $50 million versus maybe what we were thinking in the middle of last year primarily because of that dynamic. And the other thing is on the tariff side, yes, that number is correct, incremental $100 million year-over-year.

Thank you. This concludes the question-and-answer session. I would now like to turn the call back over to Dennis Lange for closing remarks.

Shannon, thanks. We'd like to thank everyone again for calling in this morning and for your participation on the call. Obviously, please contact me for any further questions. Thank you.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. Have a wonderful day.