Good morning. I'm Tim Wojs, and I co ver building products here at Baird, and we're delighted to have Stanley Black & Decker join us again at our Global Industrial Conference. Stanley is the world's largest tool company, and they own several leading brands, including DEWALT, CRAFTSMAN, and STANLEY, as well as BLACK+DECKER, and LENOX. From the company, on stage here, we have EVP and CFO, Pat Hallinan, and then we have Christina Francis, who's Director of IR. We're gonna start out with a few slides from Pat, and then we'll hop into Q&A. So with that- Yeah. I'll turn the floor to Pat. Well, thanks, Tim, and welcome, everyone. Thanks for your interest. I'll just go through three slides for those of you very familiar with Stanley Black & Decker, probably minor updates on a few things, and for those of you who are pretty new to us, it'll give you at least a little bit of clarity on what our portfolio contains and where we are in a margin and balance sheet transformation journey. So Stanley Black & Decker, for those of you who follow us closely, might know this already, but for those of you who haven't been watching us the last few years, we have divested a few businesses: oil and gas, electronic security, and electronic doors, and we have just two segments in our portfolio at this stage. We have a tools and outdoors business that Tim referenced about $14.5 billion in revenue and an industrials business. And much of our industrials business, not all of it, but much of it, is fasteners or the tools that drive the fasteners. So some similarities in the industrial space with high-quality fasteners and tool drivers. You know, right now the business is working to drive a margin transformation and to get the balance sheet de-levered, and then get back to traditional margin performance and traditional growth performance. And so, about a year ago, at this point, we started a transformation journey, the goal of which is to drive about $2 billion of cost structure improvement, $500 million of which comes out of SG&A, and $1.5 billion out of COGS, and to de-lever the business. The goal being to get the margins back to traditional margin performance, especially at the gross profit line, and to get back down towards a more traditional level of leverage for us, which is roughly about 2x. Part of that cost transformation journey is certainly to drop it to the bottom line, but we have been and do intend to take about $300 million-$500 million of it, invest it in growth drivers, both innovation and marketing and activation. You know, our long-term algorithm is we, you know, we tend to grow, our markets tend to grow, that is, with weighted GDP. We're mostly NAFTA, Continental Europe, and UK-centric, weighted GDP growth of those markets. And, you know, we try to beat those markets by anywhere from, you know, 200-400 basis points relative to that GDP range, which is kind of a two to three times GDP in those markets, has been our historic growth trajectory. To get gross margins back to the 35% range, to get cash conversion back to 100% on a go-forward basis. We've actually been higher than that as we've been working working capital down. And then finally, to get operating margins back in the mid-teens or higher, and ROIC, similarly, mid-teens or higher. That's the journey we're on. We went after it pretty aggressively at the midpoint of last year and have really been driving it successfully to date. So we closed out our third quarter and had earnings a couple of weeks ago. For those of you who followed us closely, quite a lot of progress. Our trough gross profitability was down in the low 20s, around 22%, and we were at about 28%, just shy of that. The close of the third quarter will probably be a bit above 28% in the fourth quarter, and therefore, you know, it's about seven points of gross margin improvement to go between now and 2025. On the journey to save $2 billion, we're almost to the $900 million point, and expect to be at $1 billion by the end of this year. The SG&A savings in hand, and about $500 million of the COGS saving, with another $1 billion of COGS to go. And we've been driving cash out of the business, and using it to pay down debt and to preserve our dividend. So this year, we've driven almost $900 million of cash out of the or inventory out of the business, $1.5 billion, rather, $1.7 billion since we started the program. We fully expect to hit the pretty aggressive inventory reduction target we set for this year, which was $1 billion, and to drive free cash flow this year into that $600 million-$900 million range. And we do expect to be hovering right around the midpoint of that for our free cash flow delivery this year. And, you know, we're starting to invest for growth as well. You know, for those of you who listened to our earnings call, heard us talk about the guidance we set for the balance of the year, which implies about a $0.70-ish fourth quarter. And in there, you know, we are making, like, $30 million-$35 million incremental dollars of investment to start driving the longer term growth. I'd say about half of that is engineering, and about half of that is marketing and activation, and some capability building around systems and stuff like that. But things are going well. And we, you know, we plan to stay very focused on margin improvement and cash, but ultimately, we gotta get back to outgrowing the market. And with a new chief operating officer and president of our tools and outdoor business in place, and in the midst of a strategy refresh and priority refresh, are very confident that we are gonna get there with the investments that we're making and with the priorities he's setting. So I'll end it there, Tim- Good. and turn it over to you. Well, thank you for that. If anybody has any questions, you can raise your hand, or you can email sessiontwo@rwbaird.com. Maybe just to start, Pat, you know, on the last point you made about, you know, kind of maybe, maybe shifting from a cost takeout mentality to kind of reinvesting in the business and kind of getting growth back to, you know, exceeding your end markets, what does the timeline of those pieces kind of look like for us? Yeah, I mean, obviously, we're gonna stay focused on growth. We're not done with that cost reduction. We're not done with that journey. We have to get our margins back to 35%. You know, I would say our objectives next year, and a little of this, you know, the way it might be visible or not visible in the income statement, is a little bit predicated on our consumers, especially consumers here in North America, kind of done with their switch from goods to services, and does that kind of stabilize? But if you assume that stabilizes by the end of this year or the early part of next year, you know, I expect next year, given we'll be comping against some supply chain challenges and given, you know, we maybe weren't on the balls of our feet competitively the last couple of years, next year, we could, we could beat the market, whatever that market is. I don't know that we'll beat it, by something like 200 basis points or more, but I think we, we could beat the market next year on the basis of supply chain strength, on the basis of a bit more investment and growth, especially, feet on the street in our end markets and service centers, and a little bit more tighter prioritization around innovation and commercialization of that innovation. I think it'll take us, you know, two to three years to kind of get back to the, you know, multiples of the market. Because I do think we never really lost the strength of our innovation engine from a R&D perspective. I do think we didn't commercialize it effectively enough. And so I think it's gonna take, you know, whether that's 12-24 months, both to get people into the field, but also improve the alignment with all of our channel partners, especially those pro-channel partners, and to be driving the activation on a regular basis that allows you to achieve and sustain that level of growth. I think that's more like a 24+ month journey, but I do think next year, again, assuming the consumer has stabilized a bit, we should start performing at or above market, which hasn't been where we've been the last couple of years. Okay. Okay, good. And when you think about reinvesting that, you know, kind of $300 million-$500 million, what, what, what is the bucket for like the added engineering, which doesn't sound like it's really been pulled back that much, versus, like, getting people on the street and, and- Yeah ... kind of getting them in the field? I don't- How do you think about the returns on that? Yeah. I don't... There was not a huge pullback in engineering, but I would say during this year and into the front part of next year, we will still be making some pretty significant engineering investments, mostly around electrification and outdoor-focused areas. So I don't think it goes to zero. I think it does start to get much more biased towards field investments and brand building by the middle of next year and beyond. You know, I—we need to have balance or income statement discipline. You know, we've been in that probably more like 19-ish%, SG&A, as a percentage of net sales. I think we might for periods of time drift a little bit north of 20%, for periods of time, but mostly next year is gonna be 20%-ish or thereabout. But I think we're gonna be working to get our SG&A productive in that 20% of net sales range from a returns basis. So that means you're getting returns pretty quickly from it, right? 'Cause you're not bouncing up too much. I mean, there might be quarters or half years when we're in the 21 range, but we're not gonna be running way high north of that near term. I do think longer term, as we prove that we can get paid for our innovation a bit better maybe than we have the last five to 10 years, you can revisit that algorithm, but for now, I'd say we're gonna keep it around 20 or thereabout. Okay. Okay. And, you know, you've been with the organization for six months now, is that right? Seven. Seven? Seven, yeah. And you were pretty central, you know, at Moen in terms of driving growth and some of the margin improvement there. So as you've kind of settled in, and I know, like, the transformation is obviously a big focus, but, like, where are you kind of incrementally prioritizing your time as CFO, as you've kind of gotten into the business? Yeah. A lot of—I mean, we, you know, obviously, with our balance sheet, there's been a balance sheet de-levering component to my focus of time, but I'm lucky to have a really strong treasury department and a good team working to drive capital out of the business and get that leverage down. Most of my time has been spent with both of the business units around refining strategy, getting refocused on growth, but then making sure we have real clear priorities, and being as clear about what we're gonna prioritize, but also what we're gonna deprioritize, 'cause we need to be very SG&A specific. And I think a lot of the tools we're using are similar to the tools we used at Fortune Brands, in particular in the plumbing business. You know, first around getting fuel for growth, around strategic sourcing and platforming and design to value, and being very thoughtful of SG&A that is not focused on the end markets or delighting the customers. And then being very focused on how do we deploy that thoughtfully in places where we see momentum in the market, or we've had traditional strength so that we can get paid back on it quickly. And so most of my time has been spent with the presidents of the business, prioritizing the business. And then talking about some of the longer term capabilities. I mean, some of the things we did at Moen around platforming and revenue management and e-commerce will be part of our toolkit going forward. Okay. Okay, good. I got a question here from the audience. Just if you could talk about the dynamic where, you know, what the gross margin looks like on your balance sheet versus maybe what it looks like on the P&L, and kinda what that variance is right now, and where you are in getting kind of that higher cost inventory through the- Yeah ... through the P&L. Yeah. I'd say, you know, most of the high cost inventory was out by the end of the third quarter. We'll have a little bit more of that in the fourth quarter here. Now, most of the progression from this point forward is basically cost structure improvement. And I'd say, you know, given the way we turn inventory, our income statement today is a reflection of operating productivity about six months ago. So, you know, the first half of 2024's income statement is the productivity we're producing right now in the back half of this year. And as I mentioned, we, you know, we have about 700 basis points of margin improvement to achieve between now and the end of 2025. Obviously, arithmetically, that's about 50-100 basis points a quarter. It won't be a perfect linear progression. I'd kinda say, you know, we're probably looking at 100-200 basis points every six months or thereabout. Because while Strategic Sourcing, which is frequently some of the early fuel in these efforts, has been kind of 2/3-3/4 of our achievement so far, it probably goes back down towards 55%-60% of the total program achievement of $1.5 billion of COGS. And the things from this point forward are mostly predominantly continuous improvement of lean and footprint changes, and those kinda happen a bit more in bigger chunks, as opposed to a perfect linear progression. But I think that's the progression. The progression is mostly about 100-200 basis points every six months as we continue the strategic sourcing journey, but add more footprint change and add more continuous improvement and lean to it. Most of the high cost inventory and most of the production curtailment is off the balance sheet. I'd say we'll be mindful of production levels in the outdoor space, especially kinda high-ticket item, outdoor space stuff, but outside that, our production is mostly normalized. Okay. Okay. And then, I guess on that 35% target, has everything been finalized kind of internally towards getting to that? Or is there still some areas where you know, there, there's you know- Yeah ... I guess normal, you know- Yeah ... something that needs to be finalized to kinda get there. I mean, do you, do you kinda have visibility to the 35% now? Yeah. Yes. You know, what I will tell you is things always move. Like, look at this year. This year, we're gonna over-deliver the $500 million. We would have set our annual plan this year for low single-digit revenue declines, which is mostly a volume decline, and we're probably gonna be in the mid-single-digit range. Our guidance is in the 5 and a fraction, and that's, you know, seems like where this year plays out. So with basically 300 basis points lower volume this year, we're still delivering the program, right? So obviously, things are always changing, and you're retooling. We have line of sight to the options to get to $1.5 billion. Then we have to turn those options into very specific initiatives where we have individuals dedicated, and it's usually getting increasingly cross-functional at this point. We probably have, I'd say, you know, 1.2-1.3 of it kinda lined out in very specific projects. And we'll close the, you know, the remaining gap over the course of the next two years, really by constantly revisiting where are the volumes and where is the best place to deploy resources and get cross-functional alignment. But we have the options to get to that $1.5 billion, for sure. Okay. And then you had mentioned in kinda in your prepared remarks about the maybe kinda some of the strategy that Chris is developing. I know it's not necessarily finalized, but are there pieces that you kind of have internally committed to, that are different than how kinda Stanley's operated in the past? Yeah, I'd say, you know, I... We'll, we'll obviously be rolling it out as, as Chris gets out on the road with us more and as we get a bit further down the path internally. But I do think we, we definitely signaled some of it on the last earnings call, that, you know, when you look in the tools and outdoor space, really driving growth behind three really big brands: DEWALT, CRAFTSMAN, and STANLEY. Not just here in North America, but, but globally. And it's not that the other brands have ceased to have a role for us. I think they'll, they'll be sticking more to some of their historic lineage. You know, when you talk about a brand like IRWIN, which always had a very high strength in woodworking, does it really kind of stay focused more in its, in its focal areas, or LENOX, you know, with a, a lot of strength around cutting tools and accessories, it's gonna stay focused around that. So I think you're gonna see increasingly, we focus on three really big brands to drive innovation and brand investment, and our other brands play their more specialty roles. Some of them have really good margins. You know, some of those specialty brands have above fleet average margins, so they have a role to play. And then in the industrial business, it's about how do we take the momentum around aerospace and around electrification of automotive and accentuate that into growth? We had very high double-digit growth in both of those arenas. Obviously, you know, the EV rollout will probably be at a different pace than maybe people thought six months ago. Still a great area for us where we have higher content, and a lot of expertise from the battery assembly we do in the tools business to drive to the automotive sector. Okay. Okay, good. Maybe just, just on the business, the tools business, the outdoors business, you know, the Pro seems to be holding up better than I think a lot of people have feared. Mm-hmm. How do you kind of game plan for that specific market? You know, does that continue to... You know, how, how do you think about it continuing to grow at a steady pace? You know, maybe at some point that slows, maybe it even speeds up. I mean, how, how do you think about scenario planning for, for that? 'Cause it is a- Yeah ... you know, probably the most important part of your tool business. Yeah. You know, I think the long-term trends around that business, around underbuilding of housing, around reshoring of manufacturing, and around the infrastructure build-out in North America, I think are all favorable longer trends. So that's a favorable long-term backdrop. The willingness to pay for performance is there today, and I think that stays. So, we're investing for the long term in that business, and I think there's three different opportunities for us that are kinda unique to where we are right now. Some of them build on strengths, and some of them are opportunities to probably reflect on and take advantage of where we haven't done as good a job as we could have done. So, you know, we have some real strengths in things like carpentry and concrete work, and so building on and expanding on those strengths, by in some cases, accelerating electrification and expanding the tool offering in concrete to some bigger tools. So those are places where we're mining historic strengths by breadth and depth and electrification. I think that's one area. I think the other is, we've done a great job at innovating in the battery space, but we have made a little bit of our battery offering a bit complex, and sometimes harder for both pros and consumers to shop. So how do we keep the battery innovation going, but a little streamlining of our offering and simplification, so that when people make a battery investment, they get more leverage from the battery investment? I'd say finally, there's some areas where we have a presence today, things like electricians and plumbers, where our presence isn't as big, and I think that's an opportunity for us. And there's a fair amount of innovation in the tail end of this year and the early part of next year that offers those trades tools that perform at a higher level for productivity, but are also ergonomically more attractive. And so I think we'll be doing all three of those. I think you'll see an emphasis towards investing in the Pro to have a halo towards retail, as opposed to some retail investment that's solely for retail. And I think you'll see that, a little bit more of that from us. Okay. I mean, on the battery systems, are you kinda gonna coalesce around, like, 20 volt, you know, for both DEWALT and then CRAFTSMAN? Because- Correct ... I guess as you look at the change, as what's happened in this space over the last 15 years- Mm-hmm ... like, once you get people on these systems, the switching cost gets just very- It's high ... high to get out, right? Right. So how do you kind of invest to get these batteries in people's hands? 'Cause it feels like it's a little bit of an arms race in that regard. It is. It is. I think, so first of all, I think, I think both 20-volt, 60-volt for the Pro, 'cause in... You know, when you're talking big applications in concrete for infrastructure, or industrial building, you're talking bigger than 20-volt, are a big part of it. I think, you know, what we've really learned is, pros and consumers value battery innovation, but they, they really value more, can you give them tools that perform ever better on the batteries they've already invested in? And, that is very much gonna be our focus. And then, you know, over time, is there, is there software and applications that you attach to the battery environment that both give value to, the user, but also a form of connection point with the manufacturer? I think those are where you're gonna see us focus our attention. Okay. And then how do you think about, like, the battery systems going from power tools into outdoor power equipment? A lot of the 60-volt that was, you know, originally designed around heavy pro use in construction is the backbone of a lot of what's driving, you know, obviously not all outdoor equipment, but when you're talking about the pro landscaper on, like, a leaf blower, that's gonna be based on that 60-volt battery pack. And so there's a lot of, of leverage from the battery environment, from the investment we make for pro tools that goes into the outdoor world. And I'd say, you know, the one thing that is probably electrifying and growing at the rate and the margin potential manufacturers like us would have hoped for in the outdoor space is handheld outdoor stuff. I'd say the large format, ride-on type stuff has been a much slower burn than we would have anticipated or the industry would have anticipated. But we're seeing a lot of synergies with our 60-volt battery and outdoor. Okay. Then when you think about, I mean, talking about outdoor, just the MTD acquisition, you know, I think the integration of that kinda got lost with, you know, a lot of the transformation and things that have gone on. I mean, what's kind of the status of the outdoor business today, just in terms of, you know, revenue, kind of where the margins are and kinda how you see that, you know, over the next three to five years? Yeah. I kind of break it into a few chunks. I think when you talk about the SG&A, route to market synergies, that stuff was achieved quickly from a dollarization standpoint. And given the strength of some of the DEWALT handheld stuff, that's... You know, it hasn't kind of raced out to every outlet perfectly at this point, but, we're seeing the green shoots in that route to market and SG&A initiative. I would say that, on the growth side, which then affects the electrification of the larger format stuff, is I think our business and the whole industry is finding the kind of the new post-COVID base of, you know, where is the demand level, especially with the consumer, on gas-powered, outdoor equipment, especially walk behind and lower price point ride-on mowers. And, you know, we'll see if we get to the end of 2023 and we've kinda found the new floor or if there's still more to go in 2024. But I think that demand environment, also, combined with the pros demand, on performance and longevity of performance throughout a day, has really slowed the electrification of the large format. I mean, manufacturers like us and others, we all have some very, very promising technology on electrified ride-on, but it's at a pretty high price point. And so I think that's gonna be a slower burn. And so when I look at MTD, I think the route to market promise is there, the back office SG&A promise is there. I think the growth and the transition of non-handheld ICE equipment is gonna be slower than we anticipated. Okay. And then another one here from the audience, just can you talk about the puts and takes to Free Cash Flow next year? You know, you've had maybe more inventory normalization, earnings should be higher, you know, what are kind of the puts and takes- Puts and takes, yeah. ... if you think about that? You know, when I look at our balance sheet, because I put it in the context of the broader balance sheet, right? If somehow the macro was strong, which is not our bet, and we were at the high end of future inventory reduction, which would be north of $1 billion over a two-year period, you know, you kind of fully delever organically through growth and cash flow. That's probably. We're probably not as fortunate to get there. We probably do a lot with margin improvement and $1 billion or so of inventory reduction over two years. And then you are paying down cash and maybe doing some portfolio focusing to get the rest of the way. When you look at next year, you know, we're gonna be persisting a dividend. The dividend is gonna consume about $500 million, almost, of the cash. We're gonna have, you know, CapEx of somewhere in the $300 million-$400 million range. And we're gonna have, you know, some cash restructuring, not at the level we did this year, which is kinda $200 million+, probably maybe more like $100 million, but those are gonna be the main consumers of cash. And therefore, I think your kind of organic delevering is probably similar to this year in that $300 million-ish range, right? And the rest of it, the rest of it is gonna have to come from inorganic sources, but we'll see how the year plays out. It's our job to drive the top line and the margin accretion and the working capital as tightly as we can and minimize anything. Because if we do things with the portfolio we want, we wanna do things with the portfolio that are strategic, not just balance sheet-oriented. Right. Good. Well, I think we're out of time, so please join me in thanking Stanley Black & Decker.