Welcome and thank you all for standing by. At this time, all participants are in a listen-only mode. At the end of the presentation there will be a question-and-answer session. [Operator Instructions] Today’s call is being recorded. If you have any objections, you may disconnect at any point. And I would like to turn the call now to your host Mr. Michael Larsen, Senior Vice President and Chief Financial Officer. Sir, you may begin.

Hi, thank you, Gary. And good morning and welcome to ITW’s third quarter 2016 conference call. I’m Michael Larsen, ITW’s Senior Vice President and CFO; and joining me this morning is our Chairman and CEO, Scott Santi. During today’s call, we will discuss our third quarter 2016 financial results and update you on our 2016 earnings forecast. Before we get to the results, let me remind you that this presentation contains our financial forecasts for the fourth quarter and full-year 2016, as well as other forward-looking statements identified on this slide. We refer you to the company’s 2015 Form 10-K and Form 10-Q for the second quarter of 2016 for more detail about important risks that could cause actual results to differ materially from our expectations. Also, this presentation uses certain non-GAAP measures. And while we use very few non-GAAP measures a reconciliation of those non-GAAP measures to the most comparable GAAP measures is contained in the press release. With that, I’ll turn the call over to Scott.

Thanks, Michael, and good morning. In Q3 ITW delivered another quarter of high-quality earnings growth with record operating income, operating margin and return on invested capital performance. In the quarter we generated 8% GAAP earnings per share growth, operating margin of 23.1% which if you exclude the 80 basis points of EF and CE acquisition dilution, it was 23.9% on an apples-to-apples basis. And after-tax return on invested capital came in at 23%. The key driver of our performance continues to be the execution of our strategy. The third quarter marked the 12th quarter in a row that our enterprise strategy initiatives delivered more than 100 basis points of margin expansion. In addition, we’re continuing to make good progress in executing our pivot to growth with six of our seven segments again delivering positive organic growth in Q3 despite a macro environment that obviously remains challenging. Through the execution of our strategy, we have grown earnings per share by an average of 15% per year over the last four years with almost no help from the market environment. But we still have ways to before we are operating to our full potential. We look forward to providing an update on the work that we have ahead of us to deliver on ITW’s full-performance potential at our annual Investor Day in December. With that I’ll turn the call over to Michael, who will provide you with more detail regarding our Q3 performance and our updated Q4 2016 forecast. Michael?

Thank you, Scott. ITW’s third quarter was another high-quality quarter with solid earnings growth, continued margin expansion and solid free cash flow. EPS was up 8% to $1.50 slightly ahead of the mid-points of our guidance due to solid execution and the resulting better margin performance. Total revenue was $3.5 billion up 4% and organic growth was 2% in-line with guidance. Overall demand was pretty steady state as we move through the quarter, and what continues to be a fairly challenging environment particularly on the capital equipment side. Nevertheless, six or seven segments delivered positive organic growth in key regions such as North America, Europe, Asia Pacific including China were all positive. In my opinion, the highlight of this quarter was ITW’s record operating margin performance of 23.1% - 23.9% when you exclude EF&C, and all seven segments performing above 21%. Operating income grew 6% to $808 million and after-tax return on invested capital improved to 140 basis points to 23%. Both of these performance metrics were all-time highs for ITW. We invested more than $150 million in capital equipment, new products and projects to simplify our businesses. Free cash flow of 101% on the income was a little lower than last year due to some quarterly timing but year-to-date we’re on track at 94% which compares to 96% at this point last year. We typically have a strong Q4 and we expect to finish the year above 100%. In addition, we repurchased shares for $500 million and expect to complete this year’s program with another $500 million in Q4 bringing the total to $2 billion. Finally, as we saw in August, ITW announced a dividend increase of 18%. So, overall, pretty straight-forward, good quarter as ITW continue to execute well and deliver strong results. On slide 5, starting with…

Thank you, sir, thank you speakers. [Operator Instructions]. Our first question, it’s from Mr. John Inch from Deutsche Bank. Your line is open sir.

Thank you, good morning everyone. Guys, international Food Equipment softness I guess was consistent with Lennox’s comments. I’m wondering if we could get little more color on that what you’re seeing. I remember sort of the call or the commentary around restaurants which were softer I believe it was about, I think restaurants are about 15% of your mix maybe if you could just sort of put the international softness in the restaurant issue sort of into a context for us?

Yes, so John, I would just, I wouldn’t read too much into this quarter in Food Equipment, as you know the quarter trends can bounce around a little bit. I think if you look at the year-to-date numbers up in that 3% to 4% range we expect to end up in the same place in Q4 and for the full year. I think Food Equipment more broadly we continue to see strength on the institutional side which is the majority of our business particularly in refrigeration and then on the scale side and the retail business but really nothing to be too concerned about in terms of the demand environment pretty stable as we went through the quarter and we’ll be back on trend in Q4.

Okay. So, the international, you’re describing it more as a bullet versus some sort of beginning of a trend, is that a fair statement?

Yes, that’s correct.

Okay. And then Test & Measurement and Electronics, I think some people don’t fully appreciate what’s in the Electronics segment. And I make the commentary in the context that 3M and others have experienced consumer electronics weakness. In their situation it’s all that conversion and Smartphone saturation. And I guess I’m wondering are you experiencing any kind of consumer softness within the confines of the umbrella of this Electronics up 13% organically?

Our exposures there really have fallen into two buckets. One is and largely clean-room MRO collection of businesses, that’s a pretty steady Eddie business. And then the other piece which is where we saw some of the big driver of the year-on-year growth improvement was really on the Equipment side so we’re producing equipment that people use to produce circuit boards. And that business again Michael talked about it was up somewhat in the quarter but also on a very low comp on the prior year. So I think we would not describe that business as being down significantly or being under pressure but it’s also I wouldn’t read a lot into the year-on-year growth number either.

That’s fair. And then just lastly, you Auto strength in China, Michael you attributed to product launches. Is this a one-quarter phenomenon or are you gearing up to try and penetrate the China Auto sector, like, do this have more legs beyond the quarter I guess is what I’m wondering.

Yes, I think this has a lot more legs to it as we go forward and into next year and beyond. Obviously 40% - builds were up 20% plus. But in terms of kind of what the penetration gains can be, I think that’s directional, that’s where we would expect it to be going forward.

And, that 2X numbers, is that what you’re saying?

Yes, I think that’s doable. Based on the new products and what’s in the pipeline yes.

All right. Thanks very much. I appreciate it.

Thank you. And therefore next question is from Joe Ritchie from Goldman Sachs. The line is open, sir.

Thanks, good morning guys.

Good morning.

In your next fundamental quarter maybe just focusing on Auto, since there seems to be a lot of concern out there right now giving potentially peaking Auto-builds and Ford’s comments about idling capacity. You mentioned in your prepared remarks that the D3 was down 1, but the out-growth in North America was still really strong. And so maybe just provide a little bit more color on where you’re seeing the out-growth and expectation longer-term to continue to outgrow Auto production?

We’ve talked about this a number of times in the past. On the Auto business for us is one where we do have a reasonable amount of forward visibility typically two to three years. So we have, we feel very good about our pipeline of new content going on new vehicles. Certainly we will be impacted on a relative basis based on the overall build levels in the market but our ability to continue to outgrow whatever the market growth rate is. If it flattens out we would still expect it to be positive by 200 to 400 basis points. And that’s pretty much a three-year kind of look. We’ve got some great backlogs and great programs in place and a lot of really compelling things we’re working on. So it’s an area that we are very bullish on, on a long-term basis.

And I would just add Joe, specifically to the D3 being down 1, the expectations is for them to be down again in Q4. And that’s fully embedded in our forecast. And I think similar to, in food you’ll see a growth rate in line with what we’ve done historically on the Auto side here in Q4.

Got it. That’s helpful. And maybe touching base on the margins on Auto, I know you guys are under consistent pricing pressure but at the same time can - you really get a lot of production efficiency to help continue to grow margins in that segment. Given that it’s longer-cycle, maybe have a little bit more visibility on Auto. I’m just curious, kind of compare and contract Auto versus welding because you’ve done such a great job at continuing to expand margins in your welding segment despite a roll-over in growth. I’m just curious how resilient you think your Auto margins can be if we do start to see a slowdown in Auto?

The Auto margin still is largely about the value-add content we put in the products. So we have talked I think on a number of occasions of our business being very niche, very oriented around solving tough problems for our OEM customers. We’re not planning in the bumpers on whatever model car you’re talking about. We’re at an RFQ bidder, we’re problem solver. So, from the standpoint of the overall margin performance in that business, it largely is a function of our discipline around the types of opportunities we’re going to engage yet with our customers and how well our skill-set matches up with what they need partner to do. So, I think we’re in really good shape. These are typically longer-term, six-seven-year kinds of program. And certainly there are some commitments often embedded in terms of annual cost tick-up, those are fully baked in terms of our knowledge upfront. And we would work really hard on delivering value not only in the design of the actual solution but then on an ongoing basis continue to drive benefits for customers that also drive benefits for the company.

Okay, fair enough. I’ll get back in queue. Thanks guys.

Thank you, sir. And for our next question, it’s from Scott Davis from Barclays. Your line is open.

Hi, good morning guys. I’m trying to get a sense of when welding does come back, what type of margin structure we can expect and the question really here is that how much discretionary spend is being cut and things that you’re going to have to add back pretty quickly your investment spend or how you define it I guess. But just general spend that may have to come back that would indicate that maybe even margins don’t go up, when welding comes back but more flattish, just some color on that would be helpful?

Your final comment would be very hard for me to see any scenario where that would be the case. We’ve, the teams in welding have done a really nice job of adjusting cost structure to the overall - current demand environment. But there is nothing. We’ve also been very clear and we’ve worked very hard on making sure that all of our, sort of important growth investments remains fully funded throughout this down-cycle. So, it is largely a matter of lot of reapplication of 80/20, a lot of focus and prioritization, it’s not about cutting muscle it’s about adjusting the cost structures. So from a standpoint of how it looks on a go-forward basis, I would have a hard time seeing any scenario where the incremental margins on the recovery would be far outside of our traditional 30% to 35% bucket.

Okay, that’s helpful. And then just as follow-on, if you think in terms of some normalization in welding sequentially. I mean, when do you think you’d be I know this is hard, but given that oil prices are back up over 50 in emerging markets, we’re getting a bit better and such, so do you get a sense of a book-to-bill in the 1.0 or little bit better range earlier in ‘17? Or do you still think it might be more of a mid-to-later?

I’ll tell you what I would probably not want to give into the forecasting business here. It’s been we’re going up on eight quarters now, some pretty significant contraction. And we got to see it flatten out first, I would say from the standpoint of just sequential daily order rate demand transit has been pretty solid, pretty steady state for the last three or four quarters here. But it’s not - we’re assuming not seeing any signs of any pick up at this point. I would really hesitate to call a turn at some point in the future but we’re well positioned to participate in it when it happens. And I think we’re managing the business through this down-cycle pretty well.

That’s fair. Thank you, guys. I appreciate it.

Thank you. And for our next question, it’s from David Raso from Evercore ISI. Your line is open.

Thank you. Just first a broad question. Can you set the framework for December meeting, what we should be expecting organic growth, enterprise initiatives for next year?

No.

We haven’t Dave, we haven’t even been through our full planning cycle yet for ‘17, so that happens in November and which is always our normal routine and then we come to December well-armed with pretty good view of what we think we got to be able to accomplish in the upcoming year.

I mean, is it fair to say given next year is officially the last year of the enterprise initiatives that yes, there is a year left of that but the meeting is going pivot more, trying to focus on can you accelerate organic growth with internal initiatives I mean, is that the?

Not necessarily.

Not, okay, that’s interesting. When I think about the incremental margins you just put up, and kind of simplistically I think of it is as when you provide that organic margin change, this trade operating leverage that you provide right before any changes in variable margin overhead cost. The incremental margins were about 36%, and then obviously went higher when you added some of the enterprise initiatives. Whatever you do provide an organic sales growth for ‘17 at that meeting. How should we be thinking about how you view your organic incremental margins right. Because we’re trying to pivot away from an internal how you can keep growing these margins 100 bps a year but at some point it just gets more challenging. What can you give us on organic and what kind of leverage do you expect, just to provide some framework?

Well, I think David, consistent with what we’ve said before and I think Scott just mentioned this, and when we’re talking about welding is, we would expect our incremental margins to continue to be in that 30% to 35% range.

That’s the base rate, not.

That’s the base rate that does not include the enterprise initiatives, that’s correct yes.

Most of the buckets right, whatever you think you can do on organically and obviously the pressure is on a little bit as we pivot away from the enterprise initiatives, how much can you get the ready-to-grow to show itself in fast-organic. But you still have another year of enterprise value and then again Scott, I do assume that the meeting will get some further, this progress on the idea of pivoting to the organic story? And the capital allocation obviously you’re still generating strong cash. I assume we get some clarity on how to think about the next few years? Just, I mean, I know it’s hard to forecast, just the pivot from here the margin story internally to organic would always be the benefit of your strong cash flow and capital allocation. It is sort of an interesting moment for the stock’s evolution, right. I mean we’ll get more than just here is the ‘17 outlook. Is that fair?

Yes.

Okay, all right. Thank you very much. I appreciate it.

Thank you. And for our next question, it’s from Andy Kaplowitz from Citi. Your line is open.

Hi, good morning guys. Scott, so with expected margin in Test & Measurement to improve as your enterprise initiatives continue to ramp up. Were you surprised by the speed of the margin ramp up? Is it really just new leadership this year taking a fresh look at the business and making more immediate changes than anything else? And if there is anything stopping Test & Measurement from being a mid-20% margin business, like your other businesses over time?

Yes, the second answer - the answer to the second question is no. Great fundamentals in that business and I would say as with all of our seven businesses, they are in terms of the work they’ve done moving through, these enterprise strategy initiatives they all started in a different place, they all had their own level of work to be done and Test & Measurement’s case, there were recent progress in terms of outcome is not worthy but they’ve been doing things inside that haven’t necessarily showed up in terms of margin for the last six or eight quarters. And so I’m very pleased with now what’s starting to show up and they’ve been on a pretty good track all the way long in terms of what they’ve been working on to get where they can be. And as you said, still have more room to go.

Okay, that’s good Scott. And then just shifting to Construction, can you talk about what happened this quarter? You said BSS reduced margins by 190 basis points, but I would have thought that much of the simplification in that segment had already occurred. We know you’ve been trying to simplify your European Construction footprint for some time. But the level of BSS seems a little more out of the blue I guess than I would have thought.

Well, it wasn’t necessarily out of the blue but there was, there are, from day one we knew that there was a lot to get down there, they’ve gone through a couple of cycles. And this particular project that has certainly, have visible impact on margin in Q1 was one that has been in the planning cycle for a while. But it was among our most complex structures in the company if you go back to - I'm talking about European Construction. And so, we’ve talked in the past about not only the work we’ve been doing but the way we’ve been doing the work in terms of doing it in a methodical fashion in a way that doesn’t impair our ability to serve our customers and generate some reasonable incremental progress along the way. So, while this was, this particular activity was known, we knew we were going to have to do it almost back to the beginning, it’s one where we also are now going to place from a standpoint of time and where we’re in a position to do it and do it in a way that doesn’t impact our ability to serve our customers in the region. So, it wasn’t out of the blue from our standpoint by any stretch.

Scott, does the headwind from this kind of quickly go away in terms of the margin difference?

Yes.

Look at welding from last quarter, I mean, our restructuring, when it is, when it tends to be that constant in a segment, we’re doing it every quarter, we talked to you about the overall spend, it’s typically spread pretty evenly, we even talked about it, just part of how we operate. But in the case of welding in Q2, we talked about some fairly sizeable actions and then look at the recovery in Q3 already in terms of margin from that. So in construction this is, the expense side of these, are front-end loaded based on the accounting rules. But the benefits ultimately start to show up maybe not fully in Q4 but certainly over the next three quarters or so.

Okay, great. Appreciate it, guys.

Thank you. And for our next question it’s from Nigel Coe from Morgan Stanley. Your line is open, sir.

Yes, thanks. Good morning. I know you don’t provide quarterly guidance by segment, but just given the diversions that we saw this quarter I just wonder if you could maybe give us some help in terms of how you see the zero to 2% playing out in 4Q? I’m assuming that Auto tries to maintain 7%, but any commentary in terms of that spread would be helpful.

Yes, Nigel, as you know, we and as we said, our Q4 organic growth forecast is based on the Q3 exit run rates from a demand standpoint. And really what some of the deviations from that you see are really more comparison issue than anything else. And I think you asked about automotive, if you look at the year-to-date growth rate in that 4% to 5% range, that’s probably what you would expect to see given current run rates and given the comps here in the fourth quarter.

Okay. And then how does that look in 4Q?

How does it look in sorry?

How does that look in 4Q?

In Test & Measurement?

Exactly, yes.

Yes, I mean, I think Test & Measurement, the comparison is really to drive out the big 7% increase this quarter. That normalizes a little bit here in Q4, and I think you will see probably a year-over-year increase in Q4 that’s in the low-single digits in Test & Measurement. And it’s really driven by the continued sluggish demand for capital equipment which impacts the Test & Measurement side of that segment.

Right, right. Okay, great. And then, just a quick one on the impact of EFC in 4Q, you guided for 50 bps or thereabouts of dilution for the full year, suggests that the margin impact could be slightly greater in 4Q than 3Q. Is that correct, and if that is the case why would that be given I’ve expected most of the wipe downs have happened in the 3Q as opposed to 4Q?

Yes, I’m not sure how you got that Nigel I mean Q4 is going to look a lot like Q3 in terms of the EF&C impact. So you saw the margin dilution 80 basis points at the enterprise level. We’d expect the same here in Q4. Revenues in Q3, $117 million which is in line with what we expected and we expect something very similar to that here in the fourth quarter. And then finally on the EPS side, consistent with what we said before, EPS neutral in the first six months here in the second half of ‘16 and then accretive, I would expect you to be accretive as we get into ‘17 and we have to go through the planning process as Scott said and then we’ll give you an update when we get to giving guidance for 2017.

Okay, I’ll leave it there. Thank you very much.

All right. Thank you.

Thank you. And the next question is from Mig Dobre from Baird. Your line is open.

Yes, thank you. Good morning. If we can go back to Food Equipment, I’m looking at North America service and growth here over the past couple of quarters has slowed a bit after running at 4% to 5% for the last couple of years. I’m wondering if you can give us any color as to what’s going on here, what’s driving the slowdown?

I wouldn’t say Mig it’s a slowdown, again if you go back and look, service in North America was up 4% in Q3 last year we’re up 2% this year, that’s pretty solid. But we’ve also talked about the fact that we think there is more potential here for organic growth, that’s probably closer to what we’re seeing at least on the equipment side.

I know, but I’m asking really about service. And it is a slowdown from the 4% to 5% that you’ve consistently put up since early 2014. And I guess my question is really going to this idea that we’re starting to see that restaurant sales have slowed here, and I’m wondering if that’s the driver or if it’s something else?

No, that’s not it at all. I think if you go back and look I don’t think we’ve put up 4% to 5% in service since 2014. But I think going forward that’s not an unrealistic expectation. I mean, services is stable here, we talked about this last quarter, also little bit of PLS in some parts of the business. But overall, kind of been this low single-digit is a pretty good way to think about the business on a go-forward basis, from a growth standpoint. And then obviously as you know this is a very profitable part of the business, more profitable than the equipment side.

All right. And then my follow up is back to Auto, looking at the core margin this quarter which was flattish on pretty good volume growth. I’m wondering if there is a bit of a mix issue there or anything else you would highlight.

Yes, that’s exactly right. It’s really a product mix issue.

And how do we think about?

So, I’m just saying Mig, 25.5% in automotive pretty solid margins and you’re right to point out that the volume leverage really here is the reason why I didn’t show up is the product mix issue.

Is this with us going forward into the fourth quarter?

No.

It might be it’s hard to forecast to that level of detail. But what is going to be with us on a go-forward basis of these core margins, in the mid-20s.

Thank you.

Thank you. [Operator Instructions]. Our next question is from Andy Casey from Wells Fargo Securities. Your line is open.

Thanks a lot. Good morning, everybody. Just another question on the Auto margin, could you define what the purchase accounting charges were in Q3, and are there any one-offs in Q4?

Yes, no, I think rather than go through the individual pieces here Andy I’d rather wait until we can give you the complete picture, also and include in that the guidance here for next year. What I will tell you is that the business is actually performing a little bit better than what we thought from an operational standpoint. The operating margins are like where we thought they were going to be. There were no surprises from a purchase accounting standpoint. And like we said there was no EPS impact here in the quarter.

In fact means that the charges basically ate up what the business earned in the last couple of quarters, yes.

That’s exactly right. So that’s the way to think about it. And we’ve talked about this Andy. When we give you guidance for ‘17, we’ll give a complete picture.

Okay, thank you, Michael. And then the last one in Polymers & Fluids, within that, the 1% North America decline. Can you give any color on that, and update us on what’s going on in the Auto after market?

Yes, I think automotive aftermarket was pretty stable here again, flat to slightly positive. The decline is really tied to the maintenance, industrial MRO side of that business so industrial lubricants and consistent with what we’ve seen in prior quarters. That is still somewhat challenged, the industrial MRO side.

Okay, thank you very much.

Thank you. And our next question is from Ann Duignan from JPMorgan. Your line is open.

Hi, good morning, everyone.

Good morning.

Good morning, sorry about the delay. Can you talk a little bit about the fundamentals in European Construction, and by country or by region and then by application? And where are you seeing strength, are you seeing any slowdown in the U.K., etcetera? If you could just give us a little bit more color on what you’re seeing there, that would be great.

I think Europe was pretty good this quarter up 2%, pretty steady and really nothing unusual as we went through the quarter or nothing really material to point out on a country level. So pretty steady state, we feel pretty good about the demand levels, obviously up 2% and feel good about it going into Q4.

Okay, so no big changes in the U.K. versus some of the other regions?

Not at this point.

No, I mean, overall U.K. as you know, our U.K. business overall, I’m not talking construction, it’s about 4% of sales and was actually positive in the quarter, like we talked about before the impact right now what we’re seeing is on the currency side moving on to translation side of things. But we haven’t seen anything other than that that’s worth mentioning.

And the FX, is that a net positive or a net negative? Are you exporting out of the U.K. or importing into the U.K.?

We’re producing and selling in the U.K.

Yes, the impact is really on the translation side. So we are, we have run profitable businesses in the U.K. and when we bring those, we translate those, pound, British Pound, earnings into U.S. dollars, there is a headwind. And so that’s what we’re talking about.

Okay, I appreciate the color. And then just a little bit more color on the automotive sorry to keep coming back to automotive. But your comments that mix had an impact on the quarter. Can you just give us more color there, is that regional mix or mix of builds, and just a little bit more on how we should think about that going forward?

Yes, I mean, when we were talking about this product mix, I think in North America and so, our content for vehicle might be slightly different by product line and that’s really what we’re talking about.

So can I take that as there isn’t a huge difference in margins regionally?

Yes, that’s correct, yes.

Okay, that’s important. Thank you. I’ll get back in line.

Thank you. And our next question is from Steven Fisher from UBS. Your line is open.

Thanks, good morning. I think you made indirect reference to this, David Raso, but how is your visibility changing on winding down PLS activities? To what extent are you increasingly confident that 2016 is the last main year we’ll see it as a headwind?

Well, I think what I would prefer to do is like to go through this planning cycle that we just talked about we will give you a good update on that in December. But I think before we do any speculating let our businesses run their plans for ‘17 through and then we’ll have a better picture there. Clearly at some point they will start lining down. I would also argue on the other side, we are - this is activity that is very healthy from the standpoint of profitability and focus. So to the extent that there is continued activity there that we’re going to continue to continue to support it until we get all the stuff out of here that we think needs to go so we can really focus on in the highly profitable parts of our business that we think have long-term growth potential. So, we’ll see what happens. I would expect it certainly things start to at least stabilize there if not start to slow down. But until we go through the actual details of what our businesses have in mind for next year, it’s hard to comment.

Okay. And then within your 35% or so incremental margin targets, how should we think about or how much of that is driven by pricing versus volume? As we look at slide 5, it looked like we had a negative volume impact there, so just trying to break that down if we could.

Yes, pricing is not a big margin driver for us here. Really the big margin driver is and has been I think Scott mentioned 12 quarters in a row of the enterprise initiatives, that’s really what’s driving the margin expansion. And the incremental margins, to go back and look historically that’s where the company has been for a very long time in that 30% to 35% range. And really on the pricing side, all we’re trying to do is to offset some material cost inflation but it’s not the key driver of our growth or of our margin expansion.

Okay, thank you.

Thank you. [Operator Instructions]. Our next question is from Stephen Volkmann from Jefferies. Your line is open.

Hi, good morning. Most of my questions have been answered, but I think you said price cost was like 10 basis points or something in the quarter. I’m just curious if there’s anything interesting to talk about on either the price or the cost side, and how we think that’s going to look maybe in the fourth quarter? Does it actually turn negative, or whatever commentary you might have there? Thanks.

Yes, no there is really nothing interesting to report. I mean, like I think I said all we’re trying to do is offset to the extent that there is material cost inflation that’s we’re trying to offset that with price. We’ve been in this, 10 basis points to 20 basis points range for a number of quarters here, actually longer than that. And we expect to stay in that range on a go-forward basis.

Okay. I guess there’s a perception that some of these material costs are starting to go up. Are you seeing that and you’re just able to price for it, or is that not consistent with what you’re seeing?

We’re not seeing any material cost inflation at this point. And when we do we will react like I said, and do our best in the divisions to offset that with efficiency and with price.

I appreciate it, thanks.

Thank you. And for our last question for today we have Jamie Cook from Credit Suisse. Your line is open.

Hi, good morning. I just guess just two follow-up questions. One, in your prepared remarks you mentioned free cash flow. The free cash flow was a little light, and it sounded like there were some timing issues. Can you just talk around that sort of what the issues were and how much incremental that is to the fourth quarter? And then second, I guess when I looked at your Construction revenues on an organic basis, it’s still up but obviously the increases are declining. So just a little color on your concern whether that market is turning at all in particular with the ABI data points that we’re getting out because commercial was also very strong within the Construction segment? Thanks.

So, I think on the free cash flow, like I said on a year-to-date basis we’re exactly what we were last year so there is, things can move around a little bit on a quarterly basis, for example, our CapEx number is up a little bit this quarter, but year-to-date it’s exactly in line with last year. And then maybe some larger payments that go out in one quarter versus another, we fully expect we’ll be at above 100% for the year, which would imply a strong Q4, which seasonally that’s what we usually do. So, other than that, we feel very good about the free cash flow performance. And on the construction side, I would just add, similar to what we said earlier, I mean, demand is pretty steady state. There are some comp issues that we’re dealing with but we feel good about the using current run rates to model the fourth quarter and we’re not expecting any big changes from where we are right now.

Okay, thanks. I’ll get back in queue.

Okay. That’s all for the questions sir.

Very good. Thank you very much. And have a great day.