Thanks, Tammy. Good morning, and welcome to ITW's Third Quarter 2021 Conference Call.

I'm joined by our Chairman and CEO, Scott Santi; and Senior Vice President and CFO, Michael Larsen. During today's call, we will discuss ITW's third quarter financial results and update our guidance for full year 2021.

Slide 2 is a reminder that this presentation contains forward-looking statements. We refer you to the company's 2020 Form 10-K and subsequent reports filed with the SEC for more detail about important risks that could cause actual results to differ materially from our expectations.

This presentation uses certain non-GAAP measures, and a reconciliation of those measures to the most directly comparable GAAP measures is contained in the press release. Please turn to Slide 3, and it's now my pleasure to turn the call over to our Chairman and CEO, Scott Santi.

Thank you, Karen. Good morning, everyone.

In the third quarter, we saw continued strong growth momentum in 6 of our 7 segments and delivered excellent operational execution and financial results. Revenue grew 8% with organic growth of 6% and earnings per share of $2.02 was up 10%.

At the segment level, organic growth was led by welding at plus 22%; food equipment at plus 19%; Test & Measurement and Electronics at plus 12% and specialty products at plus 8%. Our automotive OE segment continued to be impacted in the near term by auto production cutbacks associated with the well-publicized supply chain challenges affecting our auto customers.

In Q3, auto production cutbacks ended up being significantly larger than what was projected heading into the quarter. And as a result, our auto OEM segment revenues were down 11% in Q3 versus the minus 2% we were expecting as of the end of June.

In a very challenging environment, our teams around the world continue to do an exceptional job of executing for our customers and for the company. In Q3, our people leveraged the combination of ITW's robust and highly flexible 80/20 front-to-back operating system.

The company is close to the customer manufacturing and supply chain capabilities and systems and our decision to stay fully staffed and invested through the pandemic to sustain world-class service levels for our customers. They also executed appropriate and timely price adjustments in response to rapidly rising raw material costs.

And as a result, we were able to fully offset input cost increases on a dollar-for-dollar basis in Q3, resulting in 0 EPS impact from price cost in the quarter. And, by the way, our teams also managed to continue to drive progress on our long-term strategy, execute on our Win the Recovery positioning initiative and deliver another 100 basis points of margin improvement benefit from enterprise initiatives.

Moving forward, we remain very focused on sustaining our growth momentum and on fully leveraging the competitive strength of the ITW business model and the investments we have made and continue to make in support of the execution of our enterprise strategy. Before turning it over to Michael, I want to thank all of our ITW colleagues around the world for all their efforts and for their dedication to keeping themselves and their ITW colleagues safe to serving our customers with excellence and to driving continued progress on our path to ITW's full potential.

Michael, over to you.

Thank you, Scott, and good morning, everyone. As Scott said, demand remained strong in Q3 with total revenue of $3.6 billion an increase of 8% with organic growth of 6%.

Growth was positive in 6 or 7 segments, ranging from 3% to 22% and in all geographic regions, led by North America, up 9%; Europe, up 1% and; Asia, up 5%. China was up 2% versus prior year and up 6% sequentially.

GAAP EPS of $2.02 was up 10% and included a onetime tax benefit of $0.06. Operating income increased 7% and operating margin was flat at 23.8% despite significant price cost headwinds.

Enterprise Initiatives were real positive again this quarter at 100 basis points, as was volume leverage, which contributed more than 100 basis points. Thanks to a great effort by our businesses, price cost was EPS-neutral in Q3 but still dilutive to operating margin percentage by 200 basis points as raw material cost increases further escalated in the third quarter.

Throughout 2021, our businesses have quickly and decisively responded to raw material and logistics cost inflation with pricing actions in alignment with our policy to fully offset these cost increases with price on a dollar-for-dollar basis. And we've talked about this before, but given the current environment, I'll remind you that we don't hedge.

So current cost inflation is always moving through our businesses in real time. After-tax return on invested capital was 28.5% and free cash flow was $548 million.

Free cash flow conversion was 86% as our businesses have been very intentional about adding inventory to both support our growth and to mitigate supply chain risk and sustained world-class service levels for our customers. Overall, for the quarter, then strong growth in 6 of 7 segments and excellent operational and financial execution across the board.

Let's go to Slide 4 for segment results. And before we get to the segment detail, the data on the left side of the slide illustrates our strong Q3 results with and without automotive OEM.

I wanted to highlight 2 key points. The first is the benefit we derive from our high-quality diversified business portfolio in terms of the strength, resilience and consistency of ITW's financial performance.

which is enabling us, in this case, to power through significant near-term headwinds in our largest segment and still deliver top-tier overall performance. The second is the accelerating growth momentum with strong core earnings leverage we're generating across the company.

Excluding our auto OEM segment, given the issues affecting that market right now, the rest of the company collectively delivered organic growth of 11%. Operating income growth of 14% and an operating margin of 25% plus in Q3.

As you can see on this slide, if you eliminate the price/cost impact, our core incrementals were a very strong 52% in the third quarter, which points to the quality of growth and profitability leverage that define the core focus of our business model and strategy. Now let's take a closer look at our segment performance in Q3, beginning with automotive OEM on the right side of this page.

Organic revenue was down 11%, with North America down 12%, Europe, down 18%; and China, up 2%. And as Scott mentioned, supply chain-related production cutbacks were much larger in Q3 than what we and most, if not all, external auto industry forecasters were expecting heading into the quarter.

While conditions in the auto market are obviously very challenging in the near term, but really good news from our standpoint is that the eventual and inevitable recovery of the auto market will be a major source of growth for ITW over an extended period of time once the current supply chain issues begin to improve and ultimately get resolved. Between now and whenever that is, we will remain fully invested and strongly positioned to support our customers and seize incremental share gain opportunities as production accelerates coming out the other side of this situation.

Turning to Slide 5 for Food Equipment, and organic revenue growth was very strong at 19% and the Food Equipment recovery that began in Q2 continues to gain strength. North America was up 18% with equipment up 20% and service up 14%.

Institutional revenue, which is about 1/3 of our revenue, increased more than 20%, with strength in education, up over 40% and health care and lodging growth of around 20%. Restaurants were up almost 50% with strength across the board.

Strong demand is evident internationally as well with Europe up 20% and Asia Pacific, up 23%. Equipment sales led the way up 26% with service growth of 8%.

In our view, this segment is in the early stages of recovery as evidenced by revenues that are still below pre-COVID levels. Test & Measurement and Electronics organic revenue was strong with growth of 12%.

Test & Measurement was up 15%, driven by continued strength in customer CapEx spend and in our businesses that serve the semiconductor space. Electronics grew 8% and operating margin was 26.8%.

So moving to Slide 6. Welding demand continued to be very strong with organic revenue growth of 22%.

Equipment revenue was up 25% and consumables grew 18%. Our industrial businesses increased 32% in the commercial business, which sells to small businesses and individual users grew 18%.

North America was up 24% and international growth was 12% with continued recovery in oil and gas, which was up 9%. Welding had an operating margin of 30% in the quarter.

Polymers & Fluids organic growth was 3%, with demand holding steady at the elevated levels that began in Q3 of last year. And as such, had a tough comp of plus 6% a year ago.

In Q3, growth was led by the Polymers business, up 8% with continued strength in MRO and heavy industry applications. Automotive aftermarket grew 4% with sustained strength in the retail channel.

And Fluids was down 5% due mostly to a decline in pandemic-related hygiene products versus prior year. Margins were 24.2% with more than 250 basis points of negative margin impact from price cost driven by significantly higher costs for resins and silicone.

Moving to Slide 7. And a similar situation with construction, where organic growth was also up 3% and also on top of a strong year-ago growth rate of plus 8%.

All 3 regions delivered growth with North America up 2%, with residential renovation up 1%, on top of a plus 14% comp a year ago and commercial was up 10%. Europe was up 8% and Australia and New Zealand was up 2%.

Specialty organic revenue was up 8%, driven by continued recovery in North America, which was up 15%, and international was down 4%. Equipment sales were up 10% with consumables up almost 8%.

Let's move on to Slide 8 for an update on our full year 2021 guidance. As you saw in the press release, we're updating our GAAP EPS guidance to a range of $8.30 to $8.50 which incorporates the impact of actual and anticipated lower automotive customer production levels in Q3 and Q4 versus our previous guidance on July 30.

We now expect the Automotive OEM segment revenue to be down about 15% in the second half, including being down 20% in Q4 versus the forecast of roughly flat second half auto OEM revenues that was embedded in our previous guidance. All other segments remain on track or better versus our previous guidance.

Our $8.40 midpoint equates to earnings growth of 27% for the full year. We now expect full year revenue to be in the range of $14.2 billion to $14.3 billion, which is up 13% at the midpoint, with organic growth in the range of 11% to 12%.

Of that organic growth rate of 11% to 12% volume growth, including share gains are 8% with price of 3% to 4%. For the full year, we expect operating margin of approximately 24%, which is up 100 basis points versus last year.

And the fact that we're expanding margins at all in this environment is pretty strong performance, considering that we now expect raw material costs to be up 9% or more than $400 million year-over-year, which is more than 4x our expectation coming into this year. Our businesses are on track to offset raw material cost increases with pricing actions on a dollar-per-dollar basis, which, as you know, is EPS neutral but margin dilutive.

As raw material costs and consequently, price have gone up more than what we predicted in our previous guidance, we now estimate margin dilution percentage impact from price cost for the full year at about 150 basis points versus our previous expectation of 100 basis points. These margin headwinds though, will be offset by strong volume leverage of about 250 basis points and another solid contribution from enterprise initiatives of more than 100 basis points.

Free cash flow is expected to be approximately 90% of net income as we continue to prioritize sustaining our world-class service levels for our customers in this challenging environment, and as such, we will continue to invest in additional working capital to support our growth and mitigate supply chain risks. Our updated guidance is based on an expected tax rate for Q4 of 23% to 24% for a full year tax rate of approximately 19% to 20%.

And as per usual process, our guidance excludes any impact from the previously announced acquisition of the MTS Test and Simulation business. We are awaiting one final regulatory approval and expect to receive that and close the transaction in Q4.

So in summary, this will be a record year for ITW with double-digit organic growth, margin expansion, strong cash flow and EPS growth of 25% plus. We expect this strong demand momentum to continue in Q4 and well into next year with an additional boost from automotive OEM likely at some point in 2022 as the supply chain issues there begin to improve.

ITW remains very well positioned to continue to deliver differentiated best-in-class performance as we leverage our diversified high-quality business portfolio, the competitive strength of ITW's proprietary business model and our team's proven ability to execute at a very high level in any environment. With that, Karen, I'll turn it back to you.

Thanks, Michael. Operator, can you please open up the lines for questions?

And maybe just on - so to start. Could you speak to what, if any, kind of maybe whipsaw effect that's going on as it relates to inventories.

Just really trying to think about kind of how and when your sales might fully recouple with production? Or do you feel like they are fully coupled at this point?

So any kind of nuances there to be aware of as we try to get out of this point.

Yes. I don't know a whole lot of nuances.

I know that our customers expect us to be able to - as we've talked many times before, we work today, we ship tomorrow. In the auto space, we are certainly giving quarterly guides from our customers in terms of their production forecast.

And obviously, those have been more volatile than normal of late. But I would say that we're not - there may be a little bit of inventory cushioning going on if you look at sort of build rates relative to our sales I think our sales were actually higher than production declines in Q3 by sort of an incremental margin about 3 percentage points.

I don't know the exact number. But - so there may be a little bit of cushion building there just given the overall environment.

But I would say once this thing starts to turn around, that we should see a pretty immediate effect.

And Scott, would you speak also just to the activity of your M&A pipeline. It looks like we're close to getting MTS done.

Are you working an active pipeline at this point?

We've talked about this many times before. We are a very interesting opportunity to require.

We get things run by us all the time. We have a very clear and well-defined view of what fits our strategy and our financial criteria.

And so there are things that are continuously being evaluated. But it's just a matter of the right opportunity presenting itself as we go forward, and that was certainly the case with MTS, and I expect that there will be others at some point.

But I would not speculate as to one.

And just one quick house cleaning one for Michael. The unallocated cost has kind of been running higher all year and bumped up a little bit more?

Like what's going on there? And what should we expect?

Yes, I think during the last four quarters, we're averaging about $30 million or so. And there are certain costs that we don't allocate out to the segments, example is health and wealth are costs are going up year-over-year.

And there's really a laundry list of things there. I would assume that we'll stay somewhere in that 30% to 40% range on a go-forward basis.

I love your slide deck. 6 real slides, 15 minutes of prepared comments, that's best-in-class from what I can tell.

I appreciate the brevity and the information. Anyways, just switching gears a little bit.

I mean it's a little bit of a hard to perhaps measure, but your comment maintaining world-class service levels. When you think about your on-time deliveries kind of today versus where they were few quarters ago versus perhaps pre-pandemic?

Are they back up to kind of comparable levels? Did they ever slip that much?

I'm sure your competitors - some of your competitors probably had major problems.

Yes. It is a bit of a summation of a number of different cases, but I would say, certainly, there are a number of our businesses that have sustained their traditional order and they ship tomorrow kinds of service levels throughout this environment, although I have had to certainly work a lot harder with a lot more brute force given the environment to make that happen.

In some other cases, I'm thinking about, we've gone from ship tomorrow in order today to ship in a week. But I'm also thinking of cases where we've got people we compete with in certain markets that are now quoting deliveries into next year.

So I think from a standpoint of relative advantage, I think we are - again, without 84 different cases, I can't necessarily excite every exact one of them, but my bet is that we are - that the relative advantage that we have is actually increased in that regard in terms of our ability to deliver in our service level to our customers in this pandemic period.

And does that make it, Scott, easier to get price than given the value promise that you have in delivery and predictability and such that your customer doesn't have to hold a lot of extra inventory because they can have some faith that you guys are going to be there for them.

I would imagine that's certainly part of it. I think the overall dimension of the value add in terms of the IP relationship as we try to outserve to give our customers the best overall value prop in terms of both the performance of the products we supply them, the service we delivered put around those, and it's not just the delivery service, it's service those businesses where we have service positions like food equipment.

And so I think in all of that, I think all of our customers are well aware of their raw material environment. So I think from the standpoint of overall value delivery, our value to them, to the environment that we're in and the fact that we're just trying to recover on a dollar for dollar, we're not trying to get the margin back.

I think, as we said before, because we're interested in and expanding our relationships with those customers, I think all of that speaks to the fact that we've been able to recover dollar for dollar.

Good job given the challenging environment. I guess just my first question, just on the margins on the construction business.

You were up, the margins were down a little. So just trying to get some color there and when we can see sort of margin recovery.

And then my second question, can you just give us an update on sort of what the opportunities are sort of the M&A pipeline and could help - could that further supplement the growth opportunity going forward?

Jamie, I think you may have missed it. We just talked about the M&A pipeline a few minutes ago with Jeff.

So I'm going to skip that.

I'm sorry [indiscernible]...

It's okay, don't worry about it. I mean I think in terms of construction as we look at kind of the margins on a year-over-year basis, good enterprise initiative contributions, good volume leverage.

And then the headwind is really on the price/cost side. So we talked in this segment, in particular, steel costs are a significant headwind.

Obviously, offset with price on a dollar-for-dollar basis, like are in line with our policy here but still margin dilutive pretty significantly at over 300 basis points here in the third quarter. I think once the timing in terms of when is that going to be - when is that impact going to start to diminish is difficult to say.

What we can say with a high degree of confidence is and also at this point to our track record, our ability to read and react to whatever cost increases come our way and respond appropriately and decisively with price. I think kind of that track record speaks for itself, and we'll continue to do that.

And we're certainly hopeful that the worst is behind us, but we're not counting on that as we look forward. And so you'll probably see a little bit of margin pressure in construction again here in Q4 relative to Q3.

Q4 has some - we've got a couple of less shipping days, seasonality, typically, we go down in Q4 relative to Q3. But I'd say in terms of the long term, structurally, construction margins are going to be back in the high 20s at some point here once these near-term issues get resolved.

So I know it's early to talk about '22, but maybe just big picture. Given the growth momentum in your businesses.

Ex auto, up 11%, and auto potentially reflecting in '22, as you said. At this point, what's your conviction level that ITW can deliver, let's say, continuing above trend levels when we think about our longer-term goal of 3% to 5% organic growth.

And maybe dovetailing with that, are any of your businesses actually snapping back faster than expected. Food equipment comes to mind that may continue to lead growth going into '22?

Well, I think, Andy, like we said, I mean, we certainly have some really good momentum in our businesses in Q3 and Q4, if you kind of set the auto situation aside, those businesses are up 10% organically. And like you said, there's some really positive momentum, particularly in the more CapEx-oriented businesses.

So welding, test and measurement, food equipment, and then I think like we said, once the automotive production challenges get resolved, I think we're set up really well for a strong recovery down the road. We think potentially in 2022, we'll see some positive momentum as well in automotive OEM.

So we've not rolled up the plans yet fully embedded the plans fully for 2022 yet. But - and until we've done that, I don't really want to go comment too much.

We'll give you a full update in February, like we always do when we provide guidance. But certainly, in terms of demand the volume leverage that goes with that, the momentum on still on enterprise initiatives 9 years in.

Our ability to deal with whatever cost and supply chain issues come our way. I think we're really well set up for 2022 and beyond.

Michael, that's helpful. And then you mentioned Q4, I mean there is some normal seasonality.

You mentioned less shipping days. Obviously, you're forecasting EPS in the middle of the range to be down a little in Q3.

Is there anything else going on? Is it maybe a lag in how costs still hit the P&L in auto and maybe polymers and fluids?

And then would you say that Q4 maybe is the peak negative margin impact from materials and resins and that kind of stuff.

Well, I hope so. We're not counting on it.

I think if they don't go up anymore. Yes, look, what I can say just on the materials, I think the rate of increase - from Q2 to Q3, we saw a big step-up in our raw material cost inflation.

I think it's unlikely we'll see the same thing here in Q4. I mean, we're already through October.

But beyond that, who knows, I think, like I said, it's a typical seasonality for us. We go down from Q3 to Q4, revenues are down.

Margins are down. We've got 2 less shipping days.

Automotive OEM, we said down 20% year-over-year. The other 6 segments will all have positive organic growth.

Margin performance in those segments will be similar to Q3, if not a little bit better. And then you just need to adjust for the tax rate, the discrete item, we gave you the detail on that in Q3 versus Q4.

And then there is a little bit of currency headwind, which is really more of a rounding, but we have a little bit more currency headwind in Q4 than Q3. So - you put all of that together, you get to what hopefully is a risk-adjusted pretty good outlook for the fourth quarter, and we'll see where we go from here.

So...

I'm laughing because it's like 20 years later. Perhaps just digging a little bit more.

I know you've talked a lot about the momentum going into 2022, but you said in your nice brief opening comments, that other than automotive, some of your other businesses were actually doing better than you had expected. If you could just expand on that a little bit.

And then on the food service equipment side, particularly on institutional, is there any risk that there's some pull forward of demand, a lot of institutions curtailed by the federal government with COVID aid. I mean, are you hearing anything about that driving demand on the institutional side.

So broadly, first and then maybe a little bit more on the drivers of demand in Food Equipment.

Yes. I think your first question kind of, I think, was what improved here relative to expectations.

I mean food equipment and welding, certainly test and measurement. We did talk about on the last call, we had some onetime equipment orders in Q2.

If you take those out, the momentum is really strong as well in the test and measurement business on the back of strong demand on the semiconductor side. So I'd point to those 3 as the strongest.

In terms of the institutional side, we really don't think that there's a significant impact there. I mean from pull forward, overall, in the institutional side was up, like we said 20%, education was up 40%, but health so was health care.

Health care was up 20%. So we don't really think that there's a significant impact.

And we certainly haven't seen anything slowing down on the institutional side or really any of the other kind of end markets within Food Equipment.

Okay. And then just following up on the Food Equipment side, are you seeing any changes in the types of equipment being demanded coming out of COVID, thinking about the changes to quick serve or to any restaurant side.

Any notable like secular or structural changes in the types of equipment that are being ordered?

Not really, Ann. No, I think this is very similar to kind of our normal product mix, if you like.

So there's no real impact from that.

Can we spend a minute just talking about auto OEM margins and pricing - So my understanding is that historically, you guys price when you win your platforms, and it's difficult sometimes to get back and try to get price from auto OEMs? And so what I'm trying to understand, I guess, is like at what point do we start to see kind of the equation turn positive for you from a price cost perspective and thinking about the potential recovery for those margins longer term?

Yes, our - structurally derived under normal circumstances that generally, the pricing is much more sort of contractually negotiated in the auto space relative to the rest of our businesses. What I would say in regards to this current situation is the delta of inflation, raw material cost is certainly one where we're having discussions about with our customers about needing to adjust that.

And we're not clearly the only ones in that respect with our auto customers. So we're working through that.

I would say it's certainly - it remains the segment with the biggest lag in terms of our ability to recover, but ultimately, those - we're going to - our approach there is the same as it is in the rest of the company is that we're going to expect to get full recovery on the dollar amount of inflation that we're seeing. And I'd say the margin issue there is sort of the price cost is somewhat of an issue in the short run, but it's much more value.

There's a lot of volume leverage there. And as we start - shipments start improving, volumes start to recover given some of the supply chain snacks get resolved, then we'll have - there's nothing that I see that won't get us back to sort of prior peak in terms of auto margins and have them go up from there as we grow that business.

Yes. And if it helps, Joe.

I'll just add, if you're a little worried about margins here in the near term in auto. I mean, I think we just did 17%, which I think is in this industry is probably top-tier performance, if not best-in-class.

And I think in Q4, we expect maybe the typical step down from Q3 to Q4, but margins will still be solidly in the mid-teens. Overall, for the company, I think what we're - what's implied in our guidance is operating margins for Q4 and that 22%, 23% range.

And so hopefully, that helps you quantify anything that you may be worried about in terms of the margin performance here.

Yes. No, that's really helpful.

I appreciate that color from both of you. And I guess just my one follow-up is just on MTS.

It's funny, like I almost had forgotten that you guys had acquired the company or to or in the process of acquiring the company. I guess - can you elaborate a little bit on what's taking so long?

I think I think you've got announced in the first quarter. And then...

Yes, I don't want to do that, Joe. We're at the I don't know, 2-yard lines.

So let's just leave things where they are, and we'll get it over the goal line here soon.

Okay. Is there anything you can tell us about the accretion from the business?

Because we have it kind of sized like roughly $500 million business with like high 20s type gross margin. So any thoughts on potential accretion into 2022 if it closes this year?

I think in year one, kind of we've said EPS neutral, we think that's still the case. I mean there's going to be a little bit of purchase accounting upfront here.

And we didn't buy this business for what it's going to contribute to EPS or not in 2022. This is really much more of a long-term play.

In terms of size, you can go back and look pre-COVID. I mean, your numbers are about right, a little over think it was $560 million in '19.

The purchase price of $750 million is what we disposed entry margins, 6% EBIT in a space that we know quite well, and I think you're familiar with the Instron business. So we're really excited about getting this over the goal line and welcoming the MTS team to the ITW family and get to work.

The one benefit is we've had a lot of time to get ourselves organized around integration planning and everything we've seen has confirmed what we saw in due diligence in terms of the raw material and how well we think this business is going to perform over the next 3,5 years plus.

Just wanted to follow up on the near-term organic growth outlook. So it looks like, I think, implied volume growth year-on-year is maybe down in Q4 for ITW overall year-on-year.

If you've got sort of pricing up mid-single digits. I just wanted to check that that's roughly the right way to think about it on volumes?

And is that auto OE-related anything else where the volumes are soft? And how confident you feel in that overall sort of market share recapture effort?

But to answer your question, it's all automotive OEM here in Q4 with revenues down 20%. The other 6 or 7 businesses are performing like we said at a really high level combined.

If you just look at the other 6 segments, organic growth is almost 10% in Q4, or projected to be 10% margins, 25% plus, similar to what they - these businesses did in Q3. And so it's really this near-term issue in auto OE that's making the numbers look a little different than what we normally do.

Understood. And then just circling back on the divestment aspect.

I think you discussed acquisitions a couple of times. In the recent past, you've talked about divestments maybe being on the table next year.

And certainly, we've started to see some other industrial companies divesting assets now because valuations are very, very elevated. Just wanted sort of your latest thoughts on that divestment aspects, clearly multiples are high, just wanted sort of if you are planning to wait a bit more just to let the operating profit keep growing.

Well I think this is a reminder to - so you said we pulled back on these planned divestitures right when COVID hit. That was not a good time to sell these businesses and we had a few other things going on and we really - And I think we said this, we thought these businesses would be worth more coming out the other side, and that's absolutely going to be the case, not just in terms of the underlying performance of these businesses.

It's significantly better than before. And then you're right, we expect multiples have certainly gone up.

And so we think that early next year will be a good time to kind of relaunch some of these processes. If you go back to when we announced this program.

this plan in 2018, we've got a little less than half of the divestitures completed at this point. So we've got another $300 million to $500 million worth of businesses here, revenues that we're taking a close look at.

And Michael, good to have you back on the call. I want to just maybe ask Joe's question on a slightly different way.

I know you have a multi-year contracts with the OEMs. But just given the extreme pressure on inflation, do you have any mechanism to pass along that by surcharges, et cetera?

So just curious. And the spirit of my question is that if we do see volume recovering to maybe not 2022 but 2023 are we still going to be little bit under water on sort of the inflation recovery assuming you can't try to all the contracts in the .

Scott talked about the contractual nature of the industry and so it's taking a little bit longer to get those prices adjusted and it's hard for us to say as we sit here how that going to play out next year. I think what happens ultimately - and we can go back and look what happened in '18 which was the last kind of inflationary cycle and then how we got way ahead of those cost in '19 and that's eventually how this will play out.

Exactly when that happens is difficult to say. I'll just bring up the point in terms of the benefit we have from not being an auto company but being a multi-industry with a high quality diversified set up businesses that are differentiated and demonstrated again this year that every business can get price when faced with some pretty unprecedented levels of inflation, and that will be no different on a go-forward basis.

We'll be - I think we're really well positioned to read and react in all of our segments, and then auto will take a little bit longer. So I think maybe that's the way to think about it.

Yes. Maybe just the one thing I'd add is that these are - while we talk about sort of the contractual elements of these relationships.

They're also partnering with it. These are cooperative relationships.

We've been partners with our customers for a long time. So I think given the environment, whether - and I don't think it's the contractual provisions that are the ultimate obstacle, it's about what's fair for both parties and each of us working together in the current environment.

So I wouldn't overly - I don't know if this is word contractualize these relationships. These are long-term relationships with partners who need us and we want to do our best to serve them.

And so there's - it will all be worked out.

And maybe I'll just add, the price/cost equation is one element of the margin expansion here at ITW. I mean, if you look at the volume leverage that we're getting with just a little bit of organic growth, and look at the incremental margins here, once price cost starts to settle down a little bit.

And then we still have the enterprise initiatives. So.

I wouldn't get too negative on the price cost side as you look into next year. And again, in February when we get together and give you guidance, we'll give you a lot more detail on this.

Okay. Thanks, Tammy.

I just want to thank everybody for joining us this morning for our short and efficient call, and have a great day.