Earnings Call: H2 2015

Mar 16, 2016

Good morning, ladies and gentlemen. I would like to welcome you here today to the TTi Group's 2015 annual results announcement. I think we have record attendance. I apologize there are not enough shares and I guarantee to you we didn't save on beverages it looks. And Neil sorry, some of you people have to stand in the back. Thank you. 20 15 marks another milestone for our group, and it is our 30th anniversary. I am happy to report that TTi delivered another record year of revenue, profit and gross margin. And accordingly, we also increased our dividend which will make our shareholder very happy for the months to come. Frank, thank you. Thank you, Mr. Chairman. We had a solid year of revenue while expanding our gross dent in our Floor Care division, which was minor. We relocated our manufacturing from Mexico to China, and there were some costs involved only one time. And we are well on track position our performance nicely for 2016. And Joe will give you some more details. And I'm sure that we will continue our momentum and only positive surprises to come. Thank you. Frank, on to you. Thank you, Mr. Chairman. So as Chairman said, another record year for TTi, be it results and be it turn out. So thank you. And our revenue at a record of over US5 $1,000,000,000 with gross profits, net profit and margins all increased for the 8th consecutive year. We've delivered all the targets set at the beginning of 2015, continuous revenue growth, margin net profit increase, strong balance sheet and low gearing. Our turnover increased by 6% to US5.04 billion dollars despite currency headwinds negatively affecting our top line upon translation. However, if we exclude the FX effect, our revenue actually grew by 10.5%. This growth demonstrated the strength of our brands and the results of our continuous very focused investments in new products and marketing. It's also worth highlighting that Milwaukee delivered a very strong growth of 17.7 percent on a global basis or 23.7% excluding currency effect. Milwaukee's strong growth momentum will continue in the coming years and Joe will share more with you later. Gross margins increased from 35.2 percent to 35.7 percent, a 50 basis points increase over last year. Gross profit increased by 7.4 percent to $1,800,000,000 EBIT increased by 14% to $400,000,000 with margin improved by another 50 basis points to 7.9%. Net profit increased by 18 percent to US354 million dollars with a margin expansion of 70 basis points to 7%. Earnings per share also increased by 18% from US0.1641 dollars to US0.1937 dollars The Board recommended a final dividend of HK2325 dollars per share, an increase of 22.4% as compared to that of last year. Together with the HK0.16 interim dividend paid, total dividend for 20.15 amount to HK0.3925 per share, an increase of 24.6 percent over last year, representing a payout ratio of 26 0.2%. Power Equipment division accounting for close to 70 9% of the group's revenue led by Milwaukee strong growth and the outstanding performance of our Ryobi's 1 plus lithium ion product platform on both power tools and outdoor products increased by 11.8% or 16.8% excluding FX effect. Operating margins Floor Care Appliances Divisions, last year. Floor Care Appliances divisions revenue declined by 11.2% or 8.1% after excluding FX effect. However, both our Hoover and ORIC delivered growth on a global basis after currency. The negative impact of the adoption of the mandatory EU Energy Labeling Directives together with the planned exit of certain non strategic low margin and categories were the major factor for the revenue decline. With the causes associated with the EU labeling directives, investments in promoting our lithium ion cordless programs for 2016 and certain one time expenses charged to the P and L in the second half of twenty fifteen exiting non strategic businesses and the relocation as Chairman mentioned. Operating profits of this charges, which is non recurring in nature, operating margin actually was at 3.1%. From a geographic perspective, North American market representing percent if we exclude currency impact. Europe representing approximately 17% of the group's revenue registered an 11.1 percent decline. Excluding the negative translation effect, our European business delivered an over 5 point 1% growth supported by the power equipment's 14.4% growth in this region. Rest of the again due to translation effect only delivered a revenue growth of 3.5%, but in essence the growth should be 18 point 9%. Australia continue to be the major growth driver in this region. Total SG and A spend increased by only 5.8 percent representing 27.9 percent of the group's revenue, very comparable to that of last year. They increased mainly from our continuous investments in strategic SG and A to fuel growth momentum and for market share gains. R and D spend remained at 2.5% of revenue comparable to that of last year. We've managed to leverage our administrative expenses against revenue growth. So administrative expenses only increased it by 2 0.4% supporting a revenue growth of 6%. Net finance costs reduced by 48.8 percent to 13,000,000 dollars representing only 0.26 percent of revenue as compared to 0.53 percent of that of last year. The improvement came from the retirement of some high cost debt in the Q1 of 2015 and better managed effective finance costs during the year, leveraging on our balance sheet, low gearing and strong operating cash flows. Effective tax rate was at 8.5% in 2015. We continue to maintain that an effective tax rate of in between 8% to 10% is very sustainable going forward. Our balance sheet remains very strong. Shareholders' equity increased by US189 million dollars to US2.16 billion dollars Net current assets increased by 17.2 percent to $924,000,000 Our gearing ratio remained low, it was 13.4% in 2015. However, if we add back the one time cash spend of US70 $1,000,000 for the purchase of our own corporate headquarters in Hong Kong and Q2 of 2015, our gearing remain low remain low with our strong cash flows from operations and very focused working capital management. Working capital as a percentage of sales was at 17%. The increase in percentage over 14 was mainly due to the planned strategy to carry higher inventory level to support our service levels. Considering our very strong growth momentum in the power equipment segment, particularly on Milwaukee. Inventory days was at 84 days, 3 days less than that of last year. It's partly due to the cash discounts we offer to our suppliers which accelerated our payments, but delivered eventual financial benefits to the group. Our working capital below our target level of 20% going forward with inventory days expected to gradually decline in the years to come. But in any case, most of the inventory increase being self financed by the increase in the payable date. So effectively our suppliers are also helping to finance the increase in inventory. Operating CapEx for the year increased by 4.7 percent to $161,500,000 very much in line with our 2015 projections. Total debt increased as a result of the cash purchase of our office, the strategic increase in working capital and additional CapEx spend. Excluding the working capital financing which basically itself financed by our working capital, we actually are in a net cash position. Currently approximately 92% of our debts matured beyond 12 months, so we have no refinancing pressure in 2016. Under the current low interest rate environment, we will continue to maintain 100 percent of our debts in floating rate, but we will closely follow the rate movements and we align our debt structure to optimize our portfolio if needed and accordingly. This concludes my review and I would like to pass the floor to Joe. Thank you, Frank. As Horst and Frank shared, we are thrilled to announce another record breaking year at TTi. Sales up 6%. But in local currency, we were up 10.5%, which means in the markets that we're targeting, we are capturing market share like the floor care miss in sales. So the power equipment part of our company was amazing. In fact, power equipment in local currency, up 16.8%. And it's true, Milwaukee is leading the charge. Our Milwaukee business is on fire, is growing at rates that have never been seen in the industry. But our other power tool, power equipment businesses, like Ryobi, 1 plus, our outdoor business, our AEG business, all these businesses are growing beautifully throughout the world. So this was a rare year where we saw every geography and every brand of the company in the power equipment exceed expectations. We're restaging Floor Care. We had some one time issues, as Horst pointed out. We're restaging Floor Care. We had some one time issues, as Horace pointed out. And we are also in the process of a very challenging shift from conventional floor care products to cordless and to a new commercial line. And I'll show you that in a moment. Our sales geographically were a real highlight in 2015. Of course, North America up double digit. But Europe, up 5%. And that's after the floor care situation. Europe was up strong double digit in power equipment. And we see Western Europe as a massive growth opportunity for the company. We love developed markets where there's a focus on safety on the job site and where the consumer that we sell to has the right level of disposable income to buy our high end products. And then of course, rest of the world, led by Australia, but not only Australia, it was up 18.9%. As Frank pointed out, we our P and L was a record breaking picture for 2015. Gross margin up yet again another 50 basis points. And that may be the most important metric in the presentation, because we are growing this company at a a double digit rate, while gross margin goes up year after year. Frank, how many years in a row now? We're talking 8, 7 years in a row. This is unheard of. So we're capturing market share, but we're not lowering price. We're raising price year after year and the gross margin keeps going up. And that's an incredibly exciting end result of a new product flow and of a technology machine that we have here at TTi that none of our competitors can match. And what we've done so far here is just the beginning. You didn't see nothing yet because we have so much new product on the way that we are very confident we can continue this kind of trend as we move into the future. So, of course, EBIT up 14 with the sales growth up 10. So that shows good leverage. And our net profit up 18. Again, excellent leverage on the bottom line. But we're still we still have a long way to go. So look at this chart. This is my favorite part of the presentation. It's again, gross margin back to 2011. To go from 32.6% in a fiercely competitive industry, where our competitors, of course, have been in place for decades. And we're talking about large global companies the U. S. And here we are taking all this market share and driving the gross margin up to unprecedented levels. That is, to us, the most exciting and the most critical part of the end results announcement. So I can assure you that that chart, that trajectory is not going to stop. We really believe the next 5 years, we can keep doing that same thing. Now, some years, we may go up 20 bps, some years 50 bps, some years maybe 70 bps. But the gross margin of this company will keep going up as we grow. And where it ends up some day, we don't know. Can we get to 38 or 40? We'll see. But I can tell you this, that every year you come to this presentation, you're going to see that moving up. Okay. So, working capital, Frank mentioned that we put inventory in place by design to serve our customers. So we added 5 days of inventory. Why? Because we already have a reputation at TTi, which Horace created, of being the best service level, the best supplier to come to retail partners like Home Depot or Bunnings in Australia. And we have so much new product coming in the first half this year. And we have so many commitments from our retail partners that we just couldn't take a chance and we decided we would put the inventory in. So, for me, this is a very positive element of our announcement, because it shows that we are not short sighted. Our competitors will often cut off production toward the end of the year, so that they can show good inventory results to lunis. This is insane. We are trying to impress our customers. And eventually, our investors will understand that. And that's why we built the inventory. So we will we do it again this year? I don't know if it will go up from 86 days. Maybe some years it will be 90, maybe it will go back down to 80. But remember what Frank said, the implication of that inventory build on our balance sheet is 0, 84 days. 10 years ago, we paid our bills in 20 days. So, we 4 days. 10 years ago, we paid our bills in 20 days. So we now have such an aggressive purchasing organization that we've been able to extract very favorable terms from our suppliers. And don't think this is TTi being a bully and being rough and tough with our suppliers. We are pretty good negotiators. But this is really when you show numbers where we're growing double digit, the suppliers say, well, of course, I will accommodate your request, improve your terms. All the other competitors in the power tool business are growing low single digit. And they talk about mid single digit growth like it's a big success. If we have mid single digit growth, a horse would throw us out of the room. We wouldn't even accept that kind of result. So, suppliers look at us and say, this is a company that's growing like crazy. We want to be part of it. Therefore, we will put the inventory in to support the growth of the company. So anyhow, and Frank, by the way, 17% working cap as percent of sales is still 3 full points below the target that we set of 20%. The best in class working capital as a percent of sales in our industry is 20. Most of our competitors are way above it. So, we're at 17. So, we are the best in the world at managing working capital. And we're doing that while we satisfy our customers, which is a great thing. Okay. So, we measure productivity a lot of ways, but the most basic way is to look at sales growth versus headcount. Once again, our sales were up 10 we're back on heads that we need, but we're because of the productivity programs in our company are working so well, particularly in the manufacturing operations, we've been able to grow sales and hold the headcount at a conservative rate. So this is a there's a lot of ways companies show productivity. Most of them are very difficult to understand by design, so you can't understand it. This is simple. If sales goes faster than headcount, then you know we're managing overhead effectively. Okay. A highlight of our year, and we had a lot of highlights and if I cover them all, we won't have time today. But a key highlight was our Milwaukee growth, where we yet again exceeded 20%, 23.7% growth in Milwaukee Power Tools Worldwide. This is in a mature industry, where these kind of growth levels have never been seen. How are we doing it? Well, we're doing it with new product. We have so much new product coming in Milwaukee, cordless, largely high technology cordless, that's well ahead of our competitors' capabilities. With all those cordless products that we're launching, we've been able to generate growth that's again, that you've never seen in the industry. But don't think that this is a one time success. We are building a machine here at TTi that we believe is capable of delivering this kind of crazy growth. This is Silicon Valley kind of growth. This is not normal for a mature, durables industry. This is the kind of stuff you see from Apple and from the brilliant companies in Silicon Valley. We may not be based in Silicon Valley, but Milwaukee Wisconsin is a long way from there. But the numbers in the new product flow and most importantly, the culture of the company is that same kind of idea. So, I can tell you that we are targeting this kind of growth the next 5 years in Milwaukee. And that's bold. And you start adding up the numbers and it gets big fast, right, Horace? But that's what we're committed to. And we have the new product around the world, most people think, well, yeah, that's just a U. S. Phenomenon. You guys are strong on Home Depot. The U. S. Is a key market for TTi. And that's true. We are very, very strong in the U. S. And Canada, where Home Depot is based. Home Depot is a brilliant partner of ours. They do a fabulous job marketing our products. I think our Chairman was clairvoyant in deciding Canadian market. And that's paid off for us fantastically. And you can see that 24.6% growth is pretty good. However, in Europe, where we are Milwaukee was an afterthought brand 5 years ago. Europe was up 24%. This is a market where every headline says, Europe is slowing down and the economy is bad. There's one issue after another in the European Union and we're up 24%. Now, we don't let our managers read these headlines anymore. We canceled all newspaper subscriptions. We just want people focused on new product, right? So we you know, sometimes it's best not to look at some of these gloom and doom headlines, because we have so much new product and so exciting. We're leading a stampede and a revolution away from corded tools to cordless. Therefore, it doesn't matter what the economy does. If we continue to do this strategy, you'll continue to see numbers like this. And rest of the world, up 15.5%, we are very excited about a focused strategy to develop Milwaukee in Asia, in Australia, in certain parts of Latin America, but it's very focused. There's a lot of markets that we're not focused on. For Brazil. We thought 5 years ago it was too risky. All of our competitors raced in and have invested big time in Brazil. And we'll see what happens. But I think I like our position of not being in. We also have been very conservative about China. We manufacture in China, but we really don't sell much in China. And now that the economy in China is corrected, our competitors have perhaps overinvested in China. And we have no issues there. We will lose nothing in China, right? Same with Russia. Our competitors all of our competitors went into Russia. It was the thing to do. Brazil, Russia, India, China. And we decided to be very, very conservative in China. If we can't collect the rubles I'm sorry, in Russia. If we can't collect our rubles on time, we didn't deal with the distributors. And that's why we have had the least amount of pain, Frank, in the Russian theater versus any of our competitors. So, anyhow, I like our geographic strategy a lot. So, this is, again, great statement about our company across the board, because every brand of power equipment was up nicely. Milwaukee was up 23%, but all the tool businesses collectively were up 16.8%. So think about that. We're 16.8 percent growth with the headlines you're reading worldwide in the economic environment. This is pretty incredible. The momentum we have right now on Ryobi 1 plus worldwide is amazing. This brand has become the number one brand of DIY power tools in the world today. And more importantly, the Ryobi brand has become the number one brand of DIY do it yourself cordless products in the world today. There was a time when Bosch or Black and Decker held that developed a dominant overarching platform of cordless products called RYOBI 1 plus that's selling like crazy and growing in all the continents where we sell these products. So and then even AEG, which was referred to as a graveyard brand 10 years ago, when we bought it, meaning it was a brand that was on its last leg. You get the metaphor, right? And suddenly, AEG has been electrified by our teams in Australia and Europe. And AEG is now growing and has a very important position in the company. And we have a sister brand in the U. S, which is a Depot Captive brand. And AEG and that sister brand work beautifully together. So, and by the way, let's not forget outdoor. So, TTi is today the world's number 1 lithium cordless outdoor company. So, the whole world sells outdoor products that are petrol or AC. And we were pioneers here. And let me tell you, sometimes when you're a pioneer, it's not so easy, because the retailers don't want to focus on it. Even our own company struggled with some of the vision we had for cordless outdoor. But today, TTi is by far the number one cordless outdoor power equipment company in the world. And our timing is impeccable, because suddenly people realize that pulling a cord and having fumes with a petrol powered string trimmer and rushing into the gas station every weekend and having a noise level that's impossible for your neighbors. People are realizing, if they just buy a Ryobi lithium cordless string trimmer, there's no noise, it starts instantly. There's no trips to the petrol station. And you end up with a much better experience for the user. So outdoor has become a major growth driver for the company. Okay. So let me give you some highlights on new products. Now, I apologize in advance, because we have so many new products we're rolling out that you're going to see some things that are new that aren't going to be covered in this presentation. Product that we're going to roll out in the market this year. And there is a lot. So, product that we're going to roll out in the market this year. And there is a lot. So, the most important new product that we've ever developed is Milwaukee Fuel. This is a line of cordless products positioned at the very high end of the market, in the ionosphere. These are the high priced products in the market. They feature a brushless motor and more electronics on board than you have in your iPad. These sophisticated, high technology cordless products have swept the job sites worldwide. You cannot believe how fast contractors are abandoning their $99 nickel cadmium throwaway cordless drills. And they're moving right to a $2.49 fuel advanced electronic based brushless motor product. So the momentum in this line at a very high price point is staggering. We've never seen anything like it. And our competitors, we launched our first version of Fuel 4 years ago. And our competitors some electronics. But the month after our competitors launched their version of fuel, we launched Generation 2, which is 50% better than when we started with. So the competitors took 4 years to launch products that were almost as good. And now they're back in a difficult position. And this is why we're taking so much market share in cordless. And I can assure you, we're already working on generation 3, 4 and 5. We have a bold vision when it comes to cordless. We are going to be the global leader in cordless, in the high end price point, mid price point, DIY price point with Ryobi. That is a clear focus of the company. Okay, so this year, we're launching a couple of amazing additions to the FUEL family, the FUEL platform. The first are these revolutionary cordless nailers. So historically, on a job site, when a wood based job site, when you're building homes out of wood, historically, you would buy a nailer that was fired with a pneumatic with a hose, with a compressor. So, these are pneumatic nailers. So, you had a nailer that was tethered to an unwieldy pneumatic cord. The cord the host the host connected to a compressor, which had to be fired by a generator. So the compressor, which is noisy and huge and heavy and expensive, the compressor had to be connected to a generator because the job site doesn't have power. So now you have 2 large, unwieldy, expensive, dated power sources to put to drive nails in wood. We eliminate all that with a cordless nailer that has the same kind of performance as one of those tethered nailers, except there's no compressor and there's no generator. And this thing is so fast, you can't believe it. When users try this nailer, they won't give it back. They won't put it down. And it's so jam free and so quick that it changes the way people look at, not only nailers, but cordless in general. And I think this is going to trigger the next impede from corded to cordless. I think when people see that we could do a nailer and cordless that's this good, they're going to realize that the days of the corded power equipment products are over. So we're going to launch that this spring. It's very exciting. We also are proud to continue to expand our the fuel breastless motor platform. So we have the broadest line of breastless motor tools by far. In fact, that's our current line of 18 volt. I think our competitors have about 10 tools that are brushless. And we have 50 on 1,000. We're not we're just getting started. Our competitors view this as a necessary evil. And we view this as the iPhone, the future. We don't want to make landlines anymore. We're not making pay phones anymore. We're focused on the smartphone market, which is fuel. Okay. We also have the only line of subcompact brushless motor products. No one's even attempted to do this yet. The reason is, it's really hard to take a brushless motor, shrink it and put it in a subcompact tool and get the power and the runtime that the user demands. But we've done here 9 times and we have another 30 of these on the way. So that will give us almost an exclusive position in the subcompact market, which is large and and enhancing the fuel platform with something that's really revolutionary and it's called One Key. So for the first time, we have a line of power tools and really in the whole power equipment industry. This program is the first time you have a digital Bluetooth controlled line of power tools. So we have created a unique Milwaukee cloud. And if you buy a one key tool, and we have 6 of them today, and we'll have 100 of them in 3 years. If you buy any of our 1 key tools, which are really fuel powered tools that have this Bluetooth capability and these electronics on board, suddenly you could take that iPhone. And if you're an electrical contractor in Silicon Valley and have a 1,000 trucks on the road, with that one iPhone, the manager of that construction firm can set the torque, the RPMs, the watts out, whatever metric is needed for the job site, and take all the guesswork out of this for the end user. And you can set it one time at headquarters. You can track every tool in your fleet. If you have 20,000 tools and you're the purchasing manager for a big contracting company, you can track the whole thing on when literally hundreds literally hundreds of apps being developed right now for our tools with these, with the iPhone or other smartphone capability. There are hundreds of apps. Contractors, when they see this, it's interesting. We presented this to many, many big users around the world. And inevitably, they come up with ideas that we didn't think of. And so what we've created here is an open platform. And we want contractors to share their ideas with us. And we want to turn those ideas into apps. Now, the Milwaukee Cloud is exclusive. The technology we have and the tools is bulletproof, protected, and The technology we have and the tools is bulletproof, protected and impossible to replicate. And we think we're way ahead of our competitors here in this kind of mindset. But we also want to use it to feel like they can help industry. So it's a very exciting time. It's interesting. In the old days in power tools, exciting time. You know, it's interesting. In the old days in power tools, and I hate to say this because I date myself, but I started in the industry in 1980. What I, 'ten, Stefan? I guess my father said it. Yeah. Anyhow, in 1980, you know, the engineering in power tools was key. But the engineering back then was, you hired electrical engineers, mechanical engineers, a metallurgist or 2, some industrial designers. When Nickel Cadman came along, you hired some chemical engineers. And that's what an R and D department looked like, was that group of traditional engineering graduates. Today, those all those engineers are still in place in the company. But the most important, the fastest growing part of our technical environment at TTi is the software development engineer. The same graduate that's working on social media apps for the iPhone is who we are after to design these capabilities for the tools. And you know, of course, these graduates are in incredible demand. They're hard to get. But maybe there is an advantage in not being in Silicon Valley, because we were in Silicon Valley, we would have a lot of competition for the same engineer. But let me tell you, Milwaukee, Wisconsin, you know, we look pretty good if you're a software development engineer, and you don't want to move out west. So, there's a method to the madness here. And we've been wildly successful in attracting brilliant, young software development engineers, who could easily go to one of the Silicon Valley companies. But not everybody wants to go out West. So we I can tell you that the when you visit our R and D centers, it's going to look very different than it used to. It's going to look like a millennial based environment. Nothing is traditional about this. But that's how you attract these the talent that we need to pull this off. So anyhow, you're going to hear a lot more about One Key as time goes on. Home Depot was very kind and they shared their excitement of One Key in their recent results announcement. And their results were spectacular. And we rolled this out last month and the products are selling like crazy. So anyhow, it was very exciting. Okay. Believe me, one key is not the only interesting thing that we've rolled out. So we have created a line of lighting products powered by Milwaukee batteries, that will, we believe, revolutionize the whole notion of lighting on a job site. So if you think of a job site, contractors are working in the evenings. There's a lot of indoor work where there's no power. So you need lighting on a job site. Historically, with incandescent bulbs or fluorescent bulbs, the lighting was limited. Cordless lighting would be limited. There just wasn't enough the lights weren't bright enough and capable enough to really light up a job site. But with the LED lighting technology, we are now able to put a light on a job site that's powered by a Milwaukee battery. And it will replace a generator powered light that costs 5 times as much and is unbelievable. So these are not really power tools. There's no motors of these, right, David? These are lights. These are flash. So, the flashlight used to be horseed 999. Dollars This flashlight, this is what this is, is $2.49 And we can't keep them in stock. And I think that lighting will become a business within TTi that has immense potential. And the beauty is that the same battery in drill is in these flashlights, in these lights. So the platform becomes even more embedded. And we believe our position becomes even more unassailable versus our competition as time goes on. So, anyhow, you're going to hear a lot about lighting in the future. Okay. We're not going going to abandon our core user, which is plumbers. In fact, we have so much new, cool product coming for the plumber. We think we're going to the way they do their job on these plumbing jobsites. Same with the electrician. The second most important vertical historically for Milwaukee was the electrician, commercial or residential. We have all sorts of cool innovation for the electrician. Of course, all the one key and fuel products work beautifully for the plumber and the electrician. And of course, plumbers and electricians tend to work in dark areas in buildings, and so the lighting is appropriate there too. So, there's a lot for our core user. Our accessory team has done a magnificent job of reinventing categories that have been around forever. This is next generation Shockwave. These are screwdriver bits that will withstand the unbelievable amount of torque you get out of the Milwaukee impact driver. These screwdriver bits and they have a beautifully designed red coating around the ductile part of the bit, where it will flex, but not break. These are uniquely designed products. This is our 2nd generation. This is the number one growing line of screwdriver bits in the world today and has a lot of potential. We also developed these beautiful now, Stacy, this is not jewelry. These are drill bits. These are titanium nitride coated drill bits. So titanium nitride happens to be gold. Well, you can make it gold if you're smart. And therefore, it's a little easier to market. And the titanium nitride adds lubricity to the drill bit. So the drill bit will last longer, drill faster and with less heat. Lubricity is a good thing for a drill bit. However, we've added a new unique capability. We have a hex shank. So you can pop these drill bits in an impact driver, not just a drill, but an impact driver. And we also incorporated shockwave technology, so that these bits are ductile where they would normally break. So instead of snapping the drill bit, which happens all the time, the bit will give a little bit and then keep on going. And we launched this a couple of months ago. And you know, who would think you could re indent the drill bit? Drill bits are around for a long time. But we have. And when you do that, you disrupt the market and there's a lot of profitable growth potential for TTi. The tape measure business is new for us. We got into this space 4 years ago. Our largest competitor is has a dominant position. That's going to change. We are going to attack this market globally with an array of products that we think are represent superior designs. We have superior designs. We have very competitive pricing. And let's face it, our tape measures are beautiful. And who can resist tape measures that look this much better than our competitors? I didn't put the competitor slide up. I don't want to be too mean. But if you saw their tape measures, you would walk right past them in a store and you would buy the ones up on this slide. Right, David? So that we have, we'll launch that this year. We have a line of chalk wheels. This is a traditional product, snap wheels. You snap a string on a job site and you lay chalk down and then the contractor knows where to put the foundation, etcetera. We've reengineered these dramatically better than the products been on the market for years. It's a real step forward for us. Of course, we have now work gloves. These gloves will keep you safe. And people buy them not only for the safety, but people really do like to show that Milwaukee badge off. If you're a contractor, you want people to know you're a Milwaukee guy. And you know, they get tattoos too. But the problem is, you can't see the tattoo at a job site. And I have a lot of pictures that people send me the tattoos, but I really don't think I should show them here, because they're in funny places. But the gloves are an interesting addition to the company. And really, this is our first safety product. So if you think of a job site, what are we doing? We are surrounding the job site with lighting, which is new, safety equipment, which is new. You can see that these are categories that have 100 of 1,000,000 of dollars in potential. And we just put our toe in about it. We're just getting started here. This is why we're so optimistic about our growth. There is lots and lots of potential in all these categories for Milwaukee's formula to grow. Okay. So we've also attacked a couple of traditional markets. These are markets that nobody thought you could disrupt. But the pipe wrench, which has been around, what David, 100 years. So we have a new pipe wrench, which is a category that the plumbers all use. And we have designed a line of pipe wrenches that disrupts the market, where they're priced at a premium, they have superior features and people we show them to love them. So we will roll out our pipe wrenches this year. We have a line of adjustable pliers. This is known in the U. S. As a crescent wrench. And we have a better crescent wrench than crescent. And so we'll take some market share there and another traditional category. Okay. And then of course, we have our ink saw markers. These markers target the job site with superior ink and all sorts of other features that contractors like. And we're selling an awful lot of markers with the Milwaukee brand. So, okay. Our Hanseul family, if you remember back, Stefan, about 4 years ago, we just entered the hand tool market when we had acquired Stiletto, we acquired Heart, and we had a very tiny hand tool business worldwide. And we've shared that we our vision is to develop a 1,000,000,000 dollars platform in TTi with hand tools. And you can see now, when we used to say that, people would chuckle and laugh at us and say, oh my goodness, you know, Stanley's got 2,500,000,000 hand tools. You guys are crazy.' People aren't laughing so much anymore, because if you look at this slide, this is what we've done in 4 years. And I can assure you that people that worked on all those products are busy right now in a padded secret chamber, working on another 500 hand tool products. And so we will build a very large hand tool platform in the company, mostly sold under Milwaukee, but not exclusively Milwaukee. Okay. We bought a company 2 years ago that's turned out to be a fantastic success. Company is called Empire. Empire was the number one level company in North America. This business has doubled since we bought it. We've improved the manufacturing capability and we're about to roll out some really exciting new product for levels. Every job site has a level. You know, it's funny. 10 years ago, we all thought the level would be obsolete and people would go with electronic devices and shoot lasers across the room. There's not one job site you can visit in the world today, not one single job site on any continent that doesn't have levels. And usually there's 4 or 5 of them. People buy the electronic measurements, but they still want that level. I guess contractors have learned it's pretty important that the house be straight, right? And or the building or bad things happen. So we are level market. And this acquisition, which we didn't level market. And this acquisition, which we didn't talk much about, has turned out to be wildly successful. Okay. So I told you already about AEG. This is a brand. This was a graveyard brand. The funeral was complete and it was about to be lowered in its resting place. And team revived it beautifully. And our Australian team took that revival and took it to another level. And suddenly, AEG is a growing brand in the company. And it gives us a price point below Milwaukee, above Ryobi, so that we don't have to ever get too aggressive on pricing with Milwaukee. When our competitors get desperate at the end of a quarter and they want to write big orders and all that, we don't have to react with our premium brand. We can do it with AEG. And AEG has a sister brand in the U. S. That we work with Home Depot on. So, it's really a global platform that's worked really well. Okay. Ryobi is the number 1, as I mentioned, number 1 line of DIY tools in the world. And we're going to strengthen that with the launch of our first brushless DIY product, the 18 volt Ryobi brushless drill. It's not fuel, but it outperforms any DIY cordless drill in the world, and it's not even close. This is a very sophisticated product. We're actually launching it in Europe, where the user has a higher level of sophistication and is prepared to pay premium over conventional cordless drills. So that will roll out this year. The RIOB 1 plus program, people might remember back when the horse started with this, this was a very small family of blue tools with very basic capabilities. And that has led to a massive sprawling range of RYOBI 1 plus tools with the best looking colored industrial design in the industry. And really, we have the only overarching platform of DIY cordless, because our outdoor products, like the 1 mower, and our indoor products, like the drill, all work with the same battery. And the lifestyle products, like the fan or the radio, all work with the same battery. None of our competitors have figured this out. This is inexplicable to us. It's mind boggling. It seems basic that you would have a DIY line that all would have the same charger and battery. But there's so many orphan platforms. So a competitor, they fire a product manager who competitors with dozens of platforms in the DIY space. We have one, one platform. And we've been incredibly disciplined about this, of course, for 15 years. And it is paying off like crazy. So, anyhow, that's the RAVI plus program. We enjoyed great growth here last year. This year will be even better. Okay. In outdoor, we've taken ONE plus and turned it into really outstanding lightweight, compact and affordable outdoor cordless products. So not all users need a giant lawnmower or string trimmer with a heavy, expensive petrol or even lithium motor and battery. And these products are lightweight. We just launched another generation. They're selling like crazy. And really for many, many of the homes in Europe or North America, this is plenty of power and that's the job for the user. So we're really excited about that, especially since these batteries are the same batteries that we sell in our drills. Okay. So we also have though a 40 volt platform of outdoor. This platform gives you the same run time as a full tank of petrol. So if you take that lawnmower and you charge the battery, that run time on that battery is the same as a full tank of petrol on the same lawnmower. So people's objection to cordless historically and outdoor has been, I need more runtime. But now, that's over. And you don't need to run to the gas station and buy more petrol. You just go to your garage and get your second battery, which is fully charged and pop it in and you can double the runtime. And again, without the noise, the fumes and the aggravating pull start, which becomes an issue as the petrol products age. So anyhow, this 40 volt line has a lot of promise and it's selling like crazy. Okay, so we become a dominant supplier of pressure washers, both electric and petrol. And the pressure washer category is a significant business in North America and Europe. Okay. And so and then to wrap it up, floor care, we have given a lot of thought and put together a very disciplined long term strategy, a long term roadmap to turn this business into one that delivers consistent, improving results. FLIR Care will never have the margins of Milwaukee. It doesn't have to. All we have to do is improve it year after year, and it will contribute to the company. Cordless. We are obsessed with cordless. Cordless is the future. We are cordless. We are obsessed with cordless. Cordless is the future. We are going to move very fast away from the corded platform we have today, in Hoover and in Vax, which is over in Europe. And we're going to move to a cordless platform. So this is painful. When you do this, you disrupt your own range. It's hard. If you look at the Innovator's Dilemma, the famous book, it's tough to obsolete what you sell. But if we don't do this, we'll never get floor care where it needs to be. And we just decided, we're moving forward fast and we're going to turn as much of FLORCARE as we can into cordless. And the second thing, which might be the biggest opportunity in FLORCARE is commercial. If you think about where Milwaukee is to and Ryobi, Hoover and ORC and VAC's commercial could be the same thing to our consumer VAC business. And we have hired a dedicated team that know what they're doing on commercial cleaning. We have a really cool technology called Hush Tone. Hush Tone is a line of vacs, corded and cordless, that are so quiet that if the cleaning service in your office is vacuuming outside of your office, you won't hear it. If you're in a hotel and you're trying to sleep when the housekeepers are cleaning up the rooms, you won't hear it. So, we think that the hush tone and this was not easy to develop, and it's not homeowner, because it's expensive. But we think as time goes on, the hush tone combined with cordless will give us a commercial opportunity for growth in floor care that our competitors don't have. So look, we're pleased to share these record setting results with you. I know there'll be a few questions on Floor Care. Stefan and Frank and I will explain it to you. But really, our Floor Care situation is, as Horst said, it's non recurring in nature. We have a good plan. But let's not forget the 80% of the company that just delivered give much guidance to the investment community. But I give much guidance to investment community, but I can give you broad based guidance. The next 5 years in the company are going to look just like the last 5 years. There's so much new product coming, you can't believe it. And you can do the calculations and figure that out. But I can promise you, the same people that engineered all these amazing new products, they're not on holiday right now. They're working on a whole another wave of products. And it's really our competitor's nightmare. There's so much coming now, you can't believe it. So, nightmare. There's so much coming now, you can't believe it. So I've never felt more optimistic about the future of TTi. I've been here now almost 10 years. So just wait till you see what we do in the next 5. Mr. Chairman, we turn it back over to you. Thank you very much. Yes. Thank you, Joe. Let me say a few words. I'm confident that our solid performance will continue in 2016 that we had in 2015. I'll share something with you because of Joe I had to get an additional e mail, 15 e mails maximum a day from Joe but up to 3.50. Why am mails maximum a day from Joe, but up to 3.50. Why I'm so confident, Joe? I think we have to explain our investors. We have great retail partners in the home improvement such as Home Depot, Bonnix and so on. But you all should know that our main businesses, so many thousands of distributors or main or tell you today and we have a very, very solid future ahead of us and the best is yet to come. Thank you very much.