Ladies and gentlemen, welcome to the Fiscal 2014 Third Quarter Earnings Call for Applied Industrial Technologies. My name is Elaine, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I'll now turn the call over to Julie Kho. Julie, you may begin.

Thanks, Elaine, and good morning, everyone. On behalf of Applied Industrial Technologies, thank you for joining us on our fiscal 2014 third quarter investor conference call. Our combined earnings release and acquisition announcement was issued this morning before the market opened. If you haven't received it, you can retrieve it from our website at applied.com. A replay of today's broadcast will be available for the next two weeks as noted in the press release. Before we begin, I would like to remind everyone that we will discuss Applied's business outlook during the conference call and make statements that are considered forward-looking. All forward-looking statements, including those made during the question-and-answer portion, speak only as of the date hereof and are based on current expectations that are subject to certain risks, including trends in the industrial sector of the economy, the success of our various business strategies and other risk factors identified in Applied's most recent periodic report and other filings made with the SEC, which are available at the Investor Relations section of our website at applied.com. Accordingly, actual results may differ materially from those expressed in the forward-looking statements. The company undertakes no obligation to update publicly or revise any forward-looking statement whether due to new information or events or otherwise. In compliance with SEC Regulation FD, this teleconference is being made available to the media and to the general public, as well as to analysts and to investors. Because the teleconference and its webcast are open to all constituents and prior notification has been widely and unselectively disseminated, all content of the call will be considered fully disclosed. Our speakers today include Neil Schrimsher, Applied's President and Chief Executive Officer; and Mark Eisele, our Chief Financial Officer. At this time, I will turn the call over to Neil.

Thank you, Julie, and good morning, everyone. We appreciate you joining us today. To recap the numbers from our release this morning, our sales for the third quarter were 618 million down 0.6% from the prior year quarter. Foreign currency exchange rates resulted in a negative 1.6% impact on our sales in the March, 2014 quarter. Net income was 30.4 million or $0.72 per share compared with 29.3 million or $0.69 per share in the prior year quarter. We did face some market headwinds earlier in the quarter with weather a contributing factor. We also had some nice progress with our ERP business transformation. With our most recent Go Live in April, our entire U.S. service center network is now operating on our system. Our teams have worked hard to get to this point, and I want to recognize their dedicated efforts and the outstanding teamwork on reaching this significant milestone. We're also pleased to announce the acquisition of Reliance Industrial Products, a leading supplier to upstream oil and gas industry. Reliance currently operates with ten locations in Western Canada, and five locations in the United States, offering a full range of products and services including hose and fittings, hydraulic and mechanical repair and oil field supplies. The business is well positioned and well equipped to serve the unique needs of the oil field drilling industry, and has solid presence and experience in transportation, mining and construction market segments. Overall, we are excited about the opportunities for synergies across our businesses given the strong capabilities and meaningful market presence of Reliance. Combined with our Texas Oil Patch Services or TOPS operation in Houston, we have a strong foundation for growth in these entities as well as our traditional service center network in the categories of bearings, power transmission, fluid power, fluid conveyance and oil field supplies. While Reliance will be neutral to our net income for fiscal 2014, the acquisition will provide incremental EPS of $0.12 to $0.15 for fiscal 2015. Now, with our fourth quarter M&A expenses and our current view of overall business activity, we are adjusting our sales and earnings guidance for our full fiscal year to EPS of $2.60 to $2.75 on sales of 2.45 billion to 2.48 billion. With that, I'll turn the call over to Mark for additional detail on our financial results.

Thanks, Neil. Good morning, everyone. I'll provide some additional insight regarding our third quarter fiscal '14 financial performance. Any fourth quarter forward-looking comments in my commentary relate to our operations as of March 31, 2014 and do not have the Reliance acquisition factored in. I will have some specific comments on Reliance at the end. Our sales per day rate during the quarter was $9.8 million or 1.4% below the prior year quarter, and 4.5% above our rate in the December quarter. We had an additional one half selling day in the March 2014 quarter compared to the prior year. Acquisitions had a positive impact on sales of 0.5% during the quarter, and foreign currency translation decreased sales by 1.6%. Therefore, overall core same-store operations experienced a 0.5% increase in sales compared to the prior year. In addition, we believe the impact of vendor price increases was minimal during the quarter. Our product mix during the quarter was 29.6% fluid power products and 70.4% industry products. Third quarter sales in our service center based distribution segment decreased $14 million or 2.8%. Acquisitions did have a positive impact to our service center based distribution segment's quarterly sales of 0.7%. The sales in our fluid power businesses segment increased $10.4 million or 9.1%. From a geographic perspective, sales in the third quarter from our overall U.S. operations were up 0.9% compared to the prior year quarter, and experienced a positive impact of $3.4 million or 0.7% from acquisitions. Our Canadian operations experienced a sales increase in local currency of 1.8% offset by an unfavorable currency translation impact of 9.7%, resulting in a net reportable decrease of $5.7 million. Consolidated sales from our other country operations, which include Mexico, Australia and New Zealand ended up with an overall sales increase in local currency…

Thanks, Mark. So to summarize, we're not satisfied with our base business results in the quarter. However, we are very excited about our growth prospects encouraged by our ERP transformation progress and committed to executing our long range strategy by generating organic growth and accelerating acquisitions for increased shareholder value. We've been active on multiple business fronts, significantly enhancing our foundation with our technology investments and acquisition activity. In addition, we're currently in our annual planning process, focused on closing our fiscal 2014, optimistic about the year end and building momentum as we enter fiscal 2015. We'll have more information to share on our outlook in August, but for now we will open up the lines for your questions.

Thank you. (Operator Instructions) And now our first question is from the line of John Baliotti with Janney Capital Markets. Please go ahead. Your line is open.

Hi. Good morning, guys.

Good morning, John.

Hey, Mark. I was wondering, I was wondering, how did the -- we don't normally talk about month-to-month but obviously a lot of distributors have already talked about the progression, January being pretty tough. Is there any color that you could give us on how sort of the first four months of the year progressed?

Yes. So, I would say for us in the quarter we saw good progression, January to February, February to March. And then I'd say for us, our April, really the results as expected. We had our large or our largest Go Live on April 7th, 90 plus locations along with our largest, D.C. So during that time we deployed 190 associates to support those locations for one to two weeks on the ground. Our super users are power users. So the area is ramping nicely. We're in our fourth week in doing it. Those associate that came to help are back in their home locations working on quotes and projects and their opportunities. And the area that went live is ramping nicely. Looking forward, we expect April, May to June to continue to improve.

And Neil, And Neil, just unrelated to that but given the acquisition of Reliance today, can you give us a sense of the complementary or the overlap in customers? I would imagine you have run into these guys before and maybe just run up against them before in terms of customers using them and using you. Just curious any color on that.

Yeah. So we think it’s very complementary, while there would some common customers, really their strength in the areas of fluid conveyance, hose and fittings, those are going to be nice opportunities for bearing and power transmission products with their core customer base and strength. And then I think on the Applied and the fluid power side to have the reverse of those fluid conveyance products and their capabilities around design and services to be additive. And also they're in some very attractive markets. Obviously, well positioned with ten locations in Western Canada, that adds to our strength in Western Canada. And those five U.S. markets are really in strong oil and gas plays like Williston, like Greeley, like Midland, Texas, Shreveport, and so forth. So we think current landscape is good for us and really gives us more capability to build that out into some other markets as we move forward.

Great, thanks, Neil.

You're welcome.

Thank you. And our next question is from the line of Matt Duncan with Stephens Inc. Please go ahead. Your line is open.

Good morning, guys.

Good morning, Matt.

Hi, Matt.

First of all, congrats on the Reliance acquisition; I applaud you for using the balance sheet.

Thank you.

Neil, first a couple questions on Reliance. Is there anything that you can share with us on the profitability of that business? I'm assuming based on the price you paid they must be a good bit more profitable than AIT from an EBITDA margin perspective. Is that correct?

That would be correct. I mean it's accretive on margins and profitability. They're very well run business. Management team will continue to come over and operate. We're excited about that. And so, additive as we go across, and obviously more than our average size of acquisition looking back in the past, right, has been maybe 27 million, 28 million in revenues. So more sized, and with that comes what we'd expect something more than a traditional multiple, but we feel very comfortable with it.

I guess in the press release, you said it was $135 million in revenue. What was their EBITDA in 2013?

Well, we're not going to really disclose that, Matt. They did quite well, and they're expected to continue to do quite well. When we came up with the numbers for the EPS projection for fiscal '15, obviously we have some assumptions in there regarding the intangible asset amortization; they were still in the process of finalizing the split between goodwill and identifiable intangibles for amortization. But we have an estimate in there for those things. We expect it to be accretive in year one and to continue to be positive even more so in future years.

Mark, any chance you can share with us the assumption on amortization to help us with modeling?

I don’t have that number right here, Matt, but I would not hesitate to share that with you guys.

Okay. Maybe we'll talk off line later. Last thing for me and I'll hop back in the queue. Going back to the first question on monthly sales trends, Neil, some of your peers have been sharing with us the organic daily sales growth percentages just so we can kind of see how much things really did pick up when the weather cleared. Would you mind sharing with us what your growth rate was like in March?

I think in the quarter as we saw for total in the quarter on a sales per day rate, ours was around 4.5%. And so we expect traditional improvement and seasonality as we move forward. Just in April we were also busy with pretty significant delay in a lot of locations. So that's kind of in the middle of our April month right now.

Okay. Thanks, guys.

Okay.

Thank you. And our next question is from the line of Jon Tanwanteng with CJS Securities. Please go ahead. Your line is open.

Good morning, guys. Nice job on the acquisitions.

Good morning, Jon.

Good morning. Just wondering if you had any more detail on the expected synergies and the level of interest expense you've kind of included in your accretion outlook for fiscal 2015.

Right. What we talked about on interest expense, I'll jump in on that right now is you did state that we're 1.1% for these initial borrowings for these numbers. We did have an estimate for fiscal 2015 for the rates to go up very modestly from that level as we put it into our model. So, we don’t expect interest rates to do anything crazy during the year, but obviously it will be what it will be for those things.

And on the synergies?

I'd say just on the synergies, with our broad team that worked on this with the Reliance team, we probably congratulated one another for about 30 seconds. And then we are getting busy at the task at hand of moving forward on the synergies and the integration. So I talked to them about generally on with key customers we think we have the opportunity to expand our product offering and services and solutions to them on multiple fronts. So that's additive in total. We think in time this is opportunity is supposed to be in more geographies together with those common capabilities, that's going to be, and so in our outlook we'll have a modest amount of those synergies in. Obviously we build a base case for this. And we have a synergy case. That's what we are getting after right now. And I'd expect us to be talking more about that when we get together next time and giving our outlook for fiscal '15.

Okay, got it. And then just from a historical perspective, after you acquired SKF, the business was a little bit blindsided by a pretty big drop in demand. I'm just wondering if you have a relative level of confidence in Reliance.

I think we do in Reliance and the marketplace overall, they have a significant presence in energy and oil and gas. We like the sector and want to continue to grow, but they also do well in other segments. And so, we feel good about what we have modeled in going forward.

Okay. And then one final one, just more broadly, just given the impact of weather in Q1, do you broadly see a kind of pent up demand from customers?

I think we saw some obviously in the last quarter as we're moving forward, and I don’t know if it's so much pent up demand, but I'd say the macro indicators on the economy are positive in the expansionary range, capacity utilization was higher since April 2008. I think the economy keeps working to steadily get better. And our look going forward for the rest of calendar 2014 would be positive. I think there is industry associations like MAPEI that are projecting over 3% growth for '14, and greater than that thinking about in the 15. So, we're optimistic that the economy continues to improve as we move throughout the year.

Okay, thank you very much.

You're welcome.

Thank you. (Operator Instructions) And now our next question is from the line of Jeff Hammond from KeyBanc Capital Markets. Please go ahead. Your line is open.

Hi, guys. This is James Sturgill filling in for Jeff.

Okay. Hi, James.

Just a question on your gross margins, could you give us an assessment of what the puts and takes were this quarter? I know you mentioned global operations; just wondering if I could have some more detail.

I think the challenge with gross margin is there is lots of pluses and minuses everywhere that add up to the grand total, but what we saw in certain of our foreign operations that we did see some competitive pricing pressures that helped drive down margins at the point of sale. We also saw in certain areas where the level of supplier support in the current year wasn’t as big as we had in previous years, and then, we also just had some general inventory adjustments in a couple of our operations had a small impact on margins from a one-time perspective. I think a lot of these things that we see or saw we expect to be one-time type situation. So while we fell under the 28% gross margin level where we've been at prior four quarters, our expectation is we should be getting back to that level going forward.

James, I will just add. And my business reviews with the guys, I think they align with Mark’s comments on, I can understand some of the one times, some of the timing of, some of the support or activities that I will look going forward is that 28% plus.

Great, I appreciate the color. And then for the fourth quarter one time transaction related expenses, can you sort of know and arrange for what we can expect there?

Right. We think that the total expenditures for these one times things on the acquisitions will be in the $1 million to $1.5 million range in total. Now, I granted some of that happened in the third quarter because it all just didn’t occur during the month of April as we did this. But I think there is a good -- it's probably an even split between third quarter and fourth quarter for the expense levels.

Great. And then just a little final one here, demand in Australia and kick in Canada if you exclude effects both regions were fairly resilient. What's the outlook there for the fourth quarter and maybe into calendar 2014?

I think we know we are going through the annual planning process now. So I haven’t seen all of it. I just know in the dialogue with the teams and some of the early start to the planning sessions is that there is building competence and kind of optimism in those, probably higher in Canada around some of the energy markets and such, and we will be with the Australian team, but I think it’s building and I give them credit. They in Australia working very well on the product expansion, they are offering more products, more solutions to their industrial customers and they are also working at going in to some other segments that are outside of resources and mining which is helpful for us as well.

I appreciate it. Thanks, Eisele.

Thank you. And our next question is from the line of Greg Halter with Great Lakes Review. Please go ahead, your line is open.

Hi, yes. Good morning.

Good morning.

I wonder if you could elaborate on the, obviously the core business. Which segments may have been the better performers and which ones weren’t so good in the quarter?

That’s quite similar to us as last quarter. I think the ones we track maybe 13 of the 30 were positive in that. I’d say machinery, petroleum, some the transportation equipment, I think, kind of continuing aggregate lumber wood products. And we started to see a little strengthening maybe in the machinery manufacturer which would be very good for us as we think about bearing some power transmission product consumption. And probably the more inventive state a little lighter would be around electrical equipment and pulp and paper.

Okay. And regarding price going forward, I think you mentioned it wasn’t a whole lot of an impact. But what do you see going forward?

I think it continues to be really a stable pricing environment. We would see modest price increase activity that could come from suppliers. I still see the industry as good recognition of cost and cost to serve. I would say it’s a modest pricing environment or a stable pricing environment with kind of modest increases coming through.

Okay. And relative to Reliance, what will that do and I know its early days, but what will that do to the company’s overall tax rate, any thoughts there?

Well, I do have a few thoughts that I can share with the group. Obviously Reliance is headquartered in Canada and while they do have some U.S. operations, yeah, the majority of their sales and profitability is in Canada which does have a statutory tax rate that’s a little bit lighter than here in the U.S. So, we expect that to have an overall small decrease in our overall corporate effective tax rate. But I don’t have that all fully modeled in now, Greg. We are going to be doing all of that through our fiscal 2015 budget process where we get into that in super detail.

Okay. And when you say the majority of their sales is that like around 75% or is that too high?

I would say that they have more recently expanded into the U.S. So the U.S. locations, they have got five in the U.S., ten in Canada. Those are the newer locations. They are still maturing. So I don’t have that exact split between Canada and U.S., but I would say at least 75% of the sales are in Canada.

Okay. And I know you gave the sales number, I think kind of 35 million, what if they have been growing over the past three to five years, let’s say. And will you continue there own expansion plans or will this be consolidated into what you guys are doing?

Yeah, I mean they have had this very nice growth looking back and going forward we expect that to continue and really look for opportunities to accelerate as we think about expanding those capabilities into other markets. So this one isn’t the one we are just going to look to hold at a current level. It’s a space we like, and we think we can further build on and grow the platform.

And obviously the read is that they are a specialist in oil field and so forth. On a percentage of their business is that up there in the 70 area or is it not that high?

I think it’s over 50%. I don’t know exactly the split.

Okay. And what kind of capital expenditure needs do you see with Reliance. Is there anything big that there will be needed here?

No, I would say it will be higher our traditional type capital rates. It’s not a capital intensive business.

Okay. And this appears to be if I look at the records we have the largest or one of the largest, if not the largest deal at least since the fluid power resource back in August of ’08, which I think was 166 million in terms of cost. Any thoughts given your due diligence in the integration process here if this is something that’s going to be problematic for you guys or it just folds right in?

We think it’s a very good business, very well run and we are excited. And I guess I would say it’s our largest to-date, but we are busy. And as I have said before, we want to be as busy as we were in 2012. We continue to be active in M&A and have a good pipeline, and we are continuing to look at how we grow our business organically, but also accelerating acquisitions.

And will they be put on your ERP system?

We will be evaluating that in time. It was part of the assessment. They operate on a very good platform today. So it’s not going to be obviously our day one work.

All right. Thanks a lot.

You're welcome.

Thank you. And our next question is from the line of Adam Uhlman with Cleveland Research Company. Please go ahead, your line is open.

Hi, guys. This is on for Adam. How are you?

Well, hi, Courtney. Good morning.

Good morning. Just wondering if you could give any detail on sales growth by product category, I know you've been working hard to grow kind of outside bearings, fluid power, and power transmission and curious if you could give any kind of update as to how that is going.

I’d say well, you saw there or heard in our results right around fluid power. So really nice progress and I would say on the OE side and how we are leveraging our value added services that we provide to the customers, expanding our offering on currently platforms that they have, and also working with our key customers on providing products and services on new platforms. We are also translating that capability to our biggest and best MRO customers. And we are utilizing fluid power specialist to help accelerate that as well on the MRO side of our business. So, to me, a nice progress on our fluid power side both with OEMs and MRO. And we are going to look to continue that work. We are making traction with our maintenance supplies and solutions business, class-C consumables. We think that’s another product offering that we can have with our best customers. They are making nice progress and we are going to make, have expansions in that coming up in fiscal ’15 as we plan. We are having success now with key customers and we will be broadening that footprint as we go into fiscal ’15.

Great. Thanks.

You're welcome.

Thank you. And our next question is from the line of Barry Hanes with Sage Asset Management. Please go ahead, your line is open.

Thanks. I had a question -- two question mainly. One, what is the right way to think about what your overall cost increases may be this year? And in fact, how much pricing you would need to just offset cost before incrementally dropping down to the bottom line? And then secondly, I wanted to be clear, when you were talking about gross margins earlier, I think you mentioned some competitive pricing environment in foreign operations. Is that just foreign? What are you seeing to compared to the rate domestically? Thanks.

I’ll jump in on this in a very -- I think from the competitive pricing, obviously all of our markets are very competitive. But we did see some extra competitiveness in certain of our markets specifically in the Mexico area for that -- just what we were referring to. When you started your question you talked about your pricing, and as Neil mentioned earlier on the call, we are seeing modest price increases from our suppliers. Our system that we have in determining our selling price to customers, it takes in supplier price increases immediately and re-prices our product to our customers. So when we see an increase coming to us from a supplier which is the vast majority of our cost is our -- cost when we acquired the product. And we have a mechanism to pass that along, so that our bottom line impact from a gross profit margin as well as an operating profit margin are not hindered by those price increases. So, that’s a key thing for us as a distributor to make sure that happens, so that we don’t have those margin pressures for that.

Thank you.

Third part of the question -- I think I got most of which you wanted there.

Well, I would just say in terms of outside of product cost, if you are just looking at all of the SG&A and other corporate expenses, if you will, what sort of percent increase might we be looking at for the year? Thanks.

Okay. With SG&A, our key driver for that is people. 60% to 65% of our SG&A cost is related to our personnel within the organization. And managing SG&A cost deals with managing our headcount. Our overall headcount has been flat and if you exclude the acquisitions. We expect to continue to manage the headcount, so that our cost structure is consistent and commensurate with the revenues that we are getting. We expect that to continue to have the improvement in the overall industrial economy. We expect in the future that revenues will continue to improve. We expect to be able to make sure that we have an appropriate system and structure to serve our customers in an appropriate way, so that we can continue to add value to the customers and the shareholders. But we don’t see significant changes in our overall cost structure. If you think about it right, SG&A really flat in the quarter. We will continue to look at making the right forward facing investments to help the business grow. And we will maintain our cost focus and discipline in the other areas. And so obviously in the quarter we had deployment expense associated with it. So those don’t repeat. I mean, we are moving from around the system from build and deploy to really run and optimize and going forward especially in the U.S. with everyone on a common operating platform.

Thanks very much. I appreciate the color.

Thank you. (Operator Instructions) And our next question is from the line of Brent Rakers with Wunderlich Securities. Please go ahead, your line is open.

Yes. Good morning. I want to start with a couple housekeeping questions on the guidance. The first is, does the guidance include the tax benefit in the quarter? And then also related to guidance, what is your LIFO benefit assumption for Q4?

Okay, Brent. The earnings per share guidance is obviously our published earnings per share that will be coming out on our press releases in our financial results. So it does incorporate the tax benefit that happened in the third quarter. So as of March 31, we have EPS of $1.96 and our guidance says, as of this June 30th for the full 12 months will be between the $2.60 and $2.75 range. So if you just -- you will bracket that into the fourth quarter that would be $0.64 to $0.79 range of EPS in our Q4. For the LIFO perspective, we have no LIFO layer liquidations planned. And there is nothing in the guidance for that. And we don’t expect it to happen.

Okay. Great. And then just I guess one housekeeping question before we get to some others. What specific date did you close this acquisition?

We closed it this morning, 12:01 a.m.

Great. I think earlier you said that roughly $0.5 million to $0.75 million of the initial costs related to acquisition were actually in the third quarter and the remainder; a similar amount will be in Q4. Correct?

Yeah, I don’t have the exact numbers, Brent. But we had some cost in Q3 and some will be in the Q4.

Okay. And then you’ve talked some about the synergies associated with the transaction. You know, it seemed to be more concentrated with your comments on cross selling and related to sales synergies. Are there SG&A synergies or some COG synergies that will be put to work maybe quicker than some of the revenue synergies? Or how should we see this even when you think out, for example, to a fiscal 2016 accretion? Is this something on the revenue side that will ramp up and they got more materially additive when you get out into the outyears?

Yeah. We think as we go through and look at base case to synergy case, there are some cost opportunities or efficiencies that we will gain. They could perhaps, there will be COG’s benefits on it as well. And then we also had the appropriate focus on the right growth synergies. So we are not going to ignore those. Some will occure quickly and then some will occur as we gain efficiencies moving forward.

Okay. Great. And then just two more questions, you talked a little bit about -- I guess there has been a couple questions about the progression of sales during the quarter and the weather impact. And then you've also talked about some of the -- I guess the distraction associated with the ERP launch in April. Could you maybe try to quantify what that impact was in terms of a dragging April from what is called the distraction of going live on ERP?

Hi, Brent. I don’t know that I can quantify it in April. But if you look back we deployed in January. We deployed in October. We deployed in July. So we deployed in April. What we are not going to do going forward is 60 days from now, we are not going to have another deployment. I don’t know if I can look back or quantify April, it seems very focused. They closed well in the area that went live. And the focus is on the run up the rest of the way. What I get encouraged about is our business reviews aren’t around now systems and discussions. They are around customers and opportunities and business development. And we really see that in the areas that had previously gone live. And we expect we will be there very quickly with our latest deployment. But from a U.S. standpoint we are all along. There is not another face deployment that will come 60 days from now.

Okay. And then just final question again, just maybe elaborate on the gross margins. I think Mark, you mentioned competitive pricing and supplier supports and then some inventory adjustments that occurred as well and then referenced those as all being one time in nature. Could you maybe talk through why each of those would be one time in nature? I clearly understand the inventory adjustment component. Does the supplier support, does that reflect an accrual rebate adjustment relative to the first half? Is that what is going on there and then how would the competitive pricing be more of a one-time factor?

Yeah. Regarding the rebates and the supplier support that we get Brent, I think we are referring to something that we had just a tough comparable in one of our foreign operations this year compared to prior year where in the prior year they just set a one time benefit. That did not recurred here. In the current quarter it was a little bit on the opposite of things for this quarter just ended. And we don’t expect to see continuing into the fourth quarter. And then I’d say -- I think the commentary around the competitive environment especially when we look at one of the countries is a lot more related to a capital project. I would say on one of that quite not totally unexpected in that. So our real belief as we go through it you could put circles around those and say these are not repeatable. That’s our focus then with the management team and the operations of how we work this quarter and every quarter going forward that it’s back to that level and improving. That’s what we believe.

Okay, great. Thanks a lot for your help.

Thank you. And now our next question is a follow up question from the line of Matt Duncan - Stephens Inc. Please go ahead, your line is open.

Hey, guys. Just a couple points of clarification on the guidance. First Mark, does the revenue guidance for this year, does it include the next couple of months of Reliance.

Yes, it does. We did incorporate that into our numbers.

Okay. And then on the $0.12 to $0.15 of earnings accretion next year, Neil, it does sound like your base case, which is what the $0.12 to $0.15 is, does include some cost synergies on that guide, correct?

I will jump in on that one. It is our base case scenario. And obviously when we model out acquisitions where we have several scenarios that we look at we are modeling out the base case. We are working towards synergy case.

Okay, so Mark then, the base case would not include any benefit from cost synergies.

I don’t want to say it doesn’t include any benefit from cost synergies because I don’t think that would be accurate. I would say that we are looking at the synergy case as we talked about earlier primarily for expansion things from a sales perspective.

Okay, got you. That helps. And then on the seasonality of their business, is it safe to assume that given the spring breakup in western Canada that the June quarter is probably their seasonally weakest revenue quarter of the year?

Yes. I mean I don’t know if I conclude that that’s the weakest quarter, but that’s certainly spring time is -- yes, it’s a challenge for them as things dry out.

Okay. Sure.

Until they dry out and then summer gets better than they freeze again.

Right. And then things really -- then things get really good. Yeah, okay.

Yeah.

And then last thing. I want to hone in on maybe a little bit on SAP now that you're done with the US install. Are you in a position yet to be able to look at that new powerful tool that you guys now have to manage the business and start to think about what kind of margin opportunities there are out there as you've now got a strong tool to look for places to, you know, buy smarter or, you know, just manage the business more effectively? How can we think about the benefit that you ought to get from having that tool now in place?

Matt, I would say as we've gone through we have got and we have been working on kind of the programs and identifying the value realization, who are the leaders, what’s the program, what the leverage would be. And then we talked before. Some are system enabled, some are just good process, some are just good discipline, some is just good hard work as they go along. So I think from -- we will include it in our outlook on August and what we expect in ’15. But we have got clear guidelines and expectations and we have them for ’16 and we have them for ’17 and going forward. But I have said before, they are hard to parse out what did they –- system enable and what’s it from other efforts, good process, good hard work that you have going on. But we will be including it what we expect in the total business in August going forward.

Okay, thanks.

Thank you. And our final question is from the line of Jon Tanwanteng with CJS Securities. Please go ahead, your line is open.

Hi, guys. Just wondering if you feel like you have met your M&A goals for the year? Or are you planning more in the near term or what does the pipeline look like?

We are busy and we want to stay active, so it’s not a one in done. We continue to execute to our priorities that we have for the business, a good pipeline that we are working through. And we expect to continue to stay active -- I have said before we never control the timing, but we are busy now and we expect to be that way really working them every month, every quarter.

Okay. Great. And also just remind us what the remaining amount is on your share repurchase authorization and how aggressive do you expect to be now that you have completed a large acquisition?

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Okay. Great. Thanks again.

Okay.

Thank you. And at this time I am showing we have no further questions. I will now turn the call over to Mr. Schrimsher for any closing remarks.

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