Columbus McKinnon Corporation (CMCO) Q1 2014 Earnings Report, Transcript and Summary

Welcome, and thank you for standing by. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. And now, I would like to introduce your host for today's call, Mr. Tim Tevens, President and CEO of Columbus McKinnon.

Thank you, Evan. Good morning, everyone, and welcome to our conference call to review the results of our first quarter of fiscal 2014. With me here today is Greg Rustowicz, our VP of Finance and CFO. Please note that we have included the summary slides for the quarter for your review. They can be found at our website at cmworks.com/investors. And hopefully, that'll be helpful to you in following this call today. We do have a Safe Harbor statement on Page 2 of those slides, and we want to remind you that the press release accompanying the slides in this call may contain some forward-looking statements within the meaning of the Private Litigation Reform Act of 1995. These statements contain known and unknown risks and other factors that could cause the actual results to vary. You should, in fact, read the periodic reports that we file with the SEC to be sure you understand these risks. Let me get to Page 3 and remind you of our long-term objectives, which include growing to be $1 billion business with about 1/3 of our revenue in developing markets, and about 2/3 of our revenue in developed markets, along with the $200 million to $300 million acquisition target. We'd like to operate in the 12% to 14% operating margin range and have a strong working capital level and a very strong overall balance sheet. We continue to focus resources and energy on acquiring companies that add strategic position in our marketplace, our product breadth and help us grow around the world to achieve these results. Page 4 provides the highlights of the first quarter, and let me just pause there and go through it with you just for a moment. Our gross margins expanded nicely, up 270 basis points to 31.3%, and our operating profits were up 130 basis points to 9.7%, driven by productivity gains and pricing. Our revenue was down 9.2%. Now this was negatively affected by a divestiture, as well as some volume. Emerging markets, revenue increased to 18.6% in the quarter, as compared to last year's same quarter, and now represents 10.4% of our overall sales. The U.S. revenue, excluding the divestiture, was down $3.4 million or 3.8%, but up, compared to last year, if you exclude some large, heavy OEM crane business that we had last year that was very positive in last year's quarter. Sales outside the U.S. were down 9.8%. The bulk of which was volume-related. And in Europe, it continues -- Europe continues to be weak, but we're beginning to see some positive signs in quoting and order activity in that part of the world. We should also note that we made a small acquisition in Austria this past quarter. Now this has been a long-standing channel partner of ours and does allow us to extending our lifting system capability into this region, as well as other markets around the world. The adjusted earnings per share was down $0.02 per diluted share, but we should also consider a large and unusual transaction that occurred in last year's quarter, which represented about $0.06 per share. This was a brokered crane that we sold in South Africa, and you may recall that we reported that last year. At this point, we have $110.4 million of cash on our balance sheet. It's less than our fiscal '13 Q4 amount, and this lower amount of cash was driven by the acquisition in Austria that I just mentioned, as well as an increase in inventory in the quarter to support some large engineered orders we've recently booked. Our global bookings in the quarter were down in the similar range to our revenues. We have seen some bright spots, industrial distribution, material handling specialists and the entertainment industry, are some of that we've noted. This was offset by the crane builder channel and the government channel that we sell into. Some special hoist that serves specific markets, such as oil & gas, also seem to be doing well. Asia Pacific and Latin America, which are small in size for us today, continue to do very well and grow rapidly. This, of course, is driven by our strategic investments in these markets over the last several years. Page 5 summarizes our first quarter revenues. Overall, the revenues were $138.9 million on a year-over-year comparable basis. Revenues were negatively impacted by that divestiture that we had last summer. And on volume, most of the lower volume is in Europe and from lower business activity in the heavy OEM market that we service with our crane business. The revenue was down in the U.S. as well, the bulk of it coming from that divestiture, as well as less business in the heavy OEM marketplace that I just mentioned. And in Europe, the revenue was negatively impacted by lower economic activity in Western Europe. However, as I mentioned previously, we've begun to see some positive signs in quotations and order activity for large engineered projects. Let me turn it over to Greg to walk you through the rest of the slides.

Thank you, Tim. Good morning, everyone. Turning to Slide 6. Our first quarter gross profit margin increased 270 basis points to 31.3%, which was one of the highest gross margin levels achieved since our company went public in 1996. While sales for $14 million lower than the prior year, gross profit dollars were only $300,000 lower. Lower volumes negatively impacted gross profit dollars by $5 million, and the raw material inflation by $0.5 million. It should be noted that the prior year had a benefit of a one-time $1.8 million brokerage fee that was accounted for the net revenue basis with no associated costs to sales. This is included in the $5 million negative impact of lower sales volumes. Offsetting these negative factors were the benefits of favorable pricing of $3.4 million, which was up to open 2.2% versus the prior year, and productivity gains of $1.2 million. In addition, product liability costs were lower by $500,000, compared to a year ago. Finally, we also had unfavorable impact to gross margin of $300,000 related to the net effect of acquisitions and divestitures. On Slide 7, selling expense increased 2.3% from the prior year and represented 12.1% of sales this year, compared to 10.7% last year. This increase in selling costs was primarily related to the Austrian acquisition that was completed during the quarter and continued investments in emerging markets. In addition, foreign currency translation had a positive impact on selling expense of $100,000 this quarter. G&A expense declined 9.4% from the prior year, remaining constant at 9.3% of sales, compared to the prior year. The prior-year G&A costs included approximately $800,000 of one-time costs. At the current sales levels, we expect our SG&A run rate to be approximately $30 million per quarter going forward. Turning to Slide 8. Operating income increased by 5.1% to $13.4 million, or 9.7% of sales, compared to 8.4% of sales from the previous year. This improvement in operating income was driven by the net pricing gains over raw material inflation, as well as productivity gains in our facilities. Our productivity is being driven by our lean manufacturing program, coupled with the benefits of our CapEx projects, training programs and safety initiatives. In addition, lower G&A expense also contributed to the improved operating margin increase. As you can see on Slide 9, income per diluted share for the first quarter of fiscal 2014 was $0.35 per share, reflecting an $0.08 decrease from the prior-year period where we reported earnings of $0.43 per share. The decrease in reported earnings per share was primarily due to the deferred tax asset valuation allowance in the prior year, which resulted in an artificially low income tax rate of 17.4%. On a pro-forma basis at our current normalized tax rate of 29.6%, earnings per share in the first quarter of fiscal 2014 were $0.35 per share, compared to $0.37 per share in the first quarter of fiscal 2013. The prior year benefited by $0.06 per share from the one-time net brokerage fee previously discussed. Our effective tax rate for fiscal 2014 is expected to be between 27% and 32% based on the geographic mix of earnings that we anticipate. Turning to Slide 10. Our working capital, as a percent of sales, increased to 20.2% in the current quarter from 18.3% at March 31, 2013. The increase is largely attributable to an increase in project-type orders that have resulted in approximately $4.8 million of increased inventory in the first quarter of fiscal year 2014. As a result, inventory turns declined to 3.8x. On Slide 11, you can see that we used $5.5 million of operating free cash flow in the quarter, which was comparable to the prior year. Capital expenditures were $3.6 million versus $1.7 million in the previous year. On a LTM basis, we generated $27.6 million of operating free cash flow, and ended the quarter with $110.4 million of cash after funding $5.8 million for the Austrian acquisition. We expect capital expenditures for fiscal 2014 to be in the $20 million to $25 million range due to a $6.8 million manufacturing plant expansion in China, as well as capital projects that are expected to generate further productivity improvements. Finally, on Slide 12, you can see that as of June 30, 2013, net debt was $41.5 million, and total gross debt was $151.9 million. Net debt to net total capitalization was 14.4%. In addition to having $110.4 million of cash in our balance sheet at June 30, we have an additional $93.1 million available under our new $100 million senior credit facility, net of $6.9 million of outstanding letters of credit. This facility, along with our healthy cash balance, provides significant liquidity to support our strategic growth plan. With that, I will turn it back over to Tim to cover the fiscal 2014 outlook.

Great. Thanks, Greg. Let's pause for the moment and look at our outlook on Page 13. Overall, we continue to see slow growth in this uncertain markets. Emerging markets are doing well growing at double digit, driven by the investments in those regions. Order activity in the U.S. is challenged with lower crane sales, compared to last year. However, the hoist business seems to be doing quite well. There's strong activity in oil & gas, as well as the entertainment markets. The capacity utilization in the U.S. was at 76.8% in June, and seems to have moderated in the 76% to 77% range. Europe's capacity utilization was down in the quarter to 77.5%, but as I just mentioned, we are now beginning to see increased quotation and order activity, and we do expect improvement in this order activity ramp-up in the second half of the year. Backlog's at $92 million, down from $99 million in Q4. We seem to be performing very well from a profitability perspective despite these challenged revenues. Our lean system is producing productivity gains, driving margins and inflation, at least at this point in time, is moderate. We continue to execute the strategic plan that we've laid out and make investments in emerging regions of the world like China, Eastern block of Europe, Africa and Latin America, and we continue to look for acquisitions to help accelerate our growth in these regions and other regions of the world. And Evan, at this point, why don't we open it up for questions?

[Operator Instructions] Our first question comes from Jason Ursaner with CJS Securities.

Just first, I want to ask about the volume. In your prepared remarks, you mentioned that U.S. continue to grow modestly during the fiscal year. Is this more of an economic projection in terms of GDP or is it more forecast for your total U.S. volume, including the heavier crane-type items?

Yes, it's a combination of both, I think. As we look to the future, we do expect and have seen economic trends that model us to have a little bit better growth in the second half of our fiscal year as compared to the first half. And it's a broad-based improvement. So it's economically driven, but also, from what we see in the order book, as well as in the industry in which we compete.

Okay. And in terms of the gross margin that you guys are delivering right now, obviously, it's very strong level given the revenue. I guess, if you can give any more detail on the factors that are driving that, you mentioned pricing versus inflation. And just where do you see those things trending right now, and what the key elements of that is?

Sure. I think if you look at the elements, it's multiple pieces. First of all, as you know, our business normally has price. We were able to get price in it, and we're in the 1% to 3% area historically. So this 2% or 2.2%, I think it actually was in the quarter, is let's say normal, and, Jason, I would expect that to continue at least in this range as we look forward. I also expect that the activities that our various business are undertaking to go after productivity, investing wisely in capital to help us get more productive, but at the same time, also looking at all of our business processes and removing waste in all forms, has really proven to be a pretty good advantage for us in increasing productivity, and thereby, as you know, when you get productivity increases, we're seeing it come through in the gross margins. And I'd also say that inflation on the purchasing and sourcing side is relatively tamed at this point. We don't see a lot of headwinds just yet. Of course, that could change, and if it does, as we have done in the past, we'll react to that and adjust prices accordingly to make sure that we have remained margin neutral in this area. So I think it's a combination of all those things. The one thing I'd add is if indeed we can have a little bit uptick in volume, you know that our operating leverage would be very strong in this kind of environment, especially given the productivity we're seeing and the efficiencies in our facilities today that I would expect that the margins would actually increase, and increase in a measurable way.

Our next question comes from Schon Williams with BB&T Capital Markets. Christopher Schon Williams - BB&T Capital Markets, Research Division: Tim, I wonder if you could just maybe address the balance sheet here and you continued to have a very good free cash flow. You've got a good cash balance here. You've got good flexibility on the revolver, and looks like you guys put in a shelf registration as well this quarter, so I'm just wondering if you could talk about in where you see the balance sheet going over the next kind of 12 months or so?

Yes, I think that we would love to apply some of our liquidity, our cash and revolver into acquisitions. We have a number of activities on that front going on right now. We have nothing to announce at this point, but at the end of the day, we'd love to apply our cash into this area, and going forward. We bought this small little company, Schon, in Austria, about $10 million in revenue, relatively modest in size, but strategically relevant for us to help us build our lifting system capability across Europe and the Eastern block of Europe as well. So those kinds of activities that we like to apply our balance sheet to going forward, and the shelf is nothing more than a flexibility in our ability to raise capital if need be, and we certainly would think about that at the appropriate time if it makes sense.

Schon, it's Greg. It's really a best practice and just gives us more flexibility for our relatively modest cost. Christopher Schon Williams - BB&T Capital Markets, Research Division: Certainly, and maybe just as a follow-up. Can you talk about -- when you are looking at acquisition target, what geographies or product lines are really kind of your -- kind of in your top tier or top 3? And then, can you just talk about why the Austrian acquisition, why was that strategic, why do it now kind of thing?

Sure. Yes, so the Austria. Let me start with the Austrian one. That one has been a channel partner for excess of 20 years.

20 years.

Yes, it's been a long time. They actually add value in the marketplace by taking our components. They resell our hoist, but they also take our componentry and it create lifting tools, lifting slings and selling them into the marketplace. We think there's an opportunity for us to take that know-how and capability and spread it to other regions of the world where we don't have good channel partners that are able to do that today. So strategically, we can see leveraging that know-how into other regions, not regions where we have strong channel partners and already performed that value-added task in particular. In addition to that, the owner of that business is of age where he would like to work, maybe not as long or not as many hours per week as he has in the past, and he'd like to help us with this growth model, but not doing it on a full-time basis. So we view this as a win-win scenario for both the buyer and the seller of this business. The first half of your question, I'm sorry, I lost track of it. Christopher Schon Williams - BB&T Capital Markets, Research Division: Just in terms of the target on the acquisition, is it Europe, is it Asia Pacific, and then, maybe the product lines?

Thank you. I'm sorry, I just lost it. Yes, our targets include a wide swap of opportunities. Generally speaking, these companies are not for sale. So it's generally investing in markets where we don't have a strong selling presence, but this target would have a stronger presence than we would, and we can see a way to leverage our product line into this sales force, in the target sales force to add revenue, but also we look for operating characteristics where we can create cost synergies as well. And quite honestly, product -- continued product expansion, we do pretty good job in the hoist business, but our rigging tool business doesn't have the breadth of product that we'd like. So it would be great if we could find a partner that could add value in the product expansion in that area as well. So it's really a two-pronged approach, market and product expansion.

Our next question comes from Joe Mondillo with Sidoti & Company. Joseph Mondillo - Sidoti & Company, LLC: I guess, the first question that I have regards the top line. So last quarter, we saw backlog increased sequentially, and you guys were fairly positive, I'd say, on the release. And yet, we saw the volume decline of 10% this quarter, so it didn't sound like you were expecting that, so I was wondering what may have changed throughout the quarter?

Well, I don't know if we -- I'm trying to recall the last quarter in particular in our conversations. We certainly saw clearly slower growth, especially in the capital goods area of high intensity cranes. We make a line of indoor bridge cranes, hoists that are used on those cranes, and we have some key customers in that area that we definitely have seen a pull back in their investment in this capital good area. So that was not surprising to us at all, and last year's quarter -- last year's first quarter was astounding. It was incredibly positive and good coming out of this particular business of the company. So having it come back a little bit was not, I would say, surprising. We did not also see a huge surprise in Europe. Europe remains economically challenged across the spectrum there. The thing that did surprise me was a bit of an uptick in some orders in some of our engineered business there, which we have order activity, and actually, bookings that have been more positive than we expected. I think, when I look to the U.S., I also see just spotty growth. I see some markets that are pretty good, not huge, robust growth, but decent growth, and then, I see some market that aren't doing very good and they are challenged in that regard. So it's inconsistent, and I would say, uncertain would be the road I would use. Now most of the shortfall is in these 2 categories, the crane builder business, as well as Europe, and I would say those were not huge surprises to us. We'd love to keep that volume, but it just wasn't present in the market today. Joseph Mondillo - Sidoti & Company, LLC: Okay, that's helpful. And then, in terms of going forward, so now you have this backlog that is off about 7% from the fourth quarter, so you have a little bit of smaller backlog, and also, you mentioned in the press release that 38% of the backlog is extended after September, so first off, my question is, what is that number usually? What is that -- is that abnormally high or lower? What's that compared to usually? And then, having said that, with the lower backlog, are we sort of anticipating maybe even a weaker second quarter before these orders translate into a better, maybe, second half of the fiscal year?

Yes, Joe, I'll take the first question on the backlog that shifts beyond September 30, or beyond 3 months. At the end of the fourth quarter, it was $33 million. So it's gone up a little over $1 million. So it's comparable from a dollar perspective, and typically is in that $32 million to $34 million, $35 million range, so really not unusual there. The backlog in total has dropped a little bit, as you mentioned, which leads to it being the higher percentage of the backlog.

Yes, keep in mind that the bulk of our business, by far and away, is not a backlog-driven business, Joe. It's get an order today and ship it within a day or 2 or 3. So that's what we normally see. So we're not really backlog driven, except for certain portions of our business like the crane business, our engineered products business in Europe, which indeed are major projects that we've bid on and get and then, that sits in our backlog and it's extended. But most of our business is a flow business where we get the order in today and ship it in very short order. Joseph Mondillo - Sidoti & Company, LLC: Okay. And then, my next question just regards the gross margin, so I'm just trying to understand a little bit better how your products mix has sort of shifted over the last several quarters. You mentioned that some of your higher products were a little weak this quarter. The crane business was weaker. You've mentioned that the larger project work in Europe has been a little bit weak even though maybe it has started to stabilize. So that type of business, is that lower margin-type stuff or -- I'm just trying to get a better idea on how your product mix, margin mix has shifted.

I think -- I do think that if you look at the revenue that we did get in the quarter, it was more hoist-oriented revenue, which is generally a bit -- a little higher margin than what we would see in the rest of the business. However, with European down, and that is mostly a hoist business, too, and that has similar margins that we would see. So I'm not looking at it from that perspective in terms of understanding the mix impact.

Joe, there's one other factor as well. If you're looking year-over-year, the crane business we divested last August had a lower-than-average gross margin. And the other factor is our Forge business is performing much better than it did a year ago. Joseph Mondillo - Sidoti & Company, LLC: Okay. And then, in terms of the productivity gains, I was wondering last quarter, you talked about a couple initiatives at 2 of your China plans being pretty big factor to gross margin improvement this year, I was just wondering, has that taken hold and has that benefited the gross margin as of that yet or is that still not -- is that still a benefit that we're waiting for?

Yes, Joe, that will be a benefit that will come in fiscal '15, and that's in the press release, and in my comments I, referred to a $6.8 million manufacturing plant expansion in China. So that is underway, approvals have been received. The engineering's been done. Construction is underway, and that will take through this fiscal year to complete. So the real benefit from that will come in, in fiscal '15. Joseph Mondillo - Sidoti & Company, LLC: Okay, great. And then, just lastly, in terms of the long-term goals that you've talked about for several quarters now at least. I was just wondering what kind of time horizon is that sort of $1 billion sales, the $200 million to $300 million acquisitions, what is that sort of time horizon?

Reality is we'd like it to be very close to today, but the other side of that coin is that when you do acquisitions or you're targeting the way we target acquisitions, it's very uncertain as to the timing. You just don't know how quick those conversations take place, how interested the sellers, potential sellers are. So it's very difficult for us to put our finger on the timing relative to when we get to the $1 billion. However, you should know that our activity in our energy and our focus is around it to grow to get to that level, and I think that's what most important.

Your next question comes from Lance James with RBC Global Asset Management. Lance F. James - RBC Global Asset Management (U.S.) Inc.: Congratulations on really achieving significant margin expansion in a challenging top line environment that's -- you really are to be congratulated for that. My question really is with regard to -- especially the domestic oil & gas industry, have you seen -- I know you note it as an area of strength, but have you seen a real large ramp-up in orders there? Are we kind of at the sweet spot or do you perceive that as still to come? And then, just question two, if we get a buildout on pipelines, which have been held up by regulation or whatever, is the pipeline business that -- if we do get the buildout, does that going to be particularly helpful to you or not in particular?

Well, first of all, thanks for the compliment. We certainly appreciate the recognition. Relative to oil & gas, let me start with that one, and that has to do with what we're seeing in the marketplace. And I would say that it's not robust, but it continues to grow. So we're talking low, mid single-digit kind of growth. We're talking about decent, not through the roof. And on the pipeline question that you asked, certainly, the construction, the fabrication of that pipe, the construction and erection of it would use a whole variety of our kinds of lifting tools and manual hoists in the field. So we would be, I think, buoyed by that activity and look forward to it.

Next in queue is Peter Van Roden with Spitfire Capital.

Just a quick question on North American market share. Because of the fact that Asia and Europe are a little weaker now, are you guys seeing the North American market a little bit more competitive?

No more than ordinary competitive nature. It feels about the same.

Okay. And then, you guys say you've see some good signs out of Europe, what exactly are those?

Well, the engineered business, our actuator business in Europe. It has seen some opportunities come their way, and they've landed some of them for highly engineered material handling systems that they would produce. That's the piece that we're seeing a bit more robust right now.

The combination of both quote activity, as well as orders that we've received.

Okay. And then, can you talk a little bit about how your sales trended across the different distribution channels for the quarter?

I'm sorry, you were breaking out there, Peter. Could you repeat that question?

Yes, just how your sales trended across the different distribution channels in the quarter?

In the quarter?

Yes.

Let me see if I can research that. Yes, so the crane builder channel was off substantially. Industrial distribution and the rigging channel were both positive. Material handling specialists, which these are design houses generally, was up quite a bit. Entertainment was up solidly. Catalog houses was down. Retail was flat. OEM and government was down quite a bit and our own crane builder was down quite a bit, as I mentioned earlier.

Your next question comes from Gregory Macosko with Lord, Abbett. Gregory M. Macosko - Lord, Abbett & Co. LLC: Just with regard to the gross margin, I want to understand you talked about the puts and takes with regard to it. Lower volume, it sounded like lower volume hurt a little bit, but obviously, the other side of that was when volume picks up, that should -- would drive it higher, is that the point?

Yes, that would be exactly the point. It's really pretty good execution, efficiency of productivity gain, sourcing activity, that really allowed us to get that margin in the face of lower volume. So as we would expect volume to certainly return, we would expect it to go north. Gregory M. Macosko - Lord, Abbett & Co. LLC: And then, the productivity gains, you kind of talked $1 million a quarter, so it sounds like you've had -- you kind of have beaten that a little bit recently, are you pulling stuff forward and getting it done faster than you thought or I mean, is this sort of an outlier a little bit, and the $1 million is going to continue going forward?

Well, last year we reported $5.3 million of productivity for the year, so slightly over $1 million a quarter run rate and so, this is I would say another typical quarter of that sort of a level. Gregory M. Macosko - Lord, Abbett & Co. LLC: How long -- I mean, are we talking years in doing this every quarter for a while or is there an end in sight or is it pretty ongoing?

Well, I think there's multiple pieces of it. Our -- certainly, our lean is ongoing, and we'll get the productivity that's driven from those activities, I think, pretty regularly. The other side of that coin is the sourcing coin, I think, and that is -- right now, we're getting price in the flat purchasing price world out there today, and some commodities is actually down year-over-year. That's not going to hold forever, as you know, Greg, prices will come and both will increase, and we'll have to figure out a way to offset those with more productivity, and at some point, that might get flat out on us.

And just to add on, the other part of the productivity equation is the capital expenditures that we have spent to increase our efficiencies in our manufacturing facilities. So there will be a limit to that over time, but we certainly see this sort of a run rate being sustainable for the near term. Gregory M. Macosko - Lord, Abbett & Co. LLC: What kind of net-net -- it feels as if that gross margin has a little -- I mean, obviously, depends on the economy, but...

Well, the biggest piece to that will be volume. Gregory M. Macosko - Lord, Abbett & Co. LLC: Yes, yes, I agree with that. But my point is that it should -- it sounds like you've got continued upside here with some of the things you've talked about unless the economy turns bad or something?

I think, you're right. Gregory M. Macosko - Lord, Abbett & Co. LLC: Okay, good. And then, with regards to the Austrian acquisition, I must say it sounds interesting. Ease of using and creating the tools, I mean, have you done that -- kind of kick in that approach with any of your other acquisitions before and done that around the world in different places in similar approach?

We made a small acquisition in South Africa back December of 2011, where we used the similar approach. Different product group, different reason for the acquisition, but that was a mining business. They supported the mines with our hoisting products in doing the service of the hoist and the inspection and the replacement of those hoist in the mine, and we have our leveraging that know-how and knowledge from South Africa to spread around the world. So it's similar concept, different product. Gregory M. Macosko - Lord, Abbett & Co. LLC: And this is -- is this rigging tools we're talking about or not? Or is just...

Yes, this is chain slings and wire rope slings and a variety of rigging tools, that's correct. Gregory M. Macosko - Lord, Abbett & Co. LLC: So the point, I think, is that you've done it before and it's an area where you can use some breadth and could be leveraged, to some extent, around the world, you have experience in it?

That's exactly the case. Right.

Next in queue, we have Schon Williams with BB&T Capital Markets. Christopher Schon Williams - BB&T Capital Markets, Research Division: I just wanted to follow up on the pricing commentary. I would have called, maybe, actually, that we would have seen pricing accelerate a little bit more from the March quarter, I mean, that was 2% in March, 2.2% in Q1, is this -- I'm just trying to get a sense of, is there -- I wanted -- I believe that kind of March, April, was normal when you start putting through pricing a year, should that pricing actually pick up modestly as we move into Q2 and Q3 or is this kind of as good as it gets?

Yes, I think, Schon, as we've talked before, the price increases in March that you're referring to are mostly U.S.-based price increases. In Europe, our price increases tend to go in into the October time frame, and at this point in time, we're looking to see what makes sense on a product-by-product and country-by-country basis. So I think it will depend on how challenging the European environment is in that September, October time frame as to whether or not the market will accept price increases. Christopher Schon Williams - BB&T Capital Markets, Research Division: Okay. And then, just on -- back on the China expansion, can you clarify, is that just productivity gains or does that mean -- is that capacity gains as well? It is -- I don't know, have you guys -- have you quantified the -- either the price of the gains or the capacity gains?

You are referring to the capital expenditures that we would make into China? Christopher Schon Williams - BB&T Capital Markets, Research Division: Right. For this year -- you talked about spending several million dollars this year, it's going to lead to some productivity and cost savings for next fiscal year. I'm just trying to get a sense of, is that also actually expand capacity at the same time, and if so, are we talking about kind of millions of dollars, tens of millions of dollars, just trying to get a sense of capacity expansion as part of that CapEx expansion?

Yes, let me see if I can give you the strategy, and I think this might answer your question. So we have invested in the sales force in China, back up. 1992, we started our manufacturing footprint there in China. We built products that we exported out of China into America and Germany and other parts of the world, and that was very successful. About 3 or 4 years ago, we started to invest in the sales force to really sell those products into the Chinese marketplace. As we began to get into the market and understand the needs of the market more clearly, we found that the demands for the products were really coming from Germany and America. These are high-cost products and very capable products, premium products, premium-priced products, and we decided that we needed to localize the production of these power hoists into China to help the Chinese sales expansion. So we actually are expanding our manufacturing footprint in China to accept more a broader product offering to produce into China, to sell into China. So the first thing were trying to get is additional revenue that should drive more revenue into the Chinese market because today we're -- for a large part, we're actually importing into China from outside of China, and we think that we can do a better job if we produce that product in China for servicing the local market. So that would be #1, and I would expect with that increased revenue, we'd have some increase margins coming out of that part of the world as well. Christopher Schon Williams - BB&T Capital Markets, Research Division: Okay. Are there -- it's better to serve that market locally, but are there capacity constraints right now? I mean, could you actually be growing faster than the 18.6%?

Yes. There is a capacity constraint. We can't -- we don't have enough footprint right now to build all the products we want to build. So we need to expand to be able to localize the 3 or 4 product lines that we're moving in there.

Our next question comes from Joe Mondillo with Sidoti & Company. Joseph Mondillo - Sidoti & Company, LLC: I just have 2 quick follow-up questions. First, the pricing increases that you did in the U.S., I think you've talked about that you guys are sort of -- you lead in price in the market. I was just wondering what you've seen sort of in the market, what pricing has done? Has competition followed you or sort of what you've been seeing there?

Yes, so we're -- depending on the product. It could be 0, but it could be 5% price increases and we're averaging 2% or so, and I think that for the most part, our competitors follow, depending on individual products, but generally speaking, that's the case. Joseph Mondillo - Sidoti & Company, LLC: Okay. And then, the orders, obviously, were weak in the quarter, but I was just wondering how they trended throughout the quarter and into July?

The orders trended -- got worse as the quarter went on. They were stronger in the early part of the quarter and at worst as we move through June, and now, they seem to have stabilized in the front part of July here. Summer time is always a tough time, but they seem to stabilize at a level there at now.

And we are showing no other questions in queue at this time.

Thank you, Evan. So we continue to expect the rest of '14 to be a -- the slow growth mode and maybe revenues would be choppy as we're seeing in this quarter. The profits should continue to improve as the lean business system, as well as our fixed cost reduction of several years ago and good cost control bare foot. Our investments in emerging markets continue to be successful, and we do expect the U.S. could continue to grow albeit slowly and maybe in a choppy way. Europe will be in a very slow growth mode, but were buoyed by this more positive order activity as of late. We do remain positioned to continue to execute our strategic growth plans to grow our businesses. We have this $110 million in cash, this $100 million revolver to help us execute that as well. We continue to have discussions with multiple businesses that can add strategic value to our company from on acquisitions standpoint, and as I mentioned, we continue to make strategic investments in selling into these emerging markets, as well as invest in new products and services and productivity enhancing equipment in our facilities. I'd like to take the time to thank our Columbus McKinnon associates around the world for their dedication to excellence in making our company a stronger, market-leading organization. And as always, we appreciated your time today and your support. Thanks, and have a good day and nice weekend.

This concludes today's conference. You may disconnect at this time. Thank you.