Columbus McKinnon Corporation (CMCO) Q1 2016 Earnings Report, Transcript and Summary

Greetings and welcome to Columbus McKinnon Corporations First Quarter Fiscal Year 2016 financial results conference call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Deborah Pawlowski, Investor Relations for Columbus McKinnon. Thank you. You may begin.

Thank you David and good morning everyone and thanks for joining us today as we review our first quarter fiscal year 2016 financial results. We certainly appreciate your time and your interest in Columbus McKinnon. On the call I have with me Tim Tevens, our President and CEO; and Greg Rustowicz, our Chief Financial Officer. Tim and Greg are going to review the results of the quarter and give an update on the company's outlook and strategic progress. You should have a copy of the financial results that were released earlier this morning before the market, and if not, you can access those at the company's website www.cmworks.com. At the Investor Relations section of the website you can also find the slides that are going to accompany the discussion that Tim and Greg will be having here today. Now if you would turn to those slides and look at Page 2, I will discuss the Safe Harbor statement. As you are aware, we may make some forward-looking statements during the formal discussions, as well as during the question-and-answer session. These statements apply to future events that are subject to risks and uncertainties, as well as other factors that could cause actual results to differ materially from what is stated here today. These risks and uncertainties and other factors are provided in the earnings release as well as with other documents filed with the Securities and Exchange Commission. These documents can be found on our website or at sec.gov. So with that, I’ll let you start on slide three, and turn the call over to Tim. Tim.

Thanks Deb and welcome to the call to review the results of our first quarter ’16. As Deb mentioned we’ll start of page 3, and we just want to remind you of our long term objectives, which include growing to be a $1 billion with about a third of our revenue in developing markets and two-thirds in developed markets, along with the $200 million to $300 million of acquisitions and the steady stream of new products, 12% to 14% operating margin and a strong working capital level with an overall balance sheet. We continue to focus resources in energy and acquiring companies and we’ll take about Magnetek in a moment here, that strategically add market presence and product rev to help us grow around the world to achieve these results. Page four provides the highlights of our first quarter. Revenue was up 1.5%, excluding the impact of foreign currency. Of course the strong U.S. dollar resulted in unfavorable currency translation of $8.9 million. Revenue outside the U.S. grew $2.4 million over the last year and emerging markets grew a nice 10.3% over the last year; again, excluding foreign currency translation and the U.S. was flat. We continue to increase our gross margin, improving this quarter 50 basis points to 32.4% on an adjusted basis. Adjusted income from operations was at $12 million or 8.8%, GAAP operating income was 11.3% or 8.3% of sales, and as we mentioned in the prior couple of calls, our debt refinancing did indeed add $0.07 in earnings per share, which is what our expectations were. We did take a significant step forward with a complementary acquisition of Magnetek which we announced this past Monday. Page 5, which hopefully you’ve seen before provides an overview of Magnetek that we announced on Monday. The trailing 12 months of financial data, revenue was a $112 million, adjusted operating income of $12.4 million, which was a 11.1% of sales and EBITDA of 13.2% or 11.8% for Magnetek. As you can see in the slide on right, the pie chart on the right, Magnetek’s revenue mix you can see about 75% of the business is material handling. They are the largest supplier of digital power control systems in America for industrial cranes and hoists. They have a very strong position in radio controls as well. They are the world’s leading independent designer, digital motion control systems for elevators and they do serve the subservice mining industry and they have just issued a new generation of digital drive systems those devices. They were founded in 1984 and have 240 people up in Menomonee Falls, Wisconsin and that’s a solid overview of what they do. Let me move you to page – the next page, page six and we can talk about the combination of two companies. The strategic value that we could create by the combination of these two, is depicted on page six, which creates an integrated organization that is culturally aligned to help our customers lift, move and position items in a safe and productive manner. We combined the leading hoist company with the leading North America power control company to provide more complete solutions to key vertical markets, to improve the safety of material handling. We have two categories of synergies; revenues and costs. Costs are very straightforward, reductions in public company costs, administrative costs. We do see ourselves having manufacturing souring synergies as well with Magnetek. Revenue synergies are very interesting, as we will jointly develop safe and productive lifting solutions and also broaden our mutual addressable market, leveraging the strengths of the both companies. Page seven indicates the transaction highlights. This $50 per share is what our offer is, $188.9 million purchase price, which was a 55% premium to the July 24, end of day share price, which will be paid all in cash. Pro forma, our company will be about $690 million organization in revenue, $85 million in EBITDA. Costs synergies for the first full year of operations will be about $5 million and we do expect a $0.40 per share accretion, excluding purchase accounting, and a $7.5 million to $8.5 million one-time pretax cost to achieve synergies. And of course as you probably understand, we are subject to Hart-Scott-Rodino filings and other regulatory filings we believe them to be perfunctory and the minimum tender offer of 50% is what needs to take place. We do expect to close by September 30, 2015. And let’s talk about – back to first quarter of Columbus McKinnon. Slide eight shows the Q1 revenues which continue to be negatively impacted by foreign currency translation. Excluding FX, sales were up 1.5x including FX and they were down 4.7%. Our STB acquisition more than offset our volume decline. U.S. sales were flat with last year. We do believe that oil and gas impacted our revenue by about $2 million to $3 million as a reminder of the sell through distribution and this truly is an estimate from our side. Sales outside the U.S. were up 4% excluding FX, Asia Pacific up 5%, EMEA up 2.5%, Latin America up 13%. If you include foreign exchange, sales were down 10.6%. Let me turn it over to Greg for some more updates on the financial details. Greg.

Thank you, Tim. Good morning everyone. On slide nine, our first quarter adjusted gross profit margin increased 50 basis points to 32.4% from 31.9% in the prior year. Adjusted gross profit decreased $1.4 million or 3.1%. We are adjusting gross profit for two items, the European facility consolidation costs of $200,000 and the inventory step-up expense related to the STB acquisition in the amount of $400,000. The reconciliation for adjusted gross profit is included on page 22 of this presentation. This quarter represented the 19th consecutive quarter of year-over-year gross margin improvement on an adjusted basis. On a GAAP basis gross margin was 32%. Gross profit decreased by $2 million this quarter compared to the prior year. Foreign currency translation was the largest contributor to this decrease, negatively impacting gross profit by $2.9 million. Sales volume and mix was the next biggest factors negatively impacting gross profit by $1 million. The European facility consolidation costs and the acquisition inventory step-up expense previously mentioned together accounted for $600.000 of lower gross profit. Partially offsetting these negative factors were several positive items. Pricing, net of material cost inflation added $1.6 million to gross profit. Productivity net of other manufacturing cots was positive this quarter by $400,000. The STB acquisition contributed $300,000 to gross profit and lower product liability cost added $200,000 to gross profit. As shown on slide 10, total SG&A expense was flat this quarter compared with the year ago. Selling expense was lower than the prior year by $1.3 million and represented 12.2% of sales this quarter, down from 12.5% in the prior year. Favorable foreign currency translation lowered selling costs by $1.7 million. The STB acquisition added $100,000 to selling expense in the quarter. G&A expense increased $1 million from the prior year and represented 11.1% of sales this quarter, compared to 9.9% in the prior year. Acquisitions added $300,000 and the European facility consolidation added $100,000 to G&A expense. Also impacting G&A expense in the first quarter was a lower level of IT salaries capitalized as part of the global ERP project compared to a year ago. Foreign currency translation had a $700,000 favorable impact on our G&A cost this quarter. We expect their SG&A run rate to be approximately $32 million to $33 million per quarter in fiscal 2016, excluding the impact of the Magnetek acquisition. Turning to slide 11, adjusted operating margin was 8.8% compared to 9.1% and adjusted operating income was $12 million compared to $13 million in the prior year period. This represents a decrease of $1 million or 8%. The decrease in adjusted operating income and margin reflect the impact of lower sales volumes in the U.S. and Europe as adjusted gross margin is higher than 1 year ago and SG&A costs are slightly down year-over-year. We have adjusted operating income this quarter for the impact of the European facility consolidation costs of $300,000 in the acquisition inventory step-up expense related to STB in the amount of $400,000. This reconciliation can be found on page 23 of this presentation. Our U.S. GAAP operating margin was 8.3% in the quarter. As you can see on slide 12, adjusted earnings per diluted share for the first quarter of fiscal 2016 were $0.36 per share compared to $0.34 per share in the previous year, an increase of $0.02 per share or 5.9%. Adjusted earnings per share reflect the exclusion of the charges related to the European facility consolidation costs and the acquisition inventory step-up expense. GAAP earnings per diluted share were unchanged at $0.34 per diluted share. The GAAP earnings per share included the impact of the items I just mentioned, as well as the actual tax rate in the quarter of 33.9% compared with 33.1% in the prior year period. Our effective tax rate for fiscal 2016 is expected to fall between 32% and 36%, which is higher than last year’s rate of 24.5%, driven by increased pretax income in the U.S. as a result of the approximately $7.6 million of interest expense savings from the debt refinancing. The U.S. has the highest corporate tax rate for the company. On slide 13, you can see our return on invested capital is 10.8% on a tailing 12 month basis and it exceeds our weighted average cost of capital. We continue to invest in good capital projects that exceed our cost of capital and look for synergistic and value producing acquisition opportunities like Magnetek that was announced this week, that will also exceed its risk adjusted cost of capital. Turning to slide 14. Excluding the STB acquisition, our working capital as a percent of sales was 21.9% compared to 22.4% at June 30, 2014 and 20.8% at March 31, 2015. Working capital as a percent of sales while better than one year ago did increase from the most recent quarter end. This is due to higher inventory levels, largely related to large projects and backlog, as well as the timing of payments to vendors, which impact accounts payable. Inventory turns were 3.3 times compared to 3.8 times one year ago and were lower compared to last quarter’s level of 4.0 turns. Inventory turns have also been impacted by project inventory increasing in advance of shipments. On slide 15, net cash provided by operating activities was $3.2 million compared to $6.5 million one year ago. Capital expenditures in the quarter were $4.1 million versus $4.6 million in the previous year. As a result, operating free cash flow was a use of cash in the amount of $900,000 compared to operating free cash flow of $1.9 million one year ago. Impacting operating free cash flow in the first quarter was a $5 million pension contribution made to our U.S. defined benefit pension plans. We will not have any further contributions this year to our U.S. defined benefit pension plans and our overall contributions to our U.S. defined benefit pension plans will be $5 million less than they were in fiscal 2015, which will positively affect future cash flows. We expect fiscal 2016 capital expenditures to be in a range of approximately $18 million to $22 million, majority of which is dedicated to productivity and growth projects. We plan to use excess cash flow over the next couple of years to delever the balance sheet after we close on the Magnetek acquisition. Turning to slide 16, you can see as of June 30, 2015 total debt total debt was $123.5 million and net debt was $65.4 million. Net debt to net total capitalization was 18.9%. The debt refinancing that we completed in February 2015 will reduce our annual cash interest by approximately $7.6 million, which was the driver and reduced interest expense in the first quarter when compared to the prior year. As we look to fiscal 2016, our capital allocation priorities include rewarding our shareholders with dividends, closing on the Magnetek acquisition and other strategic growth initiatives to drive profitable growth. Moving to slide 17, I would like to take a minute to review the sources and uses table and our Pro Forma capitalization table related to the Magnetek acquisition. We will fund the purchase price and Columbus McKinnon estimated expense with cash on hand and revolver borrowings, including a new incremental revolver facility in the amount of $75 million. This will represent inexpensive financing for us at the same rates as our current revolver. We will have ample liquidity estimated at $95 million after the closing of this transaction. Our debt to total capital will be approximately 53.4% on a pro forma basis after the transaction, which is in line with the maximum we would flex to for the right acquisition and we do believe this is the right acquisition. Finally, we do expect to utilize our free cash flow to delever very quickly as both companies generate substantial free cash flow. With that, I will turn it back over Tim to cover the fiscal 2016 outlook.

Thanks Greg. Let's spend a moment and take a look our outlook on page 18. We do expect to continue to grow our share in targeted markets and create value by integrating the recent acquisitions. We also continue to see positive growth in Asia-Pacific, but as you probably could imagine, currency will continue to be a short-term headwind. We would expect the positive operating margin trend to continue through fiscal 2016. Our debt refinancing will create value with a $7.6 million interest savings in ’16 as well as the new ERP system that we are installing will create efficiencies across our company. Our backlog is consistent and we would expect it to be so. Magnetek will definitely add to our profitable growth and our Chinese and emerging market business will continue to grow nicely. I believe our new product development team is also doing an excellent job in the new product launches and we do expect the cadence of these product launches to accelerate. And with that, David I’ll turn it back to you for questions please.

Thank you [Operator Instructions]. Our first question is from Robert Majek from CJS Securities.

Good morning. Can you give us a little more color on the volume trends we are seeing in each of your regions, especially in China?

Yes. So the volume in China is up. I think that’s been positive. EMEA it does seem that they have reversed the negative trend and now we have a couple of quarters in a row where the volume is up obviously ever so slightly. I will tell you that our CMEP business, the engineered products business there is indeed seeing some of the large projects be released and they are beginning to book some of those, which is actually positive momentum for them and probably the most positive momentum we’ve seen in quite a while. And Latin American is spotty. Brazil is definitely down on the volume side. The Petrobras problems they are having and the pullback in their spend as a result of the corruption is definitely impacted us negatively in volumes and that’s also to a large degree driven that economy into a recession, which we are feeling broadly. And then Mexico seems to be up and down month to month depending on which month you look at, but it seems like overall very slow volume growth. And in America that’s true as well. We are relatively flat in America with the exception of oil and gas activity and we do think the explosion through hoist where we can track directly that volume is down quite a bit and the supporting industries in the oil and gas producing regions is down as well, which created an overall slightly down volume in America.

That was helpful thank you. Now with your expectation of moderate growth in the core business plus the Magnetek acquisition, the bottom line should be growing very nicely. Can you talk a little bit about how it all ties into your long term goals and where we stand in getting there?

Sure. So, on a top line as you know we have this aspirational $1 billion business and of course the Magnetek business moves it up about $100 million plus million in revenue pointed towards that. The other thing it does for us is the combination of the two companies together from just a straight cost reduction standpoint will increase the operating margin of Magnetek quite nicely and then also the overall operating margin of our business and together we would certainly maybe not directly achieve, but very closely push towards the 12% to 14% margin as a combined company, which gets us back in line with our operating margin goals as well. As Greg mentioned in his report, the debt of the total cap is the 50% area. Our thinking is that that’s – this company can support that given the free cash flow nature of the business for a while, but it would be our intent to delever that balance sheet a bit to get back into let’s say that 30 – closer to the 30% area and then of course that would give us sufficient fire power going forward to continue grow to push towards the $1 billon revenue, both from an organic standpoint and inorganic standpoint.

Thank you and my last one on SG&A, regarding to our run rate $33 million a quarter, can we get an update on what that might be once you are through with the Magnetek acquisition?

Greg, you want to take that one.

Sure, sure and let me just add on to your last question before we get to this one. So Robert if you took the pro forma sales and operating income that we disclosed as of March 31 for the two combined companies and added the $5 million of cost synergies, that ends up at 13% operating margin and so your question on SG&A. So Magnetek’s SG&A is and I’m going off the memory here, it’s in the 22% kind of a range. We would expect it to remain at that sort of level in the short term.

Okay, perfect. Thank you.

Our next question is from Mike Shlisky from Global Hunter Securities.

Good morning guys.

Good morning Mike.

I wanted to touch briefly on Magnetek first. I think just looking at your RIOC versus your average cost of capital, I guess as soon as you add on Magnetek and you’re still seeing a debt, does that lower your cost of capital and do you expect to have your kind of ROIC stay well above that after the deal is closed.

Yes. So in terms of our weighted average cost of capital, it is going to go down, because the proportion of debt in our capital structure is going to go up substantial and so the cost of that is much cheaper than the cost of equity. I haven’t done that calculation, but I would imagine it’s going to go down a couple of points for sure. And I think in terms of return on invested capital, once you strip out all the noise of the one-time cost and exclude all that, I think our return on invested capital might take a temporary downturn in that first year, because of the amount of additional assets we were adding to the business, including the good will and intangibles, but we would expect that to move back up over the 10% range fairly quickly.

Okay, great. Also following up on an earlier question, can you maybe tell us, a little more color as to which product lines do you have in our outlook as opposed to regions?

Yes sure. This past quarter we noticed that the hoist business seemed to rebound quite nicely, but our rigging business which is the forged attachments and chain went down and that kind of makes sense the way we look at the markets as well. The reason I say that is because a lot of the rigging hardware that goes into the market is sold into the oil and gas channel and as you might imagine that activity is down substantially. The hoist business is much more maintenance repair, operating production supplies and that seemed to be doing better. A slight, a sliver of our hoist business is this exposure proof for oil and gas and that too was down given the lower activity in that market. The overall major project businesses, while there is the European rail and road business, it was down this quarter. Now they are going to be booking some nice orders here, but the revenues were down year-over-year just because they didn’t have things booked a year ago that they could be delivering this quarter. And also a business we don’t talk a lot about from a product line standpoint is this tire shredder business we have which operates generally by themselves. It did have a down revenue. They had a wonderful quarter last year and on a comp basis they were down this year. The different story there is their bookings are up substantially over last year. It’s just more of a tiny one delivery of those shredders that get shipped to the marketplace, which are future from this quarter looking in to fiscal ’16.

Great. One last one here; I think Greg I think it was you who kind of said, told me once that [Indiscernible] need to be broken. I guess is there anything you can see out there that might cause your gross margins to invest in fiscal ’16 to be down year-over-year in any of the quarters or do you still feel you got all the right costs and sort of volumes in place to keep those going.

Sure. So Magnetek’s gross margins are in the 36% range. So once we add Magnetek and excluding any one time costs that would potentially hit that, that is going to be incremental to our existing margins in the 32% range. So I think we’re going to be okay for the next several quarters.

All right, great. Thank you so much.

Our next question is from Peter Van Roden from Spitfire Capital.

Hey guys.

Hey Peter.

Starting with inventory and backlogs, so your inventory was up quarter-over-quarter. I think you mentioned in the release that part of that was due to some large projects that you had expected to ship. The flipside of that is backlog was kind of flat quarter-over-quarter. How do you see those two playing out over the rest of the year in terms of a lot of factors getting released and getting shipped?

Why don’t you go ahead and take that one Gregory?

Sure. So Tim mentioned our tire shredder business. I know we have a substantial increase in sales that we expect in the quarter we’re currently in. They had a bit of an off first quarter, but the second quarter they had plenty of orders to ship and that will be up and that will knock down inventory probably several million dollars. It terms of some of our other project business that Tim talked about in our engineered products business in Europe, a lot of those orders are slated for later in the fiscal year, third and fourth quarter. So the good news though is we actually do get advances from our customers. So from a total working capital perspective there might be a slight difference, but we’re pretty good about covering that incremental cost of the build with advances in our engineered products business.

Got it, that’s helpful. And then my second question is, I was trying to do the math but it’s a little bit hard. Including STB in Europe, it would have helped the business grow excluding the FX and then I would imagine then organically it was down. Can you walk us through that to understand the puts and takes there?

So let me understand the question. Is that – are you specifically looking at STB or all of Europe?

Yes, Europe. So you guys said Europe was up 2.5% excluding FX, but Magnetek had a $3.7 million stir up in the quarter and so I think that means that the rest of Europe was down organically.

Well Greg, why don’t you take this, but I think it’s more FX related.

Yes, so FX had a fairly significant impact with the weak Euro and as I’m looking at my numbers here, there was a volume decline in the quarter in Europe, partially offset by pricing. So if you excluded the STB acquisition it was down mid single digits.

Okay, got it. Thanks.

[Operator Instructions] Our next question is from Schon Williams from BB&T Capital Markets.

Hey, good morning gentlemen.

Good morning.

Hi Schon.

Tim, as we enter the third fiscal year of what’s kind of, I would describe as a pretty difficult industrial environment, can you just talk a little bit about how your thinking about SG&A control and because your essentially guiding for SG&A as a percentage of sales to be somewhere around your kind of 23% of sales for this year. If I look five years ago it was closer to 20% of sales. If I look 10 years ago it was closer to 16% of sales. Can you just talk about, are there additional restructuring efforts that need to be done here in the near to medium term? Is there something that’s artificially kind of inflating these kind of more recent figures or should we expect Columbus, I don’t know, contingently as a growing overseas that and investing that the SG&A will continue to grow faster than the sales.

Yes, I think just at a macro level and when you think about it strategically, we are indeed investing in markets overseas that should create additional revenue opportunities for us. As you know, many times we invest in front of the revenue before we see the revenue and profits as we did in Asia for example. Now Asia is delivering on profits now after four or five years, which is having less – it’s not yet at the average of the total company, but it’s certainly pointed in a very positive direction and that would be true for Latin America too if you put aside the Brazilian woes that are underway right now. I think Schon as I look to our business, this 20%-ish area is kind of normal. But I think about Europe and some of the opportunities now that we’ve put in our new ERP system across most of Europe, not all of it just yet, but most of it, there is large opportunities to consolidate some, what I consider to be administrative functions and actually Greg is going to be working with Ivo Celi this coming years I’ll say right now. But into the future to do some of the consolidation of admin functions, we probably will still need the remote sales locations in the various countries across Europe, but I think there is an opportunity to get some ebb and cost out with the same system platform. But overall I think if you think about us in this 20%-ish area – oh! By the way, we’ve also invested more in new product development as I mentioned to you, which might spike that up a little bit. The disappointing part to be honest with you is the revenue. I would expect the revenue to continue to grow, but it hasn’t grown as much as we’ve liked. Certainly there has been some headwinds with some major customers of ours that have pulled back because of the variety of problems in their business like such as commodity pricing or mining and now we are seeing Schon as you are well aware, the whole oil and gas turned down. Obviously that’s got to turnaround sometime in the future, I don’t know when, but it is a market that’s very important to our company and all the supporting industries that go in oil and gas. You would expect that at some point it will turn. But those headwinds aside we still remain, let’s call it relatively flat. Of course currency, hopefully you can understand that the currency is a negative, but we kind of put that aside as well. I don’t know if that’s helpful or not.

Yes. That’s good for a second. Just because I guess that – I mean to some degree you are running at much higher levels than historically and I’m just trying to get a sense of what point do we start to from some of that and I know there is a lot of variables that go into that, the FX, some of the macro certainly isn’t helping you, but that’s helpful perspective. Maybe if I could dig a little bit deeper into the international markets, I wondered if you could just talk about, so Asia Pacific up mid-single digits. Certainly there is some concern about the macro in China. There is also concern about even the other part, kind of Southeast Asia, I’m thinking about Australia. Can you just talk about, do you feel like you are making enough headway with market share gains that you will be able to at least for the near term to offset some of those macro headwinds.

Yes, as you know our presence there is new and also very small. So growth becomes a little bit easier when you have a big market to go after and attack and our team has done a nice job there of doing that. I would expect with the growth in China certainly slowing and I’ll be honest, our sales team is feeling that growth and investment in capital goods slowing in China. They feel that we have been successful in taking market share from others and I would, my expectation is they would continue to do that. It may be at a slower pace, but I would continue to think that we would be able to gain share there. As we think about outside of China and get into places like Thailand and Singapore and India, these are relatively new markets for us. Singapore has been negatively impacted by our ship building and oil rig building for obviously reasons. So we are not looking at a lot of growth coming from there. But India is a virgin territory for us. We have a couple of distributors established now. We’ve just sent our first load of hoists into the market place that our team is placed with various distributors. Our team feels very positive about that with the new government that’s been established. It seems to be a little bit more pro-business, a little more pro-economy and that too is all incremental business that we’ve never had before. But I think if you add it all together Schon and you look at it, my expectation is we would continue to see APAC to grow even with the headwinds that we are seeing at this lets say mid to high single digit kind of area.

All right, that’s very helpful. And then one more if I may. Tim, can you just talk a little bit about how you are thinking about pricing this year. I mean still kind of a very heavily deflationary environment. Can you just talk about kind of where do you feel comfortable in terms of – what do you feel comfortable with in terms of pricing for this year? Could we actually see that go flat or should we still see the kind of the traditionally kind of 100 to 300 basis points.

Yes, I think that would be my expectation is that we would continue to see what we’ve always seen from this company is this 100 to 200 basis points kind of level. I think though Schon to be honest with you, it will be at the lower level. It’s not going to be towards the 200 or 300 level, it’s going to be towards the 100 level in terms of basis points improvement. It is tough to get price and harder to get price, but our channel partner do expect it and we got to do it in a smart way and we will continue to do that in a smart way.

And Schon, yes I was just going to add on. So pricing in the first quarter was up 1% and the price increases in North America, our biggest market have already been implemented.

And want about – I mean Europe normally is down I think later kind of in the fiscal year. I mean should we expect kind of you know very most pricing there or kind of little to no pricing.

Europe has also – they did their price increases earlier in the calendar year as well. So I wouldn’t expect anymore coming out of Europe given the weak economy that we are currently in there.

Okay. Thanks guys.

Thanks Schon.

Ladies and gentlemen, we have reached the end of the question-and-answer session and I would like to turn the floor back to Tim Tevens for closing remarks.

Thank you, David. We are well positioned to integrate Columbus McKinnon and Magnetek together to trade full value for all of our stake holders. This is a fabulous acquisition that we are looking forward to closing in September. Of course we will also continue to focus our efforts on growing this market share around the world that we just spoke of. I want to thank all of our Columbus McKinnon associates around the world for their dedication to excellence in making our company a stronger, market leading company and as always we appreciate your time today. Thanks very much.

This concludes today's teleconference. Thank you for your participation. You may disconnect your lines at this time.