Good day, ladies and gentlemen and welcome to the Colfax Third Quarter Earnings Call. At this time, all parliaments are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call may be recorded. I would now like to introduce your host for today's conference, Mr. Terry Ross, Vice President of Investor Relations. You may begin.

Thank you, Catherine. Good morning, everyone and thank you for joining us. My name is Terry Ross and I'm Colfax's Vice President of Investor Relations. With me on the call today are Matt Trerotola, our President and CEO; and Chris Hix, Senior Vice President and CFO. Our earnings release was issued this morning and is available in the Investors section of our website, colfaxcorp.com. We will also be using a slide presentation to walk you through today’s call, which can also be found on our website. Both the audio of this call and the slide presentation will be archived on the website later today and will be available until the next quarterly call. During this call, we'll be making some forward-looking statements about our beliefs and estimates regarding future events and results. These forward-looking statements are subject to risks and uncertainties, including those set forth in our SEC filings. Actual results might differ materially from any forward-looking statements that we might make today. The forward-looking statements speak only as of today, and we do not assume any obligation or intent to update them except as required by law. With respect to any non-GAAP financial measures during the call today, the accompanying reconciliation information relating to those measures can be found in our earnings press release and today’s slide presentation. Now, I’d like to turn it over to Matt, who will start on Slide 3.

Thanks, Terry. Good morning and thank you for joining us today. We are pleased to report third-quarter operating results that continue to track the expectations we communicated last December, and on our previous quarterly call. We made substantial progress this quarter on our permanent cost productions to get us back on track for our mid-teen segment margin goal. Although our end market did not improve, the impact at CBS and our strategic growth initiatives are positioning us to outperform. This was demonstrated by several large project wins in gas and fluid handling this quarter and by our fabrication technology team’s growth in emerging markets. We also announced a very favorable court ruling that is expected to add to our cash flows. Chris will provide more details on this later in the call. Turning to Slide 4, many of you were able to join us a few weeks ago at our annual investor day, where we discussed our path to drive segment operating margins to mid-teens over the next 3 to 5 years. The improvements will come primarily from CBS productivity efforts and additional structure [cost out] opportunities that we have identified in the business. The first step towards that target is the $50 million of restructuring savings that we committed to deliver in 2016. In our Q3 results, you can see that these actions are starting to reach through the financial results despite lower revenue. This is most evident in the year-over-year reduction in SG&A expense. Even after eliminating the prior year one time charges that we detailed at the time, you could see $13 million of savings from structural cost reductions. Our gross margins also showed positive impact. Although the path is different from each of our operating business, all of our businesses are delivering these improvements and we…

Thanks, Matt. I will start my comments on Slide 7. As expected net sales came in lighter than the prior year third quarter. Included in the 9.3% decline were 2.6 points from foreign exchange translation. Against that backdrop of lower sales, the company actually increased gross margins by 80 basis points reflecting in part our successful restructuring efforts, cost controls and the ongoing productivity contributions from CBS. Restructuring benefits are also getting through to the SG&A line, further contributing to profit improvement. In the quarter, we realized about $13 million of SG&A restructuring savings. Adjusted operating income was 78.3 million and adjusted operating margin was 8.9%, up from 6% in the prior year. Even after normalizing for the $26 million of incremental cost discussed in last year's third quarter, which included bad debt charges, [impairments], acquisition transaction costs and other items. Margins expanded by about 50 basis points. Restructuring benefits are dropping to the bottom line. Corporate costs in the third quarter were slightly better than expectations due to the seasonality and timing of expenses. We generated $0.39 of adjusted earnings per share in the quarter reflecting our expected operating performance, a lower tax rate and lower interest expense. This quarter’s interest expense included over $1 million of favorable benefits that are forecasted to repeat. Our effective tax rate for adjusted net income per share improved to 29.1% for the full year, and we recorded a benefit in the third quarter to true up to this new rate. During the quarter we received a favorable ruling from the Delaware Supreme Court that confirms our right to excess insurance coverage for [Indiscernible] liability. This ruling should pave the way for our collection of $88 million in costs that we paid over the years and reported as long-term receivable, and it also…

Thanks Chris. In closing, we delivered another solid quarter. I am encouraged by the up tick in orders and our teams’ execution of productivity and structural cost reduction actions. We continue to see our end markets at near the bottom of the cycle and are increasing our focus on key growth initiatives. We are making very tangible progress on initiatives that make us a stronger company. We have initiated several new actions to reduce our long-term cost structure and these will allow us to create value through this trough of a cycle and stay on path with the mid-teen segment margin. Our progress on aftermarket, new products and expanding the addressable market is helping us to get back to growth in advance of the cyclical – helping us to outperform in many of our markets and should enable us to get back to growth in advance of the cyclical investment recovery. I'm also pleased to see Shyam’s early impact at our ESAB business, where he is bringing focus and energy to cost alignment, customer service improvement and top line growth initiatives in that business. There is still important work to be done there, but I feel like we passed the baton without losing the global momentum we built in the recent quarters. Overall, our improved execution and new leadership team lets us increase focus on a growing pipeline of acquisition opportunities. We are committed to improving shareholder value even in a tough market environment and we see plenty of opportunities to grow in the future. With that I would like to open the session up for questions.

Thank you. [Operator Instructions] And our first question goes to Joe Ritchie with Goldman Sachs. Your line is open.

Good morning. This is actually Evelyn Chow for Joe. You noted that order growth resulted from timing and team performance, but not from an end market recovery, I guess can you just help give us a framework or a little more context on what are the signals you actually need to see to conclude that the markets are coming back as opposed to orders that is reflecting your own controllable execution?

Yes, thanks Evelyn. Well, what I would say is we have been talking for a few quarters back about, some large orders that had been in the final and had been active, but had stalled, and I think the positive thing that happened here in the third quarter not just on these projects, but some others as well is that some things in oil and gas started to move again, and these are some downstream orders actually kind of drove to fruition, but we also saw some upstream orders actually get active again and start moving forward with the customers re-engaging and moving those projects forward. So we see that as a good start but when we look behind that at the flow and movement of the kind of larger set of possibilities, we don't see enough strength building [Indiscernible] at this point versus the data. This is a good initial signal and the team stepped up and won these big orders, and we will keep working hard to move things forward from here.

Thanks Matt. That was helpful and I guess maybe I was encouraged by the second guide rate you have this year, but wanted to dive a little deeper into the bridge from 3Q to 4Q. I think what your guidance implies is maybe a little later in contribution to slow your EPS than you typically see, but cost out benefits are stepping up even more in 4Q, so I guess I just want to understand what the offsets are from your expectation?

This is Chris, Evelyn. I just want to make sure I understand the question there, you are just looking for essentially the dynamics as we drive from Q3 to Q4 and sort of what we expect to see there if I understand the question right. What I would tell you is that above the lines, if you think about it operationally Q4 is generally our strongest quarter. We are well positioned with a combination of what is in our backlog and daily order rates and other things that we need to overdrive the sales in Q4 relative to Q3. As the result of that we expect a sequential walkthrough to deliver better operating profit, and as we mentioned we are getting additional restructuring benefit. So we do expect to see sequentially the improvement in our operating profit as we step from Q3 to Q4. Below the line we had some benefits in the tax and the interest area that we don't expect to necessarily repeat. So I would expect to not see the same kind of below the line benefit that we got in Q3 as we step into Q4. So net-net, we expect that is why we were able to raise the lower end guidance range and have that confidence to finish the year pretty strong.

Thanks guys. I will get back in queue.

Thank you. And our next question comes from [Indiscernible] with Robert Baird. Your line is open.

Hi, good morning guys.

Good morning.

So sticking on the order side, obviously backlog tracked up sequentially, which is positive, still down year-over-year, you have got the dichotomy between the controllable on your side, still tough markets beneath, what does that mean if you track into next year, when do some of these orders start turning into revenue, what does the pipeline mean for next year, and maybe some early thoughts on that?

Yes, we are going to [Indiscernible] on next year and then we are going to give guidance at a later point. At that time we will certainly talk about the market environment for next year, about our revenue expectations for the next year and our performance against that including the extra cost measures that we will execute to have strong performance. And what I can say is the orders that we captured in the quarter, they were held up for a while. So, we are seeing that customers are eager to get moving on, and so we will be starting to convert these orders into revenue pretty quickly, in some cases next year and some flow a little bit into the following year, but these will start to convert to revenue quickly, and then our teams are really focused on continuing to win the big orders, but also working hard on the aftermarket, on our diversification efforts that really got to keep strengthening and growing the base underneath that and we think that combination is going to allow us to outperform and get us to growth as fast as is possible as the markets unfold.

So, to move pieces geographically on the welding side, I appreciate the commentary that you seem to get a little better through the quarter, are we at the point where you are starting to see normal sequential patterns on sequel net welding business, in other words some stability versus the normal pattern?

Yes, I would say we are certainly more stable in that business than we were a handful of quarters back, and our performance in the last handful of quarters is stronger than it was last year. But I would say that we are still not confident in how the sequentials will play out [Indiscernible] too many things over the past handful of quarters that we are not in line with historical sequentials that we are definitely taking it quarter-by-quarter and continuing to take a conservative view there and make sure that our costs are aligned for a conservative view. And then as we see things unfold we will be ready to get more aggressive if and when the market really turns in a positive direction.

I appreciate it.

Thank you. And our next question comes from Nathan Jones with Stifel. Your line is open.

Good morning, Matt, Chris, Terry.

Good morning.

Good morning.

I wonder if we could talk a little bit more about the new cost out actions that you are looking at understanding that you can't talk specifically about things that haven't been announced internally, you have talked about $50 million of cost out this year; you are going to have some carryover benefits to next year. When you layer in these new actions are you thinking a similar kind of number for costs out next year, more or less?

Yes, I will talk about philosophy maybe and then Chris can comment on what we can say about numbers. A few quarters back I shared that we weren’t seeing orders develop this year the way that we had planned for based on the market environment, and we were going to take things into our own hands and make sure that we got movement on – additional cost efforts to make sure that we have strong performance next year even if the markets stay tough. And so we at that point in time and since that point in time have worked with the teams to have a very clear view of what a very conservative view of next year is, and then use that view to define the amount of cost that we needed to get out of the businesses to make sure that we are prepared for strong performance and have the right base moving forward from there. And then I have worked with the team on projects and I found that as I have seen in other businesses, despite some aggressive things that we had already done once we get through those and we get to the side of those and things settle, you can find additional things that are attractive to do and strengthen the business [Indiscernible] alignment things – things related to outsourcing a transactional administrative cost, simplifying structures and realigning sales investment in some of the places where there has been a sharp drop, so realigning our sales investment so that we can afford to invest more in the places where the growth is going to be. And so that is the kind of the philosophy that we have been using, Chris could say a thing or two about the side.

Yes, what I would say is that as Matt suggested, they were going through a very rigorous and complex planning process for 2017 that does consider a lot of factors. I know that we previously communicated that we expected to see sort of $20 million to $25 million of additional benefit. I think we updated that comment maybe suggesting it could be even higher than that as we get into 2017. But rather than provide just sort of a sprinkling of additional information, I think what we like to do is get through that planning cycle, have the full view of our business teams and give investors a really good informed view when we have got that solidified.

Okay. So it is $20 million to $25 million carryover from actions of this year plus whatever you do next year?

Well, actually I think that we may have updated that $20 million to $25 million in our last call suggesting there could be even another $5 million or $10 million beyond that. And we will continue to pursue that if there is a chance that we could expand upon that, but again we would like to get through our full internal process before we give yet another update on that number.

Okay, and then Matt on M&A. You're talking a little bit more constructively about that in terms of market pricing and your ability to maybe get some deals done. What kind of capacity do you think you'd have to be comfortable with where the leverage would get you on the balance sheet?

Yes. So, I mean, again I'll make a comment that Chris may want to back up. So, what, we think about capacity in terms of being able to pay for the deals. We also think about bandwidth in order to be able to do them well. I think we see a number of attractive bolts on coming through the pipeline that we feel like it did afford within the cash flow that will be generating. And we see like with the work that we've done to do drive through our cross realignment effort which are now place leading ESAB and me able to focus a little more in this area. And I think with our businesses broadly moving in a good positive direction. We still we got the organizational capacity as well. That's kind of my comment about us leaning into this. Is truly based on those things, and Chris may want to comment a little bit as well.

Yes. I think the company is demonstrated over the last four to five years that, it's able to do think about fund raising for M&A in a very flexible sort of way. So, we've got certainly access to funds in a lot of different direction that can support the company strategic direction. I think it's more important to think about as Matt said, really the organizational capabilities that we had to take on that that greater -- in the greater opportunity in M&A as they come along. But we certainly have the capability to take on a additional leverage. I think we have communicated in the past that we're comfortable with leverage in, size of threes and think sure we have a good past leverage our high cash flows to drive that down. But we remain flexible on our thinking in this and make sure we drive for greatest shareholder value creation.

Okay, thanks guys.

Thank you. Our next question comes from Jeff Hammond with KeyBanc Capital. Your line is open.

Hey, good morning guys.

Good morning.

Good morning, Jeff.

Hey. So, on fab tech, I think last quarter you had said European move positive, it looks like a bash slit here. Maybe just talk about what you're seeing there and what you see from a trajectory standpoint, for that in an important geography?

Yes, I think that's an accurate comment. I think we don’t see that as a significant turn of any sort of thing. We were encouraged to see it moving positive but we didn’t presume that it would stay positive versus that it might bounce around a little bit and we've seen kind of a little bit in the opposite direction here in this second quarter, third quarter as it came out this summer. We kind of view that, you put those two quarters together, you are flat and that's good thing versus where it was and we feel like that's a good way to think about it going forward as you know flat and with a good opportunity to turn to positive, as we move forward.

Okay. And then just maybe a question for Chris on working capital. It looks continue to be a drag here on free cash flow despite kind of slower sales. When do we make up a lot of that in 4Q and maybe just bigger picture, your initial thoughts on kind of opportunities to really improve working capital matrix.

Okay. Yes, thanks Jeff. What I would tell you is that even though the sales numbers were coming down and generally that unleashes some working capital. We also have that same dynamic with the orders generally at the backlog. And that's generated, significant cash flow pressure, this week afford into '17. I would expect to see that normalize a bit and take some of that pressure out of the system. So, that's something, see we are at, that’s readily apparently look at the working capital figures but it's important to consider. We do have continued opportunity to apply CBS rounding enterprise to drive improvements, let's say principally in inventory and little bit on the receivable side as well. You will see us make a step forward in the fourth quarter. That's typical for us. And so we're expected to some nice drive. I would say that just generally speaking, I think we've done a terrific job of deploying CBS around the organization but they do remain these selected opportunities that drive CBS were impact and it's those pockets of opportunity that will continue to focus on to drive. It's addressing improvements over the next couple of quarters. So, net expect to see improvement in the fourth quarter. Expect to see a continue to drive CBS for longer term benefits and expect to see it drive for impact for shorter term pattern.

Okay. And then if I could speak one more on these big orders Matt, just to be clear. Nothing is really going to ship in '16, it's really most of it in '17 and then maybe some leak over into the following year.

Yes, that’s correct.

Okay. Thanks, guys.

Thank you.

Thank you. [Operator Instructions] And our next question comes from Andrew Kaplowitz with Citigroup. Your line is open.

Hey, good morning guys.

Good morning.

Good morning.

Matt, can you give us a little more color on what's going on your power markets within gas and fluid handling. Power Gen orders, they're maybe a little worse than they've been. But you did tell us that Chinese new builds weakness was going to start impacting the business. So, if that what that say, I think you mentioned US power plant utilization moving down a little bit. So, what's the outlook sort of in the power markets here as we move forward?

Yes. I think we continued to, we continue to say that the, power is over time going to be about a flat market. There are places in the world like India, South East Asia, where there is quite a bit of activity and there's going to be growth driven on a positive direction at a time when China is going to pull back a little bit and so those I think will tend to kind of balance things off. And so, we see the -- looking forward we see the power in a flattish range. We got a lot of focus on the growth where the growth is in power and also on aftermarket in participating in more value on the aftermarket. What you see in this year is really more about timing of large orders and a little bit of starting to see some of the effects of the China pull back to non-listed act again.

Got it. Thank you for that. So, now, Chris, how should we think about margin capability at this point without capping and it looks like, you did have some higher steel cost flow through the business and in effect play sources the mix. And also the business as you said, it's become a little bit more difficult in the US and maybe in the Europe. You talked about holding a 11% margin or above in this business. You're close even 3Q see. Can you talk about fab techs ability, the whole margin going forward, in the environment that you're now in?

Yes. I think as I said before we feel like we've made improvements in the business where we're going to move up from a 11 up going forward here. That’s going to come initially from more flow through of our cost efforts as we go through the coming order, coming quarters. It's going to come from productivity efforts as well. And then, the remainder of that to get to that kind of mid-teens range is going to come from when the growth comes back and getting a couple of year as well of GDP like growth. We still think that formula very much holds for the business and then we think we demonstrated in the last few quarters that even in a very difficult time period we can have margins in the range we are and we think that’s great strong opportunity to move up from here.

Okay, that's helpful. And just maybe one more clarifying on ESAB like, with year up maybe being more flat, Northland is still being tough. Original ratings this year was sort of that negative five, negative seven, then you talked about more like negative four. Where are we at now, Matt? Like is it still sort of trending to where that range and I see we're out in the quarter? But how do we think about this moving forward versus the original guidance?

Yes, we don’t see any change in our commentary that we would be at the better end of the original guidance in any northern and fab tech. we're still in that same kind of range. We're really, as I commented earlier the emerging markets part of the business grew in the quarter and yes Europe turned a little over to the downside but its flat across the last few quarters, so you put those together and asses that large part of the business that is, it's kind of poised to turn to growth at some point here in the coming quarters and then we just need to keep an eye on North America as things play out from here. But as you can see in our global growth numbers wearing out, stronger range on those and I think we compare nice and favorably on that part of on the business overall.

Thanks, guys.

Thank you. And our next question comes from Andrew Obin with Bank of America Merrill Lynch. Your line is open.

Hello. Can you hear me?

Hi, Andrew.

Hi, Andrew.

Hey, how are you. Just a question. In terms of 4Q orders, do you guys have a sense of what kind of book to build you might get in Q4 and maybe more color by segment?

Yes. Just trying to get to the numbers quickly, Andrew. So, it's going to be should be pretty, I mean, we should be pretty solid from that standpoint. We think the orders trajectory here been used to support. What we talked about at second half earnings for our orders growth, but Q4 is our largest ship corner at the year. So, I need to go see the numbers specifically to give you the right steer. But we think orders are going to continue to be a solid story for us to close out this year on yes.

But it is a commend trend press the work the backlog down a little bit in the fourth quarter. So.

Yes. We built it up a little in Q3 and we'll get back a little in the fourth quarter, right.

Okay, I'll follow up on that. And just another question. In terms of FX moves, are you guys what will you say transaction impact in the quarter. Given what max can pay so is, given where the Russian Ruble is. Can you talk about if you had any tailwind from transaction benefit?

Well, really the, there was a little bit of transaction benefit that we spoke to with respect, the interest sort of below the line there. That's really the primary effect that we had that in the translation impact which was two to three points for both revenue and the OP line. So, that I wouldn’t call those tailwinds, I think those are a little bit more headwinds in the quarter.

Okay. But, okay, I'll follow up on that. Thank you, very much.

Thank you. And our next question comes from John Inch with Deutsche Bank. Your line is open.

Thank you. Good morning, everyone.

Hey, John.

Hey guys. So, this is this oil and gas orders. What if you did more -- if I were to call I think is a composite of how then passer or maybe some upstream clumps, I'm just curious, it sort of talk to I guess the positioning of the orders. And you mentioned that thing Matt but this was part of a project but had been differed. These projects within differed. Are there other things in your backlog that has been differed that actually look like they're coming to provision?

Yes. So, first, as far as the orders, yes one of the large orders was a compressor, how to progress order in downstream oil and gas. The large mining order is more a fans order and then we also had a nice and smart technology order that we talked about. So, I got to cross the number of different how product technologies. And for sure there are projects in the backlog that has been there over a long time. But I would not say that there is a large stack behind these that are coming through. Otherwise with the making more positive comments about the turn, we're encouraged to see if you cut loose. For sure there is other projects out there. But we think the recovery is going to be more fueled by progress on aftermarket project progress in the broad diversification of the business. And the when these big projects come along, we got to make sure we win more than our fair share. And we're happy that we did that in the quarter.

Within gas and oil its handling. Do you have any comments on the general industrial piece of that business? Its maybe it'd remind the sort of what tends to kind of move that business. It still seems to be pretty much the same trajectory, but I'm wondering if under the hood you see any sort of other moving part that’s.

Yes. And good question. So, we actually but industry that we report in, includes general industrial which is very, broadly diversified general and industrial. But it also includes anything like steel. And if you get underneath that the trends in the general industrial which we got both in fluid handling pumps business as well as how now we got significant chunks of general industrial business where the market trends and our trends are, in a positive place going through this year. But the heavier part of the industrial feeling particular is going through a bit of a tougher rate investment place right now. Although there are indication on as go forward basis that that feel is going to move into a more positive direction.

Okay, friends. I think you make pumps and such for elevator application and other things. And I know that is very choppy indicators in say nonresidential construction markets. I realize you're not a non-risk company but are you seeing some of that reflected in what's happening either pro or more or less favorable. I'm just again I'm just trying to understand a little bit what to be under, but in terms of verticals but comprise right the general industrial segment.

Get into our android general industrial business and what are things like some of the things related to construction or are you talking about residence, commercial but also we're involved in things like stands for tunnels and then you get it a whole broader set of applications that are related to more kind of medium industry kinds of investments and improvement. Way we see the trends as you know, in a modestly positive direction as we're working through this year. In line with what is been here in externally about the general industrial part of the global timing and the US economy being in positive zone and a little bit better zone and where things work where last year. And as we shared on Investor Day, in our strategies we implicit more focus into that industrial area. And also into diversification into some of the areas that are going to grow more within places like oil and gas. And so, we see that as great an opportunity for us as we execute those initiatives to drive ourselves back to growth in advance of any large investment in recovery on the oil and gas patch based on the fact that at this point we're 2/3rd aftermarket and in industrial.

Yes. And maybe one last one for Chris. I realize you guys are trying, I mean you actually are making a lot of progress in terms of the realignment initiatives and the simplification initiatives. But there still is this, fairly why disconnect between your GAAP results and your, your adjusted results. Chris, did this just naturally converge over time as you do less restructuring because you've already execute all these projects or do you, how are you thinking about this as a CFO and your prior experience or are you just getting pro wide of it or you actually have initiatives to maybe close the GAAP between GAAP?

Well, I guess what I say John is this. We first and foremost we want to make sure that we're putting up the information out there, so that people all think have a pretty good handle on the underlying progress that we're making, and then they can make your honest testament about that. But I'd say that that's the most important part of our reporting. I think over time what you'll see is that, we're going through this restructuring phase in the business. I think its natural, it's healthy and it's helping to drive a lot of results and demonstrate the power of CBS, in a down market environment. I think you'll see at some point we'll stabilize that or be focusing and talking more about the growth, combination of end markets and self-help that we were working on throughout the enterprise. So, I think you'll see that moderated a little bit. And then the question is always is as you do acquisitions and you apply CBS for that and that generally takes the fair bit of investment. Is it helpful to investors that we continue to call that out, so they can understand the work that we're doing to create the future value in returns on those investment? So, that's just way I think about it in overtime and I hopefully that's helpful to you, John.

No, and you are being transparent. I very much appreciate it. Okay, thank you so much.

Thanks.

Thank you. And our next question comes from Joe Giordano with Cowen & Company, your line is now open.

Hi guys, how are you doing?

Good morning Joe.

I’ve question in fabrication, when do the emerging market, develop the emerging market basically 50:50, so clearly this quarter is all market weakness in excess of emerging market strength, but when do those kind of comps start balancing out and when can that start moving the other direction given the comments about Russia, India, South America moving higher?

Yes, so hard to say, hard to answer the question when. What I’ll say is, I said from the start that I feel like our global footprint in this business is real strength and having basic returns of business in emerging market is going to be real strength in an asset overtime. And the reality is that that’s a very diverse footprint, it’s not, I’ve been in other businesses where the emerging market footprint is, China is little better and reality is we’ve got a diverse market footprint and at this point we’ve been going through a patch where some parts of it are more healthy than others and from a market standpoint and frankly there is some parts of it where we really execute exceptionally well and do very well up against the market environment. And so, we’re able to have those, there is not a lot more dramatic growth going on out there in the emerging markets right now and yet we were able to get positive growth in emerging market because of a combination of our footprint and our exposure. And I think overtime every indication is that the emerging markets are going to grow multiple times the GDP of the developed market and overtime and more of those line up on the positive side and our execution layers on top that I think that’s going to be a real positive growth for our fabrication technology business. And then, if we get the US even just flattened out we put that alongside of acceleration of growth in emerging market at that point in time, we’ve nice healthy growth in this business. But, two difficult parts of that call right, when one of the emerging markets going to kind of have most of them settle in a positive way based on sort political, economical forces. And second, when is the US going to turn and flatten out at least and there is a lot of opinions on that we’re watching it really week by week, quarter by quarter and keep a close eye on indicators like what’s going to happen with deal, what’s going to happen with some of the oil and gas investments, what’s going to happen with the investments in other parts of the economy and try and make sure that we’re prepared to have strong performance.

Great, I appreciate that. There used to be, before you came on board I guess, there used to be a lot of talk about within fabrication moving that mix more towards like, let me – consumable now maybe towards two-thirds consumables, one-third equipment. We haven’t talked as much about that recently is that a shift in strategy that kind of streamlining the operations given the current mix or is there still a push to structure that differently going forward as part of, like you get to like a 15% margin in that segment?

Yes. I think what we’ve talked about is that with the current mix we have, we believe we get to that mid teens margin level. But to get beyond that mid teens margin level we would have to be driving our mix to a different place because if you look at the peers out there, to have that higher margin performance you tend to have a more significant chunk of the business in the equipment area and in particular in the general equipment area. So, our execution has been focused on with the portfolio we’ve got let’s drive the mid teen based on cost realignment, productivity and execute on the growth front. Our strategy has been around overtime shaping that mix to a little heavier amount in equipment both on the general equipment side and through our automation growth effort and also our acquisition of vector and the focus that we will have on growth of those GAAP products. So that strategically will be looking to drive that mix overtime it’s not something that you can change overnight but it takes product development, innovation, driving of products into the marketplace as we’ve done with Ravel but then it takes another product, another product, another product and really doing the hard work and this is going to take some time as we do that, we do back that to support our ability, get the mid teens margins and then as we reach mid teens of that margins, be able to think about how do we strategically driving on it.

Maybe if I can just sneak in one quick one here. You have been executing on your cost programs you talk about maybe even more spillover in 2018 above what you initially said. [indiscernible] if you had to really take a close look at overall execution on these projects is there any particular piece that you’re not satisfied yet right now and you can drive a little harder?

Yes, I wouldn’t say we are lagging, what I would say is that some of the projects tend to have rate – versus the rates we can do on it and certainly that some of the European projects has taken longer than I would like to get from execution based on the things that you need to work through in those countries and execute those kinds of projects so that’s an area that we’re continuing to try to find ways to accelerate our momentum. And then, another area we’ve got real focus is that where we’re doing supply chain realignment projects, we’re trying to make sure that the ones we’re doing now and the ones we do in the future that we do take a little extra time in the planning phase and make sure that we really think through carefully to make sure that we can execute them with kind of invisible impact to our customers and that’s something that certainly may take a little bit longer to execute the project, but it’s I think critical step to make sure that they’re executed with excellence.

Great, thanks guys, good job.

Thank you. And our next question comes from Chase Jacobson with William Blair, your line is open.

Hi, good morning. So I just wanted to follow up on the price mix in fab tech moved around a little bit this year of relatively the comps from last year. Can you give us some more color on what the drivers are within that price mix and I think that you’re slightly favorable on equipment versus consumable of this quarter but that still negative numbers, so is it incentive, is it geography, try to get a sense of trends next year?

Yes, so on the price part of that couple of different element. One is, kind of the more straightforward pricing our products, value pricing, competitive environment etcetera. There is a piece in the price area of how we price in relation to what’s going on with movements of field, movements in currency, inflationary fashion in high growth market. And I think that area is an area that we really have taken some grounds this year it’s some that I commented I think late last year about it as being a bit of a headwind for us and it’s some that we’ve put some good positive process in place that it helped us to take some grounds. And then, there are the more traditional mix effects of which products we’re selling which we didn’t, we’re selling into them. And as we sit right now, kind of overall price is better as we expected through the year. We’ve been able to eliminate that headwinds from last year of that second – kind price versus FX and inflation and quarter-by-quarter the mix effects are what they’re. I would certainly try to keep driving that to a positive direction, but in some cases that will change quarter-to-quarter.

Okay. And then, on that favorable court ruling, I know you don’t know the exact timing but can you help us frame it at all, is it something that’s expected in the next 12 months, is it 24 months and does that reduction in the annual outlay, does that only occur once the collection is made?

As you we begin to collect from the past receivables the $88 million that time we will also begin to recognize the benefits of the future cash outlays. I would expect that we will begin to see some of that benefit in some time here over the next 120 to 180 days, we might end up with the substantial amount of that benefit in 2017, but we’re quite happy to update you as we see that cash moving in.

So, it sounds like it comes pieces though not all at once.

That’s correct, we’re working with multiple parties and each party is making their own decision about how to participate, so it’s not, there are many moves.

Got you, thank you.

Thank you and I’m showing no further questions at this time, I would like to turn the call back to Mr. Terry Ross for closing remarks.

Well, thank you for joining us today. We just end our session, we look forward to updating you on our next call.