Good day, ladies and gentlemen, and welcome to the Second Quarter 2013 Parker Hannifin Corp Earnings Conference Call. My name is Stephanie, and I will be your coordinator today. At this time, all participants are in listen-only mode. Following the prepared remarks, there will be a question-and-answer session. (Operator Instructions) As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the presentation over to your host for today Ms. Pamela Huggins, Vice President and Treasurer. Please proceed.

Thank you, Stephanie. Good morning, everyone. This is Pam Huggins speaking just as Stephanie said. I’d like to welcome you to Parker Hannifin’s second quarter fiscal year 2013 earnings release teleconference. Joining me today is Chairman, Chief Executive Officer and President, Don Washkewicz; and Executive Vice President and Chief Financial Officer, Jon Marten. For those of you who wish to do so, you may follow today’s presentation with the PowerPoint slides that have been presented on Parker’s website at www.phstock.com. For those of you not online, the slides will remain posted on the company’s Investor Information website one year after today’s call. At this time, if you will reference slide number two in the slide deck, which is the Safe Harbor disclosure statement addressing forward-looking statements. And if you haven’t already done, so please take note of this statement in its entirety. This slide as required indicates that in cases where non-GAAP numbers have been used, they have been reconciled to the appropriate GAAP numbers and are posted on Parker’s website again at phstock.com. To cover the agenda for today on slide number four, the call will be in four parts. First, Don Washkewicz, Chairman, Chief Executive Officer and President will provide highlights for the quarter. Second, I’ll provide a review including key performance measures of the second quarter concluding with the fiscal year 2013 guidance. The third part of the call will consist of our standard Q&A session, and for the fourth part of the call today, Don will close with some final comments. So, at this time, I’ll turn it over to Don and ask that you refer to slide number five titled second quarter fiscal year ‘13 highlights.

Thanks, Pam and I just like to extend the Happy New Year to everybody on the call. We certainly appreciate your participation today. Just to make a couple of comments and then we’ll turn it back over to Pam for a little bit more detail on the quarter. As we explained last quarter, the second quarter traditionally is our weakest quarter, and that’s pretty much how it played out this year as well. Sales were essentially flat year-to-year. However, the real key for the quarter what to remember here, this is kind of if you boil everything down what happened is that the organic growth was down 4% and then that was offset by acquisition growth. So, we were losing some of the higher margin business, because that business was down. And we are picking up acquisition business, which was going through integration phase that our margins are a little bit compressed. And that really explains in a nutshell what happened pretty much in the quarter. Weakness is still being seen in the industrial international segment and pretty much all regions. December, in particular, was weak from mid month on as number of customers we noted, and this is true both in North America and rest of the world, held back on purchases and shipments. So about mid month, everything kind of stopped in December. In anticipation of a better second half, the earnings guidance for fiscal year 2013 is going to remain the same as we communicated to you last quarter. Just a couple other comments on the quarter, net income for the quarter as you could see was $181 million or $1.19 per share and that was within the range of the guidance that we provided the last quarter, our guidance was $1.10 to $1.20. So, we are…

Thanks, Don. So, at this time, if you will reference slide number six, I will begin by addressing earnings per share for the quarter. You can see that fully diluted earnings per share for the second quarter came in at $1.19, and this fell within the previously provided guided range. This is a decrease of $0.37 or 24% versus the $1.56 from the same quarter a year ago. And laying out the components of that $0.37 decrease in earnings per share versus last year just let me give you the puts and takes. Decreased segment operating income accounted for $0.34 mainly due to industrial international and the continued softness that we are seeing in that region, and that is in Asia, Latin America, as well as Europe. Higher taxes impacted earnings per share by $0.05 and this is mainly due to the geographical earnings mix around the world than a higher tax rate as a result of the tax on the gain from the sale of the CIC business that Don just mentioned. And then there were less shares outstanding impacting EPS favorably by $0.02 and obviously due to the share repurchases that we made in the quarter. So, moving to slide number eight now and looking at the top line, reported revenues for the quarter, they were fairly consistent with last year at $3.1 billion rounding that is, and at the segment level, revenues were down in industrial international. However, that revenue was offset by increases in industrial North America into Aerospace. Acquisitions added 4% to revenue and this was offset by a 3% decline in the base business and we did have a slightly negative currency impact of just 1%. Segment operating margins for the quarter, they decreased 220 basis points from 14.2% to 12%. And this was…

(Operator Instructions) Your first question comes from the line of Jamie Cook with Credit Suisse. Please proceed.

Hi, good morning.

Good morning Jamie.

Hi. I guess two questions. One, if we look at your guidance for North America and for international, you have taken your revenues up a little, relative to your previous forecast the margins are down a little. I am assuming the decline in margins is a result of acquisitions. Can you confirm that and tell us how much the acquisitions are hurting? And then I guess can you just talk about your comfort level with improving margins on a sequential basis? Is it just based on volumes or are there other potential tailwinds that you have to make us feel comfortable, I don’t know if material costs are more of a benefit, I don’t know what your assumptions are on FX or mix, if you could just sort of walk me through that? Thank you.

Okay. Just to clarify though at the midpoint last guidance to this guidance, we did take North America up in revenue, but on international, we did take revenue down. Okay.

Okay.

And then you are exactly right, Jamie to your point, we did take segment operating income down in the North America and international. Jon, if you want to?

Yeah. I mean, Jamie just to the point here first in terms of the headwinds and the tailwinds from a pricing and a supplier standpoint here, we are staying about even. So, nothing really different to report there at this point, it’s a tough pricing environment out there. And it’s a very important transitional timeframe here for us in the second half as we start to see sequential improvement in our margins going forward here which we’ll be looking for suppliers to help us with as time goes on. Now, in North America, that is also being impacted by the acquisitions. And as Don alluded to earlier, the margins are being impacted by the reduced organic sales being replaced by acquisition sales. And those acquisition sales are coming in at lower margins than we were seeing on the organic business that is moderating as time goes on. I am sorry, go ahead.

No, go ahead, go ahead, I’ll let you finish.

No. And then the restructuring that Pam was talking about that we are going to be doing in the second half is also going to be impacting our margins going forward here including the integration costs too. So, that’s I think in a summary the way that we are looking at margins going forward here for the second half.

And I am sorry, that was my bad. You did take your margins down, but I guess I am sorry Jon can you quantify how much the acquisitions are hurting?

I can do that for you Jamie.

And then again just to clarify. So, it sounds like I mean we are assuming margins improve in the back half sequentially versus first half, so Pam is it just based on volume because it doesn’t sound like material costs?

Yeah, but let me give you some – a couple marginal return on sales numbers without the acquisitions I think might help.

Okay.

North America for the second quarter, while the margin return on sales was unfavorable, if you exclude the acquisitions you are within 30%. You are around 30% which is what our target is.

Okay.

International, the same thing, if you exclude acquisitions not quite as good as North America, but it’s in the 40% range, so...

Okay.

So, we are very cognizant of that. And it’s typical with acquisitions when they first come in we have all these charges in the first 12 months. So, we will work our way through these. These are good acquisitions that have good margins and it just takes 12 months to get there.

Okay, but and Pam just to clarify, so the margin improvement back half versus first half, it’s all volume, and what acquisition?

We are being cautious at this point in time. We have a 48-52 split in our guidance which is pretty much the natural cycle of our business.

Okay, alright great. I will get back in queue.

Your next question comes from the line of Josh Pokrzywinski with MKM Partners. Please proceed.

Hi, good morning. First just a follow-up on Jamie’s question, what is the incremental restructuring spend quantified in current guidance versus prior, I just want to make sure we are clear on that. I know you don’t exclude it from guidance, but maybe it would be helpful in kind of understanding the margin lift?

It’s Josh in total for the year our – we only did $0.02 in the restructuring in Q2. We are keeping – we are going, we are moving up to the high end of the numbers that we gave to you earlier which is $0.10, which is in the – and we’ve got a range of $0.06 to $0.07 here in the second half.

So, that $0.06 to $0.07 is incremental versus the last time when we spoke a quarter ago.

No.

Well, last time we said $0.05 to $0.10, but weren’t thinking that it was going to get to the upper end of that. And now we think that it is.

Okay, so maybe a fair way to look at the $0.16 segment drag is an extra nickel of restructuring and some integration charges and maybe half of that $0.16 is core business deterioration?

Yeah, I think that’s fair, I think that’s a fair analysis, that’s not bad at all.

Okay and just thinking about cadence through the quarter, obviously October was pretty bad form when we spoke last quarter. Can you give us a sense of how things fared in November and December, just on an orders basis I understand that December you see shutdowns and things tail off at the end of the year. But it seems like minus 5% and minus 6% in the industrial businesses inclusive of that rough October, it seems like it would have gotten maybe even close to flat by the exit rate?

Well, let me just give you a little color that I have okay and then Don and Jon can add on if they would like, but when you look at the North American orders I mean obviously December was a weak month. But December is always a weak month for Parker-Hannifin. It’s really difficult to get any read from orders by looking at the December, but what I will you is that in North America the trough was really in August and September. So, when you look at the percentage decline year-over-year, the trough really took place in August and September and obviously getting better from there. Europe we actually saw some sequential improvements in the second quarter. Asia continues to be pretty weak for us. I am hopeful that we are going to see something as we move out. And I think everybody else is hopeful and I think in January we are even a little more hopeful of that. But December quarter end it was fairly weak. Latin America, we saw improvement over the prior year. You can see that is up 7%. So, we are seeing improvement there as well. And then of course Aerospace was remarkably strong in the quarter. Does that help Josh a little bit?

That does help. So, I guess just to summarize sequential improvement off of those August, September lows and maybe sequentially flattish in Asia if I am reading that right?

I think that’s a good read.

Okay, appreciate it. Thanks guys.

Yeah, thank you.

Your next question comes from the line of Alex Blanton with Clear Harbor Asset Management. Please proceed.

Good morning. I’d like to – I got two questions. The first one is I’d like your opinion on the thought that now that uncertainties are in Washington are slowly getting resolved that job creators, entrepreneurs and job creators who have been holding back now for four years while their cash and their borrowing power accumulates holding back because of the uncertainties would finally decide that enough is enough and we’ve got to get going with our plans and get going with our replacement capital spending and get on with life. And for that reason without too much happening down in Washington, job creation and economic growth will pick up in 2013 as we go through the year and be surprisingly strong. What do you think of that proposition? And have you seen any sign of that in your businesses?

Alex, this is Don. Good question and I wish I had a good answer for you, be honest with you. When we look at our business if you just kind of look regionally and then we kind of look at our order trends, because that would give us the best indication of what’s going on our 3/12 and 12/12 activity levels. And if you look in North America, we see a slightly improving 3/12, but our 12/12 curve is heading toward a 100%, which would indicate very moderate slow growth continuing at this point. So, not at a catastrophe on the horizon, but nothing hugely different from what we have seen here in the last quarter or two, so that’s kind of the way I would read North America right now. And maybe it’s still a little bit early to really see the impact of what happened with the fiscal cliff fiasco and all that. So, maybe that’s yet to come. Europe is really in the tank. I mean, I don’t know how else to put it. Our 3/12, we saw little bit of an improvement there, that’s the last three months orders over the previous year three, but it’s just kind of approaching a 100% and but the 12/12 curve has been under a 100%, in other words, the orders are tracking under the prior year 12/12 month period and that continues. So, I mean they are definitely in recession in Europe. There is no question about it, been in recession, and I am not sure just with the minor increase in the 3/12 I am not sure when we are going to really dig out of that over there. So, we’re basically taking actions there, restructuring things and trying to get our cost in line to basically deal…

In that regard, just a clarification on your forecast for the second half earnings per share, I believe Pam said, the second half would be divided, third quarter 45%, fourth quarter 55%, is that correct?

That’s correct, Alex.

So, mathematically using the midpoint of your range $6.45, that says that the third quarter would be $1.66 and the fourth quarter $2.02 to get that split, that’s a big increase quarter-over-quarter, what’s the reason for it?

Yeah, I think Alex, you are right, I have a couple of pennies different than what you have but you are right on, I see you are doing your homework there, so good for you. You know like I said based on what Don has said, we have basically kept our guidance in line with the natural cycle of our business, the 48%, 52%. So, while it does incorporate some sequential improvements, in international, I think if you look at each region, yeah we do have some sequential improvement, but it’s more in line with what we would see at this time in the cycle of our business at this particular time. So, we are not going way out there, but we think that if we just do what is very normal for us, we’ll be able to get that type of increase.

Okay, thanks.

Your next question comes from the line of Mig Dobre with Robert W. Baird. Please proceed.

Good morning.

Good morning.

I guess, my first question going back to industrial North America, can you give us any color on the performance of different key verticals meaning hydraulics versus filtration and automation and how you’ve sort of seen orders develop through the quarter in each one? Is there a difference between these?

Mig, I think as Don just indicated here, sequentially we are up slightly in terms of our comparisons to the prior year in Q2 in those markets. We, again, with less workdays in Q2, the change was not dramatic. Going forward, in all of those vertical markets that we are talking about, I think the things to keep your eyes focused on here is the, as Don mentioned, the residential, the commercial air conditioning, the construction equipment. And we continue to see good progress being made in the heavy duty trucks. So, I think that all of those markets in North America are trending better mobile and not as bad as it was, but certainly not to where we were 18 months ago. So, I am hoping that kind of gives you a little bit of a color as to how the guidance was put together. Keep in mind, we are up sequentially in North America in Q3 and then up sequentially in Q4. Just to add to the all the other comments that we have made, keep in mind also as you are looking at the data for us that increased as we move forward here sequentially that Alex was referring to that may look a little sporty at this point includes acquisitions that we did in Q2 and acquisitions that we did in Q1 also. And so by adding that on in the middle of Q2 we are going to see a dramatic effect in terms of our increases in the second half vis-à-vis the first half, so that 58-42 is we feel is very achievable. And that’s why we did the guidance the way that we did. So, I hope that helps.

No, yeah it does. Thank you. And looking at Aerospace to maybe just a reminder for me, the impact of the incremental R&D on the margin, trying to separate that versus just the mix shift in MRO versus OE in there?

Could you just repeat the question?

I am trying to figure out exactly how large the headwind from these incremental R&D expenses is from a margin standpoint for the Aerospace segment?

Okay, yeah it is an important headwind. I mean there is just no doubt about it. We are at the high watermark now in our Q2, which is our generally our lowest volume month. So, it just hit all of the wrong time for us. So, we are clearly at a high watermark in R&D in Q2. In Aerospace we are projecting to go down in Q3 from Q2 and then down again in Q4 from Q3. We are over 11% in Q2 and we are trending down towards 9% and then 10% for the whole year. And Don let me ask you if you want to comment further?

Yeah, there are just a couple of extra comments I might make on the R&D spend, what are the challenges that we’ve had there is first of all just the number of new programs that we have. The good news is that we’ve got a number of these programs in the air now. Okay, the G650 that has been launched, the Legacy took its first flight that’s the Embraer Legacy and the Rolls engine was certified. So, the good news is and the reason why we can tell you that the trend is going to be down from here is, because we have got some of these major programs now, which frankly going into these programs these are all new technologies, fly-by-wire technology for all these platforms is extremely complicated and it’s hard to predict frankly. And we found that is impossible to predict the cost because you run into all kinds of challenges in putting these systems together because they truly are state-of-the-art. But having said that, the good news that would give us confidence on the go forward is the fact that several of these now are launched, okay and that’s extremely important. What we are working on feverishly now is the Bombardier C-series and the Comac 919 and A350. We have got several of those and that’s the reason why we are still going to have a fair amount of R&D expense going forward. But the other thing is just the tone in the marketplace is such that if you delay the launch of an aircraft today that has very, very bad connotations with the customers. And so everyone gets a little bit gun-shy of placing orders with you based on promises that you are going to make that very likely may be missed. And we know…

Yeah, absolutely. And last point here is as we are thinking about 2014 for instance and beyond, based on the visibility that you have today, should we continue to expect rather normalization of R&D or levels similar to what we have seen and what you are guiding for?

I think based on what I am saying some of these new programs that we are working on right now, the ones that were launched of course that’s behind us, the ones that we are working on now, the list is getting reduced very nicely here over time. So, we would expect that we would level out at some normalized level of R&D. I think we’re probably going to always be looking somewhere in the 8% range probably could give or take a little bit on that, but it won’t be in the 12% plus or 10% or plus range like we have seen here. This has just been a very extraordinary activity level for us on these new programs, but again having just set a record on our backlog in the aerospace group, that is pretty exciting going forward. So, I think we are at – I think like Jon said we are at the high watermark and as that weans down and the activity, the actual shipments start going up. I think we are going to be enjoying the fruits of all this expenditure here in these last few years.

Thank you.

Your next question comes from the line of Andy Casey with Wells Fargo Securities. Please proceed.

Thanks a lot. Good morning everyone.

Good morning, Andy.

On the revenue trends, the revenue split for the second half midpoint pretty much suggests Q3 3% year-to-year decline, Q4 up 4% to 5% year-to-year. I am trying to make sure we interpret that year-to-year inflection correctly. And you answered some of this with respect to the prior questions about mobile market anticipated improvement, but is there anything else included in the top-line assumption like absence of destocking or something like that, that occurs in Q3, but not in Q4?

No, I think Andy I think the delta in the Q4 versus Q3 is just the continued slight moderate improvement that Don was talking about in his earlier comments, moderate good, moderate improvement, not only in the North America, but some of the end markets that we talked about, but although Europe is on the bottom here in recession, it is not – we are not projecting another leg down, we are projecting a moderate increase there. And of course in Asia, we have got some added growth built in as the year goes on. The last year as you know was for them the weakest in China, in particular, the weakest year in 10 years in terms of industrial production, but that is now projected to bounce back up just also very slightly here for us. And we are starting to see some early signs of that as Pam alluded to earlier too here. So, yeah, there is not, we are really taking a look at the every market, every region, and getting reports every month from all of our people and this is the way that we see the Q3 versus Q4 trends going here in each one of our segment. So, it’s really that simple.

Okay, thank you Jon. And then lastly kind of a clarification on the 28% assumed tax rate, does that include or exclude the impact of the $0.08 and the 30% plus in Q2?

Yes, it includes it, Andy.

Yeah.

Okay. So, second half much lower than first half basically?

That’s right.

Right.

Okay, thank you very much.

Thank you.

Your next question comes from the line of Eli Lustgarten with Longbow Securities. Please proceed.

Good morning everyone.

Good morning, Eli.

Just a couple of clarifications. One, how big was the gain with the divesture in the second quarter?

It was around $39 million.

$39 million, so that…

Yeah.

And that just gets taxed at a standard rate or?

Yeah, 38%.

So, I mean, we are talking about $0.15, $0.16 or something like that?

Yeah, that’s correct.

So, we had much weaker – without the gain, it would have been a much weaker quarter. Now, the R&D tax credit is going to be about 8…

But, Eli just to clarify we did do better on the segment operating income line by $0.04. So I just want to get that in.

Absolutely.

Eli, Eli, one additional point here to make to, that gain of $0.16 as we talked about at the end of Q1 was offset by some write-offs that we took in Europe and that will also be offsetting that gain in our results when they are all finally tabulated. So, the way that we look at it is that those write-offs related to some of our businesses in Europe have offset that gain.

And how much was the write-offs in the second quarter?

$0.16.

Well, the gain was $0.16 and how much of a write-off did you take?

Also $0.16.

Yeah, but let me just explain, Eli, the $24 million loss was applied against the $39 million gain on the other line. The rest is in the tax rate. So, what Jon is saying is absolutely correct, but you don’t see it all in the other category.

Okay. And the R&D tax credit that we bought something like in the center of $0.07 to $0.08 and will that all be taken in the third quarter?

Yes.

So, the third quarter has helped and is it about $0.08 a share or something like that, that the magnitude of the R&D tax credit?

You are close I think, but let’s follow up after the call to make sure on that.

Not a problem. And can we talk a little bit about your inventory levels across corporation, I mean, are you happy where they are? Are they the numbers, you can’t read the numbers if you have acquisitions in them, but the corporate inventories, I mean, are you pretty satisfied where they are or do you expect to build some or have to reduce some?

Actually, Eli through the second quarter, we didn’t build inventory. On our core business, actually the inventories were down. And so we were happy with the fact that we have been able to maintain discipline there through that period and that’s kind of what we are going to be doing going forward. Our message is we don’t want to build inventory, we want to maintain our just-in-time methodology as far as how we are going to service the customer. And with our lean efforts that we have had going on for quite sometime, that enables us to do that. So, I am very pleased with actually the inventory levels. We are now right in the 10% of sales range as far as inventories, and of course, years ago that used to be closer to 20%, so doing a good job there.

So, we are planning the rest of the year keeping the inventories relatively flat and so it’s…

Yeah, until we see some signs and then we will able to respond we have got capacity, so there is no need to build inventory at this stage.

And I guess earlier question, I mean, we talked you said if you adjust acquisitions, it was 30% or 40%, those were the incremental – the detrimentals that we are talking about in the quarter, 30% for North America and 40% for the rest of the world?

That’s right, little higher than 40% international, but yeah, you are right Eli.

Yeah, I just want to make sure we are doing that. And we are looking at basically being able to hold that level of profitability core business wise for the rest of the year is the expectation at this point?

That’s right.

Right, thank you very much.

Your next question comes from the line of Ann Duignan with JPMorgan Securities. Please proceed.

Hi, guys good morning.

Good morning, Ann.

Hi. Don, I want to go back to something you said at the beginning of your comments, I think you said that across both North America and international, customers kind of put their hands in their pockets in the middle of December and ordered nothing. Can you just give us a little bit more color on that and was it distributors or was it OEM customers or was it a bit of both or what exactly did you mean by those comments?

Well, I was just – I don’t really I think maybe the other people here can comment on specific segments, but I was just talking overall, the overall activity levels kind of really did slowdown, I won’t say one to zero, but come about mid-month, it really trailed off pretty fast. And I think that and that happened in Europe, it happened here. It was kind of a universal thing. I think that all happened as a result or anticipation of this cliff fiasco. I think people are just scared to do much of anything and they didn’t want to get stocks up real high. So, I think we are going to see the benefit of maybe some of that coming back to a more normalized level in the third quarter. And that’s my inclination anyway. I think everybody was just on the edge of their seat wondering what the heck is going to happen in Washington DC. And so it’s a little bit of a paranoia from that standpoint.

And any comment on what you are seeing out there currently from distributors versus OEMs?

Well, I would say positive, I think in both areas I think positive. And I just maybe make a comment on a couple of the market areas that we would see as trending strong right now. Distribution would be one, still positive trends in distribution. Real strong segments for us right now would be farm and ag, process industries, oil and gas and commercial aerospace OEM, those would be very, very strong. Just strong would be defense aerospace OEM, defense aerospace aftermarket, I mentioned distribution would be strong, residential air conditioning and commercial refrigeration. Those would be the key segments. There is about 10 that I mentioned, but again the real strong was our farm and ag process, oil and gas, and commercial aerospace OEM.

And any end markets incrementally weaker?

Yeah, I give you a few of those. Forestry, general industrial, machine tools, marine, construction, mining, commercial air conditioning, those would be some that would be trending negative. And then kind of flat right now, I’ll give you those, cars and light trucks, power gen, semicon, life sciences, heavy duty truck, industrial refrigeration, and commercial aerospace aftermarket. That’s kind of the lay of the land right now.

Okay, that’s great color. I appreciate it. Any of them stick out, Don as surprising to you either on the strength or the weakness?

No, I would say not, because I think these trends have been going on for a while now. So, I think nothing really jumped out significantly from what was happening all along. We are just kind of tracking these going forward. So, unless anybody else has any comment in that area that I wouldn’t have anything else to add.

You know and you read the same things I do, but the agricultural market has obviously been very resilient and Aerospace was very strong this quarter, not that we didn’t expect the Aerospace to continue to be strong, but the orders were very nice this quarter.

And were those aftermarket or OE?

They – actually, we received some orders for military OEMs, F-15, F-18 type of thing. So, maybe everybody is trying to rush ahead of any type of sequestration, we’ll see, but thanks Ann, thank you very much.

Okay, thanks.

Your next question comes from the line of Jeff Hammond with KeyBanc Capital Markets. Please proceed.

Hey, good morning. A quick follow-up on the aero, so Jon you mentioned 11% of sales kind of the peak exiting the year around 9%, what would you consider to be normal and what’s kind of a reasonable timeframe to get back to normal?

I think as Don indicated, Jeff, we should be really trending back down to the 8% range. 8% range would be normal for us moving forward. And that’s what we are expecting.

And what’s the reasonable timeframe to…

I think we’ll start to see those levels here in the FY ‘14. And as FY ‘14 moves ahead and certainly by FY ‘15 given the OEM development cycle that we are in right now, I think that’s the trend that we are going to see.

Okay. And then on acquisitions, I think you cited eight deals, I think $600 million some of acquisition spend in the first half, can you just talk about pipeline or do we take a pause here or do we still see quite a bit of activity?

Jeff, Don, as far as the acquisition activity, we do have other things that we are looking at. I don’t think there is anything that would land in this quarter coming up potentially maybe something by the end of the fiscal year for us, but the one thing we are really focused on now especially in the current environment is this, we got a little breathing room here. So, the key is to really get these acquisitions digested that we have already made these eight, eight that we have made. There is plenty of work to do there. So, while we have got a little bit of not a real aggressively high growth timeframe that we are in is to really get those acquisitions generating positive revenues and returns for us. That will be the focus, but we are not taking our eye off of other opportunities.

Thanks, Jeff. At this time, I think we are going to move to one more question and then we are going to close with some final comments from Don.

And the final question will come from the line of Nathan Jones with Stifel Nicolaus. Please proceed.

Good morning, everyone.

Good morning Nathan.

So, Don, you had said at the beginning of this year that it was your intention to offset that $0.35 in pension cost with share repurchases. And now with the M&A pipeline a little bit quiet, should we anticipate some maybe more aggressive actions on share repurchases in the second half of the year?

That’s a good question. We have done now – we are doing 50 million a quarter in dollars that is. And we did an additional $57 million in share repurchases in the first quarter. So, that’s about almost 2 million shares we did overall for the year. Are we going to do more? I think that will depend on what we actually see here. As we look at actionable acquisitions, we certainly have the capacity maybe to do some more, but we don’t want to use up all of our dry powder here on share buyback if we have got something that we can actually acquire in the next few months. So, I am not against repurchasing shares and we have done some of that and we’ll constantly look at that. We are also looking at the dividend again right now as well.

And if I could just get one in on China, it sounds like you guys are hinting a little bit that things are improving over there. Can you talk about what impacts you are seeing from stimulus efforts over there or what it is that’s giving you a little more confidence in China now than you seemed to have last quarter?

But just some of the feedback that we are getting some anecdotal kind of feedback that we are getting from different segments, the projects that were kind of put on hold, some of the projects that were put on hold, there is some more activity going on. I am not trying to send a message that this is going vertical on us, but it’s just a gradual positive movement at least some input that we are getting indicates some positive movement there. But nothing that’s going to be – it’s all in our forecast, it’s all in our guidance already, but it’s better than what we have heard in the last year, at least the tone is better than what we have been hearing.

Alright guys. Thank you very much.

Thank you. So, this time Don we’ll move to closing comments. And prior to that, I just want to say thank you. And Don?

Okay. Well, thanks to everyone that’s on the call. We appreciate you tuning in this morning and getting that update from us. As always, I would like to also thank all of the Parker employees, some of those of course would be listening in as well. And the team is continuing to do an excellent job, especially through this period, lot of activity going on with acquisitions, lot of activity going on with new products as I indicated in my opening comments and executing the win strategy. So, there are a lot of good things going forward and the team continues to excel. So, I want to thank the team, the global team for all their hard work and effort. As we go through this period, we are going to continue to manage our costs. We didn’t talk a lot about what we are doing, but I think we did last quarter. This is the continuation of short work weeks where appropriate associates and other employees have been adjusted according to the current level of activity. And other adjustments that we are making in our cost base as well as our capital allocation to make sure that we are not getting too aggressive in certain areas with our capital deployment. So, we are going through that. We are looking at all of these areas and managing costs through this period. So, we want to maintain a strong financial position. Of course, we want to meet our guidance that we gave you. And I went into a lot of that in the opening comments. So, once again, I want to thank everybody for their participation today. And if you have any additional comments or questions, Pam will be here to take those throughout the day. Okay, thank you very much. Have a good day.

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect and have a great day.