Good day, ladies and gentlemen, and welcome to the Q3 2015 Parker Hannifin Corporation earnings conference call. My name is Alex and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session toward the end of this conference. [Operator Instructions] I would now like to turn the conference over to your host for today, Ms. Robin Davenport, Vice President, Corporate Finance. Please proceed.

Thank you, Alex. Good morning and welcome to Parker Hannifin’s third quarter fiscal year 2015 earnings release teleconference. Joining me today is Chief Executive Officer, Tom Williams; President and Chief Operating Officer, Lee Banks; and Executive Vice President and Chief Financial Officer, Jon Marten. Today’s presentation slides together with the audio webcast replay will be accessible on the company’s investor information website at www.phstock.com for one year following today’s call. On Slide 2, you’ll find the company’s Safe Harbor disclosure statement addressing forward-looking statements as well as non-GAAP financial measures. Reconciliations for any reference to non-GAAP financial measures are included in this morning’s press release and are posted on Parker’s website, at www.phstock.com. Today’s call agenda appears on Slide 3. To begin, our Chief Executive Officer, Tom Williams will provide highlights for the third quarter. And following Tom’s comments, I’ll provide a review of the company’s third quarter performance together with the revised guidance for fiscal year 2015. Tom will provide a few summary comments and then we’ll open the call for a question-and-answer session. So at this time, I’ll turn it over to Tom and ask that you refer to Slide #4.

Thank you. Robin. And welcome to everybody on the call. We certainly appreciate your participation today and your interest in Parker. I’ll take a few minutes to share our perspectives on the quarter, some near-term market trends and our outlook. Also we’ll briefly discuss where we are in the process of refreshing our Win Strategy to take Parker’s performance to the next level. First, a few comments on our third quarter: Overall, we performed well, concerning an increasingly challenging macroeconomic environment, which includes weaknesses in key end-markets and the strengthening of the U.S. dollar. Sales declined 6% this quarter primarily as a result of changes in foreign currency rates. We also saw order rates decline a minus 4% this quarter, first declines in orders since March of 2013. Despite factors such as currency mix and end-market trends working against us, I am pleased we held total segment operating margins at 14.2%. This mostly reflects the benefits of restructuring activities we put in place previously and the ability of our businesses to adapt quickly to changing market conditions. Earnings per share were $2.02 per diluted share representing a 26% increase from the prior year third quarter. Adjusted for restructuring expenses, earnings were $2.06 per diluted share in the fiscal 2015 third quarter, an increase of 10% compared with adjusted earnings per diluted share of $1.88 in fiscal 2014 third quarter. Year-to-date operating cash flow through the end of the third quarter was $791 million or 8.3% of the sales. We’ve been active with our share repurchase program following our October announcement of our new authorization of the repurchase of $2 billion to $3 billion in shares in over two years. We remain committed to completing the share repurchase plan within that time period. To that end, we repurchased $477 million worth…

Thank you, Tom. At this time, please refer to Slide #5 and I will begin addressing earnings per share for the quarter. Adjusted fully diluted earnings per share for the third quarter were $2.06 versus $1.88 for the same quarter a year ago. This equates to an increase of $0.18 or 10%. This excludes the restructuring, which originally planned at $0.08 was actually $0.04 in the quarter and compares to $0.28 for the same quarter last year. Moving to Slide 6, you’ll find the significant components of the walk from adjusted earnings per share of $1.88 for the third quarter and fiscal year 2014 to $2.06 for the third quarter of this year. Income of $0.32 was realized in other, as a result of currency gains. The most significant portion is attributed to the un-pegging of the Swiss franc to the euro during the quarter. This resulted in an unexpected one-time intercompany settlement gain. Together with currency transaction gains realized from the netting of our international intercompany balances. Additionally, the impact of fewer shares outstanding equated to an increase of $0.14 per share offsets to adjusted per share income included lower segment operating income $0.18 per share driven by the strengthened U.S. dollar currency translation, increased interest expense of $0.07. And higher comparative corporate G&A that equated to $0.03 per share. Moving to Slide 7, with the review of total company’s sales and segment operating margin, total company organic sales in the third quarter was flat at 0.02% over the same quarter last year. There was minimal contribution to sales in the quarter from acquisitions. Currency impact was higher than planned equating to a negative impact and reported sales of $205 million or 6.1% in the quarter. As shown on the bottom of this slide, total company’s segment operating margins…

Thanks, Robin. As you can see, near-term challenges are shaping our immediate actions to respond to meet our financial commitments for this year. Longer term, we see a promising future and many opportunities to drive even higher levels of performance for Parker. I know there are many employees who call in to listen to this discussion and I’d like to thank you for your efforts and express my appreciation for all of your hard work. I’m very confident we can build on our past successes and continue to produce strong shareholder returns. At this time, we’re ready to take questions. So, Alex, if you’d like to give the instruction that will be great.

[Operator Instructions] Your first question comes from the line of Josh Pokrzywinski with Buckingham Research. Please proceed.

Hi, good morning, guys.

Good morning, Josh.

Just so, I guess, to parse out some of the end-market performance you guys mentioned, if you could just, I guess, first, comment on oil, and then if you had to think about the major drivers, whether it is de-stock in some of your broader distribution, oil weakness, or the strong US dollar impacting US manufacturing in general, if you could just kind of talk through some of those items and what you saw in the quarter.

Hi, Josh. This is Lee. What I’ll do if it’s okay with you, I’ll just kind of walk you through the different regions and give you some color. I think before we do that I don’t want to be overly dramatic in any of these end-markets. Remember, currency was the big driver of top line here. So organically we were flat for the most part. So starting with North America, I think the headline story there that you mentioned is oil and gas. And for us it’s really upstream land-based oil and gas. We’ve seen a rapid decline in global oil prices which really led to a quick deceleration in CapEx across that sector. We’ve notice that a big onshore rig utilization down year-over-year, which has put a lot of on some of the OEM customer servicing that sector. So those OEM customers continue to build but at a much slower rate than they have in the past. Our MRO and services business continue to be okay. We’re in touch with some of the OEM. First fit, it is down, where we’ve got MRO opportunity, that kind of continues to be good and poses opportunities for us. We talked about mining in the past that continues to be flat to down, we don’t see a recovery there soon. I think one bright spot when the Americas really comes to the energy markets, we’ve seen this around traditional and renewable power gen. There has been an accelerated de-commissioning and coal-fired power plants and what we have seen is an increase in gas-fired plants along with solar and wind capacity. So net-net, there’s not new capacity being added but the switch has created some opportunity for us, not only on first fit but for our MRO distribution. And in concert with that,…

That’s very helpful. Thanks, Lee. And I guess if I just had a one more follow-up on that, did you guys see any de-stock in the quarter anywhere? Any quantification that would be helpful and can you talk about the cadence and anything you are seeing into April?

Hey, Josh, this is Tom. We did see some de-stocking primarily like Lee was referring to distributors that would service those end markets that were the softest oil and gas, construction, ag, and that would be OEM channel, as well as distribution. I think it’s going to take a couple quarters to play through. Obviously, we will stay close to it, stay close to our customers and our distributors and give you better insight in the August call. But I do think there is some more destocking that needs to play through, that’s part of what you are seeing reflected in our updated guidance. And as far as current trends, the April trends, that’s what’s in our guidance.

Gotcha. All right. Thanks, guys.

Your next question comes from the line of Jamie Cook with Credit Suisse. Please proceed.

Hi. Good morning. I guess my question relates to, given the weakness that you are seeing in the market and as we’re approaching 2016, both Tom and Lee, I know you went through some major restructuring actions sort of last year, is there anything sort of larger that you are contemplating right now, like another round of restructuring actions, just given the weakness that you are seeing in the markets? And then I guess just my second question is, given the weakness in the markets, are you seeing valuations come down on any acquisition opportunities and how you are thinking about acquisitions in light of weaker markets? Would you be more opportunistic, because that could potentially help 2016? Thanks.

Hey, Jamie, it’s Tom. I’ll try to address both of those. First, on the restructuring, you saw that we announced $0.13 for a voluntary retirement program. And that’s an initial first step we’re looking at is really enterprise focus and efficiency. It’s really a new initiative or a continuing initiative to focus on improving our overhead costs, the overhead burden to the company, so we’re working on that. You’ll get more insights on the details of that in the August call, but this was an initial first step. We thought it was a constructive first step offering a voluntary retirement program. We do think there is extra efficiencies we can get through our overhead structure, so that would be one aspect of it. Certainly, in the near term, we are doing the normal, run the business adjustments that we would normally do with short works, reducing temps, all those kind of things. But the retirement program and the overhead efficiencies is an additional step on top of the market adjustments we will be making. On the acquisition side, haven’t seen valuations turn down yet, but we are very active and we’ve got reviews going monthly, reviews going quarterly with all the groups. We are starting to see activity pick up. Our desire is just like it has been historically to have 4 to 5 points of growth via acquisitions. You are right; in today’s climate with softness in end markets, this is an opportune time for us to add the acquisitions and we’ve got a great track record historically of being the consolidator of choice within our space and we are going to continue that. So we are very interested. Acquisitions are - it’s hard to predict. They are lumpy in nature as far as coming out of the pipeline, but the activity is certainly there.

And sorry, just one follow-up on the portfolio. Are you considering - are you and Lee both considering any, as you look at Parker’s organic growth, I would say investors have been disappointed over the past couple of years. A lot of it is macro, I get that, but are you considering any portfolio changes within Parker, any potential divestitures of sort of lower growth or commoditized businesses, or is that off the table?

No, I mean, I would say a couple things on the growth side. One, we always look at portfolio continuously through the business cycle. And you’ve seen us in the past make adjustments, so that’s something we always take a look at and there is nothing major at this point, but we always look at it and certainly we would update you if we had any changes. But on the gross side, in addition to acquisitions, Lee touched on a little bit at the end of his end markets, this is a great time for us to take share. We are only 11% share of the total motion control space, and we’ve got all of our teams around the world focused on trying to gain share by account by account, market by market, so that would be one aspect of it. The other part is, we’ve rolled out a new growth incentive plan starting this year with the full impact of that being next year and it’s a growth multiplier on top of our annual incentive plan, which is the RONA plan, which some of you may be familiar with our RONA plan, which is done division by division, goes all the way from the general manager down to the operator on the floor. But what we’ve added is an incentive, if you grow faster than the market, and we are defined on the market as the median of our proxy peers, there is an additional kicker to your RONA and a very nice kicker that really accelerates and encourages growth, but also if you grow slower than the market, there is a negative consequence where there is actually a deduct to your annual incentive. So I think that comes into full play next year, so I think that will drive the right kind of behavior incentive. And I think you are familiar with our - the key things we are going after with the Win Strategy on growth, those continue. But I think the other aspect would be services. Our e-business, the Parker.com channel, while very young as far as from a commercial standpoint, I’m very pleased with the progress the team has made there. We have a much better - from a customer friendliness standpoint and feedback. That website has improved dramatically, so attracting, finding, helping customers buy a product and then service them I think our website has clearly improved dramatically. So that in addition to other service things on the asset integrity and part tracking, so there’s a number of things besides I will call the traditional growth playbook that we are doing to help grow organically. But right now, I would love to do more acquisitions and we’re certainly going to focus on that as well.

All right, thanks. I will get back in queue.

Your next question comes from the line of John Inch with Deutsche Bank. Please proceed.

Thank you. Good morning, everyone.

Good morning, John.

Good morning. Did any of the verticals that we talked about, did that - any of them actually sequentially improve, or was this a matter of ag, construction, oil and gas got bad and the others also sort of softened, but just softened by less? And I guess if you could parse your answer in both North America and Europe, that would be great.

John, this is Lee. I would say sequentially improved. Heavy trucks in the transportation improved sequentially. Power generation sequentially and these are really North America-centric what I’m giving you right now. There are some smaller ones here, semiconductor sequentially. I would say flat would be areas like process industries had been flat sequentially. Rail has been flat sequentially, and I think that has to do probably with what’s happening with the oil markets right now, and then areas like forestry. What has been negative sequentially are areas that we talked about, oil and gas, mining to name a couple.

And Lee, would that read through in terms of what you just described, also would that map to your orders? In other words, you are sort of giving me the trend in the quarter; what about the mapping to the orders? Was there any differences there or would you (multiple speakers)?

John, I would say that is pretty consistent with the order trend.

And that I’m assuming is North America. What about Europe? You are a big company in Europe. Did you find similar trends, or is it a little bit different?

I would say similar. Distribution was okay. That’s really driven by MRO sequentially in Europe, machine tools was up. I’m always careful, because when we talk sequentially, I’m talking about our Q2 versus Q3, Q2 is such a soft quarter. So I don’t want to make too much of these sequential numbers, if that makes sense to you, John.

Yes, well, I was trying to put into a context of what you normally would have expected to see sequentially considering, to your point, you’ve got some seasonality and year-over-year comparison, so I think I get it?

Go ahead.

Sequentially, we would always want to see Q3 bigger than Q2 I think, which was really - which we didn’t expect was the deceleration in upstream oil and gas. We would not have expected that going into Q3.

And you have said oil and gas is 6% of the company. The one thing, of course, that we knew was going to happen not pertaining to Parker specifically was the derivative impact of oil-producing states like Texas, the Dakotas, et cetera. I mean, is that what you also realized, so directly it was 6%, but the indirect perhaps was more broadly felt and is there any way to kind of put a handle around that?

Absolutely, the derivatives of oil and gas had a negative impact. It is really hard to attach a number to it. We work hard to attach the 6% oil and gas, so they try and get all the periphery industries is difficult, but you could definitely see it throughout the markets in the channel.

Maybe just one last one, if these trends don’t really change much, which could be a scenario, as we roll into 2016, the one thing that seems striking is that there is going to be some relatively tough compares right, in the September and December quarters for 2016 and then, of course, we’ve got global line stuff this quarter. Is there any reason to think that 2016 the first-half is actually going to improve versus the current trend based on your thinking today?

Hey, John. On 2016 is probably too early for us to comment. We’re just now starting to roll up numbers for 2016, and we haven’t even had our initial meetings. So what we’ve got in our guidance and the comments we’ve made are Q4. I did mention obviously the de-stocking we thought will continue for a couple quarters, but it’s too early for us to give you an input for 2016, and we’ll certainly give you a lot of detail when we do the August update.

Okay. Got it. Thank you very much.

Thank you, John.

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

Good morning, everyone.

Good morning, Eli.

Can we get a little bit into the fourth-quarter guidance because, when I look at it, if I’m interpreting correctly, the North American sales decline is in line with the order decline at the mid-single digit, but it looks like the diversified rest of the world international has a huge decline and I assume when you start talking 20% plus, you start talking about at least 15% plus is currency and then it’s a bigger decline than the order weakness we saw. So it just looks like there is a very, very weak fourth quarter coming in international. Can you give us some color on what is going on in the two markets?

So, Eli, you are right, I mean, the significant driver, probably two-thirds of that is related to the currency translation. Likewise, we are also seeing that there is unfavorable mix and some volume impact as reflected through the orders as well as a result of this softness in the key end markets. So those are really the primary things that are going on with the change in revenues and then the follow-on impact on the operating margins.

But it is a very, very weak international quarter that is coming, particularly versus a tough comparison last year. Is that fair?

Certainly, but again a big part of that is on the currency translation.

And can you talk a bit about what’s happening in pricing across the marketplace, both here and particularly outside North America on the products? I mean, there’s not much inflation, but in these kind of demand scenarios, it seems that pricing is going to get a bit complicated across the board. You guys do better in pricing than anybody else in the industry, but can you give us some idea of what you are facing at this point?

Yes, Eli, it’s Lee. I would say pricing, it’s a challenging environment to say the least with the - with currency movements, et cetera. Having said that, net-net, we still are positive year-over- year from a currency standpoint - but I mean from a pricing standpoint, but it is something that we work regionally and through all our channels every single week and every single day.

And I guess the assumption is that this fourth quarter is going to be tough. And you don’t expect much business conditions other than seasonally and maybe into some restocking as we go - as we enter the second-half of calendar 2015. Is that a fair way of characterizing what is going on?

I think that’s a fair way of characterizing it.

Okay. All right. Thank you very much.

Thank you, Eli.

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

Hey, good morning, guys.

Good morning, Jeff.

Hey, just wanted to come back to, Robin, your mix comments, what’s really driving that? Is it certain end markets or weaker distribution? And are you - did you see that in the quarter and in the order outlook?

So, yes, Jeff, it basically links back to the key end markets that we talked about where we saw that softening, so ag, construction and oil and gas. So those are the big impacters there.

So those just have better mix ultimately and so that’s driving the negative mix in the margins?

Certainly on the oil and gas side in particular, yes.

Okay. Is there a way to quantify kind of the magnitude of these order declines in those three markets you called out, I mean, are we seeing like down 15% to 20%, or…?

Jeff, this is Jon. In terms of the magnitude of the order decline again, I think you’ve got a couple of things that are going on here. The first one we’ve talked about, oil and gas and we’ve talked about ag. These are relatively small parts of our - of the total company, and the decline that we’ve seen there is in line with what we’ve seen with the macro conditions around the world. We’re not really in a position to be able to give you an exact number, but they were material enough that we thought that we should just make sure that we mentioned it to give you additional color. So they’ve impacted things and as Lee and Tom have talked about, there have been other markets that have been strengthening, including aerospace and heavy-duty truck. And, again, when we’re talking about what we are seeing internationally, of course, keep in mind that when we’re giving guidance, we’re using the currency rate at March - at the end of March. And so that’s the lion’s share of what’s happening with those end markets. It’s not the contraction of them, it is the impact that we are seeing from currency due to the sharp decline, in terms of the increased strength of the dollar here for the quarter.

Okay. And then just - go ahead. So just finally on the M&A pipeline, it still sounds pretty lean, so maybe just speak to kind of the bias on buyback given kind of the lean M&A. Does that kind of bias you towards that high end of the $2 billion to $3 billion?

Jeff, this is Tom. We are committed to the $2 billion to $3 billion. I would say that our preference is we would really like to do more acquisitions. The output right now, we haven’t had any output - but the activity is increasing significantly within the company. The cadence around it, and the number of properties that we are looking at are all increasing, so I’m encouraged by that. Like I mentioned earlier, it is lumpy and it’s hard to predict the output, but our goal is to still have acquisitions 4% to 5%. So that being said, the ideal mix would be we would do $2 billion approximately of the share repurchase in the billion of acquisitions over that time period that we announced. But if the acquisitions do not materialize then we will make up the difference with a share repurchase.

Your next question comes from the line of Joe Ritchie with Goldman Sachs. Please proceed.

Thank you. Good morning, everyone.

Good morning, Joe.

Tom, your comment on overhead simplification I thought was interesting. I went back and did some analysis and looked at the past 20 years. I noticed just as a percentage of sales that you really hadn’t seen much of a change in your corporate expense again as a percentage of sales. And just given the amount of growth that you’ve had in the business, I would’ve assumed that there was a little bit more operating leverage. And so I am just curious, how are you thinking about the aspirational target on what you can do on the simplification side to get your cost structure down?

Yes, and we do have very much - we have a keen interest in this area, we are looking at overheads across the entire company, so it would be corporate at the group level and at the divisions and looking at it in aggregate and it’s really all about trying to simplify the company, have it more focused, have it be more efficient to have less of an overhead burn for every dollar of revenue that we take into the company. This is going to take multiple reviews internally, we have a number of them happening in May and June, so it’s early days. The early retirement, we felt was a really constructive first step that would be attractive to potential employees, as we try to move towards becoming more efficient from an overhead structure, even more efficient. I would say we have done historically a pretty good job there, but I think as a team collectively we are looking for opportunities to do better there. So I am not ready to give you what we think is going to come out of that, but we will in August. We will give you the details of what we think we are going to yield from this and then of course what the potential cost might be there.

That’s helpful. I guess maybe one follow-up question on the margin ramp, especially in aero, in the fourth quarter. I’m just curious like whether there is any one-time items that are really going to benefit the margins in the quarter. I know that last year you had about a 350 basis point benefit from a claims settlement and so it looks like the margin guidance implies a pretty significant ramp. I am just curious if there’s - what is driving that ramp in 4Q?

Yes, Joe, Jon here. I think the ramp in Q4 is something that we’ve seen historically. You are right, this time last year, there was a significant settlement on a few contracts. We typically are negotiating all year long and quite often, we will able to settle some outstanding either assertions that we have or issues that come up between ourselves and our suppliers, or our customers and so we have seen that pattern in last few years. There is not one particular thing though that is driving this result that we are seeing in Q4 as part of our guidance. It is more of a general bottoms-up review of each one of the operations and this is what we came out here, which will continue to bode well for us going forward.

Okay. And maybe one last question on the restructuring benefits. What are you guys expecting for the benefits in 4Q and how do we think about 2016 at this point given all the restructuring actions you have taken thus far year-to-date?

Yes, we want to - we have an estimate in for Q4 for the restructuring as it relates to the voluntary retirement program. We want to - before we commit to a savings number, we want to roll up all of the FY 2016 and we want to make sure that we understand who and how the take-up rate on the program is executed during the quarter. And so we won’t know that, until we come out with our update in August, so we won’t be able to give you a really good idea of something that is factual until August. And at that time, we will be very detailed in terms of what we expect in terms of the savings from the voluntary retirement program.

Okay. Thanks, guys.

Thank you, Joe.

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

Good morning, everyone.

Good morning, Mig.

Sticking with international, one of the things that really surprised me is really your updated guidance. You have reduced your margin guidance by 150 basis points for fiscal 2016 after only one quarter, if you would, worth of changes in terms of end markets in the environment. This is well below your 15% target after roughly two years of restructuring. So If or one am a little bit confused as to how I should be thinking about sustainable margins for this business going forward. Any help here would be great.

Two-thirds of the reduction in the guidance internationally relates to what we are seeing from a currency standpoint. Now we have seen such sharp currency trends that it takes - there’s a matter of timing that is involved here, Mig. We are very optimistic long term. We will be back up at the 15% plus rate that we expect from those operations, but there is a timing issue where we’ve got to make sure that we are keeping up with the trends in the marketplace. So that’s about two-thirds of what is happening with the international margins. The other one-third of it is really being impacted by what we are seeing on the ground in some of the end markets that Lee and Tom talked about those end markets that they called out are unfortunately for us having an impact on the mix and because of that, that mix issue, what we are seeing a very slight degradation for us in those margins. Historically, over the years, our margins for international as reflected in our guidance is 13.4%, and we are really seeing a slow ramp up to the 15% that we were talking about this time last year. All the savings that we are getting from the very successful restructuring program that we executed on last year are just being masked by what we are seeing in the currency and then these new trends and some of these end markets. So we are not backing off our determination to make those businesses 15% plus going forward here. It is just a confluence of events and that is really impacting us. And like I say, almost two-thirds of it clearly related just to the currency and the impact there as the strong dollar impacts the translation of our earnings outside the U.S. into our income statement.

All right, I appreciate that. Then it is fair to say basically as we are looking out that we should be thinking about currency impact really as well as mix and maybe try to think about scaling up margins as these effects become diminished as fiscal 2016 would progress. Is that a fair way to think about it?

I think so, yes. I think that is very, very, very true.

All right. And then my last question is on aerospace. An order decline here, and your orders are on an LTM basis, I think this is the first decline since the Great Recession. Can this business grow in the next 12 months?

Yes, Mig. Absolutely. Please do not read too much into that. We were - had a bad comps here for this quarter. We’ve got built-in growth rates due to all of our wins in excess of 5% per year and that has not changed. There was a significant - we were up mid-double digits this time last year. A lot of those orders related to FY 2016 again because of the long term nature of the business. So I can go through that with you in more detail, but we are not concerned about the impact of those order rates on the long term. We still feel very confident in our long term growth assumptions that we’ve come out with.

Great. Thank you, guys.

Okay.

Thank you, Mig.

Your next question comes from the line of Nathan Jones with Stifel. Please proceed.

Good morning, everyone.

Good morning, Nathan.

Just following up on the last caller, you talked about a timing issue on international margins related to FX. Can you talk about how long that takes to get through before we will start to see improvement there?

We - it will take a quarter or two is what our estimates are. This is something that we are all working very hard around the world to make sure that we are reacting to. But as you know very well, Nathan, I mean to take the euro down to $1.06 for us at the end of March, that, as well as the strength of the dollar versus almost all other currencies, that has had an impact on us. And in some cases we have - not in all - but in some cases we need to make very quick turns and pivots in terms of our pricing and we are working on that.

Okay. And then obviously some different drivers this time, but some of the data starting to look a little bit like your 2012, 2013 numbers. We saw four quarters of mid-single digit order declines there, margins compressed about 200 basis points. Is there some reason why we shouldn’t be thinking about that as a base case scenario going forward over the next 12 months?

Well, I think the answer to that is we should not expect that as a base case. I think that what is different, the successful massive restructuring that we did last year, that is bleeding over into expected future margins that we are going to see, a program that Tom outlined in terms of our overhead efficiency that is going to make us even more efficient going forward and our ability to grow in markets that we are not talking about too much on this call that is really going to help us in the out period. So I am very, very optimistic about us going forward. We are certainly going to see an increase in our aerospace margins as time goes on also. And because of the actions that we took in Europe, because of the markets that will continue to grow in North America and because of the aerospace segment actions and wins that we took a few years ago, I don’t feel like we are going to see a repeat of that time period, so kind of a long-winded answer, Nathan, but wanted to be responsive.

Okay. And one more, you did talk about industrial machinery exports potentially improving in Europe with them becoming more competitive with lower currency. Have you started to see any impact in Europe from the lower currency over there making European economies more competitive? Any greenshoots of that or any expectation?

Nathan, it’s Lee. I’m not ready to say that at this point in time. There’s certainly a lot of hope and a lot of conversation, but to see strong evidence of that, I can’t see that yet.

All right. Thanks very much.

Thank you, Nathan.

Your next question comes from the line of Joel Tiss with BMO Capital Markets. Please proceed.

[indiscernible] in, how are you doing, guys?

Good morning, Joel.

I just have - a lot has been asked and you guys have been great about answering everything. I just wondered if you guys share the historic view that the aerospace is a little bit too small of a percent of the whole company.

Yes, Joel. It’s Tom. Ideally, we would like to get aerospace to be 20% of the portfolio. Today, it runs around 15% or 16%. So we would like it to be a bigger piece it acts as a counter cycle to the shorter cycle industrial part. It shares all common technologies across the company. There’s parts of it that we would really like to build out, which I won’t necessarily say publicly because I don’t want to tip my hand as far as what we might want to be investing in, but there’s a lot of it that we very much would like to build out and the aerospace team is working that as we speak, both organically and through acquisitions.

And is it safe to assume that there is nothing really big in the acquisition pipeline, or else you guys would balance the share repurchase and the acquisitions a little more?

Joel, it’s Tom again. The pipeline is getting more active, and - I’ll probably never be happy with the volume there, but it is getting more active, so I’m pleased with that. Our sweet spot will continue to be in the $30 million to $300 million revenue range. That being said, we are a big company. We could do a bigger acquisition, but I think you will see us - the majority of activity is going to be in our traditional wheelhouse as far as revenue size.

And the last one, I just wondered why not top decile instead of top quartile? Is there anything from what you see today and what you’ve seen historically that makes it more realistic to reach for the top quartile instead of the top decile of industrial profitability?

This is Tom again. Are you talking about top 10% versus top 25%, that is your?

Yes, yes. You guys have been in the top 25% probably for most of the last decade.

Yes. When we look at - it is against our proxy peers is what we are comparing to and it’s a pretty competitive group and there are some metrics where we are not in the top quartile where we would like to get into the top quartile and when we give you the Win Strategy refresh November 3 for the Investor Day, we’re going to give you a vision of where we would like to take the company and that will include some metric expectations and give you an idea how and how long it will take us to get there. The bottom line is we think we can take - the company has done extremely well. The Win Strategy has been really a unifying document for the company, a defining strategy, but we think there is an opportunity to take it to the next level, which in turn will take the total company to the next level. And I can just tell you for everybody on the phone as well we’ve gotten - both Lee and I have gotten tremendous interest and participation as we’ve been going around talking to our employees about the new Win Strategy and there’s lots of good ideas and we are encouraged by what we are hearing.

Great. Thank you very much.

Thank you, Joel. And Alex, I think we will take one more call.

Okay. Your last question comes from the line of Steve Volkmann with Jefferies. Please proceed.

Hi, good morning. Just slipped in, so just one quick detail maybe, Robin. The gain in Switzerland, how much was that exactly?

That was $0.19 attributed to the gain.

$0.19. Great, that’s helpful. And then, Tom, I think it was you in the initial comments talked about refreshing the Win Strategy and I guess you are going to try to sketch that out in more detail, but I am going to just see if I can get a little bit of a preview. Traditionally, we have had kind of pricing and lean and sourcing as sort of the key levers in Win Strategy. Are we adding additional levers, do we think there’s a lot more room in the existing levers? Just give us a sense of how you think about that.

Yes, it is early for me to try to give you that, but I think the essence of why we are calling it the refresh, you’re not going to see a sharp turn to the right as far as on the Win Strategy, it’s going to be building on top of it. So I think it will be a combination of enhancements to the existing strategy and few new ones that we will put on there. And I think it’s the combination, really the vision - there’s a couple visions here. One, to be a top quartile diversified industrial company and that’s kind of the overarching one. The second is to an even stronger number one in our space, so we are only 11% share. If you looked in the back of the Win Strategy, we have always had a vision historically to be 20% market share. That would put us at a $20 billion company and that’s - I mean that’s the other part of it. So initiatives on how to get to be in top quartile and how to be significantly bigger - being significantly bigger number one - is going to frame the Win Strategy refresh.

So is it safe to say win 2.0 is more focused on growth than on margin?

I would say it is always going to be balanced, you have to do both.

Great. I appreciate it.

Okay. Thanks so much, Steve. So this concludes our Q&A and earnings call. I’d like to thank you for joining us today. Todd and I will be available throughout the remainder of the day to take your calls should you have any further questions. And once again thank you and have a great day.