Deborah Pawlowski - Investor Relations Timothy Tevens - President and Chief Executive Officer Gregory Rustowicz - Vice President and Chief Financial Officer.

Michael Shlisky - Seaport Global Securities Robert Majek - CJS Securities Joseph Mondillo - Sidoti & Company Robert Nickel - BB&T Capital Markets.

Greetings and welcome to the Columbus McKinnon Corporation Second Quarter Fiscal Year 2016 Financial Results. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Deborah Pawlowski of Investor Relations for Columbus McKinnon. Thank you. You may begin..

Thank you, Adam, and good morning everyone. We appreciate your time today. As Adam mentioned, we’re going to review our second quarter fiscal year 2016 financial results. And I have on the call with me to do that Tim Tevens, our President and CEO; and Greg Rustowicz, our Chief Financial Officer.

Tim and Greg will review the results and give an update on the company's outlook and strategic progress. You should have a copy of the financial results that were released earlier this morning before the market. And if not, you can access those as well as the slides that we have accompany our conversation today at www.cmworks.com.

If you would turn to those slides and look at Page 2, I will discuss the Safe Harbor statement. As you are aware, we may make some forward-looking statements during the formal discussions, as well as during the question-and-answer session.

These statements apply to future events that are subject to risks and uncertainties, as well as other factors that could cause actual results to differ materially from what is stated here today.

These risks and uncertainties and other factors are provided in the earnings release as well as with other documents filed with the Securities and Exchange Commission. Those documents can be found on our website or at sec.gov. So with that, I’ll let you start on Slide 3, and turn the call over to Tim..

Very good, Deb, and very impressive that reading. So thank you, Deb, and welcome to the callers to the conference call.

Let me start on Page 3, please, and we just want to remind you of our long term objectives, which include growing to be a $1 billion with about a third of our revenue in developing markets and two-thirds in developed markets, along with $200 million to $300 million in acquisitions and a steady stream of new products, a 12% to 14% operating margin and a strong working capital level and overall balance sheet.

The recent Magnetek acquisition has certainly helped us to get closer to this long-term target and bolster our profitability and revenue. Page 4 provides the highlights of the second quarter of fiscal 2016. Revenue was up $8.2 million, or 5.7%, excluding the negative impact of foreign currency.

The strong dollar resulted in an unfavorable currency translation of $9.2 million. Magnetek and STB added $13.3 million in acquisitive revenue. US revenues were up 3.6%, of which acquisitions contributed $9.6 million. Revenue outside the US was up 8.4%, excluding $9.2 million of negative foreign currency translation.

We continue to increase our gross margin, improving this past quarter 32.6% on an adjusted basis. Adjusted income from operations was at $15 million or 10.3% of sales. GAAP OI was at $6.5 million, or 4.5% of sales.

The Magnetek acquisition closed on September 2 for $188.9 million of purchase price and considering the value of Magnetek’s NOLs, we [actually impact] less than $140 million for this third strategic step to combine technology and mechanical capabilities of our two companies. Let’s now talk about the integration to date relative to Magnetek on Page 5.

The integration between our two companies is going well. These organizations are both committed to helping our customers succeed in their efforts to lift position and secure materials in a safe productive way. Their energy and business aspects match Columbus McKinnon very well.

They are currently seeing an increase in business now as hoist and crane controls are being upgraded to newer and more energy efficient and safe Magnetek controls. These are huge savings for the end user customers. We have already achieved about $1.2 million in cost synergies and are well underway to achieving our goal of $5 million.

As previously mentioned, the value of the Magnetek NOLs far exceeded our original expectation and we are now seeing about a $62 million of value there, thereby reducing our purchase price just under $140 million.

Magnetek is seeing us a solid year as they are now executing and delivering their increased revenues in the current quarter, the December quarter. Adjusting for purchase accounting, Magnetek is recognizing in excess of 17% operating margins. And this number in fact should improve as more synergies are implemented throughout the upcoming year.

Slide 6 shows the quarter two revenues which are 5.7% higher than last year, excluding the negative impact of currency, which was $8.2 million. The Magnetek and STB acquisitions more than offset the decline in volume. US sales were up driven by those acquisitions.

Volume has been negatively impacted by lower activity in oil and gas and the general industrial MRO markets. Sales outside the United States were up $8.4 million excluding the effects of currency translation.

EMEA had some very nice growth as they continue to see improved bookings in the normal hoists and rigging business and in the capital projects work from our rail and road business at CMEP. Let me just turn it over to Greg for more details.

Greg?.

the inventory step up expense related to the Magnetek and STB acquisitions in the amount of $600,000 and the European facility consolidation and reduction in force costs of $100,000. The reconciliation for adjusted gross profit is included on Page 18 of this presentation.

This quarter represented the 20th consecutive quarter of year-over-year gross margin improvement on an adjusted basis. On a GAAP basis, gross margin was 32.1%, which matched our all-time record as a public company. GAAP gross profit decreased by $200,000 this quarter compared to the prior year.

Foreign currency translation was the largest contributor to this decrease, negatively impacting gross profit by $2.5 million. Excluding foreign currency translation, gross margin was up $2.3 million. Our recent acquisitions contributed $4.5 million to gross margin. Pricing and material cost deflation added $1.8 million.

Partially offsetting these items were additional product liability costs of $100,000 and additional costs related to our European facility consolidation and reduction in force of $100,000.

The impact of purchase accounting acquisition inventory step up expense was $600,000 this quarter, reflecting the impact of the remaining step up expense for STB and one month’s impact for Magnetek. We expect the impact of inventory step up expense to be largely completed by the end of our fiscal third quarter ending in December.

Sales volume and mix negatively impacted gross profit by $1.5 million. Finally, reduced fixed cost absorption and productivity net of other manufacturing costs were negative this quarter by $1.7 million. The Magnetek acquisition was accretive to adjusted gross margin.

However, even without this impact, Columbus McKinnon’s standalone adjusted gross margin would have been 32.2%. As shown on Slide 8, selling expense was higher than the prior year by $300,000 and represented 11.9% of sales this quarter compared to 11.7% in the prior year. Favorable foreign currency translation lowered selling cost by $1.5 million.

The Magnetek and STB acquisitions added $1.2 million to selling expense in the quarter. G&A expense increased $8.7 million from the prior year and represented 15.1% of sales this quarter compared to 9% in the prior year. There were one-time costs related to the Magnetek acquisition which drove the increase in G&A expense this quarter.

We incurred $5.3 million of acquisition deal costs and $2.3 million of acquisition-related severance cost. Excluding these two items, G&A expense was $14.4 million. This includes $900,000 related to the ongoing G&A expense of STB and Magnetek. Favorable foreign currency translation reduced G&A expense by $900,000.

We expect our SG&A run rate to be approximately $38 million to $39 million per quarter in the second half of fiscal 2016, including the impact of the Magnetek acquisition. Turning to Slide 9, adjusted operating income was $15 million compared to $16.1 million and adjusted operating margin was 10.3% compared to 11% in the prior year period.

This represents a decrease of $1.2 million or 7.1%. While down from the prior year period, adjusted operating income and margin have improved over last quarter's results where we reported $12 million in adjusted operating income and a resulting margin of 8.8%.

We have adjusted operating income this quarter for the impact of the acquisition deal costs and severance costs of $7.6 million, purchase accounting acquisition inventory step up expense related to STB and Magnetek in the amount of $600,000 and the European facility consolidation and reduction in force of $300,000.

This reconciliation can be found on Page 19 of this presentation. As you can see on Slide 10, adjusted earnings per diluted share for the second quarter of fiscal 2016 were $0.40 per share compared to $0.44 per share in the previous year, a decrease of $0.04 per share or 9%.

Adjusted earnings per share reflect the exclusion of the acquisition deal costs and severance costs and purchase accounting inventory step up expense as well as charges related to the European facility consolidation cost and reduction in force.

GAAP earnings per diluted share were a loss of $0.02 per diluted share versus earnings of $0.53 per diluted share in the prior year period. The GAAP earnings per share include the impact of the items I just mentioned as well as the actual tax rate in the quarter of 111.5% compared with 21.1% in the prior year period.

The increase in the tax rate this quarter was due to two factors. First, we recorded a valuation allowance on deferred tax assets of certain foreign subsidiaries which impacted the tax rate by 51 percentage points. Second, certain of the acquisition deal costs are not deductible but are rather capitalized for tax purposes.

Our effective tax rate for fiscal 2016 is expected to fall between 38% and 42%, which is higher than last quarter's guidance of 32% to 36% because of these two items. Without these two items, our effective tax rate for the year would have fallen within the range previously given.

On Slide 7, you can see our return on invested capital was 9.4% on a trailing 12 month basis and exceeds our weighted average cost of capital.

We continue to invest in good capital projects that exceed our cost of capital and we expect the value creation opportunities from a full year of the Magnetek acquisition to further increase our return on invested capital.

Turning to Slide 12, excluding the impact of acquisitions, our working capital as a percent of sales was 22.9% compared to 22.1% at September 30, 2014 and 20.8% as of March 31, 2015. Working capital as a percent of sales increased 80 basis points from one year ago.

This is due to higher inventory levels largely related to certain large rail and road projects in backlog that was shipped by the end of the fiscal year. Inventory turns were 3.4 turns compared to 4.0 turns one year ago and were slightly improved from last quarter's level of 3.3 turns.

On Slide 13, net cash provided by operating activities for the six months ended September 30 was $4.1 million compared to $12.7 million one year ago. Capital expenditures year-to-date were $8.7 million versus $7.6 million in the previous year.

As a result, operating free cash flow was a use of cash in the amount of $4.6 million compared to operating free cash flow of $5.2 million one year ago. Impacting operating free cash flow in the second quarter was the $5.3 million of acquisition deal costs.

We expect fiscal 2016 capital expenditures to be in a range of approximately $18 million to $22 million, including Magnetek CapEx, the majority of which is dedicated to productivity and growth projects. Our focus with the cash flow we expect to generate in the second half of the year will be to pay down debt incurred for the Magnetek acquisition.

Turning to Slide 14, you can see that our total debt as of September 30, 2015 increased by $172.6 million from March 31, 2015 level as a result of the Magnetek acquisition. We borrowed $195 million in the quarter for the acquisition and deal costs and repaid $15 million in September.

Our net debt to net total capitalization was 47.5% as of September 30. The debt refinancing that we completed in February 2015 has provided us the opportunity to reduce our interest expense despite having substantially more debt outstanding.

For the remainder of fiscal 2016, our focus will be on deleveraging the balance sheet, funding our strategic growth initiatives and continuing our dividend payments to reward our shareholders. We expect to repay approximately $50 million of debt over the next 12 months. With that, I will turn it back over to Tim to cover the fiscal 2016 outlook..

Thanks, Greg. Let’s spend a moment and take a look at that outlook on Page 15. We do expect to continue to grow as bookings have improved across many sectors in Q2 and into Q3. We still face some challenging markets and negative currency translation.

Excluding the effects of currency changes, Columbus McKinnon booked more than $20 million in Q2 this year than last year. It’s over 13% more volume into our business mix. Acquisitions added $11.5 million, Europe $9.2 million, Asia Pacific $2.8 million, Americas were lower by $2.9 million.

We do not see any improvement in the oil and gas, mining markets, heavy OEM manufacturing, but we are seeing an uptick in construction which is definitely improving. We see very positive upside in the Magnetek acquisition as we expand their revenues globally and develop new and innovative products as we add a brain into every hoist.

Our backlog is up nicely by almost $26 million to $110.8 million, driven by Magnetek and improved European bookings. And with that, Adam, let me open it up for questions..

[Operator Instructions] Our first question comes from the line of Michael Shlisky with Seaport..

Can we just confirm, Magnetek only for a month or two here, the increase in expectations for fiscal 2017, is that still $0.40 a share?.

Yes, it is, Mike. When we talked about the $0.40 per share, we said that was prior to purchase accounting. So with the purchase accounting impact and we had a very strong month Magnetek which is going to be indicative of what we would expect from a margin perspective going forward.

So with purchase accounting, I would expect us to be slightly below the $0.40, but still that’s a substantial increase in EPS next year..

And perhaps for the rest of this year, the back half, can you give us any sense of what you think the accretion might be excluding any one-time charges and cost?.

That’s one that I don’t have at my fingertips..

Why don’t we give Greg just a moment to pull up the next six months, Mike? Go onto your next question and then we’ll come back to that one..

Also little surprised with another quick thing on Magnetek, it’s not going to be its own centric going forward, I mean, it’s a little bit different product with the tone, management team that – as far as I know is probably still in place in the same facility.

Is that a thing we should see in the 10-Q or is this going to be folded into the overall business here?.

We studied that, Greg and team, SEC council, of course, the Magnetek folks and I had some input into this. And Magnetek product portfolio goes into the very same markets, Mike, that our hoist products go into and there is a close alignment between the selling activity, the product development. They certainly will continue to have their own facilities.

Pete McCormick continues to lead that business for us. It’s obviously a bit changed internally there because of some of the corporate folks have left at this point. So it’ll be more of an operating division within Columbus McKinnon and it will be folded in from a segment reporting standpoint..

Just one other thing also, just on STB, I know it’s a little bit small obviously, let’s not put it into the background entirely, can you say how that’s going with the intro to the US and just overall how that’s integrated so far?.

So the STB acquisition has been going well, their product portfolio has been integrated into the Americas and to Asia, I might add, so into the Columbus McKinnon network of sales activities and marketing activities going well.

I would say that in America there has been some good quotation and actually orders that have been placed with STB to bring the product into the States, that's true in Latin America as well, so into Brazil. Asia, surprisingly is doing better than we expect it to do.

They didn’t think that’d be a big impact there given some of the competitors, the Asian competitors, but so far so good there.

I would say that we are from a revenue standpoint slightly behind where we expected to be, but the reason isn’t because of the integration activities, the reason is predominantly the markets that these large products are sold into, like oil and gas is a good example, is down compared to when we bought the company where it was actually at.

So I think the general business activity in those sectors are down considerably. But having said that, I think from a business standpoint and integration into the Columbus McKinnon structure, all have gone very well. Let me go back, Deb wanted to add just one point, and I want to make sure that..

Mike, although Magnetek won’t be reported as a separate segment, you will be able to see the product line category where we break out the product categories..

Mike, in looking at our models, we have this all integrated, so I can't quickly break out it and it's not something that we typically forecast anyway. So I think there is a lot of moving parts, you have to factor in the tax rate, the additional interest expense, the forecast for Magnetek, one-time costs.

So that is something that – I think you really got to build up piece by piece, and right now I have it all together and that's something that we typically don't comment on..

Can I at least ask do you think it's going to be accretive in the back half of the year, positive, on the current side of things?.

Yes. Excluding fixed cost and the restructuring cost..

If I can just throw in one last question here on your core business, are you seeing any differences, I know it’s perhaps hard to really tell, is there any difference currently in some of your more challenging markets between replacements and Greenfield build outs, either it's a customer building something new or it's a share gain for you guys, can you give us color as to what, yes it is down in certain markets, but is it doing better in your business?.

I have to break out the world for you, because it's certain aspects of the world. I would say that Europe has definitely improved, we have seen significant bookings in the rail and road business and in the hoists and rigging business across Europe.

So it's definitely off the bottom, I might have reported, Mike, last time that we thought recession-like in Europe. But over the last four, five, six months, it's definitely improved. So I think there is much more normal MRO hoist business and capital expansion going out there, which is helpful for us.

Unlike the United States, which both of those markets, the traditional replacement business that you might know us as and the capital expansion is definitely off and heading in a negative direction. There doesn't seem to be a lot of energy around those two sectors just today.

And I would tell you that Latin America feels the same, Mexico is doing okay, other than the currency issues, but Brazil is definitely recession-like and not a lot of activity there. That's way off. Asia is doing fine, I think that, as you know, it's the Chinese business and the investments we made there are relatively new to us and new to the market.

So growth there is going to be a bit up and down depending on the individual bookings that come through. But overall, we are taking market share and the team there is doing a fabulous job. I hope that was helpful..

Indeed it was..

Our next question comes from the line of Robert Majek with CJS Securities..

In your prepared remarks, you mentioned that you expect both sales and earnings growth in the back half, inclusive of acquisitions.

Could you talk about your expectation in the business ex acquisition?.

In the back half of fiscal 2016, is that what you're referring to?.

Yes..

I think based on the bookings we are seeing today, Robert, I would say that Europe should be definitely better and positive. Asia should be better. Latin America and America, US, will be down. The general industrial activity across the United States seems to have paused, capital expansion certainly has paused.

I think oil and gas, mining, heavy OEM, look at some of our large industrial distributors that we sell to, the MRO channel, and you’re seeing a malaise across the United States which definitely falls back into us. There is no question about that, especially given our large installed base of industrial hoists across America.

So I think that depending on the individual market, currency will definitely be a headwind in Q3, the December quarter that would lessen through Q4, because as you might recall, that's when the euro start to swing.

But as Greg reminded me the Brazilian real and the Mexican peso, they are having some headwinds, the Canadian dollar also has some headwinds against the strong US dollar. So this currency bump globally is certainly having an effect on us.

So that's why we try to report things net of currency so that you can really see what the business activity is in the local markets..

Our next question comes from the line of Joe Mondillo with Sidoti & Company..

I was just wondering topping on to that last question regarding your outlook for the back half of the year.

I know you guys don't necessarily talk about backlog that much, but you do report, it's really only a quarter’s worth of outlook, but the only reason I bring it out here is because it's up 13% year-over-year and it looks like it is up quite a bit sequentially, if I'm doing the math right, excluding the Magnetek contribution.

So I was just wondering what kind of – where are you seeing the order strength recently over the last couple of months that’s driving that and what your take is on that?.

The bulk of the if I can use the word old Columbus McKinnon backlog, which is what you're talking about it, excluding Magnetek because that's obviously all new to us, is you could point toward a sector of the capital project work across Europe.

We have been successful in landing some very large projects in our rail and road business, some engineered systems to help people lift these railcars and those guys have been incredibly successful in quotation activity, we booked quite a bit which added to the backlog. That's the good news.

But the bad news is that backlog won’t be recognized till the fiscal 2017, it's actually falling into 2018 a little bit as well. The core hoist business in Europe also added a little bit to backlog, not much, but it's mostly in these large capital projects..

So if you exclude the capital projects, is it still – has activity stabilized because you guys have been seeing weakness for a year or two now, is it stabilizing or is it still on an overall perspective still declining modestly?.

In Europe, it's increasing, definitely increasing across Europe and in certain sectors, Germany in particular, I would add. And I would say that in the United States, it's definitely weakening. So I don't have the backlog chart in front of me, Greg has it or not, but I think that just from an activity standpoint, it seems like.

There is some recent highly engineered hoisting products that have come through in the last quarter which has been helpful in America, but the core think of it as the MRO business that we sell into has been weaker, that's just an analog to backlog because as you know, Joe, we’re taking orders from the industrial distributors in America and we ship it in days, very quick turn in our business.

So it doesn't really influence backlog. But I'm really referencing your activity, net activity is down. Some capital projects in America seem to be doing slightly better which has added to the backlog..

So in terms of the US activity, is it largely oil and gas or is there other pockets that are also weak?.

I would say for us it's mostly oil and gas and oil and gas related industries that support oil and gas. You just think of large industrial markets in Texas and Louisiana and all of the support industry that produce and support the oil and gas exploration and processing, those guys are off as well.

You don't always see that directly, Joe, because you support that industry through local distribution. So we don't feel it directly, but we just know that it's down. But the bulk of that would be oil and gas and oil and gas related.

And then I would say that the general MRO supply which is an indicator of general industrial activity beyond that seems to be either flat or down slightly..

And then I was wondering if you could update us on your progress within China and Asia, given obviously relative to the slowing in that environment..

Our team is definitely seeing – first of all, they are very successful and continue to be. But they are definitely seeing newer opportunities which is related to the slowing Chinese environment. I will tell you though that they are winning more than their fair share of the projects they are seeing.

So given that as the backdrop, they are doing quite well and growing, but they are definitely seeing fewer opportunities coming at us.

And we are in the, what we would consider to be the premium market there, the top quality market, higher cost and supporting foreign enterprise as well as – nuclear power plants for example, where they demand quality and safety and uptime. That's where we are being successful. Automobile plants is another good example of that.

And the lower market, always definitely seeing the churn off or a downturn, we don't play a lot in that just yet, we plan to broaden our product offering to be more aggressive in the market, but that's the piece that would be more slowing than our piece just yet.

So the strategy continues to work and they continue to do a great job, but it's definitely in a slower environment..

Do you think that's probably not going to be a needle mover within the next 12 months just because the market is just that rough?.

Okay, so we grow 10% on $40 million so that's what you’re talking, $4 million. It's going to be great and helpful, but not move the needle just yet..

And then just lastly I was wondering – Magnetek, it looks like is largely focused within the US market, I was just wondering in terms of the international opportunities, how fast are you going to try to integrate that business into your international markets and how significant could that be?.

On US, I just got back from Europe meeting with a key supplier to plan that strategy across the European market with Magnetek, Columbus McKinnon and the supplier that we have. I think that as you look at the list of opportunities to grow top line with Magnetek, that’s certainly in the top one or two, it is to grow internationally.

Europe seems to be the biggest opportunity for us given our presence there, given Magnetek’s technology and what they have been able to do in North America to replicate that in Europe and that there is a lot of energy and thinking and planning going around that.

To be honest with you, though, that's not going to happen like in a quarter or two, that's going to be a year or two. This takes time to develop the right products to penetrate the market, to train up the sales force, so it's a little further out, Joe. But definitely that's an area of incredible interest to us.

We will do the same thing across the Asia-Pacific, which we think has good opportunities, but that too is not tomorrow. That's going to be out away..

Our next question comes from the line of Robert Nickel with BB&T Capital Markets..

Following up on the previous questions, the weakness in North America, I think you alluded that the trend could continue into the next quarter or a couple of quarters, should we be assuming that there will be any type of restructuring going on in that market?.

The reality is there has been. We have not, let’s say, specifically called it out, but there certainly has been oil and gas related products that we produce in our rigging plant and our hoist plant, we have definitely downsized and reduced those facilities to reflect the lower business activity and lower incoming of orders.

So that's been going on actually for the last seven months, I don't remember exactly when it started. But it's been a while. So yes, we haven’t called that out and reported it separately, because it's an ongoing business to us. It is a normal thing.

I would not expect anything major given what we see today in terms of any significant restructuring like a plant closure or anything along those lines. I think the reality is it's not that severe, it's less working hours..

And then one more if I may, we are expecting a big bump up in total SG&A cost going forward. I think you mentioned a run rate of $38 million to $39 million.

Is that mostly Magnetek or is there something else underlying that bump?.

I think, Gregory, that’s mostly Magnetek..

Mostly Magnetek. We bought STB in December of last year, end of the year. So there is a little bit of that left in the current quarter, but then it will be on a comparable basis. But it is largely Magnetek related..

Our next question is a follow-up from the line Mike Shlisky with Seaport..

Just had two quick ones here. Given the sense of consolidation elsewhere in the industry, a couple of competitors in the United States have agreed to merge.

Could you maybe give us your thoughts as to whether you feel you need to get a little bit bigger, I mean you have already gotten bigger with Magnetek, but maybe do you have room to get bigger here and be the affiliate to need to or [indiscernible] already waiting to be as far as scale and size go?.

A good question and it's something, Mike, that we think about, study and strategize continually. At this point, we don't feel the absolute need to get bigger, although it is part of our strategy to grow, there is no question that we want to continue to do that, but we want to do it in a measured and thoughtful way.

We don't want just react to somebody else is doing something different. Their strategy is completely different than ours as you might know. They go to market and sell equipment for nothing more than to generate service business and that's where they make all their money. That's not what we do.

So we think that staying on the path we’re on, generating, producing high quality products that have a total cost of ownership that’s significantly lower than theirs, and by the way they make large crane systems, harbor cranes and portal cranes and a whole bunch of industries, aerial work platforms, and mobile cranes.

We don’t even touch, we’re not part of. The hoist business in particular, we think we are well positioned to compete against that now larger organization in the combination of the two of them. But having said that, it’s still our strategy to grow.

So I think we need to take the prudent steps to think about the right areas to invest in globally with the right product portfolio to win in a market. So I think we're going to basically continue on the same path we’re on..

And my last one here and I think I ask it every single quarter, can you maybe confirm that you still expect to see year-over-year growth in gross margins may be for the back half of the year here at least, including the M&A?.

Yes, we work really hard at gross margin line item as you might imagine. It's a tough battle everyday to generate positive gross margins and our team is very focused on that. I think records are made to be broken, which is fabulous, but the reality is how much longer we are going to actually have the tailwind to do this.

But the team is very focused on it and we're going to continue to drive the profits north. I can't tell you exactly where it will be next quarter and certainly the Magnetek acquisition which should benefit that gross margin as well. So that's a bit of a tailwind for us adding Magnetek to the pool gets us a little higher gross margin..

I thought you had about 40 basis points here just on the one month alone, is that a good place to start having Magnetek on board?.

Magnetek was a public company and there is lots of financial information out there on them at least through June of this year and if you looked at their June year-to-date financials, they were a 36% gross margin business..

Ladies and gentlemen, we have no further questions in queue at this time. I would now like to turn the floor back over to Tim Tevens for closing remarks..

Thanks, Adam. As you can probably tell, we’re very excited about the combination of Magnetek and Columbus McKinnon.

In the short term, technical growth and earnings by implementing our synergies and more importantly for the long-term the strategic positioning by combining Magnetek technology into the traditional Columbus McKinnon mechanical products is a fabulous view.

As of now, our balance sheet is fairly levered, but it will also generate some significant free cash flow to repay the debt fairly quickly. And our balance sheet will in fact delever very quickly.

Again, I want to thank all the Columbus McKinnon associates around the world for their dedication and excellence in making our company stronger market leading organization. Without them and their significant efforts, none of this can be accomplished. And we also greatly appreciate you and your time today. Thank you..

Thank you. Ladies and gentlemen, this does conclude our teleconference for today. You may now disconnect your lines at this time. Thank you for your participation and have a wonderful day..