Good day and welcome to the Columbus McKinnon Second Quarter Fiscal Year 2018 Conference Call and Webcast. All participants will be in a listen-only mode. [Operator instructions] After today's presentation there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference call over to Ms. Deborah Pawlowski, Investor Relations for Columbus McKinnon. Ms. Pawlowski, the floor is yours, ma'am.

Thanks Mike and good, everyone. We certainly appreciate your time today and your interest in Columbus McKinnon. I have with me here Mark Morelli, our President and CEO; and Greg Rustowicz, our Chief Financial Officer. You should have a copy of our second quarter fiscal 2018 financial results that were released earlier this morning. If you don't, you can find them on our website at cmworks.com. You will also find alongside the slides that are accompanying today's conversation. So, with those slides if you’ll turn to Number 2, I will review the Safe Harbor statement. As you’re aware, we may make some forward-looking statements during the formal discussions as well as during the Q&A session. These statements apply to future events, which are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from what is stated here today. These risks and uncertainties and other factors are provided in the earnings release as well as with other documents filed with the Securities and Exchange Commission. These documents can be found on our website or at sec.gov. During today’s call, we will also discuss some non-GAAP financial measures. We believe these will be useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We have provided reconciliation of the non-GAAP measures to comparable GAAP measures in the tables that accompany today’s release and slides, for your information. So, with that, please turn to Slide 3, and I’ll turn it over to Mark to begin. Mark?

Thank you, Deb. We had a great first half of fiscal 2018 by delivering another solid quarter. I believe that this is indicative of the potential of our franchise as we continued the strong momentum from the first quarter. Our sales in the quarter rose 40% to $212.8 million with strong organic growth of 8.5% compared with the prior year excluding the impact of favorable currency exchange rates. Compared with many others, we got off relatively light with the hurricanes. Nonetheless, we had to work hard to get our products to the port of Houston to get to the customers on time. Another fact of the help drive demand was improved availability of our products. I believe this was an excellent demonstration of the commitment and professionalism of our employees to execute a growth roadmap and work through issues. Our new operating system helped us deliver results but putting structure and discipline around the regular review process and deep deployment in the organization we clarified our targets and developed roadmaps to achieve our goals. This structure has led to more effective polarization, better decision-making and improved execution. The performance in the quarter also highlight the relevancy of our product lines and a wide variety of workflow market segments and how they fill the need for high quality, professional grade products and solutions. Let's first discuss our robust organic growth of 9.5% for the quarter in our U.S. market. This was strong than we anticipated and the market tailwinds from industrial capacity utilization improvement and the approximate 3% GDP growth in U.S. this past quarter were certainly welcome. However, we're also better addressing customer needs by reducing lead times and improving responsiveness which helps ensure our success in the market. It's important to understand too that our products relevant in several…

Thank you, Mark and good morning, everyone. Turning to Slide 4, consolidated sales in the second quarter of $212.8 million was up 40.1% from the prior year. STAHL was a strong contributor in the quarter adding $45.8 million of sales which represented 30.2% of the quarter's sales growth. We also grew organically $12.9 million or 8.5%. Sales volume was up $12.2 million or 8% and pricing was up by $700,000 or 50 basis points. Overall, we saw sound organic growth in the quarter as the U.S. and Latin American markets continue to show strength and markets improved in Canada and EMEA. Foreign currency translations shifted to a tailwind and increased sales in the quarter by 1.4% largely the result of a stronger euro and weaker U.S. dollar. For the quarter, U.S. sales were up $14.4 million or 14.6% compared with a year ago period. STAHL contributed $5 million to our U.S. sales. Sales outside of the U.S. were up $46.5 million or 86.8%. STAHL contributed $40.8 million to our international sales. Latin America saw double-digit organic growth while Canada and EMEA saw mid-to high single digit organic growth in the quarter as the business environment improved in these two regions. On Slide 5, our second quarter gross profit increased by $21.9 million or 44%. Adjusted gross profit was $69.9 million an increase of $20.2 million or 40.6% versus the prior year. Our adjusted gross margin percentage was 32.9% compared to 32.7% in the prior year an increase of 20 basis points. STAHL was accretive to adjusted gross margin, posting an adjusted gross margin of 36.7%. This demonstrates the value of a highly engineered, ATEX-certified product line, which is consistent with our plans to transform into an industrial technology company. The reconciliation for adjusted gross margin can be found on Page…

Thanks Greg. Turning to Slide 12, I'll provide some considerations as we look at the remainder of fiscal 2018. With solid year-over-year organic growth with orders up 5.5% overall. Sequentially this was down from the very strong quarter levels we had in the first quarter. Our backlog while down 6% from the second quarter was a strong $162.7 million and about 5% higher than September 2016, adjusted for the STAHL acquisition. As we look at the remaining two quarters in fiscal 2018, our third quarter is seasonally our weakest quarter and we would expect the fourth quarter to rebound from there. Our organic growth has certainly been encouraging and we expect 3% to 5% organic revenue growth for the December quarter. At this point it's difficult to tell what the relative strength could be for a typical uptick in the fourth quarter given uncertainty on the sustainability of our industrial recovery, but we're confident that fiscal 2018 will be a good year. Let me update you on the progress with our near-term priorities. The STAHL integration is on track to provide $5 million in synergies in fiscal 2018 and we captured approximately $2.54 million year-to-date. We are capturing savings for organizing synergies, supply chain efficiencies and leverage as well as the elimination of transfer service agreement. Our partner team for leveraging Magnetek Technology has further defined a roadmap for smart hoist products. We've taken advantage of several near-term opportunities to pick up demand for our products. A key component to strengthening our core is creating organic growth opportunities. As I've mentioned, we're working toward better product availability and improved customer responsiveness in many of our operations, in part by improving lead times. Greg, spoke about the success we're having with our debt reduction goal. While we do generate strong cash,…

Thank you, Sir. We'll now begin the question-and-answer session. [Operator instructions] The first question we have will come from Matt Koranda of ROTH Capital. Please go ahead.

Hey guys. Good morning.

Good morning, Matt.

So just wanted to go ahead with the organic revenue growth guide for Q3 here, it's ahead of where we would have expected, but wondering if you could just provide a little bit more detail on why the relative deceleration versus the first half? Is it just conservatism or are you guys seeing something specific in the channel that causes you to throttle it back a bit versus the first half?

Hey Matt, it's pretty typical of our business that we would see a seasonality decline in our Q3. So, I think if you look back historically into our rates and trends, there is a couple things that happen particularly as we approach the holiday season at the end of the year. We also have less working days that have also impacted. So, I think it's very much characteristically in line with the slowdown we would expect. I think we received some outsized growth that are probably well beyond what you expect from our business. So, we've been really pleased with we've been able to do so far. But I think going forward we really want to get responsible guidance that I think reflects what the seasonality is as well as we see reflective in the order rates that we're able to understand or recognize at this point.

Okay. And you Mark in your prepared remarks some impact from the hurricane in terms of logistics, is all of that buttoned up now and maybe if you could also just tie in some comments on any expectation of residual impact? It sounded like you are alluding to maybe utilities potential, is there going to be any material impact to revenue over the next couple of quarters?

Yeah, we think the hurricanes impact is pretty much been impacted already in our quarter. Our quick-cycle business with some of these hand tools. You either have it out of availability or you're able to sell it and position it or folks have got to go elsewhere. So, I think that that's pretty much been reflected and resolved. Once again, I think we're pretty pleased with how we're able to manage things. Obviously, we had some disruptions there we're able to with some hard work and some luck, we're able to manage through and we really came out of that unscathed. We did see a small bump or small impact to us restocking orders and getting some equipment on time, but other than that, I don't think you should expect anything else going forward.

All right. And then maybe one for Greg on debt repayments, nice job there, but wondering are you guys pulling forward some of the expected repayment from fiscal '19 or should we expect the same rate of debt repayment heading into next year as well?

Yeah good question. Thanks Matt. So, we would expect in fiscal '19 to be at the $55 million level for debt repayment as well, which is comparable to our new guidance for this year.

Got it. Okay. That's helpful. And then I'll just sneak one more on the STAHL and the synergies, it looks like you got an incremental $1.6 million in synergies by my calculation. So maybe you can provide a little bit of color on where that specifically came from during the quarter? And then what's the visibility like to just achieving the remaining $2.6 million for the rest of the year?

Yeah so Matt, part of the savings came in the sourcing area. There is some operations items that add to the synergies in the quarter, a little bit of savings from some subsidiary consolidations that we're going through. TSAs the Transition Services Agreements, we're getting off of those faster than we had originally anticipated. A lot of those are IT related. So, the combination of all those puts us at about $2.4 million year-to-date. So, we feel very confident about the $5 million we're cracking clearly towards that $5 million number this year.

All right guys. I'll jump back in queue thanks.

[Operator instructions] Next, we have Mike Shlisky of Seaport Global Securities.

Good morning. This is Jordan Bender on from Mike this morning. I guess going back to organic growth, were you guys surprised with any of the organic growth there in the second quarter maybe to the upside or even the downside?

Yes, so I think there was certain level of surprise in the number. As we headed into the quarter, obviously things have been strong for us and as we started piecing together our roadmap, we just started figuring out things. We have some headwind early in the quarter we had to begin to offset with some of the businesses. We had the hurricane issues that came up and we get line things up. We have a pretty regular review process where we build our roadmaps for the quarter and then we try to manage the risk and opportunities and I am very pleased and very proud that the team really came through on many fronts. So sometimes you put your hand on the wheel but your foot on the accelerator and you go a little bit faster than we had thought we might end up getting to, but I think it's a real testament to what the team was able to achieve in the quarter.

Okay. And then a quick modeling question here. Your organic growth outlook in that third quarter, does that include current or does that exclude it?

That excludes currency. So, at current exchange rate levels, there might be a little bit of a positive benefit on translation.

Okay. And then pricing going forward, I was kind of wondering if there's improvement anticipated there, any pricing improvement?

Yeah, we would expect we have about 50 basis points of pricing so far and we would expect that to continue in the third quarter.

All right. I appreciate it guys, thanks.

[Operator instructions] Next, we have Christopher Hillary of Roubaix Capital.

Hi. Good morning.

Good morning.

Can you give us your perspective on kind of the medium-term demand outlook given that we see this continued strength in the manufacturing surveys and more recently bit of a more constructive oil price?

So, I think we see from our business pretty wide set of applications and verticals as I spoke about in my script, where we're definitely seeing the industrial markets recovered. We have tracked industrial capacity. It's sort of marginally just uptick a bit. So, what we've seen has certainly been I would say quite encouraging. I think it's really tough for us to say will happen in the midterm. It's difficult to understand how the markets will play out from an industrial setting. But I have visited some customers and I have toured their factories. We've seen capital equipment going in. We've seen them retooling and refurbishing and these are all at times but very difficult for us to tell how this will play out going forward given that you have political uncertainty in the political environment. There can be a number of twists and turns it's difficult for us to predict, but we're going to continue to build our roadmap and take advantage of whatever market opportunities that present themselves and hopefully we'll continue to get outsized growth accordingly.

Okay. Great. Thank you.

Well, at this time, I am showing no further questions. We'll go ahead and conclude the question-and-answer session. At this time, I'd like to hand the conference back over to the management team for any closing remarks.

Well thank you for participating today. I think this is an exciting time for Columbus McKinnon and for executing this strategy that builds greater value into what already is a highly durable and high-quality franchise. I believe we're making great progress and I look forward to discussing with you our new strategy, goals and objectives. Thank you for participating and enjoy your day.

And we thank you sir and to the rest of the management team for your time also today. The conference call has now concluded. At this time, you may disconnect your lines. Thank you again everyone, and take care.