Ladies and gentlemen, thank you for standing by. Welcome to the Actuant Corporation’s First Quarter Fiscal 2011 Earnings Conference Call. We are conducting a live meeting to coincide with the audio conference. If you would like to view the presentation online please refer to your meeting invitation for details. During the presentation all participants will be in a listen only mode. Afterwards we will conduct a question and answer session. At that time if you have a question please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator please press the star followed by the 0. As a reminder, this conference is being recorded Thursday, December 16, 2010. It is now my pleasure to turn the conference over to Karen Bauer, Actuant’s Director, Investor Relations. Please go ahead.

Good morning and welcome to Actuant’s first quarter fiscal 2011 earnings conference call. On the call with me today are Bob Arzbaecher, Actuant’s Chief Executive Officer, Mark Goldstein, Actuant’s Chief Operating Officer and Andy Lampereur, Chief Financial Officer. I would like to point out that our earnings release and the slide presentation supplementing today's call are available on the investors section of our Web site. Before we start let me offer the following cautionary note. During this call we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Investors are cautioned that forward-looking statements are inherently uncertain and that there are a number of factors that could cause actual results to differ materially from these statements. These factors are outlined in our SEC filings. With that, I’d like to turn the call over to Bob.

Thank you Karen and thanks to each of you for joining us today on our first quarter call. I’m pleased with our fast start for the year, essentially coming together as we expected with strong core growth, good margin improvement and EPS at the high end of our range. There are four highlights I want to call out before turning it over to Andy. First, our energy segment core turned positive, posting a 4% year over year increase. So now energy joins the other three segments in positive core sales territory with both engineered solutions and industrial segments displaying strong double-digit growth rates. Margins increased as expected with the impact of higher volumes, restructuring benefits and positive segment mix equating to 230 basis points of year over year operating profit margins. We delivered above forecast EPS, up 71% year over year excluding last year’s restructuring costs. And last but certainly not least, we received all necessary approvals and closed on the Mastervolt acquisition last week. We’re excited about this asset and we’ll talk more about it later in the strategy portion of the call. With that, I’ll turn it over to Andy to go through the numbers in depth for the first quarter.

Thank you Bob and good morning everyone. Similar to last quarter all my comments will be covering continuing operations only and exclude our European electrical business, which is held for sale. We were happy with the way the first quarter came together on a number of different fronts and I’ll try to provide some color on this from our vantage point. Sales of $318 million for the quarter were pretty much in the middle of our guidance range and were up 17% year over year. I’ll dissect and provide more color on them in a few minutes. Our first quarter EPS of 36 cents was above our guidance range and benefitted from favorable margins at about 2 cents a share from a lower effective tax rate. We’re projecting our effective income tax rate to be in the 22% range for the entire year so we’ll continue to benefit from that going forward. During the quarter we increased our year over year operating profit margins despite about a penny a share headwind from restructuring and acquisition related costs. Now the 36 cents a share EPS was up 71% from the 21 cents in the prior year with the prior year excluding restructuring costs. So we’re off to a strong start toward our current year EPS targets. On a trailing basis we continue to make ground on the EPS front with our last 12-month EPS increasing during the quarter from $1.08 to $1.23. Free cash flow for the quarter was on target but lower than in prior quarters. This results from the cash used to fund the approximate $20 million of prior year bonus payments that were made in November that we had discussed on our last earnings call. We’re not projecting our full year free cash flow to be close to…

Thanks Andy. We’ve now delivered four consecutive quarters of EPS growth and completed our first sizable acquisition since the fall of 2008. This return to predictability at Actuant has given us confidence to step up our growth initiatives first with the growth in innovation program we highlighted for you at the annual investors conference in October and more recently the acquisition of Mastervolt. We consider Mastervolt a platform acquisition as opposed to a tuck in because we acquired it with the intention of growing it both organically and through future tuck in acquisitions similar to Hydratight joint integrity strategy that we started in 2005 and the more recent Cortland acquisition in 2008. Given the Mastervolt acquisition, we have already hit our $100-150 million acquisition targets for the year. It was a busy quarter from the M&A front and we did not proceed on a handful of acquisition funnel ideas, this due to a combination of strategic fit, market growth rates and valuation. My guidance to you is that we will still look to do 100-150 million of tuck in acquisitions over the next 12 months. Splitting that between fiscal 2011 and fiscal 2012 is not something I’m going to predict. As Andy mentioned earlier, our debt leverage is well within our targeted 1.5 to 2.5 debt to EBITDA ratio so we have plenty of capacity for acquisitions. Now let’s talk about Mastervolt. This is an asset that has been in our pipeline for a number of years. We were initially attracted to it due to its marine and harsh environment electrical products and the European channel expertise with marine. Their team was just embarking on a solar strategy using their inverter technology to penetrate a niche of the fast-growing market. And they have executed well, growing their solar business from…

Thank you. Ladies and gentlemen, if you would like to register a question please press the 1 followed by the 4 on your telephone. You will hear a three tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration please press the 1 followed by the 3. If you are using a speakerphone please lift your handset before entering your request. One moment please for the first question. Our first question is from the line of Wendy Caplan with SunTrust Robinson Humphrey. Please proceed with your question.

Thanks. Good morning.

Good morning.

Hi. Given that we always start with how’s Enerpac, I’d like to ask that question. But more specifically if you could give us some sense of the outlook for Enerpac as we go over the next through the end of this fiscal year. And given that IS mix is somewhat negative and puts a lid on margin and the fact that as I think it’s growing faster than Enerpac, can you address that mix issue and whether we can overcome it going forward?

Yeah. Why don’t I start, Andy, and you follow? As Andy’s remarks went and I think it’s where we’re going to stay is just we had orders faster than sales for the quarter. We view that as a very important barometer, very broad based across the businesses. IS grew faster than the base Enerpac so we were feeling very good about the IS acquisitions and some of those new programs. You see one get announced today. We got a little press on the wire with the Bay Bridge project. So I think that that is where we’re at. I think we’re feeling very optimistic and very broad based so don’t see anything that has given us any alarms in ordering patterns. IS margins are lower than Enerpac’s. That’s something that has been in existence. I think over time those will close. I don’t know if they’ll ever get to the upper 20s that Enerpac base business will get to but I think they’ll improve. But Wendy, we’re talking about longer timeframes than quarters. It will take a concerted effort over years to do that. They’re not bad. They’re great from a ROIC for what we paid for it. But they’re not best in class like the distribution margins of Enerpac.

In terms of the sales assumptions going forward for the year we had laid out last quarter our expectation that kind of for the full year looking at 7-12% core growth for this segment. We are sticking with that. We think it’ll probably be at the upper end of that range as opposed to the lower end given the way the first quarter came up. The only other comment I would make as well is the IS business has got a very big second quarter coming at it with a lot of shipments going out.

Yeah. (That big stuff).

That is going to impact margins in that segment in the second quarter as well as within industrial and overall as well. So that’s just another sound byte there.

Okay. And finally Bob, just kind of overall you sound very optimistic about this fiscal year. Can you just - I know you mentioned four things that you found positive in the quarter. What are the two or three things that make you very optimistic about fiscal 2011?

Well, I think number one, Wendy, just the sheer numbers that we put up in the first quarter and we’re endorsing for the second quarter. It’s a front end loaded year so it’s easy to be optimistic when you’ve just put a quarter of the points on the board in the first quarter. So I guess that would be the first thing. The second is just the fact that I don’t think we’re - I don’t feel pressured by any one thing. I think we have multiple good things going on. I think we have got an acquisition that we really are excited about that I think is going to add some accretion to the business. I think energy turning positive was a big plus. We already talked about the energy, I’m sorry, the Enerpac. The truck business - anything you read from our big truck suppliers just doesn’t look like ’11 is going to be a hard year to keep going. And again, our ’11 ends in August so we’re already four months into the year. So it’s kind of easy to be positive when you’re already that far into the year. Anything you’d add, Andy?

I think the other thing here is I’ll just say management attention on growth and not costs. I mean a year ago we were stick handling construction projects through and through and through

Yeah.

And today much more of our time is spent on growth investments, people development, adding the right people the organization to support growth and innovation and acquisitions as well. We have looked at a lot more in the last six/nine months than we did the prior year.

That’s really a good point. I mean with this diverse portfolio you never have everything, every end market rolling in the same direction. But just the sheer volume of what Mark and I see every month from the businesses, you’ve just got a great batting average of positives versus issues that you’re navigating on the negative. And that gives you a lot of confidence too.

More going right than going wrong I guess is the message.

Right. Right. And substantially more than break even on that.

Yeah. Okay. Thank you very much.

Thank you. Our next question is from the line of Robert Barry with UBS. Please proceed with your question.

Hi guys. Good morning.

Good morning.

Thanks for taking the question. First on energy, I was wondering if you look within the energy segment at the principal end market by capital projects, a refinery MRO and oil and gas MRO. I was wondering if you could give us a little more color on what the outlook is in those particular end markets. I know you called out seismic but I was curious about these others.

Sure. I’ll start off and Bob will come behind me. I think what we’re seeing there is a mix. We are seeing some more capital projects out there. We’re hearing of more corporate (boats), more ROVs, certainly seismic, more activity from that standpoint. There is a lot more quoting on the surface work in the last 60 days here as well. We’re seeing it pretty much across the board from a geographic standpoint. A lot of it in emerging markets, that part of it continues as well. Refineries I would say not quite as positive.

But not a drag.

Yeah. It certainly has not gotten worse than where it was at before. I think we have just had low refinery numbers in our numbers now for about a year. So we’re up against a little bit easier comps. But there is absolutely I’d say more of a kick in step I guess of the energy guys right now as far as the quoting that is going on. It’s just overall increased activity.

The industry just took a positive bias once the BP thing got capped. Petrobras comes out with the big IPO, GE is doing deals in oil. Oil at $90, energy needs starting to move up a little bit, demand starting to move up. It’s just all of that has just created a positive bias. And not every particular perfect area but with our MRO area it just ends up touching so many different parts that the positive bias has moved it from the negative 7 to the plus 4 for the quarter. And we think that will build as the year goes along.

Got you. And then on the guidance you mentioned I think EPS guidance went up about 15 cents. Could you break that down into how much of the delta is tax rate, Mastervolt, what you’re seeing on the revenue front and what you’re seeing on the margin front?

Yeah. I think you can kind of do the math on the tax rate.

The tax, yeah.

What our prior guidance was, was about 25% tax rate and we’re saying now it’s going to be about 22%. So you can do the math there. It’s coming out to 4 or 5 cents. Currency we gave you last quarter essentially we have laid out a graph, what the move was, that’s about 3 cents. And the balance of it is Mastervolt and the overall outlook for the business - not really going to provide a split on those two.

Mastervolt in the first quarter.

Okay. And then just the last question on the electrical segment and the margins there - could you give us some just sense of how we should think about how those should track? I mean when I look back over the past really eight or 12 quarters there is a lot of variety there in terms of which is the strong quarter, which is the weak. Often there is one weak quarter and three strong but it’s always a different one. I mean should we think about something in the 7-8 range or the 9? I mean any color you could provide there would be helpful.

Yeah I’m probably not going to give you a specific number. I would just say we agree that this is probably the disappointing number from our standpoint for the quarter. Margins were not where we needed to be. We had some supply chain issues. We paid way, way too much freight, air freight getting stuff in here. We certainly had some increased expenses related to growth and innovation to just the initial launch of a new computer system as well. So I expect going forward this thing is going to improve especially once we get beyond Q2 because again we’ve got that seasonal impact hitting us in Q2. We do have a marine business out there. There is not that much that happens in the middle of winter in marine and a lot of different areas. So you’ll see improvement. My expectation is you’ve seen the low water mark for the year. You’ll see it top up but it definitely was kind of a disappointment for us.

Variety is a good term for it. I mean we weren’t happy and we’ll do better than that. We showed good performance last year. As Andy said, a number of things that were quarterly specific here. We did have some duplicate warehouse stuff that we knew the first quarter was going to be in. So we can see the light back to the double-digit EBITDA that we broadcast to you guys over time. We still think it’s going to be a couple hundred basis point improvement over the year as we rumble along. And we built a little hole in the first quarter we’ve got to dig out of but it’s not anything to mark our eyes as looks like anything more than specific discrete events.

Okay. Great. Thank you.

Thanks.

Thank you. Our next question is from the line of Ajay Kejriwal with FBR Capital Markets. Please proceed with your question.

Thank you. Good morning.

Good morning.

Hey Ajay. How are you?

Good. Just following up on the electrical question, would it be possible to maybe quantify some of those supply chain costs and growth initiatives? Was it sizable? Any numbers you can throw around, that would be helpful.

It was sizable because our margins were down considerably. I really don’t want to map out what the specific items that are out there but clearly it was several hundred basis points you can just see from last quarter

Fourth quarter to first.

Good. And so as we think about the trajectory of electrical margins and I’m thinking ex-Mastervolt, Mastervolt I mean obviously when it comes blended margins will be different. But ex-Mastervolt how should we be thinking exiting the year? And Bob, I know you mentioned the double-digit at some point but is it closer double-digit some time late next year or is it 2012?

(Unintelligible) - Andy so give whatever you’re comfortable.

Yeah. I think the EBITDA our expectation is will be double-digit.

It’s got to be. It’s absolutely got to be.

Yeah.

Sure. In the back half, yeah.

Good. And then a minutiae question on the tax rate - so your tax rate going down. Maybe help us with any color you can. We are seeing that some other industrial companies’ tax rates are going up next year. So is it tax planning initiatives or is there any discrete items that are helping?

It was clean from that standpoint. It’s tax planning. Part of it is where our profits are as well going forward, a little bit more international or offshore income at lower tax rates in Europe at 25 percentage range as opposed to 35% range here. So the mix helps out. But there is some planning in there as well but there is no discrete item.

So if I look forward?

Let me add one thing to that. I mean tax planning at Actuant is a real - our ROIC focus, we really spend a lot of time on taxes. And if you have been a long-term follower of the company we have moved our tax rate down significantly from high 20s to low 20s. Some of that is the mix of businesses onshore to offshore. Hydratight brought more international and there is a number of things that caused that. But we are very discrete planning things and this year we just have a number of great things in the hopper. It is not one-time in nature meaning it’s a quarter and then it pops back. It is things that are planned out over the year and we will try to find another shopping list of the same types of stuff for following years. So this is very analogous to our continuous improvement in margins. One we’re trying to make go up and the other we’re trying to make go down. But this is real stuff. It is not window dressing, quality earnings type issues. These are legitimate cash flow tax items.

Thanks for answering that because that is exactly where I was going. So thinking out to say 2012 and I know it’s early, is tax rate lower than 25? I’m not saying tax rate is 22 but is directionally tax rate lower?

Why don’t you talk to Andy offline? I think the answer to that, the complicating to that is what kind of earnings growth do you have because obviously that - and where is that earnings coming from because statutory rates and in a lot of the mature parts of the market are higher than that. So it’s not a discussion you can just have. You’ve got to make a volume assumption. So I think Andy and Karen are going to have to walk through whatever assumptions you want to make before they can give you any comments on that.

Okay. Thank you.

Thank you. Our next question is from the line of Jeff Hammond with KeyBank Capital Markets. Please proceed with your question.

Hi. Good morning. ((Crosstalk))

Just on the organic growth - so you bumped from 6 to 10 to 8 to 10 and I think you touched on industrial kind of being higher this 7 to 12. But at the analyst meeting you kind of gave us ranges for each of the four segments. And I’m just wondering how you’re thinking about the different segments shifting around. Is it just kind of a wholesale shift to the higher end or are some things getting notably better, some things worse?

I think it’s the one that I’ll say it’s outside of the range of what we had laid out before. We had energy I think at the conference kind of in the 3-7% range and I think we’re looking 5-10 right now. And the other ranges are still intact. I’ll just say we’re probably at the in a couple of those we’re a little bit higher, in the case of industrial and in the case of engineering solutions, just a little bit further up in the growth range but no other changes.

Okay. And then Bob, I think to another question on electrical you mentioned a couple hundred basis points of margin improvement. Is that core electrical? Is that electrical with Mastervolt coming in at a higher rate?

No. That’s core and Mastervolt would be on top of that because as we said, it’s more of an Actuant line average.

Okay. And then just finally, a question on Mastervolt. You talked about Europe being a much bigger market and some of the opportunities are in other regions. And I’m just wondering how do you pull them into other markets? Do you need to make other acquisitions to access those other markets? I’m just asking because there seems to be some concern that Europe is at least flattening out and there is some pressure on subsidies. And I’m just wondering how do we get the growth outside of Europe?

Well, these are all valid things and I think we tried to cover them in the call but the thing about we think there is growth. Our primary focus for the next 12 months is European growth. We are going to put some investments into growing organizationally in some other parts of rural China, North America, etcetera. I don’t think it will be meaningful revenue when I’m having a conference call with you in two quarters. Okay? So our growth profile and our focus for 2011 in the integration is the European markets and that is France, that’s Italy, that’s Germany and the Benelux. These are the markets they’re in. So did that answer what you were looking for?

But growing outside of Europe is a longer term piece of the story is what you’re saying?

Yeah. It’s not going to happen in the next six months. We will look at both organic opportunities to grow as well as acquisitions as well. I think it’s just a little bit premature. We’ve got to map that out with the management team and talk about it.

Right. And that was really my question on Europe or on growing internationally is do you need to acquire in those markets to grow or is there you can take their technology?

It’s going to be very analogous to how did we grow the service group in Hydratight. We bought DL Ricci, we bought SPS. Those were (sunk). We also added some of our own technicians. We brought our own products, we built our own facility. It’s going to be a make versus acquire. It’s going to be ground up build through our growth and innovation model versus acquisitions. It’ll be a blend. It’ll be different country by country. It’ll be different size of inverters. As we talked earlier, we’re on the small stuff. I think we’ll probably stay mostly there but there are all kinds of niches as I talked about. There might be things outside of inverters that we want to expand into that are part of the system very similar to what we did with Hydratight where we started with a torque wrench and a tensioner and we ended up at joint integrity. So all of that Jeff, is the model and that’s what excites me is we’re talking about a space that is measured in the billions with lots of niches.

Okay.

And we’re playing a small role and a meaningful role in some countries where we have a great niche product and now how do we decide where to go next.

Okay. Perfect. Thanks guys.

Lots of farming to use a Midwest term there.

Thank you. Our next question is from the line of Deane Dray with Citi Investment Research. Please proceed with your question.

Thank you. Good morning everyone.

Good morning Deane.

Hey. On the core revenue growth at 14% I was hoping you could give just a little more color around maybe geographically how that looked and what the impact on pricing was.

I’ll handle the first one. Pricing was negligible. Probably less than 1%. Sorry, second one. I’ll let Andy handle the first one.

Yeah. I think from a core growth standpoint it was within a band, I mean pretty close geographically Europe and the US. Asia had a very good quarter. The emerging markets certainly growing quicker than that as well. But I would say Europe was on par with the US through the quarter.

And then given the kind of nervousness you’ve had about the sovereign debt European outlook and you even commented as of the analyst day it was a little bit of a question mark. It seemed to be playing out a little better than expected. Is that the way you have seen it and is that baked into your expectations for the balance of the year?

Correct Deane. That’s exactly right.

Nice. And how about Andy, anything you can give us some color on the incrementals for the quarter? Overall it came in nicely but there are some big swings within the segments, energy being on the lower side. Was there anything in terms of the comparison with last year that might be swinging that?

Yeah. Within energy we had…

We had a tough comparable last year. We had a very good quarter last year.

Yeah. We had a good quarter last year. We have mix. I mean there are different margins whether it’s product sales or (port) service or rental and even between Portland and the Hydratight business as well. So the mix was not optimal or the mix of product mix of sales was not optimal.

Yeah. Year over year sequentially it was actually pretty good.

Yeah.

Sequentially it looked great. It’s just guidance that was (funny).

We just had a very good mix situation a year ago.

Yeah.

And fall through was very good and in industrial very good and engineering solutions and we touched on…

Electrical went the wrong way.

Got it. Thank you.

Thank you. Our next question is from the line of Jim Lucas with Janney Montgomery Scott. Please proceed with your question.

Thanks a lot. First question on the housekeeping side, with Mastervolt in there now could you give us where you think DNA and CapEx is going to come in for the year?

Yeah. CapEx, still expecting it to be in the 25 million range. Mastervolt is not a very capital intensive business because it outsources most of its product. DNA, historically we have been kind of in a 50 million range. That included European electrical. We pulled that out and put Mastervolt in. I think we’re somewhere in the 52-53 million range going forward.

Versus counting still to do.

Okay. Okay. And then from a strategic standpoint you highlighted the supply chain issues on the electrical side in the quarter. I was just wondering as demand continues to come back and with the improving growth profile could you just give us an update of how your overall supply chain is in terms to handle this acceleration of growth? And secondarily, I know you covered pricing in the prior question but any comments on what you’re seeing on the material inflation side.

I think from a supply chain standpoint I think we feel better at the end of the quarter than we did at the beginning of the quarter. We talked last quarter about making the air freight companies a lot of money on the Enerpac side and some of the truck side as well because the demand was coming back so quickly. Those we feel better where we’re at there let’s say even at the end of the quarter. We feel better on the electrical side. It’s just it was a hole in the first quarter. So I think overall you see it in our inventories as well. Our inventories are up. We built inventories in a few locations to compensate for demand as well.

And on the material inflation side?

Yeah. Material inflation - certainly we’re hearing and seeing all the headlines on commodities and what not and certainly copper is something that we spend money on. A lot of our contracts are set up in automatic indexes or zones that are tied in so both on the cost input side where what we pay to vendors and what we sell to, there is some automatic adjustments that go on in that. I think probably the thing that we’re watching the most for the full year and it certainly is not going to impact just us if it happens, it’s going to impact the rest of I think multi-industry land is just what happens with the R&B. If the R&B continues to strengthen that’s going to impact us. China goods become more expensive. We’re not alone. We’ll have to address it from a pricing standpoint to the customers because we are not going to get stuck in the middle. Beyond that, not a lot. I mean we had a little bit of a pinch in electrical from an unfavorable spend type purchase price thing. But beyond that it was pretty good for the quarter.

Okay. And finally on the acquisitions side I mean Mastervolt I think you covered it in your prepared remarks. But when you look at that 100-150 million of potential tuck ins as you highlighted, when you look at the pipeline today is there a potential other Mastervolt type acquisition? Or will it be more of the traditional tuck ins?

Potential but not a high potential.

Okay.

It’ll be tuck in and it’ll be probably more industrial and energy related.

Great. Thanks a lot.

Thank you. Our next question is from the line of Charlie Brady with BMO Capital Markets. Please proceed with your question.

Thanks. (I’ve just got) some clarifying questions. Andy, on electrical so I understand, the one time costs that happened this quarter particularly with the logistic stuff, that’s not expected to repeat in Q2 or was there ERP implementation stuff that drags into that?

Yeah. I think there will be a little bit of it in the month of December. I mean today we’re over halfway through the month. So there will be a little bit coming through here. We’ve got duplicate facility costs. Like I said, we’re in the process of in the next 30 days getting out of one of our big warehouses as well. So some of that will be coming through.

Not to the magnitude.

But I think not to the magnitude that we had last quarter. Unfortunately the flip side is usually demand is a little bit lighter in the second quarter.

Second quarter.

And it’s just a shorter month but you’ve got the same fixed cost base and it’s just spreading it over less volume so it just pinches the margins just a little bit from an absorption standpoint.

All right. And I don’t know - did you mention how that directional business on the big box retailer side, how that’s comping relative to the big box retailers?

Yeah. I think we’ve pretty much tracked I’ll say very similarly the last nine months or so. Going forward we’re watching it. I mean they both had investor days recently and they both commented that some of the construction related or departments are going to be impacted more than others. We’re watching that. We certainly are not forecasting much in terms of growth doing through DIY in the next 12 months from an industry standpoint. There are always opportunities for market share and stuff like that. But I think that is not what we’re expecting for top line growth in the segment.

Yeah. I would say from 90 days ago the big boxes have moderated their expectations for same store sales.

Yeah.

And I would say our sales have followed that trend.

That’s helpful. And just one more on the energy side - just I want to make sure I heard you correctly. In your commentary on core sales in Q2 did you say you expected core sales to be down year on year or did I mishear you?

No. In absolute dollars when you - sequentially from Q1 to Q2 dollars will probably be down but core sales would still be up. They’d be up to 14.

I think what I want to communicate and Andy just confirmed I can is that we did 14. We think it’ll absolutely be positive, Scott, so it’s not a decline. It might not be at 14.

He was talking just energy.

Were you talking just energy? Sorry. I’m talking overall.

Yeah. It’s dollars will be down year over year. Still will have core growth.

Yeah. (It’ll probably be the other way around).

Got it. Okay. Thanks very much.

Thank you. Our next question is from the line of Scott Graham with Jefferies. Please proceed with your question.

Hey. Good morning. You’ve done this for two of the segments and I was hoping you’d do it for the other two, industrial and engineering solutions. Kind of by end market which were the better end markets and which were the worst end markets in each of those segments for you?

I think industrial I will just say is very broad based. Virtually all end markets were looking good. We continue to benefit from our bolting initiatives probably more than the others but it’s just widespread.

Emerging markets were best, probably US behind and then Europe third but all three pretty broad based.

Specific panels doing pretty well. Within engineering solutions certainly leading the pack in terms of momentum is the heavy duty truck. It doesn’t matter if it’s Europe, if it’s Asia, if it’s the US - all of them are hot right now.

And then off highway.

Yeah, the off highway and construction equipment so military work in there is doing well. So the likes of like (unintelligible) - they both had good profit quarters.

Yeah.

So feeling pretty good about that tailwind.

On the lighter side auto and we’ve talked about auto. Had a great year last year, harder comps that we’re having. It wasn’t terrible. It was at expectations but lower than truck. And then RV and everybody’s talking about RV. Are we at a point where you’ve got to see a little more sell through? And for us it was flat.

Okay. That’s helpful. Thanks. The other question I had was regarding mash fault. Now as I look at the trading multiples of some of those mash faults’ peers, those multiples are in some cases a lot lower but generally lower than what you paid. So what I’m wondering is if you could tell us a little bit about you guys are very good at this time proven, acquiring at good prices. I’m just wondering what is it that you saw in Mastervolt that was maybe worth a little bit of a premium versus what those companies are now going for? And going forward would you say that now that you have this platform type of acquisition that maybe the multiples that you pay come down on bolt ons to Mastervolt?

Yeah. I mean it’s not an analysis I can spend a lot of time on. I have not followed SMA for any period of time to do that. What I do know is they have an EBITDA margin that is absolutely breathtaking that people have some concerns whether it holds in there. Mastervolt does not play in those kinds of breathtaking margins in those same niches. So it’s a very - I think you have to be careful if SMA is in your camp but I don’t know who else would be in your camp then?

I just took a quick look at my firm covers about five or six of these. I can send you the names.

So we look at it in the niches. What ROIC, what cash flow is the business going to give us? A third of the business is marine. We know how to value the marine stuff. It’s just our other stuff. We looked at it and said what’s the ROIC, what is the returns? Are we going to get to our 20% modified CMM calculation we have all walked you guys through? That’s what we valued on. We did not pay a lot of attention to third party things. It’s only going to be 5, 6, 7% of total Actuant and I guess we just didn’t spend a lot of time. We saw it but I think we thought it had more to do with their extraordinarily high profit ranges due to some product shortages, component shortages last year and people believing that wasn’t sustainable. It’s a very different - it’s not the same issues that Mastervolt has.

From a valuation standpoint we feel very good about what we paid. Again, a third of the value here is the marine business on this thing and we see a lot of opportunity going forward. So ROIC on this thing is probably one of the most attractive ones we have seen in the last few years from - given the size and what not.

That is what drives acquisitions.

And that is what drives acquisitions. Yeah.

Okay. That’s helpful. Last question is on your indication that you think you can still do another 100-150 million in the let’s call it the calendar 2011. What I’m wondering is are you seeing enough things in the pipeline where maybe it’s one big one that you’re looking at or two or three big ones that you’re looking at, let’s say one or two of which could close that are Mastervolt type of size? Or do you just see enough 25s and 50s to kind of give us that confidence acceleration?

Yeah. Three to five acquisitions in the 25-50 is what we’re expecting.

As I said, the funnel - we cleared some things out of the funnel this quarter. I think we were disciplined. I think Mastervolt took a lot of our time and we were quite picky and so some things cleared out. And what we’re saying is we’re kind of restarting the clock now for the next 12 months and saying 100-150 is going to be our fairway. And we’re thinking it’s going to be three to five deals in that 25-50 and probably focused on industrial and energy.

I think the key message here is we certainly are not slowing down on acquisitions. You just don’t know how to predict these. We worked on Mastervolt three years ago. We had offers on Mastervolt three years ago and it didn’t close because of valuation. It came back because that stuff can come and go. It’s just very difficult to predict timing of deals like this. We feel very good about just the overall activity in the M&A market right now. There is a lot of ideas out there. I think our message to you is it’s business as usual. We’re going to do more tuck ins than platforms and that’s kind of I think the message that Bob is sending.

Yeah. And I hope you’re pretty relaxed. I mean we have a great growth and innovation process that we’re spending time on. We have good tailwind already at our back on number of markets and we have a nice funnel of acquisitions. We do not feel that that - we don’t feel pressure at all to hit a number. Last year we were disappointed at 50 million we did. Boom, here comes 150 in one deal. It’s the lumpy nature of acquisitions. And what you got with Actuant is enough businesses and enough groundswell of activity that we never really feel that pressure. And we fish in these small ponds that we just don’t get too enamored with different things going on and it just kind of feeds itself.

Got it. Very good. Thanks a lot.

Thanks Scott.

Thank you. Our next question is from the line of Robert McCarthy with Robert W. Baird. Please proceed with your question.

Good morning everybody. Thanks for taking my questions. Mostly asked and answered, I do have some small things that I want to clarify and then I have one question. In terms of clarifications, if I understand the earnings outlook and the earnings outlook slide in the way it’s annotated, your guidance fully reflects any and all restructuring expenses for this year, right?

That is correct.

They’re included in the number.

Yeah. What we are contemplating is included in the numbers. If something would come up big down the road, that’s out of it but our expectation for the year is in there.

Okay. Second, corporate expense line probably was a bit higher than a lot of people were looking for in the quarter. Is this a reasonable average run rate for the year, Andy?

It’s a little bit on the high side. I would expect seven to eight going forward. As I called out we had about a penny of headwind this quarter in transaction costs that were going through there. We spent a half million dollars on growth and innovation stuff as well. We had some restructuring going through a little bit up here. But seven to eight is what you should think about going forward as a little bit on the high side.

So closer to 30 for the full year?

Yeah.

Okay. And third, while I understand you don’t want to specifically quantify what you’re forecasting for accretion for Mastervolt for the full year, can we assume that it’s not making any contribution in the second quarter because of purchase accounting adjustments?

That certainly weighs in on our view for this second quarter. I don’t want to say it won’t make anything but it’s a bit of a headwind in the second quarter.

Well, I don’t think it’s going to be a drag.

The currency - I mean excuse me, the purchase accounting will be a headwind against its base numbers. I mean we are in the middle of getting valuations done on this thing right now. So we still have to - everything here is based on estimates on top of estimates type stuff. So we’re just trying to be careful.

You know, it’s a penny plus or minus. It’s just not going to be major because of the first quarter. We also didn’t get a full quarter of it either.

Of course. And then the question I wanted maybe just to slightly nuance difference in now we’re asking about what you had to say about acquisition activity and I hear you cleared out the pipeline and attributed it to discipline. But there was no element of we just did a big deal maybe we should take a breather here?

There were a couple of small things in electrical that we wanted to focus on Mastervolt.

Okay.

They’re actually still in the funnel and they’re just pushed out.

Yeah. And that’s the other thing I wanted to ask about Bob, is the way you’re describing the funnel and you cleared some stuff. Okay. So some stuff went away but it almost when you describe it that way it makes it sound like the funnel is now empty and you need to fill it back up.

Yeah. Well, it shouldn’t sound that way and I think last call we said the funnel was fuller than it’s ever been. Okay. So now it’s not fuller than it has ever been but it ain’t empty. There is Mr. Wozniak is sitting next to me. He’s got plenty of airplane tickets to travel around with.

So if I may interpret a little bit Bob, part of what you’re telling us is look, there was some other stuff that could have happened immediately and it’s gone away. And so just don’t necessarily look for something this quarter.

I think you guys are just reading way too much into it. We bat about 30% on our deals. That’s why we keep a big funnel. This quarter we have cleared out those 70%. They kind of cleared out together and I said it was a handful, okay? You guys are reading way too much into it. The funnel is a little lighter than it was a while ago. We’re guiding you that we’re not going to do 150 million of tuck in in the next seven months. We did Mastervolt, we met our objective. It’s not because we met our objective that we’re stopping. It’s just what the funnel looks like. Activity hasn’t changed one iota. The process, the flow, the number of things coming in, the market view, the pricing - I don’t think there is any change in any of the underlying fundamental acquisition things going on. We’re just giving you a point in time that we’re saying the funnel is not as full as it was a quarter ago and we’re saying we’re staying with the 100-150 million of tuck in acquisitions even though we just spent 150 on Mastervolt.

That’s great Bob. I just wanted to make sure I hadn’t misunderstood.

Yeah. That’s fine. Thanks for clarifying Rob because I think everybody needed to hear it.

Okay. Thank you.

Thank you. And our final question comes from the line of Jamie Sullivan with RBC Capital Markets. Please proceed with your question.

Good morning. It’s Mike Schlifke filling in for Jamie today.

No problem.

Hey. So just wanted to ask a quick question on your growth and innovation program. First of all, it was very impressive how you were able to keep headcount down despite the pretty decent core growth. I was just kind of wondering if any of the products that are sort of in the pipeline or any of the programs that are in the pipeline in your growth an innovation plan, are they going to require some additional headcount or are you expecting for them to mostly work within your current footprint?

Yeah. I think what was impressive about Andy’s headcount comments is it did include - we’ve added probably 20-25 people specific to growth and innovation. But we took out more than that in the operational restructuring and downsizing efforts that happened over the last couple of years. So we fed that and still kept the headcount down 5%.

There are additional heads that we’ll be adding during the balance of the year supporting growth and innovation as well.

But our hope is the same metrics.

Yeah. There will still be some savings coming out of some other businesses as well. So we feel good about that. And it’s really deployment. We are deploying resources out of some back office functions out of some other stuff by consolidating and putting it on the front end with growth and innovation.

Got it. Got it. Thanks. And just can I ask you one or two more questions about a couple of your segments? On the industrial segment I kind of noticed there was a bit of a sequential downshift on margins from 4Q to 1Q. I guess I was wondering what was behind that? Was it just even more IS in the mix? Or was there anything else at play sequentially there?

I don’t think there was anything in particular that I would point to. I mean the margins at Enerpac do wiggle around. It is true that IS mix will impact this thing but there is nothing that I would call out in particular in the quarter. I mean they were up nice year over year and I think that’s our story line.

Got you. Just one final one in your energy segment - can you just give us maybe a little flavor about differences between your customer outlook on the maintenance budgets from sort of geographic region to geographic region? Is it a little stronger in Asia than elsewhere or North America than elsewhere?

I don’t think specifically the maintenance budgets have changed as much as just what is the inherent growth in the markets and where we might have more refinery based business versus other business. Is there more expansion going on in emerging markets where they’re bringing up new fields? Whether you’re in Kazakhstan, whether you’re in Australia, whether you’re off of Brazil, it’s more that necessarily than maintenance budgets of a given region.

And even that’s hard to look at. You’ve got people like BP who make these decisions out of the North Sea for their global operation. So it’s not even if you look at the region, that doesn’t mean that’s where the decision making or the budget was spent or deployed in. So I don’t think we’re going to be able to give you any granularity that’s going to help you look at anything there.

Okay. Great. Well, thanks. Great quarter.

Thank you.

So just to wrap up, we appreciate everybody’s interest in Actuant. We hope you were as pleased with our results in the quarter and the outlook as we are. Just a reminder that our second quarter call will be held on March 17 and we will be around the balance of the day to field any questions you may have from a follow up standpoint. So happy holidays to everybody.

Thank you.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and we ask that you disconnect your line.