Ladies and gentlemen, thank you for standing by. Welcome to the Actuant Corporation’s Fourth Quarter Earnings Conference Call. During the presentation, all participants will be in listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded Wednesday, September 30, 2015. It is now my pleasure to turn the conference over to Karen Bauer, Communications and Investor Relations leader. Please go ahead.

Good morning and welcome to Actuant’s fourth quarter earnings conference call. On the call with me today are Bob Arzbaecher, Actuant’s CEO; and Andy Lampereur, CFO. The earnings release and slide presentation for today’s call are available in the Investors section of our website. Before we start, a word of caution. 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. Consistent with prior quarters, we’ll utilize the one question, one follow-up rule in order to keep today’s call to an hour. Thank you in advance for following this practice. And with that, I will turn the call over to Bob.

Thanks Karen, and thanks for joining us on today’s call. I can honestly say I didn’t expect to be back doing quarterly earnings calls, but here I am back in the saddle again. I have spent the last month immersing myself in the business, and while there is always more to do, I feel like I am up to full speed. Just briefly, I will comment on the Board’s decision to make the CEO change. This was not a reflection of a strategy change and as you saw in this morning’s press release, not an issue related to fourth quarter. It was about leadership, business predictability, and execution. The Board’s Nominating and Governance Committee is leading the CEO search, which is expected to take 6 to 9 months to complete. I am prepared to stay on as Actuant’s CEO as long as it takes to ensure we have the right successor. Now, on to earnings, as you read in this morning’s release, we delivered $0.37 of fourth quarter EPS, above the guidance range. Excluding the benefit of lower income taxes, EPS was in line with our outlook. Core sales were also consistent with our expectations. While end markets remained weak, they have generally behaved as anticipated. We generated strong fourth quarter cash flow resulting in our 15th consecutive year of free cash flow conversion of at least 100%, which is an accomplishment we are all proud of. Looking at our free cash flow in relation to our market cap, today we have over a 10% cash flow yield. I will provide more detail on our three-year vision as Andy goes through the fourth quarter details and the fiscal 2016 guidance. Andy?

Good morning, everyone. I am going to start today’s financial review on Slide 4 with the summary P&L. Fourth quarter sales were $300 million and EPS was $0.37 a share. Compared to last year, both sales and earnings were hurt by the stronger U.S. dollar, inventory destocking, and weaker end-market demand. As with last quarter, our sales declined 15% year-over-year and our SA&E costs were down slightly more, but lower gross profit margins resulted in operating profit margin erosion. Significantly lower income taxes as well as fewer shares also comes into play in year-over-year comparisons. Versus guidance, our fourth quarter sales and margins were in line with our expectations. As anticipated, production levels and absorption declined in response to continued weak end-market demand, exacerbated by inventory destocking efforts by both us and our customers. This, along with $3 million of restructuring costs, weighed on profit margins in the quarter. As you can see here on Slide 5, our core sales in the quarter declined 7%, in line with our guidance of minus 7% to 9%, and the 8% decline in the third quarter. Consolidated fourth quarter sales were down the same 15% that we saw in the third quarter, with the strong U.S. dollar accounting for 8% of that decline. Each of our three segments reported core sales declines with Energy’s year-over-year trend being a little better than last quarter and Engineered Solutions slightly worse. We continue to see weak demand globally with sales in traditionally higher growth markets such as India, China, and Brazil weakening sequentially as well. With the exception of mid-single-digit core sales growth in heavy duty truck and resin commercial construction, all of our primary end markets continue to be challenged. I will provide more color on sales by segment shortly. Consolidated fourth quarter operating profit…

Thanks Andy. Before talking about capital allocation priorities, I wanted to talk about our free cash flow, the fuel that creates growth. As Andy just reviewed, we have had 15 consecutive years of free cash flow conversion over 100%, few companies can match that. We use this cash flow to fund our growth initiatives, stock buybacks and acquisitions. We have several tuck-in M&A targets in the pipeline right now that are looking promising and hopefully we will have one or two cross the finish. We are focused on tuck-in acquisitions with tight fits to our best business Enerpac, Hydratight and agriculture. Tuck-ins are modest in size, strategic to our core businesses and will make them even better by improving the competitive mode and providing synergies around them. One final word about capital allocation, regardless of M&A activity, we still expect to continue to deploy some capital and opportunistic stock buybacks during the year. Moving to restructuring, we are seeing success in our G&I expenses and as Andy highlighted a couple of new wins in the Energy segment, our results of that targeted investments. While we are protecting these investments, we are also going to incrementally reduce our cost structure to better position Actuant for higher profit margins down the road. As highlighted in today’s press release, we are planning on taking restructuring actions totaling $25 million over the next 18 months. The majority of this will be recognized in 2016 and will be slightly over a 2-year payback. You can categorize these actions in two primary buckets. One bucket is simplification by reducing organizational structure and in layers. The second involves facility consolidations that will be done to reduce our fixed costs and help drive future margins. We have excluded these charges from the fiscal ‘16 guidance that Andy just…

Thank you. [Operator Instructions] And our first question comes from the line of Matt McConnell with RBC Capital Markets. Please proceed.

Thank you. Good morning and welcome back, Bob.

Well, thanks Matt.

Could you give us a little more granularity on that $300 million EBITDA forecast? And to talk about your level of conviction on that and maybe specifically on the $50 million that you expect to come from an end market recovery, just maybe go through how did you get to that $50 million number? What are you assuming from the end markets during that forecast period?

Well, to try to do all of that in a 1- or 2-minute response is going to be a little difficult. So, I am going to remind you that come to Investor Day next week and you will probably get a little more. But let me talk about it in a few general terms today. The first piece is just to set you on expectations. Actuant did about $260 million of EBITDA in 2013-2014 timeframe before electrical was sold, before RV was sold, but before Viking was bought. And those three probably, these positions were probably about $35 million to $40 million at EBITDA and then offset by Viking coming back the other way at about $20 million. So, when I backstop it, what are we looking at, we are expecting modest recovery, not all the way back to the ‘14 level across every business, but getting back to the kind of ‘13, ‘14 neighborhood, which gets us a big chunk of that piece of that $50 million. That growth and innovation will continue to add value to some of the markets we play in like resi and commercial construction, with the Hayes acquisitions will add some growth. So, it’s broken down business by business. I don’t think I am going to guide you to that. It’s a big bucket and there will obviously be changes between those buckets that I listed, but hopefully that gives you some comfort that this was a tops-down and a bottoms-up analysis.

Okay, great. Thanks. I will stay tuned and certainly get more when we see you next week. And then maybe switching gears to Industrial, it’s just been so volatile lately for you guys and the sector. Can you just give us a sense of what you are seeing there, like how big of an impact did destocking have on your Industrial segment this quarter? What drove the modest increase in Europe and how weak did China get? Just any kind of incremental insight there would be helpful.

Okay. Well, I will start and Andy, you follow up. As Andy said in his prepared remarks, Industrial did what we expected it was going to do for the quarter. So, there was not any large change in the predictability of the business. When we look at the pieces, China was incrementally weaker and the Asia-Pac region, which is influenced by China demand, I think also felt some of that. We did better in Europe and we did okay in North America. Andy, anything you would add to that?

No, I think you’ve got it.

Okay, great. Thanks very much.

Thank you. And our next question comes from the line of Allison Poliniak with Wells Fargo. Please proceed.

Hi, guys. Good morning.

Good morning, Allison.

Good to hear your voice, Bob. Just kind of going back to Matt’s question on the inventory side with Industrial sort of we have been through this destocking and this is sort of our second quarter. How far do you think we are into that? It seemed like distributors are running pretty lean, but just any thoughts on that, how far that should go at this point?

A lot of our, I guess, G2 or feedback on this thing is based on what we are hearing from North American distributors in particular, what we are definitely seeing it in the Canadian distributors and South American distributors in Brazil as well. And they have definitely peeled back their inventory levels pretty much in the U.S. We are hearing distributors did not bite – if you remember back in the May quarter, they did not bite on buying ahead of our price increase, and the feedback from them was we are trying to reduce inventory, not increase inventory, so why do we want to load up right now. So, I think they are just – this malaise, if you will, clearly has spread much way beyond just energy and mining, and it’s impacting other areas of Industrial as well. And I think distributors were expecting a bigger second half than what they are going to see play out and they are peeling it back, but beyond that, we don’t have specific data how much inventory we have in our system or in our distribution system out there, because these are all independent businesses, smaller businesses. It’s quite a bit different than say looking at the Home Depot channel and seeing what’s out there. I just can’t do this.

But to use the baseball analogy, I think we are in the later innings of the stock, stocking and destocking that’s going on in distributors. The challenge was in Andy’s prepared remarks. We were still growing in the first quarter with Enerpac of last year. So, I don’t think it’s going to be destocking related, but we are going to be challenged for those core growth numbers until you get into the third and fourth quarter. As I said, this business was predictable in the fourth quarter, and so destocking tends to be something that is unpredictable. So, if I am saying we hit our numbers, I am saying destocking was a manageable number, and I think we are in the later innings of that.

That’s great. Thanks. That’s helpful. And then just on a global perspective, obviously, Actuant had a focus on emerging economies and they are certainly challenged today. Maybe just give me your thoughts on sort of the long-term opportunity for Actuant as you are seeing it today?

Yes, I mean, I continue to be favorably inclined to grow our emerging businesses. I think India, we have won a number of truck wins recently as some of the big OEMs in Europe globalized their distribution and their fleet. We have done well in some energy markets in new things that we hadn’t done in the past. So, we are doing more rental in China that’s been beneficial. So, I am pretty optimistic that what you are seeing now isn’t – when you take a longer term horizon isn’t going to last in some of the Industrial markets that we are in. We don’t do a lot of commercial construction in China. And I think that’s going to be a very difficult market. We don’t play a lot in that kind of area. Our stuff is more infrastructure, roads and ports and bridges and things like that. When I think about China – when I think about India, I think we are in good shape. We have got a great leader there that represents all the Actuant businesses. I feel pretty good. Brazil is a place that’s tough. We got Petrobras really feeling it, and obviously, that influences Actuant’s business along with a lot of others. Agricultures and any picnic down there either and those are kind our two big markets there. So, out of the three, I guess I have put Brazil a little lower than the other two. Andy, anything you want to add to that?

I think what you are saying is right. Even in markets where the economy is slow like Brazil, there was a lot of interest in customers down there for some of our other products that we are just starting to introduce down there. So, we are optimistic that we will hit some share down there and we will grow over time. We are not focused on the next quarter.

Great. Thanks so much.

Yes. We also have some positive in both China and India on our sourcing strategies there, because obviously, with those economies down, sourcing we have had some success with cost reductions and talking to vendors and people who supply our cost system product. It’s a little more of a buyers market, so to speak in that regard, so there is puts and takes.

Okay, perfect. Thank you.

Thank you. And our next question comes from the line of Jeff Hammond with KeyBanc Capital Markets. Please proceed.

Hey, good morning guys.

Good morning Jeff.

Good morning Jeff.

Hey. So I just wanted to understand a little bit better how you are thinking about decrementals in the energy business as you move through the year, kind of given the moving pieces in the different businesses and where do you think margins really trough out for energy and maybe longer term within that ‘18 framework, what do you think is kind of the new normal for the Energy segment?

Yes. I guess I will attack the first part of that question, Jeff. From a margin standpoint with energy, if you just remember what has happened this year, Viking just went negative for the first quarter of fiscal ‘15 and Viking by far has the biggest incremental and decremental margins. So that’s going to put pressure on our margins for the next fiscal year within energy. Our next higher margins in the segment are with Hydratight and that’s the least impacted from an economic standpoint, it’s more tied in with maintenance and OpEx and that sort of thing. And certainly, we expect some down core sales quarters coming up in the first half of the year. The year here, it’s not the scale of what you are going to see go down in Viking as an example. So I don’t think we have hit the bottom quite yet. I think we are awfully close, I think on margins in the Energy segment. Could they drift down another 100 basis points or more right now, they quote over the course of the next couple of quarters on this thing. But I mean where we are certainly not expecting margin degradation or erosion much more than that in fiscal ‘16. I mean I think as we get to the back half of the year, you are going to see improvement coming up as Cortland in particular should be coming out and we have anniversaried some of the slowdowns and people do have to do maintenance on the Hydratight side. Of course the other piece here is the savings coming in from maintenance – excuse me, from the restructuring projects that we already kicked off last year. We laid another batch into it late in the fourth quarter. And we will be doing a few more incremental things here in ‘16 as well.

I think when you look longer-term to the ‘18 timeframe, Jeff we don’t see any reason we can’t return to more historical norms within Energy. There is nothing fundamentally different about the mix, if anything with the Viking stronger margins, newer to the thing I would think we could return to the ‘13, ‘14 type margins that we experienced in this business before it slowed down.

Okay. And then just on the $25 million restructuring, are you able to kind of bucket it between simplification and facility consolidation. And should we think of any of the particular regions or businesses as getting a greater percentage of that number?

The facilities side or leases is probably a little bit more than half of it overall. But in terms of how it spreads out geographically or how it spreads out across the segment, each of the three segments will be participating in this thing, it’s pretty spread out across all of them.

Thanks guys.

Thank you. And our next question comes from the line of Mig Dobre with Robert Baird. Please proceed.

Yes. Good morning everyone. Mig Dobre here and Bob welcome back.

Thanks.

First question for me is just trying to attain a little more comfort with the fiscal ‘16 guidance. If I just kind of look at the first quarter guidance, the EPS that is, it amounts to about 17% of the total EPS figure for the year. And we also sort of now that in the second quarter, we typically see a step down in earnings just due to seasonality, if I look back historically, what I see in my model is that roughly 20% to 25% of the full year earnings are generated in the first quarter, you are guiding for 17% this time and we know that the second quarter typically has some seasonal headwinds, how do we get comfortable with the fact that the back half seems to have such a significant ramp in earnings to deliver the full year, especially given that your cost savings are not really going to start flowing until fiscal ‘17 per your comments earlier. What happens and in what segment do we have to see this significant ramp as the second half arise?

When I listen to your comments on kind of the spread out for this seasonality or the calendarization of the forecast, here I mean I hear what you are saying, but when I look at laid out in front of me for the year, I mean I am taking into account what we were talking about as far as more currency headwinds in the first part of the year. We are seeing this destocking, this slow down, more sluggishness, if you will on the energy side in the base Viking business which is the higher margins on this stuff. We expect things to be already less worse as we get into the back half of the year as it relates to Hydratight as it relates to Cortland. We will have been negative for six quarters within Cortland by the time we hit the midpoint of the year. In the last time around, when we saw this in the great recession, we had 20% type increases in that business in the following four quarters. So there is a bit of a rebound in there. We talked earlier about some of the wins that are coming through in the energy sector and that connector when it’s sizable is going to be hitting in the back half of the year. That is a very profitable product line for Hydratight as well. So I think I look at those factors, the little bit carryover destocking that we expect in the first half of the year to work its way through and I guess we are comfortable with our guides. Of course, there will be some restructuring savings coming through in the back half of the year. Not a lot, but you are going to see a little bit in the fourth quarter as we roll through that you won’t see in the first quarter and that’s a piece of it as well.

Okay, I appreciate it. So basically a lot of it wouldn’t depend on energy, am I correct in that?

Energy and industrial. In industrial, industrial does get impacted by energy. So it might be one and the same. But we think mining and energy that come through in the Industrial segment will be less worse in the back half of the year.

Okay, I appreciate that. Then switching to the 2018 targets and I think Matt was asking about this $50 million figure as well. Asking this question maybe a little bit differently, if the lower for longer thesis is proven to be correct, meaning that these end market simply won’t recover as quickly as we all sort of hope they will, what does that mean for your operating strategy?

Okay. Well, it – I have read in earnest all the lower, longer theories that are out there and I don’t actually disagree with them. And I am not saying that our guidance for the back half of the year doesn’t incorporate some of that. What I think it continues to be misunderstood about Actuant’s energy assets is how much of it is OpEx versus CapEx related and how much of it has nothing to do with the price of oil. So the large order that Andy talked about that we are doing, that’s a joint integrity. It’s for a refinery, okay. Refineries are doing fine right now. The input cost is low. There is plenty of gas. There is no demand issue. Refineries are okay, okay. So, there are things like that that continue to do well. I think about chemical plants, fertilizer plants. There is a number of other markets that our joint integrity and our joint maintenance that we do continues to move along. And so I don’t – I think people attribute our businesses much more to price of oil than they probably should. And I just think we have much more of a maintenance side. As Andy said, Hydratight grew in the fourth quarter because of pent-up demand. You can’t delay these turnarounds forever. There are requirements from a safety point of view that these guys won’t – will not try to cut the corner on, they have to turn around assets and we continue to see that be a big piece. We are seeing a lot of power gen turnarounds right now in the U.S. So, there are chunks that I just don’t think are well understood in the lower, longer, while I believe it will impact some of our very front-end businesses. I don’t think in totality, it’s a theme that’s going to bother us as much as you guys expect.

Okay, thank you and good luck.

And the next question comes from the line of Charley Brady from SunTrust Robinson Humphrey. Please proceed.

Good morning.

Good morning, Charley.

Just a couple on Industrial and can you tell us the degree of IS and tools were down in the quarter?

They were both similar in terms of their core for the quarter. I mean, they were both down. It certainly vary by region. Last year, we had a big IS project in the U.S. that didn’t repeat. This year, we had a big one over in Europe, but they were both down.

With IS down double-digits and I guess I am trying to get to is when do we anniversary the kind of large declines we saw in IS, a more normalized, even if it’s down, it’s not down 20%, 30% type of levels?

No, it wasn’t down double-digits.

No, no, it wasn’t.

They were down overall 5, Hayes, PSL, was in the number, this time, core so that was the growth. So, if you kind of infer the other two, then we are down just a little bit more than that 5.

Okay, got it. That’s helpful. And I guess, just on ES, what’s your expectation for European truck growth in ‘16?

I think we are looking at mid single-digit growth. We had our business leader in here actually this week from Europe and he was pretty bullish on what he is seeing in terms of order rates and what we had expected, what he had baked in and where the built-to-suit are…

That’s off to a good start.

It’s off to a good start. Yes, so we are feeling pretty good on that one right now. Certainly, not gangbuster, but I mean, it’s we are expecting mid single-digit type growth.

Great, thanks. We will see you next week.

It sounds good.

Thank you. And our next question comes from the line of Ann Duignan with JPMorgan. Please proceed.

Hi, this is Mike Conlon on for Ann. Good morning.

Good morning.

Good morning, Mike.

You guys noted the negative mix in Hydratight hurt margins a bit in the quarter. Can you just expand on that a little bit and provide some color?

Sure. Within Hydratight where we do about one-third of our revenue comes from service, one-third comes from rental and another third comes from product sales. As we called out, our service work was quite high in the quarter and that carries the lowest margin of the three categories. So, that’s really what impacted our mix in the quarter.

Are the other two pieces of that of a similar margin or how would we expect the mix to move going forward?

Well, next year, it should be pretty good, especially in the back half of the year on this win that we talked about, the subsea connector win. First, the current quarter we are in I called out the service job, large service job in the Middle East that will probably put a damper, if you will, on the margin...

But good utilization.

Yes, but flipside as utilization will be better, but I mean, so when I look at it as a result of those two factors, this kind of play into what I said earlier, Energy margins, Hydratight margins will probably be weaker in the first part of the year than in the back half of the year.

Thank you.

Thank you. And our next question comes from the line of Scott Graham with Jefferies. Please proceed.

Hey, good morning and welcome back, Bob.

Good morning, Scott. How are you?

Okay. I have a little bit of a mass verification and I hope you guys can help me with some. I am looking at the implied sales for fiscal ‘18 of about $1.7 billion off of your Page 16 chart, which suggests about 10% to 11% of growth a year. And if my math is correct on your tuck-ins, it seems like you are expecting about, call it, 7% of that from acquisitions and 4% organic. Is my math in the ballgame there?

I think your math is in the ballgame, but I am going to do the same thing, I did the math earlier. That will be a subject where we can get into a little more depth with you on next week.

But you have got – the first year is going to be down on core growth and then it’s going to come back. So that’s entering into the core assumption or what you are seeing the perceived growth in the base business.

Got it. The other pocket with the market recovery sort of a question earlier before maybe just a different slant, if we were to take energy, ag, mining and industrial as we stand at the end of 2015, what percent of sales is that for the company?

Energy, ag, what was the other one?

Mining.

Mining and industrial?

I don’t have the fact sheet in front of me, but the updated fact sheet is on the website already, so just pull up the back page and that are filled out or outlined on there.

Karen, you are the best. Thank you.

Yes.

It’s more than half.

Yes, just I don’t have industrial right on my fingertips here, but energy is 30%, ag is 10%...

Industrial is about 15%...

15% and mining is a couple of percent...

4% or 5%.

That’s perfect. Thank you, guys. Thank you. Karen, last question, on the G&I, Mark obviously was a big fan of this and but at the same time fully acknowledged that G&I investments were not delivering what you guys had hoped for. So, Bob, how does that change from here?

Yes. In fact, I had a major employee meeting this morning and we talked about the exact same issue. So, I think it’s not that the prior investments, they didn’t work to the level we wanted, but you got to understand, it’s very similar to adding [indiscernible] organization. You got to start by training the organization of the tools you have. The Tracy tools, the Michael Tracy tools that we followed are very analogous to what you do on continuous improvement in an OpEx point of view. So, we had to learn the tools, okay. And the way our original investments were spent in G&I, there was a lot of training. There was a lot of small projects peanut buttered across all of the locations so people could get used to using the tools, okay. And we had some great successes. The joint integrity that I talked about was absolutely one of our successes. The ag seeder, while it’s having a tough year now because it’s down was a smashing success last year, contributed $20 millionish revenue associated with that G&I. So, there were lots of good examples that worked. In the future, the organizations trained. We are not going to be spending as much time on training and we are not going to be peanut buttering that investment across all locations. We are going to be putting it towards projects that tie exactly to one of our businesses. So, there is some move a foot about smart pumps within Enerpac, okay. We are not to a point where we are talking about it as a brand new product line that’s going to reinvent the world, but that’s an area that we are excited about, makes a lot of sense to us from a safety and productivity point of view, okay. Hydratight, in the under subsea clamping, there is a lot more we can do in terms of remote actuation and different things. When you go over to Cortland, there’s a lot more we are doing within structural health monitoring is a product we call that analyzes the inside of a rope and that conversion from cable to rope that will help that. So, our growth and innovation investments are much more targeted towards specific identifiable projects this time versus spreading them across from the organization could try the tools get trained, etcetera. So you had to do the first before you can get to the second. That would be – so I don’t look back and worry about the past. I am looking at it and say we needed to train people. Now we have got that done, here we go and the investments will be much more impactful.

So a lot of it is prioritization. And it’s we are prioritizing which are the businesses we really want to put the dollars in and what are the best, the most impactful parts of this. And so I agree on the two wins I talked about today, both of those were targeted G&I-type projects and we are having success. We are just, I think applying our dollars differently than we did 3 years or 4 years ago, a lot smarter targeting.

Okay, those are great answers. I thank you for that. And if you don’t mind, if I just sneak one more here, pricing in the quarter, is that something you can talk about?

I am going to let you sneak one more just because you are such a long-serving analyst for Actuant.

I want to cut you off.

Karen want to cut you off.

I know.

The answer is, Scott, very diverse across the businesses. I don’t think pricing had any impact in industrial. It had a small impact on Hydratight, a bigger one on Viking, particularly in Norway. When I go to Engineered Solutions, nothing has risen to my attention in the first month that would say there was any pricing issues.

Thanks a lot guys.

Thank you. [Operator Instructions] The next question we have is coming from the line of Stanley Elliott with Stifel. Please proceed.

Good morning everyone and Bob welcome back. A quick question about the destocking, typically in your experience, how long does this last, also kind of mentioned we are in the latter part of the innings, does the guidance anticipate any level of restocking in the back half of next year?

Like I say, I would think a six month destocking would be about normal. They don’t really last so much longer because there is candidly not that much inventory in the field. It’s not like cars or something. And do we have any – we do not have any inventory build expected for the year.

And then kind of switching gears to free cash flow guide, could you help me bridge that, if you are looking at kind of the midpoint of the EPS range, is that $80 million or so in net income and the conversion ratio I guess to get to the midpoint of the free cash flow guidance seems to be a little bit heavier than what you have done historically and is it lower CapEx, is it more working capital, any sort of help that will be great?

Sure. This year we had a pretty tough, pretty challenging year for a free cash flow standpoint because we had heavy income taxes. Some of the income taxes we paid out this year actually related to last year’s divestitures. CapEx next year should be roughly in line with what we had this year. The biggest swing, I think will be around income taxes in particular. One of the other items is in here is the beginning of this year we paid out the retention agreements on the Viking acquisition, which were about $5 million and those are a one-time cash usage in fiscal ‘15 that will not repeat. So when you start adding up some of the one-time hits you have in fiscal ‘15 from a free cash flow standpoint, it certainly – I feel good about the cash flow number for ‘16, I really do.

Perfect guys. Thank you very much and see you next week.

Thank you. And our next question comes from the line of Justin Bergner from Gabelli & Company. Please proceed.

Good morning, Bob. Good morning, Andy. Good morning, Karen.

Good morning.

My first question is a follow-up on the free cash flow question, if I take sort of the high $70 million, maybe $80 million of net income and add back $30 million difference between depreciation and amortization in CapEx sort of similar to this year, I still come up a bit short of the $110 million to $120 million, so sort of what gets me into that range and does restructuring cash costs work against the free cash flow guidance?

It will be a bit of a drag. Restructuring will be a bit of a drag this year. Some of the charges that we have for restructuring will be non-cash, some of them will be lease charges to cover a couple of years of leases, so you have a little bit of drag not just in the year you take the hit, but in the following year as well. One of the other items that you may or may not have factored in is equity compensation expense, you called out depreciation and amortization expenses as non-cash items offset by CapEx. But we have got another $12 million, $13 million pace in non-cash equity comp expense coming through each year. There is some bonus expense baked in fiscal ‘16 as well that wouldn’t be paid out in fiscal ‘16 and paid out in fiscal ’17, so each of those items contributes to it.

Okay, that’s helpful. And then the free cash flow is after cash restructuring expenses or before, the $110 million to $120 million?

I have factored in net cash after.

Okay, great. And then my second question just if I may, one big picture question, which is how would today’s presentation and how would sort of the ‘18 outlook have looked or sounded different if there hadn’t been a CEO change?

Great question, one that we can only hypothesize, right. I am glad you asked that question because I didn’t probably stress it enough in the presentation. This guidance and this plan was created in the numbers that come up to that target of $300 million and 18% were created as part of the strategic plan. We review that strategic plan in the early summer with the Board. It’s accumulated by bottoms up analysis of the segments and put together. Andy puts the numbers together. We have to make some acquisitions assumptions. We make some currency assumptions. And we come up with this plan, okay. So what you are seeing now is a change in the communication of that plan. We have always done a 3-year forward plan. We have never endorsed one in the future, okay. We have never come out with this kind of guidance. And there are plenty of companies who do this very well. Honeywell would be an example of one that does a great job of putting out long-term target and then rallying the organization to hit that plan, having annual milestones, etcetera. That’s what we are trying to create within Actuant. So it’s not a new process. I doubt the numbers would be any different, whether Mark would have communicated it as passionately as I am and rallying the organization around it, that would be different. But I really want to leave you with the impression that this is not a Bob Arzbaecher bait scenario that came up in the last month and ta-dah, here is the moment. This is a derivative. This is an outcome that comes out of the strategic planning process and has been packaged in a visionary way that we can put it in buckets that you can understand and equally as important that the employees are around the organization can understand what are we driving to, what are we trying to get to?

The other two sense I would add to that is when the change took place, one of the first things that Bob asked me is that, tell me where we are going to be in ’18, so I pulled up the strategic plan and I said we are going to be at $300 million of EBITDA in 2018. And his numbers were a little bit different as far as some of the composition, as far as how much came from savings, from the resistance...

The restructuring was more robust.

From core growth and that sort of thing. But we ended up essentially – it is the strategic plan that’s out there. So I guess you can theorize different ways, but that’s where the number tied out towards that plan.

Great, thanks.

As a Board member, I had many discussions with Mark about creating this vision, that hey, with the current malaise in energy, nobody is buying Actuant’s stock for the next quarter’s earnings, they are looking for where this thing is, how is the market share, how does things look. It just he was less comfortable putting out a goalpost, just to be candidly honest with you, he was just more uncomfortable with that. I am not uncomfortable with that and it’s not just because I am 1-year CEO. I am comfortable with it because I see how it was built up from the grassroots strategic plan. And I want to rally the organization around it because that’s the way you hit these things, is to rally the organization around it.

Great, thanks. Look forward to hearing more next week.

Thank you. And there are no further questions. At this time, I will turn the conference back over to you.

Great. Well, thanks everyone for joining the call today. We will be around all day to answer follow-ups you have. Just a note for your calendar, our first quarter call will take place on December 17. As we mentioned, we have the Investor Day coming up. The registration is closed, but as we have done the past couple of years, we will post the slides and actually videotape of the ATU update and the Enerpac overview on the website a day or so after the event. Thank you.