Mark Goldstein - President and CEO Andy Lampereur - EVP and CFO Karen Bauer - Communications and IR Leader

James Picariello - KeyBanc Capital Markets Ann Duignan - JPMorgan Matt McConnell - RBC Capital Markets Rob Wertheimer - Vertical Research Partners Charley Brady - BMO Capital Markets Mig Dobre - Robert W. Baird Justin Bergner - Gabelli & Company

Ladies and gentlemen, thank you for standing by. Welcome to Actuant Corporation's Third Quarter Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we’ll conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, today Wednesday, June 17, 2015. It is now my pleasure to turn the conference over to Karen Bauer, Communications and Investor Relations leader. Please go ahead, Ms. Bauer.

Thanks. Good morning and welcome to Actuant's third quarter fiscal 2015 earnings conference call. On the call with me today are Mark Goldstein, Actuant's CEO; and Andy Lampereur, CFO. Our earnings release and the slide presentation for today's call are available in the Investors section of our Web site. 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 the 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'll turn the call over to Mark.

Thanks, Karen and thank you for joining us on our fiscal 2015 third quarter earnings call. As you read in this morning earnings announcement we reported third quarter sales of 320 million and earnings of $0.63 per share. We are very pleased with the sequential improvement and profit margins from the second quarter’s season lows as well as the benefits of current year cost reduction actions despite the sequential oil and gas market slowdown that we had previously forecasted. Soft demand in several of our key end-markets continues to present challenges and we have now begun to feel incremental weakening over the past 45 to 60 days in general industrial activity and spending, as well as distributor and end-user de-stocking. We are taking additional cost reduction actions to counter this, but unfortunately are now expecting a weaker earnings finish to the year than previously forecasted. Despite this we continue to focus on cash flow, growth and capital deployment. Andy will go through what we saw in our segments during the quarter and I will come back to discuss the outlook and our action plans. Andy?

Good morning everyone. I'm going to start today's financial review on Page 4 with the summary income statement. Third quarter sales were $320 million and EPS was $0.63 a share. Compared to last year both sales and earnings were hurt by currency and weaker end-market demand. Third quarter sales declined 15% year-over-year and SAE costs were down 17%. But lower gross profit margins resulted in decline in operating profit margins. Lower income tax expense also came into play for both years as did fewer shares outstanding in fiscal '15. With respect to income tax expense our third quarter effective tax rates have historically been uneven as it is the quarter when we plan out most of our tax returns and therefore includes annual adjustments. Last year's third quarter effective tax rate was 3% and this year’s was negative due to an approximate $5 million net tax credit. Excluding this credit our current year third quarter rate would have been in the high single-digit range modestly better than the 12% to 13% rate that we had included in our guidance due to incremental tax planning. This tax pick up will result in cash tax savings which is also good news. With or without the tax benefits this quarter sales and margins were slightly below our internal forecast and I'll be reviewing some of the causes in my prepared remarks this morning. Turning now to Slide 5, I'll provide a few comments on consolidated sales. Third quarter sales were down 15% year-over-year with core sales down 8% and foreign currency being a 7% headwind. The impact of last May's Precision-Hayes acquisition and last June's RV divesture were a net wash. Each of our three segments reported core sales declined with the oil and gas headwinds becoming more pronounced in our energy and the industrial segment results. The trend in engineered solutions improved sequentially but the segment is still dealing with weakness in off-highway convertible top in agriculture end-market demand. Demand in the quarter weakened as it progress and all geographic regions participated. Emerging markets continue to be a bright spot with solid third quarter core sales growth in India, China and Brazil as well as growing sales in our European heavy duty truck markets. I will provide more color in sales by segment shortly. Consolidated third quarter operating profit margins were 13.4% as you can see on Slide 6. This is the best we have seen this fiscal year with sequential improvements in each of our three segments. On a year-over-year basis however margins were down about 200 basis points below last year's high watermark despite SAE spending reductions that outpaced our sales rate of change. The margin reduction reflects unfavorable M&A mix and unfavorable sales mix with some of our highest margin product lines having larger sales declines. We also experienced overhead under absorption due to lower production levels, foreign currency pressure on material costs and lower energy rental fleet and technician utilization. I will provide more color on each of these in my segment level discussions which I'll now begin starting with the industrial segment on Slide 7. Core sales in the industrial segment declined 6% year-over-year and broke the improving trend line we have been seeing in the business. As expected integrated solutions product line sales grew nicely in the quarter on the strength of gantry sales and large project revenue. However, the industrial tools portion of the business was down sharply after a good second quarter with sequential core weakening in all geographic regions. Distributor feedback indicates that end-user demand is very soft in not only mining and energy markets but other markets as well now. In addition distributors are reducing inventory levels in response to this softness. From a margin standpoint industrial’s third quarter margins were the highest of the year due to seasonal volume increases but below the prior year by about 290 basis points. The two biggest contributors to this were unfavorable sales mix, being high IS content sales and low IT sales within the mix of Enerpac as well as the impact of last May’s Hayes acquisition last June’s May’s Hayes acquisition which was worth 130 basis points of erosion year-over-year. Additional contributing factors included lower production levels and foreign currency pressures and material purchases by our international sites. In the overall scheme of things of industrial’s EBITDA margins are in the 30% range which they were for the quarter I am pretty happy with this segment’s profitability. Now let’s turn our attention to the energy segment you will find here on Slide 8. We expected a sharp sequential decline in trends in the third quarter in this segment and that happened as core sales went from positive low single-digits growth to minus 12% core. Cortland core sales rate of change was in line with the first half of the year down in the mid 20% range. Viking performed a touch better than we had forecast for the quarter and ground out 3% core growth but it was a sharp sequential decline in the sales trend. Hydratight was hit a little harder than we had forecasted primarily in the North Sea and Americas and saw sequential year-over-year core sales move from positive 2% in the second quarter to minus 10% in third quarter. We saw several customers make last minute changes that either totally deferred planned maintenance projects or substantially reduced the scope of the work. When we reserved rental kit or service crews for a specific job and don’t have the chance to redeploy them elsewhere after a short notice cancellation, this negatively impacts both asset utilization and profit margins and unfortunately we saw a lot of that in the third quarter. Operating profit margins in the energy segment increased sequentially after seasonal a second quarter lows but we’re down 300 basis points year-over-year on account of lower volume and the weaker rental and technician utilization that I just discussed. We are carefully balancing supply and demand of service and rental assets and erring on the side of having too much rather than too little to guarantee that we’re able to meet our customer’s needs. The segment’s done a great job reducing cost as the industry is cycled down and continues to work on additional opportunities to help mitigate incremental volume challenges moving through the balance of the calendar year. While short-term demand in oil and gas was poor we are encouraged with new project awards and RFQs from customers planning on future investments despite the drop in oil prices. Now we’ll turn to engineered solutions on Slide 9. Overall, segment sales declined 18% but that includes 9% currency drag and a 5% headwind from the sale of the RV business last June. Core sales declined 4% in the segment which is an improvement over the last two quarters. Our sales to the heavy duty truck market grew in the quarter on improved demand in Europe and some gains in China but end-user demand in most other served markets continued to be weak for the segment and this includes agriculture, mining, defense and off-highway equipment sales. On a bright note, profit margins through the segment improved to the highest level in the last 12 months. This reflects cost reduction benefits and operational improvements. Importantly, we saw sequential improvements in both operating profit and EBITDA margins in the 500 basis point range above second quarter levels. Before wrapping up I wanted to cover cash flow and capitalization. We had a descent free cash flow period in the quarter with the highlight being an inventory reduction and we’re up to $30 million of free cash flow on a year-to-date basis. Following last quarter’s announcement that we’ll be scaling back stock purchase volumes given our leverage being in our targeted zone we spent a more modest $24 million of cash on about 1 million shares of stock in the quarter. We have about 8.5 million shares remaining in buyback authorizations. After factoring in the third quarter cash flow, currency and stock buybacks net debt declined modestly in the quarter while net debt to EBITDA leverage ticked up to 2.3 times. We’re expecting significant cash flow in the fourth quarter impart due to lower cash tax payments and further primary working capital reductions. That coupled with approximately 600 million of availability under our recently amended credit facility provide substantial capital and flexibility to fund growth and capital deployment priorities. That’s it from my prepared remarks today. I’ll now turn the call back to Mark.

Thanks Andy. I’d like to review how we are attacking cost reductions which have been necessary to maintain our competiveness during the down cycle. Some of these actions have been fairly straight forward for example cutting discretionary expenses including travel and entertainment and consulting, others have been much more difficult such as employment reductions, line moves and facilities, consolidations and closures. The benefits were clear in this quarter’s results as we achieved a 17% reduction in SA&E and a 15% decline in revenues. We are substantially through these previously announced projects and are now reviewing incremental cost reduction opportunities which include additional staffing reductions, management structural changes and further facility closures and consolidations. We are protecting certain areas in investments such as growth in innovation projects and our energy rental fleet and technicians in order to drive sales growth and protect market-share. We know that oil and gas prices and industry demand will eventually rebound, and we need to ensure that we can support key customers when they need us. Our revised fourth quarter guidance includes $2 million to $3 million of incremental restructuring expense for new approved projects. We will be spending time finalizing other cost reduction opportunities which will lead to additional cost reductions in fiscal ’16. It has been a challenging year but there are a lot of good things going on in the business and I wanted to spend a little time highlighting a few of these. We see sustained albeit modest growth in Europe truck for the foreseeable future. We enjoy a high market-share in the global cab-tilt business and are leveraging Power-Packer’s reputation, relationships and technology to expand. We have landed a number of new multi-million dollar annual contracts in truck this year that start in late 2016. Second, we are having success building our business in high growth markets such as China, India and Brazil with our inside out strategy that we’ve discussed in the past building increased capabilities and investment in these areas and markets are paying off. We have followed our customers there for more developed countries and built deeper relationships with significant local companies such as Petrobras, CNHTC and Gemini. Despite moderating GDP in these countries in 2015, our year-to-date core sales growth in them is up 10%. And finally we are winning new business. We were recently awarded a $10 million plus integrated solutions contract to work on a world’s largest observation wheel located in Dubai. This is an important win for Enerpac Integrated Solutions that will be delivered in fiscal ’16. Such wins reinforce Enerpac's technical solutions leadership for the most demanding customers and applications. We also recently won a $10 million Hydratight maintenance contract with Fluor, where we prevailed over the incumbent for the strategic customers business. Make no mistake about it, we are fighting significant market headwinds today in specific end-markets, but our past successes, innovative technologies and solutions and customer focus are leading to growth opportunities that will extend well into the future. Turning to Slide 13, we had a busy Investor Relations schedule over the past 60 days and we’ve heard many of the same questions out on the road. I wanted to relate some of these to you and some are the most common ones that are related to acquisitions are questions about the pipeline, valuations, availability of energy assets given the down market and why haven’t we completed any this year. I wanted to take a few minutes today to summarize what we’ve been seeing in M&A more recently. First, we’ve been very active in looking at tuck-in acquisitions. The absence of completed deals should not be viewed as the lack of activity or interest. The number of energy related deals has declined as sellers don’t want to exit at the bottom of the market. However, we still looked at several energy businesses despite valuation multiples that for the most part have yet to come back down to earth. We continue to be interested in tuck-in acquisition opportunities in each of our three segments. Second, we’ve seen several attractive businesses for sale in the last year, but not all had reasonable prices and we therefore chose not to proceed. We passed on other opportunities because of lack of cultural fit with Actuant, we didn’t buy the forecast that they presented or didn’t like other aspects of the business. In this environment, some of our best deals may be the ones that we don’t do. In terms of where we are today and what the M&A pipeline looks like, I am encouraged by what I see. We have a few opportunities that are more probable than others and a number of businesses that would be great strategic additions to our existing core. Valuations are still surprisingly high overall, but there are still some good ideas in the funnel that hit our return criteria. Whether any of these make it to the proverbial finish line for us remains to be seen, but I am encouraged by the fit and the prospects for a number of them. On to Slide 14 and guidance. We’ve incorporated the incremental end-market weakness and cost reduction activities discussed today in our updated guidance. We have also recalibrated for the improved stability of the U.S. dollar, third quarter stock buybacks and income taxes. As summarized in this morning’s press release, we are projecting fourth quarter sales to be in the range of $290 million to $300 million and earnings in the range of $0.26 to $0.31 per share. This is based on an assumed core sales decline in the 7% to 9% range. Year-over-year profit margin comparisons will continue to be negatively impacted by unfavorable sales mix, currency and reduced overhead absorption, the latter reflecting lower volume and production levels as we and our customers continue to work down inventory. Additionally, weaker rental fleet and technician utilization rates will continue to be a headwind, sequentially profit margins are expected to be lower than those reported in the third quarter as we experienced reduced customer production schedules given their summer vacation shutdowns. We'll also be incurring additional restructuring costs that are included in guidance. Revised full year guidance includes sales in the $1.24 billion to $1.25 billion range and EPS of $1.55 to $1.60 per share. We are forecasting full year free cash flow in the $100 million to $110 million range extending to 15 year of track record of free cash flow conversion to net earnings of at least 100%. As I just reviewed, we are pursuing several tuck-in acquisitions and we will continue to opportunistically repurchase Actuant stock but neither of these is included in our guidance. Despite the current environment, we remain focused on our key growth initiatives on the items we can control. We have a strong balance sheet, great cash flow and leading positions in niche markets. We remain focus on creating a long-term value for our shareholders. I like to thank you as well as Actuant employees globally for the support as we continue to navigate this dynamic environment. One final topic on Slide 14, before I open the lines for on Slide 15 before I open the lines for Q&A. After holding the traditional Investor Day in New York City for over five years, we decided that it was a good time to mix things up a bit and change the format. We intend to alternate every other year between an Actuant facility visit and a traditional New York City investor meeting. Therefore this fall, we will be providing investors with a tour and a business overview of our new Enerpac facility in Columbus, Wisconsin. Please mark your calendars for October 7th and Karen will be providing you with more details in the coming weeks. That wraps up our prepared remarks. So, let's open up the phone lines for Q&A.

Thank you. [Operator Instructions] Our first question comes from the line of Jeff Hammond with KeyBanc Capital Markets. Please go ahead.

This is James Picariello filling in for Jeff. So just to the guidance, can you talk about on a segment basis how you are thinking about the fourth quarter? And I'll follow up with my other question.

Yes, so if we look at the fourth quarter, we will be starting with the industrial piece of it, from a revenue standpoint. Industrial we’re seeing a little bit sequential improvement in core sales, so that will be improved from our negative 6% that we saw this last quarter. It will be I guess still down at least. It's still down by 5%. Energy is going to be down at similar level what we saw last quarter of 11% to 12% year-over-year. And then engineered solutions will be down a little bit more than we saw last quarter. It will be down about 8% from the current 4%. So, the energy is pretty much similar to what we saw this last quarter and a little improvement but still declining year-over-year, quarter-over-quarter in engineered solutions and a little improvement on the industrial side.

Just a little color on some of those because it is impacting our mix as we move forward and when we look within energy, we are expecting a noticeable downward shift in the fourth quarter with the Viking business. Sequentially, when you move to Q3 and Q4; the year-over-year core will decline. That will hurt margins because of the high decrementals on the rental fleet. Shifting to engineered solutions Mark talked about it going down from roughly 4% to let’s say 7% or 8%. The biggest shift there is in the ag business that's going from roughly flat to down roughly 10% on the OEM basis. And industrial, we expect IT to do a little bit better than it did this past quarter but are still pretty week.

And just following up there, for the IT business what gives you the confidence or comfort, at least that things are going to stabilize and possibly even get better? And then also, on top of that, just integrated solutions -- what's that large project that helped in the quarter? I assume that's also going to benefit next quarter?

Yes the IS volume will still be pretty strong. In the fourth quarter, we have got a couple of big projects in place there. So, they will be going on and we are on percentage completion with those, so still would be strong. When you look sequentially, why do you think IT will be a little bit better? We were up against a pretty difficult May of last year. We had put in a price increase on June 1 of the prior year. We did a price increase June 1 of this year as well. There was much less, I would call pre-buyer or buying ahead of the price increase this year than last year. The price increase was a little bit bigger last year than this year and given distributors’ interest in reducing inventory. We just did not see the pop. So, I think we will not have that impact not only the benefit in the third quarter but that hole that we saw in the fourth quarter of last year in the first month, or so after people pre-bought isn't going to be there this year.

Yes I think the other trend that we saw is the first couple of months in the third quarter in industrial tool. We are pretty much in the circle of where our expectations where if things fell off and in the May time period lot of discussion around de-stocking with some of our larger national accounts and we feel that they will begin to move through that position as the fourth quarter progresses. Then on -- the other question you had was around IS with the wheel.

It was Reunion Island the suspended roadway is along that revenued in this quarter.

Right, and as the third quarter was Reunion…

We thought that happened in Q1.

And that will continue in fourth quarter moving forward.

Our next question comes from the line of Ann Duignan with JPMorgan. Please go ahead.

Can we talk a little bit about a bit more color on your commentary on the industrial weakening, distributor weakening as you went through the quarter both geographically -- is that pretty consistent around the world? And then how has it been in June? I know you talked a little bit in the last answer about national destocking. But a bit more color globally, please?

Sure. So if you look at industrial for the quarter. The areas where we saw headwinds were in China as well as North America. Europe from an industrial tool standpoint pretty much came in the way we had expected but a fair amount of headwinds in the North American market as the quarter progressed and we are in a circle the first couple of months the third month things fell off rather dramatically. And in investigating it, it's mainly due to a couple of things, one is end-user. I think, into the energy market the tentacles of energy are little broader than just the oil and gas market and from a maintenance standpoint, there was an impact and the second was destocking from some of the major national accounts in North America. Our secondary distributors, the mid-sized distributors continue perform as expected. China, we've seen a falloff from an industrial standpoint over the past several months, we've talked about the industrial slowdown there and that was just mirrored in our industrial tool take-up in the quarter. So, that's the geographical piece of it and June is coming in similar to what we are looking at in our forecast for the fourth quarter. So, that's what we anticipate.

And just a quick clarification, why do you think the large national guys are destocking right now? Is it oil and gas related to just indirect, or is it general industrial production weakness?

I think it's mainly because of oil and gas also they built their stock levels in the first half of the year, anticipating that there would be a better flow through to the end-markets and they haven't seen it.

And then just one clarification on the energy side -- on the pricing pressure, can you just, again, give us a little bit more color on what's going on in pricing? Where are you seeing the most pricing pressure? Just more color so we can draw some other conclusions from that, please? Thank you.

There was a little bit of pricing and certainly year-over-year in our third quarter numbers and in energy, I would say, it's not any different than what we had anticipated as we talked last quarter, there was a fair amount of concern about these letters floating around about 20% to 30% reductions and we said we've seen these in the past. We're negotiating our way through those with customers some cases accepting some modest reductions, other cases, taken reductions but giving additional volume. So, it washes through but I don't think it was a significant factor in what the energy numbers were this past quarter versus expectations. That part of it, I think, was pretty good.

Our next question comes from the line of Matt McConnell with RBC Capital Markets. Please go ahead.

So you talked a little bit more about deals this call, and it seems like you have a decent pipeline. Could you give us a sense of the types of deals, primarily size or maybe by segment? And then you also mentioned valuation is quite high. So how do you balance or prioritize M&A versus share buybacks, which have been the primary use of capital recently?

So on the deal front Matt we continue to focus most of our attention on tuck-ins into our core segments. And that continues to be the focus many of them are private negotiations these are smaller companies and we've categorized these in a $50 million to $100 million deal size. And so that continue -- or less to tuck into our core technologies in each of the businesses, obviously, energy and industrial are primary targets but we're looking at tuck-ins in all three segments in order to improve our technology and service to our customer base.

In terms of prioritization between buybacks and acquisition, our capital deployment priority is definitely number one is acquisitions and two would be returning capital to shareholders through buybacks after that. So that really has not changed.

And maybe touching on Viking, those projects are rolling off as anticipated. But do you have a pipeline of projects you are looking at that can replace this stuff that's rolling off? And maybe give us a sense of how steep the falloff could the in the fourth quarter. And you mentioned that you are holding onto assets there, I think, to make sure that you are able to serve your customers. Does that imply that either this downturn is maybe shallower than we might have been anticipating, or you can sell these assets later as things get worse? Or how do I combine those two comments on the slowing demand but holding onto the assets?

I think the comments about assets in utilization there equally applies to in the service technicians as well relates equally to Hydratight as well as Viking it is not just Viking and especially on the service side there is so much value so much knowhow in these service technicians to let him go and to have someone else come along and pick them up is something we do not want to happen from that standpoint. With regard to your first question with Viking we had expected them to be flat to down a couple of percent on a year-over-year basis this quarter and we ended up by I think squeaking out 3% growth we did pick up some small incremental blocks of business in the quarter, some call out type stuff that comes along where you might have a rental out there for a month or two on it. So there is still some of that volume going on there is additions on to some of the projects that we got down in Asia Pac where they have x number of lines out there and they want some more and they want them out there are a little bit longer. So there is still some of that going on. That being said we definitely are bracing for a significant decline sequentially on a year-over-year basis sequentially in sales where we were up 3% with Viking this past quarter a combination of currency and actual core decline is going to take revenues down probably 40%-50% from a year ago with core being half of that. So there will be a noticeable decline from low single-digits down to probably mid 20s down on a year-over-year basis and again with the high decrementals that are associated with these big rental assets is going to have quite an impact on segment margins and overall margins for all of Actuant. So that certainly is one of the drivers for the steep reduction from Q3 to Q4.

Our next question is from Rob Wertheimer with Vertical Research Partners. Please go ahead.

Trying to ask two questions, circling around within some markets that are soft, how much is abnormal softness so let me just as them both at once? Deferrals of maintenance, where in the oil patch was that, is it broad spread? Is it just offshore? I wonder if you can give any color there. And you mentioned a few times the channel destocks that had started. Do you feel like you undersold the channel? I guess, obviously and so it's over? Or is that ongoing into next quarter and thereafter? So I'm just wondering if that maintenance deferral was material, if it's all widespread or not, and then how much channel destock is depressing things this quarter or next. Thanks.

So, on the deferrals that was really focused on the energy side of the business and predominantly Hydratight. And it was occurring in this current dynamic market and it's mainly in North America that we’re seeing this and in the North Sea. It's mainly North America as well as the North Sea. The scope and size of the jobs continue to move very dramatically as we go through this. So where normally they may use 30 technicians on a job for 30 days they are at the last minute scoping it down to 20 technicians for 20 days. And so you need to have to material, the technicians and the kit ready to be mobilized and that gets changed at the last minute and you are typically getting reduced in scope versus expended in scope. And in the normal market period they tend to get expended in scope over a longer period of time. So we see that going on it's something that began last quarter in those two markets and that will continue in this type of market as we move forward.

One comment I just want to add on this before Mark picks up the other one. What we have heard a lot of is we're going to defer a project from April and May to September 1st. okay so it doesn’t make sense to take the technicians out and essentially lay them off and hope that they're three months from now and bring them on. It would be different if to say we are deferring this thing indefinitely but you're almost forced to hold on to what you got knowing that you're going to have weak absorption weak utilization in the fourth quarter and that’s really what we're up against. Go ahead Rob. [Multiple Speakers]

I am so sorry that's midstream or upstream only?

That’s maintenance in general.

That’s downstream. Yes it's really across the board whether it's refineries, whether it's on rigs what not it is it is just maintenance in general in Hydratight.

So that’s it on the deferral piece of it. On the destocking we began to see that last quarter. It's been with our larger industrial accounts it's mainly due to the fact that I think a lot of these larger accounts and Grainger just released last week and you could see a little softening on their industrial side as well. I think they anticipated a much larger take through and flow through to the end-user and I think the oil and gas and energy market slowdown is impacting them as well. So we’re seeing it mainly in the larger customer base that we have.

Our next question from the line of Charley Brady with BMO Capital Markets. Please go ahead.

Just quickly, on the $2 million or $3 million incremental expense, where is that going to appear? Is it under corporate or is it falling into segments?

It’d be spread across the three segments and corporate so the cost will be coming out of everywhere.

Okay. And did you guys tell us what the -- on ES, how much the truck was up and ag was down? I don't know if I missed that.

For Q3?

Yes.

Q3 was just the Weasler portion of ag was flat the big ag related to I’ll say the cedars and [Multiple Speakers] the OEM part of that I really should say big ag but the OEM part was probably down 15% and the aftermarket we had a good aftermarket quarter and so we were down low single-digits overall for ag. Truck was strong in the quarter and we were up by close to 10% within truck a lot of benefit coming out of China’s start up ramping up some high volume on one particular platform as well as Europe coming out of the pre buy from a year ago.

So do you expect trucks, then, as we go through the next few quarters to remain pretty healthy? Or are we seeing a one- or two-quarter pop and then it ought to slow a bit?

Europe we talked a little earlier about being up low single-digits moving forward but China is where we’re going to see it falloff the overall market is relatively slow we had some gains recently due to market share gains that will move off. And so China will be slower as we move forward.

[Operator Instructions] Our next question comes from the line of Mig Dobre with Robert Baird. Please go ahead.

Andy, maybe a clarification on Viking it is my understanding that revenue at Viking for fiscal 2016 is running somewhere around $80 million. Maybe you can clarify that a little bit? And then I also heard you talk about 40% to 50% decline there. So are we basically talking about a $30 million-plus headwind as we are looking into fiscal 2016 in energy from Viking alone?

No, my comment related to the fourth quarter that in the fourth quarter we will see a sizeable downward shifts in growth I am not saying that will be there for all of next year at all that’s not what I am saying. But this will be the first quarter this year within Viking that we are down year-over-year in revenue. And it has to do with some of these big projects coming down and the softness up in the North Sea.

Sure, I understand that. But I'm trying to clarify the 40%-plus comment. And if you are saying that there is going to be some sort of rebound in fiscal 2016, I guess I'm wondering what gives you the confidence or visibility in that regard.

I guess just to clarify here again 40 I should have mentioned that because that is a -- that includes a 40-50 that includes currency we’re going to be down 20%-25% core this quarter. Do I expect that to continue on into ’16? Of course it will continue on into the first couple of months first quarter of ’16 beyond that we’re really -- we're not going to talk about what our expectations are for the full year.

Okay, I understand. And then my follow-up is on industrial. If I look at the margin in the first half of ’15, there were a number of one-time items there, like you had, for instance, the ports. There were some shipping disruptions and so on that compressed margin. If, into fiscal 2016, taking into account your cost savings and taking into account your mix, even if we're talking about something like call it low single-digit or mid-single-digit decline on a core basis in industrial revenue, is it fair to say that you will be able to, on easy comps, at least stabilize margins in industrial? Or is that too optimistic if we’re talking about a volume decline potentially stretching into ’16?

I guess I am just a little bit surprised by the comment stabilized I think the margins here have been pretty stable I mean they’ve been in the neighborhood of 30% from an EBITDA level other than the second quarter which always is the weakest quarter of the year. We are getting clipped year-over-year on margins in this segment by about 125 basis points because of the acquisition that mix that came in. And there are variability throughout the year like we talked about parts last quarter probably costing us $1 million in freight and whatnot, but the margins here in our view have been remarkably consistent and certainly there is mix that impacts these things when you go from IS being down double-digits to being down double-digits first-half, up double-digits second half and the differential between IS margins and IT margins that’s going to wiggle margins around. But from our standpoint when we look at what is the base profitability of IS, what is the base profitability of the IT businesses, we’re very happy where there’s at and we think there was nothing wrong with those margins.

They are going to be in that circle authority and we’re going to have puts and takes on a regular basis, whether it's mix, absorption et cetera. So we feel very good about the sustainability of those margins.

[Operator Instructions] Our next question comes from the line of Justin Bergner with Gabelli & Company. Please go ahead.

My first question is on the subject of acquisitions. The language you are using suggests that you have a tuck-in focus. What would cause you to go beyond doing a tuck-in acquisition, sort of looking out over the next six to 12 months?

I think probably a couple of things, one is we’ve got a pretty broad funnel of opportunities that we’re looking at on a regular basis. So right now we’ve got a focus that’s mainly in tuck-ins, but certainly we’d define those as under 100 million. If something very strategic should come up that makes a lot of sense for one of our core businesses or core technologies especially in the industrial area we would be very open to take a look at that. But certainly we’re scanning the marketplace right now Justin it is just that we’ve got in the funnel is predominantly those tuck-in smaller acquisitions.

The only color I would add to that Justin is, when we look at our funnels across our businesses, each of our businesses that have -- it was a rule breaker acquisition where as if this company would ever come up, we would absolutely lust for this business because it would be such a rule changer such a game changer and it's a big business that’s what we’re talking about outside of these tuck-ins and there is probably a couple in each of our segments that we would stretch for but that is not really what we’re looking for now, 90% of our activity is on tuck-in. So real cautious here on the message that people misinterpret what we’re saying, we are not looking for bigger deals a vast majority of our activity is on tuck-ins, but if one of these suddenly popped open we would be crazy not to look at it. That’s something that pops up once every 10 years along those lines.

And then a follow-on question on acquisitions, if I may the last 12 months have proved challenging for both Actuant and other industry participants in terms of forecasting end markets, so as you move forward with acquisitions or considering acquisitions, whether bolt-on deals or larger, how do you as an organization deal with the uncertainty of your end markets in evaluating both whether or not you do acquisitions and the price that you consider?

It's a very good question Justin, I talked a little bit in my prepared remarks about some of the reasons why we have decided to walk away from specific acquisitions and one of them was not believing the forecast, when the forecast were driving some multiples that we thought were didn’t make sense in this environment. And so we’ve been spending a lot of time with our team within due diligence to take a look at those forecasts and really did a very granular relative to each of the forecast, we’re also utilizing third-parties to help on markets, technologies and some of the other areas to assist us and in making sure that we make the right decisions and vet the forecast effectively. So we have put some measures into our aim process, which is our integration due diligence process that we use for acquisitions to help us better focus on that.

The other comment I would add here is given what’s happening in some of our base businesses, things are really rough there, it was going through a restructuring, we’re not even going to think about tackling an acquisition even if it's a tuck-in in some of those end-markets. Now that would impact a small number of our businesses out there, but some are just not going to be looking at deals because they have to get to base in order to…

Get the foundation in place.

Okay, that's good clarity. One more quick one, if I may you mentioned emerging market sales were tracking, I think, 10% or 10%-plus, core, fiscal year-to-date. How has that progressed over the course of the fiscal year, to average to 10% plus?

Justin it is actually been pretty -- if you look at the three quarters it has been up and down in some of the markets like India, but in China and Brazil as well. So we’re seeing fits and starts in the markets. I would tell you that, that Brazil is mainly driven by energy right now and we’re seeing some strong revenue there and then from a China standpoint truck was driving a lot of that. And so the truck has really been driving the upside of that. So it all averages out to 10%, but we’re very pleased with the progress that we’re making in all three of these markets.

There are no further questions at this time. Please continue with your presentation or closing remarks.

Great. Well, thanks to everyone for joining the call today, Happy Father’s Day this weekend for those of you who are celebrating that. We’ll be around all day to answer any follow-up questions for your planning purposes. Our year-end call will take place on September 30th and as Mark noted we’re going to be hosting our Investor Day a little different as a tight visit to Columbus. So look for e-mail information invite from me kind of later in July. Thank you.

Ladies and gentlemen that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.