Emerson Electric 2Q16 Earnings Call Notes

David N. Farr – Chairman & Chief Executive Officer

Poor profitability has now begun to improve

“Poor profitability has now begun to improve, and we’re exhibiting strong cash flow and very good performance. And again, I want to thank the global Emerson organization out there for doing some very difficult heavy lifting in a very challenging marketplace.”

Europe has continued to improve

“From my perspective right now, as I look at the global marketplace, I just came back from Europe. Europe, our Western European business has continued to improve. I finally see some good momentum there. No, the economy is not going to be robust there, but they clearly are making investments.”

US has continued to be challenging

“To the U.S., the U.S. economy in particular around the industrial segment has continued to be challenging. And in certain segments, I would say even weaker within the U.S. marketplace.”

Capital budgets continue to be curtailed by oil and gas

“Relative to North America and particularly the U.S., it’s primarily just the day-to-day type of spending that you see on the oil projects, not really big project specific. It’s all around the day-to-day type of what we’d call the MRO type of – normal type of spend. But capital budgets are definitely being curtailed by most oil and gas guys. There are companies within North America, both in Canada and the United States. And so they’re continuing to tighten those belts up, and we’re seeing that business and that day-to-day business given our strength in this marketplace, which has been hurting us more on what I would call the shorter-cycle type of products.”

You’ve got to see stability in oil prices

“I think that the price of oil, I’ve talked about my opinion on the price of oil over the months here. I still think there’s a chance that we could slip back in the $30s and then start trailing back up towards $50. You’ve got to see stability in the $50-plus range toward $60 and then a continued growth of demand, which we see today around the world, the demand for oil and gas.”

Been shifting resources to small and mid sized projects because not as many large large projects out there right now

“From our perspective, we’ve been really pushing resources because there’s not as many large, large, large projects out there right now. So we redirect our resources back into the small and medium-sized projects to pick up that business because you’re right. If you look at our share, we go very high to large. We’re very, very strong in the day-to-day. In the middle, we’re probably the weakest, as you said. So we’ve been shifting some of the resources down from the large down to the medium and go after those – off to the smaller projects”

CEOs are being very cautious relative to spending

” If you look at our capital spending in the first half of the year, we’re down significantly from last year. I don’t think I’m any different from any other CEO out there, and I think that CEOs right now are being very, very cautious relative to spending, and particularly given they keep seeing weakness emerging in the industrial space. So I think that part is going to be pretty challenging here for the next six months until CEOs feel okay, I can let go of a little bit more money and reinvest back into the company.”

One surprise is that we have seen the US spending rate come back down again

“The one surprise we had is in the last couple months we’ve seen the U.S. spending rate come back down again, which bothers us. And that’s what’s created probably this delay by one month relative to April, the April target, which we have – I don’t know yet for sure, but just intuition tells me where we were at negative 4% that should have been closer to negative 2%.”

US is slow to start turning that nose up in sales

“I feel a little bit more worried about sales because of the U.S. marketplace in particular. I feel better about Europe, as you can tell. I feel a little bit nervous about Latin America because I still think these guys are still struggling. But the U.S., this I would say slow to start turning that nose up really bothers me.”

Parker Hannifin FY 3Q16 Earnings Call Notes

Parker-Hannifin’s (PH) Thomas L. Williams on Q3 2016 Results

Saw a moderation of declines

” So orders during the quarter sequentially got better as we saw January going through March, and obviously what we saw in April is consistent with the guidance that we gave you. As far as the markets go, I finish all my comment and will let Lee give you some deeper color, but I made the comment about that we saw a number of markets move from accelerating declined to decelerating declined. So I think the theme of what we are seeing is this moderation of decline and the movers from accelerating to decelerating have really lead to charge or distribution general industrial ag, mining and similar account and you asked for some of a positive markets”

Lee C. Banks

Oil companies appear to be restructuring to try to be profitable at $40

“The story around oil and gas, I guess major OEMs really continue to indicating no significant improvement until the end of calendar 2016 early 2017 and this is really massive and I’m sure you have covered this restructuring plans taking place. It looks like everybody is trying to restructure and look to be profitable around $40 per barrel.”

Inventories have normalized outside of oil and gas

“here is the consensus when I checked this not only from our guys and then I just go out and cal our contacts. If you are involved in oil and gas and you had a lot of OEM exposure, you are still sitting on a lot of inventory. If you get away from that inventory is pretty much normalized at this point in time. I think some of the guys may have gotten hit a little bit by some side effects from oil and gas, but that’s fairly normalized. I would say on OEM inventory where I still see this kind of construction equipment, mining markets especially Asia comes to mind. If you tour some of the equipment yards, I mean there is just excavators and wheel loaders that go on for miles so. But our North American distribution, I’m most comfortable that outside of oil and gas, it’s not a big issue.”

Sun Hydraulics 4Q15 Earnings Call Notes

Tricia Fulton

Saw more normal seasonality from Q4 to Q1 this year

“Our normal seasonality Q4 to Q1 shows increased order rates and results from Q4 into Q1. We are seeing that normal seasonality this year. If you look back to 2014 Q4 with 2015 Q1, we did not see that normal seasonality. In fact, we also did not see it going into Q2 of last year, but we do see that now, and we think that that is one of the signs explaining to why we believe that we will see some improvement at some point in 2016.”

Distributors said they may see some modest growth in ’16

“When we pooled our distributors most recently, we had several of them that felt like they would potentially see some modest growth in ’16, some — about the same number, felt like they would see flat growth. So I think we maybe on the distributor’s side have bottomed out. It’s difficult to tell what the OEMs, because we don’t always have insight into what their inventory levels are, and we aren’t as close to them because we’re working through distributions.”

Allen Carlson

Distributors appear to have taken inventory down as far as it will go

“Let me just add a little bit to Tricia’s comments. We also follow our distributor inventory, and we saw that inventory started going South in late ’14, continuing into ’15. And it appears that that distributor inventory, they’ve taken it down to as far as they can take it down, so when they get an order from a customer, they now have to place orders on us.”

Consumer spending will eventually incite capital spending

“I think another thing that’s going to happen, I can’t predict when, and that is consumer spending will eventually turn into capital spending in projects. That hasn’t happen yet, but I think the way out of this slowdown — I won’t call it a recession, but the slowdown will be based upon consumer spending driving things into the capital markets.”

Emerson Electric FY 1Q16 Earnings Call Notes

Emerson Electric’s (EMR) CEO David Farr on Q1 2016 Results

The last 30 days have been the most unusual in my time at Emerson

“As I look at our current marketplace, the last 30 days have been what I would call the most unusual in my time at Emerson. I have never seen a marketplace go so volatile from the standpoint of the end markets, the stock markets, the interest rates, I guess the attitudes. It’s just a very amazing marketplace right now and one that clearly global CEOs like myself have to deal with and be prepared for whatever comes at us.”

We’re in the 4th quarter of the recession, maybe one more

“But we are now basically in our fourth quarter of the recession. I see, as we will talk about next week, I see at least one more quarter, maybe another quarter.”

Oil market may not recover until late ’17

“We are looking at a situation, in my opinion in the oil and gas marketplaces, that will not recover until well past middle of ’17, maybe late ’17.”

I think the psychology is very tense at big oil

“I think the psychology is very nervous and tense within the big oil and gas investors at this point in time…I would say that my concern is the psyche of a Chevron or psyche of Exxon Mobil, psyche of these Shells and the BPs and things like that. I think they can freeze up some of that spending level. They can’t go to zero but I think it’s going to make it tougher. So my gut tells me that it is going to be more challenging I the near term”

Inventory levels are in pretty good shape

“I would say what my knowledge is right now, inventory levels within the channel including ourselves, our levels that, they are pretty good levels, low. And so the pace of business right now and the run rate where I see, I would say the inventory levels are pretty good for us. I don’t see much of a downward draft on that now. I think it’s pretty well over with, probably very minor downward draft. I think it’s pretty well there, around the world. I’ve been in Asia, have been around the world and I don’t see the inventory being a big issue for us right now. So that’s a good thing.”

I think China will be -5,6,7 range, but our team there is more optimistic

“I think that China in my opinion today, the forecast when we put that out there, I still think it’s going to be that mid-single plus digit. I think it’s going to be in that 5%, 6%, 7% range negative. I don’t see it changing. I would say my China organization is more optimistic than that. They are less negative. But I think that looking at what I see going on in China and the marketplaces around the world, I think that that’s going to be a tough one for them to do though they are working through the inventory that was built up in the first part of 2015.”

Hopefully we will start to see capital freed back up in oil and gas

“I think we are going to see a slow down and then hopefully as we get into the year, we will start seeing that capital freed back up. It can’t to go zero. It’s not going to go to zero but they are clearly going to reallocate and they are doing that really fast right now from our customer base”

Industrial automation sitting towards the bottom of the cycle

“relative to IA, I think IA got hit harder, sooner relative to the space they are in. And so there might be a little downside risk in IA but not that much. I think these guys are sitting really down, pretty far right now. I mean things can always go down further but my gut tells me they are pretty close to that cycle right now.”

My forecast for China is probably worse than what most people expect, so I’m concerned

“My forecast of China is worse than probably most people would say out there. So I am a little concerned about that one.”

There are some verticals that will do better than people think

“I think the answer is yes. I think there are some verticals that are going to do better than people think… We had a very very good run in oil and gas upstream and we gained a lot of growth, gained a lot of market share. And now what we are doing is refocusing those resources”

A leader has to take action

“I can’t speak to other people. I mean they’ve got to be looking at the same issues from the standpoint of too much cost, too much capital, fix that investments invested. They’ve got to be looking at that and so eventually they are going to have to say look, we’ve got to take action. A good leader — if they don’t take action I think there will be some other people coming and working on that issue. But from our standpoint I feel quite strongly as you know. We’re trying to deal with this issue. We make calls. I make calls, as you know my for a long time. I make a call. Sometimes I call right, sometimes I call wrong. But you have to make calls and say we’ve got too much capacity, things are going to be down longer, you’ve got to deal with it.”

Some companies are dealing with this well, others not so much

“I think there are several companies out there in my opinion in the industry right now that are doing a good job in dealing with this issue. There are several companies that are not and you know that. You can see it.”

Parker Hannifin FY 2Q16 Earnings Call Notes

Thomas L. Williams – Chairman & Chief Executive Officer

Continues to be a very tough environment

“It continues to be a very tough environment in many of our end markets and regions. We have responded decisively to adjust to these conditions and delivered impressive margin return on sales. We have tightened control of discretionary spending, reduced employment levels across all regions in our company and implemented reduced work schedules where necessary.”

Continued to experience general industrial weakening

“We continued to experience general industrial activity weakening due to the knock-on effect from natural resource markets. These challenging markets outweighed positive growth in other markets such as power generation, air conditioning, lawn and turf, rail, and heavy-duty truck.”

Expect environment to continue through the rest of our fiscal year

“We expect the difficult environment to continue through the rest of our fiscal year.”

Valuations are still high. Sellers expectations have not met the new reality of growth rates

“On the balance sheet, the acquisitions – the pipeline is active, but valuations are still high and I think what you’re seeing is a delay in the reality from seller’s expectations to buyers like us as far as setting a new revenue target as far as what they think for the business. That’s the key valuation difference. I think everybody knows we’re disciplined buyers and we buy things that are in our space, so we understand what the growth rates are. And I think the time is on our side with that. I think as time goes on and people see the new reality that they – it’s maybe not going to grow what they thought it was the previous decade, but those valuations will come in more line and I think our pipeline will become more actionable at that point. So, it’s lumpy, it’s hard for us to predict output, but we’re still working on it.”

An example of the IoT in the field

“if you take an air-conditioning contractor today, they have a lot of mechanical tools they have to utilize to measure pressure, humidity, temperatures and so this is a patented sensor that we have. It allows you to diagnose and troubleshoot the conditions of that air-conditioning unit much more rapid, so the value for the contractors as many more calls happens during the call, they can get a print out right on their smartphone or visual on their smartphones and print it out if they want it for the customer, so they can see what’s going on with their unit. So, we launched that. We’ve been very pleased with the initial sales. And that’s a really good example of taking a traditional market and using Internet of Things to make it even better.”


Jon P. Marten – Executive Vice President-Finance & Adminstration and Chief Financial Officer

January has been consistent with what we saw in FY Q2

“This is Jon. I think, James, the pattern is consistent with what we saw during Q2. I think what we’re seeing in January is consistent with what we’re seeing in guidance. January is, of course – the first two weeks of January are a little bit – very difficult to judge, but I think from what we can tell so far that we’re consistent with the guidance that we’ve got together for Q3.”


Lee C. Banks – President and Chief Operating Officer

natural resource markets have remained challenging

“I think one common thread that hasn’t changed is the whole natural resource driven markets, ag, mining, construction equipment, oil and gas, they really by and large continue to be challenging everywhere around the world.”

Residential air conditioning has been strong as housing markets have been strong

“Looking at, really, air conditioning, refrigeration markets in North America, we’ve seen good North America residential air conditioning growth. This is a result, obviously, of the continued strengthening in the housing market.”

Continued topline declines in ag

“Turning to agriculture, we continue to see topline declines, which is consistent I think in contraction and production schedules at our major customers. So, very weak on the agricultural equipment side.”

Heavy duty truck has been strong

“On heavy-duty truck, Class 8 truck, this market has been very good and growing for us. And it was excellent, but consistent with industry forecasts, we are lowering our forecast by at least 20% from the 2015 levels going forward.”

China renewables and rail strong

“On energy, in the region, really I’m speaking to China mostly, renewable, wind, solar and hydro is growing rapidly, but traditional thermal powers, coal, gas, nuclear is still taking a major share. On rail, and this really speaks to China, we continue to be very bullish on the rail market; the Chinese government is making significant investments in this area. ”

Brazil continues to be in dire condition

“talking to Latin America, it’s really about Brazil. I won’t go into the details. I think everybody knows, but Brazil continues to be just in very dire condition and we’ve seen softness in all our end markets, mining, PowerGen, oil and gas, heavy-duty truck, et cetera.”

INventory stocking has stayed about the same, but it’s tough to get a read on that

“Andy, it’s Lee. I would say it just stayed about the same. I mean at the end of the day it’s really hard for us to get a gauge on that. But it certainly didn’t get worse.’

CLARCOR FY 4Q15 Earnings Call Notes

CLARCOR’s (CLC) CEO Chris Conway on Q4 2015 Results

Economic conditions are unsettled

“As we entered 2016, economic conditions are as unsettled as they were at the start of the year.”

Conditions remain challenging and have even deteriorated in Ag and Energy. Cost cuts forthcoming.

“Conditions in these markets remain challenging in an Ag and oil and gas have even deteriorated from where they were last year at this time. As a result we made adjustments in our business with our restructuring in the fourth quarter in order to reflect the market conditions we face. We expect a headcount reduction and other cost reduction initiative we have undertaken. ”

David Fallon

Expectation that these dynamics will continue into 2016

“Based upon these challenges and our expectation that these dynamics will likely continue into fiscal 2016. We have taken some aggressive cost reduction actions as summarized by Chris in his comments.”

Pressure should actually get worse in ag and construction equipment businesses based on orders we’re seeing

“If you look at some of the other businesses that we anticipate the see pressure one is agricultural and construction equipment businesses. Sales there were down by 23% in the fourth quarter only 16% for the year so it’s certainly ramped up as we moved through in the third and fourth quarters. We anticipate that pressure to actually get a little bit worse based on the orders that we have here in the first quarter.”

We think we’re at a low point in agricultural activity here in the first quarter

“I would say we don’t have crystal ball, it’s hard for us to project when agricultural activity is going to turn around, however we do believe we are at a low point here in the first quarter as it relates for that activity based on conversation with some of our customers.”

Donaldson FY 1Q16 Earnings Call Notes

Donaldson’s (DCI) CEO Tod Carpenter on Q1 2016 Results

Mining and ag have remained weak and are unlikely to rebound in the near term

“Mining and agricultural end markets have remained particularly week. And perspective from some of our largest OEM customers suggests that build rates are unlikely to rebound in the near term.”

Outlook for construction equipment market has worsened

“Since our last update, our outlook for the construction equipment market has worsened. We now expect that sales will be flat to down 5%, compared with a more stable outlook in our prior guidance.”

Slowdown in heavy duty NA truck

“The anticipated slowdown in heavy-duty North American truck production next year is well documented, and we have been including that in our forecast.”

Our order intake slowed as we got towards the latter half of the quarter

“what we did see is that our order intake slowed as we got towards the latter half of the quarter. And that was one of the considerations when we looked at our guidance, is that we entered the year with a fairly healthy backlog, but as the quarter went on that began to get depleted, even though we were shipping fairly strongly throughout the quarter. So as we ended the quarter, we were less optimistic, particularly in the U.S., with regards to the project inventory, or project-related sales and I think that’s the biggest difference since three months ago.”

The softening we see in construction is from a global perspective

“The softening that we see in construction is really we’re talking about from a global perspective. So we saw additional softening in some geographies like China. We clearly see it hard in Brazil right now. So when we roll it up comprehensively, it’s not necessarily driven for us by an end-market in our comments to you on why we’ve reduced that outlook, it’s more a geographic rolling up to a consolidated number at the company level.”

We know there’s a decline in truck builds coming

“we know that in the U.S. first rate truck builds there is a decline in the future, and we’ve just tried to take a more cautious approach in the second half of our fiscal year and bake that in for the U.S. market.”

Sun Hydraulics 3Q15 Earnings Call Notes

Difficult environment continuing into 2016

“The global business climate continues to be difficult. Demand in all regions is down and the strong dollar persists in creating headwinds for both sales and earnings. Our fourth quarter forecast notes additional softening in demand related to: weak or weakening end markets, macroeconomic conditions, and a strong U.S. dollar. Indicators signal today’s current demand levels will continue into 2016 with accelerating growth during the year.”

PMI was artificially high in the middle of the year because it missed inventory builds

“PMI through the middle part of 2015 into the third quarter, it was artificially high, because it didn’t reflect that a lot of what was going on in terms of production of new orders and hiring practices was going into inventory build in the channel, not only with the fluid power producers, but also with the end users. And so that inventory build given artificially strong signaled that to PMI. And that was supported by inventory numbers that available. Since then, we’ve seen a rundown versus like since August. We’ve seen the rundown of the inventory and as a result PMI has softened significantly since mid-year. In fact, it’s floating right around 50 right now. And the inventory component of that is the piece that first of all was not seen and it is now being readjusted for.”

Inventory balance has probably already happened

“I think it happens very quickly, in fact, I believe is probably already happened. And as the economy stabilizes and starts to grow that inventory will be built back up.”

If the economy strengthens at the beginning of next year, we probably wont get a mid year softening

“normally mid-year is when there is a softening. And if the economy does recover in the early part of 2016, the sequential softening going into the summer of 2016 probably won’t happen, but that something that we need to look at and watch very carefully going forward.”

The currency piece of the forecast is very speculative

“The currencies translation piece of it is very, very speculative in terms of what is the euro going to do or other currencies. We were sitting here a year-ago, I don’t think any of us would have foreseen, the euro weakening or the dollar strengthening to the level of we should have. So I have no confidence that we can predict was going to happen a year from now, relative to currency.”

Seeing excavator production decreasing in Korea primarily related to equipment that would go to China

“we’re seeing OEM business related to excavator production decreasing in Korea. We believe it’s primarily related to equipment that would be going into China, and what the China economy down the way it is, it’s affecting those Korean orders.”

Many large OEMs in Korea are closing plants

“Many of the large OEMs in Korea actually are closing their plants for extended period of times, two, three, four weeks as a result of business conditions in Korea and in China and in Asia in total.”

I see what China is projecting as GDP growth and it doesn’t make sense

“I go to China some years three, four, five times, and I look around and I look at what they’re projecting as the GDP and the growth. And I just would sort of say, I don’t see it, it doesn’t make sense.”

China’s PMIs are the best indicators

“What I would be looking at is I would be looking at the two PMIs. The government PMIs, HSBC PMIs and there is a slight difference between the two. Sometimes there is more than a slight difference, but right now it’s a bit of a slight difference. And I’d be – that’s what we look at as – and talking to our people in the market that kind of what we look at.”

Currency headwinds start to disappear in Q1

“They start to disappear actually in Q1 when we started to see the primary effect specially of the euro. So as we move into 2016, we’re going to see from a currency perspective much easier comparison.”

Digital logic valves are a revolutionary product

“This product has got the same characteristics, game-changing characteristics. It’s not evolutionary at all. It’s totally a revolutionary product. And that’s what we set out to achieve, when we started doing product development and research about three or four years ago.”

Agilent FY 3Q15 Earnings Call Notes

Orders accelerated throughout the quarter

“we got off to a slow start in the third quarter in incoming orders after finishing so strong in Q2. But throughout the quarter, we saw an acceleration of incoming orders throughout the quarter and finished the quarter strong.’

Growth in China is strong

“I figure we’d probably spend some time today talking about China, given some of the recent news. But in terms of our performance in China in the third quarter, we have very strong revenue growth with low-double digits. And we’re tracking through the first three quarters right on the plans. We’ve talked about with all of you at the analyst meeting the high-single digit level of growth in China.”

We’re hedged in China by local manufacturing

“In terms of the areas of strength, we’re continuing to see strength in pharma, life science, research, the diagnostics, food, environmental. And the business really continues to develop as we had expected, albeit some of the recent changes, which in terms of how that affects our profitability in China, it’s really neutral. We’re naturally hedged in China in terms of both the amount of revenues that we bring in, in China. Even though it is our second largest country in terms of revenue, we also have a very large footprint there, including local manufacturing. So we are naturally hedged in China.”

we have plenty of reason to be positive

“we have reason to be positive about the outlook. If you look at the business by our three groups, our ACG and DGG business have momentum…When we look at our business here, we respect pharma, biopharma, diagnostics, clinical diagnostics, environment space to remain strong. China is on a steady trajectory, no expected hiccups there. And we just had a number of new product introductions”

Strength in China is in private sector money. Traditionally has been dominated by government investment

“What I can share with you is because we’ve been kind of nosing around on this question ourselves internally. And the areas of strength particularly the Pharma area is a lot of private sector money. So traditionally this market has been heavily dominated by the direct investment by the government.

We’re seeing a move. I think it’s still the majority but we are seeing a lot more business coming from private funded enterprises, particularly as the Chinese government also is moving a lot of its testing outside of government testing labs, for example, the food area where there’s now whole new set of private testing labs that are — they are coming online in the country.”

Deal cycles lengthening out because of anti-corruption crackdown

“I think it’s a new normal. I think this is — the effort is here to stay. I think in terms of the changes where we talked about before of slowing deal velocity and a lot more conservatism in terms of the overall approval process. I think that sort of baked out now. So we’re no longer pointing to longer deal cycles in China as a result of anti-corruption. But I think the longer deal cycles are here to stay and now are now in this kind of this rhythm of really cautious approvals by the government authorities. And that’s why I mentioned earlier that a lot of the areas of growth particularly in the private sector where you’ve not seen the same bureaucratic approach to approvals of deals. I think this is the new normal.”

Outside of currency impact, Europe has seen nice local growth this year

“I think our European outside of the currency offset, I mean the business there has been a really nice story for us this year…the European market although has held up very nicely and we have been positively surprised over several quarters now by the local currency growth we have seen in Europe.”

Fastenal FY 1Q15 Earnings Call Notes

There were things we could control and things we couldn’t this quarter

“The quarter was when you look at it’s really two stories. One of things we can control and things we cannot control. Obviously the things outside our control the currency, weather, oil and gas and the port situation in California. But the things we can control, I think when I look at the Fastenal team I think it was a solid quarter.”

Not happy with single digit revenue growth. (8.8% growth doesn’t sound too bad to me

“But that being said I will always say this that when we see single digit revenue growth, we are not satisfied nor we happy. But with 8.8% growth we did some things and I think hats off to the Fastenal team when you look at some different areas”

Grew head count in stores by 1k people

“we’ve added 1,000 people into our stores. Now most of those heads came in the last half of Q1. January, folks I got to tell you January coupled with the weather affected the kids aren’t back to school. It’s a rough month for recruiting. But in the second half of February and in the month of March, that’s when you started to see the team really start to bring people into the stores.”

It was a tough environment out there

“talk about the environment, tough environment out there. Our sales growth softened as we got deeper into the quarter. Weather hit us hard in the January, February timeframe. Oil and gas and some of our customers that involved with export markets, the currency is — US strong US dollar is not helping export. So our business did weaken as we went through the quarter. You really see it showing up in the industrial, the production side of our business”

The Fastener business slowed more

“Our fastener grew about 6% for the quarter. They were growing 10% and 11% in the third and fourth quarter of last year. So that business really slowdown. We didn’t lose any customers but those customers are producing fewer widgets and therefore they need fewer fasteners. ”

There’s a lot of tentativeness in the marketplace right now

“I think there is a lot of tentativeness in the marketplace right now.”

Everyone is just getting a little nervous

“export and oil and gas. That casts one heck of a shadow; it is not just the folks that are directly involved in that business. If you are in the same geographic area and the manufacturing pace, the manufacturing heartbeat of that area is weaker, everything else is kind of takes a step down. If you are working at industrial business and you are kind of worried about what’s going on your business, people aren’t as quick to other things to buy a car, to buy a thing to make a renovation to their home. People just say let’s wait and hold because I don’t need to replace this television set today. Stuffs like that, you just become a little bit more conservative because everybody is little nervous.”

Deflation makes things challenging

“the lower steel prices, any time you have deflation it creates a challenging environment and we have been in a situation having deflation now for a few years. And so it makes challenging as we go through the year.”

The Canadian dollar has weakened too

“That business there is held up reasonably well. If I am looking at in Canadian dollar. Obviously, the Canadian currency is very much tied to the fact that their economy is tied to extractive industries. And the weakness in oil and gas, weakness in energy in general is not helped their currency. So we are in a local currency basis we are growing reasonably well. But when compared to the USD, that’s what we report in, picture isn’t quite so good”

We don’t know where we are in the weakening cycle

“That the business really weakened in this three months period. We don’t know where we are in the weakening cycle. We don’t know if it is 90% behind us or 50% behind us. We don’t know.”

Local mom and pops still have 70% of the business

“There are a lot of very, very good local and regional distributors out there. And they have probably 70% of the market.”