Columbus McKinnon Corporation Price & Performance (CMCO)

Before we begin our remarks, please let me remind you that we have our Safe Harbor statement on Slide 2. Management may make forward looking statements in regards to our current plans, lease and expectations, These statements are not guarantees of future performance and are subject to a number of risks and uncertainties and other factors that can cause actual results and events to differ materially from the results and events contemplated by these forward looking statements, I'd also like to remind you that management will refer to certain non GAAP You can find reconciliations of the most directly comparable GAAP [indiscernible] on the company's Investor Relations website and in its filings with the Securities and Exchange Commission, Please see our earnings release and our filings with the Securities and Exchange Commission for more information.

Today's remarks will be followed by a question and answer session.

We respectfully ask that you limit yourself to 1 question and 1 follow-up With that, me hand it over to David. Thank you, Christy, and good afternoon, everyone. We're excited to share more about a transformational milestone for our company bringing together Keto Crosby with Columbus McKinnon Columbus a highly complementary deal that we expect to deliver compelling value for all of our stakeholders. This business combination enhances our scale and market position while delivering top tier financial performance. Let's discuss the Change in the prior year. While the demand environment deteriorated over the quarter, midterm market sentiment remains positive. As the third quarter progressed, we encountered two dynamics. First, our U. S. Customers took a cautious approach to the evolving policy environment particularly related to tariffs, which delayed decision making. And second, we saw subdued demand in Europe, particularly in Germany, and France consistent with what you are hearing across the industry. While our optimism for the business over the medium and long term remains unchanged, our third quarter results and revised guidance for the near term contemplate that the resolution of these dynamics extend through the fourth quarter. We continue to see attractive opportunities from industry megatrends like near shoring, scarcity of labor and infrastructure investments and we are well positioned to benefit as we capitalize on those dynamics.

As always, we remain focused on what we can control operating effectively, managing our business with agility executing our strategic plan. As you would expect, we are diligently managing costs to reflect current demand while remaining flexible to take advantage of what are likely to be upside opportunities. We continue to advance our strategic plan including executing our eightytwenty simplification initiatives. In fact, this quarter we announced the execution of the next step of our footprint simplification plan. Specifically, we are consolidating two smaller precision conveyance factories into our largest U. S. Precision conveyance manufacturing facility. We began transitioning manufacturing last week and expect to cease operations at discontinued locations in the first quarter of fiscal twenty twenty six. Like the rest of the market, we are monitoring the recent developments with respect to tariffs closely. If a 25% tariff on both Mexico and Canada and a 10% tariff on China were implemented, the impact would be less than 5% of trailing twelve month sales. If they were matching retaliatory actions from the impacted countries, these would affect another 3% of sales. And of course, in that environment, we would explore strategic adjustments to our supply chain and manufacturing footprint to minimize the impact to our customers to the extent possible.

Where this isn't possible, we have a consistent record of working with our partners to pass through input cost increases and preserve margin. As referenced earlier, the demand environment has been choppy. And we saw orders down 4% year over year driven by a 6% decline in short cycle orders were destocking pressures uncertainty and delays in decision making persisted. Project related orders remained flat with strength in precision conveyance, offsetting softness in Europe. Precision conveyance grew by 16% and linear motion was up 8% from the prior year. Our project funnel remains healthy reflecting improving customer sentiment and the effectiveness of our commercial and customer experience initiatives. Quotation activity in the quarter increased to near record levels, but this speed of order conversion is lagging historic levels. Backlog also remains healthy. Down modestly from prior year driven by softer short cycle demand. Project related backlog was up 3% again driven by strength in Precision conveyance and Linear Motion. With that, turn the call over to Greg, who will provide some additional color on our financial results and outlook. Thank you, David. Afternoon, everyone. We delivered third quarter net sales of $234,100,000 down 8% from the prior year driven by a 9% decrease in short cycle [indiscernible] We believe this was largely related to U. S. Policy uncertainty and economic softness in Europe particularly in Germany.

Project related sales were down 7% driven by weak demand and delayed revenue recognition resulting from a delay in receiving final design While we expect revenue to be challenged in the short term, we are optimistic about the future as the new administration's policies take shape. Interest rates decline over time and we benefit from certain megatrends such as near shoring in The U. S. And automation more broadly. Our gross profit decreased $11,800,000 versus the prior year on a GAAP basis impacted by $3,100,000 of expenses for factory closure activity and the ramp up of our Monterrey, Mexico facility and $2,000,000 of higher year over year product liability expense as we lap a favorable product liability adjustment in the prior year. The remainder of the decline was due to lower sales volume and mix which was partially offset by favorable pricing net of manufacturing cost changes. On a GAAP basis, our gross margin was 35.1% and on an adjusted basis, our gross margin was 36.8%. A sequential basis, adjusted gross margin expanded 50 basis points but contracted 40 basis points year over year largely due to lower volume, unfavorable mix in the previously discussed prior year favorable adjustment to product liability accruals.

With the lower sales volume in the quarter, we managed our SG and A expense appropriately, decreasing our spend by $2,600,000 to 56,900,000.0 This was driven by cost management actions and lower incentive based compensation partially offset by two unique items, namely a $1,500,000 legal judge dollars legal judgment for a customs duty assessment in Mexico that goes back to 2014 and a $1,300,000 bad debt reserve for a large customer in Sweden that filed for bankruptcy. We are pursuing recovery of the amounts owed to us as the bankruptcy process unfolds. As a result, we generated operating income of $17,700,000 in the quarter on a GAAP basis and adjusted operating income of $25,600,000 Adjusted operating margin was 10.9% in the quarter, We recorded GAAP income per diluted share in the quarter of $0.14 and $0.56 on an adjusted basis. Adjusted earnings per diluted share was down $0.18 versus the prior year including $0.11 per share due to unfavorable FX compared to the prior year. In addition, the unfavorable year over year adjustment to product liability reserves Negatively impacted adjusted EPS by $0.05 The remainder of the shortfall in EPS Our adjusted EBITDA was $37,800,000 in the third quarter an adjusted EBITDA margin of 16.1%.

Delivered $6,200,000 of free cash flow in the quarter, a decrease of $16,900,000 versus the prior year driven by elevated inventory levels, due to the timing of large orders and high stocking levels, to facilitate the consolidation of our manufacturing footprint, as well as $6,000,000 of costs incurred for unbilled overtime revenue recognition. Free cash flow conversion for the quarter on a trailing twelve month basis was 266%, reflecting the impact of the non cash pension settlement factory and warehouse consolidation costs and Monterey Mexico startup costs and other unique items impacting GAAP net income. From a balance sheet perspective, we paid down $45,000,000 of debt in the first three quarters of fiscal twenty twenty five and anticipate paying down another $15,000,000 in the fourth quarter. Our net leverage ratio was three times a financial covenant basis up 0.3 times from last quarter. For the company's credit agreement, are capped at $10,000,000 for cash restructuring costs that can be excluded for fiscal year. Given the magnitude of our factory consolidation and Monterrey, Mexico startup projects, we have exceeded the maximum allowable adjustment by $11,700,000 Without that cap, our credit agreement net leverage would have been 2.8 times. As a result of this cap along with our updated guidance, we expect our net leverage ratio will remain approximately three times at the end of this five.

Let me wrap up with our updated guidance for fiscal year twenty five, which reflects the current challenging macroeconomic environment we are seeing in the short term. Our new guidance for fiscal twenty twenty five assumes a mid single digit sales decrease year over year which will result in a low teens decline in adjusted EPS. CapEx for the full year will range between $18,000,000 to $22,000,000 and our net leverage ratio will end fiscal twenty five at approximately three times as previously discussed. Our other guidance assumptions for fiscal twenty twenty five remain unchanged. Despite the challenging quarter, we remain confident in the health of our business and our ability to achieve our long term objectives. While we expect near term macro pressures to continue, we remain focused on operational execution and managing our expenses in the current demand environment. With that, I will now turn it over to David to discuss the exciting news on this transformational acquisition. Thanks, Craig. Now on to our deal. I'm thrilled to share that we have entered into an agreement to combine Keto Crosby Columbus McKinnon in what is a highly complementary deal that we expect will drive compelling value creation for all of our stakeholders.

This acquisition enhances our scale and market position while delivering top tier market performance. Our combination creates a scaled intelligent motion platform with over $2,000,000,000 in sales, enhancing our holistic offering in material handling solutions. Increases the resilience of our portfolio with meaningful additions to our hardware and consumables portfolio with expanded scale and complementary geographic exposure and realizes a top tier margin profile with pro form a adjusted and approximately $70,000,000 of net cost synergies expected by the end of year three. Our combination also produces strong free cash flow which will enable significant debt reduction following the transaction. [indiscernible] as we've done consistently following prior acquisitions and over time that cash flow will create financial flexibility to reinvest in growth. On a pro form a basis, the trailing twelve month adjusted EBITDA multiple for the transaction is approximately eight times reflecting the expected run rate net cost synergies. In summary, this is a highly compelling combination for all stakeholders that establishes scale, strengthens our core increases resiliency, enables growth and positions Columbus McKinnon well for the future. The transaction is expected to deliver value for shareholders and be accretive to the company's adjusted earnings per share in the first year on a pro form a basis at run rate net synergies.

Normalizing for expected integration costs, we expect greater than 100% free cash flow conversion providing flexibility for deleveraging, Reinvestment and future growth. I have long had a great respect for Keto Crosby's strong portfolio of offerings and their talented team. Through this strategic combination, we are creating a company with a shared customer first culture focused on safety, productivity, uptime and performance. I look forward to welcoming Keto Crosby's associates to the Columbus McKinnon team. Building on a two fifty year history, Keto Crosby has become a leader in lifting and securement including hardware and consumables with globally recognized brands and a manufacturing footprint across over 50 countries. The company has a strong financial profile attractive margins, revenue across a complementary set of vertical markets and geographies and has grown at a 7% revenue CAGR over the last three years. While there are a multitude of benefits that have our team excited about this combination, Let me summarize the top five. First, the combination delivers a meaningful improvement in our [indiscernible] This not only doubles the size of CMCO, and enables broader reach It expands our portfolio and enables us to strengthen capabilities while reducing relative costs to deliver an enhanced value proposition for customers.

Strategic nature of this combination delivers benefits across all components of our growth framework. Strengthening the core with an increased breadth and depth of product that enables a one stop shop for all material handling needs. Growing our core with the addition of a meaningful position in lifting securement and consumables that includes a more resilient revenue source. Ito Crosby's lifting and securement consumables products sell at a low average selling price. But are relied upon in mission critical applications where the safety is paramount and failure is not an option. This combination of attributes drives stable replacement demand. Expanding our core, through a complementary geographic footprint that provides us a pathway to deepen Columbus McKinnon's presence in the APAC region where Keto Crosby is well positioned Similarly, we see opportunities to deepen keto cross use penetration in Europe, The Middle East, Africa and Latin America given Columbus McKinnon's reach into these regions. And given the strength of our combined free cash flow, we'll be better positioned to reimagine our core as we reduce debt and utilize our financial flexibility to accelerate growth. This flywheel effect provides even greater capacity to reinvest in growth over time. Significant scale also enables meaningful benefits to our collective operational excellence and commercial capabilities.

Over the past four years, we've invested meaningfully in Columbus McKinnon business system that defines standard processes, procedures and technologies to optimize our business. Going forward, we will leverage best practice practices across the portfolio bringing the most effective commercial and operational approaches to bear as we execute in support of our customers' needs. For example, I'm excited to leverage the lean manufacturing Japan facility where I had the privilege of spending time with Yoshio Kito and his team last month. By combining the best of what both Columbus McKinnon and Keto Crosby have to offer, We'll have a greater capacity to invest in tools, technologies and resource that differentiate our performance and improve customer experience across a diversified global footprint. Second, the combination positions us to benefit from growth tailwinds that are supported by global industry megatrends. Including near shoring, supply chain resilience, labor scarcity, industrial infrastructure investment and sustainability. For many companies, in region, four region, year shoring is reducing risk. Stabilizing supply chains and enhancing logistics efficiency. Workforce gaps, particularly in The U. S. And Europe, are accelerating the adoption of lifting assistance and automation across manufacturing and logistics. Aging facilities are modernizing to stay competitive Many countries across North America and Europe are suffering from an aging infrastructure requiring investments in automation for transportation, logistics, and smart infrastructure and regulatory requirements and sustainability goals are increasing demand for safer energy efficient operations across EMEA and A It's expected that these megatrends will continue to accelerate demand for our combined offerings and we are better positioned to capitalize on these opportunities with great people and a more fulsome portfolio of products serving a broader set of geographies.

Third, this combination results in a highly attractive financial profile with a more than doubling of revenue and a tripling of adjusted EBITDA with an adjusted EBITDA margin of 23% on a pro form a basis. And this top tier financial profile is expected to deliver free cash excluding one time costs related to the integration. Importantly, this combined financial performance will exceed the long term goals we established revenue adjusted gross margin and adjusted EBITDA margin during our twenty twenty two Investor Day ahead of schedule. While we will be relentlessly focused on the seamless integration of our businesses immediately after closing, we are identifying opportunities for longer term improvements that will enhance customer experience and financial performance over time. Fourth, this combination and its attractive financial profile are underpinned by significant synergies that deliver operational efficiency and long term value creation. Columbus McKinnon has a strong track record of successful integrations and cost synergy realization. At run rate in year three, we expect to deliver $70,000,000 of annualized net cost synergies. These cost synergies include supply chain optimization, and enhanced purchasing power. Operational efficiencies duplicative structural expenses, and overlapping third party expenses. We expect these synergies to phase in over a three year period with the majority being achieved in year two.

CMBS is expected to be a significant enabler of success with its market led customer centric and operationally excellent framework. This disciplined proven approach will enable consistent standard work, focus on improving customer experience and loyalty, continuously innovate and leverage best practices from across the combined organization and accelerate integration and synergy realization. While not included in our deal model, we also see some meaningful revenue synergy opportunities Specifically, cross selling opportunities with existing customers bridging gaps where customers do not overlap driving growth through our complementary geographic footprint leveraging KetoCrosby's strong APAC footprint for CMCO product, and CMCO's EMEA and LatAm footprint for Keto Crosby product. Attracting new customers with our enhanced scale, combined portfolio broaden capabilities and expanded reach and through simplification efforts that will improve the customer experience. Across a broader portfolio of products. And fifth, this combination results in a highly cash flow generative business that enables us to deleverage rapidly. This will be our primary focus for capital allocation in the near term. Upon completion of the deal, we expect to be approximately 4.8x levered on a credit agreement basis Through our significant cash flow and debt structure designed to We expect to reduce our net leverage ratio to approximately Over the long run, our strong cash flow generation characteristics provide the financial flexibility to reinvest in the flywheel of growth and accelerate the execution of our Intelligent Motion strategy.

By investing in businesses with strong cash on cash returns, we create even more capacity to reinvest in growth. As part of the transaction, Columbus McKinnon has partnered with CDNR, a leading private investment firm with nearly fifty years of history approximately $80,000,000,000 under management, and 50% of their capital invested in partnership deals. CD and R brings deep and proven experience delivering growth and operational improvement in industrials and manufacturing companies. As a result of CD and R's investment in Columbus McKinnon, it is expected that CD and R's Mike Lamach, Nate Sleeper, and Andrew Campelli will join the company's Board of Directors upon closing. We plan to fund this acquisition through a combination of $3,100,000,000 of committed debt financing, including a $500,000,000 revolving credit facility from JPMorgan, and $800,000,000 of perpetual convertible preferred equity investment from CDNR. The initial debt financing structure provides flexibility for timely which we expect to replace with a permanent financing structure. Company has a strong track record of quickly delevering its balance sheet following prior acquisitions. On behalf of our entire management team and our Board of Directors, we are thrilled to welcome Nikita Crosby and seeding our teams to Columbus McKinnon. With the addition of Keto Crosby's exceptional business, and CD and R's world class expertise, to our already strong team I have never been more excited about the future of our company.

Let me end where I began. We are combining Keto Crosby with Columbus McKinnon in a highly complementary deal that we expect will drive compelling value creation for all of our shareholders. This acquisition enhances our scale and competitive position elevates our financial profile creates significant value for shareholders and generate significant cash flow to deleverage and enable growth over time. This deal delivers on our Investor Day targets ahead of schedule and results in an improved platform for future value creation over the long run. Operator, we'll now open the line for questions. Thank you.

Ladies and gentlemen, we will now begin the question and answer session. Your first question comes from the line of Matt Summerville from D. A. Davidson. Please go ahead. You've got Canyon Hayes on for Matt Summerville tonight.

Maybe just to open up the discussion, Hi, good afternoon. Just to open up the discussion, any kind of early early prioritization for the $70,000,000 in cost savings and any quantitative guidance we can think to as far as top line synergies? Yes. Good afternoon. Hi. This is David Will And just as far as the $70,000,000 is concerned, I outlined those categories in my prepared remarks. And as I mentioned, we'll start with supply chain optimization and enhancing purchasing power. And operational efficiency focused items We do believe there are duplicative structural expenses as we are combining two companies of roughly equal scale. And overlapping third party expenses. And so I would characterize the synergy opportunities in those four primary buckets And then as far as the revenue synergies that we've identified, we think there are a number of paths for revenue synergy opportunities that include leveraging our global roofline and getting geographic coverage enhancements cross selling to existing customers, leveraging the strengths of both businesses to provide a simpler solution for our customer base. And others that I won't get into here now, but I think those are opportunities that we haven't built into our model and would see as upside to the existing existing framework that we've outlined.

Great. Thank you. You. As far as we think about the longer term margin profile of the two businesses, are there any structural differentials we should think about? And between the two assets The Keto Crosby business has a portfolio that includes a larger portion of what we would call lifting and securement consumables These are items such as shackles and hooks and manual tools, manual lifting equipment that is wear oriented. And has requirements that limit wear to less than 10% for it to be safe to use. And these products serve high highly critical applications. And so failure is not an option Security and performance is critical. And the average ASP for those products is quite low, dollars 500 and less generally. And so when you think about criticality versus the requirement of the item and the potential that a used item might be have been exposed to extreme temperatures, which can change the metallurgy. As well as where or other exposures that could deem the product to be more brittle or have other challenges. Given those characteristics and risks, people generally decide to use new new components in that space when doing work that is critical and where failure is not an option.

And so with that in mind, those products have a more resilient revenue [indiscernible] And over time can command I think a really healthy return for the business. Thank you. You're welcome.

Okay. Thank you. And your next question comes from the line of Steve Ferrazzani from Sidoti. Please go ahead.

Good evening, David, Greg. Appreciate you outlining what's seems like interesting combination. I do have to ask obviously, you've levered up before and successfully delevered multiple times. But in this case, you have the combination of what clearly is some global uncertainty that at least in the short term is affecting your business, and you're levering up to almost five times Was there any thought to given the timing of this to lever up so much how you came around to being comfortable doing it?

Yes. So Steve, it really boils down to the confidence we have in the free cash flow generation of the combined businesses. We believe that we're going to generate over $200,000,000 of free cash flow a year and that's going to grow. And we also one other important fact is from a timing perspective, we need regulatory approvals. We think it's going to we'll get that in the first half of the year and be able to close. But I think as we march through the upcoming quarters, I think people are going to get more and more confident with the current administration and what the policies are going to be and a lot of that uncertainty is going to be removed. So we would expect actually EBITDA to grow going forward, which will help on the leverage perspective. And And just to add on to, we spent a lot of time looking at the synergies, the cost synergies and clearly have a range of outcomes. We have upside to deliver potentially on the cost synergies. And we think that between that and once again the free cash flow, we're comfortable with our ability to delever very quickly. And as David said in his prepared remarks, it's going to delever roughly a turn a year.

Okay. My follow-up is just on location of Quito's facilities. Obviously, with the tariffs being high on everyone's mind right now, Can you give us a general overview of where their facilities are And do those facilities serve fairly local geographies?

Yes. They're generally in region for region.

I would say, with the exception that Japan supplies a lot of product into The U. S. And so that is a supply chain dynamic within their business, but we see that as a relatively low risk relative to tariff implications. And so I think there's a a moderate exposure associated with that business. [indiscernible] Thanks, David. Thanks, Greg. I'll get back in queue. Thanks, Steve.

Thank you. And your next question comes from the line of Chen Tanwanteng from CJS Securities. Please go ahead. Hi, good afternoon. Thank you for taking my questions. I was wondering how Keto fits into your current simplification strategy the mix shift to higher growth and higher margin markets, number one, Number two, I guess, do you have to pause or readjust your current consolidation efforts with so many new assets and products coming into your network and portfolio?

Yes, appreciate it. Thanks. And we we do see this fitting well into the framework that we've outlined has historically. And so if you think about our growth framework that highlights strengthening the core, growing the core, expanding the core and reimagining the core, this fits squarely in the strengthening and growing categories and enables expansion and ultimately reimagining as we pay down debt with this superior cash generation and enable future investment in growth. And so this was an opportunity to combine two really good businesses and bring a tremendous value, we think, not only to our shareholders, but to our customers. And we see the combination as something that fits very well within the framework that we've talked about. And as you can see with the margin profile that we're forecasting, this will ultimately deliver a top tier financial profile at scale. And so we saw this as a really compelling opportunity to do that. And then accelerate as we get to that stage in our integration of this business the deployment of capital in a way that accelerates our our transformation into some of those more secular growth markets over time.

Okay. And then just to sorry, go on. Yes, I was going to say, I think you had a second part of your question on does this impact our footprint consolidation. So that's really a core part of our eightytwenty strategy. And so as you know, we've been moving forward with our new facility in Monterey. We did as David mentioned in his prepared remarks, consolidate two smaller facilities. This quarter, that's going to be happening in the fourth quarter. That'll have about $3,000,000 of benefit going forward. So we think that's a key part of eightytwenty and we're going to continue to move forward with our existing plans. Okay. Thanks, Ray.

Second, I was just wondering if you could expand a little bit on your confidence in the synergy numbers. And the cash flow just given the uncertainty and the full blown trade war. Is that achievable if you have these tariffs that we've that you've outlined in the exposures that both you and Kito have? Yes, John. We do believe that that's achievable. We have got a range of possibilities. And I think we've been reasonably conservative relative to what the targets are. We have done a tremendous amount of work both internally and with our advisors to arrive at a set of objectives that we've also vetted with the Keto Crosby leadership and feel like we've got a a good calibration on where those numbers should be. And that those are very achievable over the timeframe that we've outlined.

And John, just to add on Yes, sorry, just to add on. So from an exposure perspective, for Columbus McKinnon, in a worst case scenario, 25% across the board, we're probably looking at in the neighborhood of $10,000,000 to $20,000,000 tariffs and Quito Crosby has significantly less than that exposure. So we still think we're going to be would it have an impact? Yes. But not not significant enough to really affect leverage. Right. And just to clarify that $10,000,000 to $20,000,000 is without passing through the impact of tariffs in terms of price increases. And so we'd be working to avoid those impacts on our customers But clearly, if they weren't avoidable, we've had a history of making sure that we work effectively with our our channel partners to pass those on and preserve margins in the system.

Got it. That's helpful. Thank you.

Sure. Thank you.

Thank you.

Thank you. Your next question comes from the line of Will Lipac from Seaport Research. Please go ahead.

Hey, thanks. Good evening, guys.

So I wonder if we could just get some metrics here on keto cost. I mean, what's the price multiple that you're paying for Keto Crosby? Yes. It's 8x post synergy leverage.

Okay. How about pre synergy? Pre synergy, it's just over 10.

Okay.

And then what about other For us, for some of us who might not be familiar KetoCrosby, how much can you tell us how much sales they had like the LTM where their gross margin is?

Sure. They have one Absolutely.

It's in the deck, Walt, and they have $1,100,000,000 worth [indiscernible] They have 23% gross margin EBITDA margin. Sorry, EBITDA margin high 30s gross margin or 40 ish gross margin depending upon how you calculate it. They have grown at 7% over the last three years, [indiscernible] They have 4,000 channel partners 600,000 plus end users, that have been trained by the company And they're pretty geographically diverse. Well situated around the globe, about 20% of their business in it is in Asia. Close to 60% is in North America. And then the European business is about 20% and they have about 4% in Latin America.

Okay, great. Thank you for that. And yes, that does. And so you're saying that the 60% that's North America presumably that's mostly U. S. [indiscernible] Latin America and well, Canada is included in that North America Columbus.

Okay. And how much is is coming into The U. S. From outside The U. S. That might be impacted by [indiscernible] Yes, it's modest. There's the most significant import amount or amount of kind of transferred product from overseas locations is coming in from Japan.

Okay.

Okay. All right. And then the the factory consolidation in Mexico, I guess since we talked last time at your second quarter conference call, that was pre discussions about tariffs what are you guys thinking now if there are tariffs, is Mexico really the place that we want to be? Consolidating? And the two factories that you mentioned today, are those both going from The U. S. Down to Mexico?

Yes. So on the second one, it's a combination. There could be some product lines moving into Mex sense sense to do so after we evaluated it. And in terms of the first part of the question related to [indiscernible] It's once again, I think if there is any tariffs from Mexico or on Mexico and vice versa. It would be It would impact our savings some, but remember, we're looking at very substantial savings when we're fully consolidated. To the factory. So it still makes sense to move forward with with our plans.

Okay.

Okay. Thank you. Thanks, Walt.

Thank you. And your last question comes from the line of Jantan Wangping from CJS Please go ahead.

Hi. Thanks for the follow-up. I was just wondering if you could give a a blended interest expense or rate expectation once you've completed the [indiscernible] Yes. So it will be a market rate. But right now we're expecting it to be below 8%.

Okay, great. And one more question, just I mean, this is one of your larger competitors and I'm wondering if you're anticipating any regulatory antitrust or anything like that? And where do you think the greatest risk might be?

Right, right. So we've assessed this and have obviously worked closely with our advisors to assess risk here and we understand that it's a low risk and we're going to be filing as we should for a process like this. And so we're going to proceed with the filing process and we'll look forward to results and feedback on that within thirty days and then proceed from there. The most significant overlap within product categories would be in the power chain hoist category. And so, we'll be working closely with our teams to assess that as we go forward. Okay, got it. Thank you. Great. Thanks, John.

Thank you. There are no further questions at this time. I will now hand the call back Mr. David Wilson for any closing remarks.

Perfect. Thanks, Yna. And thank you to everyone for joining us today as we celebrate this milestone in our history. Let me reiterate that We have significantly scaled our business and positioned our business for the future. As always, Christy will be available after the call if you have any questions Thank you.

And this concludes today's call. Thank you for participating. You may all disconnect.