Peter Skibitski: Hey, Mike, I was wondering if I could ask you a big picture question just because in industry you do touch so many end markets. Obviously, we’ve seen kind of ISMs be below 50 here in the US for about a year now and people think Europe is already in a recession. But things have slowed a bit in industrial organically, it seems like, but not — so your factories are full still. So, I just wanted — what does it feel like to you? Does it feel like we’re kind of in the late part of the cycle? Or do you think all the Federal spending is kind of offsetting it for you guys? How does it feel like to you? Are we deep in a recession? I’m just wondering given all the end markets that you touch and the visibility that you have, just kind of your gut feel.
Michael Hartnett: Well, I think, right now, we’re kind of drifting with the tide in terms of economic demand in the industrial. I don’t think we’re gaining great — in any great way, and we’re not losing. We’re staying about even. I mean, you can grow industrial if you can grow your market share and if you have some interesting new products to introduce. So, to some extent, you have to make your own wind. And so, we’re building wind machines. And so that’s how we see it. That’s how we see it.
Peter Skibitski: That’s fair. No, it makes sense to me. And I guess, to the extent you have new — I imagine maybe you guys are lightening up on pricing in certain areas, because it’s a little bit of a disinflationary environment. But I guess, to the extent that you have new product introductions, I don’t know how widespread they are, but maybe that gives you an opportunity on price. Is that the way to think about it?
Michael Hartnett: Yeah. Well, we’re — when we bought Dodge two years ago. We — I think the first order of business is to kind of get your fingernails into the business and figure out how to improve it and how to synergize it with RBC and all that sort of thing. And I would say that took an endless amount of meetings. So, your product development isn’t on the forefront. And so, after the first year, we started pulling out what new products they’ve been developing for the last five years that are ready for commercialization and found some very, very promising ones. And we also found that in some of their product cases, their sales were constrained by the ability of their supply chain to increase production. And the supply chain was unwilling to increase production because they were happy with whatever they were getting for the production they were making.
So, based on that, we decided that, hey, listen, this is a well — these are well accepted product in the marketplace. And if we produce more, there is a market for them. And so, how do we produce more? And the answer to that came that we need to open up floor space for production equipment for these particular items. And so, hence a new plant in Tecate is constructed, and off we go. And so that’s kind of — I mean, we’ll get Dodge cooking, but it wasn’t the first order of priority. And it usually never is with the new acquisition. It takes some time to go through the motions and integrate. And so, we’re beyond that now, and we’re into the growth mode.
Peter Skibitski: That’s great. And I appreciate the color. I’ll get back in queue.
Operator: Thank you. Our next question is from Steve Barger with KeyBanc Capital Markets. Please proceed with your question.
Steve Barger: Morning, guys. Your Industrial segment outperformed some of the other public bearing companies on the top line this quarter. Do you think that’s all end market exposure? Or are there some other structural differences between Dodge and the public competitors that make your platform more resilient?
Michael Hartnett: We’re just better than everybody. We service the same end markets. It’s — in many cases, there’s great overlap with some of our end markets and to some extent, some of our products. So, I think, we do an exceptional job at Dodge, and in customer service, and customer support. And it’s really well recognized. And — so we don’t test anybody’s loyalty. And in times like this where you’re sort of drifting with the industrial tide, you definitely want to be a leader in a company that the customers can trust. And that’s kind of where we are. And I think that’s accruing to our benefit.
Steve Barger: Yeah. And it certainly seems to be accruing to the margins. Incremental margin in 1Q was 52%. Industrial margin was up 570 basis points to almost 27%. As I look at this quarter, consolidated incremental was 75%, which is pretty amazing. Did you see a similar result in the Industrial segment in 2Q margin wise?
Robert Sullivan: Yeah. The Q2 margins in Industrial look very similar to what you saw in Q1, sustained strength there.
Steve Barger: And we’re saying all this is primarily Dodge synergy?
Robert Sullivan: I think the Dodge Synergy is absolutely driving their growth at 1,100 basis points that Dan talked about earlier, 1100%. But the RBC industrial products margins have done well — as well. So, it’s really been across the entire segment that we’ve seen a lot of strength in industrial.
Steve Barger: Got it. And just with the industrial environment becoming increasingly dynamic and Mike, you referenced that we’re kind of drifting along. Is there any chance that you’ll give us segment margins in the release, so we can have more informed conversations on the earnings calls?
Michael Hartnett: Yeah. We can certainly look at that. It’s obviously in the Q every quarter, but we can look at breaking it out in future releases for you.
Steve Barger: Yeah.
Michael Hartnett: Yeah. The story is the Industrial margins are still around the 45% mark. Aerospace margins ticked up this quarter, less than a point, but they’re definitely up, which is the trend that we were looking for as the plants continue to pick up the capacity with the increased build rates. And I suspect we’ll continue to see that as well. We should see the Aerospace gross margins this quarter on an adjusted basis, we were at 40%. And I think we’ll continue to see that grow from there in the future periods.
Steve Barger: Got it. Yeah. It would be great to get that data in real time with the rest of your release just so we can update our models before the call. Thanks.
Operator: Thank you. Our next question is from Seth Weber with Wells Fargo. Please proceed with your question.
Unidentified Analyst: Hey, good morning, guys. This is Larry on for Seth this morning. Just wanted to — was wondering about the Specline acquisition, if you could give a little bit more color on that and what your expectations are for Specline going forward?
