Michael Hartnett: Well, we just completed — we expect to complete this quarter a plant in Takata, that’s about 100,000 square feet. And that will be pretty much earmarked for the Dodge business. And so we will move manufacturing from the US to Mexico for Dodge for the purpose of opening floor space in one of the Dodge plants, where we have new manufacturing equipment arriving and no source base to accommodate it. And so, we’re sort of playing musical chairs there with one of the Dodge plants. And — so the new equipment that’s arriving in the plant will be for increased volume on product lines that are very successful but constrained by production. So that’s the first phase of Takata — that’s our first phase. Our second phase will probably be for lower-cost manufacturing of some of the Dodge products and maybe some insuring re-shoring some of the supply chain.
Seth Weber: That makes super helpful and makes total sense. Thank you for clarifying that. That’s for me.
Michael Hartnett: Thank you.
Operator: Our next questions come from the line of Pete Osterland with Truist Securities. Please proceed with your questions.
Pete Osterland: Hey. Good morning. A month or much lower, this morning and thanks for taking our questions. First just had a question on raw materials, we’ve heard about some tightness in the bearings market stemming from lack of material availability. And just wondering, if you were seeing anything like that where there any challenges procuring materials or any additional cost inflation? Just any color there would be helpful.
Michael Hartnett: Yes. Well, I mean in Aerospace and Defense, materials are more exotic than not and difficult to get. If your planning horizon is short, you’re going to be buying it from third parties at extremely higher prices. So your planning horizon needs to be long and long is probably 60 weeks. And the special grades of stainless steel are — and that’s really the only way to acquire them. And overall I think in the aerospace business from what we hear from customers that keep coming to us is that bearings are really hard to get, and so that’s music to our ears. And that’s part of the reason why we’re generating so many contracts with people to supply them over a longer term. Unfortunately it takes us a long time to get that material.
So to turn that into revenues isn’t the most immediate thing, but it turns into revenues over time. And very often customers are willing to pay a premium if you have to buy steel from a third party at a high price and are more than willing to absorb the price difference. So I would say there’s a lot going on in our business right now with regard to supply chain.
Pete Osterland: Very helpful. Thank you. And then just turning to industrial. What are you seeing within your distribution sales channels in terms of customer inventories? Are they generally rightsized? Or have you seen any signs of destocking activity there?
Michael Hartnett: Yeah. I mean, we haven’t seen much destocking. As far as I can tell, they’re rightsized to a little bit heavy, but not — they’re not overwhelmingly heavy.
Pete Osterland: Great. I’ll leave it there. Thank you for taking the question.
Operator: Thank you. Our next questions come from the line of Joe Ritchie with Goldman Sachs. Please proceed with your questions.
Vivek Srivastava: Hi. Good morning. This is Vivek Srivastava on for Joe. Thank you for the question. My first question is on the industrial market. Just if you can provide some color on how the trends are diverging between original equipment versus aftermarket sales growth and potentially how is January trending? That would be helpful.
Michael Hartnett: On the industrial side or…
Vivek Srivastava: On the industrial side, correct.
Michael Hartnett: Yeah, Vijay, let us refer to our charts here for a minute. I don’t think we would have that on how we’re trending right now, because we’d have to break that information down how much has come into distribution, how much is coming in through OEM. But Rob I think you have the industrial OEM and the industrial distribution.
Robert Sullivan: Yeah. So the industrial OEM for Q3 was $79.4 million effectively flat year-over-year and industrial distribution was $165.3 million. So again very close to last year. So it’s not as if one was diverging if that’s your question.
Vivek Srivastava: Yeah. No that’s definitely helpful. Thank you. And then I noticed on the food and beverage market you said it’s going on well for you guys. And we are hearing from your peers that it was actually one of the softer markets for them. So just maybe wanted to zoom in on this end market? And why you are seeing better trends than some of your peers? Is it more market share driven? Or is it a product offering?
Michael Hartnett: Yes. I mean, I don’t think we can speak for our peers but I would say that we spend it’s a priority for us. So we direct a lot of attention to that market both in terms of calling on customers identifying, problems problem solving product development new product introduction. So it’s active for us. It’s — it performs well for us, but we have to work at it. It doesn’t — it’s not on autopilot.
Vivek Srivastava: Great. Thank you.
Operator: Thank you. Our next questions come from the line of Pete Skibitski with Alembic Global. Please proceed with your questions.
Peter Skibitski: Yes. Thanks, guys. A couple of questions on margins. One on gross margin it sounds like if you kind of hit your mark for the fourth quarter gross margin it sounds like for the full year fiscal 2024 you’d be up at least maybe 1.5 points call it roughly. So I’m just wondering for fiscal 2025 do you see the ability to move it up another point or so on the gross margin line?
