Financial Data and Key Metrics Changes - Consolidated sales increased by 8.4% year-over-year, with acquisitions contributing 6 percentage points to growth and organic sales growth at 2.2% [20][24] - Gross margin was 30.4%, down 19 basis points from the prior year, primarily due to LIFO expense of approximately $6.9 million, which was significantly higher than the previous year's $0.7 million [21][22] - Reported EBITDA increased by 3.9% year-over-year, resulting in EBITDA margins of 12.1%, down 52 basis points from the prior year [23][24] Business Line Data and Key Metrics Changes - Service Center segment sales increased by 2.9% year-over-year on an organic basis, driven primarily by price contributions, while volumes remained relatively unchanged [24][25] - Engineered Solutions segment sales increased by 19.1% year-over-year, with acquisitions contributing 18.6 points of growth; organic sales increased by 0.5% [27] - Automation orders were up 20% year-over-year, indicating strong demand across various applications [14][37] Market Data and Key Metrics Changes - Year-over-year trends across the top 30 end markets showed 15 markets generating positive sales growth, up from 11 in the prior year [6] - Growth was strongest in metals, aggregates, utilities, energy, mining, machinery, transportation, and construction, while declines were noted in lumber, chemicals, oil and gas, rubber and plastics, and refining [7] Company Strategy and Development Direction - The company remains focused on capital deployment, including an 11% increase in quarterly dividends and over $140 million in share buybacks during the first half of fiscal 2026 [9][29] - The acquisition of Thompson Industrial Supply is aimed at enhancing the company's footprint in Southern California and expanding technical capabilities [10] - The company is optimistic about growth potential in the second half of fiscal 2026, driven by increased technical MRO needs and positive demand signals from various end markets [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth trajectory entering the second half of fiscal 2026, despite mixed market conditions [10][34] - There is an expectation of ongoing macro and policy uncertainty influencing customer spending behavior, which may lead to variability in monthly sales growth [31] - The company anticipates a more productive operating environment supported by lower interest rates and favorable tax policies [34][35] Other Important Information - Cash generated from operating activities was $99.7 million, with free cash flow totaling $93.4 million, representing a conversion of 98% relative to net income [28] - The company ended the quarter with approximately $406 million in cash and a net leverage ratio of 0.3 times EBITDA [29] Q&A Session Summary Question: Clarification on Engineered Solutions orders and book-to-bill ratio - Orders in the Engineered Solutions segment were up over 10% on an organic basis, with a book-to-bill ratio above 1 for three of the last four quarters [37] Question: Insights on fluid power comparisons and end demand trends - Destocking has been worked through, and there is encouraging performance in the mobile off-highway part of fluid power, reflecting increased industrial activity [38] Question: January sales trends and impact of December's performance - January sales are trending up by mid-single digits, with Engineered Solutions showing high single-digit growth, indicating a recovery from December's seasonal weakness [40] Question: SD&A growth relative to revenue growth - Organic constant currency SD&A growth was less than organic revenue growth, and a slight increase in SD&A is expected as the company laps Hydradyne [41][42] Question: Capital allocation priorities and share repurchase authorization - The company has about 700,000 shares left under the current repurchase authorization and will balance share repurchases with organic growth investments and M&A [46]