Sam Darkatsh: A couple of questions if I could sneak two in, first the guidance and I know you’ve typically craft your guidance very conservatively but the guidance seems to imply HBP margin degradation sequentially, despite the fact that I know you’re coming into a little bit more of your selling season seasonally. What sorts of things would have to occur for there to be margin degradation from where you’re seeing margins now? And then I’ve got a follow-up question too, if I could.
Brian Harris: Sure. So we’re still anticipating the 30% plus margin in the back half of the year. And we’re not seeing any pricing pressure what could occur is mix. And also we had some steel costs that will be — we know will be coming through in the third quarter in particular that will hurt margin a little bit sequentially.
Sam Darkatsh: Got you. So that actually segues, my next question perfectly. So I think there was — at least there was an announced price increase in the Residential Garage Door industry in March from one of your competitors and it apparently didn’t stick or at least didn’t stick yet. Knowing that the steel prices are a little bit of a pressure Brian and that volumes residentially are now turning positive what — why didn’t that price increase get matched? Or why doesn’t the market bear that right now?
Brian Harris: We focus on our structure of costs and what we feel is good value to our customers. I can’t really comment on why someone else’s price increase didn’t stick. We see a good market. We will continue to monitor costs and take actions if necessary.
Operator: Thank you. The next question is from the line of Julio Romero with Sidoti & Company. Please go ahead.
Julio Romero: Thanks. Good morning, Ron and Brian. On CPP, can we maybe talk about the inventory levels by geography across your UK and US customers compared to three months ago, how are those levels doing right now? And do you think the spring summer selling season kind of helps flush out the remaining inventory levels there? Or is it more of a longer time frame in your view for inventory to normalize?
Brian Harris: Yes. So inventory positions at our customers are improving though there is still some work to do. We do expect that to normalize by the end of our fiscal year as we get through the Q3 spring selling season and into Q4, particularly on the fan side since a lot sells in Q4 and our internal inventories should decrease. So the US inventory that applies to the US when those UK inventory still is a bit high. That may take longer. Their economy has been a more difficult spot, but there — that part of our business is not so large, it’s not affecting us too much. And Canada and Australia are fine.
Julio Romero: Okay. That’s very helpful. And then for my follow-up just staying on CPP. Curious how you guys are doing in regards to your distribution centers on the East and West Coasts? Are they still kind of maintaining those high service levels as you’re getting further along in your global sourcing strategy?
Brian Harris: Absolutely. Yes, no change in our service levels. We’re able to provide our customers everything we need.
Operator: Thank you. Our next question is from the line of Justin Bergner with Gabelli Funds. Please go ahead.
Justin Bergner: Good morning, Ron. Good morning, Brian, good quarter. First question is just on the residential HBP volumes. What are the underlying drivers that you think are behind the more positive demand there? And is there any kind of offset from commercial being weaker than expected or is that just softening as you expected a couple of quarters ago?
Brian Harris: On the residential side, we have continued to come out with great products that people are taking to very well. We had the best service, the best lead times, the best dealer network, the best production. I might have skipped one or two. I don’t know best quality. That’s showing in the marketplace. Overall an investment in a residential garage store is a good investment. There was a recent survey done by Zonda or recent reports on by Zonda that shows that the ROI on putting a new garage — a new garage store is about 200%.
Justin Bergner: Okay. And any change to your capital allocation priorities? Are you going to continue to repurchase shares? You’re going to look at bolt-on M&A?
Ron Kramer: I’d say that we’re in a very luxurious position that our businesses are performing well. Our cash flow gives us optionality. Our stock remains a compelling value. And while it’s clearly outperformed any index over any period of time in any peer group competitor, it’s still undervalued and we have and we will continue to take advantage of that. Separately, the M&A outlook for us is a robust pipeline of things that we think are value-enhancing and possibly additive, particularly on the HBP side, but the predictability of what we’re going to be able to do and when we’re going to be able to do is always the uncertainty of looking at M&A. As far as capital, we can buy back stock and do M&A. We said that our leverage of 3.5 times is an outer limit of anything that we would ever consider doing on the M&A side.
