Christian Zyla: Moving to the UAW comments, just want to make sure I understand your comment. You quantified about $27 million in monthly revenues from the Detroit 3 automakers impacted by the strikes. How should we think about haircutting that? I guess, is like a 20% haircut on those revenues fair? Or are you shifting production from some of those products in the near term? Just trying to think about how we should haircut that.
Matthew Crawford: So I’m going to let Pat gather his thoughts here for a second. Please understand that the UAW strikes have not only impacted — or strikes, in general — organized labor strikes have not only impacted the big 3. While that is the significant chunk of impact, there have been other labor disruptions in the marketplace. I might point one out, Mack Truck, who is still currently dealing with a strike. So I just want to point out in this environment, this is an ongoing thing that is happening in the industrial workplace, is I think many of these unions are sort of the last people at the table relative to what the nonunion workers have gotten, particularly in the direct labor side over the last several years. So we probably will see more of this is my guess.
But this isn’t just the big 3 for starters, particularly as we think about Supply Technologies, who doesn’t do as much auto. So I would just comment briefly on that risk and then turn it back over to Pat.
Patrick Fogarty: Yes. I would comment that the ability to forecast the impact of the strikes is very, very difficult. It’s fluid. There’s tentative agreements that are — have to be voted on. Ramping up each of our production sites based on volume demand coming not only from the OEMs, but as Matt mentioned, the Tier 1s and Tier 2s, we’ll start to see that come back throughout the month of November. My script included the monthly impact based on what we knew as of the end of October, and that’s probably a good barometer. Obviously, as the production plants get back to work and volumes start to begin to get back to normal levels, $25 million to $30 million a month will drop pretty significantly. But it’s unknown right now at this time how quickly that’s going to happen.
Christian Zyla: Got it. That’s helpful. And then I guess switching over to M&A. So Southern Fasteners seems to have been a really good value deal when you guys bought it. Are there other good value deals out there? And what does your pipeline look like? And what are you most interested in acquiring?
Patrick Fogarty: The pipeline has always been consistent. The diversity of our business allows us to get a look at a number of strategic opportunities throughout the course of the year. We’re careful with the capital allocation. Southern Fasteners was a tremendous acquisition, allowed us to expand our industrial supplies business. What we’re seeing in the marketplace, credit markets are tightening. And as a result, valuation multiples are starting to drop. And so there could be more opportunities that come our way. We continue to look for strategic acquisitions that are accretive to our margins, not only our gross margins, but our operating income margins, and those businesses that we’re able to grow at a faster pace than the current organic growth levels.
Christian Zyla: Great. And just last one for me, I guess a follow-up on Fasteners or Southern Fasteners. Can you just remind us how are Southern’s margins relative to the overall ST segment? And then what are the opportunities that you guys think about for improving that in the long term?
Patrick Fogarty: Sure. Before we acquired Southern Fasteners, we had built up an industrial supply business within Supply Technologies, which is primarily an OEM production supply chain manager. The margins are higher than our segment margins would indicate in that space. Typically, those are MRO products or products used to fix equipment fasteners and other supplies used in the production plants that often are critical spares needed in the business that generate higher margins. I won’t comment on the individual margins in that particular business for us, but they’re higher than the traditional segment margins that you see.
Matthew Crawford: I would also add to that, that as we think about how to identify opportunities in Supply Tech, our focus is going to be bringing value to our customers. We think that there are opportunities to do that, which will be accretive and provide improved consolidated margins. But our strategy both internally and externally is to continue to provide more value to our customers. So — but yes, I think that there will continue to be opportunities to extend that product portfolio in a very accretive way. And if you think about it, the systems are already set up, which is nice.
Operator: We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Matthew Crawford for any closing comments.
Matthew Crawford: Great. Thank you all for your interest and your ownership in our company and know that while times are still interesting and then challenging in many ways, again, we have a more focused, disciplined business model here, and we’re anxious to take advantage of what we see as a very bright future in industrial space, both globally and particularly in the U.S. Thank you very much. Bye-bye.
Operator: Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation, and enjoy the rest of your day.
