Beacon Roofing Supply, Inc.
Q4 2008 Earnings Call Transcript

Published: 2 Dec 2008

[Operator:]

Welcome to Beacon Roofing Supply’s fiscal year 2008 fourth quarter and year-end earnings conference call. My name is Kristen and I will be your coordinator for today. At this time all participants are in a listen-only mode. We will be conducting a question and answer session toward the end of this conference. At that time I will give you instructions on how to ask a question. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. On this call, Beacon Roofing Supply may make forward-looking statements including statements about its plans and objectives and future economic performance. Forward-looking statements are subject to a number of risks and uncertainties. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors including but not limited to those set forth in the Risk Factors section of the company’s latest Form 10K. On the call today for Beacon Roofing Supply will be Mr. Robert Buck, Chairman and CEO, Mr. Paul Isabella, President and COO, and Mr. David Grace, Chief Financial Officer. I would now like to turn the call over to Mr. Robert Buck, Chairman and CEO.

[Robert R. Buck:]

Welcome everyone to our fourth quarter and fiscal year 2008 earnings call. As you might imagine we are excited to announce these results and we’re particularly excited for our loyal shareholders and fellow employees. A lot of hard work went into making these results possible. I will begin the call with a few summary comments and then David Grace, our CFO, will present the financial details for the quarter and the fiscal year. When David is finished, Paul Isabella, our President and COO, will answer prepared questions that we know you want answered during this call. Then when Paul is finished, we will open the call for additional questions you may have. At the conclusion of our third quarter earnings call a few months back if you recall, I stated that our fourth quarter was off to a strong start and you can see from our just released earnings the fourth quarter remained strong. Our growth was strong, our margins improved and we controlled costs in a manner that you have grown to expect from us. EPS for the quarter is higher than even the high assessments, many of which were updated recently. Again we are grateful for this performance in these tough financial and economic times. The first quarter of fiscal ’09 is off to a very good start and I sense a good feeling in our company that we will have another successful fiscal year. I will now turn the call over to David and he will present the financial details for the quarter and the fiscal year.

[David R. Grace:]

For the first time in quite a while, all of our results for the quarter are from our existing markets. Sales increased 14.9% to $567.2 million from $493.8 million in 2007 with residential and non-residential roofing product sales increasing 36.8% and 6.6% respectively while complimentary product sales declined 11.8%. Roofing product sales benefited from unusually large and frequent rises in price during the fourth quarter, mostly in residential shingles. We also saw strong re-roofing activity in storm-affected regions and continued growth in commercial roofing activities in most markets. Complimentary product sales which we believe are much more discretionary in nature than roofing products continued to be negatively impacted by both the slowdown in the economy and lower levels of new residential construction. We estimate inflation in our product costs based upon our current inventories product mix and invoice costs as compared to the invoice costs of the same products a year ago. Based upon this estimate, our product costs were up 11% to 14% compared to 2007 levels while pricing to customers increased slightly ahead of those product cost increases. While there was very little inflation impact on our complimentary products, we estimate that about 75% of our roofing product sales growth in the quarter came from inflation. We closed two branches and did not open any during the current quarter with one branch opened in the fourth quarter of 2007. We operated a total of 175 branches as of the end of this quarter compared to 178 last year. We had 64 business days in 2008 compared to 63 days in 2007 which we estimate boosted our sales growth by 1.8%. Fourth quarter gross profit was $139.7 million for 2008 as compared to $108.2 million in 2007, a 29.2% increase, with gross margins increasing to 24.6% from 21.9% in 2007. We use the weighted average cost method in valuing our inventory and the impact of that method combined with buying ahead of the price increases allowed us to increase gross margins as we increased our pricing in concert with the vendor announced price increases. The effects of the price increases along with increased demand in the storm-affected regions and a slight mix change towards residential roofing products led to significantly higher gross margins. While we cannot precisely calculate the effects of these unusual price increases on our gross margins, we expect our future average gross margins to be in the range of 23% to 24% dependent upon product mix. Operating expenses increased $8.9 million or 10.9% to $90.8 million in 2008 from $81.9 million in 2007. Despite year-over-year headcount reductions, payroll and related costs increased by $5.1 million as our strong quarterly performance saw us reach performance based pay and profit sharing goals. Bad debt expense increased $3.5 million as we experienced higher write-offs and increased our reserves due to the economic and credit climate. Increased transportation costs and higher sales volumes pushed other expenses up $1.4 million while depreciation and amortization dropped about $1 million. During the quarter we expensed $3.7 million for the amortization of intangible assets recorded under purchase accounting compared to $4.5 million in 2007. Operating expenses as a percentage of net sales decreased to 16.0% from 16.6% as we leveraged our fixed costs over our higher sales pace. Interest expense decreased $1.1 million from the pay-down of debt since 2007 and also lower interest rates. Income tax expense of $17.8 million and $17.7 million was recorded for 2008 and 2007 respectively. The slight increase in our effective rate to 41.7% in 2008 from 50.5% in 2007 was primarily due to the allocation changes affecting our state taxes and true ups of prior year’s accruals. We expect our future tax rate to range from 40.5% to 41.5%. As a result of all I’ve mentioned, we had net income of $24.9 million in our fourth quarter compared to $11.3 million in 2007. Diluted net income per share was $0.55 compared to $0.25 in 2007, a 120% increase. Our earnings before interest, taxes, depreciation and amortization, and stock-based compensation are adjusted EBITDA which is reconciled to our GAAP net income in our press release was $58.5 million in 2008 as compared to $36.9 million in 2007. As for our fiscal year results, annual sales increased 8.4% to $1.78 billion in 2008 from $1.65 billion in 2007. Our acquired markets increased $119.4 million while existing markets saw a sales increase of $19.3 million or 1.3%. We estimate that overall inflation was approximately 2% to 4% for the fiscal year. 2008 had one more business day than 2007 which we estimate increased our sales 0.4%. Our overall gross profit increased 12.3% to $420.0 million in 2008 from $373.9 million in 2007. Existing markets saw their margins increase to 24.8% from 23.5% while overall gross margins increased to 23.5% from 22.7% mainly due to the same factors I previously discussed for the quarter along with higher 2007 calendar year-end vendor rebates. Existing markets operating expenses as a percentage of sales decreased to 18.8% in 2008 from 19.0% in 2007 as we leveraged our fixed costs over the increased sales. Overall operating expenses as a percentage of sales were down slightly to 18.2% from 18.5% due primarily to the lower cost percentages at North Coast. Overall operating expenses increased $21.2 million or 7% to $325.3 million almost entirely from the increase in our acquired markets of $20.4 million. In existing markets a bad debt increase of $4.4 million and selling and warehouse expenses increase of $2.5 million driven by the transportation cost increases was partially offset by savings from our cost out program and other savings of a combined $4.1 million and lower depreciation and amortization of $2.0 million. Interest expense decreased $1.5 million in 2008 while income tax expense was $28.5 million in 2008 compared to $9.4 million in 2007. Our effective income tax rate was 41.4% and 40.3% for 2008 and 2007 respectively. As a result of all I’ve mentioned, our net income for 2008 was $40.3 million compared to net income of $25.3 million in 2007. Adjusted EBITDA was $133.8 million in 2008 as compared to $107.7 million in 2007. Diluted net income per share was $0.90 in 2008 compared to $0.56 in 2007. Cash flow from operations was $49.6 million in 2008 as compared to $63.8 million for 2007. Inventory levels increased by $44.1 million as we built up our inventories especially in residential asphalt shingles ahead of announced price increases and to ensure sufficient availability in the regions affected by the storms in 2008. Due to these increases inventory turns were down in 2008 as compared to 2007. As the pricing environment settles, we expect inventory turns to range from 5.5 to 6.5. Accounts receivable increased $17.4 million in 2008 primarily due to the higher revenues. The number of days’ outstanding for accounts receivable based upon fiscal year sales increased slightly in 2008 but are still within an acceptable range. Prepaid expenses and other assets also increased by $9.6 million mainly due to higher levels of vendor rebates caused by the increased purchases during the third and fourth quarters. Accounts payable and accrued expenses increased $44.1 million in 2008 mostly again from the higher levels of inventory purchases and increases in income taxes payable and increases in performance based pay accruals. Capital expenditures in 2008 were $5.7 million compared to $23.1 million in 2007 as we substantially reduced capital spending due to the business slowdown and prior year required upgrades to the fleet of some of our more recent acquisitions. Net cash used by financing activities was $23.8 million in 2008 compared to net cash provided by financing activities of $83.7 million in 2007 as we pay down debt in 2008 while 2007 we did the refinancing of our debt. As I mentioned, our adjusted EBITDA for 2008 was $133.8 million which when divided into our net debt of $350.6 million as defined under our credit facilities gives us a ratio of 2.62 to 1 down from 3.48 to 1 at the end of 2007 and well below the required ratio of 4.1. To summarize key points, organic sales grew 13.1% in the quarter on a same business day basis. Gross margins were up in the quarter to 24.6%. Operating margins for the quarter were 8.6% compared to 5.3% in 2007. Fiscal year operating margins were 5.3% and without the purchase accounting amortization would be at 6.2%. Diluted net income per share for 2008 was $0.90 compared to $0.56 in 2007. Lastly we ended the quarter with cash on hand of $26 million, total availability under our credit facilities and solid balance sheet ratios as we continue to be good stewards of our assets in very tough times.

[Robert R. Buck:]

Now we’re going to go through our process of answering prepared questions. Paul’s going to do that. He will state the question and then go through the answer. Then when he’s finished, we’ll open the call. So let me turn it over to Paul.

[Paul M. Isabella:]

We have 14 questions. I’ll get right into it. Number one

[Robert R. Buck:]

Let’s open up the call for questions that were not handled there. I hope you appreciate those because some of those questions we hear when we’re out on the road doing road shows. But Kristen, we’re available for calls.

[Operator:]

(Operator Instructions) Our first question comes from Analyst for Michael Rehaut - J.P. Morgan.

[Analyst for Michael Rehaut:]

I was wondering if you could give some more color on the commercial side of the business relative to historical kind of slowdowns. Is there usually a delay in terms of you activity there and what’s happening in the general market?

[Robert R. Buck:]

There’ve been a lot of questions about the commercial side. The first thing I want to do is remind everyone that in commercial re-roofing is actually a bigger part of that segment than residential. Re-roofing is about 80% of the commercial business. I would expect that new commercial construction would decline and we will get our growth in that area from re-roofing and there’s always the possibility of price increases. That’s how I see that segment. I try to stay away from predictions. I basically have read everything about commercial new construction. I think in ’09 we’ll work hard to emphasize re-roofing in that area.

[Analyst for Michael Rehaut:]

Following up on your comments on the first quarter so far, you said October and November were pretty good. Is that like you’re talking about 10% to 15% sales growth so far or how should we be looking at that?

[Robert R. Buck:]

I think what we always try to do is state how the quarter’s going and it’s off to a really good start. October as David said was very healthy so we’re optimistic about the first quarter. I think the estimates for the year look very doable so we’re off to a good start. [Inaudible] percentages. So we’re doing very well.

[Operator:]

Our next question comes from Michael Cox - Piper Jaffray.

[Michael Cox:]

On the pricing side I was wondering if you could just comment on what sort of sign posts we should look for in terms of looking at the shingle companies cutting prices. It seems like asphalt costs remain at very high levels despite the drop in oil prices so it seems unlikely they would be lowering prices any time soon. But can you provide a little more color there?

[Robert R. Buck:]

Actually you’re correct. Asphalt prices have held up mainly because asphalt is not the primary thing that the refineries like to make and there have been some shortages regarding asphalt. So I think that is one factor that keeps the prices up. Our anticipation is that the shingle manufacturers will not reduce prices. I think they needed those price increases and we worked hard to pass them on. We don’t anticipate that. There’s not a capacity issue where new plants have come on line in the last several years. Actually several plants were closed as a result of the GAF acquisition of Elk. I think we’re positioned where positions will remain at this level subject obviously to changes in the future. But that’s how I see it. I agree with you that asphalt prices are high, the manufacturers are recouping past losses from the cost of manufacturing. So I agree with you.

[Michael Cox:]

On the balance sheet your cash balance has moved higher to its highest level in the last year and a half or so. Will that be used to pay down debt over the next couple of quarters as you generate cash?

[Robert R. Buck:]

I’ll let David respond to that but he has taken away my checkbook so we’re on the sidelines regarding acquisitions. But right now we’re building cash and David do you want to add to that?

[David R. Grace:]

Currently we only have the term debt that’s left to pay down as a possibility. We did if you noticed have an excess cash flow payment of about $7 million that will be due in May. Currently we do not have plans to pay down the term debt any further but if we come to a choice where we have a bunch of excess cash, that’s what we would do. We think right now the best thing we can do is to keep building the cash and if we choose to in the future, pay down that term debt. But we have no plans for that right now.

[Operator:]

Our next question comes from John Kasprzak - BB&T Capital Markets.

[John Kasprzak:]

I wanted to ask a little bit more on the subject of guidance. The $0.11 a share that is attributable to the unusual price increases that you detail in the quarter, is that being stripped out as basically a way to suggest that it’s one time in nature and the jumping off point, the basis for projecting fiscal ’09 should exclude that?

[Paul M. Isabella:]

Yes. I believe that’s the right direction to take. What we’re really trying to do there is that if those price increases don’t happen next year, you would normally need to take that out of your base assumption. We also have stated further though that we think currently at the $0.86 that the street has that we’re comfortable with that position. If you do the math, that would give us an approximate 6% to 7% increase over the base after deducting the $0.11.

[John Kasprzak:]

So given that scenario, the growth that implies would come from basically the first half of the year primarily from continued storm-related demand? Is that more or less the situation as you see it today?

[Robert R. Buck:]

There are two factors. One is that because there were no storms last year and also prices in the first half are higher than last year. We have good headwind in the first half so we’re excited about that. David?

[David R. Grace:]

I think you’re absolutely correct. Once we hit February and March of 2009 we’ll start against the tougher comparison when we first saw those price increases. We have told folks that we think we can do between 23% and 24% margins and I think if you do the math with the price increases over the first two quarters and expected slight drop in unit volume, then you become comfortable with the street that has 3% to 4% revenue growth for us with those type margins. That’s how we get to the $0.86.

[Operator:]

Our next question comes from Theodor Kundtz - Needham & Company.

[Theodor Kundtz:]

Bob, if you could comment a little bit more on this recessionary environment that we’re in here? It doesn’t seem like it’s affecting your residential business all that much. Could you just throw out some thoughts on that? Are you seeing any impact of the recession at all on your business?

[Robert R. Buck:]

One thing to look at would be the three segments that we disclose

[Theodor Kundtz:]

I know you’ve always said that and it’s always been true. I was just wondering in this particular recession being as severe as it is if you were seeing any signs of it, but it sounds like you have not up to this point.

[Robert R. Buck:]

Yes.

[Theodor Kundtz:]

And it sounds like the first quarter’s starting off very well as well.

[Robert R. Buck:]

Correct.

[Theodor Kundtz:]

I think this question was kind of answered but the inventory levels did move up in the fourth quarter. They generally go down in the fourth quarter because it’s a big quarter for you in terms of shipments and installations. Are you comfortable with the inventory levels where they’re at and as long as prices are okay, there’s probably no risk of having to revalue your inventory downward in case prices did move down?

[David R. Grace:]

What you need to do is take that in comparison to 2007. In 2007 we had expected that once GAF bought out that there would be some pricing changes and we wanted to slim down our inventory especially in September. We did see some of those price changes come through in October and November of last year. This year contrastly we saw prices increasing and wanted to have the stock on board to be able to sell at lower prices as the prices kept increasing. We also had the effects of Ike come through right at the end of the quarter and we certainly bumped up those 10 or 15 branches we had in that region quite immensely to be honest with you at the end of the quarter to take care of that business.

[Theodor Kundtz:]

It sounds like a good strategic move on your part to do that. It sounds like it’ll also benefit margins in the first couple quarters here.

[Paul M. Isabella:]

Yes, and as we move through this first quarter we’ll see a natural reduction of inventory as we sell off what we bought in October for storm and other related regions.

[Operator:]

Our next question comes from Analyst for David Manthey - Robert W. Baird & Co., Inc.

[Analyst for David Manthey:]

I know it might be a little hard to quantify but if you could talk about the pricing impact to sales growth in commercial and residential as well as complimentary products please?

[David R. Grace:]

Sure. We’ll start with the easy ones. As far as commercial, we think probably half of that was price. Carlisle which is our major supplier of commercial roofing products announced two price increases; one in June and one in August. We really didn’t see too much of the one that they announced in October. So that was late in the quarter. We did see some effect of that. In the residential product probably 80% to 90% of that growth is price. That comes from again doing that year-over-year comparison we do on our inventory. But there’s certainly some unit growth there and it’s in some of the storm-affected areas but it’s also some strong results on the East Coast that we had. As for complimentary products, there is no price increases in there for the quarter we believe; any that are materials. So the entire loss in growth there was from unit volume.

[Analyst for David Manthey:]

As far as re-roofing with respect to res and non-res, have you seen any evidence of attempts to defer spending for either of those?

[Robert R. Buck:]

It’s hard for us to see that because we talk to our contractors we ask about the tone of business because we are adding a room addition or something like that. It’s really hard to say. We don’t do surveys. Maybe we should. But we really just pay attention to great service, having the product available but that’s basically it. It’s in many respects a non-discretionary purchase. It’s not something that someone really wants to do; it’s something they feel they need to do. Good question; we just don’t have surveys to indicate that.

[Operator:]

Our next question comes from [Scott Picarelli] - RBC Capital Markets.

[[Scott Picarelli]:]

Number one

[Robert R. Buck:]

Regarding housing starts I read reports. There are a lot of different outlooks. The most recent report I read was Owens Corning. I think everyone knows that brand. A very good company that we’re close to. They anticipate second half of ’09 to show improvement in housing starts. The total year may be flat but they think the second half will pick up. I’ve read similar things from others but that particular report comes to mind because it’s actually sitting here on my desk that I recently read. That appears to be the general consensus. Housing starts are at a level now not seen since the ‘60s. To show quarter-over-quarter improvement in the second half of the year sure looks like it’s going to be a possibility particularly with the stimulus packages that are out there, mortgage rates are lower than in a long time, so I think there are a lot of things afoot that could make housing starts from a comparison standpoint look a lot better in the second half of ’09.

[[Scott Picarelli]:]

Is it fair to assume any upside or improvement there would be incremental to your current expectations?

[Robert R. Buck:]

Yes, I think there’s a possibility for that. I think the second half of your question had to do with the health of our contractors. I’m going to turn that over to our wise CFO here and see what he has to say.

[David R. Grace:]

What I’d really like to say is it’s nice to have a group of customers, roofing contractors. Their main objective in life is hard work and we have third and fourth generation contractors that have been through some tough times like this. Since a big part of their cost structure is payroll, they know how to shrink their crews but the greater aspect is that we get to see them almost weekly. The residential guys as they finish up jobs, we know they’ve finished up a job. They come to us for some new material. We ask for payment on the previous job. It’s very much a loyal based system and it’s a system that our guys out in the field do a very good job. Some of these contractors are their business friends. They know what they’re doing and they stay very active in that approach. As for some of the commercial guys, we have larger jobs with them but these companies are not financially based as much as you would expect. They don’t have big bank loans. They live job to job and we live job to job with them and provide them with the credit they need to carry them over from the jobs as they get paid themselves.

[Operator:]

Our next question comes from [Robert Nicholson - Pine Cobble Capital].

[[Robert Nicholson:]

My one question for you as you look at guidance for next year and what is embedded in that, it strikes me that embedded in that is a reduction in average pricing per square for residential shingles. Because if pricing stayed where it is now and you ran that through even as you’re lapping the increases from last year, you get to a very different EPS number than where the street is. Are you being conservative in your perspective or do you actually expect shingle pricing to retrench pretty meaningfully as we get into the spring and summer?

[Robert R. Buck:]

We always like to be conservative particularly when estimates are involved. We in the past couple years have been able to be conservative and then perform up to your expectations and occasionally beat them. So our nature is to be conservative. We are certainly not anticipating further price increases. We think our margins have firmed and we’re seeing that in the first quarter as well. We anticipate a successful year because of that.

[[Robert Nicholson:]

Leave aside increasing of prices, is your expectation at this point that the level where shingles are feels about right going into next year?

[Robert R. Buck:]

Yes, I think so. I think even if they went down a little bit, we’d still be fine with those estimates. David was going to comment.

[David R. Grace:]

The only thing I was going to say is remember, for the first five months or so we do have that advantage in pricing. Even if they come down somewhat compared to last year, they would still be up substantially.

[Operator:]

Our next question comes from Analyst for Brent Rakers - Morgan Keegan & Company, Inc.

[Analyst for Brent Rakers:]

In terms of your cost out program, can we talk about goals for fiscal ’09 in dollar terms and what else you think you can strip out and also what it was in the quarter?

[Paul M. Isabella:]

Our approach hasn’t changed from last year. Every region is challenged to run at the lowest cost and cost percent of sales that they can. We constantly watch volume and as we see any specific region or branch let’s say falling below any of those sales numbers we are very aggressive at taking action. To quantify it for the whole year would be difficult on this call but again it’s the same consistent approach we took last year.

[David R. Grace:]

And remember, what we do is we do a budgeting process and the cost on initiatives as far as this year will only come at a point in time where we feel that we’re going to fall short of those budgeted revenues. As such we think we’re okay through October and November as we’ve mentioned and if that comes into play during January, February and March, then as a management team we’ll do the right things. I think that we’ve shown people that that’s how we react. We will not predict what the future is because we can’t but once we see the indicators to us that say there’s going to be a change in revenues, we’re going to react. That’s when the cost out initiatives come into play.

[Paul M. Isabella:]

Dave’s correct. The approach is to continue to do what we did last year and lever those reduced costs as we go through time.

[Analyst for Brent Rakers:]

On bad debt expense the reserves went up in the quarter. Is that something that as a percent of sales we’re going to take forward and they’ll continue to be conservative or was that kind of a one-time anomaly for the quarter?

[David R. Grace:]

It’s certainly not one time. It’s probably reflective of the economic and credit times that we’re in but remember, even at 0.6% if we were to take credit cards for those same sales, it would probably cost us at least 2%. If we can stay in the range of 0.3% to 0.75% or so during these times, that is a remarkable accomplishment by our credit department. They do a great job.

[Operator:]

Our next question comes from Robert Kelly - Sidoti & Company.

[Robert Kelly:]

On the trend month-to-month throughout the quarter, I believe you said coming out of 3Q you’re seeing low double digits. Did you see pricing or volume accelerate towards the back half of the quarter? Maybe just some help there.

[David R. Grace:]

As we went through the quarter there were certainly additional price increases especially from the shingle manufacturers. Then as I mentioned the price increases from the commercial kicked in after they did them in June and then again in August. We also saw a little bit of the tail effect of some of the hail storm business being done in the summer and also remember that a lot of the commercial work for the municipalities especially the schools is done in the summer. We think we won our fair share of jobs in those aspects especially in the New England region and the region around Ohio Valley with North Coast. So we’ve done a good job.

[Robert Kelly:]

A year ago we were talking about competitive pressures and the reason for the margin degradation. Somebody asked about the health of your customers. How about the health of your competitors? Have you seen competitive pressures abate here or is it just a matter of a rising tide lifting all boats?

[Robert R. Buck:]

I think our competitors are doing well. It’s almost an answer that you do region by region and even branch by branch but we have good competitors. I think they’re doing really well at this point.

[Operator:]

Our final question comes from [Adam Light - Tiger Management].

[[Adam Light:]

Relative to your guidance for next year, how much of the earnings you think will occur in the first half versus the second half?

[Robert R. Buck:]

That quarter-to-quarter comparisons we stay away from but I can say generally that the first half looks awfully strong because last year was really the beginning of a slowness through the first and second quarters. I would characterize our year as that where our comparisons are easier first and second quarters. With the quarter being off to a good start, it sure looks like that.

[[Adam Light:]

So relative to I think last year and the year before that the first and second quarters tended to offset each other somewhat. The second quarter tended to be a loss. Are you expecting something different this year?

[David R. Grace:]

No. We will still have the seasonal aspects to our business. Q2 for us because we’re so still concentrated in the northern regions will be the lowest quarter. Bob was talking about in comparison to last year which is really the only thing to go on. We’ll still have seasonality.

[Operator:]

That does conclude our question and answer session. At this time I would like to turn the conference back to Mr. Buck for closing comments.

[Robert R. Buck:]

Thanks everyone for your questions. As usual David, Paul and I will be available for additional questions immediately following this call. And as usual I’d like to close this time together by emphasizing several points. First, we really are pleased with our double-digit organic growth of approximately 15% for the fourth quarter. Our gross margins were up for the quarter and for the fiscal year. Paul and all the other officers of the company are very focused on delivering on our lean and clean culture which is something that we have a lot of pride in here at Beacon. Next, we’re building cash. Our balance sheet is very strong and we want to always be known as good stewards of our assets. We trust that our efforts are pleasing to our employees, our suppliers who support us and our shareholders. The first quarter is off to a good start and we certainly have the talent in Beacon to do well even if the business gets soft as the fiscal year unfolds. We really feel good about where we are and how well we’re doing. Again thanks for your interest and support of our company. I can tell you that our employees also appreciate your support and they are working hard to continue earning your trust and confidence. Thanks very much for calling in. I appreciate your support. We’re going to work hard to make this a very successful fiscal year. At this time we’ll conclude the call.

[Operator:]

That does conclude today’s conference. Thank you for participating.