Ladies and gentlemen, good morning and welcome to the Acuity Brands 2014 Second Quarter Financial Results conference call. After today’s presentation, there will be a formal question and answer session. To ask a question, press star, one and record your name. Today’s conference is being recorded. If you have any objections, you may disconnect at this time. Now I’d like to introduce Mr. Dan Smith, Senior Vice President, Treasurer and Secretary. Sir, you may begin.

Thank you. Good morning. With me today to discuss our second quarter results are Vern Nagel, our Chairman, President and Chief Executive Officer, and Ricky Reece, our Executive Vice President and Chief Financial Officer. We are webcasting today's conference call at www.acuitybrands.com. I would like to remind everyone that during this call, we may make projections or forward-looking statements regarding future events or future financial performance of the company. Such statements involve risks and uncertainties such that actual results may differ materially. Please refer to our most recent 10-K and 10-Q SEC filings and today's press release, which identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements. Now let me turn this call over to Vern Nagel.

Thank you, Dan. Good morning everyone. Ricky and I would like to make a few comments and then we will answer your questions. First off, our results for the second quarter of 2014 were very strong despite some noise in the quarter, as I will explain in a moment. Our net sales increased over 12% this quarter while our EPS grew 21% compared with adjusted EPS last year. In fact, this was the fourth quarter in a row where we achieved double-digit sales volume growth. The level of growth this quarter is even more remarkable given the negative impact of unusually severe weather conditions in many parts of the U.S. this winter as well as tough comparisons to the year-ago quarter, as I will explain later as well. Also noteworthy, sales of LED-based luminaires now make up 30% of our net sales. We believe this level of growth is yet again positive evidence our strategies to provide our customers with differentiated value propositions and to diversify the end markets we serve are succeeding, allowing us to extend our leadership position in North America. These strategies include the continued aggressive introduction of innovative, energy-efficient lighting solutions, expansion in key channels and geographies, and improvements in customer service and company-wide productivity. Our profitability and cash flow for the quarter were again strong, even as we continued to fund our robust sales growth in areas with significant future growth potential, including the expansion of our lighting solutions portfolio. I know many of you have already seen our results and Ricky will provide more detail later, but I would like to make a few comments on the key highlights for the quarter; however, before doing so I would like to address the issues that gave rise to the noise, if you will, in our…

Thank you Vern, and good morning everyone. I’ll highlight a few items regarding our income statement. I then will discuss our cash flow and financial condition before turning the call back to Vern. Vern covered the primary drivers for our sales growth and our profitability, so I’ll not repeat these items; but I will provide a bit more color on certain aspects of our first quarter results. Our gross profit margin for our second fiscal quarter of 39.4% decreased 20 basis points compared with the adjusted year-ago period. As Vern mentioned earlier, the benefits of the 12% increase in net sales, lower material and component costs primarily related to LED fixtures, and benefits from greater manufacturing utilization and improved productivity were offset by the noise of 100 basis point reduction in gross margin due to the product design issue, unfavorable currency impact, and increase in expedited inbound freight. The unfavorable currency impact was primarily due to the over 8% weakening of the Canadian dollar year-over-year relative to the U.S. dollar. This somewhat unusual occurrence is primarily due to two factors: one, the speed of this decline; and two, the fact that we did not see a corresponding decline in the Mexican peso. Historically, there has been a fairly close correlation with the Canadian dollar and the Mexican peso since both of these countries’ economies are highly levered to energy and commodities, so as goes energy and commodity prices, so too goes the relative strength of their currencies. Acuity is long Canadian dollars and short Mexican pesos, so we tend to have a natural hedge. Since this large Canadian dollar movement was much more than that of the Mexican peso this quarter, the natural hedge was not as effective and we experienced approximately $3 million negative impact on our gross profit.…

Thank you, Ricky. As we look forward, we continue to see significant long-term growth opportunities well beyond just the current year. With regard to our expectation for the balance of 2014, our view has not changed over the last few quarters. We remain very positive. So while we don’t give earnings guidance, I would like to reiterate what we’ve mentioned over the last two quarters regarding our expectations for 2014. First, most economists expect the economy in North America will continue to improve at a modest pace. While forecasts for industry growth rates by independent organizations continue to vary widely, the consensus estimate is that the broad lighting market in North America is expected to grow in the mid to upper single digit range for 2014. Further, we continue to see other signs that give us optimism regarding the future growth of the markets we serve in our business. Leading indicators in the North American market such as the Architectural Building Index, vacancy rates, office absorption, lending availability, and the rebound in residential construction are all improving. As has become the norm over the last handful of years, we are always leery of the next round of uncertainty that might come out of Washington regarding fiscal issues as well as foreign policy. As you know, the manner and how these key issues are handled can meaningfully influence business and consumer confidence. Nonetheless, we continue to expect that the overall demand in our end markets for 2014 will continue to improve and be more broad-based and consistent than experienced in 2013, though still with some volatility in demand among certain sales channels and geographies. The continued favorable trend in our order rate again seems to support this level of improvement. Second, we do not anticipate significant changes in input costs for…

Thank you. [Operator instructions] Our first question comes from Kathryn Thompson with Thompson Research Group. Kathryn Thompson – Thompson Research Group: Hi. Thanks for taking my questions today. First is really more of a top line look. Obviously weather has been an impact in the quarter. In terms of looking at—you said you feel like sales have been pushed out. What gives you conviction for that, and are you seeing any change in order trends today that supports your conviction that these sales are not lost but just pushed out?

So Kathryn, if we look at our sales by geography, we see very robust growth in many of the geographies except for those that appear to have been impacted by the weather. Earlier in the quarter when the first storm rolled through, we didn’t really expect much of an impact, but as the storms persisted, it became pretty evident from a channel perspective and a geography perspective that weather was having a pretty meaningful impact. As we look at our order rates now, we see in those geographies a return to what our view is a more normal rate. To say that all of those sales will be made up in the third quarter, I think that would probably be inappropriate. I do believe that projects took delays, some of those with hard deadlines. People probably will work overtime to achieve those deadlines, but for the most part it should be made up over the next couple of quarters, would be my guess. Kathryn Thompson – Thompson Research Group: Great. Along that line, a question that we get—we’ve been focusing on and have received frequently is just that of pricing conviction. To have one storm, as you said, you can shake it off; but when you have several weeks in a couple of months of just bad weather, sometimes there is a concern that pricing conviction can be tested. So could you comment in those weather-affected areas what pricing trends you got, and what type of pushback, if any, you received, most particularly in the weather affected areas in the quarter.

So Ricky, I don’t believe that we’ve heard really any, if you will, issues or comments around the pricing side of things. For the most part, these would be particularly in the C&I channel, for example, where there are specific projects that were very project-oriented. Those would be orders that were already placed; they’re just looking for the ability to have workers get to the jobsite and install those luminaires. If you look at the home improvement channel, you look at some of the stock and flow business – again, pricing is usually pretty consistent there, so it’s really just how do you get the material there and are the people who are building projects and doing these things available to install. So I don’t believe that the weather had any impact on pricing. Pricing overall, as we said, was fairly benign this quarter. You know that most of our business is a bid business, so every day you’re out there fighting for an order, and I don’t believe that anything has materially changed in the pricing environment, weather related or non-weather related. Kathryn Thompson – Thompson Research Group: Okay, great. Thank you for taking my questions today.

Thank you. The next question is Jed Dorsheimer of Canaccord. Josh Baribeau – Canaccord Genuity: Hi, this is Josh Baribeau for Jed. Vern, can you talk about the channel a bit and how that’s evolving with new technology? Some of your competitors, let’s call them large and small, are attempting to bypass the traditional agent model. Are you seeing any loss in their leverage or how that channel works?

I believe that the channels that we serve and the way we serve them, whether it be the C&I channel going through agents, or whether it’s stock-and-flow with key distributor partners, I believe that our growth is reflective of the building strength of that channel; and sure, you’re going to have folks who will attempt to go around channels because they just don’t have strength there, and they’ll get orders – there’s no issue around that. But at the end of the day, I believe that the way the market wants to be served – so if you’re a lighting designer, an architect, an engineer, a building owner, a contractor – you want to deal with those folks who can reliably bring you the breadth and depth of the kind of portfolio that Acuity as. As we get more and more into smart and simple lighting solutions, people want to deal with the folks who truly understand that, so lighting professionals that exist within our rep network are robust and add great value. I actually think as we get—as we migrate more and more to technologically enhanced lighting solutions, you’re going to see the agency model get even stronger and for those folks like Acuity become even stronger because of the breadth and depth of our knowledge and capability. Josh Baribeau – Canaccord Genuity: Great. And then how do we think about, or how are you thinking about international expansion and maybe how that compares to the growth of your—the comments you’ve made about the growth of your served markets growing by 50%? Is international included in any of that?

Yes, we have over the last 18 months – Ricky? – 24 months really kind of restructured our international organization to really become more narrow and deep. In fact, I’m pleased to see that we saw some nice success this quarter in some of our international markets, but that narrow and deep opportunity for us to leverage our existing capabilities, both in Europe, South America and to a lesser degree in the Middle East and Asia, we think are good opportunities. We’re looking at different ways to access that market more effectively, or those markets than we do today, and I think that the international space for us over the next handful of years will provide opportunities for growth. Josh Baribeau – Canaccord Genuity: And just maybe a quick follow-up – any way you can quantify for us the percentage of business outside of North America at this point?

Sure. Ricky, what’s that number? It’s between 2 and 3%?

Yeah, it’s less than 3% but it is growing, as Vern commented, particularly Europe is coming off of a very deep trough that it’s been in. We’ve seen some nice sequential as well as year-over-year growth there, but it’s still a pretty minor percentage of our total sales.

And to be clear, when we look at our leadership position in Canada, U.S. and Mexico, we believe that we’re tied for that number one spot in Canada, clear number one player in the U.S., and clear number one player in Mexico, and we believe that these are growing markets and opportunities for us. So we’ll leverage our knowledge of lighting solutions and leverage our portfolio into some of these international markets more aggressively, again over the next handful of years. Josh Baribeau – Canaccord Genuity: Great, thanks. I’ll pass it on.

Thank you. The next question is Rich Kwas of Wells Fargo. Rich Kwas – Wells Fargo: Hi, good morning. Just a couple questions. Just back on that weather comment, so Vern, we should think of this as three points of lost revenues, and if we put a 20 or 25% incremental on that, we should think of it as kind of $0.04 or $0.05 of incremental headwind on top of the $0.09? Is that the right way to think about it?

Yeah, we didn’t really attempt to quantify the exact sales number because I think it would be, frankly, impossible to do that. We believe it was as much as 3%, to Kathryn’s question earlier. That’s not a bad number. If you look at what our variable contribution has been, particularly this year given our outsized performance, so we have incentive comp going through there, 20% is not an unreasonable number. If you look at our variable contribution even with the unusual items, it was about 17%. Our bonus this year or in this quarter, there was virtually no bonus accrued in the year-ago quarter, so our variable contribution margin, if you take into account those three unusual items – not weather – that variable contribution margin was 27% even with the higher bonus. If you do it apples-to-apples, our variable contribution this quarter, taking into account those three unusual items and then removing bonus so you can truly see what the actual variable contribution off an incremental dollar sale, it was north of 35%, so very, very robust. Obviously weather impacted our business both from a top line perspective and some inefficiencies, just expediting more over time, so on and so forth, we had a robust quarter, so we’re just—we’re not really looking at weather as a huge issue. But your math makes sense to me. Rich Kwas – Wells Fargo: Okay. And then Ricky, on the warranty costs and the expedited freight, should we assume that these costs all hit this quarter? There’s going to be nothing incremental moving forward in FQ3 and beyond?

First on the warranty-related cost, that is an ongoing process, as we mentioned in the Q. You’ll see a little a more disclosure in the Q, so we’re not certain what the ultimate cost is. We are in discussions now with the government around this—with the CPSC on this, so there could be some additional costs there, and they could be significant. We don’t expect them to be, but they could be significant depending on how that plays out. As far as the expedited freight, there we do believe we’ve got countermeasures in place where that will not continue in any meaningful way going forward, not to say that we won’t every now and then still have to expedite some components and all in, so there could be some but not to the degree we had this quarter, based on the countermeasures we put in place.

This is Vern. Just a couple of quick points as well. On the accrual, we’ve accrued our best estimate for what we believe—what we know now vis-à-vis the design issue around that emergency product; and then with regard to the expediting cost, it’s interesting. There were two real factors that influenced it. One, one supplier, their factory burned down, which is not a good thing, so we had to move quickly as part of our emergency response plan to a different vendor, so we incurred some expedited cost as a result of that. And then additionally, we had some products that just are extremely well received in the marketplace, so while we always put forth what our estimates are on future demand, we missed those expectations by meaningful amounts. So it’s a good news story and a bad news story, as Ricky points out, but we believe that we have gotten our arms around the expediting issue as it relates to these couple of issues. Rich Kwas – Wells Fargo: Okay, and then just one quick one – C&I, Vern, did you say C&I grew at the same rate as the corporate volume, or was it higher? I wasn’t sure.

It was essentially the same rate; and again, understand that in the C&I world, we had geographies that again we believe were impacted – we can see that in the numbers – by the severe weather conditions. Again, the Midwest and northeast are two examples of where weather did have an influence. So C&I was essentially, if you will, the overall growth average of 12.2%. Rich Kwas – Wells Fargo: Okay, great. Thank you.

Thank you. The next question is Winnie Clark of UBS. Winnie Clark – UBS: Good morning. You talked about the variable contribution margins and on an apples-to-apples basis being north of 35%. As we return to kind of a more normalized mix and as you’re seeing new non-res construction orders come back, is that the type of contribution margin that we should be thinking about longer term?

Well again, to be clear, we’re trying to give folks a very good picture around what is influencing the variable contribution. Because of how we do our incentive comp, and it is strictly based on period-over-period improvement and if you hit the 50th percentile, we accrue at a rate, if you hit 75th percentile, it’s obviously more, and then 95th percentile. We right now, based on our performance on a year-over-year basis on the three measures that we generally drive to, which is earnings, operating profit percentage, and cash flow, we’re at well north of two times what our targets would be, so meaningful difference. Assume next year in 2015 we have the same level of performance that we’re having this year. You therefore would not see any period-over-period difference in the accrual for incentive comp, therefore what you would see is whatever that true variable contribution off the incremental sales dollar for the product is. Thirty-five percent is robust, and just to be clear about that, we’ve worked very hard to drive productivity throughout our facilities. We’ve taken streamlining actions that, as Ricky pointed out earlier, are benefiting our numbers, but I would say that 35% is probably on the high range or the high end of the range. We would want to be putting some of that incremental margin back into our business and in terms of additional headcount, additional capability, and we’re doing that. So I think the number at 35% was at the upper end of what it would be normally. Winnie Clark – UBS: Okay, thank you. That helps. And then just on the currency impact, can you talk a little bit about what your expectations are for that going forward? Should we expect there to be a continued headwind, potentially at least in the coming quarter?

Yeah, it’s obviously very, very difficult to predict currency movements, but we have seen the Canadian dollar stabilize a bit; in fact, come back a little bit, and again it seems to move pretty directly with energy, natural resource, commodity-type costs, so let’s hope the Canadian dollar, given our portfolio or our profile, continues there. It’s almost at parity now with the dollar. The Mexican peso also has not been too volatile over the last year, so those are the two primary currencies. As I say, we’re long Canadian dollar, short peso, and have not chosen to really artificially hedge those since they typically naturally hedge. The European currencies have a little bit of impact on us, but not significant because we do manufacture in Europe, both in the U.K. and in the euro zone, and therefore have a more balanced cost-revenue profile in those regions. So it depends primarily on the Canadian dollar and the Mexican. Historically, those two have been a natural hedge for us. Our expectation going forward is that they will as well for the most part, and based on current movements in the last month since the end of our second quarter, they seem to be pretty benign right now. Winnie Clark – UBS: Great, thank you.

Thank you. The next question is Peter Lisnic of Robert W. Baird. Peter Lisnic – Robert W. Baird: Good morning gentlemen. Vern, on your comments on new construction coming back, can you give us a little feel for what that mix of business looks like nowadays, and what I mean by that is just are you seeing more higher value-add type of content today versus previous cycles? Just a view on as that business improves, what type of mix, if you will, we should be expecting to see.

Peter, if you look at—when you do all of the statistics around non-residential construction, particularly as it relates to new construction contrasting that with renovation, we are still way in the early, early stages of a rebound. I mean, when I look at the inflation adjusted numbers, we’re still off 25% from what our peak was in 2008, and yet you have population in North America growing at roughly 2% per annum. So our view is that we’re in these very stages. Our expectation is that as new construction rebounds, you are going to see people procuring more and more of holistic lighting solutions, things that embed controls into luminaires, LED-based luminaires that then can be controlled as part of an energy/building management capability. So people will be focusing on quality of light and the ability to take advantage of systems like our nLight system, systems controls to really drive better energy efficiency. So our expectation is that as new construction comes back, you will see people procuring, again, more holistic integrated solutions. We’re just really in the early innings of that. We were encouraged by the order rate in a couple of our product lines that are really more generally tied to new construction, but what we also look at is the value of orders coming in, and we still really have not seen big jobs roll through like if you were to imagine in the 2007 – 2008 time frame when there was a lot of new construction going on at that point in time. So it’s still really too early to tell you precisely that we’re seeing this and this is how the mix is. We can only tell you what we believe will happen. Peter Lisnic – Robert W. Baird: But is it fair to say the uptake on some of those holistic lighting solutions is kind of in line with what you’re thinking to give you the confidence to say going forward, we expect this to happen?

Yes. Peter Lisnic – Robert W. Baird: Okay.

You know, what’s fascinating is in the old days when someone wanted to have dimming capability, it was very expensive, and so you saw it only in the very high-end type of applications. So K – 12 schools, for example, couldn’t afford really dimming capability. Today with products in our portfolio that Acuity has, and others, we’re able to provide dimming capability which allows for energy savings while you’re using the space. It’s no longer that if you’re in the space, turn the light on; if you’re not, turn them off and that’s how you get energy savings Today, we’re able to offer a wide range of applications, energy savings, taking advantage of dimming, taking advantage of day lighting, to a much broader range of clients or customers, if you will, and application, and doing it in a way that it’s a little bit more, if you will, expensive but the paybacks are quite significant and quite quick. Peter Lisnic – Robert W. Baird: Okay, perfect. And then just a last follow-up – as you look at that uptake of the more holistic lighting solutions, is there any headway being made by what I’d call non-traditional competitors – you know, competitors that you didn’t necessarily deal with, call it previous cycle that now have a more broader product portfolio and are able to compete a little bit more effectively with you, or is it still confined to kind of the four majors and some other more niche players?

Yeah. I would say that there are folks that are out there that were not participants in the market – and I’d just pick 2008 – that are here today that have capability to offer certain types of solutions into certain types of applications, and we’ll compete with them again on a feature and benefit basis. We believe that it’s no longer just the system or the fixture—systems are new, but the ability to really provide service and support, and for our end customers to have the confidence in a company like Acuity with its size and scale and its ability to serve really anywhere in North America very effectively. It’s a huge advantage for us. So you’re going to see non-traditional players have sales and get a piece of the market, but when you think about the market as we define it today being roughly a $13 billion market having the potential over the next, you know, handful of years to go to $19 billion, and a lot of it is going to be because you’re selling more value per square foot, I think that the leverage is with those folks who have the kind of market connectivity that is deep and very, very consistent. Others who are new entrants, some have big names, I think that they’ll find it a challenge after they get past a few jobs that they may take. Peter Lisnic – Robert W. Baird: Okay. All right, perfect. Thank you for the time and the insights.

Thank you.

Thank you. The next question is Mike Ritzenthaler of Piper Jaffray. Mike Ritzenthaler – Piper Jaffray: Yes, good morning everyone. Just one other follow-up, I guess, on the C&I channel. We have also (indiscernible) about that have seen an uptick in interest in that particular vertical, but one of the areas of pushback is which types of buildings are seeing that type of growth. I guess given your size and your view into multiple bids and projects, I know we’re early but is there any wisdom that you can impart on where we should be looking for the pockets of strength within C&I, at least in this initial phase?

Sure. You know, I think a good indicator for all of you would be to look at absorption of real estate space and look at, again, the end vertical applications – schools, office buildings, industrial spaces, roadway opportunities. Schools are still having a bit of a tough go because a lot of that is funding from local and state governments, but we’re starting to see an uptick there. Commercial office buildings, the absorption both in urban centers and non-urban centers has really started to improve nicely, so we would expect that as vacancy rates continue to decline, you’ll see people putting investment in there. Commercial office buildings has always been a traditional strength of Acuity, and that portion of the market has been soft over the last four years, so we have additional enthusiasm as that market comes back that our product portfolio, our solutions capability and our access to market will allow us to really capitalize on that. Industrial spaces, particularly on the renovation side, have been a good opportunity for us, so those would be some of the ones that I would mention as strengths going forward. Mike Ritzenthaler – Piper Jaffray: Okay, that’s helpful. Then just as a follow-up, with the LED growth continuing to be very impressive, a lot of us are trying to reconcile all the different moving parts this quarter with some of the different unusual items that you had backed out. As we’re trying to reconcile LED growth with those items, one of the questions that comes up from time to time is on cannibalization. I wonder if you can just comment maybe qualitatively about as LED growth ramps, talking about slower growth in some of your more traditional lighting businesses and what that might look like in terms of results and margins over the next, I don’t know, six or nine months.

Excellent question. We actually don’t look at our business that way. We look at our business as what are the end markets, the end vertical applications, and what’s available to us; so in other words, if someone says I’m going to build something, we go into that opportunity by saying, what is it that you are trying to do? What would you like to accomplish? Are you first cost, total cost of ownership, sustainability – I mean, the whole gamut of questions. So what we then do is make sure that we’re providing a good-better-best option for that person who is trying to build that particular building. If it’s a renovation project, similarly – what are you attempting to do? Because we sell from a full wagon. We’re not selling from just one light source versus another. I mean, our OLED business is starting to show great growth, so again we’re agnostic, if you will, to the light source, but very focused on the application. So when we look at our growth or LED-based luminaires, it’s really you that are most interested in that. We’re excited about it because we think that it’s allowing us to sell more holistic solutions that can offer more capability, but if you walk through our facilities, you’re going to see one cell that’s manufacturing a traditional fluorescent luminaire, and right next to it is an LED luminaire, and that afternoon they could switch. So we are focused on that end application. I do believe that as we continue to migrate into the digital world, Acuity is uniquely positioned with its controls position, with its light engine component business to really bring together solutions into these end vertical applications like schools, industrial spaces that are truly smart and simple to use. So we think that gives us the opportunity to really over time improve our margins as we sell these types of value-add capabilities to those end customers.

I would just reinforce we don’t make lamps, we don’t for the most part make ballast, we don’t make LED chips, so it’s not as if we’re going to be sitting with stranded assets as the technology moves from lamp and ballast to LED, or even as the LED chips continue to evolve and you go to different types of manufacturing and all of that. We’re an integrator, assembler, a designer and so forth, so as Vern commented we, unlike some of the more vertically integrated companies, don’t have the stranded asset issue as this technology continues to evolve. Mike Ritzenthaler – Piper Jaffray: Excellent. Thanks for all your help.

Thank you. Next question is from Glen Wortman of Sidoti. Glen Wortman – Sidoti: Yeah, good morning everyone. Looking at SG&A, just based on some of your previous commentary around the fixed component and then variable costs, it does look like your SG&A came in lower than I would have expected. Should I read anything into that, and how should we be thinking about SG&A going forward?

So again, as we have stated in the past, if you go back over the last six quarters, our freight and commission as a percentage of sales has been in a pretty tight range – around 11.5 to 11.6%. If I look at our fixed SDA, more interestingly if I back out bonus – and I’m not suggesting you do that – but if I back out bonus, this quarter was pretty consistent, by the way, with where we have been, kind of roughly in that $90 million range. This quarter was a little less – it was 88, but bonus obviously was the difference in that fixed piece, so you get a sense there. But my two cents on it is I would look at fixed excluding bonus to be probably in the $90 million range, and then bonus, it depends on how well we do. We’re hoping to accrue a huge bonus this year, so. If you add back the bonus and you look at this quarter, we were at about $93.5 million on the fixed. Previous first quarter we were at about 94.5, so again all pretty tight in that range of around 95 in total. I think that’s probably a decent number. And understand that in what we are calling fixed, they are still variable pieces in there. I mean, when we have trade shows that we go to, it’s that period where we accrue that cost, so Light Fair is coming up, so in the third quarter typically—Light Fair is always in the third quarter, so typically we’ll have a little higher cost associated with that. But I think for modeling purposes, we’re not uncomfortable with kind of that mid-90 million number. Glen Wortman – Sidoti: Okay, and then just walk us through the balance sheet. You’re in a net cash position. Can you just update us on your cash priorities?

Sure. Our first priority is obviously to invest in the business, and we’re doing that. We’ve got $50 million of capital expenditure estimate for this year as we continue to invest in new products, in new capabilities and IT, as well as productivity opportunities, cost reduction opportunities, and so forth. M&A would probably then come next as a priority. We’ve been fairly acquisitive throughout the last six, seven years, and would continue to do that. And when you look over the last six years or so, five, six years, you’ll see about half of our free cash flow we spend on M&A and organic growth through CAPEX, which is not dissimilar actually from peer companies as well as other manufacturing companies. The other 50% of cash flow, we’ve returned to shareholders in the form of dividends and share repurchases, and would expect to continue somewhere in that range. We do have a consistent dividend we’ve been paying. We look at that as a—the board looks at that periodically and evaluates that, and then we do have authorization for another $2 million share repurchase that we will opportunistically use, based on potential other uses of the cash flow; and as I said, over the last five years, dividends and share repurchases have resulted in about half of our free cash flow being returned to the shareholders.

And Ricky, I would also point out we are very focused on acquisitions, but the problem is that—I call it the two D’s. A deal has to be both doable as well as desirable, so we continue to look for opportunities. eldoLAB and Adura are great examples of what we’re attempting to do. The other point I would make – you know, our cash flow return on investment on the trailing 12 months is now in the kind of upper 20’s in terms of percentage, so we continue to deliver very strong cash flow return on investment and we’re generating good cash. Glen Wortman – Sidoti: Okay, thanks for taking my questions.

Thank you. Next question is from Matt McCall of BB&T Capital Markets. Matt McCall – BB&T Capital Markets: Thank you. Good morning everybody. Vern, you mentioned in—I think it was you, might have been Ricky, investments to vertically integrate your fixtures and controls. Are those manufacturing investments, are those front-end investments in SG&A? I’m just wondering if they are showing up fully in OPEX or CAPEX, or we’re going to see incremental spending from here.

So our CAPEX—well, the simple answer to your question is it’s human capital primarily, but we are investing capital at capital investments at about 1.5% to 2%. So as Ricky pointed out earlier, we are upgrading or upticking some of our CAPEX to really expand our eldoLED driver capability because they have unique features and capabilities that we want to make available to the entire marketplace, so we’re upticking investing to handle that capacity. The second issue or opportunity is headcount. You have seen our fixed SDA, or that portion that we call fixed increase over the last three years, four years, because we have been investing in people. Our productivity, our sales per person continues to improve very, very nicely, so SDA—we will get leverage off of that, and you saw it this quarter. We picked up 100 BPs even though our bonus this quarter was significant compared to the de minimis amount that was in the year-ago period. So we are adding people, but we’re doing that in a way that is consistent with leveraging our SDA to the top line. The kind of growth that we’re getting on the top line requires service and support, but let’s be clear – our variable contribution margin is improving and the fact is that we’re growing very aggressively because of how we’ve proliferated our lighting solutions portfolio, which includes luminaires, controls and components. That’s due to the acquisitions and the investments that we’ve made over the last x-years. I actually believe that for folks that are doing modeling purposes, one of the longer term things that they have to do is look at what our sales per headcount is, and if you go back to 2005 it was $200,000 of revenues per head. Last year it was $325,000 revenue per head, so we’re continuing to drive productivity throughout our business and getting leverage both at the gross profit side as well as the SDA side. Matt McCall – BB&T Capital Markets: Okay, thank you Vern. The last question – this is kind of a follow-up to an earlier one, but when you look at how your business is trending this cycle from a kind of all-in spend per square foot when you bring in controls and components and the items that you were talking about, as you’ve looked at that on kind of a per-project basis, be it a new building or a remodel or retrofit, what can it tell you about this success? You talked a lot about the bigger market opportunity, but what is your actual data telling you about the all-in spend per square foot, and what does it tell you it could look like as we move through the cycle versus the last cycle?

So again, for new construction we’re very early in this game; but if you look at renovation, on average – and again, it varies so widely in terms of what type of end market application. If you’re in the industrial space, you’re going to have a number. If you’re—you know, an office like yours is going to be a much higher number. We kind of guesstimate that the install base – 100 billion square feet – to renovate that for luminaires is probably $3 a square foot, and then you add another $0.50 or so a square foot for controls. That’s a $300 billion to $350 billion market install base that will renovate. But it varies so widely, it’s very difficult for us to precisely say, and truthfully we really don’t track it that way. What we’re looking at is how do you win a job, and then what are our margins on that job. Matt McCall – BB&T Capital Markets: Okay, that’s fair. Thank you, Vern.

Thank you. I would like to turn the call back over to Mr. Vernon Nagel for closing remarks.

Thank you for your time this morning. We strongly believe we are focusing on the right objectives, deploying the proper strategies, and driving the organization to succeed in critical areas that will over the longer term deliver strong returns to our key stakeholders. Our future is very bright. Thank you for your support.

Thank you for your participation. That does conclude today’s conference. You may disconnect at this time.