Ladies and gentlemen, thank you for standing by. Welcome to Actuant Corporation's Second Quarter Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we’ll conduct a question-and-answer session. [Operator Instructions]. As a reminder, this conference is being recorded, Wednesday, March 18, 2015. It is now my pleasure to turn the conference over to Karen Bauer, Communications and Investor Relations leader. Please go ahead, Ms. Bauer.

Thank you. Good morning. Welcome to Actuant's second quarter fiscal 2015 earnings conference call. On the call with me today are Mark Goldstein, Actuant's CEO; and Andy Lampereur, CFO. Our earnings release and the slide presentation for today's call are available in the Investor section of our Web site. Before we start, a word of caution. During the call, we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Investors are cautioned that forward-looking statements are inherently uncertain and that there are a number of factors that could cause actual results to differ materially from these statements. These factors are outlined in our SEC filings. Consistent with prior calls, we will utilize the one question one follow-up rule today in order to keep the call to an hour. Thank you in advance for following this practice. With that, I'll turn the call over to Mark.

Thanks, Karen. Thank you for joining us on our fiscal 2015 second quarter earnings call. We reported earnings per share within our guidance range on sales that were slightly below guidance. As Andy will explain, the continued strengthening of the U.S. dollar impacted both comparisons. Our EPS excludes the accounting impairment charge we’ve recorded in the quarter on our upstream energy exposure. We reported 2% core sales growth in both our industrial and energy segments in the second quarter and an 8% decline in engineered solutions resulting in a consolidated core decline of 2%. While pleased with the sales growth in industrial and energy, engineered solutions sales in our consolidated profit margins were disappointing. The lower tax rate and stock buybacks in the quarter helped mitigate the margin impact. We are facing cyclical headwinds in each of our four key verticals but remain confident in their secular long-term growth potential. Andy will talk through the details of the asset impairment charge but let me reiterate that despite this non-cash write-down, we believe the worldwide demand for energy will be strong over the long run and our niche leadership positions in that market offer very attractive long-term growth prospects. In the short term, given current market conditions, we are aggressively managing costs, which I will discuss later on the call. With that overview, I’ll turn the call over to Andy to go over the quarterly details.

Thank you, Mark. Good morning, everyone. Before getting into a discussion on operating results, I’m going to review the impairment charge. In accounting terms, we had a triggering event this quarter given energy market conditions that required us to rerun our annual impairment test. This resulted in a $6 million write-down of trade names and a $78 million write-down of goodwill for a total gross non-cash charge of $84 million. We were only able to book a $2 million tax benefit against the charge as the goodwill is not deductible for tax purposes. The net $82 million impairment charge amounts to a non-cash $1.33 EPS loss as you can see on this schedule. Moving on to operating results on Slide 5. Sales were approximately $301 million for the quarter and diluted earnings per share excluding the impairment charge was $0.28 a share. The continued strengthening of the U.S. dollar throughout the quarter had a meaningful impact on our financial results. Versus guidance, foreign currency rate changes caused an $8 million sales shortfall and a $0.02 a share EPS headwind as well as a $10 million increase in our net debt. However, stock buybacks and the lower tax rate provided a combined $0.03 a share EPS benefit compared to the guidance. With or without these items, our actual EPS of $0.28 was within our guidance range with sales falling just under the low end of the guidance after considering currency. Compared to last year’s $0.30 a share first quarter EPS, currency was $20 million sales and a $0.04 EPS headwind in the quarter. Earnings per share benefits of $0.04 from the buybacks and $0.05 from the lower tax rate more than offset this and highlight the year-over-year profit margins. Turning now to Slide 6, I’ll provide a few comments on sales.…

Thanks, Andy. As Andy mentioned, I’m going to dive deeper into oil and gas and provide a more detailed update to what we shared during our December earnings call. As you heard today, second quarter energy core sales growth of 2% was right on forecast, and our outlook for the next two quarters is still in the circle with our prior estimates. We saw mid 20% core sales decline in Cortland in the second quarter following a mid-teens core sales decline in the first quarter. We expect Cortland’s core to be down about 10% to 20% for the remainder of the fiscal year and into next year. Hydratight was up 2% core in the second quarter but we expect that it will start to post core sales declines starting next quarter and will continue for the balance of this fiscal year and into next year in the negative 5% to negative 10% range. Finally, Viking posted robust growth in the second quarter due to significant Australian and Southeast Asia project work. Some of these jobs, however, are winding down and comps start getting more challenging as we anniversary their start dates. Accordingly, we anticipate Viking to have sales declines starting in the fiscal third quarter, which will increase to about 20% for the balance of the calendar 2015. What all this means is that we feel that our flat to negative 2% core sales outlook for the energy segment for the year is realistic. However, we need to emphasize that our exit rate in the fourth quarter of fiscal '15 will be significantly lower than today, which sets up for a more challenging fiscal '16 outlook for the segment. While energy segment profits are up year-to-date that will continue giving the upcoming sales declines and pricing relief requests from oil…

Certainly. [Operator Instructions]. The first question is from the line of Jeff Hammond with KeyBanc Capital Markets. Please proceed.

Hi, Jeff.

Hi, guys. This is James Picariello filling in for Jeff.

Hi, James. How are you doing?

Hi. I’m doing well, thanks. So can you just – to start off speak to the Enerpac business, particularly what you’re seeing in the downstream refinery maintenance space and what your expectations are for the second half? Is the guidance reduction mostly a function of Enerpac slowing or is it more integrated solutions just not refilling the backlog as you had hoped? Thanks.

Sure, James. When I look at Enerpac on a global scale, if you look at integrated solutions, it was down about 14% for the quarter. We’ve got a great funnel of opportunities out there and as we mentioned in the prepared remarks, we continued to see push-offs, delays but the funnel is good and it is converting at a lower rate than we anticipated. On the Enerpac industrial tool business and if I focus on North America right now, we actually saw good growth in the quarter. In North America, it was up about 7%. The backlog is not what we expected coming out of this and the momentum isn’t where we wanted it to be going into the second half. And as a result that certainly has impacted us. Europe continues to putter along, if you will. It’s fairly flat. Asia-Pac, we’ve had some strength there but mining and oil really impacting the Enerpac business in the Australia market, which is a fairly strong area for us. So because of a number of those elements, we’ve taken the forecast down in the second half. The one area we are focused on in the IS portion of the business is more of that standard product that we’ve talked about, so gantries and sync lifts and some of the more standard product versus the larger ticket items that you’ve seen us win on larger projects in the past. So that’s been our focus there.

Got it, that’s helpful. And if I’m allowed, just one follow-up. Can you quantify what the one-time items were in the energy segment tied to Cortland severance, et cetera, just to get an idea as to what the underlying operations were?

About $1 million in the quarter.

Okay. Thanks. I’ll get back in queue.

Your next question is from the line of Ann Duignan with JPMorgan. Please proceed.

Hi, Ann.

Hi. Good morning. This is [Tom Semonitch [ph]] on behalf of Ann. You described continued strength in Australia and Southeast Asia in energy. When do you expect to complete these projects?

The strength that we’ve seen in Southeast Asia is primarily driven by some of the Viking wins that we’ve had over the past 12 to 18 months, they vary in length. Some of those are longer contracts, some of those are 12-month contracts. And so they stagger off, but we do see a falloff as we get into the third and fourth quarters and that’s one of the reasons why we’ve guided down the expectation in revenue.

Okay. Thank you. And also you say that product mix was a headwind to margins in industrial. Can you add some color there?

Yes. The Hayes acquisition primarily has been the drag there. That’s a lower margin in our core Enerpac business.

All right. Thank you very much.

Your next question is from the line of Allison Poliniak with Wells Fargo. Please proceed.

Hi, guys. Good morning.

Good morning, Allison.

Hi, Allison.

Hi. Mark, can you talk about growth and innovation a little bit, expand on that? Just how do you view that in this kind of environment where you’re obviously needing to strip out costs? Does the filter get a bit tougher for some of these projects?

Yes. So that’s an interesting question and we’ve spent a lot of time on that, Allison. What we’ve done is to, from a growth and innovation standpoint, we’ve really narrowed the focus of our activities and what we’ve narrowed it down to is top three, next three by segment, and we’ve really begun focusing most of our resources and capital around those top growth initiatives. And so in this period of time where we’ve got to do some cost takeout within the business, we’re still focusing on growth and innovation, but it’s more narrowly focused on these top three, next three and we’re rallying our people around those areas.

Great. Thanks. And then, Andy, just want to just go back to your comment on EBIT margin. I think you said this was sort of the – this quarter would be sort of the bottom for the year. How should we think about them in the back half? Obviously, core volume declines are accelerating. You’re obviously taking cost out. Obviously a lift, but potentially down year-over-year.

Yes. The margins when I look at the back half of the year, they will be down year-over-year just given the volume shortfall and the impact of – or the year-over-year volume reduction as well as the impact of purchase price variance on currency, particularly in the third quarter. I think by the time we get to the fourth quarter that’s going to be evening out. We had some restructuring costs fourth quarter of last year, we’ll get restructuring savings this year, so I’m hoping that our fourth quarter of this year will be up year-over-year from a margin standpoint.

Great. Thanks so much.

Allison, one of the other things we’ve done on the ring-fencing of initiatives is around the high growth markets where we’ve really seen some good growth over the past four to six quarters as well, mid single to high single digit growth.

Perfect. Thanks so much.

Your next question is from the line of Matt McConnell with RBC Capital Markets. Please proceed.

Thanks. Good morning, guys.

Hi, Matt.

So on the free cash flow guidance, you’re still looking for above 100% conversion, but that 105 to 115, I think that’s a little below what you’ve done the past couple of years and you might expect with lower revenue you’d have inventory coming out maybe. But anything else we should be thinking about with respect to that free cash flow forecast?

No, I think when you look on the average over the last 5, 10 years we probably averaged about 110 or 115, so I feel okay about it. Working capital will have to come down but that’s incorporated in there.

Okay, great. And then you ran through a bunch of the initiatives in engineered solutions and I wonder – could you put a cost savings number around that and how much of that cost savings would hit in fiscal '15 versus '16? And just margin expectations maybe for the second half of the year as you see a seasonal volume lift.

I think the reactions that we talked about or projects that we talked about last year already, I mean we took a hit in the fourth quarter of last year to do kind of phase II of the automotive move out of the Netherlands down into Turkey and the other one was a much more minor, it’s probably 15 employees or so coming out of our Lancaster plant. When that is done, essentially manufacturing will be totally out of that plant. The issue here, we have savings with this stuff but you’ve got cost and you’ve got margin going the other way because of the impact to lower volumes. So it’s all net out, it’s included in our forecast already. But the savings that we talked about are a couple million dollars on an annual basis, you’re just going to see that starting in the fourth quarter of this year.

Okay, that’s helpful. Thanks.

Your next question is from the line of Rob Wertheimer with Vertical Research Partners. Please proceed.

Hi. Good morning.

Good morning, Rob.

So, obviously the oil market has been soft so maybe the impairment is no surprise. But I wonder if you can talk about, did the triggering mean you flipped from an undiscounted cash flow to a stricter test? And does the implied new valuation assume much lower margins that are in the quarter or the fiscal year? I’m just trying to understand how that worked mechanically.

Yes. Essentially we did have a triggering event like we said. We used the same calculation you do at any time if you’re tripping the cash flows on it or whatnot. Our forecast going forward was also baked into the DCF calculations that we’ve got in that model that do have to jive obviously, so in the near term some significant headwinds especially with Cortland right now and then I would say Hydratight coming on late this year into the negative range and Viking hitting this quarter, in the third quarter.

Okay, so mix but some of it is forward-looking rather than what you’re seeing right now in the current environment? Okay. Perfect.

Yes, honestly if we – based on our – we beat numbers right out of the first half, our profits were actually above our plan.

And the second question is and again, I’m not sure how much you want to get into the detail, but how much price downs – obviously, there are some very, very big headline numbers that people are asking for and then I guess that turns into a negotiation. How much of that is baked into this year versus you think is something you struggle through and then you’ll struggle through again next year? I don’t know if you’ve incorporated that into the forecast in a material way.

What you’re referring to, Rob, is the ask that we’re getting mainly on the energy side from some of the larger folks and those requests are – first of all, we typically get request in the markets that we’re in for price reductions on an ongoing basis. This is obviously a little bit more intensified. We’re getting letters from 10% to 25% request. We’re using those as an opportunity to negotiate and see what additional revenue streams we can pick up in the process. And we’ve got those discount funds [ph] that our businesses have already baked into our guidance for this year.

Okay, great. Thank you.

Your next question is from the line of Scott Graham with Jefferies. Please proceed.

Hi. Good morning.

Hi, Scott.

I wanted to jump around the businesses a little bit because you guys have really not gotten a lot of help from markets which I would have thought would have been helping you by now. When do you – and it’s essentially these five. Industrial tools, maybe when does the turn up more decisively? European truck, IS, China truck, auto, when is the inflection for sales in those businesses best guess for you?

Yes, so let me just run through this and any of you can --

We’ll get our crystal ball out.

You can follow up. Let me give you just – on the industrial tool side, we had anticipated that we’d see a lift obviously and that isn’t – the backlog isn’t where we thought it would be. And we continue to have softer production numbers coming out of a lot of markets that we’re in. And so we’re thinking that’s going to be fairly tepid over the next couple of quarters.

Yes, just to point out here, we are up. I mean the thing is growing again the change that we really had is we anticipated more momentum coming out of this quarter that would lead to a little bit better growth in Q3 and a little bit better in Q4 and we’re just starting at a lower pace. And it is extremely frustrating to forecast this thing, because you got a good month then you got a bad month. There doesn’t appear to be momentum in this market in particular with tools.

On the truck side on European truck, we had that big Euro 6 build last year. We had a tail on that that came into the first couple of quarters. We’re in middle of anniversarying that right now. All indications from the data that we see come out of Europe and that’s where most of our – the majority of our truck business is in Europe. And most of the market data coming up right now talks about low-single digit increase in build as the year progresses. So that’s what we’re thinking on the European truck side of things and that’s on the calendar year as well, Scott. On the IS side of the business that’s a more difficult one to predict. We are really focusing on the standard activities around gantries, sync lifts, some of the more standard product versus some of the larger projects even though we continue to bid on them, we’ve got a funnel that’s as big as we’ve had. We’ve got a number of programs that we’re working on. We still have build into the second half of the year, about 10% to 15% lift in IS and --

That 10% to 15% is coming off easy comps. Sequentially, it’s not – it’s not suddenly boom things are going but we were down quite a bit.

On the China side, Scott, I just got back – I was in India and China a couple of weeks ago. I just got back from China and I’m very happy with the team there. We’ve seen some growth I think even in a tepid environment. And again, they came out with lower government growth numbers while I was there. But I do believe that we’ll begin to see some growth, but I think it’s more share. The truck part of the business continues to be very sluggish though in China. That continues and that’s down about 10% through the remainder of the fiscal year. And I think that was --

The last one was just auto OEM.

The auto ones is just a function of platform, Scott. There just aren’t new platforms coming out. We’ve had a couple of wins. We’ve talked about the Camaro earlier this year but there have been very few that are coming out and so we feel in all areas that we’re maintaining our share, it’s just that there is less new stuff coming out and the existing platforms are being extended from what we used to see as five years to seven years.

Yes, understood.

I’ll just comment on auto in particular. This is a question we get all the time when we’re meeting with investors. They’re asking me about margins in engineered solutions. Automotive revenues this year for us will be about $50 million. Back in 2012, they were $120 million. So the business is down by $70 million over the last three years. Certainly at a 50 million base, this business is breakeven. We were making very good margins two, three years ago but the volume differential is not there. So auto certainly will be a great thing when it comes back, but it’s weak right now.

All right, thank you for that. And the last one, if you could, Andy, what was the quarter end share count?

The actual share or what we had – if we look in the face of the income statement, I think we had 61,759 which was the average without the common stock equivalents. The average with the common stock equivalents would have been 62,500 or so or 63,000. I’d expect that to come down by about 1 million. The actual count was about 1 million less than that. This is obviously a quarter average on here, so it could have been less than by about 1 million shares.

Okay, so essentially on the face of your Q, that’s the number I was looking for. That’s like the 61 --

It will be around 61.

Very good. Well, thanks, guys.

Thanks, Scott.

Your next question is from the line of Ajay Kejriwal with FBR Capital Markets. Please proceed.

Thank you. Good morning.

Good morning, Ajay.

So on your free cash flow, it looks like you’ve cut that guide a lot more than the EPS and I know share buybacks are helping EPS but that’s really not all of it, so maybe just help bridge that. Is that your expectation on free cash flow a lot weaker than where it was last quarter?

Our guide last quarter was $150 million for the full year. We’re at $110 million to $120 million right now, so obviously it has come down. Currency is a huge driver in that. Our EBITDA has come down quite a bit because of currency and because of the reductions in the end markets that we’ve built into the forecast here. So again, it’s 110% or so conversion of net income. So I think we’re doing what we can from managing it standpoint and I think it’s a good number.

But my question was more about the disconnect between EPS versus cash flow. The reason that you mentioned --

It’s the shares and the taxes because EBITDA is really down about 25.

Okay, all right. That’s helpful. And then on the leverage ratio, you’re at 2.2x and I guess that’s based on trailing 12-month EBITDA on pro forma. It’s probably a little higher. So I guess the question is what are some of the constraints that might limit the flexibility that you have on buybacks? Are they any debt covenants or is it more just corporate policy? How should we think about your flexibility from here on?

Our covenant is either 3.5 or 3.75 maximum leverage depending on acquisitions occurring around that test, so certainly there’s a lot of flexibility with regard to that. I think it’s more governed internally just based on we would want to be generally in the 1.5 to 2.5 range and if we’ve got M&A in the pipeline that’s certainly going to impact our buyback activity and just what we’re thinking about the business, confidence level in the business and that sort of thing.

So it’s how we’re managing it versus the covenant issue.

Got it. Thank you.

Thanks, Ajay.

Your next question is from the line of Mig Dobre with Robert Baird. Please proceed.

Good morning, everyone. Just going back to energy, as I understood it and I appreciated all the color as we look out over the next, call it, two to four quarters. But we’re going to exit the fiscal year with Hydratight maybe down 5% to 10%, Cortland and Viking down double-digit as well. So I guess my question is we’re positioned for maybe double-digit core declines into fiscal '16, would a 10% headcount reduction be consistent with that expectation or is there more that needs to be done? And I guess the corollary here would be in terms of the way we should be thinking about decremental margins going forward, how do we think about the savings versus the fact that Viking, for instance, should have very high decremental margins on that revenue loss?

Yes, let me just talk about is 10% enough. I think the team – you got to remember we finished the last quarter. We’re up 2%. We anticipate it coming down as we’ve described in our guidance. I think the team is doing an excellent job in addressing these cost issues and getting ahead of the curve there. So I think from that perspective, we’re being very responsive. I think if you look – and if you look at other people in the marketplace, Mig, the Schlumberger’s, the Halliburton’s and some of the headcount reductions that they’re looking at, I think we’re probably north of what they’re contemplating at this stage in the game in their pure plays in energy. The team is also looking at additional contingency plans. This is something that we do as part of our normal business process. And so if we find that things deteriorate even more then we’ll be able to implement those actions. So I think at this stage of the game, it’s what we need to do and we’re actually a little bit ahead of the curve on that. Andy, you want to cover the other piece of this question.

Mig, if you can repeat the second part of the question again.

Sure. I mean basically what you’re saying is you’re reducing the headcount by 10, but core growth is going to be down double-digit as well. So I’m trying to figure out what decremental margins should look like in this environment recognizing that Viking should have relatively high decremental margins from what I’ve been told.

Correct. The decrementals for Hydratight and Cortland typically in 30% to 40% at the gross profit level, the EBITDA level as well. For Viking it’s dependent on if the revenues coming out are rental. Whether they’re rental or whether they are sales of product and kit and that sort of stuff, it makes a very big difference. If it’s rental, the decremental is probably 80%. If it is product sales, less than 20%. Blended, it’s somewhere in the middle, probably I’d say somewhere 60 there. These would be without other cost reductions, so that is contribution margins. So what we are trying to do is reduce cost to mitigate that. So to Mark’s comment earlier, don’t incrementalize these cost savings. That’s what they’re intended to do is to offset part of but not all of the reduction there.

I appreciate the color. And then I guess my follow up is back to engineered. There has been considerable restructuring there in the past few years. It sounds like more of it is needed. Can you give us some color looking at your main product lines as to which one of them, if any, have negative operating margin at this point? And do we need a volume bump there or can you return those businesses to profitability just through cost management and facility reductions and such?

We’re not going to get into talking about individual margins and which businesses are positive and not positive right now, but I mean I did make the comments earlier on what’s happened with automotive that it’s kind of at a breakeven OP level at this point in time. I absolutely need volumes there in order to get anywhere back to the mid-teens that we had in that particular business, you just cannot do it without the volume even with the benefit of the savings that we’re getting from moving to Turkey. In that product line, certainly we need volume. Tuck volume will certainly help. Margins are okay in the business overall, but as a reference point in Truck, volumes last year were still below the volume levels back in 2008. We’ve never fully rebounded in European truck on this thing. So there are cost downs from a structural standpoint that are going beyond this thing, but the revenues in the business are off. So it’s a combination of that. And going forward, we’re trying to reduce the cost base through restructuring and whatnot. From an ag standpoint, ag is among our highest margins in the segment. I mean these are very good margins in here and certainly been great with Weasler and with the ag seeder and whatnot. But as the ag seeder line has come off, as a reference point there, it’s coming off $10 million year-over-year at contribution margins that are very high. So that’s kind of what’s weighting on us there. So there are other things that we are looking at in the segment from a cost down standpoint. We want to get through the ones we’re on right now just so we have got good execution on them, but certainly it’s something we’re looking at; what more can we do within here because generally the facilities in here we are down to single plants supporting these product lines in a lot of cases and you still want to make product. You really can’t consolidate that plant to nothing.

One of the things from a growth standpoint and Andy is right on relative to the volume is what we need. When we went through these plant moves over the past year or so, we anticipated our volume would be higher than the current run rates and so we need to structure even further. But all we’ve really done is also deploy a lot of our resources to assist the segment and focusing on service quality and delivery to improve the revenue stream and get at least as much as we can out of these stagnant markets. So we continue to look at ways to drive that, but it is a volume issue.

All right, very helpful. Thank you, guys.

Thanks, Mig.

Your next question is from the line of Charlie Brady with BMO Capital Markets. Please proceed.

Hi, guys. This is actually Patrick [ph] standing in for Charlie. Thanks for taking my question.

Hi, Patrick.

I just wanted to get some color on, it looks like freight costs sort of hurt margins on both the industrial and engineered solutions segments, so wanted to maybe get – maybe you can guys can quantify what that hit is? And how much can we expect that to carry through to the third quarter or if any?

It was expedited freight or air freight essentially was one of many factors I called out. Individually, it’s not like millions and millions we probably had. We probably had $1 million of incremental expedited freight in the quarter. This was predominately in industrial and in our truck business and engineered solutions where they’re very reliant on China supply chain for this. So with everything get backed up on the West Coast, we had to air freight stuff in to keep top product in stock within Enerpac and to keep production lines moving as it relates to truck. Will there be a little bit of carryover on this? Possibly, but it seem like the worst was backed into the November – it was in December timeframe, December-January. We think they’ve got enough inventory and now to handle the next couple of months until the backlog has worked down out in the West Coast. So I’m not expecting really any incremental air freight here, so I would expect $1 million reduction sequentially on this thing. I don’t think it’s going to take more – it’s going to spill over into this quarter.

And part of this expedited air freight issue is the intent. Given the softness of the end markets that we’re in, an intent focus on meeting customer needs, having fill rates as high as they possible can be to pick up as much revenue as we can. And so that’s really been the mantra within the businesses.

Okay, got it. Could you guys talk about how much core sales declines were in truck and convertible top earlier? I may have missed that, but not can you maybe add a little color there?

Yes, truck was I’d say mid-single digit decline and auto was year-over-year.

Sorry, something sort of blocked off. Can you repeat the auto?

Sure. The auto was a 10% decline year-over-year and the truck was a 4% decline year-over-year.

Right. What are you expectations for ag for the rest of the year?

We expect there’s two different pieces of ag; two-thirds of it or more is tied in with implements side of it or the replacement part. That was positive core, 1% in the quarter. We expect that to trend down during the balance of the year probably toward a mid-single digit down. The other part is more, I call it the big egg. It would be the equipment that some of the displays and some of the seeder product that we talked about earlier. That stuff is in line with what you’re seeing on build rates. It’s off in the 30% to 50% range and I expect that pace to continue on for the balance of the fiscal year.

Great. And if I may just throw in one more.

You’re the last questioner. It’s the only reason I’m letting you ask more.

Got it. Thanks, guys. Just jumping on a question earlier in terms of share buybacks, will most of them be funded through your cash flow or are you guys willing to draw down part of the revolver to do it?

I think we’re comfortable with where our leverage is right now and we want to be in the 1.5 to 2.5 zone just this quarter. The last quarter was the first time in three years that we’ve been within that zone, right. So it’s going to be predicated on what is our cash flow and probably more importantly what is the funnel for acquisitions and what kind of need do we have there. So, you can model in free cash flow coming in. I don’t expect to necessary move above this target range here for more than a quarter or two if there’s a deal that pending and that sort of stuff, but it’s going to be somewhat fungible. And if cash comes in, we pay down the revolver, we borrow it back to fund the buybacks.

Okay. Thanks a lot.

Gentlemen, we have no other questions at this time.

Well, thanks everyone for joining the call today. We’ll be around all day to answer any follow ups you have. Just a reminder that our third quarter call will take place on June 17th, so you can mark that on your calendar. Thank you.

Thank you.