Transcript
Operator
Executives Mark M. Rothleitner - Vice President-Investor Relations & TreasurerNolan D. Archibald – Chairman of the Board, President & Chief Executive OfficerStephen F. Reeves – Chief Financial Officer & Senior Vice PresidentAnalysts Nishu Sood - Deutsche BankAnalyst for David Goldberg - UBS SecuritiesDavid S. MacGregor - Longbow ResearchSam Darkatsh - Raymond JamesPeter Lisnic - Robert W. BairdDennis McGill - Zelman & AssociatesOperator My name is Regina and I will be your conference operator for today. At this time I would like to welcome everyone to the Black & Decker third quarter conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks there will be a question and answer session. (Operator Instructions) I would now like to turn the call over to Mr. Mark Rothleitner, Vice President Investor Relations and Treasurer.Mark M. Rothleitner Welcome to Black & Decker’s third quarter conference call. On today’s call our Chief Executive Officer, Nolan D. Archibald and our Chief Financial Officer, Stephen F. Reeves will discuss our third quarter results and outlook for the remainder of 2008. Their comments should take about 15 minutes and then we will answer your questions. In keeping with SEC requirements, I advise that during this call we will be making forward-looking statements that involve risks and uncertainties. For a more detailed discussion of the risks and uncertainties that may affect the Black & Decker Corporation, please review the reports we have filed with the SEC. In addition we will be referring to non-GAAP financial measures within the meaning of SEC Regulation G. A reconciliation of the differences between these measures with the most directly comparable financial measures calculated in accordance with GAAP is included on the corporation’s website under the Investor Relations section. And now, I will turn it over to Nolan.Nolan D. Archibald This morning Black & Decker announced solid earnings and free cash flow for third quarter. Before we discuss those results however, I would like to make a few comments in light of recent events. As you know our industry has faced a very difficult business environment over the past two years. A global credit crisis will make conditions even more difficult. Against this backdrop it is important to remember the underlying strength of Black & Decker’s people and business model. Our world class innovations and leading brands combined with financial discipline will help us emerge from this challenging period well positioned for the future. During my 23 years at Black & Decker we have overcome many challenges. I am very proud of the team that we have at Black & Decker and I am confident that we will overcome these challenges as well.Turning to the third quarter, our operating performance was a little better than we had forecasted in July. Sales decreased 4% in line with our guidelines including three percentage points of favorable foreign exchange. Excluding a charge from additional structuring actions, our operating margins were 8.6% versus 10.1% last year. This was above our expectations due to expense reduction efforts. Earnings per share were $1.42 for the quarter versus $1.59 in 2007.This quarter’s EPS was affected by a restructuring charge but that impact was offset by favorable taxes and other non-operating items. Now let me discuss our business segments, sales at our worldwide power tools and accessory segment decreased 6%. As we expected the North American decline was smaller than in the first half. Business conditions in Europe however, weakened significantly this quarter. In the US industrial products group sales decreased high single digits. Depressed housing and decelerating commercial construction hurt our sales particularly in the IC channel. Overall, our cordless sales improved slightly but other major categories had double digit declines. Results of the home centers were mixed. Demand was down in this channel, but we benefitted from new listings at major customer. Following cautious inventory management at our key customers in the first half the order trend improved sequentially this quarter.In the US consumer products group sales decreased double digits this quarter. As we have discussed previously this business has been affected by reduced pressure washing listings and the transition out of the Firestorm sub brand. These factors did not affect sales as much as in the first half due to seasonality of the initial shipments of our new porter cable line. Excluding pressure washers sell through at the home improvement centers decreased mid single digits. This was consistent with the second quarter trend.In Europe sales declined in the double digit rate this quarter. Economic growth has slowed significantly throughout Western Europe with a few countries entering a recession and others expected to follow. Our sales were particularly weak in the UK and Iberia again this quarter. Performance was similar for the industrial and consumer businesses reflecting lower demand and inventory reductions by our customers.We saw continued growth in the Middle East and double digit gains in Eastern Europe but on a much lower sales base than in Western Europe. In Latin America our sales rose at a rate in the teens extending an impressive growth trend. All key product lines grew significantly as did each key region. In the Asia Pacific region a decline in Australia and New Zealand roughly offset growth in China and South East Asia.Return on sales for the power tools and accessory business decreased this quarter to 7.5%. SG&A spending was down both in absolute terms and as a percentage of sales. Gross Margin however was down significantly particularly in our US consumer business. Component inflation, pricing and unfavorable mix all had a negative effect on the segment. In our hardware and home improvement segment sales decreased 13%. We knew in July we faced a difficult comparison so this performance met our expectations.Last year SmartKey drove sales growth for this segment despite the housing downturn. That comparison combined with ongoing construction declines drove the decline of roughly 20% for the US lock business. Sales through key retailers was roughly flat as SmartKey continues to gain recognition and market share. Sales in the price Pfister faucet business decreased slightly. In the wholesale channel which is significantly tied to new housing sales were down double digits.Pfister’s larger channel retail saw modest sales growth. Increases in inventory retail partially to support relisting gains helped our results this quarter. Operating margins for the hardware and home improvement segment decreased 100 basis points year-on-year to 11.3%. Significantly lower sales volume against slightly lower SG&A spending caused the margin decline.Partially offsetting this was productivity gains which helped the segment post strong gross margins. We are pleased to see this improvement in a quarter where production and inventory levels continue to fall. In the fastening and assembly systems segment sales fell 2%. The well documented challenges facing US auto makers resulted in the double digit decline for this part of operations in Asia and Brazil where we grew double digits, compensated for the US shortfall. European sales were flat this quarter reflecting the slowing economic conditions. Our margin for the fastening segment was virtually flat at 15.5% for the quarter. In September our Emhart business acquired Spiralock a provider of highly engineered threaded fastener solutions. This is a small addition of roughly $15 million dollars of annualized savings which we plan to grow by leveraging Emhart’s global platform.As we have said in the past the industrial fastening business has outstanding potential. As a result we continue to evaluate acquisition opportunities in this segment. Now I will turn the time over to Steve who will discuss our financials in more detail. Stephen F. Reeves Starting with the income statement sales were $1.6 billion for the quarter, a 4% year-on-year decline. Organically, volume was -6% and price was -1%. In July we expected price to be moderately positive for the second half and neutral for the full year. While we are implementing price increases in several parts of the company we have also faced some price competition in increased promotions particularly in Europe and the US consumer business.Currency translation added 3% to sales in the third quarter, a little less than in the first half due to the strengthening of the dollar late in the quarter. Gross margin was 32.4% for the quarter, 160 basis points below last year and down slightly versus the second quarter. The main driver remains component cost inflation including the impact of Chinese currency and VAT policy. While many commodities fell during this quarter our component contracts lagged the spot prices therefore, inflation still had an approximate $30 million dollar impact in the third quarter and $120 million year-to-date.For the full year we can continue to expect roughly $145 million of component inflation. In addition to inflation this quarter’s margins were unfavorably affected by mix. As in the second quarter, productivity gains and restructuring savings roughly offset the negative price. We made outstanding progress on SG&A this quarter reducing expenses by $18 million or 5%. Despite lower volume SG&A fell as a percentage of sales. Power tools and accessories continue to aggressively manage expenses posting decreases in every major spending category.During the quarter we recorded a restructuring charge of $16 million which had a $0.21 impact on EPS. Most of this charge relates to a workforce reduction in the tools business to address the slowing economy in certain international markets. In addition we are taking further restructuring actions in hardware and home improvement including reconfiguration of our Mexican manufacturing operations. We anticipate these actions will generate annual pre-tax savings of approximately $15 million starting in 2009.In total these actions and the others we have previously announced are on track to reduce costs by $20 million in 2008 with incremental savings of $30 million in 2009.Interest expense for the quarter was lower than the prior year primarily due to favorable interest rates for most of the quarter. As you know the global credit crisis has caused rates to move up dramatically since mid-September. Therefore we expect higher net interest expense for the fourth quarter. As we have often seen since FIN 48 became effective, the tax rate had a significant effect on earnings this quarter.Last year we announced the settlement of a tax matter with the US government which had a favorable impact on earnings for the fourth quarter of 2007. In the third quarter we made the final payment on this settlement and released $7.2 million of remaining reserves adding $0.12 to EPS.Other small tax adjustments contributed another $0.04 to EPS relative to the tax rate assumed in our prior guidance. As Nolan mentioned, the tax and other income favorability relative to our prior guidance essentially offset the impact of the restructuring charge on net earnings.In the current credit environment liquidity is especially important. We generated $212 million of free cash flow in the quarter versus $113 million last year. The year-to-date total is $258 million down from $413 million in the prior year. Considering business conditions and our unusually strong cash generation in early 2007, we remain pleased with our working capital and cash performance.Inventory at quarter end was 12% below last September significantly outpacing the decline in sales. Both the power tools and HHI segments lowered their inventories more than 15%. While we anticipate free cash flow in the fourth quarter will not match third quarter level, we expect at least 100% conversion of the full year net earnings.After repurchasing 5% of our outstanding shares in the first half, we did not buy any since the first week in July. We had planned to slow the pace of repurchases partly in anticipation of bolt-on acquisitions. Near quarter end it also became clear that we should preserve our liquidity.As a result of strong cash flow and financial discipline, our balance sheet is in good shape to support our business. We reduced net debt by $137 million from the end of the second quarter and decreased average short-term borrowings by roughly $40 million versus the first half. During the recent volatile period we have issued commercial paper each day. In addition we have incurred no direct losses related to exposure to any of the failed financial institutions. As a reminder, none of our long-term debt matures until 2011 and we maintain solid investment grade debt ratings of BBB flat and BAA2.In the near term our plan for cash deployment is to maintain liquidity, solid debt ratings and our dividend. We will still consider bolt-on acquisitions of high quality businesses at compelling valuations. Over the longer term we remain committed to aggressive redeployment of free cash flow including share repurchases to drive shareholder value.Now I’ll turn it back to Nolan to discuss the outlook for the rest of 2008.Nolan D. Archibald Entering the fourth quarter we face unprecedented level of market volatility and economic uncertainty. It is reasonable to expect that the credit crisis will affect our construction and automotive end markets. US housing construction which has already declined more than 50% from the peak appears to be taking another step down. We’ve also seen a rapid deterioration in European economies and a slowing of capital investment in growth regions. As we discussed, our leadership is taking the necessary cost actions in response to these conditions.However it is also important to maintain our market leadership through new products. This holiday season our consumer business will be spotlighting several innovative cordless products. Smart Select drills and Smart Select jigsaws make it easy for end users to fine tune the tool speed and power to the application. The new Smart Driver simplified screw driving with a retractable screw holder, Smart Clutch System and lithium ion lightweight power. We have extended our popular pivot VAC platform with an 18-volt floor VAC which is ideal for cleaning in hard-to-reach places.As I mentioned earlier, we have started shipping the new Porter-Cable tools. This line gives light contractors and high end do-it-yourselfers a reasonably priced alternative with strong performance.DeWalt is launching several key corded products in the fourth quarter. The lineup includes a band saw, a ½-inch drill, a stud and joist drill, and the award-winning track saw. DeWalt is a leader in motor technology and the innovations in these tools enable users to complete applications 25% to 55% faster.In cordless we’ve continued to expand our 18-volt franchise and have major launches such as the new Ni-CAD and Lithium XRP lines planned for 2009.This new product lineup puts us in a good position for the fourth quarter. However we anticipate continued deterioration in macro conditions. Therefore we expect high single-digit organic sales decline for the fourth quarter including neutral price. Based on current exchange rates we are modeling 3% to 4% of unfavorable currency.We also anticipate incremental pressure on our margins in the fourth quarter. Component prices have not yet eased and we expect significant costs from product transitions during the quarter. Our European business which has delivered strong margins in recent years faces lower volumes and less favorable currency. Savings from the restructuring actions we are currently implementing will not be fully realized until 2009.As a result we expect operating margins in the 6% to 7% range for the quarter. Last year our fourth quarter operating margin was 3.7% including an unfavorable 430 basis points from a restructuring charge, environmental charge and product recall.As mentioned earlier, our interest expense will likely increase versus the fourth quarter of 2007. We are assuming a tax rate of 29% and diluted share count remaining around 60.5 million in the fourth quarter. In total we expect diluted EPS in the range of $0.70 to $0.90 for the fourth quarter and $5.20 to $5.40 for the full year. Consistent with our previous guidance, this full range excludes year-to-date restructuring charges of $0.41 per share. Our fourth quarter range is wider than usual reflecting significant uncertainty in the global market place.In summary, Black & Decker continues to deliver solid earnings and cash flow despite the economic downturn. EPS and operating performance exceeded our expectations this quarter. We remain the most innovative company in our industry with a broad line up of corded and cordless new products for the fourth quarter.We aggressively lowered SG&A spending and developed additional cost reduction plans. We generated strong free cash flow of $212 million for the quarter and are on track to exceed 100% conversion for the full year. We reduced inventory sharply and improved turns. We made a small fastening acquisition and continue evaluating opportunities to take advantage of a more normal M&A market. And we strengthened our balance sheet providing stability in volatile times.We remain confident that our experienced management team, strong financial position and proven strategy will enable Black & Decker to deliver long-term growth and create value for our shareholders.That concludes my prepared remarks now. I’ll turn the time back to the operator and we’ll answer your questions.Question-and-Answer Session Operator (Operator Instructions) Our first question comes from Nishu Sood - Deutsche Bank.Nishu Sood - Deutsche Bank I am trying to understand what you are seeing incrementally that has led to such a substantial reduction for your expectations for the fourth quarter. If I look at the components, your sales are kind of coming in line with where you’d expected, components costs may have not seen the benefit yet of declining commodity costs but I certainly wouldn’t have expected them to get worse. The only thing you mentioned was a product transition cost but I’m sure that can’t account for all of the shortfall here. So what exactly is it that you’re seeing and factoring in here that has led to such a sharp reduction in your expectations for the fourth quarter?Nolan D. Archibald Well, you mentioned commodity costs. They continue to be a strong headwind for us. You mentioned the transition costs that I mentioned in my prepared remarks. With several new listings that we’ve gained at our major retailers, we’re going to have some increased transition costs. And we are just very concerned about a very unpredictable economy out there. We find it very, very difficult to predict in this volatile economy. Lastly, Europe has decreased significantly as far as the macro economic conditions in Western Europe.Steve, would you like to add anything?Stephen F. Reeves I think the main driver is Europe and our more pessimistic outlook relative to the top line there. In addition, when we provided guidance back in July it was probably at the low water mark for the US dollar versus most major currencies. Based on where currencies are today the translation effect of our international operations is greatly reduced from where we had provided prior guidance. The European economic issues and the currency translation are the two big drivers. There are other puts and takes including a little bit higher interest expense.Nishu Sood - Deutsche Bank About a year or two ago your European operation had achieved rough parity in terms of operating margins with the rest of the world with the US. How has that looked in the third quarter and how will that be in the fourth quarter?Nolan D. Archibald Year-to-date we’ve done still pretty well in Europe relatively speaking. In fact our European and international operations have very good margins right now but we see a slowing in Europe so those margins are going to be affected somewhat. We still have strong operating margins relative to other businesses.Nishu Sood - Deutsche Bank Obviously you’ve seen over $500 million of commodity cost impact over the last couple of years as a headwind. Could we expect a tailwind in 2009 at current pricing levels and about what might that be?Nolan D. Archibald Commodity prices have come down in most of our commodities. We’ve seen a real easing. For instance I think copper now is about half what it was at its peak. Steel still remains high so we still have a headwind there. We’ve tried to lock in some of the prices what we thought was reasonable. So on balance it may take us a few months to see some of those benefits coming to us.Stephen F. Reeves As Nolan mentioned, we have seen some of the commodities come off certainly their peaks and some have retrenched quite a bit. Steel is still up over last year although one would presume that if the economy continues to deteriorate that will come down further. All of the commodity benefits that we should eventually see will take a while to work their way through our supply chain obviously. While we’ve reduced our inventory, it was bought principally at pre-decline rates so you shouldn’t see much of a benefit in the fourth quarter.As you look into 2009 as Nolan mentioned, we do hedge some of our commodity exposure. Some of those contracts are at rates above where current market stands. In addition some of our commodities reprice on various indices; some based on quarterly reprices; some on six month reprices. So there will be a favorable effect on 2009 from reduced commodity costs but it’ll work its way through later in the year as opposed to the beginning of the year.Operator Our next question comes from Analyst for David Goldberg - UBS Securities.Analyst for David Goldberg - UBS Securities You guys discussed a little bit of the pressures that you’re seeing at the big box retailers and I know that you’ve had some transitions there that are helping you. But as we come upon the fourth quarter, can you just talk about any plans that they have in terms of incentives and how that could impact what you’re seeing?Nolan D. Archibald I don’t see any incremental change there. In this difficult economy we’ve been rather aggressive with our promotions at all of our major customers and that will continue in the fourth quarter. I don’t see any real differences than what we’ve been doing in the third quarter.Analyst for David Goldberg - UBS Securities As you’ve seen the commodity prices come down, I know that you said you haven’t really seen the benefit of that yet, but are you getting any pressure from retailers or other customers in terms of the price increases that you’re still looking for?Nolan D. Archibald We have not. They always want lower prices but we have been unable to pass on the significant price increases that we’ve had over the last several years so I think they’re understanding of that. Therefore because we’ve seen some easing recently the fact that we never passed all of those costs on to begin with I think is a pretty good argument and I think they’re understanding about it.Operator Our next question comes from David S. MacGregor - Longbow Research.David S. MacGregor - Longbow Research The share repurchase program has been a pretty key part of your strategy for some time now and you mentioned that this quarter the thought prevailed that maybe it was a good time to start being careful with cash and husbanding cash. I’m just wondering if you could talk just about your plans with respect to share repurchase activity over the next visible time horizon, two to three quarters?Nolan D. Archibald Historically, as you are well aware, share repurchase has been right at the top of our list although acquisitions we prefer. We just felt like the values from the market places at that time just were not compelling so we bought a lot of shares back and have earlier on this year and still have them at pretty decent prices. With the uncertainty that’s in the economy right now we just felt like it was prudent to put that on hold and strengthen our balance sheet with our cash flow.As the financial markets improve and as the economy starts looking a bit better; housing was the first one to go into this dump and usually is the first one to come out of it; so as we start seeing some encouraging signs there hopefully next year we will continue our aggressive share repurchase. But for the time being here we just think it’s prudent to strengthen our balance sheet and therefore reducing debt has come a bit higher up on our priority scale.David S. MacGregor - Longbow Research What would be the likelihood of seeing goodwill impairment at the end of the year?Stephen F. Reeves We do have to measure it every year end. I don’t foresee a challenge on that at this point in time.Operator Our next question comes from Sam Darkatsh - Raymond James.Sam Darkatsh - Raymond James I might be rephrasing a little bit what Susan was asking you. You’re forecasting for high single-digit organic declines in the fourth quarter. What are you anticipating sell-through for that assumption? I’m guessing mid-single like perhaps a little bit better than what you’re looking at or how should I look at that?Nolan D. Archibald I think we’re looking at similar or maybe a little bit declining point of sale that we saw in the third quarter which is in the mid-single-digit decline.Sam Darkatsh - Raymond James So no accelerating level of decline from Q3 to Q4?Nolan D. Archibald We don’t anticipate that. We do think and we’ve seen this historically that particularly in times like this that our customers get a little bit more conservative on their inventory positions and as they get near the end of their fiscal year we think they may take their inventories down and therefore we may be a bit more pessimistic in our shipments than we are anticipating with our point of sale.Sam Darkatsh - Raymond James Following up on that, why would pricing improve sequentially? If pricing was down one in this quarter and sell-in and sell-through getting still real difficult, why would pricing improve sequentially on a year-on-year basis?Stephen F. Reeves A couple different factors. We’ve been working through price increases, some of which take effect in October. Some of the pricing negativity in the third quarter related to disposing of excess obsoletes that we took the inventory write-down on in the second quarter so it didn’t read through the gross margins necessarily. It is a little bit of improvement sequentially but it has to do with having achieved certain price increases in certain channels.Sam Darkatsh - Raymond James You mentioned that your expense reduction efforts were better than anticipated broadly. Can you put a little bit of meat on the bone and specifically what areas were better than your expectations and whether they were one off or of a non-recurring nature or whether the reduction efforts would be able to continue?Stephen F. Reeves I think they’ll be able to continue. I think in addition to just cutting back on discretionary spending we’ve been working on some very positive productivity efforts in our distribution network and we saw the benefits of that which should recur going forward.Operator Our next question comes from Peter Lisnic - Robert W. Baird.Peter Lisnic - Robert W. Baird I was wondering if we could dig into the European fundamentals a bit more. Maybe if you can give us some color on your comparisons relative to competitors and what you might be doing on the new product front, specifically on that content to help offset what appears to be a rapidly deteriorating end market?Nolan D. Archibald The UK has particularly slowed down as well as most of Western Europe. Germany’s probably holding up the best so far but we’re even starting to see some deterioration there. Fortunately Eastern Europe and Middle East Africa still is pretty good business for us and that’s increasing but as I mentioned in my prepared remarks it’s a smaller base than Western Europe. The UK and France and Italy have all slowed down markedly. We do have excellent new products going in there. I mentioned some in my prepared remarks. We do think new products as well as the margins we get from new products as well as the fact new products seem to sell even in difficult times and therefore we think we’ve got a good product line up going in Europe.Peter Lisnic - Robert W. Baird I think the trend on the content has been relative share gains on your part. With the down market scenario that we’re under, is it presumably okay to say that you are gaining share relative to the competitors on that continent?Nolan D. Archibald It depends on what you’re talking about. In professional I think we’re still doing pretty darn well. In consumer we have seen this year some real price action by our competitors. We may have lost a bit of share in consumer this year.Peter Lisnic - Robert W. Baird I know you won’t talk about ’09 but in terms of the economy and the pressure it’s under, can you maybe talk about the leverage that you might have for ’09 if things turn out to be as bad as they look right now?Nolan D. Archibald A couple of things. One is we’re going to continue our aggressive cost actions and look for every opportunity to take costs out. Many of the things that we have done this year particularly in the last six months we’ll be getting more of the benefit next year. We also are going to be seeing a very strong 18-volt platform in cordless and lithium ion. I mentioned in my remarks our XRP in both Ni-CAD and lithium ion. We’ve got a good strong product here next year so we’re hopeful that that will help mitigate some of the stronger headwinds we anticipate.Operator Our next question comes from Dennis McGill - Zelman & Associates.Dennis McGill - Zelman & Associates I was hoping you could just give us an update on the pension plan just realizing what’s going on in the markets. I think you had been expecting to fund around $30 million or $40 million this year. Just with what’s happened with the assets can you give us an update on any additional cash requirements or what that might mean from a P&L perspective?Stephen F. Reeves Obviously it’s a tough period for the pension. Our measurement date has been moved to December so we haven’t yet set on what the exact funding requirements will be going forward. I really can’t give you any specifics around that.Dennis McGill - Zelman & Associates Will it be tied to your cash contributions or tied to the performance of the plan to some degree though?Mark M. Rothleitner You bet. Under both the US and the UK plans, there will be calculations that have to be made at year end and it is probable that funding requirements will go up. Very often they’re on a lagged basis so they may not go up directly in ’09 or maybe only go up a little bit in ’09 and be on a staggered basis. We’ll give you some more color on that in January but you should anticipate given what’s gone on that our funding requirements will go up probably a bit in ’09 and then later in 2010 and beyond.Dennis McGill - Zelman & Associates On the commercial paper program I think you’ve got around $200 million out. Given that you’re pulling back on the share repurchases would you prefer to be paid off by the end of the year or as much out of that as you can given that you’ve got the flexibility on cash or are you okay with being outstanding there?Stephen F. Reeves We are okay. The commercial paper market has been open to us the entire time. It has gotten a little bit better in the last few weeks with all of the government programs that have been announced in the last four weeks. So we are comfortable we are able to fund every day and we’ve also been able to take the term out a bit. It was very short term during the peak of the crisis. It’s gotten better. We are comfortable that we’d like to keep that commercial paper program in place and anticipate that we’ll be using it throughout the quarter.Nolan D. Archibald Mark, you might also mention the cash we have offshore too.Mark M. Rothleitner Yes. As you saw on the balance sheet we do have cash offshore. We try not to use it for great lengths of time because of the potential tax consequence of that; however we do use it and can tap into it and in fact most quarter ends we do tap into a good bit of that cash at quarter end to relieve the commercial paper because it gets a little tight. It obviously got very tight at this quarter end so we did avail ourselves of that again this quarter end.Nolan D. Archibald They’ve loosened the restrictions on the amount of time that you can have it over here somewhat also.Mark M. Rothleitner They have indeed. So that should give us a little more flexibility as well in terms of how long we can borrow it and pay down CP with that cash.Dennis McGill - Zelman & Associates So the $200 million out on CP at the end of the quarter, right?Mark M. Rothleitner That is correct; however that is a low water mark. Generally it’s a little higher. So our cash flow comes in towards the end of the quarter. That tends to pay it down. If you go back and look at the filings we produce, you’ll see that our average debt is higher than normally our quarter end debt and that’s because we normally do bring cash back at quarter ends to pay down the CP.Dennis McGill - Zelman & Associates You mentioned you haven’t repurchased any shares since the beginning of July. Does that mean that there was a little bit this quarter or none at all?Mark M. Rothleitner You’re talking about share repurchase?Dennis McGill - Zelman & Associates Yes.Mark M. Rothleitner What happened was just because of the spot date versus the clearing date, we had about 150,000 shares roll into the second quarter that we had actually transacted on before quarter end.Dennis McGill - Zelman & Associates What would be embedded for the corporate cost line within your 4Q guidance since it’s a number that bounces around quite a bit?Stephen F. Reeves It’s a continuation of the trends that you have seen through the year-to-date with some favorability in pension, etc. A little bit of the favorability that’s in the third quarter is probably timing so it’ll be a little less favorable in the fourth quarter. [Inaudible] 65 to 70. The full year will probably be closer to the 65 range.Operator There are no further questions at this time. I’ll turn the call back over to Mr. Archibald for any closing remarks.Nolan D. Archibald No closing remarks. Just thank you for joining us and have a good day.Operator This concludes today’s conference call. Thank you for participating. You may now disconnect.