Joy Global Earnings Call Nuggets: Aftermarket Business and Restructuring
Andy Kaplowitz – Barclays Capital: Mike Olsen, congrats on your retirement again. Mike Sutherlin, if I could ask you about aftermarket, the aftermarket business was down 5% in terms of orders in the quarter and it was flat for the year. Can you sort of reconcile for us what’s in your guidance for ’13 in terms of aftermarket? Is it still sort of that flattish growth that you expect and what’s the visibility like to flattish for 2013 in aftermarket?
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Michael W. Sutherlin – CEO and President: Let me just touch on 2012 for just a second, because I think it relates to what we see for 2013. The flattish aftermarket that we had was largely the international markets growing year-over-year and offsetting the decline we’ve seen in the U.S. coal markets. So, we’ve seen a pretty significant decline in the U.S. coal market, not unlike that which we saw in 2009. Due to different reasons, but the magnitudes are not all that dissimilar. So, fairly significant decline in a large sector for us and we saw the aftermarket in other regions around the world capable of offsetting that. We do have a pretty consistent aftermarket on an annual basis. On a quarterly basis, we do get some lumpiness for example from China. We’ll get large aftermarket orders three or four times a year rather than monthly. So, the fact we got a large order in our third quarter from China that became aftermarket revenue in our fourth quarter as we delivered that order. So, I think you got to look at the year-over-year more so than the fourth quarter just because the predictability on aftermarket even on a quarterly basis particularly with large parts orders is not absolutely crystal clear and it’s not always consistent. As we look at 2013, we’ve gone back and looked at our aftermarket business over long periods of time and aftermarket has historically in worse conditions has flattened. In 2009, we saw aftermarket flat now and I think it demonstrates the stability there. We’re looking today — aftermarket is generally aligned to production rate, so we’re looking at some decline in production rates, but not massive declines globally in production rates. U.S. is going to seem a little bit more severe because the structural changes to – the coal volume in the U.S. is not down all that much. It’s like 5% or 8% or something in production, but much more in Central Appalachia. We’re seeing increases in Illinois basin. So, that structural dislocation is having a bigger impact on aftermarket in the U.S. and yet there through 2012 we were able to offset that albeit in national markets. Generally those adjustments are more severe at the early stages as people destock inventories at mine sites and part equipment and things like that and then they begin to move back up to a little bit higher level where we see stabilization. So, in that regard 2012, would represent what we would expect to be possibly the worst year for our U.S. underground coal aftermarket, so you put all those things together and I think we still believe that the aftermarket is going to be able to stabilize over 2013 given what we see new machines coming into the fleet, machines moving into their first rebuild cycle, production levels internationally coming off a bit but not dramatically, and you put all that into the equation and we expect our aftermarket to hold its own in 2013.
Andy Kaplowitz – Barclays Capital: Let me take a short at a slightly longer-term question. You had relatively good awards in the quarter and you guided to 2012 order rates carrying forward into ’13. I know it’s early, but one of the big questions that I think we have is whether earnings should stabilize at your ’13 rate as you go into ’14. I mean, I think you’re kind of hinting that at least at this point you think that’s possible given the stabilization of the markets, but I don’t want to put words in your mouth. How do you look at sort of ’14 and beyond versus ’13? Is this going to be sort of the bottom in earnings and what confidence level do you have around that?
Michael W. Sutherlin – CEO and President: Well, I think two sides of that, one side is the market side and we certainly have seen our customers adjust CapEx to cash flow, and cash flow dropped pretty dramatically in 2012 as commodity pricing came down. And we’ve seen commodity prices in the second half stabilize. In the fourth quarter, we saw it’s starting to move up in commodity price and certainly iron ore has regained a lot of its loss. So, we’re starting to see some – we’re seeing a roll over in met coal, but we expect the first quarter to be better as the steel mills go back to restocking of iron ore and met coal. With those pricing level, we will some improved cash flow and I think that our expectation from that and talking to customers is that we’ll see a stabilization of cash flow. We don’t expect to see multiyear significant declines in customer cash flow. Our customers generally believe that when they stopped projects in 2008, restarted them in 2010, that process was very inefficient. The push to catch up in 2011 created a lot of inefficiency and gave them projects that had higher cost than they had planned for. So this idea of starting and stopping big projects had some negative impacts on cost efficiencies and so at this point I don’t see multiyear significant declines in CapEx. We really do believe CapEx is going to stabilize and what we see is at 2013 level that our customer is looking for the opportunity to bring new capacity back online. First that will be their bets projects with – they will come in low on the marginal cost curve, but they certainly don’t want to be in a position where we massively undersupply the market and when we start moving, the difference between supply and demand, even though there is excess supply today, the difference is not a large magnitude difference. It’s a relatively small magnitude of difference. So that’s why we talked about CapEx in 2013 when we start to see improvement, it will be back-end loaded. And on our own earnings we have been taking cost out to restructure our business. Some of this is to reflect current market conditions, some of it is in line with our strategic plans. This is for us an opportunity to move forward on some plans that might have taken longer had we done them by the original plan timeline. So this will allow us to accelerate what we plan to do anyhow. But those costs that we incurred in 2012 are helping us to take cost out in 2013. The (restructuring) we’ll be doing in 2013 will help us take more cost out in 2013. So, under level revenue conditions, we would expect 2014 to be a better year than 2013, just as those cost improvements flow through. But we do believe that the market is on a cusp of starting to see some improvement and we think that that will make a bigger impact on our 2014. Long answer to your short question.