Joy Global Earnings Call Nuggets: Orders Outlook and Cost Analysis
Joy Global, Inc. (NASDAQ:JOY) recently reported its third quarter earnings and discussed the following topics in its earnings conference call.
Brad DeStricki – Barclays: This is (Brad DeStricki) on for Andy. So, first question, I guess, if I look at your bookings of $700 million this quarter that, obviously, implies revenue well below the $4 billion level. So, what gives you the confidence that orders will pick up here in the fourth quarter and will be sustainable at a higher run rate than what we saw this quarter?
Michael W. Sutherlin – CEO and President: I think you better look at two pieces of that and maybe the smaller piece is the aftermarket. But you’ve seen in the U.S., the early stages of correction are fundamentally slower to overcorrection to get parts inventories down and to stretch out some of the rebuilds. And then as things settle in those aftermarket order rates begin to move back up to a level that’s in line with the production change. So, what we’re seeing in the U.S. is the bottoming is starting to see modest quarter-over-quarter improvement. As you go through the corrections in Australia and China, we’re seeing the drop at the frontend and so that’s becoming a drag on our third quarter bookings for aftermarket. We’ll start to see Australia improve, and I think that we may see some more headwinds out of China. But fundamentally we think that the aftermarket is going to start to become incrementally better. But the big one is the original equipment. Original equipment for us has been notoriously lumpy. We’ve said that repeatedly over the last several years, and I think that’s a factor we have here today that – in addition to slowing CapEx and some of the projects that have been slowed down in our project tracking list. At the same time, we’ve earned in some timing issues on some projects that we’re working on, we had the choice of trying to accelerate those to get them into the quarter, but in the process of doing that we end up losing some negotiating position and that could affect margins, it could affect terms and conditions, and in the long-term it’s just not good for our business. So, we always – in those situations we take a long-term view and we left the timing be what it may and continue to work to pricing levels and terms and conditions that we think are right for the business. So, as a result of that we have some stuff in process that we didn’t get into the quarter and it wasn’t good for us to do that. So, we have that to look forward to as we look to the fourth quarter. But down the road, we also see a number of other projects, and again, some of the timing is going to be a little bit iffy, but we do see the commitment on our customers to move some of the projects forward and we expect to see some projects that are over and above our base rate bookings.
Brad DeStricki – Barclays: Then just as a follow-up. Can you talk about decremental margins in the quarter; I think it actually seemed a little higher in the quarter I think than we have come to expect. I think as you mentioned as the cost saves flow through that you expect them to get back to that low 30% range you’ve talked. But can you talk about what impacted detrimentals in the quarter and your expectations going forward?