Pall Earnings Call Insights: Current Environment and Foreign Exchange
Pall Corporation (NYSE:PLL) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.
Kevin Maczka – BB&T Capital Markets: Larry, if I could just start with what you commented on at the end of your remarks there on the guidance, just trying to get a sense for how conservative or not conservative that initial view is on EPS? I think you said that you did achieve your $50 million cost takeout goal for ’13 and you are still on track for $25 million in ’14. So I guess, if we exclude that $25 million on low-single-digit revenue in ’14, it doesn’t look like that’s implying the normal kind of strong 30% plus incrementals that I think you’ve described in the past. Is that the proper way to think about it? I guess, why would that not be particularly, if Systems mix maybe is getting more favorable?
Lawrence D. Kingsley – President and CEO: It’s a fair question, Kevin. I think that let’s take a look at the big picture first. When you think about the current environment, first on a macro basis, there is still a fair number of mixed indicators out there as to how growth opportunity there is. For us, if you look at relative to history, against the emerging world, we are not going to see the same kind of outpaced emerging world growth going forward that we have, at least not in the very short-term. We’ve taken a pretty muted view, I would say in total if you look at all the emerging country and economies in aggregate. Then you look at the kind of what the mature world is contributing, as we’ve said this several times during the prepared remarks, we don’t see that there is a huge capacity expansion basis for spend. So, we do think that the top line opportunity is still yet to be determined. We may be taking a slightly conservative approach. So that’s the top line environment. To your point, we are now operating the Company the way that we should be. We’ve got our cost management in place, we’re beginning to earn the productivity that we’ve been talking about for a number of quarters on the operations side. We do feel pretty confident about our ability to earn incremental margin and whatever organic growth we produced. So, when we factor in admittedly so, a kind of mixed view of the top line, but some reasonable confidence on the bottom line. There – again, excluding some of the thinking around what happens with FX, both transactional and translational impact, we netted to the stated range that you see there. The good news is, any incremental growth beyond what’s inherent to the implications that are stated on Slide 10, should convert very well, but I think what we’ve said by way of influence is nothing else is that there is good conversion capability in the Company at this point.
Akhil Johri – Chief Financial Officer: If I may, Kevin, also just to – the math would suggest that our incremental margin for 2014 is about 50% including the benefit of these cost reduction actions. So I think organically we are talking about the range of 35% to 40% excluding the cost reduction benefits…