Alexander Blanton: Thank you very much. Appreciate you taking my questions. The thing that stood out to me the most was the decremental margin in ag only 15% you’ve talked to something. You’ve talked just to that already quite a bit. That’s very low for the kind of volume decline you had in that business. And it’s quite a bit different than what happened in the engineering — or the earthmoving segment which was a decremental margin of 42%. And I’m wondering why that is so different? I see in the text that you mentioned contractual price givebacks due to lower steel prices. And that was not in the ag segment at least it wasn’t mentioned. Was that the main difference between the two? If you had great cost control in ag why not in the earth moving, it’s basically the same kind of product?
Paul Reitz: Yes, that’s a good question Alex. Let me jump in first with a comment and then David will touch on the financial aspects and I know he’s kind of touched on already. But you look at ag, think about what we have in ag Alex where we got to LSW. I mean LSW is just a tremendous product and what it delivers to the end user. It’s a premium product for us. It’s a premium product for end user as well for our customers. And so the LSW serves the marketplace very well in aftermarket. As we’ve noted in our comments, in ag I mean, the fields are still being planted. The work is still going on in the LSW that ultimate product that can take care of the customers’ needs. And so one of the differentials we have in ag versus earthmoving construction is going to be LSW.
We have other innovation besides LSW. There’s other products that do serve the marketplace well. So, I don’t want to make it seem like LSW is it. But LSW stands up to test the time and down markets up markets the demand is strong. We see it increasing in many aspects. So really just one key differential though to keep in mind is just the pull-through we get of LSW. We do have a strong aftermarket distribution channel. We’ve talked about that and we worked very hard to have what we see and what we firmly believe is the best distribution channel in North America for large ag. Strong partners servicing the marketplace very well. We’re connected to the end users. And so again that aftermarket piece and ag is really one of the drivers that is different between earthmoving and construction.
So, go ahead David.
David Martin: Yes, the only thing I was going to add there is that on the EMC side, it’s more heavily weighted towards the OEMs and in particular in Europe and in Brazil. So, you don’t have that strong aftermarket opportunity on the EMC. So, as the volume declines you’re just much more impacted there versus ag where we have a good balance of OEM and aftermarket and aftermarket margins are good.
Alexander Blanton: Well, I think I’ll take the rest of that offline because I still don’t quite understand what the difference is it’s the same kind of product in both sectors. And one you had a big decline in margins and the other you didn’t, I’m not sure I understand why.
David Martin: Before you go any further with it they are different products. The majority of our EMC segment is undercarriage product. It’s not wheels and tires. So it’s different.
Alexander Blanton: It’s what? Undercarriage?
David Martin: It’s the undercarriage.
Alexander Blanton: Okay. And what is the effect of these givebacks and the lower steel prices in that sector?
David Martin: We typically try to line that up. Obviously, when it still comes down, you’ve got steel, your prices come down in line, but you don’t necessarily always get it exactly. And there’s leads and lags when you buy steel. So it can be more impactful in a given month or quarter. It’s not tremendous, but there is some of that. But the steel has moved in a reasonably down fashion in Europe and Asia over the last year.
Alexander Blanton: Okay. Thank you. Second question is on the guidance in EBITDA, what is that in earnings per share for the second quarter?
Paul Reitz: Yeah. Alex, we’ll — it’s going to be — if you think about it from a tax rate perspective, it shouldn’t be totally different. So it should be fairly in line with how we did the first quarter. I don’t have that number off the top of my head. But Alan maybe you can help me out with that one.
Alexander Blanton: Okay. So we’re going to have basically flat earnings in the second quarter versus first, but the sales were 14% higher. So what’s happening there?
David Martin: Yeah. Again, that’s a little bit of the mix and seasonality in the business in terms of the mix of where the — what products we’re selling. So that’s primarily it.
Alexander Blanton: Okay. So you’ve modeled that out then.
David Martin: Yes.
Alexander Blanton: Just a general question one more question on that. Why is it that you don’t give us the guidance and the results in EPS as well as EBITDA? I mean that’s…
David Martin: That’s a good question. That’s a fair question. We can look at that in the future and we’ll help you out with that.
Alexander Blanton: Because most channels really use EPS more than EBITDA. And to get that, we have to calculate it from your numbers.
David Martin: Sure.
Alexander Blanton: If you’re guiding an EBIT — in other words, the $250 million to $300 million in EBITDA that you’re saying you have a long term target for. What is that in EPS? That’s what people really want to know.
David Martin: That’s a great question. We’ll look at that.
Alexander Blanton: That would be something you could do in the future. Thank you very much.
David Martin: Yeah. Thanks, Alex. Appreciate your questions.
Operator: Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Reitz for closing remarks.
Paul Reitz: Yeah. Thank you everybody. Appreciate your participation in our Q1 earnings call. Look forward to touching base here in the near future. Thank you.
Operator: Thank you for attending today’s presentation. The conference call has now concluded.
