Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Jerry Revich – Goldman Sachs.
Jerry Revich – Goldman Sachs
Dave, I’m wondering if you can talk about the $87 million of access equipment intercompany sales this quarter? Does that imply that you barely ran any volumes through your defense facilities or is that the impact of the telehandler business flowing through the same way as M-ATV? Also, can you discuss what were the product rationalization costs in JLG this quarter?
David M. Sagehorn
The $87 million of intercompany M-ATV sales from JLG to defense, that represents the value of the crew capsules as well as completed assembled vehicles that JLG sold to our defense segment. They’re treated as another supplier to defense, obviously a very valued supplier. They deliver crew capsules specifically as well as completed vehicles in advance of defense selling those ultimately to the government customer.
Charles L. Szews
In other words they also would have sold more crew capsules in the quarter than necessarily we sold full vehicles to the government. That’s why it looks like they have a high percentage of the overall sales. A lot of that sales in intercompany profit would have been eliminated in our final results.
Jerry Revich – Goldman Sachs
The product rationalization costs, were they meaningful to JLG in the quarter? I guess I would have expected more absorption benefits from the military business in JLG this quarter unless that product rationalization line was pretty significant?
David M. Sagehorn
Overall product rationalization and related impact on inventory Jerry was a little bit north of $4 million in the quarter.
Jerry Revich – Goldman Sachs
Can you step us through the accounting impact of the M-ATV production in JLG? You mentioned the mid singled digit margin but I’m assuming you got some very nice benefits from the absorption side, where does that get impacted or does the impact of that iteration kick in as you ramp up production in coming quarters?
David M. Sagehorn
I think you’ll see more of the benefit in the coming quarters. Again, JLG was just ramping up in the fourth fiscal quarter of 2009.
Operator
Your next question comes from Charles Brady – BMO Capital Markets.
Charles Brady – BMO Capital Markets
On the commercial segment and your comment in your prepared remarks on the backlog maybe being a little lower than it might have otherwise been because of your refuse customers delaying orders, did I hear that correct? And, should we expect a tick up in the backlog in the next quarter or two and was there any single reason why those orders got delayed? As a follow up to that, just on the margins in that business, looking out to fiscal 2010 do you expect that business to be profitable? It obviously was not profitable ex the LIFO benefit in the quarter?
- To read the full transcript on Seeking Alpha, click here »
