Question-and-Answer Session
Operator
Thank you. (Operator instructions) And our first question will come Jim Rollyson with Raymond James.
Jim Rollyson – Raymond James
Good morning, Peter.
Peter Socha
I knew you were out there.
Jim Rollyson – Raymond James
Let’s talk about costs.
Peter Socha
I told you he would do this to us.
Jeffrey Lipton – Post Advisory Group
If I look at your 2008 costs in Central App on average, 52.5 plus or minus, and you take your kind of $90 type number for Central App prices which are mostly booked for assuming you end up averaging close to there, then you end up at kind of a $57.50 type of number. So – in your guidance I guess you got about 2.50 less in costs, which gives you about a 5% inflator on core underlying costs from ’08?
Peter Socha
Yes, but keep in mind what happened during the course of the year, Jim, and I’ll let C.K.– C.K. will step on me if I get it wrong. But – I mean, we saw the productivity impact during the course of the year. You are looking at an annual number. And that’s why we took the Q4 because the Q4 really reflects the inspector regime kind of the way it is right now. And rather than – and that was from debate. Actually we had some discussions on whether or not to use the annual or the quarter. And C.K. and I just felt like quarter was more reflective of where productivity is today. But in fact, I don’t know whether I would say we will assume a 5% inflation. Yes, I guess you can. I mean, it’s certainly the math works out that way. But we look at it, say that there are – the things that push up the costs obviously is going to be MSHA and the productivity. It’s going to be less absorption on fixed costs because we are haircutting the production back. Weight is in training. We gave weight increases in October, C.K.?
C.K. Lane
Yes, it’s October 1st.
Peter Socha
In October. So those will be fully reflected this year. And then you just have safety costs that are non-capitalized, but safety costs. Those push things up. What push things down obviously are the lower turnovers. We are keeping them in. So they are becoming more experienced than the productivity is picking up. Raw materials, C.K. mentioned raw materials, and then the newer equipment. So what we’ve said is that net-net those are our approach.
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