Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Scott Davis – Morgan Stanley
Scott Davis – Morgan Stanley
I understand you’ve been very conservative on guidance the last two years and you’ve successfully beaten guidance quite nicely. Can you give us a little bit of a frame of reference on what type of macro environment you’re looking at for 2010, how you view the quarters sequentially getting better because your first quarter guidance certainly I think is probably below consensus, it looks a little conservative at least based on our model? Given the incremental currency tailwind that you’ll have and not much of a pension issue and you just put up a $0.68 it just seems a little conservative. Maybe just a little bit of color around that.
Ed Breen
Let me mention first that the first part of your question on the macro picture to make that clear. We have assumed that the current environment continues well into the year. As we said in our prepared remarks with some modest, I emphasize modest pick up in order activity in the second half of the year. I don’t know if we’re being conservative there but we’re not seeing the order pick up yet. We are seeing the quoting activity picking up but we’re making that as an assumption. Assuming orders stay at these levels.
As far as the first quarter guidance goes, when you look every year, our fourth quarter to first quarter we clearly have seasonality because our service volumes drop off from the higher activity we have in the summer months. If you look at that we’re expecting our revenue will drop $300 to $320 million which gets you to that $4.1 million and you do the math on the decremental margins off of that $320 million of revenue you get $0.17 or $0.18 of earnings of volume de-leveraging there.
Then there’s a little bit higher tax rate, interest, and pension which is another $0.04 or $0.05. When you take that off $0.68 or $0.70 in the quarter we just did and you back that down that’s that seasonality you get that gets us into that guidance range that we just gave. Then we do, our revenue will pick up as the year goes. With all the cost actions we’ve taken we should get very nice leverage off of that to improve our bottom line as the year goes.
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