Question-and-Answer Session
Operator
(Operator Instructions). Thank you. Our first question is coming from the line of James Bank with Sidoti & Company. Please go ahead with your question.
James Bank - Sidoti & Company
Hi, good morning.
Jim Lines
Hi James.
James Bank - Sidoti & Company
My first question is on SG&A. I think that was for the biggest alarm to me and biggest disappointment in the quarter. Why was the expense so much materially higher than it was in the first quarter on a percentage of sales basis?
Jim Lines
The SG&A has a component that is tied to the profitability of our orders, which is commissioned in variable compensation and that is the biggest effect that caused the increase, that is been the profitability of our work, linking the margins that is 44.4% and we had some resulting expenses as well.
James Bank - Sidoti & Company
Okay. So, given the fact that the gross margins are relatively similar, despite the fact the sales were down, the profit share will still remains static, more or less?
Jim Lines
More or less.
James Bank - Sidoti & Company
Okay. Fair enough. Thank you.
Jim Lines
You are welcome, James.
James Bank - Sidoti & Company
Jim, if you would quantify the hesitation of the larger order placement?
Jim Lines
Sure. We began to see some slowing a few months back from our customers. We have commented on several conference calls, going back over last several quarters the difficulty we had in predicting when orders would be placed by our customers. We commented in the past that some orders that we thought would be booked in a particular quarter, actually still are open to be won several quarters later, or were we booked two or three quarters after we thought that should be booked.
We have noticed that there has been a slowdown as our customers are taking – a certain segment of our customers are taking a wait-and-see attitude. Other customers, I would say, the independent refiners have had to change their capital spending plan in light of what is occurring in the credit markets. I commented in the prerecording that the previous independent refiners they are important to us, for they have in the past represented between 5% and 10% of sales to our integrated customers or the nationalised oil refiners. They really have not seen the credit market affecting their long-term spending plan. Although, I would say we have seen a pause or I believe a temporary delay in order placement.
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