Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Ann Duignan – J.P. Morgan.
Ann Duignan – J.P. Morgan
My question is around your mix in 2009. If you could talk about given the significant slowdown in after-market orders, how are you feeling about the margin mix in both business segments going into ?09 and through ?09?
Tim Sullivan
Well, we don’t really see a slowdown in after-market business. As a matter of fact, if you look at our installed base in machinery, we have effectively with the DBT acquisition and with the new business that we have had here with new machines over the last two or three years, we have effectively tripled our installed base in machinery. Now it’s just shy of $30 billion.
So our projections for the year do not really show any falloff in aftermarket activity. In some respects, we think that we are probably going to be at least equal to what we had in 2008 and maybe even more. So the mix for 2009 is planned right now to be fairly similar to what we had in 2008 as far as new machine business to after-market.
Ann Duignan – J.P. Morgan
And then just out of curiosity, I know that you have continued to make small acquisitions. Given the uncertainty in the market place and given your uncertainty kind of beyond 2009, can you talk a little bit about your capital allocation strategy? I guess we are seeing a lot of companies’ kind of pull back on acquisitions and be very prudent with their cash kind of just in case. Can you talk a little bit about what your strategy is and why you are so comfortable spending the cash on acquisitions?
Tim Sullivan
I think two things. I didn’t mention that and I should as far as our guidance. We will be cutting our CapEx in half. We spent about $118 million in 2008. We are projecting to spend $60 million in 2009. We’ve got a strong balance sheet. We’ve got a very large installed base machinery.
Even if the OE business starts to fall off appreciatively as we move through 2009 or into 2010, we still believe that we know how to manage this business through that type of a possibility. And this is the time, if there’s opportunities out there and you can pick them up and they don’t cost a lot of money, but they position us for not only current and near-term revenue and earnings growth, but even longer-term opportunities, we feel that’s the thing to do.
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