Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Michael Cox – Piper Jaffray.
Michael Cox – Piper Jaffray
My first question is on pricing within the irrigation equipment segment. I was wondering if you could comment on what that looks like in the environment given the softer sales levels.
Richard Parod
What we saw in the second quarter is that pricing moved down some. I think the overall net price difference was probably in the range of about 3% in the quarter. We also saw a little bit of a mix shift in the machines that we sold in the second quarter versus the second quarter of last year. The machines were a little bit shorter and there was a combination price/mix effect in there. But overall, pricing moved down about 3%.
Michael Cox – Piper Jaffray
Would you expect that to hold at that level or given that steel prices have come down significantly, would you expect the pricing move lower?
Richard Parod
What I expect at this time is that pricing will be a bit volatile and I don't mean really that it will be all over the map but I expect that we'll see some price reductions then moving back up some based on market conditions. We have seen competitors adjust price down in an attempt to try to pull in or stimulate more demand in the market which I really don't think is extremely successful in terms of creating demand at this point.
So we will see some volatility in pricing, but overall, I don't think we'll see anything dramatic or anything that will really be, probably not be offset with the lower steel costs.
Michael Cox – Piper Jaffray
On the gross margin coming in right around 20%, should we think of that as a run rate for this level of sales or should we expect some seasonal impact as we move through the year?
Richard Parod
I wouldn't jump on this as a long term or overall run rate. I think there's a seasonal impact. I also would say that there's an adjustment that took place during the quarter, and that adjustment was really in response to the changing market conditions. So during the quarter, we're making further reductions in our staffing in response to the order rate. I think that you really can't assume that this would be a run rate at this point.
- To read the full transcript on Seeking Alpha, click here »
