Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Michael Schneider – Robert W. Baird.
Michael Schneider – Robert W. Baird
I wonder if we could first talk about the margins in Water Systems. Last time we talked on the July call you made a point of calling out that Water Systems had a 17% margin in June. It looks like it came in in the mid 15% for the quarter now. I suspect raw materials are even lower during the third quarter for you, so could you reconcile what’s changed in that mix?
Scott Trumbull
If you were to take our June sales in Water Systems and extend them out for a full quarter at that rate, the quarter’s sales would have been about $152 million. Our sales in the third quarter in Water were about $137 million. If we had had sales of $152 million for the quarter at the contribution margins we’re achieving in Water, our margins would have been in excess of 17%. The difference is our third quarter sales were lower than the run rate in June.
Michael Schneider – Robert W. Baird
Geographically, is there a mix impact as the U.S. declined more than the foreign markets?
Scott Trumbull
Our contribution margin in our international markets and our current contribution margin in our domestic markets are very similar. Certainly within product lines, some of our products have significantly different margins than other products but overall in our Water Business, the contribution margin that we get on an incremental sale on average in our international markets are not materially different than the contribution margin we get on incremental sales in our domestic markets.
Michael Schneider – Robert W. Baird
Your comment, you expect Q4 Water revenue in total to be up year on year or just the domestic markets?
Scott Trumbull
No, we said we think that in the domestic markets, I think we used the term in the region will approach prior year levels, and then for the overall, we indicated that we felt that if the fourth quarter overall Water Systems sales should be up modestly.
Michael Schneider – Robert W. Baird
Does that hold true sequentially as well for water, because Q4 is fairly low water mark? In fact that’s when the cataclysm started.
Scott Trumbull
We would not expect Q4 sales versus Q3 sales to be up sequentially just because of the seasonality of the business.
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