NCI Building Systems’ (NCS) Q2 2017 Results

Norman Chambers – Chairman and CEO

Some normal hesitation from customers

“While not unusual, there has been some recent hesitation in bookings while our customers digest current workloads. Our quoting activity is good, our backlog is solid and our customer’s outlook is positive anticipating a good year. More encouraging, our internal forward-looking indicators forecast a marked improvement in growth over the next 12 months.”

Mark Johnson – EVP, Treasurer, and CFO

Steel prices higher than expected. 

“In the second half of the year, the steel prices are a little higher than we would have thought at the beginning of the year, anywhere from 4% to 7% higher on a year-over-year basis than in the original guidance.”

The rising steel prices impacting margins

“…our gross margin increased sequentially from the 21.4% reported in the first quarter to be consistent with the prior year second quarter of 24%. In fact, on an adjusted basis, gross margins were approximately 20 basis points higher than the prior year margins…our margins continue to reflect the near-term headwind of rising steel prices.”

Better margins expected in the third quarter

“Historically, the fourth and third quarter are the strongest two quarters of our fiscal year…this year, and our third quarter, we will have progressively better margins than the second quarter….when we get to the fourth quarter, we expect a much more normalized margin that won’t have that impact of the higher steel costs as a headwind that we still expect to see in the third quarter and so the margins will progressively be better in the fourth quarter and will be more illustrative of the margins we now can obtain given our improvement in our cost structure.”

Expectations going forward

“…we continued to expect 3% to 6% in underlying growth in new low rise starts measured in square feet in fiscal 2017. The insulated metal panel business should continue to be a strong driver of order growth and margins through the rest of the fiscal year. Rising steel costs should exhibit less of a downside impact on our margins by the end of 2017…Based on these factors, we believe we will deliver another year of modest growth in underlying volumes with continued year-over-year operating margin expansion and earnings growth.”

Caterpillar (CAT) Q1 2017

D. James Umpleby – CEO

In sum

”….generally weak economic conditions and commodity price volatility have made the last few years challenging and have significantly impacted the industries we serve…Quarterly sales and revenues were up for the first time since 2015… Profit per share, excluding restructuring, is twice what it was a year ago. There are encouraging signs and promising quotation activity in many of the markets we serve…there is still a great deal of geopolitical and market uncertainty, along with economic volatility around the world that continues to present risks.”


Bradley M. Halverson – President and CFO

On China

“Strength in China has mainly been driven by a strong execution of public-private partnership projects, particularly related to infrastructure and strong housing investment. Credit growth has remained supportive and better than we previously expected. High replacement demand and a tight used machine inventory market have also helped. While March and April are traditionally the highest months for industry opportunity in China’s peak selling season, if policy remains supportive we expect strong market conditions in China to continue at least through mid-year.”

Strong order demand in North America

“North America dealer inventory increased, but by less than a year ago. And end user demand was lower. Both contributed to the sales decline in North America. However, order activity in North America has been very strong, which has contributed to the increase in the backlog. The Middle East and Brazil remain weak..”

Increases oil and gas rigs means more demand for equipment

“The number of oil and gas rigs in service continues to increase and has more than doubled the lows that were reached last May. This has resulted in an increase in aftermarket parts demand to support the overhaul and rebuild of well servicing fleets. We are also seeing a significant increase in demand for our large reciprocating engines used for midstream gas compression applications. Demand for drilling and production application remains very low.”

Positive business sentiments…

“There are several positive sentiments. World business confidence is at a two-year high and world growth is accelerating. There are also positive indicators for North America construction demand. Many states have passed infrastructure bills. Pipeline projects that were previously stuck in permitting are now moving ahead and residential and nonresidential demand in certain parts of the U.S. remains robust. We believe business optimism, which may be contributing to elevated quoting and ordering activity in North America, is partially a reflection of the benefits of pro-business policy in regards to infrastructure and tax reform. However, we don’t expect to see any meaningful impact from these changes until 2018.”

…offset by some risks

“…there are other risks to the outlook that we believe are prudent to take into account. Outside of Asia-Pacific, retail stats for construction industries remain negative. Demand for overhauls and rebuilds in mining and oil and gas could diminish as those units go back to work. Brazil remains weak. The Middle East continues to struggle as a result of lower oil prices. Competitively, the pricing environment remains very challenging. The potential for oversupply of oil could drive volatility in the price of that commodity. And geopolitical uncertainty across the globe is elevated….there’s still a lot of uncertainty in the world. And there’s still the potential for volatility both in commodity prices and oil prices.”

 More positive outlook

“The backlog is up $2.7 billion on strong order activity in all segments. China construction equipment industry is robust with industry sales up sharply versus last year. Gas compression demand for reciprocating engines is very strong. And miners’ balance sheets are improving, and they are expecting increases to CapEx…We do believe that there may have been some restocking of dealer shelves in the first quarter. And certainly if you look at the hours of utilization of the mining equipment versus where it was at its depth, kind of middle of last year, mining equipment is being used quite a bit more extensively. And I think that you can conclude from that that it’s driving consumables of filters and fluids and other things like that as well.”

Caterpillar 4Q16 Earnings Call Notes

James Umpleby

Michael DeWalt

China positive

“Construction in China has been positive, and that’s good. But that said, it’s dependent upon continued economic growth and government support for construction in China as we go into 2017.”

Not seeing big increase in CapEx from mining customers in 2017

“Now, in terms of concerns, and we talked about these in the release, mining customers, our estimates and what we’ve read, we’re not seeing – we’re seeing better sentiment, for sure, but we’re not seeing expectations for a big increase in CapEx in 2017, although it does look like that could occur in 2018. We’ve had weakness in North American construction over the past year. There’s been a lot of used equipment in the market. The slide in oil and gas over the last couple of years has been a negative for our sales.”

Not looking for major declines in US construction but maybe a little softer

“Let me try to address that, Ross. We’re not looking for major declines in North America next year. On balance, Construction looks – our Construction industry segment looks fairly neutral year-to-year. Our view is that the Middle East and North America will be a little softer, and Asia Pacific may be up a little, but we’re not signaling some large continuing decline. I wouldn’t want to give you that impression whatsoever. And we have a range out there. And you never know if economic growth is faster than we think, if tax reform comes sooner, if infrastructure spending comes sooner, maybe we can be towards the high end. So I don’t want to make it sound like we’re super negative on Construction, because that’s not the case.”

Pricing environment not getting any worse

“I think what’s happened is that stabilized. It doesn’t look like it’s getting any worse. I don’t think the pricing environment is any better on an absolute basis, but we don’t see it getting kind of worse from here. We do use our operating and execution model, and you don’t want to be doing silly things. You don’t want to, for example, have big sales discounts on products you don’t make much money on.”

DR Horton FY 4Q16 Earnings Call Notes

D.R. Horton (DHI) Q4 2016 Results

David V. Auld – D.R. Horton, Inc.

Michael J. Murray – D.R. Horton, Inc.

Feel good about October sales

Stephen, with regard to our October sales, we feel really good about our October sales. We were up over the prior year, in line with where we thought we’d be, and it’s definitely supporting the outlook we have for the year, in terms of underlying market factors, we’re not seeing significant changes. We continue to see both in looking at the numbers as well as talking to field, visiting the field operations, continued strong demand across the brands, and we’re not in any way alarmed. We’re in fact very encouraged and positive about the way 2017 looks and our positioning for 2017.

Bill W. Wheat – D.R. Horton, Inc.

Sales in Texas still strong

Overall, Texas has been strong for several years now, and especially, Dallas Fort Worth area certainly stands out, continues to be a very strong level. Certainly, the growth rate has moderated versus where we were, but still maintaining at a very strong level. Our sales in Houston, the second largest in Texas, was up year-over-year. So we’ve continued to see that at a very strong level, as we continue to move back down the price curve and making sure that we’re staying at an affordable level in the Houston market. Austin, San Antonio, the other two major markets also just very solid consistent results, and when you’re comparing versus where those cities and where the state of Texas was last year, that’s at a very strong level of performance.

Only modest loosening in the mortgage market

“To the extent there’s been any loosening, it’s been very modest, really similar to what we said over the last couple of years. Any loosening has been very modest. Nothing that’s moved the needle significantly in the market, but we would certainly expect that over time, probably, we continue to see a little bit more loosening, as the economy improves, as the mortgage market continues to improve.”

Fluor 3Q16 Earnings Call Notes

Fluor (FLR) Q3 2016 Results
David Seaton

Seen significant increase in industry infrastructure

“Through the first three quarters of 2016, overall global economic growth has underperformed our expectations. We continue to experience greater than anticipated headwinds from the commodities and related markets, which impact our Energy, Chemicals, Mining and Maintenance Modification Asset Integrity segments. On a more positive note, we’ve seen significant increase in industry infrastructure in power new awards and backlog which should contribute to our growth next year. Looking forward, we do expect a modest improvement in the economic growth next year, which should lead to greater consumer spending and growth in industrial production”

Expecting better economic activity in 2017

“We expect these increases and economic activity will lead to greater project opportunities for Fluor. We do believe that in order to maintain supply demand balances in key commodities like crude oil and copper, our customers will need to move forward with major capital projects, but it will be gradual. We also expect infrastructure and government spending to continue.

Lower for longer mindset on commodity prices is distorting the E&C contracting market

“As we move into 2017, I remain concerned that this longer – lower for longer mindset on the commodity prices – is starting to distort the E&C contracting market. We were now seeing customers not only expecting lower prices without addressing capital efficiencies, but also demanding contractors take on risk that is in some cases outside of the contractor’s control. This along with an increased level of irrational bidding in feed pricing creates an unusual and challenging marketplace. But we’ve seen this cycle before. Having said all that, it’s imperative that we maintain the discipline in our approach to pricing and risk management. That means not only seeking the right clients, but the right projects with the right clients. It means making sure we appropriately price for risk, advise our clients on the benefits of an integrated solutions approach, and when we win the contract, intentionally focus on execution and project completion.”

Competition is extremely tight

“When you look at 2017, I would say, it’s just in a couple of places. One is there’s been a delay in the award of some of the projects, even with the TCO project. So it’s a book and burn issue that drives us to – and not the number we presented. The other issue is I think the competition is extremely tight. And we’re probably, maybe a little bit more conservative in terms of the win rate that we look to get – because we are going to maintain that discipline in terms of risk and pricing.

Stay disciplined

“So, as I said, this isn’t the first time we’ve seen this behavior, both on our customers’ sides and on our customers’ sides. But I think we’re going to maintain that discipline and I think that’s where our diversity is part of the answer for continuing to grow. We’re able to skate to where the puck’s going to be, and not – not have to rely on, going back to a previous – previous question, not rely on a must-win project. We’re going to maintain our discipline.

Lower for longer creates some opportunities because people are comfortable with it

“Now, I would like to comment on the lower for longer piece. When you think about our oil and gas customers as well as our mining customers, I think they’ve gotten their head around the fact that the commodity prices are going to be maintained at current levels for a long, long time; and they have in fact changed their business model to deal with a lower for longer oil price as an example. So, when you look at what’s out there, they’re prioritizing those projects. They – you can argue they’ve taken a longer deep breath here – not having the confidence that the oil prices were going to moderate. And therefore, that pushes even the high quality projects out in time, and that’s what we’re experiencing now. I would also say that the conversations we’re having with our customers is they’ve gotten comfortable with their new model; they’ve gotten comfortable with the lower prices and they’re starting to move forward with projects that are critical in terms of their growth trajectory. So, we’re seeing many, many of these customers moving these projects towards FID as we get through next year into 2018, 2019, 2020. So, where lower for longer can be seen as a negative, I actually see it as a positive. Because we’re seeing much better behavior from customers in terms of the priorities that they’re doing, and these high value projects are typically the most critical and most complicated projects, which I think feeds right into our value proposition with those customers and what those customers expect us to deliver. So, I kind of denoted a little bit of negativity in the way you used the term – the phrase, lower for longer, but in fact I actually see that as an opportunity now.”

It becomes a buyer’s market when this cycle happens

“It’s a great question. We’ve seen, as I’ve said, I’ve seen these cycles before. And when there is movement in terms of lack of capital programs, it becomes a buyers’ market, and we see a lot of customers across the board looking for benefits from that. So I wouldn’t say, it’s just oil and gas, it’s across the board in terms of competitiveness.”

Caterpillar 3Q16 Earnings Call Notes

Caterpillar (CAT) Q3 2016 Results

Douglas R. Oberhelman – Caterpillar, Inc.

Splitting Chairman and CEO role around transition of CEO

“We did make a change in governance with a split Chair and CEO role. I think most of you know we’ve had a shareholder proposal on that for several years in a row and we have a couple of large shareholders that are fundamentally for that. They push that at transition times. And obviously, this was a time the board considered that because we’re in transition.”

Mike DeWalt

Lowered 2016 outlook

“Let’s look at the outlook. We did lower the 2016 outlook. Previously, we were thinking $40 billion to $40.5 billion for the year and $2.75 profit per share, $3.55 without restructuring costs. Now, we’ve lowered that. We think sales and revenues are going to be about $39 billion this year, and profit will be $2.35 a share, or $3.25 excluding restructuring costs.”

Decline in construction, particularly in NA

“Now, the decline for construction is particularly North America. And the weakness in North American construction is impacted both our Construction Industries segment and, to some degree, Resource Industries for large equipment. So I think that’s one of the bigger reasons for the decline in the outlook”

Commodity prices still not quite good enough to drive substantial sales increases next year

“we don’t think commodity prices are still quite good enough to drive substantial sales increases next year. We would like to see commodity prices rise more next year. And if that happens, that, we think, logically would be upside for the second half of next year; if that doesn’t happen, probably not upside then.”

Remain very cautious on the first half of next year

” On balance, we’re not seeing a significant difference, but we’ve said this in the release. I think we’re much more cautious about the first half of the year. And the flattish for the year relies on a bit of improvement in the second half of the year. So I think to your point on costs, I would suspect as we wrap this up, we will be planning and trying to set a cost structure for something that’s probably a little bit more conservative than where we’re thinking sales for the year could be. So there will remain a very big focus on cost and cost reduction.”

I don’t really want to answer your question about goodwill impairment so I’ve going to talk around it rather than give a direct answer

“Well, those are big questions, so I’ll try to talk around it rather than giving you a direct answer, because our credit rating is up to the rating agencies. But first off, if we knew what the result of the fourth quarter goodwill testing would be, we’d book it. We don’t. We go through a defined process every year. We’re going through that now. And we’re pretty straight up. If there’s an impairment, we’ll book it. If there’s not, we won’t.”

We don’t have a Bucyrus, there is no Bucyrus

“First, there is no Bucyrus. Bucyrus does not exist. And the goodwill is not in one measurement bucket. We measure goodwill. We do the work based on which of our business it’s in and that goodwill is spread across more than one business. And also remember that some of the intangibles in goodwill changed after we acquired Bucyrus and sold a portion of it to dealers…So we don’t have a Bucyrus. Everybody wants to think we do, but it’s been integrated in across a couple of different businesses within the company. And so the measurement is not just Bucyrus, because it doesn’t exist. It’s each of those businesses that we have. That’s how it’s done.”

Problem in NA construction is infrastructure spend hasn’t been robust and too much used equipment

If you look at construction in North America, housing seems to be motoring on and has been okay. The problem we find ourselves in, I think, is the larger projects, the infrastructure, the infrastructure spending is maybe not quite as robust as housing would be right now, and that’s a bigger sweet spot for us. We have this other dynamic going on and I’ll try to describe it like this. We have too much used equipment in the marketplace right now, and used equipment prices are fairly depressed.”

D. James Umpleby – Caterpillar, Inc.


“Thanks, Doug, and hello again to everyone on the line. It’s an honor and privilege to be selected as the next CEO of Caterpillar. I’ve worked with Doug for many years. I have great respect for him and am proud to be part of his team that has kept Caterpillar strong throughout some of the most difficult market conditions that we faced. Like other incoming CEOs, I’ll pull together a team of leaders that will refresh our enterprise strategy in the coming months. Again, it’s an honor to have been chosen to lead this great company. Thank you.”

KB Home 3Q16 Earnings Call Notes

KB Home’s (KBH) CEO Jeff Mezger on Q3 2016 Results

California reflects ongoing strength along the cost

“The dynamics of the California real estate market continue to reflect ongoing strength along the coast, with rising prices in those areas driving higher demand to the inland areas as buyers seek affordable alternatives. California is a large and diverse economy, one that is showing an accelerating recovery”

Houston market stabilized

“In Houston, as we discussed, we pulled back on our investment in early 2015 until we had more clarity on the impact on demand from falling oil prices, and our community count is now lower as a result. We are now seeing the market stabilize with demand solid at price points below $250,000. We are well-positioned today in Houston with an average selling price of about $230,000 and our net order growth for the quarter returned to positive territory in spite of fewer opened communities.”

Interest rates low and credit availability is expanding

“Economic indicators continue to show general improvement and we remain encouraged by the housing market’s steady recovery. Interest rates remain low and credit availability is expanding, contributing to healthy demand. And with existing home inventory limited and new home starts well below normalized levels, the new home industry is positioned to benefit for the foreseeable future.”

We are seeing strengthening demand in the B submarkets

” we are seeing strengthening demand in what I’ll call the B submarkets. We’re really not looking at the Cs yet, don’t know that we ever will, as long as there’s opportunity in the B. So we’re, within each city, we have a strategy. We’ll target the median income and that submarket. We try to get to the most desirable submarkets with the best balance of demand supply and a median income that can get a mortgage, and that’s where we’ll spend our attention. So we hug the coast in California but we are seeing more business in the inland areas as they recover.”

Biggest order growth areas in inland empire and central cal

” our two biggest order growth areas were Inland Empire and Central Cal. So the inland area is the more affordable place, typically more first time buyer or more affordable first move-up demand in those regions, and that’s what we’re seeing. It’s also where we, in a year ago, had more what I’ll call underperforming communities, whether reactivations or things that just weren’t working that well. So we’re, if you want to say there’s a mix shift going on, I think there is because we’re holding our business in the coastal zones of California, and lifting it inland.”

Underwriting standards continue to migrate towards normal

“Well, if you look at credit profiles of Fannie Mae bonds being sold, the FICO score continues to move down a little bit. So you’re seeing they’re still well above the regulations and guidelines but they are coming down from where they were a year ago or certainly two or three years ago. I think as more submarkets get into a position where more of the homeowners and loans have equity, that the banks are feeling more comfortable in getting back to more normalized underwriting as well. But I would start by looking at the Fannie and Freddie bonds that are being sold because the credit profile is migrating more towards normal underwriting.”

Not going to talk about this quarter yet but solid demand in the last quarter

“The color on the quarter that just finished is pretty consistent through the quarter. We saw solid demand, we saw good traffic levels. And as you could tell by our comments, across the Company, our sales per community were better than they were a year ago. So it’s encouraging, but we’ll speak to the fourth quarter later this year.”

Jeff Kaminski

Very tight labor conditions across the country

Right. What we’re seeing across most of the markets, there’s been very tight labor conditions across the country in most of the markets, particularly in framing labor category and dry wall I guess secondarily. And as the demand ticks up for those services, as we get later in the year, we’re seeing more and more pressure on that side. And we’ve had instances in some of our divisions where some contractors are coming back to us and basically saying they’re going to have to work over time with their folks or that they’re going to need to see some price increases in order to stay on the job. It’s been a very competitive environment out there and we’re trying to hold our build times and obviously complete our homes and deliver those for our expectations. So those are and they have been continuing to be headwinds for us for quite some time.”

Toll Brothers FY 3Q16 Earnings Call Notes

Toll Brothers’ (TOL) CEO Douglas Yearley on Q3 2016 Results

Just not seeing weakness in luxury new home market

” While there has been a lot of discussion about weakness in the luxury new home market, we just aren’t seeing it based on this quarters contract growth across all of our regions and our strong deposit start in fiscal year 2016 fourth quarter. Our contract growth this quarter was among the best in the industry. It appears that buyers in the luxury market continue to be drawn to our great brand name and nationwide reputation. ”

6th most admired company in the country

” This February we were number 6, among global brands in the quality of our products, services offered according to Fortune Magazine’s survey of the World’s Most Admired Company. The only companies in the world that ranked above us were Apple, Walt Disney, Amazon, Alphabet, and Nordstrom.””

No change in appetite from foreign buyers

“We have not seen a change in the appetite of foreign buyers. This has remained about the same at about 3% to 4% of our total contracts nationwide with the greatest concentration being about 15% to 20% in California, 10% to 15% in New York City, and 5% to 10% in Seattle. These percentages have not changed materially over the past few years.

Saw sequential improvement throughout the quarter

“We saw a sequential improvement in sales throughout the entire quarter. July was better than June and June was better than May.”

Continue to be very bullish about the West

“We continue to be opportunistic with land buys. We’re looking all over the country. This past quarter much of the land we bought, most of the land we bought was in California where we had some very good opportunities to buy at various price points and in various locations. So we continue to be very bullish about the West

If rates go up it’s something we’ll deal with

“In terms of rates going up it is not something we can control. What we do offer is a year rate lock on jumbo loans so people want to walk into very close to today’s rate they can do that with a market rate float down. If rates go up we will deal with it. I don’t see any terrific increase in rates coming but right now I would say the market is strong”

Caterpillar 2Q16 Earnings Call Notes

Douglas R. Oberhelman – Chairman & Chief Executive Officer

Don’t think it was a surprise that Joy was acquired

I’ll take that one. It’s Doug Oberhelman here. I don’t think it was any surprise that Joy was acquired with what’s happened to them and the mining industry in general and all the mining customers, particularly coal customers, that are out there around the world. Obviously, we’ve known Komatsu for decades. We’ve known Joy intimately as well the last decade or so since they emerged from bankruptcy and we entered mining in a bigger way. So neither one of these are new players. Certainly it’s a consolidation that makes sense in the mining world.

Michael Lynn DeWalt – Vice President-Finance Services Division

Taken down sales guidance as everything we’re seeing around the world is not giving us more confidence

“Talk a little bit about the outlook for the year. When we were sitting here a quarter ago, we were expecting sales in a range of $40 billion to $42 billion, so $41 billion as a midpoint. We’ve taken that down, from midpoint to midpoint, about $0.75 billion. And the gist of that is just everything that we’re seeing in the economy today around the world. Additional risk; everything from the results of the Brexit vote and the short-term uncertainty that that causes, the trouble we’ve seen in Turkey, all the negative rhetoric around the U.S. elections. Oil prices have come off a little over the last couple of months. It’s not any one thing, I would say. And we said this in the outlook. You know, we have sluggish economic growth throughout the world in general, but not enough to drive growth in our end markets. And the news we’ve seen over the last few months is definitely not giving us more confidence.”

There is some improvement in mining

“I would say there’s some improvement in mining on the horizon around aftermarket. We are seeing a little more activity on dealer rebuilds and we would hope that that would translate into higher sales for us. I think one of the things that might distinguish us a little bit from competitors is that we sell through dealers. So a lot of these projects might hit them quicker than they hit us. We’re still expecting a decline in dealer inventory this year and particularly in the second half of the year. So if we were just selling to end user demand, sales would be a bit better than they are right now.”

dealer inventories are not excessive but will likely come down in the second half

“If our delivery – let’s say things ticked up, orders ticked up, the markets heated up, and let’s say we had trouble keeping up, that would concern dealers and they would order even more. They would want to hold even more. But just the opposite is happening right now. We have excellent delivery performance. They can get pretty much what they need when their customers need it. And so that’s causing them to hold, or want to hold less. And the more – the better we do with lean, the more that’ll probably be the case. So I’m trying to stress the point I don’t think dealer inventories are excessive. I mean, there’s a reasonable range but I think they will come down over the second half of the year.”

Caterpillar 4Q15 Earnings Call Notes

Doug Oberhelman

Cat financial asset quality has stayed strong

“Actually in 2015 they hit a very high market share number for what they financed. The quality of that asset portfolio is very good, past due has actually improved a little bit from 2014. ”

Want to create the internet of Caterpillar things

“What we are aiming at is quite a bit different than others. I would say we’re aiming at the internet of Caterpillar things, so that when we think about what we’re doing with digital technology, what we’re doing with site preparation and technology, machine guidance technology, machine health technology, it’s all about our installed base of the 3 million machines and engines. Rail, construction, mining the things we do.”

Lots of sensors across our machines

“We have knowledge of our machines. Our idea is to make a ready platform, lots of sensors across our machines and other brands to make sure that our customer gets the most out of their construction equipment in his or her fleet. I suspect that in the next year or two, five [ph] this will be a tremendous and we’ll be talking a lot more to you about it in our investor meetings and so on as we get there.”


Done pretty well with material costs

“Hey, Rob this is Mike, I’ll start this out. I’m going to start a little bit with material costs. We’ve done actually very well over the last, I don’t know three, four years on material cost. I think we in combination taken out over $1 billion. So over that timeframe and last year ’15 was a good chunk of that. So it’s been a combination of actually lower commodity prices have helped some. But all the work we’ve done on lean, resourcing, engineered value change, our investments in R&D, our partnerships with suppliers, that helped generated a pretty good chunk of that cost reduction as well.”