Jim:    Mr. Sutherlin welcome back to Mad Money...

Mike:     Thank you Jim, good to be here.

Jim:    I have got to tell you… I read the quarter, I read the release, I read about the numbers, and then I listen to the conference call… and by the time the conference call is over, I am saying why the heck, would I ever want to own a stock of a company where the CEO is basically saying that we are no where near trough… trough will not happen to 2011... there could be a lot of cancellations coming… China could just be a blip on the radar screen… and the US is falling apart… why, why, why did you have to put such a negative spin on everything that happened?

Mike:     Well, I think that by nature I am going to be a little bit conservative. But the reality is, that the positive indicators that we are seeing in the economy, the positive indicators that we are seeing in our industry, are still very, very early. And we have a business that has got back logs that will continue to carry us another year or more. And as a result of that, we see a declining business over the next year and a half, if we do not get improvement in the market. The signs that we see are very positive, the economic signs are starting to improve. China’s demand is up for sure. And I think that it is an aggressive buy, but I think that they will sustain a positive growth in China. And that will be positive for the commodities market. But all of those signs are still very, very early and I am reluctant to go out on a line and say that the commodities market are turning right now. So we continue to be cautious. Manage our business for all possible outcomes. I do believe that the markets ahead will continue to be volatile. So we want to be in position to handle a continued weak market if it stays that way. We have proven our ability to handle a good market when it comes. So I am not worried about our ability to respond up. So our position is, positive indicators, still cautious.

Jim:    Alright, one of the things that I think took everybody by surprise is that you had said that you might be able to do this on our show last time… is how much less it costs to make your equipment… and how much more you saved, in terms of what we talk about on our show… I always try to get our viewers to understand the concept of the gross margin, what is left after you sold.. talk about how you were able to bring your cost down dramatically, and make so much more money from the sales that you had, than we ever thought was possible.

Mike:     In our reported second quarter, we had the benefit of several things. One, certainly, a better supply chain management and we have gotten pretty significant reductions out of our supply chain. Those numbers are on average right now, in the middle single digits. They have the potential to move into the double digit reductions. But we have also got the benefit of very strong operational excellence programs that we have been running in our business for the last year and a half, or two years. We have got the benefit of very, very stringent cost controls. And we also, a year ago we were shipping contracts that we booked in 2005, 2006, 2007, now we are starting to book contracts that we placed in our back log in 2008. So that has helped us as well. So, the margins are really a combination of a number of things. All of which I believe are sustainable and will continue to get improvement out of them.

Jim:    That is terrific… because the key in my thinking about the stock, is that that is not done, the cost improvements are not done… so you have confirmed that. Now I think our viewers, because I have always associated… when people say, China is getting strong… I say go buy Joy Global… I want you to contrast in a boiled down fashion, from what you talked about in the conference call, which is pretty amazing… the differences right now in China and the United States for your business.

Mike:     Well, China is a market that is coming back. They are importing record levels of commodities. And I can give you names of 5 or 6 different commodities that are at record level for their imports. And they are preparing for the strong impact of their stimulus program in China. In the US, we are still working down our production levels to match the level of demand for coal primarily in the US. The metals markets have come down dramatically because we have older, higher cost copper and iron ore mines in the US. So the US is still adjusting to the realities of a weaker market. Internationally we are seeing that the production cuts have come thru, had there effects and now we are starting to see the recovery in the international markets. So different phases between the two markets, dramatically different.

Jim:    I was wondering, would you do the same… I know that you did your conference call just now… but I look at what has happened with commodities in the last 4 weeks… and everything that you have talked about, whether it be from the cancellations or delays for orders from machines that would have been involved with shale to oil… or whether it be the price of coal, which I think will now be lifted by the price of oil… isn’t it true that if the commodities rally that has just happened in the last month is sustained, then your projections will be too low?

Mike:     Well certainly, we hope that they are too low, that is for sure. But we are seeing positive signs in the industry. The industry cut back, globally the industry cut back very dramatically and very quickly to keep supply in balance with demand. As a result, we really have very little excess supply in the industry today. Less excess supply than we have had in any other economic down turn.

Jim:    See, that was shocking to me. Because this downturn is probably the worst since the ’30’s… yet somehow this downturn was shallower for you than all the last few downturns… and I wonder if that isn’t again the China factor, or if that isn’t the fact that basically you guys are the only guys in town.

Mike:     Well, we see just outside of China, we see the industrial sector in the global economy having reduced their production levels with a relentless effort in order to get inventories down. So the level of industrial production today is lower than the level of current demand. And the destocking efforts are coming to an end and we will see some improvement in industrial production which will help commodities as well. So, it is not all China, certainly China is a big part of it, but it is not all China.

Jim:    Excellent, Mike Sutherlin again, always telling it straight. You have made a lot of money for our viewers. I think you so much.

Mike:     Thank you, Jim. It is good to be on again.