Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from Paul Swinand - Stephens, Inc.
Paul Swinand - Stephens, Inc.
My first question is on the restructuring to Virginia. What is your capacity like there? How many shifts are you running? How many buildings do you have there? Can you give us a little more detail on how that’s going to work out as you have to move other operations there?
Edward J. Bramson
Both of the factories are highly underutilized and it depends on how you look at it. Tulsa was probably less than 20% utilized on an effective basis and the factory in Virginia I believe is running a single shift most of the time Bill.
William D. Meadowcroft
Yes. In fact it had some shutdowns this last quarter as well.
Edward J. Bramson
It was not an issue of physical capacity. The belief that we have is that we can take all of the fixed costs that were incurred in Tulsa and absorb them for no extra money in Virginia. But you’d need to add some hourly labor and I think the issue is just making sure that you can go into the local labor pool and get the extra hourly workers you need, which I believe you can do.
Paul Swinand - Stephens, Inc.
And those are at a similar rate I assume?
Edward J. Bramson
Actually it’s very similar, yes.
Paul Swinand - Stephens, Inc.
And just something that caught my eye on the PowerPoint, I was surprised to see on one of the earlier slides comparing 2003 and 2007 that they’re actually spending less on marketing in the direct business. Was the former plan actually under-investing in advertising or were they just shifting stuff around?
Edward J. Bramson
Do you want to say that one again? I think you’re on page 6, is that right?
Paul Swinand - Stephens, Inc.
I’m looking for it here. It was comparing 2003. Direct business spent $79.6 million in advertising and they only expensed $75.9 million in 2007. I was surprised it went down.
Edward J. Bramson
I think it was because in direct marketing what typically you do is when the efficiency of advertising drops, you reduce the advertising. Because if you find that when you advertise for another dollar, you get two dollars of sales, you advertise more. When you find that you’re only getting another dollar, you advertise less. So it’s a relatively minor change but I think that’s the reason.
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