Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from the line of Scott Hamann – Keybanc Capital Markets.
Scott Hamann – Keybanc Capital Markets
Can you give a little bit more detail on the strategic sourcing initiative? I think in the past you had identified about $8 million in potential savings, is that still a good number to look at? And maybe talk about how that timing flows throughout this year or I guess even next year?
Timothy C. Delmore
Scott, we still are optimistic about the strategic sourcing initiatives. We expected about $8 million for this fiscal year, this coming fiscal year, that probably will be slightly less based on les volume for the year, we had expected a higher volume but we’re still optimistic about that 09 year being in that round $5 to $6 million range. And, we think that we’ve identified significant opportunities going ahead in to 10 and really 11 as well. It’s to a certain extent the strategic sourcing initiatives are offset by increased commodity pricing that we began to see at the end of fiscal 08, in Q4 fiscal 08 and we expect to see going in to at least certainly the first half and maybe the first three quarters of fiscal 09. We’ve got the opportunities, they’re going to be the 09 range that we said was $8, we’ll probably be in that $5 to $6 based on just reduced volume. But, going forward we’ve identified additional opportunities and again, that will be possibly offset by commodity price increases that we’ve just begun to see in the first three months of the calendar year.
Scott Hamann – Keybanc Capital Markets
That’s kind of a gross margin benefit and offset. It looks like you’re embedding some margin improvement, how is that going to flow through SG&A? I mean, where are you cutting some costs out there?
Timothy C. Delmore
For the year actually with the mix the margin looks like it’s flat to down 8% and that will be offset by reduced operating expenses. We’ve got the Canadian hedged costs in their kind of muddying things up.
Scott Hamann – Keybanc Capital Markets
For next year?
Christopher A. Twomey
Yes, for next year the Canadian hedged costs goes away at the current Canadian exchange rates so we’ll see an improvement in the operating expenses as a percent of sales with flat to slightly down margin percents.
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