Question-and-Answer Session
Operator
(Operator Instructions)
The first question comes from the line of Kathryn Thompson with Avondale Partners.
Kathryn Thompson – Avondale Partners
First of all I know you are limiting a lot of your comments to the out quarter, but could you at least give us some idea for your gross margin targets for 2008 and also any type of general time horizon for consistent profitability?
Edward Bramson
I think maybe both of us should probably take a shot at that one, but in terms of gross margin if you look at it statically as Bill said earlier we have got some pressure on gross margin from cost increases in China. On the other hand as part of the plan we are looking to come out with a fair quarter. We will have plans to offset that either through improvements in efficiency or possibly even some repositioning of prices. So, I think there are really two answers to the question.
Bill, if you’d like to expand on that?
Bill Meadowcroft
Kathryn, as you know there has been lots we are doing and will continue to do. I don’t think we want to peg a figure at this point but we certainly would be looking even with the pressures we are facing and the rebates going away we look to be in the 40’s from a margin standpoint. Again, we’ll have to give more color on that as we continue to plan and take some actions heading into the third quarter.
Kathryn Thompson – Avondale Partners
I understand with there being some management changes also there have been some forecasts you had in the past that may have changed. First of those might be capEx. What are your capEx assumptions for 2008?
Bill Meadowcroft
We will still keep them lower. We had already gotten planned this year down below $6 million and certainly in this environment we are continuing to evaluate every project and make sure that it has a suitable return for the economics of the business we expect going forward. That would certainly be an outside number and we would be looking to reduce that further.
Kathryn Thompson – Avondale Partners
In the past you have often talked about forecasting savings for op ex for fiscal 2008. Where are you on track for that? How much savings was there in Q1? What do you expect for 2008?
Bill Meadowcroft
You’re certainly hitting again on stuff I think we are going to be more prepared to talk through as we go forward. Certainly moves have been made and some progress has been made. As you have seen we were able to cut G&A, the one-time items, by a few million dollars and there has certainly been reductions in S&M of about $5 million. There have been some?we’re seeing the early returns of the moves that are being made but there is still a lot of actions being determined and that will be executed over the next several months and the rest of this year.
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