Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Chris Donaghey – Suntrust Robinson Humphrey
Chris Donaghey – Suntrust Robinson Humphrey
As we’re going through trying to determine what a normalized margin would look like for the company, you walked through a lot of the details in the first and second quarter on inventory write downs and severance, what I wasn’t quite following is were the excess or higher then expected legal and consulting fees included in those or is there another number that we should be using as a number that might come out of a normalized looking quarter?
Charles Mathis
On the write down of the inventory as in the cost of sales, the higher SG&A we had for the audit, legal and consulting fees was what Michael had mentioned the $3.5 million in the first quarter and the $5 million in the second quarter that was all in the G&A. Those items are included in the number that was provided for the SG&A additional expenses.
Chris Donaghey – Suntrust Robinson Humphrey
So in Q1 you had $3.5 million in severance, and higher then expected legal and consulting fees. The $1.5 million contribution to the Medical University of South Carolina and then the $4.9 million non-cash expense due to Roxboro.
Michael Moody
Right they are all separate items.
Chris Donaghey – Suntrust Robinson Humphrey
And then in the second quarter the $5 million was for severance as well as the elevated legal and consulting?
Michael Moody
Right.
Chris Donaghey – Suntrust Robinson Humphrey
In the second quarter there was only $1 million in inventory write-down?
Charles Mathis
That’s correct.
Chris Donaghey – Suntrust Robinson Humphrey
And so are you comfortable with the inventory levels now and should we expect any more inventory write-downs or is that pretty much taken care of?
Michael Moody
We’re comfortable with the inventories now.
Chris Donaghey – Suntrust Robinson Humphrey
As we look forward international opportunities beyond the UK, I know that there’s been some reporting in defense news recently about the UK potential getting significantly larger but beyond the UK can you quantify at least the number of different countries that are out there that you’re pursuing international sales with?
Michael Moody
The number of active negotiation discussions we have is really not much different then the number we reported on the last investor call which I think we had indicated about half a dozen. And we are obviously actively supplying the United Kingdom, Canada, and Italy; there are a number of countries we are currently supplying to, France as well.
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