Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Larry Marsh - Barclays Capital.
Lawrence Marsh - Barclays Capital
I can relate to the advice some one of your hospital CEOs, except most days I feel like I’m knowing that’s getting blocked and tackled, anyway just a couple of quick things.
First on pricing; actually you talked about, and I’m not used to seeing this kind of LIFO charge of your business, obviously a big up tick in the first quarter. Two things here; one, what do you think your full LIFO charge is going to be for the year and then two; how are you thinking about this environment when you talk about a supplier’s raising prices, with that trigger any of rebate. Is that really good for you or do you think the pricing could be going in an extreme or that could come back and hurt some suppliers?
James Bierman
Larry, let me take the first one on the LIFO charge for a year, because you hit upon the essence of the accounting issue, which is in a sense the accounting for LIFO provision is similar in concept to the accounting for income taxes were one needs to have an estimate or a view as to what the amount would be for the course of the year.
Our provision in the first quarter of $16.4 million compares to last year’s $10.4 million. So, you are absolutely right, it’s a significant increase for the course of the year. If you consider the variables that one would take into consideration and determining the LIFO provision for the year, certainly inventory levels come into play and the expectation as to both the quantity and type of the inventory that you would have as well as the critical variables of what the expectation for inflation and price increases would be over the course of the year.
What we’ve historically seen, and if we don’t look any further back than last year to this year, what we saw was a significant amount of supplier price increases in the first quarter, followed by two more quarters, second and third were very little activity and then in the forth quarter we saw a small amount of price increases.
We’re taking that expectation as we move forward in to the remainder of this year and fundamentally saying that the experienced pattern that we saw in 2008 seems reasonable as an amount to target to occur in to 2009.
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