Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from Mike Weinstein with J.P. Morgan.
Mike Weinstein - J.P. Morgan
First question, Rob, I was hoping you could just spend another minute on the $20 million in incremental expenses in the COGS line that you identified, so we understand that.
Robert M. Davis
Yeah, no, I’m happy to do that. A couple of things; first, in the quarter, as you know we have been in the process of remediating our single channel pumps throughout really most of 2007 and in the fourth quarter, we did have one customer, an important customer, where we did give some concessions in the form of really lower margins on some products that we put into that chain. And as a result, that did drive down the margin in the quarter for medication delivery. That’s one piece of it.
And then as we continued to evaluate where we are with our total remediation costs, we saw the opportunity in the quarter to take a little bit extra for some of the charges we’ve seen over time as we’ve been continuing to do the remediation, so that was a portion of it as well.
Mike Weinstein - J.P. Morgan
And Bob, if we listen to the 2008 guidance and we look at what’s in our model and think back to last year’s analyst meeting, you laid out a base case LRP for 2011 which talked about gross margins in that base case going north of 50% and operating margins of roughly 23%. And here we are looking at 2008 and we’re already talking about gross margins north of 50 in ’08 and operating margins of 22%. So pretty quickly in your LRP you are going to blow through that 2011 plan. Do you want to update the LRP today?
Robert L. Parkinson Jr.
We’re just giving you guidance for ’08 and now you want guidance for -- you know, our outlook base case stays the same. Obviously we’re pleased with the progress to date. You know, we are -- the facts are what they are. We are moving ahead, given our guidance for ’08, slightly faster than that base case that we presented to all of you back last March, I guess, at our investor conference. But we’ll see how things go before we become more definitive beyond that. Rob, I don’t know if you have anything you want to add.
- To read the full transcript on Seeking Alpha, click here »
