Question-and-Answer Session
Operator
(Operator Instructions) We’ll hear first from Budd Bugatch from Raymond James.
Budd Bugatch – Raymond James & Associates
Just to make sure I understand, Curt, if I did our numbers right I think the operating margin implied by the range for the fourth quarter is like 11.2 to 11.8% and you had said gross margins between 33.5 to 34.5% for the fourth quarter?
Curtis S. Pullen
Yeah around 34 is our kind of guess on gross margin and we’ve got operating income of around 11 and change in the fourth.
Budd Bugatch – Raymond James & Associates
Just to make sure we also understand your plans on price increases, you have as you said correctly a couple of competitors have already done that in a weakening environment with costs going up it’s obviously hard to do that. What is your thought about timing and what more can you say? Any more color on that?
Brian C. Walker
First of all I think if you look historically at price increases when we’ve seen that it’s a major commodity change those have been able to stick pretty well regardless of the demand picture. Certainly it’s harder, right? So we’re not counting on all of it sticking but we do believe that if steel keeps going at the degree it is that most if not all the competitors will be forced at one level or another to raise prices in the industry. I think that’s going to be true not only in our industry by the way, I think that’ll be broader. We’re seeing significant increases in steel that are just not possible for anybody to absorb them. So I think we’ll be able to capture some. We are working through the details of the price increase right now. We will probably make an announcement shortly of the exact timing. Given where we’re at though our belief is we won’t see much benefit of that, we won’t see really any benefit of that in the first quarter. It will probably start in the second quarter and beyond. So the issue on the raw material costs for us right now is going to be while we think between all the work we’re doing around efficiencies, other cost reduction efforts and the price increase we can offset a fair amount of the commodity increase and some of that depends on what’s the magnitude of those increases in the long run. The issue is we’re going to have a timing issue that for sure in the first quarter we are not going to be able to offset all of that commodity increase and in fact we’ll get hit with a little bit of it in the fourth quarter as Curt mentioned but it’ll be heavier actually in the first quarter. But we really won’t get any relief from a pricing perspective at all.
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