Question-and-Answer Session
[Operator Instructions] Your first question comes from the line of Jamie Cook of Credit Suisse.
Jamie Cook - Credit Suisse
Hi, good morning.
Martin H. Richenhagen - Chairman, President and Chief Executive Officer
Good morning.
Jamie Cook - Credit Suisse
Congratulations on a nice quarter. My question I guess has to do with the guidance for 2008, at your December analyst meeting you sort of suggested that EPS should be up 25% off of the base in 2007. And the base came in higher and you are keeping the EPS number the same. So should I view your guidance is an actual... should I view this as your... as basically you're are lowering guidance because I would have assumed we should have taken the higher base in growing EPS 25% off of that?
Martin H. Richenhagen - Chairman, President and Chief Executive Officer
No. You should see it as a kind of conservative guidance and the reason for that is that previous management was talking about the $3 EPS for many, many years and unfortunately there were a good reasons why they never could make it. And this actually then wasn't that well received by you guys, and therefore I and my team we personally decided to be more on the conservative side, and we actually want to make sure that 2008, we will reach the $3 plus maybe, but we want to be conservative and want to make sure that you don't get carried away.
Jamie Cook - Credit Suisse
Let me ask another question, If I use your... I think you said in your prepared comments that your tax rate will be in the mid-30s. I am taking your interest expense down. If you seen other expenses sort of flat with 08. I mean that implies that your margins at the mid-point of guidance would be down to flattish depending on how you play with the model I guess why wouldn't your margins be going up. Are there any mix issues or anything else that I should be aware of when I am thinking about 08 versus 07?
Andrew H. Beck - Senior Vice President and Chief Financial Officer
No, I believe that the way we have our model rolling up and our expectations as we will see some margin improvements at the gross margin line. Some of that will be offset a little on the engineering and other investments that we talked about. The $50 million of additional R&D and system project investments, as well as the distribution expenses that we have, but we are certainly anticipating that our operating margins will be improved in 2008 over 2007. So not sure where the disconnect is, but we are expecting volume growth, as well as the margin improvement as well. The margin improvement is held back a little again by currency or we even have a higher number in 2008 then 2007.
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