Question-and-Answer Session
Operator
Ladies and gentleman, we will now begin the question and answer session of our conference. [Operator Instructions]. Our first question comes from the line of Budd Bugatch at Raymond James. Please go ahead.
Budd Bugatch - Raymond James & Associates, Inc.
Good morning.
Stan A. Askren - Chairman, President, and Chief Executive Officer
Good morning Budd.
Budd Bugatch - Raymond James & Associates, Inc.
Stan, good morning, Jerry, good morning Marshall. Jerry, would you do me a favor and just run over the SG&A guidance again kind of out? You went through that and I kind of lost you somewhere midstream.
Jerald K. Dittmer - Vice President and Chief Financial Officer
Sure, I can do that Budd.
Budd Bugatch - Raymond James & Associates, Inc.
And just take it slow for this old ears.
Jerald K. Dittmer - Vice President and Chief Financial Officer
No problem. We expect the SG&A including our restructuring charges as a percentage of sales to be comparable with the year-to-date run rate. Our year-to-date run rate is about 27.5% range. Additional charges related to our previously announced operations realignment and implementation of our brand building, our new products, our growth initiatives etcetera is what's going to drive a little bit higher than when you just saw in the third quarter.
Budd Bugatch - Raymond James & Associates, Inc.
Okay. So the additional charges are included in the SG&A, though. That's still in that run rate?
Jerald K. Dittmer - Vice President and Chief Financial Officer
That is correct.
Budd Bugatch - Raymond James & Associates, Inc.
Okay. And when you look then at the EBIT margins when you look divisionally, you I think in the fourth quarter of '06 in hearth had just under a 7% pre-tax margin and for office furniture was a couple of basis... 30 basis points under 10%. How would you feel about that or what guidance can you give us on that?
Jerald K. Dittmer - Vice President and Chief Financial Officer
You asked about the breakdown, but we don't normally break it down, as you know, by the actual group.
Budd Bugatch - Raymond James & Associates, Inc.
I understand, but you have done such a good job this year in containing costs, particularly in hearth under just enormously challenging conditions, and both segments quite frankly. I just was hoping you could give a feel, because fourth quarter was when we really started to feel the pinch last year.
Jerald K. Dittmer - Vice President and Chief Financial Officer
Yes, and I think you are going to see in the hearth, Budd, if your remember, the hearth last year was the first quarter that it was really down.
Budd Bugatch - Raymond James & Associates, Inc.
Yes.
Jerald K. Dittmer - Vice President and Chief Financial Officer
So the comparison is going to be our fourth quarter run rate in the margins is going to be higher than it was in our third quarter that we just went through. So the numbers you gave us are going to be pretty well up 200 to 300 basis points. The office furniture is going to basically be flat.
Budd Bugatch - Raymond James & Associates, Inc.
Got you.
Jerald K. Dittmer - Vice President and Chief Financial Officer
Okay.
Stan A. Askren - Chairman, President, and Chief Executive Officer
You know what, and we'll caveat the hearth side too Budd... barring some major, major change. Certainly, it's very uncertain.
Budd Bugatch - Raymond James & Associates, Inc.
And you haven't seen... and like the downturn, you were late seeing it because fireplaces go pretty late in the building process, you'll probably be late seeing it on the upturn as well or what are you hearing from your customers if they are still there?
Stan A. Askren - Chairman, President, and Chief Executive Officer
Yes, I think certainly what we are hearing is they are not at the bottom yet.
Budd Bugatch - Raymond James & Associates, Inc.
Okay, all right, thanks. I'll let others ask questions.
Operator
Our next question comes from the line of Chris Agnew of Goldman Sachs. Please go ahead.
Chris Agnew - Goldman, Sachs & Co.
Thank you. Good morning gentlemen. I would like to ask about the supply-driven business, the continued softness that you are seeing. I was wondering if you could give us a little more color. I know you have limited visibility, but are there any rays of light? Maybe could you discuss are there any differences you are seeing maybe between products or geographies or particular types of business, because I know that's a mix of a whole different sort of go to market businesses. I'm just wondering if there is any more color there.
Jerald K. Dittmer - Vice President and Chief Financial Officer
Yes, Chris, I guess the only color I can provide is it really is there is no change as to what we have been... as to what we have seen in the previous two quarters regarding kind of business activity mix, geography and all that.
Chris Agnew - Goldman, Sachs & Co.
Okay. In terms of... I mean what are your... are there any comments that your customers or your sales people are providing back, provide any more color?
Stan A. Askren - Chairman, President, and Chief Executive Officer
Yes, again it's kind of a maybe not very exciting answer is we are... as I said, we really are looking forward as no change.
Chris Agnew - Goldman, Sachs & Co.
Okay, okay. And with the contract business, what sort of initiatives are you doing there? You talked about your investing in growth. Can you maybe discuss what parts of the business you are investing in? I know you are still challenged from the hearth side, but are there areas where you are investing for growth there, or are you putting all your money towards contract and international? Maybe can you discuss that?
Stan A. Askren - Chairman, President, and Chief Executive Officer
Yes, sure. I think it's a good question. In general, our strategy has been to pull two levers simultaneously. One is to look at the structural cost, the non-value added ways, which is part of our legacy of this lean continuous improvement and remove that. What we do is typically we take some of that and we plough it right back into the business. We are... we do that across the board generally. So we are investing in sales growth, top line growth, even in the hearth business through marketing programs, through advertising, through product development, through sales initiatives. Likewise, we are doing that in the supply-driven channel. I think you can anticipate in '08 that we will have a very high level of new product introductions across the office furniture business. I think if you... in many markets, you can hear advertising, radio advertising, you see print advertising around HON Company in particular. If you listen in the markets, you can see that they are advertising. I think you can see that we continue to invest in selling resources such as sales people, showrooms across the board. And so we really think about this kind of as working both levers simultaneously. Take the waste out, take the structural costs out, but think long term and plough that back in to really growing the top line. So as this... the macroeconomic conditions change as the businesses cycle out, including the hearth business that we really have a lot of momentum coming on through. So we are not just kind of harvesting; we are trimming and investing at the same time.
Chris Agnew - Goldman, Sachs & Co.
Can you touch on international? Is it possible to break out what that is, within the mix?
Stan A. Askren - Chairman, President, and Chief Executive Officer
We have not broken that out historically and, as I often say, we are relatively small in that area. We made some big steps in the last 24 months, primarily the acquisition of Lamex and our sales initiatives in Asia. What we can tell you is that it's going well, we are pleased with the results, it's meeting our strategic objectives, it's meeting our commitments and we anticipate that that will, as time goes on, become a even more important part of our business.
Chris Agnew - Goldman, Sachs & Co.
And do you think... your competitors are doing particularly well in Europe. Is that a geography that is of importance to you? Do you think you need to be positioned there?
Stan A. Askren - Chairman, President, and Chief Executive Officer
Yes, we don't comment on specific markets. I think certainly Europe recently has done well. I think it's still a very mature market. And the question always is is there a good entry point for us. So that's probably the extent of what I could comment on, Chris.
Chris Agnew - Goldman, Sachs & Co.
Okay, great. Thank you.
Stan A. Askren - Chairman, President, and Chief Executive Officer
Thank you.
Operator
Our next question comes from the line of Matt McCall of BB&T Capital Markets. Please go ahead.
Sean P. Connor - BB&T Capital Markets
Hi, this is Sean Connor for Matt McCall. I had... just want to get... try to understand a little bit further on the SG&A. That was kind of a surprise for us. I guess we were looking for something in line with Q2, and stripping out the restructuring, it was significantly better as a percent of sales against lower costs. Are there any surprises there that had lower, something that you guys weren't anticipating or when you were talking about that been in line with Q2, were you already kind of building in that, the restructuring from Richmond?
Stan A. Askren - Chairman, President, and Chief Executive Officer
Well, the restructuring, we weren't building it in. But I mean if you at the restructuring wound up being in that $4 million range. There are some non-operating gains that offset that by a little bit. It really comes down to the cost control and managing the business is really the key things we were doing during this quarter and still making sure we were investing for the future, which is why we talked about we're still going to be doing the brand building and new product and growth initiatives. There is a little bit of timing in there, and that's really all it is at this point.
Sean P. Connor - BB&T Capital Markets
Okay. I know you talked about like '09 when the restructuring is completely finished, you took on the $10 million of savings annually. Will we see any of that in the near term or at least some idea on what the savings might be for '08?
Stan A. Askren - Chairman, President, and Chief Executive Officer
In '08, it pretty well nets out. As we had in the press release, we said that... if I can grab it here... the cost in '08, we are going to be in that $78 million range, the savings will be not quite at that same level, so the cost will still be a little bit higher. But it pretty well nets out for '08 and then by '09 is when you really see that $9 million to $10 million in savings. So we will see some of the savings in '08, but not enough to totally overcome all the costs.
Sean P. Connor - BB&T Capital Markets
Okay. I think at the last call you guys had talked about on the supplies channel business that I guess it wasn't getting any worse, and even maybe being more positive than negative. Is that when you say the same, is that kind of what you are seeing now for October and heading... maybe expecting that trend to go forward through the end of the year?
Stan A. Askren - Chairman, President, and Chief Executive Officer
Correct.
Sean P. Connor - BB&T Capital Markets
Okay, great. Thank you.
Stan A. Askren - Chairman, President, and Chief Executive Officer
All right, thank you.
Operator
Our next question comes from the line of Budd of Raymond James. Please go ahead.
Stan A. Askren - Chairman, President, and Chief Executive Officer
Budd, are you there?
Budd Bugatch - Raymond James & Associates, Inc.
Yes, can you hear me?
Stan A. Askren - Chairman, President, and Chief Executive Officer
Sure, go ahead.
Budd Bugatch - Raymond James & Associates, Inc.
I am sorry. On looking at the sales line for the fourth quarter in your mid teens down for hearth, have you got much included in Harman on that?
Stan A. Askren - Chairman, President, and Chief Executive Officer
There is nothing including in Harman on that.
Budd Bugatch - Raymond James & Associates, Inc.
So Harman has not closed?
Stan A. Askren - Chairman, President, and Chief Executive Officer
That is correct.
Budd Bugatch - Raymond James & Associates, Inc.
And you still expect to close it in the fourth quarter? Are there any issues that have come up?
Stan A. Askren - Chairman, President, and Chief Executive Officer
I think, Budd, what we would say on this is... would be to take kind of a cautious approach on this is it has not closed and it's uncertain as to whether it will close at this point. And so we are not factoring that into our numbers, and I would recommend that you do likewise.
Budd Bugatch - Raymond James & Associates, Inc.
I see. So I take it from that, Jerry, that what you are telling us is that there may have come up with an issue with the creditor issue on this. And I don't expect you to comment on it, so I'll just tell you that's my aside. So when you look at the other side of this is you did have some acquisition revenues in the third quarter, what's left in the acquisition run off essentially for the fourth quarter?
Jerald K. Dittmer - Vice President and Chief Financial Officer
Yes, Budd, for the fourth quarter, it's $15 million roughly.
Budd Bugatch - Raymond James & Associates, Inc.
And which acquisitions are that?
Jerald K. Dittmer - Vice President and Chief Financial Officer
It's mostly an office furniture acquisition that we made down in North Carolina.
Budd Bugatch - Raymond James & Associates, Inc.
Okay. Thank you very much.
Stan A. Askren - Chairman, President, and Chief Executive Officer
Thank you, Budd.
Operator
[Operator Instructions].
Stan A. Askren - Chairman, President, and Chief Executive Officer
Okay.
Operator
There are no further questions in queue. Please continue.
Stan A. Askren - Chairman, President, and Chief Executive Officer
All right, well thank you very much for joining the third quarter call. Have a good day and we look forward to talking with you soon. Bye bye.
Operator
Ladies and gentlemen, that does conclude our conference call for today, which will made available for replay from today at 1:30 Central Time until October 25, 2007 midnight of that day. You may access that conference by dialing 1-800-475-6701 and entering the access code 887382. If you happen to be dialing from an international location, please dial 1-320-365-3844 and enter the same access code 887382. Those dial-in numbers once again for domestic are 1-800-475-6701 and the international number is 1-320-365-3844 and the access code for both numbers is 887382. On behalf of today's panel, I would like to thank you for your participation and I would like to thank you for using AT&T Teleconference. You may now disconnect and have a good day.
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