Question-and-Answer Session
Operator
Yes, sir. (Operator Instructions). Your first question comes from the line of Michael Schneider of Robert W. Baird. Your line is open, sir.
Michael Schneider - Robert W. Baird
Good morning guys.
Randy Hogan
Good morning, Mike.
Michael Schneider - Robert W. Baird
Maybe first we can address the cost savings way down on slide nine, you layout the headcount reductions we are going to save your 85 million annually. I am just curious is that at the end of the year, what would you actually expect to realize in 2009 of the 85 or you said the number?
John Stauch
Well clearly the 85 is what we expect and so the 85 million reflects the 2009 benefit, Mike as it pertains to those headcount reductions.
Michael Schneider - Robert W. Baird
Okay, than still one in the 2010 would be roughly how much?
John Stauch
Probably, another $10 million to $15 million or so.
Michael Schneider - Robert W. Baird
Okay, so if you bare with me for a second and in an elevator right here, if you add up the savings on slide nine, you basically get to $145 million and your operating income assumption for the year at 350 is down call it $41 million. So, I am trying to understand if you take $41 million of decline in operating income and add back the $145 million in savings on slide nine, it looks like you are assuming decremental margins now on this 10% revenue decline of about 55%, which seems extremely sever given what’s going on even over the last quarter, and then certainly given your historical decremental margins. I am curious in that savings versus decline in operating income what I maybe missing or why 55% is the assumption for decremental margins?
John Stauch
I don’t think you are missing it, Mike. The way we have put together the plan Randy and I and Mike Schrock as we laid it out and said, we got sales minus material and let's look at that variable contribution margin, and let's assume that's cost. And let's count on two forms of productivity and this is productivity, we can absolutely see, which is lower purchases and lower payroll.
And let's put behind this the challenges capturing it by lien or capturing it by program, or initiatives and so we put together what we think is a tight plan that reflect sales minus material over our payroll reduction and our purchase reduction. And that's what we have guided people to and that's what we are reflecting here today.
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