Question-and-Answer Session
Operator
(Operator Instructions) your first question comes from the line of Budd Bugatch from Raymond James.
Budd Bugatch – Raymond James & Associates
Good morning, Barry, congratulations on the quarter and the year. In the past, you have told us that a penny of movement of the Canadian dollar is about a million dollars worth of operating profit on an annual basis. Does that relationship still hold? Did it hold in the quarter?
Barry McCabe
That's an approximate relationship, and it did hold in the quarter.
Budd Bugatch – Raymond James & Associates
Secondly, can you quantify for us maybe the pricing? I think you put in a price increase of about, if I remember right, 3% or 4% in February. We've got you getting about $2 million of favorable pricing, maybe 3/4 or 1%, is that a reasonable guess for the quarter?
Barry McCabe
Yes. I don't have the specifics in front of me, but we've said normally we realize, due to any price increase, anywhere from 25% to 33% of any increase. If you did a 5%, you might expect a 2%.
Budd Bugatch – Raymond James & Associates
Finally, contribution margin in the gross margin area, would a 55% contribution margin for gross margin be reasonable?
Barry McCabe
That seems a little high, especially as you move forward and think about absorption of fixed costs.
Budd Bugatch – Raymond James & Associates
I understand that. Are you talking about with inflation?
Barry McCabe
I think when you look at inflation and the question is inflation seems to be backing off. So we expect tailwinds as we look at some of our key commodities and other things. It's hard to say in this environment when you are looking at where your volume is going to be, the benefits you might pick up from inflation, the mix within your factories, to come up and say what would be a typical margin contribution on sales.
Budd Bugatch – Raymond James & Associates
In this quarter, inflation was still a headwind, right? Yearoveryear?
Barry McCabe
Yes, it was.
Budd Bugatch – Raymond James & Associates
Would you care to quantify a little bit of that? Other than fuel. Fuel went the right way, I think.
Barry McCabe
Things started to move at the end of the quarter. Steel was moving directionally favorable. Inflation turned out to be not quite as high as we thought it would be going into the quarter. It probably helped us couple million dollars.
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