Question-and-Answer Session
Operator
(Operator Instructions) We have our first question comes from Arnie Ursaner from CJS Securities.
Arnold Ursaner - CJS Securities
You mentioned the new Leblanc clarinet. I thought one of your key strategies was to try to manufacture offshore. I assume Leblanc is still manufacturing here, so can you tell us more about the clarinet, price points, and again, most of the manufacturing you had previously done in the states with band instruments you achieved margins much, much lower than what you were getting on imported products.
Dana Messina
The clarinet market is a pretty large worldwide market. We designed a clarinet from the ground up. It’s made from composites. It’s got some unbelievably attractive features. It’s 20% lighter. They keys are black, plays great. We manufacture it most of it in the U.S. We have the keys for the instrument made for us in Taiwan and we do the final assembly and testing in the U.S. It’s a product with margins that we expect to be in the 40%-plus range and so we’ve proven that we can build products in the U.S. using offshore components that will be competitive for us around the world.
This particular product that has a retail price of about $800. We will be competitive with any clarinet maker in the world. It’s a better clarinet for less money than any other clarinet in the world and that’s what we’re driving towards with it.
Arnold Ursaner - CJS Securities
And the product that it would hopefully gain some share, what sort of price point is that one selling for?
Dana Messina
Probably a little over $1,000.
Arnold Ursaner - CJS Securities
Dennis, what sort of tax rate, guidance review can you give us for the upcoming year?
Dennis Hanson
38 to 40%, Arnie.
Arnold Ursaner - CJS Securities
Two things within your balance sheet or financials. Obviously you had a fairly sizable jump in inventories year-over-year and I’m sure that was despite some efforts to reduce them and the other thing is your debt went up a little bit and I though you were trying whenever possible to buy debt in the open market with your excess cash.
Dennis Hanson
You know the fourth quarter, we had a lot of pianos in production, even though we reduced volumes, but we were not prepared for the level of sales decline and it will take us some time to catch up on reducing our inventories, but we will get there.
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