Question-and-Answer Session
Operator
(Operator Instructions) The first question comes from the line of Kevin Maczka – BB&T Capital Markets.
Kevin Maczka – BB&T Capital Markets
The first question, remarkable gross margin performance to put up a record like that with down nearly 30% revenue. My question is just to try and understand the sustainability there. I guess you are looking for 57% in Q4 but can you talk a little bit more in detail about some of the mix shifts, some of the aftermarket mix that really drove that upside this quarter? Maybe talk about how much different are the margins in some of these high profit products or these aftermarket products and why that might not be the same in Q4 and beyond.
Edward Campbell
Clearly when we look at the revenue that we had this year versus revenue last year it is down big double digit percentages. If you look at what is not in the income statement this year that was in the income statement last year it is disproportionately systems. That is true in each of the businesses by the dollar amounts we have fallen short. Clearly some consumables and spare parts are down somewhat but not nearly as much so we have a favorable mix.
Now, those systems that we didn’t sell if I can describe it that way, they carry gross margins that are substantially higher than the operating margin of the organization so the recovery of those systems and the associated expenses if you will to install and get those sales, all other things being equal, tend to be accretive to operating margins not to gross margins. We have been able I think to yes generate very strong gross margins because of that mix and we have been able to generate strong operating margins as we have taken out cost, again with a good gross margin as well.
I think if we look at the performance we would expect going forward without trying to get specific around time, I think we would see that okay the recovery will disproportionately bring to us systems revenue as compared to incremental parts and consumables revenue and it is reasonable to expect the gross margin to come down. I think as we begin to have a healthier economic environment we will look on a targeted basis to add resources to get that next round of sales or do the things to support the investment initiatives the customers may have and we may see some changes if you will in the spending pattern sequentially as we begin to put bonus programs back in and unfreeze wages, as we have done for the last year.
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