Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Budd Bugatch - Raymond James.
Budd Bugatch - Raymond James
Nobody likes congratulations when you have the kind of sales performance which you are all facing and the market conditions you’re facing, but the 9.3% operating margin is quite notable and needs to be lauded. Barry, you said in the fourth quarter, you think gross margin will be 300 basis points less. Is that less than the third quarter or less than the fourth quarter of 36% a year ago?
Barry McCabe
I’m saying sequentially.
Budd Bugatch - Raymond James
Sequentially?
Barry McCabe
Could be, depending on the CAD and some of the other factors, so I would just caught otherwise just?
Budd Bugatch - Raymond James
The Canadian dollar is the biggest issue there you think?
Barry McCabe
Excuse me?
Budd Bugatch - Raymond James
Say again?
Barry McCabe
No, I was asking you to?
Budd Bugatch - Raymond James
The Canadian dollar will be the biggest issue?
Barry McCabe
I think both the Canadian dollar as well as pricing pressures.
Budd Bugatch - Raymond James
Can you kind of quantify for us what pricing pressures you’re seeing and how is that being reflected in??
Barry McCabe
I think the whole industry, based on the volume levels that everybody is experiencing on any large project and again we’re more project based. You see very, very competitive pricing and we expect that will continue.
Budd Bugatch - Raymond James
What kind of impact might that have had on margins in the third quarter?
Barry McCabe
I don’t want to give that.
Budd Bugatch - Raymond James
Could you give us some flavor of what the international business was down versus the U.S. or versus North America?
Barry McCabe
Well, the international business was worse. I would say, only slightly worse in terms of sure volume percentages, orders being down and then, it even makes it worse is the currency.
Budd Bugatch - Raymond James
Obviously, with Generation starting to get out there, you are probably gaining some share I think in seating. How would you look at that versus systems, which has been such an important part of Knoll for an extended period of time?
Andrew Cogan
Budd, this is Andrew. I mean, systems continues to be the core strength of the company and I’m very pleased again with our overall systems performance, although it did decline more than some of the complementary categories, but our Neocon introductions in the systems’ space have been very well received, and I think we’ve got an exciting pipeline of activity in that area as we head into 2010.
- To read the full transcript on Seeking Alpha, click here »
