Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from Jeff Blaeser - Morgan Joseph & Co., Inc.
Jeff Blaeser - Morgan Joseph & Co., Inc.
Can you give us an idea of the timing of the cost reductions second half of this year and next year in terms of like $6 million per quarter, percent of sales? And then are there going to be any other impacts to the business? Does this allow you to increase R&D, advertising or is it as simple as taking $25 million out of our expectations next year?
Richard J. Cote
I think from a standpoint of its $25 million on full year impact. Obviously the payroll related expenses which are about half of the cost certainly would be pro rata each and every quarter. The other expenses would not quite be pro rate each and every quarter because some of those expenses are booked as a percentage of sales and things of that nature. But I think if you use it as a general guideline that pretty much pro rate per quarter that’s probably a safe bet. Number one.
Number two is for this year the $6 million will basically be incurred and we will disclose at each of the quarters. Again I think payroll, most of it this year will be certainly some in the third quarter but more in the fourth quarter so a bit more of a 60/40 type of split that may be the case. But again we will disclose that during the rest of the quarter.
Clearly from a company, it does give us the opportunity to invest as we have in the past including we would expect that this would drop from a standpoint of reducing our expenses, there are other expenses that we will incur. We talked about those in my comments but this certainly does give us the opportunity of further investing as we need to and obviously taking sales growth to invest. I think the best measurement is one I’ve outlined that next year we would expect to have our operating profit basically in the arena of 15% range and that’s probably the best guidance of how to look for next year.
Jeff Blaeser - Morgan Joseph & Co., Inc.
For the cost reduction plan, is this part of the longer term plan from the beginning? Because I remember I think the old plan was to get to 15% on a longer basis. Now would this expand your long term EBIT margin goals as an additive to that?
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