Question-and-Answer Session
Operator
Our first question is coming from William Chappell - SunTrust Robinson Humphrey.
William Chappell - SunTrust Robinson Humphrey
Good morning. First, on a clarification. When you’re talking about the restructuring savings, it’s $10 to $12 million in fiscal 2009, and then an incremental $1 to $3 million in 2010 – is that correct?
Stephen Smith
Yes, that is correct.
William Chappell - SunTrust Robinson Humphrey
And then, second, would you expect most of the savings to fall to the bottom line? Or are you planning on reinvesting that into SG&A or other parts of the business?
Scott Beattie
It will be a combination of both. We’ve got our guidelines in terms of EBITDA margin and return on invested capital, and obviously, we want to drive that, as well as drive the brand portfolio.
One of the key initiatives we’ve talked about in other conference calls is the allocation of capital to our fastest growing regions and fastest growing brands across our portfolio. So that capital will be redeployed in order to maximize that, as well as improve our return on invested capital.
William Chappell - SunTrust Robinson Humphrey
And then, any idea of how the savings will break out between gross margin and SG&A?
Scott Beattie
I don’t think we have got it; we haven’t pro forma’d those kind of things. I can give you an idea of where some of the elements of the savings are. We’ve got a combination of reduced inventory levels which will result in, obviously, improved working capital and reduced carrying costs on inventory.
You’ve got improvement in gross margin through better fulfillment and lower costs in terms of order processing and distribution. In terms of the SG&A line, you’ve got streamlining of personnel and overhead costs associated with the business processes.
So it will affect multiple lines. And we’ve also, in terms of our operating savings, outlined the direct savings. We’ll also have reductions in inventory that will generate one-time cash flow improvements over the next several years, so we will see that flow into our business.
William Chappell - SunTrust Robinson Humphrey
Just, finally, on overall business trends: I know you’re not giving guidance for fiscal 2009 at this point, but are you assuming that you can grow the top line ex-currency? And, if not, or if so, are you looking to scale back the number of launches or advertising promotion – just with the weak consumer – just trying to adjust accordingly?
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