Question-and-Answer Session
Operator
(Operator instructions) Your first question comes from Larry Solow – CJS Securities.
Larry Solow – CJS Securities
Can you confirm Mark, you said 42-44% of your gross margin, but in your 10-K I believe you say 41-43%, I mean it’s a small difference but what am I missing there?
Mark Thomson
I think we do have a different range. We have historically been over the last year in the 42% range. You know we’ll have plus or minus 1% on the low end and on the high end. So we could say 41-44%.
Larry Solow – CJS Securities
That range, part of the range have to do with how the RMB appreciates, do you have any kind of expectations of the RMB appreciating in there already?
Mark Thomson
Yes we do.
Larry Solow – CJS Securities
So assuming that the RMB doesn’t go gangbusters, your low end would be 41%?
Mark Thomson
That’s correct. We’ve assessed foreign currency in depth as we’re painfully aware, the RMB appreciated 9% in 2008. And based on banks and institutional estimates, our best estimate is somewhere in the 7% for 09.
Larry Solow – CJS Securities
Could you just discuss pricing trends, of course Sensata is coming down but ex Sensata, how are prices going in the industry and are you able to pass on some of these higher costs, rising material costs and what not?
Frank Guidone
We did go through a fairly sensitive evaluation this year on pricing and price increases. And it’s kind of a mixed bag. We have, particularly if you look at A customers, customers that represent 80% of the sales, in many cases we have kind of negotiated pricing and have limited ability to push through price increases.
But we do have some flexibility there and I would say that our pricing power is greater with the B and C customers. If you blend that all together, we have been able to push through some price increases this year and offset some of the commodity inflation pressure.
You know kind of net where we’ve ended up, it’s hard to say because included in our budget every year is an assumption around improvement on material spend over standard as a result of our global sourcing initiative.
So I would say right now, we feel kind of cautiously optimistic that the combination of pricing that we’ve been able to push through on a blended basis as well as the global sourcing initiatives will be able to offset kind of the wage and commodity inflationary pressures we’re seeing.
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