Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Amit Daryanani – RBC Capital Markets
Amit Daryanani – RBC Capital Markets
On the 17% headcount reduction in Q4, how much of that reduction was actually just from hourly employees versus full time and could you talk about what sort of charges may have flown through the model to reflect this headcount reduction.
Diana Reardon
We don’t necessarily want to get into the details of exactly all of the types of reductions that were made, what I would tell you is that we made reductions on an operation by operation basis that were commensurate with the demand levels that we saw and will tell you that those reductions would have been both in direct labor and in indirect functions as we felt was appropriate for the particular business.
I think that these actions were taken in response to lower demand levels, our operating management has been I think very responsive in terms of trying to adjust the structure to the demand levels that they see. Whenever you have to make these types of adjustments particularly with the quickness and steepness of the demand reductions we saw on a month-by-month basis in the quarter there are of course certain costs that result.
There are inefficiencies as you can imagine. In the factories there are also in some cases severance charges that have to be paid. We believe these costs are an astragal part of the operating costs of the business. We work hard to minimize these costs and we therefore really don’t consider them to be one-time in nature either for internal or for external reporting and so to quantify those now we don’t think really would be an appropriate thing to do.
We certainly did have some costs in the fourth quarter and we’ll most likely have some costs also in the first quarter and that is considered in the guidance that we gave. We feel that the margin achievement in the quarter which was about a 27% negative conversion from Q3 given the level of demand change from the two quarters it was really significant accomplishment and certainly feel that we’ve made all the adjustments from an operating standpoint that make sense.
Amit Daryanani – RBC Capital Markets
Let’s just say revenues remain around the $650 to $670 million run rate for the next few quarters where do you anticipate margins starting to stabilize for you and given all the headcount reductions you have done, what sort of revenue run rate would you need to get back to 20% margins, you were at 19.8, 19.9 on $850 million run rate two, three quarters ago.
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