Question-and-Answer Session
Operator
Thank you. (Operator instructions). Our first question is from Glenn Hanus [ph]. Your line is open.
Glenn Hanus
Good morning, guys.
Paul Zeller
Good morning.
Frank Russomanno
Good morning, Glenn.
Glenn Hanus
Okay, so I appreciate you're not giving guidance. Maybe we can at least talk about some of the operating costs and how to think about them. So for SG&A and R&D, you had sort of a 10 million item in December for SG&A. So would we sort to take 10 million out of the SG&A and think that sort of a run rate and then you're reducing from there? Can you give us help on the operating side?
Paul Zeller
Sure, Glenn. The thing to remember is that some portion of that you could say is contained to the quarter but certainly a significant portion continues to some degree as we continue to deal with the litigation costs ongoing. You know we like to believe that bad debt expense is behind us but we continue to monitor all our accounts carefully and I think that that's something clearly a subject to economic realities in our channels. And so I think to some degree, yeah, there was an uptick in cost and that 75 point, whatever it was, $75 some million is higher than we should have seen in the fourth quarter but I don't think you can subtract $10 million from that and start saying that's a run rate. We do have the benefits from our cost structure changes coming into play in 2009. Quarter by quarter by quarter we will be taking costs out as we implement those actions.
Glenn Hanus
The $40 million, is that all on the operating area? Or is some of that hit the gross margins, the cost of goods as well?
Paul Zeller
The vast majority of it is in SG&A. There is a small amount in R&D and a small amount in cost to goods sold. For the most part that's SG&A. And that is a run rate benefit that we should see for the most part as we exit '09. But we will be getting pieces of it across the year.
Glenn Hanus
Okay. So from a gross margin perspective, you're kind of weak this quarter. You know, so directionally over the next few quarters how should we think about gross margins?
Paul Zeller
You know one of the issues with trying to get very specific about gross margin and SG&A of course is the economic realities will impact that. That's one of the reasons we are not providing an outlook right now. I think there is a lot of uncertainty around that. But in addition to that, as you've seen in our results given quarter it can bounce around depending on how much growth there is and where we get that growth and the mix impact can impact that. We're not pleased with 13.6% gross margin and you can assume we think we need to be north of that to be an effective operating company in the industries we're in. And there were some impacts for sure in our CE business that were specific and unique to inventory issues and things we've had to take care of in fourth quarter. But having said that, exactly and precisely what that's going to be quarter by quarter, we can't get into those kinds of details at least not with the uncertainty we're seeing at this stage.
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