Question-and-Answer Session
Operator
(Operator Instructions). Our first question will come from Reik Read with Robert Baird. You may ask your questions.
Reik Read - Robert Baird
I just wanted to make sure I understood what you were saying about breakeven. I heard you say $735 million, and you can reduce that by another $150. So that suggests, by yearend, you could be at $585 million breakeven. Did I understand that correctly?
Bob Driessnack
Reik, this is Bob. We started with 2008 breakeven, which was $760 million, and then indicated that we've made progress to about $735 million in the first quarter and annualized the first quarter. So really the $150 million remains to the level that would come from the 2008 starting point.
Reik Read - Robert Baird
Okay. And then once you complete all of the actions that you're taking and you get to that level, could you give us an idea of what the incremental contribution margin at the gross margin level might be?
Bob Driessnack
Reik, I think with gross margin, longer term, we've always talked about a target of 43%. Certainly in near-term, the economic pressures and currency declines have created a lot of headwind for us. We're focused first and foremost on adjusting the cost structure to lower that breakeven point, as you indicate. Longer term, certainly we want to be profitable and drive the positive operating cash flow.
The balance of the year, we expect to see improving gross margins, driven by the realization of our manufacturing costs, diligent pricing process, proactive management of currency changes and the benefit of new products, which Pat talked a little bit about.
Longer term, as the cycle recovers, as we realize those benefits and with the manufacturing transition now substantially complete, we'll make quite a bit of progress. Our objective longer term remains to drive gross margins in the 43% range.
Reik Read - Robert Baird
And I guess that's what I was getting at, is in the 2010 timeframe, assuming that we're beyond kind of the current situation, with every incremental dollar of revenue, is it something like 40% to 50% goes to that gross margin line on an incremental basis?
Bob Driessnack
Well, I think we have to prove that we can achieve our target business model on a consistent basis, but certainly our objective remains unchanged.
Reik Read - Robert Baird
Okay. And then with the incremental restructuring that you've announced today or the headcount removal, how much of that is cost of sales and how much of that is in the operating expense area?
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