Question-and-Answer Session
Operator
(Operator Instructions). We will go first to the line of Mark Jordan with Noble Financial.
Mark Jordan - Noble Financial
Jay nice to hear off, a little bit of an improved tone in your comments. First question relative to gross margin sequentially declined about 270 basis points is that just severance and overhead or what was any change in the underlying margin opportunity on product?
Keith Bair
Mark, it’s Keith. Primarily overhead there is some severance in their in the cost of sales number for this quarter, but primarily some of that unobserved overhead that comes from lower unit volume, that was expense during the quarter.
Mark Jordan - Noble Financial
Okay. So, at higher volume you would see no reason, why you shouldn’t move back to the 65% plus tight gross margin on product?
Jay Freeland
What our comments specifically to our gross margin on product, but I think yes, in fact even without higher sales volumes I look at this and say the item that hit us in the third quarter are not necessary repeatable in the coming quarters regardless of sales volume.
Mark Jordan - Noble Financial
Okay, but there is nothing that happen in the marketplace with regard to pricing that would fundamentally change a longer term gross margin module that you would aspire to?
Jay Freeland
Yes, certainly not fundamentally obviously look there is plenty of pricing pressure in the marketplace, as there always has been, as you know our one competitor is predominantly price focused. So, we’ve certainly seen a little bit more of that, but not to the point where we look at it and felt concern either near-term and certainly long-term relative to that competitive price pressure.
Mark Jordan - Noble Financial
One or two just confirm, when you’re taking about account managers, I believe you said there were 43 in the US and my number said that you had 57 in the second quarter. It seem that, they have a little bit of drop in the other two geographies, but was that a significant drop in terms of your restructuring of the accounts reps domestically here?
Jay Freeland
Yes, certainly sales was a part of the reduction in force particularly in the one that we did in August here. We are not getting the same productivity as we had in the past. It was time to make some moves there and again as we start experimenting with some of these other potential sales channels we may have a little bit less reliance on that direct model, and I’m not saying that going to go away obviously any time soon, but reducing opportunities for strengthening the bench so to speak by playing down to a number of account managers that was more appropriate and quite frankly still should get leverage out at their current productivity levels, we should get leverage out of that as we go forward here for pretty good period of time.
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