Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Adam Fisher – Burnham Asset Management.
Adam Fisher – Burnham Asset Management
Q 4 of 08 we started seeing some of the weakness in the end markets so Q4 of ’09 should be down less year over year than other quarters potentially.
Thomas Vacchiano
That is true that Q4 in 2008 marked the first big shift down, and as we’ve been narrowing the year over year gap through Q3, we would expect to continue to narrow the gap in Q4.
Adam Fisher – Burnham Asset Management
On the operating expense side, it sounds like there’s still maybe $1.5 million of operating expense that will show up, that will decrease starting this quarter.
Thomas Vacchiano
I don’t know how you get that figure. What I would tell you is this, we do believe that we will achieve our $28 million to $30 million year over year expense and cost savings. Remember, on the OpEx line, you see where it says $23 million of savings, that’s year to date. That’s only the OpEx savings. That doesn’t include the cost savings which Rajesh talked about earlier is influence 1.6 point improvement in gross margin year over year even though our sales volume was down.
So you need to look at both components. And we continue to expect additional savings in the fourth quarter.
Adam Fisher – Burnham Asset Management
So just to clarify, gross margins still have the potential to go up and operating expenses still have the potential to go down starting next quarter.
Thomas Vacchiano
My point is, we will continue to see year over year savings in both lines.
Adam Fisher – Burnham Asset Management
On the balance sheet, the $29 million of cash, how much more do you think you can extract from the cash to pay down debt before you get to a level that you think you need to maintain the cash balance at?
Thomas Vacchiano
This is actually not a simple number, but let me give you some feedback. First, we generally need about $12 million of cash in the pipe at any point in time, so roughly $12 million of working capital from cash standpoint.
We have $29 million. Of course one of the issues is where that cash is sitting and whether or not it’s sitting in the right place. We’ve instituted some new programs which is improving our cash management performance and optimizing where it sits and providing flexibility so we can move it where it needs to be, which will allow us an opportunity to take the $29 million down if we choose to.
- To read the full transcript on Seeking Alpha, click here »
