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To: rudedog who wrote (60326)	5/2/1999 9:49:00 PM
From: Andreas	Read Replies (2) \| Respond to of 97611

To thread and loki, .16/shr. lost profit is not in additional SGA. Comparing Q199 SGA to Q1 98 SGA and then stating Q199 SGA is 3.7% above historical norms is not a proper analysis. You may as well compare Q1 99 SGA to any chosen period in which SGA was below the norm and then conclude that SGA accounted for even more than .16/shr (maybe .22 or .23). You can compare Q1 99 SGA to any period you want and come up with a different answer every time. The proper analysis demands that we compare Q1 99 SGA to whatever period or % was utilized by the analyst community in deterimining the .31/shr. expected eps. The analyst community did not use historical average SGA as a % of sales in determining the anticipated eps for Q1 99. How do I know? I asked. So what was that percentage? I've been told that the analyst community typically used the same percentage for Q1 99 as was found in Q4 98! On this basis, none of the Q1 99 shortfall of .16/shr. was attributable to SGA. so where did it go you ask? Reduced profit margin. Cost of Goods Sold as a percent of sales went up!! It is important to remember when trying to determine where did the shortfall go to compare apples to apples. The key is what did the analyst community use in their assumptions for each component of the income statement? We must compare to their assumptions and not ours. We cannot assume that historical SGA as a percent of sales was used in determining the .31/shr. eps number. Nor can we assume that q4 98 SGA as a percent of sales was used. We have to specifically find out what assumptions were used in determining the expected .31/shr and only then can we determine where the shortfall lies. In conclusion, Q1 99 SGA was less than Q4 98 SGA as a percent of sales. Therefore, since Q4 98 was utilized by analyst community as the base the .16 cannot be attributed to SGA. The .16 is primarily in Cost of Goods Sold. Any argument on this point is appreciated and I will respond as best as i can. In conclusion - it appears imho that Rosen has got to get his arms around the profit margin issue (which is really a problem of lower prices brought about by a failure to effectively compete in the marketing arena).