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Operator
Welcome and thank you for standing by.
At this time all participants will be in listen-only mode.
(Operator Instructions).
Today's conference is being recorded.
Now I would like to introduce your host for today's call, Mr.
Tim Tevens, President and CEO of Columbus McKinnon.
Sir, you may begin.
- President and CEO
Thank you, Evan.
Welcome to the Columbus McKinnon conference call to review the results for our fiscal 2009 fourth quarter and annual results as well.
Earlier this morning we issued a press release with corresponding financials.
With me today is Karen Howard, our Vice President of Finance and Chief Financial Officer.
We do want to remind you the press release and conference call may contain some forward-looking statements within the meaning of the Private Litigation Reform Act of 1995.
These statements contain known and unknown risks and other factors that could cause actual results to vary.
You should read the periodic reports that we file with SEC to be sure you understand these risks.
Our revenue is down over the same quarter last year by about $25.4 million or 15.8% and was positively affected in the quarter by the Pfaff acquisition, which you may recall we made in October of last year, and that positive result was $16.6 million.
The decrease in overall revenue is a direct result of lower industrial and commercial market activity around the world and to a lesser extent currency translation.
At this point in time, we have seen great de-stocking in our channel partners and believe we are feeling booking activity directly from the end user markets.
Revenues outside the United States hit 40% of our total revenue in the quarter and this continues the trend of increasing our revenue and international markets.
As many of you know, in the United States, we track the Federal Reserve Board's US Industrial Capacity Utilization figure, which this past March, hit 66%.
That was down 1,200 basis points since January 2008 and in fact the last quarter it's down about half of that.
This is the lowest level we have ever seen.
I do know that two points don't necessarily make a trend, but in April it did remain at 66%, and unfortunately this is the best news I have heard in awhile.
Europe is not much better as industrial production is, too, at its lowest level in decades.
A little commentary about our Channels of Distribution.
Industrial Distribution in large industrial distributors, you know them as catalog houses possibly, are down in the 30% to 45% area with us.
Many of our partners are reporting revenue decline in similar areas.
Grainger, the broad based MRO distributor, reported their sales in April to be down 15%, and another large publicly traded distributor reported revenues to be down almost 20% in their second quarter ended February.
The Crane Builder Channel fared a bit better with revenues down 12% to 24% and Material Handling Partners down 33%.
The Rigging Channel, which provides tools for heavy lifting to manufacturing and construction markets, is down in the 40% area as well.
Our Entertainment business with sales and markets to concert, live theaters, TV, etc.
is down a considerable amount from last year, 72%.
That offsets an 86% growth in the third quarter.
Our European revenues were also lower than last year down about 30% with 11% being currency and 19% being volume.
Our Asian business is also lower but not as much, and as you may know, that's a new business for us, actually selling into that market.
Several trade conventions held over the last several months have indicated very anemic market activity, as well.
As a matter of fact, a couple that I attended were somewhat depressing.
Putting aside for a minute the current market conditions, the integration of Pfaff and Columbus McKinnon is proceeding very well.
We've identified more synergies than originally planned and our companies are working well together in executing this integration plan.
This is a very strategic and value-oriented acquisition that we made and for the long term will prove to be a very good acquisition for our Company.
We have identified new operating strategy for our Hoist and Rigging Facilities in North America that allows for the closure of a couple facilities and the significant downsizing of a third.
These closures produce about $8 million to $10 million in annualized save that is will ramp up throughout fiscal '10 to a full potential in our first quarter of fiscal '11.
We expect the cost to implement these closures to be equal to the annual benefit in this $8 million to $10 million area, and most of this cost will be incurred in fiscal '10.
One attribute of Columbus McKinnon is our ability to generate cash.
Even with a severe downturn in revenues for the quarter, we generated almost $19 million in cash from continuing operations this quarter.
For the full year we generated $63 million.
We'll also continue to make strategic investments in new products and new markets to help position Columbus McKinnon to be more an integrated global company.
From an earnings perspective, there are a number of different items that occurred in the quarter which impacted our results.
On a pro forma basis for the quarter we achieved adds $0.17 earnings per share and $1.90 for the full fiscal year.
There were numerous items that directly affected these earnings including $107 million Goodwill Impairment Charge.
I'm going to ask Karen to review all of these items in detail in a moment.
Gross profit was down 32%, the bulk of which was directly related to lower volumes.
Bookings for the quarter were down significantly.
This is in the 30% or so area, excluding Pfaff.
We are obviously very concerned with this low level of incoming business and, of course, have taken dramatic steps to controlling our costs.
We reduced our operating headcount by well over 20% along with executive pay reductions, suspension of our 401(k) plan match, and cost control throughout the company, all happening in this past quarter.
These are obviously difficult, but necessary steps given the significant reduction in business activity.
We as a management team have managed through difficult economic times before and we'll do so again.
As I have said in the past, down-turns are a great opportunity to remove structural costs from the business and dramatically improve the overall performance of our company.
During the last recession, we were able to remove about a million square feet of manufacturing space.
By the way, this represent about $15 million of fixed costs.
This time we expect to remove another significant portion, about $.5 million of manufacturing space, and fixed costs in a corresponding way in the $8 million to $10 million reduction area.
The backlog of our business is down to $70 million.
Actually, it's up $12 million from a year ago, but most of that is Pfaff.
All of that is Pfaff, in fact.
Down from our last quarter, our third quarter about $9 million.
The backlog number represents about four to five weeks worth of shipments for our Company.
Additionally, we announced our Board of Directors had adopted a Shareholders Rights Plan, whose rights are exercisable if 20% or more of the Company's common shares are acquired or there's a tender for 20% or more of the shares.
Our Board, whose makeup is eight of the nine directors are independent, carefully considered the shareholders best interest when adopting this plan.
It is intended to ensure fair treatment for the shareholders from potentially coercive take-over practices that are inconsistent with the interests of our shareholders and the Company.
With that overview, I'd like to turn it over to Karen for some more details on the results.
- VP Finance and Chief Financial Officer
Thank you, Tim, and good morning, everyone.
I'm pleased to have the opportunity to review some of the financial highlights of Columbus McKinnon's fiscal 2009 fourth quarter and year that ended on March 31st, 2009.
However, before I get into that, I want to mention that we discovered an error in the earnings release that was issued this morning.
On page four, within the section referencing our balance sheet and liquidity, we describe a charge to other comprehensive income associated with the change in our pension liability.
That charge was actually recorded in the fourth quarter of fiscal 2009, not fiscal 2008, as incorrectly stated in the release.
We will be issuing a revised and corrected release later today, and that will be the only change.
Now I will get into my planned commentary.
As a reminder, this is the second quarter that includes our new German-based Pfaff business that we acquired on October 1st, 2008, so our annual results include Pfaff for the latter half of the year.
Further, all the numbers reported here reflect our former Univeyor business as a discontinued operation divested on July 25th, 2008, and accordingly the prior year reported numbers relate to ongoing operations, unless otherwise noted.
Consolidated sales decreased by 15.8% to $135.8 million in the fourth quarter of this year, compared with last year's fourth quarter.
The Pfaff business added $16.6 million but nearly all of our geographic markets were negatively impacted by the global recession, except for the Asia Pacific, Latin American, and eastern European region.
Excluding Pfaff, overall volume decreased 26.1% from last year with US and international volume declining by 32.3% and 20.5% respectively.
Further, given the volatility of the currency markets during this time frame, foreign currency translation negatively impacted revenue by 3.1% compared with the prior year's quarter.
However, pricing favorably impacted the revenue growth by 2.3%.
On a full-year basis, consolidated sales increased $12.9 million or 2.2% over last year, of which $43.4 million or 7.3% was attributable to the newly acquired Pfaff business.
The Company's quarterly sales pattern, assuming a period of consistent economic conditions, which we did not see during this past year, typically shows sales strongest in the fourth quarter and weakest in the third quarter.
The recent quarter had 65 shipping days, two more than year-ago-quarter, and the first quarter of the coming fiscal year will have 63 shipping days.
Included in the press release is a table showing the number of shipping days in each of the quarters of fiscal 2009 and fiscal 2008, as well as the upcoming year, fiscal 2010.
Overall, fourth quarter consolidated gross profit decreased $16.7 million or 32.4%, with gross margin contracting 630 basis points to 25.6%.
The contraction was primarily due to the sudden and significant reduction in demand for our products driven by the global recession, and the lagging impact of cost reduction activities which were initiated during the third and fourth quarter.
Rest assured that many activities have been undertaken and will follow to effectively manage costs during this economic downturn.
Much of this relates to normal ongoing cost management and will be complimented by the financial benefits of strategic facility consolidation.
Those projects are underway and the benefit will be ramped up as the year progresses and into fiscal 2011.
On a full-year basis, consolidated gross profit is down $11.9 million or 6.4%, with gross margin contracting 270 basis points to 28.6%.
Consolidated selling expense as a percent of sales was 12.8% in the fourth quarter, up modestly from 12.5% last year due to the addition of the Pfaff business offsetting a reduction in spending for the Historical business as compared with the first and second quarters of fiscal 2009.
On a full-year basis, consolidated selling expenses were 12.0% of fiscal 2009 sales compared with $11.8 for fiscal 2008.
During the first two quarters of fiscal 2009, we increased investments to further grow global market share.
In the latter two quarters, we continued those investments but reduced base costs given the economic climate.
Consolidated G&A expense was 7.2% of sales in the fiscal 2009 quarter compared with fiscal 2008's 5.5%.
The fiscal 2009 quarter was impacted by the addition of the Pfaff business of G&A as well as the rapid and significant revenue decline and lagging impact of cost reductions in light of the current economic climate.
Full year G&A expenses were 6.2% of fiscal 2009 sales, compared with 5.7% for fiscal 2008.
During fiscal 2009 total SG&A of 18.2% came within our expected range of 17.5% to 18.5% of sales.
We are taking further action to adjust our actual expenses to be in alignment with the lower sales level, while continuing to invest in accordance with our growth strategy.
During the fiscal 2009 quarter we further adjusted staffing and incurred approximately $800,000 of restructuring charges for which we anticipate beginning to recognize approximately an additional $12 million of annualized cost savings in our fiscal 2010 first quarter, adding to the actions begun in the third quarter of 2009.
Those were -- the restructuring charges add to $1 million of restructuring charges incurred in the fiscal 2009 third quarter, which will generate approximately $4 million of annualized savings.
As we currently stand our STE level is down approximately 20% compared with a year ago on a pro forma basis.
As we progress into fiscal 2010, we are consolidating North American Hoist and Rigging Operations in alignment with our strategy, which will further improve our cost structure while improving our customer service, efficiency, and productivity.
We expect to close two facilities and significantly down-size the third, amounting to approximately 500,000 square feet of manufacturing space and further reducing FTEs by an additional 10%.
These activities will cost approximately $8 to $10 million as we progress through fiscal 2010 and are expected to be complete by June of 2010.
Annual savings of $8 to $10 million will begin to be realized as we progress through fiscal 2010 and will ramp up through completion of the project.
Throughout and upon completion of this consolidation, we will have sufficient capacity to support anticipated volume upon market conditions returning to normalcy.
Driven by the stock market conditions during the fourth quarter fiscal 2009 and our stock price falling below our net book value per share, we recognized a non-cash non-tax deductible $107 million goodwill impairment charge in accordance with Financial Accounting Standards Board Statement 142.
This charge had no impact on our cash flow, liquidity, or debt covenant.
Driven by the gross margin contraction and restructuring charges described above, as well as a currently lower operating margin profile of the Pfaff business, operating income excluding the Goodwill Impairment and Restructuring charges decreased by $15.3 million or 68.2% with operating margin contracting 860 basis points to 5.3% for this year's quarter compared with last year's 13.9%.
On a full-year basis, operating margin contracted 340 basis points to 10.3%.
Our long-term goal is for each peak and each trough to outperform our results of the prior cycle.
In the prior cycle our operating margin troughed at 6.
8% on a full-year basis in fiscal 2003 with $394 million of revenue.
Interest and debt expense was up $100,000, or 4.3% over the prior year's quarter, but down $400,000 or 3.1% for the full year.
The increase in the quarter is due to the assumption of some previously existing Pfaff debt.
Below the operating income or loss line, we realized a $3.3 million gain from litigation this quarter, which we identify as an unusual item.
Within our earnings release, we have quantified the net income and per share affect of the unusual items affecting the fiscal 2009 and 2008 fourth quarter, as well as full year comparison.
Regarding income taxes, excluding the fiscal 2009 fourth quarter non-tax deductible Goodwill Impairment Charge, the effective tax rate for the fiscal 2009 and fiscal 2008 fourth quarters were 43.4% and 19.5%, respectively.
On a full-year basis, effective tax rates were 36.8% and 32.7% for fiscal '09 and fiscal '08 respectively.
Both years were impacted by year-end adjustments to valuation allowances in accordance with Financial Interpretation #48.
On a go-forward basis our expectations are for an effective tax rate in the 35% to 36% range.
Loss per diluted share for the fourth quarter of fiscal '09 was $5.43 versus $0.44 in the fourth quarter fiscal '08.
Upon isolating unusual items as previously described and as specified in the earnings release, including the Goodwill Impairment Charge, Restructuring Charges, the gain from litigation, Year-end Tax Adjustments and Discontinued Operations, non-GAAP earnings per share for the fourth quarter of fiscal '09 were $0.17 versus $0.67 in the fourth quarter fiscal 2008.
Similarly, on a full-year basis, actual loss per share was $4.16 in fiscal '09, compared with $1.95 earnings per share in fiscal 2008.
Upon isolating unusual items as delineated in the the earnings release, full-year diluted EPS was $1.90 compared with last year's $2.35.
We have included tables in the earnings release listing the significant items impacting comparison between the two years as I have previously described.
Depreciation was $2.5 million and $2.3 million for fiscal 2009 and 2008 fourth quarters respectively.
On a full-year basis, it was $9.6 million compared with $8.2 million last year.
Capital expenditures were $3.7 million and $5.1 million for the fiscal 2009 and 2008 fourth quarters respectively.
Full-year CapEx was $12.2 million and $12.5 million for fiscal 2009 and 2008, respectively.
The spending included investments in our new product development activities, our growing low-cost international facilities, productivity improvement equipment, as well as normal maintenance CapEx.
We expect capital expenditures for fiscal 2010 to be in the $10 million to $11 million range, down approximately 10% to 20% from fiscal 2009.
Net cash provided by operating activities from continuing operations was $18.6 million in this year's quarter, or $0.99 per diluted share compared with $22.5 million in last year's quarter, or $1.17 per diluted share.
On a full-year basis, net cash provided by operating activities from continuing operations in fiscal '09 was $63 million, or $3.34 per diluted share, and $60.8 million last year, or $3.17 per diluted share, representing a 5% increase.
This year, earnings contributed $43.7 million, and operating assets and liabilities provided $19.3 million.
Last year, earnings contributed $73.2 million, while operating assets and liabilities used $12.4 million.
We continue to focus attention on our working capital utilization, especially opportunities to improve inventory turns with sales at currently lower levels.
At quarter's end, debt net of cash was $98.7 million, and total gross debt was $137.9 million.
In addition to the $39.2 million of cash on our balance sheet at year end, availability on the $75 million revolver provided for under our senior credit agreement was $64.5 million, representing $10.5 million of outstanding letters of credit and nothing drawn against the revolver.
We were comfortably in full compliance with all financial covenants related to this agreement and expect to be throughout the remainder of the facility period, which doesn't expire until February of 2011.
Net debt to total capitalization was 35.2% at the end of the quarter, up from 26.8% at December, primarily due to the impact of the goodwill impairment charge against total capitalization.
However, this level remains reasonably in line with our 30% debt to total capitalization ratio goal.
The majority of our outstanding debt relates to our Senior Subordinated Notes, which don't expire until November 2013.
We're ultimately targeting an investment grade rating to give us flexibility to support our growth strategy which will include strategic bolt-on acquisitions, regardless of the point in the economic cycle.
With that I thank you and turn it back to Tim.
- President and CEO
Thanks, Karen.
Evan, we can open it up for questions.
Operator
Yes, sir.
(Operator Instructions).
Our first question today comes from Arnie Ursaner.
Please announce your affiliation.
Your line is open.
- Analyst
Hi, this is Arnie Ursaner from CJS Securities, good morning.
My first question relates to your change of control.
We've seen another company that because of IRS Code 382, to try to preserve their NOL, were forced to put in a change of control.
You mentioned that you were an approach, but with no specific reason, but was IRS code 382 part of your reason?
- President and CEO
No, it was not.
- Analyst
Okay.
My second question is, obviously, it's been six weeks since the quarter ended and, obviously, you were challenged on volume and a lot of other things.
Could you comment on the trends you've seen in the last six weeks?
- President and CEO
Sure, Arnie.
I think generally from the market things have not improved.
They continue to be depressed.
I would say that they're in the same area in terms of down for the last six weeks from a bookings standpoint.
So the things we're beginning to see now, of course, is the actions that we've taken to reduce costs are beginning to kick in now so that's a little bit on the helpful side.
- Analyst
Another quick question.
Last quarter you had spoken about your high cost of steel.
You used some very specialized alloys.
You had mentioned you were being impacted by these higher costs for the alloys.
Can you comment on where we are now in terms of the costs in the quarter, the cost of the steel you have in inventory relative to market or selling prices that you're selling the products at, at that time moment?
- President and CEO
The PPV has actually come down nicely in the quarter.
Karen is just looking up the actual number here.
Steel is down, let's say even below last year's levels for the most part.
Just to remind you, Arnie, we buy forging bar and rod and wire for our Chain business, which is really the bulk of our steel buys.
The rest of the flat rolled things, we buy for our frames for our hoist is much smaller, but for the most part, those two categories, the forging bar and wire and rod are down in the 25% area, now.
So, PPV would be much lower, today.
- VP Finance and Chief Financial Officer
It's down significantly Arnie.
Down more to a level about where we were a year ago.
- Analyst
Relative to the selling prices and your ability to hold margin, are you now fully recovering your inventory costs?
- President and CEO
We would be in that -- yes, that's about right, yes, because our turns would represent the inventory that's already been flushed through, so we would be fully recovered by now.
- Analyst
My final question is I know you don't give formal guidance, but you have given us a view that your operating margin could approach the high single-digits, which is what you did say in your prepared remarks, so I'd like to try to think about the components of that.
We've tried to back into your margin for the quarter and for the year, operating margin, and if we've done our math right, it looks like you're about 5.3 in the quarter and about 10.3 for the year.
I guess the question I'm trying to come to grips with, if, in fact, you were at the 5.3 level in Q4, how should we think about building to high single-digit operating margin?
I guess the question really is, give us -- you speak frequently about a 17.5% to 18.5% selling expense, so your view of gross margin and perhaps R&D, how do we back into that high single-digit operating margin?
- President and CEO
I think the gross margin is going to improve.
I haven't done this math, but I'm going to have to do it as I think my way through it.
Mid to high 20s area is kind of what we would expect as we go through this coming fiscal year.
I think SG&A will be somewhere in the -- it's a little higher expense to take out.
It would seem to me that might be in the high -- let me look here.
Somewhere in the I would think 18%, 19% area.
As you know, G&A has a lot more fixed components in it, and so does selling to a large degree.
There's some more variable, given the commission structure we have.
So I think just generally speaking you can work your way down to high single-digit just between those two major components.
- VP Finance and Chief Financial Officer
I think conceptually, Arnie, your 5.3% that we're seeing here in the fourth quarter was impacted by the fact that revenues dropped so much so quickly, and while we have taken a lot of actions to take costs out, the full impact of those hasn't been felt.
So it affects both cost of sales as well as SG&A, and that's really where we get the margin improvement at this lower level of sales.
- Analyst
Thank you very much.
- President and CEO
And that excludes, of course, restructuring, Arnie.
- Analyst
Yes.
Thank you.
Operator
Next in queue we have Dan Wang.
Please state your affiliation.
- Analyst
Yes, this is Dan Wang from B.
Riley & Company.
I just wanted to understand a little bit better, you talked about all the de-stocking in the channel that's taken place, but you also mentioned that you are booking orders from your end customers.
So from that standpoint, do you think that de-stocking is about finished?
Any sort of feel around that would be great.
- President and CEO
Sure, Dan.
Let me tell that you it is more of a feel.
It's not an exact science or something that we can measure.
We don't know all of the inventory.
We just know anecdotally some of the major players, as well as our sales force calling on our channel partners.
The the feel we have today and looking at the trend of the bookings of the orders indicates that we're seeing a lot smaller quantity, a higher number, same number of orders but less quantity per order, and given the anecdotal touch to the channel partners it feels like those orders actually represent end user demand that is just being pulled through the channel partner as opposed to any kind of stocking at this point in time.
- Analyst
Okay.
And I know you talked about the six weeks since the March quarter ended that things -- year-over-year trends seem to be kind of holding where they were.
How do the months during the quarter work out, January through March?
- President and CEO
Relative to what?
- Analyst
Just kind of year-over-year trends.
- President and CEO
Oh, I think they got consecutively worse as time went went on.
We started to feel the lower bookings level sometime in mid-December, and it's not uncommon around the holidays of December to see some kind of fall-off anyway, but we really started to see it back in December, then January was, for all intents and purposes, a cliff.
And it started then.
The capacity utilization number that we track actually started its downturn in the August-September time frame, so we kind of anticipated some panic turn-off because we normally lag by several months or so.
And then February continued down, and so did March.
I'd like to say that things are kind of bumping along on the bottom right now, but the reality is who knows.
We don't really have a feel for the future.
Our backlog is so small, but the orders feel like they're at a low level and kind of bouncing along the bottom.
- Analyst
Okay.
And just shifting over to pricing, you saw -- continue to benefit from pricing, and you talked about some of the recent price increases put in place, and just wanted to find out, was that across the board, around certain products or geography?
- President and CEO
Pricing varies by product.
We try to put an annual price increase on all products.
This past November we put a price increase on our Hoist products, for example, which is about half of our business, and then the European business put a price increase in, in January, and our Forgings and Steel was back last fall as well.
And I would say that those prices are hanging in there, reasonably.
So again, they were anywhere from 1% to 3% kind of increases.
- Analyst
Okay.
So going forward, you're kind of -- your outlook on pricing, considering the environment and so forth, do you think you will continue to hold a little bit of pricing, or is that your plan?
- President and CEO
That's exactly what we would expect is to hold most of that pricing.
- Analyst
Okay.
Great.
I'll let someone else have a chance in the questions.
Thank.
- President and CEO
Thank you, Dan.
Operator
Next in queue we have James Bank.
- Analyst
Sidoti & Company.
Thank you, good morning.
- President and CEO
Good morning, James.
- Analyst
Tim, I'm sorry, you kind of ran through a lot of that quickly.
Was there an end date to the capacity reduction, these two plants in North America?
- President and CEO
Yes, we would expect to have this complete sometime in the first quarter of fiscal '11.
So sometimes about a year from now.
- Analyst
okay.
- President and CEO
By the way, there are three plants that are affected and they have different schedules.
The one I gave you is the longest tenured one.
It will take that long for one of our larger plants.
- VP Finance and Chief Financial Officer
They'll be in process.
- Analyst
So, throughout this fiscal year but when we can really expect to see the full benefit would be roughly June quarter 2011?
- President and CEO
Correct.
- Analyst
In the press release, you mention that you believe a lot of market share can shift around in these periods of time, and you're working to get more toward your advantage, and I realize you have a number one share in a number of your product categories, so I was wondering if you could elaborate on that and which area you might be going after.
- President and CEO
I think the reality is the supplier that can provide the goods for the demand that occurs at that moment is probably going to be a winner, and it's our intent to put the right levels of inventory across the network so that we're the ones that are positioned well.
By the way this is a global statement, not just a North American statement.
We're the ones that are going to win when the demand is there today, which is fairly low, but equally more important is when the demand starts to rebound that we're the ones that are there to do the supplying to the channels.
- Analyst
So it wasn't a particular product segment in general, it was sort of just a macro picture?
- President and CEO
Correct.
- Analyst
November 1st, I believe you can begin to really go after that Senior Subordinated Note you have outstanding with prepayment penalties coming down.
Are you going to be more aggressive now, on this after that date?
- President and CEO
I would say it's a little premature to say that.
I mean, ideally, James that would be great position in to.
I would say at this point in time we're going to be cautious.
I want to really understand where this general economic trend is headed.
I want to make sure that we have a very strong cash position and liquidity is strong so that we can weather any kind of downturn.
But if things play out the way we would like to see them play out, not to say that they will, that by then it would be nice to see some level of recovery in the global markets.
We'd like to see some revenue start to move north, then we can maybe be -- possibly be a little bit more aggressive in rebuying those.
- VP Finance and Chief Financial Officer
The other thing to consider, too, James, as we said before, is timing of potential acquisitions.
As Tim just alluded before, we're sitting on our cash.
Because there's so much uncertainty out there, but if we start to get some clarity, there may be a time when we're comfortable using that cash for acquisitions as opposed to debt repayment.
- Analyst
Okay.
Fair enough.
And last question, Karen, in the balance sheet, again, I apologize if you already touched on this, the accumulated or the comprehensive loss, was that more from the pension plan's portfolio performance, or did you guys maybe lower the discount rate or is there something else going on?
- VP Finance and Chief Financial Officer
There's a combination of a variety of variables, James, but the majority is simply due to the reduction in the value of the assets.
- Analyst
Okay.
- VP Finance and Chief Financial Officer
In the market.
- Analyst
Okay, that's all I have, thank you.
- President and CEO
Thanks, James.
Operator
Our next question comes from Ted Kundtz.
Please state your affiliation.
- Analyst
Needham & Company.
Hi Tim and Karen.
Couple questions for you.
Tim, is Europe worse than the US at the moment?
- President and CEO
Not from our standpoint.
We're still able to see some -- not growth, but we're able to see some market share swings so it's offsetting some of the downturn.
I think just from a purely economic base, I would measure them about the same at this point in time.
- Analyst
Okay, but you think you're gaining some share?
- President and CEO
Yes, in certain product lines.
- Analyst
How are you doing that?
What's your indication of that?
- President and CEO
Just that our revenues in Europe are down not as much as the economy would indicate we should be down.
And also I would say that just looking at some of the competitors and some of the things, the actions that they have taken and reading some of their reports that we're not down as far.
- Analyst
Okay.
And how about, you mentioned Asia as a growth market for you.
I know it's pretty small still.
Maybe you could remind us what percent of revenues outside US and Europe is and how those markets are looking to you.
- President and CEO
Yes, 3% to 4% is the revenue area right now.
We have a number of sales personnel in the region that are aggressively pursuing opportunities.
There is more activity in Asia that we can see.
We are growing there, albeit at a lower rate today.
It's such a small number today.
And I would say that it's really more of an introduction, getting our brand name and our position established in the marketplace, so there's a lot of ground work and legwork that's going on right now.
- Analyst
Are you still pursuing a possible joint venture over there?
- President and CEO
I would say -- Or acquisition?
We would, as Karen mentioned, we would, and continue to search for acquisitions and or joint ventures that make sense for us in that region.
The key there is organically we're building the sales force right now, and if we can find a partner that has an existing sales force that we can put our product through would be a great benefit to us.
So we continue to search, but, of course, we'll be prudent on the step we take, the actual action we take, we need to be thoughtful about that.
- Analyst
Just going back to the capacity utilization numbers, they are the worst in 42 years, ever since the fed has been keeping records on this.
If they were to remain at this level -- they seem to be sort of flattening out, as you indicate and the data is indicating, would you expect your sales level to remain at this $135 million level as well?
- President and CEO
I think it would be somewhere in this area.
I don't know exactly how -- because we lag that -- that indicator is a leading indicator for us.
So I'm it not exactly sure what we would bottom out at, but at some point we would, indeed, bottom.
If it hit 66%, for example, and stayed there for six months, which, by the way, would be a trend that never occurred in the history of keeping records, for this metric, I would expect our revenue to bottom and stay at a relatively constant level as well.
- Analyst
Okay.
Can you give us any sense -- I know you may not want to answer this question, but like the next several quarters, do you think they could be lower than this one, revenue-wise?
- President and CEO
I think it's really hard to say.
I think that's a possibility, obviously.
I don't know -- I wish I had a better feel for the general economic activity in terms of the long term.
I think if, indeed, two points do make a trend and we do he see a bottoming in this utilization number that I mentioned, Ted, I would expect some level of recovery, and if we see any kind of up tick, even a point or two upwards, we'd see some rebound in our revenue a quarter or two thereafter.
So I'm planning for the worst and hoping for the best.
- Analyst
We're hoping for the best.
We think we'll see a recovery in the second part of this year.
- President and CEO
I think that would be great, but I'm not sure we would.
- Analyst
Right.
It may take a little longer.
May take a little longer.
Thanks very much.
Operator
At this time we have no other questions in queue.
- President and CEO
Well, wonderful.
Thanks very much for everyone's time this morning.
Just in summary, I'd like to say that we remain well-capitalized with $39 million of cash and $75 million of an untapped revolver, of course, matures in 2011.
Our remaining debt, subordinated notes, mature in 2013, so we don't have any kind of pressures along those lines.
We did generate about $19 million in operating cash in the quarter and are well positioned to weather this economic storm that we find ourselves in.
You should know we will continue to make prudent investments, attack waste in all forms, to position our Company to be much stronger as we emerge from the current economic malaise.
I'd like to thank all of our associates around the world for their dedication and excellence in making our Company a stronger well-positioned organization.
As always, we appreciated your time today.
Thank you.
Operator
This concludes today's conference.