Commercial Vehicle Group Inc (CVGI) 2009 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter Commercial Vehicle Group Incorporated earnings conference call.

My name is Litreve and I will be your coordinator for today's conference.

At this time, all participants will be in a listen-only mode.

(Operator Instructions).

At this time I would like to turn the call over to your host for today's conference, Mr.

Chad Utrup.

Please proceed, sir.

Thanks, Litreve.

Thanks, everybody, for joining the conference call.

As usual, before we begin the call today, I'll first read through the Safe Harbor language and then I'll pass the call over to Merv for a brief Company update.

And then I'll take you through the operating results for the first quarter.

And then we'll answer some questions for you.

With that, I'd like to remind you that the conference call contains forward-looking statements; actual results may differ from anticipated results because of certain risks and uncertainties.

These may include but are not limited to the economic conditions in the markets in which CVG operates, fluctuations in the production volumes of vehicles for which CVG is a supplier, risks associated with conducting business in foreign countries and currencies, and other risks detailed in our SEC filings.

And with that, I'll turn it over to Merv.

Thank you, Chad, and thanks to everyone who has joined our call today.

With all the news that's come out this morning with Chrysler in the automotive world, we appreciate you taking your time to join us and we would like to remind you that we do not have any light vehicle production tied to Chrysler, GM, or Ford.

With that, we'll start on ours.

As indicated in the earnings release we issued last night, during the first quarter, CVG continued to experience the effects of a recessionary economy and depressed business levels in the commercial vehicle and construction equipment industry.

In response, we've continued to aggressively adjust our manufacturing footprint and consolidate operations wherever possible to reduce costs in the short term while improving our long-term competitive position.

In February, we announced a 15% salaried workforce reduction; the closure of several of our warehouse, manufacturing, and assembly facilities; and our executive officers offered a voluntary wage concession equal to 10% of their base salary.

Later in the quarter, we also released -- sorry, we also implemented a furlough and temporary pay reduction of 10% for our salaried employees at North America and, where possible, in the rest of the world.

During the quarter, we also temporarily suspended the Company's match on employees' 401-k contributions.

At the beginning of the year, we instituted a hiring freeze and eliminated base salary increases for all employees in 2009.

We continued to adjust the working hours and pay structure of our hourly and salaried employees at our operating facilities on a weekly basis, in line with our customer order schedules wherever possible.

In March, we announced a plan to close our Vancouver, Washington manufacturing facility.

The facility had approximately 62,000 square feet of leased space, employed about 70 people and has been part of our organization for a long time.

These were necessary steps in response to the current market conditions and we deeply regret the impact, which all these actions have had and will have on our employees and our families.

On a more positive side, we also announced two new business contracts during the quarter.

We believe this speaks highly of our workforce and the strength of our Company.

This new business, which was captured from distressed suppliers, should lead to expanded market share for CVG when the economy improves and more volumes return.

The first contract expanded our existing agreements to provide multiple CVG interior products for Daimler Trucks North America or DTNA.

Under this agreement, our Dublin, Virginia and Statesville, North Carolina facilities will supply headliners for use in Daimler's Freightliner Cascadia model and miscellaneous interior trim moldings for the Freightliner FLD model.

We have already started supplying these parts and expect production to be fully ramped up by the end of May.

The second new business contract calls for CVG to provide Volvo Trucks North America or VTNA with additional interior products.

Under this contract, we will ship interior products such as headliners, back walls, sidewalls, bunks, tables, ladders, and door panels for use on Volvo trucks.

This new agreement also calls for us to supply additional parts for Mack-branded trucks.

In addition, we will send CVG products to supply aftermarket and replacement inventory at Volvo and Mack service outlets nationwide.

We will also produce these products at Dublin, Virginia and Statesville, North Carolina facilities.

We are pleased and encouraged that Daimler, a long-term partner with CVG, and Volvo, which is also an established and valued CVG partner, chose our Company to supply them with additional CVG products.

The fact that we achieved this new business demonstrates their comfort with the strength and reliability of our Company, as well as the value of our products we produce.

It will certainly help strengthen our competitive position in both the near and long term.

As we managed through the first quarter, we continued to address volume declines by further reducing our workforce to meet declining market demands.

We also increased our efforts to control inventory, which can be tough when volumes don't permit its rapid use.

Our success is evident through the reduction of our inventory balance of nearly $20 million during the first quarter.

Analysts and customers continued to expect low production volumes in 2009 for Class 8 trucks in North America.

They also continued to predict weak construction markets in Europe and Asia.

While we're not providing 2009 guidance due to the [belittled] volatility of our global markets, we believe that North America Class 8 production levels will range around 135,000 units.

In addition, our global customers in construction continue to refine production volume projections on a daily basis.

And in some cases, still see 40% to 50% reduction in production levels for the year from 2008.

These are primary reasons why we are proactive, taken strong actions to align our cost with current market realities as quickly as possible.

At this point, I'd like to turn the call over to Chad for a brief financial overview and then we will take questions.

Thanks, Merv.

As Merv mentioned, our revenues for this past quarter were down, down to $108.5 million, which is a reduction of $88.5 million or 45% from the first quarter of last year.

The drop is not only the result of an estimated 43% decrease in North American Class 8 build rate from the prior year but also reflects our global OEM construction business revenues which were down just over 60% from the prior-year period.

In addition to the reductions in demand in these keys markets, our OEM, bus, aftermarket, service, and other specialty product market revenues were collectively down over 30% from the prior quarter of last year, while our military business remained relatively strong, yet still down from the same period last year.

Even when compared to the fourth quarter of 2008, our revenues were down 34%.

Topline reductions of this magnitude are, of course, difficult to overcome in a short period of time, which is why we've been proactive on cost reductions and cash management throughout the quarter, which Merv mentioned earlier.

These cost reduction initiatives are evident in our SG&A expenditures for the quarter, which were reduced by approximately $1.7 million or 11% from this time last year.

And on a comparative basis, excluding the one-time gain of our sale on our Seattle facility in last year's first quarter, and the $1.7 million restructuring costs from this past quarter, our operating income decreased by approximately $22.1 million from the prior year on a sales reduction of $88.5 million.

This represents a 25% decrease in operating income as a percentage of the decline in sales, which highlights the benefits of our highly variable cost structure and the impacts of our fixed cost reductions, despite such a drastic and rapid drop in revenues.

While our earnings levels were depressed during the quarter due to poor market conditions, the quick reaction of our cost management initiatives implemented throughout the first quarter as well as the continued benefit of these variable cost structures should prove even more beneficial beyond the month of March.

Depreciation was approximately $4.3 million for the quarter and amortization was reduced to $97,000 as a result of the impairment of certain of our amortizing intangible assets during the fourth quarter of last year.

Capital spending also continues to remain a focus and was only $1.7 million for the quarter or 1.6% of revenues.

We did record a gain of approximately $4.9 million in other income related to the mark-to-market of our foreign exchange contracts, which as you may recall was a substantial expense for us in 2008, as rates continued to move unfavorably to our contracts throughout the prior year.

The loss on early extinguishment of debt of approximately $795,000 was related to the write-off of certain deferred financing fees from our prior senior credit agreement, which was replaced by our new asset-based loan agreement in January.

And finally, our effective tax rate for the quarter was negative 8.1%.

This was driven primarily by valuation allowances required under FAS 109 due to the three-year cumulative loss created by the goodwill and intangible asset impairment from last year.

Taking these valuation allowances out of the equation would have resulted in an effective tax rate for the quarter of approximately 32%.

Net debt, defined as total debt less cash and cash equivalents here, was approximately $160.2 million at the end of the first quarter, consisting of our $150 million 8% senior notes, a $15.5 million outstanding revolver balance, and approximately $5.4 million of cash on hand at the end of the quarter.

I'd also like to point out a change in the classification of our revolving debt during the quarter.

While the borrowings under our ABL agreement are not due to be repaid until January of 2012, going forward, our outstanding revolver balance, if any, will be re-classed as current debt in accordance with EITF 95-22, as it was in the first quarter.

As you can see from the fact that our revolving debt balance and overall net debt position was relatively unchanged since the end of 2008 despite making a $6 million bond interest payment and ABL-related fees payments during the quarter, we've made substantial headway in our working capital and cash generation efforts.

We've reduced our net inventory balance by nearly $20 million over the past three months, during a period when production levels were very depressed and we've been successful in minimizing our capital expenditures and upfront restructuring costs.

With only $15.5 million of funds borrowed under our revolving credit facility and less than $1.5 million in letters of credit, our ending March 2009 collateral position would have permitted us to borrow up to approximately $34 million, which provides us with additional borrowing capacity of up to $18.5 million.

We feel this is sufficient for our current borrowing needs and we are very pleased with our cash and liquidity position.

As mentioned in the press release, we're not providing guidance at this time due to the volatility of the end markets.

That said, we currently believe that the Class 8 production levels for North America, as Merv said, to be in the range of 135,000 units.

And based on this assumption as well as, of course, other cost-saving assumptions and market assumptions, we believe we will be in compliance with our financial covenant requirements for the full-year 2009.

As both Merv and I had mentioned, we have implemented significant cost-cutting and cash-generating initiatives during the first three months of this year and we continue to focus on the development of new initiatives on an ongoing basis.

This first quarter was indeed a difficult time with drastic revenue decreases and substantial employee-related cutbacks, but we remain focused on the test at hand and optimistic about our improved cost base and overall footprint when we do see volumes and the economy return.

And with that, I'll open up the call for questions.

Thank you.

(Operator Instructions).

And our first question comes from the line of Chip Miller.

Please proceed, sir.

Hi, guys, how are you doing today?

Good, Chip.

Okay.

First off, if I could dig into the restructuring a little bit, you announced $2.5 million of restructuring in the fourth quarter, how much of a benefit did you see from that in the first quarter?

Well, the restructuring cost of $1.7 million, that -- a substantial portion is related to the severance costs from the reductions that we announced and some of the closures with a small piece of it being related to facility closure costs.

On average, Chip, we probably saw -- if you annualized our $10 million benefit, we probably saw -- and take a quarter of that, for a quarter basis.

We probably got implemented maybe half of the quarter, if that makes sense.

Okay, it does.

And then -- so, if I'm thinking about a decremental margin and obviously with revenues being down so much, a 25% decremental margin is extremely good here.

But, if I look at your guidance, you are kind of assuming to not violate your covenants that you'd get back to kind of a mid '07 EBITDA performance level.

Is that the way that I should be thinking about it and to kind of get there if volumes stay where they are now, decrementals would have to get even better from here?

Am I thinking about that properly?

No, you are.

And to the point of the restructuring and the cost savings achievements in the first quarter, obviously they weren't there for the full quarter, as they will be for the balance of the year, past the month of March, and in addition, there is obviously some new business wins that we announced, some other things that were not announced that we've always been working on and other markets outside of Class 8 that we're looking at as well.

So, those types of things and carry-overs into the first quarter from some of the cuts that we made.

So really a lot of, I'll call it costs, that were there in the first quarter that we don't expect to see beyond the first quarter.

Okay.

And on the pricing front, you guys are obviously winning some business from some competitors.

So does that imply that actually pricing is doing fairly well right now, even though it is a very weak environment?

I think anytime that you're taking over business, especially after the commodity prices have increased and the Company is distressed, you have the opportunity to work with the customer to enhance your margins to be able to cover the new costs that have come up, where the predecessor may not have had the same opportunity.

And if there is less of us, obviously there is a better chance to enhance the margins.

Okay.

Okay, thanks.

I'll get back in line.

And our next question comes from the line of Alan Weber.

Please proceed, sir.

Good morning.

Good morning, Alan.

Hi.

A few questions, one is, can you talk about or chat about the current cash position and debt and availability as of, say -- I don't know, last week, today?

Well, I think -- I think the purpose of today's call, Alan, is talk to the first quarter.

I really don't want to get too much into -- too much into beyond the March 31 time frame.

But, what I can talk about is, where we were at the end of the quarter which was the -- I mentioned in the call earlier we had a headroom, say, of about $18.5 million at the end of March.

I can tell you, we haven't changed significantly from that, but I don't want to get into specifics.

Okay, that's great.

And then I guess my next question is, again I know it's really -- I mean you did a great job in the quarter of maintaining the debt given the decline in revenue.

And I'm wondering, if market conditions stay at these levels for, I don't know, another year or whatever time frame, how long can you actually realistically maintain this level of debt without at some point the debt starts to really creep up and increase?

We intend to keep taking the inventory down, keep increasing -- keep decreasing our working capital usage, limit the amount of capital equipment that's purchased or capital in general only for new business that's coming in, that can support itself.

So, we intend to keep working to reduce our reliance upon any revolver.

And I think for your hypothetical, Alan, if things stayed the same that they were in the first quarter kind of alludes to what we talked about earlier which is the cost cutting, which is -- and we didn't see the full benefit of that in the first quarter.

In fact, there were still some lay-over costs from prior year and as a result of some of the costs that we made.

So, probably can't look at the first quarter and carry that out another four or five quarters to look at it.

And I think we got to take into account some of the benefits that we should see going forward.

But if we're going to be at the same levels for the next year, yes, it would be pretty tough, but we've got a lot of cost cutting that we've taken into play.

And as Merv said, inventory and those types of things.

So, it's a little hard to speculate on that but hopefully that gives you some color.

Right.

I wasn't sure how much -- because you're in kind of a spot where you don't want to cut so much that, if and when the business returns, you've kind of lost that opportunity.

So I don't know --

Well, keep in mind, we launched two different programs over distressed supplier and we had to move quickly on it over, what [Jay], a couple of weeks?

Right about six.

About six weeks total, without much inventory build and had to change the processes, change the equipment and refine it to fit into our processes and our patents.

And that was all done within a six-week period without missing one part and delivering quality that was very highly rated by the customers.

Okay, my last question --

We got work force in -- what I'm trying to say, Alan, and paint the picture for you, we got a very dedicated workforce that is still here.

Nobody liked being gone for a day every two weeks.

But that's what we're hoping to bring the new business in where we can take that out and we've got good solid people here that's continuing to stay here.

Okay, great, thank you very much.

You're welcome.

And our next question comes from the line of David Leiker.

(Operator Instructions).

Yes, hi guys, this is [David Sui].

Just wanted to walk through the revenue number a little bit more, down about 45%.

And if I look at kind of the US, Canada Class 8 number, that's only down about 25%.

So, I guess that kind of implies the rest of your business was down in kind of 60% range.

Does that sound right?

Yes.

The -- our total OEM truck business, David, which includes some of our European business was down about 40%, construction was down over 60%, and the balance was down over 30%.

Okay.

So the construction was down considerably.

Okay.

You made comment with the aftermarket, was down what 30%; did I hear you right on that?

I grouped everything together.

So collectively aftermarket, specialty vehicle, specialty products, OEM, bus, those markets were down collectively about 30%, a little more than 30%.

Okay.

In the aftermarket world, we're seeing trucks that are maybe in the backyard that have been set for storage.

Some of the parts being taken off and put on the trucks that are running.

Yes, okay.

So, we think, once the market does come back, obviously they are going to need a windshield wiper.

So, we think we will see that pop back up.

Okay.

On the construction side, how much of that decline do you think was kind of your customers saying, we're not building as many trucks, we're going to hold less inventory, which is actually just declines in production?

Well, a lot of our sales is -- well, almost all of our sales is directly related to production since being just in time.

I don't know if that's your question, David, or not but --

Okay.

So you think just end production was down about 60%?

Yes.

Yes, this is directly connected to the shutdowns of our construction people around the world.

Okay.

And you're saying, your customers are saying that it's going to be down 40%, 50% for the year, it's just not getting a whole lot better as we track through for the rest of the year here.

Is that --?

Some of them.

We're still hearing from some customers, not all.

But, yes, from '08 to '09 on an annualized basis is the 40% to 50% down.

So there's --

That's for the full year?

It's not across the board for every single one of our customers and another way to look at that is, if we were down 60-some percent for the first quarter, 40% to 50% would be an improvement for the rest of the year.

Okay.

The other thing to think about on the construction, we make medium and heavy construction equipment we supply to and with any economic stimulus package that starts with infrastructure that has been built up within the states and waiting for funding and if this economic package ever does release money to these, it should help us.

Okay.

Are your customers including that in their kind of 40%, 50% plans or is it -- would that be on top of that?

I think they're taking some of that into consideration but a lot of it's relatively new.

So kind of a wait and see.

What we're finding and even in the truck market is it's always been pretty difficult for us to see any firm orders out past a couple of months but it's even more difficult today with trying to figure out what the customer schedules may be, really beyond a month or two.

Okay.

On the covenants, I guess you did about negative -- if I backed out the restructuring you did about negative $10 million in EBITDA this quarter, you need to get $22 million over the next three quarters if I remember correctly.

You kind of talked about a few of the things that are going to improve there sequentially.

But if we're only building 135,000 Class 8s, I guess we're having a high time making them (inaudible).

You're getting it from negative $10 million a quarter up to, I think it was 7, 8 a quarter, we need to hit the covenant.

I guess can you go into a little more detail on all the cost savings that you think they are going to be flowing through?

Yes, I mean, well, you got the $1.7 million of cost and you've got for restructure costs in the first quarter.

As I mentioned, a little bit ago, there is -- the true benefit from a lot of the restructuring and cost savings that we have implemented throughout the first quarter really aren't there for the first quarter.

They are either maybe halfway through the quarter or the latter part of the first quarter.

So the true benefit we expect to see more on a full basis beyond the month of March.

That's one aspect of it, the other aspect is -- again while we continue to look at the Class 8 market at whether it's 135,000 or whatever it is, we've got another 60% of our business that will drive our revenues based on the assumptions in certain markets.

So we've talked about -- in February, we announced the RIF and the closures.

I mean so those are on an annualized basis $10 million of cost savings.

So beyond the first quarter, which is really the implementation period, that's kind of the run rate that we expect to see.

That's one piece of it.

Another piece is with inventory levels being reduced as significant as we did in the first quarter, you don't get a lot of material cost savings because you're not buying anything.

So, there is another aspect to those type of things and then new business add on top of that and the other 60% of our markets outside of Class 8, David, really are some of the things.

There are assumptions that go into our plan to be compliant.

There's no question about that.

But those are some of the things that really where we see beyond first quarter.

Okay.

I think you made some kind of comment about launch costs in Q1.

Is that a big number or can you kind of frame around that with the new business that you picked up?

Yes.

I mean there's -- some of our CapEx is certainly related to the start-up of new business.

I don't -- it's probably not a huge number, but it's probably at least several $100,000 up to maybe $0.5 million, something like that when you include all the indirect related types of things.

And Merv mentioned, we implemented 10% cuts and furloughs.

I mean we did have some exceptions for people who were launching programs.

And so when you add all those things up, it can add up.

Okay.

You said out of that $10 million restructuring savings, you got about, I think $1 million of it in the first quarter.

Is that fair?

Yes.

It's shooting from the hip here.

That may be in the ballpark, David.

Okay.

The annualized number is about $10 million, so just estimating what that would be -- it's maybe in that range.

Okay.

And how much more do you think you can pull out of working capital if we keep selling at current levels?

Well, inventory is a big piece of that.

We're working with the customers and suppliers on terms.

Nothing outrageous but those are things that we work on everyday.

It's hard --

(multiple speakers) forecast it, but that's not something we feel comfortable going into at this time, Q1 numbers.

Inventory is one of our biggest focus areas, as you saw from Q1.

I think, the results from Q1 ought to -- point to the direction how aggressive we are on inventory.

Anytime you can take out $20 million in a depressed market like we have is saying quite a bit when you're not shipping very much.

Right.

Thanks, guys.

Thank you.

And our next question comes from the line of Chip Miller.

Please proceed, sir.

Good morning, Chip.

Hey, just a couple of follow-ups.

Can you talk about the military business a little bit?

Obviously it was up pretty significantly in 2008.

How much of that was due to MRAP versus other vehicles?

For 2008, I mean a significant portion of our increase was related to MRAP.

I don't have numbers; we don't have numbers off the top of our head here, Chip.

But --

Okay.

With the new MRAP-ATV, is kind of the next version that's coming in, do you guys have an opportunity there, is it a similar opportunity that you had on the larger vehicles or is it a smaller opportunity per vehicle?

Well, I don't think it's something that we can release, but we do have a very good opportunity on as we will on the continuation of the MRAPs.

Okay.

And then I guess, if I just take a look at the covenants, I just want to make sure that I understand this correctly, Chad, that you need to get to the -- back to the $22 million by the end of the year and obviously you have to hit thresholds along the way, but basically you guys are starting over from scratch on April 1, right, the losses from the first quarter don't count into that?

That's correct.

So our covenants don't start until April.

So, that $22 million is really for three quarters, April through December.

In addition, we received credit for restructuring costs out of the first quarter.

It doesn't matter when they happen but cash-based restructure cost of up to $1.5 million.

So frankly, since we already have $1.7 million in the first quarter, our real target for the balance of the year is about $20.5 million.

20, okay.

And just so I have the calculation correctly, the EBITDA under the covenant for the first quarter would have been like a negative $10.5 million or $11 million [is that] in the ballpark?

If you exclude the restructure costs, it's like $11 million, $11.2 million, something like that.

Okay.

Okay, great.

Thanks.

You're welcome.

No problem.

And our next question comes from the line of [David Nelker].

Please proceed, sir.

Hi.

Good morning.

Good morning.

Just a couple of things here.

You spoke briefly about the fact that the ABL facility has to be treated as current because of certain requirements.

Could you just expand on that, please?

Why exactly is that current, notwithstanding the long-dated maturity?

It's based on regulations under -- you're going to make me cite this -- EITF 95-22.

It's based on revolving credit agreements that include both, it's what is called a subjective acceleration clause and general lockbox arrangements.

So, it's basically a technical arrangement.

I mean it's pretty common, I mean there's many ABL revolving credit agreements that have it.

It's just the language surrounding our lockbox arrangements.

And what's really called a subjective acceleration clause, meaning something can get accelerated for certain reasons but this is not defined.

So it's subjective.

So, under those regulations, it just moves to current.

There's been quite a few companies that made the change here in the last year or so.

And was that something you had full expectation on when putting it together or was that something that kind of once you put it in place and the accountants got their chance to look at it -- that conclusion?

Yes.

I mean we knew it was out there but frankly whether it's long term or current, just to be honest, whether it's -- how it's classified on the balance sheet doesn't impact the -- I guess the nuts and bolts behind the agreement.

So, frankly, it doesn't impact us one way or the other.

We knew, it was out there but because of the new agreements and it wasn't in place at the end of the year, this is just the first quarter it switched.

Right.

Changing gears, market share, you've spoken about a couple wins that you're very pleased with.

Can you give us an idea of what's happening with your market share across your businesses?

Our market share across the business has been pretty much solid as it was before the recessionary results that we're wading through now.

The only real difference is on the new parts that we've won -- during the cutbacks we've won.

At the end of the last quarter, we took over a couple of lines of business just from other distressed companies and then during the first quarter this year, we've taken over a couple of lines of business.

Certainly, your competitors are feeling stressed, like you.

Is this really kind of the first opportunity that you've had to really kind of take what would appear to be some conquest business, which would expand your market share or have we seen anything else like that in the past six months?

I'd like to clear up, first of all, they're not distressed like us or we wouldn't be taking their business.

They're distressed and we're not.

So, yes, we will continue to increase our market share as we take over distressed business and yes, there are many more out there that are distressed or will soon be, in our opinion.

The last thing I just wanted to ask about is you've spoken about your expectation for Class 8 builds for 2009.

And I guess you're kind of working with the ACT number.

Is there anything that ACT has put out with respect to the pacing through 2009 or anything to the extent that they have not that you're willing to supplement in terms of how that 135,000 would build quarter-to-quarter?

No.

We're not seeing anything that's really very predictable and your crystal ball is as good as ours.

Yes, I think you see it too.

Even ACT and a lot of the other research guy, I mean, the numbers change quite a bit from month to month, and as I mentioned earlier, it's always been difficult out past beyond a couple of months to predict anything and with the volatility lately, it's even more difficult.

So, not at this time to comment on it.

Okay, thank you.

Welcome.

And our final question comes from the line of [Chris Stan Sony].

Please proceed.

Hi guys, how are you?

How are you?

Great, how are you?

Fine, thanks.

When you look at repossessions in the Class 8, there's clearly going to be an overhang.

So, how do you see the rebound playing out with respect to what we're hearing is a pretty significant overhang of repos?

I think you were breaking up a little bit.

Would you mind repeating the question?

It's just with respect to repossessions of trucks, there is a pretty significant inventory of those repos.

How do you see a rebound in your business shaping up with respect to that overhang?

Well, frankly, that's something that we don't really get into on the numbers, we kind of rely upon our customers to tell us how many trucks they're going to build.

And I'm sure they're taking those things into account and that's something that we just wouldn't be able to have a good prediction on because we've not tracked it for all the years that our customers have.

Okay.

And then with respect to your inventories, can you kind of categorize for me what it consists of in terms of finished goods, work in progress, and raw materials?

That will be in the 10-Q here in a couple of weeks.

I don't have it in front of me at the moment but --.

All of those.

Yes, all of those will be in the 10-Q here shortly in a week, I guess.

All of them were affected though.

Okay.

And then with respect to your long-term debt, I guess there's going to be an interest payment, cash interest payment coming up at some point.

And obviously your cash interest payments this year probably are going to be just with the 8% debt, $12 million.

So it seems like with respect to your additional capacity and your cash and continuing negative operating cash flow, you get to eat into that additional capacity it would seem but pretty significantly over the course of the year.

Can you -- and I'm sure you guys have done some planning.

Looking out beyond that additional capacity, what are your -- what are some of the options that you would want to contemplate, should we find ourselves there, in the end of the year or in nine months or so, something like that, in relatively short term?

[Why not?]

I think you need to look at the first quarter, there is already one of those interest payments made of $6 million and about $1.5 million in bank changes that were taken out and we still ended up with the same -- with the cash results that Chad has already gone into.

So --

Yes, the other -- you're right on the $12 million, but $6 million -- our payments are due twice a year, January and July.

So $6 million was already paid in January, we've got another $6 million payment in July which as I went through the -- our collateral and our availability earlier, we don't expect any issues at all.

We're pretty pleased with where we are.

And with respect to the balance of the year, I mean obviously if we're looking at volumes and those types of things coming into play, then I think it kind of circles back around to some of the other questions from earlier on the call in terms of where do we expect the balance of the year to be, which is the ultimate question.

But right now, we don't have any issues with our availability or our liquidity, which hopefully I went through earlier.

I don't know if we answered your question or not, but there is a lot of assumptions that go into where the Q2, three, four, or first quarter '10 are going to be.

So a lot of that comes into play, so it's fairly speculative to get into.

Okay, thanks.

And our final question comes from the line of [George Amila].

Please proceed, sir.

Good morning, gentlemen.

Good morning.

Hello, sir, are you there?

And there are no questions in queue at this time.

Thank all of you very much for joining us today.

We're going to keep going aggressively after the things that we've talked about and we look forward to seeing you on the next quarter call.

Thanks, everybody.

Thank you for your participation in today's conference.

This concludes the presentation, you may now disconnect.

And everyone have a great day.