Commercial Vehicle Group Inc (CVGI) 2009 Q2 法說會逐字稿

Good day ladies and gentlemen and welcome to the Second Quarter 2009 Commercial Vehicle Group Inc.

Earnings Conference Call.

My name is Marisa and I'll be the coordinator for today.

At this time, all participants are in listen-only mode.

(OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to the host for today's call, Mr.

Chad Utrup.

You may proceed sir.

Thanks Marisa.

Thanks everybody for joining the call today.

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

And then we'll walk through our second quarter operating results.

And then we'll take time to answer your questions.

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 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 turn it over to Merv.

Thanks Chad and thanks to everyone who's joined us on the call today.

The national and global recessions continued to impact CVG during the second quarter.

Depressed business levels in the heavy truck, global construction and other industries have continued to negatively affect each of our end markets.

Although market conditions remained weak during the quarter and our revenues were reduced by approximately 50% from the same period last year, we were able to minimize the detrimental impact to our bottom line due to the significant savings programs we implemented over the past 6 to 9 months.

The value and effect of our cost initiatives is demonstrated by comparing our financial performance during the second quarter to that of our first quarter.

In the second quarter, our revenues declined by an additional $5 million, yet our operating profit improved by approximately $6.6 million, excluding our non-cash asset impairment.

With this cost structure change in place, we are very excited about the potential for CVG when the recession is over and our end markets and volumes return.

Going forward, we will continue to take steps to align our costs with current market realities and we will also continue our efforts to develop additional business from current and perspective customers.

We will also continue to examine our manufacturing footprint and related costs by consolidating the smaller-- closing the smaller, overlapping manufacturing assembly and sequencing facilities.

These closures and consolidations will be performed strategically to insure we preserve the capacity to meet market demands when customer orders increase.

During the past quarter, we were pleased to announce Nissan Diesel Motors, a subsidiary of Volvo AB selected CVG as the development source partner for our new seat and suspension program.

This joint initiative is the result of our strategic efforts to expand CVG's global presence and our ability to meet Volvo AB global sourcing objectives.

These new seats along with other interior components such as bunks are planned for use in multiple Nissan Diesel vehicles.

These vehicles will be assembled in Japan for domestic use there as well as export to other global markets including South America, Asia, Australia, and the US.

We will produce and supply these new model seats from our Shanghai, China, facility.

The program is scheduled for a late 2009 launch and we expect it to be implemented over an 18 to 24-month period.

We appreciate this new business and look forward to a long and continuing relationship with Nissan Diesel.

As mentioned during the quarter, we continued to aggressively pursue other new business opportunities.

Many of you had asked about CVG's participation in the military vehicle market and the potential impact on CVG from recent Navistar and Oshkosh announcements.

Navistar defense and Oshkosh defense are only two of CVG's many military customers.

We also sell multiple product lines to most of these other customers that produce noteworthy military projects.

There are at least four major tactical vehicle players who each buy more than one type of product from CVG, whether it would be wiring harnesses, wiper assemblies, seats or interior systems.

Overall, we currently have engineers on site or provide the prototype and design services with several major defense contractors that supply motor vehicles to the military including Oshkosh and Navistar.

To win supplier awards with these vehicle makers, CVG initially distinguished itself through both speed and services and our manufacturing technology housing our facilities in Vonore, Tennessee and Monona, Iowa.

Recently we bolstered our cost advantages by obtaining international traffic and arms regulation, ITAR, certification for our Agua Prieta, Mexico facility.

So as you can see, despite the negative markets and headlines, we do have some positive news which we will continue to focus on with Chad at this point when-- turn it over for the financial overview.

As you can see from the announcements that have come out recently, this has been a very busy quarter.

At the facility, it's been a very busy six months for us.

Chad would you go through the financials for us?

Sure.

As you guys saw from the release, our revenues this past quarter were $103.5 million, which is a reduction of $105.7 million or about 51% from the second quarter of last year.

The drop is not only the result of a estimated 57% decrease in North America Class 8 build rate from the prior year but also reflects our global OEM construction revenues which were down more than 60% from the prior year-- period.

In addition to that, we've got reductions in demand in our OEM bus, aftermarket, military, service and other specialty product markets were collectively down a considerable amount from the second quarter of last year as well.

With top line reductions of this magnitude, we continued to focus heavily on cost reductions and cash management throughout the quarter.

These cost reductions initiatives are evident in our SG&A expenditures for the quarter, which were reduced by approximately $6.4 million or 38% from this time last year and down approximately $3 million or 22% when compared to just one quarter ago.

And on a comparative basis, excluding the one-time, non-cash intangible and fixed asset impairments charged during the quarter, our operating income actually increased by approximately $6.6 million from just one quarter ago despite a reduction in our sales of approximately $5 million.

This highlights the benefits of our highly variable cost structure and the impact of our recent cost reduction efforts.

We did record approximately $10.4 million in one-time non-cash impairment charges related to certain domestic and foreign operations and in connection with our FAS 144 and 142 analysis performed during the quarter.

The current market environment continues to put pressure on the carrying values of certain assets and we recorded additional impairment charges as a result of our analysis.

Depreciation was approximately $4.3 million for the quarter and amortization was $97,000.

Capital spending also continues to remain a focus and was only $1.5 million for the quarter or 1.4% of revenues.

We recorded a gain of approximately $3.5 million in other income related to the mark-to-market of our foreign exchange contracts.

As you may recall was a substantial expense for us throughout 2008 as rates continued to move unfavorably against our contracts throughout the prior year.

Finally, our effective tax rate for the quarter was negative 0.5%.

As I mentioned last quarter, this was driven primarily by valuation allowances required under FAS 109 due to the 3-year cumulative loss created by the goodwill and intangible asset impairments from last year.

Net debt defined here as total debt less cash and cash equivalents was approximately $147.3 million at the end of the second quarter, consisting of our $150 million 8% senior notes, $3.4 million outstanding revolver balance and approximately $6.1 million of cash on hand at the end of the quarter.

That said, as you may have seen from our recent release, on our bond exchange issuance of the new second lien term loan and our ABL amendment, the actual balance on our ABL as of yesterday after giving effect to the transactions was actually zero.

This comes even after making a $6 million bond interest payment during July.

This would not be possible without the significant efforts in our working capital and cash generation efforts throughout the quarter, such as inventory, which has been reduced by nearly $30 million over the past 6 months, during a period when production levels were very depressed.

The employees in our facilities have done an outstanding job in the areas of operations and materials management to make this happen.

As mentioned in the press release, we are not providing guidance for the balance of the year at this time due to the volatility of our end markets.

That said we currently believe we will remain in compliance with our financial covenant requirements for the full year 2009 under our revised capital structure.

With our success in cash and working capital management along with our revised capital structure announced yesterday, we are now in a better financial position moving forward toward market recovery.

As both Merv and I have mentioned, we have implemented significant cost-cutting and cash-generating initiatives during the first six months of this year.

And we continue to focus on the development of new initiatives on an ongoing basis.

The second quarter was indeed a difficult time with continuing market pressures and substantial employee-related cutbacks.

But we remain extremely focused on the tasks at hand and optimistic about our improved cost basis and overall footprint when we see the economy and our end markets return.

And with that Marisa, we'd like to open up the call for any questions.

(OPERATOR INSTRUCTIONS) And you have your first question from the line of David Leiker.

Please proceed.

Good morning.

Morning David.

I want to walk through the revenue number here a little bit as we go forward.

And just get an understanding of the new business that you've announced here recently and then what's going on with the end markets.

You know where this-- I guess let me put it this way.

If you take a look at the Nissan, the Volvo, and the Daimler programs in aggregate, that's about $22 million to $24 million.

I think most of those were expected to be fully ramped up around this time.

How much of that are you actually able to realize at the moment given where the end markets are?

Well I think the Nissan Diesel one you mentioned, you know that doesn't start till towards the end of this year, so I'm not sure that one is included.

Okay.

And the other two that you mentioned David?

Sorry.

The Volvo and the Daimler.

The Volvo and the Daimler.

The Volvo piece is in the process of ramping up.

It ramped up probably midway through the second quarter I believe.

Merv, wasn't that the date?

Yes.

Somewhere around the middle.

So obviously volumes are down but I would say roughly we're seeing maybe half of that impact with the timing and the ramp up.

And something similar with the Daimler piece as well, probably more along the lines of maybe half or towards the end of the second quarter David.

That's what fell into your second quarter number?

Yes.

I don't have exact numbers with me but yes those were the timing.

I mean the Volvo piece and the Daimler piece, I think they--

Then the $6 million for Daimler and the $8 million for Volvo, I think the release said that that was at current production volumes.

Are those still accurate numbers on a run rate going forward from where we are?

Yes, you know I think at the time the current thought was we were in that 120, 130 range.

So you know maybe it's down 10% or something like that David.

Okay great.

And then are there any other items there plus or minus, excluding the end market that would move revenue one way or the other in the second half of the year versus the second quarter?

Well probably the biggest thing for us, which we can't get into numbers just yet, is the military piece.

You know Merv mentioned we've got product on pretty much all those OEMs, whether it's seats and interiors with one or harnesses and wipers with another.

So that will be beneficial for us we expect for the last half versus the first half.

And what do you have in terms of Oshkosh on the MATV?

We have different product lines from wire and harnesses to wipers and currently working with them on several other items.

They've been a very good customer of ours.

They've gone from probably fourth or fifth largest customer up until-- they're probably one of our top two customers now.

And would you guess your overall revenue on the MATV is larger than what you recognized on the [rail] program as that went through.

Yes it's a little bit difficult for us to get into numbers just yet cause we're still kind of finalizing everything David.

But you know our hope is that will be comparable at a minimum.

(inaudible) and your MRAP volume is down to zero right now.

You don't have any aftermarket or anything like--?

Yes essentially that's right.

And then the other item here is if we look at incremental opportunities here on cutting costs, you guys have pretty much cut as deep as what you can.

But is there anything here given the volumes continue to be weak on the capacity, on the headcount, on the SG&A line and again you've done a fantastic job so far.

So it's not a critical comment.

Just whether there's anything incremental left there?

Yes, there's always incremental left.

You know one of the things that we've been trying to do is be very conscious when we are taking out of SG&A because of new programs that we are landing and that we implementing on, on launches.

So what we've been able to do is talk to the people and we've taken what we call furloughs or time off without pay starting with myself down through my staff and then we just kind of led the way on doing this.

Right.

And then the plants that have been more affected, they've taken more of that.

So no, that's something we'll still continue to monitor.

And if need to be, we'll still do the tough decisions and make the cuts like we've been doing.

I think our SG&A well exceeded most people's expectations on the way we've cut.

Yes, no definitely that's true.

Thank you.

I'll come back in if I have a couple other ones, if no one has some.

Thanks.

And your next question comes from the line Alan Weber.

Please proceed.

Morning Alan.

Hi.

Merv, when you talked about the, obviously the Class 8 market's down and the global construction is down.

Can you talk about the aftermarket?

Some of the other products?

And then also by kind of products betweens seats, you know the electronic harnesses, cab structures, just kind of what's better and what's worse than just being down 50%?

Well what we see on the aftermarket, it is down.

It's down worse than what we had-- most all of us had originally anticipated.

One of the reasons is as long as your tonnage miles are down, then and your replacement of trucks are down, then your replacement of components on those trucks are going to be down.

Along with what we're being told at some of our fleets there parts are being taken off of other trucks in the field.

So when this comes back, we expect the aftermarket to come back probably more expedited than what it would normally being during a heavy OEM sales growth too.

As far as cabs, our major production of cabs are for International and MAC.

So you know if according to how they're doing on market share and that's something I really don't want to get into is my customers' market shares.

Then we're going to be up or down on those.

As far as wire and harnesses, that's primarily construction and military.

And seats is pretty much across the board at all customers.

And as far as construction and heavy truck.

So yes, they're pretty much down whatever the markets down.

Yes and that's probably, you know Alan probably seats, seating probably down more than any of the other products given what Merv just said.

It's cause our seating products are on construction and truck.

And construction for us in the second quarter is down certainly more than we expected, but it's down more than other end markets as well.

So it's-- that one's probably impacting seating.

Okay and Merv, in the previous call I think it was maybe the third quarter call, you kind of alluded-- and you alluded to again this morning that you're kind of in a spot where you don't want to cut so much because you want to be able to participate and bid on potential new business.

Cause at some point I think we all believe the markets will rebound.

And so I believe that's what you stated.

And so from-- you look at-- if you look at this quarter, having said that, if the markets did stay flat and your revenues stayed at the current level, can you get the Company positioned so that it can actually be profitable at a run rate of $400 million of revenues?

I think so.

While you could also be looking to bid on potential or you know increase your market share?

Absolutely.

We-- you know the difference when we talk about bidding versus launching is two major concerns.

The people that bid on the product are not necessarily [probably] much the launching of the product.

The quoting, we're still quoting a lot of business.

The thing we're not seeing is many people taking a lot of moves because right now a lot of the customers' times are spent just trying to keep the suppliers they've got afloat.

And that's one reason I'm very proud of the way that this Company has been able to perform with cost reductions, with new agreements on financials, where we've got the Company very well positioned to last longer in a very difficult market where most people-- let me rephrase that.

Where a lot of people are continuing to struggle and still being as proactive as we have been.

So is there-- I mean do you have and whether you tell us or not, do-- is there some timeline where if the markets continued to be worse than anybody expects and you have $400 million of revenue where you really will be profitable?

I mean you've done a great job of cutting costs.

And it's just the question of--

Yes that's the ultimate question though isn't it?

I mean if we knew-- had a crystal ball today that said we were going to be $400 million and the markets were going to be where they're at for infinity, I think you would see a lot different positioning than trying to ensure that we're still landing new business and going to be in better shape than we were in prior, positive markets.

You will see us address some of this as the time goes on this year.

And that's when we have customers that their volumes have gotten so low that they-- we cannot substantiate the support that it takes for them.

You'll see us move and exit some of those business lines.

Because what we have really done a lot of concentrating on is going back into our markets and saying, okay let's suppose that we're going to have 125,000 unit run rate or X percent on the construction market, what does this Company need to look like and what customers does it need to have?

So where you see us going in with a Nissan Diesel, it's a huge growth opportunity for us plus it's also adding to a current customer, which is Volvo, which is very important to us.

So you'll see growth with a strong customer where you may hear that we released a certain amount of business because even during-- you know when the-- in 2006 when there's a lot of units being built, it was a minimal player maybe.

And now with 2009 run rates, they just can't support the level of business at the sales price that they've got and sometimes they can't afford to pay the higher price.

So they have to figure out some other way they're going to get their product made.

Okay my final-- okay.

I didn't mean to interrupt.

Thank you.

The exchange offer you did and the new $16 million raised, all of that, the $44 million or $42 million that was exchanged of new notes or whatever, that's all senior to the 8% notes that you had outstanding previously?

Is that correct?

Yes.

Okay, thanks.

And your next question comes from the line of Ann Duignan.

Please proceed.

Morning Ann.

Good morning guys.

How you doing?

(inaudible)

Good.

A couple of just nitpicky questions and I can take them offline if you like.

But what was the tax rate on the impairments in the restructuring?

Our effective tax rate Ann if you exclude the valuation allowances that we need to apply, it's in that 34%, 35% range and you kind of normalized it and take that up-- took that away.

Okay.

And that's what I should-- that's what we can use when we look to forecast for the rest of the year?

Yes.

It's very cumbersome.

But with that FAS 109, that 3-year look back and that impairment from '08, it just basically that's all I can point to is use that rate to the extent we have positive pretax, it may change the percentage a little bit.

But yes it's about the best I can give you.

Okay and then can you talk a little bit about your cash flow from operations?

You know you did a good job on reducing inventories and the working capital looked okay.

But just trying to back into cash from operations for the quarter.

Can you help us with that?

Yes I think cash flow to us looks better than okay.

Cash flow does look so damn good to be honest with you.

So I mean there's--

Yes.

The cash flow in this Company, that's something we're very proud of how we've been able to develop cash and gone from during the first quarter I think somewhere about $25 million borrowed on our revolver to as we talked today, zero borrowed on it.

Yes that's right.

I mean there's-- you know for the quarter Ann, we had a $1.5 million of CapEx.

And you know so if you take the net debt change.

I mean the balance of that is going to be in your operating level.

So we did pretty darn good.

We're, you know, we're effectively at zero today.

You know with the new announcement we've got out there, we've got I think it was in the press release, we've got-- we can borrow up to about $21 million before we hit any covenant threshold.

So it's not like we have $21 million of availability and if we get to $15 million we have covenants.

No that's not true.

We have $21 million-- we can borrow up to about $21 million today and still not have any covenants effectively.

So that's what I think the number was $20.8 million in the release.

But so we've got-- we've created a substantial more amount of flexibility for ourselves with the cash flow generation.

The inventory reduction that our folks in the field have done has been absolutely astonishing.

And they're not done yet.

So we're still pushing there.

So, that's a very long-winded explanation but hopefully I circled back around to your answer.

You didn't really you know.

I'm still looking for the number.

Well the operating piece Ann-- I mean we had $1.5 million of CapEx.

Yes.

So the change of-- you know at the end of the first quarter, we had about $15 million borrowed.

And you know I guess if you're using June numbers, we had $3.4 million borrowed.

So there's a $12 million, $13 million delta there.

Yes.

But I was getting about $1.5 million of cash from operations and then $1.5 million of CapEx with kind of zero free cash flow?

What starting point and ending point are you using?

Well I can take it offline.

It's like, but I'm struggling with a net income loss of $22.5 million and depreciation and amortization $5.3 million, change in working capital of a positive $18.7 million so that was getting me to net cash from operations about $1.5 million.

Yes.

Let's take it offline rather than sit here and try to sketch it out.

That might be more helpful.

Yes, cause I would like, you know I'd like to start with that for my forecast for the rest of the year--

Sure.

And for next year.

Just changing tact a little bit, I know you're not giving guidance but you know we're already in August here, what are your forecasts internally for Class 8 build schedules for this quarter?

Yes, I mean you know we've pretty much have seen ourselves kind of align where ACT you know plus or minus 5%.

We've kind of been within their range.

So you're-- you I think said down 57% in Q2, so that was roughly 25,000 build.

Is that about what you were looking at for Q2?

Yes that's right.

And I think if you went out for Q3 and Q4, I think it's around-- I think it's pretty close to that and then goes up another I don't know, 4,000 or 5,000 units in Q4 I think is the latest.

Yes, it looks like orders were up a little bit yesterday.

You know might be seeing a little bit of pre-buying in there, but--?

Yes we're seeing a little bit of that as well.

And you know that's why we kind of generally think maybe Q4 will up just a bit.

Okay and then just one final question, you-- your restructuring costs were down significantly sequentially.

Are you kind of-- I know there's been a couple of questions on how many more levers could you pull, but you know is your restructuring kind of done and over for now and you're just kind of sit back and wait and see if markets recover?

Well I think the biggest thing is we've got this line item on our P&L called restructure.

Those are the costs that we can run through there from a GAAP's perspective.

We have-- you know the facilities that we announced that we closed down, the leases may not be run out just quite yet.

You know those are still running through cost of sales.

So there are some things that will fall off as opposed to what you're seeing.

Most of what you see on the restructure line item is, especially in Q1, $1.7 million, that's mostly related to wage and those types of things that you, you know that we technically can call restructure.

Everything else that may run out from our facility closures and what not is-- you know still runs through cost of sales.

Okay so we should see some improvement--?

We also watch all of those costs closely associate with cash impact it would have too.

Okay.

Okay that's helpful.

I'll get back in line and maybe we can talk offline on the cash flows.

Sure.

And your next question comes from the line of Matthew Kaplan.

Please proceed.

Hi guys.

I was wondering if the holders of the remaining 8% notes will have the opportunity to exchange into the new third liens?

No, it was a private exchange.

Okay, so that's kind of over.

There's no chance for the 8 to move up?

Not under the current structure, no.

Okay.

Thanks.

And your next question comes from the line of [Colin Leonard].

Please proceed.

Hey Chad, could you walk through the pro forma cash balance post the exchange?

The cash balance?

Yes I know it was about $6 million at the end of the quarter.

Just wondering what it is pro forma for the exchange?

It's going to be probably-- you know if you use the $5 million or $6 million that we typically have in transit, we'll-- we had $3.4 million at the end of June.

We obviously made our $6 million bond interest payment in July, which brought us around to the $10 or so million.

And yesterday we were just shy of that around $8 million or something like that.

So it would have added a couple million in addition to that, with the use of the $10 million pay down.

Positive?

Positive, yes.

Got it, okay.

Thank you.

No problem.

(OPERATOR INSTRUCTIONS) And you have a follow-up question from the line of David Leiker.

Please proceed.

Hey Chad can you just remind me, I don't think it's very restrictive, but what's the covenant on the 8% notes?

The maximum of the indenture is like a lien test of about $140 million.

In total borrowings or--?

Yes, yes.

So are you-- would that mean that you're in compliance with that right now?

Yes.

Okay.

And then--

Million in front of it.

Yes, $140 million in front of it.

All right, okay.

Got it.

Okay, no problem.

And then on the, as volumes pick up here at some point, you know you've had huge working capital swings here on the positive side that conceivably flips around on the other side.

What flexibility, capacity do you have to kind of replenish that working capital as volumes build again?

Well you know we're still working on some inventory things.

But probably the biggest thing that we still see as favorable for us is we're still working on some terms negotiations with both customers and suppliers, which we've been very successful with.

So that's a positive side.

But you're absolutely right.

When the markets come back up, we will have that use of working capital.

And you know with the reductions we've done and programs in inventory, that's probably one big one and the changes in DSO and DPO.

Yes, it'll be a use but that-- you know we, the new structure that we announced yesterday gives us quite a bit of flexibility on the up side.

And I don't have a magic number for you David in terms of what it gets to, but we feel we've got a lot of flexibility here.

Don't you, as of today right now, if I heard correctly have about $10 million available?

No, no, no.

We have-- let me-- yes let me walk through that.

We have $37.5 million line, okay with the change from yesterday.

We've got $1.7 million of letters of credit.

Right.

And if you take away $15 million of availability which is what we need to have before we can have covenants.

Right.

Before we have covenants.

Right.

That leaves us with the ability to borrow $20.8 million and still have no covenant test.

But you have $20-- $10 of that $20 borrowed right now, right?

No, we have nothing borrowed today.

We have a cash surplus today with-- we used $10-- we got $10 million yesterday from the transaction of new second lien coming in.

Okay, right, right, right, right.

That effectively completely paid off our ABL.

We have nothing borrowed today.

And then as we look at I think the understanding is on the credit agreement, the old covenants are in lace which is this cumulative $23 million in EBITDA.

Is that correct?

No, no.

There's new covenants with the second amendment David.

They don't start till July.

July-- actually they don't start till September.

It's not tested till then but there's EBITDA tests for the rest of '09.

If we reach that $15 million mark, which we don't think that we will and then it just moves to a fixed charge test after that.

And still no test if we stay under the $15 million.

So--

So in other words, there's no covenants until we borrow more than $15 million.

No, availability, until we borrow more than, you know, under the scenario I just gave you-- $20--

$21 million.

$20.8 million.

Sorry about that.

So as your volumes come back up and your working capital increases and you need to dip into that $15 million set aside, presumably the EBITDA gets up quickly enough that you access to that?

That's exactly right David.

You got it.

So to the extent working capital is needed, you know, really the only way that it should be needed is when volumes come up and then you're fine under the covenants to be able to borrow more.

Okay great.

And then just last two questions.

Where do you think capital spending finishes for the year and depreciation/amortization?

Depreciation's probably going to stay at the same run rate that you've seen in the first couple quarters David.

And CapEx, CapEx we're going to do our [darndest] to keep it the same too, about $1.5 million a quarter.

But we do have some kickoff on some of the programs like Nissan Diesel that may push it up.

But you know I don't expect it to be a significant amount more.

And then lastly, I don't-- and you might have said and I missed it, but currency impact here in the quarter, in the revenue?

Yes it was-- the exchange?

Yes FX?

Yes, there's-- the numbers are about the same.

The non-cash mark-to-market record as other income.

It is FX related.

It's $3.5 million again non-cash.

And the currency translation on our revenues for the quarter was I think about $4 million, reduced revenues about $4 million.

Okay, great.

Thank you much.

No problem.

And your next question comes from the line of [Brendan McMillan].

Please proceed.

Yes, thank you.

Just a couple questions.

Could you just go over what the total debt outstanding is now including the second lien notes?

Could you just tabulate what the components are?

Sure.

It's the-- I'm going to give you the face value cause there's some pick aspects and accretion aspects.

But it's $90-- we had $150 million of 8% notes.

We exchanged $52 million.

So we have $98 million of the 8% remaining.

Okay.

I'm rounding here, okay.

Yes.

That $52 million that we exchanged is now $42 million.

Okay.

It was exchanged at a discount.

And we issued $16.8 million second lien.

And that's where the new money came from.

Okay.

And we have nothing borrowed on our ABL.

So that's pretty much the-- that's pretty much the components right there.

Okay.

And--

That today.

The catalyst for renegotiating the-- or exchanging the 8% notes was to basically get more flexibility in terms of the-- of getting a second lien note package from those same borrowers.

Is that basically the catalyst for--?

Yes.

I mean that's just-- that's how the transaction ended up.

That's right.

I mean one wasn't-- I don't know how the right way to say it.

But that's where the transaction ended up, yes.

Okay.

And the last thing is just around military, could you just help me think about military sizing in terms of either what it's been as a percentage of revenues in the past or maybe actually even better would just be sort of you know some kind of rough dollar content per vehicle for wire and harnesses with Oshkosh in the past or on similar type vehicles to MATV?

Yes unfortunately we can't get into the dollar values per vehicle.

We just can't do that.

2008 military was about 7.7%, close to 8% of our total revenues.

Yes.

2008.

It's up a little bit for 2009 as a percentage of our sales but you know I think a lot of that is driven from the decline in the other markets.

Right.

So I'm not-- unfortunately we can't get into too much detail on the military stuff in terms of content and what not, only to talk about the-- our revenues in total.

Right do you-- I guess along the lines of the previous caller's question or a few callers ago, in terms of expectations for MATV, do you think that it will-- your total dollar content on that will more or less run in line with MRAP?

That's our objective.

Okay.

All right.

Thank you.

Appreciate it.

And your next question comes from the line of [Ross Lehman].

Please proceed.

Hi.

Thanks for taking my question.

So I'm sorry, just to confirm this again.

Your total liquidity currently is $28.8 million, right?

You have $8 million in cash and $20.8 million on the revolver.

Is that right?

No, no, no.

After the transaction yesterday, we have nothing-- we have zero, nothing borrowed on our revolver.

No, I understand that.

I understand that.

So I'm talking about your total liquidity available to you.

$20.8 million to borrow on the revolver.

Yes.

If we chose to do.

Yes.

And cash position probably--

Yes our cash position, it improved maybe a couple million yesterday with the-- after we paid down the revolver.

So what-- I thought you said it was $8 million.

Is that wrong?

Yes well if you add a couple million to the-- to our typical $5 million or $6 million of cash in transit, yes you're right.

Okay great.

And then in terms of the cash burn for the rest of the year, are you able to continue to source cash out of working capital or does that kind of come to an end and then you end up, you know, burning a little bit between here and the rest of the year?

Well I think-- obviously it depends where markets are.

We've, you know we've taken a huge giant leap through the first six months with improving-- getting cash out of working capital.

It won't continue at that rate.

You know but we do have some plans for inventory and some plans for DSO and DPO like I mentioned.

But it'll, if markets stay exactly the same, yes we'll probably see some cash burn, maybe to the extent of what our CapEx is.

So it's-- we don't see it as substantial.

But again we are working on some things to negate that so--

Okay, so that's kind of again at current demand levels.

That's sort of your run rate burn.

Yes.

Until things start to turn.

Yes that's give or take, that's right.

So based on that, you've given yourself it looks like quite-- quite a bit of runway here until the markets turn.

Yes, absolutely.

We're-- we couldn't be happier about getting the transaction in place yesterday.

So it's a big relief for us and we're pleased.

Just on the mechanics of the exchange.

So those private individuals that exchanged I mean-- so is there like a lockup period where you-- where when they're privy to the details of the exchange, they're not allowed to trade their securities.

And then now they are free to trade securities?

Yes.

I'll-- they are free to trade because we've completed that-- completed everything through yesterday.

But were not free leading up to the transaction once--?

Correct, correct.

Yes, they were-- that's correct.

They were not--

Thanks that helpful.

I appreciate it.

Thanks a lot.

And your next question comes from the line of [Jose Feliciano].

Please proceed.

Good morning.

Quick question.

You know you mentioned that you had a significant restructuring charges that are kind of running off but are not included in the restructuring line item.

Could you kind of estimate-- give us an estimate of those?

Yes in total you know maybe it's $1 million, something like that.

But spread out, I mean most of that's going to be facility cost and lease run outs.

And some may expire next quarter.

Some may not expire for a year.

So but, you know when all is said and done, it's probably somewhere in that range.

I'm sorry, million aggregate or a million--

Aggregate, aggregate.

Got it.

And could you comment on the, specifically on the change in restructuring transaction on the second lien.

You know it looks when you factor in the discount a fairly high cost of capital, something like 25%, 30%.

Is that kind of what you think what it took I guess to get that type of money in this environment?

Well I don't think you can look at it individually.

I think you have to look at the transaction collectively.

We've got-- you know we were able to get pick on the third lien, so that helps us out in the current timeframe from a cash perceptive, which was certainly our objective.

And with the discount from $52 million to $42 million, you know we got a 20% discount on that plus the pick plus the new money.

You know expense wise interest may go up a little bit but for what our objective was from a cash perspective here, you know hopefully in the trial of these markets not necessarily looking at it from that's what it took to get second lien, but I think you have to look at it collectively, if that makes sense.

Got it.

Thank you.

And you have a follow-up question from the line of Alan Weber.

Please proceed.

Hi.

You know it seems to me that you've done over the last six or nine months really a great job on the operations.

Your debt is-- you know your debt prior to the exchange is down.

And you seem to be picking up market share, winning new business and cutting costs, which is all I think you really can do, given the end markets.

But I must say that it seems to me on the financing side, it's terrible.

I, you know, Chad you just made a comment about interest expense might be up.

How is it possible that interest expense isn't going to be up?

Yes, no I said it might be up.

But you have to look at it from a cash perspective.

So I agree that it's up.

From an expense perspective, but the cash side of things is down when you look at it for the next call it 18 months, if you look at that pick period.

Right, cause it's a pick.

Now why didn't you offer or why-- or can you explain who you used as an advisor to do this?

Unfortunately I can't.

We've got confidentiality agreement that I was advised not to do that, just on today's call.

It may come out later.

I just can't do it today Alan.

Okay and did any part of anybody in management to the board participate in this exchange offer, in any way?

Participate in terms of-- did we sell some of the bonds--?

Yes did they participate, whether they bought the new paper, participate in the exchange or anything like that?

No.

Absolutely not.

No.

And I guess I just don't quite understand why-- I mean cause somebody asked the same question, why you didn't try to, you know-- try to solicit from all your holders?

Well I mean the structure-- the transaction was structured in a way that we thought best to (A) not run the risk of getting a deal done and a timing standpoint and from a cost standpoint.

So, that's--

Okay I guess I just disagree with all that.

But okay.

All right, well anyway the operations, you know you do seem to be doing an excellent job there even if I think the financing is terrible.

Okay.

Thank you.

And I show that you don't have no more question at this time sir.

So I turn it back to you to any closing remarks.

Well we'd like thank all of you again for calling in.

Do appreciate your comments.

We always take them to heart.

We always look at them.

Look at them for alternatives to make the Company run better.

As you can imagine, with Alan's comments, those aren't completely in agreement here.

Any time you're dealing with different entities and trying to get a deal done is some times like pushing a rope, just if you're dealing with a couple.

So this has been a major time-consuming effort and we have been working on it for some time.

And we will continue to look moves that we think will make this company stronger and better and be able withstand the pressures of the marketplace.

Until they do improve, we intend on being you know one of the last soldiers fighting.

And we feel very good about the position we've got the Company in right now.

And we feel very opportunistic with the market as it does start to return.

You'll see us realign some of our customer base.

You'll see us as we've been continuing to do, realign some of our manufacturing operations.

So again thank you.

Chad, do you have anything?

Yes, no just to add onto that.

We're pretty pleased despite differing opinions, the liquidity and the cash position of the Company is much stronger than it was last week, today in our opinion.

So we're positioned to move forward.

And thanks everybody for the call.

Thank you.

Bye.

Ladies and gentlemen, this concludes the presentation.

Thank you for your participation in today's conference.

You may now disconnect.

Have a great--