Stoneridge Inc (SRI) 2009 Q1 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the first quarter Stoneridge earnings conference call. My name is Camisha, and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the call over to your host for today's call, Mr. Ken Kure, Treasurer. Please proceed, sir.

Good afternoon everyone. Thank you for joining us on today's call. By now, you should have receive our first quarter earnings release. The release has been filed with the SEC, and posted on our website at www.stoneridge.com. Joining me on today's call are John Corey, our President and Chief Executive Officer, and George Strickler, our Chief Financial Officer.

Before we begin, I need to inform you that certain statements today may be forward-looking statements. Forward-looking statements include statements that are not historical in nature, and include information concerning our future results or plans. Although we believe such statements are based upon reasonable assumptions, you should understand that these statements are subject to risks and uncertainties, and actual results may differ materially.

Additional information about such factors and uncertainties that could cause actual results to differ, may be found in our 10-K filed with the Securities & Exchange Commission under Forward-Looking Statements. During today's call, we will also be referring to certain nonGAAP financial measures. Please see the Investor Relations section of our website, for a reconciliation of these nonGAAP financial measures to the most directly comparable GAAP measures.

John will begin the call with an update on our results, and his thoughts on market conditions. George will discuss the financial details of the quarter and future outlook. After John and George have finished their formal remarks, we will then open up our call to questions.

With that, I will turn the call over to John.

Good afternoon, and thank you for joining us on today's call. As you have seen, we have reported sales of $121.1 million, which is a decline of $82 million, or 40% from the prior year. The sales decline was the primary reason for the net loss of $11.6 million, compared to last year's profit of $6.5 million. To give you some perspective on the results, let me briefly review the market's performance.

When we develop our planned projections for 2009, our expectations were for North American automotive production to be about 10.1 million units, and North America commercial vehicles to be about 358,000 units, and European commercial vehicles to be around 526,000 units. The actual production rate for the first quarter was 25% below our North American light vehicle production estimates, 20% below our North American commercial vehicle production estimates, and 35% below our European commercial vehicle production estimates.

Compared to 2008, North American automotive production in the first quarter of 2009 was 1.7 million units, which was a decline of 50.9% from the prior year, and 36.5% from the fourth quarter of 2008. In addition, the annualized first quarter run rate was the lowest since the 1960s. In the North American commercial vehicle sector, first quarter production was 58,600 units, a drop of 41.8% from the prior year. In Europe, where we sell predominantly in the commercial vehicle market, first quarter production was 92,300 units, a decline of 55.7% from the prior year.

First quarter 2009 production volumes were the lowest in six years. Last time industry volume was this low was in 2003. Our budget projections had volume estimates of around 133,000 units. Obviously the actual production volume came in well short of what we forecast. While our 2008 restructuring helped mitigate volume decline, it could not offset the entire market decline. Globally, we experienced declines in every market. In Brazil, our PST joint venture had sales declines of 35%, and in India, our Minda joint venture sales declined 42%. All of this adds up to an extremely turbulent market, with no certainty of when we will see a recovery.

Yesterday, we saw the latest example of this turbulence with the announcement by Chrysler of a bankruptcy filing, and temporary plant closures during the filing. The challenge for management is how to operate in this environment, get through it, and have the Company well-positioned for recovery.

As we have previously stated, we have significantly reduced the Company's operations, by closing down plants and consolidating of work. We have curtailed wage and benefit programs, by reducing benefits and freezing salaries in 2009, unless contractually committed. We have had voluntary raise reductions, and are continuing to reduce head count. Yet even with these actions, we were not able to overcome the entire impact of the market decline on our financial performance. As we saw the first quarter unfolding, we have taken additional action.

In Europe, we have announced an additional reduction of 122 people, and are attempting to adjust our operations, to lower demands without reducing our capabilities to respond when the volume does begin to improve. In our three manufacturing facilities, we resized our operations, and have adjusted work weeks to the extent possible, to match the reduced demand.

Because of the floating schedules among our customers, we have experienced inefficiencies, as we need to keep operations running to support some customers at certain times, and others at other times. We are looking at various options to build inventory banks, so we can temporarily reduce work schedule volatility, and get the maximum benefit of our facilities.

We have reduced our direct labor and factory overheads. We have lowered our design and development costs, and reduced our SG&A expenses compared to the first quarter of 2008. This represents a total cost reduction of $20.2 million in the first quarter, which excludes restructuring charges and direct material. Our overall cost structure has been reduced by an annual run rate of 80 million to $90 million.

While we have reduced design and development expenses, we have not reduced it to the point where we are not supporting future growth programs, or programs where we might obtain near-term revenue. Much of the reduction has been in response to customers delaying or deferring platforms or projects.

In emissions, for example, we have added an engineer to the US and Asia, to support the growth of our EGT sensors. We recently were awarded another Audi platform for EGT, which we believe positions us well for future larger awards with this customer. We have improved performance of this product substantially in terms of response times, and our closed-tip design, can now compete against an open tip design, in terms of response time. Closed tip design is not affected by the eventually soot build-up that occurs, and frankly, we believe this makes our product superior.

We were awarded additional military business, which should commence in the fourth quarter of this year. We are actively quoting near term wiring opportunities, as some suppliers are facing difficulties, or have chosen to exit the business entirely. All of this shows that there is still a great deal of sales activity underway, even though the markets remain volatile.

Our cash position remains solid with over $89 million in cash on hand at the end of the quarter, compared to 92.7 at December 31, 2008. We continue to focus on cash enhancements and protection. One example is our participation in the government programs for suppliers, by seeking a guarantee of our receivables with GM and Chrysler. While it is up to GM and Chrysler to determine who they allow to participate, we have been included in both of their programs, and have met the filing requirements, as the full details of the program are being finalized.

If the market does not decline further this year, we believe we are positioned to be able to support our operations with our current cash balances. While inventories declined by $6.6 million, we still have work to do in reducing our inventory levels. Our Receivables have the lowest past due percentage in recent years, though the reduction in our Receivables is due to sales declines, and is a temporary source of cash. We will continue to work to reduce inventories.

The transportation industry, as well as other industries, are in a global decline. When it turns around is anyone's estimate. We continue to operate under the assumption that this market decline is different from previous downturns, and that a turnaround will not occur until at the earliest, late this year. Until we do see a turnaround, our priority is to make sure our business can sustain itself at the lower volumes. We have taken actions and continue to adjust to the market realities to protect our liquidity, maintain our Company, and then to grow the business.

I am reminded of a quote attributed to Winston Churchill, where he said, 'when going through hell, it is best to keep going.' That is what we are doing. We believe we have positioned the Company to get through this dramatic market decline. When the markets start to turnaround late 2009 or 2010, we can continue our growth plans, with an improved performance for the future.

With that, I would like to turn the call over to George.

Thank you, John. When we started the journey three years ago to improve the operating and financial performance of the Company, we were on track for a record performance through the first half of last year. At that time, we were exploring business opportunities to enhance our top line growth. However, in the second half of 2008, the market declines which began in the US markets during the third quarter, quickly spilled over to the emerging markets, and has been a significant negative impact on the European market.

As John explained, we were finalizing the major restructuring projects we had initiated in November of 2007, when the significant downturn in the market occurred. We then quickly adjusted our strategic growth planning to a shorter term focus, to manage our cost structures, lower our breakeven level, and manage liquidity. Last year our sales were $752 million. During the first quarter this year, our sales were $121 million, which is an annual run rate of approximately 480 million to $500 million.

We have taken down our controllable costs for direct labor, fixed and variable manufacturing overhead, design and development expenses, and SG&A expenses by $21.9 million in the first quarter of 2009, compared to the first quarter of 2008. We have been able to lower our breakeven profitability level, and our breakeven cash flow very quickly, which is a real tribute to the Stoneridge organization. Even with the significant drop in sales in the first quarter, our cash balance only dropped by $3.5 million in the quarter, from 92.7 million to 89.2 million.

We continue to manage our working capital aggressively. We are reviewing our customer schedules every month, to adjust for capital expenditures and design and development expenses, to reflect our customer's activities on their product and platform plans, without impacting our own growth potential. We will continue to manage our liquidity, and aggressively pursue cost opportunities to reflect the reduction in our markets, until we see the markets starting to rebound.

Revenue of $121.1 million in the first quarter represents a decrease of $82 million, or 40.3%. Our sales decrease was the result of the decreases in production volumes in our served markets, severe restrictions in our new consumer credit, and general economic conditions. Indeed, we believe that the recent well-publicized financial difficulties of the Detroit Three, have further affected their sales performance.

For the first quarter, light vehicle revenue declined from $70.2 million to $33.8 million, a decrease of 36.4 million, or 51.9%. The decline was primarily true over the 54.5% decline in traditional domestic production in our controlled devices segment. Medium and Heavy Duty truck sales totaled $59.6 million in the quarter, a decrease of $45 million, or 43% over the prior year. The revenue decrease was driven by a decline of 41.8% in the North America commercial vehicle production, and a decline of 55.6% in European commercial vehicle production.

Finally, unfavorable foreign currency exchange rates, resulted in a $7.5 million reduction in sales. Sales to agriculture and other markets totaled $27.7 million, a decrease of 600,000, or 2.1% below last year. North America revenue accounted from an 80% share of first quarter revenue, compared to 73.7% for the same period last year. The percentage increase over North America revenue reflects the more dramatic effect of a reduction in European commercial vehicle builds, and unfavorable foreign exchange rate changes.

In the first quarter, Electronics revenues were $82.8 million, compared to $133.2 million last year, a decrease of $50.4 million, or 37.9%. Unfavorable factors affecting the first quarter performance, were the 41.8% decrease in North America commercial vehicle production, the 55.6% decrease in European commercial vehicle production, and unfavorable foreign exchange translation. Revenues for controlled devices of $38.3 million, declined from $69.9 million compared to the first quarter of 2008, which is a decrease of $31.6 million, or 45.2%. The 50.9% decline in production in North America light vehicles for the traditional domestic manufacturers, was the primary reason for the decline.

Our first quarter gross profit was $19.3 million, resulting in a gross margin of 15.9%. The gross margin decreased 9.6 percentage points from the prior year level. This decrease was due primarily to reduced industry volumes, and foreign exchange translation, relative to the prior year. Gross margin in the first quarter of 2008 was also affected by restructuring costs of $1.1 million to facilitate production line moves.

Sales from low cost manufacturing locations accounted for 42.8% of total sales for the first quarter, compared to 35.3% in the prior year. The increase is due to lower overall Stoneridge sales in the current quarter. With our China operation and our announced production line moves from our Mitchell Dean UK operation to China and Estonia, and our own corporate-wide initiatives, we expect our sales from low cost locations to be a key focus for our growth in the future. We will continue to expand our presence in the three low cost manufacturing locations, in Mexico, Estonia, and China.

Selling, General & Administrative expenses totaled $27.1 million in the first quarter, compared to $36.3 million in the previous year. The decrease in SG&A is primarily due to cost structure savings, which are the result of the previously discussed restructuring initiatives, and lower compensation related expenses in 2009. The first quarter income tax benefit was $2.1 million, or 15.4% of pretax income.

As reported for December 31, 2008, the Company is in a cumulative loss position, and continues to provide evaluation allowance offsetting it's Federal, state, and certain foreign deferred tax assets. As a result, no tax benefit was provided for losses in the first quarter of 2009 for Federal and state tax purposes. The impact of those valuational allowances was partially offset by tax benefit losses incurred in Sweden, in which it is more likely than not, that the benefit of those losses will be realized in the current year.

Due to valuation allowance and pattern of projected earnings, the quarterly effective tax rates could fluctuate significantly. We expect the 2009 annual effective tax rate to be between 38% and 42%. The unusually high effective tax rate anticipated for 2009, is due to the circumstance that caused us to write off our deferred tax assets in December of last year, and which continue to prevent the Company from recognizing a tax benefit, for domestic and certain foreign losses.

Once the markets stabilize and profitability returns, we expect the effective tax rate to normalize and be in the range of 27% to 30%. Including charges for pretax restructuring costs in the first quarter of $1 million, Stoneridge recognized the first quarter net loss of $11.6 million, or $0.49 per share. This compared with prior year net income of $6.5 million, which included pretax restructuring charges of $2.5 million.

Depreciation expense for the first quarter was $5.1 million, and amortization expense was negligible, as most of the intangibles had been written off in the prior year. Earnings before interest, other income, taxes, depreciation and amortization were negative $4 million in the first quarter, compared to a positive $21.5 million in the previous year, a decrease of $25.5 million.

Our primary working capital totaled 91.1 million at quarter end, which decreased 35.9 million from the first quarter of last year. As a percentage of sales, our working capital decreased from 17% of sales in the prior year, to 13.6% of sales in the first quarter of this year. The primary reason for the decrease was reduced Accounts Receivable, and lower inventory from lower sales activity.

Operating cash flow net of fixed asset additions was a cash use of 2.7 million in the first quarter, compared to a cash source of $3.1 million in the previous year. Our cash flow results in the first quarter were affected by lower sales activity, generating lower net income, offset by lower working capital. Capital investment totaled $3.9 million in the first quarter, mainly reflecting investment in new products, and a building expansion project in our Lexington, Ohio, facility, that is part of our previously-discussed restructuring initiative. The Lexington facility was originally contemplated to be a lease facility.

Some significant areas of our capital investments were in emissions, switch, and actuation products, and instrumentation. We are projecting our capital spend to be in the range of 16 million to 19 million this year. One of our most important measures for 2009 will be cash flow and liquidity. As of March 31st, we have 56.3 million of availability under our $100 million asset-based lending facility. We have no borrowings drawn against our asset-based lending facility, which has a maturity of November 2011.

Our quarter end cash balance totaled $89.2 million, compared with $92.3 million at the end of last year. Going forward, we expect we will continue to fund our operational growth initiatives for our free cash flow generation and available cash balances. Now I would like to take a moment to discuss our 2009 outlook.

As mentioned by John, the environment for 2009 will most likely continue to be a challenge. The same is true for the entire industry, given the interdependence of the supply chain to the OEMs. Though we have positioned Stoneridge to weather the storm as we see it now, we believe there still is abundant risk, given the state of the industry as a whole. Based on the efforts of our restructuring programs, head count reductions, adjusted 2009 compensation programs, flexing our production schedules, and our reduction in design and development expenditures, we have quickly adjusted our 2009 cost structures, to lower our breakeven level.

Based on the market forecast we are experiencing, our goal is to maintain profitable operations, and liquidity in these very difficult times, by lowering our breakeven sales level for profitability and cash flow. Although the first half of 2009 will be worse than we originally expected, we continue to expect Stoneridge to be operating income and cash flow from operations positive in 2009, with improved business conditions by late third quarter and in the fourth quarter.

In summary, we continue to modify our plans to respond to the rapidly-changing markets. We are making further reductions in our European and Mexico operations. We are lowering our cost structures to offset the volume reductions. We have adjusted our compensation programs to contain costs. We have reduced our head count over the last two years. We continue to adjust our work shifts and our plants, to adjust to new forecasts. At the same time, we were driving cost reductions, we continue to focus on liquidity and balance sheet strength.

We have continued to strengthen our balance sheet, by managing working capital and reducing capital expenditures. We have filed with GM, Chrysler, and Citibank, to avail ourselves of the government guarantee program for Accounts Receivable with GM and Chrysler. We continue to monitor business conditions, and will take necessary steps to ensure Stoneridge is positioned to deal with the current economic environment, while positioning the Company for growth when the markets turn.

Operator, I would now like to open up the call for questions.

Ladies and gentlemen, (Operator Instructions). Your first question comes from the line of Brett Hoselton from KeyBanc. Please proceed.

Good afternoon. This is Matt Michon in for Brett.

Hi, Matt.

I would like to start off by talking a little bit about potential restructuring charges. I know you did about $1 million in the quarter of restructuring charges. What do you see going forward for the rest of the year?

Well, the biggest charge will come as we are planning it right now. Again, we might modify our plans if we don't see the market turn around, but the biggest charge right now would come out of our European operations, of the people that we talked about, because those employees over there, even the salaried employees are unionized. We have to go through a period of discussions with them to work through this period of adjustment.

So we expect we will get some restructuring costs in the second quarter out of that. Maybe the third quarter. But that would be offset by the savings. We are still in the process of determining the exact amount, and nature of that. There will be additional restructuring costs coming. But they should be positively offset in the balance of the year.

So you guys feel pretty confident that your restructuring starting off in 2007 has gotten you to the point, where even though you are definitely flexing your work force, you are definitely doing all of the right things here, you don't necessarily need restructuring?

The plants that we have taken, that we have restructured, I think they were exactly the right thing to do. We have taken out high cost locations or high overhead locations, and consolidated those in.

If you look at the manufacturing operations now, we have three operations remaining in the United States. We have three operations in Mexico. We have one in Sweden. One in Estonia, and then one in China. So we continue to move that footprint to lower cost areas.

We don't see any other major restructurings that would require a significant restructuring expense. We will continue to monitor it, and I think, as we indicated, we will do that in both Europe and we have some Lean initiatives going on in Mexico, which we are implementing right now.

As I look out to the second quarter, and I look at some of our production assumptions, it looks like things are relatively in-line with first quarter. Is there any reason to think that you guys will, the cost savings and additional restructurings will come in and help you guys with margin, and perform a little bit better in the second quarter than you did in the first?

Well, I think what we are going to see, Matt, is the full impact of the actions we have taken, and the light vehicle market was better in March than February, and February better than January. So it started to stabilize in April and May. But the full implication of what we have done to right-size the plants, and reduce our work weeks, will see improvement in our direct labor and our variable overhead, that will kick in the second quarter.

The one wild card in this is of course yesterday, Chrysler, when they filed for bankruptcy, also announced they were shutting down their plants during the bankruptcy period, or at least for some period of time. So we are adjusting to that right now. We have started notifications to affected employees, that they would be on layoff. And so that is lot, we are adjusting to that real time, so that is a wild card to what the implication might be for the second quarter.

As far as the Chrysler bankruptcy is concerned, were you guys granted critical vendor status?

We were included in the program so I guess by the very nature, that I think that from Chrysler's perspective and GM's perspective, we were considered to be, I don't want to say critical vendor, but I think a vendor that they wanted to make sure was protected.

I guess with that program, placement of critical vendor status in bankruptcy. Depreciation. I am sorry, I didn't hear the number, what was it for the quarter?

It was $5.1 million, Matt.

Okay. And you also mentioned that your liquidity and capital structure is a competitive advantage, and you are quoting some [Byrons] business right now. Can you elaborate a little bit on what you are seeing on the resourcing front, and whether or not do you expect to see a General Motors and a Chrysler, with a nine, ten week shutdown here. Do you expect, or are you anticipating them making any kind of moves?

Well, I think regarding the shutdown, the real question for Chrysler right now, is how does it preserve it's supply base? And make sure it's supply base is capable of supplying when it comes back. We are certainly positioned to do that. That is not an issue for us. But it might be an issue for many other suppliers.

Regarding GM, I think the same question is true. I think if you looked at the latest forecast that came out around the 8.1 million to 8.3 million unit range. That already had factored in the GM, some downturn in GM, for the plants they were going to idle in the eight to nine-week timeframe. So that is factored in. What is probably not factored in is the Chrysler implications.

Regarding the wiring opportunities, as we see customers are just concerned about their supply base, and are looking for alternatives. Should they need to react and move quickly. We are certainly actively quoting on some programs, that we believe will have some opportunity there later on in the year as it unfolds. These programs probably won't impact us significantly in 2009, in terms of revenues, but they build a nice foundation for 2010 going forward.

Do you think later in the year, it goes from quoting activity to an actual move?

Yes. We are working right now, the real question for a lot of the customers is how fast could you move, and what could you handle? We are going through those discussions right now with them, and making sure that they understand what it would take, for us to take on business. It is kind of going to be, eventually we will run out of capacity, so to speak.

Right now, we are looking at all of the ways to take on this business, and some of those might be including leasing new space. But it wouldn't take us long to get that started up and run. I would say within a three to six month time window. That is consistent with what we see as the opportunity in this space.

And this really will be my last question. The size of the military award?

That we don't disclose, Matt. But we continue to work with Navistar, and they have been publishing their expectations of additional volumes, so we have been working very actively with a key customer on that side, on the government business.

Thank you very much.

You are welcome.

Your next question comes from the line of David Leiker for Robert. W. Baird, please proceed.

Hi, good afternoon, it is Keith Schicker on the line for David, George on the last conference call, you provided expectations for the North American light vehicle production and commercial vehicle production. Have you updated those forecasts that you are basing your guidance on?

Yes, I mean we didn't disclose that but the market, the industry has come down to on the light vehicle side, at about 8.1 million. That is what we are planning and building our expectations on for this year. As with the exception, as John has already discussed, with potentially what will happen to Chrysler, depending on how long they are down, they have indicated they will be down 60 to 90 days, as they work their way through the process.

We are still sorting out, in some cases General Motors announced the nine-week shutdown, but a lot of that is very based on when the holidays hit, July 4th, and those kinds of things. Some of that is in and some of it is out. We are still trying to work our way through that, and fully understand it. But on the light vehicle side, the forecast that we are working with is about 8.1 million annual units.

Then on the commercial side, both in Europe and we see that market being flat. It was down about 60% in the first quarter, and we see that being down about 55% for the year, of what is in our forecast. And then on the North American commercial side, we are looking at that being down in the heavy by about 30% from last year, and medium is down about 16% from last year.

Okay. That is perfect. Thanks. Then if I look at, we expect to be operating cash flow breakeven for the full year, there was an $8 million loss in the first quarter. What are the things that improve there sequentially, we mentioned some of the actions in Europe, is there anything on the SG&A level, or is the first quarter a good run rate?

I think you are going to see our cost initiatives trend up some in the second, third, fourth quarter, as the full implementation as we talked that our last call, we were doing a restructuring initiative in our one key plant in Mexico. John talked about the European operation, and also what we are doing on Leaning initiatives in Mexico. So you will see some improvement there.

We still have a ways to go on inventory, that John indicated. Our inventories were only down about $5 million in the first quarter. We have got room there. We had some bank builds that we did with the restructuring efforts, that will start to work themselves down in the second or third quarter. So I think a lot of it is going to come really from improved profitability off the first quarter level some, and then a continued effort in our cost initiatives, and in our working capital.

Okay. And to what extent does the guidance contemplate higher revenue, or how much of the benefit? Is it more cost driven that we are getting back to the breakeven level, or are you going to be reliant on a sequential increase in revenue throughout the year, to get back to the breakeven level on a full year basis?

It is about 50/50 between volume and improvements in the operation, between cost and other things that we have done, and clearly, for example, the Mexico peso is an advantage to us. We have a lot of operations there. That is all peso-denominated. There is clearly about half coming from volume, and half coming from other operations.

Okay. That is very good. Thank you.

You are welcome.

Your next question comes from the line of [Tom Mackay, Citlon]. Please proceed.

Hello?

Your line is open.

Good afternoon. I was wondering if you were able to buy any of your bonds in the market so far this year?

We haven't been actively out pursuing buying bonds. We feel that maintaining liquidity in this situation is in the best interest of the Company, because of the volatility of the markets, and so I think that is going to be one of the things that positions us well versus other competition.

Great. Thanks.

You are welcome.

Ladies and gentlemen, (Operator Instructions). Your next question comes from the line of [Gary Moorman] from Alpine Associates. Please proceed.

Hi, guys.

Hi, Gary.

Hi, Gary.

I am sorry if I missed this earlier in the call. The $100 million revolver, I understand it is undrawn. Did you say the availability was 56 or 66 million?

I think it was 56 million or $57 million.

And then what was depreciation and amortization for the quarter?

$5.1 million.

Okay. And then based on the caller's last question, you basically are saying you haven't bought any bonds this year?

No, we have not purchased anything in '09, and I think as John stated, that liquidity is our primary issue, and so we continue to monitor the situation, but we have not purchased anything this year.

Okay. Thanks, guys.

You are welcome.

Your next question comes from the line of Brett Hoselton from KeyBanc. Please proceed.

Just a couple of follow-ups. Can you update us on the status of the Brazil operations, and whether or not you expect them to start to recover, the Brazil JV, do you expect that to recover any time soon, as well as where are you on the sale of Sarasota?

We expect the Brazilian operations will have an improvement in the second half. The market, it has started to somewhat improve. But this is just a very volatile situation. You see some good months and some bad months. We do expect from what we are talking with them, that we expect a second half improvement in their business. They are also undertaking cost reduction measures in their business, and have undertaken cost reduction measures, to improve that, to maintain their performance to the extent possible to match the revenue decline.

On the sale of the building, we continue to have it marketed.

Matt, we continue to work on that. We have had active bidders on it. We are not a distressed seller. In fact, we just had a follow-up call this morning. As you can imagine, the commercial market is pretty tough in Florida. We continue to work with that, and I am not sure I see anything in the near term, but that is an active project that we have, and will continue to pursue.

Thank you very much.

You are welcome.

We have a follow-up question from the line of David Leiker from Robert W. Baird. Please proceed.

Just quickly, can you sort of discuss qualitatively or quantitatively what you are looking for in the ag market, and the military market, for the balance of the year?

Keith, we normally don't disclose those. I think where we are at is what John shared and I shared, is that that is a market that clearly, there are some advantages for us, and we are currently working with those now. At this point, we won't disclose anything in relation to those. We will keep you up to date as we move forward. We will probably have more next quarter, or early in the third quarter.

Okay. Thank you.

You are welcome.

At this time, there are no questions in queue. I will turn the call over to Mr. John Corey for closing remarks.

Yes, thank you. And again, these are very difficult times for everybody, and I just want to reflect that they are also difficult for our employees. We are asking them to go through and incorporate a lot of change in our business, as we try to adjust to reflect to this. When we do look at what we are trying to do, I think the strategy that we laid out several years ago, which was to improve our operations, to improve our financial performance, and then to diversify our customer base still remains legitimate.

We have improved our operations. The volumes hit us pretty hard, but we have improved our operations, we have improved our financial position. We have had a good program of customer diversification. We are seeing some great penetration there going forward. So that is positive for us, because it is moving our positioning away from dependence on the GMs and Chryslers of the world, to get some additional business. So that is important.

Second, this year as we talked about, we will continue to look at anyplace where we can get near term revenue wins, and we are actively working on that. Most of those will come in the commercial side of the business, and the wiring side of the business. We continue to focus on the cost reductions, and finally, and probably foremost, which is what we talked about last year, was to build our cash position, so should the situations get worse, we can get through those situations. And I think that is where we have positioned the Company.

I think as volumes start to return into this industry, whether that be late this year or next year, the Company is well-positioned to take advantage of that, and it has the cash capabilities to be able to take advantage of that also.

With that again, I would like to thank you all for joining us on the call, and look forward to speaking with you at the end of the second quarter.

Thank you for your participation in today's conference. This concludes the presentation, you may now disconnect. Have a wonderful day.