Interface Inc (TILE) 2002 Q4 法說會逐字稿

Good morning my name is Judy and I will be your conference facilitator today. At this time I would like to welcome everyone to the Interface fourth quarter and year 2002 conference call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question and answer period. If you would like to ask a question during this time, simply press star then the number 1 on your telephone key pad. If you would like to withdraw your question, press star then the number 2.

I will now turn the call turnover to Ms. Christine Morman (ph) of FD Morgan-Walk for introductory remarks.

Good morning and thank you, everyone, for joining us today. I'd like to welcome you to the Interface conference call. We're here to discuss the company's results for the fourth quarter and year-end 2002 which was reported yesterday after the close of the market.

Hosting the call today from Interface is Dan Hendrix and Patrick Lynch, Vice President and Chief Financial Officer.

I'd like to say a word about procedures before we begin after management makes formal remarks we'll take your question. Please note that during today's conference call management's comments regarding interface business which are not historical information are forward-looking statements.

Forward-looking statements involve a number of risks and uncertainties and could cause actual results to differ materially from any such statements, including risks and uncertainties associated with the economic conditions in the commercial interiors industry as well as risks and uncertainties discussed under the heading safe harbor compliance statement or forward-looking statements in item 1 of the company's most recent annual report on Form 10(k).

We direct all listeners to that document. Any forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and as such speak only as of today's [inaudible].

The company assumes no responsibility to update or revise forward-looking statements that are made during this call and cautions listeners not to place undue reliance on any such forward-looking statements.

Lastly, please note that this call is being recorded for Interface and contains copyrighted material. It may not be re-recorded or re-broadcast without Interface's express permission. Your participation on the call implies your consent to the company's taping of it.

With these formalities out of the way I'd like to turn the call over to Dan Hendrix. Dan, please go ahead.

Thank you. Good morning and thank you for joining us today for a discussion of our results for the fourth quarter of 2002. Total revenue for the quarter was in range with the guidance that we provided last quarter and was in line with street estimates.

As expected [inaudible]our bottom line number was negatively affected by the charge taken in connection with the previously announced initiative to restructure our fabrics position and reduce head count. And also [inaudible] or position to sell or otherwise finance strategic alliance for our raised flooring system which I will discuss further in just a moment. Excluding these items, we also were within the range of our bottom line guidance given in the third quarter.

In addition, notwithstanding the continued difficult market conditions, we were able to generate more than 17 million of free cash flow during the fourth quarter 2002. For the full year we generated approximately 39 million in free cash flow, which was at the high end of the guidance that we gave and we finished the year with 34 million cash on the balance sheet. So even in these tough difficult times we have demonstrated our ability to generate cash and we resolve to continue this focus in 2003.

Interface continues to be the undisputed leader in the corporate market segment for modular floor coverings and fabrics. We don't believe we've experienced any market share erosion during this downturn. If anything, we are gaining share, even in a depressed corporate market. Our modular products, particularly carpet tile, are the top choice among corporate users.

While we are committed to maintaining our leadership in the corporate segment, we see great growth opportunities in other segments such as retail, hospitality, health care, education, government, and yes, even residential.

We have some interesting announcements about our residential efforts in the next two or three weeks. [inaudible] non-corporate sales opportunities we have increased our marketing budget in those segments in order to raise awareness for our products and stimulate revenue growth. In essence, as I've mentioned before, we are leaving no stone unturned when it comes to implementing efforts to penetrate those markets outside the corporate segment. And we've made good progress this year.

For example in the U.S. module business sales for the corporate segment were 71 percent of our 2001 sales versus 64 percent of our 2002 sales. [inaudible] sales in the corporate segment were 75 percent in 2001 versus 60 percent in 2002. We also have had success penetrating new markets for our fabrics products. Unfortunately, the decline in corporate spending overall has simply out paced our marketing segmentation efforts. Rest assured we are going to keep working hard to reverse that trend.

Also in our fabrics divisions we're on track with our restructuring initiative. We expect the plans to be completed by late second quarter, early third quarter of this year. As we stated in our press release, we decided to divest or create a joint venture for strategic alliance for access floor business. We expect the plan transaction to help us generate free cash and also allow us to focus on better near term opportunities for growth and profits.

Now I'll turn the call over to Patrick who will give you more details on the numbers and I'll follow-up afterwards with some closing remarks..

Thanks, Dave. With the announced plan to sell our raised flooring business our results reported in the earnings release reflect the accounting treatment required by [inaudible] 44 for the planned disposal of long lived (ph) assets.

As in the press release, my discussions here except for net loss excludes the raised flooring business. Sales in the fourth quarter were 232.3 million compared with 240.4 million in the same period year ago and 231.3 million in the prior quarter.

During the fourth quarter the company recorded a 23.4 million non-recurring pre-tax restructuring charge equivalent to 31 cents per diluted share after tax. Associated with our previously announced initiative to further rationalize manufacturing operations in our fabrics division and further reduce worldwide work force.

Operating income excluding the restructuring charge and intro speculative period was 7.4 million in the fourth quarter of 2002 versus 10.1 million in the fourth quarter of 2001. For purposes of your comparison, I will note that there was a nonrecurring pretax restructuring charge of 2.9 million or 2 cents per diluted share after tax in the fourth quarter of 2001.

Loss from continuing operations was 1.8 million in the fourth quarter of 2002, excluding the restructuring charge compared with income from continuing operations of 1.6 million in the fourth quarter of 2001, excluding the restructuring charge in that period. With respect to re-structuring charges included, loss from continuing operations 17.4 million in the fourth quarter 2002 compared with the loss from continuing operations of point 3 million for the fourth quarter of 2001.

In accordance with FAS-144, the results of operations for the raised [inaudible] business are broken out separately [inaudible] shown on our press release as discontinued operations. In the fourth quarter the loss from those operations was 12.8 (ph) million, net of tax. That number includes a pre-tax impairment loss of 18.3 million, associated with the write down of the carrying value of the assets of that business (ph) [inaudible] net realizable value as required by FAS-144.

Net loss, which I mentioned earlier, includes discontinued operations as well as restructuring charge in each respective period or 32.2 million 60 cents per diluted share during the fourth quarter 2002, compared with the net loss of point 7 million or 1 cent per diluted share during the fourth quarter of 2001.

Gross profit margin in the fourth quarter was 27.8 percent compared with 28.5 percent a year ago and 27.9 percent the previous quarter. The year-over-year percentage decrease is due primarily to overall lower sales volume and our efforts to reduce overall inventory levels which inhibited the full absorption of six manufacturing costs.

The contraction in gross margin was offset somewhat by the exclusion of [inaudible] foreign business [inaudible]. As the sequential numbers show we have pretty much curtailed any further margin erosion.

Interest expense in the fourth quarter was 10.3 million versus 8.8 million in the same period year ago, 10.6 million in the third quarter. The year-over-year increase is primarily due to the [inaudible] 2002.

Depreciation amortization in the fourth quarter was 8.4 million resulting in EBITDA for the before the restructuring charge of 15.8 million for the quarter, 74.8 million for the whole year. Capital expenditures in the fourth quarter were 5.4 million, total capital expenditures for fiscal 2002 were 13.9 million in line with our previous estimate. SG&A remained fairly flat for third the quarter in absolute dollars and as a percentage of sales and were down 1.3 million compared with the fourth quarter of 2001.

During the fourth quarter we generated 17 million in pre-cash flow, and at the end of the quarter we had 34.4 million in cash. [inaudible] credit facility, the balance under our accounts receivable securitization [inaudible] approximately 30 million at the end of the quarter. Now I will review our individual business units starting with our domestic floor covering.

U.S.modular experienced decrease of approximately 5% in [inaudible] third quarter 2002. Our performance remained strong but reduced volume and increased pricing pressure [inaudible].

Our European modular business continues to perform well despite tough economic conditions throughout Europe. Sales improved almost 6 percent compared with third quarter 2002 (ph), which translated into a 16 percent improvement in the business unit’s profitability during the quarter. Additionally orders in the fourth quarter 2002 were up 17 percent when compared with the third quarter of 2002.

Our Asia Pacific business continued upward trend. Sales were up almost 10.5 percent, operating income was up almost 45 percent during the quarter compared with the third quarter of 2002. Also orders during the fourth quarter were up 4 percent compared with the third quarter and up 27 percent compared to the year ago period. Again this is a good example of the operating leverage that exists in all of our businesses.

Our [inaudible] business rebounded (ph) slightly during the fourth quarter, saw sequential improvement in both sales and overall profitability. However the performance the quarter is still not in line with our expectations. The expectations we have for this business and more work remains for us here.

Our service business continues to struggle in this slow (ph) environment. Sales declined almost 10 percent during the fourth quarter and pricing pressure especially on large jobs negatively affected the profitability of this business unit during the quarter.

Our fabrics business continues to be depressed by market conditions in the office interior market. However, despite lower sales volumes in the fourth quarter as could have paired to the third, we have begun to see some of the benefits of our restructuring activities which resulted in the slight improvement in operating results. Now I'll turn the call back over to Dan.

Thanks, Patrick. While we're still operating in a difficult business environment which probably will continue in the near future, we will not remain idle waiting for the corporate market to recover. We've heightened our efforts to penetrate new markets and expand our revenue base. We are very encouraged by the progress of our market [inaudible] strategy and are pleased with the positive [inaudible] carpet tile business, both in the United States and abroad. We are particularly pleased with advances made in education, retail space, hospitality and residential segments.

We remain confident in our ability to generate strong cash flow to pay down debt in the coming quarters. (ph) The full year 2003 our goal is to generate between 30 and 40 million in free cash flow and we feel good about our liquidity position as well. We have 4 45 million in public bonds outstanding and our first principal payment is not until November 2005, almost three years from now. We have $100 million in revolving credit facility in place with our primary banker and currently we have zero borrowing outstanding under it (ph). So in essence we have created a capital structure that can continue to weather this downturn.

Additionally we do believe there is light at the end of the tunnel. Our U.S. modular carpet business, while not immune from economic conditions, continues to show strong, resilience remains very profitable throughout the downturn. In fabrics we believe the first quarter 2003 will be challenging, but we still expect to improve profitability from the fourth quarter 2002.

In addition, we expect fabrics to be profitable in the second quarter of 2003 and as begin to realize the benefits associated with our restructuring initiative and recent sales initiative

Our business in Europe is improving in the fourth quarter has first sequential increase in sales stretching back for 8 quarts quarters. We expect that trend to continue. Asia Pacific has been a bright spot for us recently and finished in the second half of the year with strong momentum. The fourth quarter of 2002 sales margins and operating income were all up compared with the prior year and previous quarter.

We've recently introduced a new price point product in Asia under the well known [inaudible] brand, and it is opening up a wealth of new opportunities for us. [It is an] extremely promising marketplace. Our carpet and service business are still challenging but we feel we have the right win in place to return them to profitability.

All in all, we are confident in the future prospect of our company and our positioning ourselves to fully capitalize on improvement in the market position.

Now I'll take questions.

At this time I would like to remind everyone if you would like to ask a question, please press star then the number 1 on your telephone keypad. We'll pause for just a moment to compile the Q. and A. roster.

Your first question comes from Sam Darkatsh with Raymond James.

Two or three quick questions if I could. Dan, your quantification of restructuring savings for 2003, if I recall is about $10 million, is that right?

It's 10 million in fabrics and probably 5 million elsewhere.

Okay. And so I know you guys didn't give earnings guidance for 2003, but if we were to assume that revenues were-- would remain essentially sequentially flat as they have in the last few quarters, could we then assume that we could just take the restructuring savings and apply that as an incremental EPS performance over 2002?

I would say-- we're going to blend it in. We won't get the full benefit until probably second quarter, but I'd say [inaudible] 6 to 7 percent.

Okay. Second question. From Patrick's-- just description of the individual business trends, U.S. module were down mid single digits sequentially, yet [inaudible] was up. This is a the first quarter. I can remember at least that[inaudible] may have shown weaker trends than broad loom. Can you talk a little bit about that? Is that a trend that will continue or is that something that happened third quarter to fourth quarter that's been a bit of an anomaly?

I think it's a bit of an anomaly. I would say that-- yeah, I think our module business will out pace our broad loom business. We’ve had some very good success [inaudible] the education and institutional market with broad loom business, that happens third quarter.

Let me remind you the hiccup we had in our business in broad loom business we had production problems at the end of the third quarter which left production [inaudible] production that should have hit in the third quarter actually fell into the fourth quarter. We kind of had a little bit of a double dip in the quarter [inaudible].

If you take that out of the equation, then-

It’s probably sequentially flat.

Okay, I gotcha. Two more quick questions.

You mentioned that your mix of corporate has continued to come down 2001 to 2002. Your sales fourth quarter to third quarter were essentially identical. Did that mix also drop third quarter to fourth quarter?

I don't have that in front of me, Sam. But I'm sure it did. We're having [inaudible] success in retail space [inaudible].

: And last question would be we're seeing fiber prices on the residential side, a little bit of pressure on pricing. Can you again address a little bit what you're seeing?

I'd say Dupont is making noise 3 to 4 percent price increase. I'm not certain it will stick or not, but I'll tell you if we get it, we'll raise our prices. Typically we are always able to pass that on. Sometimes it's welcome news to get a price increase believe it or not [inaudible]. We'll see if it sticks or not. There's some discussion in the marketplace.

Okay. Thank you very much.

Your next question comes from Lee Braiding (ph) of Wachovia Securities.

Hi, thank you. A couple follow-up items. One similar to the previous caller, in regards to the modular business could you find some further segmentation giving color to change sequentially [inaudible]?

I would say, Lee, that the biggest benefit we got in segmentation came out of the education market and the institution market, both in broad loom and the modular business.

I would say we're getting pretty good traction now in hospitality. We haven't realized the benefit of that yet but I anticipate this year we're going to get a good benefit out of hospitality.

So I would, to give you color, there’s a lot of good things happening with the market segmentation most especially (ph) education and retail space, but hospitality [inaudible]. This quarter for broad loom and modular carpet and we're really excited [inaudible] but we're getting a lot, a lot of chatter about home product and interface residential partners modular.

I know you talked about in the past sales force, how you stand [inaudible]. Are you pretty satisfied is this

We're actually adding-- we're continuing to add people in the market segment.

One in particular?

Particularly in the education market and the [inaudible] market. [inaudible] hospitality.

And you also--

[poor quality audio throughout this response].

You also had mentioned – I guess in the outlook [inaudible] $30-40 million cash flow. Can you walk through some of the components [inaudible]? I know you talked about CAPEX roughly 15--

If you look at CAPEX there is a $19 million delta between depreciation amortization [inaudible].

Our target working capital reduction, 15 to 20 million. There's probably a pretty good hedge (ph) in there, we expect to get 10 to $15 million tax [inaudible]. So we have an opportunity to reap that component of it [inaudible]. I'm pretty confident that 30 to 40 million I would be very disappointed if we didn’t [inaudible].

I know I think last quarter you were talking about expecting to have 7 million in cash restructuring charges [inaudible]. Is that still the number?

yeah, we have incurred two and a half in the fourth quarter.

Two and a half in the first quarter?

No, in the fourth quarter of ’02. we’ve incurred cash restructuring charges already. (ph)

Okay. Thank you very much.

Your next question comes from Scott Phillips [operator said Keith Hughes}of SunTrust Robinson Humphrey.

Hi. It’s Scott Phillips stepping in for Keith. My line was breaking up. Could you run through those 30 to 40 million assumptions again real quick working capital?

: Sure. If you look at depreciation should be around 35 million to 34 million. CAPEX is projected to be 15 million. [inaudible] 19 million [inaudible].

And then on the asset sales?

Well, the working capital-- asset sales aren't in the 30 to 40 million.

Right. But in the October guidance of 60 million, didn’t you have 20 million included in that?

Yes, we had 15 million included in that.

Okay, okay. And is that constant or does that go up when the rates [inaudible]?

It goes up:

Do you have a number you could offer?

I think your numbers are [inaudible]. So that's obviously gives us a lot of ability to be [inaudible]. [audio cuts out completely]

Hello?

: I said that gives us an opportunity to obviously reach the 30, 40 million guidance.

Gotcha, I see.

[inaudible].

Sure. And then on the current liabilities, could you fill in the blanks on the payables and accrues?

: Sure.

Hello? I might have a bad connection here. Can you hear me

Yes, I can hear you. 56.4 million in payables and accruals were 93.2 million.

93.2?

NEW SPEAKER: Right. It was about 7 million of liabilities under the liabilities held for sale category.

Great. Okay. Thanks a lot.

OPERATOR: Your next question comes from Robert Manowitz (ph) with UBS Warburg

Hi, good morning.

: Good morning.

: I'm looking at the press release here balance sheet section and I was wondering if you could walk us through the two line items that together declined by about $60 million, year over year and that would be the property [inaudible] and equipment and the other asset. If you could provide sort of the main components, that would be helpful.

Sure. The 2 12 million C.P. and E. line? And the other assets of 2 83 or 2 84, together those two items are about 60 million yearful (ph) and I'm wondering what's falling into that $60 million [inaudible].

Part of the asset category would be the write down of good will which would be 5 million.

I'm sorry, how much?

$55 Million. [inaudible] and equipment was disposable [inaudible] assets as well as the write down associated with the restructuring in fabrics, fabrics business, as well as $18 million write down of the asset rates access for [inaudible] business as well.

Okay. So there are no sales lease back transactions or anything like that?

: No.

Okay. Secondly, we touched a little bit on the divestiture of the first assets, but where do you stand specifically in the process?

That's done and was completed mid 2002. [inaudible].

So no additional proceeds are expected in '03?

: That's correct.

And then could you give us a more updated balance for your cash position either today or over the last couple days?

We're probably in the neighborhood of 10 to $12 million through February in the bank. It's down from year-end.

Great. And finally, I'm having a little trouble also hearing all of what you're saying, but I thought you said you spent 2.5 million on restructuring charges in the fourth quarter ' 02 ; is that correct, and how much did you say you would spend in '03?

That's correct. And I think there's probably three to four in '03 [inaudible].

Great. Thank you very much.

Your next question comes from Mike Kender (ph) with Salomon Smith Barney.

I was wondering if you could fill in a couple of the blanks. On [inaudible] European modular [Low audio] North America I think you only gave a sequential sales number. I was wondering if you could fill in this other--

Say that again, Mike. I'm not sure we got much of the question.

For North America modular versus sequentially fourth quarter, I don't think you gave us as much detail as European and Asia. For those you gave sales profits orders.

Both of them were sequentially up.

Could you talk about North American modular? What was that sequentially versus third quarter? I think you said sales were up 5 percent, but I didn’t -

Numbers were roughly flat third to fourth and actually we're flat year over year as well in modular .

That's North America? Is that North America or total?

That's just North America.

Okay. And we're about almost two months through first quarter. Can you talk about first quarter the trends you see and do you have any guidance for revenues EBITDA for first quarter?

: We're actually not giving guidance. I will tell you the first quarter feels pretty much like the second half of ' 02. January was a little soft, February is [inaudible].

Okay. [inaudible]. In terms of the cash flow walk through that you've given us a lot of the pieces, you know. Should we-- the one obvious missing piece is EBITDA. Should we be assuming similar run rates to what we've seen in the last two quarters?

I would say if you looked at the first quarter, that trend is very similar.

Okay. Great. Thank you.

Thank you.

Your next question comes from John Mall with Wachovia Securities.

Good morning, thank you. My question is first I know discontinued, but what were the sales in the operating loss of the raised taxes foreign business in Q4 and for the year?

NEW SPEAKE: In the quarter it was about 3 million in sales and the operating loss was about a million, million 2. Sales for the year were roughly 22 million, operating loss was $4 million dollars (ph).

John Mall I'm sorry, how much?

4.

John Mall Okay. And then could you discuss-- obviously you've got some restructuring in fabrics and lowering costs and virtually all your business units, volumes aren't picking up. Can you discuss pricing by market, if you will, to get in the smaller ones? But curious as to whether you expect pricing, in ‘03 , to put additional margin pressure on any of the unit?

I will say prize surprisingly our [inaudible] price to sell. Our modular business on the big jobs there is also pricing pressure but on the day-to-day business fourth quarter, third quarter pricing [inaudible].

In Europe pretty much don't have the same kind of pressure you have [inaudible]. The modular, I mean the broadloom business is surprisingly resilient. [inaudible].

I'm sorry?

I'm going back to the products. There's a [inaudible] we printed in the [inaudible].

The fabrics?

Fabric side you've got price pressure from the OEM (ph) [inaudible] management. I think pricing there has been a real pressure, but it always is [inaudible]. I don't know that we're going to have pricing pressure going into [inaudible]--

I'm sorry, I couldn't hear that last comment.

: We're breaking up.

John Mall Yeah. When I picked up the phone, you're extremely muted, the volume is very low.

I said from an overall pricing standpoint, I don't see any more pressure in [inaudible].

Okay. That's all I had. Thank you.

Once again, if you have a question, please press star then the number 1 on your telephone keypad. Your next question comes from Larry Taylor of CFSB.

Good morning. Most of my questions have been answered, but I wonder if you guys could comment as you look quarter to quarter, without asking you for guidance, [inaudible] tight this year and [inaudible] how you expect that to unfold?

You know, I would say that [inaudible] we're actually going to look at [inaudible].

I'm sorry, could you speak up? I'm having trouble hearing you.

[inaudible]. I said we're looking to do an asset back deal [inaudible]. Look at the current trend it gets tighter [inaudible].

Okay. And then if you could give us some sense, I know it's sort of an open question here, but an evaluation-- I'm sorry, the timing of the sale for this raised [inaudible]?

: We hope to get it done by the end of the second, we're actually in conversation [inaudible].

Okay. End of the second quarter. And then one last question, and then I apologize, this is the second or third clarification here. But on the cash payment pending from the prior restructuring charges I thought I heard you say 3 to $4 million this 2005ful still in '03 to go?

: Correct.

Does that mean some of these are going to trail into '04 as well?

No, that will clear any pending charges.

NEW SPEAKER: That's correct.

Terrific, OK thank you very much.

Your next question comes from Philip O’Sullivan of Good Buddy Stockbroker. .

Phillip O’Sullivan: Hi. I have three short questions with the raised floor business. What would be the time frame for completing the deal? Also, if you can't find a buyer, would you consider [inaudible] division and if there is interest how many companies have expressed an interest in it so far?

I don't want to giveaway my [inaudible], but obviously [inaudible]--

Phillip O’Sullivan: Can you speak up? I can't hear you. Hello?

: Yes. I'm sorry. There's something wrong with our speaker[inaudible]. I would say that from a buyers that are interested, we're talking to several. I don't expect it's going to happen [inaudible] two players in the marketplace [inaudible].

Phillip O’Sullivan: Are you saying one or two companies are interested? The line is very bad.

Several. I said.

Phillip O’Sullivan: Several, okay. And what would be the time frame?

By the end of the second quarter.

Phillip O’Sullivan: End of the second quarter, okay.

Yes.

Phillip O’Sullivan: Great. And that's about it. Thanks very much. Bye.

: Your next question comes from Eric Roberts (ph) of Greenwich Capital.

Good morning. Can you hear me?

Yes. We can hear you fine.

Great. I just want to talk a little bit about the company’s, I guess longer term, regarding leveraging. The company is currently very levered, and I know you talk about you have a revolver that I guess you can draw down on.

But at the end of the day a lot of the free cash flow that the company has generated both last year and what you're projecting this year from comes from, shall we call [inaudible] one time items, whether tax refund or not spending as much of CAPEX as you may have otherwise or just reducing your working capital. So given that the company is leveraged six times, I just wonder what your guy's thoughts are?

: Obviously we're going to use our excess cash flow to pay down debt. I looked at just a break even scenario over the next three years what kind of cash will we generate and when would we run out of the benefit of reducing working capital. I think we can generate about 150 to 160 million by the end of ' 05, to de-leverage the company.

Additional reductions in working capital?

: Actually if you looked at-- if you looked at how much cash we would have to do leverage the company in ' 05, we have the 120 million nonpayment. And we just broke even and now until ' 05 the way I look at it we generated about 150 million in free cash flow that we could use to pay down debt and de-leverage the company.

So hopefully we're going to have a turn up in the market. Market segmentation is going to kick in and margins improve significantly.

I know you have a $10 million tax refund last year and you're expecting one this year. Is that the end of these one time items?

: I hope so. Actually hope we start earning money--

I just didn't know if there were additional payments you guys were expecting.

No, that's it.

My next question had to do with the write down of the raised flooring business. What was it written down to?

I'd rather not say what that is. It's part of the negotiation. I'd not disclose what the net number is. I can tell you what the write down was.

$18 Million write down.

$18 Million.

I don't care about the exact number.

It was probably 20 million plus.

Okay. I mean, the issues I think a lot of shareholders are feeling a little frustration here it seems to be very every quarter there are additional write downs and this is well, $20 million is a huge number in terms of the dollars and cents and magnitude. It certainly does make people question or, you know, what else might there be. It seems like last quarter there were write downs.

We announced it last quarter. We didn't write it down last quarter.

This was the same one?

: Yes.

So after the good will write down and this write down, what are your thoughts? Is the balance sheet looking pretty good? Can we be pretty sure there won't be additional write downs for next year?

We've rationalized 12 plants in the last 24 months.

Okay. A couple more quick questions. How much availability is there with the revolver today?

100 million.

You can draw down on all of it?

Right.

On the A.R. facility, if the company's debt gets downgraded, is there anything that would trigger that A.R. facility?

No, no.

Okay. My next question has to do with the pension. Are there any cash contributions that need to be made over the next couple years?

We do have a pension plan in the U.K. will there require about a million to million and a half next year of pension contributions incremental by 500,000 to a million dollars next year of additional pension [inaudible] acquired from a cash flow perspective.

Okay. And two other questions. One is I know you guys were in the market buying back some of the senior sub notes that were trading in, yielding 25 percent. What is the company's status now in terms of buying back their debt? Are you capable of doing it from a credit perspective --

not capable of buying back the 9 and a half, we are capable of buying back the 10 and three eighths, 7.3.

Okay. Your other debt covenants don't prevent you from doing that ] is that currently something you're looking at or better uses of capital at this point?

I think we’re going to accumulate cash to pay down the 9 and a half.

Okay. My last question just had to do-- I know there was a non-interest bearing loan to Mr. Anderson and I was just wondering if that has been paid off ?

: It's actually interest bearing with an amortization period to it.

Okay. What is the interest rate on that?

Would be our market rate which is I guess 4 percent today, 5 percent.

Okay.

I don't have-- I looked at my legal counsel. We put a market rate.

What are the chances of that half million dollars loan-- it's still half a million, right?

600,000.

$600,000 I don't think the company's market rate can purchase that, it's 5 percent?

We were doing that on an incremental borrowing rate.

As a shareholder those types of things when you're owning the stock which is in the gutters those type of things do not sit well and just my thoughts about the shareholders. Thank you for your time.

Point taken.

Your next question comes from Juliet Gerk (ph) of Bank of New York.

Hi. I was wondering if you could talk a little bit about your working capital strategy. There's been a significant decline in accounts receivable inventories. I was wondering if you could talk a little bit about that whether any of that was written off, and whether any of that was seasonal?

No, I would say that it's a philosophical change that we made, we adopted a spot chain management program probably 15 to 18 months ago. It's coordinated with Cap Gemini. We've undertaken over the last couple months to streamline and make our working capital needs more efficient -- kind of adding some science to our methodology, in our process. That has been a concentrated effort across all receivables-- there hasn't-- a significant portion of that has not been a significant write down is so forth. It's really kind of fundamentally improving our prophecies and strategies associated with working capital.

Thank you. And one more question. Just going back to the restructuring charge for a moment, in your last press release, you said 18 million of the restructuring charge that you expected to take this quarter, 8 million was going to be in cash and 10 million in non-cash.

That was not in that particular quarter. Over the life of the whole restructuring.

Okay. So can you break down the 23.4, can you break that down into cash and non cash?

: It's very similar in the components. I would say that it probably actually the increases are mostly non-cash and additional one or 2 million in cash.

So 9 to 10 million in cash and the remainder non-cash?

Yes. [inaudible].

I'm sorry, say that again?

I'm sorry, I'm confused by your question.

Can you repeat that? I think I missed a number, the amount in cash out of the 23.4 was going to be what?

Probably be 8 to $9 million in aggregate.

Thank you.

Your next question comes from Macon Ruddsill (ph) with Keane Capital management.

Hi, guys. How are you doing?

Good morning

A couple questions. [inaudible?] I guess he in the 100 million dollar revolver, can you layout for me-- I forgot these numbers exactly when the covenants are due, in different pieces.

Under the revolver?

No, just kind of wondering, I think we all know the carpet business is not great and neither is the semiconductor business and a lot of other businesses out there. You're doing a lot of wonderful things to, you know, lower your operating cost to give you significant earning power in light of a recovery. I just kind of want to simplify some of the covenants due.

I guess the EBITDA interest is the 155, steps up to 2 by the end of the year.

Under the revolver.

And we are moving to go to an asset backed deal where you take away the covenant and we are actually already in the process of doing that with the bank to take away all covenant pressure. And we [inaudible] our assets-- all indications, it's pretty easy to do and we should get it done actually by the end of this quarter.

And I know you talked a little bit about the raised floor business, and I think you said-- you talked of making assumption of what that business would be worth at this point. Is that kind of where-- but that would be additional--

: That would be additional cash.

Additional to the [inaudible] toward the end of the year.

Right.

It's hard at this point to kind of--?

I've got some valuation numbers in mind. I just obviously don't want to give them over the conference call.

Right. Okay. Best of luck. Congratulations on some good cost savings and we'll--

: Thank you for your time.

Thank you.

: Tilt there are no further questions.

: Thank you.

Ladies and gentlemen, this concludes today's conference call. You may disconnect at this time. [Normal Termination]