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Commercial Vehicle Group, Inc. (NASDAQ:CVGI)

Q1 2009 Earnings Call

May 01, 2009 10:00 AM ET

Executives

Chad M. Utrup - Chief Financial Officer

Mervin Dunn - President and Chief Executive Officer

Analysts

Chip Miller - JPMorgan

Alan Weber - Robotti & Co.

David Leikar - Robert W. Baird

Operator

Good day, ladies and gentlemen and welcome to the First Quarter Commercial Vehicle Group Incorporated Earnings Conference Call. My name is Leticia, and I will be your coordinator for today's conference. At this time, all participants will be in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions).

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

Chad M. Utrup

Thanks Leticia. Thanks everybody for joining the conference call. s usual before we begin the formal portion of today's call I will first read through our Safe Harbor language then I'll pass the call over to Merv for a brief company update. And then I'll take you through the operating results for the first quarter and then we'll answer some questions for you.

With that, I'd like to remind you that this conference call contains forward-looking statements. Actual results may differ from anticipated results because of certain risks and uncertainties. These may include but are not limited to the economic conditions in the markets in which CVG operates, fluctuations in the production volumes of vehicles for which CVG is a supplier, risks associated with conducting business in foreign countries and currencies, and other risks detailed in our SEC filings.

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

Mervin Dunn

Thank you, Chad, and thanks to everyone, who has joined our call today. With all the news that's come out this morning with Chrysler in the automotive world. We appreciate you taking your time to join us, and we would like to remind you that we do not have any light vehicle production tied to Chrysler, GM or Ford. With that, we'll start on ours.

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

In response, we have continued to aggressively adjust our manufacturing foot print and consolidate operations, where possible to reduce cost in the short-term by improving our long-term competitive position.

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

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

During the quarter, we also temporarily suspended the company's match on employees' 401(k) contributions. At the beginning of the year, we institute a hiring freeze and eliminate base sale increases for all our employees in 2009.

We continue to adjust the working hours and pay structure of our hourly and salaried employees that are operating facilities on a weekly basis, inline with our customer order schedules wherever possible.

In March, we announced plan to close our Vancouver, Washington manufacturing facility. The facility had approximately 62,000 squire feet of lease space, employee based 70 people, and its been part of our organization for a long time.

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

On a more positive side, we also announce two new business contracts during the quarter. We believe this speaks highly of our workforce and the strength of our company. This new business which was cash from the stress suppliers from stress suppliers should lead to expanded market share for CVG, when the economy approves and more volumes returned.

The first contract expanded our existing agreements to provide multiple CVG interior products for Daimler Trucks North America or DTNA. And in this agreement, our Dublin, Virginia and Statesville, North Carolina facility will supply headliners for use in Daimler's Freightliner Cascadia model and miscellaneous interior trim moldings Daimler's in Daimler model and miscellaneous interior trim load for the Freightliner FLD model.

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

The second new business contract calls for CVG to provide Daimler Trucks North America or DTNA with additional interior products. Under this contract, we will ship interior products such as headliner, back walls, sidewall trucks. Tables, ladders and we also announced bunks tables, ladders and door panels for use on Volvo trucks. This new agreement also cost for a supply additional parts for Mack landed trucks.

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

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

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

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

It will certainly have strength in our competitive position both the near and long-term. As we manage through the first quarter, we continued to address volume declines by further reducing our workforce, to meet declining market demand.

We also increased our efforts to control inventory, which can be tough when volumes don't -- its rapid use. Our success is evident through the reduction of our inventory balance of nearly $20 million in the first quarter.

And with new customers continue to expect low production volumes in 2009 for Class 8 Trucks in North America. There are also continued to predict, weak construction markets in Europe and Asia.

While we are not providing 2009 gains due to whole EBIT (ph) volatility of our global markets. We believe that North America Class 8 production levels for a range around the 135,000 units.

In addition our global customers, and construction continue to refine production volume projections on a daily basis. And in some cases still see 40 to 50% reduction in production levels for the year from 2008.

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

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

Chad M. Utrup

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

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

In addition, to the reductions in demand in these key markets our OEM bus aftermarket, service and other specialty product market revenues were collectively down over 30% from the prior quarter of last year.

While our military business remained relatively strong, yet still down from the same period last year. Even when compared to the fourth quarter of 2008, our revenues were down 34%. Top-line reductions of this magnitude are of course difficult to overcome in a short period of time, which is why we have been proactive on cost reductions and cash management throughout the quarter, which Merv mentioned earlier.

These cost reduction initiatives are evident in our SG&A expenditures for the quarter, which were reduced by approximately $1.7 million or 11% from this time last year. And on a comparative basis, excluding the one-time gain of our, sell on our Seattle facility in last year's first quarter, and the $1.7 million restructuring cost from this past quarter.

Our operating income decreased by approximately $22.1 million from the prior year on a sales reduction of 88.5 million. This represents a 25% decrease in operating income as a percentage of a decline in sales, which highlights the benefits of our highly variable cost structure and the impacts of our fixed cost reductions, despite such a drastic and rapid drop in revenues.

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

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

Capital spending also continues to remain a focus and was only 1.7 million for the quarter or 1.6% of revenues. We did record a gain of approximately 4.9 million in other income related to the market of foreign exchange contracts, which as you may recall was a substantial expense for us in 2008, as rates continue to move unfavorably to our contract throughout the prior year.

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

And finally, our effective tax rate for the quarter was negative 8.1%. This is driven primarily by valuation allowances required under FAS 109 due to the three year accumulative loss created by the goodwill and intangible asset impairment from last year. Taking these valuation allowances out of the equation would have resulted in an effective tax rate for the quarter of approximately 32%.

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

I would also like to point out a change in the classification of our revolving debt during the quarter, while the borrowings under our ABL agreement are not due to be repaid until January of 2012. Going forward our outstanding revolver balance if any, will be re-classed as current debt in accordance with EITF 95-22, as it was in the first quarter.

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

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

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

We feel this is sufficient for our current borrowing needs and we are very pleased with our cash and liquidity position. As mentioned in the press release, we are now providing guidance at this time due to the volatility at the end markets. That said we currently believe that the Class 8 production levels for North America, as Merv said to be in the range of a 135,000 units, and based on this assumption as well as of course other cost savings assumptions and market assumptions we believe will be in compliance with our financial covenant requirements for the full year 2009.

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

This first quarter was indeed a difficult time with drastic revenue decreases and substantial employee related cutbacks. We remain focused on the tax that had an optimistic about our improved cost base and overall footprint when we do see volumes in the economy return.

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

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). And our first question comes from the line of Chip Miller. Please proceed, sir.

Chip Miller - JPMorgan

Hey guys. How are you doing today?

Mervin Dunn

Good, Chip.

Chip Miller - JPMorgan

Okay. First, I can dig into the restructuring a little bit you announced 2.5 million of restructuring the fourth quarter. How much of a benefit did you see from that in the first quarter?

Chad Utrup

Well, the restructuring cost of $1.7 million, that's a substantial portion as relate to the severance cost from the reductions that we announced, and some of the closures with a small piece of it being related to facility closer cost. On an average share we've probably saw if you annualized our $10 million benefit

Chip Miller - JPMorgan

Yeah.

Chad Utrup

We probably saw and take a quarter of that for our quarter basis. We probably got implemented maybe half of the quarter, as that make sense.

Chip Miller - JPMorgan

Okay. It does. And then -- so if I'm thinking about the decremental margin and obviously with revenues being down somewhat with 25% decremental margin is extremely good here. But if I look at your guidance, you're kind of assuming to not violate your covenants that you get back to kind of a mid '07 EBITDA performance level.

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

Chad Utrup

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

So those types of things, carryovers into the first quarter from some of the cuts that we made. So really a lot of cost that were there in the first quarter that we don't expect to see beyond the first quarter.

Chip Miller - JPMorgan

Okay. And, on the pricing front, you guys are obviously winning some business from competitors. So does that imply that actually pricing is doing fairly well right now, even after very weak environment?

Chad Utrup

I think anytime that you're taking over business, especially after commodity prices have increased. And the company is distressed, you have the opportunity to work with the customer to enhance your margins to be able to cover the new cost that have come up for the -- may not have had the same opportunity. And if there is leftover obviously there is a better chance to enhance the margin.

Chip Miller - JPMorgan

Okay. Thanks. I'll get back in line.

Operator

And our next question comes from the line of Alan Weber. Please proceed, sir.

Alan Weber - Robotti & Co.

Hi. Good morning.

Mervin Dunn

Good morning, Alan.

Alan Weber - Robotti & Co.

Hi. Few questions, one is, can you talk about or chat about the current cash position and debt and availability as of you know say I don't know last week to date?

Mervin Dunn

Well, I think the purpose of today's call, Alan to talk to the first quarter. I really don't want to get too much into beyond March 31st timeframe, but what I can talk about is where we were at the end of the quarter which was, I mentioned in the call earlier we had a headroom say of about $18.5 million at the end of March. I can tell you we haven't changed significantly from that, but I don't want to get into specifics.

Alan Weber - Robotti & Co.

Okay. That's great. And then, I guess my next question is, I mean I know its really -- I mean you did a great job in the quarter of maintaining the debt given the decline in revenue. And I'm wondering if market conditions stay at these levels for another year, whatever timeframe, how long can you actually specifically maintain this level of debt without at some point that start to really creep up an increase?

Mervin Dunn

We intend to keep taking inventory down. Keep increasing decreasing our working capital usage none of the amount of capital equipment that's purchased or capital in general only for new business that's coming in. That can support itself. So we intend to keep working to reduce our reliance upon any revolver.

Chad Utrup

I think -- for your hypothetical Alan if things stay the same that they were in the first quarter, kind of eludes to what we talked about earlier which is the cost cutting, which is -- and we didn't see the full benefit that in the first quarter in fact there were still some rate over cost from prior year and as a result of some of the cost that we made.

So, probably can't look at the first quarter and tear that out another four or five quarters to look at and I think we got to take into account, some of the benefits that we should see going forward but. If we were going to be at the same levels for the next year, it would be pretty tough, but we've got a lot of cost cutting that we've taken into play. As Merv said inventory in those types of things.

So, its little hard to speculate on that, but hopefully that give you some color.

Alan Weber - Robotti & Co.

Right. I wasn't sure how much -- kind of a spot where -- you don't want to cut so much that if and when the business returns, you've kind of low that opportunity. So I don't know.

Chad Utrup

Keep in mind, we launched two different programs over distress supplier and we had to move quickly on it, over couple of weeks.

Mervin Dunn

For about six.

Chad Utrup

About six weeks total, with that much inventory build and had change the processes, changed equipment and refine it to fit into our processes as in our patterns. And that was all down within the six week period but that miss in one part in delivering quality that was a very highly rated by the customers.

What I'm trying to say in and trying to picture for you, we got a very dedicated workforce that stood here. Nobody like being gone for day every two weeks but that's what we're hoping to bring the new business in where we can take that out and we got good solid people here that's continuing to stay here.

Alan Weber - Robotti & Co.

Okay, great. Thank you very much.

Chad Utrup

You are welcome.

Operator

And our next question comes from the line of David Leiker. (Operator Instructions).

Unidentified Analyst

Yeah. Hi, guys this is David Suri (ph). Just wanted to ask you the revenue number little bit more, down about 45%. If I look at the kind of the US, Canada Class 8 number, that's down about 25%, so I guess that kind of -- rest of your business was down in kind of 60% range upon that?

Chad Utrup

Yeah, there are total OEM truck business David which include some of our European business are down about 40%. Construction was down over 60% and the balance was down over 30%.

Unidentified Analyst

Okay. And...

Chad Utrup

So, construction was down considerably.

Unidentified Analyst

Okay. You make it was down what 30% that...?

Chad Utrup

I grouped everything together. So, collectively aftermarket, specialty vehicle, specialty products OEM that those markets were down collectively about 30% little more than 30%.

Mervin Dunn

The aftermarket we're seeing trucks that are maybe in the backyard but have been set for storage. Some of the parts been taken off and put on the truck that are running. We think once the market does comeback, obviously they're going to need wind-chill viper (ph). So we think see that backup.

Unidentified Analyst

on the construction side, how much of that declined you think was your customers think trucks are going to pull less inventory versus actual declines in production.

Chad Utrup

Well, a lot of our sale is almost all of sales are directly related to production since the -- I don't know if that's your question David or not.

Unidentified Analyst

What you think the production was down about 60%

Mervin Dunn

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

Unidentified Analyst

Okay. And you are saying your customers are seeing the -- down 40, 50% for the years it's just not getting whole lot better as we track through for the rest of the year?

Chad Utrup

Some of it, we're still hearing from some customers not all, but yeah from '08 to '09 on an annualized basis, the 40 to 50% down.

(Multiple Speakers)

Chad Utrup

Its not across the board for every single, one of our customers in another way to look that as we were down 60 some percent for the first quarter, 40 to 50 would be an improvement for the rest of the year.

Unidentified Analyst

Okay.

Mervin Dunn

Think about on the construction we made medium and heavy construction equipment, we supply to. And with any economic stimulus package that starts with infrastructure, that is been build up within the states and waiting for funding and if this economic package ever does release money to these, it should help us.

Unidentified Analyst

Okay. Are your customers including that 40-50% plans or is that or just top of that.

Mervin Dunn

Oh, I think they are taking some of that in a consideration but lot of this is relatively new. So we can see. What we are find in even the truck market is, its always been pretty difficult for us see, any firm order is as to couple of months, but its even more difficult today, with trying to figure out what the customers schedules maybe really beyond the month or two.

Unidentified Analyst

Okay, on the covenants, I guess you did have a negative -- 8 to 10 million in EBITDA this quarter, you need to get 22 over the next three quarters, if I remember correctly, I guess you talked about a few this things or you are going to improve that sequentially? Firmly going under 35,000 class aids, I guess I you're having a high time make them watch. You didn't from negative 10 of quarter up to inadequate 7 or 8 of we need to tip the covenants, I guess can you go into little more detail on all the cost savings falling through?

Chad Utrup

Yeah, I mean, well, you got the million cost and you have got for restructured cost in the first quarter. As I mentioned little bit -- the true benefit from a lot of the restructuring and cost savings that we have implemented throughout the first quarter, really unfair for the first quarter, and they're either maybe halfway through the quarter in latter part of the first quarter. So, the true benefit we expect to see more on a full basis beyond the month of March. That's one aspect.

The other aspect is again, while we since they any to look at the safe market, whether it's a 135 or whatever it is, we've got another 60% of our business that will drive our revenues based on the assumptions in certain markets. So, we've talked about in February we announced the RIF and the closures, so those are on annualized basis $10 million of cost savings, so beyond the first quarter which is really the implementation period, that's kind of the run rate that we expect to see.

That's one piece of it and another piece is with inventory levels been reduced as significant as we did in the first quarter, you don't get a lot of material cost savings because you're not buying anything. So, there is another aspects of those types of things and then new business add on top of that and the other 60% of our market is outside of Class 8, David really are some of the things. There's assumptions that go into our plan to be compliant, there's no question about that but those are some of the things that really where we see beyond first quarter.

Unidentified Analyst

Okay, the launch cars in Q1. Is that a big number, can you think kind of playing around that with the new business that you picked up.

Chad Utrup

Yeah I mean there's some of our CapEx is certainly related to the start of new business. Its probably not a huge number but you know its probably at least several hundred thousand dollars up to maybe half a million something like that. When you include all the indirect related types things and more mentionable we implemented 10% cuts in pro lows and we did asked some exceptions for people who are launching programs and so when you had all those things up, you can't add up.

Unidentified Analyst

Okay. You said there about 10 million restructuring savings, you got about like a million of it in the first quarter...

Chad Utrup

Yeah, its shooting from the hip here. That maybe in the ballpark David.

Unidentified Analyst

Okay.

Chad Utrup

The annualize numbers is about 10 million. So just estimating what that would be its maybe in that range.

Unidentified Analyst

Okay, and how much more do you think you can pull out of working capital, if we keep selling it current levels.

Chad Utrup

Well, inventories are big piece of that, we are working with customers and suppliers on terms, nothing outrages, but those are things that we work on everyday.

Unidentified Analyst

Forecasted, but that's not sense we comfortable into this time.

Chad Utrup

Yeah

Unidentified Analyst

If you want numbers.

Chad Utrup

Inventories one of our major focus areas as you saw from Q1.

Unidentified Analyst

I think the results from Q1, other point of the direction how aggressive we are on the inventory that we take out $20 million in it press market like we have is same quiet a bit when you not ship in very much.

Unidentified Analyst

Okay. Thanks guys.

Chad Utrup

Thank you.

Operator

And our next question comes from the line of Chip Miller. Please proceed, sir.

Chad Utrup

Good morning, Chip.

Chip Miller - JPMorgan

Hey, just a couple of follow ups. Can you talk about the military business a little bit? Obviously it was pretty significantly in 2008. How much of that was give MRAP versus other vehicles?

Chad Utrup

For 2008, I mean a significant portion of our increases related to MRAP, I don't have numbers, we don't have numbers up ahead Chip, but

Chip Miller - JPMorgan

Okay. With the new MRAPs (ph) is kind of a next version that's coming in. so you guys have an opportunity there or is it a similar opportunity that you had on the larger vehicles or is it the smaller opportunity per vehicle?

Mervin Dunn

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

Chip Miller - JPMorgan

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

Chad Utrup

That's correct, so our covenants don't start until April. So that 22 million is really for three quarters, April through December. In addition, we see credit for restructuring costs out of the first quarter. It doesn't matter when they happen, but cash based restructure cost of up to 1.5 million so, frankly since we already have 1.7 million in the first quarter, our real target for the balance sheet is that about 20-25.

Chip Miller - JPMorgan

It's nice. Okay.

Chad Utrup

So,

Chip Miller - JPMorgan

Can you just arrived the calculation correctly? The EBITDA under the covenants for the first quarter would have been like a negative 10.5 or 11.6 in the...

Chad Utrup

Not. If exclude the restructure costs that's like 11 to something like that.

Chip Miller - JPMorgan

Okay, great. Thanks.

Operator

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

David Leikar - Robert W. Baird

Hi, good morning.

Mervin Dunn

Good morning.

David Leikar - Robert W. Baird

Good morning. Just a couple of things here. You spoke briefly about, the fact that the ABL facility has to be treated as current because of certain requirements. Could you just expand on that please? Why exactly is that current notwithstanding the long dated maturity?

Chad Utrup

It's based on regulations under; you are going to make me cite this. EITF 95-22. It's based on revolving credit agreements that include both its what is called a subjective acceleration cost. And lot of those arrangements. So it's basically a technical arrangement I mean, its pretty common, there is many ABL revolving credit agreements to have. Its just the language surrounding our arrangements and what's really called as subjective acceleration clause meaning something can get a accelerated for certain reasons, but its not defined. So it's subjective.

Under those regulation, it just moves to current. There has been quite a few companies that made the change in the last year so.

David Leikar - Robert W. Baird

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

Chad Utrup

We know it was out there but frankly whether its long-term or current, just to be honest, whether how its classified in the balance sheet doesn't impact the -- I guess the nuts and bolts behind the agreement. Frankly it doesn't impact us one way or the other. We know it was out there but because of new agreement and wasn't in place at the end of the year. This is just the first quarter. It switched.

David Leikar - Robert W. Baird

All right. Changing gears, market share. You just spoke at about a couple of wins that you are very pleased with. Can you give us that idea on what's happening with your market share across your businesses?

Mervin Dunn

Our market share across business has been pretty much solid as it was before. The recessionary results that we're waiting through it now, the only real difference is on the new the parts that we want during the cutbacks. We want, at the end of the last quarter, we took over couple lines of business from other distressed companies and then during first quarter this year we've taken over couple lines of business.

David Leikar - Robert W. Baird

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

Mervin Dunn

I'd like to clear up. First of all, no not distress like this or we will be taking their business. They're distressed and we're not. So yes, we will continue to increase our market shares. We take over to stress business and yes, there are many more out there that are distressed or worse in the in our opinion.

David Leikar - Robert W. Baird

Yeah. The last thing is just wanted to ask about is, you've spoken about your expectation for builds (ph) for 2009 and I guess your working with the ACT number. Is there anything that ACT has put out with the respect to the pacing for 2009 or anything to the expenses that they have not that your willing to supplement in terms of how that 135 would build quarter-to-quarter.

Mervin Dunn

No. We're not seeing anything that's really very predictable and your crystal balls is good as ours.

Chad Utrup

Yes, I think you see it too, even ACT and a lot of the other research, the number changed quite a bit from month-to-month and as I mentioned earlier its always been difficult out past beyond a couple months to predict anything and with the volatility lately is even more difficult. So, not at this time they're coming on.

David Leikar - Robert W. Baird

Okay. Thank you.

Chad Utrup

Welcome.

Operator

And our final question comes from the line of Chris Sam (ph). Please proceed.

Unidentified Analyst

Hi guys, how are you?

Mervin Dunn

Great, how are you?

Unidentified Analyst

Fine, thanks. When you look at reproductions in the Class 8, there is clearly going to be an overhang. So how do you see the rebound playing out with respect to what we're hearing in the pretty significant overhang of repose.

Mervin Dunn

I think you were breaking up a little bit. Would you mind repeating question?

Unidentified Analyst

With respect to repositions of trucks. And there is pretty significant inventory of those repose. How do you see a rebound in your business shaping up with respect to that overhang?

Mervin Dunn

Well, frankly that something that we don't really get into on the numbers. We kind of rely upon our customers to tell how many trucks are going to build. And I am sure they're taking those things into account. And that's something that we just wouldn't be able to have a good prediction -- we've not tracked it for. All the years that our customers have.

Unidentified Analyst

Okay. And then with respect to your inventories. Can you kind of categorize for me what it consist of in terms of finished goods, working progress and raw materials.

Chad Utrup

That'll be in the 10-Q in a couple weeks. I don't have it in front of me at the moment but...

Mervin Dunn

All of those.

Chad Utrup

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

Mervin Dunn

All of them were affected.

Unidentified Analyst

Okay. And then with respect to your long-term debt. I guess there is a there is, it's going to be a interest payment, cash interest payment coming up at some point. Obviously, you know your cash interest payments this year probably or going to be just about the 8% debt, $12 million so it seems like with respect to your additional capacity and your cash and continuing negative operating cash flow.

You get into that additional capacity, you would see by pretty significantly over the course of the year, some planning looking out beyond that additional capacity, what are some of the options that you would want to concentrate, should we find ourselves there and at the end of the year or none months or something like that in relatively short-term?

Chad Utrup

Think you need to leek at the first quarter, there is already one of our interest payment made of 6 million and about a 1.5 million and bank changes that we are taking out and micro-machining still ended up with the cash result to -- is already gone into.

David Leikar - Robert W. Baird

The other, you are right on the 12 million but, 6 million, our payments are due twice a year, January and July. So, 6 million was already paid in January. We've got another 6 million payment in July which as I went through the collateral and our availability earlier. We don't expect any issues at all.

Chad Utrup

We're pretty pleased with where we are. And with respect to the balance of the year, I mean obviously if we're looking at volumes and those types of things coming into play then I think account is circle has background at some of the other questions from earlier on the call in terms of where do we expect the balance of the year to be, which is the ultimate question. But right now we don't have nay issues with our availability or liquidity which, hopefully I went too earlier. I don't know if we answered your question. But there is a lot of assumptions I go into, where the Q2, Q3, Q4 or first quarter '010 are going to be so lot of that comes into play, fairly speculative to get into.

David Leikar - Robert W. Baird

Hey, thanks.

Operator

And our final question comes from the line of George Miller (ph). Please proceed, sir.

Unidentified Analyst

Good morning, gentlemen

Mervin Dunn

Good morning.

Operator

Hello sir you there. And there are no questions in queue at this time.

Mervin Dunn

Thanks all of you very much for joining us today. We're going to keep going aggressively after the things that we've talked about, and we look forward to see you on the next quarter call.

Chad Utrup

Thanks everybody

Operator

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect, and everyone have a great day.

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Source: Commercial Vehicle Group Q1 2009 Earnings Call Transcript
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