Accuride's (ACW) CEO Richard Dauch On Q2 2014 Results - Earnings Call Transcript

| About: Accuride Corporation (ACW)

Accuride Corporation (NYSE:ACW)

Q2 2014 Results Earnings Conference Call

July 28, 2014, 10:00 AM ET


Richard Dauch - President and CEO

Gregory Risch - SVP and CFO


Kirk Ludtke - CRT Capital Group

Sarkis Sherbetchyan - B. Riley & Co.


Good morning. And welcome to the Accuride Corporation Second Quarter 2014 Earnings Conference Call. On today's call are Accuride's President and CEO, Mr. Ric Dauch and the Company's Senior Vice President and Chief Financial Officer, Mr. Greg Risch.

My name is Brandon and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded and will be available for replay later today. At the end of today's call, I will give the instructions for accessing the replay.

And now I'll turn the call over to Mr. Greg Risch. Please go ahead sir.

Gregory Risch

Thank you, Brandon, and thanks, everyone, for joining us today. As we turn to Slide two, I want to remind everyone that during this call, we'll be making statements that can be considered forward-looking as defined in the Securities Act. We caution you that these statements are subject to risks in our business, and we encourage you to read all of our SEC filings to understand what those risks are.

Please turn to Slide three. During today's call, Rick will provide an update regarding activities within the company, including the conditions in our industry and within our businesses. I'll then review our second quarter and our outlook on 2014 prior to opening up the line for questions.

With that, I'll turn it over to our President and CEO, Rick Dauch.

Richard Dauch

Thanks Greg and good morning to everyone, and thank you for joining our call.

Greg and I are pleased to report that Accuride delivered strong results in the second quarter. Our Fix & Grow efforts are driving continued improvement in our margins and overall profitability. Greg and I will walk you through our second quarter results and discuss our newly revised and higher outlook for the balance of the year.

Please turn to Slide four for a summary of our achievements and challenges in the second quarter. Let's start with the good news and the continuous strength of Accuride's financial performance. We achieved positive net income of $0.11 per share in the second quarter of 2014, that's compared to a net loss of $0.11 per share in last year's second quarter on slightly higher sales this year.

We were also net income positive on a year-to-date basis through June for the first time since the onset of the industry recession back in 2007. During the quarter, we doubled operating income to $12.3 million and Gunite achieved an operating income margin of 15%, our highest level since 2005 and 2006.

Gunite's continued margin expansion is a direct result of a significantly reduced cost structure, our improved commercial discipline at Gunite and the higher operating efficiencies resulting from our investments in that business over the past two years.

Also in the second quarter, our adjusted EBITDA was $23.2 million, compared to $17.9 million in the second quarter last year. That represents an EBITDA margin of 12.8% of revenue, up from 9.9% in the second quarter of last year. Our liquidity remains strong, improving to $72 million, which included $31.9 million of cash.

This quarter you can clearly see in our results the impact of the actions we took to fix Accuride ahead of the current industry cycle upturn. Customer demand continues a ramp-up across industry. Orders were higher every month this quarter over last year extending backlogs and filling truck and trailer OEM build schedules.

The forecast agencies, ACT and FTR both increased the 2014 Class 8 forecast to nearly 300,000 units here in 2014. In addition, Gunite delivered higher adjusted EBITDA on sales that were slightly lower year-over-year as a result of its seasonally strong aftermarket demand being delayed a few months due to the extreme cold and inclement weather over the winter time.

Across the Company, we are seeing the results from our operational improvements and introductions and new products that deliver real value for our customers. First, nearly all of our facilities are running at world-class levels on the metrics that matter most of our customers, quality, warranty, lead times, and on-time delivery.

Second, we continued to launch our PLEX, ERP system without any major issues and have another launch coming up at Erie facility this week.

Three, we continue to receive positive responses and new orders from customers for our new Steel Armor Coating technology. They like its performance and value advantages over competing steel wheel coatings.

Fourth, in addition we've recently introduced our new Accu-Flange product to aluminum wheel family to address aluminum wheel flange wear issues in the heavy and shifting load applications part of the industry.

Fifth, the operating improvements we made in our plants have resulted in customer quality awards for our Camden and Monterrey facilities and over $10 million of new business at Brillion Iron Works.

I am especially proud of the Camden team having only come into our family less than two and half years ago to cope from a start-up operation basically to an OEM Master of Quality Supply Award is really great news.

Turning now to our challenges, we were disappointed in Brillion performance this quarter. Let me cover a couple data points why. First we had a non-cash inventory charge, which I'll let Greg cover in detail and two, Brillion experience higher-than-expected maintenance expenses this quarter specifically one of our casting lines needed a little bit more attention than we had planned.

Let's now turn to Slide five for a look at market conditions. The key indicators that we track continue to be positive. The ISM manufacturing index notched its 13th consecutive month of expansion. Housing starts and auto sales remain strong helping to drive fleet and increased fleet utilization.

Overall fleet capacity remains extremely tight. We continue to see strong orders as fleets are upgrading their aging equipments. If you remember back in 2005 and 2006, there were large orders of Class 8 trucks and we're seeing some of those trucks now come up to the end of their life and being replaced.

Let's turn now to Slide six. As I mentioned a minute ago, expectations for Class 8 production in 2014 continue to grow with both ACT and FTR increasing their recent forecast. Industry expectations now call for 2014 Class 8 production of greater than 290,000 units and closer to 300,000 units in 2015.

With our expanded capacity and reduced cost structure, we are well positioned to both handle and profitably capitalize on these improving industry conditions. This is a major change at Accuride versus our capabilities back in 2011 and 2012 during the last brief Class 8 upturn when we weren’t prepared to handle those kind of volumes in an efficient manner.

Let me turn to Slide seven. As we discussed on our last call, Accuride is realizing the operational and financial performance improvements from the fixed portion of our business strategy and we are now increasingly focused on driving the Grow portion of Fix & Grow.

We still have a couple of fixed items we are moving to completion. The new ERP system is one of them. We successfully launched PLEX at our Camden plant in the second quarter and are now approaching the launch of our Erie plant next week.

Speaking of Erie, we reached a new four-year collective bargain agreement there with UAW Local 1186 this quarter and we will begin Local negotiations at our Rockford facility with UAW here in the third quarter with a target to get that contract complete before yearend.

We're also continuing to work to lower operating costs at our Accuride distribution center at Batavia, Illinois, which today is operating at significantly improved levels for lead-time and on-time delivery performance to customers versus 2013 when we changed providers at that location and also changed locations from Indiana up to Illinois.

We have a similar focus to achieve reduced costs and higher levels of operational performance at Brillion. They're getting special attention from myself and Greg with operating views about every 45 to 60 days. We're looking at a reduction of overhead that we may accomplish in part with modest CapEx for new equipment and further lien systems implementations.

Liquidity, we continue to monitor and manage our liquidity, which was $72 million at quarter end. We will continue to control it through tight working capital management and smart capital spending plans. We've elected to up our 2014 CapEx by a couple of million dollars in order to pull forward some key projects with high rates of return and to take on some additional new business.

Grow, we're highly focused on driving the Grow portion of our plan. Our revamped sales organization is working to very clear defined expectations, targets and metrics across all regions.

We are in the final stages of selecting a new CRM system, which we expect to launch in Q3 that will boost sales force affecting this customer support, bottom line results and timely information sharing across the organization.

And we're selectively expanding our regional sales coverage through a combination of added regional sales reps and a marketing representative firm in Canada, which will expand our ability to better call on and service customers across the entire North America area.

As the economy industry continues to strengthen, we have adequate capacity and more importantly, competitive capacity to meet the growth in customer demand, while profitably recapturing additional share in the process. That's certainly true at wheels and is true at Gunite, which is increasingly focused on share expansion by growing our fleet and aftermarket relationships.

Brillion customers continue to ask for more vertically integrated solution for castings. Specifically they products at our cast, machine, heat treated and occasionally painted from a single source instead of the spider work -- network across the upper Midwest that we compete with today.

We're in advanced discussions with several customers about providing these integrated services for them and believing we can secure some of this business in the near future.

Finally we continue to explore opportunities to grow the business globally with key international customers, however it's premature to discuss anything more specific on that today.

And now, I'd like to turn the call back over to Greg, to discuss the specifics of our financial results in the quarter.

Gregory Risch

Thanks, Rick. Please turn to Slide nine now, which summarizes our Q2 results. Before I get started, I want to remind everyone that due to the sale of the Imperial business during Q3 of 2013, the financial results for Imperial are represented in discontinued operations.

Okay, let's look at Q2. Sales for continuing operations of $181.6 million were almost 1% higher than Q2 of 2013 sales of $179.9 million. While the truck and trailer OEM production rates continue to improve, our aftermarket segment for Wheels and Gunite were slightly weaker than expected with the industrial and agricultural markets that we serve at Brillion remains fairly flat.

On flat revenue, our operating income of $12.3 million this period shows a significantly favorable comparison to the $6 million of operating income we had last year. Gunite continuous to show significant improvement over the prior year. We'll look at the businesses in just a minute.

For our continuing operations we had net income of $5.1 million as Rick said, which is a great improvement over last year's $5.1 million loss. In the current quarter we recognized $2.2 million of onetime favorable tax benefits related to tax reform at Mexico and the resolution of previously uncertain tax positions.

For Q2 2014 we had adjusted EBITDA of $23.2 million or 12.8% of revenue, which is an improvement of $4.4 million over last year’s Q2 results.

Let's move on to Slide 10. Through the first six months of 2014, net sales for continuing operations of $348.4 million or $5.5 million or 1.6% higher in almost $343 million of sales in the same period in 2013.

On the small increase of revenue, our operating income of $18.9 million for this period shows a significantly favorable comparison to the $1.2 million of operating income we had last year, which shows more of the fix that is being realized in the current year’s results.

For our continuing operations we had net income of $1.8 million, which is much improved over last year’s loss of $19.9 million. I have to go back to 2007 to find the June 30, year-to-date net income position.

For adjusted EBITDA, we have $41.2 million or 11.8% of revenue, again an improvement of $15.2 million over last year results, again on a minor increase in revenue.

Moving to Slide 11. The top half of Slide 11 shows the correlation of our revenue and earnings for Q2 of the current and previous two years for our continuation operations with the breakout of certain segment information on the bottom half. I would point out again that while revenue was fairly flat, our earnings increased significantly.

Compared to Q2 results in 2012, our revenue has decreased by nearly $48 million while adjusted EBITDA was only reduced by $2.2 million.

On the bottom part of the page, we have our full year 2013 revenue segmentation for our three businesses, our customer base and the markets that we serve. The far left pie chart shows that Wheels was our largest revenue segment at 57%, Gunite at 27% and Brillion at 17%. Those percentages didn't change much in Q2 of this year.

The middle graph shows that the truck OEMs including their service locations represent about 44% of our sales. The market graph on the far right shows that the commercial vehicle market and the associated aftermarket in North America drive nearly 80% of our revenues.

Next slide; Slide 12 shows the trends for our Wheels and Gunite businesses. First Wheels. Obviously it's our largest segment and represented roughly 56% of our consolidated revenues with sales of $101.2 million in the quarter. While truck OEM production was improved year-over-year, we experienced slightly reduced demand in the life of vehicle and military segment, which totaled $4 million. Adjusted EBITDA improved to $20.9 million for the period.

Gunite continues to show improved earnings power year-over-year, despite slightly lower revenue as a result of the tough winter conditions that crept into Q2 this year. With the softer spring selling season for brake drums, Gunite' revenue of $48.3 million was down from last year's revenue of $51.2 million.

The bigger story is the significant improvement in earnings. Adjusted EBITDA of $8.3 million represented 17.2% of sales and was a large improvement over the results in both 2013 and 2012.

Year-to-date Gunite’s adjusted EBITDA this year is 13.7% of sales. While we are pleased to be on track to achieve our goal of Gunite being 10 to 12 adjusted EBITDA business in 2014 you should remember that Gunite has stronger operational results in the first half due to the seasonality and demand in the aftermarket for their products.

Next slide; Slide 13 shows the Brillion's revenue of $32.1 million for Q2 this year was 9.7% over the last year's revenue of $29.3 million. Brillion's adjusted EBITDA of $1.6 million this period decreased by $1.7 million from Q2 of 2013. And as Rick stated these results were pretty disappointing.

The incremental contribution from the higher demand was offset by a non-cash inventory charge related to valuation of approximately $1 million and we also had abnormally high downtime on certain equipment that resulted in unfavorable labor variances as well as higher cost to repair the line.

Okay, let’s move to the next slide to review trade working capital. The top two graphs on Slide 14 break out the three components of our trade working capital, trade accounts receivable, inventory and accounts payable.

We saw slight improvements in our components of our trade working capital as a percentage of sales compared to the first quarter of last year -- sorry, second quarter of last year as shown on the graph on the lower half of the slide.

While I still expect receivables to track sales fairly consistently, our improvements on the other two components are key. Overall our trade working capital has improved percentage-wise year-over-year decreasing to 7.4% of annualized sales this quarter compared to 8.2% in the second quarter of 2013.

This represents not only a record low for us, but was also done in a period that typically has an inventory build for the seasonal summer shutdown in July, this one was no exception. This is clear evidence of effective lean initiatives that work and I appreciate the efforts of our entire team from the office through the plant floor.

Next Slide please. Slide 15 shows our positive free cash flow for the quarter of $10.9 million, an improvement over last year's positive cash flow of $1.4 million. Quarter two is traditionally neutral on cash, so we’re pleased to have an improvement this year. Otherwise it’s a pretty quite quarter cash wise.

Next Slide please. What we see on Slide 16 that liquidity has been steady for the last five quarters. We’re pleased with this quarter's liquidity of $72 million. I can’t say enough about our supply chain and manufacturing group's focus on improving working capital.

Additionally we continue to manage our CapEx as much as working capital and as Rick said we’ve got a couple million dollars more that we’re going to add this year from our previous expectation but that should also set us in good shape as our industry continues to increase demand.

Let’s turn to Slide 18 to discuss our 2014 rising outlook. This slide shows an improved outlook from 90 days ago when we pointed you to the top of our previous guidance range. With the operating performance through the first six months and how the commercial vehicle industry is firming up for the second half of the year, we’re increasing revenue and earnings ranges for 2014.

Considering the slightly improved build ranges listed on the top part of the slide, our 2014 net sales should now be between $675 million and $700 million and adjusted EBITDA between $70 million and $80 million for the year.

Now, I’ll turn the call over to Rick to summarize prior to taking your questions.

Richard Dauch

In summary this is the same Accuride story that we shared with you last quarter. We simply continue to execute upon that plan and our performance demonstrates that our plan is working. Our Fix & Grow strategy has succeeded in repositioning Accuride.

Today we are more agile, more competitive and more operationally disciplined across every one of our assets. Our reduced cost structure and greater operating efficiency are driving margin expansion and profitability. Our second quarter results continue to demonstrate that kind of performance.

Our restored dependability as a supplier is enabling us to secure additional new business and we’re pushing hard to win more share as the cycle upturn continues to build momentum.

We’re confident that we can now compete with and win new business against our primary competitors here in North America. Since Brillion's end markets are expected to remain flat until 2015, we’re pushing hard on innovative approaches with customer's acute new business.

The business we won this quarter at Brillion was with a rail customer, someone who is not traditionally a customer of Brillion, while simultaneously addressing our cost structure looking to expand our capabilities up at Brillion.

We continue to develop and launch new products that provide value to our customers with Steel Armor and AccuFlange being the prime examples in this quarter and we have several more to follow over the next two years as we continue to invest in our R&D.

And our PLEX ERP rollout continues at every milestone and we’re on our way to achieving much more efficient ordering and scheduling performance in the future.

And with that I’d like to open up the call for your questions. Brandon, please go ahead and provide the instructions for the Q&A portion of our call.

Question-and-Answer Session


Thank you, sir. And we will now begin the question-and-answer session. (Operator Instructions) And from CRT Capital Group, we have Kirk Ludtke online. Please go ahead.

Kirk Ludtke - CRT Capital Group

Good morning, guys.

Richard Dauch

Good morning, Kirk.

Kirk Ludtke - CRT Capital Group

I was -- great quarter by the way.

Richard Dauch


Kirk Ludtke - CRT Capital Group

I was curious, last quarter you were talking about a rebound in the aftermarket and I was wondering if you could expand on what you saw in the quarter and if you still think there is some type of rebound due going forward?

Richard Dauch

In terms of the Gunite side of the business?

Kirk Ludtke - CRT Capital Group


Richard Dauch

Yeah, Greg you want to comment first on Wheels and I’ll take Gunite?

Gregory Risch

Yeah, I would say to the point Kirk, I think the first quarter was a little tough in regards to weather. I think people were just trying to keep trucks on the road, so there wasn’t a lot of maintenance going on, and that was just a bit of a survival.

So, I think things definitely did pick up on both sides and Rick if you want to provide more comments on Gunite, that’s fine.

Richard Dauch

Yeah, we pretty much heard consistently Kirk across the U.S. and in Canada that the spring selling seasons has been delayed by anywhere from 45 to 60 days. We typically see a strong spring selling season in March, April and May.

This year, we started to see it first in May, and we saw it continue in June, and we think we’re having pretty strong July as well from an aftermarket standpoint at the Gunite.

So, it looks like everything got delayed 45 to 60 days because basically the fleet just had to survive the winter, which didn’t end really until March or April up North, right. So, we’re starting to see trucks and trailers come back through for repairs right now, which is good for us actually.

Kirk Ludtke - CRT Capital Group

Yeah, it was good…

Richard Dauch

Go ahead.

Kirk Ludtke - CRT Capital Group

I am sorry, that used to be very high margin business and is it still?

Richard Dauch

Yeah. You see our results were at 17% plus EBITDA I think for Gunite in the quarter, right.

Kirk Ludtke - CRT Capital Group

Yeah, okay. And speaking of the Gunite margin, it's at what 13.7% year-to-date, 10% to 12% seems low relative to where you are?

Richard Dauch

Yeah it’s reasonable to say -- it’s reasonable to say that we’re on the high end of the range and pushing up above that.

Gregory Risch

Remember that we have a big July shutdown and then we have a December shutdown right. We're still doing maintenance work on our casting operations. I think we have our casting operation down for two weeks, the last two weeks of July and start backup August 4.

We’re doing some major repairs there. So you take a little bit of a hit there in terms of the maintenance expense and then you don’t have the fix cost coverage for July where you get a little bit of coverage earlier in the year when you had build some inventory to get ready for that.

So that’s part of that moving numbers there. Hopefully we’ll do better so.

Richard Dauch

Yes, I hope we can do better as well. Kirk, if you remember, we came out with that 10% to 12% range back in December of 2012. So we’ve been working hard to get there. So, being there we're going to maybe be just above that is a good thing. We like where we are.

Kirk Ludtke - CRT Capital Group

Excellent. And with respect to market share, it seems as though it's trending in the right direction, I was curious if you could maybe expand on what you saw in the quarter and particularly at Gunite on the OEM the aftermarket side?

Richard Dauch

Go ahead, Greg.

Gregory Risch

Yeah I would say for Gunite on the OEM side I think actually our sales are little down year-over-year. We don’t typically break that out. It’s a smaller piece.

If you remember we're only standard at one of the OEMs. So it represents roughly 25% of the Gunite business and in particular there is a certain product line that is down but for us it was not necessarily a money making business.

So, being more focused on the bottom line rather than the top line, I'm fine with that. So we’re down a couple of percent on the OEM side, and the rest of it is aftermarket that's up.

Richard Dauch

And actually on the Wheel side we are holding our own and gaining some on the aluminum side of the aftermarket, and on the steel wheel side, we’re holding our own against the Chinese Wheel imports. We are probably around 45% to 50% of the overall aftermarket.

That’s down from two or three years ago when they lifted the tariffs, but we are still over 50% of the aftermarket for steel wheels right now.

Gregory Risch

And I think -- and if you’re trying to do the math, just remember that year-over-year, it started from the class five through eight or the aftermarket would be our military or light vehicle segment, which is -- it’s a pretty small piece, but year-over-year that’s down $4 million.

Those are predominately two main customers. So that’s just going to flow with government purchases or on the light side, just which models our running.

Kirk Ludtke - CRT Capital Group

Got it. That's helpful. And then lastly, do you get the sense that as industry volumes rebound, that your customers are starting to think about shortening their supply chain and going with more domestic supply sources?

Richard Dauch

I would tell you as we've been out talking to the truck OEs for the last three or four weeks, we've also talked to some of our peers out there. I think that because some people got burnt back in late 2011 or early 2012, when numbers kicked up to 300,000 trucks, that there is a real analysis going on among some of the big Tier 1s and OEMs about can they near shore.

What does that means back in the United States or down into Mexico, I think they're taking a hard look at that. I think that's one of the things we are working with at Brillion, we've showed five key customers that because of the current setup and structure in North America, where we have five or six casting guys, then you’ve got anywhere from 15 to 20 machining houses and painters out there and that's about 30 days to the supply chain.

Our proposal out of Brillion takes that down to less than 20 days and so we're getting some serious interest and some of that was -- some of the customers are going offshore and then they have a seven week supply chain. So we're getting some strong interest right now in figuring out how to do some things differently up at Brillion.

And I think that's true also on the Gunite side. I know that we were working with a couple key aftermarket guys where they’ve got a five to six weeks lead time on their casting from overseas and they’ve got to have a warehouse and we're seeing we can pick up some business now that we're more competitive on the Gunite.

So yes, I guess that's the answer, a long answer.

Kirk Ludtke - CRT Capital Group

Good, good, excellent. Do you see any type of supply chain issues anywhere in the industry at this point and then I'll...

Richard Dauch

I don't hear any major breaks yet. I think we're getting to the range when we get above 290 to 300, we'll make sure that some guys hadn’t cut their capacity too tight. The good news for us is we're not in that position. We're one of the guys who hampered the build rates in 2011 and 2012, that's not our situation now and I can tell you in the last four weeks, when we sat down those OEMs, the first question they have is do you have adequate capacity to run hard as we're going to run in the third and fourth quarter and our answer is now yes.

In fact, we say when our competitors have little struggle let us know because we can pick up some more volume with you. That's the position to be in for first time and since I've been the CEO.

Gregory Risch

Kirk, I can tell you being the -- I am just week's away from hitting 20 years at Accuride. I am so -- I'll just repeat, I've never seen our leadership, our facilities and our equipment in better shape and enable to handle the uptime. So I love where we are right now, love our position and I really like how we are investing in technology.

So I think it's putting our singular position and if you look at the trade working capital results, obviously we're clearly running at really impressive numbers, while the industry is having an upturn. So I like how the team is managing it and we look forward to more boring quarters where we just keep improving the numbers.

Kirk Ludtke - CRT Capital Group

That's great. Thank you very much.

Gregory Risch

Thanks Kirk.


From B. Riley and Company, we have Jimmy Baker on line. Please go ahead.

Sarkis Sherbetchyan - B. Riley & Co.

Hi, this is Sarkis actually calling in for Jimmy Baker. How are you guys? How are you doing?

Gregory Risch

All right. Good morning.

Sarkis Sherbetchyan - B. Riley & Co.

Doing well. Thank you. Just a quick few questions. Actually thank you for providing an update into Brillion. I know you guys mentioned you won about $10 million in new business for Brillion and you are also in advanced discussions with some customers to secure some future business, do you mind giving us some incremental color on the opportunities for that new customer growth?

Richard Dauch

Yes, let's talk about the one we won, right. We had a situation where a customer was having supply issues with his provider of castings. We got a phone call and they moved the tooling over to us within less than 10 days. We made a few tweaks to the tooling. We were up and running within 15 days from the time we got the phone call. So that shows you the capabilities that we have up at Brillion in terms of our ability to make tools and adjust tools and get things running.

On the new business opportunities we are talking primarily to both truck OEs and Tier One OEs and some off road equipment OEs and their suppliers. We're talking about significant numbers of amount of business. We don't have any of it baked into ours right now because we don't have TOs, but I think we're going to be able to win at least a little bit of that business now and in the year.

So the price show up in our 2015 numbers and that's probably all I need to talk about right now out of respect…

Sarkis Sherbetchyan - B. Riley & Co.

I agree.

Richard Dauch

Out of respect to our customers until they make some sourcing decisions.

Sarkis Sherbetchyan - B. Riley & Co.

Okay. Understood and separately the impact of any new supply that's coming in or is expected to come online in the near term with regards to Brillion?

Richard Dauch

New suppliers?

Sarkis Sherbetchyan - B. Riley & Co.

Yes, not new suppliers necessarily, but perhaps any new supply that you are aware of or…

Richard Dauch

No, I don't think so. We pretty much have told people that some of the ones have put in new cashing equipments. If you build new plant that's a three year by the time you buy the land, get the permits, build the plant, order the equipment, launch, you are talking about a three to four year process.

The only place we'll see incremental new capacity is with someone buys new line he can put it into the existing plant. We do a pretty strong analysis every quarter on the supply and demand situation amongst all the cashing guys and I think we're headed into a period as long as truck business stays up both the Class 8, Class 5 to 7 trailer and auto sales stay in the $16 million, $17 million range, if some kind of slight recovery in the off road, I think we are going to be back to where we were in 2011, 2012 where demand is going to exceed supply, that's always good for the supplier right in terms of ability to price and choose what business you want to take or not take.

So we like where we are heading for Brillion next two years.

Sarkis Sherbetchyan - B. Riley & Co.

Yes, that's helpful. And then just on the point of capacity utilization at Brillion, where would you say you are at today maybe 55%, 60%.

Richard Dauch

Yes, I think a little slightly higher than that right now prior approaching 60%, 65% and it's a line dependent. Our two big [diesels] (ph) are running about five and half, six days a week. Our two [quote] (ph) and drag lines are running a little bit less prior four and half five days a week. So we have adequate capacity to take on another $30 million or $40 million of business for sure, so.

Sarkis Sherbetchyan - B. Riley & Co.

Okay. Great. That's helpful and then just by volume, what are your latest thoughts on refinancing. Maybe if you can give us any color on the timing, sizing, perhaps rate?

Richard Dauch


Gregory Risch

Yes, it's a good question. So I would say at this point, we're analyzing and we're watching the market and we're looking to see what will be the opportune time to jump in, but nothing to announce today.

Sarkis Sherbetchyan - B. Riley & Co.

Okay. Thank you very much. That's all for me.

Richard Dauch



(Operator instructions)

Richard Dauch

Well, I would say if there are no more questions, Brandon, we can probably end it and we will take calls individually if they have anything out there.


Okay. Ladies and gentlemen, thank you for participating in today Accuride earnings call. As a reminder, this call was recorded and will be available for digital replay beginning today at -- July 28 at 11:30 a.m. Central Time until 11:30 p.m. Central Time on Monday, August 4.

To access the call, you may dial toll free at (888) 843-7419 in the United States or (630) 652-3042 internationally. Please use access code 37693480. This concludes today's conference. You may now disconnect.

Richard Dauch

Thanks Brandon.


You're welcome, sir. Thank you.

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