Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Bob Evans - Craig-Hallum Capital
Bob Evans - Craig-Hallum Capital
Can you comment on how much of your inventory is non-interest bearing as of the end of the quarter?
Peter Christianson
Our interest bearing inventory as of the end of the quarter was 30%. In relation to where our interest bearing inventory as of the end of the second quarter was 30% versus 35% as of January 31st.
Bob Evans - Craig-Hallum Capital
You said 30% is interest bearing?
Peter Christianson
Yes.
Bob Evans - Craig-Hallum Capital
Your debt level bumped up a little bit sequentially from Q1 to Q2. I want to make sure I understand the reason for that.
Peter Christianson
We just went to a more traditional financing arrangement where we have a five year term debt with Bremer Bank on our fixed assets. That was $15 million.
Bob Evans - Craig-Hallum Capital
How will that flow through as we look at the second half? Can you give us a sense of how the cash flow, going back to the more traditional model, how will you pay that down? I’m trying to get a sense of cash flow for the second half.
Peter Christianson
There’s a five year term on that. Its straight amortization on that.
Bob Evans - Craig-Hallum Capital
USDA came out with comments not long ago as early farm receipts and then costs being higher for the farmer. Can you maybe talk about that, maybe what you’re seeing in the marketplace in terms of farmer income and maybe put a little bit more clarity on it in terms of your market.
David Meyer
If you look at our market where it’s predominantly production agriculture, heavy in your grains, your corn and soybeans and wheat, if you actually look at the forecast of $165 billion for crop cash receipts, if you eliminate the livestock and dairy out of that, if you just strictly look at the crop cash receipts $165 billion that’s the second highest level ever in history right now. It’s a little bit off from last year but still it’s the second highest level ever. We think in our area here where its predominantly large production agriculture we’re a little buffered from what you’re seeing from those numbers for all of North America it includes hogs, cattle, dairy and some of the different diversified crops.
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