Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Mark Cooper – Wells Capital
Mark Cooper – Wells Capital
My question has to do with the balance sheet structure of the company and any commentary you can give us on covenants and that sort, the obvious things that equity holders would want to know about here.
Marc Fierman
I guess you’re probably curious about our covenant in the third quarter we were able to make our covenant by a comfortable margin. Looking forward in this difficult economic environment I feel cautiously optimistic that we will comply with our covenants. Like I said in Q3 we passed with a comfortable margin and that was after Circuit City and the benefit of our some of cost cuts.
So we really feel comfortable, we have significant excess availability. Our revolver is a $300 million line. At the balance sheet date it was $190 million and that is actually at the time when we are at our highest level of inventory because we’re building up for the holiday season. So that I would expect that that inventory comes down, we could expect to see additional excess availability build up in our line.
Greg Mays
And I think its important to recognize in the third quarter that we had the unusual item of a $10 million provision for Circuit City and as Marc said we still made our covenants and in a comfortable range.
Mark Cooper – Wells Capital
Just from a, since you’ve been on the Board for awhile Greg, give us, what is the delta between what the company is doing today and what the expectations were because there’s no, its hard for me to fathom or at least come up with the math that says this debt can get paid off and so maybe we say, well you only have to pay off half of it and you can get the rest refinanced some years down the road. How does that happen given what appears to be some real structural deterioration in the core markets, DVDs, CDs, etc.
Greg Mays
The real difference obviously and its for all businesses when I joined the Board three years ago we certainly didn’t have this type of an economy and it’s a complete change in the credit markets. Certainly in the last six to nine months the reality of that has hit all of us, and Source is no different.
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