Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from Steven Schwartz – First Analysis.
Steven Schwartz – First Analysis
Cliff, if you could give me some more details on the restructuring it would be helpful. It sounds like you’re expecting basically a quarterly run rate of about $1.5 million savings. Basically, can you just confirm that I guess for the first half of ’09 that’s what we would see, about $3 million in savings?
Clifford D. Nastas
As I mentioned Steve, it’s $4 million for the remainder of this fiscal year. Essentially, those savings are divided between the cost of sales, part of the income statement and SG&A. So, if we’re looking at $6 million, I’d say between those two areas we’d be looking at approximately $1.5 million per quarter for fiscal 2010.
Steven Schwartz – First Analysis
How do you expect that is going to split out between COS and SG&A?
Clifford D. Nastas
It’s about 50/50.
Steven Schwartz – First Analysis
How does it impact – you’ve been expanding the tech centers in Michigan and Germany and adding staff. I take it these cuts are probably going to be more in the production areas?
Clifford D. Nastas
As I said, it’s 50/50. If you take a look just at our SG&A, we eliminated about 40 positions. Those include both heads that were currently open and people that were currently in several of those SG&A roles. It’s a substantial reduction for a company of this size but, like I said earlier it’s shared between cost of goods sold and SG&A.
Steven Schwartz – First Analysis
Any special charges associated with it in the second half of this year?
Clifford D. Nastas
Yes, the restructuring charge will be about $500,000 for the remainder of the year.
Steven Schwartz – First Analysis
That will fall in the third quarter?
Clifford D. Nastas
Yes.
Steven Schwartz – First Analysis
As far as inventories are concerned, it looks like they’re up sequentially here in the second quarter and it seems that they follow a pattern in the second quarter. One year you spend on inventories, the next year you pull cash out and you go through this cycle. What goes on there? Particularly this year where you’ve built up inventories?
Clifford D. Nastas
Well, you know, if there is a cycle there, it’s not because it’s intentional. I mean, at the end of last fiscal year, the last two quarters we had a concerted effort to really bring our inventory levels down. What you’re seeing in this quarter is the fact that the significant rapid drop off in the sales of past year cars and light trucks have affected us because our window for ordering various steel products can be as long as three, four, five months.
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