Sunday, 08 Aug 2010
Management expects that net revenues and volume in the fourth quarter of fiscal 2010 and first quarter of fiscal 2011 will at least equal and possibly improve from the levels of the third quarter of fiscal 2010. Market demand and the mix of products being sold have improved since the fourth quarter of fiscal 2009. Improved market demand is primarily reflected by transactional service center business, where volume and pricing have improved throughout fiscal 2010, contributing to better than anticipated results. Although uncertainty in the marketplace continues, the company's backlog is showing signs that our end markets, particularly the aerospace market, are improving.

Management also expects that net income for the next two fiscal quarters will at least equal and possibly exceed that of the third fiscal quarter of 2010. Although volumes have increased, results for each quarter will continue to be unfavorably impacted by reduced absorption of fixed manufacturing costs due to less than optimal volumes. In addition, the market environment continues to place downward pressure on prices. The unfavorable effect of both these items should have less of an impact on the company's operating results if the business environment continues to improve.

Controllable working capital increased by USD 45.2 million during fiscal 2010. Accounts receivable increased during fiscal 2010 due to increased sales, while days sales outstanding remained flat. Management anticipates that accounts receivable at fiscal year-end will be approximately equal to the current balance as net revenues are also expected to remain flat between quarters. Inventory increased significantly during the fiscal year due to staging of inventory for initiation of the inventory pull process, staging of inventory as safety stock for customers in the event of a work stoppage associated with the collective bargaining agreement negotiation and increased sales volumes. The process of reducing inventory started in July and management expects that by the end of fiscal 2010, inventory will decline by approximately USD 30 million. Accounts payable and accrued expenses increased from the beginning of the year to equal USD 55.7 million at June 30th 2010 due to the increased inventory requirements and are anticipated, in conjunction with the inventory reduction, to approximate a balance of USD 40 million by the end of fiscal 2010.

As a result of the above, and the net effect of other sources and uses of cash, management anticipates that the cash balance at June 30th 2010 of USD 58.6 million will increase to approximately USD 73 million by the end of fiscal 2010.