Phil Gibbs, KeyBanc
I’m asking about the potential for some of your facilities on the export side to be rationalized, given the fact that export demand is tepid. Also in light of the fact that I think Sims has more aggressive management in place now and they might not be as aggressive in looking to expand their business domestically.
Tamara Lundgren, President, CEO
Phil, we review the effectiveness, efficiency, and metrics of our projects – of our facilities on a very regular basis and that is what has driven the productivity initiatives and the very disciplined cost reduction moves that we have made over the last couple of years because we want to maintain the position of being the low-cost producer in all of the regions in which we operate.
So we have been quite disciplined, focused, and aggressive in making sure that we can effectively adjust our variable production costs and our metal margins in this business. So we don’t have plans to take out capacity. We have done a lot of work in restructuring our cost base and our focus has been on reducing fixed costs, adjusting resource levels, and shift schedules to match volumes. We have done portfolio optimization by adjusting asset and equipment utilization, and we’ve put a big focus on those assets that we believe can improve their performance.
So we’re not looking to take any of our major facilities offline. We were not in the position where we had shredders competing against each other, nor were we in the position where we were putting in new shredders that were going into markets that had a lot of capacity. Sso for example, if you look at our southeast region, we have never put a shredder in there because we thought that region of the country was over served by shredders.
Phil Gibbs, KeyBanc
Okay. I appreciate it and then just a couple follow-ups, if I may. As far as your outlook for net working capital or inventory levels moving into your next couple of quarters because I don’t know if your inventory is built this quarter, but certainly your cash went down a bit, so any color you could provide there?
Richard Peach, CFO, SVP
Yes. Hi, Phil. It’s Richard. Overall, our inventory levels are low, so we have been – we have got a strong focus on matching or buying to our selling and not building inventory levels and what is a fairly volatile market. So we have had very tight management of our working capital and our inventory. In fact, that’s one of the reasons why we do not have any significant inventory charges despite this very large drop in the market because we have been managing our inventory turns and our buy program very, very carefully to adjust to the market changes.
After seven quarters in a row of positive operating cash flow, in the last quarter – you are correct. We did have a modest use of funds of about $16 million. That is mainly just due to the timing of working capital movements. I think we have shown over time a strong track record of positive operating cash flows in good markets and in tough markets. I would expect as we move forward throughout this fiscal year that we will have some positive operating cash flow in the quarters to come, but we remain very focused on disciplined working capital management.
