Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Special Note on Forward-Looking Statements
Certain statements in Management's Discussion and Analysis (“MD&A”), other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements generally are identified by the words “estimates,” “projects,” “believes,” “plans,” “intends,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. These statements are subject to a number of risks, uncertainties and developments beyond our control or foresight, including changes in the trends of the cable television industry, changes in the trends of the telecommunications industry, changes in our supplier agreements, technological developments, changes in the economic environment generally, the growth or formation of competitors, changes in governmental regulation or taxation, changes in our personnel and other such factors. Our actual results, performance or achievements may differ significantly from the results, performance or achievement expressed or implied in the forward-looking statements. We do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.
Overview
The following MD&A is intended to help the reader understand the results of operations, financial condition, and cash flows of the Company. MD&A is provided as a supplement to, and should be read in conjunction with the information presented elsewhere in this quarterly report on Form 10-Q and with the information presented in our annual report on Form 10-K for the year ended September 30, 2015, which includes our audited consolidated financial statements and the accompanying notes to the consolidated financial statements.
The Company is reporting its financial performance based on its external reporting segments: Cable Television and Telecommunications. These reportable segments are described below.
Cable Television (“Cable TV”)
The Company’s Cable TV segment sells new, surplus and re-manufactured cable television equipment throughout North America, Central America and South America and, to a substantially lesser extent, other international regions that utilize the same technology. In addition, this segment also repairs cable television equipment for various cable companies.
Telecommunications (“Telco”)
The Company’s Telco segment sells certified used telecommunications networking equipment from a broad range of manufacturers primarily in North America. In addition, this segment is a reseller of new telecommunications equipment from certain manufacturers. Also, this segment offers its customers decommissioning services for surplus and obsolete equipment, which it then processes through its recycling program.
Recent Business Developments
Investment in YKTG Solutions, LLC (“YKTG Solutions”)
On March 10, 2016, the Company announced that it entered into a joint venture, YKTG Solutions, which will support decommission work on cell tower sites across 13 states in the northeast on behalf of a major U.S. wireless provider. YKTG Solutions is owned 51% by YKTG, LLC and 49% by ADDvantage Technologies Group, and YTKG Solutions has been certified as a minority-based enterprise. The joint venture is governed by an operating agreement for the purpose of completing the decommission project, but the operating agreement can be expanded to include other projects upon agreement by both owners.
For its role in the decommission project, the Company will earn a management fee from YKTG Solutions based on billings. The Company is financing the decommission project pursuant to the terms of a loan agreement between the Company and YKTG Solutions by providing a revolving line of credit. The management fee encompasses any interest earned on outstanding advances under the loan agreement. The Company anticipates that this project will be completed in our third quarter of 2017, and estimates that this project will generate a total of approximately $1 million in pretax income over the life of the project.
In the third quarter of 2016, YKTG Solutions completed another project with a major U.S. telecommunications provider, which generated management fees to the Company of $38 thousand and equity earnings of $0.3 million.
For the nine months ended June 30, 2016, the Company recognized management fees of $0.2 million as other income and $31 thousand as interest income from our participation in the projects and financing provided. In addition, the Company recognized income from the equity method investment of $0.1 million for the three months ended June 30, 2016 and a loss of $0.1 million for the nine months ended June 30, 2016 for its role in YKTG Solutions.
Results of Operations
Comparison of Results of Operations for the Three Months Ended June 30, 2016 and June 30, 2015
Consolidated
Consolidated sales decreased $1.8 million, or 15%, to $10.1 million for the three months ended June 30, 2016 from $11.9 million for the three months ended June 30, 2015. The decrease in sales was due to a decrease in sales from both the Cable TV and Telco segments of $0.8 million and $1.1 million, respectively. Consolidated gross profit decreased $0.6 million, or 16%, to $3.5 million for the three months ended June 30, 2016 from $4.1 million for the same period last year. The decrease in gross profit was due to a decrease in gross profit from both the Cable TV and Telco segments of $0.2 million and $0.4 million, respectively.
Consolidated operating, selling, general and administrative expenses include all personnel costs, which include fringe benefits, insurance and business taxes, as well as occupancy, communication and professional services, among other less significant cost categories. Operating, selling, general and administrative expenses decreased $0.1 million, or 4%, to $3.1 million for the three months ended June 30, 2016 from $3.2 million for the same period last year. This decrease in expenses was due to a decrease in the Telco segment of $0.2 million, partially offset by an increase in the Cable TV segment of $0.1 million.
Other income (expense) consists of activity related to our investment in YKTG Solutions, including other income, interest income and equity earnings (losses), and interest expense related to our notes payable. Other income, which is our fee for our role in the YKTG Solutions projects, for the three months ended June 30, 2016 was $0.1 million. Equity income for the three months ended June 30, 2016 was $0.1 million. Interest expense remained relatively flat at $0.1 million for the three months ended June 30, 2016 compared to the same period last year.
The provision for income taxes was $0.2 million for the three months ended June 30, 2016, or an effective rate of 38%, compared to income taxes of $0.2 million for the three months ended June 30, 2015, or an effective rate of 27%.
Segment Results
Cable TV
Sales for the Cable TV segment decreased $0.8 million to $5.9 million for the three months ended June 30, 2016 from $6.7 million for the same period last year. The decrease in sales was due primarily to a decrease in new equipment sales of $0.9 million, partially offset by an increase in repairs revenue of $0.1 million. Gross margin was 36% for the three months ended June 30, 2016 and 35% for the same period last year.
Operating, selling, general and administrative expenses increased $0.1 million to $1.6 million for the three months ended June 30, 2016 from $1.5 million for the same period last year. The increase was due primarily to increased personnel costs primarily related to the acquisition of the net operating assets of Advantage Solutions, LLC.
Telco
Sales for the Telco segment decreased $1.1 million to $4.1 million for the three months ended June 30, 2016 from $5.2 million for the same period last year. The decrease in sales primarily resulted from a decrease in used equipment sales of $1.8 million, partially offset by an increase in new equipment sales and recycling revenue of $0.3 and $0.4 million, respectively. The decrease in used equipment sales was due primarily to the absence of $0.8 million in equipment sales to an end-user customer in the third quarter of 2015. Gross margin was 32% for the three months ended June 30, 2016 and 33% for the same period last year.
Operating, selling, general and administrative expenses decreased $0.2 million to $1.5 million for the three months ended June 30, 2016 from $1.7 million for the same period last year. The decrease in expenses was due to decreased expenses related to the earn-out payments resulting from the Nave Communications acquisition of $0.1 million and decreased personnel costs of $0.1 million.
Comparison of Results of Operations for the Nine Months Ended June 30, 2016 and June 30, 2015
Consolidated
Consolidated sales decreased $5.2 million, or 15%, to $28.9 million for the nine months ended June 30, 2016 from $34.1 million for the nine months ended June 30, 2015. The decrease in sales was in both the Cable TV and Telco segments of $2.4 million and $3.0 million, respectively. Consolidated gross profit decreased $2.4 million, or 20%, to $9.8 million for the nine months ended June 30, 2016 from $12.2 million for the same period last year. The decrease in gross profit was in both the Cable TV and Telco segment of $0.6 million and $1.8 million, respectively.
Consolidated operating, selling, general and administrative expenses include all personnel costs, which include fringe benefits, insurance and business taxes, as well as occupancy, communication and professional services, among other less significant cost categories. Operating, selling, general and administrative expenses decreased $1.1 million, or 11%, to $9.0 million for the nine months ended June 30, 2016 from $10.1 million for the same period last year. This decrease in expenses was primarily due to the Telco segment of $1.4 million, partially offset by an increase in expenses of $0.3 million from the Cable TV segment.
Other income and expense consists of activity related to our investment in YKTG Solutions, including other income, interest income and equity earnings (losses), and interest expense related to our notes payable. Other income, which is our fee for our role in the YKTG Solutions projects, for the nine months ended June 30, 2016 was $0.2 million. Equity losses for the nine months ended June 30, 2016 were $0.1 million. Interest expense decreased $52 thousand to $184 thousand for the nine months ended June 30, 2016 from $236 thousand for the same period last year.
The provision for income taxes was $0.3 million for the nine months ended June 30, 2016, or an effective rate of 38%, from a provision for income taxes of $0.6 million for the nine months ended June 30, 2015, or an effective rate of 32%.
Segment Results
Cable TV
Sales for the Cable TV segment decreased $2.4 million to $17.0 million for the nine months ended June 30, 2016 from $19.4 million for the same period last year. The decrease in sales was due primarily to a decrease in new equipment sales of $3.2 million, partially offset by an increase of $0.4 million in both refurbished equipment sales and repairs revenue. The decline in equipment sales for the Cable TV segment primarily occurred in the first quarter of fiscal year 2016. The Cable TV segment has experienced declining equipment sales over the past several years for the products we traditionally carry due to the continued consolidation of the cable television operators and fewer upgrades of the cable television networks and plant expansions. For the first quarter of fiscal year 2016, our equipment sales
decreased to their lowest level during this downturn. However, we believe some of the decrease in sales was due to uncertainties caused by pending merger activities. In the second and third quarters of fiscal year 2016, we saw our equipment sales increase back to similar levels we experienced last year. Gross margin was 33% for the nine months ended June 30, 2016 and 32% for the same period last year.
Operating, selling, general and administrative expenses increased $0.2 million to $4.6 million for the nine months ended June 30, 2016 from $4.4 million for the same period last year. The increase was due primarily to increased personnel costs primarily related to the acquisition of the net operating assets of Advantage Solutions, LLC.
Telco
Sales for the Telco segment decreased $3.0 million to $12.1 million for the nine months ended June 30, 2016 from $15.1 million for the same period last year. The decrease in sales resulted from a decrease in used equipment sales of $4.4 million, partially offset by new equipment sales and recycling revenue increases of $0.9 million and $0.5 million, respectively. The decrease in sales was due primarily to the absence of $2.3 million in equipment sales to an end-user customer in the second and third quarters of 2015. In addition, in the first quarter of fiscal year 2016, we believe that the decreased sales volume was due largely to delays in capital expenditures from our major customers due to weak economic conditions and budgetary constraints. Sales for the Telco segment did increase in the second and third quarters of fiscal year 2016 as compared to the first quarter as we saw these conditions improve. Gross margin was 35% for the nine months ended June 30, 2016 and 40% for the same period last year. The decrease in gross margin was due primarily to decreased margins from recycling revenue resulting from lower commodity prices.
Operating, selling, general and administrative expenses decreased $1.4 million to $4.3 million for the nine months ended June 30, 2016 from $5.7 million for the same period last year. The decrease in expenses was due primarily to decreased expenses related to the earn-out payments resulting primarily from the Nave Communications acquisition of $0.9 million and decreased personnel costs of $0.3 million. In March 2016, we made our second annual earn-out payment for $0.2 million, which was equal to 70% of Nave Communications’ annual adjusted EBITDA in excess of $2.0 million per year (“Nave Earn-out”). We will make the third and final Nave Earn-out payment in March 2017, which we estimate will be between $0.3 million and $1.0 million.
Non-GAAP Financial Measure
EBITDA is a supplemental, non-GAAP financial measure. EBITDA is defined as earnings before interest expense, income taxes, depreciation and amortization. In addition, EBITDA as presented excludes other income, interest income and income from equity method investment. EBITDA is presented below because this metric is used by the financial community as a method of measuring our financial performance and of evaluating the market value of companies considered to be in similar businesses. Since EBITDA is not a measure of performance calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, net earnings as an indicator of operating performance. EBITDA, as calculated below, may not be comparable to similarly titled measures employed by other companies. In addition, EBITDA is not necessarily a measure of our ability to fund our cash needs.
A reconciliation by segment of income (loss) from operations to EBITDA follows:
|
|
Three Months Ended June 30, 2016
|
|
|
Three Months Ended June 30, 2015
|
|
|
|
Cable TV
|
|
|
Telco
|
|
|
Total
|
|
|
Cable TV
|
|
|
Telco
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
operations
|
|
$
|
528,651
|
|
|
$
|
(124,788
|
)
|
|
$
|
403,863
|
|
|
$
|
846,372
|
|
|
$
|
95,833
|
|
|
$
|
942,205
|
|
Depreciation
|
|
|
84,152
|
|
|
|
24,902
|
|
|
|
109,054
|
|
|
|
72,909
|
|
|
|
27,795
|
|
|
|
100,704
|
|
Amortization
|
|
|
−
|
|
|
|
206,451
|
|
|
|
206,451
|
|
|
|
−
|
|
|
|
206,451
|
|
|
|
206,451
|
|
EBITDA
(a)
|
|
$
|
612,803
|
|
|
$
|
106,565
|
|
|
$
|
719,368
|
|
|
$
|
919,281
|
|
|
$
|
330,079
|
|
|
$
|
1,249,360
|
|
(a)
|
The Telco segment includes earn-out expenses of zero and $0.1 million for the three months ended June 30, 2016 and 2015, respectively, related to the acquisition of Nave Communications.
|
|
|
Nine Months Ended June 30, 2016
|
|
|
Nine Months Ended June 30, 2015
|
|
|
|
Cable TV
|
|
|
Telco
|
|
|
Total
|
|
|
Cable TV
|
|
|
Telco
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
operations
|
|
$
|
981,770
|
|
|
$
|
(152,943
|
)
|
|
$
|
828,827
|
|
|
$
|
1,813,022
|
|
|
$
|
325,884
|
|
|
$
|
2,138,906
|
|
Depreciation
|
|
|
237,418
|
|
|
|
74,985
|
|
|
|
312,403
|
|
|
|
214,622
|
|
|
|
84,969
|
|
|
|
299,591
|
|
Amortization
|
|
|
−
|
|
|
|
619,353
|
|
|
|
619,353
|
|
|
|
−
|
|
|
|
619,354
|
|
|
|
619,354
|
|
EBITDA
(a)
|
|
$
|
1,219,188
|
|
|
$
|
541,395
|
|
|
$
|
1,760,583
|
|
|
$
|
2,027,644
|
|
|
$
|
1,030,207
|
|
|
$
|
3,057,851
|
|
(a)
|
The Telco segment includes earn-out expenses of zero and $0.8 million for the nine months ended June 30, 2016 and 2015, respectively, related to the acquisition of Nave Communications.
|
Critical Accounting Policies
Note 1 to the Consolidated Financial Statements in Form 10-K for fiscal 2015 includes a summary of the significant accounting policies or methods used in the preparation of our Consolidated Condensed Financial Statements. Some of those significant accounting policies or methods require us to make estimates and assumptions that affect the amounts reported by us. We believe the following items require the most significant judgments and often involve complex estimates.
General
The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates and judgments on historical experience, current market conditions, and various other factors we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates under different assumptions or conditions. The most significant estimates and assumptions relate to the carrying value of our inventory and, to a lesser extent, the adequacy of our allowance for doubtful accounts.
Inventory Valuation
Our position in the industry requires us to carry large inventory quantities relative to annual sales, but it also allows us to realize high overall gross profit margins on our sales. We market our products primarily to MSOs, telecommunication providers and other users of cable television and telecommunication equipment who are seeking products for which manufacturers have discontinued production or cannot ship new equipment on a same-day basis as well as providing used products as an alternative to new products from the manufacturer. Carrying these large inventory quantities represents our largest risk.
We are required to make judgments as to future demand requirements from our customers. We regularly review the value of our inventory in detail with consideration given to rapidly changing technology which can significantly affect future customer demand. For individual inventory items, we may carry inventory quantities that are excessive relative to market potential, or we may not be able to recover our acquisition costs for sales that we do make. In order to address the risks associated with our investment in inventory, we review inventory quantities on hand and reduce the carrying value when the loss of usefulness of an item or other factors, such as obsolete and excess inventories, indicate that cost will not be recovered when an item is sold.
Our inventories consist of new and used electronic components for the cable television industry. Inventory is stated at the lower of cost and net realizable value, with cost determined using the weighted-average method. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. At June 30, 2016, we had total inventory, before the reserve for excess and obsolete inventory, of $24.9 million, consisting of $14.9 million in new products and $10.0 million in used or refurbished products.
For the Cable TV segment, our reserve at June 30, 2016 for excess and obsolete inventory was $3.2 million, which reflects an increase of approximately $0.5 million to reflect deterioration in the market demand of that inventory. If actual market conditions are less favorable than those projected by management, and our estimates prove to be inaccurate, we could be required to increase our inventory reserve and our gross margins could be materially adversely affected.
For the Telco segment, we do not maintain an inventory reserve as we recycle any surplus and obsolete equipment on hand through our recycling program when it is identified.
Inbound freight charges are included in cost of sales. Purchasing and receiving costs, inspection costs, warehousing costs, internal transfer costs and other inventory expenditures are included in operating expenses, since the amounts involved are not considered material.
Accounts Receivable Valuation
Management judgments and estimates are made in connection with establishing the allowance for doubtful accounts. Specifically, we analyze the aging of accounts receivable balances, historical bad debts, customer concentrations, customer credit-worthiness, current economic trends and changes in our customer payment terms. Significant changes in customer concentration or payment terms, deterioration of customer credit-worthiness, or weakening in economic trends could have a significant impact on the collectability of receivables and our operating results. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, an additional provision to the allowance for doubtful accounts may be required. The reserve for bad debts was approximately $0.3 million at June 30, 2016 and September 30, 2015. At June 30, 2016, accounts receivable, net of allowance for doubtful accounts, was $5.8 million.
Goodwill
Goodwill represents the excess of purchase price of acquisitions over the acquisition date fair value of the net assets of businesses acquired. Goodwill is not amortized and is tested at least annually for impairment. We perform our annual analysis during the fourth quarter of each fiscal year and in any other period in which indicators of impairment warrant additional analysis. Goodwill is evaluated for impairment by first comparing our estimate of the fair value of each reporting unit, or operating segment, with the reporting unit’s carrying value, including goodwill. Our reporting units for purposes of the goodwill impairment calculation are the Cable TV operating segment and the Telco operating segment.
Management utilizes a discounted cash flow analysis to determine the estimated fair value of each reporting unit. Significant judgments and assumptions including the discount rate and anticipated revenue growth rate, gross margins and operating expenses are inherent in these fair value estimates, which are based on historical operating results. As a result, actual results may differ from the estimates utilized in our discounted cash flow analysis. The use of alternate judgments and/or assumptions could result in the recognition of different levels of impairment charges in the financial statements. If the carrying value of one of the reporting units exceeds its fair value, a computation of the implied fair value of goodwill would then be compared to its related carrying value. If the carrying value of the reporting unit’s goodwill exceeds the implied fair value of goodwill, an impairment loss would be recognized in the amount of the excess. If an impairment charge is incurred, it would negatively impact our results of operations and financial position.
We performed our annual impairment test for both reporting units in the fourth quarter of 2015 and determined that the fair value of our reporting units exceeded their carrying values. Therefore, no impairment existed as of September 30, 2015.
We did not record a goodwill impairment for either of our two reporting units in the three year period ended September 30, 2015. Although we do not anticipate a future impairment charge, certain events could occur that might adversely affect the reported value of goodwill. Such events could include, but are not limited to, economic or competitive conditions, a significant change in technology, the economic condition of the customers and industries we serve, a significant decline in the real estate markets we operate in, and a material negative change in the relationships with one or more of our significant customers or equipment suppliers. If our judgments and assumptions change as a result
of the occurrence of any of these events or other events that we do not currently anticipate, our expectations as to future results and our estimate of the implied value of each reporting unit also may change.
Intangibles
Intangible assets that have finite useful lives are amortized on a straight-line basis over their estimated useful lives ranging from 3 years to 10 years.
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC 360-10-15, “Impairment or Disposal of Long-Lived Assets.” ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on discounted cash flow analysis or appraisals.
In the third fiscal quarter of 2016, we concluded that there was a triggering event requiring assessment of impairment for certain of our intangible assets in connection with a new operating system implemented in our Telco segment. The new operating system in our Telco segment enhanced the functionality of the overall software system and decreased reliance upon a former employee maintaining the predecessor system. We did not record an impairment charge against the technology intangible asset as we determined that the carrying amount of the asset group did not exceed the sum of the undiscounted cash flows for the asset group.
Liquidity and Capital Resources
Cash Flows Provided by Operating Activities
We finance our operations primarily through operations and a revolving line of credit of up to $7.0 million. During the nine months ended June 30, 2016, we generated $2.7 million of cash flow from operations. The cash flow from operations was favorably impacted by $1.5 million from a net decrease in inventory primarily from the Cable TV segment and by $0.6 million from a net increase in accounts payable due primarily to timing of inventory purchases. The cash flow from operations was unfavorably impacted by $1.4 million from an increase in accounts receivable.
In March 2016, we paid $0.2 million for the second of three annual earn-out payments. The earn-out is equal to 70% of Nave Communications adjusted EBITDA earnings in excess of $2.0 million for the twelve month period beginning March 1 each year. We estimate the final remaining annual payment will be between $0.3 million and $1.0 million.
Cash Flows Used for Investing Activities
In March 2016, we paid $1.0 million for the second of three annual installment payments to the Nave Communications owners for deferred consideration resulting from the Nave Communications acquisition. The deferred consideration, which consists of $3.0 million to be paid in equal annual installments over the three years, is recorded at its present value of $1.0 million at June 30, 2016.
On December 31, 2015, we acquired the net operating assets of a business for $0.2 million. The acquisition is discussed in Note 2 of the Notes to the Consolidated Condensed Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.
During the nine months ended June 30, 2016, we funded YKTG Solutions, pursuant to a revolving line of credit between the Company and YKTG Solutions, for $1.6 million. We plan to fund future advances to YKTG Solutions utilizing our cash flows from operations or our revolving line of credit. The investment in YKTG Solutions is discussed in Note 4 of the Notes to the Consolidated Condensed Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.
Cash Flows Used for Financing Activities
During the nine months ended June 30, 2016, we made principal payments of $0.7 million on our two term loans under our Credit and Term Loan Agreement with our primary lender. The first term loan requires monthly payments of $15,334 plus accrued interest through November 2021. Our second term loan is a five year term loan with a seven year amortization payment schedule with monthly principal and interest payments of $68,505 through March 2019.
At June 30, 2016, there was not a balance outstanding under our line of credit. The lesser of $7.0 million or the total of 80% of the qualified accounts receivable plus 50% of qualified inventory is available to us under the revolving credit facility ($7.0 million at June 30, 2016). Any future borrowings under the revolving credit facility are due at maturity.
We believe that our cash and cash equivalents of $5.1 million at June 30, 2016, cash flow from operations and our existing line of credit provide sufficient liquidity and capital resources to meet our working capital and debt payment needs.