西南航空 (LUV) 2002 Q1 法說會逐字稿

Good morning everyone and welcome to the AirTran Holdings Incorporated, First Quarter 2002 Earnings Release Conference Call. Just a reminder, today's conference is being recorded.

At this time for opening remarks and introductions I would like to turn the conference over to Mr. Arnie Hawk, Director of Investor Relations. Please go ahead, sir.

Good morning everyone. My name is Arnie Hawk and as director of investor relations I want to thank you for joining us today for AirTran Holdings First Quarter 2002 earnings call.

Joining us today is Joe Leonard our Chairman and Chief Executive Officer; Bob Fornaro, our President and Chief Operating Officer; and Stan Gadek our Chief Financial Officer.

Before we begin, I would like to remind you that many of our comments today are related to AirTran's outlook for future earnings, revenue and capacity growth, cost estimates, load factors, fleet plans, and expectations about future profitability. These comments are not historical facts, and instead, should be considered as time sensitive, forward-looking statements that are accurate only as of April 25, 2002.

These statements are subject to a number of risks that could cause future results to vary materially from our expectations. These risks include, but are not limited to general economic conditions, commodity prices, regulatory matters and the competitive environment.

Additional information concerning factors that could cause actual results to vary from those in our forward-looking statements are contained in our 10K filing for the year ended September 31, 2001.

Finally, I would like to remind you that this conference call is the property of AirTran Airways. Any redistribution, retransmission, or rebroadcast of this call in any form without the express written consent of the company is strictly prohibited.

At this point I would now like to turn the call over to Stan Gadek, our Chief Financial Officer.

Thank you, Arnie, and good morning everyone.

During the first quarter of 2002, AirTran's financial and operating performance continued to improve. As the rest of the industry scaled back capacity, we reevaluated our growth plans and decided to move forward.

Since the beginning of the year, we have announced service to three new cities and have increased our 2002 deliveries of 717 aircraft to 20 units. In addition, we negotiated a new financing agreement with Boeing Capital Services Corporation to finance all of the 2002 deliveries. As part of our fleet plan we also decided to accelerate the retirement of the DC-9s and will have reduced that fleet type by almost half before the end of this year.

Most importantly, we remained on plan and recorded net income in March. We believe that the foundation for sustained profitability is in place and that the pace of economic recovery, while slow, will still support profits in the second quarter and for the full year.

I would now like to talk about our operating statistics. During the first quarter of 2002, AirTran set a new first quarter traffic record of 1.2 billion revenue passenger miles which represented a 6.1 percent increase in RPMs compared to the year earlier period. Available seat miles increased by 12.8 percent to 1.8 billion miles and load factor decreased 4.2 points to 66.3 percent.

The increases in traffic and capacity were driven by a 9.1 percent increase in the number of aircraft on a year-over-year basis. At the end of the first quarter 2002, AirTran's fleet consisted of 33, 717s; 29 DC-9 aircraft; reflecting three 717 deliveries and one DC-9 retirement during the first quarter. On a year-over-year basis, we added 14, 717s and retired four 737s and four DC-9s.

Revenue passengers were up 1.8 percent to 2.1 million compared to the first quarter of '01, and increased 14.7 percent compared to 1.9 million passengers in the fourth quarter of 2001. We believe that both the year-over-year increase in passengers and the increase over the fourth quarter of last year reflect the continuing trend of traffic improvement following 9/11.

And now I would like to talk about our numbers.

For the first quarter of 2002, AirTran recorded a net loss of $3 million or 4 cents per share. The first quarter results included a non-cash credit to interest expense of 5.6 million net of tax related to our fuel derivative contracts. These contracts were terminated during the first quarter of 2002.

In addition, the company recorded an income tax benefit of $.8 million reflecting the recent change in the tax laws. Without these credits AirTran's net loss for the first quarter was 13 cents per share. This compares to net income in the first quarter of '01 of $8.8 million or 12 cents per share.

Passenger revenue declined 8 percent from $169.3 million to $155.7 million in '02. Unit revenue or passenger revenue per available seat mile was 8.65 cents in the first quarter compared to 10.61 cents in the prior period or a reduction of 18.5 percent. The decline in unit revenue is the function of a lower load factor and a reduction in yield from 15.05 cents to 13.05 cents. The reduction in yield resulted from a lower average fare and a higher average space length on a year-over-year basis.

AirTran's first quarter unit costs or costs per available seat mile also declined and helped to partially offset the decline in unit revenues. Our operating

dropped from 9.77 cents in the first quarter of '01 to 9.02 cents in 2002, or 7.7 percent brought about in part by the decline of fuel prices. On a non-fuel basis our unit costs decreased 4.7 percent from 7.49 cents to 7.14 cents year over year. By any measure the reduction in unit costs is significant given the fact that our aircraft rent expense increased by more than 139 percent from 14 additional 717s and a 180 percent increase in aircraft insurance and security services.

Looking at the individual line-item expenses, salaries, wages, and benefits increased 16 percent to $45.3 million compared to $39 million in the first quarter of last year. The increase was driven primarily by flight crews and airport personnel hired to operate and support the additional aircraft and new stations. Also contributing to the year- over-year increase were contractual wage increases and the higher costs of employee benefit programs.

Aircraft fuel decreased 6.8 percent from $36.3 million to $33.8 million. Our first quarter fuel price per gallon was 87.4 cents on 38.7 million gallons compared to 98.3 cents on 36.9 million gallons in the first quarter of 2001. Our fuel burn per block hour continued to decline as we added more 717s and retired DC-9s and 737s.

During the first quarter of 2002, fuel burn was 732 gallons per hour compared to 774 gallons per hour in 2001 for an improvement of 5.4 percent. The reduced fuel burn per block hour equated to a fuel savings of over $2.2 million in the first quarter of 2002.

Maintenance materials and repairs declined 48.5 percent from 20.5 million in the first quarter of 2001 to 10.6 million in 2002. On a block-hour basis maintenance costs dropped 53.5 percent from $430 per block hour to approximately $200 per block hour year over year. This substantial reduction in maintenance expense primarily reflects a reduced number of maintenance events related to retired aircraft as well as the lower maintenance costs associated with a higher number of 717 aircraft in our fleet.

Distribution costs decreased 14.3 percent from 12.5 million in the first quarter of '01 to 10.7 million in the first quarter of '02. The main factor driving the reduced distribution costs was an 8 percent reduction in passenger revenue year over year. Partially offsetting the volume- related reductions were increased CRS fees and increases in the number of credit card transactions.

Landing fees and other rents increased 7.6 percent from 9.3 million to 10 million in the first quarter of '02. The increase primarily reflects higher landing fees as well as an 8.6 percent increase in the number of departures year over year.

Commencing with the first quarter of 2002, we are separately reporting aircraft insurance and security services on both a quarterly and a year- to-date basis. During the first quarter aircraft insurance and security increased $5 million or 180 percent. The majority of this increase resulted from additional premiums for war risk liability insurance. Increased hull and liability rates as well as an increased insured fleet hull value resulting from the new aircraft also led to higher insurance costs in the quarter.

Marketing and advertising expense increased approximately $500,000 or 10.5 percent from $5.1 million to $5.7 million. The increase primarily reflects additional advertising for new market development.

Depreciation expense declined 45.8 percent from $8.1 million in the first quarter of '01 to $4.4 million in the first quarter of '02. The reduction in depreciation results from the retirement of seven owned aircraft on a year-over-year basis and a reduction in the net book value of the DC-9s.

Other operating expenses increased from $16.4 million in 2001 to $20.2 million in '02 or 23.5 percent. The increase resulted primarily from passenger-related expenses associated with the higher level of operations, contractual costs related to new station openings, and costs associated with the company's new reservation system.

Operating margin for the first quarter of 2002 was a negative 1.8 percent compared to a positive 10.3 percent in '01. Looking at the balance sheet, our cash on hand at March 31, 2002, was $121.8 million compared to $130 million at December 31, 2001.

The year-end cash balance included approximately $20 million of federal excise taxes which were remitted on January 15th. Adjusting for the tax hold back at year end, our cash balance was $110 million.

Long-term debt decreased $8.4 million from $268.2 million at 12/31 to $259.8 million at March 31 of '02.

Stockholders' equity as of March 31, 2002, was $32.9 million compared to $33.4 million at year end.

Reviewing our first quarter 2002 cash flow and cash burn rates, AirTran was cash positive on a fully allocated basis taking into consideration all debt service and capital expenditure requirements as well as cash required for normal operating expenses.

At this time I would like to give some guidance for the second quarter and for 2002. ASMs are projected to grow approximately 20 percent in the second quarter, 30 percent in the third quarter, and 35 percent in the fourth quarter on a year-over-year basis.

Aircraft insurance and security costs are expected to trend in the direction of first quarter 2002 costs. During the second quarter we expect to take deliveries of five additional 717s and we intend to retire three more DC-9s. We expect that our non-fuel unit costs will continue to decline approximately 5 to 8 percent in the second quarter and 3 to 4 percent in the second half on a year-over-year basis.

We also anticipate that the year-over-year decline in unit revenues will be similar to the first quarter. We are projecting the price of fuel to be in a range of 85 cents to 95 cents per gallon all in. And, finally, we are projecting an effective tax rate to be approximately 5 to 7 percent.

In summary, we believe that the improving market and financial trends experienced during the first quarter of 2002 will continue. We have made significant progress in reducing our costs and expect this trend to continue throughout the remainder of the year. Lower costs allow us to offer lower fares and we intend to maintain our position as the low-fare leader in our markets. We will continue to grow in the months and quarters ahead and to take advantage of new opportunities as they present themselves. Our business plan is on track and we look forward to once again generating profitability for our shareholders.

At this time, Operator, I would like to open the call to any questions.

Thank you. The question and answer session will be conducted electronically today. If you would like to ask a question, please press star one on your touch-tone telephone.

Again, if you do have a question, please press star one and we'll pause for just a moment to assemble our roster.

Our first question comes from

with Merrill Lynch.

Yes, good morning, gentlemen. I guess two questions and maybe this is more related to revenue and markets. I guess, could you give us a sense of how your

trends improved during the quarter by month?

You know, March was, I think, you know, pretty good. I think you have to look at March as taking it up because of the placement of Easter and Passover. So I think March got a little bit of benefit at the expense of April. So, you know, for us we were -- our declines were above 20 percent in January and February and below that in March. But we expect in April because of, you know, Easter placement and also last year we had a benefit, the Delta job actions in April. So, you know, April will be a little bit worse than March from a RASM decline perspective.

That's helpful, and then I guess secondly, and I guess this is a question for you Bob, again, with respect to -- regarding the recent fare initiative where you simplified your structure there. Can you talk through some of the more salient aspects of that fare initiative?

Again, you know, some people have compared our initiative to America West's initiative and I'd just like to say it's probably completely different. America West you might have had 12, 13, 14 fares in a market and gone to eight and dropped Saturday night stays. Yes, we basically have always had a one-way fare structure.

Okay.

For the most part we've had five coach fares in the market and we've gone to four. So basically the salient feature was in Atlanta, we went from two walk-up fares, you know, unrestricted walk-up fares to one. So, you know, what we would call a "B" and then a "Y"; unrestricted walk-ups with no advance purchase. That was basically a modification. And really more a reflection of the fact that even on our lower fare base, price is probably too high compared to peak of the year 2000. We basically rolled back the walk-up fares to 2000 second quarter levels.

Okay. What has been the competitive response in the Atlanta market? Have they matched you, you know, in lock step?

Yes. I mean, basically -- I would say probably for at least pretty much the last year, virtually everything that AirTran does from pricing and capacity standpoint is matched usually in a matter of hours.

What about on the Saturday night stay?

In AirTran markets, Delta has a very similar, basically to, you know, copy our fare structure.

Okay. Thank you very much.

Okay. Thanks, Mike.

And as a reminder, please press star one to ask a question.

Next we have

with Connor Capital Management.

Good morning, fellas, and congratulations. Joe or Bob, would someone give us more color on cost controls in light of insurance and security costs going straight up? They look wonderful, I'd like to understand why.

Yes, I think a couple things, Herb, right after 9/11, you know, it became pretty clear that we didn't know what the heck our revenues were going to be and there wasn't a lot we could do about them. I think everybody is having that problem and we really needed to rededicate ourselves to getting our costs down and maintaining them down. And I think we did a pretty good job of that as we put the 2002 plan together, we were pretty aggressive. But then after we got the plan together, we put a task force, a cross-functional team together to go find another 5 percent. And we were really pretty successful at that.

I think we got a little lazy last year and we rededicated ourselves to it looking at virtually every item in the company. Having said that, clearly bringing the 717s in is having a significant effect on our costs. It's reducing our maintenance costs substantially. We went from about 12 percent of revenue for maintenance last year in the first quarter to about a little under 7 percent this year. In addition, we are saving fuel and so those are the primary elements, the 717 versus DC-9. But, really, just a rededication to paying attention to it.

The last thing I would say is, we've been underflying the 717 ever since we had the airplane, primarily because there weren't enough pilots in the pipeline which really goes back to the very beginning when we couldn't get the simulator up on line early out. So we have been behind. We have now caught up with pilots. We have exactly the right number that we need to fully utilize that airplane. So we are getting better utilization out of the most efficient asset we got. So it's a combination of those things.

And I think the good news is we see costs, as Stan said, going down even from the first quarter, going down three to five, maybe more than 5 percent through between now and the end of the year.

May I ask another question reference 717s. In your press release you told us that you were going to add 20 this year and retire 14 DC-9s.

Right.

Why the disparity? What should we expect reference an unwillingness to retire more DC-9s?

Well, we need the six units -- additional units for growth. We came up with the number 20, quite frankly, by doing a number of iterations, anywhere from 10 to 30 new airplanes and we came up with 20 because it was the optimum balance between having to fill the pipeline with additional pilots versus the amount of money you would save by avoiding maintenance events. And so we backed into the number 20 really by doing numerous iterations from one to 30, and that's sort of the optimum number for us.

And the retirement of 14 DC-9s as opposed to retiring more is an indication of what?

You know, as Stan said, we're going to have significant growth this year. We're looking at 20 percent the second quarter, 30 plus in the third and the fourth, and so we didn't believe that we should be growing at any faster rate than that. And so we sort of came up with the number by, again, backing into what we thought would be controllable growth rate.

Along those lines, again, a couple of things that happened, and I think we've been presented with a very good opportunity in Baltimore with Metrojet pulling out, again, particularly in the northeast where there's been significant capacity reductions. It may not necessarily have been the optimum time from a revenue standpoint to position yourself, but it was really the optimum time from a strategic standpoint given the pull backs by Metrojet and U.S. Airways.

Thank you very much.

Thank you, Herb.

And we'll go next to

Good morning.

Good morning.

A few questions, please. One, can you go over the business/leisure mix and how that's changing?

Actually, the business/leisure mix obviously has, you know, declined. You know, a year ago you might have had 60 percent of your revenue in what we would call the business area, roughly 45 percent of your ticket purchases, 6 percent of your revenue and this year the revenue from what we would call "business fares" which are inside of seven days is about 50 percent, maybe a little less than that.

So, two things: one is that we believe there are actually fewer business travelers, and we also think that people who used to buy tickets three or four days in advance are buying them eight or nine days in advance. So there's actually a change in habits even with our simple fare structure.

Any sign of the mix starting to improve yet or is it just simply stabilized?

I think it's stabilized. You know, again a couple of things that have gone on. You know, the southeast has been hit pretty hard, you know, Washington, and Boston, you know, and even New York City. We carry quite a few business customers. Those markets have been hit, I think, harder than certain other markets. And also some of the short-haul markets are also a little bit weaker. I mean, clearly the hassle factor and 225 mile markets is significant compared to what it was a year ago. So I think those markets are taking a little bit longer to come back.

And if we looked are your unit revenue performance versus the industry, is it simply because you're adding a lot more seats that you're showing steeper declines?

You know, I think so. You also have to go back, you know, we were -- our unit revenues were improving last year, 10, 11, 12 percent when the industry was already beginning to decline. So I guess to some degree the impact to us is going to be a little bit steeper. But I think we will probably trail the industry, you know, pretty much through the third quarter of the year. And then I think we'll normalize with the industry.

But I would add to that, Glen, I mean, we shifted our strategy a little bit after 9/11, I mean, we protected earnings per share at all costs, as you well know in '99, 2000, 2001, but we saw incredible opportunities that presented themselves and so we shifted our focus a bit. We are very much willing to give up a little bit on the RASM in order to have the accelerated growth. Because some of these opportunities may not be there a year from now or 18 months from now. So we've shifted our focus a little bit here because 9/11 presented the opportunity. We believe that we will be better positioned, vis-a-vis the rest of the industry September 11th of this year than we were September 11th of last year. And as all the boats start rising, we think we'll be in a better position to rise at a faster rate than we otherwise would have been.

Can you share with us how you're doing in terms of both reducing security lines and just in general your reliability?

Our reliability is excellent. We are running -- we ended up 98.5 for the first quarter. That's really made up of a 99.3, 99.2, and then a 96 something in January where we got hit with that ice storm in Atlanta. We were running 99.5 so far in the second quarter. We typically run 99.5 plus and then we may have a bad day when we get thunderstorms in Atlanta or something like that.

Our bag numbers are superb. We are right at the top of the industry. We screwed up our block a little bit. We pulled some block out back when traffic was down and flights were down, and we didn't get it back in fast enough. But we are fixing that in May. So our arrival performance is lower than it needs to be, but the completion factor in bags are just superb.

I forgot the other point of the question.

The issue is really in terms of lines, you know, what are we doing about it. We're looking at a number of things. We have not gone to any express lines yet, but we are actually looking at that.

Also what we're doing probably the most significant thing we're doing is we're having a very aggressive deployment of curb-side check-in, because we historically have only done curb-side check-in at a number of locations and we're putting it in our biggest locations, really, as we speak. Right now I think there has been a lot of progress really in Atlanta in general. Atlanta was really one of the most difficult places for security. In late last year the lines were unbelievable, but I think the airport and the security agencies, everybody working together, have dramatically improved that situation. So I think it's -- and the key thing is to make sure you've got enough staff at your ticket counters which is something we're very focused on right now.

Finally, on the maintenance side, you said it's down to $200 per block hour, what is a sustainable number?

I would say it will probably be higher than that. The last year rate of $450, I think, was certainly over where our long-term rate will be. With the 717s, I would expect that you could probably take maybe 10 to 15 percent off that $450 rate, maybe even 15 to 20 percent for long- term.

You know, in the long run -- well, first of all, you'll see the number is low this year. In the long term, our 717 is contractually guaranteed at no higher than 330 a block hour. So, as you move out to, say, you know, '03 and '04, we'll be in that range and we'll stay there for seven or eight years. But they'll be lower than that coming through the corridor as we retire DC-9s.

One thing that we've done, we've put a lot of our maintenance on power by the hour. We have a ten-year agreement with Rolls Royce on the engines. We've got a long-term agreement on the wheels and brakes. We are pretty close to a deal with Honeywell on all the avionics. Our goal is to have 75 percent of that airplane on power by the hour. And I'm pretty sure we'll achieve that objective by the end of the year. So our costs will be very predictable and hopefully very low on a go-forward basis.

It looks like the annual rate this year will be at 215 to 230, somewhere in that range.

Thank you very much.

And next year shouldn't look a lot different because we'll continue to avoid -- continue to retire DC-9s and avoid those heavy maintenance events. We don't believe at this point that we'll ever have to overhaul another JT-8 engine, that we are consuming the maintenance capability of the DC-9s as in advance of their retirement. And

and his group have done a very good job of controlling that.

Our next question comes from Jim Parker with Raymond James.

Good morning, gentlemen. A question regarding you announced, it wasn't a co-chairing, but what, an interlining agreement with British Airways?

Right.

And I'm just curious, what's the prospects for actually entering into co-chairing agreements with international airline and maybe even domestic airlines? It's something you all have talked about from time-to-time and are we any closer to seeing that to happen?

I don't know is the answer. I mean, we have had conversations. I think most of those conversations have been geared toward keeping us out of the other guy's markets. But we continue to talk. There are some other international operators that we have an ongoing dialogue with and we'll just have to see where those go. And we continue dialogue with domestic operators as well. But I can't predict what the outcome of those are likely to be, quite frankly.

Jim, there are two conflicting areas. Geographically our network, particularly the southeast, is very complementary to a lot of the larger carriers with the frequent flyer programs. At the same time, the larger domestic carriers don't like to align with airlines that charge lower prices. So you have a push and pull there. But at some time down the road there may be some opportunities if the price is right, if the deal is right.

I may have missed, it, but did you mention some of the logic about Milwaukee and kind of what is the game plan there?

The game plan, again, two things. Milwaukee -- first of all, it's a fairly sizeable market and you give the competitive environment in Atlanta, you know, we're going to be focused more on bigger cities rather than going into some of these smaller cities. We found Delta pretty much does everything that we do. They followed us into virtually every small market we compete with over the last seven, eight months. So, you know, rather than trying to develop small markets, we're going to come out and go into big ones as there's more revenue upside. So we're less interested in developing very small markets unless there's a subsidy or guarantee.

Regarding Milwaukee in general, Milwaukee has no low-cost carriers. It's a fairly large market to Florida, and it's untapped. And it's also an opportunity to participate in traffic on the north side of Chicago as well. So we are just doing something completely different than what the incumbent carrier in Milwaukee is doing.

Right. Okay. Thanks.

Thank you, Jim.

Moving on to Jim Higgins with CS First Boston.

Yes, thank you. Can you give us some indication of how your new point-to-point markets are running in terms of revenue build, how that may be pulling your numbers down over the relatively near term?

Jim, a couple of things. Again, some of the new routes, for example, to Florida are a longer haul and by definition would have a lower yield. But in terms of, you know, coming out of the blocks, we're starting them at a pretty good time of the year. So they actually look pretty good. I mean, I would have to say a lot of our new servers, particularly in Baltimore and Rochester, they're all doing, you know, actually better than planned. Most of the decline in the airlines is really in the southeast which is very competitive. So we're pretty happy with the new stuff.

You know, Atlanta has seen a lot less cutback in capacity than the rest of the industry. As they move forward, I think you'll find that, you know, looking out in the future Delta has canceled very little service in AirTran markets and canceled a lot more service where they don't compete with us. So we will have to basically ride that out. We pretty much have gone through the worst with an 80 percent overlap with a sick carrier and we're coming out pretty good.

So, if there's going to be money made in the southeast, which I believe there will some day, we're going to participate pretty nicely in it.

I bet you're right. Your CASM guidance for the second quarter, what are the key variables in the range you're looking at?

Well, certainly, I think fuel we've got a fairly wide range of guidance there, 85 cents to 95 cents. Security, and I think in aircraft insurance and security you've just got to trend it out along the lines of what we experienced there in the first quarter.

With the five aircraft deliveries, that will directly increase our aircraft rental. They'll all be lease financed. And, in fact, all 20 aircraft this year will be lease financed.

the key variable sounds like it's fuel really then?

Yes.

Okay. What are you paying for fuel currently?

We're paying about anywhere from 85 to 89 cents a gallon.

That's all in.

All in.

Jim, just FYI, we -- Jim and others, in the second quarter we have about 24 percent of our fuel purchased at about 64 cents. That's delivered, not all in. We've got about 37 -- 36 percent in the third quarter at about 68 cents. We've got about 32 percent at 69 in the fourth quarter. And as prices dipped, we've been out buying the forward-future contracts.

And to get it to all in, you add, what, five cents a gallon or so?

No, it's about anywhere from 14 to 16 cents for taxes and transportation and other things.

About 14 average.

thank you very much.

Our goal in that regard is to have about 50 percent of our fuel prices locked in at any one time.

And our next question comes from

with J.P. Morgan.

Yes, good morning, everybody. Stan, unless I'm mistaken, your earlier X-fuel CASM guidance for this past quarter was for a modest increase as it was for the year. Instead you posted one of your largest year-over-year declines in X-fuel CASM which is great, and you've substantially improved your forward guidance. What is driving the improvement? You know, what categories are coming in better than what you had earlier expected?

Well, I think what changed really in a big way was on the maintenance side with the acceleration of the retirement of the DC-9s, that allowed us to line up these airplanes to exit the fleet as Joe was indicating earlier such that we wouldn't have to incur another heavy maintenance cycle on that aircraft. And that phase-out plan, last year we were looking at, I think, about a retirement schedule of six airplanes. So going from six to 40 is pretty significant. And that's really what changed it.

Okay. Good. And --

I would add to that, Jamie, better utilization of the fleet that we --

Absolutely.

-- have in service. We are just squeezing more hours out and with some of this point-to-point flying, it permits us to get better utilization of the airplane. So we're working the fleet harder as well.

Good. Good. Glad to hear it. Second question, probably for Bob. Prior to your fare change of last week, what percentage of your business revenue was sold in the BFL category, the YFL category, and the AFL category? Just, you know, kind of round numbers, what was the relationship of those three?

I would say probably on a system basis --

Hang on, we got it here.

Okay. Thanks.

Just one second.

I guess about a third.

A third altogether. Yes, but could you break down that third into the three buckets that are business revenue buckets just so we can, you know, better understand how those will combine into your two remaining buckets?

I could probably do it. I would just be guessing.

Let us think it out and we'll get it back to you.

Okay. No rush. Just curious. Thanks a lot, appreciate it.

Once again, please press star one to ask a question. We'll go next to William Green with Morgan Stanley. Mr. Green, your line is open.

And hearing no response, we'll move on to

.

Yes. Could you tell me your present cash position?

Yes. At the end of the quarter which is where I can speak to, we had $121.8 million in cash.

Thank you very much.

And we've been cash neutral since December.

And one final reminder, please press star one to ask a question. And we'll pause for just a moment.

Okay. Operator, I think we'll go ahead and wrap it up. It sounds like -- unless there are additional questions.

There are no further questions.

Okay. Thank you, everybody, for joining us today. I appreciate it. Obviously we're never satisfied unless we're making money. That's what we're here to do. But we are very confident about our ability and we're very proud of what we did in the cost side of the business in this quarter and we will do it for the year.

We will be profitable in the second quarter. And we believe, obviously, as we make our business plan, we will be profitable in the third and fourth as well, although it's very hard to predict revenues at this point. But we are very close to our plan in the first quarter, so we believe we have the business under control and do have the ability to forecast what's going on.

So, we are actually quite confident of having a decent 2002 and certainly one that will look very good compared to the vast majority of the industry. So that's sort of the wrap up. Profitable in the second quarter and if we're on plan profitable in the third and the fourth. Cash looks good. We watch that daily, as you all know, and have maintained the cash neutral position since December. So all in all in a pretty bad environment we are feeling pretty good about how we're positioned.

With that, thanks very much and we'll talk to you later.

And that concludes today's teleconference. Thank you for joining us.