Miller Industries Inc (MLR) 2005 Q4 法說會逐字稿

At this time I would like to welcome everyone to the Miller Industries' fourth quarter 2005 conference call. (OPERATOR INSTRUCTIONS). Mr. Boyriven, you may begin your conference.

Good morning everyone. This is Eric Boyriven of Financial Dynamics, and I would like to welcome you to the Miller Industries' conference call. We're here to discuss the Company's 2005 fourth quarter and full year results, which were released after the close of market yesterday.

With us from management today are Bill Miller, Chairman of the Board and Co-CEO, Jeff Badgley, President and Co-CEO, Vince Mish, CFO, Frank Madonia, General Counsel, Debbie Whitmire, Corporate Controller, and [Allison Houton], Director of Finance.

Today's call will begin with formal remarks from management followed by a question and answer period. Please note that in this morning's call management may make forward-looking statements in accordance with the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. We would like to call your attention to the risks related to these statements, which are more fully described in the Company's annual report filed on Form 10-K and other filings with the Securities and Exchange Commission.

What these formalities of the way, I would like to turn the call over to Jeff Badgley. Jeff, please go ahead.

The fourth quarter of 2005 capped a successful year for Miller Industries on many fronts. The strong demand for our products from our customers, together with complementary product development, led to an increase in sales of nearly 50% to 352 million in 2005. In the fourth quarter of 2005 we saw the continuing effect of positive economic conditions as sales increased 38% over the prior year quarter to 93 million.

Throughout the year the benefits of higher volumes, combined with our focus on cost-containment and pricing actions, which worked their way through our backlog, have resulted in improvements to profitability. Our achievements in this area have minimized the effects of the continuing volatility we have seen in the cost of some of our key materials, such as aluminum and some types of steel. As a result, we saw gross profit increase over 77%, and operating profit increased 128.5% over the prior year quarter.

Throughout 2005 we have also continued to take steps to strengthen our financial position through a debt refinancing and our debt reduction program. Thanks to the cash flow we generated in the second half of 2005, we have reduced our senior debt down from the 20.8 million in June at the inception of the new senior credit facility, to 6.3 million at the end of the year. This is nearly 4 million ahead our goal of 10 million in senior debt that we established at the beginning of the year.

We achieved a 240% increase in net income to 18.6 million, or $1.62 per share in 2005, with net income for the fourth quarter of 6 million, or $0.52 per diluted share, an increase of 276% from year ago levels.

We're very happy with our results in 2005, which are the culmination of our successful efforts over the past few years to refocus on our core business and increase our financial strengths.

Now I will turn the call over to Vince who will review the quarter's financials in greater detail. After that I will be back to provide some additional comments regarding the business, following which we will take your questions.

Good morning everyone. Let me just remind everyone that the discussion that follows relates to the continuing operations unless otherwise indicated. And note that the sales of Final Distributor from the Distributor Group was completed in December of 2005. With that said, let's review the 2005 fourth quarter results, which were a continuation of the strong performance we have seen in the past two quarters.

Net sales for the fourth quarter of 2005 rose 37.8% to $92.6 million versus $67.2 million in the fourth quarter of last year, as a result of continued strong demand in the market. As a result of higher sales levels, combined with increases in raw material cost and energy costs relative to year ago levels, cost of operations rose to $78.5 million in the 2005 fourth quarter compared to 59.3 million in the fourth quarter of '04. However, as a percentage of net sales cost of operations declined on a year-over-year basis from 88.2% to 84.8%.

As a result, gross profit rose 77.1% to 14.1 million from 7.9 million in the fourth quarter of 2004. This equates to a gross margin of 15.2% in the fourth quarter, as compared to 11.8% in the prior year quarter. On a sequential basis, we saw continued improvement in gross margin from the 15.0% level in the third quarter. Improvement in gross margin reflects the leverage inherent in our higher sales volumes, as well as cost-cutting initiatives and the positive effect of our past pricing increases.

In the fourth quarter of 2005 SG&A expenses were $6.4 million compared to 4.6 million from the same period a year ago. As in the second and third quarters, much of this increase was associated with increases in personnel expense, including commissions on the higher sales volume, and increased incentive accruals.

Operating income, which is defined as income before interest and taxes, increased 128.5% to $7.7 million or 8.3% of net sales for the fourth quarter of 2005 from $3.4 million or 5% of net sales in the fourth quarter of 2004.

Total interest expense for continuing operations in the 2005 fourth quarter decreased 35.2% to $797,000 from $1.2 million in the fourth quarter of last year, primarily as a result of the refinancing actions taken earlier in the year, coupled with our successful efforts to pay down total debt.

For the fourth quarter of 2005 income from continuing operations was $6 million, $0.52 per diluted share, compared to $1.8 million, or $0.16 per diluted share, from the fourth quarter of last year.

Including an after-tax loss from discontinued operations of $4,000, $0.00 per diluted share, net income for the fourth quarter totaled $6 million, or $0.52 per diluted share. This compares to the net income of $1.6 million, or $0.14 per diluted share, in the 2004 fourth quarter, which includes an after-tax loss from the discontinued operations of $230, $0.02 per diluted share.

Now let me briefly review our results for the year ended December 31, 2005. For the year, net sales from continuing operations were $351.9 million compared to 236.3 million in 2004, an increase of 48.9%. Reported income from continuing operations of $18.7 million, or $1.63 per diluted share, in 2005, which is over 2.5 times the 2004 level of $7 million, or $0.64 per diluted share.

Including an after-tax loss from discontinued operations of 114,000, or $0.01 per diluted share, the Company reported net income for 2005 of $18.6 million or $1.62 per diluted share. In 2004 the Company reported net income of $5.5 million, or $0.50 per diluted share, which included an after-tax loss from the discontinued operations of $1.5 million, which was $0.14 per diluted share.

For the current year the Company's diluted shares outstanding increased 4.5% as a result of the previously discussed private placement of 480,000 shares of common stock in the second quarter of 2004.

Let's now review some balance sheet highlights. Accounts receivable at December 31, 2005 were 65.8 million compared to 49.3 million at December 31, 2004. Inventories at December 31, 2005 were 38.3 million compared to 35 million at the same time last year. Our increase in accounts receivables and inventory of the year ago period is in response to the higher production and order levels and stronger demand in the market.

Accounts Payable were 45.4 million for 2005 compared to 36.2 million in 2004. Accounts payable increased from the year ago level due in large part to the increased inventory levels to support the higher volume.

With the cash flow generated in 2005 we were able to fund our increased working capital needs, while continuing to pay down debt ahead of schedule. The total senior and junior debt for all operations at December 31, 2005 was 16.3 million, which is down significantly from the 24.7 million at September 30, 2005 and the 26.7 million at December 31, 2004. At year-end the senior debt consist entirely of the term debt with the revolver portion paid down to zero.

In terms of new accounting standards applicable to our financial reporting, we will adopted the provisions of SFAS 123R in 2006. With the standard having an anticipated $0.03 per share effect on earnings per share over the course of the year.

As Jeff mentioned, we are very happy with these results, which represent another year of operation improvements and continued strength in our markets. And with demand remaining strong, we anticipate another profitable year in 2006.

With that, I will turn it back over to you, Jeff.

Looking ahead to 2006, we continue to seek positive trends in the marketplace for our products. Our strong backlog in order levels indicate another profitable year ahead for Miller Industries. In 2006 we will spend approximately $10 million to upgrade our facilities in order to more efficiently accommodate the strong demand we continue to see in the marketplace. These facility improvements will streamline our production, increase our capacity, reduce our product cost, and ultimately improve the overall customer service level in delivering the highest quality, most innovative products in the industry.

In closing, I would like to thank all of our employees, shareholders, suppliers, and customers for their continued support in making 2005 a successful year for Miller Industries. With that we're ready for questions.

(OPERATOR INSTRUCTIONS). [Robert Steiner] with Rothschild Investment.

A wonderful year. You always have the big show in April, and I was curious if there were usual expenses that would occur in the first quarter where you don't have the sales and the sales come in April -- is that something we should be looking for?

You are correct. However, the show this year is in May. But still, we are building our new product for exhibit at that show in May in the first quarter. We will not recognize that revenue until the end of the show in May. Historically we take over 100 trucks to that show.

On a sequential basis, would that -- with those expenses would that have an impact on the gross margin in the first quarter versus the fourth quarter?

I think sequentially the first quarter over fourth quarter is always tough. Obviously, the Florida show is part of that, certainly.

[Matthew Servich] with Scotia Capital.

Congratulations on a nice quarter and I'm getting out of the distribution business finally. I noticed the capacity expansion of $10 million is more than the 5 to 7 that you had estimated last quarter. And I'm curious how much of that increment is for additional capacity beyond what you had planned versus perhaps incremental modernization of equipment versus whatever else might be in there?

This is Bill Miller. Yes, we had estimated 5 to 7 million originally for the Chattanooga facility and an additional 1 million for the [Sharing] facility for their expansion as well. But that did increase through a combination of reasons. One, as we went into the city of Chattanooga to get improvements, which we have been annexed into, it cost us a little more to meet some of their landscaping and other requirements.

But in addition we also added a couple of pieces of new equipment in there that we think are going to be very valuable to work in large wreckers. And finally, we did increase the size of that facility slightly over our original anticipation, but overall it is still pretty much the same program. We have increased some of the things a little bit.

And one thing I did fail to mention in my comments is that the Company's goal is to fund that $10 million through cash flow and that includes debt.

But we see some advantages, so we did a couple of things as we got into the project that we thought could help the cost. And so we took it back to the Board and they approved it.

Can you give us some sense of what you expect to pay back on that 10 million to be?

You mean its IRR?

Its IRR, or I don't know if you look at it as payback or IRR, but give us some sense of the return you're expecting on that capital?

We think it is in excess of 25% IRR. In general we will just leave it there. And we expect it to help improve our gross margins. That is what we are focused on here. That is our effort this year is to continue to improve our gross margins. Like Jeff said, the first quarter is always a difficult quarter, but we're hoping we don't -- that we can continue to improve them.

In terms of the revenue, I imagine there is some revenue impact of the incremental capacity. When should we expect to start to see that?

This is Jeff. We won't be done with our facility expansions until Q4 going into Q1 of next year.

But it gives you another leg of growth in '07 I guess?

Yes. But really, again, we have talked about this on previous calls. Although it does increase capacity somewhat the modernization to enhance gross margins and efficiency is really what we're after with the spending and the money.

In terms of margin improvement areas, can you talk about where you stand in terms of price increases? It seems that your raw material costs and energy costs can continue to be a challenge to you. Have there been pricing increases, and where else beyond the capital expenditures that your spending now can you imagine finding incremental margin?

This is Bill again. Actually as we looked at the fourth quarter, and it was a very good quarter for us, we had actually anticipated even more of an increase in gross margins. But for some of the reasons you mentioned and I would just -- ingot prices went up 30% in the fourth quarter. And although aluminum is not a big user, we do use aluminum boxes and we have -- on our large wreckers, and we do have aluminum car carriers. That that was a cost that we faced.

We had, as you know, increased fuel costs in our factories. The gas prices -- it actually went up, I think, like $75,000 a month. We're facing those costs. We're still getting cost pressures from our vendor. And we're fighting them back, as you know. In anticipation of some of these things we actually had a price increase in February of another 3%, trying to get out in front of the cost that we see. So we're trying to stay ahead of the curve.

Right.

[Brian Gilmore] with [Payhaus].

Congratulations on a great quarter. I just wanted to ask you -- get a quick overview as to what is going on with the main competition I guess being Jerr-Dan, and with the new [Verax] acquisition and things change there, just kind of what your general thinking is on that?

This is Bill. We really don't -- we are the leaders in the industry, as you know, and we don't really focus that much fun on our competition as an individual company. That particular company, we don't feel like we have seen any real changes at this point. We continue to maintain and gain market share. We're very happy with our results. We're think they're great competitors.

I was just going to say they are good competitors.

They are tough. They help us raise the bar. We want the bar raised for the industry.

Yes.

Sounds good. Thank you.

(OPERATOR INSTRUCTIONS). Brandon Austin with [Benitor Capital].

Great quarter. Where is the tax rate going to be going forward?

This is Vince. That is a very good question, and I'm certainly glad you answered it, but I'm not sure if I can answer -- you asked it, I'm not sure if I can answer it.

Right now we have 16 plus million in the K, and you have read it, of net operating loss carryforwards, plus we've got some credit carryforwards which are equivalent of another couple of million dollars. We're hoping that we're able to get some additional NOLs from the discontinued operations, but that is not yet finalized, and probably won't be until probably late in the year. And so --.

But that could be significant.

That could be significant. I don't even want to predict how significant. But with the numbers there as we have been going we could be -- without any additional losses we could be in a tax paying mode perhaps by the end of year. (multiple speakers). We're paying alternative minimum tax now. But as far as predicting where it is going to be, it is hard to do right now.

The $10 million, is that the extent of your CapEx for this year or is there more on top of that?

There is probably a little bit more, but that is roughly the big number. We tried to put everything in that when we took it to the Board to make sure we had all our stuff.

Some of the other facilities may have a few things here and there, but about --.

Did you guys provide -- I might have missed this -- did you guys provide a geographic breakdown of the Q4 revenues?

No, there is -- that information in the footnotes.

They are definitely not in the K.

Yes, they are in the K. (indiscernible) I don't know if that is not -- yes, I don't know if that is by quarter. I can't --.

In terms of gross profits, you are putting in this modernization program. It sounds great. I look at other guys who are sort of heavy equipment, lots of steel, building truck type related things. They seem to be able to push their margins through price increases into sort of the high teens. Do you guys see yourself getting there eventually?

This is Bill. What you have to realize is if you took a look at our -- maybe we need to give you a perspective. We sell a combination of chassis and back ends -- the wrecker portion of this. And so you end up with a consolidated margin of chassis, which has a very low margin, usually in the 3% range versus our back ends. That mix changes depending on the chassis, but our back end margins are significantly better than the high teens already. We would love to see the consolidated margin continue to improve. Can we get to the high teens? Our goal is to get as high as we can with them.

But we do have -- the more success we have in our chassis program, which brings significant dollars to the bottom line, the more difficult it is to continue to keep pushing up the gross margin. We have to push both sides up together. So it is a little -- it is already pretty good, but we think it can be better. And that is our goal for this year to continue to make it better.

Just a few more things, the conference that -- I guess is in Q2 this year. Is that -- do you have in terms of a budget of how much you guys expect to see your SG&A increase, because last year it was kind of in a $700,000 range, is that about the level or --?

Is not -- yes, it is actually with the largest trade show -- there is trade shows throughout the year, about every (multiple speakers). That is the biggest trade show -- it is in Florida in May, as Jeff mentioned.

Our GS&A is kind of leveling out here. After we have made some -- put some meat back on the bones from very difficult times, and so I don't see our budget showing a real big increase in GS&A this year.

Just sort of last question. You guys seem to have a lot of confidence with two weeks to go in Q1. I know you don't give guidance, but can you maybe to some people like me who are a little newer to the story, can you just sort of elaborate a bit on what the margin market drivers are that is causing 40% growth in something that is basically (technical difficulty). And with the catalysts that are driving you now, how long do you think those catalysts can last (technical difficulty) good growth. I mean not necessarily 40%, but something pretty healthfully above 10%?

You really broke up on the question. I hate to ask you to repeat it, but --.

I'm just looking in terms of you guys are growing at 40% in a business that I don't know of a lot of people would characterize as a high-growth business. Can you just sort of refresh some people who are new to the story about what is really driving this market, and how long can these drivers last?

The drivers in the market basically our total miles driven, which is a combination of vehicle registrations and the increased miles per car that are driven, the vehicles on the road. All of those things drive the market. (multiple speakers) The age of the fleet. Those things all drive this market. They are the overall long-term drivers. And you can look at any of those statistics and they all are continuing on a steady trend upward.

Because our customers are entrepreneurs, they continue to find different ways to increase their revenue dollars. And when they do they need to buy more equipment. To some extent, we probably -- the thing that would affect us probably the most is if the economy turned down real heavy, because these guys do at some point look at their financing structure, and if the financing got difficult for them that could have an impact. But am -- those are the long-term drivers of this business.

In terms of international expansion, so like people are buying cars around the world, does that help you guys as well? Are you seeing more work internationally than maybe you have seen in the past?

We certainly are seeing an increase in demand internationally. Yes. You are new to the story. We do have plants in Europe. Those plants are doing well, seeing some growth. But more importantly, we are seeing more export opportunities out of our U.S. plants through other overseas locations.

We have been kind of -- we are on the radar screen now of the government, the military, and so we have had a lot of successes again in the fourth quarter. We were able to gather up some significant government orders. And some of them will have to be shipped out in the first quarter. We've got a lot of different things going on around the world.

Things a lot. That is a great quarter, great year.

(OPERATOR INSTRUCTIONS). Jon Evans with Coker and Palmer.

Can you guys talk a little bit about the military orders? And I guess first of all in DataPath can you give us an update on what is happening at DataPass, and do you think you'll get more orders for '06?

We will split this question. I will take the military wrecker orders. As we announced in the fourth quarter, I believe, we received somewhere in the neighborhood of -- and don't --.

We didn't say the number.

I thought it was 40 some.

We received three large orders in the fourth quarter; some going to Iraq, some going to Afghanistan, some going to Vietnam. All of those orders, except the Vietnam order, had add-on capabilities going forward over the next two years. But in particular, the Iraq orders and Afghanistan orders to get to a position to get add-on orders had to be delivered very quickly. So through the first quarter of this year we will deliver substantially all of the Iraq and Afghanistan orders. However, due to our delivery and our quality we have already received an add-on order from Afghanistan.

Can you quantify Afghanistan for us -- the add-on, or no?

Too many people listen to our calls, so I would hate to quantify for --.

That is fine. Is it as big as the original or is it bigger than?

The Afghanistan add-on was larger than the initial order for Afghanistan. But in the first quarter keep in mind due to deliveries we had to shuffle military orders in, commercial orders out, because we could not raise production quick enough to meet the demands of delivery on the military side.

In the fourth quarter basically you had to use more of your production for military because it had to be shipped by the first quarter. Is that correct?

Not in the fourth quarter, in the first quarter.

In the first quarter.

Correct.

But didn't you build some in the fourth quarter also?

We build a few in the fourth quarter.

Okay.

Very few. The first quarter we had to burn through -- by the end of March we will deliver substantially all of those first round of orders. (multiple speakers).

I guess one of the questions I have then is, if you built some of those in the fourth quarter wouldn't that have hurt gross margins too?

It was very small. We didn't get our plant rolling quick enough in Greenville in the fourth quarter to provide enough inventory for us here in Chattanooga to complete the order. Most of those military orders we will build and ship all in the first quarter. And obviously margins are a little less on military orders than they are on commercial orders. At the same time, we are -- because of delivery constraints, we're attempting to raise production levels even further on large wreckers going forward, because we're behind on just commercial deliveries.

Can you talk about that? I think on the last call you mentioned that you were -- was it 5 to 6 months out for a big wrecker. Is that correct?

Yes.

Since you have had to increase the military how far are you out on big wreckers now?

I can talk about our backlog in general. I would say we have not eaten into the backlog of all large wreckers at all. But if you look at our backlog at the end of February this year, it is stronger than our backlog was at any point in time last year.

And then on the last call you also talked about you were going to evaluate the order trends and decide when you were going to step up to new revenue level. Would you is step up to that in Q1 or is that more of a Q2 phenomenon?

No, it is really hard to predict. I can tell you we are working our tails off trying to step it up now. The problem is obviously in the first quarter your revenue is impacted by two items. Recognized revenue is impacted by two items. The first of which happens the end of every year when we close for approximately five production days doing inventory in all our plants. And the second is Florida, the Florida Tow Show that you've got to build product to exhibit in May during the first quarter.

And lastly, you've got that moving target of our chassis program is starting to take hold. We're trying to increase chassis sales. It is really hard to -- there are moving pieces. I don't want to sound dumb, I just want you to understand it is not easily predicted when you're going to see that final delivery take place, and when you're going to recognize revenue. For instance, the first quarter we're behind in large wrecker production. We're building large wreckers for the Florida show. I don't know if the distributor is going to jump in and PO some large wreckers for the show in May and accept delivery prior. It is just a lot of different moving pieces.

Can I ask you one last question?

Not if it is that tough.

You were expecting margins to go up because the price increase that you had put in large wreckers was going to start to hit in the first quarter. Is it fair to say that none of that large wrecker increase in margin hit in the fourth quarter, and it probably won't hit much in the first quarter, right? So we still have that to come, is that correct?

You know, given the fact that I shoved all those military wreckers up into the first quarter, your assumption is probably 60%, 70% true.

Then the 3% price increase, can you talk about competitors? Did competitors follow that, and was it 3% across the board, or was it just for large wreckers? Can you --?

Our 3% actually was across the board. And to the best of my capability, our competitors -- our major competitors I think followed suit because they are faced with the same kind of energy cost increases, health insurance increases. So, yes, I think the market moved with us.

Because your backlogs though are out so far when does that 3% start to hit? Will it not hit until the September quarter, or will it be all the way to December?

No, I think you're probably looking, depending on the product type, the majority of it hitting in Q3.

[Matthew Servich] with Scotia capital.

You didn't think you got off that easy, did you?

No.

Just a couple more, sorry. Just to follow-up on, I guess it was Branden's question on gross margins. Given the current mix between chassis and wreckers and the rest of the product line, do you think you can get to the 17%, or above the 17%, that you talked about on past calls? I'm not asking whether you can do that this quarter, but assuming the current mix, I know it won't stay the same. Do you think you can get to that sort of gross margin level over the next few quarters, let's say?

That's absolutely our goal.

Yes, that is --.

That is the goal. And that is what we're chasing.

It is our goal I would tell you. It is also my goal to increase chassis It is also my goal team to get another add-on order on the military side. All of those things impact the goal of 17% blended margins, but it also increases -- it impacts EPS. Our goal is to continue to improve gross margins, absolutely.

I'm more concerned with gross profit going up than gross margin. If I look at something like a $400 million revenue base and 17% gross margin, I get to $68 million. However, you get there, whether revenues grow up more and gross margins come down, or the other way around, I think most people on this call -- investors on this call probably don't care which way you get there.

Actually, we don't care which way we get to those numbers too, if we can get there, but they are good numbers.

Clarify something on the last gentleman's question. In terms of the step up in production, I guess I had thought that there wouldn't be a significant step up until the new facility was completed, which I heard earlier on this call was going to be fourth quarter. Are you saying that there could be a step up between now and then, and then another step up when the new facility is completed?

We're attempting to take production up currently. Okay.

To meet the demand.

To meet demand and to eat into the backlog. I don't like -- I love getting orders from around the world with different governments. But I also do not like being late on delivery to our everyday customers that we have built relationships with over a twenty-year history. It is absolutely necessary that I attempt, or we attempt, this is not -- we are a great team -- that we attempt to take up production now.

I really -- I really -- I have said in a couple times on this call -- that expansion, although it does give us some more room, it is really aimed at modernizing our processes, not so much at capacity. Certainly, we will increase capacity a little bit. But it is really aimed at trying to maintain an efficient manufacturing facility in the United States. That is what it is aimed at.

We don’t really have a serious capacity constraint here.

No, we don't. We can go to a third shift.

It is not about capacity, it is about improving our profitability through margin improvement.

I hope that answers your question.

It definitely does. Let me ask just one last question. It looks to me like even beyond the 10 million that you'll be spending on CapEx this year that there should be some perhaps significant excess cash flow. If there is, what would your intention be to do with it? Would you pay down the junior debt, or are you allowed to pay down junior debt? Would you perhaps initiate a dividend or buy back stock? What are your options and what are your thoughts?

This is Bill. Now that we have got our audited financials in, according to our bank covenant we can do a couple of things. First of all, there's a calculation we have to go through. Our rates dropped from 2 over LIBOR to 1.75 over LIBOR. That is official as soon as they get this document -- because we won't see much of a benefit because LIBOR keeps going up. At least it is improving as to some extent.

The other side of it is we have in that bank agreement that as long as we meet certain calculations, which we have to do now, and they're doing it with us, we think we've got it met, but we're not exactly sure. It is about the combination of fixed coverage ratios. We have to have debt last than 1 times EBITDA, etc., etc. There's several calculations in there.

At that point we are allowed to spend $5 million in a year for anything from paying down some debt to stock buy backs to whatever it is that we want to use that 5 million for. And when we finish this calculation at our next Board meeting, the independent Board numbers will decide what they want to do, if they have that luxury, which we believe they will have.

I have one other.

Otherwise, we will and up with a lot of cash sitting around.

I was going to say, Bill, let's make our answers a little shorter so you can't think of any more questions (multiple speakers).

The last one. I don't know if you will know anything about this, but I saw somewhere that there's an expectation that your stock would be added to the Russell 2000 Index. Is that something that they get in touch with you about, or is there any sort of process with you guys with respect to that?

I don't even think we know anything about that. Do we Frank?

We at this point know nothing about that.

Thank you.

And we wouldn't comment to it if we did.

Congratulations again on a great quarter.

Jon Evans with Coker and Palmer.

Can you give us any kind of update since the quarter is almost over from the standpoint of have you paid down any debt this quarter so far?

This is Vince. The revolver was at zero at the end of the year, and it is still at zero. And we're making payments on the term loan.

Can you help us frame SG&A next year? Last year you had to make some growth because you starved a business for awhile. How should we think about the growth in SG&A this year?

Bill had commented a little earlier, but we're not looking for any huge increases except for those tied in more into volume. We added an incentive program last year, and we added some personnel, but we are not looking for the same kind of increases.

Is that like in the 5% range, is it 10%? Can you give us any kind of sense?

Yes.

In that range, right?

Yes.

We have no further questions at this time. Are there any closing remarks from management?

Bill, do you want to -- any closing remarks?

It was a great quarter. We appreciate it. As Jeff said, we thank all the shareholders, especially all of you out there that have stuck with us through this period of time, and we appreciate your continued support. We're looking forward to another good year.

With that, we will end the call. Thank you.

This concludes today's conference call. You may now disconnect.