美國廢棄物管理公司 (WM) 2002 Q1 法說會逐字稿

Good morning everyone and welcome to today's Waste Management Incorporated First Quarter 2002 Earning's Conference Call. This call is being recorded.

At this time, I'd like to turn the call over to the vice president of investor relations, Ms. Cherie Rice. Please go ahead, ma'am.

Thank you, .

Good morning everyone and thank you for joining us. With me this morning are Maury Myers, chairman, president and CEO of Waste Management; and Bill Trubeck, executive vice president, operations support and chief administrative officer. Maury will start things off with an overview of the quarter, an update on business trends and a review of progress on our initiatives. Then, Bill will review the financial statements in detail and cover a few related topics. After that we'll open up the line for question and answers.

This call is being recorded and will be available 24 hours a day from about noon Central time today, until noon on May 21. To hear a replay of the call over the Internet, access the Waste Management web site at www.wm.com. To hear a telephonic replay of the call, dial 719-457-0820 and enter reservation code of 521236.

As is our custom, I will remind you that during the course of this presentation we will be providing estimates, projections and other forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21(e) of the Securities and Exchange Act of 1934. The forward looking statements are subject to a number of risks and uncertainties which are described in detail in Waste Management's annual report on Form 10-K for the year ended December 31, 2001 and in the company's press release this morning. These risks and uncertainties could cause actual results to differ materially from those described in the forward looking statement.

As I stated earlier, this call will be available for replay for a two-week period. Time sensitive information given during the course of today's call, which is occurring on May 7, 2002 may no longer be accurate at the time of a replay. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed, written consent of Waste Management is prohibited.

Now, I will turn the call over to Waste Management's chief executive, Maury Myers.

Thanks, Cherie.

And good morning everyone and thank you for joining us.

I'll start the call off today with an overview of the quarter and a review of current business conditions, and then I'll give an update on our key initiatives. And after that, Bill Trubeck will review the numbers in some detail.

As you may recall during our fourth quarter conference call in late February, we mentioned that volumes to date in the first quarter were down about 2 percent on a year-over-year basis. That situation didn't improve during the later part of the quarter. In fact, March volume comparisons were worse than that. While we did see some other seasonal upturn in volumes that normally begins in late March, that upturn was not as pronounced as last year's nor as great as we anticipated. However, April volumes are showing more of the seasonal upturn that we'd been looking for.

As reported in our press release this morning, the total internal revenue growth for the first quarter was negative 1.7 percent with a positive 1.6 percent coming from , but offset by negative 3.3 percent from volume.

While in previous quarters our volumes were tracking the same general trend as GDP that was clearly not the case this past quarter volumes had held up pretty well through 2001, but they slowed in the first quarter. Regionally, the biggest slippage in year-over-year disposal volumes was in the West, primarily Southern California. At our Kettleman Hazardous Waste Facility, volumes declined sharply and in many markets in the West the C&D volumes did not have the same kind of improvement during the month of March that they'd had in 2001.

Volumes in the western group had held up well through most of 2001, but began to slip in the fourth quarter. For the total company, all types of waste , , , special waste were running at lower levels than last year during the first quarter. The good news is that we've seen marked volume increases in April: seasonal growth and waste generally starts to occur in March or April. And this year it appears that there is very little seasonal improvement until April.

In April, with very little exception, both landfill volumes have been trending up each week. We do have volumes for all but the last couple of days of April compiled at this time, and average landfill tons per day are up almost 11 percent over March. All average rolloff per day are up over 5 percent over March.

For the week ended April 20, landfill volumes were higher than both prior year and budget for the first time since the second week of January. And while roll off haven't quite met that measure yet during April, we've had one week where hauls were over prior years and one week where they were over budget.

These are the facts that give us confidence on the seasonality that we were looking for. Another interesting analysis we did was to review the most recent five week and 15-week roll off trends in six major industrial markets. Based on the slope of the trend lines for this year versus last year, in at least a couple of these markets, it appears to us that we may be seeing something other than just a seasonal pick-up in volumes.

We will continue to closely monitor these trends in the coming weeks. Another positive sign is that in April, for the first time in many quarters, we're finally seeing improvements in recycling commodity prices, primarily for cardboard and OCC. Today, we're seeing higher prices across the country including spot market export pricing for OCC in a range of $90 a ton on the West Coast and $85 a ton in the East. The May yellow sheet pricing for cardboard is up $15 to $40 per ton over March pricing across the nine U.S. yellow sheet regions.

Pricing for old newspapers has also strengthened, with the new yellow sheet pricing for number eight news up on the average of $5 to $10 per ton. These prices are above our floor pricing, and now we'll just have to wait and see whether they hold or are just temporary.

While the main source of increased demand is Asia, primarily China, it has oftentimes been the case that wastepaper commodity markets foreshadow broader trends in our business. As you'll recall, cardboard and newspaper prices began dropping in mid-2000 right before our volume started slowing. And we're hopeful that these improving prices are a sign of economic activity from which waste volumes will soon be growing. While we're very pleased to see these increasing commodity prices, it's too soon to be sure that this is a sustainable positive trend. So we would not to anything into your estimates yet.

On the pricing side, we continue to make progress using our commercial customer profitability analysis software. During the first quarter, we implemented another $1.5 million in monthly price increases using a pricing tool which contributed to the overall 1.6 percent price improvement recorded in the quarter.

In the recent reorganization to the market area structure, we've included a director of pricing management who has clear responsibility for the pricing activities in each of our 85 markets. We think that with that clear accountability to one individual can better define roles and responsibilities as they relate to pricing and price increases, will get improved pricing performance.

Of course, prices should also be helped by a firm economy and increasing volumes. One of our main points of focus during the quarter was cost control: We think we did a much better job in managing cost during this past quarter. The biggest challenge in the quarter was obviously volumes and from what we can tell, the lower volumes are a result in the economy and therefore not something that we could have impacted without dramatically lowering prices. And we don't think that's a good long-term strategy.

What we can manage in these slower economic times are our costs and S/G/A costs especially were certainly improved in the quarter versus the fourth quarter. In February, we announced a tactical cost savings initiative targeted at overtime costs and certain discretionary costs such as travel and professional fees. Then in early March, we announced a new organizational structure for the company.

The reorganization is a significant step forward in the evolution of waste management into a world-class service organization and is designed to reduce the number of management layers by one in most markets and by two layers in others thereby streamlining both our communication

And it's designed to reduce the number of management layers by one in most markets and by two layers in others; thereby, streamlining both our communications and our reporting structure.

It also gives clear accountability and responsibility for profit performance in each of the significant markets in which we do business. With one management team responsible for integrated operations in a market, we expect to be able to improve asset utilization within each market.

We've made progress on our cost-savings growth already, and during the first quarter we reduced expenses by approximately $15 million as a result of these two cost-saving initiatives, and Bill will talk more about these savings in a few minutes.

The new organizational structure was implemented shortly after our public announcement and immediately after our with the restructuring, we eliminated 1,836 positions and took a pretax charge of approximately $40 million. We actually have reduced overall head count or over 2,200 since the end of 2001, but some of these reductions fell outside of the qualifying restructuring period, which was basically the month of March.

The charge taken in the quarter was lower than the $50 million we had initially projected primarily because relocation and out-placement costs ended up lower than we had anticipated. We also have some updated estimates on the full-year expenses and savings associated with the new organizational structure, and Bill will review those with you as well.

So far the change to the new organizational structure seems to be growing well. By the beginning of April we were effectively operating within the 85 new markets instead of the 900 districts we had previously. There are some open staff jobs here and there within the market areas and, for the most part, we expect to leave those positions open until the economy has turned around.

While reorganizations never happen seamlessly, our people seem to have moved into the new structure without major disruptions. Some capital projects certainly were delayed as we moved people around, but we kept picking up the garbage and safely disposing of it regardless of the changes.

In late March I embarked on a two-week road trip during which I visited four or five of our locations each day. As is normal with restructurings, I expected to hear a lot of negative remarks about the reorganization, but what I heard in most places was that our people had already recognized that a market-phase , which was where the company was headed months ago. So the announcement was largely anticipated and our folks were prepared to move in that direction.

In many respects the timing for the reorganization an ideal. Not only was it the slow time of the year seasonally, but as I mentioned earlier, the business lines in general were in a lull. With the new organization now in place, I expect we'll be able to react more quickly to increased business demands when the economy picks up again.

Regarding our economic outlook, as you're all aware, there have been signs that the U.S. economy is headed in the right direction and we expect that to translate to improving volumes during the second half of the year. We believe that the first quarter of this year will be the trough in our business levels and continue to anticipate that year-over-year volume growth in the second half of 2002 will offset the modest volume losses we posted in the first half.

The conference board announced April 18 that six of the ten components of the U.S. leading index increased in March. Similarly, in the recent U.S. Federal Reserves Beige Book, it was noted that manufacturing activity in March and early April was reported to be either stabilizing or showing signs of improvement in all districts.

It also noted that residential real estate activity remains robust and commercial real estate activity, while generally weak, appears to be stabilizing in some districts. As a reminder, we project a total internal revenue growth of about 1.5 percent for 2002. Within that estimate, we've assumed volumes will be flat or slightly up for the full year and pricing will represent the bulk of our year-to-year improvement.

So based on our current conditions and on our expectations for the second half of the year, we anticipate flat volumes and sustained price increases of 1.5 percent are reasonable for the full year. A more or less robust economy could, of course, change those assumptions.

And now I'll review the progress in some of our other key initiatives, starting with the implementation of our new information technology. As of the last conference call, we had completed installation of the finance modules and were about to complete the final conversions on the payroll and human resources side. I'm happy to say that we successfully completed the payroll and HR conversions, putting that project cleanly behind us.

We've now turned our attention toward a new customer management and billing system and plan to start a pilot of that system around the middle of the year. This will be another big project with implementation anticipated to run through the end of 2003.

The procurement initiative is picking up steam in 2002: During the first quarter, we posted year over year savings of approximately $8 million in capital and $17 million in expenses. Our full year goal is for $25 million in capital and $70 million in expense savings over and above the 2001 savings. We continue to make good progress on consolidating our buying power and negotiating favorable prices from our preferred suppliers, based on our committed purchases.

One supporting fact in the progress we've made is that we've reduced our number of suppliers from over 500,000 to less than 100,000. We ultimately intend to reduce that number to something less than 10,000. When you consider that we estimate that each vendor payment costs as much as $25 to process, the administrative costs alone are significant.

The market business strategy initiative continues to give us real tangible benefits as well. In the first quarter, we continue to review additional markets. And in total, we've now reviewed MSAs representing about 74 percent of our total revenues. Year-over-year even improvements as a result of the market business strategy initiative were approximately $23 million in the quarter and on-track with our internal expectations for $70 million in savings over 2001.

And finally, our service improvement initiative or what we call service machine. Today, 57 of our larger districts have been certified gold, meaning they've passed a rigorous audit to ensure that they're meeting minimum performance standards and several key customer-identified service categories, such as new customer satisfaction process, number of missed pickups per thousand customers, same-day service for customers, issue resolution success rate, and call abandon rates in our call centers.

About 60 percent of all collection districts have met the green service machine standards which are similar to the gold standards but have lower hurdles. So we've made good progress on service delivery in a significant portion of our operations, and we're beginning to see lower customer churn. As mentioned on our last conference call in 2002, we're working to improve our sales effectiveness. We're implementing a new sales process in 29 of our largest markets and are pleased with the results we're seeing.

This is not rocket science here, just a disciplined approach to how we target and sell potential customers while we retain existing customers and ensuring that the right people are in the right job. The implementation includes standard processes to target various customer segments, generate sales leads, and provide new metrics and accountability measures for all sales channels.

Another important aspect of our sales effectiveness initiative is that we've removed the cap from our sales incentives. So our new incentive plan provides a way to motivate and encourage superior sales performance. Our biggest accomplishment during the quarter was seeing real evidence of our cost controls. As I've stated before, we're committed here at Waste Management to operational efficiencies, and cost control is a big part of that.

Additionally, we're beginning to have success with mining our system data for information that will help us improve our business faster. For example, we've identified roughly 12 percent of our work force who have been involved in incidents that represent about 60 percent of the total annual costs of all accidents and injuries.

Many of these are repeaters or those with two accidents or more in a 12-month period. We know who these employees are by location and name, and corporate has sent out the information to our field management. With these facts in hand, our local management can assess each individual and put out an action plan to give the appropriate training as necessary or identify other steps to address and correct the situation. With our continuing focus on metrics, this is one of several developing tools that ensure that we target our safety intervention where we can have the most immediate impact.

That said, we've made considerable improvements on our safety record. In the first quarter, our worker injuries were down 20 percent versus the first quarter last year. And vehicle incidents were down about 18 percent year over year. Significant focus was put on safety across the company in early 2001, and by late last year, the trends were beginning to indicate obvious improvements.

We still have a long way to go to get to the level of safety that we know we can obtain, but the improvements are significant and we appreciate the effort and commitment to safety by our people. Our goal is to have a complete culture of safety where it's a natural part of what we do each and every day.

We've also developed an operational scorecard by district that grades each location on a series of measurable categories assigned an A, B, C or D grade by category, and then ranks the districts within each group based on a point system. The groups' senior vice presidents now have in hand these rankings of their operations and can clearly see where the opportunities for improvements lie.

This has been an eye-opening experience in many regards and is exactly the approach we think can help us to improve those operations with lower than average performance in various measures.

Now, let me briefly discuss the organizational changes announced yesterday. As you probably saw, we made some changes here at our headquarters, primarily within our finance organization, but there are also changes in the reporting structure with some of our operational and support departments.

Bill Trubeck, who has been executive vice president and CFO is now executive vice president of operations support and chief administrative officer. The department's reporting to Bill now include legal people, information technology, recycling, real estate, finance and investor relations. We're actively searching for a new CFO and that individual will report directly to Bill, as well.

As I said in our press release, these changes are in line with furthering our succession planning, and I anticipate making additional moves in the future to give more varied experiences to our senior leaders. Bill has done a fine job as CFO these past two years at getting the accounting back in shape and making progress on several fronts within the finance discipline.

Now is an appropriate time to hand off some of these departments to a new CFO to oversee accounting, internal audit, tax and treasury on a day-to-day basis and broaden Bill's scope of authority to other important disciplines.

So far as contact with the street is concerned, there will be no loss of continuity as Bill, Sherie and I will continue to be the three principal individuals responsible for keeping you all informed. And, of course, Sherie remains the primary contact for the investment community.

To wrap up my comments, let me just add that I do continue to be optimistic and excited about the progress and potential here at Waste Management. The new organizational structure has been a natural evolution of our efforts over the past two years. Our people are showing focus and progress in controlling costs and in utilizing our approved vendors. We're working on approaches to approve customer satisfaction, reduce churn and also to improve our sales approach to our potential customer base.

As the economy improves, I expect that the leverage of our asset base and organizational structure will combine to show favorable revenue growth as compared to our competitors and great financial leverage on the upswing in revenues. Meanwhile, as we wait for the improving economy to result in growing volumes, we'll continue to stay focused on operational improvements and controlling our costs.

And with that, I'll turn the call over to our Chief Administrative Officer Bill Trubeck.

Thanks, Maury.

Let's start with a review of some key items of interest in the quarter's financial statements beginning with revenues. Total revenue is down $110 million versus first quarter 2001 with $84 million of the reduction in our core North American solid waste business and the other $26 million difference largely related to having sold the last of our international and non-core businesses. There were a variety of factors that resulted in the negative year-over-year comparisons in our core business, including some of the following factors.

First of all, commodity prices continue to be a drag on revenue with a $20 million impact on the quarter. Although, as Maury mentioned, commodity prices are improving. Lower diesel costs in the current year resulted in our ongoing fuel surcharge in the first quarter being $16 million less than the prior year quarter, of course, also reflecting the lower fuel prices we paid in the quarter.

Due to lower electricity rates in 2002, revenues from our independent power production facilities worth $15 million less than last year. And in the first quarter of 2001, had about $6 million more in construction revenues that the first quarter of this year. And the remaining $27 million negative year-to-year variance can be explained primarily by volumes being off in excess of our year-over-year price increases, as discussed by Maury earlier.

Operating expenses in the quarter were $1.565 billion or 6 percent of revenue, as opposed to $1.646 billion or 60.5 percent of revenue in the year ago quarter. Showing that we have reduced operating costs by $81 million quarter-over-quarter. As Maury mentioned in his comments, we have been focusing on controlling our costs, and we think that that is evident in these comparative numbers.

Similarly, SG&A expenses were $387 million in the quarter, as compared to -- the reported $389 million in the year ago quarter. Of course, last year on a pro forma basis we reported $355 million for SG&A costs in the first quarter. But as you may recall, the pro forma SG&A costs had grown through the quarters to a high of $419 million for the fourth quarter.

As we discussed on our February conference call, we are focusing diligently on lowering our SG&A costs in 2002 and our longer-range target remains at 11 percent.

While the restructuring occurred very late in the quarter, we did see about $4 million in cost benefits in the first quarter. And from the tactical cost savings initiatives that we announced in February, we reduced the quarter's total expenses by approximately $11 million. These $15 million in combined savings showed up as approximately $10 million in operating expense reductions and $5 million in SG&A expense savings. So these programs are off to a good start.

As noted in the press release, although we are not reporting pro forma numbers any more, we did have about $12 million of the same types of costs, relating to building out our information systems infrastructure, that we have adjusted out for pro forma purposes in 2001. We know that some of you are still interested in tracking those costs this year, so we plan to identify them for you each quarter.

We also believe that our investments in IT will play a large role in driving our revenue growth, cost management, and information improvements well into the future.

Depreciation and amortization expense in the quarter was $294 million, or 11.3 percent of revenue. This compares to $335 million last year, except that last year's number included $39 million of goodwill amortization expense. On an apples to apples basis, then, first quarter 2001 depreciation of amortization would have been $296 million, or 10.9 percent of revenue.

The next line on the income statement this quarter is restructuring, which totals $37 million. This, of course, relates to the reorganization that we announced in early March, and is comprised primarily of severance costs. Additionally, there is another $2 million of restructuring-related costs in the asset line, making the total charges in the quarter relating to the restructuring about $39 million.

Moving on to the asset impairments and unusual items line, this is actually a benefit of $6 million for the quarter. As I just mentioned, there are $2 million of restructuring-related charges within that net $6 million credit.

There are three main favorable items making up the difference. We had a $4 million lost contract reserve reversal, meaning a contract that had been operating at a loss has been turned around. So we have reversed the remaining loss reserve. The reason this is classified as unusual is that the reserve was set up at the time of the merger in the unusual items line.

The other two items are both relatively small, but they include the reversal of an impairment previously booked on an asset that for sale, and an adjustment to the impairment on a divested asset based on cash we received in April.

The only other item on the income statement that I would point out is the effect of change in accounting principal of $2 million. This is related to negative goodwill reversed as required based on the implementation of 141.

As noted in the press release, the diluted EPS as reported for the quarter is 22 cents per share. This includes a net negative impact of approximately three cents for the combined restructuring, asset impairment, and change in accounting items in the quarter.

So without those unusual items, we would have reported 25 cents earnings per share for the quarter. And as I mentioned, we also had the $12 million in expense in the quarter, which equates to another penny. As Maury already mentioned, with bonds as sluggish as they were through the course of the quarter, we think this is a pretty .

Now we'd like to update you on our financial projections related to the recent restructuring. Not only is the current quarter charge somewhat lower than we had initially projected, but we now expect the restructuring costs for the full year to come in at approximately $50 million, as opposed to our original projection of $75 million.

Beyond the lower and relocation costs that Maury mentioned, the biggest driving factor is that we have determined that some of the costs we included in our initial projections do not classify -- or do not qualify, rather, for classification -- as restructuring costs under the accounting rules.

Additionally, some of the potential impairments and abandoned facility costs that we had identified early on in the process have not materialized.

I should point out that while there are some costs that do not qualify as restructuring under the accounting rules, including non-capitalizable systems changes, employee training, and future severance, we do expect to incur approximately $10 million of these types of costs as a result of the new organizational structure. But we will not be able to classify them separately as restructuring.

One other technical issue that impacts our classification of cost is that we had to identify a specific restructuring period, which is March 4 through March 31. Some of our people in the field had gotten a bit out in front of the formal reorganization announcement and severed employees before the restructuring period started.

The severance and the cost-savings associated with these jobs that were eliminated cannot technically be included in the accounting and reporting for restructuring, but the 1,836 confirmed eliminated positions that qualify within the accounting guidelines, we have an estimated annual payroll-related savings of that of $86 million.

So as opposed to our initial estimates of $75 million in costs and $100 million in annualized savings, we are projecting approximately $50 million through restructuring costs, an additional $10 million of related costs and an additional savings of $86 million -- rather, an annual savings of $86 million.

In terms of annualized cost benefit ratio, the revised numbers are a bit more favorable for the company. And while we cannot include in these numbers the benefits we expect to get from those job eliminations that we obtained either before or after the official restructuring period, we think that the true total annualized benefit to the company will still come closer to $100 million.

Now let's turn our attention to cash and cash flow. Free cash flow in the quarter was $256 million. By holding back on budgeted capital spending in the quarter, we were able to produce free cash flow quite a bit higher than we had previously projected. After addressing the tactical cost-savings initiative, we decided there probably were similar opportunities with the capital budget. The reduced capital spending was largely the result of holding off on spend for both landfill construction and expansion efforts, as well as collection equipment consistent with the sluggish economy.

We continue to project roughly $1.3 billion in capital spend this year, but it won't be as heavily weighted towards the first half of the year as we had earlier expected. And if we don't see some rebound from the economy, we won't spend the full $1.3 billion. Importantly, we still anticipate producing $1.1 billion in free cash flow for the year before payment of the class action settlement and we are off to a good start on that.

As many of you noticed in our 10(k) filing and also was evident in the first-quarter cash flow statement, we executed $300 million in stock repurchases during the quarter. This was accomplished by entering into a contract with a third party, whereby the company purchased approximately 10.9 million shares of stock at $27.46 per share.

There is an ensuing six-month period for final settlement of the agreement however in which the actual price of the repurchase will be adjusted based on the average daily market price of the stock during the six-month period, excluding those days where the company's window is open. If the average daily market price times the number of shares purchased is greater than a notional amount from the original agreement, Waste Management will pay the counterparty the difference and vice versa.

As of the end of the first quarter, Waste Management would have received approximately $8 million from the counterparty to settle the contracts. We determined that an accelerated purchase of some sort was going to be required as it would have been virtually impossible for the company to have bought back $1 billion of shares in the open market -- through open market purchases over the remainder of 2002 based on the number of days we would have had an open window to make such purchases, combined with the other rules regulating such repurchase activities.

We do plan to be out in the open market during the appropriate open window periods over the remaining period of this year and anticipate being able to execute up to $700 million in additional stock repurchases using open market purchases, possibly block purchases and/or an additional accelerated buy-back program.

On the debt side, we do have $935 million in notes coming due in three separate tranches during the second half of the year. At this time we expect to refinance the majority of these notes and are projecting that we will go to the bond market twice this year, probably with $500 million offering before the end of this month and then again late in the third quarter or early in the fourth quarter.

We will continue to monitor the debt markets closely in order to take advantage of the best economics for the company and for our shareholders. Additionally, we plan to convert our 364-day line to a three-year revolving credit facility. I should also note here that year-over-year we have seen solid improvement in our ratio of earnings to fixed charges, from 2.2 times in the first quarter last year to 2.6 times in this most recent quarter.

As Morie mentioned, there are some favorable economic reports and we continue to believe that our outlook for a resulting increase in waste during the second half of the year is likely. Having three consecutive monthly increases in industrial production is a very favorable trend in terms of the key external indicators we're looking at. Some of the other indicators we believe have a strong correlation to waste production are manufacturers' new orders and building permits, both of which support our expectations for increasing volumes in the coming months.

For the coming quarter and the full year, our EPS estimates are still within the current analyst ranges on first call. The that our full year projections are based on strengthening volumes in the second half associated with an improving economic climate also based upon the results of our cost-savings initiative that are evident in our first quarter financials, we are confident that we have introduced the necessary discipline to effectively manage our costs during this period of slow economic recovery.

Let me also mention some good progress on our legacy litigation issues. Waste management continues to put the past behind us by successfully resolving litigation related to historical issues and two major events toward this end occurred on April 29, when in hearings in separate court rooms in Houston, two separate trial judges took important steps to finalize significant cases that had been pending in their courts.

In federal court last Monday, the judge heard arguments for final approval of the company's shareholder class action suit relating to events in 1999. As expected, that judgment will be final in late May, assuming there are no appeals. As you probably recall, this will trigger a large payoff from the company approximately $370 million after insurance recoveries. And then after the tax benefit, we expect the total cash-out to be in the range of $230 million to $240 million.

We currently expect to make this payment late in the month. Also on April 29, a significant lawsuit brought against the company, one of the so-called cases, was dismissed by the trial court following Waste Management's motion that the case lacked legal merit and could not be sustained under Texas and Delaware law. In terms of signs, this case was the most significant of the pending cases and we were obviously quite pleased with the outcome.

So we continue to put these legacy legal issues behind us. Before closing, I want to mention a change in our segment reporting for our 2002 SEC filings. We will begin reporting Wheelabrator as a separate business segment. As a reminder, Wheelabrator consists not only of our 16 waste-to-energy facilities but also includes the independent power production business. In the data sheet and in the supplemental information sheet we issued with the press release, we've revised the revenue breakout to reflect this segment change.

Previously, the waste-to-energy facilities revenue was included in disposal, and the IPP revenue was included outside of the North American solid waste revenues in the other category. Those are now combined as Wheelabrator and the disposal category has been replaced with landfill. We believe this reporting gives our investors a clearer picture of waste management business.

With that, Operator, let's open the lines for questions.

Thank you. If you'd like to ask a question on today's call, you may do so by pressing star-1 on your touch tone telephone. Again, that is star-one to ask a question. Your calls are monitored

We'll take our first question from William Genco with Merrill Lynch.

Good morning. Just on the volume issue being down 3.3 percent and the at the time being worse than January and February, it appeared to be down more than what your competitors were reporting. Is it possible that in the month of March you kind of lost a step with the reorganization?

We really don't think that's the case, Bill. Of course it's possible. We just think that we finally hit the in the volumes and fortunately, we've seen the volumes pick up substantially in April.

And in relation to the reported procurement savings of $17 million and the business initiative savings of $23 million year over year, could you give us a little help on each line item? How much of that was new cost savings versus a carry-over of what you put into effect last year?

Yes, on the most efficient strategy savings, those are primarily going to be roll-over benefits. The procurement however was -- it was closer to being spread evenly between procurement actions that were taken last year and then some of the events that went into play early this year.

Thank you.

We'll take our next question from Bill Fisher with Raymond James.

Good morning.

Morning, Bill.

Could you really just touch on the April volume figures, the trends you gave? I guess weekly or whatever?

What we talked about was that the trends were up in both roll-offs and landfills, almost without exception, every week in both of those categories through the month of April. And we kind of saw some milestones in the landfill tonnages for the first time since a week -- I think, it was early January, we had a week where landfill tonnages were over both last year, as well as our budget.

And we haven't had a week quite like that in the roll-off that we've had a week in April, where we were over last year and we've had a week where we over budget. You know, these things never really run exactly in a straight line, but the trends have been real positive.

I guess, the other thing that I said, Bill, was that April average landfill tons per day are up almost 11 percent over March.

OK. And switching gears, just on the more recent cost restructuring savings, you mentioned about, I think about $15 million of savings in the quarter there. Is that a number if you analyze it, you're right around 60 and you're targeting 86 or so, is that apples to applies?

What you have to recall that the reorg didn't happen until the beginning of March and those tactical cost saves happened about the beginning of February. So, you know, neither one of those had a full quarter's impact.

I think you had $15 of savings as relating to those or is that...

Right. That's right.

Is that an annualized number, the $15 or?

No. The $15 is just what we had in the quarter, and that was partial on both.

So it should be better than that.

Yes.

All right. Thank you.

We'll take our next question from Leone Young with Salomon Smith Barney.

Good morning. If I could just follow-up a little bit more on the volume question? Obviously, as you noted, March was worse than January, February. Can you give us a sense for how April's looking? Say, vis-a-vis call the first quarter average.

Let me see if I can get those for you if you want to move on to your quarter -- question.

I'd love to move on to the next quarter -- on to the next question. Maury, you kind of hinted at looking at the five-week trend you might be seeing something more than seasonality. I assume you're implying hopefully some economic signs, and I was hoping you could expand on that a bit.

Yes. What we're trying to do is to get a feel for what's going on, especially in the industrial sector, because we think that's the sector that most closely parallels what's going on in the economy. So we zeroed in on six major industrial markets, and actually we looked at Detroit, Chicago, Pittsburgh, Newark, Cleveland and Philadelphia.

And then, so we took some rolling averages -- five-week rolling average and 15-week rolling average, and we looked at last year, and then we looked at this year and we compared the slope of the curves. And what we found was, at least in several, that the slope of the curve this year coming, you know, on those averages, was more up than last year, which would indicate that there's something other than, you know, just seasonality. So that's what we're looking for. Now, we saw that in several of the markets. We think this is a pretty good measure and we're going to continue to follow it.

OK. And lastly, Bill, what was the reference you made to the second quarter in terms of guidance?

I think, what we said is we're still in the range of analyst estimates. I think that's exactly how we left it.

OK. I'm sorry. I just didn't hear it quite right. Thank you.

We'll take our next question from with First Analysis.

Good morning. Relative to what you saw near competitors, in terms of your price increases, would you say that you are in line with what you saw or you are, you know, pushing a little in what you saw?

Well, I guess, in just looking at the numbers it would appear that our pricing is a little more aggressive than the competitors.

OK. In the West in particular, if we could just move on to that for a second, you said you were having a hard time in the West. How much worse was that than the rest of the United States?

In terms of volume? You're talking about volume, I assume.

Yes.

Well, it was down -- volume in the West was a little over 5 percent. And a big part of the problem has to do with last year, that is 2001, we had some very large special waste jobs out there. So the year-over-year comparisons are more difficult for them. And a lot of their problem is with special waste.

OK. So when you talked about an improvement in the roll-off, were you referring more to the industrial volumes in the Midwest?

Yes. What we were trying to show is that -- exactly -- is that the industrial hauls are picking up.

All right. And then, finally, can we just -- is it possible for you to break out profitability in cash flow for the section?

Profitability and cash flow? Well, the profitability will be in the . The cash flow, I don't know. We'll take a look. I'm not sure that that's going to be separated out, though. It's not.

It won't be.

OK. Thanks a lot, guys.

Profitability will be with the Q, which we'll file...

We'll file tomorrow.

Tomorrow.

We'll take our next question from Trip Rodgers with UBS Warburg.

Good morning. Can you make some -- any comments on what you're seeing as far as landfill pricing and any initiatives you're making on that front?

Well, we increased landfill prices earlier, really, in the fourth quarter fairly substantially. And we had good success with those landfill prices sticking. We didn't see our competition matching us in every case, but, you know, generally it went pretty well. And now, we're concentrating primarily on commercial pricing increases.

(Inaudible) a lot of those price increases were on the East Coast, are you trying to push for those, as well on a nationwide basis?

Well, yes. I guess, we focused the discussions on Pennsylvania, where we have over 20 landfills and where it was obvious that we also had great demand. So those prices went up substantially and we have increased landfill prices around the country and other places, as well. One that we talked about earlier was in the southern group, specifically in Atlanta, where we raised our prices but the competition in Atlanta, right across the street, took theirs down.

We've had pretty good success at landfill price increases, but there are, obviously individual instances around the country where competitive pressures we've had more difficulty having those prices stick.

And within the new timing of , can you talk about how that might change your expectations for D&A for the year?

Well, I think one of the things I mentioned was the cap-X expectation has been and will be part of the function of where the economy goes. We're still looking at a total of $1.3 billion based upon where we see things today. It would be less than that, of course, if we didn't -- if the strength that we're anticipating did not develop. So if that were the case your D&A would not be as high for the full year as currently expecting.

We'll take our next question from Stacy Devine with Deutsche Bank Alex Brown.

Wanted to actually expand on the pricing question a little bit more. You talked a little bit about where you focusing on the landfill price increases in the fourth quarter. Can you talk a little bit about where you are seeing the commercial price increases that you put in in the first quarter?

Well, we've been pressing this, Stacy, all over the country. I mean, those are on a district by district basis, and there's no focus on any particular areas. We've had more success in some areas than others. But we really had good success all over the country with the possible exception, again, of the south. That's where we've seen that commercial rate -- the competition press the hardest on commercial rates. And that, again, was from our biggest competitor.

But the rest of the country we've had good success. In the East in particular, we've had very good success. Midwest, prices are up nicely. West, prices are up nicely. And again I'd say just the south is the biggest problem.

OK, and with the reclass of -- the $8 million still in the other is that a little bit of residual from ? Is that basically going to go away now?

Yes, that's correct.

OK. And then with putting the negative 1.9 percent in the recycles, my impression -- I just want to clarify -- that did include then the change in the field surcharge and also the IPP change and the construction change for Wheelabrator.

Well, it didn't include the construction. It included those others.

The other three? And will those three line items then continue to be -- I assume -- continue to break out into that up above there?

Right. The recycling and the fuel surcharge -- last year, we started keeping those separate from the true pricing, because those are going to just fluctuate up and down based on commodities. And now that IPP is part of North American Solid Waste -- you'll recall last year it wasn't. This year it is, and especially in the first quarter of 2001, you know, you still have those high prices in California.

So it was a pretty significant -- again, really kind of a commodity-related impact in the quarter. So we'll keep that separated out for you as well.

OK. So if we were to restate the '01 interim growth, the only line item that would change would be that commodity line, your price and volume numbers wouldn't change for your reclass.

For the IPP reclass?

Yes.

Well, there might be some tax from IPP's underlying business. I haven't really taken a look at that.

OK. And so I just wanted to confirm when you gave guidance, you talked about the consensus EPS basis. Your prior guidance had indicated revenue of $11.4 to $11.5 billion and EBITDA margins of 28 to 28.5 percent implying EBITDA of basically $3.2 to $3.3 billion. I mean, is that basically the same guidance then?

That's correct.

And one last cleanup question is the acquisitions. Is that all debt for the consideration?

Let me double check.

We set a schedule. We'll look that up.

OK, great.

The question is were there , Stacy, no.

We'll take our next question from with JP Morgan.

Hi, good morning and thanks for all the information. To dig a little further, first of all I was intrigued when you talked about your operating support and rolling that out into the field. And Maury, you talked about some eye opening experiences. I wondered if you could just expand on that a little bit and give us some examples, because I'm thinking this is probably the case where under the rock you find more rocks down the road.

Yes, that's right. Yes, we measure a number of items, for example safety and for example maintenance efficiencies, some productivity numbers -- there's about five different measures that we use and then compare our operations against each other and then array them from top to bottom with the people getting the As and the Bs versus the ones at the bottom.

It's pretty interesting, because the ones at the top are typically good in all the categories. And the ones at the bottom are typically bad in all the categories. So it seems to be a pretty good tool for identifying well-run operations versus the ones that aren't so well-run and gives us an opportunity then to close in on those and determine whether we have a management problem or something that we can solve by providing some tools and some help.

So the ones at the top are presumably the most profitable ones already, or not necessarily.

Yes, that's usually the case. Not only are they the best run, but they're also the most profitable.

Right, that makes sense. OK, now going to the restructuring savings and the expense savings -- you're saying that of the restructuring, you're now if I've got this right -- I think you said 85 for the year and of that 85, you got five in the first quarter which was all basically in one month right?

It was four in the first quarter, basically in one month, and yes, 86 .

OK. So obviously if you did that on a monthly basis over the rest of the year, that's only 36. So is that expected to ramp up on a monthly basis?

Yes, you know we announced that on March 4, was the date we announced it. So the people weren't out for the entire month.

OK. So basically that's all -- so that's a pretty comfortable number, that 86 is all basically the payroll that you're not paying for all those people.

Right.

So that's a safe number.

It is.

OK. And then on the IT expense where you spent 12 million in the first quarter, this is for the new billing program, are you still looking to spend $25 million on that for the while year?

We are looking to spend $20 to $25 million in each expense and capital on the revenue management work this year. There were other things included in that $12 million. You know, we were doing the payroll and human resources conversions, it was for Canada and Puerto Rico, and so we had one currency issue that we had to deal with that we hadn't dealt with previously in the earlier conversions and some other things...

OK, great. And then on the market strategy savings, you said that, you know, the 23 million that you got in the quarter, you said a lot of that was roll-over of things you did last year. So, is most of that pricing initiative that you did in your deep dive last year that are starting to annualize? And how much of that is new pricing that are markets you still haven't gotten to? Because I'm looking for how much more upside you have that can roll all the way through this year.

Typically in those deep dives, about half of the improvements come from pricing.

Uh-huh.

So, you know, that's safe, I think, to use as an estimate.

How many markets have you still not gotten to?

I think we said we're now at what, 74 percent of our revenue.

So you still have upside there, you know, in pricing and savings, that will go presumably even, you know, all the way through this year and some into next year, then.

Yeah, but I think you also need to take into consideration that we take on the biggest markets with the biggest opportunities first.

You've got 74 percent of the markets, but a much higher percentage of your revenues.

No, it's 74 percent of revenue.

OK.

Revenue's the number.

OK. OK. All right. Thank you.

We'll take our next question from Tom Ford with Lehman Brothers.

Good morning.

Good morning, Tom.

Quick question for you on the volume trend on the disposal side. Could you -- do you have available what the monthly sequential trend is starting in March of last year?

I don't think we have all that right here, Tom, no. I mean, that's the kind of stuff we look at, but...

Uh-huh. OK. All right, I'm just trying to get a sense . Because obviously one would expect the uptick that you're seeing. And I'm just trying to get a sense as to how that compares to again, you know, just kind of get a sense as to how we're going.

I think maybe part of the way to think about it is, you know, March volumes were quite a bit lower than last year's March volumes. April's are starting to approach April's of last year. I mean, we've seen a much bigger uptick this April than we did last April. And it kind of appears to be getting close to making up for what we didn't get in March.

OK. All right.

And then the second thing we're trying to do is to dissect that a little bit and figure out how much of that is seasonality and how much of it is economy, perhaps. And that's the discussion we had earlier about getting into the industrial .

Right. Right. OK. In terms of -- with the landfill tonnage down 6 percent year-over-year, I was curious about -- you talked about disposal pricing that was done in 4Q. I was curious about what the disposal tonnage -- what occurred there in the first quarter.

It's primarily what we're -- our problem is primarily special . We just didn't see the big projects get started that we anticipated were going to get started. And then, as I mentioned, in the west we had some very large projects last year. And in the Midwest, the projects just didn't get under way. So a big chuck of that is special .

So you don't think that the pricing activities is what has impacted the volume performance.

We don't think that. In fact, of course, that was one of the first things that we would close in on and try to figure out. We don't think that that's the case.

OK. And then lastly, I think Bill, you had given, and Maury, you had given the total impact from fuel, commodity, and IPP -- I'm not sure if I missed it, but do you have a breakdown between the three?

Yeah, we do.

That was in Bill's -- The recycling commodity was $20 million. The fuel was $16 million. And the lower electricity rate at were $15 million.

ford OK. Great. Thanks very much.

Thank you.

Maury, before we take the next question, let me just jump in on the one on the cash flow. The issue on the $48 million outflow for acquisitions. That was, in fact, all cash in the $48 million is $10 million that really relates to a prior year hold-back payment. So that's the reconciliation.

And on Leon's question on the landfill tonnage side, it looks like average first-quarter tonnages were about the same as March's. So the 11 percent increase April over March is also about an 11 percent increase April over the average in the first quarter.

And we can move on to our next question.

We'll take our next question from with Credit Suisse First Boston.

Hi. Just a question on the market strategy initiative. You guys got $73 million in year-over-year savings last year, $37 million of which was in the fourth quarter. Is there a reason that that pulled back to $23 million in the first quarter? Is there some seasonal factor in there that you get less in the lower quarters than you do in the stronger seasonal quarters?

I don't think it's so much seasonal, Alan, as it is that we did take on the biggest opportunities first. And then I think the other thing is that much of the market business strategy improvement is in price, and we've attacked price in a different way, with our pricing tool. So there's some overlap there, I think. But I think primarily it's that we took on the bigger markets first.

But even if you got $37 million in the fourth quarter and you did nothing else, shouldn't you get at least that much in the first quarter in year-over-year savings?

Well, there was some. There was around $5 million in the first quarter last year. So you'd start anniversarying on that. And I think there is going to be some seasonality to it all. I mean, just as our revenues are down and some of our costs are down, then your associated cost savings price increases, especially where there are landfill-related price increases that you are getting, are going to be down as well. So it's kind of a combination of those two.

OK. And just kind of a follow-up, I guess, on Tom's question for the number a year ago, you gave the 11 percent number April over March for this year. Do you have the comparable statistic for last year?

That's what I said I don't have handy now.

You don't have it? OK. And I guess...

And it was something -- it was certainly something smaller than that.

Right.

For Bill, you know, in terms of the cash flow sensitivities for the year, could you give us an idea of how much cap-ex might be lower if we assumed, let's say, 2.5 percent lower GDP just as a rough framework for sensitivity?

It's pretty hard to estimate that. I mean, if you're talking about GDP, full-year GDP at that level, that would probably be a little bit weaker economy than we're anticipating right now. So that might, you know, just speculation, but that might result in perhaps backing off some of the landfill cap-ex and procurement. So you might be thinking in terms of at that level, and again, this is just a guess, but $50 to $100 million less, I would think it something you could work with.

Maury

Yes, I think that's reasonable.

All right. Thanks.

We'll take our next question from with J.P. Morgan.

Hi. I wanted to follow up a little bit on the cost side. First of all, on the SG&A, there was certainly some improvement versus the fourth quarter on absolute and a little bit on a percentage basis, but year over year first quarter was still substantially higher. Could you just review again, on a percent basis that is, could you just review again main differences in the cost structure year over year? I'm trying to get at a core rate and whether this is a run rate or whether there were some unusual items that will run off later.

Well, of course, we talked about the, you know, the $12 million in IT spending that, you know, will go away once we get the infrastructure all in place.

And do you have something else there, Bill, that you want to...

You know, one thing we talked about during the second half of last year was that over the course of the year we had kind of a buildup of some of our infrastructure. We put a service center in place here in the corporate offices.

Looking at a list we have here.

And I'm looking at the percentage, you know, SG&A as a percent of revenues.

Yes. Well, and, of course, the percent was increased this year just because the revenue was down quite a bit year-over-year. So, you know, when you look at the absolute dollars spent, they were pretty similar.

Right.

But with lower revenues, you know, you can't really flex a lot of your SG&A as much as you can flex your operating costs.

A couple of things we're looking at here in Q, the first quarter of 2001, our labor-related expense was $40 million and professional fees were 31. Of course, the big delta, of course, came from where we ended up in Q 4 this year versus where we are today.

OK. And then on the gross margin slide, it actually looked like there was some improvement there, you know, going out the direction of SG&A, despite the lower volumes and high margin volumes. So were there some -- you know, and on a quarter for adjusted basis, at least, they were the same and an improvement year-over-year. Were there any particular items in there that caused that improvement in the -- you know, the run rate near the core margin?

I guess the one that we could cite that we actually talked about before was that we did implement in the first quarter just because we could see that volumes were going to continue to be low, some quick reductions in costs; things including overtime reductions that we just basically edicted out of the general office and we did have those overtime. We could see that overtime coming down in the quarter. That's the first time we've been able to accomplish that.

Travel and entertainment: We, again, sort of edicted a decrease in that. We could see that those costs were coming down. Professional fees: We also took those costs down. And we did see some immediately impact of all of that and that's encouraging for us because for the first time really we flexed our cost down as we saw the volume soften.

Is it fair to say then as the economy picks up, this -- I mean, it's kind of masked by the lower volumes in the first quarter -- but, really, your gross margin should give you some pretty good leverage, more than you can last year.

Well, that's exactly right, and I guess that's how we look at -- you're always trying to look at the glass is half full. Coming out the other side of a downturn, we've got our costs now scrubbed down and, of course, the key is to keep them scrubbed down.

And what we've just done is to put out head count numbers to all of our 85 markets so they know how many management heads they have, how many hourly heads they have in place. And the idea is to keep those numbers at the current levels so that as we start out the other side of this downturn with our head count numbers, you know, under control as well as our other categories of variable costs under control, we can see some real leverage coming out the other side of the downturn.

Yes, let's hope so. One last detail, on volumes that were down just a little bit more than the industry in the first quarter. Do you attribute that to some of the markets, like the South you were talking about where there was some competitive pricing issues? I'm sure you tried to look at that.

If you're going to pick one big factor, you'd have to talk about special waste where we'd been very successful in the previous year taking some very large special waste jobs, several airport jobs around the country. And as we headed into this year, those special waste jobs just didn't materialize as quickly as we'd hoped.

So you don't think as the economy recovers that that will come back? Do you think that will come back? It's just a temporary mix?

Yes, we are seeing the special waste jobs pick up again, especially in the Midwest, which is one of the places that we had trouble getting those jobs underway as far as we'd anticipated. So where we haven't seen the special waste come around yet is in Southern California. But, overall, if you could pick one factor, I think that's probably the one that we'd talk about.

Thanks.

Mauri, let me add just a little more color again on the other question related to this one as well on the SG&A expense of Q 1 2002 versus 2001.

And the numbers I mentioned there I mentioned the $40 million in labor. Actually part of that relates to the development of our service center here in Houston. Part of that relates to increasing severance and a piece of it to contract labor. So that's a $40 million number. The offset is an SG&A. In SG&A it's $31 million in lower professional fees. So if that gives a little bit better flavor for that composition, I hope that helps.

And this hopes to be the last call we're going to take, last question.

We'll take our last question

Good morning.

Good morning.

I just wanted to tackle the cost question before and maybe a couple different things. Number one, on the jobs, can you maybe give a little bit better breakdown on how much that was truly related jobs that might have been down the SG&A versus and how many might been direct or indirect?

Well, as to exactly what went out the door, of course we got those, but we had a lot of thumping where management jobs were people that were in first-level management positions and bumped down into hourly jobs. So with the vast majority of the, you know, of the jobs were taken out of management that actually went out of the door in many cases were hourly jobs.

So you would you say predominance to the cost is control?

We say that -- the of the costs that came out will come out of SG&A, because of the budget.

OK. Secondly, can you maybe just talk sequentially as well as year-over-year? I mean, you kind of tackled the SG&A question, but if you look at your major buckets of cost mainly later, you know, disposal insurance and maintenance and fuels you ? I mean, you kind of touched on fuel already, but if you look at those four buckets sequentially in year-over-year, and you look at it kind of like on a basis if you do it all. Can you maybe talk about trends that you're seeing?

Like yesterday, to begin with the labor buckets, what we're seeing is predicted wage increases which are in there -- 3 to 4 percent range, which is what we had budgeted. I don't think -- I think that's about what we anticipated.

In terms of other impacts to labor crops, of course, we've taken the SG&A numbers down as a result of the rift that we have maybe, you know, maintaining that, keeping that under control and making sure that that doesn't just pour it back into the head-count as a key item. We have attrition in this company of a couple thousand heads every month. That's both hourly and management. So managing that is a key item. But we think that that's where there are substantial possibilities for leverage coming out of this thing as the economy starts to pick up.

Fuel -- we really have fuel covered by our fuel surcharge, and we continue to have fuel covered by, you knoow, by a surcharge, so we don't look at that as a, you know, real big problem.

Insurance costs is another area which is being -- which is up this year. You know, insurance rates are up in the range of 12 to 15 percent, but at the same time we're having great success at reducing the incidents of accidents and getting our costs down as a result of that. So we think that's another area where we have some real leverage. Now that stuff lags a little bit, because of the nature of the costs. That's going well for us. And I'm sorry, what other category?

Disposal costs?

Disposal costs. You know, they're -- I don't think there's anything new to report. They're for us just right about on what we'd anticipated.

And getting back to kind of unit pricing, when you look at where your price increases stock and where you got most of your price increases identified some of the territories, is it basically kind of a demand-supply? I mean, is it pretty much in areas where demand is strong where you're seeing the price increases stick?

I mean, are there any markets that there's been any -- you talked about the south, obviously, where it's tough from pricing standpoint, because of the competition -- but are you seeing any markets where supply has changed that's allowed you to go to price increases without demand strengthening?

I guess, number one, you got to break it up between landfill pricing and commercial, which are our two big opportunities. And if you talk about landfill pricing, certainly we went to the East where we said that there was -- where we could see that there was demand and we got our best landfill price increases there, and that was really in the fourth quarter of last year.

But on commercial, we've gone about that in a different way. We've done that based on just dissecting each district's customer list and determining which ones are not profitable and going after the nonprofitable accounts. And that doesn't seem to have much, you know, relationship to demand. It seems like we can go after those prices, you know, whether demand is strong or not. And that's held us in good stead as we've gone through an economic downturn here. And I think that's why we've been successful at price increases, even in a time of slacking demand.

OK. Thanks very much.

OK. Thank you.

And that's it. That was our last call. We appreciate you all joining our call this morning. I think, overall, what we can say is things have gone about as anticipated in this quarter. Probably volumes are a little slower than we've seen, although our pricing has continued to be very strong. And on the volume side, things have picked up substantially now as we've gotten into April, so that's very encouraging.

And maybe the most encouraging thing of all for us is our ability to control costs now in the first quarter. And we see that as a real opportunity as we head into the second quarter.

So thanks very much for joining us.

This now concludes today's conference call. At this time you may disconnect.