美國廢棄物管理公司 (WM) 2003 Q4 法說會逐字稿

Welcome to the Waste Management fourth quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Miss Rice, you may begin your conference.

Thank you. Good morning, everyone and thanks for joining us. With me this morning are Maury Myers, Chairman, President, and CEO of Waste Management; and David Steiner, Executive Vice President and Chief Financial Officer. Maury will start things off with a review of our achievements during the quarter and the year, as well as price and volume trends and will talk about our plans for the coming year. Then David will review the 2003 financial statements, and 2004 guidance in more detail and cover a few related topics. After that, we will open the lines for questions and answers. This call is being recorded and will be available 24 hours a day beginning about 1:00 p.m. central time today until 1:00 p.m. on February 26. To hear a replay of the call over the Internet, access the Waste Management website at www.WM.com. To hear a telephonic replay of the call, dial 1-800-642-1687 And enter reservation code 4861246.

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 27-A of the Securities Act of 1933 and section 21-E of the Securities and Exchange Act of 1934. These 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 10K for the year ended December 31, 2002; 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 statements. Additionally, during the course of the presentation, we will discuss free cash flow, a non-GAAP financial measure. Waste Management defines free cash flow as net cash provided by operating activities, less capital expenditures plus proceeds from divestitures of business net of cash divested, and other sales of assets.

The Company includes this discussion because the amount of cash produced by non-financing activities, that is available for uses such as acquisitions, share repurchase, debt reduction and the payment of dividends is important to the Company's capital allocation process and it's goal of providing returns to it's shareholders. For the same reason, the Company believes investors are interested in this measure. In 2003, the Company is also giving adjusted free cash flow. The adjustments made are related to the payment of a shareholder class action settlement net of certain related favorable cash flow items, including cash tax benefits. 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 February 12, 2004, may no longer be accurate at the time of a replay. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Waste Management is prohibited.

Before turning the call over to Maury, I just wanted to note that there appears to be some confusion this morning, regarding the impact of the current quarter's tax rate. On the third quarter call, Waste Management specified an expectation for a 37.3% tax rate in the fourth quarter. The actual rate as reported was 32.9%. For a $15 million difference. This $15 million difference translates to about 2.5 cents in earnings per share. Combined with the $17 million litigation settlement that we discussed in the press release, which translates to about 1.5 cents in earnings per share. These two items together are about 4 cents in quarterly EPS, which we did note in the press release. If you deduct the settlement, the litigation settlement from our 39-cent result, you'd end up with 37 cents, deducting the tax difference, as well, results in 35 cents for the quarter. We just wanted to make sure that was all clear to everybody up front before we started the call. Now let me turn the call over to our chief executive, Maury Myers.

Thanks, Cherie and welcome to all of our conference call and webcast listeners. The fourth quarter results reflect positive momentum for the company. We're very proud of our continued progress in cost reduction, margin improvement, revenue growth and, most importantly, production of cash flow. During the past few years, the tough economy accounting changes and our trimming of unprofitable customers have created challenges in terms of visible evidence of improvements in our financial statements. We saw progress in 2003, and in 2004 we expect more clarity as we focus on bringing the company's fourth quartile operating unit performers up to the median and continue to manage this company for the long-term. Let me review now the most important initiatives in areas of focus in terms of both the progress we have made through the end of 2003, and what we expect to achieve in the future. I'll start with one of our four original initiatives procurement.

This initiative has been ongoing for three full years now and, in total, we have achieved approximately $236 million in annual run rate cost savings. These savings have primarily been in expense items, about $148 million; but also on the capital side at about $88 million. Long-term our goal is to achieve $350 million of annual savings. Our 2004 goal is to increase savings by another $44 million, $10 million in capital and $34 million in expense. We're looking for these savings to come primarily in the areas of IT, trucks, truck parts, local services, and landfill-related costs.

Safety is another very important matter for us here at Waste Management. In 2001 we launched an initiative we call mission to zero with a goal of achieving zero recordable injuries in each of our operating units. The progress we've made is absolutely amazing. In each successive year since 2000 we've improved our total recordable injury rate, an important OSHA measure, by more than 20% from the previous year. While we've made great progress, we're not where we want to be yet. Forty percent of our operating units proved in 2003 that zero is an achievable goal, and we continue to push for all of our operations toward this level of achievement. To date, in terms of cost savings, the rising cost of insurance, and the increased average cost per incident have largely offset the savings achieved from the reduction of injuries. In 2004, we're taking an aggressive approach on post-injury management in order to reduce the cost per claim. In addition, we're focused on substantially reducing our vehicle accidents. We had a 10% reduction in 2003, and are targeting another 20% reduction this year. It's more difficult to estimate the timing and magnitude of the potential savings that will result from improved safety statistics, but without a doubt, reduced claim costs and reduced premiums will eventually follow.

A third cost initiative that has received much of our attention is fleet maintenance. Our primary performance metric is cost per driver hour. In 2001, cost per hour was $12.31. In 2003, we reduced it to $11.87, or by about 3.6%. Our 2004 goal is to further reduce maintenance cost per hour to $11.32, or by another 4.5%. We plan to do this by focusing on the fourth quartile performers, as well as by challenging the second and third quartile business units. Within another three or four years, we think we can get the cost down to around $10 per hour; and with 50 million driver hours per year, these reductions translate to real money. We know what we need to do to reach the $10 per hour goal, and we have many locations already at or below this $10 level. This is just a matter of continuing to execute our plan.

In a similar vein, a recent cost improvement target has been container maintenance. While the total spend and thus the available opportunity here is smaller than vehicle maintenance, maintaining our containers is another very important activity in this business and we need to do it as efficiently as possible. We've just received improvement plans from the 14 U.S. market areas that are in the bottom quartile and estimate that we can reduce cost in these markets by $6 million in 2004. Additionally, we're testing opportunities for outsourcing container repair in certain markets. Through outsourcing, we estimate an additional $2 million of savings this year. While outsourcing is only feasible in certain locations, a pilot test has shown that it can be a much better alternative to keeping this activity in-house. We are also looking at the entire container life cycle, beginning with procurement and continuing through the decision to sell the used bins as scrap metal. Our combined annual expense and capital respond containers is nearly $300 million. This current work just scratches the surface of our opportunities here.

Waste route or the optimization of routing through the use of propriety technology was our biggest single initiative in 2003. We were very successful in reducing routes, well exceeding our announced goal of 750 route reductions for the year. We were not, however, as successful with our target of eliminating $10,000 of associated monthly costs for each route eliminated. Our initial goal for 2003 was to save $40 million gross, with $10 million of implementation costs. Our actual 2003 waste route gross savings were $18 million, about half our goal. The savings did ramp up late in the year, and in the fourth quarter we had savings of about $12 million from the program. We're now developing and implementing a plan for 2004 that will focus on reducing driver hours and providing additional training; and be supplemented by new productivity metrics to make the process more effective. Our goal for 2004 is an additional $44 million of savings.

In 2004, we're launching a waste route initiative for the roll-off line of our business, where we have about 4,000 routes. As opposed to looking for route reductions in the case of roll-off, we're expecting to get a combination of improved efficiencies and greater capacity out of our existing resources. We continue to believe that we can improve our overall route efficiencies by 10% during the course of the next few years.

And finally, on the customer service and sales front, we've had significant success with two separate initiatives, service machine and sales force effectiveness. Service machine was one of the major objectives rolled out in 2001. The idea was simple. Find out what service-related issues are causing our customers to leave us and fix them. The results have been evident in our customer churn rate. Before implementation of service machine, our commercial customer churn rate was running in excess of 12%. Since 2002, we've been running consistently under 10%. We'd estimated that each 1% drop in churn improved our pretax income by $20 to $25 million per year. While this is a studied estimate and difficult to measure, clearly retaining more of our customers each year with is a financial benefit to the company. In 2004, we plan to go back into the field with a special team to reinforce the service machine program with the goal of moving customer satisfaction to the next level.

Sales force effectiveness is also very straight-forward. It involves management and discipline in our sales activities. It also involves segregating the duties of the sales department so that we have specialists rather than generalists. For example, some people specifically search out and sign up new customers, and others focus on the retention of existing customers. The results have been very encouraging. In 2003, with a sales force roughly 30% smaller than we had in 2001, we had new, permanent commercial and industrial sales of $39 million, the same as in 2002. Our lost business within that customer group was $34 million. The dollars gained outpaced those lost by nearly 15%. Our national account sales team continued it's growth, exceeding 2002 revenues by 12% in 2003. Our growth in new, national account revenue more than outpaced our losses, and we expect that trend to continue. The 2004 goals for the sales function include further refinement of our process through improved recruitment and training, improving our prospect management systems to provide better targets for our sales reps and a focus on improving the performance of our bottom quartile sales units.

Outside of the efforts I just reviewed, there is work in process to continue to reduce our SG&A costs, and I will let David cover that a bit later in the call. Now that we've taken a look at the big picture, let's step back and review some of the results and trends from the fourth quarter and early into this year, starting with internal revenue growth. As noted in the press release this morning, in the fourth quarter, our revenue growth for base price was .7% and our volumes were flat. The previous two quarters had negative volumes, .4% in the second quarter and .7% in the third. The unfavorable trend we had been seeing early in the year was clearly reversed toward the end of the year. As a reminder, the second, third and fourth quarters each had about a .5% negative volume impact related to the loss of the Chicago Blue Bag contract in mid-February. Adjusting out that one negative impact, means that the remainder of our business actually had favorable volume growth of about .5% in the fourth quarter.

We open hope this is an early sign of an improved economy, but we will wait for successive quarters of this type of trend before feeling comfortable that this is the case. January volumes do not show increased economic activity, but there were weather events during the January month that may have impacted those trends. As always, March is the critical month in the first quarter. Fourth quarter revenue growth from base price was the same percentage as we saw in the third at .7%. We successfully implemented and retained significant price increases during the second half of the year with over $8 million in monthly price increases on our collection business. Waste Management's IRG price component is net of price increases to existing customers, price decreases to retained customers when the competition offers a lower price, and the price we get on new business. It's more of an average rate measure as opposed to the same-store sales price increase measure.

To give you a metric more comparable to some of our competitors, we did calculate the price increases successfully implemented on our collection revenue base between the fourth quarter '02 and the fourth quarter '03. By that measure, we affected a 2.7% price increase on the customer base. On the commercial segment, which is where we focus much of our price increase efforts during the second half of the year, we attained 4% average price increases quarter-over-quarter. In 2004, our pricing plan includes expanding the centralized process we started in the second half of 2003 to include subscription residential. The corporate pricing department is also working with the field-based groups to build a disposal pricing strategy that takes into account our strategic position, our geographic location, and the supply and demand characteristics of the market. We expect to find new opportunities for price improvement through these efforts. As stated in the press release this morning, we project revenue growth from pricing on base business of about 1% for the full year. Each of the prior two years we were able to get only .6% so this outlook does include improvement.

I will note that in certain markets we've seen more price increase activity from our competition than we had in previous quarters, giving us optimism that the pricing conditions are improving. Regionally, the price and volume trends are similar to what we reported on our last conference call. Out of the four U.S.-based groups, the east, with tight disposal capacity, is seeing the best price improvement; while the west is seeing the best volume improvements. With strong volumes in the west, pricing is also above average there. The weakest region overall continues to be the midwest, with slightly negative IRG even after excluding the Blue Bag contract loss. Volumes are still growing in the south, but they have relatively flat pricing due to strong competition in that part of the country. Interestingly, in certain sectors of the business, the eastern and midwest groups have seen very favorable trends over the course of the year. The east is seeing considerable improvement in the roll-off volumes, and the midwest is seeing municipal solid waste volumes into their landfills strengthen significantly.

On the acquisition front, we closed on the purchase of $125 million in revenues during the fourth quarter, including Allied South Florida assets. In total, we purchased $561 million of revenues during the year, including approximately $234 million in recycling revenues; primarily the Pellch group, and about $185 million of revenues from Allied. These additions fit well with our existing operations and were consistent with the acquisition plan we laid out for you a year ago. In 2004, we expect our acquisitions to moderate. We plan to spend approximately $250 million in purchase price and would anticipate revenues purchased to be a similar amount, although the revenues could vary, depending on what kind of assets we buy.

One significant topic of interest regarding Waste Management, both internally and externally is the end of my five-year contract in November and the associated CEO succession plan. Since my arrival in late 1999, it's been known that my intention is to retire at the end of my five-year contract. With that in mind, the board of directors began addressing the succession issue as soon as the company had addressed the more pressing issues we had in 1999; such as improving our IT systems, divesting of non-core and non-North American assets, preparing a blueprint for improving the business, and establishing a strong leadership team. Our senior leaders were assessed for overall management abilities and leadership skills. Over time, three individuals were identified as having the potential to one day lead this company, and each one is now an Executive Vice President. I have the utmost confidence in these three men. I truly believe that come November I will walk out the door, leave the company safely in their hands, and no one will notice that I'm gone.

The formal succession process is continuing and late this year, with the help of an outside firm that specializes in these issues, the board began a more focused process of determining the next CEO. The process is moving along according to plan, and there is no issue more critical to the board in the coming months. From our perspective, there is no rush to make the decision but certainly we need -- or intend to finalize the succession plan and announce it to the world with a reasonable time to ensure a smooth transition. Before turning the call over to David, I want to share with you a couple of items related to stock ownership within the company. We have approved and implemented a program which requires specific levels of stock ownership for certain of our leaders. Depending on the level, designated Vice President, Senior Vice President, Executive Vice President, or CEO; the individual is required, within a specific timeframe, to hold from one to five times his or her annual salary in shares of Waste Management. In addition, any stock acquired through option exercises, after paying taxes and exercise price, must be held for at least a year before sale.

We think that this programs helps to align the interest of our leaders with those of our shareholders. I do expect in the coming quarters, some of the individuals affected by this program may exercise options to begin accumulating the necessary shares. I point this out only because cashless exercise of options may be used, and there will be SEC filings showing the effect of option exercises. My expectation is that you will see our senior leaders increasing their stock ownership in the coming quarters and years, which is exactly the goal of this new program.

As I near the end of my contract term here at Waste Management, I'm planning for my future, including taking care of certain financial issues. For me, this includes selling some Waste Management stock. It is my intention to enter into a 10b51plan shortly after our trading window opens, which should be early next week. This plan will entail me selling some restricted stock that has associated long-term gains over the next several months. I was granted this stock in 1999. In addition, I also intend on exercising stock options and then holding Waste Management shares valued at least the minimum of -- of five times my annual salary, which is per company policy. As you can imagine, a very significant portion of my net worth is in the Waste Management stock and diversification is necessary. I'd also point out as many of you know, I intend to move from Texas after I retire and Texas has no state income taxes. Meaning for tax planning purposes, it's much smarter for me to recognize some of this income this year while I'm still a Texas resident.

The company's 2004 guidance was outlined in our press release this morning. Generally, we have taken a similar approach to projecting the coming year as we did in 2003. That is we have not included in our estimates a rebound in the economy that results in increased waste production. Our full year outlook anticipates continued price increases, cost reduction, and flat volumes. If waste production increases, we'd expect to benefit from that. The current range of EPS estimates for the year by the analysts is fairly wide, from $1.36 to $1.52. We think that the low end of this range is indicative of an economy that proves to be even more difficult than we anticipate in terms of price increase opportunities. At the high end, the range is probably indicative of growth and volumes associated with an improved economy. In other words, depending on your outlook, any point within that range may appear reasonable. Our goals for the year, with an expectation for modest price increases, are obviously somewhere in between.

Regarding the first quarter, in addition to weak volumes in January, I just point out that in each of the past two years the first quarter EPS has been 16 to 17% of the full year. David will review with you further details regarding our 2004 outlook. With that, let me go ahead and turn the call over to Dave who will review both financial details of the fourth quarter and the full year; as well as our 2004 guidance.

Thanks, Maury. I'll begin with a comparative review of fourth quarter 2003 and fourth quarter 2002 financial results. As noted in the press release, there are differences in accounting from year-to-year, and last year there were some significant one-time items included in our results. The accounting changes, primarily the implementation of FAS 143 in the first quarter of 2003, would have reduced 2002's fourth quarter by 2 cents per share had they been in effect at that time. The significant one-time items included in last year's quarter were reduced taxes related to utilization of a tax loss carried back to a prior year increasing earnings by 5 cents per diluted share, a gain on the sale of an investment that added 4 cents per share to our results, and the resolution of a legal dispute which negatively affected EPS by 3 cents per diluted share. In total, these three items increased our reported earnings in the fourth quarter of 2002 by 7 cents per share. In combination with the differences related to FAS 143 and other accounting changes, the 2002 quarter would have been 9 cents lower or 30 cents per share.

The fourth quarter 2003 included a $17 million favorable legal settlement, helping this quarter by about 2 cents per share; and we benefited from a lower tax rate, which also added 2 cents to the fourth quarter. So, as you can see, if we compare this year's underlying 35 cents per diluted share with last year's 30 cents, we improved our performance significantly during the course of the past year. Revenues in the fourth quarter increased by $156 million to $2,968,000,000 versus the 2002 quarter. The single largest driver of this increase was acquisition net of divestitures. Accounting for $108 million of revenue increase in the quarter. To break this down further, $115 million was related to acquisition; with $60 million of that $115 million in recycling, and approximately $32 million coming from solid waste transactions that we closed with Allied. This was offset by $7 million of lost revenue from divested operations. Volumes were basically flat. Actually down $1 million, even though we had $15 million of volume losses due to losing the unprofitable Chicago Blue Bag contract earlier in the year. In other words, outside of that one large contract, our revenue from volume change was really up $14 million or .5% for the quarter.

Foreign currency translation from the Canadian dollar favorably impacted revenues by $23 million. Fuel surcharges were $2 million higher than the 2002 quarter, commodity prices were up $5 million, and IPP prices were lower by $2 million. Revenues from price, excluding the fuel, IPP, and commodity changes were up $21 million or .7%. Operating expenses in the quarter were $1,917,000,000, or $125 million higher than the 2002 quarter on an apples to apples basis. As a percent of revenue, the year-over-year increase is almost 90 basis points higher. I will remind you that the second quarter's year-over-year increase was 340 basis points and the third quarter's was 270 basis points. The dramatic closing of this gap is a result of our cost reduction and operational efficiency efforts, our stepped up acquisition program, and the anniversaries of certain cost increases. The cost increases that bring about the bulk of the year-over-year variance are $51 million of increased cost of goods sold, largely related to our Recycle America alliance, fiber brokerage activities, and acquisitions. Most of this is simply a pass-through of the price we pay to buy fiber and then sell it to third parties. The margin impact related to this cost of goods change is 52 basis points.

Salaries and wages were up $21 million, a 53-basis point impact; in part related to acquisitions. Foreign currency translation from the relatively stronger Canadian dollar added $19 million in the quarter, and had a 16 basis point impact. Disposal costs were up $17 million, primarily in the eastern group as a result of our redirection of some volumes to third party sites. This accounts for an estimated 9 basis points of margin change. Subcontractor costs were up $14 million, or 31 basis points. Primarily, again, in the eastern group where we're having to move quite a bit of waste longer distances than in the past. You may have noted that the items I just gave you account for much more than the 90 basis point change that we saw in cost of operations. That's because price increases and tuck-in acquisition activity have added revenues, effectively lowering our cost of operations as a percent of revenue.

SG&A costs, at $295 million, were $63 million lower than in the 2002 quarter. Two litigation settlements, an unfavorable won of $26 million in 2002 and a favorable one of $17 million in 2003 constitute $43 million of this difference. Other favorable contributing factors include lower contract labor, wages and benefits, bad debt expense and office supplies. This led to SG&A for the quarter at 9.9% of revenue. If we had we not had the favorable legal settlement in the quarter, SG&A would have been 10.5% of revenue. Depreciation and amortization was $313 million, or 10.6% of revenue, as compared to last year's $304 million or 10.8% of revenue. The tax provision for the quarter is recorded at a 32.8% effective rate. For the full year 2003, our effective tax rate was 36%. The lower rate in the quarter is primarily due to landfill gas credits exceeding our previous estimates, and foreign audit related adjustments.

In the recent quarter, we also had a $43 million after-tax negative impact from cumulative effect of change in accounting principles. This is all related to our December 31 implementation of FIN 46, consolidation of variable interest entities; and has to do with the consolidation of two limited liability companies that own three of our waste energy plants. I will review more on this in a few minutes. As noted in the press release, income from operations as a percent of revenue increased for the third straight quarter. With negative seasonal impact that began to materialize during the course of the fourth quarter, we believe this is a significant accomplishment. Let's move on now to balance sheet and cash flow items. Adjusted free cash flow, as detailed in the data sheet included with our press release this morning, was $232 million in the quarter; making the full year adjusted cash flow $1,023,000,000. This exceeded our projected range for the year which had a top end of $1 billion. In part, the reason we exceeded the top end of our expected range is that certain of our 2003 expenditures were still in our payable balances at year-end.

We estimate that there was $70 million more of such items in our year-end payables balances than we had anticipated simply due to timing of invoices and the associated processing. Without that $70 million, our free cash flow would still have exceeded our target of $950 million for the year. So while that makes our 2003 free cash flow result look very strong, the payments will show up in our first quarter 2004 cash flow results.

The year 2003 was another successful year in terms of our share repurchase program, too. In total, we repurchased $574 million worth of shares, or about 22 million shares. This represents about 3.7% of the number of shares outstanding at the beginning of the year. During the first two full years of our share repurchase program, the company's total number of shares outstanding has been reduced from 628 million at the end of 2001 to 576 million at the end of 2003, a reduction of 52 million shares or 8.3% of the number of shares outstanding when we started the program. In 2004, we anticipate spending between $400 million and $500 million on further share repurchases. The actual amount we spend will depend on a number of factors including actual cash flow results, amounts allocated to acquisitions, cash drawn from industrial revenue bond proceeds, and our refinancing strategy for the year. As in past years, we plan to keep our total debt at about current levels so in 2004, we'll continue to allocate our available cash to dividends, share repurchases, and acquisitions.

At December 31, total debt was $8.51 billion. Down about $50 million from the previous quarter end. There were significant changes within the debt categories during the course of the quarter, however, that merit discussion. First of all, we repaid $434 million of senior debt using available cash. Then on December 31, we consolidated two variable interest entities, pursuant to FIN 46, bringing an additional $171 million of debt onto our balance sheet. We've discussed and disclosed the nature of those entities for several quarters now in our SEC filings. Because Waste Management has been deemed the primary beneficiary of those entities, we consolidated them onto our financial statements. On the asset side of the balance sheet, this consolidation resulted in an increase to our property and equipment of $401 million, and a reduction to other assets of $125 million. On the liability and equity side, other than the aforementioned change to the debt balances, the other significant changes were to minority interests, which increased $194 million and to equity, which is where the $43 million cumulative effect was charged. Further detail to the application of FIN 46 during the fourth quarter will be included in our 10K, which we expect to file in about a week.

Consolidating the Wheelabrator LLCs will also change some of the expense line items in our financial statements. With respect to the variable interest entities, our projection is that operating expenses will be reduced by about $54 million, depreciation will increase by $12 million, interest expense will increase by about $10 million, and minority interests will increase by about $25 million. In terms of upcoming debt maturities, we do have two senior notes that are due during the first half of 2004. There are $150 million of notes due on April 30 and approximately $200 million of notes due on May 15. We expect to refinance these notes with one new senior note offering late in the first quarter. There's one other balance sheet item I want to cover this morning.

As of December 31, 2003, we are recording the liabilities associated with certain of our insured liability programs on a gross obligation basis. Prior to December 31, the liabilities for certain claims, such as auto and general liability, were based on our estimates of exposure net of insurance recoveries. We've now decided to book the obligations on a gross basis and carry the expected insurance recoveries as receivables on our balance sheet. This change in approach resulted in the balance sheet including approximately $266 million in estimated insurance recoveries as a new component of both assets and liabilities. Now let's turn to our 2004 outlook.

As Maury mentioned, our full year outlook anticipates continued price increases, more cost reductions and flat volumes. Free cash flow, the most important goal we have, is estimated once again in the range of $900 million to $1 billion. Keeping in mind that our 2003 cash flow benefited from $117 million of cash received related to our interest rate swaps, which we're not expecting we will recur in 2004; we think that this range is a good goal for us, indicating improving business fundamentals. Internal revenue growth is estimated to be about 1%, virtually all from price. The 2004 revenue will also be favorably impacted by about $200 million of rollover benefit from 2003 acquisitions. Depending on the amount and timing of our 2004 acquisitions, we estimate about $100 million of additional revenues recognized during the current year. Rollover from dispositions of operations and a lower fuel surcharge are expected to reduce 2004 revenues by about $30 million. Total capital expenditures for the year should be very similar to the $1.2 billion we spent in 2003.

In terms of margins, Maury discussed some of the efforts we have under way to reduce costs and to continue to improve our margins. That said, there may continue to be increases in certain costs, like pass through disposal taxes, that are out of our control. In addition, in 2004 there are more pass through types of taxes that we will be reporting as revenue with a corresponding expense, which will have the effect of decreasing our margins, although it will have no effect on cash flow. Primarily for that reason, and because accounting changes continue to eminate from the FASB and the accounting firms, we find it difficult to specify a margin goal for the year. But we will continue to focus on improving our fourth quartile performers and reducing controllable costs wherever we can. By doing so, we believe we can continue to generate sufficient cash flow to provide attractive returns to our shareholders. The 2003 financial results show proof of our ability to reduce costs and to continue to generate cash, and we would expect the 2004 results to show more of the same.

Moving on to SG&A expenses, our efforts over the past couple of years have put these costs solidly in the range of 10 to 10.5% of revenue, which is about where we expect them to be for the full year 2004. While we continue to attack our administrative costs and reduce what we can, we're also adding sales employees where we see opportunities to leverage our success with our sales force effectiveness program. Also in 2004, we're moving forward with the consolidation of our credit and collections efforts which, in the past have, been very decentralized. We've already consolidated all of our western group credit and collections operations into our new central facility in Phoenix and we've begun bringing in the midwest. We expect to have the entire country migrated in by the end of the third quarter. Our projection is for annual post implementation savings of about $8 million; but for 2004, it will be near break-even because of start-up costs. The savings will primarily be a result of reducing the headcount associated with these processes by about 175, and by enabling the consolidated processes to work under new technology.

Additionally, we would expect to see some improvement in our receivables in terms of day sales outstanding; although that likely won't come until 2005, and it's possible we could see some temporary slippage in 2004 as we implement the consolidation. For every one-day reduction that would translate to over $30 million in favorable cash flow on top of the expense savings. So, reducing DSOs will be a focus at the new center. So, in 2004, we do not foresee substantial SG&A savings from one-time headcount reductions, and we do plan to give your normal wage increases in March at an average of about 3%. However, in 2004 we'll also lay the ground work for continuing consolidations in 2005 and beyond. So I fully expect that by year-end 2005 we will have our SG&A below 10% of revenue. In the meantime, we'll work to make sure that it remains at acceptable levels despite rising wage and benefit costs.

Our 2004 tax rate is currently projected to be 32%. The reduction in our effective tax rate is due primely to additional section 29 tax credits arising from our recent acquisition of a minority investment and a synthetic fuels facility. It's likely that during the year we will revise our effective rate due to potential forthcoming events; such as the passage of state or federal legislation, for example, the pending energy bill and a second, smaller section 29 transaction that we're considering. For those of you working on models, here's some details regarding how the completed synthetic fuel investment will impact our income statement. The investment will generate a pretax loss estimated at $79 million for the year; $73 million of this loss will show in the other income line, and $6 million of the loss will show in the interest expense line. These losses will be offset by tax benefits and tax credits totaling an estimated $97 million. The result is, therefore, projected to be $18 million in after-tax income; with all of the components appearing below the income from operations line.

When I look at 2003, I see great improvement, and reason to be very optimistic for 2004 and beyond. We continue to remain focused on improving our free cash flow and ensuring that we allocate that free cash flow in a manner that optimizes returns to our shareholders. On our past calls, we've talked about our strategic challenges in some key markets; most notably, New York and Chicago. To update you on those situations, in New York we've continued to be very successful in raising prices to cover our increased costs, which was our first method for attacking these so-called strategic cost issues. We will continue to raise prices in New York as existing contracts come due, as we are not yet covering all of our increased costs on our older contracts. The second way of attacking these strategic costs is through lowering our cost of transportation. In New York City, that entails utilizing three lanes of transportation, including barging. What we're finding is that although we still believe we will barge out of the city, we now expect that we will not start until the second half of the year. As happens in this business, the permitting process tends to move slower than you would hope and expect.

Our third approach to alleviating higher strategic costs is through obtaining increased landfill capacity. In the Chicago market, we recently obtained a new permit at our Will County site and opened the site for business in January. At Pennsylvania sites we also obtained three expansion permits and one increase to the daily tonnage limit during the last few months, the most critical being at the landfill in the eastern part of the state. In fact, we had great success at obtaining landfill expansions in 2003. We received approval for 21 expansions during the year, representing nearly 400 million tons of new, permitted capacity. In addition, some of these expansions were vertical expansions resulting in higher waste density forecasts for the preexpansion part of the facilities, meaning we will be able to put more tons into the existing airspace. As of December 31, the average permitted life of our landfills has increased to 26 years, and the average remaining life including the expansions we expect to get is up to 36 years. This was great progress on the permitting front and we're very focused on increasing our landfill capacity whenever we can.

One final note before we start taking questions: As you all have, I'm sure, noted, Cherie will be assuming a new role as our treasurer and we're currently looking to name her replacement. Finding a replacement for Cherie won't be easy, but we know she will be successful in her new role; and I'm sure you all will join me in thanking her for her hard work and leadership in the past several years. With that, operator we will open the line for questions.

Press star 1 on your telephone to ask a question. Your first question comes from Amanda Tepper of JP Morgan.

Good morning! You gave so much detail, I don't know what I can ask!

Good morning, Amanda.

Good morning! I guess the first question is if there is an upturn in volumes that you have not budgeted for, would there be an uptick in the cap ex or the SG&A in your budget for growth capital, either for more landfill capacity or more bins or trucks or anything like that?

We've looked at that pretty carefully and in fact put that into consideration when we put our plan together. We think we're well-positioned to handle additional volumes. We'd like to be in the position where we needed more capital because the volumes were so great, but our guess is that we're in good shape.

So, in other words, if the volumes come in, that would presumably largely fall to the bottom line?

Yes.

Above your current plan. Okay. And then Republic Services last week talked about a new approach in taxes that's going to generate substantial savings for them. Is this the kind of thing you guys would take a look at?

I don't know we don't listen to Republic's call.

That's the approach we've been using for a number of years already, Amanda.

Oh, it is. Okay. Okay. Thanks a lot.

Thank you.

Your next question comes from Lorraine Maikis of Merrill Lynch.

Thank you. Could you comment on the Teletown expansion? And how many years remaining on that landfill you have now?

Let's see. Do we know the number of years --

I don't know that I have that handy.

I don't think we have that in front of us here.

What I can tell you is that, you know, prior to the expansion we were getting pretty short on air space and we had substantially reduced the amount of tons that were going in on a daily basis. The expansion I know is -- is for multiple years. I don't think we're going to be able to get back up to, you know, we've got some construction to do and we -- you know, we probably won't really be getting the volumes moving back upwards until somewhere around mid-year.

We'll see if we can round up the years for you before the call is over.

Thanks. And then regarding the barge program, do you now have the permits in place that you'll need, and you'll be constructing through the mid year or is that a wildcard in the process?

Well, the primary holdup at this point is permits we need out of New York at the docks there to get -- to get our operations set up in -- in New York. And we do not have those as yet.

And then finally is -- is the cost of that program included in your cap ex budget that you gave with your guidance?

Yes, it is.

Thank you.

Thanks.

Your next question comes from Raymond Chang of Lehman Brothers.

Good morning, guys. I'm calling on behalf of Tom Ford. The first question is -- I'm just curious, with respect to your price growth we saw in this quarter. Remember the last quarter you spoke about the $15 million carryover in terms of some per-quarter price increase. So I would have thought that would be a 50 basis point addon. Is there something else that added as a partial offset to that.

I think -- if you're talking about the .7%, again, it's a -- it's a net number that includes price that we actually lose as a result of matching the competition when they come after our business. So... Yeah, that -- that is the primary offset.

Okay. And do you --

Ray, I'd just add, the other thing that we said, though, is that we did look at the fourth quarter '03 versus the fourth quarter '02 and on the commercial price increase side we -- we did get a 4% price increase, which better matches the number that you're talking about.

Right, right. So are you seeing any carryover, incremental carryover from like your second half of '03 price increase translated into additional price in '04? Or is that incorporated in your 1% assumption?

Well, the 1% is the net number again.

Okay.

And so that's -- you know, we are seeing the carryover, yes, we do -- you know, and we saw that in the fourth quarter. It will occur again as we head into 2004. But that 1% is net.

Okay. And you talk about exploring your pricing plans to disposal pricing, like can you talk about a timing when you expect that should happen in terms of bouldering your price increase program?

Well, it's happening now.

Okay.

You know, the -- all of the pricing efforts that we have in place are incorporated into that price number that we gave you for '04. That is the 1%, basically. So that's the net impact of all the pricing efforts that we have in place.

Okay. All right. And going into the free cash outlook for '04 it looks like the number you provided is exceeded by the expected usage number in the form of dividends, stock repurchase and acquisitions. Was there something that would be financed by something else? Like IRBs or other financing sources?

That's correct, Ray. What -- recall that the same thing happened last year where we fund a portion of our capital expenditures through the drawdowns from our industrial revenue bond proceeds. And so we would expect that to be the same this year.

Can you provide some sort of a guidance like a range? How much you would expect to be financed by IRBs?

Yeah, I think we have that number. In fact, I've got my new treasurer sitting here with me, she can probably tell us that number.

Yeah, you know, this year we're expecting to bring in in the range of $400 million through the money from the IRBs.

Great. And lastly, just wanted to get a sense of your take on deferred taxes and bonus depreciation, are there any implications to the free cash outlook, not only in '04, but also in the years thereafter.

You know, we took advantage of the bonus depreciation this year and, you know, we've got that built into our forecast for next year. So, we're looking at cash taxes being about 55% of book taxes. So, but that -- that's made up of a lot of different things, section 29 credits and all the other things that -- that we benefit from for the year.

Uh-huh. Okay. All right, thank you, David.

Your next question comes from Michael Hoffman of Friedman Billings.

Good morning.

Good morning, Michael.

SG&A, just want to make sure I understand your statement, David. I -- 10.5%, you're headed toward 10%, are you suggesting to us that we're doing 10.5% every quarter, or we're doing 10% in the beginning and get towards the 10% by the end of the year?

Well, you know because of the seasonality that we have, you know, what we said last quarter, you're going to see some lumps because of seasonality in the revenues, and because of the one-time item type things that you saw with the settlement out; but what I'm saying is that for the full year we expect it to be in the 10.5% range. Then in 2005, as we go through the consolidation of our billing functions and our revenue management center, by the end of 2005, we will drive that below 10%.

Okay. And you -- so that means that some of the quarters could be higher than the 10.5% and you might finish the year a little less and that's how you get the average. Do you get a sense of -- like the first quarter will be higher than 10.5% kind of aspect? Is that what you're thinking?

I'm not going to say a specific number for the first quarter, but I would expect that the first quarter will be higher than other quarters because of the seasonality of the revenues.

Got it. The taxes, 32%, is that even or lumpy?

That's going to be fairly -- fairly even through the year. But, you know, we're going through the closing of a couple of audit cycles so there could be a few items throughout the course of the year.

Okay, and --

And we will update you on those as the quarters progress.

You have no landfill gas tax credits in that right because we don't have a new energy bill?

We have some from existing sites, but we don't have any into the effective tax rate from the new energy bill. That's correct.

All right, if that one got passed, is your expectation -- I realize this is an if, but if it gets passed, would you be able to lower your taxes even further in '04?

Absolutely. And as I said, as the year progresses, we will update you on the effective rate as those types of things occur.

It depends on whether or not '04 gets impacted.

Yeah --

And you don't know how the new bill is going to roll out.

And I would note the way it's been written and what it would include, we wouldn't have as much right away but we would expect that to increase over the next couple of years as we're able to put on new facilities that meet the requirements.

Got it. Free cash flow. FY03 net of the, you know, the payment, $1,023,000,000. The interest rate swap added $125 million?

$117 million.

Okay. So for kicks and giggles it's $125. That means you did $900 million net-net. Basically it's flat year-over-year free cash growth, but you have pricing, cost saving improvements. Why aren't I seeing a better cash flow growth year-over-year?

You will be seeing that $117 million of cash. I think that's what we're saying. Having to replace that in our number shows improving fundamentals in the business.

All right. Did I misunderstand the statement, that was a positive impact or a negative impact on the cash?

Last year that was a positive impact.

Right, so I would take that out and to make it a comparable number to '04 and you're only forecasting $900 to $1billion for '04?

Right, so at the low end of the range we would be flat year-over-year, at the high end of the range, up $100 million.

Why isn't the low end higher given the cost saves that you're starting to see trigger, the margins are improving and you have pricing leverage?

Well, like we said, we planned our year with flat volumes. We think that's the appropriate thing to do and like Maury said in his script, if we see improving economic fundamentals throughout the course of the year that could change.

Okay, and last question, any thought about the share impact of these option exercises, you know, thanks for giving the heads up that we'd see lots of F-4 filings, do you have a thought for what those numbers look like as far as number of shares?

No, I don't think we're talking about anything substantial, Michael that would have an impact. And we don't know.

Okay. Nice job on the quarter, too.

Thank you.

Your next question comes from Leone Young of Salomon Smith Barney.

Good morning. Do you have any sense of the DD&A trends? You were a little bit lower than you had been. Do you have a go-forward run rate on DD&A?

DD&A next year should still be 11%, maybe even a little higher for the year, Leone.

Okay, and also, your landfill tonnage looked to be up about a percentage point or so. That was a bit less than what we've seen out of a few of your competitors. Anything there that you can comment?

I think the -- maybe the one primary thing we'd comment on is that we continue to divert tonnage away from our landfills in eastern Pennsylvania just due to capacity constraints.

Right.

In fact, let me take the opportunity to just answer that previous question about Teletown. The expansion is for about 5 additional years of capacity there and again, we were getting pretty short on capacity before that expansion.

Thank you.

Thanks.

Your next question comes from Brad Coltman of Deutsche Banc Securities.

Yes, thank you and good morning, guys.

Good morning.

You went through and detailed out some of the initiatives you're working on, procurement safety and so forth. It's been a few quarters since we heard about that. Can you provide the other end of that, in terms of what is the cost associated with getting those incremental savings and, you know, the costs perhaps involved with any other initiatives that might offset the margin benefit from that?

You know, at this point, we talk about costs when we started those initiatives and at this point those initiatives are just baked into our SG&A and it -- there really isn't -- really incremental costs anymore. It's part of our overhead. So, we aren't out hiring new people, hiring consultants, send spending a lot of money on implementation. This is part of our G&A at this point.

We should see margin improvements from the initiatives, then?

Yes, exactly.

What about the billing system?

The billing system, Dave, you want to talk about that?

Yes, the billing system, we talked about it in the previous conference calls that, you know, this year we -- we slowed down the implementation of the billing system and we expect to bring that online during the course of 2005. That's what I talked about as being the primary factor that through 2005 will help us drive SG&A down below 10%.

Oh, okay, I missed that. I thought it was going to be done in '04. But now '05 is the timeframe?

Yep. I'd only add to that, that as we did slow it down, we picked off pieces of the billing system implementation to continue to roll out. These are things that we can see that we needed, for example, pieces of information on our customer base or other pieces of information we needed to do some consolidation work. So, it's still going forward. I think that's the important piece in that we're just kind of putting together incrementally as opposed to the full blast approach that we started off with.

Okay, and I just wanted to clarify, you mentioned the CEO succession, did I hear that right that the board is only considering the three internal candidates?

Well, I guess that's what I talked about. The -- the process goes forward and I guess I can't really give you anymore detail about it at this point, makes sense the decision hasn't been made and that still is an option that's open to the board to look at external candidates.

You don't have like an external search firm retainer or something like that?

No.

Thank you very much.

Thanks.

Your next question comes from Trip Rodgers with UBS Warburg.

Good morning.

Good morning, Trip.

A question on Waste Route, you're saying $44 million of additional savings this year. If I remember correctly, that was started at near $100 million. As the benefits from Waste Route are they now lower or extended over more years?

They're just lower. We're just using the current level of savings as opposed to the initial estimate of $10,000 per route per month. We've been getting, you know, somewhere in the range of half that. So, that's what we have baked in. Into our budget for '04. That doesn't mean we've given up on trying it get more but I think it reflects what we are currently getting.

Right. And just with the pricing guidance, I know you're assuming flat volumes, but if you were to do better on the volume side than you would assume, I guess you'd be in a better pricing environment and the pricing assumption would be conservative there, as well?

I don't know. I think we've -- you know, we've been pretty aggressive with price in the fourth quarter. We've been pleased with our results. I think the primary problem with net price is we have to give up price on business to keep it, as it's been attacked by our competitors. What I'd like to see is the competition sell on some other basis than just price. You know, what we've done here over the last couple of years is to try to improve our service so that we can go out and sell service and have something to talk about other than just price. As long as they keep continuing to try to poach our business with just price, it's going to be difficult get that net number higher.

Great, thanks.

Thanks.

Your next question comes from Jay Leopold of Legg Mason.

I wanted to get a little more information on this fuel investment program that you have. Is this a fuel coming out of your landfill? Is it fuel that you're purchasing?

No, Jay, what this is is, as you know, we do have a lot of section 29 credits so we're very familiar with synthetic fuels. This is actually a coal partnership, where they chemically treat the coal to be used in utility plants, and we generate a loss from that operation but we also get tax credits coming out of the other side with respect to the operation. So, it's an investment that we've made in a partnership that we will not manage or control, but we will see the tax benefits from it. You know, there's an active market in section 29 credits. We're very familiar with them so we made the investment; and we made the investment on the basis that we will be receiving a favorable private letter ruling from the IRS says it's an acceptable transaction.

And there's going to be an $18 million after-tax income effect, which is 3 cents a share.

That's correct.

And you gave it $73 million in other income, $6 million in interest expense, and in the tax credit and I think you mentioned all below income from operations line.

That's correct.

That means operating income, that doesn't mean below -- not netted out below the net income line?

That's correct, that's absolutely correct. It won't affect our operating margin.

It will be built into the quarterly earnings per share?

That's correct, absolutely.

And just to clarify on your free cash flow there was a comment about free cash flow in '03 being around $900 million backing out the swap. But you also mentioned the $70 million swing positive cash from the first quarter fourth into the fourth quarter third.

Right.

If we were to really think about that, we might thinking about $830 million --

No, no, absolutely not. We will make that part up, too. That's actually a good point. We need to make up that $117 million in the swaps and the $70 million carryover effects so -- even on a flat year-to-year basis you can see the improvement.

For 2003, if it wasn't for the delay of $70 million due to timing, it would -- and the swap, you might be looking at $830 million. So that when you're talking about $900 million to $1billion, the change is actually that much stronger.

No, that's exactly correct.

Okay. And on the final question, your low tax rate in the fourth quarter of 2003, was that truly a one-time issue; or was that recalculating what you think you should have paid for the whole year?

Primarily that results from our section 29 credits. And at the end of the year, we go back to the landfills and we true up the amount of gas we produced. That's a one-time effect in the fourth quarter.

Well, but it -- let me just clarify, about half of that was from section 29s. It should have been more evenly spread throughout the year.

Correct. It's just a true up for the end of the year.

The other half was more unusual kinds of items.

Right.

That's correct.

I guess what I'm thinking about your whole year earnings, do I want to back out that entire positive tax impact in the fourth quarter?

You're backing out about half of it.

Yeah.

Looking at the whole year earnings.

The rest is section 29 credits that should have been spread over the whole year.

Thank you.

Thanks, Jay.

The next question is from Bill Fisher of Raymond James.

Good morning.

Good morning, Bill.

Just on -- you mentioned the cost up front, there's four or five of cost savings you're targeting. You mentioned about $80 million or so when you total them up. I guess if you expected to realize that in the year or, you know, if that would be spread over the year so you'd be effectively realizing half of it in '04?

Those are -- for the most part, those are programs that have been in place that we are achieving the savings, you know, for the most part over the year as opposed to toward the end of the year. Generally they're spread pretty well.

Okay. And following up on the tax rate, if you kind of exclude the 29 in '04, section 29. And the associated cost, I mean is the -- the embedded tax rate, you know, underneath that, is that around 36%, as well?

It is I think about 37.

I think that's right. The embedded tax rate shouldn't change much year-over-year. You know, you've got the federal rate -- unless some of the states come through and continue to try to raise taxes, the embedded rate shouldn't change too much year-over-year.

Maury mentioned that the first quarter the 16% to 17% relationship for the year, is that generally -- were you implying it should hold this year or is that just kind of historical reference?

Yeah, I am implying it should hold this year. That's about what we've run. That's how our seasonality works. I was just trying to give you an idea as to what the first quarter might look like.

Great. Thank you.

Thanks.

The next question comes from Corey Greendale of First Analysis.

Good morning.

Good morning.

Dave, a question for you. The SG&A, I think you said if you were to pull out the litigation benefits there, that it would have been up about $20 million sequentially and you talked about some of the impacts going forward. Could you talk about what were the impacts above that sequential increase?

Yeah, actually it was -- it would have been down and we talked about some of the items that make that up. I can actually give you some dollars behind that if you'd like.

Sure! [ Laughter ]

Let me flip through and find you the numbers. We didn't do it sequential, we did it year-over-year, it was $43 million from the two legal settlements, then we had lower contract labor at $6 million, lower wages and benefits at $3 million. Lower bad debt expense at $4 and office supplies at $3.

And on a sequential basis, G&A was $297 million in the Q3?

Right.

You said if you pull out the -- the benefit from the -- the settlement in Q4 it would have been $317 million in Q4?

It would have been -- up about $17 million.

Okay. So, what contributed to the sequential increase on an absolute dollar basis?

Yeah, you know, we talked about that we're adding sales folks throughout the system to increase our sales but we also had a -- just a number of one-time knits and knats, we had slight increases in bad debt and bank charges, professional fees. You know, it's just a lot of little one-time type items.

Okay. All right, so -- and then I wanted to ask, do you have anything baked into the guidance in terms of possible upside from commodity prices, you know, OCC prices trending up and just -- I mean can you sort of summarize what the hedging position is at this point and what the potential upside we could see from OCC could be?

The potential is large based on what we see in the past. We really don't have baked in increased commodity prices. In fact, we don't have baked in the prices -- increased commodity prices we've seen already. But these are a wildcard, you know, typically commodity prices do increase as the economy improves and they've popped here in the last two or three weeks. Whether they will continue or not is anybody's guess. So, at this point we don't have any commodity price increases really baked in our plan.

And on the hedging side, Corey, most of our hedging actually is floor pricing so we wouldn't be limited on the upside from the increase in commodity prices.

Okay. Good. Thank you.

Your next question comes from Jamie Cook of CSFB.

Hi, good morning, guys.

Good morning, Jamie.

You talked a little bit about volumes in the first quarter and said they were seasonally slow. I guess I'm trying to get a feel for if we compare it -- you know, in the first quarter '04 versus last year, whether that's flat or down; or if you can talk about backing out the areas impacted by winter storms, were volumes up in that area?

Yes, that's -- well, that's the same thing we're trying to sort through here. They actually have been compared to last year, that's what we commented on, just kind of flat to down, and so then you try to compare weather to weather and it gets very complicated. At this point, we frankly don't have all of that unsorted yet. And again, I think most important, the first -- January's okay. It's just not -- we were enthusiastic coming off of December, I guess, and November. So we're a little disappointed in January, but again, most important is that the quarter really is made up by March. So, I guess I haven't given you a -- you know, the -- the information you probably would really like to have because we don't have it yet.

Okay. And my next question, if you look at valuations for the acquisitions out there, is there any change in what people want in terms of pricing? Is that picking up at all? And then my last question, on the industrial side, I don't know if we can do this, if you look at -- I'm trying to get a feel for how much pricing is down today versus before we entered, you know, we -- we went into this most recent recession. Was there any way to quantify that?

Yeah, I guess first in terms of prices, prices I guess have firmed a little since a couple of years ago when they were at the bottom. But there's still not a lot of people out there buying trash companies and as a result, we still are doing pretty well in terms of price I would say there's really not a substantial impact on the upside as we -- you know, as we buy companies. In terms of industrial prices we saw typically in the range of 1 to 2% deterioration per year over the last two or three years in that -- in our volumes. In terms of prices, we really haven't seen much happen, you know, year-to-year. It just gets more competitive and price increases are more difficult to get. So, we really haven't seen much in terms of price deteriorations, but really a volume deterioration.

Okay, great, thank you very much.

Thanks.

Ladies and gentlemen, we have reached the end of the allotted time for questions and answers. Are there any closing remarks?

We thank everybody everybody for joining us on the call today and look forward to continued success in 2004; and I'm sure we'll see most of you along the way as the year goes by. Thanks very much.

This concludes today's conference call, you may all disconnect.