Wabash National Corp (WNC) 2002 Q4 法說會逐字稿

Good morning. My name is [Inaudible], and I will be your conference facilitator today. At this time I would like to welcome everyone to the Wabash National financial result for 2002 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, press star, then the number one on your telephone key pad. If you would like to withdraw your question, press star, then the number two. Thank you. Mr. Gruebel, you may begin your conference.

Good morning. Before we begin, I would like to make an important announcement. As with all these types presentation, this morning contain certain forward-looking statements, including statements about company prospect, the industry outlook, backlog information, financial information. As you know actual results could differ materially from those projected in the forward-looking statements. These statements should be viewed in light of cautionary statements and risk factors set fort from time to time in the companies filling with the Securities and Exchange Commission. Welcome to Wabash National's fourth quarter earnings call.

I am William Greubel, Chief Executive Officer. With me is Mark Holden, our Chief Financial Office and Richard Giromini, Chief Operating Officer from Wabash National Corporation. I would like to welcome all the listeners on today’s telephone conference call as well as listening via Wabash National internet web cast. We have much to cover today. We will try to provide as much information as possible.

I will comment on the status of the industry condition, our business. Dick will discuss our critical operational initiatives, after which Mark will review and discuss the fourth quarter 2002 financial results and the financial condition of the company. At the conclusion of the prepared portion of our presentation, we will open the call from questions from the listening audience. Let's start with an industry update. Industry production for trailers only in 2002 was 136,000 units, down 4.4%, compared to 2001. This is the third consecutive year in a row to show a decline. This is the longest trough experienced in this industry in over a decade. Although production was down year-over-year, increasing net orders throughout the year strongly suggest that the worst is behind us. Industry bill versus orders appear to be in balance during the fourth quarter.

Fourth quarter of '02 showed an annualized build rate for trailers only of 169,000 units versus 114,000 the fourth quarter of '01. That's compared to 163,000 units in the third quarter of '02. Wabash market share of shipments declined 20%. We believe the decline in the share of shipments is due to lack of available of sheet and post capacity as demand for that product segment increased greater than the demand for DuraPlate. We finished 2002 again as a largest trailer manufacturer. Great gain remains number 2 according to trailer body builder magazine. Prices is holding steady on new trailer. Our [Inaudible]. For the first quarter we continue to see softness and demand.

Understand, this is generally the softness in the calendar year. We continue to see a combination of weak economic activity in the trucking industry that is more disappoint in adding capacity. We believe shippers will experience shortage of capacity in 2003, which would facilitate further rate increases, enhancing overall industry profitability. Given the significant emphasis on the truck pre buy in 2002, we would expect to see a greater buying emphasis on trailers in 2003. Road activity is generally picked up in partner and key accounts throughout North America. The conversion of this quote into industry orders is very dependent on the U.S. economy and the geopolitical events unfolding.

Both of our core partner’s respected businesses continue to improve. Wabash National continues to enjoy excellent relationship with the key freight providers in North America. Industry forecast for trailer only for [ACT’s] February 2003 five year outlook are as follows. 2003, 182,000 units. 2004, 233,000 units. 2005, 256,000 units. And as referenced in 2002, we produced 136,000 units. 2002 was a critical transition year for our company. The emphasis wasn’t stopping the bleeding, sorting out and resolving legacy issues and rallying the troops to attach our critical issues. With the exception of safety, all goals were achieved or exceeded. Operationally, this was clearly a break-out year. Dick and his folks have done a very incredible job at improving all aspect of our management function. What more exciting is that we continue to see added momentum building for additional improvement throughout 2003.

I want to take this opportunity to briefly discuss our results associated with our previously announced critical issues. Generate cash and de lever the balance sheet was number one. We have been successful in freeing up working capital by increase focus in accountability on inventory, payable and receivables. 2002, our liquidity increased by approximately $51m. Our inventory has declined quarter over quarter and is richer in the proper mix so is to allow greater returns and further opportunity for reduction in 2003. All this happened as our business increased throughout the year. We've been proactive in paying down debt in 2002 we reduced our indebtedness by $100m and intend to further reduce this level in 2003 by greater than a $100m. Cost productivity and process improvement.

We will achieve our $35m cost savings target earlier than expected and we see continued savings throughout 2003. Dick will cover this later in the discussion. Our continuous improvement initiatives continue unabated and now cover every aspect of our business. Schedule attainment and capacity expansion. We met our goal of 100% schedule [Inaudible] in December. We continue to achieve this in 2003. We are also bumping up our daily rate as we complete CI initiatives. By year end 2003 we'll have effective capacity in Lafayette to meet 1999 demand on almost a five-day basis. Please understand in 1999 we had two other plants and were running 24/7. This will put us in a significant cost and lead time position versus our competition. Quality. We have made significant progress here and see this as a continuing opportunity for great strides in 2003. Waste is a killer in this business.

We just aren't going to allow this going forward. [Warranty] both in terms of past legacy and prior six months is down considerably. Customer issues are down considerably. All of this is due to our first past yield showing substantial improvement. Our goal for 2003 is 95% first pass yield. In this business, that would be considered best in class. Branch integration and optimization. We are starting to see some light at the end of the tunnel here. As you know we have consolidated our branch operations into Lafayette. We have closed seven underperforming branches. We have been successful in filling key leadership positions. All of our branch sales personnel have undergone extensive sales and product training. We will be initiative a new [Inaudible] program to reward excellence at the branch. The used trailer overhang is just about behind us. At some branches we are actually seeing shortage of used trailers which [Inaudible] for pricing as we go forward. Age [new trailer] inventory has also been significantly reduced allowing us to replace it with [DuraPlate], [GreatPro] [Inaudible] third party product. All associate are actively engaged in the product areas.

Our initial results in January give us a picture that much of the bleeding has been stopped. Much work still has to be accomplished. The branches are critical to our goal of increasing customer breath in 2003. Finally, safety. We achieved almost 50% improve in recordable’s over the last six months. Although some may consider it a success, we did not hit our target. We will see significant improvement this year. There also been other important successes in 2002. We have successfully commercialized our new high base rail DuraPlate van. We commercialized a new DuraPlate container for JB hunt. We finalized design and began construction to commercialize our new freight pro line of sheet and pro stands the first quarter of this year. We initiated a computerized tool for consulted selling, the total cost of ownership for DuraPlate versus sheet and post. For some customers, the payback and the premium DuraPlate product is measured in months based on product features and maintenance cost savings. We sold a record number of used trailers in 2002, over 17,000. We currently have less than 4500 used trailers in stock.

By year end all major trade commitments had been resolved. Bottom line, the associates at Wabash have done a lot of heavy hauling necessary to make this business a growing, profitable concern. Going forward, we will continue to focus on liquidity, safety, quality, process improvement and branch profitability. In 2003 we will add two other areas of focus, increased customer breath, a used trailer retail sales model. We are writing a lot of thought of momentum, our associates have moved from a reactive mode to a proactive mode. There is greater focus on profitability, more so than ever in this business. There is a great sense of pride within the organization as to what has been accomplished and even better realization of what we really can be. Dick will now talk about our operations and be followed by Mark who will discussion the financials. Dick.

Thanks, Bill. It was my pleasure again this quarter to have the opportunity to update everyone on the continuing progress that's been made within the manufacturing segment. Maintaining a consistent focus, the manufacturing team has remand intent in driving improvement in five key areas, safety, quality, delivery, productivity and cost reduction. While Bill touched on some of this area, I will elaborate on each area. Safety, which remains our number of focus, great strides were made during 2002. While true that we came up short of the internal goal to realize 70% reduction of recordable incidents year end, we are still pleased that we achieved 48% improvement for this index. Looking forward into 2003, we have continued to see marked improvement with January results reflecting 63% reduction, compared to our mid-2002 baseline level.

We include safety improvement as a standard part of our CI events and implement those identified improvement immediately. The strength in our improvement efforts even further and to accelerate them and are pleased to announce a corporate director of environmental health and safety have joined our team effective today. He will be immediately tasked to put the systems activities and initiatives in place to bring us to world class levels of performance. In the area of quality, we also continued to realize steady improvements. We have implemented a focus on measuring and improving our first pass yield performance to assure that our outgoing product is of the highest quality possible. To date, we have seen 62% in first pass yield levels over mid-2002, and we continue to receive favorable feedback from our customers regarding the improved quality of a recent trailer builds. Furthermore, we have strengthened the leadership of the quality organization with the hiring of a new corporate director of quality assurance this past December.

This individual comes to us with significant experience as a tier 1 automotive supplier and clearly understands the requirements and expectations to be truly world class. Additionally, we have revamped our warranty management system to provide improved response to our customers and better analytical feedback to aid in the elimination of warranty issues going forward. In the area on time delivery, as Bill stated, we are please to meet our objective of reaching our goal 100% schedule attainment by year end. To achieve this and to assure we met our customers' needs, we did make a considerable investment at overtime during the fourth quarter as we continued to work on refining our systems and improving our processes. We achieved our objective in December and have continued with the strong performance into 2003, while having eliminated the need for overtime. I am now very confident that we have the systems and programs in place to continue this level of performance. Our fourth area of focus, improving productivity has rally been the center piece of our improvement results.

The dedicated effort of our associates, supporting our lean manufacturing initiatives, we have successfully improved cycle times on our assembly lines by 21% and improved overall through put by excess of 36%. These improvements have resulted in an effective increase in capacities of over 32%. Allowing us now to meet all production requirements on two shifts five days per week. To top it all off, we are today producing more trailers per day than we were in July and doing it with 1130 less associates. Again, similar to my discussion relative to safety, there was an investment that we made during the fourth quarter to achieve these improvements. These investments in the form of internal overtime and outside contractor support total approximately $4m, allowing us to accelerate the CI improvement and efforts we needed to make. With that [Inaudible] effort mostly behind us, we are now benefiting fully from our improvements.

Finally, the installation of our new freight pro assembly line is on target for a mid-march launch which will further increase our available straight time capacity by some 20%. As Bill pointed out, by year end, we will be positioned to handle 1999 level volumes on a two-shift, five-day basis. Finally, our overall improvement efforts during third and fourth quarter have resulted in cumulative cost reductions of over $17m in annualized labor cost savings alone and an additional $11m in purchased material price reductions for 2002. The impact of those initiatives will continue this year at increasing levels as the year progresses. In addition, significant work has been done by the team in improving the effective management of our working capital. Of purchasing team working closely with manufacturing has done an excellent job in reducing the level of manufacturing raw materials inventories needed during the fourth quarter by nearly $15m from third quarter levels, resulting in improvement from six turns to an impressive 19 turns at year end.

Additionally, the manufacturing team, with its focus on improving first pass yield, is helping to reduce the amount of work in progress inventories that we would traditionally would carry. In closing, I would like to add that while we are extremely pleased with the significant progress made to date, we recognize that much more remains to be done to achieve our objective of best in class in all areas of our manufacturing activities. The whole manufacturing team has very quickly developed its cohesive cross functional, highly responsible team all focused on a common set of objectives. They clearly understand the mission and are committed to deliver. We firmly expect to continue to make more and more improvements in all areas of the business and for 2003 to be a true break-through year for our manufacturing operations. With that, I'll now turn the discussion over to our Chief Financial Officer, Mark Holden. Mark.

Thank you, Dick. By now, you have a sense of our mission. Build operational excellence and financial strength. Turning to fourth quarter results and full year results of 2002, first for the fourth quarter, revenues were down 15% compared to the third quarter of 2002 on a 26% decline in units. Compared to fourth quarter '01, revenues were up 24% on a 20% increase in units. Reported loss for the fourth quarter 2002 was $11.6m, including $3.3m benefit for our NOL position. Revenues were $206m on 8400 units in the fourth quarter, compared to $167m and 7,000 units in the fourth quarter of 2001 and $241m and 11,400 units in the third quarter.

As we stated on the last conference call, we have expected a decrease in the fourth quarter bill rate because of our planned holiday shutdown during the fourth quarter. Retail distribution revenue was $73.3m on 662 units in the fourth quarter and for the full year, retail distribution revenue was $331.5m on 3600 units. Manufacturing revenue was $150.4m on 8600 units in the fourth quarter and for the full year, manufacturing revenue was $530m on 33,200 units. Eliminations total $17.4m in the fourth quarter on 923 units and for full year, corporate eliminations were $42m with revenue on 2300 units. As you might observe in the fourth quarter, we built 923 units for the retail network, up considerably compared to prior quarters. As Bill had mentioned, we are improving our mix of inventory in the branch network. Gross margin for the quarter was 6.0% and was 4.9% for the full year. It is important to note there were no significant charges that impacted the quarter for nonrecurring or non-operating items. Most of the legacy matters, we believe, are significantly behind us.

Trade commitments, used trailers, finance contracts, excesses manufacturing capacity, warranty issues, legal issues, and international have been resolved during the 2002. As Dick mentioned, the fourth quarter benefited approximately $4m from CI events within the manufacturing operations. These savings were offset by one-time investment of approximately $4-5m during the quarter for overtime and outside contract labor to achieve the schedule attainment and CI objectives. Our labor force totaled approximately 2750 associates, and 940 temps at the end of the year compared to 3700 associates and 1200 temps at the end of the third quarter. The fact of the one-time $4-5m investment in CI initiatives and our schedule attainment, our gross margin for the fourth quarter would have been 8-8.5%.

This compares to 9% in the third quarter and, again, keep in mind our fourth quarter seasonally is our lowest month because of our planned holiday shutdown. For the fourth quarter 2002 SG&A and was $18.8m versus $24.9m in the fourth quarter a year ago. Interest expense of $8.9m in the fourth quarter compared to $4.8m in the previous year, reflect the full effect of the rate increase on our debt of approximately 300 basis points year-over-year. Between the increase -- considering the increase in our rate on our debt, the annual impact was over $10m on an annualized basis. Fourth quarter benefited from approximately $3m as a result of our free up of our [Inaudible] losses in 2002. Leaving us with a pretax loss for the quarter $14.9m. This compares to pretax loss of 8.3 in the third quarter, approximate $22m pretax loss in the second quarter and a $26.5m pretax loss for the first quarter, totaling $71.5m of pretax loss, we will have $38m of charges that we incurred in the year, net for the full year pretax loss of approximately $33m. And again keep in mind, our charges totaling approximately $38m for the year were incurred during the first three quarters of the year.

These charges included charges of -- related to our finance portfolio and contracts of approximately $15m, used trailer write-down and losses of approximately $9m, refinancing costs in the first and second quarter of 2002 of $6m, and other charges net of approximately $8m. It included 7 and various restructuring costs. On an EBITDA basis, EBITDA for the fourth quarter was negative $1.2m during a what I would say a very challenging environment for many EBITDA perspective, primarily because of our planned shutdowns. EBITDA for 2002 was $24.3m, including non-cash charges for the year. It is very important to note we were cash flow positive for the year on a 5% decline in revenue. EBITDA of 3 -- the EBITDA for the year was $3m as defined by a debt agreement in 2002. I would discuss our covenant in more detail later. Backlog at the end of the year was approximately $200m compared to $95m at the end of the third quarter.

As again as Bill mentioned, order activity began to pick up and accelerate in the latter half of the year. Now, turning to our balance sheet, our cash position at the end of the year is $36m. Our total liquidity position at the end of the year was approximately $90m, including availability under our credit facilities. Currently, our liquidity position is approximately $40-50m as production levels are seasonally lower this time of year. Receivables at the end of the year was $38m versus $58m a year ago. This is a $20m decrease in receivables despite a $40m increase in revenue during the fourth quarter year-over-year. Inventories were $135m at the end of the year compared to $191m same time a year ago. Looking at the components of our inventory, raw materials were $28m, work in process was $14m, finished trailers was $55m, used trailers were $22m, and parts inventory was $15m, totaling $134m.

Our finished trailers inventory actually increased quarter-over-quarter and, again, as a result of our beginning to turn our inventory and address the mix of our branch stock inventory. Locking at used trailers for the year, clearly a bright spot for the company. Used trailers of $22m compared to $72m at the end of 2001. More importantly, the number of units in inventory at the end of 2001 were 12,000 units and at the end of the 2002 were less than 5,000. During 2002 we sold 17,800 units at a gross margin of approximately 8%, compared to sales of approximately 11,000 units in '01 and a negative gross margin. Our used trailer position has improved to the point where we began in the latter half 2002 to increase pricing on our inventory. Our inventory is more balanced and the market has improved. There is still an opportunity for us to continue to take infrastructure costs out associated with the used trailer inventory.

And equally important, our open trade commitment is less than $10m, and the exposure associated with this $10m is pretty nominal. Accounts payable at the end of the year was $60.5m, compared to $51m at the end of '01. Looking at the three components of working capital, our receivables are down, inventories are down, and payables are up. Between these three components of working capital, we have achieved a $90m improvement in working capital year-over-year. From a liquidity and financial condition, our total debt position of $360m, including both on balance sheet and off balance sheet debt. This compares to $460m of debt at the end of '01. $100m reduction or approximately 22%. And, also, approximately $10m annualized savings in interest cost. As Bill mentioned, our goal was over $100m, and approximately $125-150m reduction in debt reductions in 2003. This would equate to another $12-15m in annualized savings in interest cost, totaling $20-25m reduction in costs, approximately, over a two-year period. Looking at the financial covenants, the maximum leverage ratio covenants was .95 at the end of the year. Our actual leverage ratio is .73.

Our minimum EBITDA covenant for the nine months ended in 2002 was negative $20m. Our actual EBITDA was $24.3m for a nine-month period includes non-cash charges. Again, keep in mind, as defined under our bank agreements; our EBITDA for the nine month period was $3m. Beginning Jan. 31, 2003 our minimum EBITDA covenant rapes it up to $26m on [Inaudible] 12 months basis. We do not expect to meet this requirement. We expect to report our compliance on our January 31 EBITDA at the end of this week. We are currently in discussion with our lenders to waive and amend our 2003 covenants, and we anticipate receiving a waiver for noncompliance through the filing date of the Form 10-K. On a go forward bases for 2003, we expect to develop with our lenders a matrix based covenant package with or without some of our assets and divestitures. We continue to pursue all opportunities to de leverage the balance sheet, including of the divestitures of non-pore asset, we believe opportunity of non-pore assets total approximately $150-175m. We will not be as successful on all of them. At the same time, we will not conduct a fire sale.

We believe we can achieve a $125-150m debt pay down during 2003 through the efforts of our divestitures activities, the cash flow from our operations in 2003, and working capital improvement. We already paid down approximately another $15m so far in 2003. In addition, we have retained various investment bankers to assist us on the larger divestiture opportunities. Apex, our rental fleet, our wood products operation, and our parts distribution business. As of today, we have received [Inaudible] on our parts distribution business. We expect bids this week on our flooring business and we expect bids this week from other interested parties on apex.

We expect by the end of this week and next to have in-house bids on three different non-core assets. We broke off discussions with interested party on apex. The third party was having difficulty getting comfortable with our future revenue stream on this business. Simply a different customer base. Our fleet has consisted of used trailers. Their fleet consisted of new trailers. Our options to date on apex are, basically, one, we keep an operated a decent business cash flow positive. Two, we sell it to other interested parties and, as I mention, we expect to receive indications of interest this week from other parties or, three, we simply liquidate the fleet. Our rental fleet today includes -- comprised of approximately 11,000 trailers. As we noted, we sold approximately 18,000 trailers in 2002.

Therefore, we are quite capable of liquidating our rental fleet on our own, if necessary. As of Dec. 31, 2002, the company was in compliance with all of the covenants under the credit facilities. If the company is unsuccessful in managing its financial covenant and is determined to be in default on the credit agreements, it may have difficulty meeting working capital needs, capital [Inaudible] requirements, and interest and principal payments on indebtedness during the next 12 months. Further, under the terms of the credit agreements, give the lenders certain rights with respect to the encumbered asset itself of the business, as well as the ability to accelerate the principal payments. We anticipate that we will favorably amend our financial covenants prior to filing of our 10-K. However, obviously, there can be no assurances this will be accomplished successfully. We have been and continue to be in constant dialogue with our lenders. At this point, I will turn it over to Bill for closing.

As we all understand the critical objective in the next few weeks is to restructure our bank covenants. As Mark has alluded to, we have regular discussions with our lender group. They are fully aware of the positive changes in this business and our capability to profitably move forward as the cycle changes. Our goal has been and continues to be going forward to pay down debt. We have shown our commitment to this as evidenced in 2002, and we'll continue to do so in 2003. We expect to continue our discussions until we reach a successful conclusion that benefits all parties. At this time, I would like to open it up for calls, any questions.

At this time, if do you have a question, press star, then the number one on your telephone key pad. We will pause a moment to compile the Q&A roster. Your first comes from Tom Albrecht from BB&T Capital Market.

Good morning, guys. I have got some follow-up questions off what you said, plus some other stuff. Mark, you were giving so many numbers I felt like I was on a game show. I wanted to clarify a couple things. It is partly tied into what Dick said. In terms of the fourth quarter, you eluded to the fact you made one-time investments of $4-5m for overtime and outside contractors, et cetera, but that -- did you say you believed you also got about a $4m benefit during the quarter, or that's expected to be a benefit going forward.

Both. We believe we realized the benefit of $4-5m, and, more importantly, believe this is a recurring savings from a CI, cost take-out stand point. However, there, they are, basically, offset entirely through overtime outside contractors, such that our margins for the quarter, the impact of it all was neutral, but, again, if we look at the cost incurred as a one-time investment in the quarter, we also incurred costs in Q3, but much less to a degree, such that, again, if I look at the quarter fourth quarter margin time, I would come up to 8.5% on what I would consider to be a normalized basis.

Why did you spend the money on overtime, given that I know you have a couple goals on the labor front, one of which is to minimize overtime and weekend work as much as possible. Why was there the need to go ahead and spend that money on overtime right now?

Well, if you can -- I'm sure you've been following us long enough, Tom. You know that we really had put a hard focus on meeting our customer requirements. When I came in with the business, we were saying we could do 100 trailers per day. For the month of June and July, we were, roughly, at 76 trailers a day. So we were making commitments to our customers to -- that we would have enough production to meet their demand requirements and their scheduled delivery dates. Really what we were doing was just pushing them out, pushing them out. We just had to clean that up, and that really was a backlog of demand that we didn't meet as far as the customers were concerned.

We had to run overtime to do that. In addition, as you know with all the CI programs we're doing, the only time we were able to implement some of the changes from a maintenance perspective is either after shift or on the weekends. All that is behind us now. We have caught up with our customer requirements. We are pretty much at 100% requirement. As a matter of fact, in some cases, in January, we were ahead. So that's behind us. In order to keep the customers happy, we had to do what we said we did in the third and fourth quarter.

Would the financial penalty, I guess it's fair to say, by not having met that deadline, been greater than what you would have spent on overtime.

Yeah. We would have lost customers.

What was the mid-march launch that Dick alluded to? Was that the commodity line or was that something else.

Yes. That's [Inaudible] we're putting up in the building here. It is going to be the new line [Inaudible].

And what do you think your annual volume is going to be there.

We'll probably be at between 3 and 5,000 units as we start up this year. We would like to ramp it up to 12 to 15,000 units in '04.

Okay. And then the numbers that you gave, Mark, six times to 19 times, was that your inventory or something other.

That was actually Dick's reference to our turn on the manufacturing, inventories Tom. We went from 6 to 19.

How do you stand here for first quarter production? Are you sold out? How much space capacity do you have left to fill for the first quarter?

As I mentioned, at the end of the year we had about $200m in backlog. Obviously that backlog stretches throughout the year. We received a very large order in October of '02 that really stretches out for most of '02. Depending upon which production line you look at, there will be holes in the first quarter. Those are filling up all the time, such that, you know, we adjusted, as Dick mentioned, we adjusted our shifts in online, for example. We eliminated third shift online one in January. However, today we are operating at a run rate greater than we were running in July with-- without the third shift. I would simply say from a schedule stand point, backlog stand point, we have seen certain signs of improving order pattern, but that's not to say we still don't have holes in the schedule for Q1.

Okay. And then of the cost of goods sold component, approximately what percentage of that figure is direct labor costs.

Direct labor will run as a percent of our revenue, about 10-11%, Tom.

So the vast majority of that is material cost, truly, then.

Yeah. Again, on a percent of revenue basis, material costs will run, say, approximately 65%. Direct labor will run 10-11%. Then we have other. In that number is labor as well. We have indirect labor, functions that don't necessarily work directly on the assembly line, but our feeder systems within assembly lines. So, again, variable will include on direct labor of another 5%.

Okay. And then have you been successful in fully going to a consignment method with the used trailer trades? I know that's something you have talked about. Some customers were open to that. Are you still buying or taking used trailer trades, or are you now fully on a consignment basis.

No. We're just starting that right now. In most cases what we're still doing, Tom, is buying and reselling. As far as the major partners are concerned, there are no trades coming in at this point, other than small amount from one of them. And of those that are coming in, we will put those pretty quickly.

How quickly do you think you can get to a consignment basis? Is that going to be something that will take all year to get comfort with?

Yeah its really two things, Tom. That certainly makes sense for us. We don't want to put out the cash, and I think what it really comes down to, to our partners and other people who are going to be source trades through us, we feel comfortable that we, indeed, can sell them at a price that makes sense for both of us. I think that what we have to do over the course of the next six months is to work with the folks and get that done. It is important to understand that in the branch area we actually have some branches that really don't have salable used trailers at this time.

That's going to help us significantly. The branches are actively questioning our sales folks to get trades in. Some of the fleet trades that come in the near future will immediately go out through the branch. A lot of these are the newer used models, and we feel that, unlike what has happened in the past, we should be able to turn these rather quickly. But the intent is going forward that we do not -- what we really look at is a commission basis on most of these so that we do not have to take that asset to the end.

What about in the quarter that ended -- I know you didn't really alluded this directly. Were there some severance costs as you continued to bring down labor, or because most of that is floor labor there's not a lot of severance costs.

Most of the reduction, there is no severance associated with that. In the -- in this year, 2003, we had a small change in some of the salary size. That was very small severance also associated with it. What we're seeing also in the plant is as we lose our full-time associates, we're really not replacing them also. Its not that we're letting them go but as they leave, and we do have generally about 1%, I would say, over the course of the year, 1-2% a month we will not replace them with full-time people but with the temp that is we have. Then again understand we closed seven branches in the fourth quarter, and there was some severance associated with that. But not much.

Mark, would it be fair to assume based upon your comment that you've paid down $15m more of debt in '03 your cash would be about $20m as we speak now, or would it be less than that.

Our cash position as of today, Tom, is your question.

Yeah.

Again, it's seasonally. Approximately today it's $10m.

And then I'm sorry to keep going back and forth here. Bill on the first quarter production, you did 8600 in the first quarter, excluding what came in from the retail and the inner company revs. What do you think you can produce here in the first quarter for the manufacturing division in terms of number of units?

It would probably be somewhat comparable, Tom. I think we'll continue to monitor demand fairly closely. We built a fair amount of stock in the fourth quarter branches. I don't see us repeating that same quantity in the first quarter. So that's no longer in the schedule, yet we're seeing an improvement in third party demands. On a net basis I don't see us changing too much from Q4.

Okay. So if I modeled around 9,000 units, it's probably at least in the ballpark as we speak right now.

Yeah, I think so.

I guess one question I've gotten and I'll turn it over to some others. Given the fact you've been in ongoing discussions with your banks, really for last several months keeping them of priced to potential asset sales as well as your performance, why wouldn't you be in a position today to say that you've got those amendments or waivers right now, you know, given the fact this is not a new discussion.

Very good question, Tom. Basically, we had an agreement with our lenders for a new covenant package for '03 built on the assumption or in the inclusion of the sale of apex. As we talked in the past, the contemplated sale of apex necessitated us going back to the lenders, one, to get the approval to sell the trailers [Inaudible]. Secondly, apex has positive EBITDA. Therefore, if we were to sell that, we would need to redial our covenants for '03 anyway. So that gave us reason to go back to the lenders in the fourth quarter and seek their approval, which we received the approval.

Two, we have reached an agreement to redial our covenants in '03 however, that agreement was contingent on the closing of apex. To some extent, we are still in that position. Apex hasn't closed. Obviously, we're pursuing other bids. Now, we are nearing close to the timeline for filing our K. We mentioned the most likely scenario is that we will reach an agreement with a new set of covenants on a with and without basis. And the with and without is, most likely, apex. So, you know, it is it has been for, really, the last 15 to 18 month; it's been a pretty fluid environment within the company. I mean, this company has basically been turned inside out in turns of a lot of change and, as a result, has been pretty fluid and, obviously, the industry conditions have contributed to that as well. So I think, like I said, we are in discussions with the lenders.

The facts are the lenders have been -- have worked with us over the last 12 to 15 months given the state of the company. In return, they have gotten paid down a $100m and they-- stand to get paid down a significant amount of money again in '03. The reality is the company is cash flow positive. They have recessionary levels of demands for the industry, and stand to pay down debt through the divestiture of non-core assets. When people look at the situation, Tom, they realize it would be one thing if Wabash didn't have a sound business model or hadn't showed any signs of a turn around. Those things would have been evident. As a result we do have some basis for credibility with our lenders.

Good. I'll let some other folks ask a question. Thanks.

Your next question comes from Michael Harris (ph) of Robert W. Baird.

Good morning, gentlemen.

Hi, Mike.

Mark can you review once again the sales by segment? I missed that.

Yeah. You bet. Retail distribution revenue was $73.3m on 662 units. For the full year, revenue for retail was $331.5m on 3600 units. The manufacturing segment, revenue was $150.4m in Q4. That's on 8650 units. For the full year, revenue was $530m on 33,200 units. Then we eliminated in consolidation for the quarter $17.4m of revenue for 923 units. For the full year, elimination was $42m or 2300 units.

Great. That’s helpful. Are you in a position to give the operating income breakdown on a segmented basis for the quarter?

Yeah. I will give that to you. Hang on a second, Mike. I have to track it down in my notes. Bear with me for one second. In the fourth quarter, operating results would be -- these are ballpark numbers. I will have the detail segment data when I file the K. On an approximate basis, manufacturing was -- operating loss was $4m and retail was approximately $2m.

Okay. Great. If I can get an appreciation for the daily unit build rate during Q4 and just remind us what that was for Q3.

I think, Mike, it's been subject to change. In fact, I would say our preference is really not to get into a daily build rate. Then we get into reporting almost on a daily basis. I think at this point, you know, you can assume that we had, probably, 8 to 10 fewer production days in Q4 than Q3. Normally in a month we'll have 20 to 21 production days in it on a five-day work week basis.

Okay. Then looking at the backlog at the end of the quarter, I know there's been some questions already regarding what is the production looks like over the next quarter. Going at it a different way, if you would look at your backlog the end of the quarter. I realize it is permanently a 12 month backlog. What percentage of this backlog do you see shippable within the next 90 days.

I would say approximately 50% as a range. Again, there is one large order in there that stretches throughout the year. Ballpark, Mike, would be about half.

Okay. And just revisiting the large sequential drop in receivables. I understand there is some seasonality there with the shutdown at the end of the year. It seems pretty steep. Was there anything unusual in there?

From our perspective, it represents a fundamental change that we put in place during the year. We've consolidated all of the credit and collection up underneath the treasury. There is still room for improvement, but, nonetheless, I think it represents, Mike, a positive change in which -- and how our profits change in how we do business with the customer group. On a working capital basis, you know, we think there's probably another $25m in working capital between receivables and inventory to take out during '03. Believe it or not, receivables are still part of it. Even though we've seen a $20m drop year-over-year in receivables, in our opinion, there's still more to achieve there.

Okay. Great. And then, Bill, you gave some nice industry statistics for the quarter and for the year. As you look on to 2003, for your internal forecasting purposes, what kind of industry bill rate do you think is reasonable.

For trailers, you might want to look at 166.

You're looking at maybe a 15, 18% increase over 2002.

Right.

Okay. And just to talk about average selling prices within the manufacturing segment, Mark, can you remind us what that was again for Q4.

Again, bear with me.

Sure.

The revenues for manufacturing were roughly $150m for the quarter on 8650 units.

It is back into that.

Again, I gave you retail revenue of $73m. Obviously, that $73m includes not only new trailers, but used parts and service. So the new trailer component of that was about $14.5m on 662 units.

Okay. So going -- looking forward over the next quarter, where do you see those ASP trends going? Are they going to be relatively consistent, or is there going to be a mix shift that's going to cause it to be variable [Inaudible] in Q4.

I would think out of Lafayette manufacturing, the price would probably be stable to trending upwards, but not significantly.

Okay.

In the branch retail side of the business, we have some third-party business that will be coming in. It would probably be a little bit lower. And as we take off with the freight pro, that will be a lower price than the DuraPlate. Both will be moving, but I would tend to think you will see more freight pro than you will DuraPlate on the branch. My guess is there will be a mix issue there that will probably bring the ASP down.

Compared to fourth quarter. Year-over-year, Mike, actually we probably see even or up. In '02 we build a fair amount of containers [Inaudible] for a particular customer. Those tend to be lower price points. Year-over-year I would expect to see an average price increase, but relative to the fourth quarter, I think Bill is right.

Okay. And then, Mark, you've given a range of target debt pay down for ‘03 that encompasses cash flow from operations and as well as non-core assets divestiture. Just wondering, get your felling on what a reasonable range of cash flow from operations from 2003 be.

I think if you consider that for the full year ‘02, cash flow or EBITDA was, roughly, $25m. I think internally you certainly have a lot of goals and objectives to significantly take costs out. I will tell you, Mike, if you just look at the CI goal of $35m that both Bill and Dick talk about, and you look at to the end of the year $17m was achieved. That tells you that there's another $18m that is targeted for '03, which is, obviously, incremental to the $25m on EBITDA.

Okay. All right. Cash flow from operations for the current quarter for Q4 was how much.

For capital expenditure.

No. Cash flow from operations for the current quarter.

I'm sorry. EBITDA for Q4 was a negative $1m.

So that EBITDA number is [Inaudible] same as cash flow from ops.

No. Cash flow from ops, I don't have that in front of me, Mike, to be honest with you.

Okay. Just a couple more questions here. For CAPEX and D&A for 2003, is that relatively consistent to what you said in the prior call.

Yes. In fact, we have -- we talked about we have a covenant, a cap ex can't exceed $6m. Actually, that fits pretty well internally. I think our CAPEX we're looking at $5m, $5-6m. Depreciation should probably run annualized at about four quarters rate.

Okay. Last question here. I just can't resist asking you guys this. Is there any truth to the rumor that Extra corporation which, for the benefit of everyone on the call, is a subsidiary of [Inaudible], it is there any truth to the rumor that Extra was the potential buyer for your apex [Inaudible] subsidiary.

We can't comment.

Okay. I'm not surprised by that. Thanks for your help on everything.

Okay, Mike.

Your next question comes from Alex Mitchell (ph) of SAC Capital.

I wanted to ask a couple questions. One is, were you -- was this covenant violation in effect because you couldn't sell the leasing business? I was not clear on that.

We were not required to sell it. We weren't in violation on covenant because we didn't sell it. I think our '03 EBITDA covenant matches up significantly. We do not anticipate or expect to be in compliance with those covenants.

Okay. You knew the ‘03 [Inaudible] was going to up.

That's correct.

Was there a point in time you knew you would be in violation of that.

Well, obviously, that's a very fluid situation. At this point, now that we have 2002 closed out, we know what the numbers are. The new EBITDA requirement becomes effective January 31. I will tell you, when did we know? We knew as of January 31.

And are there any other covenants that you stand to violate, or is that the only one.

That's really the tightest one. We have other covenant, including capital expenditures, including leverage ratios. Clearly, the EBITDA covenant is the tightest.

Okay. Is there -- I missed this. If you explained it, I'm sorry. Is there a time when you think you will resolve that one issue of that covenant, or is it fluid with the sale of assets and the like?

I think, as I mentioned, we anticipate resolving it before we file the 10-K.

When do you anticipate filing with 10-K.

It is due March 31st.

Can you just address some of the capacity issue in the industry. You've had some players go out of business. Were they fully liquidated?

Well, there are three companies that either have gone bankrupt or have stopped producing product. Dorothy has gone bankrupt. They are back on very limited basis. We've seen [Trilmobile] go bankrupt. They are completely out and their assets have been sold. Some of those assets were sold to great dain. Then [Monon], is, technically, not bankrupt, but they are not producing and have not been producing for the better part of 2002. Those assets could come back into play. We are not aware of anybody -- anybody having interest in that. In addition, two of our facilities, Scott county and Fort Madison are out where we have transferred some of that product from Fort Madison here. That is our new line 4. I would say, overall, industry right now is, roughly, 60-65% utilization.

65% utilization. If you had to take a guess as to how much capacity has been removed from the system, you know, '02 over '01 --.

I'd say about 20%.

20%.

Whether or not that's permanent or not remains to be seen.

Okay. And is that continuing? Are you continuing to hear stories about capacity coming out of the industry.

I think at this point in time everyone is kind of holding on and waiting for the cycle to change. I think if we see a protracted trough, you may see some other people leave the industry or reduce the available capacity they have. At this point, the outlook looks more rosy than it did a year ago. I think people are focusing on the change in the cycle.

Okay. Thank you very much.

Your next question comes from Andrew Conner (ph) from Clipper Capital.

Hi. Thanks, guys. I had a question on apex again. If you considered marketing I guess it as a discontinued operation, maybe in light of the fact you didn't receive favorable bids above, I'm guessing, the $50m mark. Should you either take a write-down on that or classify it as a discontinued operation at this point.

Well, just to correct a few things, Andrew. We didn't say we didn't receive any acceptable bids. The one discussion with the primary party that we were in was simply resulted in the third party not getting comfortable relative to the future revenue stream, plus the due diligence extended for some period of time, which we simply -- because we had other interested parties, we simply chose to break off discussions so that we could entertain other interests.

So as it relates to discontinued, we're not, obviously, at this point -- we're not classified a discontinued op because we have not made a decision to sell it. As I mentioned in my comment, we can either sell it, keep it and operate it, or we can liquidate it. Our analysis and discussions continue. As to whether or not there will be a loss on the sale or not, obviously, it depends, ultimately on the price, if we were to sell it. I would remind you at the end of '01 we brought this fleet on balance sheet and mark to market rental fleet at that time which results indeed about a $30m haircut as of the end of '01, which was truly in the midst of a very depressed used trailer [Inaudible] which Wabash was dumping the trailers. Whether or not ultimately if a sale goes through and if we sell it at a loss, we don't know. Does the rental fleet today approximate fair market value? You bet.

I guess what we're trying to get our arms around is you said you would sell it at the end of the year and by February 5. Now is March 31. Now you're saying you may not sell it. Just so we can understand the valuation, what's the run rate annualized on EBITDA for that division right now for apex.

It is a decent business. We have put up an amount of business. I will tell you we have entertained bids on that business in the range of book value. Book value, as I mentioned on prior calls, is approximately $65m. So, you know, again, obviously cash flow on that business would support that type of a carry back.

Okay. So is it reasonable to assume that you broke off the discussion or -- I mean, if you were bid 60 or 55, even it seems like its close enough to take it, given the circumstance you're in.

That was mutual.

Okay. And then on the classification as the debt is long term, if you're in violation today of the loan covenants, shouldn't you change the classification of your debt at this point.

Again, as of today, we're not in violation. Secondly, we were not in violation as of 12/31. It's proper to reflect it as long-term.

That's the end of March.

That we are due to file the 10-K. At that time, like I said, we anticipate concluding discussions with our lenders.

Okay. What about the -- okay. Then the net worth covenant is the same time line.

I'm sorry.

The net worth covenant is on the same time line.

Yes.

Okay. I guess a question on the income statement. Is it looks like you took an income tax benefit that added 13-cents to the bottom line. And you had a full valuation allowance against income tax benefits for the last two quarters. Why the change this quarter.

Obviously, now we know the full year. It's not unusual for a company to true up their tax accruals at the end of the year once they know their tax position for the full year.

Okay. On the receivables, was there any portion of the receivables that were sold? I mean, it is a dramatic reduction.

No. No receivables were sold. We put in place $110m receivable facility a year ago. In fact, we did not use that facility at all since we put it in place.

Okay. Have you changed, I guess, the terms on the sale, on the sales that you're making that -- that's affecting collection times.

Yeah. We, again, are making process changes with how we do business with the customer. All for the better. And such that I think, as I mentioned, we expect to continue to realize benefits on the working capital side.

Okay. And are there any -- you mention that their backlog was concentrated. Well, there was one large order. Are there any -- is there any one order that's 20% or more of your backlog.

Not that I'm aware of, Andrew.

All right. Thanks, guys.

Your next question comes from Bruce Teller (ph) of EGHM.

It's Bruce Teller.

Hi, Bruce.

I have a couple quick questions. Did you say that the -- what you're out of compliance with is $36m of EBITDA for '03? Is that the covenant you're not going to meet?

Yes. We expect to be out of compliance with that covenant.

And you had given some industry statistics. I think you said 156 for 2003, and then there were estimates for '04 and '05. Could you repeat those?

Just a minute, Bruce.

Yeah. The ACT for 2003 says 182. We believe it to be more 186. There is a Delta there. '04 is 233 and '05 is 256. The reference of '02 is 136.

What are they basing that on, wishful thinking? Do they have some scientific way of compiling that?

Well, I suggest you call ACT and ask them.

You guys are more experienced with them. What's been your experience in the past of how they compile that?

They're really rotten when it comes at a peak of a cycle. They are generally good in a trough and they are generally good as far as indicators when the trough is going to end. And an idea of the increase that we're seeing. As I said in previous calls, we would be very happy to have between 200 to 225,000 of a build that would make us a very profitable company. I pretend to believe at this point that the '05 numbers are just guesstimates. But go with the trend. Then watch it on a quarter by quarter basis.

Yeah, Bruce. The point of reference. They were within, I think, 3.5% on '02’s forecast.

When you say that you would be very happy and very profitable at 200 to 225, can you quantify that a little bit? What would a range of EBITDA be for you guys at that run rate?

We can talk about -- I think it's probably more appropriate, Bruce, as far as what our EBITDA goals are.

Okay.

And that, for sure, we can talk about.

Internally, what we would like to do is during the up tick of a cycle is get a EBITDA of about 15%. We feel comfortable that given a year or two at that type of level of production build, we could achieve that.

Okay. So you're saying your goal would be to have 15% margin. Now, it looks like in '99 at the peak of the cycle it was below 10%.

Yeah. It was 7-8%.

We're not the same company we were in 1999. It's going to be very difficult for you guys to go back and try to make some comparisons. This business and this company is a heck of a lot different. Understand the focus now is on making money. That doesn't take away from what the Jerry had done. He had built a great business, but I don't think we really focused on optimizing profitability. Today we're optimizing profitability. I tend to believe that any comparison in 1999 would be very difficult and, probably, meaningless.

I will say, Bruce, keep in mind, in '99 there were some offsets in there. Scott County was brought online; I believe, in '98, '99. That was a very significant drag on '99's results as well as Internationals. There are some things that, as Bill said, it is a much different business today than it was in '99.

Have you -- in your efforts to begin to maximize profitability, have you loss any of your major core customer relationships because of that.

Yes. One of our original partners was FedEx. We have lost that business. We actually chose, through the quoting process, not to proceed with it. As I said, we're trying to emphasize the fact we want to make money, and we just envision this as a profitable future partnership.

My one last question is, you referred to a lack of cheat and post capacity in the fourth quarter. My impression was that the problem you guys have had over the past few years is excess capacity. Are you saying you are now at a point where you reduce capacity so much that if the market does strengthen materially, you're going to need to add capacity?

No. It's a question and no. Let's go through it. Certainly, in '02 we did not have enough capacity in cheat and post. That was mainly because we did the right decision to shut down the Fort Madison plant.

With that, we shut down a line that had significant sheet and post capacity. What we have done now is we've moved that line into Lafayette. That line has been -- is being put in, at this point. We will actually in probably about two to three weeks start our pilot bills. When that line comes on stream [Inaudible], we will have enough capacity to make us -- take us through the cycle as it starts to move out. We also have the capability of this line at a future date, if we decide to move stronger into the DuraPlate product. We can convert this line to a DuraPlate product. It is a great opportunity for us.

Thanks, guys. Good luck.

Thanks, Bruce.

Your next question comes from David Anderson (ph) of Anderson [Inaudible] Company.

Two questions. Bill, in the past, one of the problems has been the key customers have had you build trailers and then, basically, had you maintain the inventory. In other words, not take delivery, carry them for them. I noticed that the finish good inventory was $55m out of the 135. Are you making progress on getting your customers to actually take the inventory when it's finished.

Yeah. We are and aren't. We have half our partners now taking the inventory. The other half, we are still working on. They're definitely was, at the end of the year, one major partner that was sitting -- we were sitting on quite a few trailers.

That's one reason to be optimistic about reaching working capital goal.

Oh, yes. This particular issue we'll be able to resolve. I think all the partners understand this, and it's not one of the things you can write a little note to some CEO and say, here's what we want you to do. We are working that process judiciously. We should have that resolved sometime this year.

My second question is, as you know, it is really, really tough to adjust the operating model of a firm in a recessionary environment you've had. What are your current gross margin and operating margin targets for the business as you see it reconstituted after the additional $18m.

David, this is Mark Holden. On a gross margin basis, our goal is to see consistent double digit gross margins. At the operating line, I think we still have quite a bit of work to do on the SG&A side. At this point I think given the state we're in with our retail business, we've not -- we've really not finalized, I would say, an operating margin only because of the status we are with the retail business. I think on an operating line, or EBITDA line, we have more confidence as far as what the potential is there.

Okay. So you would see -- if we have a transition of 166 and go into the 200 to 225 range, you would have a very positive cash flow year, but the real difference would be two years out.

Yeah. I think so. Again, keep in mind that $25m in '02 was based on 136,000 units in the industry. And in '03, as you say, 166,000 with another potential $18m incremental add-on. That puts us in the ballpark of $50m. So, yeah, that's why we -- for Bill's comments as far as what's possible in the 200 plus.

Very helpful. Thank you.

Your next question comes from Edward Ocien (ph) of DKR Capital.

My questions have been asked. Thank you.

Your next question comes from Lawrence Kame (ph) of Sunny Capital.

Hi. I wanted some color on the income tax benefit. That 13 cents added to the bottom line, you can't utilize that NOL unless you make a profit, right.

Actually, we did. There are certain -- I'm not -- I'm clearly not a tax expert. There are certain abilities to go back to ten years on certain carry backs, litigation related. We actually did utilize some of the benefit to go back ten years. Others we simply, as I said, trued up our accruals.

You actually got a refund this quarter.

I believe at some point in time in the quarter, yes.

Okay. So on a go forward basis we shouldn't expect any -- in terms of modeling, we shouldn't expect a tax benefit.

That will be correct. At the point in time when corporately we become profitable. At that point we'll begin to look at benefiting or providing a tax.

What was apex's 2002 EBITDA?

I'm sorry.

What was the EBITDA for apex for 2002?

We didn't provide that. Again, as I mentioned earlier to a previous question, the EBITDA on apex generally supports the valuation of a book value.

We just want to get an understanding of how much that would contribute with or without the contribution of apex if you didn't sell it.

You bet. We're in discussion right now with lenders. I would expect, at the point in time when we finalize discussions with the lenders, we'll have the with and without scenario nailed down with the lenders.

Okay. And one last thing. I'm a little confused when you talk about the January'03 EBITDA covenant. You seem to suggest that you're not aware whether you're in violation or not. It seems like what January'03 has already passed. You should, therefore, know whether you're in violation or not.

Our compliance certificate is due February 28th. At that point, that certificate would result in the company being either in or out of compliance. So until there's basically a 30-day reporting period for compliance with the January 31st EBITDA.

If you didn't make $12m in EBITDA in January, then you're out of compliance in four days.

That would be correct. We see we do not expect to be in compliance with the '03 with our covenants.

Okay. Just wanted to make that clear. Thank you very much.

You have a follow-up question from Tom Albrecht from BB&T Capital Markets.

High, guys. You know I know that it is very difficult for you to give this sort of number. Having seen the plant in its old state and seen it in its new state, I know there are pretty exciting things going on. Bill, can you talk about whether or not you have a break-even level you're comfortable with. In other words, what level of volumes would it take for you guys to be producing at a break-even level?

Well, almost in a backward bottoms up, if you assume $25m for the moment for '02 and EBITDA and the -- you add to that if we were to achieve the balance of the CI initiatives, that's another 18. The depreciation and amortization is going to run around $28m in '03. So you can begin to see, you know, where ballpark wise that would get to.

Okay. I'll run that drill fresh again. I didn't know if from a production viewpoint if you targeted xamount.

I think we've targeted the industry to be about 166,000 units. We think we'll hold our share. If not, increase it. We'll probably be somewhere between 20-25%.

If we went back, if we had another 2002 we reran, we would be a cash positive business, Tom.

Okay. That's kind of my sense as well. The year started really noisy and finished with very few extraordinary expenses, for a change. Earlier, Bill, you talked about first your round one $35m savings goal, which you indicated you'll actually exceed by the time the May deadline comes up. In the past, you've talked about; you'll have a second $35m goal from May '03 into May '04. Will you still have a $35m goal for that time period?

Well, yeah. Again, that's what we're telling you. As you know, internally, our ideas are a little bit higher. We set up an internal goal for the first year of $50m. I'm not sure we'll get to that. We'll certainly be greater from the 35. Then for the next two years we set up another goal that was closer, much higher than the $70m we've talked. We've got a ways to go. There are things that we have on the books and in process to do. I would say at this point at $35m, the next $35m is something we feel that we should be able to achieve and, again, our goal would be much higher than that.

Okay. And then if I go back to the $35m, you broke it down, roughly, in $17m of annual labor costs, $11m from enhanced purchasing efficiencies, and the remainder was all working capital, or was it a bunch of miscellaneous things.

There was more labor than the $17m. And there's a productivity impact associated with running more trailers, basically, for free as far as labor is concerned.

Okay. Then, Bill, refresh my memory. I know line one is kind of your mass production DuraPlate line. What are lines two and three? The new lines four is the commodity trailer.

Right. Line two is a DuraPlate -- well, I'll Dick tell you.

Line two is also a DuraPlate line. We actually have been producing our high base product on that line. Line three is the high spec sheet and post line. Of course, line four, you just mentioned, is the freight pro commodity trailer. We also have a line five that we produce the short banner pups on and what we refer to line eight is our repro line.

All right. Good. And then what's the latest in terms of implementing surcharges to the price of wood and steel.

Well, we haven't seen much increase in wood other than what we saw in 2002, and we are starting to raise the prices on our new quotes coming up this year. On steel, it if the increase was not as significant as we were once led to believe. However, we are still getting some of those price increases. The goal in 2003 is not to be encumbered by rising prices. I think we'll achieve that goal.

If I'm a customer today, I'm going to start seeing a line item as a surcharge, the way they would bill it out as a surcharge.

No. You see a price increase of roughly $175-250. If the price of wood goes down, we'll pass it back through.

I guess, lastly, Mark, we will see an update Friday? That's just a formality, or would there be more with that?

It is a formality, Tom. It really -- I would expect any update that will be necessary and not self-explanatory in a trust release would be with the 10-K filing. I question whether or not anything other than a press release would be necessary.

Okay. You paid down another $15m of debt in the first quarter. Did you have to tap into your revolver to do that, or did you just generate enough cash internally to be able to pay down that $15m.

We just paid it down. We didn't tap the revolver or the receivables.

Thanks again.

I would like to thank everybody for listening in. I think we've answered enough due diligence questions. We intend to resolve the issue with banks. We intend to do it in a timely manner that is good for both them and for us. Thank you very much.

Thank you for participating in today's conference call. You may now disconnect.