Wabash National Corp (WNC) 2003 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Wabash National First Quarter Financial Results Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the one, followed by the four, on your telephone. As a reminder, this conference is being recorded Wednesday, April 30, 2003.

I would now like to turn the conference over to William Greubel, President and Chief Executive Officer for Wabash National. Please go ahead, sir.

Thank you.

Good morning. Before we begin, I would like to make an important announcement. As with all of these types of presentation, this morning’s contains certain forward-looking information, including statements about the Company’s prospects, the industry outlook, backlog information, financial condition and the like. 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 forth from time to time in the Company’s filings with the Securities and Exchange Commission.

Welcome to Wabash National’s First Quarter Earnings Call. I’m Bill Greubel, CEO. In the conference room with me this morning are Mark Holden, our Chief Financial Officer, and Dick Giromini, our Chief Operating Officer, of Wabash National Corporation. I’d like to welcome all listeners on today’s telephone conference call, as well as those listening live via the Wabash National Internet site webcast. We have much to cover today, and we’ll try to provide as much information as possible. I will comment on the status of the industry condition and our business, Dick will discuss our critical operational initiatives, after which Mark will review and discuss the first quarter of 2003 financial results and financial condition of the Company. At the conclusion of the prepared portion of our presentation, we will open the call for questions from the listening audience.

As an industry update, industry production for trailers only in Q1 ’03 was 42,700 units, up 88 percent compared to Q1 ’02 but up only 8 percent quarter over quarter. Two thousand and two (2002) was indeed the year in which the industry demand troughed, most notably in the first quarter. Q1 ’03 continued the slow road to recovery. Q1 ’03 showed an annualized build rate for trailer-only products of 171,000 versus 136,000 trailer-only units built in 2002, a 26-percent increase in line with our estimates for 2003. Net orders for trailer-only were approximately 48,800 units, a 43-percent increase over Q1 ’02 and a 15-percent increase over Q4 ’02. Please keep in mind that these orders may represent requirements over a broad timeline and should be viewed as a trend only.

While build rates are still below rates that we believe are replacement level, the trend is nonetheless very encouraging, although tempered with caution. Wabash market share of production remained consistent at 20 percent. This is especially favorable given the following reasons. The majority of our partners have not placed any significant orders for 2003. As such, our share of non-partner fleets has improved. We believe that our partners will place new orders as the industry continues to consolidate and the future of the economy becomes clearer.

Our new line four, sheet-and-post, is now up and running, which will allow us to participate selectively in a market segment we have been constrained by capacity in a core cost structure. We continue to see our competition bid to fill plant capacity. Although the industry is experiencing increased demand and increased production rates, pricing is generally worse today than a year ago. We continue to be disciplined in our pricing strategies on both new and used trailers.

We continue to see a combination of weak economic activity and a trucking industry that is more disciplined in adding capacity. All fleets continue to be hammered by high fuel and insurance charges. We believe shippers will experience shortages of capacity in 2003, which should facilitate further rate increases and handsome overall industry profitability, particularly at our primary customer base, which historically has accounted for approximately 40 to 50 percent of our demand.

In addition, there are some signs that the dynamics of the freight industry are turning as new orders for durable goods rose 2 percent in March, the second increase in three months. As an additional sign of improving fundamentals, demand for computers and electronic products rose 4 percent in March, indicating businesses may be increasing their spending, according to the U.S. Commerce Department.

In a recent survey conducted by Bear Stearns, 100 public and private truckload, [less than][ph] truckload and truck leasing companies were contacted. Of the 25 respondents, capital spending is expected to rise 19 percent on average in 2003 compared to 2002 despite a drop in tractor spending. Trailer capex is expected to rise substantially. While this is based on only 25 respondents, it is another data point which validates the belief that trailer demand still has quite a bit of up side to go.

Most of our core partners’ respective businesses continue to improve. Wabash National continues to enjoy excellent relationships with the key freight providers in North America. Industry forecasts for trailers-only per [ACT][ph]’s February 2003 five-year outlook is as follow.

In 2003, it was 182,000. It has now been revised up to 190,000; 2004, 233,000; 2005, 256,000. As a reference, in 2002, we were at 136,000. We stated in the last conference call our estimate for trailer-only builds in 2003 was 166,000 for the industry. At this time, we still believe 190,000 units is too aggressive, but we are now raising our forecast for the industry to 170-175,000 units in 2003. I believe some of the demand experienced in Q1 ’03 are dealers placing orders to hold slots with the OEMs in case demand takes off.

Looking at the first quarter, obviously we are very pleased to be able to report a profitable quarter, the first since Q3 2000. In Q3 2000, the Company had $346m in revenue with a gross profit margin of 8.5 percent and a profit of $5m. In Q1 ’03, seasonally the weakest quarter of the year, the Company had 224m in revenue, with a gross profit margin of 10 percent and a profit of $1.5m. This comparison shows that with a 35-percent decline in revenue of approximately $120m, gross profit margins are running ahead of previous peaks.

Our focus during Q1 ’03 was simply a continuation of the progress established in 2002. To date, we have taken out over $50m in cost on an annualized basis during the past 12 months. Of the $50m in cost reduction, approximately $40m was achieved in our manufacturing operations; another $10m in reduced interest costs through debt reductions, with the balance coming from our retail operations through the closing of under-performing locations. Mark will cover in more detail our Q1 ’03 results. What’s more exciting is that we continue to see added momentum building for additional improvement throughout 2003.

In the interest of time, I will briefly discuss our branch operations and let Dick cover the excellent work done by his crew in Operations.

Our branch operations continue to remain a wild card in our business. I believe we have made good progress in defining our business model. We are putting together an organization to execute this model. Over the course of the year, we will see continuous quarterly improvement. Much work remains to be accomplished. Next to an upswing in orders, success at our branch network can greatly impact our results going forward. It continues to get a lot of attention.

Dick will now follow with a discussion on our operations. Dick?

Thanks, Bill.

Once again, as has become our custom, I’d like to briefly share with all of you updates relative to our drive toward operational excellence and leadership in our industry. Consistent with past discussions, our focus continues in five key areas – safety, quality, delivery, productivity and cost reduction.

When we talk about safety, we are not only speaking of our number-one priority but our number-one value as an organization. The safety of our associates stands above all of our other improvement efforts. That said, we continue to work intently upon making our workplace the safest, cleanest, brightest and best organized it can be. Safety improvement continues to be a key ingredient of each of our continuous improvement workshops as we identify and eliminate hazards.

For example, a plant-wide interior painting program is well underway, and we continue with our lighting improvements at all of our facilities. Additionally, specialized safety awareness training is now being provided to all of our manufacturing management team. Results continue to be encouraging, with our recordable incident rate in January and again in March the best performance in the past year. And with April coming to a close, it appears that we will be able to report our best performance yet, with a recordable incident rate projected at a level which would represent an improvement in excess of 70 percent from the levels we experienced mid-last year. However, I can assure you that I won’t rest until we achieve the industry benchmark status that I outlined for you last fall.

In the quality arena, we continue to make progress. As I’ve stated in previous calls, our goal is to establish Wabash as the benchmark for quality in the industry. Many customers continue to comment that our recent quality is the best that they’ve experienced from Wabash. However, we still are not satisfied. The occasional lapse still occurs, indicating a need to continue to enhance our control and containing systems while concurrently working on increasing the robustness of our assembly processes.

To this end, we have recently introduced an 18-point final inspection review, which is much more critical than previous approaches. We continue to work with our associates in educating all on our expectations of what constitutes acceptable product to ensure that they are properly armed with the skills and knowledge they need to perform effectively. Under our new tougher acceptance criteria, we have still improved our first-pass yield performance to 63 percent and remain committed to achieve our target of 95 percent first-pass yield this year.

Our third area of focus, on-time delivery, continues to be an ongoing success, meeting our objective of attaining 100-percent schedule attainment overall. We are now achieving this with only limited overtime, mostly focused on work-in-process inventory management. To further enhance our support to our customers, we are now developing a new on-time delivery metric that will truly measure our delivery performance on a customer-by-customer basis, order by order. Only with this new metric will we truly achieve total customer satisfaction. Working in conjunction with our MIS group, I expect that this new metric will be fully implemented during the second quarter.

Moving on to our fourth area of focus brings us to productivity enhancement. As I shared with you on the last call, the investment in effort and expense that we made during the fourth quarter of last year was beginning to yield some very positive results. We’ve not only sustained the improvements but continue to make further gains as we work through the second wave of our lean manufacturing improvement process.

A total of 155 continuous improvement events have now been completed through the end of the first quarter, yielding throughput improvements of 36 percent overall, with staffing reductions of 24 percent. Through the combined efforts of our salaried and hourly associates who have committed their time, energy and support to the CI process, we will shortly have the capability to produce 1999-level volumes on a two-shift, five-day basis in one location, Lafayette, versus three-shift, seven-day basis in three locations previously.

Additionally, our new FreightPro manufacturing line, our line four, was launched on schedule in March and is now slowly ramping up to full production.

Finally, in the area of cost reduction, the manufacturing team efforts have yielded approximately $40m in annualized savings for the Company overall during the past nine months. This savings is a combination of labor cost savings through the elimination of non-value-added activities, productivity improvements resulting in throughput increases, and purchased material savings, among others. For 2003 alone, we have realized an incremental annualized savings of $10m overall as we continue our drive toward operational excellence.

In other areas of our business, we also continue to drive continuous improvement initiatives. Last fall, we discussed our product standardization effort. We’re now moving to the next phase, or the cross-functional team, working on standardizing individual components and modules in which there is little or no added value to our customers. This will have the effect of further simplifying the manufacturing process, resulting in less complexity, fewer errors, less material inventory, along with many other benefits. Additionally, we are developing improved fabrication and assembly documentation for our associates to have on the factory floor, which will enhance their ability to do their jobs more effectively. This will translate to more consistent workmanship and better products for our customers.

In closing, I’ll just say that the results of manufacturing are beginning to speak for themselves. I’m extremely pleased with the efforts of the whole team, and, most importantly, their results. They remain focused and supportive, with a clear understanding that our work is far from done. Furthermore, they understand that the bar must continue to be raised each and every day if we are to achieve our objective of best in class. This is truly beginning to shape up as a breakthrough year for the Company.

With that, I’ll now turn the discussion over to our Chief Financial Officer, Mark Holden. Mark?

Thank you, Doug. Our mission continues to be centered around building operational excellence and financial strength. I think it warrants repeating that Q1 ’03 is the first profitable quarter in over two years. Given an industry that went into a freefall during 2001 and saw its demand decline by over 50 percent, Bill, Dick and I want to acknowledge our people for their efforts over the past two years to turn this company around.

Before I begin the detail, I want to refer our listeners to the Wabash National website for discussions of any non-GAAP financial measures that I may discuss today.

In the first quarter of 2003, total revenues were up 38 percent compared to the first quarter of ’02, based on a 74-percent increase in new units. The increase in new trailer revenues and units were partially offset by a decline in used trailer revenues. Compared to Q4 ’02, revenues were up 8 percent on a 15-percent increase in units.

Net income for the first quarter of 2003 was $1.4m. These results included costs associated with our debt refinancing amendment of $1.7m and a $2.8m foreign currency gain associated with our Canadian operations as a result of the strengthening of the Canadian dollar. On a net basis, our first quarter of 2003 was indeed profitable.

On a revenue basis, revenues for the quarter of $223m, based on 9,600 units. That compares to $161m and 5,500 units in the first quarter of ’02 and $206m, or 8,400 units in the fourth quarter of ’02.

On a segment basis, retail and distribution revenue was $78m, and based on 1,100 units. Manufacturing revenue was $167m on 9,700 units. Eliminations were $23m and a little over 1,200 units.

On a product line summary, our new trailer revenues were up 70 percent compared to the first quarter of ’02 at $167m. Used trailer revenues were down 20 percent compared to ’02 first quarter. At $20m, parts and service revenues were down 4 percent, compared to first quarter ’02 at $28m, and other revenues, including rental and leasing and financing were down 8 percent compared to the first quarter of ’02 at $7m.

Turning to our gross margin, the gross margin of 10 percent for the first quarter of ’03 compared to 6 percent in the fourth quarter of ’02 and 9 percent in the third quarter of ’02. You may recall during the fourth quarter of ’02 we noted that our gross margins were impacted by the investments made in overtime and outside contractor costs to achieve certain improvement initiatives Dick had discussed. We are pleased to say that these investments have more than paid off and were indeed nonrecurring. Overtime and outside contractor costs during first quarter were approximately $1m. That compares to $4-5m during Q4.

From a labor standpoint, our headcount numbers, 2,900 associates and 500 temps at the end of the first quarter. That compares to approximately 2,750 associates and 900 temps at the end of ’02. Overall, a net reduction in our headcount, yet our production was up quarter over quarter.

And our first quarter results –

Our SG&A costs were $15.8m. That compares to $19.8m in the first quarter of ’02 and $18.8m in the fourth quarter of ’02. Keep in mind, in the first quarter of ’03, our SG&A costs include $1.7m of refinancing costs for professional fees and waiver fees – bank waiver fees. Our SG&A should continue to benefit from our resolution of legacy issues and better control over spending.

Interest expense for the first quarter was $7.9m versus $5.7m in the first quarter of ’02, which reflected a full-quarter effect of our increased borrowing costs a year ago.

Taxes – you may notice that we did not tax-effect our earnings for the quarter. The Company currently has approximately $150m in NOLs. As a result of our past losses, we have wholly reserved for this tax benefit on our balance sheet with an approximate $70m tax reserve. To the extent the Company continues to earn a profit, this reserve will be reversed to income as the probability of utilizing this tax benefit becomes greater.

On an EBITDA basis, EBITDA for the first quarter was $16m. That compares to breakeven EBITDA for the fourth quarter and a negative $13.4m EBITDA for the first quarter a year ago. Depreciation and amortization during the quarter ran $6.7m. Capex in the first quarter was $2.3m.

As of March 31, our backlog was approximately $195m, flat with 12/31/02, which would tell you that our build rate and net order rate are in sync, and at this time we do not anticipate increasing our build rates in Q2 ’03.

Turning for a moment to the balance sheet, cash at the end of the first quarter was $7.4m. Our total liquidity at the end of the first quarter was $61.4m, which includes our availabilities under our credit facilities.

Receivables were $74m net at March 31 compared to $36m at the end of 2002, a $38m increase, which was primarily a function of our increased production during the first quarter and collections at the end of 2002.

Inventories remained flat relative to 12/31/02 at $135m.

Used trailer inventories were $18.6m at the end of the first quarter on 4,000 units, compared to $22m, or 5,000 units, at the end of ’02. We continue to see a general improving trend and pricing on our used trailers given our inventory’s more in balance and the market has improved. However, there is still opportunity to take infrastructure costs out.

Our open fleet trade commitment today is approximately less than $20m. Our accounts payable at the end of March were roughly $62m, compared to $61m at the end of ’02. We did [win] at some tightening of our terms with buyer/suppliers during Q1 as the Company was working on its refinancing. Now that it is complete, we anticipate an additional $8-10m in trade credit by reverting back to our normal trade terms.

From a liquidity and financial condition standpoint, our total debt today amounts to approximately $357m, both on balance sheet and off balance sheet. That compares to $367m at the end of ’02. Our goal remains for ’03 to pay down over $100m in debt. During the first quarter on a net basis, we had $10m of debt paid down despite an increase of approximately $35m in working capital.

As we have announced and as I’ve stated, we were successful in completing our refinancing and amendment process in April. As a result of those negotiations, our new covenants are as follows – our minimum consolidated equity covenant at the end of March 2003 is $40m; our actual equity is $75.5m; our maximum leverage ratio covenant is .95; actual leverage ratio at the end of the first quarter was .82; our minimum EBITDA covenant for the three months ended March 31 ’03 is zero; and our actual EBITDA for the first quarter was $16m.

Looking at our EBITDA covenant for the remainder of the year, the EBITDA covenant steps up to $5m at the end of June, a minimum of $15m at the end of September, and a minimum of $20m at the end of this year, as defined under our credit agreements. There are certain add-backs permitted with our lenders. These add-backs include loss on any sale of assets and a general $10m add-back for non-cash charges.

We’ve also committed to a range or refinancing by January 15, 2004 with our current lenders. Most of our debt matures by the end of the first quarter of ’04. Our capex is limited to $4m for 2003. As a result of the amendment and the changes in our covenants, our pricing on our debt increases by 50 basis points effective April 15, and we incurred fees of $2.6m with our lenders, of which $600,000 of these fees was expensed in the first quarter of ’03 and included in the $1.7m of cost I referenced earlier. The remaining $1.9m of fees will be capitalized and amortized over the next 12 months.

From a debt standpoint, we continue to pursue all opportunities to deleverage the balance sheet, including the divestiture of non-core assets. We have not and will not conduct a fire sale, but we believe we can achieve over $100m total debt pay-down in 2003 through divestitures, cash flow from operations and working capital improvement. We are currently in talks with two firms interested in our rental and leasing business and our parts wholesale business. It’s still premature to speculate on the outcome; however, our options do include the sale or liquidation of the fleet, our rental fleet, on our own. We do anticipate completing a refinancing of our entire debt later this year.

With that, I’ll turn it back to Bill for a wrap-up.

Thanks, Mark. I appreciate what you guys have done. It’s certainly been a very hectic first quarter on the finance side of the business.

The associates of Wabash National should be applauded for a great job in turning this business around. We are continuing the positive momentum achieved to date and remain focused on the task at hand. We all realize a couple million dollars in profit isn’t our ultimate goal. I will say, and I have heard, it sure feels good, though. And we remain committed to creating shareholder value. We believe that our best course is to proactively pay down debt and establish a sound track record of earnings growth throughout the cycle. We intend to continue to execute our plan and make this happen. We are just now beginning to see the potential opportunity for this company, and it’s very encouraging.

I’d like to thank you on behalf of Mark, Dick and myself, and at this time, we’d like to open the call up for any questions. Tammy?

Thank you. [Caller instructions.]

Our first question comes from the line of [Mike Harris][ph] with Robert W. Baird. Please proceed with your question.

Good morning, gentlemen.

Good morning, Mike.

Mark, you commented that you expect the build rate in Q2 to be similar to Q1, so I just want to make sure, does that imply that the Q2 revenues for the manufacturing segment are likely to be flat with Q1?

I think that’s what we’re trying to infer.

Okay, just wanted to verify that. And just a question on the demand environment. You went over the industry order data for Q1, which, if you annualize it, it’s about 195,000 units. Yet, based on your commentary, it appears that the demand environment is only modestly improving. I realize, you know, there is the issue with -- your larger customers are not making significant orders yet in 2003. Just wanted to talk about or ask you if there are some market share issues going on with Wabash where the Company has decided to walk away from certain less profitable business?

Mike, we’re constantly – the way we look at it is everything we bid on now, we want to make money. Does that mean we’re walking away from some business? We’ve already talked a little bit about FedEx. We did walk away from that business – or, actually, they walked away from us on the basis of pricing. I’m pleased to say that we did pick up a portion of that order. They did come back to us and gave us some DuraPlate orders for that.

At our price.

And, yes, there was no further price discussion on that basis. I think, really, the issue here is as far as the – whether we’ll get to the 190, I think that will depend upon the big fleets, whether they come in or not, and I think certainly ACT is believing that the Swifts and the Werners and the other big fleets are going to be entering the market this year. I think we’re somewhat cautiously optimistic that that will happen, but until we get an order in hand, I think we’re going to stay with our forecast of $170-175,000.

Okay, great. Switching gears here, in the retail and distribution segment, is it possible to give us an appreciation for the level of sales needed in this division in order to achieve breakeven in terms of profitability?

I think there are a lot of things that could happen. First, just from a process function within the organization, there are some costs and productivity that we can do that will help underline our improvement, and we’ll probably see that in the next quarter or so. But as the industry starts to take off, you will see the branch operations improve. I’d rather – I’m going to take it if I get it, but there are just so many fundamental things still with our branch operations that need to be corrected that we’re working on right now. It’s premature for me to say what the breakeven is.

Okay, that’s fair enough.

We do expect, as I said, to see incremental improvement quarter after quarter, and my guess is that sometime by the end of the year, we’ll be in the black.

Okay, great. Just regarding the build for the quarter, Mark, you gave a lot of data. I didn’t hear you say how many units were built during the quarter. Do you have that number, or, at a minimum, what the daily build rate was in the quarter?

Yes, the total build for the first quarter was 48,364.

That’s for the industry.

That’s for the industry.

Yes, I was looking specifically for Wabash.

Our build versus shipped approximated each other, Mike, I would say plus or minus. There wasn’t a wide disparity. I’d don’t have the build number in front of me.

Okay. All right. Regarding your debt reduction goals for 2003, you’re still looking at debt pay-down of over 100m. Can you quantify the level of reduction targeted specifically through cash generated from operations? In other words, independent of divestiture proceeds?

No, I would say at this time we’ve not quantified that, Mike. I think our goal is simply over 100m. I think you can begin to see how we can get there if you look at one first quarter EBITDA running at 16m and what that might look like on an annualized basis. We have stated that we believe there’s an opportunity to take another $25m out in working capital, and so that probably gives you some idea as far as the first two components and then obviously the balance and any up side to the $100m will come from [asset sales][ph].

Okay, that’s fair. Talked about the increase in accounts receivable. I understand a large portion of that is due to the seasonality issues in Q4. Just wanted to make sure there wasn’t anything else unusual with the sequential increase?

No, Mike, not at all. Again, we have several customers that want to actually pay us ahead of schedule, which is kind of a nice phenomenon, at the end of the year so they can get the tax deduction in that calendar year. So from a timing standpoint – and, plus, keep in mind, we are shut down the last week-and-a-half or so of the calendar year, so we’re not running any new production or generating any new receivables. Simply, we’re just -- it’s all collections.

Okay. The reclassification of approximately $267m in debt to short term – I certainly understand where that amount is coming from, but I was – my question is, why was it reclassified to current in this quarter if you met your loan covenants for the quarter?

That’s a very good question, Mike. It really had to do with our senior debt and what our obligations are under our agreements with our senior note holders. Basically, we have roughly $120m of our senior debt that technically matures after March 31 of ’04, mostly in ’07 and ’08. However, our senior note holders have the right to accelerate their debt if Wabash is unable to meet our original -- i.e., 1997 – private placement covenants. And the two primary covenants under the 1997 placement were a debt-to-cap of less than 60 percent. We’re currently at 81.5. The second covenant was a minimum net worth of $135m. And, again, we’re currently running at approximately $75m.

So as we look to March of ’04 and our probability of meeting these covenants under the senior notes, in addition, and as we have stated, we have planned to refinance all of our debt later this year. Now, I would say based on our assessment of our ability, Mike, to meet the covenants in March of ’04 with our senior note holders as well as our plans to refinance, we’ve reclassed the $120m up to current.

Okay, so just to clarify, for that $120m, that really relates to covenants that were established in 1997?

Yes.

Okay, interesting. All right. Just looking at the debt pay-down during the quarter, the net on balance sheet debt pay-down was approximately $8m. I thought that the pay-down was tracking a little higher than that for the quarter. Just wanted to discuss whether there’s some off-balance sheet debt brought on balance sheet during the quarter? Or were there any present value calculation issues on the reclassified capital leases?

No, actually, you’re right. The net reduction on balance sheet debt is about $8-9m, and we have about another $1-2m reduction on our off-balance sheet debt. I think what you’re referring to, Mike, is we actually had debt pay-down of roughly $25m of our own balance sheet debt that we had to borrow during the first quarter against the revolver of, say, some $15-18m. So on a net basis, what we’re saying is we’ve reduced our debt by a net $10m in the quarter.

Okay. All right. I think – well, one more question here. Interest expense was a little bit lighter than what I was expecting. You commented on the increase in the cost of debt starting April 15, so, clearly, Q2 is going to see the full impact of the increased cost of debt?

That’s correct.

Okay, okay. That is all I have for now. I appreciate it.

Okay, Mike. Thank you.

Thanks, Mike.

Our next question comes from the line of [Jerry Heffernan][ph] with [Lord Abbott][ph]. Please proceed with your question.

Congratulations on some very hard work completed in a very good fashion.

Thank you.

Thanks, Jerry.

I’d like to review the one-time bank and financing charges associated in the quarter. I believe you said it was 1.7?

That is correct.

And 600m – I mean $600,000 of that referred to a $2.6m total piece for part of the, I guess, penalties and stuff associated with the reworking of the covenants. What’s the other 1.1?

Professional fee.

Professional fees.

Legal and basically audit or accountant fees. We not only incurred the cost of our professionals, but we also incurred the cost of our lenders’ professional fees.

But, of course. They certainly couldn’t do it themselves. And how – is there a tail on these professional fees? I mean you’re still going to be working on a number of the financing structure issues going forward. Is that component, that 1.1 component, is that finished for this quarter, or how does that continue on?

Yes, I would say it is finished, Jerry. Now, obviously to the extent that we do a refinancing later in the year, there will be costs associated with that, but as far as the amendment goes, the only tail is really the 1.9 that gets capitalized and amortized over the next 12 months.

Okay. That total of 1.7, of which [indiscernible] use a 1.9 to continue, what line is that seen in the income statement?

The 1.7 is included in SG&A for the first quarter of ’03.

Okay, and the 1.9 gets to be amortized. Will that occur in the SG&A, also?

I believe it will be classified as interest expense as we amortize it.

Okay. So that $600,000 part is – of the total 2.6 will actually be in different lines?

Yes, the $600,000 is really “a waiver fee.” The remaining balance is an amendment fee. And they’re accounted for differently. The waiver fee is expensed.

Okay.

Amendment fee is capitalized and reflected in interest.

Okay. I know that you discussed this. Perhaps I’m a little dense this morning. Could you give me again an explanation as to why the big increase in the receivable line currently? I mean I understand the seasonality that you discussed, but the magnitude seems to exceed the seasonality aspect of it.

Yes, I think – there are a couple things, Jerry. One, historically, if you go back into history and look at year-end versus first quarter receivable trends, you will see this is a very common trend. Typically – well, for example, at the end of ’02, I would estimate we collected some $30m that were either paid ahead of the terms with our customers or very quickly, such that that, in essence, it’s really related to timing. That’s one issue.

Secondly, as I mentioned, we are shut down the last week-and-a-half of December from a production standpoint, so, therefore, we are not generating any additional revenues or receivables, and our run rate may run some $3m a day, say $2-3m a day. So there maybe $20-30m, if you will, of production or receivables that would not be generated in December, if that makes sense to you.

Yes, that does make sense. Well, then, on a seasonality basis, we would expect this to trail down each quarter through until the fourth quarter? Or should we stay at this level and then drop off again at the fourth quarter?

It really is a function of volume. And having said that we expect our volumes in the second quarter to remain flat, I would anticipate our receivables to remain flat as well. In the third quarter again, depending of our build rate, our receivables are simply a function of the build rate. But then, yes, it would trend down in the fourth quarter.

Okay. Next topic, if you would, please, the cost savings, $50m annualized. And I know you’re still working to improve upon that. However, my question is in regards to the first quarter as presented here. Does this quarter represent a one-quarter amount of that $50m? Or is some of that yet to be actually realized in the P&L?

Yes, it will continue to be realized as we go forward. Certainly, that’s an annualized amount, and we’ll continue to benefit from the improvement as the year progresses.

Okay, so the – where the total labeled is 50m, one quarter of that, and we’ll just take this evenly for ease of discussion here, 12.5, you do not see a $12.5m expense reduction in this quarter yet; that is yet to come, the full 12.5 per quarter run rate?

That’s a fair statement.

Okay, I just want to make sure I’m understanding the timing of all this. That’s very good. I will get off now. Thank you very much.

Thank you.

Thank you, Jerry.

Our next question comes from the line of [Carl Wiseman][ph] with [Early Bird Capital][ph]. Please proceed with your question.

Good morning, gentlemen. Good quarter.

Good morning. Thank you.

Good morning.

A couple of very, I guess, minor questions. In the past, you guys filed a registration statement, and I was wondering now that you’re profitable if you were going to use the registration statement to perhaps raise $50m in equity?

And I guess the second part of that is, wouldn’t you think by doing that you would take pressure – or at least the industry perception would be that you guys don’t have the pressure to make the $100m in asset sales and, therefore, you’d probably get a better price for them?

Well, certainly, we did file an [S3][ph] at the end of ’02, a $15m shelf. At this time, as I had mentioned, our goal is $100m in total debt reduction, which will not entirely come from the proceeds from assets. It’ll come from – in addition, it’ll come from operations as well as working capital.

Having said that, at this time, we do not have any plans to exercise the shelf. We’re really focused on three things – operations and improving our results there, continuing to take out as much in working capital as we can, and, thirdly, the asset sales. So I think to the extent we accomplished those three, which we believe we will, we think that we’ll be able to meet our goal without the shelf, but simply, the shelf was filed to give the Company as much flexibility from a capital standpoint as possible.

Oh, I can definitely appreciate the flexibility. But you had spoken before about your net assets being at approximately $75m and one of the covenants being, I believe, $120m? So why wouldn’t you just raise the $50m, get through the covenant, and then be able to negotiate with the banks, I think, on a much better term?

I’m not quite sure I follow you on your numbers. The $75m is our minimum equity, so I’m not quite sure I followed your question.

How much is the minimum equity that you need to be in line with the bank covenants?

At the end of the first quarter, I believe it was $40m.

Okay. And you guys were at $75m?

We’re at $75m.

Because I believed I heard earlier in the call that we were talking about $120m that you needed to be at.

[Indiscernible] I don’t believe – hang on just a second. I’ll tell you exactly what I said.

[Inaudible].

Our minimum consolidated equity covenant at the end of March was $40m. Our actual consolidated equity at the end of March first quarter was $75m. Our maximum leverage ratio at the end of March was 95 -- .95, and our actual was .82. So the EBITDA covenant was zero for the end of March, and our EBITDA actually was $16m. And then I talked about the EBITDA covenant trending out ultimately to $20m by the end of ’03, and those were our covenants.

Okay, great. I think that’s the last of my questions. Thank you.

Okay.

Our next question comes from the line of [Tom Albrecht][ph] with BB & T. Please proceed with your question.

Hey, guys. Congratulations. Sigh of relief on a number of fronts, considering what we’ve all been through here.

Thanks, Tom.

Various questions I wanted to follow up on. First of all, Mark, you mentioned that the EBITDA was $16m. I’m trying to figure out exactly how you got that. I show $6.6m of EBIT, six, seven of DA and then even if I add back the $1.7m, that’s closer to $15m rather than $16m. Can you help me out there?

Well, I think the add-back is – there’s really not even an add-back, but it’s the inclusion of the foreign currency gain. In other words, we have EBIT – hang on just a second.

Okay. So you’re saying that that EBIT of 2.8 or 2.9m really gets put in the EBIT figure?

Gets put into the EBITDA figure, correct.

Okay. All right. And then –

And then I would say, Tom, we do have a – we’ve got a reconciliation out on our web page of the EBITDA calculation if you or anybody else wants to refer to it.

Okay. I’ll be sure to take a look at that. Also, Mark, you were giving numbers fast and furious. I wanted to make sure I heard the correct amounts. Manufacturing produced 9,700 trailers in the quarter; is that correct?

I believe that’s correct, Tom.

All right. And then retail, when you talk about 1,100 units, that’s them selling 1,100 units?

Yes.

But I guess my question is how many units of the 9,700 that manufacturing built went to the retail?

Twelve hundred and fifty-four (1,254), so that when you add – actually, it’s 1,141 units at the retail business that were sold or invoiced. On the manufacturing business, it was 9,713 that were “invoiced,” but then in the 9,700, that includes 1,250 that were built for the branches, and so, therefore, it gets eliminated.

Okay. And then how many used trailers did the retail networks sell during the quarter? You had a net decline of, I know, 1,000 quarter over quarter from the December quarter, but in total, I guess a gross used trailer figure. How many did they sell?

They sold right at 3,500 trailers, Tom.

Okay. Bill, we’ve talked in the past about a healthy branch ought to be able to sell maybe 500 to 800 new trailers per year, which, you know, would be just a phenomenal number on an annual level. Eleven hundred and forty-one (1,141) is a big step. I think you’ve been doing less than that, but how quickly can that improve in terms of new units sold through the retail network?

Well, we’ll see that on a quarterly basis. Can’t divulge what our budget is, but I’ll tell you that they’re certainly underperforming where we feel they should be. Again, this is an area that we’re bumping up against pretty good competition. We’re picking and choosing our accounts. I think, Tom, if we wanted to be exceptionally successful in volume, we could do that, but we would give up price in going that route, and I’m not ready to certainly throw in the towel.

There is a good opportunity now with FreightPro line coming on stream and our customers finally seeing the quality of that product coming off the line that we should see some improvement in our sales roughly in 45 to 60 days. Understand that’s the type of backlog that we would have to encounter going forward.

So what you’ll see in the second quarter is a continuation of selling off some of the inventory that’s on the lots and orders coming in for the third and fourth quarter. We have very focused accounts. We have improved the condition and the capability of our sales force, so I’m somewhat bullish that in that particular area we will see a vast improvement. And, you’re correct, we think that at the branches, between five and eight hundred is a good average and a good goal. When you do that multiplication on 32 branches, you can see the delta that we’re trying to aspire to. That’s not something that I can confidently say at the end of the year we’re going to be there, but I can say very confidently at the end of the year we’ll be moving in on that.

Okay. I believe the St. Louis branch was announced to be closed a while back, but I think it’s still open.

No, that was the corporate headquarters.

Or that’s, yes, what I meant, corporate for retail. But is that still open right now? And are there still some expenses there in a kind of a delayed closure there?

No, that was moved at the end of the year.

I can speak to that, Tom. We have, I believe, maybe a few employees still based in St. Louis assisting on the divestiture of our rental fleet.

Okay.

And we have an office lease that runs, I believe, for some period of time that we already accrued that tail associated with a lease in ’02. But nonetheless, we have an office there but only with less than a handful of people that are associated with our rental fleets, though.

Everything else and everybody else was moved up to [Lafayette].

Okay. So the rental expense for that office was already accrued for, so there’s no current expense, I guess, is what I’m trying to get at?

That’s correct.

Okay. And then your thoughts on potential additional branch closures? I’m sure that’s a sensitive subject, Bill, but any potential candidates still here in the next quarter or two, without naming cities perhaps?

Well, we’re certainly not going to name cities. We are going to get to a level that the branches are going to have to show profitability and maintain it and then grow it. And it will be up to the individual branches to decide their future. At this point in time, we have a significant amount of branches yet that haven’t achieved a profitable level of EBITDA for us, and, as such, I think they’re very aware of their tenuous situation.

Okay. How did the quarter flow? I mean when you had the exciting press release in late February about January, I know certainly the freight world had an awful February, but I can’t see that impacting your volumes or bottom line quite as much. But can you talk about how February and March stacked up relative to what you saw in January and maybe break it down to manufacturing and retail as a discussion?

Well, from a production standpoint, I think we’ve been basically flat. And on the retail basis, naturally in February with the storms, we had some issues there. I think everyone else in the industry did. We have started to see some pickup in the retail business in March, and we believe that’s probably going to carry through for a while. As far as orders are concerned, we’re still in the fits and starts.

Right.

We can get one or two really, really good weeks, and then we can follow with something that’s a heck of a lot slower than that. I think as Mark explained, our backlog is basically flat quarter over quarter, and that gives you an indication of where we’re going. We are seeing on a very positive basis, a heck of a lot of quotes starting to come in. Most of this quoting activity still is not from the core partners that we have but from other areas, and we are pursuing those quotes to see if we can pick up some of that business, and we have been relatively successful in either increasing our share at some companies that we had a smaller piece of business with or picking up new accounts. It’s nothing yet to write home about, but our focus on accounts has started to show some very positive results.

Okay. Mark, did I hear you correctly, $28m in sales for service and parts during the quarter?

That is correct, Tom.

And how does that number compare versus last year?

It was down about 4 percent compared to a year ago.

Okay. All right. And then, let’s see, a lot of questions. I know in a turnaround like this where there’s so much leverage working for you and against you, you probably don’t want to talk too much about forecasts, but, you know, I think – and I know one of the questions I’ve already been asked is, you’ve come so far. It’s easy to start extrapolating high-and-mighty numbers, but I guess what I’m sensing from you is while we’ll see some more improvement in Q2, that we shouldn’t go crazy with the earnings-per-share numbers until we see a more sustainable pick-up in demand. Can you comment on that a little bit?

I think you said that very appropriately.

Yes, I couldn’t do a better job myself, Tom.

All right. Well, we’ll run the numbers and throw some assumptions by you later today, but I think, too – let me just make sure here I’ve got all the questions -- with the revolver at maybe $17m or $18m as of the end of the quarter, do you believe you’ll be able to get that back down to about zero here in this second quarter? I would imagine part of the drawdown was both seasonal, combined with some of the concern with your vendors that should’ve gone away by now?

Yes, as I mentioned, two things, though – you’re right. With our vendors, now that we have the refinancing and amendment in place, I think we’ll see getting anywhere from 6 to 8, $10m of additional trade credit improvement as well as, I think, yes, we’ll see a general trend down in inventory. I think what the things that Dick is talking about, we see it in the various buckets within our inventory. We see, for example, our work-in-process category decline pretty significantly, and then it moves into our finished goods inventory. So now we’re working closely with our customers and trying to do a better job of moving the trailers out with our customers. So I think we’ll see or experience some benefit in the finished goods area over the balance of this year. In addition, on a used trailer front, I think we probably have over 1,000 trailers that are still remnants of our problems two, three years ago that we’re now in the process of clearing out. So I think we’ll convert probably another $6-10m of used trailers to cash over the next two quarters.

Okay. In terms of the inventories, if I could drill in there, you mentioned that about $18.6m of the $135m is used trailers. Can you give us a ballpark figure for how much is raw materials and how much is finished goods of that $135m?

Sure. Raw materials are right at $29m. Work in process is about $8m. Finished new trailers would be about $65m. The used trailers are around $18m. And then our parts inventory is approximately $16m.

Okay.

And, again, if we look at it quarter over quarter, the biggest change is really between WIP and finished goods. We’ve moved roughly $8m or so out of work-in-process into finished, and like I say, now, the opportunity and the challenge is to work with our customers to get them to pick up the equipment.

Okay. Refresh my memory on your second-year cost, goals. Was it $35m kind of this coming May through the next May? Or was it another $50m? Because I know this past year was, I believe, $35m, so you’ve exceeded that.

Right. What we wanted to do, Tom, is we’ve been $35m on an annual basis up to May of this year, and then another $35m over the next two years. Internally, naturally, our targets are a little bit higher than that, and we’ve met our internal goal for the first year and our internal goal for the next two years is roughly the same as the first year.

So that’d be $35m cumulative over the two years or --?

Yes.

-- two more times?

That would be wonderful, but right now, we’re only telling you guys $35m over the next two. Our numbers are different, and we want to achieve our numbers because that’s where we’re [incented][ph].

Yes, you just got a reaction out of Dick, Tom, so –

That’ll keep him on his toes. I think a couple of other questions. I believe at the end of the December quarter – and, Dick, you might know this number – but you guys gave us a figure where you were. I think you were a little shy of the $35m goal as of the end of the December quarter, maybe $30m.

That’s pretty close, Tom. We were just shy of $29m at that point.

Okay, so –

On an annualized basis.

So then you had a tremendous first quarter for costs. In other words, the 20 to 21 million annualized, you realized, and I think one of the earlier questions, I think the guy was really trying to get at the point of the improvement you just saw in the first quarter. Forget about the $50m target. That $21m-ish-type of number -- how much of that do you think you really realized this quarter? It seemed to me, at best, you probably couldn’t realize more than about half of that.

Well, Tom, let me clarify. First of all, the $50m number included about $10m of other reductions through working capital improvements and such. About $40m was tied to the manufacturing – productivity improvements, labor cost reductions and purchased material reductions. So I think our basis number really is $40m when it comes to the manufacturing side.

Okay.

And so we’ve generated between $10-11m of incremental improvement over and above what we reported at the end of December --

Okay.

-- thus far this year. And on a total annualized basis, cumulative, when we look at what we had done, reported through the end of December and now through the first quarter of this year, that’s where the $40m annualized number comes from.

Okay, okay. That’s very helpful there – … belabor these things. What are your – where do you stand on line one, Dick, in terms of number of workstations right now and approximate time? Where do you think you can go maybe over the next three or four months?

We’re on the verge of taking – of completing that second wave of lean manufacturing CI events throughout that line, and we’re expecting to see some further improvements on that line during this next quarter.

Okay. I guess I was a little surprised, the first-pass yield of 63 percent. Well, that’s a gargantuan improvement compared to the early days of 2 percent or whatever. Thought maybe it would be closer to 75 percent. Can you talk a little bit about the 63-percent figure? Was that brought down by the introduction of FreightPro or just other things that you’re still working on?

No, what we’ve done, Tom, as I tried to allude to, as we continued to drive for best-in-class excellence in quality, outgoing quality, as we continue to get feedback from customers on what their expectations are and as we learn what the expectations need to be, we continue to increase or raise the bar on what the outgoing quality expectations are, and that was the reference I made to the 18-point final inspection checkpoint system that we’ve installed. When we’re doing our reviews of our product now, we’re reviewing it against much more critical criteria than what we may have been doing previously so the 63-percent measure is against tougher criteria.

Okay.

So I’m not disappointed or discouraged at all by the 63 percent. What we’re getting today at 63 percent would’ve equated to, based on the old criteria, probably in excess of 80 percent –

Okay.

-- the way we were measuring last fall.

[Inaudible.]

Mark just asked when we implemented. We just implemented the 18-point system early March, so we’re building up from there, and I expect to just continue to improve as we – as our folks learn the expectations, we work with them, we educate them, we put the systems in place, and we continue to drive out the process variation.

Okay. That’s helpful there. And then, lastly, on the [refr][ph] line, I think that’s at the south plant. What are your latest thoughts in being able to move that up to the north plant? I’m sure even if Dick works his magic down there that it’s still got to be harder to realize some of the efficiencies being in a separate plant location from where everything else is.

At this point, Tom, that’s under review, and we’re looking at the possibilities and opportunities to be able to do that. There are some space-restriction issues. Our focus right now for the immediate quarter is to really continue to optimize the operation in the south plant. I think we’ve got a lot of up side there still. We’ve made some real strides during this past quarter, and I don’t want to suggest that we will, in fact, move it. It’s something – we’re always looking at opportunities, so, you know, it’s something that we’re evaluating, but I don’t want to suggest that that will or will not happen, but we’re – our focus currently is to optimize what we have down there, and I think there’s a lot of up side.

How much of your production, roughly, is [refrs][ph] versus other products?

I don’t have a number right off the top of my head, Tom, but historically, refrigerated trailer product line has run anywhere from, say, 10 to 15 percent of our total production.

Yes, that’s pretty – about 15 percent is about right.

[Inaudible] historic kind of range, if you will.

I’m sorry, Mark, what was your --?

[Indiscernible] somewhat of a historic range. In other words, 10 to 15 percent.

Yes, okay. That’ll be good enough, just for my understanding. Okay, well, great. Delighted to get the quarter, and congrats again.

Thanks, Tom.

You bet.

Our next question comes from the line of [Lawrence Kamm][ph] with [Sonic Capital][ph]. Please proceed with your question.

Hi, guys. I saw that you guys said that you repaid $100m in debt in 2002 and then on February 28 you said you repaid another $18.5m. But on the balance sheet, it only went down by $65m in 2002 and only $8m as you intimated in the first quarter. And I guess I’m a little disturbed that you’re intimating, you know, a gross number of debt pay-downs when you’re actually using a revolver, you know, to pay against that because that really nets out to zero.

Well, let me say – clarify what your comments were. The pay-down in ’02 was $100m between on-balance sheet and off-balance sheet debt. You alluded to the only on-balance sheet component, so when you look at our total debt in ’02, we paid down $100m. In the first quarter, as I’ve just finished walking through on the call, on a net basis, we paid down $10m. On certain components of that debt, we would’ve had greater pay-downs, but then as I just briefly mentioned, we had borrowings on a revolver. So on a net basis, our pay-down in the first quarter comes out right at $10m.

Right, right. Well, you also said that the Company would be constrained from a liquidity and customer and supplier relationship perspective if you couldn’t prevent the debt from going from a non-current to a current status, and that’s exactly what happened. So given that’s the case, what disruptions have you seen?

Yes, that’s not what we said. We said if we were unsuccessful in amending our credit facilities, then we could experience that. Obviously, we’ve successfully completed that amendment. So –

But the point was is that debt would move, that if you were unsuccessful, that the debt would move from non-current to current, and that’s exactly what happened.

But, no, what that meant was that [we thought] all that debt would become due and payable immediately not moving from long-term to current on a balance sheet.

Oh, okay. So now it’s only due nine months hence?

No, again, as I’ve mentioned, we have through March of ’04, and we’ve stated for some time that our refinancing that we conducted in the first quarter of ’02 was a two-year bridge facility to allow the Company to turn the operations around, pay down as much debt as possible, to then do a refinancing. And we haven’t changed that answer or that course.

My understanding is that there were negotiations in ’03, accelerated the repayment schedule so that they’re all due in the first quarter of ’04.

No, that’s –

Am I incorrect in that understanding?

No, that’s not correct.

Where am I misunderstanding?

Well, again, we have – we amended – well, I would encourage you to go back and listen to the replay of the call today. It’ll walk you through exactly what the amendment entailed and what the results or the outcome was.

Well, I read the 10-K, and that was my understanding from the 10-K.

What’s your understanding?

That the debt becomes due within the first quarter of ’04 and that you need to have that renegotiated by January of ’04.

Yes, that’s correct, and that hasn’t changed any.

So that was not a change from the ’02 renegotiations?

No, it’s not. The ’03 negotiations did not change any of our debt maturities other than in the current year for ’03 we did see a slight reduction in the principal payment obligation for the remainder of ’03.

But there was an increase in the ’04 repayment schedule?

Absolutely. And at the end of the day -- I guess I’m not sure I recall who I’m talking to – at the end of the day, I think what you’re trying to get at is does our debt become due and payable at the end of March of ’04? You bet. That hasn’t changed, and that hasn’t changed the Company’s plan or expectations to do a refinancing sometime this year.

Okay, thank you very much.

Our next question comes from the line of [David Anderson] with [Anderson, Hoaglund and Company][ph]. Please proceed with your question.

Thank you. Great quarter. One question. In February, you talked about in your cost of goods sold, 65 percent of that was material and that prices per trailer were up $175 or $200 as a function of increasing wood and steel prices. I’m interested to know did those price increases hold, and sort of what is the – what’s going on currently in terms of raw material costs and pricing pass-through?

Raw material costs, we’re seeing basically steel were not too fussed with nor aluminum. On wood products, of course, we’re in the wood products business. We are seeing [that raw] material go up. Last year, we had basically three price increases that came through. We are not the leader in raising those prices, however. One of the larger [indiscernible] manufacturers for the trailer industry has raised their prices, and we have followed suit. We’re a little bit ahead of them as far as what our price is to our customers. So I would say that we are getting most of that price increase through.

Okay. And the second question, Bill, is can you say anything about the source of the increased industry-wide demand? Is this purchase of trailers that was deferred when they were trying to beat the environmental deadline on [cab][ph]? Or is this normal replacement cycle? Or is some of this economically sensitive? Do you have any thoughts about the rationale behind the pick-up here?

I think it’s kind of all of the above. It really depends on the customer and what they’re looking at. Some certainly are replacing some of their fleet. We’re seeing a lot of that with one of our largest customers. We’re also seeing some other people pick up new business, and, as such, they need trailers for that. And I think a lot of folks who are not investing in the tractor side of the business are doing either/or-type thing. So it’s – I would say that a preponderance of the business that we’re seeing is replacement and not growth.

Okay, last point. Is there anything you can say about core partner orders? In other words, you’ve got the manufacturing side well on its way. You’re focused on the branches. What is your strategy from a marketing point of view with respect to the core partners at this point?

Well, our relationship with core partners is still very, very good. I think that really their issue is to determine where they’re going and where the economy is going, going forward. This is a lot different than what we saw in ’96 and ’91, where, when the industry starts to turn, everyone comes in, and they buy in preparation for the future. I think that a lot of our core partners are very, very financially astute and they’re now saying, “Why do that because all I do then is add more supply, so it becomes a buyer’s market instead of a seller’s market?” So they’re balancing this pretty nicely. They’re seeing some of their prices go up. I think we’ve been able to see that. If you were listening in on the J.B. Hunts and the Heartlands and so forth, they are getting rate increases. I think they’re just playing it a little bit more close to the vest. I think that they’re also looking at the industry and saying, you know, with increased insurance and the cost of fuel, a lot of the players are leaving the market. A lot of shippers right now are concerned about that. They want to have consistency in the product that’s moving out, so there’s a flight to quality. All this bodes well for us. It’s just more of a waiting game. From the partner standpoint, we’re in negotiations. We’re having a lot of discussions. But they’re just not ready to go yet.

That’s very helpful. Thanks again for some great work on this company.

Okay, thank you. We have time for one more question.

Gentlemen, at this time, I am showing no more questions. I will now turn the call back to you. Please continue with your presentation or any closing remarks.

We’re very pleased with what we’ve done in the first quarter. As I’ve said, a few million bucks ain’t the year, and we’re still focused on where we want to go. I’ll reiterate – we are going to pay down debt, we’re going to get ourselves in a very, very good position to refinance our debt later this year, and we’re going to do everything that’s necessary in order to achieve that success. Thanks for your time. We’ll talk to you in a quarter. Bye.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.