Wabash National Corp (WNC) 2008 Q4 法說會逐字稿

Greetings and welcome to the Wabash National Corporation's fourth-quarter and fiscal year 2008 earnings results conference call.

(Operator Instructions)

It is now my pleasure to introduce your host, Dick Giromini, President and Chief Executive Officer. Thank you, Mr. Giromini, you may now begin.

Thank you, Jackie. Good morning. Before we begin, I remind everyone that this morning's presentation 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 the 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 fourth-quarter and fiscal year 2008 earnings call. I am Dick Giromini, Chief Chief Executive Officer. In the conference room with me this morning is Bob Smith, our Chief Financial Officer who will discuss the Company's financials. I would like to welcome all of the 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 will try to provide as much information as possible. At the conclusion of the prepared portion of our presentation, we will open the call for questions from the listening audience.

Well it goes without saying that 2008 was a challenging year, but one of progress in many areas. During the fourth quarter, we shipped 9300 units, which brought our full-year total to 33,300 units. This compares favorably to our previous guidance of 8,000 to 9,000 and 32,000 to 33,000 units respectively. Based on preliminary data, our market share improved 150 basis points to 22.7% in 2008 for all trailers, raising Wabash National to the clear number one market position in our industry. For the van trailer segment, which includes both dry and refrigerated vans, we picked up 350 basis points of share overall, now at 35.4% of all dry vans or a gain of 560 basis points and 18.0% for refrigerated vans or 30 basis point gain. These increases are a testament to the quality of our product offerings, the strength of our customer base, and improvements we have made in providing support and service. However, gross margins were adversely affected by volatile raw material prices that reached their most severe levels during the fourth quarter, consistent with what we expected and announced last quarter.

Further, depressed demand combined with contractual obligations, limited our ability to pass cost increase offsets on to customers during the quarter. Finally, fourth-quarter results were also impacted by fewer production days, related to the holiday season and annual planned shutdowns at our Lafayette facility.

Looking ahead, we continue to face strong headwinds as we begin 2009, as the depth and duration financial crisis and global economic recession continues to widen. As you well know, we are facing one of the most difficult economic times in our nation's history, and likely the most challenging time for our industry. Freight tonnage declined by 6% in the fourth quarter, with December alone declining by 14.1% from year earlier levels, and by 11.1% from November, yielding the worst freight performance since December 2000. This followed what had been ten consecutive months of year-over-year improvements.

Current forecast of trailers now reflects this depressed freight environment as ACT has once again adjusted its estimates downward, and now projects 88,000 trailer units in 2009, down from previous estimates last fall of 134,000. ACT views '09 as the bottom, and expects an increase in subsequent years with roughly 151,000 trailer sales in 2010. FTR also expects total trailer sales to be lower than previously expected, estimating average 88,000 units in 2009 and 100,000 units 2010. Longer-term forecast for 2011, include ACT at a much stronger 231,000 units and FTR at 174,000.

To put these numbers into perspective, average industry replacement volumes are estimated at 185,000 units annually. And in looking at earlier deep trough cycles such as 1982, recovery and demand was rapid and steep, rising more than two fold in the following two years. Near term was a smaller backlog than in any recent year at this time, and recognizing that first-quarter is seasonally our slowest period, we are now looking at Q1 volumes to be lower than any period in many years, with shipments in the neighborhood of 3,000 total units. For the full year, recognizing the limited visibility we have this year as a result of the unsettled market environment, but basing estimates on the industry forecasts, along with conversations with our customers regarding their needs, and while assuming an average market share, we would expect total units in the area of 18,000 to 22,000 units for the year. We will refine that projection, as we gain more clarity going forward.

A deteriorating housing market, volatile commodity costs, and the ongoing credit crunch has significantly and adversely impacted demand levels. Recent bankruptcies of smaller freight haulers have flooded the market with excess equipment, putting downward pressure on used trailer values. And, if short-term financing remains unavailable for many freight haulers, the bankruptcy rate could climb once license and insurance fees come due late in the first quarter. In general, carriers have held off committing new capital expenditures for new trailers and related equipment, due to concerns over the economy. Although van orders currently remain lower than build rates, order cancellation rates and trailer inventories did abate during the fourth quarter. Given the limited visibility and challenging market environment, we continue to keep a watchful eye on our liquidity position. Recognizing that our liquidity levels are tighter than in previous quarters, we are taking the steps that we believe are necessary to manage through this period. Bob will have more to share with you on that topic in just a few minutes.

Let me now review with you some of the key actions we have implemented since early 2007, to improve our cost position and maintain healthy liquidity. We temporarily suspended our quarterly dividend which will save the Company approximately $5.5 million annually. We have reduced our salaried head count by 180 associates to date, a roughly 30% reduction in our salaried work force, as compared to staffing levels at the beginning of 2007, with an excess of 60 of those reductions, occurring since the beginning of this year. We put an immediate freeze on all new hiring, eliminated all temporary salaried positions, and recently introduced a Voluntary Unpaid Layoff Program for salaried associates. We conducted an extended holiday shutdown at our Lafayette facility, from December 22nd of last year through January 5th of this year. We adjusted the 401(k) match, eliminated any match for nonqualified participants, and froze merit increases for the year for 2008.

Since that time, we implemented a 10% reduction in base salary effective this past month for all officers of the company, and a temporary reduction of 10% of annualized base salary for all remaining exempt level associates, while reducing the standard workweek for most exempt classified associates from 40 hours to 36 hours. All nonexempt associates paid workweek has been temporarily reduced to 36 hours as well, both hourly and salaried. And finally, we have significantly reduced all discretionary spending throughout the entire organization, including reductions in CapEx and development projects to a bare minimum. These cost actions alone will reduce our overhead spend by approximately $20 million in 2009, which we expect will begin to fully impact our operating results by some time in the second quarter. However, we are not done and continue to look at all cost elimination opportunities, and we will continue to make further adjustments to our cost structure as necessary.

Importantly, these actions have been taken in concert with other strategic initiatives including our Lafayette transformation initiative, which is now largely complete. This initiative has provided for the consolidation from six trailer assembly lines down to three, while preserving all previous product type capabilities. Designed with increased flexibility, these new line configurations will still provide for total company capacity to produce over 60,000 trailers on five days, two shifts when needed, while freeing up floor space to allow for the centralization and consolidation of all of our warehousing activities. During the second half of 2008, we completed the integration of all pup trailer production, and all high spec DuraPlate into the high-speed DuraPlate line. The final phase, the warehouse consolidation is on track to be completed on schedule for the second quarter of 2009.

Given the low volume environment, production flexibility afforded by this transformation, provides significant benefits to our manufacturing process, and will serve to drive margin improvement by lowering our manufacturing costs. We have estimated that this consolidated Lafayette transformation effort, will yield measurable benefits in excess of $5 million annually. Separately, our purchasing consortium is now fully operational and we have four agreements in place including Kentucky Trailer, Utilimaster, VT Specialized Corporation and Federal Signal Corporation. Our first leverage by agreement was completed during the fourth quarter, which we estimate saved the group approximately $400,000. As we have mentioned previously, we are initially targeting a collective 3% annual savings for the members on approximately $350 million spend, with additional cost savings opportunities as the consortium matures and grows. New additional consortium members are being considered for addition throughout the year to further grow this opportunity.

Separately, we are also working aggressively to improve our position with suppliers, as we are taking proactive steps to renegotiate current contracts with our supply base, in an effort to gain better pricing and terms with each of them; particularly as related to those components high in steel and or aluminum content. Early results have been extremely encouraging as suppliers recognize their accountability to adjust pricing, tied to dropping commodity costs and our needs. To date, we have already received commitments that will result in several million dollars of savings to us by year end, over and above the $20 million burden related savings I mentioned earlier. And I personally thank those suppliers who have stepped up so quickly to support us.

Outside of these costs and efficiencies actions, we continue to focus on opportunities to capture additional but profitable market share, and to diversify and expand our market presence. We made noteworthy progress with the expansion of our DuraPlate products group during the quarter. And, again, I am excited to again announce our multi-year agreement with PODS, one of the largest and most recognizable brands in the storage and moving industry. This partnership agreement appointed Wabash as the exclusive manufacturer of all of their fixed design PODS portable storage container needs worldwide. Additionally, we have been afforded the opportunity to also provide servicing and repair support for their franchises, which will provide additional sources of revenue for our retail business. Production began in January with expectations for some 5,000 units for this year, with projections up to 15,000 units annually in future years. Needless to say, we are very excited about this agreement, and the potential long-term growth and diversification opportunities that it presents.

While we have elected to slow some of our major product development efforts to reduce spending during this time, we still remain focused on the development and introduction of products that will benefit from the increased interest in safety and security, improved aerodynamics, and alternative energy development. One that we are particularly excited about as we head into 2009, is the development of our specialty application trailer designed specifically for use in hauling blades for wind towers. We currently have two of these units in evaluation service with one of our customers. This is an attractive growth market due to the renewed focus on green energy, and increased demand for wind turbines used in large wind farms across the country.

Lastly, production at our Benson facility in Cadiz, Kentucky restarted in September. As production has ramped up, we have been in the process of rebuilding the dealer and customer relationships, and have made noteworthy progress with this initiative. Additionally, we are focused on taking Benson from a regional to a national suppliers of aluminum flat beds and dump trailers. To accomplish this goal, we are leveraging Wabash's current sales force and marketing platform to drive brand awareness and identify possible cross-selling opportunities.

In summary, while the current environment remains challenging, we have been taking, and continue to take the steps, that we believe are necessary to right-size our operating footprint and manage our cost structure. Further, we are continuing to make selective investments in our business to diversify our product offerings, and reduce cyclicality. 2009 will be a challenging year no doubt, but I believe we have tremendous opportunity to create long-term sustainable value when the economy recovers, as we come out of this stronger and better positioned than ever before. With that, I would now like to turn the call over to Bob Smith, our CFO, to discuss details of our financial results. Bob.

Thanks, Dick. Let me take a few minutes to go over our fourth-quarter financials and talk about the path forward. Sales for the quarter, $231 million on 9400 new trailer units, 8800 vans and about 600 flatbed trailers. For the quarter ,we had a net loss of $110 million -- $110.8 million or $3.69 a share. During the quarter, we recorded two noncash charges that totaled just over $89 million, or almost $3.00 a share based on 30 million shares outstanding. In the quarter, we completed our annual goodwill test as required by GAAP. We determined that goodwill primarily related to the acquisition of Transcraft, but also including goodwill related to our Wabash wood products business was impaired. Accordingly, we recorded a noncash charge of $66.3 million. The determination that the goodwill was impaired was made after considering the current economic environment, the depressed price of the stock, and the present value of -- expected future cash flows.

I think it is important to point out that this is a GAAP-driven requirement at a particular point in time. And when you are at the -- down in the trough of the cycle, near-term events don't help you if future expectations don't help you much. Also in the quarter, we recorded an additional charge related to income tax expense of approximately $23 million, related to establishing evaluation allowance on our net deferred tax assets. We looked at the evidence both positive and negative, and concluded no longer it was more likely than not, that we would realize the full value on our net deferred tax assets. It really is a time-based analysis that said, "what has the business done over a three-year period and then looking forward to where we expect to be". The shares included in the EPS calculation, $30 million. The details are laid out in the press release.

Again, going back on sales, $231 million, 9400 new trailer units in the quarter, compared to $243 million or 9700 units in Q3. And $257.8 million on 10,900 units in the fourth quarter of -- of last year. If we look at the sales by segment, manufacturing sales were $209 million on 9200 new units. Retail and distribution sales were $30 million on 500 units. And eliminations amounted to just under $8 million, roughly 300 units. On a product line basis, new trailer revenues for the quarter, $211 million, again 9400 units. The ASP on those units was $22,400. Comparing that to the third quarter of this year, we had $216 million of sales on 9700 units, and the ASP in that quarter was $22,300. Compared to last year, units are down and ASP is up roughly about $800 per trailer.

I think the -- the ASP that we had in the fourth quarter, the slight increase over -- over the third quarter reflects the mix of product that we were selling. And it also reflects the fact that what point in time were deals done, which was generally much earlier in the year. On a unit basis sales to core customers, amounted to approximately 49% of the -- of the units sold in the fourth quarter. Again, this harkens back to the strength and the quality of our customer base. The used trailer business, we did about $7 million of revenues related to used trailers. About 1300 units were sold during the quarter. Average selling price roughly $5300. In the quarter, we -- our sales were down compared to the third quarter when we did about 2200 units and $11 million. The fourth quarter is a seasonally slow period for used trailer sales.

Also, in the third quarter we were able to take some of the lower priced units, move them to -- to scrap. That window closed as metal prices started to decline rapidly towards the end of that quarter, and going through into -- in the fourth quarter. Parts and service revenue for the fourth quarter amounted to approximately $12 million. This is down roughly $2 million from the third quarter of this year, a little bit off from the $13 million we did in the fourth quarter '07. This is the fourth quarter, again, historically it is a low point for parts and service business. And the volume of business overall remains slack as truckers have parked much of their equipment due to the reduced freight demand. Other revenues roughly amounted to $1 million in the quarter, primarily freight-related.

Gross margins -- gross profit performance declined approximately $13 million compared to the third quarter. And this is primarily due to increases in raw materials and components costs of about $11 million. Unfavorable burden costs of roughly $3 million, and a reduction in -- in volume, in part offset by about $4 million of average selling price increases. The -- we also in the quarter, had a negative in the used trailer business of approximately $1.3 million, as declining prices relative to the cost of the material plus reserves we took, accounted for the $1.3 million. As a percentage of sales, gross profit margin for the quarter was a negative 1.8%, compared to the 7.4% for the prior year period. Again, driven by the change in raw material costs and the declining volume for new trailer sales year-over-year. When we looked forward into the -- into the first quarter, the margins are going to be adversely affected by the hang over of high material costs going into the quarter. And as Dick mentioned, it will be very light in terms of production and sales.

SG&A for the period was approximately $15.6 million, which is up about $2 million for the -- from the third quarter. It is primarily due to the timing of charges for fees and outside service. And a modest increase in the -- in the allowance for accounts receivable. Overall, if you looked at it for the year, net-net, it is about $100,000 increase in provision. And just more timing than anything else. Again, compared to the prior year fourth quarter, SG&A increased about 7 (inaudible) of a million, primarily due to the increases in bad debts that I just mentioned and some stock-based compensation. Interest and other costs for the quarter. Interest expense for the quarter amounted to $1.3 million, average borrowings -- average borrowings during the period was approximately $84 million. Again as I said on the tax side, we recorded the $23 million expense in the quarter. Again, related to valuation allowances against the deferred tax assets.

The NOL that we carried forward, amounts to approximately $95 million. And these operating losses don't begin to expire until 2022. Depreciation and amortization, $5.9 million in Q4, $21.5 million for the year. In 2009, we expect depreciation be approximately $19 million. Depreciation in the '08 period included some acceleration of charges related to equipment that was taken out of service with the Lafayette transformation. CapEx, $12.6 million in 2008. That includes just under $3 million that we spent for the Benson assets. As we look forward into 2009, we are projecting a capital spend -- CapEx expend of roughly $2 million, limited to maintenance type activities and cost reduction type initiatives. Headcount at the end of the year, was 2800 full-time associates. Basically no temps were on the rolls at the end of 2008.

Looking at the balance sheet, we close the year with just under $30 million in cash. The revolver borrowings at 12/31 is amounted to $80 million. Today that is approximately $57 million of outstanding under the revolver. Liquidity which we measure as cash plus available borrowings under the line of credit are roughly $65 million as of 12/31. And I will come back on liquidity in just a second here. Receivables, $38 million at 12/31, down from the $76 million we had at September 30th, and down from the $69 million we had at the end of last year. DSO roughly 16 days. Inventories amounted to $93 million, compared to $113 million at the -- at the end of last year. Decreases were in essentially all categories. $6 million reduction in raw materials to $24 million, a $16 million reduction in finished product to just under $50 million. Used trailers was up approximately to $2 million. Turns were good, about seven times in total for the fourth quarter.

Just to come back on liquidity. As we noted in the release, we have initiated discussions with our bank group to increase the flexibility under the revolving credit line that we have. We are in compliance with all requirements of the revolving credit. I think as most of you are aware, the revolver contains a EBITDA to fixed charge coverage covenant that triggers only if our availability falls below $30 million. Our current projections for the 2009 year, looks like we will be above the $30 million threshold at each of the required reporting intervals, but the -- any deterioration in -- in the business, could impact our ability to stay above this threshold, and based on our current estimates, we would not meet the coverage test for the fixed charges.

We are very focused as Dick mentioned on the generation and preservation of cash. We are taking a look at other options to improve our liquidity and capital structure. And while it is too premature to make any additional comments at this point, I will point out that several members of our bank group have been with us through the earlier tough times we had during this decade, and we feel we have a very good and constructive relationship with the group. So at this point, I will open the line to -- to questions. Operator? Thank you.

Thank you. (Operator Instructions)

Our first question is coming from Rhem Wood of Stephens, Inc.

Hi, good morning guys.

Good morning, Rhem.

Let me start -- can you put a total dollar amount on the savings actions you have taken today. Headcount, cost savings, cutting the dividend, and how much was that in 2008 and is new to 2009? And that you mentioned on the call there were 60 employees at the beginning of the year. So -- how much of that is new to 2009?

Rhem, when you look at it the majority of those actions are new to 2009. Obviously we have been in this cycle since the beginning of 2007 and have been making adjustments as we go along. But when we look at the actions that have been taken, roundly the majority of it is a 2009 event relative to 2008. Certainly the $20 million in cost actions, Dick referenced the $5 million-plus in terms of the dividend abatement, the reduction in capital spending depends on how you want to look at that significant amount of -- of decrease there. The -- the -- while it is more of an opportunity cost than a true savings on a relative basis compared to 2008, certainly the transformation impact is a big help in the environment that we are going into. It just provides us so much flexibility in terms of the product we can produce, without having to run three additional lines to get that product out. You can imagine what we have done by shrinking that footprint. It is tantamount to closing a if a facility or to -- that other people might have to do to get to the same place. And yet we have effectively retained all of the capacity we believe is appropriate and necessary, when the industry will return to a more normal condition.

Okay. Can you talk a little bit about some -- the steps or quantify the amount that you think you can take in additional actions to generate cash?

Well, I think the actions that we are taking, that we've described before is one piece of the action. The other piece of the action which to a degree is a volume dependent event, is what happens with the cost of raw materials as -- as we go forward. Obviously that we get a benefit as the price of steel steps down. We also get benefits as the price of aluminum, some of which is tied to -- to hedge contracts step down. But we also have been working very closely with our supply base, and they -- they -- there are very good opportunities there, committed opportunities or committed savings, that we will achieve as we go forward into -- course of this 2009 year. We will also work with them in terms of terms to -- to assist on that -- on that front also. And then we continue to look at what is the appropriate level of manning. What is the appropriate workforce, worksize, workweek kind of thing.

Okay. But you can't put a dollar figure on that?

I am hesitant to put a dollar figure on it, because we haven't -- we haven't done anything yet. Let's just say, particularly on the savings side from raw materials, we think it would be a very significant step change, compared to where we were as of -- of 12/31. And the risk you run obviously, is that volumes don't -- don't materialize the way would you expect. And, also, your ability to -- to hold those -- hold on to those with a market that is chasing very small volumes out there.

Okay. Can you give a little color on Q1 '09. I am kind of assuming thats going to be as bad, if not worse than Q4 '08. And I guess in our model, we are kind of showing that you are kind of $10 million to 15 million operating losses over the next few quarters. So I guess what I am trying to get at, is what is the -- what is the willingness of the banks to kind of fund operating losses. Am I looking at that right?

I think -- I think that what we can tell you and ma Dick intimated in his remarks and what I said, is the first quarter will be a very challenging quarter that we are looking at volumes that we haven't seen, or that the industry hasn't seen in two decades. And that it will -- it will be a tough pull. And as,, a lot of the things that we have talked about in terms of cost savings, they do have a little bit of tail associated with them, because of severance-related costs and whatever. But we will start to see a fair amount of traction on those items as we get through February and deeper into March. And most of that is behind us, by the time we hit the early part of the second quarter. It -- it is beyond my ability to comment on what the bank group will do other than to say what -- other than to repeat what I said before, and I am not going to bore you with that at this moment.

Okay. Thanks. And then lastly, can you remind us how many flatbed units you are selling right now. And do you see this as kind of an Obama play? Do you see any kinds of pickup in flatbed.

We love to think it is a Obama play, but we haven't necessarily seen the manna from heaven on the stimulus package yet. But flatbed business in our particular instance was -- and I think we talked about this earlier in the year, aggravated by the fact that we did not have a good competitive offering when the customer base was looking for lower weight to -- to what's the cost of the trailer, because in the early part of the year, aluminum flats were a -- a very competitive offering. Because steel prices have come up so much, aluminum gives you the weight differential so net, net, net, it was a better play for the carriers to go for aluminum. We have remedied that situation with -- with the Benson acquisition, but still in all, the volume in the flat business is -- is as depressed as the volume in the -- in the van business.

Okay. So how many units are you doing right now?

Probably something -- I think I --

Generally ranges between 10% to 15% of our total volume, Rhem.

Okay. Great, thanks. And just one more question. Can you give a little bit of color on why Greubel resigned?

Yes, Bill -- Bill decided that it was time for him to move on with -- with his retirement years. And made that decision last week that -- that he wanted to -- to cease active participation on the Board, so I guess it is basically as simple as that.

Okay. Great. Thanks for the time.

Thank you. Our next question is coming from Kristine Kubacki of Avondale Partners.

Good morning, gentlemen.

Good morning.

Just so I understand, in terms of your discussions with the bank group, are those discussions right now primarily around the credit terms, around the covenants? Or is it also in the availability, increasing the line of availability in the future?

Well, I am not going to comment other than to say the -- the discussions with the bank group are at a very -- at a very early stage. In some respects, they have so many things on their plate that it is hard to get their attention. But it -- covers a range of -- of opportunities or initiatives, all designed at the same end point which is to provide greater flexibility for -- for Wabash under the -- under the arrangement that is out there.

Okay. And then just another quick clarification. In terms of raw material pricing, I mean, you mentioned that things were pretty tough in the fourth quarter, and we are kind of hearing people aren't expecting things to roll off until maybe the second quarter. Kind of how do you expect your raw material pricing or trends to -- will they abate in the second quarter? And more in the third quarter? And how should we think about that in our models?

Yes, I think if we -- if we talk about steel, you are going to see steel reacting sooner, rather than later in decreasing costs relative to that. And that's because of the -- of the type of contract structures that we -- that we have in place on that side. Also, the efforts that were working with our supply base in renegotiating pricing going forward, those actions will be taking place throughout this quarter and into next quarter. And would be largely completed some time during the second quarter. And we would -- we would expect to realize the -- the favorable impact from that going forward. On the aluminum side, a little bit different story. As Bob mentioned earlier, we have some forward positions that we took during the -- during the latter part of last year, which is our policy to -- to take forward positions on a decreasing basis and we have to work through those pounds now.

So that will work itself out as the subsequent quarters work through. And as we get closer to the end of the year we would have fully worked through all of those pounds, and will be working off of -- if the market stays favorable like it is on aluminum pricing, then we will be working off those pounds. So with suppliers on the aluminum side, we are going through the same type of negotiations. Suppliers who convert aluminum into finished products for us, we are working with them the same as we would on suppliers who manufacture steel components for us, to negotiate better pricing relative to what's happened in the marketplace on it.

Okay. That's helpful. And then -- just a question in terms of how you've increased market share appreciably. I was wondering if that is a result of the customer segment you are focusing on or -- how -- how is -- how is pricing impacting your market share and are competitors standing aside? How do you see the competitive dynamics in the industry right now?

Yes, the market share gains that we made were as a result of a combination of things. One that I pointed out, of course, is the -- is the strength of the customer base that we serve. They are -- they are the ones in this type of challenging environment who have the -- who have the financial means and firepower to be able to operate effectively, not nearly as challenged by some of the smaller fleets are. Likewise -- so they are able to purchase a product probably at a higher volume level than some -- then some smaller fleets can do. Also, the -- the continued improvement on -- what we refer to internally as the Wabash experience side of things. And that's working with our customers. Improving our -- the post sales support and service to the customers and all, is also helping us pick up some new customers in the marketplace. We -- we don't believe in -- in doing it through pricing.

The pricing environment is very competitive, but the -- the opportunities that -- that we have been able to gain as new customers have -- have not necessarily been through pricing, but rather through the relationships that we have continued to build and the quality of the product offerings that we have. Commenting on the pricing environment, very competitive. We expect it to continue to that be way throughout 2009. It is just basic supply and demand. As the demand stays depressed, a lot -- a lot of the competitors are being very aggressive with pricing in the marketplace. To this date, we have -- we have been successful in not only retaining all of our customers, but actually have picked up some new customers in spite of the challenging environment. So we feel very confident about -- about our position.

Okay. And then last question, kind of a bigger picture question, to lob it all together. I think most concerning to us is that we have seen the truckers reduce the publicly traded truckers, have reduced their fleet sizes again and the trailer to tractor ratio has gone way up. I guess -- what are your customers telling new terms of when they would come back to the market? And if they come back to the market, and is it going to be longer in duration than I guess, what we are even considering at this point?

Yes, interesting that the fleets that we serve the most. These large, strong fleets, they are -- they are actually gaining strength through this market. They are looking to take advantage of what's happening in the marketplace to actually increase their presence, increase the territories that they cover. And as a result, we would expect that our opportunities would actually be enhanced going forward. Now with that said, we also recognize there are excess trailers out in the marketplace, but customers are telling us that they still need to maintain the age of their fleets at a reasonable level. So most of our customers are still saying they intend to buy. Some have been placing some orders. Others are looking at what the demand environment, and wanting to get a little more clarity to it. But for the most part, the customers we serve have not changed their -- their attitudes toward replacement of trailers or their intentions to buy. It is just -- it is a timing event right now, as to do they do it this quarter or do they do it second or third quarter.

But with those fleet sizes coming down do you see that the replacement rate, I think you said 185 is kind of the ongoing normal replacement rate. Do you see that evolving or secularly changing lower then, as we go forward because fleet sizes have come down?

Actually that is an adjusted replacement figure. It used to be replacement was estimated between 200,000 and 220,000 units a year. And I believe as a result of technologies like trailer tracking, which has increased the utilization levels for fleets, to manage their fleets, not needing quite as many in their fleets. And the fact that trailers do, in fact, last longer, they're built better. Components are better on trailers. Those factors have led ACT to adjust their calculated replacement levels down to the 185. So I think we have already seen that adjustment take place.

Okay. That is very helpful. I appreciate your time. Thank you.

Thanks, Kristine

(Operator Instructions)

The next question coming from [Douglas Leif] from State Farm Insurance. Thank you. We will have to go to the next question.

(Operator Instructions)

We will take that next question from [Ralph Mirage] of First Manhattan Company.

Good morning.

Good morning, Ralph.

I just want to clarify. You said that the debt level -- the line of credit was now at $57 million.

We have reduced borrowings during the course of the first number of months or first six, eight weeks -- six weeks of this year.

So did you basically use the cash that you had at the end of the year?

We used some of the cash that we had.

Okay. Can you give that cash level right now?

It is probably somewhere five and ten.

Okay. Okay. I also noticed that the accounts payable was higher than it was a year ago. Can you comment on that?

I don't -- I don't -- I didn't notice any appreciable change in that, Ralph. We might have had a few -- a little bit different terms or the mix of the players that were in there. I don't think it was -- we have obviously tried to work our -- our working capital levers as much as we can during the course of the year. So nothing specific that comes to mind.

Okay. And then my last question is, what's your current interest rate that you are paying on your debt?

It is a LIBOR that goes 125 to 225.

So that's about 3% or 4%?

Something like that, Ralph.

That includes the hedge? You have a partial hedge as well?

That's correct.

Okay. Thanks very much.

Thank you.

Thank you. (Operator Instructions)

Thank you. Gentlemen, there are no further questions at this time. I would like to hand the floor back over to you for any closing comments.

Thank you, Jackie. Well, the operating environment continues to remain challenging, likely the worst in history, we are staying focused on executing our strategic initiatives that will further diversify our customers base, and streamline our operations. We realize that there is significant work to be done to improve our profitability, and manage through difficult headwinds. But we have strong customer relationships and a leadership position in the market, that gives us a measure of confidence that we can continue to improve our market share and sustain the business in the near term. Wabash National is a company with a proud history and a strong heritage, and we are confident in our management team and associates and long-term prospects for the business.

I want to personally recognize and thank our associates for their continued support, sacrifice and understanding as we work through this difficult time. I would like to close by recognizing Bill Greubel, who resigned as a Director of the company effective February 12th of this year. On behalf of the Board of Directors and the management team, we thank Bill for his dedicated service to Wabash National since 2002, first as President and CEO, then Chairman of the Board and most recently as Director. I personally extend my appreciation to Bill for his guidance and support these past nearly seven years. Thank you for your participation today. Bob and I look forward to speaking with all of you again on our next call.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.