Question-and-Answer Session
Operator
(Operator Instructions) We’ll have our first question from Bob Simonson - William Blair.
Bob Simonson - William Blair
If I’ve got these numbers right, you’re going to have depreciation a little north of $30 million and CapEx of about $25. Does the difference and whatever net income you can earn go towards debt pay down? Or what are you looking for the balance sheet at the end of?
Robert J. Vold
Bob, clearly our goal is inventory management, deliver operating performance and pay down debt during the year.
Bob Simonson - William Blair
Are there any debt covenants that you have on the revolver that says you should or would hope to do a certain level of debt by the end of the year?
Robert J. Vold
No. there are no specific debt covenants relative to a dollar amount. There’s two covenants, one is a 5% minimum availability covenant, and the second is a limitation on capital expenditures.
Bob Simonson - William Blair
Bob, the extent of the revolver, how big is it now?
Robert J. Vold
We have about $30 million availability under our revolver today. Again our revolver capacity is $345 million. At year-end we’re at $246 million that would be under both term loan A and the revolver itself. So we would have $244 million in the revolver as of year-end. Be slightly higher than that as of today.
Bob Simonson - William Blair
Now was there also something with you could increase the $345 if needed?
Robert J. Vold
The $345 has an accordion provision. However, we cannot invoke that while term loan B, which is the Overton’s term loan, when that’s outstanding.
Bob Simonson - William Blair
If your 2008 results and your internal expectations prove reasonably accurate, can you give a guess as to how many stores you might have next year?
Mark R. Baker
Bob, what we would probably look to do is somewhat similar to what we’ve done this year. We’ve got a number of stores that are coming up on their lease provisions, a couple of them, but one or two replacements is what we have been and probably traditionally will do and there are a couple of other stores that we’ll look to in the markets, but it will be similar growth.
Bob Simonson - William Blair
And you have talked on a number of occasions even before Overton’s of the southern strategy hopefully moderating the losses in the first and second quarters and ultimately getting to some profits at least in the second quarter? Is that in this difficult environment still an expectation for 2008?
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