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Executives

Geralyn DeBusk - President, Halliburton Investor Relations

Gilbert M. Cassagne - Chief Executive Officer and President

Steven J. Janusek - Executive Vice President, Chief Financial Officer and Secretary

William P. Brick - Executive Chairman

Analysts

Analyst for Jonathan Feeney - Wachovia Securities

Bill Leach - JWL Capital

Mike Marburg - Ramsey Asset Management

Michael Turgor - Eaton Vance

[Chris Fortson - San Cati]

Reddy Ice Holdings Inc. (FRZ) Q2 2008 Earnings Call August 7, 2008 10:00 AM ET

Operator

Welcome to the Reddy Ice Holdings Inc. fiscal year 2008 second quarter earnings Results conference call. Your host for today’s call is Gilbert M. Cassagne, President and Chief Executive Officer of Reddy Ice. (Operator Instructions) I would like to turn the call over to Geralyn DeBusk, Halliburton Investor Relations, who will begin the call.

Geralyn DeBusk

Thank you for joining us today for the Reddy Ice Holdings, Inc. conference call to discuss the company’s second quarter 2008 financial results.

Before I turn the call over to management, I’d like to review a few items. The company issued its second quarter earnings release this morning, and if you did not receive a copy, the release can be found on the Reddy Ice website at www.ReddyIce.com. Additionally, if you would like to be placed on the company's email or fax distribution for future announcements, please email your request to InvestorRelations@ReddyIce.com or call the office of Halliburton Investor Relations at (972) 458-8000. You may also register to receive announcements through the Investor Relations portion of the company's website www.reddyice.com. A replay of today's call will be available at approximately 1:00 pm Eastern Time, and can be accessed by dialing (888) 203-1112, and entering pass code number 4688797. The telephone replay will be available through August 14, and the webcast will be available for approximately 90 days.

Before we begin, I would like to remind you that during the course of this conference call, management may make statements concerning the company's future prospects, business strategies and industry trends that are based on management's beliefs, as well as assumptions made by and information currently available to management. Such statements are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995, and are subject to certain risks, uncertainties and assumptions, including known events and developments, which could cause actual results to differ materially from those that management might be describing during today's discussion. Please refer to the company's filing with the Securities & Exchange Commission for more information on those risk factors. Please note that time-sensitive information reported on this call is current as of today, August 7, 2008, but may no longer be accurate at the time of any subsequent replay. Additionally, the company undertakes no obligation to publicly update or revise any forward-looking statements.

And now, I would like to turn the call over to Mr. Gil Cassagne, Reddy Ice's Chief Executive Officer.

Gilbert M. Cassagne

As you know, the purpose of today’s call is to discuss our second quarter 2008 earnings and outlook for the balance of the year. But before getting into the detail of our results and business, I’d like to, again, thank the Board for the opportunity to lead Reddy Ice and want to re-emphasize how excited I am about building on the past accomplishments of the company and enhancing the value of the business.

Having now been at the helm for approximately six weeks during the peak of the company’s business, I’ve seen firsthand the dedication of the company’s employees, the strength of our business, and the value that the company brings to our customers. Now that being said, the national economy is experiencing some challenging times and Reddy Ice is feeling some of those effects. We believe the economic downturn is affecting key drivers of our business. The unprecedented increases in fuel costs is leading to a reduction in summer recreational activities and general consumer spending, while the decline in many real estate markets is negatively affecting construction activities. Clearly as a result, we have work to do to overcome the pressures on our business from these macro economic trends.

Diving more into the details, revenues for the quarter were $102.7 million, as compared to last year’s $103.6 million. The revenues were down $900,000 or slightly less than 1%, primarily as a result of volume shortfall due to a softer economy, which as we’ve said, has impacted consumer spending and construction activities.

Somewhat offsetting these declines was overall better weather, particularly in June, acquisitions, and slightly higher average selling prices. Adjusted EBITDA from continuing operations as defined in our credit facility was $29 million for the current quarter versus $32.9 million in the prior year. Our trailing 12-month pro forma adjusted EBITDA from continuing operations as of June 30, 2008, is $76.2 million, which includes the impact of acquisitions closed through the end of the second quarter.

Our EBITDA margin was negatively impacted during the quarter as significantly higher fuel prices and other cost increases were not fully offset by additional pricing and operating efficiencies due to lower than expected volume.

Due to lower than expected results in the second quarter, preliminary results for July and anticipated impacts from current economic trends and higher energy expenses during the remainder of 2008, we see no choice but to reduce our full year 2008 revenue and adjusted EBITDA guidance. We now expect our full year revenues to range between $330 million and $340 million, with adjusted EBITDA ranging from $70-75 million.

With regards to acquisitions, we closed one transaction during the second quarter of 2008, which has been previously announced, bringing the total acquisition count for the year to six. Total acquisition costs for these transactions were approximately $3.8 million. And annual revenue and adjusted EBITDA related to these six transactions are approximately $2.6 million and $0.7 million respectively.

Although we’ve not closed any transactions since April, we continue to review opportunities as they present themselves and believe acquisitions still present an attractive opportunity to grow the business.

At this point, I’d like to turn the call over to Steve Janusek, our Chief Financial Officer, to provide additional details after which I will return for some closing comments.

Steven J. Janusek

Let me provide some additional details regarding the second quarter.

Revenues were $102.7 million versus $103.6 million last year. As mentioned previously, revenues were down $0.9 million primarily due to volume declines related to the effect of the current economic trends on our customers and the end users of our products, offset by increased pricing, slightly better weather primarily in June, and acquisitions.

Compared to 2007, sales of packaged ice in the second quarter of 2008 were down approximately 2.4% to approximately 574,000 tons sold. Cost of sales excluding depreciation were $62.5 million in this year's first quarter, compared to $61.0 million in the same period of 2007. This increase was primarily due to significant increases in the prices of fuel, moderate increases in the prices of plastic bags and electricity related to the higher market prices for energy, and additional fixed cost related to acquired operations. Partially offsetting these increases was the effect of reduced volume sales during the quarter.

Operating expenses for the quarter were $12.1 million, compared to $10.9 million in last year's first quarter. Labor and benefits were up approximately $0.6 million due to wage increases, acquisitions and the hiring of a new CEO. Professional services were $0.3 million and bad debt expenses were up $0.1 million. The professional service increase was primarily due to the executive search for CEO.

Adjusted EBITDA from continuing operations from the quarter decreased $3.9 million to $29.0 million in this year's second quarter, compared to $32.9 million in the previous year's quarter. For a reconciliation of adjusted EBITDA from continuing operations to net loss or net income, please go to today's press release at our website, at www.reddyice.com.

Total depreciation and amortization expense was up approximately $0.5 million as compared to the prior year due to the effects of acquisitions and new CapEx. Net interest expense decreased by $0.2 million from last year to $7.8 million, primarily due to lower interest rates on our evolving credit facility and the un-hedged portion of our term loan and higher cash balances earned in interest income, partially offset by scheduled increases in and the non-cash interest expense associated with our 10.5% senior discount note. The notional balance of our hedge is $180 million while the balance of our term loan is $240 million.

The income tax expense in this year’s first quarter was $3.8 million compared to $6.8 million in last year’s second quarter. Our year-to-date effective rate is 52.9%, which is higher than expected due to a non-cash charge to tax expense in the first quarter of 2008 to adjust deferred taxes on our prior acquisition and the effective margin tax being spread over a smaller than expected net income base. We expect that the effective rate for the full year of 2008 will approximate 45%.

Our federal net operating loss carry forward was approximately $88 million at December 31, 2007. Assuming that we refinance our 10.5% senior notes by the end of 2010, we do not expect to pay significant cash tax through the end of 2010. If we do not refinance those notes by the end of 2010, we would expect to pay a minimal amount of cash taxes in 2009, and a more significant amount in 2010 and beyond until the bonds are refinanced, although less than originally forecasted due to the lower than projected net income in 2008.

In regards to the ongoing antitrust investigation related litigation, we incurred $4.6 million of expenses for legal and other professional services during the second quarter. These expenses are being funded by cash at the holding company level and have no impact on the company’s adjusted EBITDA.

We are continuing to work with our insurance carriers in regards to coverage and are working to maximize any recoveries. However, no estimates can be made at this time regarding any potential reimbursements.

Net income for the quarter was $5.7 million or $0.26 per diluted share as compared with net income of $10.6 million or $0.48 per diluted share in the second quarter of 2007. The current basic and diluted share count is 22.0 million shares and cash dividends declared during the quarter totaled $9.3 million or $0.42 per share.

With the six months of 2008, revenues were $145.7 million versus $149.0 million in 2007. The decrease is primarily due to reduced volume sales related to current economic trends. Partially offsetting these declines were higher average selling prices, slightly better weather overall and acquisitions.

Combined sales of packaged ice in the first six months of 2008 were approximately 814,000 tons, compared with 849,000 in 2007, approximately a 4.1% decline. Cost of sales excluding depreciation were $99.8 million in the first six months of 2008, compared to $97.7 million in 2007. This increase in cost of sales, again, is primarily due to significant increases in the price of fuel, moderate increases in the price of plastic bags and electricity related to higher market prices for energy, and additional fixed cost associated with acquired operations. Partially offsetting these increases were the effects of reduced volume sales.

Operating expenses for the first six months of 2008 were $22.9 million compared to $21.3 million in the prior year. This increase is primarily due to the $0.8 million increase in labor and benefits, a $0.5 million increase in professional services, a $0.2 million increase in insurance costs, and $0.1 million increase in bad debt expense. The increase in labor costs is related to annual wage increases, increased headcount due to acquisitions, and the hiring of a new Chief Executive Officer in June 2008.

Professional service expenses in the six months ended June 30, 2008, included $0.5 million of costs related to a potential acquisition that was not completed and fees related to an executive search firm.

Adjusted EBITDA from continuing operations for the first six months in 2008 decreased $7.5 million to $24.8 million, compared to $32.3 million in 2007.

Regarding the balance sheet, cash and equivalents were $28.8 million, including the restricted cash, as of June 30, of which $19.8 million is at our holding company level and represents the remaining cash generated from our IPO in ‘05 and net proceeds from the termination of the GSO merger agreement. As previously noted, the holding company cash has been and is being used to fund the cost of the antitrust investigations and related litigation expenses, and the expenses of the GSO transition, including the stockholder litigation.

As of June 30, we had $4.6 million of restricted cash remaining from the sale of our non-ice businesses in 2007. These proceeds must be used to either repay term borrowings under the credit facility or to make acquisitions and/or capital expenditures within 12 months of receipt of such proceeds. We have been using these proceeds to fund CapEx and acquisitions and anticipate fully utilizing the funds during the third quarter of 2008. Using the cash in this manner is maximizing the company's available cash and cumulative available cash under the credit facility.

Our total debt, net of cash and restricted cash was $372.7 million on June 30, 2008. Our ratio of total net debt to pro forma adjusted EBITDA was approximately 4.9 times and our ratio of operating company net debt to pro forma adjusted EBITDA was 3.2 times. Included in the net debt amount was $16 million of additional seasonal borrowings under our revolving line of credit.

From an availability standpoint, at June 30, we had $36.9 million of availability under our $60 million revolver which was net of an outstanding revolver balance of $16 million and standby letters of credit of $7.1 million. As of yesterday, availability under our credit facility was $41.7 million, which was net of a revolver balance of $11.2 million and letters of credit of $7.1 million. The revolver is off its seasonal high point and will be fully repaid during the third quarter.

Our current cash balances including restricted cash are approximately $21.1 million, which includes $18.8 million at the holding company level. Capital expenditures and dispositions during the six months of 2008 were $10.1 million and $1.5 million respectively.

Capital expenditures net of reinvested proceeds from disposition, a relevant measure in our credit facility for purposes of calculating available cash, were $0.8 million in the first six months of 2008. We also received $1.5 million during the second quarter in connection with the settlement of a property insurance claim related to a fire at one of our facilities in 2007 and recorded a $1.0 million gain in connection with the settlement.

Available cash, as defined in our credit facility and a key measure in determining our ability to pay dividends, was $24.3 million for the second quarter of 2008 and $15.2 million for the first six months.

As Gil noted, we are revising our 2008 guidance to reflect the second quarter results, preliminary results for July, anticipated impact from the current economic trends, the ongoing effect of this year’s increases in energy-related expenses, the projected impact of energy surcharges and price increases, and expenses incurred in the second quarter of 2008 related to the ongoing antitrust investigations and related litigation. These projections do not include any costs incurred after June 30, 2008, in connection with the antitrust investigations and litigations or GSO-related shareholder litigations.

We currently expect revenues for 2008 to range between $330 million and $340 million. Adjusted EBITDA is expected to range from $70 million to $75 million. Net income is expected to be $10.4 million to $14.5 million, or $0.47 to $0.65 per diluted share.

Please keep in mind that this net income guidance includes the $17 million gain from the termination of the GSO transaction, which represents approximately $9.4 million of net income and $0.42 of diluted earnings per share.

Available cash is projected to range from $47.9 million to $56.9 million. Available cash per diluted share for 2008 is expected to be in the range of $2.15 to $2.56. The projected amount of available cash is higher than it typically would be under the circumstances due to the utilization of the restricted cash generated by the non-ice business sales to offset 2008 CapEx. We continue to expect capital expenditures for the full year of 2008 to range between $17 million and $19 million and dispositions to total $2 million to $4 million, for net capital expenditures of $13-17 million. Capital expenditures, net of reinvested proceeds from the sale of our non-ice operations and other dispositions for purposes of calculating available cash under our credit agreement, is expected to range from $0.5 million to $3.0 million in 2008.

Please note that we have continue to include our expectation of depreciation and amortization expense, interest expense, income tax expense, and non-cash stock-based compensation expense in our reconciliation of adjusted EBITDA to net income. We have also included our expectations for cash interest expense, cash taxes, capital expenditures, net of reinvested proceeds from disposition, and principal repayments in our reconciliation of adjusted EBITDA to available cash. This guidance does not include the effects of any future acquisitions or corporate transactions.

At this point let me turn the call back over to Gil for some further comments.

Gilbert M. Cassagne

The results for the quarter have been disappointing as the combination of negative factors continue to affect us. In response to these challenges, we have implemented several initiatives, including energy surcharges and additional pricing initiatives. This additional revenue currently amounts to an increase of approximately 1.5% annually. In addition, we’ve implemented certain cost containment measures and are looking at other opportunities to offset the challenges we’re facing.

With that said, I am pleased that our liquidity remains strong as we look into next year and continue to review acquisition opportunities. I’m sure the antitrust investigations that are in progress weigh heavily on the minds of all of our stakeholders. And I can assure you that the Board’s special committee and its council and the company’s council continue to work through the process in the most diligent and expedient manner possible.

In the meantime, we’re continuing to service our customers with a high level of service and operate normally. Obviously due to the active nature of the ongoing investigations, we’re not able to answer any questions related to these matters in the Q&A Session this morning.

As mentioned in this morning’s press release, the senior team and I have begun a process to review all aspects of the company’s business. We expect to complete that process this Fall and look forward to discussing the conclusions of that review in a future call, and are optimistic that we will identify new opportunities and initiatives that will be both beneficial and financial accretive for the company.

I’d also like to take this opportunity to thank Bill Brick for his contributions as CEO of the company and look forward to continuing to work with him as Executive Chairman. Bill is joining us today for the Q&A Session.

I also look forward to meeting many of you who are on this call over the coming months and look forward to speaking to you again after the third quarter closes. Thanks again for joining us today. And now, we’d be happy to take any questions.

Question and Answer Session

Operator

(Operator Instructions) Your first question will come from Analyst for Jonathan Feeney of Wachovia.

Analyst for Jonathan Feeney - Wachovia Securities

Hi, this is actually Analyst for Jonathan Feeney on behalf of Jonathan. Good morning. Just a couple of clarifications, I guess, to start. Did I hear you say correctly that packaged ice volumes was down 2.4% during the second quarter?

Steven J. Janusek

That is correct.

Analyst for Jonathan Feeney - Wachovia Securities

And a little bit more than that for the first six months of the year?

Steven J. Janusek

Right. 4.1% for the first six months.

Analyst for Jonathan Feeney - Wachovia Securities

Was July roughly in line with what you saw during the second quarter?

Steven J. Janusek

Going into the second quarter, June and July, with better weather, we had our volume was up in both those months a small amount. But net for the quarter was down 2.4%.

Analyst for Jonathan Feeney - Wachovia Securities

Got it. And then just to clarify a couple guidance items. The $0.47 to the $0.65 EPS guidance, that includes the $17 million gained from the GSO transaction. Correct?

Steven J. Janusek

Correct.

Analyst for Jonathan Feeney - Wachovia Securities

And the available cash guidance includes that $17 million as well as the non-ice proceeds?

Steven J. Janusek

No, it does not include the $17 million. The $17 million went right into the holding company. So, that cash that’s sitting there has no effect on available cash. As far as the proceeds on the sale of the non-ice operation, it does not directly impact available cash. But since we are utilizing it to offset our CapEx, it’s significantly lower than what it normally would have been. So, our available cash is being increased because our CapEx is, as I said, it’s from a range for this year’s only $0.5 million to $3.0 million in terms of from a credit facility standpoint. On a gross basis, $17 and $19 million.

Analyst for Jonathan Feeney - Wachovia Securities

Great. And then can you also remind me of just on that point, what’s the significance of the available cash within your credit agreements as it relates to taking the dividends? Is that the maximum permissible dividend? How does that work?

Steven J. Janusek

The available cash accumulates into a factor that we call our “cumulative available cash,” which is the amount of money that we have available to distribute out of our operation company for purposes such as dividend or other purposes. That current balance of cumulative available cash at the end of the second quarter was about $77.5 million.

Analyst for Jonathan Feeney - Wachovia Securities

That’s very helpful. When you showed a balance of that against your outlook for the business and what you want to do around the capital structure, etc., would you care to comment whether you think that’s sort of sufficient level to maintain the dividend for certain various [inaudible]

Steven J. Janusek

John, what I will comment on that is as we’ve said on our previous calls, that is the dividend policy, something that the Board reviews every quarter, typically during the third month of the quarter with all the relevant financial data. I don’t expect that evaluation to change in terms of the dividend but I wouldn’t be able to quote right now on behalf of the Board for what they may or may not do with the current levels of operations in our future plans.

Analyst for Jonathan Feeney - Wachovia Securities

And then moving on, you sort of cleared it up with your final comments that the surcharges in pricing initiatives you referenced in the press release and in your prepared remarks, they’re going to debt out to about 250 basis points impact on sales per volume or net pricing. That’s correct, right?

Steven J. Janusek

That’s on an annual basis. So, for this year, the impact will be somewhat less than that but that’s on the annual impact from those increases at this stage.

Analyst for Jonathan Feeney - Wachovia Securities

So, how would the surcharges then, just based on sort of the back to the envelope mat, it doesn’t seem like that would offset the pretty hefty level of cost inflation you guys are dealing in. Are those surcharges going to be linked to certain commodities? What are the structures of the surcharges going to be?

Steven J. Janusek

The surcharges, as we reviewed our pricing, I’ll say that those aspects are continuously under review. And I would agree with you that at this point in time, you combine that with where our pricing is year-to-date of approximately 2.5% is what our pricing for six months compared to last year on our packaged ice revenue, you put in an additional 1.5% on an annual basis to get to somewhere on a run rate of 4% at this stage still does not fully cap our expense increases. I think we are continuing to review our opportunities going forward.

Analyst for Jonathan Feeney - Wachovia Securities

Okay, that’s helpful. And then one last one please. Regarding some of your comments, some of the macro sensitivity and consumer weakness, it’s a little surprising to hear you talk about it. At least I’ve always sort of thought it’s the business because of the nature of the product and fairly recession-resistant product. Is my view of that business consistent with the way you recall past consumer recessions? And if so, what’s different about this particular consumer environment?

William P. Brick

John, it’s Bill Brick, as I’ve been on these calls throughout seven years now. I guess I can comment. We never seen the impact that we’ve seen with the fuel pricing scale in our business through the past seven years. The only time that would be comparable to this for a short-term was 9/11 in ‘01, when sort of everything came to a halt. But you’re certainly seeing a lot less recreational use if you’re talking to people in resort areas. They’ll tell you that. The construction industry, which is a big part of our business, the downturn there. Especially some of our stronger markets: Arizona, Florida, Nevada. We’ve seen this impact. I touched on it in the last call that we were starting to feel it. We believed in the month of April when we did our call and it’s certainly has come true.

Our customer base remains the same and we’re seeing it across the board. And even though, as Gil mentioned in his comments, was better weather that we’ve had in summer markets especially a little bit in June and July where we would’ve normally see a bigger spike. We just haven’t had that. We’re slightly better but we would expect it much greater. So, it’s definitely feeling us, the economy.

Operator

The next question will come from Bill Leach of JWL Capital.

Bill Leach - JWL Capital

I’m not that familiar with your company. Can you just review briefly why your dividend yield’s so high and you’ve got a 15% yield; you’re paying out about 70% of your available cash. What is the company’s policy in terms of dividends?

Steven J. Janusek

Bill, I could touch on some of that. In terms of our dividend yield as a company, when the company went public in August 2005, our Board put in place a dividend policy which its intent is to distribute a significant portion of our available cash on an annual basis to our shareholders as a form of a return. And dividend policies are reviewed quarterly.

In terms of the yield, the yield right now is strictly a factor of the current stock price and I wouldn’t say it’s thought of on a yield basis at this stage. It’s more around the analysis of our free cash flows and all the other various aspects of our business as the Board looks at our total package and on a long-term basis. So, that was the original intent was to distribute a decent portion of our original cash and I’d say it is not necessarily thought on today as a component of a yield based upon the stock price.

Bill Leach - JWL Capital

It looks like you’ll be distributing about 70% of your available cash this year. Is that sort of in line with your long-term objective?

Steven J. Janusek

I would say from a long-term standpoint, what we’ve said historically has been that in these early years, ‘05, ‘06, ‘07 and now into ‘08 and ‘09, and with a lower cap obligation on our taxes, we would have a lower payout ratio. And then in the out years, assuming that everything remains static, we would have a higher payout ratio. So, our original anticipation for this year were a lower payout ratio, somewhere in the high-50’s to low-60%. But with the change in our guidance of adjusted EBITDA, the payout ratio is now calculated and be a little bit higher for this year.

Operator

The next question will come from Mike Marburg of Ramsey.

Mike Marburg - Ramsey Asset Management

As it relates to the debt covenant on the $240 million note, does the adjusted EBITDA number that you used for that ratio include or exclude these litigation payments?

Steven J. Janusek

As we’ve said in our prepared remarks, those expenses are being paid out of our holding company cash and are excluded from that calculation.

Mike Marburg - Ramsey Asset Management

In the discussion, kind of just to continue on the economic situation on the volume side, when I look at the last ten quarters, volumes have been negative for the last eight quarters, less two years. Volumes have been negative for six out of the eight quarters. So, it definitely makes sense that the economy contributes to a weakening volume but it seems to be a trend. You would’ve thought that this helping more. So, are you seeing more of an impact by our calculations, the ice house, America, the number of units, they’re up to about 25%. Their capacity’s about 25% of your capacity. It’s about 1,300 or 1,400 units out there now. Are you seeing an impact from them? Is there something else besides blaming it on the economy because it’s lasted now for a while, that you can comment on?

William P. Brick

With respect to the last eight quarters, we’ve talked fairly extensively that the weather patterns in summer quarters definitely affected us and historical data prove that between temperature and rainfall. Where to this, I think last quarter, we’re seeing the weather coming back to what we call “more normal patterns” and see the economy being there. With respect to the ice as of America, you said that 25% of capacity, well, that may be on a manufacturing basis but they’ve got, as you’ve just indicated, 1,200-1,300 locations. We have 80-somewhat-thousand, 82,000 boxes on the street. So, it’s really not a comparable in that respect. And if you look at some markets where they have very little, if any, business today or any penetration, we’re still seeing the effects of that. And Arizona is a great example this year, where their weather’s been up and we’ve certainly seen softness there. And that’s the market where using ice of America are the bending of example is little to no penetration at all.

Mike Marburg - Ramsey Asset Management

And then finally, the comment on acquisition, is that something that realistically we should be thinking about over the next year or so as the litigation is in process? I mean is it likely? And the cast of it seems as, based on the previous question, it seems likely that you would be doing acquisitions in the next year or so. Is that a fair statement or are you still out there actively looking?

Gilbert M. Cassagne

We are attempting to run the business as usual from a day-to-day operating standpoint. And as we mentioned, we obviously closed a few so far this year, closed one during the second quarter and we are still aggressively looking at acquisition opportunities. Obviously, the company’s strategy over the last few years has been focused on what we refer to as “tuck in” acquisitions, which are within our footprint, if you will. And we are continuing to look for opportunities along those same lines.

Operator

Your next question will come from Michael Turgor of Eaton Vance.

Michael Turgor - Eaton Vance

Just a comment, a follow up, on the question regarding the cash to pay for litigation expenses [inaudible]. How much cash is available have the holding company to pay for those expenses currently?

Gilbert M. Cassagne

Currently right now is $18.8 million. And just one small comment to that is that when we say the litigation expenses are up there, one of the things that’s also up there is, as we noted before, is the termination of the GSO transaction. That $17 million also did not affect available cash from our credit agreements and that’s where the majority of the cash that lies. Plus, as we’ve said before, some of the remaining proceeds we have are from IPO.

Michael Turgor - Eaton Vance

Oh, so the cash from GSO is on top of the other half?

Gilbert M. Cassagne

No, it’s where the majority of that came from.

Michael Turgor - Eaton Vance

So, if you burn through that $18.8 million over the next couple of quarters, cash to fund that would come from the operating company?

Gilbert M. Cassagne

Yes.

Michael Turgor - Eaton Vance

And then just wanted to follow up on--did I hear correctly the revolver balance right now is down to $11.2 million? Is that right?

Gilbert M. Cassagne

Yes, correct.

Michael Turgor - Eaton Vance

As of today?

Gilbert M. Cassagne

Correct.

Michael Turgor - Eaton Vance

And the actual cash at the operating company today is what?

Gilbert M. Cassagne

A couple of million dollars. There’s a million or two of restricted cash with a couple million dollars of operating cash. Just our historical seasonal pattern. This is a period of time where we, over the next coming months, we generate tremendous amount of cash. If you look at our guidance and all the components of our guidance, ex-new antitrust litigation expenses, without any additional because that’s an item that we’re not putting any projections out on.

The range of total cash available at the end of the year would be somewhere between $45 and $55 million or a good point of around $50 million of cash based upon our current guidance, excluding new cost-related antitrust. And of course there would be no revolver outstanding at that point in time either.

Michael Turgor - Eaton Vance

So, assuming that the dividends continue at the current rate, you should still generate sort of positive free cash flow, Gil, for the year?

Gilbert M. Cassagne

For the year we would. Although, at these EBITDA levels, the only reason that we will be fully positive would be the utilization of the non-ice proceeds. It would be close without it.

Operator

Thank you and your next question will come from [Chris Fortson of San Cati].

[Chris Fortson - San Cati]

Just wanted to make sure I understand the way that your guidance works. So, you are not incorporating future antitrust costs. So, in other words, this quarter, can I interpret of your $12 million guidance revision, $4.6 million of that is simply you recorded the antitrust costs that were not in the previous guidance?

Steven J. Janusek

No, Chris, that is not correct. The $12 million is on the guidance is on a pure adjusted EBITDA basis and those costs, once again, are not included in that calculation as they are at the holding company level.

Operator

There appears to be no further questions.

Gilbert M. Cassagne

Okay, thank you very much. I’d like to, again, thank everyone for taking the time and the effort to be on the call. I and the rest of the team are very much looking forward to progress that we’re going to make within the next 90 days, looking at the business and opportunities around the business. And obviously, at that time we’ll be back to you at the end of the third quarter and look forward to sharing our findings with you.

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Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

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Source: Reddy Ice Holdings Inc. Q2 2008 Earnings Call Transcript
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