Rand Logistics, Inc. (NASDAQ:RLOG) Q3 2016 Results Earnings Conference Call February 10, 2016 8:30 AM ET
Annemarie Dobler - Director of Corporate Communications
Edward Levy - President and Chief Executive Officer
Mark Hiltwein - Chief Financial Officer
Scott Bravener - President of Lower Lakes
Jonathan Tanwanteng - CJS Securities
Gene Garfield - Revere Securities
Alex Silverman - Special Situations Fund
Good day and everyone and welcome to the Rand Logistics Incorporated Fiscal Year 2016 Third Quarter Conference Call. Today's conference is being recorded. At this time I would like to turn the conference over to Ms. Annemarie Dobler, Director of Corporate Communications. Please go ahead, ma'am.
Thank you, Eric. Good morning, ladies and gentlemen and welcome to Rand Logistics fiscal 2016 third quarter conference call. On the call today from the Company are Ed Levy, Rand's President and CEO and Mark Hiltwein, Rand's Chief Financial Officer. Scott Bravener, President of Lower Lakes Towing and Grand River Navigation, will join the call for questions and answers.
A live audio webcast and accompanying slide presentation will be available on the Rand website at www.randlogisticsinc.com/presentations.html.
Before we begin, we would like to remind everyone that this conference call contains forward-looking statements. For all forward-looking statements, we claim the protection of the Safe Harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy or are otherwise beyond our control and some of which might not even be anticipated. Future events and actual results affecting our strategic plan, as well as our financial position, results of operations and cash flows could differ materially from those described in/or contemplated by the forward-looking statements.
Important factors that contribute to such risks include, but are not limited to, the effect of the economic downturn in certain of our markets, the weather conditions on the Great Lakes, and our ability to maintain or replace our vessels as they age. For a more detailed description of these uncertainties and other factors, please see the Risk Factors section in Rand's Annual Report on Form 10-K as filed with the Securities and Exchange Commission on June 11, 2015, as well as other recent filings.
We may refer to certain non-GAAP measurements, such as adjusted EBITDA, which we define as operating income plus depreciation, amortization, and loss or gain on foreign exchange. Please see our press release dated February 9, 2016, filed on Form 8-K for a reconciliation of certain non-GAAP measures.
With that, I'd like to turn the call over to Mr. Ed Levy. Go ahead, Ed.
Thanks, Annemarie, and good morning everyone. Thank you for joining today's call to discuss our fiscal year 2016 third quarter performance. Our results for the third quarter were disappointing. We were adversely impacted by liquidity issues and the subsequent bankruptcy filing of one of our major customers which disrupted our operations as well as continued foreign exchange headwind.
For our fiscal third quarter ended December 31, 2015, we reported adjusted EBITDA of $9.7 million. For the first nine months of fiscal 2016 adjusted EBITDA was $38 million down 12.8% from the prior year period and 6.1% on a constant currency basis. A significant customer for whom we have had a contract to provide 100% of their water borne raw material transportation needs for over a decade, experienced liquidity issues resulting in their deferring their inventory purchasing which reduced their transportation needs.
Their purchasing deferral impacted our trade pattern efficiency particularly in October. The customer filed for creditors protection under the Company's Creditors Arrangement Act in November 2015 and secured a Debtor-In-Possession Financing facility. To address their depleted on-hand raw material inventory and meet their winter needs before the end of the sailing season, they compressed their purchasing into a 60-day window.
In addition, as a result of factors beyond our control the customer changed iron ore suppliers which lengthened their supply chain and transit time. The sum of these factors resulted in our not having adequate vessel capacity and trade pattern flexibility to be able to economically transport all of their required tonnage prior to the end of the sailing season.
We transported approximately 900,000 tons of material for the customer in the quarter on our owned vessels at historical margins and retained third party carriers to haul an additional 700,000 tons. The tons transported on third party carrier's vessels resulted in us generating approximately $7 million of revenue at no profit.
We made this strategic decision that it was in our best short and long term interest to maintain the customer relationship by securing the third party capacity. We expect that based on preliminary tonnage nomination for the 2016 season and ratable demand our profitability related to this customer will be consistent with prior years.
Because the customer was behind in securing their raw material needs it resulted in us sailing our vessels for 84 days in January 2016, many of which were dedicated to this customer. These additional sailing days compared favorably to our previously disclosed approximately 12 budgeted sailing days for the month of January 2016.
In late November we introduced our newest Canadian-flagged vessel into service, the Manitoulin. The vessel operated for 39 days in the quarter and an additional 19 days in January. The new vessel has the largest carrying capacity of any existing river class self-unloader and it is anticipated to be the most efficient vessel of its class on the Great Lakes. As previously stated, this vessel will service existing long-term contractual business which was serviced into 2015 sailing season through a third party time charter which has since expired.
During the three months period ended December 31, 2015 we operated for 1,292 sailing days which we define as days a vessel is crewed and available for sailing. This was a 69-day decrease compared to 1,361 days in the same quarter last year.
With the exception of our new vessel we sailed an average of 84 sailing days per vessel during the three-month period ended December 31, 2015 versus a possible 92 days available. This performance resulted in a fleet utilization of 90.8%. Of the 69-day reduction in sailing days, 44 days were associated with vessels under time charter whereby we received revenue regardless of whether the vessel operates or not. Substantially all of the remaining 25 unutilized sailing days were attributable to our U.S. flagged vessels which could not economically haul tonnage for the aforementioned customer.
With the exception of our new vessel, we sailed an average of 251 sailing days per vessel during the nine-month period ended December 31, 2015 versus a possible 275 days available. This performance resulted in a fleet utilization of 91.3%.
Vessel reliability remains a top priority for our company. Process improvements that we have implemented are continuing to yield results. For the nine months ended December 31, 2015 we had a total of three days out of service or 0.2% of total sailing days. This compared to approximately 37 days out of service in the 2014 sailing season and close to 150 days as recently as the 2012 sailing season.
We also monitor vessel reliability by measuring Delay Days which we define as the lost time incurred by our vessels while in operation and includes delays caused by incremental weather, dock delays, traffic congestion, vessel mechanical issues and other varied events. We experienced 156 Delay Days during the three-month period ended December 31, 2015 compared to 139 Delay Days during the year ago period.
During the three-month period ended December 31, 2015 our lost time factor calculated at Delay Days as percentage of sailing days equaled 12% compared to 10.2% during the year ago period. The majority of the increase in Delay Days on a quarter-over-quarter basis was weather related.
We experienced 333 Delay Days during the nine-month period ended December 31, 2015 compared to 342 Delay Days during the nine-month period ended December 31, 2014. Such Delay Days represent a lost time factor calculated at Delay Days as a percentage of sailing days of 8.8% during the nine-month period ended December 31, 2015 compared to 8.9% during the nine-month period ended December 31, 2014.
Overall for the year we experienced tonnage growth. Total tons hauled during the nine-month period ended December 31, 2015 including tons carried on outside vessels charter equipment increased by 6.2% compared to the nine-month period ended December 31, 2014. Tonnage carried on vessels we operated during the nine-month period ended December 31, 2015 decreased by 1.5% compared to the nine-month period ended December 31, 2014. The decrease in tonnage carried were the results of the aforementioned issues related to our steel customer in the third quarter.
Our aggregate tonnage increased by 7% to 10.8 million tons in the nine months ended December 31, 2015 versus 10 million tons in the same nine-month period last year. Aggregate tonnage carried in the three-month ended December 31, 2015 decreased 16% compared to the same quarter last year. The decline in tonnage quarter-over-quarter was a result of our achieving our annual contractual obligation ahead of plan with certain of our major aggregate customers. This was due to improvement in our reliability metric including the near elimination of days out of service as well as a decline in demand for aggregate used in certain industrial application.
We haul majority of the infrastructure aggregates transported on the Great Lakes based on preliminary 2016 sailing season nominations we are optimistic about our future aggregates demand due a recently approved legislative bill in the State of Michigan, which is aimed at increasing funding for road and infrastructure. We anticipate that this is likely to have a positive impact on aggregate demand for the foreseeable future.
Iron ore represented 12.6% of our tonnage in the year. Iron ore tonnage was down from 3 million tons last year to 2.7 million tons this year. Including iron ore tons moved on third-party vessels our iron ore tonnage for the year was up 7.5%.
Salt represented 12.5% of our total tonnage. Our salt tonnage was constant during the 2015 sailing season versus the 2014 sailing season. Based on preliminary nominations from our salt customers we are expecting our salt tonnage to be down in the 2016 sailing season given the relatively mild winter and relatively low level of precipitation in the Great Lakes region thus far this winter.
Our coal tonnage which accounts for 9.6% of our cargo was down 2 million tons from 2.5 million tons on a year-over-year basis. Most of the decline was associated with our customer who experienced liquidity issue. Including tons of coal on third party vessels our coal volume was down 12.3%.
Our grain tonnage was relatively flat year-over-year at roughly 2.1 million tons in the sailing season.
With that, I'd like to turn the call over to Mark Hiltwein for a further review of the financial results. Mark?
Thanks Ed. I would now like to provide a more detailed explanation of our financial results for the quarter ended December 31, 2015 compared to the prior year's fiscal quarter. Our third quarter financial performance was impacted by lower vessel margin per day relating to the supply chain issues of a major customer as well as lower sailing days. The reduction in sailing days was the result of our decision to reduce capacity due to meeting aggregate customer contractual commitments earlier than anticipated.
In addition, our financial performance continues to be impacted by the Canadian dollar which weakened by approximately 15% versus the U.S. dollar in the quarter ended December 31, 2015 compared with the same time period last year.
Total revenue during the three-month period ended December 31, 2015 was $45.8 million a decrease of 6.7% compared to $49.1 million during the year ago period. On a constant currency basis, our total revenue increased 3.7% or $1.8 million during the three-month period ended December 31, 2015 compared to the previous three-month period.
Included in revenue in our third quarter is approximately $8.2 million of outside charter revenue. Nearly $7 million of these revenues was the result of retaining third party outside vessels to meet the dense supply chain schedule of our customer who had liquidity issues and subsequently filed for bankruptcy protection.
Fuel surcharge revenue declined from $6.5 million last year to $1.6 million this year a reduction of 75% relating to lower fuel price. Freight and related revenue per sailing day decreased $3,026 or 9.8% to $27,808 per sailing day during the quarter compared to $30.834 per sailing day during the year ago period.
The revenue decrease was primarily due to the lower Canadian dollar, inefficient trade pattern and mix of cargo. Additionally, vessels operating under time charter that did not sail for 44 days out of a theoretical maximum of 184 days also contributed to the revenue decrease.
Vessel operating expenses decreased $5.5 million or 18.3% to $24.4 million during the quarter compared to $29.9 million during the year ago period. These decreases were due to a weaker Canadian dollar and reduced fuel prices during the quarter compared to the year ago period. Vessel operating expenses per sailing day decreased $3,067 or 14% to $18,862 per sailing day during the quarter from $21,929 per sailing day during the year ago period.
Vessel margin per day for the 2015 sailing season equaled $12,586 a decrease compared to the 2014 sailing season which was $13, 845. This reduction in vessel margin was the result of the inefficient trade patterns and the weaker Canadian dollar. Our general and administrative expenses were $3.8 million in the quarter. We incurred a one-time expense of $500,000 associated with equity based severance cost. Excluding this one-time charge, compensation and benefit expense increased modestly associated with new hires, but were partially offset by weaker Canadian dollar.
Our general and administrative expenses before the one-time charge equaled 9.1% and 8.3% of freight and related revenue during the three months period ended December 31, 2015 and December 31, 2014.
Operating income for the quarter was $3.1 million versus $6.4 million last year. Interest expense decreased from $3.4 million last year to $3.1 million this year. Unlike last quarter where we had a large tax benefit we had a $3.9 million tax expense which is driven by a number of items including a tax adjustment on a balance sheet hedge, the calculation of tax based on the consolidated approach and the seasonality of our business.
We still have substantial net operating loss positions in the U.S. and Canada and therefore we’ll not be a paying cash tax payer for a number of years. Net loss was $3.8 million or $0.23 compared to a net profit of $4.3 million or $0.21 per diluted share last year.
For the quarter and for the year-to-date period ended December 31, 2015 the average exchange rate equaled $74.9 and $77.6 U.S. cents per Canadian dollars respectively. This compared to $88 and $90.5 U.S. cents per Canadian dollar respectively for the quarter and year-to-date period ended December 31, 2014. The change in the exchange rate resulted in a reduction of $840,000 and $3.1 million as compared to the quarter-over-quarter and year-to-date periods respectively.
Over the course of the year every one penny of change in the value of the Canadian dollar versus the U.S. dollar impact EBITDA by approximately $215,000. We reduced our debt in the quarter by $12.4 million. Our cash flow from operations for the quarter was $14.1 million this year versus $11.8 million in the last year and for the nine months period cash flow from operations increased to $26.3 million versus $22.7 million last year.
In addition, we currently have in excess of $60 million of liquidity. We continue to focus on our core initiatives to improve return on capital. Our goal is to continue to improve operating efficiencies by lowering our stated lost time occurrences, continue to reduce our vessel incidences, as well as our goal to reduce loading and unloading times and increased time spent in revenue loaded conditions.
Our newest vessel is in service and will operate for the entire 2016 sailing season after introduction into the fleet in the last quarter. We believe that this vessel is the most efficient vessel in its class in the Great Lakes region and we look forward to having the contribution for the entire year.
CapEx management has been a focus as we enter the winter work in dry dock season. As the Canadian dollar has continued to depreciate, we have shifted as much of our work to Canada to take advantage of the weaker Canadian dollar.
Capital expenditures are projected to equal approximately $12 million this winter including two vessels dry docking and we are maintaining a disciplined approach regarding all capital and winter works pending.
In regards to gaining more value added revenue, we are introducing demurrage into contracts where it does not exist today and we remain focused on driving value through greater contribution from our customers. Our customers enjoy a supply chain which is consistent and cost effective and we need to ensure the results are sustainable.
Our cost initiatives will provide savings as it relates to fuel, spare parts, provisions, insurance and rent. The key is to deliver real and meaningful bottom line results. Targets for the company have been set for the year and we are going to leverage the size and scale of the business and deliver on the cost savings goal.
As part of our cost savings initiatives, we recently announced that we will relocate our company headquarters from New York City to New Jersey effective March 1, 2016. Our new location provides us with a dedicated office space for rent and will result in the termination of our reimbursement agreement with Hyde Park Real Estate, LLC an affiliate of one of our directors. It will also result in an attractive annual lease cost savings. We remain committed to improving all aspects of the business generating cash flow and paying down debt.
I would like to turn the call back over to Ed.
Thanks Mark. Over the last nine months, we have been fortunate to attract and retain a number of talented managers to our company to augment the existing team and capitalize on the depth and breadth of their knowledge. Both the Chief Commercial Officer and Chief Human Resources Officer position are new to our company and reaffirm our commitment to our customers and our employees.
Our new Vice President of Procurement and recent promotion of two of our strongest captains supports our goal of operational excellence and a detailed focus on operational metrics management. Our new CFO is improving our commitment towards cost and capital accountability.
Finally, we are beginning to score tangible wins in our commitment to improving return on invested capital including more aggressive working capital management, reducing procurement cost and our recently announced corporate headquarters relocation. In December, we began to see positive signs from a number of purchasing initiatives that our new VP of Procurement is overseeing.
Beyond purchasing we have begun reengineering and streamlining a number of other functional departments including payroll, compensation and benefit, food, travel and finance in order to improve our internal processes. We believe this will eliminate inefficiencies and drive improved profitability.
We are optimistic about the contribution that our newest vessel will have towards achieving our return on invested capital goal and believe that the $12.4 million of debt reduction in past quarter is tangible evidence of our focus and commitment to de-levering.
Operator, we would now like to open the call up for questions.
Thank you. [Operator Instructions] And our first question is from Jon Tanwanteng with CJS Securities.
Good morning. Thanks for taking my questions.
Good morning, Jon.
Good morning, you mentioned in the press release you expect the profitability from your steel customer to be in line with prior periods. I’m just wondering how that is possible given the differentiated patterns to suppliers, are they going back to the original supplier in that case or are you just getting better efficiency now going forward [ph]?
Jon at this point, what we’ve been told in terms of the preliminary nominations that they are not going back to their previous supplier. However, they’ve given us a schedule of ratable demand which we can do economically and efficiently in 2016 and which we were doing by the way in November and December post their bankruptcy filing at same trade pattern that they’re looking for – that they’re looking to be doing in 2016.
Okay. So if I understand you correctly it is possibility just that you don’t have to do their time charters anymore?
Correct. The outside charter in part was driven by quite two reasons, first of all the amount of tonnage that they needed in a very short window and in addition they changed a portion of their procured – they changed all of their – they changed their supplier a portion of which they source in a trade route that we could not do efficiently and a much further distance from their plant.
Okay. And is that inefficient route still going to be in effect going into the next year?
We are unaware, at this point I don’t think they have made – the customer hasn’t made a determination whether they are going to continue to source from that location. That location is far more expensive on a cost per ton basis Jon, so it is not in their best interest to source from that location if they can avoid it. It’s really a function, how much supply they can get from the more efficient location and that is the efficient, that is the location that we are providing the transportation route.
And what do you expect the ultimate resolution of that customer's issues will be, will they remain [indiscernible] if there is a risk 4% of revenues are they - how should we think about that?
Jon, historically the revenue as a percentage of that particular customer is around 10%, this year it was a little higher close to the 15% just because of that expanded trade lane and greater cost per ton to move it. We do not speculate on what is going to happen with our customers. I couldn’t tell you where I thought that was going to wind up. There are a few options obviously that may come out there, but it’s really tough for us to speculate on what is going to happen with that particular customer.
Okay. Great and can you provide a little bit more color on the ongoing cost reduction program, how much progress have you made to date, where do you stand at negotiating things that new fuel contract or other procurements, what is your position?
So we brought the VP of Procurement on in September. He is making great progress digging into just about every single line item in the P&L and providing savings in each one of those areas. We’ve seen some meaningful targeted, certainly at the end of the year in December there was some nice cost savings and we continue to work through the slow season here to line up and leverage our supplier base to provide us with greater cost savings.
And the ones I mentioned in the script, the galleys, the spare parts, the fuel, all of the line items are being attacked for cost savings and we are making very good progress as it relates to that. Because of our discipline around vessel incidents, our vessel incidents have been down quite a bit.
Over the past few years, we’re seeing some nice savings as it relates to some of our insurance premiums as well that we mentioned in the script also that we’ll see some savings out of the real estate move from the New York to New Jersey. So we are attacking everything, the line item and trying to drive pennies, nickels and dimes anywhere we can.
That’s helpful. Thank you very much.
[Operator Instructions] And we’ll go next to Gene Garfield with Revere Securities.
Hello, good morning can you hear me okay?
Yes, we can, good morning.
Good morning, Gene.
Okay, just a question on the outlook going back to November last year at the Stephen's Conference I believe it was Mark who provider roadmap toward fiscal year 2018 with an outlook for $42 million EBITDA and $163 million in debt. I know that was predicated on stable ForEx which hasn’t panned out so far, but just taking the ForEx aside, are the other assumptions that you used to reach those numbers still valid as of now three months later or has there been any change?
No, I think Gene, as we look at the overall health of the business, the tonnage growth was there, unfortunately it was not there ratably for us and that obviously led to an extremely disappointing quarter here. The fact that we grew our tons 6% I think is certainly a statement that’s the business is a good business. It is just that third quarter was one disappointing. I think that all of the components that drive that improved EBITDA performance are in progress and I think the first thing that is very important is the cost savings. We’ve got targets set inside the company that I think are achievable and they are meaningful targets to us and they will be hit for sure.
We are looking at better ways to gain value added sales or more value added sales from customers and a good start to that is the demurrage campaign that we’ve got going on for putting demurrage into contract that we don’t have today, the operational metrics of the business continued to improve. The vessel incidents are down which has helped us on the insurance side. We just continued to try to drive down our loading and unloading times and try to get into a revenue-loaded position as much as possible.
We talked about capital as well. We’re trying to take a disciplined approach as it relates to capital and not spend money unless there is sufficient return on capital. And then the last and probably the most impactable thing is that we’ve got our new vessel that was introduced. And if you take a look at the tonnage and forget about what happened in Q3 with that particular customer, Q1 of last year had almost 400,000 tons that were delivered on an outside charter vessel and that was about $2 million dollars that we basically passed through the books.
So that tonnage this year which is sold is going to be transported on the new vessel which is a very efficient vessel and so that $2 million of outside charter revenue that we had last year we’ll see that internally in our historical margins.
So I do believe that all of the stepping stones that we laid out and that we continued to lay out and that we continue to focus on, on a daily basis here are relevant and they are measurable and I believe that they are achievable.
So I do believe that we’ve got the roadmap to improving our return on capital and we're focused on, on a daily basis. And I truly believe that what we have been talking about over the last three or six months are still relevant today. I think we are more than disappointed with the results in Q3, again we certainly don’t want to make excuses, but some of the impact there was out of our control and we made the short term and long term decision to do what we did and I stand firm that that was the right decision for the company.
Please let me follow up what Mark is saying. The cost of the new vessel is on our balance sheet. For all intents and purposes we have not gotten the earnings associated with that asset we were satisfied with the performance of that asset from end of November until mid January she performed and we were satisfied with that performance. So we clearly have that growth opportunity ahead of us.
Our tonnage numbers as Mark had mentioned were up 6.5% including outside vessel charter. Those are the tones which are going to fill the new vessel, so it as not as though as we talked about couple of years ago when we introduced the idea this new vessel that we were going to build it without having the tonnage we had a contract, we had contracts, we had already presold the vessel. Evidence of that is the fact that our tonnage was up and that we needed to bring in third party vessels during the sailing season just to meet the demand for that particular vessel.
And then finally, this management team continues to be committed and laser focused on operational excellence and debt reduction. That continues to be our first priority and we’re pleased about the fact that we were able to improve our working capital management which was one of our initial return on invested capital opportunities and that we were able to drive down our debt by approximately $12.4 million in the quarter. So that’s what we're going to be focused on, operational excellence, driving down debt, continuing to improve those reliability metrics.
I know we've got the tonnage available to us to continue to operate our vessels in an efficient and effective manner. We can’t control liquidity issues of a particular customer and as Mark said we as a management team gathered, we made a decision that we were all committed to that we believe was in the best short and long term interest of the company and we stand by the decision.
Okay, and thanks I really appreciate the depth of your response there, that's reassuring. Could I get a follow up please?
Okay, I saw from your cue that yesterday you signed an agreement with your lenders on a wave of covenant breaches as of the end of the calendar year. I'm wondering if you could just speak a little bit about that situation? And also in particular you’ve got a requirement under the waiver of a minimum EBITDA of $5.75 million for the two months April and May coming up in the first two months of this sailing season, is that it would seem to be easily achievable based on what you did in the past quarter even with unexpected problems, but if you could just give some commentary on that I’d appreciate it?
Sure, so yes, we signed a waiver for our December 31, 2015 covenants. I will tell you that our lenders were extremely helpful and we appreciate their support wholeheartedly. With that said, we've got the mortgage [ph] out here and we need to continue to deliver on our targets and we’ve got a roadmap to getting to those targets and the key is maintaining our EBITDA, our forecasted EBITDA as well as paying down our debt. It is a combination.
As it relates to specifically the, what I'll call the May quarter-to-date threshold of $5.7 million, if you take a look at our last three years average for April and May that’s exactly what it was, it was $5.7 million for the last three years it was $5.7 million last year and we got off to a bit of a rocky start last year in April, less rocky than the prior year, but still a bit challenging. I think that the introduction of the new vessel and those tons that I discussed in the first quarter of last year, that were taken by the outside charter, that $2 million on our historical profit margin is an impactful number to us. So we view that as a positive.
If you just look at the weather conditions, there is really very little icing in the Great Lakes this year. We’re hopeful that come April 1 that all of our customer docks are ready for us to get in and start transporting that we will have an earlier start to the sail season. I think that will help as well. That is the last two years April we have had a lot of lost days, and last year I think we lost 100 days in April or close to 100 days. In the year before that it was 300.
So I do believe that targets are achievable, but I do believe that we need to work hard every single day to achieve them. I think that operationally that will certainly help us get there, but I also believe that our cost savings initiatives have to provide us with additional savings that give us the cushion to make sure that we achieve those targets. So I do believe they are achievable Gene, but I also know that we need to work hard every single day and we need to stay focused on the basics of the business here, the blocking and tackling and not lose focus on that and I clearly believe that those are achievable targets.
Okay, okay, I understood, thanks for that. Can I just bother you for one more, your stock price is now at a $1 are there going to be any skews going below that as far as listing requirements go and any contingencies you have in mind for that?
Well the NASDAQ requirements are that the stock will need to trade below $1 for 30 straight days and then there is a six-month period where you have got to try to move the stock above a $1 and then at that point you need to have a plan for NASDAQ as it relates to getting the stock above a $1. So I think that again, unfortunately we’re in a bit of a quiet period here where we’re not going to really have relevant news for a period of time. So we’re going to have to work through the stock price issue.
Okay, got you. Thank you very much for all your answers. I appreciate the time.
Okay. Thank you for your questions Gene, have a good day.
Our next question is from Alex Silverman with Special Situations Fund.
Hey, good morning.
Good morning, Alex.
Can you help us with what your CapEx budget is either for calendar 2016 or fiscal 2017 and similarly how you’re thinking about deploying your free cash in terms of availability to put on that?
So, CapEx $12 million…
And that is for what period?
That you will see that hit the cash flow statement in the April through June period.
April 2016 through June 2016.
The current fiscal year.
Got it, okay. Yes.
And that is that will be the CapEx number and in terms of utilization of that free cash flow, we’re going to be paying down debt.
Okay do you have targets you can share with us?
Alex, the way we look at it is we've got our base EBITDA, we have got approximately $12 million of cash interest payments. We've got no cash tax payments and then we've got the CapEx number of call it $12 million. So without providing guidance on the EBITDA, I mean those are the components that provides for the full cash flow, free cash flow number for the year that we'll use to pay down debt.
Got it. That’s helpful.
Any other questions, Alex?
No, I’m good, thank you very much.
Okay, thank you.
[Operator Instructions] And it appears there are no further questions at this time. I'd like to turn the conference back to today's speakers for any additional or closing remarks.
Thank you, operator. Again we want to make sure that all of our shareholders appreciate that this was not an acceptable quarter from a management perspective. We were profoundly disappointed by the outcome. We continue though to be focused on operational excellence and we continue to focus on de-levering the company as we have committed and we look forward to reporting back to you the results of our performance in our next conference call. In the meantime, if you have any questions as always please don’t hesitate to reach out to Mark or to myself. Thank you very much.
And this concludes our conference for today. Thank you for your participation and you may now disconnect.
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