SLCA (2020 - Q2)

Greetings. Welcome to the U.S. Silica Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Arjun Sreekumar, Manager of Treasury and Investor Relations for U.S. Silica. Thank you. You may begin. Arjun Sr

Thanks. Good morning everyone and thank you for joining us for U.S. Silica’s second quarter 2020 earnings conference call. With me on the call today are Bryan Shinn, Chief Executive Officer; and Don Merril, Executive Vice President and Chief Financial Officer. Before we begin, I would like to remind all participants that our comments today will include forward-looking statements, which are subject to certain risks and uncertainties. For a complete discussion of these risks and uncertainties, we encourage you to read the company’s press release and our documents on file with the SEC. Additionally, we may refer to the non-GAAP measures of adjusted EBITDA and segment contribution margin during this call. Please refer to today’s press release or our public filing for a full reconciliation of adjusted EBITDA to net income and the definition of segment contribution margin. And with that, I would now like to turn the call over to our CEO, Mr. Bryan Shinn. Bryan?

Thanks, Arjun, and good morning, everyone. I'll begin today's call with an update on our response to the various challenges by the COVID-19 pandemic and how we continue to prioritize the health and safety of our colleagues. I'll then review the key factors that drove our strong second quarter performance despite the unprecedented decline in oil field activity and a deterioration in general, economic conditions. Next, I'll discuss the tremendous progress our operations and logistics teams have made in swiftly aligning our cost structure with current market reality. Finally, I'll conclude my prepared remarks with an outlook for both our industrial and oil and gas segments and share thoughts on why we remain excited about the opportunities ahead despite a challenging macro environment. First and foremost, I hope you and your families are staying safe and healthy during this difficult time. The nationwide lockdown and the resulting effects of the COVID-19 pandemic have upended many business models and oil and gas sector in particular has been heavily impacted. I am extremely proud of my colleagues for the resilience and fortitude displayed in navigating this volatility, while continuing to meet the dynamic needs of our customers and remaining good members of the communities in which we operate. The health and safety of our colleagues remains the top priority. Our COVID-19 action team has been instrumental in providing employees with regular communications and best practice plans. As an essential supplier to key industries including energy, food and beverage and medical, we continue to safely operate across our nationwide production facilities in accordance with local and federal guidelines. I'm also pleased to report that year-to-date we're delivering the best safety performance in the history of the company with a recordable injury rate of 0.59. Now turning to the second quarter, total company revenue of $172.5 million declined 36% sequentially. Solid execution on key cost reduction initiatives helped us deliver strong adjusted EBITDA of $40.8 million, which included customer shortfall penalties of $16.7 million in our oil and gas segment. Our Industrial and Specialty Product segment generated $35.1 million in contribution margin, representing a 19% sequential decline. Volumes in this segment fell 17% quarter-over-quarter due to the temporary idling of some glass customer plants in the month of May and generally weaker demand from housing and automotive end markets as a result of the impact of COVID-19. In addition to reduced volumes, the segment's contribution margin was impacted by lower fixed cost absorption across mixed-use plants and unfavorable customer mix. In Diatomaceous Earth and Specialty Clays business however, volumes and margins were flat sequentially as demand for filtration media particularly from the food and beverage industry remained robust. We also had several exciting new commercial developments during the quarter in our industrial business including signing two new long-term contracts with multinational building materials companies for both whole grain and ground silica products. I am also pleased to share that we initiated multiple trials and bench-scale testing for our blood plasma filtration product line with key multinational bio-pharma customers that yielded promising initial results. We continue to make solid progress on our pipeline of new products and will share more information on that in the coming quarters. In our oil and gas segment, we sold 1.1 million tons down 65% sequentially, doing slightly better than the overall estimated 70% decline in well completions. Quarterly sales were mostly in the Permian basin and the Northeast and activity in other basins was minimal. Oil and gas contribution margin of $26.2 million was much better than expected due to strong execution on our cost-out initiatives and $16.7 million in customer shortfall penalties. Despite the sharp decline in well completions, we experienced minimal pricing pressure with proppant's pricing down approximately 3% sequentially, a testament to the strength of our contract portfolio and the quality of our customer base. We expect low single-digit pricing decline in the third quarter. SandBox loads declined 71% in line with the reduction in completions activity, but are expected to increase meaningfully in the third quarter as key customers return to work and add more frac crews. During the quarter SandBox was awarded full-service work with three leading operators in the Permian and Eagle Ford basin. We also signed a new delivered to the well agreement with a leading energy customer. With the recent addition of Arrows Up offering to our portfolio, we believe that we now have a roughly one third share in the last mile logistics market. Let's move now to an update on our progress on cost reduction initiatives. We responded swiftly to the sudden change in market conditions that became apparent in early March through the combination of COVID-19-led demand reduction and a sharp decline in crude oil prices. We rapidly right sized our oil and gas segment by idling seven higher cost plants and de-rating capacity at six others, which resulted in a 75% reduction in our active oil and gas capacity. We also made the difficult decision to significantly reduce our staffing to match market demand. Since the first quarter of 2019, we reduce company headcount by approximately 50%. As a result, we expect our SG&A expense to approach an annualized run rate of $85 million by the fourth quarter of this year, down from $150 million in 2019. We believe this is the appropriate level staffing for our enterprise in the current environment. Our operations and logistics teams continue to work diligently on bringing out costs wherever possible, while continuing to ensure the safety of our colleagues and the high quality of our products. Our primary goal is continue to make cost variable, as variable possible to maximize flexibility and responsiveness to changing market conditions. Our 2020 cost improvement plans are now targeting over $40 million in cost reductions, up from $25 million previously, as our teams identified additional opportunities through in-depth plant and department cost center reviews, purchasing initiatives, property tax savings and the execution of plant efficiency plans. As part of this effort, we're actively working to reduce railcar lease cost given the dramatic decline in frac sand demand and the shift towards invasive sand. We're in the process of determining which lessors will be our long-term strategic partners and have been pleased with the engagement and results thus far having executed initially lease modifications in the second quarter. We're optimistic that in the third quarter, we will complete the remaining lease modifications required to lower ongoing railcar costs to a sustainable level. I'd like to emphasize that we, you to railcar lessors that are working with us as important strategic partners and I believe they see the value in having US Silica as a key long-term customer as well. Now let me conclude with market commentators starting with industrial. In the third quarter, we expect to rebound in whole grain and higher-margin ground silica volumes as customers have temporarily shut down in May ramp back up. We forecast continued strength in our filtration business where market demand remains robust. As a result, we expect the ISP segment contribution margin to be up 5% to 10% sequentially. Looking further ahead, unlike in the past where we have experienced seasonal declines later in the year, we expect the fourth quarter this year to look more similar to the third quarter. However, we do acknowledge the heightened economic uncertainty ahead given the possibility of a resurgence of the virus and the imposition of additional lockdown as well as the lingering effect of higher unemployment. In our oil and gas segment, we expect activity to remain below first quarter levels for the rest of the year, but we are forecasting Q3 mid-single digit percent increase in our profit volumes and a meaningful increase in sandbox loads as well. Due to the second quarter benefits from customer shortfall penalties, we expect that Q3 contribution margin will be down sequentially but that the underlying business should be stronger. For the fourth quarter, we're presently expecting another mid-single digit sequential increase in both proppant volumes and loads, but once again, visibility is limited. Unlike the past two years where E&P budget exhaustion has resulted in a drop-off in the fourth quarter activity, some customers have indicated to us that there is a potential for a modest sequential increase in activity in the fourth quarter. In summary, we've acted decisively to prudently manage risk and minimize the impact of lower oilfield activity and weaker economic conditions. We successfully executed our key cost-out initiatives further improving our position as the leading low-cost proppant provider. Our industrial businesses continue to thrive led by our diatomaceous earth and specialty clay product line that have remarkably seen little to no impact from the economic contraction. And finally, while many industry peers pursue financial restructuring, we are keenly focused on serving customers and maintaining a strong balance sheet. Despite the unprecedented macro challenges, we are actively working to maintain strong liquidity and through our cost-out efforts, recent tax legislation and other work underway, we're aiming to end the year with more cash on the balance sheet than we started with. We will continue to control what we can, act in the best interest of our stakeholders and remain good neighbors in the communities where we operate. And with that, I'll now turn the call over to Don. Don?

Thanks Brian and good morning, everyone. First I would like to reiterate Bryan's comments on our team delivering a strong second quarter in which we generated $40.8 million in adjusted EBITDA despite the well-documented and unprecedented downturn in North American energy market and weaker economic condition. Moving on to the results of our two operating segments, second quarter revenue for the industrial and specialty product segment was $100 million down 12% from the first quarter of 2020, caused by the negative effects on the economy due to the COVID-19 disruption. The oil and gas segment revenue was $72.5 million down 53% from the first quarter of 2020, due to a dramatic decline on tons sold as a result of sharply lower frac activity and well completions during the quarter. Contribution margin for the industrial and specialty segment came in at $35.1 million, representing a 19% decrease from the first quarter, mostly due to a 17% reduction in Huntsville due to COVID-19 disruptions mentioned earlier. However, the ISP segment generated $44.32 on a per ton basis down only 2% when compared quarter one of this year. The oil and gas segment contribution margin on a per ton basis was $23.53 compared with $10.27 for the first quarter of 2020. The increase was largely due to $16.7 million in customer shortfall penalties, which offset dramatically lower volumes. Additionally, both segments benefited from very difficult but necessary decisions that were swiftly by our business leaders, which allowed for lower cost and reduced spending across the company during the quarter. Let's now look at total company results, selling, general and administrative expenses in the second quarter of $39.1 million represented an increase of 30% from the first quarter of 2020. The actual results were higher than the estimate provided last quarter due entirely to $15.7 million of one-time charges associated mostly with the right-off of $11.8 million of legal fees related to the unsuccessful defense from the fuel of our patents in the oil and gas segment and severance payments related to the latest reduction in staff. As Bryan stated, we expect our SG&A expense to approach an $85 million annualized run rate for the fourth quarter. Depreciation, depletion and amortization expense in the second quarter totaled $37.1 million, a decrease of 12% from the first quarter of 2020 driven by a decrease in total depreciable assets due to idled plants, subsequent asset impairments and reduced capital spending. We expect DD&A to be up slightly in the remaining quarters of 2020. Our effective tax rate for the quarter ended June 30, 2020 was a benefit of 42% including discrete items. The company believes our full year effective tax rate will be a benefit of approximately 24%. Moving on the balance sheet, as of June 30, 2020, the company has $158.7 million in cash and cash equivalent and $53 million available under its credit facilities including $12 million allocated for letters of credit, resulting in total liquidity of $221.7 million. The company increased the cash balance by $14 million during the quarter, thanks to a tax refund related to the Cares Act of $36.7 million, a laser focused on reduced spending and reduced capital expenditures versus the first quarter of this year. Additionally, the company's net debt was under $1.1 billion at the end of the quarter. Capital expenditures in the second quarter totaled $7.1 million and were mainly associated with maintenance, cost improvement and growth projects. We maintain our prior expectations and capital spending to be approximately $30 million for the full year 2020. I'd now like to focus on our cash and liquidity position. As a reminder to everyone during the first quarter conference call, we have no near-term obligation as our term loan doesn't mature until 2025 and revolving credit facility expires in 2023. Additionally, we have identified incremental income tax refunds of $33 million related to the net operating loss carrybacks attributable to the Cares Act provision that we expect to recover in 2020. This brings the total estimated refunds of $78 million and will help support our business and our cash flow goals for 2020. Finally, despite the collapse in oilfield activity and sharply lower economic growth, we still expect to end the year with a cash balance higher than that it was at the end of 2019. And with that, I'll turn the call back over to Brian.

Thanks Don. Operator, would you please open the lines up for questions?

[Operator instructions] Our first question is from Kurt Hallead with RBC Capital Markets. Please proceed.

So Brian, maybe start off with the industrial segment today, you gave some good directional commentary with respect to the second half of the year on the contribution margin. So I was just kind of curious how you think the volumes are going to rebound after the substantial decline that occurred in the second quarter?

So I think we'll see volumes up pretty substantially in industrials particularly on the sand side. Where we saw the decline in the second quarter occurred it was really a few of our large glass customers that for lack of demand idled some facilities and they've already restarted those facilities and so we start to see some of that come back in June and July looks pretty strong. So I think we'll see a really nice volume ramp in the industrials and as we look for the rest of the year, I believe we'll have pretty performance out of that business.

So maybe in the context, I guess 20% plus volume ramp and then in the fourth quarter kind of moderates a bit?

So I think something like let's say 15% to 20% volume up in Q3 and then at that level of for Q4.

So on the frac oil gas side, the frac sand side just initially so your comments about the fourth quarter right that's providing a lot more visibility than the number of other oil service companies were comfortable in providing, so that kind of stood out to me for sure. So can you just give me a general sense of the customer mix in which you're gaining that sense, those customers that you do the most business with are telling you fourth quarter, they're going to continue to accelerate their completion activity.

So what we've seen is a really interesting trajectory Kurt so just wind the clock back in April, things are going pretty well, May things have dropped off substantially in terms of completions and I believe that we hit somewhere in the neighborhood of 50 frac crews active at that point maybe a little bit less. We saw that start to rebound in June and has come back even faster in July. So I believe today we're somewhere between at least 75 to 80 crews maybe a few more and we think we could get back to 100 frac crews working by the end of the year. So on one hand it's simple math when you think about that the sand demand out there and the share that we have as frac crews come back, we feel like we will get our share of that business and then to your question specifically, we've obviously had a lot of conversations with our customers and we've got really excellent blue-chip customer base and I think our folks, the folks that we serve will tend to come back faster perhaps than others. So we know with relative certainty that some of our large customers are going to be adding frac equipment and adding frac crews coming back throughout the remainder of the year. So we're pretty optimistic that we'll see strong rebound in terms of our sand demand into oil and gas and you never know with the fourth quarter, but it doesn’t feel like a standard year to us just based on what we're hearing directly from customers.

One additional follow-up just to make sure I understand the nature of your commentary on again the oil and gas contribution margin. So when you back out the shortfall payment I think you come up with something about 17% contribution margin percentage. Your commentary said that it should get better in the third quarter. So first and foremost I am using the right number at 17% contribution margin and then what kind of improvement would you expect from there?

Yeah, you're right Kurt. If you back the numbers out, if you just talk about contribution margin per ton for a second, we did 23 and 53 in Q2 and if you back it out you're roughly at $8.50 per ton and we're saying as you role in Q3, I think it Q2 plus. I think just a little more color on that Kurt, we talked about sand demand, but we're seeing SandBox sales ramp up pretty substantially in Q3 faster than the sand demand actually. So I think we'll see a big bounce in SandBox for the remainder the year as well.

Our next question is from Stephen Gengaro with Stifel. Please proceed.

There was a study pretty recently that talked about the benefits of Northern White versus in-basin and with a similar more history and some of the longer-term production benefits of Northern White. Have you -- what have you been seeing there and hearing from the customers as far as the demand for Northern White versus in-basin?

So it's really interesting point Stephen and I think that we maintained all along that there's always going to be a place for Northern White in certain basins and with certain customers and I think that the study that you referenced in customer behavior and choices that we're seeing out there would indicate that. We do have some subset of customers who want Northern White in certain locations and for certain wells and I think in some cases it's for the general benefits that you referenced. In other cases it's well-specific. So I feel like Northern White will deftly have a home out there and we saw that in the second quarter. Things were down pretty substantially. We still had a decent amount of Northern White sand sales and surprisingly the pricing for Northern White quarter-on-quarter was only down about 2% right. So we held pricing very well there. I think it speaks to the fact that certain customers want that to recognize the value of it and are willing to pay for that.

Thank you and then just as a follow-up and I am not sure how much color you can give on this, but the shortfall revenue in the quarter, based on your contracts that are in place, are you expecting and you're giving us sort of adjusted clean expectations for the third quarter going forward. Are you expecting reserve potential for any more shortfall revenue over the next couple of quarters, it's just hard to gauge.

Well there is definitely the potential I would say it's a wide range, but our estimates would put it between somewhere in $5 million to $10 million worth of probability weighted potential, but the actual upside to that is much higher but you never know, our hope is that the customer buy the tons that they're contracted to buy, but if they don't, I think we've proven that our contracts have good [indiscernible] and we're willing to enforce those contracts and get the shortfall penalty. So one way or another, we'll get the benefit.

Great. And then just one final one for me, how much visibility do you have into the inventory of sand out there? We've some things about frac companies working through some sand inventories and have you seen that at all? Has there been any disconnect between activity in your sales volumes and is there any kind of restocking phenomena we might see over the next several quarters as activity ramps?

So I feel like the amount of order cost quote unquote "stranded inventory" out there that's been speculated is a bit overblown based on our understanding of the details of the situation and the reality is most of that inventory is in locations where the design activity going on right now. So it's not like you can move it 500 miles somewhere to sell it in a different part of a basin or in a different basin. It's just is too expensive. So we really haven't seen much out there in terms of that impacting our ongoing business and I feel like it's one of these things that it's like an interesting discussion point, but for a practical standpoint, we just haven't seen much impact.

Our next question is from Connor Lynagh with Morgan Stanley. Please proceed.

I wanted to actually touch on the G&A cost savings we're freezing just run rates are good 40% plus production in the overhead cost there. So if you could just give a little more color as to what the big drivers of that were and I guess on the flip side of things here is you restated [indiscernible] problem to have, would you add cost back there?

It's a really good question. We spent a lot of time working to get our SG&A cost down for sure and if you look at the work that the team has done, we were at $151 million in SG&A last year. We think we'll be at a run rate of about $85 million as we exit this year. So really big changes there and a lot of that obviously is headcount related, will be down at the company about 45% to 50% in headcount over the last 12 months or so. So we had to make some pretty tough decisions there, but the team has really looked boy so many other places and on top of all that, we've got another $40 million plus of other operational cost reductions in process and those are all kinds of things from sourcing to yield efficiencies at our site and a variety of other things. Some of those won't naturally show up in G&A because there are happening at our mine site, but it really doesn’t matter where you can save the dollars it all counts. I think what our team has done really well at the end of the day Connor is variablize our cost structure, it's amazing what they've been able to do and I think -- and Don has done a lot of work on this and Don do you want talk about the cost structure and how we are variable versus fixed right now?

So if you that the oil gas business and it's hypercyclic. So we've done as we plan out and really reduced our fixed cost which really protects us in a down cycle and then when the business turns around like you mentioned the high class problem when things start to move around, our business operates a little bit differently there as well because typically when our business turns around we get priced as well right. So it's just -- to be able to drive the fixed cost down in this business really helps with some both [ph] into the equation. So the team has done a fabulous job there and really it's protecting the P&L in each one of the cycle.

And maybe just one last point there Connor, we've also worked really hard on getting our railcar costs down and so while others are going through bankruptcy and things to accomplish that, I think what we're able to work with our lessors in a way that we can get substantial cost out and so all that cash goes up right to the bottom line.

Don, I was wondering if you can just walk us through the big source and uses on the cash flow side of things here. It sounds like tax is probably going to be -- maybe you can just sort of bridge the gap somewhere we are now to the increase in cash and why it's flat year-over-year?

Yeah, you're right. The big tailwind for us is going to be cash from the Cares Act. We've $38 million in Q2 and we anticipate another $40 million by the end of the year and we also expect working capital to be a source by the end of the year as well and look with all these cost savings you're going to see that as a tailwind as well. So those three things add up to us being relatively confident that we're going to end up with a cash balance at the end of this year greater than where we ended up with the end of last year.

And I think Connor what we set out as an objective as a company and we're pretty much there as we get into Q3 and Q4 is that kind of it's the worst of the worst time to be cash flow neutral and as we start to turn out I think we'll turn cash flow positive in the coming quarters and to me it's remarkable be able to do that with the kind of issues that we've had just in general with the economy and things falling off in oil and gas at least in Q2. So that's what we think about it. We want to be cash flow neutral in the sort of worst of times and then I think that will serve us well in terms of building cash when things get better.

Our next question is from [indiscernible] with B. Riley FBR. Please proceed.

This is actually Matt Key here asking the question today. So while guided deposit cash flow in 2020. I was wondering if management had kind of any additional levers if you potentially pull to increase liquidity further in the advance that kind of the business environment gets even worse or extends longer than expected, kind of for example, asset sales or other further overhead reductions that you could do to bolster balance sheet?

So as I was saying just a minute ago I think our commitment is to try variabilize the cost as much as possible and think there the playbook that we use over the last couple months here to get out right side kind of fit the economic condition, can be useful in any other conditions as well. So I think we're appropriately sized for where our businesses are today. If things were to get worse, look we'll take further actions and do what we need to do to right size our cost and try to get as much of that out as possible. In terms of asset sales there is always opportunity that we have things that we're working on continuously, the properties that we own that we don’t have to use for any more or for example when we ended up taking over the arrows up business there were a lot of equipment that came with that many, many forklifts for example that the team decided we didn’t need SandBox because they were excess. So we can sell that equipment. So we're always looking at opportunities to do other cash generation things as we need to and I think we're pretty scrappy team and we're committed to figure things out if it does get worse.

That's very helpful. Just one more quick one for me. What percentage of the contribution margin in the industrial build business is from the legacy ETE side that kind of acquisition?

Yeah I think we're about 50-50 between what I will call "old U.S. silica" and then key minerals coming in. It does feel a bit different though. If you look at the markets that we serve with the new EP minerals businesses that we acquired a couple of years ago, as we found out in this downturn, that business held up extremely well. So our filtration business where we do a lot in food and beverage and we're also getting more into medical applications there, all those things I think really helped counterweight some of the older industrial parts of U.S. Silica that are more tied to housing and automotive. So this is the first time obviously since we've owned EP Minerals that we have just kind of an economic contraction in the country and it's held up extremely well. So I love that part of the business and I know we've got a lot of questions from investors around are you happy that you took on some leverage to add that business to your portfolio and as I look at it now, this is why we wanted to diversify and add more industrial assets for these kind of economic scenarios. So I'm really excited and happy about the EP Minerals businesses and the assets that we added there.

[Operator instructions] Our next question is from J. B. Lowe with Citigroup. Please proceed.

This is actually Stephen on for Jamie. So looks like based on the outlook commentary you guys are expecting, ISP contribution margin dollars down 12% year now. I'm still in that previous guidance range of 10% to 15%. I don’t want to get ahead of myself here, but given that's it's been GDP plus business and still appreciating a large amount of economic uncertainty here, do you guys have any sort of target growth rate for where those contribution margin dollars can go next year? Could you continue to appreciably outpace GDP growth in that line?

So I think we can and if I look at the base case that I have in my mind there, I believe that somewhere between 7% to 8% CAGR in terms of contribution margin dollars is what I would target for those businesses and the underlying business grows pretty well with GDP and then you put on top of that all the things that we have in the new product pipeline and I think you can pretty easily get to that kind of a level and where you're starting to see a lot of pretty exciting things on the industrial side, we can talk about it specifically in our prepared comments. But just to give you a flavor for the kind of things that are happening on the industrial side that backstops that GDP plus sort of growth for example our new diatomaceous earth additive product for consumer products started shipping into Q2. We just signed a new long-term agreement actually two long-term agreements with two international building products customers in the quarter. And I did mention in my prepared remarks we've had some very successful initial trials and qualification runs with plasma blood -- plasma filtration and some of our key BioPharma customers and we've actually got some new products for the service course countertop market, they're moving forward with a key trials with a number of customers. So, that's a short sampling of the pipeline, but I feel really good about what's coming in the industrial business and I think our investors will be surprised to the upside with the amount of contribution margin power that we have to grow that piece of our company.

And I guess on the oil and gas side, you guys gave some pretty good color and where you think activity is going to go. I was just curious if you see I guess any just regionally where you guys see coming back, is it's different proportionally than what you had seen previously.

So as we look at Q2, the vast majority of the activity in the country I would say approaching 90% within the Permian and the Northeast and we're starting to see some life in could of the other basins. I think we might see little bit coming back in the Bakken and maybe a bit in the mid-Con and then we'll see obviously growth in the Permian and the Northeast as well. So Stephen that's what I see in the short term. Obviously I think longer-term, we'll see some of the other basins come alive again as well Eagle Ford and [indiscernible] probably we get further into 2021.

We've reached the end of the question-and-answer session. I'd like to turn the call back over to Bryan for closing comments.

Thanks operator. I'd like to close today's call by reiterating a few points. First, we delivered another strong financial quarter and substantially beat expectation on the strength of our cost reductions some of which we talked about in detail on the call today, strong execution in oil and gas and a resilient ISP business. Second, I believe that continuing to prioritize the health and safety of our colleagues is critically important and I just want to say again our team has done a great job this year and we're on track for the best company safety performance in history. So I am very excited about that. Third, we say sales volumes rebound in both of our operating segments in July and I believe we're lined up for another good Q3 and finally, we continue to carefully manage our cash and liquidity and despite the unprecedented macro challenges we do expect to end the year with more cash on the balance sheet than we started with. I am very proud of our team and I want to thank everyone for dialing in today to our Q2 earnings call. So have a great day and please stay safe everyone.

Thank you. This concludes today's conference. You may disconnect your lines at this time and have a wonderful weekend.