Q1 2020 Earnings Call
Ladies and gentlemen, please standby your conference call will begin momentarily again, please standby your conference call well begin momentarily. Thank you for your patience.
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Corporations first quarter 2020 conference call My name is catching and I'll be your operator for today.
At this time, all participants are in listen only mode.
I have a question and answer session at the end of the conference as a reminder, this conference is being recorded for replay purposes.
At this time I'd like to turn the call over to Joe Disalvo, Vice President Treasurer and Investor Relations. Please proceed.
Thank you gather good morning, and welcome everyone joining us on the call today before beginning we'd like to remind you that statements made during this conference call maybe considered forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Forward looking statements with your current expectations are forecast to future events are not guarantees of future performance.
They're based on management's expectation and involve a number of business risks and uncertainties enable which could cause actual results could differ materially from those expressed in or implied by the forward looking statement.
Some of these risks and uncertainties can be found the company's filings with the Securities Exchange Commission as wells in today's press release.
[music] during the discussion today, the copper use both GAAP and non-GAAP financial measures.
Please refer to the earnings release Pulsatile, Polyone website, where the company describes a non-GAAP measures and provide you a reconciliation from the most comparable GAAP financial measures.
Unless otherwise stated operating results reference during today's call will be comparing the first quarter of 2022, the first quarter of 29 team.
Joining me today on the calls or chairman, President and Chief Executive Officer, Bob Patterson.
And executive Vice President and Chief Financial Officer Bread Richardson.
Now I will turn the color to Bob.
Thanks, John Good morning, everyone.
I'd like to start the call with a special thank you.
It's to all the first responders health care professionals food service workers infrastructure and delivery employees, who work tirelessly, giving their time and the Corona virus response and recovery efforts than many others are keeping the world moving at a time, we need them most.
For those on the front lines, our world is especially grateful for you right now.
The covert 19 pandemic is having a significant impact on the world and our first priority is that health and safety of our associates customers and all stakeholders.
We are strictly adhering to government guidelines and protocols as well as other preventative measures to help stop the spread of the virus.
At the same time, we continue to serve our customers many of whom need us now more than ever.
Just over 60 manufacturing facilities around the world.
And all that to continue to operate as we earn a central source of supply related to the caronna by our support and recovery.
These are certainly unprecedented times.
As you know on March Twentyth, we held an investor call during which we commented on our first quarter expectations in light of the Corona virus pandemic.
Now as we share our actual results. We're pleased to report we delivered adjusted EPS of 53 cents.
That's a 23% increase over the prior year first quarter and five cents better than we expected a month ago.
Recall that to align with our initial guidance provided in January.
These results exclude the impact of the additional shares we issued in February.
If we included those shares our adjusted EPS for the first quarter is 48 cents.
Much of the upside.
Was driven by better than expected margin performance across all segments and regions.
And an increase in orders in Asia late in the quarter as China recovered from the local impact of Corona virus.
When we spoke a month ago, we weren't sure how fast China could get up and running but they have certainly moved quickly and I believe this bodes well for us and the global economy.
Our margin and mix story is an important one as I believe it differentiates our performance in these trying times.
On a constant currency basis sales declined 4% in nearly all of that was due to a decline in automotive demand.
Some of this is likely pre existing weakness we saw in the second half of last year, particularly in Europe.
But we also started to see the impact of Corona virus related shutdowns.
Packaging consumer and health care markets, all fared much better and there were either up or flat globally.
Pockets of strength were seen in demand for Colorants and additives for food and beverage packaging as well as for composites.
And we also saw an increase in demand for some of our materials and outdoor.
Outdoor solutions.
I'm sure none of this comes a surprise to anyone when you consider what has unfolded in the last six weeks.
Well stay at home orders across the world and significant slowdowns and even shutdowns of certain industries.
I'll have some additional comments in a moment, but for now I'll turn the call over to Brad for some additional details on our performance for the first quarter.
Well, thank you Bob and good morning, everyone.
Now, let me first start with our GAAP earnings.
We reported GAAP earnings per share from continuing operations of 38 cents.
Special items in the quarter resulted in a net after tax charge of 8.6 million compared to 11 million in the prior year.
Special items in the first quarter were primarily associated with acquisition related cost.
Adjusted EPS for the quarter was 53 cents as Bob said.
This was driven by 5% improvement in operating income.
As margins improved in all segments on slightly lower sales.
We also benefited from lower interest expense.
From a regional standpoint.
Sales in Europe were down 7%, primarily due to weak demand in automotive applications and unfavorable foreign currencies.
Foreign currency negatively impacted the region overall sales by 3%.
Asia sales were down 6% with weaker foreign currencies impacting sales 3%.
Bill despite the slight topline decline and cobot 19 implications.
Strong margin performance resulted in a 2% growth in operating income for the quarter.
In North America sales were down 4% primarily related to weaker demand in automotive end markets and lower average selling prices in distribution as underlying raw material prices are declining.
In reviewing our segments for the first quarter.
SDN grew operating income, 9% on slightly lower revenue at strong performance in healthcare and consumer applications improved our overall mix.
The segment also benefited from lower input costs and expanded operating margins of 130 basis points.
Over the prior year first quarter.
Continued strong performance from composites, and healthcare sale offset unfavorable FX and demand weakness in the automotive end market.
Weaker foreign currencies impacted sales by 2%.
Yeah, its position in health care application Didnt happen overnight.
It's been an important and deliberate journey for all of our segments at Polyone.
We made a commitment to invest in higher performance technologies for specialty applications and less cyclical end markets.
We also hired and trained our commercial team to service customers in this very demanding market.
Recall last year I spoke about examples of new business wins in health care application.
Such as medical devices and next generation glucose monitors.
Formulations for new catheter Extrusions performance to being required for the effective delivery of liquid and medications.
And component and field on mask used for continuous positive airway pressure therapy made possible by our thermoplastic elastomers.
Healthcare and other end market diversification helped us deliver for our stakeholders last year and is doing so during this global healthcare crisis.
In fact, E.M.C. healthcare sales grew over 10% in the first quarter.
Health care also had a positive impact in our color additives in Inc. segment.
This was partially offset by automotive demand and weaker foreign currencies as operating income grew 3%.
On 3% lower revenue.
And just like in food and beverage pressure preservation.
Color and additive played a crucial role for healthcare products as well.
For example, when certain pharma content are you be sensitive and can be great. It requires packaging with additive that protect the quality and integrity of the precious content inside.
Our additives portfolio offers that anymore.
Lastly, our Polyone distribution segment delivered sales of $290 million, a 9% decline versus the prior year.
Over half of this was due to price deflation as volume declined 4%, primarily due to weakening weakening demand for automotive applications.
Margins, however expanded to a first quarter record of 6.7%.
As healthcare sales approach, 30% of segment revenue.
Before I hand, it back to Bob I wanted to comment on our strong balance sheet and liquidity position.
First we ended the quarter with $1.28 billion and cash slightly higher than we had initially projected and this is a balanced did exceed our total debt obligation of 1.2 billion.
We also have approximately $300 million of additional liquidity from our committed revolving line of credit which is currently undrawn.
Lastly, thank the conservative planning in the past years are defined plant benefit plans here in the U.S., our overfunded at 108%.
In short.
The actions we have taken since the last recession to strengthen our portfolio and balance sheet have us well positioned to navigate the challenges that lie ahead.
That concludes our segment and financial review I'll turn the call back to Bob.
Well, thanks, Brad again, I'm very proud of our teams accomplishments. This quarter initially navigating the Corona virus pandemic in Asia and now seeing how we're managing through the effects on our customers in Europe and the Americas.
Brad gave some great examples of how so many of our products are essential. Unlike many companies we are working hard to serve our customers. During this challenging time.
Although our bottom line results for the first quarter exceeded our expectations as well as a prior year, we expect the corona virus impact on to be on demand to be greater in the second quarter.
Market conditions remain challenged as most of the world outside of China remains under stay at home orders, while our business is essential in the supply chain for many customers, we are adjusting to and expecting reduced demand in the coming months, most notably for transportation and consume.
Our discretionary items.
As Brad pointed out the actions we have taken in the past to strengthen our portfolio and our balance sheet have us well position.
But that being said and as a matter of Prudence, we are already taking actions to reduce discretionary spending an administrative costs as you would expect.
We have also created a plan to reduce capex from 65 million to 40 million.
If and when needed and depending on when we start to see a recovery.
Unfortunately, we cannot predict the length of time, we will experience this week in demand or when or how fast the recovery will occur accordingly, and as we said in our release. This morning, we're not providing specific guidance related to sales or EPS for the coming quarter per year.
As investors, we can appreciate the desire for transparency, along with better and more frequent communication.
To this end, we expect to provide a mid quarter update to provide more clarity around what we're seeing in the markets and how that will translate to the bottom line as we did in March.
We will also provide an update on the clearing acquisition at this time, there isn't any new information to provide other than to convey to you that like us. The clarient Masterbatch team is working hard to serve their customers.
Over 70% of their sales into packaging consumer and health care end markets. There are products are essential and I expect their business to farewell through the Corona virus pandemic.
And this should serve as a reminder of what attracted us to this acquisition in the first place.
I have market, leading technology and specialty less cyclical end markets and they have almost no automotive or construction related sales.
Just like US Clarient has a high commitment innovating materials that enable sustainability.
This includes technologies to facilitate the use of recycled content increase recycle ability and conserve energy and water just to name a few.
Their commercial presence is strong and they have an awesome key account organization that provides an exemplary model for how to serve multinational Oems.
And from a regional standpoint, the Clarient masterbatch business increases.
Our presence outside the United States, adding complimentary presence in high growth regions like Southeast Asia, India.
I used to say, we were a U.S. company doing business around the world, but with this acquisition I believe we will be a truly global specialty organization.
And that is what we have been all about for over 10 years.
From the day my predecessor first introduced our four pillar strategy in 2006, we've taken actions to become more specialized.
These included divesting commodity businesses and significantly reducing our exposure to cycle cyclical end markets like North America housing and auto.
Last year's divestiture of Pbms stands out as our most recent step in this regard and this is huge when you think about where we are today.
Simultaneously, we have increased our presence in other less cyclical and highly specialized technologies like composites barrier technologies and healthcare related materials. These are proving to have staying power more volatile times like we are experiencing right now.
Consider this in the last few weeks, we've been rushing orders to support production for ventilators and masks that use our thermoplastic elastomers, we're supplying high strength composite material orders for hospital bed components and we're also involved in fulfilling high demand for Culver 19 test kits.
Our materials are a key component in the supply chain that allows for food beverage and personal care products to continue to be produced package shipped and used.
In addition, our materials allow for infrastructure telecommunication and technology to function and they must continue to do so, especially now.
10 years ago, I don't think we could have done this or said this in fact in 2009, we were at the bottom of the greatest recession, most living generations have ever seen.
I'm, telling you. This because this management team has led through a lot of adversity, and we will do so again.
Last year, we launched our new branding campaign, and it's called challenge accepted.
We built out around our ability to solve our customers' biggest challenges that's who we are what we do.
Now on the current pandemic and the related challenges, we're facing as a global community. This new brand in this promise we make has taken on an even greater meeting.
L. China serves as an example of how the early steps of recovery can take place and all the coming demand declines we expect in Europe, and the Americas too shall pass soon.
For now we will continue to take care of our associates and serve our customers as we have always done.
That concludes our prepared comments for today's call will now open the line up for questions.
Thank you call lines open as a reminder, you would need to press star one to ask a question.
Please limit your questions to one question and one follow up.
And our first question comes from Ben Kallo with Baird. Your line is open.
Hey, Thank you good morning.
Then we could just start.
Bob just I.
No just bought all our visibility, but if you could just walk us through.
What you're seeing through April.
By geography, and how steep decline in demand.
And then maybe could you just remind us about raws.
Correct.
Oil environments, and how we should factor that it as well.
Yes, maybe I'll take the last one first if I can.
One thing I'd, just remind everyone on the call sometimes.
Have a tendency to look at major indices of things like polypropylene and polyethylene and certainly those our raw materials that we use but they're really only about 10% of our.
Spend when you look at color and engineered materials.
In total we had a raw material benefit of about five and a half $6 million in the first quarter bands. So hopefully that kind of puts things in perspective of what we have seen so far.
That likely carries into the second quarter as well.
April orders just to put that in perspective, our are down and they are down about 15% from where we were last year.
And that's almost entirely driven by a decline.
That we're seeing an automotive demand as well as what I'd describe as consumer discretionary items.
And then maybe ill sneak one more Brad could you just talk about the debt markets and beds plans around financing.
Acquisition there.
If you could give us an update there.
Yes, I mean.
Yes, Ben were watching the markets, obviously very closely the last couple of weeks have been good for the debt markets since the federal reserve has stepped in.
And so we haven't set timing, but I can tell you that the markets now.
In the non investment grade market that we would be issuing into our open there are issues issuance being completed but we're watching it closely at this point and certainly again the fed action has improved the market. So we'll just watch it here over the next several weeks.
Great. Thank you.
Thank you. Our next question comes from Mike season, with Wells Fargo. Your line is open.
Hey, guys.
Nice start to the year.
But when you think about yeah. The last downturn your portfolio as much different I think I recall volumes being down 20% can you maybe talk about the differences now in this.
Downturn and and.
And I know you just noted what you thought April orders would be but if you think about the last downturn in this downturn, maybe differences in your portfolio and and how this this business could perform.
The into this recession.
Yeah.
Well, let's first talk about end market differences. Obviously, if you went back in time to 2008 2009, well over half of our sales came from building and construction or automotive related end markets principally in.
North America, and maybe just to provide some more context around the size of those end markets today.
Building instructions actually quite small now at about 6% of sales.
But maybe from an automotive standpoint, because I think thats, probably the industry, that's going to see the most significant reduction in demand here in the near term Mike.
We actually if you were add up everything as directly automotive related or wire and cable that goes into automotive.
Last year, we had about 125 million in revenue.
Dedicated to those end markets. So that was about let's say 15, 16% of our sales last year to second quarter.
Again, maybe the second market would be around consumer discretionary items and not approximated about $60 million in revenue last year. I mean these are the two areas that we expect to see the most significant declines in demand.
In the coming months, but as you can tell we're talking about 18% of our sales.
So that's obviously far different and much smaller than where it was in 2008 or 2009.
Got it and then.
A follow up when you think about the Clarion transaction.
Yes, given difficult.
All tied to predict anything, but if you think about the deal closing.
How do you think about synergy now how do you think about accretion now.
Yeah, what sort of your base case.
Transaction does go through.
Yeah, So well first of all I really expect.
On a relative basis that the Clarion masterbatch business will perform relatively well during this time because over 70% of their sales are into.
Packaging consumer and health care again, an underlying thesis for why we have always liked this acquisition.
I don't believe the current market conditions.
You know change our perspective on the long term strategy of this this deal so that's important for us to remember.
There's no change relative to what we think we can accomplish from a synergy standpoint relative to.
Sourcing or back office consolidation.
And those types of things, albeit that they could take place a little bit further out into the future depending on when the deal actually happens. So in our base case really hasn't changed with respect to our underlying assumptions about putting these two organizations together.
We are still waiting for regulatory approval in a couple of jurisdictions that again made still take some time may potentially even be delayed as result of grown a virus. So hopefully that answers your questions Mike.
Great. Thank you stay safe.
Thank you we have a question from Frank Mitsch.
Gary.
Research Your line is open.
Hey, good morning folks and.
Bob appreciate the commitment to do a mid quarter update if I could just follow on to your comments about regulatory approvals, where specifically are you.
Are you still awaiting approval then you suggested that that might be delayed due to.
The current of Iris.
So with that as a backdrop, where when when you are how far delayed you think what's your what's your current thinking on on when and if that deal may close.
Right, so two locations or Morocco, and Russia.
Those approvals could come obviously in the next few weeks or.
Later in May the earliest we could close is really unchanged from what we said before which was.
June 2nd, but there are a number of other conditions to closing that need to take place.
That we're still working toward as well so.
There are still.
Some I'd say timing things is still need to work out and so the earliest we could do anything would be June 2nd.
And.
Thank you.
Offered that 70% of their businesses are more attractive markets.
I assume that you've been tracking there.
Results.
Since you signed the document et cetera, how would you describe clarion its results and outlook relative to relative to expectations.
Well I don't have their final numbers for the I don't know flat first quarter numbers, then as we prepare to actually go out and do a debt issuance at some point, we do need to were sent a refresh the financial projections. So.
At this point I really can't comment on their or their first quarter results I know, they're going to have a call I'm sure in a couple of weeks time, and they'll probably provide some better details on that so I'll leave that to them to cover.
Gotcha, and with respect to that to the debt offering given how.
Given how positive your timing wise, how good your timing wise on the equity offering.
Everybody is going to be.
Switching as to when you when you bought perfectly cherry pick.
The debt offering thanks, so much.
Thank you Frank [laughter].
Thank you. Our next question comes from Laurence Alexander with Jefferies. Your line is open.
Good morning, two questions one.
Yes, how you adaptation this environment is affecting your technical sales.
Runway costs.
How do you think about the sales cycle, you're going to customer interaction.
And.
Secondly, just clarify the 15% decline.
Year over year, correct rather than.
Sequentially.
And can you give any sense for.
No unusual surge that you're seeing on the health care and packaging order, maybe I mean because.
So.
The company's we're talking I'll, probably like walking one month order book.
I do think more realistic run rate.
Visible to you can get there.
Yes, so the three questions there Lauren Sloane me.
Take them there first of all the comment relative to April orders being down 15% you are correct that as compared to April of last year sequentially that would be about 10% below what we saw in the first quarter of this year.
Your question related to health care.
If you look in total for US health care sales were actually flat for the first quarter, maybe up about a percent. What we saw was there were certain sub segments of health care that were actually up by 50%. So if I look at certain areas of medical equipment in those that we.
I think really are very much connected to.
The Corona virus response were up significantly, but it's been offset to a certain extent bye.
Things like elective surgeries being postponed and then a reduced demand for drug delivery devices surgical devices and lab, where things that are general.
To that so healthcare is up a little bit in the first quarter, but there are two things going on there that result in that and then I believe your first question was around just how maybe the pandemic is sort of impacting technical sales and.
Well as you can imagine I mean face to face sales calls just are taking place right now, but I have really been amazed by the amount in volume of interaction as taking place between us and our customers still on technology related items and I just had a conversation.
A day or so ago with our head of technology. You. Just said you just is amazing how much inbound is still taking place and in fact, your even seeing.
Perhaps some people looking beyond the pandemic and things that are longer term from that and maybe that's because they are at home and.
Got time to do that or whatever it might be I can only conjecture, but.
Clearly theres a huge focus on the here now and handling the supply chain and get in materials out to support the response and recovery that's the priority, but it really doesn't seem to have dampened the enthusiasm that customers still have for next generation products.
Okay, great. Thank you.
Thank you and our next question comes from Colin Rusch with Oppenheimer. Your line is open.
Thanks, So much you can speak to inventory levels that are in the channel right now and how you see that.
Moving at this point.
How do we see inventory movies inventory movement, where I'm sorry.
So where inventory levels.
In the channel downstream from you guys.
And how quickly are those things moving if orders are pretty strong and.
Inventory levels are overly accessing it seems like there is maybe a decent environments for your guys. That's we're trying to get after.
Well, what I think really remains to be seen is just what happens to demand here in April and May and then.
That will probably put inventory levels into perspective, I think we're already.
Feeling the pull back and auto certainly at the end of March and April.
There wasn't anything that I would have pointed to or even standing here right now that I would say was out of the ordinary unusual about.
About inventory.
To comment on of any real substance column. So I mean, if something changes maybe an army Corps update we've got some more color on that but right now I don't really think there was anything alarming or different.
Okay, and then in terms of the factories that are up and running can you just a sense of where utilization as at this point.
Yes, I mean, it really does vary we have.
India for example, that's been as low as about 10% maybe closer to 20 now.
Just based on certain jurisdictional requirements on what can be made in our facilities.
Many of our plants are actually between 75 and 85%.
Utilization and so continuing to really wrong, but it really is a spectrum depending on location. There's only two that are closed.
One is in Italy, and the other is in Peru.
Perfect. Thanks, so much.
Thank you. Our next question comes from Popcorn.
Goldman Sachs. Your line is open.
Good morning. This is Don Campbell on for Bob Good question inherent in the first quarter.
Impressive margin grew on a year over year basis.
Particularly in color.
Previously.
I'd comment that you don't expect your margin improvement I'm until the second quarter 2020.
Im curious kind of what drove that earlier than expected margin.
On a year over year basis then.
Expectation.
Yes, I mean, I really think it is a combination of.
Some raw material benefit I do think mix has helped us I mean, when I look at the sales decline in.
Color. It is almost entirely automotive related while auto is small it is where we saw the decline.
In the first quarter.
And where that was.
I had some still upside yet and.
From end market standpoint, really was around packaging and healthcare. So mix is certainly a part of that.
But there was some raw material benefit as well and then if you look year over year.
About $1 million of.
Sales general and administrative costs, which are down and.
Some of that as a result of administrative actions, we took last year, but we've also just not to replace personnel as we've had to tread normal attrition.
Over the course of the last six months.
Yes.
And in terms of that the raw material benefit.
Long expected to be able to hold onto the kind of capture.
Sure a benefit or how much are historically you have you been able to.
Hold on to pricing umbrella.
The way scenario raw material environment.
Well I think both the color in engineered materials businesses of.
Done a really good job of managing you know in both deflationary in inflationary environments.
And being able to hold onto that as I said I think in response to one of the very first questions about raw materials is that.
If you just look at headline things like polyethylene and polypropylene, it's just such a small part of our spend.
That it's really a much broader larger basket of raw materials, and and I think you know as a result of that that helps us to preserve.
Those benefits when we when we see them and it also helps us I think to communicate on pricing changes in the future when we see inflation. So.
It's not index based business. So there is no formula to those that says we're going to give it all back in three months as not all works.
Thank you.
Thank you and our next question comes from Jim.
With Suntrust. Your line is open.
Thank you good morning.
Can you talk about your wire and cable business fiber line and your sales into five GE is that some of the stuff that did well in the first quarter and if so did that you into April or did that slow down how does your order book luck in.
Fiber line business.
Yeah. So if you take the entire.
Wire and cable portfolio that we have we did start to see a pullback for our business that relates to.
Transportation, there's also a slight decline as a result of wire and cable that goes into oil and gas applications, which you could imagine right now.
The quarter was relatively flat from.
Infrastructure.
Build out if you will around technology, but we actually expected that will pick back up again.
In the in the later part of this year so.
So for the most part, but we had in fiber lines actually doing just fine really what we saw a decline in there just to be specific about fiber line really was around oil and gas market in Europe.
And regarding your near term liquidity.
Like your cash.
Other than expected at the ended the quarter kind of flexibility do you have second the balance sheet. During this recession and did you provide some detail on any debt covenants you have a and you mentioned the revolver or do you have plans to tap that revolver.
Well, we don't have any plans to tap the revolver.
One thing I'd say about Brad mentioned as I think already so might be a redundant here but.
In a downturn you know we are going to see some benefit from working capital, we actually expect our cash flow this year to be equal to last year, even with a sort of a projection of sales being lower so I think that's all positive and maybe Brad can talk on covenants, we don't really.
Have you. So it's a short conversation, yes, Jim and just last year, we generated 160 million of free cash flow and again as Bob said, I think we will be at or even slightly better because of the release of working capital. Bob just mentioned terms of the covenants that it really is a very short conversation we have no.
Financial covenants. So there are no.
EBITDA to interest or debt to EBITDA or any kind of thing.
Like that that we have to comply with so we have a very covenant lite debt structure and again nothing matures until 2023.
Thank you.
Thank you and we have a question from Rosemary Mulberry with GE Research. Your line is open.
Thank you good morning, everyone.
[noise] growth.
Bob I was wondering if you could give us a better feel for the raw materials that you are using outside of polyethylene and polypropylene and what the trends in those particular categories.
So you can think about capital our carbon in glass.
It is important.
Inputs for composites business, there actually up year over year.
Nylon six announced six axis and other.
Port raw material for again, the end business and are down a little bit year over year, it's kind of a push if I look at the total spend there.
And then maybe shifting gears to look at color the two largest areas of spend or a T O two and.
Pigments and they were down just slightly in the first quarter.
Okay. Thank you outside of some.
DNA.
What are the in <unk>, you know cost control what other actions can you do too can you take you noted to us that what it's going to be.
Well looks like it pretty decent <unk> second quarter in terms of global demand overall im not talking just probably one and we don't know how long that it's going to last so what else can you do.
Yeah, I mean, I think it's important to look from a from a manufacturing or operational standpoint.
We can flex our workforce to manage and meet demand.
I will I will say that it's challenging in this environment as some things get rushed and move forward or faster, we actually need to have an even more flexible workforce and I'm really proud of our team.
For being in that regard so it really is around administrative costs.
Obviously things like travel, we're just not traveling and so those costs are going to be way down this year, but we will flex the planned spending as we need you to match demand.
Okay, and if I Miss sneak one in one more you said that healthcare, we presented about 30% of distribution do day he has that properly.
Yes, correct.
And so is the your distribution business the higher margin.
Due to the fact that they are selling more of your in house products. If I can tell them that as opposed to we packaging you know basic cuisine said you buy elsewhere and in bulk.
I don't know the margin expansion, we saw in distribution really Wasnt, a result of selling more.
Polyone materials, but it is a result of mix. So that was to your first point I think around healthcare.
Which was the bigger impact, but a lot of that of course is material that we provide from our other suppliers. So it's a mix. If you will the health care was driving that again I wouldn't point to the stuff that were sold on behalf of us as being a major mover of their margins in Q1.
Okay. Thank you.
All right. Thanks, we appreciate.
Your your questions everyone that concludes our call today, we'll obviously have more.
To say here as we get through the quarter as I said in my prepared remarks, we certainly appreciate.
The investor desire for transparency and more frequent communication and we'll look to.
Provide an update sometime during.
The second quarter. Thanks, everybody.
Ladies and gentlemen, today's conference call. Thank you for participating you may now disconnect everyone have a great day.
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