Q1 2020 Earnings Call
2020 conference call at this time, all participants on notice and only mode. Later, we'll conduct a question and answer session at that time, if the other question you. When you press the star followed by the one key on your telephone.
Conference call is being recorded today Wednesday April 29 2020.
Before we begin note that the matters. The company management will be discussing today are not statements of historical facts are forward looking statements went into many of the private Securities Litigation Reform Act up 1995.
These statements regarding 2020 total company financial outlook as well as statements relating to the Companys expectation strategies.
Well I guess.
These forward looking statement are not guarantees of future performance and involve significant risks and uncertainties.
Actual results to differ materially from those projected.
Furthermore, it should notice that the full impact of the Comac nine she's a gimmick continues to evolve I Scotch deferral magnitude. The pandemic will have on the Companys financial condition liquidity and feature was also operations if I'm sorry.
The following discussion by management about the Companys financial condition is subject to future stacked with the cobot 19 pandemic.
In addition to cope with 19 pandemic important factors that could cause actual results to differ materially if when the company's expectations I disclosed under this factors in the company's form 10-K, and I do you see filings.
Oh, <unk> looking statements, Amit only up to date hereof, except as otherwise required by law, we assume no obligation to update any forward looking statement.
In addition to the press release issued today.
Oh still filed with the Sq feet earnings release on form 8-K and to form 10-Q.
Speaking today will be Joanna Chief Executive Officer, and Keith right, Chief Financial Officer I.
I'll now turn the call over to Mr. Hannah. Please go ahead Sir.
Thank you Libya good afternoon, and thank you for joining us on today's call I will start the call with some overall remarks and comment on our first quarter 2020 performance and are looking ahead.
It will provide additional detail in his financial review and outlook comments.
Before reviewing our first quarter performance I would like to remark on the health and safety or team members as we have transitioned to a very different working environment over the past six weeks relating to the cold It 19 pandemic.
We made many changes to our operating protocols to ensure that we're in compliance with national and local health <unk> weighted guidelines and placed the health of our team members as a top priority.
We are fortunate to have a team that is dedicated and ready to serve our customers and they ensured that the business remained operational across the board while adhering to all the additional safety requirements.
Many of the company's and projects, we are supporting our deemed essential and therefore, we are at work.
So now, let's turn to our first quarter 2020 performance.
First mobile modular delivered a very solid quarter and demand was healthy in both our education markets as well as our commercial infrastructure markets.
Student population growth and modernization projects in many of the markets. We serve continue to drive classroom rentals.
Trs Rentelco demand for general purpose test equipment was robust and broad based consistent with previous quarters.
On the communication side of the business infrastructure for bandwidth expansion was underway to support Fiveg Rollouts.
At Adler, we continue to see weakness in oil and gas and related industries as demand for oil worldwide slowed thus reducing activity levels.
I would like to now address some of the current demand conditions in our environment.
Customers are adjusting their plans in real time, so there's a lot of uncertainty at mobile modular most education projects appear to be proceeding as planned and if you are even starting earlier due to schools being vacant.
Some commercial <unk> construction projects are proceeding well others are getting pushed out until later in the year and this is varying by geography.
It appears on balance that any instance of changes to construction projects. The majority are delaying as opposed to canceling plans.
Trs many of our semiconductor and defense contractor customers are working and are expecting our support.
Some fiveg infrastructure projects are pushing out resulting in higher than normal equipment returns and fewer new shipments, but we do not currently expect significant cancellations of installation work that major carriers have planned.
Work in the field has slowed that's contractors have had to adjust to new social distancing requirements, but we believe many well be back on the job as shelter in place restrictions are lifted.
At Adler, while upstream oil and gas work is only 9% division rental revenues, we believe the rebel from the collapse of oil prices is now being felt through the supply chain from last well had activity and environmental support work to downstream refinery.
The projects.
Many projects are being delayed with lack of clarity on future start as the industry deals with an unprecedented supply and demand imbalance.
There are markets construction projects are delaying but we're not seeing many cancellations at this point.
I would like to stress that the information, we're receiving from our customers, it's fluid and dependent on unpredictable market conditions. Therefore, the level of uncertainty is very high.
Projects directly relating to covert 19 emergency support had been light with many inquiries, but no material projects to speak up.
Recovery depends on the pace and success of restarting the economy and getting people back to work on a broad scale.
We are expecting challenging demand conditions near term and possibly longer if shelter in place restrictions continue in our geographic markets.
Given the changes we are seeing and our operating environment, we are adjusting along with it.
We have taken steps to reduce expenses due to a slowing topline we've curtailed hiring reduced all extraneous expenditures delayed less critical projects and closely examined our capex plans for the year, which will be reduced.
I would also like to stress a few things about the durability Mcgrath rentcorp and our ability to whether an economic storm like this.
We transition quickly and successfully tab team members work from home if they can and have our field teams supporting business demand under more stringent pandemic related operating conditions.
We have many long term customer relationships and we had a seasoned leadership teams running our divisions.
We also have a very strong financial foundation to support ongoing business operations.
And tying that altogether as a group of team members that are dedicated and work well to support our customers in each other.
While the current environment is difficult, we hope for stabilizing and improving conditions as the year a progressive.
Now, let me turn the call over to keep it will take you through our financial review.
Thank you Joe.
Picking up on Joe's comments [laughter], our primary focus since the cobot 19 pandemic began to significantly impact the U.S. as being on the health and safety of our team members ended then business continuity to service our customers.
Our teams have done a great job in moving quickly to adapt to the hopefully temporary new operating norm.
They did all this while also delivering strong first quarter results, which we were very pleased.
And this next section of our prepared remarks, I'm going to briefly recap. The first quarter results highlights then turn to expanding on Joe's comments with respect to high we're managing our financial health through the current Qubic 19, uncertainties.
Please refer to our earnings press release, and first quarter 10-Q for more details and risk factors.
For the first quarter of two 520 total revenues increased 6% to 129.5 million from 122 million a year ago.
The company's 9% operating profit increased for the quarter was driven by 4.4 million increase in gross profit from rental revenues and 1.2 million increase gross profit on rental related services revenues, partly offset by a 1 million decrease.
Gross profit on sales revenues.
Net income increased 9% to 20.2 million from 18.4 million.
And earnings per diluted share increased <unk> percent to 81 cents from 75 cents.
No I will briefly results dawn by reviewing rental division operating results and performance compared to the first quarter two Thaugsuban 19.
Each of our rental divisions had minimal impact from Qubic 19 pandemic during the first quarter of 2020.
Mobile modular total revenues increased 8.1 million or 12% to 73.2 million on higher rental and rental related services revenues, partly offset by lower sales revenues.
Rental revenues for the quarter increased 12% from a year ago, which was driven by 87% improvement in average rental rates and 5% higher average equipment on rent.
Sales revenues decreased 2.7 million or 9% on lower new equipment sales.
Rental revenue growth was healthy across our commercial and education markets as well as in our portable storage business.
Equipment preparation costs included in other direct cost of rental operations was comparable to a year ago at 12.6 million.
As a result rental margins increased to 61% from 57%.
Average modular rental equipment for the quarter was 816 million, which was an increase of 37 million.
Average fleet utilization for the first quarter decreased slightly to 78.7%.
[laughter] Trs Rentelco total revenues increased 3.4 million or 11% to 34.1 million on higher rental revenues, partly offset by lower sales revenues.
Rental revenues for the quarter increased 17%, primarily driven by 21% higher average equipment on rent, which was partly offset by 3% lower average rental rates.
The lower average rental rates, reflecting mix shift towards more general purpose equipment rentals that tend to have longer term.
Transactions compared to communications equipment rentals.
Rental margins decreased to 41% from 42%.
We saw growth in rental revenues from both general purpose and communications test equipment.
Average electronics rental equipment for the quarter was 338 million, which was an increase of 54 million.
Average utilization for the first quarter increased to 65.3% from 64.3%.
At Adler tank rentals total revenues decreased 2.7 million or 12% to 20.7 million on lower rental and rental really related services revenues.
Which was partly offset by higher sales revenues.
Rental revenues for the quarter decreased 13%, primarily from 16% lower average equipment on rent, which was partly offset by 3% higher average monthly rental rates.
The rental revenue decrease reflected weaker demand in upstream oil and gas, which we believe also negatively impacted other market segments with five of our six and markets, having lower rental revenues compared to last year's first quarter.
Rental margins decreased to 55%.
58%.
Adlers average rental equipment for the quarter with 315 million, which was an increase of 2 million.
Average utilization for the first quarter decreased to 47.8%.
From 57.3%.
Moving on the remainder of my comments will be on a total company basis.
Selling and administrative expenses increased 2.3 million or 8% to 32 million, primarily due to increased salaries and employee benefit costs.
Interest expense for the first quarter 2020, 2.7 million decreased to 15% as a result of 13% lower net average interest rate and 2% lower average debt levels.
The first quarter 2000 to 20 provision for income taxes, which based on an effective tax rate of 24.3% compared to 23.9% year earlier.
Our 2020 year to date Cashman highlights include.
Net cash provided by operating activities with 45.7 million, an increase of 8.8 million compared to 2000 to 19.
We invested 35.4 million for rental equipment purchases, mostly mobile modular and Trs rentelco.
Property plant and equipment purchases were 3.2 million and dividend payments to shareholders were 9.4 million.
During the quarter the company repurchased 164000 shares of common stock totaling 7.9 million.
For an average price of $47.89 per share.
These were opportunistic repurchases taking advantage of what we believed to be an attractive price range.
Just over 1.4 million shares remain authorized for repurchase.
There were no repurchases during 2019.
Net borrowings decreased 1.9 million to 291.5 million during the quarter.
At quarter end, the company had capacity to borrow an additional 240.5 million under its lines of credit.
And the ratio of funded debt to the last 12 month actual adjusted EBITDA was 1.21 to one.
First quarter 2020, adjusted EBITDA increased 10% to 54.9 million compared to a year ago.
Consolidated adjusted EBITDA margin was 42% compared to 41% a year ago.
Our definition of adjusted EBITDA and a reconciliation of adjusted EBITDA to net income are included in the quarters press release.
Turning now to expand on Joe's comments related to covert 19.
The most important financial steps, we've taken to manage through the current covert 19 uncertainty have been to secure liquidity and extend debt maturities.
On April 1st we announced the renewal of our 420 million credit facility with the syndicate of banks.
The five year facility matures on March 31st 2025.
On April 3rd we announced that we entered into an amended and restated 250 million note purchase and private shelf agreement with Prudential private capital.
The new agreement allows for the issuance of up to an additional 150 million of senior notes on terms to be determined at such time than any additional notes issued.
As Joe discussed.
We have reviewed all aspects of our operations under the current cobot 19 conditions.
From a financial perspective, we are closely managing cash flows by resetting capital spending budgets to align with lower and less certain near term demand.
While many operating costs are relatively fixed in the near term across our branch operations.
Our teams have reset budgets and spending priorities in order to respond to local market demand changes.
While retaining operational flexibility to support many of our customers who are still working.
As we mentioned earlier Cobot 19 did not have a significant impact on first quarter results.
Nevertheless, recent business trends indicate fewer new shipments of equipment as some customers delayed projects.
As a result, we expect near term rental revenues to decline compared to the first quarter.
The near term drop in rental revenues is likely to be more significant our shorter term higher velocity rental operations Trs and outdoor.
While the turnover of contracts and rental revenue impact.
Mobile modular is expected to be slower.
Given its longer rental term contracts.
The size of the reduction in rental revenues, it and its duration or not possible to forecast accurately at this time.
Consequently, given the economic uncertainty and rapidly evolving circumstances related to the cobot 19 pandemic. We are withdrawing our previous we issued 2020 guidance and not providing an updated on look at this time.
Finally, please keep in mind some of the important pillars in the Companys Financial Foundation.
At the 40 plus year old company, we have managed through many challenging cycles.
Generally we believe we have been more resilient to economic cycles or shocks as a result, so far lower leverage capital structure.
During economic slowdowns, we typically experience healthy free cash flows as of the reduction in near term profitability is more than offset by lower capital spending needs for the business.
In addition, we have achieved a 29 year history of increasing our annual dividend.
Through prior market cycles and shocks.
Reiterating Jews earlier reflections, we have a team of do culture that adapt quickly to new circumstances works hard to serve customers.
And that smartly to maintain the company's long term financial health.
We are proud of our team members and their responsiveness to the cobot 19 pandemic and thank all of them for persevering through the many public advisories and operational challenges.
We are all in this together.
That concludes the prepared remarks.
Libya you May now open the lines for questions.
Ladies and gentlemen, if the other question you'll need to press the star key followed by the one key on your telephone.
And our first question coming some to line up Scott Schneeberger from Oppenheimer. Your line is helping.
Thanks, very much good afternoon, guys I hope you and years, you doing well I'll start off by a as I've enjoyed to hit on all the segments.
Can we discuss the education.
I will remind you are just curious how you view data being affected given the timing of a.
We're only virus and how that might affect all on a.
Our ramp and contracts at this point of the year. Thanks.
Sure Hi, Scott Thank you.
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Actually where we're very pleased with.
The activity levels in our education business.
As I said in my prepared remarks, we've got some school districts who are actually.
Accelerating the pace of.
Them completing work that they had planned for the summer because schools are vacant right now.
Many of these projects that were working on now had been plan Dan you know in in the.
Execution stages for awhile and.
School districts at this point do not are not communicating with us about any significant delays or postponements to these projects. So we're we're pleased that that part of the business appears to be on solid footing.
Thanks, Joe.
Staying in the modular segment I'm just curious it sounds like you were saying no no cancellations just still ways for construction projects.
Could you elaborate and any just give some thoughts on how you think that may shape up.
Sure.
I wouldn't say there were no cancellations I mean, there have there been many many fewer cancellations then there have been delays.
You know as as things kind of unfolded back in March.
Those customers you know who have.
Had folks.
Not able to work in the field because those projects are deemed to be non essential and that varies by geography as an example, more in California.
We've seen.
Projects.
Deemed to be non essential construction projects. So some of those have stopped but not canceled.
And new projects that we're hearing from folks in those areas are more.
You know just delays as opposed to where canceling that that project at this point, so overall and even in the areas where we.
Our operating that that construction is still fairly active like in Florida as an example.
We're we're just seeing just more delays at this point and fewer cancellations as I don't really have a numeric break out on that but that's the.
That's the the feeling that were getting from customers and our discussions with them right now.
Thanks, and any any returns did education or more likely construction of all of of I guess, it's only been really a month, but yes, I I would assume not facing any trend of of customers, taking things off rent because they've become bits.
At least.
Not really image, it's been I'm relatively stable and we haven't seen an excess of number of returns at this point.
Thanks, just last one in this category pricing and in fact, it will use this is a segue to the other two segments. Please Joe I are you seeing just how is pricing being affected if it all across the segments over the last month sex sure Yeah pricing is holding in there.
And we we've not seen any significant degradation in pricing.
I would say.
In the one business, where we've seen it more than than the others has been Adler and that's just due to the demand conditions, that's been challenged for a longer period of time.
And so we're seeing softer pricing there, but the other businesses is holding in there very nicely. We're we're pleased about that.
Great and Oh, I guess I'm going to add were next you mentioned in prepared remarks.
There's there's apparently had contagion impact from upstream which is obviously under pressure.
How how are you reacting with regard to.
Well, how you're managing your assets are you are you going to attempt to move perhaps and tanks out of the out of the upstream oil patch in elsewhere or.
Just stay the course at this point.
Based on the expense in probably the complication and try to do that at the moment.
Yeah. It's a it's a fair question, we will move assets before we buy new fleet.
And so that's that's a priority for us to do that to reposition and I would say at this point, we havent repositioned a whole lot of fleet.
Yes that may happen in the future, but not so much currently.
Yes, Scott I'd say momentum Adler markets, we've got good fleet coverage and given the way current demand conditions are somewhat softer, there's just less urgency to do that and longer term, depending on how things how things might play out we have that as an option and just like Joe said, we'll.
Do that ahead of putting new capital in.
Thanks for that Keith I, just I know taken a lot of time in new support to questions. So one real quick on Trs Joe would you be so kind of used to elaborate a little bit more on he touched the surface I know on fiveg in what you're seeing just a little bit more thought on how you think that progress is its hopefully.
It's only a short term.
I named the core encountering most likely I inferred that that shouldn't in impact a larger plants too much but just a little more a more input there would be appreciated. Thanks sure yeah absolutely.
We do not think that.
This pandemic has kind of getting the way of Fiveg rollouts on a on a broader scale you know that that need for bandwidth expansion and.
You know additional.
Capacity for folks is has just it's always there and I think as soon as.
Shelter in place restrictions are lifted and things start to ease up a bit I think the contractors are going to be right back at work again, and we've not heard anything from.
The major carriers as far as their delays on the rollout of Fiveg. So we're we're still very much looking forward to that picking back up.
As soon as things get better.
Got it.
I appreciate a little bit of RBC, yeah, just a little bit of color from what we've been hearing anecdotally from that part of the business and it's a great example, where people had the desire and intention to do work in the field, but during this rapidly evolving set of circumstances.
Groups going to tower sites, sometimes they don't have transportation, where they are expected to own traveled separately when they get to a site. There are no hotels opened in the in the region add to accommodate them if they're on a multi day project. So when we're hearing stories of left field work I think its era.
Collection of people, having to adapt to these new a pandemic related work protocols and as they seek arrive how best to do that if indeed, it's possible to do it you're seeing this hopefully temporary and lower level of activity in the field.
Okay. That's a that's interesting and helpful. Thanks you.
I will play there now guys. Thanks, so much stay safe.
Thank you Scott Thank you.
Our next question coming from the line of Sam England with Dan break your line is open.
Hi, guys. Just a couple of made if that's one of the around the Capex reduction that you said I just wanted to do you must stay above replacement levels. Do you think or are you planning to deeply it's a way ahead of schedule the session today lump them.
Keith do whatever you want to handle Alan Shearer, Sam I would say very fluid, let's just start with whom we started the year. We spent 35 million of gross rental equipment capex in the first quarter and that's basically comparable to what we did a year ago and I think in recent weeks as you've heard weve.
We really are revisiting all the capital.
And I think under normal circumstances, and our growth engines for new capital have been electronics and Modulars. We have a good amount of fleet in most product categories to meet current demand, especially given the level of uncertainty in the very near term. So when we look at you know the rest.
The year just to give you possible ways to think about it last year gross rental equipment purchases were just over 160 million.
You know there are scenarios for this year, where we could spend half that in mind and we would have almost spanned a close to 50% of that reduced the mind, even in the first quarter, but all of this is very fluid and if people get back to work more quickly and if we see demand.
Recover, particularly in the electronics part of the business than the number could move up a little bit.
But also if shelter in place or other complications with work continue for longer the number could be potentially lower but just to give you an order of magnitude.
Hopefully that helps.
Yeah, that's really helpful. Thanks. The next one could you just talked little bit more about the flexibility having the call space. I know you said on the coal that may seek six that could you give us an idea of wall.
Variable costs you Didnt ask you can Tom and I say looking ahead to the rest of the year coupons to make any significant cost reductions in Q2 or like a lot of businesses the waiting to see how much longer than lockdown guys on before making any major cost related decisions.
Yeah. It's great question I would say just as you ended the question, that's where our thinking is which is we're not doing anything dramatic at this point I think we're playing the long game. If you will we've got good people in the organization. We have good teams with good relationships with customers, what I would characterize it as is.
You know our branch network, we're really trying to continue to support customers clearly in some areas and often times. This is that the smaller branches.
You may have 80 or 90% of the workload that you might have expected and we're just absorbing that loss of productivity. If you will we're just absorbing that with the current cost structure now having said that our teams have been very thorough and are doing ongoing work to look smartly and.
Every line item in the operating budget, so obvious things like hiring is really not happening at present or one or two critical positions that are exceptions, but for the most part we're not hiring in some areas. We have some natural attrition and we won't immediately necessarily backfill those positions clearly things like over time.
And we're we're not having any of that and the other elements of our cost structure are generally tied to add getting equipment ready for customers and new customer orders and Ironically. This is a busy time of year in the modular business, particularly with the upcoming education season. So.
If you look at our operating costs those direct costs of rental operations.
I would pick that as an example, where our costs are probably going to be flat to up slightly looking at the second quarter compared to the first quarter of this year and really it'll depend on how busy we are at modulars, particularly related to the education season, and I Hope we're spending dollars there because we wanted to do that business.
I think on the SGN a side if you were to look at a typical year you would see the business coming out of the.
Generally quieter seasonally slower winter months, and then as we move through the spring, we generally see business activity levels, increasing and you see that reflected typically in our SGN a cost increasing as you go from Q1 to Q2 I think from what we know today and again it is very fluid.
I think we would expect to CSG in a cost flat to declining going from first to second quarter. This year. So hopefully that gives you a feel for how we're thinking about it how we're still trying to manage things very tightly and supporting customers over the next few months.
That's great. Thanks, and then just a little more may.
How you're thinking about the second half of this year and retire do you think there'll be a build up overtime that happened when the locked down finishes and well so proportionate business all businesses that basically shut down at the moment until the locked down ads and what proportion off.
Continuing to walk right.
Just I know I dared, how it overtime it will be phased across the.
Yes, and that's a that's a kind of a tough one to predict at this point done. Obviously you know we have we have equipment that cycles off and that's going to come back.
Either.
On an extended.
Process because projects have been delayed or you know on time, we're just not sure at this point.
And I think really.
I think a lot is going to depend more on the pace of bookings that we get in the second half of the year and I think thats really going to determine.
You know how well the topline works as opposed to the amount of returns that we get I just.
If it bookings and returns are high then then that's a double hit but.
If bookings are pretty good and returns are are you know.
As expected.
We should be okay, it's just a little bit hard to predict at this point.
Okay, great. Thanks, you're not spot outside either on thanks, taking the questions yes.
Our next question coming from the line of my greeted with Sidoti Your line is open.
Hi, good afternoon gentlemen.
Mark Mark.
So first of all I want to thank you for the all the the color and the commentary around all the segments. It certainly has been really helpful. One other things I just wanted to start with Ah wanted to touch on the strength of rental related services in the first quarter and so wondering <unk>, particularly in and modular so wanted to get spent some time on on.
On that strains and maybe where that was coming from and then if you follow ups after that.
Sure.
We had been doing.
Some additional work at the business as an initiative to.
Provide customers more of a rental solution as opposed to just stay.
Alex that they use.
As you are already just a piece of equipment and so what comes along with that and Thats included in the rental related services aligns our things like re rents.
Which could be for additional ancillary products that the customer might want with that rental or it could be site related service work, which could be.
Additional electrical connections or canopies, our walkways or things like that that customers also want with our buildings and so that falls into that that rental related services line and.
We've been doing more of that business as as each quarter progress is in so you're seeing seeing some of those services mixed in there.
Okay. So it's more additional services as opposed to pricing those deliveries or things of that nature correct.
And Mark that's that's helpful. Just to help you with those line items I'm going to make it very simple in a business like Adler when we make a delivery or when we make a pickup we recognize the revenue at the time that work is done so you're seeing that read through in the financials and then in the modular business you've really got.
The two things you've got delivery and install and then dismantle and returned delivery.
It really tracks over time somewhat in line with the rental revenue activity, but layered on top of that are these sites related services that Joe referenced and there were a little bit more lumpy and they are episodic I mean, the quarter they happen and we get paid the work gets done and we move on so that's just.
A way for you to sort of think about it I wouldn't necessarily bank on the uptick we saw from we did have one particular, particularly notable site related services project in the first quarter, we may or May now get similar to that in future quarters glass that are more than its a little bit lumpy, but its layered on top.
But the underlying delivery and set up and then the dismantling return.
Okay. Okay. That's very helpful. Thank you I was wondering we could spend a little time touching on maybe what you've seen a with portable storage and maybe some of the trends that you're you're experiencing there.
Sure the business has been performing well, we expanded into some new markets at the end of last year and.
Our our rental revenues have been increasing nicely there.
I believe were up 12% in the first quarter and so that business has been has been operating very nicely for us.
And where are we us as far as percentage of revenue now so just for just portable storage.
It's still around 8% to slow the tempur still about eight 8%.
Okay, great. So wondering if it so you mentioned at the beginning here remarks about some of the needs to make some changes on protocols for safety and those wonder if you could such a maybe a couple of the key ones, there and and how that or how that ended up being.
Brought to fruition over throughout the fleet.
Sure.
Well I Miss I'm, assuming you're you're referring to how how we're handling employees. During this timeframe that is that correct.
I believe so I think you made some mentioned of changes of operating protocols.
I just had that jot it down I wasn't sure if I got that right got it got it okay.
Yes, let me give me an example, so in our inventory centers, where we produce our modular.
Buildings, we maintain them and get them ready for the next rental as an example.
We have staggered shifts.
To allow for greater social distancing, we've closed our lunch rooms, we decreased the number of meetings that we have weve.
Provided on cleaning materials for tools.
So that theres not a transfer of.
Potential germs and things like that so these are all changes that we made to protect our employees and have them operate safely under the new requirements and so.
It's it's been some change and our folks have really adapted very nicely and we're getting very nice work output from those facilities.
Okay, Great and then I guess last ones for me Keith I was wondering if you'd made mentioned on tax rate being Oh, it seems a little lower than I would expect I just wonder if you could give a well granted as far as not as far as for your guidance wise, but as one of its main thoughts on on on the where where tax rates might be headed.
Throughout the course of that you. Thanks, Yeah from a planning point of view I plan to enter around 26% this year.
What you're seeing from time to time, and we did see some of this in the first quarter is the accounting for equity compensation, we occasionally get a tax benefit there that reduces the effective rate and that was something we witnessed in the first quarter. This year I've given some of the turmoil in the equity markets, we may or may not see any of that going for.
Forward and in fact with the accounting rules that can either help or hurt your tax rate at the margin. So I would say just as a planning number for the balance of the year somewhere in the 26% neighborhood is probably as good a agassiz any of US would have at this point.
Okay, great. Thank you very much gentlemen.
Thank you Mark Thank you.
Ladies and gentlemen that appears to be done last question. Let me now turn the call back over to Mr. Hannah for any closing remarks.
I'd like to thank everyone for joining us on a call today and for your continuing interest in our company. We wish you all health and safety in the months ahead, and we look forward to speaking with you again in late July to review, our second quarter results.
Ladies and gentlemen does conclude today's conference call. Thank you for your participation you may now disconnect.
Okay.
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