Q1 2020 Earnings Call
[music].
Ladies and gentlemen, today's conference is scheduled to begin shortly please could you just standby. Thank you for your patience.
[music].
Ladies and gentlemen, thank you for standing by and welcome to begin at first quarter earnings Conference call.
This time all participants are in listen only mode. After the speakers presentation will be a question and answer session.
Ask a question during the session I need to press star one on your telephone if you require any further assistance. Please press star zero.
Now looking at the conference over to your Speaker today actually against please go ahead.
Thank you Marcella good morning, everyone and thank you for joining our call today to discuss connect first quarter 2020 results.
Presenting on today's call will be Mike Reed, Chairman and CEO the public company.
Corn Chief Financial Officer.
Products and services.
Our news organization here can that highlights this work through impactful journalism every day, we chronicle the stories of these heroes put themselves at risk every day to serve and to say.
Finally, I want to damage to work my nearly 20000 colleagues here than that.
As an essential business ourselves our team has risen to the challenge of this pandemic honoring their professional commitments, while balancing the immense personal responsibilities but.
Of keeping families and loved ones safe in a time look great stress.
This is enabled our company to provide uninterrupted accurate and up to date news and resources to our customers and our communities puppy everyone managed through it gets pandemic.
I want to express my gratitude to all of my colleagues for the hard work and continued commitment to our mission as we navigate through this crisis.
And before diving in this morning, I would also like to take a minute to welcome our new C.F. old doesn't horn.
Enjoined the team about a month ago.
Does brings deep accounting and finance skills as well as a significant experience with large scale integration projects.
Yeah.
They'll just done a fantastic job diving in with the team and making immediate contributions we are really glad to have them on board.
Then you'll hear from Doug This morning.
And out to today's business pollen dog or with me on the call it's actually much.
We'll cover our first quarter earnings, which were salad in in mind with our internal expectations.
Headwinds we felt during the last couple of weeks March.
We'll cover our response to cope with 19, which came upon the country and us so quickly so fast.
Choir immediate actions to keep our employees safe to keep our business running and to improve our key to financial outlook, all of which I think we accomplished.
A team moved very quickly to respond to this unprecedented in that.
The actions, we have taken have been significant and I believe head position dust to whether cute too.
Which will be a different court, which will be a difficult quarter for most businesses and for our country.
We'll also review important balance sheet items and liquidity along with some key details of our credit facility.
And we have an update on operations and importantly, our progress on the integration and realization of synergies.
The lots to cover this morning.
I'll start with a review of our first quarter financial performance, which as I mentioned was salad in largely in line with our expectations.
After the first couple of weeks of March in fact, we were actually pacing ahead of our internal expectations for both revenue Andy.
However, we saw significant declines in advertising over the last two weeks to March indirect impact of the cold in 19 pandemic.
We estimate the declined we experienced in revenue from this was about 17 million during those last two weeks.
Despite the impact of the decline parse same store revenue trend was consistent with that of key for 2019.
Without the cold and impact same store revenue.
Would have improved to being down 8.4% improvement of about 150 basis points versus a cue for same store trend.
Adjusted either I was down 3%.
The prior year kind of pro forma basis.
And was pacing the head of prior year heading into the last two weeks in March.
Or integration and synergy realization remained plan for the first quarter.
We implemented 75 million evangelize synergies.
Which resulted in 19 million of cost reductions recorded in the first quarter.
We also pay down 12.7 million in debt during the quarter, primarily with proceeds from real estate sales.
Later on the call.
We will provide an update unexpected debt repayment in the second quarter with proceeds from real estate sales that are under contract and expected to close during the second court.
[noise], we close the first quarter with 200 million of cash on the balance sheet, which group from 156 million a year round.
We are pleased with the progress of our integration efforts and remain confident in our ability to outperform or synergy plan and too aggressively pay down debt through real estate sales.
Despite the economic crisis, we are in the mixed dog.
Well the first quarter was in line with our expectations. The probing crisis says change things dramatically since mid March cause I'm sure. Many of you feel as well.
Our company has had to adapt to respond quickly.
The disruption to our lives how we do our jobs.
For the into the economy all of these things are just unprecedented.
As I mentioned, a few minutes ago I leadership team took a media and deliberate action to support the health and safety of our employees and to preserve our ability to deliver a high quality journalism.
To our customers into the communities who served.
I'm proud of the speed and the <unk> Decisiveness, our team has shown in responding to this pandemic.
In addition to the changes taking to operate safely they've also taking actions to enhance and improve our liquidity position and financial performance.
How how how I'll highlight four of those actions for you. This morning.
First we implemented measures that we expect to temporarily reduce expenses and the second quarter by an additional 100 that 125 million.
Alimentation furloughs pay reductions reductions in force.
Cancellation of non essential traveling spending.
And and expected reduction in cost of goods sold.
These additional cost saving measures are added to synergy cost reductions, we will realize it too too as well.
And also.
Additive to the Rollforward of previous regular way cost action.
As a result of all these measures we expect to to expenses to be down versus the prior year by approximately 25%.
For context that compares to attend and a half percent decline.
In costs into one.
Second we took immediate action to significantly reduce our cat that spend.
We have lowered our plan stand by more than 20 per cent for the remainder of the year.
That equates to about $10 million and cash savings.
Third the board has suspended our quarterly dividend until conditions improve.
And finally fourth.
We are also leveraging the hairs Act.
To defer FICA payments and <unk> pension payments.
Pairs that allows.
Bunnies to defer these payments until 2021 in 2022 interest free.
This improves our 2020 liquidity by a little more than 50 million over the remainder of this year.
Obviously, none of this is reflected in our two one cash balance of 200 million.
We believe all of these actions will improve liquidity end up financial performance.
Helping us to navigate through the uncertainty we are facing from the pandemic.
We also remain confident in our ability to continue to execute on Earth integration plant.
We mentioned on our last earnings call for priorities, we have for 2020 and 2021.
Those priorities have not changed we are simply executing on those priorities against the backdrop of the pandemic.
But let me recap those priorities for you with a little update on how we're doing.
First we expect to implement at least 150 million or roughly half about 300 million.
Analyze synergy target during 2020.
Through two two we expected had executed on 140 million of annualized synergies.
We expect that these measures will enable us to realize 35 to 40 million of run great expense reduction in the second quarter alone.
We remain confident that we will achieve our target with regard to synergies both in terms of amount in time.
Check if we have continued our normal costs.
Normal course cost reductions.
That's reflected in our two one total cost savings of 10.5%.
Of the total approximately 2% is attributable to synergies.
And about 8.5% is attributable to regular way cost reductions.
The eight and a half per cent of regular way cost reductions is made up of permanent cost actions as well as lower cost of goods sold resulting from lower revenues.
Third we are aggressively paying down debt with the goal to refinance the term loan when leverage is about two times, either which we expect to achieve at the end of 2021.
Since entering into the term loan in November of last year, we have pay down approximately 50 million of debt.
And we expect to make additional voluntary prepayments in the second quarter.
The proceeds from approximately 15 million of real estate sales that are under contract unexpected the clothes in the second quarter.
Further we have another 50 to 75 million of real estate that we intend to sell throughout the remainder of this year.
Hand into next year.
Lastly, we <unk>, we remain focused on improving our same store revenue trends.
As I mentioned, we had seen a very strong.
Start to the year performance in January and February was was good above our expectations.
And as I mentioned, when you exclude the 17 million irrevocably Boston late March due to the coldest situation or revenue trend would have improved by 150 basis points from down 9.9 per cent in q. for down 8.4% into one.
Talk a lot. This morning about cost reductions in while cost reductions are a major priority. We are balancing that against our afterwards to produce quality content have quality products.
Have product development.
And along with making improvements to our cell structure.
So that we are position to report improving revenue trends once we get to the other side of this crisis.
[noise] [noise] now, let's talk for a minute about our debt and our credit facility.
We have also detailed the points I'm gonna make now in our two one earning supplement which actually mentioned that can be found on the investor Relations section of our website.
And first let me say.
We remain very confident in our ability to satisfy all our obligations under our turn long.
Importantly, there there's only one financial covenant that is tested on a quarterly basis.
And that covenant is a requirement to maintain 20 million of cash on the balance sheet at the end of every quarter.
As of the end of two one we had 200 million of cash.
And we're generating positive cash flow.
We feel very confident in our ongoing ability to satisfy this <unk>.
Importantly are turned loan does not have any event of default tied to compliance with any financial ratio.
R. term loan does use that to me, but ah ratios to determine whether we are permitted to make restricted payments such as dividends are stopped by that.
But this should not be confused with a troop financial covenant, requiring maintenance of a debt to eat without ratio to avoid an event of default.
Under R. loan the consequences of failing to comply with the debt to you, but that ratio is solely height, you restriction on our ability to make restrict the payments as opposed to a trigger for an event of default.
Next term loan restricts our ability to spend more than 60 million on capital expenditures annually.
We are highly confident in our ability to remaining compliance with this club.
In 2020, we did not.
Anticipate spending more than 45 million.
And cutbacks.
In the last point I'm on a highlight is that we are required to commence making quarterly interest payments in June of this year.
The June payment encompasses seven and a half months of interest so it'll be approximately $125 million.
With 200 million of cash on the balance sheet at the end of March and the business continuing to generate positive cash flow yeah highly confident we can make that required interest spent.
Given the current that balance between three and two four interest payments would be approximately 50 million each.
However, assuming additional debt pay down school proceeds from real estate sales into two of approximately 50 million.
The actual interest payments in two three into four could be about two and a half million lower.
Then I'll reiterate we are highly confident in our ongoing your ability to make interesting.
We are highly confident in our ongoing ability to stay in compliance with our credit facility.
Obviously, no one knows how the current crisis will play out.
Hopefully the worst was behind us, but we just don't know.
Some reports are suggesting that we should brace for new outbreaks of the virus and renewed locked down in the fall and or the winter.
That's all hope that that's not true, but it's still very hard today to know what next year will look like.
However, we have a great relationship and a very open dialog with other lenders.
Which gives discomfort that we can deal with the unknown the uncertainty and the unforeseen should the need arise.
And now like to turn things over to Paul who who will give us a all an update on operations.
<unk> integration, we have underway and a very important cold 19 response efforts our company has undertaken.
Thank you and Paul I'll turn it over to.
Great. Thanks, Mike.
I wonder to open with suck Congratulations established Livable Courier Journal, who were word on Monday with a surprise [noise].
Breaking news for their coverage of the hundreds of last minute pardons by Kentucky's Governor Matt Devon during his final days his office in office.
An incredible story and we couldn't be more proud of this work in that of all of our journalists. It's really a reminder for all of US why we are here degraded and during platform for this important work to continue our communities.
It's like mentioned I'd like to speak a little bit more detail about how we responded to the covert 19 pandemic. Some key one operational details or an update on integration.
Regarding our corporate 19 response by March 20th we had migrated 95% of or non production and delivery workers to work from home.
Position, which is over 12000 employees, we also implemented social distancing measures and hygiene best practices for all of our production and delivery facilities in line with C.D.C. and W.H.O. guidelines.
This is included spreading out or teams in our ships distributing personal protective equipment implementing multiple daily Cleanings. In addition, we've also procured and distribute mass and other protective supplies to any employee who needs to travel outside the home for work.
Across the company, we've set up communication channels for people to report infections, and any workplace concerns, which we monitor respond to in real time.
On April 1st as Mike mentioned, we also implemented costs measures to save an additional hundred 125 million.
Most of these measures are temporary in nature searches for Lozon salary reductions and were designed to give us some flexibility as to how to adapt based on how the future plays out.
And while every function or is participating in these costs management programs. We did work to minimize the impact on some select groups such as lower salaried staff and people who were directly involved in the systems integration and transformation projects.
So we're now beginning to plan for the future returns were offices, we are working to develop office specific plans to ensure sufficient supplies are at all locations to monitor recommendations from government officials in health care leaders.
Really the final steps are returning to the office, but it's not one that we are looking to rush in any particular way, especially given the companies in a highly functional position right now.
We will ensure that we're prepared so when the time comes will be prepared to transition smoothly and safely.
Turning to our performance as Mike mentioned January and February were also very strong revenue months that meaningfully outperformed R.Q. for trends, there's a pandemic significantly affected the U.S. in March we also saw spike in advertising cancellations in a slow down and do sales across both print in digital.
Results are still preliminary for April however, our initial view is that same store revenue was down approximately 30 per spent 30%.
In response, we've adjusted our new sales focus around business segments that are better position during the crisis.
Also working with our existing clients, particularly or a small businesses to make sure they're digital presents a strong.
We're able to ship messaging for them emphasizing features that bills online presence e. commerce capabilities and also to implement digital marketing programs to help them be discovered on line.
Given the range of advertisers, we touch from the very smallest local business to the largest advertised in the world.
Expect to have a front row seat on the recovery.
Ready to adjust resources messaging products as opportunities present themselves.
They want to take just a brief moment to just say how proud I am of all the work that are journalists have done through this crisis like so much of our team, they're working remotely and managing through furloughs and yet they continue reporting from the front lines of this pandemic are telling the stories of human impacts you're holding our public officials accountable.
And they have investigated the problems with testing the lack of medical.
Protective equipment.
And the crisis in our nation's nursing homes.
For journalists have met readers needs by swarming the story, creating new Corona virus beats and teams redesigning reporting resources away from other areas such as sports to make sure that we're providing this critical information.
USA today moved quickly to condense certain print sections to make way for a new daily section called Nations Health.
Which is being shared with subscribers across all our local sites as well.
Digital traffic proves that America depends on our news are brands reach more than 170 million viewers in March and achieved 29 per cent growth in digital subscriptions in the corridor. Despite keeping much of our current a virus coverage outside of the payroll is a public service.
I know our communities will continue to be strongly to serve Byron use teams as states begin to open backup and we'll be there to make sure our readers can navigate the changes and remain six.
In consumer marketing, we've seen print subscriptions whole pretty steady while we've had a rapid increase in new digital subscriptions is it just mentioned.
In all our markets, we're seeing a recognition to devalue, our local news organizations and what they bring to their communicate their communities and the need for consumers support to continue in the face of advertising decline.
We believe this crisis actually has the potential to accelerate the paid digital subscription model across all our markets.
Are events business space that initial wave canceled events for late March beyond but the team quickly pivoted converting many races in a word shows to new virtual experience.
Rescheduled many of the advanced later in the year when we anticipate they may be allowed.
Team has done a phenomenal job, but maintaining our sponsors as they completed the pivot to pershall formats.
Finding actually that participants he's virtual events are offering a welcome reprieve to stay at home orders.
Sentence has been fantastic in while not the same as in in person experience events continue to provide an important sense of community.
Using a virtual format, we reduce the revenue in some cases that would've been generated through attendance ticket sales.
There were also significantly reducing our operating costs by four going to venue in in person production costs.
Finally, I'd like to highlight the significant work completed on or integration during the first quarter.
Our focus here is not just on cutting costs, but on rebuilding the business to take advantage of our scale and we're well on our way.
Sales is now rolled out their new regional leadership team and rebranded the organization under the local like Q. branding. Our editorial team is completed his new regionalized structure, leveraging or expanded footprint and strong newsrooms down.
We've implemented or announced 23 printing facilities for consolidation.
It'd be gun migrating to a common technology platforms for all of our Keith functions.
<unk> these decisions will lead to a streamlined simplified operating foundation for getting it for the years ahead.
Importantly, we do not expect disruption from or covert related cost reductions honor continued synergy implementation.
In the second quarter wheel implemented additional measures that we expect to lead to 140 million in savings and an annualized basis, which puts as nearly at our full you're 2020 synergy target as we sit here today.
In closing I went to thank all my colleagues across the organization, we were asking so bunch of everyone delivering wrist belts integrating companies cutting costs accepting furloughs wage productions, working remotely or navigating close communities to get to production facilities. I. Just went on everyone on this call to know whether it.
Incredible and committed team we have here without l. now try it over to dog to discuss or detailed financial performance.
Thank you Paul and good morning, everyone I'm very excited to be with you. This morning, and even more excited to be part of that can that team moving forward.
For Q1 total operating revenues were $948.7 million, which was up 144.8% ask compare but the part of your quarter. As a result of the acquisition of legacy can that and Q. for 2019.
On a pro forma basis operating revenues were down 9.7% us compare but the par you're quarter, which is in line with what we experience. During two four of 2000 then 19.
Oh same store basis revenues were down 10%.
Originally on line with the fourth quarter trend as well.
Total operating revenues as Mike mentioned reflect approximately $17 million something negative impact on the <unk> 19 situation, primarily as a result of the cancellation or pausing of advertising campaigns during March.
Adjusted the but I totaled $99.1 million in the quarter. This reflects the impact of lower revenues, partially offset by costs productions and Cenergy savings the adjusted even a margin in the quarter was 10.4%.
And the first quarter expensive spell approximately 10.5% on a pro bono basis, reflecting compensation savings from various cost reduction and Senator Jinisha those significant newsprint say makes for both lower volume then prices as well as continued production and distribution efficiency is.
Moving onto the segments within the publishing segment rubbing on the first quarter was $858.2 million.
Print advertising revenue was down 21.2% to the prior year on the same store pro forma basis that as reflecting both continued secular pressures as well isn't the disruption from the co bit 19 situation in the last week so the corner.
Digital advertising and marketing services revenues increased 1.7% on the same store pro forma basis, driven by national campaigns during the quarter as well as games and digital marketing services within our local markets offset again by the disruption from coping 19 during the second half of March.
Circulation revenues decrease 7.5% the prior year on the same store pro forma basis, which reflects reductions in single copy distribution and home delivery sales and includes the negative impact of covert 19 during the latter half of March.
The year of your declining to one reflects an improvement of 160 basis points as compared to the fourth quarter due to seasonality in our snowbird markets.
Paid digital only subscribers grew 29 per cent Europe year on a per phone a basis to approximately 863000 subscriptions.
Digital only subscriber revenue for 36.6% on a pro forma basis as compared with the prior year.
As a result adjusted to keep it off for the publishing segment totaled $110.9 billion, representing a margin of 12.9% in the first quarter.
Turning out of the marketing solutions segment.
Total revenue in the first quarter with $121.3 million, an increase your beer a 3.8% on the same store pro forma basis.
The increase in profile my rubbing it was driven by sales and marketing services in our local markets.
Which was also offset by the negative impact of Kobe 19 during March.
Adjusted EBITDA for the marketing solutions segment totaled $7.9 billion, representing a margin up 6.5% to the first quarter.
<unk> gap net loss attributable skin that was any point $2 million, which reflects $78 million up depreciation and amortization.
$34.2 million cash charges related to integration reorganization and transaction related costs.
$18.5 million related some non operating pension income.
And $9 million for the quarterly income tax provision the vast majority of which is non cash.
Additionally, accompany incurred $57.9 million interest expense during the quarter.
We ended the quarter with $1.747 billion of debt after paying down the $12.7 million during the quarter.
Cash balance as Mike mentioned was $199.7 million at the end of Q1, resulting in net debt of $1.543 billion.
Little expenditures total $13.8 million during Q1, reflecting investments related Duke related to digital product development.
Technology, an ongoing facility consolidations.
And with that I will have it back to actually.
Well that my father.
<unk>.
[noise] at this time I'd like to remind everyone in order to ask a question. Please press star and the number one.
Key pad Yeah first question comes from the line have Kyle Avenue.
Mine is open.
I think you stick in my questions.
Oh.
So.
A lot of discussion about real estate sales as a source of liquidity could you provide a little bit more detail there on.
What you're going to bring to the market and maybe some supporting thoughts on while you're confident you can get those done in its current environment.
Well, yeah. So the the real estate sales I mentioned are <unk> are actually hundred contract with.
Scheduled closing dates down payments made et cetera. So we feel highly confident that those trends. Those transactions are are nearly completed and and will be completed.
These are these are pieces of property generally that are in good strategic location.
And these towns across the country and so the the buyers for these types of facilities generally have very long term plans for what they want and what they want to use the building those were the land for it so the the kind of the disruption of the cold the pandemic doesn't alter or change the long term view of.
Local developers local contractors et cetera, maybe the business next door that want that's wanted that land for a long time. So these these transactions were on are we going to sell real estate.
Are with strategic local buyers, who have very long term pew on the market and what they want to do with the property. So we we feel highly confident that the disruption that that the pandemic has caused will have little impact on our real estate sales. Obviously, there's there's there's a lot of real estate that we're trying to say.
Well over the next two years, so there could be some pickups and some delays, but primarily the bulk of of what we're trying to do is tied to say eight or 10 properties that we feel really good about.
[noise] got it.
And you know you're gonna get <unk> bombing without talking about circulation. Obviously the declines you had in one q. were pretty considerable improvement over the four q., but still running down more than the first recorders in 19, what what do you think the pandemic does to the circulation line going forward is <unk>.
Discretionary spending.
And what were the underlying volume numbers, they're into down seven and change.
You know so we have about 375 million a revenue in the first quarter in circulation above 60 million to that is digital subscriptions.
315 million to sprint.
So we mentioned digital subscriptions or 29% the first quarter and we've seen that grow.
Celebrate more than 30% in April so I I I expect you know as a result to the pandemic and just are more importantly, our ongoing efforts to grow or digital subscriber base that.
You know that we'll we'll see that that growth accelerate and N.B. could in that revenue part of our total revenue.
Coming from digital subscriptions will continue to represent a bigger piece of pie and that will help drive.
Positive change and trend. So when you when you think about the first border you know our print trends were down.
Kind of you know <unk> <unk> offset by by the the digital growth the food and a half and then the volume we're not doing much on pricing right. Now. So we're doing doing a small amount of pricing. So volumes are you know a little bit.
North of 10 per cent declines, but I think what what I've been impressed with his resiliency of our products both print and digital during the the crisis in.
Then what it's really showed up communities and our own customers is how important then I'll vital your local media organization is how important then I'll buy it on your local news organization is so.
I think Paul mentioned, you know, we haven't really seen any.
Any change to the negative in our print circulation trends other than and single copy.
And and so that's been favorable so right now it's really hard to obviously c.
Long term, what what the pandemic and crisis looks like for our country, but right now we've seen some improvement overall in our circulation trends.
And that's primarily driven by digital but the print has been resilient as well.
What are your thoughts on pricing going forward to this current environment.
Yeah, we're we're not we're not raising prices in the current environment.
And I ask you. This question just recently, but it wasn't a completely different universe. It feels like would you consider eliminating somebody unprofitable print days across the system.
Going forward.
You know called US not part of our plan today, you know we've been pretty consistent you know with that view you know everything's on the table. If the if you know depending on what happens with revenues and how things about you know in our World. You know nothing is off the table, but you know as we sit here today and it's been pretty consistent in our view.
You know, we want our consumers to habitually come to US every day for their local news and information that we don't want to drive our consumers to other places by you know eliminating products in the market that that we produce today. So that's our current view I mean I've ever seen subject to change obviously, but.
Sit here today.
It was to keep our our schedule says they are now.
That's all I got just also a quick thanks on given the liquidity balance sheet metrics very helpful.
Thanks.
Thank you.
Yeah. My next question it comes down the line have Ryan.
Hi, they keep their licking my question.
Yeah right.
Just a couple of questions you you referenced that the the current trends that you saw through April just to be a little bit more brand new I guess first off that did you notice and have you noticed anything on your trends just from over the last five weeks call. It whether it's just been pretty steady at that rate and then.
The second question, just so I'm clear just it does that include obviously it prints in there, but as far as digital advertising I. Just had also include the market service just trying to get an idea when you when you reference the current trends what's inputs included in that and if one is if digitals holding up better than.
Thanks.
Yeah. So thanks shrine, yeah, the the down the down 30 that we.
Are anticipating that.
<unk> going to close out and we're still in the process close and the books for April but.
Our best <unk> today's down 30, but that's for the whole that's for the whole company sold includes encompasses everything.
Obviously, we've seen the biggest hit during the crisis come to print advertising, which is down more than 30% digital businesses definitely held up better it's been more resilient then print advertising.
Or circulation. This we just talked about with Kyle husband, it'll probably the most resilient part of our business.
The events the events part of our business you know Paul Paul talked about that that you know we've been resilient there with virtual events, but it's still probably going to be you know down the down 40 to 50 per cent you know revenue quarter for events, but you know to to your specific question on how it's played out over the last five weeks.
You know we definitely saw this really really more than that now the last couple of weeks of March things worse in.
The first couple of weeks of April we're probably the worst.
I wouldn't say the <unk> the bat half of April [noise].
A lot.
In terms of helping April, but what we really have seen over the last two weeks late April and early may is.
More meetings more conversations more businesses now entertaining coming off <unk> with their spend silex encouraging.
Not you know, it's not really we can't really reflected in their numbers, yet because we don't know for sure but the the tone all of our conversations with our customers the.
The number of meetings and the discussions around you know getting back to business.
In the end restarting campaigns.
Campaigns with US are are are positive right now so that's that's not a prognosis the second quarter may or June I mean, I think our our best be right now and say pulls down 30.
The tone has improved so we're we're cautiously optimistic that you know the worst is behind us.
That would be great and then just the other point about the real estate South you had mentioned look we can take to 50 million bucks and and pay down that term load and and knocked out interests by a couple a million bucks. It over the next couple of course to be clear you don't have to pay down that term on obviously that's part of your plan. If you wanted to you could just put that in the <unk>.
Gosh I put that in the books and other balance sheet here. It just just to just in case. This is pro long 10 second wave of of those things no no obligation to to pay that account cracked.
No actually we are required in a in the code agreement, if we sell assets to pay down that.
Okay. So real estate familiar that okay. Thank you [noise].
I meant thanks right.
No further questions at this time I'll try and the color Overkill for final remarks.
Okay. Thanks, Thanks, everyone I'd I'd, just like to reiterate you know pretty solid performance in the first quarter. We're pleased with it. Despite you know how it ended.
To reiterate the the very strong quality position, we'd have today with with 200 million of cash on the balance sheet in our expectation to continue to generate positive cash flows also mentioned that cares act in the liquidity enhancement there that's going to be more than 50 million that you have to add to the to the cash position we have today.
Or integration plan as you heard you know for me and from Paul is progressing really well, we have 140 million of analyze savings that we expect to have in place by the end of the second quarter.
And you know we've taken the steps necessary to create additional flexibility.
And to the to be able to create additional cost savings during the crisis.
And we're in a position to continue to adapt you know as conditions evolved so generally feel feel really good.
We continued to reduce our debt during the quarter, we remain optimistic about our ability to continue to do that with real estate asset sales and you know as I mentioned in my remarks on the call. We are highly confident in our ability to to be in compliance and stay in compliance with a credit agreement. Just a reminder to five year term loan we're only six months.
So we have four and a half years left so we have nothing nothing hanging hanging or dangling out there that we have to deal with so.
Very unfortunate situation that we're in today and impacts everybody across you know our country and really most people around the world It's unfortunate but.
You know I feel I feel good about the efforts we've made to position our company to come out of the other side of this crisis hopefully that sooner not later, but come out of the other side of this crisis with with a better stronger and leaner company. So thanks for your time. This morning, when we look forward to updating you again.
At the end of the second quarter in in the meantime, everybody be be safe and the healthy. Thanks Bye.
It can claim studies conference call.
<unk>.
[noise].
[noise] so.