Q1 2020 Earnings Call
Ladies and gentlemen, please standby your conference call will begin momentarily once again, ladies and gentlemen, please stay on the line.
[music].
Gentlemen, and walk through the heritage Crystal Clean incorporated first quarter 2020 earnings Conference call. Today's call is being recorded that's just talk more colors microphones are muted and you will have an opportunity at the end of the presentation to ask the question.
Instructions will be provided at the time for you to cure for you to cure for question.
Yes, it all callers limit themselves to one or two questions.
Comments, we will make today are forward looking statements generally the words aim anticipate believe could estimate expect intend may plan project should will be well continue will likely result would and similar expressions identify forward looking statements. These statements involve a number of risks and uncertainties that could cause.
Actual results could differ materially from those anticipated by the forward looking statements. These risks and uncertainties include a variety of factors some of which are beyond our control.
These forward looking statements speak as of today and you should not rely on them as representing our views in the future. We undertake no obligation to update these statements. After this call. Please refer to our FCC filings, including in our annual report on form 10-K.
As well as our earnings release posted on our website for more detailed description of the risk factors that may affect our results copies of these documents may be obtained from actually see or by visiting the investor Relations section of our website.
Also please note that certain financial measures you may use on this call such as earnings before interest taxes, depreciation and amortization or EBITDA or adjusted EBITDA. Our non-GAAP measures. Please see our web site for a reconciliation of these non-GAAP financial measures to GAAP.
More information about our company. Please visit our website at Www Dot Crystal dashed Green Dot com.
With us today from the company, our President and Chief Executive Officer, Mr., Brian Ricardo and Chief Financial Officer, Mr., Mark Davita, That's just talking about let's turn the call her Barbara capital. Please go ahead Sir.
Thank you Kevin Good morning, everyone and thank you for joining us today.
First off and most importantly, I hope you and your families are healthy and stay in say during the cold 19 crisis.
On behalf of the heritage Crystal clean family I want to take all the healthcare workers first responders.
It was working in a central businesses.
In our employees you could do to put their own help and risk while serving our communities.
Thank you again for yourself and service.
It was with mixed emotions that we began this call today. We're so pleased with the results at our hard working team delivered for our first quarter.
However, the thoughts are feeling was short lived as we entered our second quarter would be cobot 19 outbreak.
Rapidly spread throughout the U.S. and began to inflict both the physical and economic toll millions of people.
My comments today will address some of the impact of the pandemic at our company along with detail than what we've done to navigate the company through these uncharted waters at the onset of this pandemic and how we're preparing to set ourselves up for the opportunities in the future.
Mark will take you through the result of the first quarter. We'll then open up the lines to take your questions.
As Mark will detail later, the strong results of our fiscal first quarter do not reflect the adverse impact could be Cobra 19 pandemic has had on our business.
That's our fiscal first quarter ended on March 21st we did not begin to feel the effects of the pandemic until the last week or two of our quarter.
However, as we moved into second quarter fiscal 2020, we began to experience a noticeable decline and the demand for our products and services.
As our customers businesses began to feel the impact of the shelter in place orders, which have become commonplace throughout the country.
Shelter in place orders social density practices and other similar actions have negatively impacted demand across diverse industries, which included many of our customers.
This has led to a decrease in activity for our customers, what's your virtually affects their demand for our products and services.
While we were fortunate the we also serve many customers who were considered a central businesses, such as automotive repair and certain manufacturers.
Even some of these customers are experiencing a decline in activity due to the cold in 19 outbreak.
As a pandemic spread we assembled key leaders within the company and initiated our response plan.
Our initial focus was taking steps to ensure we could continue to safely serve our customers.
While protecting the health and safety of our employees.
Help safeguard the well being of our employees would decrease the risk of this grew out of the cold 19 bars, we have taken the following steps.
We provided additional personal protective equipment in Sanitizers.
Implemented staggered work schedules to increase social doesn't seem.
Allow high risk employees or other impacted individuals the work from home one possible.
Thoroughly claimed the disinfected some of our facilities.
Temporarily closed a few facilities, none of which would close for more than three to four business days or the time.
These steps along with the prudent behavior of our employees has allowed us to limit the number of confirmed or suspected cases of cobot 19 marched our employees.
The getting near the end of the first quarter continuing into the second quarter, we experienced situations, where some of our customers have temporarily closed their businesses, while others have remained open but limited our access to their facilities, which curb to our ability to fully servers those customers.
Other customers that are remained open Nevada decrease need for our products and services due to the economic downturn.
In addition to taking steps to ensure the safety of our employees.
Ill also executed several actions to ensure the health of our business.
Some of these actions include but are limited to the following.
Implementation of salary reductions for all levels or management.
Implementation of reductions of cash compensation for members of our board of directors.
Suspension of all material and non essential capital expenditures.
It's a stretch it a mergers and acquisitions.
The elimination of all not a central travel.
Implementation of a hiring freeze.
We also conducted vendor assessments to ensure continuity of critical supplies and materials.
We extended payment terms the vendors.
And this is due to tighter customer credit controls.
We're also preparing furlough plans to augment the compensation reduction as I alluded to a moment ago.
Yes, the outbreak of covert 19, we have also procured cleaning and disinfecting supplies as well as PB and other equipment to facilitate the implementation of a kobin 19 decontamination service.
I would now like to spend a little time talking about the oil industry.
As most of your where there's been a significant drop in demand for crude oil and all refined products due to covert 19 pandemic. This deflated demand scenario came on the heels of a battle for market share putting two of the world's largest oil producing countries, Saudi Arabia in Russia.
This market share battle as led to a historic oversupply of crude oil and.
Supply demand dynamics, a push the price of crude oil and finished products at historic lows in the past couple of weeks.
The widespread sheltered place orders have led to much less driving lower levels of manufacturing activity.
This in turn as led to a decrease need to replace finished lubricants such as engine or hydraulic oil.
Less oil changes made less used ought to be collected in less demand for finished lubricants.
As most of you know base oil is the main ingredient. The finished lubricants. So there's been a decreased demand for our base oil as well as downward pressure on the price of our product.
While there is less used all being generated we've been able to move from a slight pay for oil position during the first quarter two.
To a significant charge for oil position during the second quarter.
Compared to the weighted average pay for oil in the first quarter. Our current charge roll represents a net increase of approximately 50 cents per gallon.
From a re refinery perspective with lower demand for our base oil we have decreased the run rate at the refinery to approximately two thirds of our normal run rate.
In order to take advantage this demand weakness, we're planning on moving up the timing of our fall extended turnaround enter next month.
After our shutdown maintenance work is completed in May we will determine if it is prudent to keep the refinery idle until more favorable market conditions exist.
As we move forward, we believe that we will experience a decrease of activity in both our environmental services and our oil business segments. During the second quarter fiscal 2020.
And the remainder of fiscal 2020.
At this point, we're unable to determine the full instead to whats the cold and 19 pandemic will impact our business and operating results.
During the beginning of the second quarter, we've seen a number of services performed in our environmental services segment businesses decline between 20 and 30% in some weeks.
From an oil business perspective early in the second quarter, we've seen collection volumes as much as 40% lower uncertain weeks and base oil volumes sold have been down by approximately 30% compared to last year.
In summary, we are undoubtedly an unprecedented times and the ultimate impact of the colder 19 pandemic on our business.
Results of operations financial condition and cash flows is highly uncertain.
Cannot be accurately predicted and is dependent on future developments, including the duration of the pandemic and the related length of its impact on the global economy.
Until the uncertainty because the clear we remain focused on supporting our employees and customers and regained the momentum and execution. We've demonstrated prior to the Golden 19 outbreak.
On a positive note we believe the strength of our balance sheet will put us in a strong position relative to most of our competitors, allowing us to capitalize on growth opportunities as the economy begins to recover.
With that Mark will now walk us through our first quarter financial results.
Thanks, Brian Good morning, everybody.
Well get started I want to Echo Brian's comments and thank all those who have continued to rest their own health are going to work every day treat the SEC, providing essential services services, we all need to continue our daily lives.
As Brian mentioned the results of our fiscal first quarter reflect only a minor impact probably a couple of weeks of the adverse impact that the culprit 19 pandemic has had on our business due to the timing of when I first quarter ended.
With that in mind, let's go over our first quarter results.
Revenue was a first quarter record of 107.3 million compared to 95.8 million for the same quarter 2019.
While net income was also first quarter record 5.3 million compared to a net loss of 2.5 million in the year earlier quarter.
Diluted earnings per share was 23 cents, another first quarter record compared to a diluted loss per share of 11 cents in the year go quarter.
Now, let's talk environmental services.
In the first quarter, we posted record segment revenues of 77.5 million compared to 66.5 million in the first quarter 2019.
16.5% increase in revenue was driven primarily by growth in our field services parts cleaning and containerized waste businesses.
A field service business accounted for 8.7 percentage points with revenue growth for the quarter, mainly due to a large project that continued from the fourth quarter 2019.
Excluding the field services project, the first quarter organic revenue growth in this segment was 7.2%.
The growth in other parts cleaning business was due to stronger pricing, partially offset with slightly lower volume compared to the year earlier quarter.
The growth in our containerized waste business was price excuse me and volume driven.
Resulting in a 9.1% increase compared to the first quarter 2019.
Overall same branch revenues grew approximately 10% on a year over year basis during the first quarter.
We reached the first quarter record and environmental services profit before corporate selling general and administrative expenses of 18.8 million, which compared to 14.7 million in a year ago quarter.
The 28% increase in operating margin dollars from a year ago quarter was mainly driven by higher revenue and lower health care costs.
Partially offset by higher disposal and repair and maintenance costs as well as higher depreciation expense.
Our operating margin percentage came in at 24.2% compared to last years 22.1 person.
Well beyond the only business segment.
Oil business revenues increased 1.8% to 29.8 million compared to 29.3 million in the first quarter fiscal 2019.
Slide.
His may increase in revenue.
On a unit increase that are selling price base oil, partially offset by decrease in the volume of baseball gallons sold.
Profit before corporate us generics bouncing off as this segment increased 5.4 million in the first quarter 2020 compared to the first quarter of 2019, mainly due to better operating efficiency and less downtime at the refinery and lower part third party feedstock costs compared to last year.
Oil business segment operating margin improved to 3.1% compared to negative 15.3% during the first quarter 2019.
Our overall corporate afternoon, a expense declined 1 million compared to the first quarter of 2019.
And as a percentage of revenue came in at 11.6% compared to 14.1% from the year ago quarter, mainly driven by lower severance costs, such all services expense and legal fees.
Partially offset by higher non management salaries and share based compensation.
The company's effective income tax rate for the first quarter fiscal 2020 was 21.5% compared to 28.9% in the first quarter fiscal 2019.
The rate decreases principally attributable pivoted to the opposing effect on the tax rate from equity compensation and income quarter, such as the first quarter 2020 compared to last quarter like the first quarter 2019.
We generated record first quarter EBITDA at 12.2 million, which represents a momentous improvement over the 1 million EBITDA figure, we achieved than year ago quarter.
Adjusted EBITDA for the quarter was 13.5 million. This is also a first quarter record there's over two and half times higher than our adjusted EBITDA of 5.1 million there during the first quarter 2019.
Looking at the balance sheet, we had $56.9 million of cash on hand at the end of quarter.
We generated 10.3 million in cash flow from operations during the quarter compared to 9.2 million in the first quarter 2019.
Total debt remained steady at 29 million year over year.
From an acquisition standpoint.
Early in the first quarter, we purchased the non controlling interest in one of our subsidiary for approximately 2.8 billion.
Also at the beginning of the second quarter, we closed the acquisition of an environmental services business focused on field services and waste water treatment.
This acquisition provides us our first waste water treatment operation in the mid western U.S. as well as the ability to use internal labor to perform some field services projects, albeit an unlimited geography.
Total consideration for this acquisition was approximately 10 million.
As I stated earlier, we ended the first quarter with approximately 57 million in cash and then a strong net cash position.
Given our net cash position.
No I felt the need to draw on our $65 million revolver.
We believe that if we execute on the cost and capital reduction reduction measures Brian outlined earlier.
You should not need to take on any additional debt in order to make it through the worst that the cobot 19 in this downturn.
As our first quarter results demonstrate the true operating strength of our business.
Combined operating and balance sheet strength should put us in a great position to capitalize on the opportunities. We believe will be available to us as the economy recovers.
Thank you for joining us today and with that I will now turn the call back to Kevin to take your question.
Ladies and gentlemen, instead of a question or comment at this time. Please press the star than the one key on your Touchtone telephone. If your question has been answered Houston with yourself from the Q. Please press the balance sheet.
My first question comes from Jim maturity with Needham <unk> Company.
Hi, Thank you.
I'm wondering if you if we.
Hello can you hear me yeah were good areas how are you do I'm sorry.
I'm fine hopefully you guys are well.
Thanks for taking the question and I'm wondering if we think about your your branch network. You Route based network do you have any maybe a rough.
Percentages what.
Level of that network has been most heavily impacted.
Yeah, I don't know if you have that data I'm, just trying to get a sense as to how much of an impact you're seeing.
Yeah, I'll, let mark answer to the granular detail, but but certainly.
As we look at our network we have.
Roughly 14 branches that are in only exactly know 40 branches that are in oil field areas across the country that are supporting shale plays. So they went into the first quarter being down a little bit as expected because of the activity in the oil field, but understanding that from.
The 2014 downturn relative to now the base was a lot higher back in those days you had.
2000 drilling rigs working in a lot more completion crews so certainly not seen the the impact of the oil field like we did in 14, and then I'll, let mark if he wants to add any any additional detail no I think as far as variation across the network. The real underlying factor here is not caught with 19.
The more oil center, yeah, sorry, so if you really want to getting to covert 19.
Other than the branch on Okay. So for a few days or branch and Tennessee, New York areas you might expect that were part of some of the very short lived shutdown. So to speak that we had and a few of the branches that Brian addressing in his prepared remarks, but.
Really call in 19 sand oil impact and really hasn't had a much greater effect in one area versus another at this point yeah I agree.
It's been fairly outage costs, our branch network.
Okay.
And I'm wondering I mean, it sounds like you're you're taking.
Cost initiatives.
There.
As this has the potential to extend.
Is there any any.
Color you can provide on perhaps what other steps you might be considering and again I realize you mean.
Well, it's still a very fluid situation, but I'm, just trying to get a sense as to.
What what kind of leverage you might be able to Paul.
You know the levers that we have the next move would be the furlough rail to an understanding our our workforce at least our service reps are already heavily impacted by Oh.
Our revenue decline because different than most of our competitors there, but they're paid heavy commission. So they've already experienced some erosion in that pay but we will as activity decreases and we lose density with our.
Our servers Rehabs and our trucks that are operated out in the field will have to eliminate somewhere else because you like enough density to keep them going and that'll that'll lead to furloughs that'll be the next step for us. It obviously at this last longer than that doesn't we'll look at other other potential cost reductions would involve.
You know potentially.
You know more and more people, but I doubt we go in any direction on the furlough rail.
Got it and if its final questions from me.
Is this small acquisition that you announced in the Midwest I just wanted to make sure. There is this also tied into.
This this koby cleaning service initiative as well or they separate I may have missed interpreted that.
No. It's a dozen marks comments it certainly Todd and they have field crews that do.
Their own field services type activity, one of which was they were already in the Golden I'd business before we closed the acquisition. We subsequently taken our field services group as procured the supplies necessary to get into that work directly with the hope that we can re purpose several of our field reps in the spirit.
And I'm trying to keep everybody whole out in the field allowed us to rebound quicker with rebound happens repurpose them to do cobot Nike decontamination understanding of the that was in our old our old structure. So we had to build the safety programs. We had a cure the supplies we had a drain the people make sure they were outfitted drop.
We've done all of that and we've actually conducted some direct work ourselves pretty excited about it as a way.
To help augment our activity in the field report for some of our very important deep net and this might not have been no domain for your question I'm sure Brian already to just address that but when we look at says.
Well, we had already side, we have closed we assign thats before this is anything more than a Chinese story. The coffee at 19 issue. So certainly while this is it's for two does for US it's great Brian discuss how we're leveraging the knowledge company to do this disinfecting pandemic type planning work.
We see a ton of value just in general on this entity not just in field services work the more traditional.
Tank cleaning remediation E. R Tech World, but also the fact that we have wastewater treatment processing assets now and.
You look at some of the synergies in the real drivers behind that return on investment on this deal. It really lies in kind of all the things we call it.
Understood. Okay. Thanks, Thanks very much.
And I think when he talked about our our desire to get more into the non has treatment business on I know, we talk about a during our last quarter conference call and that's part of the reason why we acquired this company for us to control more of our own density on on nod record regulated waste treatment.
Makes sense. Thank you.
You're welcome thanks.
Our next question comes from Brian Butler with Stifel.
Hey, Brian Hi, Hi, Thanks for taking my questions.
Just a on the oil business just a couple one items do you have the number of gallons sold as well as how much are already.
Recycled fuel oil you also sold.
Yeah, we'll dig that out once you've already done that's what how.
Yes.
All right and then you talked about that facility being down for service in GQ here, what does that go down and what's the plan days and then I'm assuming over that time, because you're going to decide whether you bring it back up or not that I just want understand timeline on that.
So essentially what we said in our prepared remarks, but right now it looks like we're going to bring the plant down.
The night of May test and then we'll be down of the as you recall, our extended fall turnaround usually less tend to 14 days.
I expect this will be a little bit longer just because of market conditions and that's our current plan and we built a which I think I mentioned on the last call. We built a swing tyke last year, which gives us a base oil storage capacity. We will go into this turnaround prepared for for an extended shutdown given bottom can do.
Issues and as we begin to sell off to.
The supply base oil will bring to fly back up when needed.
And Brian we sold.
On base oil I think based on our phones you want to we so kind of half or 10.5 million down.
In Q1 next year, which is.
Yeah couple hundred thousand gallons from Q1 last year, and then 1.5 million.
Our goal, which is exactly what we felt less.
Q1, so the plan will be 14 days and possibly sensitive based on market conditions.
Okay and then when you tell you talked about the charge for oil the an increase.
Net 50 cents.
Well what is your netback look like now versus a.
A year ago versus what you saw in.
In first quarter.
So.
You can give them the number and I'll add some color. It's it's 20 plus.
No for Q1 was I don't know if that's where are you going in most all of that was improvement.
Thanks.
On the base all saw improved even more than that but.
When you look at.
Yes.
Different story as you interested in.
And what we're seeing today.
Yeah I'd be interested in.
What that looks like now that oil has has come down so much and and charge for oil has gone up so much.
You know surprisingly the spread has held up reasonably well I mean, we're off.
I'm not going to give the exact numbers, but let's say we're off 15 to 20 cents on spread and that's been driven by our ability to to get out there in charge for used motor oil we also.
Pushed off from third party used motor oil, which is typically are cheaper supplies, we moved into Q2 and didn't need the used motor oil, but goes a lower base oil demand social not not not a terrible spread scenario today.
We have seen a little bit of a flattening out in our ability to get a higher price tool recharging currently views mobile bore hope and disciplined continues to prevail out there and most of our competitors are feeling the same blade we arent.
Now at this point it needs to be considered a waste stream when you to charge for because.
We all know the whole industry is going to be lower for longer.
We don't expect a base oil pricing the rocket back up we do expect to see some recovery as we move into Q3, there's a lot of pent up demand for people to jump back in their cars and go see family and take vacations I've dealt they're going to get.
On an airplane so our hope is that getting their cars and we began to see more used motor oil more demand for base oil and pricing begins to go back up.
We can't lose focus on the fact that we need to continue to charger use Motorola this industry is going to be productive.
Okay, and then one one on the environmental services piece.
What was the profitability in first quarter. If you took out the project I mean was that project that materially higher margins are kind of in mind.
Well it would or wouldn't normally been in line we are on.
We have.
Some issues what.
Kind of working out some of the billing there so to be quite honest with you had the way we can.
Conservative booked at it did it was a drag.
We would have been close to 26% I think the rough math is.
25.9%, so you're talking to 180 basis 170 basis points improvement over the 24.2 that we printed and not inconsistent with loans.
The last quarter are made our cost problems have been.
A lot of health care issues, and we can't help them and it's a self insurance program. We had it where we've had a good run here lately as we started 2020 that helped and that was not inconsistent with what we said last quarter. Yeah. I mean, when you compare that is a.
If you want to call that I'm adjusted operating margin for lack of a better terms.
And then what we normally print in Q1.
In the segment really really good and I would attribute part of that.
It was generally a milder winter and most of the northeastern Northern States, obviously were where are you a centric here so.
That is that was 150 basis points 200, I mean, using we'll see a couple hundred basis points headwinds versus other quarters, but really I mean, the underlying story. There is really really good margins in the corpus.
Yes.
And what Weve, Okay, and then just added.
But we continue to work on our fleet pretty hard I mean, we've got a.
More robust preventative maintenance program, so that actually.
Has increased our cost over the last few quarters, one, which we talked a bell and we think it's the right thing for us to do they get on top of the overall maintenance of our fleet.
So we think as we move deeper into the year that will begin to go away because a lot of these older trucks are being returned.
Okay, and then just one last one on the Capex you said you focus just on maintenance stuff. So what does that look like if you just that you could you do just do maintenance capex.
What level of.
Well, we're looking at the rest of the year to try and keep it.
Pretty low probably around the.
$6 million ish, maybe a little more but.
We'll see how that goes obviously Q1 was kind of baked in some of the dollar that we will spend.
Already committed to.
So.
Hopefully we can keep it down to around that number we started off so that we were going to be around where we were last year. So if we execute the way we want hopefully we're going to save about 20 million Capex.
You can reduce 20 million capex.
It's mostly go down versus what you know I told you a couple months ago. After Q4 results. That's our plan currently.
Okay, great. Thank for taking my questions.
Thank you.
Our next question comes from coverage Feinstein with Barrington Research.
Hi, Kevin.
Thank you all day.
Good morning.
On that talked about.
[music].
Potential opportunities coming out of this environment.
I guess are you referring to potential.
No acquisition opportunities to do the opportunities become more attractive in this environment, even though I know you said you suspended M&A activity.
For now, but coming out of this do you think there are going to be more attractive targets in the areas where you'd like to acquire.
Yeah, I'll comment first and then mark and gone as necessary, but but certainly we see that's been a consistently for us we hired a dedicated resource to pursue M&A activity. We closed the deal in Q1, which we're very excited about.
We've got a very extensive pipeline of opportunities, obviously everybody's feeling the impact of cold and 19. So the guys that were continuing to have dialogue with targets.
They want to postpone it we want to postpone it but we'll continue to maintain the dialogue and get them in a position to hopefully move in 2021 as soon as we feel comfortable that.
The pandemic is behind us and would begin to see some recovery in revenue, which we think will be in Q3 Q3 will bounce off the bottom we're going to see that back up because it's a major focus area for us and we got the balance sheet to do it.
And we continue to want to expand in our core environmental service offering we like them the non haz waste treatment plants any business its collecting wage jobs the potential target for us we've got a long list and we certainly want to continue to move out West and in addition to acquisition opportunities and let me reiterate that.
Your thought process mirrors are I think acquisition is the first idea. When you think of that general comment we made in our prepared remarks, but really a close back into is.
Ties in with some other things that we've articulated our plan for instance, the timing of furloughs or other reductions be then be a temporary workforce we.
Some people's mind, maybe we're not looking at quick as others, but to us.
Having that connectivity with employees longer is going to allow us once the economy does start to turn and more hopeful we're not that far away from it even if it's not a V shape at least some type of U shaped recovery that we're getting even the inorganic that organically, we will have the better position.
The company from an employee continuity standpoint. The go ahead and take advantage of those opportunity do you won't be having to go out rehire a bunch of people, we really do or anything like that just because we were maybe a little too quick on the trigger on the front end to that so there is a delicate balance there, but we think that could be just as Paul Horne.
Even if you really add up the dollar it probably would be more meaningful didn't even some opportunistic deals.
Okay that makes sense you know given that.
Your your team out in the field is.
So a little more dependent on commissions you'd like to retain it sounds like that.
The team I mean.
And any thoughts to you know I know, you're trying to conserve but doing something to you know.
Retain them. So they can you can tie them over during this period.
Maybe in terms of mix of salary or anything like that versus commission or is it you just going to continue.
Kinda is is.
Kevin you you're thinking a lot like we are [laughter], we've already done some of that I mean, our employees and.
We do a series of town halls, with our employees every other week I mean, we've done everything in our power to communicate with our employees and try to keep them as always possible there absolutely critical as mark talked about for our organic recovery. So we have we have done some of that.
And as revenue has declined we have to look at furloughs, because when you look at the opportunity on the federal cares AG.
In some of the state unemployment programs.
I can actually do.
Fairly well if we if we position ourselves right and then furlough alma continue to pay for their health care benefits, which we will do because we care about them and want to keep them to the Q.
And that's been our strategy. So we delayed it we've augmented their pay so we've kept our workforce intact. We're gonna dragged itself as long as we can we're going to use the furlough rail so they can.
Stay reasonably holder in the process and they could be back there for us when that will initially it opens back up that's our game plan right now and if we want to win as well.
Levered up or anything like that kind of Lincoln affected as strong on net cash position, we wouldn't be in that position do that we've seen that.
Out of our competitors. So we know even the employees me for low even if they are negative in negatively impacted most of them realize already or will realize relative.
The way other people are treating are handling their employees and maybe not on a desire, but just out of necessity.
We're going to be looking pretty good.
Okay. That's good to hear thanks for taking the questions.
Welcome.
Again, ladies and gentlemen, if you have a question or comment at this time. Please press the star and the one key on your Touchtone telephone.
Our next question comes from Jerry Sweeney with Roth capital.
Hi, Jay Good morning hearing you guys doing thanks for taking my good.
Right.
Hanging in there I guess like everybody else, but most of my questions have been answered, but one just more on the opportunities side, we've always talked about or at least the recent years shake out of some smaller collectors and really moving too.
A charge for well on a permanent basis, it's a service.
It's.
Somewhat hazardous material et cetera, do you think this environment, maybe accelerating that process shakes out the most small collectors.
So let me come back out on the other side.
Maybe the.
The market is.
Different than when we came back in.
Hope you're right to be that Dutch are that that's certainly our hope and we've seen some regional competitors shut the doors, but it's very difficult if you're not tied into a re refinery today.
Obviously in the winter winter months, the our AFFO markets, a little more low Boston.
It starts to dissipate in the summer periods, you certainly have the impact of IMO 2020, which we expect.
Because of the pandemic will not have much of an impact this year, but we still believe in a long term viability of that as it impacts the our AFFO market.
So were.
I mean, we have to have that happened I mean base oils wont be lower for longer it's been a bit on the board since 2012 its.
Never done what we really wanted to do so and then in order for us to consistently make money.
And the oil business at the levels that we think justifies the capital that we spent we need everybody to start charging for used motor oil we have a lot of cost associated with people and equipment to collect used motor oil and water and we need to be a charge I mean, it happened in this medco and wall back in the day long ago.
And these to happen here.
Got it back to one last final. One this is just a small and disposal costs have come down I think that was a little bit of a headline last year I believe it was maybe partly vendor related.
That.
Reasonably well positioned on a go forward basis.
<unk>.
Loan costs actually just carry overs.
Yeah, we had one vendor problem last year early vendor went went down for unscheduled maintenance, but but overall our vendor arrangements are very solid right now.
She was.
Coming into 2020 pretty bullish economic cycle. So.
Like us everybody got their their price increase cost of living adjustments are we saw some of that coming into 2020, but overall we're pleased.
With our vendors performance and pleased with our margins pleased with our price increase was able to the so no issues on on the vendor fraud obviously.
As we evolve as a company, we're trying to develop more of our own internal capabilities, mainly on the nonrecurring in because we think it's very important for us as we continued to grow in the industrial marketplace with our regional customers. It Wouldnt controller on Destiny and that's what we're doing.
Great appreciate.
Thanks, a lot stay well.
Thanks, Jim Thank you.
Ladies and gentlemen, thus conclude the Q any portion of today's conference and it also includes the presentation. You may all disconnect have a wonderful day.
Thank you. Thank you.