Q1 2020 Earnings Call

president and chief executive officer and our corporate controller and chief accounting officer from Alexandria Kevin Richardson, Mike burbach and Gym classes are North American region will be joining us with you and I

But not for the most directly comparable gaap measures a Reconciliation of the non-gaap financial measures discussed on today's call to the most directly comparable gaap measures life is provided in our first quarter twenty $20 to leave file on form 8-k yesterday, which is available on the investor relations section of our website.

authorities or virus and operates

General and administrative expense reductions in the process we variable eyes their cost structure to a 67% or 33% variable to fixed cost split.

Pani onset of the pandemic a rapid-response team was commissioned to plan and Implement covid-19 policies procedures and practices within our facilities and throughout our service center Network including but not limited to social distancing restricted travel staggered shifts reconfigured working spaces dedicated Communications channels and resources disinfecting and sanitizing our facilities and working remotely whenever possible

Before we get started. Let me remind you that certain comments you make on this call forward-looking statements within the meaning of the federal Securities laws these forward-looking statements involve a number of risks and uncertainties, including the impact of covid-19 and related economic conditions that could cause actual results to differ materially from those implied by the forward-looking. That's a certain foods include but are not limited to those that for under risk factors in our annual report.

Get any unparalleled and a key drop in demand which was practically instantaneous. We have made difficult and pain decisions including reducing production schedules employee furloughs salary reduction and work shares.

And I'll turn the call over there.

Thank you Justine and thank you all for joining us this morning to discuss our first quarter results in our response to the novel coronavirus or covid-19 pandemic. I hope this call find you all healthy and well our best wishes and prayers go out to all those who are recovering from or have been lost for the virus. I want to start today by thanking all front-line responders whose tireless and courageous efforts are so imperative to the fight against the disease and to all essential workers.

As we communicated throughout our organization we are doing the things we have to do given the dystopian abnormalities currently present and society. And in fact conomy additionally, we understand that there's a very high probability that if we don't take these measures the alternative outcomes will be worth.

I want to thank each of my writers and teammates for their commitment to our community's health and safety and for their resolve and resilience during this ongoing public health and economic crisis.

I also want to thank my Ryerson colleagues for delivering commendable results during a quarter who's positive momentum was hijacked by the covid-19 outbreak.

These decisions represent a culture of shared sacrifice as evidenced through virus and eight K filing on April 22nd, 2020 notifying stakeholders that a person's directors and Executive offices were taking voluntary salary and fee reductions between 20% and 30% This was the necessary, right thing to do under the circumstances and underscores our commitment to our covid-19 or mandate. Additionally we have been actively engaged in evaluating an acronym on Thursday or applicable and appropriate the various stimulus legislation Provisions that have been passed in the US Canada in China.

Ryerson sell volumes and margins track higher through the quarter until mid-march before the coronavirus or BCD. We saw a slow start out of the gate with respect to volumes due to original equipment manufacturer program business contraction in commercial ground transportation consumer durables construction equipment as well as sharp declines in oil and gas.

We generated net income of just over 16 million exceeding guidance and adjusted ebitda, excluding lipo of 34 million, which is in line with the age range articulated in our fourth-quarter and full-year 2019 earnings release further if the mark-to-market impacts of Hedges placed on behalf of our customer excluded from our results, they didn't cover would have totaled twenty million and adjusted ebitda, excluding lipo would have been $39 million during the quarter which felt like three thousand years in three months prior to an executed upon organizational priorities by repurchasing approximately 55 million of our senior secured notes off an average price below par. We generated significant cash from operating activities.

I need the current economic environment. The first quarter of 2020 was three different flashbacks jammed into 1/4. The quarter started. Well inspectors such as Arrow Auto and construction and we can others such as machinery and equipment commercial ground transportation and energy on the price side of the equation carbon prices will recovery month for the first 2 months of the quarter while stainless and aluminum pricing lagged through the following stainless surcharges bearing supply and demand and balances in aluminum.

Our base-case going into the year as communicated in our fourth quarter 2019 gotten with our slower start to the year. That would see momentum picked up getting in the second quarter of 2020 and continued for the balance of the year. Of course, as we all know things have turned out starkly different since the end of February off at the pandemic began spreading geometrically, the economy has been largely shuddered which is painfully evident in every economic indicator. The fact is there are too many unknowns present to guess. It demands for the balance of the Year given the uniqueness and magnitude of this crisis that said we would offer a base case scenario using our prior experiences in 2008 and 2009 and 2015 and 2016 to stay we expect to see continuing demand contraction through the second quarter, which dead

Decrease net debt by $30 million and continue to increase our net Book value of equity.

Meanwhile, the notable progress being made at Central Steel and Wire see S&W was demonstrated in the company's results as post acquisition synergies met up with covering carbon gross margins to provide us with a positive view of csnw performance. And what was a below average Market b c d

and which was

Very encouraging in advance of the onset of covid-19 as a nationwide emergency wires and established a dual mandate for our organization through the crisis our top and pack it is to provide a safe work environment for our employees while preserving liquidity and Recovery capacity. We are seeing a paralyzing economic impact due to covid-19 given a deep depression and mitigation measures required a date requiring us to call upon lessons learned during the Great Recession of 2008 and 2009 and the deep in dust off the recession of 2015 and 2016 today requires the same steadfast resilience and perseverance that we exhibited then and throughout our one hundred seventy eight year history wise and quickly and late February and establishing kirala t or the ability to see reality clearly and began executing wage.

reservation occurring in the third

Quarter and economic growth returning from depression levels and the fourth quarter and continuing into twenty Twenty-One. The price Side Of The Ledger wage is more encouraging if it holds given the speed with which supplies going offline in this crisis as compared to others and given that nickel aluminum and carbon prices went into the crisis below their ten-year averages if history is any guide prices will soon bottom margins will be begin to recover followed by demand. The biggest drawback of course is the virus itself and whether we can collectively manage public health and safety risks the lower levels and take positive forward steps toward normalization off.

Detailed plan to serve our dual mandate given the early chaos and capital markets the force.

The risk also is of economic false starts where demand-driven and virus driven business continuity cannot be re-established with anybody consistency wage providing more color around wires and specific demand conditions. We have greater exposure to commercial ground transportation consumer durables and machinery and equipment wage Aerospace automotive and in place Construction.

that tip demand

The downside to start the year particularly with large o m program account, but we gained momentum to the quarter as we business began onboarding late in the quarter and into the second quarter may be it and Emma Kim package would be straight. We also saw relative strength in our transactional business and Fabrication business with noted relative relative and markets. I'm in healthcare Material Handling packaging defense and consumer essential and Market from a geographic perspective China shipment ever covered 90% of three pandemic you one level.

In Mexico shipment have fallen to forty percent of pre pandemic level. It's given a greater number of customer and plant closures by Mexico government authorities that the u.s. And Canada are operating at approximately 75% a few one prepend demek levels.

Viruses ability to quickly move to remote work Readiness across our network of service centers with significant digital infrastructure to support you Commerce transactions and multi-channel. The customers continues to provide valuable benefits in our ability to navigate the challenges posed by covid-19. There have been numerous examples to Clarksburg there by our ability to service customers who's flattened utilizing multiple branches and digital infrastructure allowed for mutually appreciated customer experience there by customer satisfy their complete needs or getting a lower overall risk solution. Although it is early to declare a deeply-rooted trend. We know what appears to be evidence of supply chain reorientation favoring domestic Supply chains given the menu supply chain disruptions caused by the covid-19 pandemic and what we hope is a laughing

realization that supplies

Stan rebalancing is among the highest economic and Public Safety priorities moving forward.

Looking at the supply side is a quarter and through the lens of the pandemic. We have not experienced any Supply disruptions as material is widely available inventories are adjusting to the demand shot. And we take our suppliers the manner in which we have worked together through the early and difficult part of this economic shutdown, given that virus and imports less than 8% of it appeared metal from non-domestic sources and given current Supply demand and price conditions import purchases are disadvantaged as a base case may expect Supply to continue adjusting to demand shock condition to the balance of the year is limited further downside to domestic industrial prices.

The first quarter of 2020 csnw contributed 123 point five million in Revenue in two point nine million and adjusted ebit, excluding lipo wage virus and overall results the. 172 point two million in revenue and 3.4 million in adjusted ebit excluding lipo in the year of no. And 115.5 of Revenue in a loss a point three million in adjusted you would actually in lipo in the fourth quarter of 2019.

First quarter results illustrate the year-over-year progress of management commercial portfolio and cost and supply chain optimization actions month gross margins, excluding light bulb standard by four hundred basis points, 22.9% expenses declined by 12.3% to 27.2 million month. You have any declined 28.3% on a year-over-year basis? This is within a position close close expectations adjusted the current economic conditions wage stage csnw Saturdays include digitalization of Legacy systems and processes as well as an Erp conversion in the virus in standard European environment wage, which was further improve the customer experience and see if it w

Further enhance the bar to band played franchise and generate additional cost Synergy opportunities to 120 performance was a validating data point for she is in Dublin and the future looks bright the Central Steel and Wire after we get to the other side of the covid-19 pandemic.

With respect the writers and operations all wires and Facilities except with two of our Mexico plans are operational and producing relative to current activity levels are operators off brilliantly even more so given the current crisis safety performance in q1 of twenty-twenty as measured by oceans t r i metric of total recordable incident declined to a five-year low indicating that our workplace is becoming safer and more important. Our culture of workplace safety is being internalized and embedded in our behaviors.

You do the math.

Economic uncertainty stemming from the coronavirus pandemic and overall lack of visibility into future demand Trends Metal pricing and market conditions the End Market wage which wires and operate the company will not provide. Into the second quarter ending June 30th, 2020 what we can share and what is painfully obvious is that the virus off like a response to the virus in terms of case rates testing tracing containment Healthcare infrastructure treatment recovery rates and mortality rates will largely dictate what happens next.

Central Bank and fiscal policy responses have been surprisingly fast and unbalanced very positive and necessary given the suddenness of the Joel in difficulties involved in Staffing up such responses.

More of a likely be necessary to accelerate normalization and growth sooner rather than later with respect to rise. Can we have taken will continue taking the actions necessary to go here and persevere through the pandemic. We know that April or March shipment were down 25% in North America and down 5% in China with Mom declined and noted in Mexico relative to the US and Canada.

It's too early to have enough visibility into the man trajectories to know whether we have whether we move lower or higher over the next several months, but we can say is that current demand levels represent those witnessed over a one year period in 2008 and 2009 and two times the demand decline experience over a two year period from 2015 - 2016 it would be a tragic first in the lifetime of most of us with these public health conditions and economic conditions persisted for longer periods than those reference off during prior industrialists sessions with that. I'll turn the call over to Molly will discuss the highlights of our first quarter performance.

Thanks, Eddie and good morning. And the first quarter of 2020 Ryerson achieved revenues of 1.01 billion a decrease of 17.9% wage compared to 1.23 billion. And the first quarter of 2019 with average selling price is down, 10.2% and 10 ships down 8.6% off gross margin expanded to 19.4% in the first quarter of 2020 compared to 18.8% in both the fourth quarter of 2019 and the same quarter last year.

First quarter 2020 gross margin expansion was partially driven by an increase in our transactional sales mix included in first quarter of 2020, The material sold was Michael income of 20.2 million compared to lipo income of 6.5 million in the fourth quarter of 2019 and light go off of 20.1 million in the first quarter of 2019.

Soothing life. Oh gross margin was 17.4% in the first quarter of 2020 compared to 18.1% in the fourth quarter of 2019 and 17.2% and the first quarter of 2019.

And the first quarter of 2020 Ryerson reduced warehousing delivery selling General and administrative expense by eight million or 4.9% off compared to the year ago. Driven by reductions and variable Staffing related expenses. However, warehousing delivery selling General and administrative expenses as a percentage of sales increased in the first quarter of 2020 to 15.4% compared to 13.3% in the first quarter of 2019 as the decline in Revenue outpaced expense reductions.

Net income attributable to Ryerson holding Corporation was 16.4 million or 43 cents per diluted share and the first quarter of 2018 compared to twenty nine point five million or $0.78 per diluted share in the prior year.

Adjusted net income attributable to Ryerson holding Corporation, excluding restructuring and the other charges gains and losses on retirement of debt and the associate income taxes with 15.8 million for the first quarter of 2020 or $0.41 per diluted share compared to twenty nine point nine billion or $79 per diluted share and the prior year. Ryerson achieved adjusted ebitda, excluding lipo of 34.4 million in the first quarter of 2020 compared to 63,000 and the first quarter of 2019 and 46.9 million in the fourth quarter of 2019.

At the end of the first quarter of 2020 Ryerson has 74 days of supplying inventory down from eighty four days at the end of the fourth quarter of 2019.

On the same-store basis excluding csnw Ryerson had seventy two days of inventory Supply in the first quarter of 2020 compared to 81 days at the end of the fourth quarter of 2019.

Why why our inventory within our target range of 7275 days on both a total company and same-store basis? We anticipate an increase in the summer quarter as demand deteriorate faster than inventory levels can adjust however aggressive decreases in inventory purchases alongside Innovative. Inventory management practices are expected to bring us below our target range by the third quarter.

we just

Maria cash from operating activities of 72.8 million for the first quarter of 2020 compared to cash used in operating activities of 18.5 million a month ago. Driven by lower working capital requirements and the deflating price environment during the quarter. We wisely repurchased 54.6 million an outstanding senior secured notes at an average price of 98.5. The transactions are expected to result an annualized interest expense savings off of approximately 6.1 million and we're funded through a combination of restricted cash, which was in majority of portion of the proceeds generated through the sales office transaction completed in the fourth quarter of 2019.

And Company operating cash flows.

Even with having completed these repurchases we maintained ample liquidity throughout the corridor and although we are always mindful of our liquidity position. We are carefully monitoring our credit line availability and projecting working capital requirements. This includes actively managing our receivable and payable cycles and decrease inventory purchases in line with demand and enabling liquidity accretive actions under the various stimulus legislation within the US Canada and Chong.

Also to ensure adequate cash access during the early and unsettlement Chaos surrounding the covid-19 demek Fallout during the second half of March month. We proactively drew on our credit facility in March to increase our North American cash balance to 185.2 million.

As of March 31st 2020 borrowings with $546 million on our primary revolving credit facility with additional availability of $159 a month.

Including cash restricted cash from the sale of real estate under the sale-leaseback transaction and availability from us and foreign sources and total equality was 396 million as of March 31st 2020.

Additionally to preserve liquidity. We have reduced our capital expenditure budget for the year from approximately $45 billion to approximately $25 million, which would be almost entirely funded through remaining restricted cash generated on the sale-leaseback transaction completed in the fourth quarter of 2019.

We have also taken decisive action to reduce expenses. And unfortunately those actions included difficult but necessary decisions to reduce our Workforce by approximately 16% since mid-march to adjust to the covid-19 demand environment. These decisions were made with careful consideration throughout liars and teams and combine with the aforementioned salary reductions will preserve liquidity as we manage through this unprecedented crisis.

now

Turn the call back over to Eddie to conclude.

Thanks Molly during this crisis. I can't remember going five minutes without cycling through a word stream including unprecedented virus tragedy distancing history Page Plus hardship. Hope humility determination resolved resiliency and optimism Bob Dylan song Blowin in the Wind has been playing early during this period and many times. It is felt like the answer is literally blowing in the wind. We wish we didn't have to say it but we have experienced managing to the other side of times of great hardship and we'll do it again despite the solemnity humility and Melancholy that is at the center of all of it off. We are doing what we must by generating counter-cyclical cash flows and adjusting expenses the current run-rate while keeping a safe work environment.

And maintaining our recovery capacity post-pandemic virus in is a much stronger company today than in 2008 and 2009 and 2015 and 2016 but no organization is immune to the crisis at hand. So we have Clarity around the magnitude of current circumstances and the responses required as a grateful to our employees communities customers and suppliers as we have found the best in ourselves during this trying time as hope plus all out efforts termination will prevail

It is coming. However at a price that seems incalculable when looking at the pain and loss already endured and what is likely to come at least in the near-term. Let me page phrase something on up by saying if we fail to learn from the global tragedy, you'll be condemned to repeat it several weeks ago Marc Andreessen wrote an essay title. It's time to bill when I read it. I was overjoyed with a great release that what we have been yelling from the top of peach crates for the past twenty years with catching on in Earnest with other leaders outside of the industry has failed chalkboard. Theories are finally seen for what they are and we emerged from this page News global tragedy with a renewed optimism and unbeatable resolved. I hope I can't go five minutes without someone saying why i t t e

Y-yes, it's time to build and apply all of our learnings and covid-19 the best possible use to us to never see this kind of history with team. Please stay safe and well as a lot can change in the next three months it may it be through all of our Collective efforts and all these for the better with that. We look forward to your questions operator of this time. Ladies and gentlemen, if you would like to ask a question, please go ahead and press star then the number one on your telephone keypad again. That's just our then one to ask a question.

Your first question today comes from the line of Matthew filled with Bank of America your line is open.

Hey everybody, Eddie appreciate the the heartfelt comments there a couple detailed questions for you on the workforce reductions off our those furloughs versus layoffs. And is there an Associated kind of upfront cash cost we should expect and and if so, what's the timing of that?

Hey Matt, I hope you and your family are doing well. The majority of furloughs. There is not an upfront cash cost at this time and will be monitoring how and when we can we can bring our folks back to work as as conditions normalized and and recover.

Okay. All right. Thanks Mills announced the price a price hike recently the sort of seems like they want to Target $500 off again. I think you know Barry zekelman earlier this week said they were seeming to stick. Are you are you seeing the same thing?

Yeah, I mean by and large. I think we're spot transactions and what I'll call truckload quantities. Yeah, I mean are there deals to be had for life has there probably are but I think it was a smart move by a by the steel producers. I think when they look at import costs all in and they look at where they can more or less set of floor price relative to demand because we we saw this happen in ninety-eight. When I work for Nucor Berkeley there comes a time when he cut the price more and more you're not going to stimulate any more demand because we're in a demand shock right? I've seen it many times before and I think I think they took a thoughtful approach to it. And yes, I think it'll stick if if something doesn't change.

Dramatic way more than how dramatic it's been already.

Okay, I appreciate that.

We're starting to hear that the oems are going to start back up on the auto side this month. Are you seeing any shipments ahead of those restarts to make sure that there's a story on the on the stamping floors or is their inventory kind of already in the channel for those guys?

Matthew it's a it's a mix. I mean, I think what we said in our comments is true. And that is I think there are V and starts and I think everybody wants to come back. There's there's a couple issues that involve that one is the the safety and health of the workforce obviously and and if there are confirmed cases and we've seen shutdowns and they haven't been long shut down, but we seen shutdowns that have been virus related, but then we've seen shutdowns where people come back for a couple of weeks and there's just not enough of a backlog to sustain a sustained production in a way that's affected. So many customers are really working to come back online. The real question is is really demand and is there a consistency of demand that will allow them to to at least stay at a consistent on a great that is

you know that is

Possible, but let me let me take that over to Mike and Kevin and let them have them give you some more color on that.

Hey Matt, this is Mike burbach. Say I think the way he described it is very similar to what I would say the it's really a customer by customer type situation. And it really I think you could kind of narrow it down a little bit in terms of what is the product they're making so if it's a product that's needed for the for the current situation and supports the solution to the virus, you know, making medical equipment or something. That's really in short supply. But that's one story and then if if if the customer is making products that truly are not as critical as is as others, you see a different story so hard to put a generalized statement to say everyone's doing this or doing that and and you're watching it very closely. A lot of them are coming back on stream right now. You know, most of April was was really hit with with a number of people taking them one, too.

Two three four or five weeks off. And so I think later this month will have a better idea what that looks like. When are all back online?

Okay, thanks on the energy side. I know it's not a big part of your business. I think it was like less than less than 5% of your of your Revenue last year, but is that we're seeing you know, obviously a lot of clubs of tubing facilities is that market sort of completely dead from from your point of view or there are the shipments still going on and you just give us a little color on the energy side.

I mean, I'll start then I'm going to I'm going to go ahead and direct it to Kevin. I would just say that above ground where we're storage is is really at a high degree of needs above ground is is active but it doesn't it doesn't make up for for e&p work below ground, but I'd have Kevin and have Kevin, Thursday.

Yeah. Hey Matt, Kevin Richardson. That's really the only short-term Catalyst that we see is that people are running out of room to store the oil and we do have a segment of our business that makes above ground storage tanks owned not acting a little bit of a demand boost in Q2 Q3 from that but it's coming from a very low base. If you just look at the rig count, you know, it's I think it's stance of like 400 or something which is down 60% from last year. So there's not much going on in the energy markets excluding the above ground storage tanks right now.

Okay, great. And what what types of products are involved in those storage tanks long flat mix is primarily carbon plate products where it gets rolled and fabricated and welded. There'd be something that would go into it, but it's all carbon products.

It is it's not it's not to say that there's no demand for the typical long product Alloys bar. It's just it's very depressed demand. And and and we don't see a big Catalyst wage. It's a it's a relatively small segment of our overall business relative to what it was five or six years ago.

Right. Okay, thank you. And then, you know, obviously the you know, the last couple of months have been sort of triage, but as hopefully things settle out and we hope that's not you know, a big second wave of that. Do you think about kind of the ability to do more sale-leaseback monetize more assets similar to the way you did kind of a little while ago to generate some cash.

Mad, I I think the the positive thing is we we have the assets and we have the ability and we have the optionality which we didn't really have an 2012 or 2016 certainly have it now and we we demonstrated that I mean part of the reason we did project more when we did the sale-leaseback in the return on that has really been I think we'd have to say excellent not just wage first part of that but then being able to use the restricted cash to go in and buy the bonds and and take down our take down our our principal of notes. But we we have significant State value in our company. It's certainly an option for us and we look at different scenarios of

Of how we how we create thoughts.

Refinancing see scenarios as we move forward and options that we have to not just generate cash and liquidity but to back the cap think the really important thing is not to put first things first and we have a dual mandate which is a safe work environment for our people and and managing liquidity and it's really important to get that back. Right and I think as we work in the business and we follow through on the measures that we that we've had to take we we will certainly a focus as appropriate and start to run through different scenarios with respect to our bonds. I mean, we're you of course are well aware that we're still 20,000 plus months out from our maturity date when we did the refund 2016. We were eighteen months of our maturity day when we did that in May of of 2016. What was

Interesting and doing the prep for the call. Not that not that we don't know but you go back and look at things and it just provides a different lens through which you look at it. But you know when we did the refined 2012 weary five nine hundred million. So we we did six hundred million secured in three hundred million unsecured and when we did the refund 2016 we did $650 million insecure. And right now we're at five hundred thirty-three million of secured and we've taken a lot of debt out of this company and certainly makes it a lot easier when we look at our interest expenses Now versus what it was then in the options we have now versus the options we had then and when we look at the collateral coverage, which is significantly better today than it was in 2012 and 2016. So we have time we have options and we need to be thoughtful about it, but will be on time when that time comes

Okay, and then you know, thanks for that and then sort of on that vein in that vein. You know, the is the is the strategy do you think kind of picking away at that maturity a little by little before you get it back to a more manageable size to approach the capital markets or or do you think you can still kind of approach the capital markets out for a kind of a holistic reflect that I think it's going to be dependent on conditions. I mean if you let me say this and and we we we set it in the Life Lock can change we know a lot can change in one month two months three months six months luck and change and and we hope it's going to having been through this a couple of times and not wanting to take anything for granted life.

I I I believe that there's going to be windows in which we can affect a range of good options for for Ryerson and for our capital structure of right now, it's really important to focus but I do believe that that they'll be a window and they'll be multiple options that we can pursue.

Great, great. That's it for me. Thank you, and good luck and and hope you and your family doing well as well. Thanks. Thanks. Thanks, man. I appreciate it.

And again, ladies and gentlemen, if you would like to ask a question, please go ahead and press star and the number one on your telephone keypad.

Your next question today comes from the line of Michael the shock of keybanc capital markets your line is open.

Hey guys. Good morning. Good morning.

So the first I just wanted to talk on sg&a on how much it's fixed versus variable. I know you talked about how you brought your variable to fixed cost 67% to 33% off respectively, but could you could you touch on what that ratio was DC V or in 2019? And then how much of your sg&a is labor?

Yeah, so we've gone from about 40% variable to 60% very well 67% variable over the last call at four years and it's been a month. It's been a very intentional progression to verbalize our cost structure more and more. We are 2/3 Labor All In All when we look at them look at all comp benefits incentive plans 10th and over time and we're about say I'd say even 35% would be would be all else and the team has done just a really just a

I think job given the circumstances and not just for their variable eyes in these costs but being very fast in recognizing the situation and and taking costs out.

in the

Right sequence with really with a really good sense of timing.

Okay, got it. And then do you have a forecasted lipo impact in in the second quarter?

Yeah, I'm going to I'm going to kick it over to Molly and just a second. I would say that I'm always going to tell you a little bit about how our life will lypo pools work without getting into too much picky details, but we had twenty million in light the low income in the first quarter and we would continue expect lipo income through the year and month old prices until replacement costs hit a bottom and then we start to inflict higher which were modeling for sometime in Q4 or late to 3. So we would expect to generate light between come through that whole period until we get into certain life of pools that were created in 2007 when commodity prices were very very high or 2018 when we acquired Central Steel and Wire. Let me go ahead and kick it over to Molly and she can give you some she can give you some more color and even better expertise.

Hi, thanks. Thanks Betty. Yeah, you know our lifestyle calculation has a lot of different variables that go into it and we are trying to aggressively reduce our inventory on happen as we do that. We are expecting to eat through a lot of our old Life Away layers that we have and all those layers were built on prices that were much higher at the time and so long as you read into those layers you very well could get into a situation where you're actually generating life expense. We also have to take into consideration our lower of cost or Market correction as average selling prices fall. We are in a debit lifo Reserve position right now. So there's this a lot of variables that we continue to look at where I'm monitoring it very closely every month, but just have to you know think that lifestyle has no impact on our liquidity and our cash flow. So we're certainly going to be back here in July birth.

Will M. Give another update on how life was playing out?

And I think I think Molly makes a point that we want to emphasize and that is regardless of Gap Driven Life of Optics and and there's certainly important but it's really important to keep your eyes fixed on a generation of liquidity especially during this time because that is the most important metric.

Understood got it. And then just lastly for me. Could you comment on what you've seen in May the bar versus April in in other words Thursday April the low point for a parent demand levels based on what you've seen directionally at least in in May.

We don't we don't know. I mean and it's hard to say we don't know but I don't think anybody knows I really don't I mean here's what I'll tell you is we were very transparent off in explaining what business levels were in April relative to Marge what's been a pleasant surprise has been a and the transactional strength and that's that's a tribute to everybody in the organization. I mean, we have good digital tools. We have a good digital framework. We have a lot of expertise. We've been staying in front of customers to change their spot demands and the network of service centers. We have has been very instrumental and very useful in providing what I'll call low Risk Solutions when customers want one vendor one truck as opposed to many vendors wage trucks for for a host of different reasons primarily covid-19 related. So we've we've been able to put a lot of solutions together using that Network very effectively and moving into a job.

For you around and getting material.

Where we have it to to where it's most needed and of course the essential responses into the covid-19 place pandemic response Marketplace the Ingenuity of our customer and and adapting their operations to make products for covid-19 founding and and we've been really proud to participate in that as well. I would like Mike and Kevin to give you some more color on that in terms of what they're seeing in May so far and it's if if we see any real discernible Trends one way or the other

Hey Michael, this is Mike burbach. So I think Eddie said it about three or four days in the Mets and really too early to make a call. I think too, you know with any certainty on it. What we saw through April is is a little bit of variation with with some of the customers coming on stream going on upstream and and there's fairly inconsistent from day-to-day and week-to-week. So I I would say the three or four days probably is not a good enough sample size to make a call for May. So all right, can I give you a better rate than that? But I think that's that's the truth of the matter. I can tell you this, you know, we're setting ourselves up to take advantage of every opportunity that presents itself to us and Eddie touched on it with with our Network in with the in a story and capabilities. We have in the way we're able to leverage all the different things we have going on. We we've seen a lot of opportunities that we've been able to seize upon in Fallujah.

So do to those resources and capabilities, so certainly isn't the environment that we want to be working in but we found a way to make make some good out of it.

And and let me add one comment. This is one of those times though that there's there's a lot of there's a lot of sight that we don't always have because we're not used to dealing with demand shocks that take you down twenty Thirty forty fifty sixty seventy even 95% I mean this is this is soham parallel that what is different life time is you can go to a group of oems and just about any sector but let's just take industrial oems and you can you can you can look at what they're communicating in terms of their recovery and they're reopening plans and you can map that right back to demand. So the announcements coming from Automotive plants or machinery and equipment manufacturers consumer herbal manufacturers. I mean, this is one of those times when if you're following the headlines you can get a pretty good pretty good beat on how how it's going.

Hey, Michael, Kevin Richardson. Let me just add one more one more comment, because this is what we're watching is two different themes. One is the positive impact from large oems coming back online after shutting down in April because a lot of the large oems did shut down. So that's clearly a plus that's a little easier to predict based off of the schedules of them coming back online. What's hard to understand is the negative impact of customers that stayed open in April, but they may be depleting their backlogs. And so it's hard to really understand how you would net those two things out needless to say, we're watching it like a hawk but to Mike and Ed's early four or five days in the bay. So it's hard to get a reference point. But directionally, those are the two things were watching closely.

Okay, we all need.

Some clear reality in times like these. I appreciate the commentary guys. Thank you. Thanks.

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