Q1 2020 Earnings Call
Ladies and gentlemen, please stand by your Houston wire and cable companies first quarter 2020 earnings conference call. We get momentarily. Thank you for your patience increase 10 Bucks.
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[noise], ladies and gentlemen, thank you for standby welcome to the Houston wire and cable companies first quarter 2020 earnings Conference call. My name is Josh and I'll be your operator for today.
That's on a color, Jim <unk>, President and Chief Executive Officer, and Christmas list.
Vice President and Chief Financial Officer, today's cause being recorded for replay purposes, and all participants trying to listen only mode. At the end of the financial discussion. We will conduct big question answer session and instructions will be given that that funds and comments. During today's call me include forward looking statements any such statements are based on assumptions that the company believes a reasonable look subject.
<unk> factors that are summarizing press release it.
File.
Forward looking statements are not guaranteed the actual results could differ materially from what is indicated in such statements any forward looking statements speak only has a good decreases color and the company undertakes no obligation to publicly update such statements. If you did not receive a copy of the earnings press release that was distributing or is it earlier. This morning coffee can be found them with the.
Investor Relations page of the company's website at W.W.W. Dot H.L.U.W.I.R.E. Dot com.
At this time I would not like to turn the call over to Jim could khuda.
President and Chief Executive Officer speak again, when you're ready.
Thank you Josh good morning, everyone and thank you for joining us are called a day.
If you've read the press release, you're already familiar with our first quarter performance. Therefore, today's called will be primarily focused on the recent progress we've made to strengthen our company.
First and foremost, though I wish to express my gratitude to my coworkers for the extraordinary efforts an accomplishment during these challenging times everybody porn together pulling together as a team moving quickly acting responsibly.
I can only to safety, making all decisions in the context of providing superior customer service, our accomplishments, which you should all be proud.
First quarter revenue was negatively impacted in March due to the impact of covert 19 or not for this event in the reduction in the price of metals, which negatively affected product pricing.
Q1 revenue would have increased over the prior you period.
Adjusting for non cash impairment charges, we estimate Q1, E.P.S.O. four cents per share.
Now, let's move on to what we're doing today to strengthen our company.
As you know on March 16th of this year, we elected our largest shareholder David Nerenberg to our board. We immediately put them on our compensation Committee and told him. He would be sharing that comedian may after its current chair Gary Yetman becomes denominating corporate governance chair as part of our plan transition for him to become our next board chair.
Succeeding Bill when Bill retires from the board in 2021.
In days of David joining the compensation Committee the committee met to determine how covert economic recession and the imbalance between all supply and demand Jamaica's change our 2020 goals for the company in for management, because the world had changed so radically the committee and then the board with management refocused and simplified the any.
Annual incentive plan to just two goals, 70% on having debt and 30% on remain profitable for the full year on a normalize basis. Despite the obvious negative impact of tumbling oil.
Part of our business, which serves the energy industry and the impact of recession in other parts of our business.
And we have already been focused.
On meeting those two new goals excuse me and we've really been focused on meeting those two new goes the first goal for example involves having debt here's our latest progress report at year end 2019, net debt was 79.4 million. It rose in Q1 is Prague and transit was received you crest.
It in February it over 90 million as of May 5th. However, we have already brought net debt down 11.7 million versus where we ended in Q1 and down over 20 million versus the quarters peak, we're making solid progress and pushing hard and intelligently to drive it under 40 million by your rent. We can we believe we can do this or.
Manically with no adverse effect on our ability to service customers.
We say this because we have done exactly this in the past during the last downturn as our revenues fell so too did our requirements for working capital when the last downturn began or net debt was over 60 million and by the end of that cycle, we had more than half to 230 million today. We're doing the same thing it's not newer novel, we know what to do.
And how to do it.
Having said this we should be clear about why we're doing this this is not being done because of any issues or concerns about.
Are lender.
We have been in our expect to remain in compliance with Oliver asset base covenants or credit facility has been extended the 2024 and we have no concerns with maturity rather we're having our debt for two reasons. One if you analyze our interests expensing Q1, it would cost us about $3.2 million for that.
Four year, given how hard we were pushing to remain profitable for the full year, who wanted to chop our debt level impact on the interest expense in half.
To a number of our a thoughtful investors have shared with us their belief that perhaps or public market equity value may be depressed because of widespread concern about solvency in other parts of the energy energy industry, even though that concern should not applied H.W.C.C. for the reasons just shared we in the board believe that it is responsive to our.
<unk> is concerned that we have our debt and eliminate any concern.
The second goals to produce normalize profit for the year. Despite today's operating environment challenges to accomplish this we're executing multiple business development margin preservation and expense reduction initiatives.
Each W.C.C. is an essential business and the products and services, we supplier critical part of the supply chain.
Customer development and pricing disappointed remain front and center because it is not our intent to drive profitability only through expense reduction.
Investments in collaboration and productivity tools will accelerate are enterprise strategy.
Expense management and cost reductions are best led by personal example from the top down the board is cut its fees, 20% and employs of taking pay cuts ranging from 15% to 5%. The board is also reducing all costs under which it has direct per view, including meaning cost do you know insurance and.
Professional fees.
Additional cost reductions include savings generated direction fusion of lean principles or methodology is.
Distribution center efficiencies Immaturity management and staff reductions 2020 estimated savings.
2020 savings are estimated to be more than 8 million and would result in $14 million annually.
We look forward to reporting or success with the above as well as cost savings progress an additional areas in future earnings releases with that are now turn call over to Chris and ask them to share some more details I debt reduction in cash generation Chris.
The morning.
As Jim mention we're on track for sales growth in the first quarter until the abrupt changes caused by the coded 19 pandemic in the falling oil demand and prices.
And in preparation for lower sales dined, we reacted immediately to these changes and began to adjust their purchasing activities and operating structure.
In addition, given the new reality of the operating environment, The board refocus and simplified the company's 2020 annual incentive plans on two major goals with 70 per cent waited on having the the year end 2019.
That debt.
30% had remained profitable for four years.
First goal of reducing the net debt by $40 million will be achieved through leveraging our $141.5 million of working capital and counter cyclical business model that monetizes receivables an inventory in economic downturns.
As I stated earlier, we immediately changed their purchasing behaviors by adjusting minimal stock levels, changing reorder targets and concentrating products within certain markets.
The initial results of our react of our actions are reduction on $11.7 million in net debt to $70.7 million on may 5th from our quarter and level of $82.4 million.
This may sets level.
Was over $20 million lower than the peak in February and we have made progress in believe has we have demonstrated in the past economic downturns, we can make the needed improvements without adversely impacting our ability to serve our customers.
Again, <unk> reiterating legitimate said these actions where are taken in our being done in response to changing market conditions into it improve our operational efficiency.
But not because of issues with our banking relationship.
You're in compliance with the availability based covenants within our credit facility and image and the agreement matures and 2024.
Therefore, the result of reducing our debt service.
Services to purposes to improve the profitability by decreasing the interest expense entering there's concern over solvent see.
That is president within much of the energy sector.
When the market returns, we respond accordingly, using our facilities available cat capacity to capture the market and to service our customers demand.
Thank you. This ends my prepared remarks, and I'll turn the call over to the operator for questions.
Thank you as a reminder is asking question then you'll need to press for 100 telephone.
<unk>, we stand by we compiled culinary roster.
As a reminder, that's smaller than 100 touch tone telephone to ask a question.
And I'm not trying any questions at this time I would not want to turn the ball back over to Jim Buddha for any further remarks.
Thanks, Josh Thanks to lower value team members for their continued hard work and dedication to the company.
Into our shareholders. We appreciate you joining us on the call today and look forward to success in that period ahead.
A day every one.
Thank you, ladies and gentlemen fiscal includes conference call.
<unk>.
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