Q1 2020 Earnings Call

Please standby.

Good day and welcome to the P.F. industries Inc. quarter, 120, 20, <unk> earnings Conference call.

Today's conference is being recorded.

At this time I'd like to trying to come over to Mr., Richard Goodman P. S Industries General Counsel. Please go ahead Sir.

Thank you operator.

Morning, walking to pick up industries first quarter 2020 earnings conference call yesterday for management or what your college.

I've been president and CEO and judge it maybe though chief operating officer GFL.

Before we get starboard I'd like to remind you that any forward looking statements of swaps on todays call by management.

Including those related to the company's future performance and outlook based upon the company's historical performance current plans estimates and expectations, which are subject to various risks and uncertainties, including but not limited to restore did sort of global offered the colder 19, another public health cartoon exposure the fluctuations in energy prices.

Given that service requirement.

And then compliance your covenants under our credit default.

Disruption in the global capital credit markets strictly the retail economy, that's it from abroad.

Associated with sourcing from overseas.

Importation delayed.

This is sensitive.

Customer concentration.

Changes in currency exchange rates in Paramount Wonder about symptom goodwill.

Of course gene inventory adjustments will change the poaching product market acceptance Plavix competition post reduction interest rates litigation and insurance Retrenching with key personnel acquisition of different age regulatory environment threat of terrorism under their political instability and economic uncertainty.

And information technology system failures and attacks and there's other risks and uncertainties, describing a report such statements filed by the company.

For the Securities Exchange Commission, including among others I described their most recent annual report on form 10-K.

Quarterly reports on form 10-Q, ACOG reports on form 8-K or other filings.

The risks could cause the company's actual results for future periods <unk> materially from those expressed any forward looking statements made by all the helping the company forward looking statements speak only as of the data, which they have made the company undertakes no obligation to update publicly televised any forward looking statements.

As a result at new information future developments or otherwise.

Oh, no could turn call over to Richard Horowitz Good morning, Richard.

Hi, good morning, Bridgetex, so much and good morning, everybody. Thank you all for joining us this morning.

I think that I do want to say trend Oh.

So should that didn't sort of Dupont and at our country in the world, but just we just oh shortly once safety in welding.

Oh I will begin today's call. It a brief summary of our first quarter 2020 results.

And how they can state. It compares to say 30 years ago I direct you to at least from earlier today for more information.

This mornings release presented to you know spell sheet statement of operations for sure.

Along with most of what would be on management's discussion and analysis, which that the size of course as I always do it at the purpose of trade schools and said that discussion with you only it's a combination trials for the three blocks to we ended March 31 2020.

And also I'll just point out the content that makers affecting our business.

As such I ask that you can usually your best answering your questions to these topics. After after that after my speech My Oh, Rambo idle as Joe Molino to briefly or would you cash flow information at the board update oddity key points affecting the company, which of course, you have moved to the Q1 I guess.

The company's first quarter 2020, consolidated revenue was 13 million storage keeping thousand dollars that 14 billion $322000 Gonna security you look at all.

As discussed in the company's press release published earlier today. The most significant jackie's question did not decline how consolidated first quarter revenue was moved out to one of wireless or close to 19, the negative sextuplets itself I'm doing all of a larger business.

To a lesser degree the significant declined in the global crisis crude oil.

Compared to what the Twelveth 19 affect negatively impacted Hy Tech's ATP revenue.

The company's consolidated first quarter 2020 gross margin.

33.6, or seven compared to 36.9.

30 years ago.

Florida Pneumatics gross margin was 37.6 person compared to 38.4% than the first quarter 29.

The slight decline was due primarily to product mix and covered 90 related business inefficiencies.

Hi, Techs gross margin this quarter.

It was 21.3 person compared to 32.8 pursuant to the first quarter of 29 team.

The decline was due to among other things are less favorable mix of products sold during this first quarter over the year compared to the security ever go weaker manufacturing overhead absorption and low gross margins that I knew power transmission group, well, we call PPG ton due to startup efficiencies, which have subsequently been addressed.

Our first quarter 2020, selling general and administrative expenses was 5 million six or 9000 compared to $5.263 million I saw the most significant item driving the increase supposed to watch 20.

Some dollars of course incurred as a result about decision to accelerate the relocation set up about good business. Because this is really quite in late 2019 into our punks 20, Pennsylvania This new facility.

We determined that it would be more efficient to complete this process in a short period of time than originally planned and that's a result that this expenses this quarter with greater than expected. However, this decision will result in greater efficiencies earlier than planned for CTG power transmission group.

Our interest expense during the first quarter of 2020 was $55000 compared to $63000 in the centered in 2019. This decline was due to lower amortization of debt issue cost, partially offset by increased short term borrowings.

This quarter, we recorded a tax benefit of $505000 compared to $25000 for the same period last year.

All the above into consideration on an after tax basis.

Our first quarter 2020 to 20 that loss of $758000 compared to net after tax laws and the first quarter of last year of $26000. We're reporting first quarter 2020 basic and diluted loss per common share of 24 cents.

For sure.

Compared to one cents basic and diluted loss per common share in the same period, a year ago again as a reminder, I figured I'd afraid to this mornings press release for much more additional information at this time joke Oh. Please.

Pick the call discuss cash flows.

Thank you Richard or capital expenditures during the first quarter of talking 20 was $650000 compared to $485000 into first quarter 49 team.

I forget noncash items affecting first quarter 2020 cash flows were depreciation and amortization of $433000 amortization of intangible assets $495000 amortization, well operating lease assets of $234000.

Imitation of consideration payable to a customer of 67000 balls.

Stock based.

Restricted stock based compensation of $29000.

Additionally, significant as opposed to they cut impacting cash used in operating activities. During the first quarter 2020 were a decrease in inventories of $524000 an increase of $528000 in prepaid and other current assets decrease in accounts receivable of 720000.

<unk> a decrease of 894000 accrued compensation benefits.

Accounts payable accrued liabilities in the aggregate increased $80000 and finally operating lease liabilities decreased by $230000 with that I'd like to turn the call back over to Richard Richard.

Hi, it's actually John ER and before we get to the Q1 day at this time I just like the briefly discuss it up and how we're addressing the called the 19 pandemic as we all know during 2019, we began to source many of the tools and plus it would be manufactured in China. The other quality manufacturing facilities elsewhere.

Despite this beneficial actually the tone of I wish I had an impact on our supply chain, although not really material at this point in time, we continue to talk just the guidelines issued by the CDC and other governmental bodies, such as social business into the house cleaning and disinfecting protocols loudly many workers to Telecommute telecommute and splitting work shifts.

Thirdly, except for a corporate offices in New York, which is close to our government's orders governors on as well about facilities remain open no. One knows how this economy to fuel our business will say opposed to stand up well how long it'll be felt the rest assured our management teams and board of directors are working diligently to ensure that this does pass and we will do well position.

The big advantage over recovering global economy.

Additionally in April Oh, we applied for and received approximately $2.2 billion into full of the table protection plan long.

This will allow us to maintain at least for the period as outlined in the carriers that are full workforce. We had very grateful for these funds at the government has provided us.

Lastly, the board of directors decided not to Vishal quarterly dividend at this time, they will evaluate we will evaluate the relevant facts or circumstances when deciding future current.

Dividend payments asking about what the that today now operator, we'll be happy to answer any questions have you done now.

Thank you.

I would like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speakerphone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.

Again press Star one to ask a question.

So just a moment to allow everyone the opportunity to signal for questions.

And that is wanting to ask a question I will check our first question from Andrew Shapiro Lawndale Capital Management. Please go ahead.

Hi, guys. Several questions asked if you wouldn't get back out into the question Q hopefully there's others there.

First off fine if I'm correct, they just want to understand.

Other than the headquarters, where youre doing telecommuting working from home.

Much of the rest of the business is manufacturing and I just wanted to clarify in each of the state you manufacture first off what are the states now suggests Pennsylvania, Florida in Nevada.

Yeah, we manufacture in Pennsylvania to two factors in Pennsylvania, Florida, Florida and.

Got it and all about factories are open all about what's still see those three offices or open.

And.

And I love that people are coming in sporadically as needed, but we are we are basically working from home at this point.

Right and and we're all of these manufacturing operations deemed essential by the various states. During the time, yes, yes, I should especially that actually yes, yes, yes.

Yes, we.

Sure They lock down again should they lock down again, the odds are they get to remain open yeah <unk>. During this period of operating.

It's the manner in which things are manufactured in our facilities.

Such that employees are able to be fairly spaced out and protected in have the kids the company encountered any occurrence.

Within its staff of any outbreaks of cobot.

We've had a.

Good success with that thus far.

All right about that.

We actually see this they don't believe anybody has contracted covidiens out of any large facilities.

Okay, Great and then getting to some of that we'll call it nonrecurring, albeit maybe cash expenses with the acceleration.

The SGN a cost of consolidating the gear acquisitions into Q1.

What remains of left for Q2 and will that be the remainder of the cost.

I'll, let Joe do you didn't watch specifics in June, but does that Saddam Italy. The majority the vast majority oh sketches or in Q1, they'll be remaining remaining little start feeling there but for the majority vast majority. We are you are moved in and operating it really full full control of capacity, but Joe.

You can you can have more color if you'd like.

I'm just not much more to address is right. There's just an immaterial amount of expense. After Q1 that you it's in a noticeable.

Figure UK.

And then you referred to in your press release startup issues in the new facility what were those issues and when were they or are to be resolved.

Gotcha.

We did a running change, meaning we didnt stop production at all so we had machines being worried in next to machines that were running.

We had employees that were.

You know on machines, having to come off those machines wall. Other machines are being installed electric was named installed.

And then you know that's a new layout well also incorporating.

Resets of.

Build plans.

In the one into one building a you know as you can imagine a fair amount of.

Confusion agents and the right word, but a lot of activity in very short amount of time, a lot of things going on so not as productive as you would be if everything is where it was should be a in the play indeed been placed in.

For the production plan had been placed for a month or two so you know nothing unusual or it's just we did an incredible amount of time I'd say.

Even though it was Q1 I would say it was probably scrunched into more like 45 days to be honest, where we got all this activity done. So we thought it was a great effort.

So where are they resolve then by the end of Q1 or how far into Q2 or are they still to be resolved.

Hi, it's all these Andrew Gardiner.

Oh My God for.

All machines have any consequence are up and running at producing parts by the end of March having said that.

With any new layout and consolidation.

It will get a little better with each quarter and I'm, just guessing, but you know I would say it'll probably take us another quarter or two to be it where I consider that full full efficiency, but we're very efficient after after Q1.

A huge huge improvement one to two.

Right now on in Q4 your run rate included operating in you know basically separate locations.

Q1, you are doing the accelerated consolidation you've had the startup issues you referred to.

And you.

Well get better and better you know overtime et cetera can you quantify what you feel the expected savings if any seems like it would be some of your expected savings on a run rate would be from Q4's run rate.

Which we assume was normalized pre cobot and everything else, but deconsolidated. So.

<unk> at the end of the day for comparing to.

Yes, Q4, I don't think there was a full Q3, because you've acquired in October.

Well, what should we I hope to achieve her C.

The I guess, we'll call it the cost savings side of this acquisition I know, there's other revenue benefits, but on the cost saving side, what what should we see compared to Q4.

Oh I love the Joe discussed out, but just Mark just remind you Andrew dice I believe we had six factories six Oh places in Oh in Chicago and the two business.

In the two businesses I'm gonna be started and now we have a zero places there and a there's one small office two people with the Diminimus amount of rent just sort of its place to go salesmen that all that kind of sales person at <unk> and another guy and engineering original owners of the topic I'm. So just.

Definition were one place now that we moved into facilities. So much credit facility, but George George you can get them to specifics so it it just so clear.

Let me say savings compared to what Q1 Q O. Q Q4, No Q1 Q1, you were in the middle of the running consolidation, but we bought it not tober in Q4, presumably was a normalized.

Double SGN, a or whatever the run rate was pre consolidation and now that it's all done or.

You know, it's still evolving in terms of startup issues, but the improving but you said most of it's all been done by the end of March.

One in a sense since the expected savings that we would we could see from the S. Gionee that would be expected from this whole consolidation effort.

Well as a bill this is down the cost side hated.

Yeah, I mean, I've seen a side.

In Q1, certainly had hundreds of thousands of dollars transition costs that were direct in addition to that.

We're on margins probably half of what it should have been.

In the good business. So yeah I can't give you exact figures I can't tell you exactly what the savings are gonna be other than I would say beginning with Q2.

Largely on the geared business should look a lot like the rest of the company if not a little better.

On average so enough that answer your question.

I would also I would also mentioned that we use manufacturing labor obviously to move what are the things going on I would say, we're not making products during that time, obviously and 64 in Q4 had much less SGN right.

Most of that.

Okay well.

Well I guess I'm trying to get the end of the day you know you guys.

Justified the acquisition your present things to the board the board approves the acquisition et cetera, trying to just get a feel for what is the scope of revenue and gross profit impact.

You think relocations and set up cause to P.T. GE.

Segment within high Tech to getting an understanding about basically Q2.

Normalized run rate in Q3 normalized run rate for that segment of high Tech.

I think there a lot of moving parts wouldn't have whenever you move new company and I know if you've ever done that but it's a if you have you know and you'd realize that there's a lot of moving parts. When we like the turned into a place and that's it that's certainly will be a lock up there certainly there that saves I don't know if we shouldn't really pinpoint yet exactly what it is do we get a couple of months under our belt and see.

What it all is but I mean, certainly as Joe said in the margins are going to be back up to what you would expect perhaps even better.

Everything and everything thus far.

Is exactly as we had projected and forecast when we went back to come before we bought a company when we bought the company.

Pretty much what do you see margin <unk>.

Got it.

So when you see margins. So P.G. I don't think do you provide the margins of the sub segments is like BTG margin available.

No. So is it the margins of all the high Tech overall, you're saying that will run up that or.

Well I bet as I said to the when they went down this quarter, because <unk> direct labor being used to move I totally understand yeah, I understand that I'm trying to I'm trying to you know.

I'm trying to project here I'm trying to be perspective to understand earnings power that this company can generate.

Well I don't really.

Scott <unk>, John one of the issuances, whatever we would've expected about two or three months ago.

No.

Not I'm not sure that's the proper expectation given this environment, while I won't say that I believe our power transmission.

It was probably among the best position of all of our product lines because in many cases.

We're dealing with a supply essential businesses. In addition to that much of the work is break down work.

Somebody's got to hear it breaks down any to fix right away. So there's a lot of.

You know a lot of state regulated businesses in the unaffected by the.

By the virus so.

You know, it's a little hard to say I'll go back when we said well maybe acquisition that.

We paid a little more than a full oh for multiple on this on these businesses as they stood a but once inside of our operation and combined with a deal.

All the gear business.

You know, we're paying a fraction ultimately pair fraction that and that is where.

All of the transition costs, which I would imagine.

Our easily a half a million dollars a hard costs and.

Soft costs like I said inefficiency that went on for six or seven months hundreds of thousands of dollars. So I'm sorry, I can't give you a better answer because I think it's really apples and oranges, but I think I'll agree with Richard that.

Where everything that's happened it's been pretty much the expectation.

Right. Okay. I mean, you know the costs of what the either the cross cutting or the cost consolidation savings are kind of what they are I realize covert has changed the near term revenue picture. So.

It's hard for us to really project you know you know, but do you understand that kept you know very hard for us that check right now.

But as soon but it's all good I can tell you that.

I have more questions. Please come back to me I'll get back in Sherman sports others have stuff.

Okay. Thank you.

As a reminder, that if star one if you like to ask a question not next question is Henry you Brown, a private investor. Please go ahead.

Good morning, gentlemen.

I know there's lot of that they would.

A 8-K recently filed that said you need more time to fall the first quarter two.

And one of the reasons was to evaluate assets for any impairment.

In releasing the first quarter.

[noise] results. This morning is that is that evaluation complete and is there any impairment adds up that date March 31st.

I'll, let Joe answered this question from read but the delay the answer I believe snow and the delay was supposed to it at least certain and they the recent requirements that.

Every public company how to go through now to should there be quarterly numbers, but show you can you expand.

Yeah. The analysis that was completed.

Regarding the assets was done prior to really Citi. Your earnings these numbers reflect that even though there is no impairment.

First quarter.

Okay, and I'm, just reading something from the.

Okay got it was dating.

Paul maybe 15.

Okay.

Let's move on.

What's the total payroll incurred in the first quarter.

For the entire company.

Correct.

Joe do you have to I know the I do not know the answer that off the top my head, but we can probably has somebody.

Take a crack at that while we're on the call and try to get that answer too.

<unk>.

Just to try and may not entirely.

To the amount that you got the European banking loans of 2.9, well say well loved that ballpark.

So the TPV FILO was based on two and a half months of.

The approved the payroll number and that payroll number includes.

Right.

Role.

Yeah, that's correct.

And of course capped at anyone making over $100000 that were not included.

Right.

So it's just that's your I don't know I don't know, what you're trying to get to that so strict.

It's a strip the calculation based on or actually will average later.

Yeah that known objects. You know also include what when they get a sense that number includes also.

Payments rare.

No no no no the rent if that's a part of the forgiveness it the calculation.

Of the borrowing the money that we could borrow includes payroll and what that also includes additionally, the hourly pay cap at 100000 annualize. It include our contribution per employee.

Health insurance and also our contribution for the fall in cash pension plan and I believe.

Got it the average took two and a half months of average for 2019 to come up with that figure of the bought about bar because 2.9 billion.

So what does that answer yes.

Would it be fair to say quarter twos.

Email expense.

For payroll will be substantially less.

Well I didn't give you an ex <unk> a perfect answer.

As.

As we've stated.

We have not held off on terminations that might have been made.

As a result of getting the TPPL, which is exactly what the long design to to accomplish I can't tell you, where we're going to be.

The end of June and whether you know who knows what's going to happen as they're gonna be.

For the further out legislation I don't know I can't tell you what our Q2.

Well, it's gonna do I, just I can't see that far into the future and my question what was for a number of weeks eight week someone else's, it's paying the payroll.

Correct.

That's what the cats with the PTC is.

That's what that's what the health Care's actives.

Maybe many Henry or is your question the following well our eight weeks of paid be consistent with what are what approximately eight weeks and pay wise and 29 weeks in 2019 that your question.

No I think it's eight week.

Subsequent to when you received alone I presume you for your expense for salary expense will be diminished by that that amount that you received.

No it doesn't really work no.

<unk> <unk> the alone is separate from our expense structure. Our expense structure is weather days, it's unchanged relatively speaking unchanged on certainly on the personnel thought at some point in the teacher there will be complete guidance on how long it gets forgiven I think what you're you're you're possibly can plating is.

Forgiveness of the loan and how that affects the profit or loss of the company. Those are two separate state wall related.

One doesn't go in and one in other words are our payroll doesn't go down because we got the loan I didn't fill that bucket so to speak we have our payroll or whatever.

It's by requirements of the forgiveness calculation, then they'll be a separate game somewhere else when the loan gets forgiven, but.

Our personnel will look.

Would you expect alone up you know quite similar to what it what it looked like in Q1.

In terms of or what are the pay way.

So he can answer your question other gain is gonna be in some future period.

Whenever the loans forgetting yet and it will be having some just said just if you like I mean, I'm I don't know how familiar with this PPP or the requirements and all that but all of US heads are spent an awful lot of time on this be totally before we submitted an insight and we've been really doesn't appear to all the rules and the guidance that.

Well the TPP funds could be used and we're hopeful that a large portion of the 2.9 will be to get them, but we're not able to predict right now how much that'll be or it's a little bit to get in at all you know the government will or what it did all that stuff. So if we choose doing without the with following the rules strictly of course as we always look for many reasons, including these royalties.

Guidance things that keep evolving does PPP long to get this application. We just released by the <unk> has to be a in the treasury on Friday.

So we can't make any predictions as to the publicly announced all that stuff because it's something that's kinda like in the here, we don't know, but we know that the government will be scrutinizing the eligibility for all companies such as OS benefit more than $2 million Someones.

Probably though.

I have two other questions if time permits.

And Chris is it says that you had a loss of a large customer.

I don't make sure I'm reading it correctly is that a reduction in sales to a customer or you lost the customer.

We lost the customer.

But we picked up many up there about customers customers, if you get what I'm, saying, but we did lose the customer.

And once it.

But decision of yours due to credit the customer wasn't happy price differences what was the reason price differences that essentially price differences nice differences.

And how much was that customer in the first quarter.

19.

We don't really we don't really give you that information, but maybe you can speak a little bit.

The that led customers annual revenue.

In prior years it is low seven figures.

Hey, good thing here.

That concludes the low single.

<unk> seven figures.

But having said that we picked up to many of those customers along the way now.

<unk> without the Christmas.

When do you have to sounds like it's the sales to that customer where they branded product.

There are many other channels available to end users, who would like to purchase that product and if that is the product that they want they don't have to go to that customer so while I'm certainly wall that customer wins would do.

Loading the last of our inventory.

There was absolutely an impact but once they were out of our product people weren't just going to buy the replacement product with that customer they were going to find another avenue. The by always in there or a number of ways to get our product and everybody is well aware of those people purchasing that product are well aware that where to go.

And whatever you were filling this prior customer with anything.

Got you still have inventory that was made only for them.

Or there's no when they were our regular our regular branded product there's nothing special about it.

Okay, Okay, Okay, I'm going to leave I'm going to leave a.

Reserve my right to come back thank you.

Thank you.

[noise] and once again that is star why if you'd like to ask a question and our next question is Andrew Shapiro Lawndale Capital management. Please go ahead.

Thank you have a few follow ups on Henry's questions, just get a little bit more clarity and then I have a few more regarding the last automotive distributor customer and the sale of it was a branded product can you give a little more color as to what line of automotive product.

Sure products.

This is a bare cat that who's had cat, they're gonna say a cabinet.

Yeah, Eric Canterbury Air Aircat with an eye on right and and or was this was a U.S. distributor not the.

Or something over in Europe.

It was it just goes.

It was probably smaller okay. So short.

They have a and when I say, yes.

They have they loosely affiliated.

Entity in Europe, as well, but those out there to minimize.

Okay, and when you said low seven figures that was annual that was not for Q1 last year annual correct content. Okay. Good thank him for that clarification, and then going back.

To and these questions on the P. P P and.

Perspective, a loan forgiveness stuff, which and I'm very familiar with and yes Im sure over 2 million do you know the S.P.A. and and it's not it's more S.P.A. and not Congress, but they keep on shifting and changing to their wins in rules based on the political wins and criticism. So you know who knows what what is the news.

Forgiven in the three weeks I think.

You probably agree that that there's still an uncertain thing, but yes. It sounds as if you went.

Yeah. When you do the forgiveness it'll be a separate line item it sounds like it won't be a reduction of the.

Various income statement items. That's correct you do you know whether its forgiven are not its not coming through your normal.

Gross margin line item is that correct.

Correct Joe.

Okay right went went up.

When where you're the bonuses paid in March that you referred to bonuses in the press release.

Watched since I believe.

Last week emotional [laughter], alright, and then during the period of covert constrained business.

Or at least the period, which the P.P.P. load is outstanding.

Has and and you know we have you guys made cuts across the board here in variety ways, including cutting the dividend temporarily but during that period of the cobot constraint business or at least the period, which the P.P.P. loans outstanding.

That's the board implemented any reductions keep the portion of the senior executive salaries that are a in excess of the 100000 dollar annual rate cap splitting it in the P.P.P. program.

Andrew I don't know if I understand your question, but we're not that discussing executive compensation on the school, but just wanted to spend the question a little bit more I'll I'll see if I can answer.

Okay. So in the P.P.P. program, you have here or a it's your average annual its your average monthly payroll and that worked out to an FX plus the the various health. Another denny's that were covered in it that worked out to the $2.6 million get above the the.

The PPP loan OK dividends have been suspended so that's on the shareholder side. So there's you know there's things that are going on it and and what's involved in the P. P. P is you know with yours chose another senior executive salaries 100000 dollar annual rate is included in the in the PPP Okay.

But the other portions of your guys compensation are above and beyond that and that's not part of the P.P.P. So I'm asking has the board implemented any reductions to the portion of senior executive Sally in excess of the rate caps.

Got it because you don't cut it.

They have not yet not any marketing.

This time.

All right.

Regarding the credit facility. Your release said there will be detailed discussion in the 10-Q, which unfortunately is not yet been filed.

Are you able to I don't know if that standard language, but are you able to summarize any of these.

Changes so that we may ask any pertinent questions prior to waiting until this current quarter's earnings call that won't be held until August.

Again on or off I understand the question Joe do you understand what exactly is asking if not what kind of imply there's changes I didn't know theres changes to the credit facility that will be detailed in the 10-Q, but the 10-Q's not out so I can't read it and I can't ask questions now and it's just a shame not to be able to ask questions until next August. So I was just asking if.

You could summarize any changes in the credit facility that might be detailed in the 10-Q two become a two to come to my knowledge. There I know there are no changes to trade you can add onto it.

There's there's only change to the Q right now he's using the change in the credit agreement is.

Change, allowing for a <unk>.

TPP, though the credit agreement prior to the issuance of the TTP loan did not allow us to borrow outside of the capital one facility I think so it's just a covenant change for the incurrence of additional debt. That's correct. There were no change or something that's out there. There's no I mean, just that's what I wanted.

Yeah Okay.

Going to be a waiver.

Yeah, or whatever is okay waiver.

Which makes a lot.

Last alone in the main gets forget it's true.

And Andrew but the but TPP level was filed piloted the at an 8-K.

Yeah, No no I guess I I didn't see all that and very happy to see that you guys qualified for and got it and I'm hopeful that upon the subsequent audit because the size of your loan that.

You'll be able to have most if not all of it forgiven.

The.

Released talked about I'm not sure. If this is it sounds like it's outside of P. TG, but maybe in ATP of high Tech.

What type of functions and cost go into what do you called and in early in the press release outside finishing and is that the scene is what you refer to later in the press releases outside processing costs.

John.

Outside costs could be things like a.

Heat treating you know metal prep.

And those would be that those would be the big ones metal hardening processing things we can't do.

Internally so yeah I would say those are those are related covenants, we probably just seems different language each of them.

Okay. So same stuff <unk> different language and the in the release, Okay. And then yeah are these outside cost some more permanent change in cost to you or is there anything high tech can do to mitigate such increases.

I'm sure, Yes, and certainly can you think the mitigate them and you know we analyze that stuff all the time as you know were pretty vertically integrated at this point, we don't have the ability to do any heat treating and much of our product is heat treated.

We have looked at bringing out in house, but at this point it doesn't seem that that call sufficient to do but that doesn't mean you always <unk>. You know, we look at different ways of manufacturing things and depending on the kind of metal you bring and you might not need it.

So yeah, we're always looking at that stuff of course.

What if any are the big items remaining in the Capex that you have identified still plan for the rest of this year.

I'll take that one nothing nothing of any major consequence, a we're going to try to.

<unk>.

If the environment and the outlook doesn't change for the markets. We serve you know capex for the rest of year will be a more modest than it has been in quite a while obviously that will do maintenance capex and.

Where there's a return on and expenditure for a new product or something like that of course will extend those kinds of money, but and then lastly, we just got done.

Finishing a lot of IP expenditures or you know around a whole business. So.

All the I've seen stuff. He's now all pretty encouraged so things are going to fall off a little bit here in next few quarters for.

Capex.

So with you we already experiencing we'll call it unless there's a really bad resurgence in the fall and there's no visibility on therapies, and there's probably not a vaccine, but but even therapies would caused the governmental authorities not to close things down as tight as they were.

With the bulk of the the deepest part of the of the economic closures or across the country now beginning to be rolled back okay.

And clearly companies that are involved in vaccines are seen they didn't plucks people, who make masks are seeing an influx et cetera et cetera.

Can you share your your views and observations.

On the effective the covert 19 pain deck pandemic in terms of basically in.

The economy, there's a reallocation of resources going on certain businesses actually you're doing well, whereas travel and other types of the activities where people are socially gathered.

Has been greatly damaged and potentially for the long term.

With respect to the where the company has been or is person projecting or or focusing on selling can you give some views here on the impact of the pandemic from both the supply point of view and your supply channels as well as a demand point of view.

Joe I I will let us just at the <unk>. It is a bit is virtually impossible for us or anybody else in this country or this world and make addictions I mean, I don't know I'm now.

Oh, it was still I'm not attitude.

So I'm asking I mean are you you know look if you have customers, who make masks you might have seen the increases in certain sub sectors of your customer base are there certain industries that you serve.

Where you are.

She either no degradation or potential in increasing activity versus obviously certain areas of your business that have has encountered serious headwinds until they reopen.

I can't think of and they enjoy your you'll chime in I can't think of any business any customers that we have that have not shown degradation to pretty important degree having said that some of them. At this moment. That's had a couple of good weeks or do you know what are such et cetera.

But for the most part has been very very low for that and who knows what the future brings to the Joe you want to answer that are up eventually the question Andrew but.

Give me, where I think you're asking but Joe you want to answer that.

As I said earlier, I think painting gene staring the good bass.

I think.

To the extent.

The government keeps ordering you know military equipment, and we supply those guys that.

Well.

There okay.

Last is gonna be very industries, except that you could tell me then.

Oil and gas prices are going to be back up to 40 or $50 a barrel that would be like that'd be helpful. Develop when planes are going to be back in the air that would be helpful. If you can tell me when the mobile job as Ken.

Start calling on garage is again would be helpful. So it's you know business like different drivers and we certainly don't know whenever those things are going to turn around but there.

Got to be affected by slightly different.

Sort of SASSA.

Sure and as you moved into some new product development inside of high Tech for example, food processing got mentioned you might have stuff that goes into health care and if its food processing for you know certain types of food items that are consumed when people are stuck in hone more than restaurants or something then.

That might be areas that would have a tailwind to offset obviously your many areas that have headwinds.

Yeah, I don't I don't let's put it this way despite the fact that are thinking TG. It's doing the best it is in no way gonna grow in some way.

Mitigate.

Materially and any other fall, it's just it's difficult not that big and second of all its hanging in there it's not growing dramatically.

And are you seeing you're right are you seeing your run rate here at the end of May going into June as a result of partial reopenings are you seeing the run rate of orders and things starting to pick up.

No so very very very inconsistent dairy sporadically local how they're a good they are two of <unk>. Good orders from customers and then a week of no waters. So I would not say, there's any signs yet of anything like that.

Can I sing.

Okay.

Can you quantify or provide a range of cash flow impacts and timing related to the provisions of the cares Act that you referred to I think it's primarily the tax provisions in terms of either.

On the amount of money at I've seen other public companies are ready providing estimate.

The range of cash flows they think that they can claw back a cash they can call back to because of carriers that changes in tax in a well carry forwards carry backs et cetera, do you have any kind of a range of cash.

Intact from that this as of yet.

Joe.

I would say that this is a reflection that over the rest of the year.

We we would expect about a half a million dollars of.

Clawback, it's a combination of stuff that was available to us and then stuff that became available to us. So just roughly half a million dollars over the next three quarters.

Okay, well every little bit helps to pare down the debt right.

I have a few more questions fell back out come back to me. Please.

Sure.

And as a reminder, that is star one if you'd like to ask the question.

And well Paul for just a moment.

Oh, we have Andrew Shapiro Lawndale capital management. Please go ahead.

Okay.

Regarding the I think this important nomadic anything thats, where all the aerospace isn't all that regarding the military oriented customer was the increased limited to Q1 or is there carryover work into the current into future quarters.

Our mill I'm, sorry, if you go ahead.

Gotcha.

Yeah, the military orders or.

The military orders are not want all with the most part answer.

Orders, we would expect to continue.

Of course, given a cold it I can't tell you exactly how but you are not.

One project these are.

Part tools and parts that we expect to develop a regular flow of waters from South Dakota military on an ongoing basis.

And are there any particular aerospace programs to which you can.

Tie as end user customers for creating the end user demand for your tools.

Maybe like a particular type or the aircraft you know as it is just the F. 22 stealth is it. The F. 35, you know various programs might be specific to the product demand of your or.

Your aerospace customers, which I'm, assuming it's not the military per se, but it may be one of the airframe makers or something else, yeah, well set up 37 for sure you know.

So.

Okay, Yeah, that's not military.

That's not built there enough or something.

Yeah, just wondering solitary program that created this.

Yeah, there's no single program.

These are general military aviation tools that are used across award.

Variety of platforms now I will say this whatever the hot production is at the moment for you know that supplier to the military that'll obviously take more tools, but these pools are useful across many different kinds of jets.

Is it primarily Boeing or are there other no okay. The helicopter ordinarily though.

Okay, No I know.

Okay.

And has there been happy to talk to us.

Lucky.

Hello.

Yeah, and and as we've talked on prior calls has there been any more indication of progress at all with the [noise].

But the long term plan to.

Crack into a Airbus.

All right now they wanted to see visitors.

Okay, No deal was always going away.

Yeah. Boeing is just starting to open up a little bit of that but to my knowledge. There's two issues one with Airbus, they're not accepted as citizens and the second thing is the country that the rindos except those.

No. We can't do you can get there right now until they can't do it it's always zoom zoom sales calls.

And then I did then I mean, I don't know for doing that either.

Okay.

And.

Good.

Again, it's probably hard to do an apples to apples comparison, but do you have introduced lots of new products over the last few quarters.

Is there are there any particular products or introductions that you you did make that are showing a you know since or new products, presumably year over year, they would actually be [noise] revenue enhancing hand, Stephen though it's in the face of they reduced.

Economic activity from coated are there any particular, a new products introduced over the last few quarters.

That are worthy of any revenue generation call out from the current quarter.

[noise] they loved it was before before anything happened with covert, but Joe do you recall exactly that.

I mean I.

I certainly want us.

We're very excited about the incident so.

[music] fastening systems toll for new staff and system to military aircraft than we were just starting to get a little momentum there.

While doing a boom people were talking to a very excited about it there's waters or kind of on hold for now so I'm hopeful and hopeful that once things get back to something a little more in the way of normal production at the military.

Aircraft providers that we should get some influx of orders there. So the answer is yes, but nothing's happening right now.

Okay.

All right I think.

That's all the questions I have for todays earnings call. Thank you.

Okay. Thank you Andrew.

There appears to be no further questions at this time I now like to turn the conference back on which our speakers for any additional closing comments.

Ah we just we thank you for me to taking the time to comment I'll call today and.

We wish of course, we wish everybody well into two states safe and well and we hope that that somebody get together in August that we have some the world is it a better place and of course PNNT as well. Thank you all stay safe and have a good day.

This concludes today's call. Thank you for your participation you may now disconnect.

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