Q2 2020 Neenah Inc Earnings Call
Need to press Star one on your telephone Cc advice of today's conference is being recorded its really core or any further assistance. Please press star zero I'd now like to hand, the conference over to the speaker today, So Mccarthy Vice President Investor Relations. Thank you. Please go ahead.
Great well. It went thank you for joining this 2022nd quarter earnings call with me today, our jewelry sure tell Chief Executive Officer, and I have a pleasure of introducing for the first time pulse Santas start Chief Financial Officer.
Julien Paul will cover business activities and financial results for the quarter in detail, including impacts from the Corona virus pandemic and actions we've taken to respond.
In addition, we'll share a few thoughts on our outlook for the rest of the year and following these prepared remarks, we'll open up the call for questions.
As usual I'll start with a few headlines.
Sales in the quarter were 161 million down 36% versus prior year. This was in line with our communicated estimate then the drop in the U.S. economy.
Operating income declined due to the lower sales as well as from the impact of reduced operating schedules to manage inventories.
On an adjusted basis operating income was half a million dollars in the quarter down from 23 million last year.
We booked $59 million are mostly noncash adjusting items related to asset write offs and impairments and other restructuring and nonroutine cost in the second quarter last year. There were 3.5 million of Nonroutine charges will cover. These items later in the call and complete details along with a reconciliation to comparable GAAP figures can be found in.
Our press release.
Yes in the quarter was negative $2, a 98 cents. Excluding these adjusting items EPS was negative eight cents and compared to 95 cents in 2019.
Lastly, I'll note that our comments today include forward looking statements and the actual results could differ from these statements due to the risks outlined in our website and in our SEC filings.
With that I'd like to turn things over to Julie. Thank you Bill good morning, everyone.
Oh started out the year strong there was no avoiding a significant impacts from the pandemic in the quarter I'm very pleased with how our Neenah team has responded and it's kind of great uncertainty, we responsibly manage operating schedules in inventories aggressively reduced spending and delivered strong cash flow all while continuing to support our customers with a high school.
Level quality and service.
I'm confident with the work we've done we will emerge in a strong position.
Last quarter I shared our plans to address the pandemic covering five key areas.
Maintaining the health and safety of our employees exceeding our customers' expectations and working with them on future needs.
Driving operational excellence in manufacturing and reducing cost in all areas.
Preserving our strong liquidity position and continuing to execute our long term growth strategies.
I'll update you on our progress and each of these areas.
Our top priority is always the health and safety of our employees with enhanced protocol and practices. We've implemented numerous changes to the ways we operate.
Our employees quickly adapt to these changes while remaining focused on delivering the high quality of service our customers expect from us.
Most importantly, they've done all of us while working safely in fact, we reduced injuries by almost 30%. This year as we continue our progress to ensure that no one gets hurt while working at Nina.
I guess, it's serving the needs of our customers who have also been impacted to various degrees by this year's unpredictable environment.
I mean is known for our flexibility speed nimbleness and responsiveness in the marketplace.
During these times have increased volatility our customers value these characteristics more than ever and our global footprint has helped us effectively support customers with a local supply chain.
At the same time, we continue to develop innovative new products for the long term I mentioned in May our success in commercializing media for high performance face masks.
Recently, we've also launched replacement filtration media for consumer branded Basemat.
This business, while small today continues to grow and we've accelerated efforts to increase throughput on our assets in Europe. In addition to face masks, we'd run or high efficiency H.B.A.C. applications and expanded our high performance industrial filtration media to address the need for data storage.
Growth in both of these markets continues to accelerate.
Let me introduce proprietary new environmentally friendly digital transfer products that expand our addressable market and provide increased customization and cost efficiencies for our customers.
Developing new tape backing applications to meet the increased demand for painting and other do it yourself home projects and not to be out done our consumer fine paper team recently design and launch new teacher tool products under our wealth Astra Rice, Bran and began selling southworth brands planters and journal.
These products are available a major retailers, both online and in stores and help extend our reach beyond the traditional paper category.
Third area of focus has been operational excellence and cost management.
In the quarter, our team significantly reduced cost both temporarily in line with reduced operating schedules and also on an ongoing basis as a result in restructuring effort.
We reduced over $15 million, a manufacturing costs in the quarter as we optimize capacity restructured parts of our organization improved asset yield and deferred spending in multiple areas.
In addition, our procurement team did an excellent job negotiating lower prices and more favorable terms with many vendors.
Our hard work extended beyond manufacturing and actually today was more than $6 million less than last year with reduced payroll cost of course, more travel expenses and spending decreases in virtually all other areas.
These reductions included non recurring savings of $1 million from furloughs.
Additional initiatives included optimizing certain brands and skews and as noted in May idling of fine paper machine and reallocating if the volume to other asset.
While these efforts it didn't work on the significant impact of under absorbed fixed cost in the quarter. The changes we've made clearly set up for more efficient operations as volume return and are expected to generate ongoing savings of around $7 million a year.
Next we focused on preserving our strong liquidity cash generated from operations in the quarter with almost $30 million. In addition to cost reduction we've reduced working capital not essential capital spending and discretionary pension contributions.
In May I communicated a targeted cashel improvement a $50 million versus our base plan to help mitigate impact of lower volume I'm pleased to know we're on track to surpass this target.
These efforts as well with the successful refinancing of our debt held the and the quarter on sound financial footing last but not least we remain resolute in our efforts to create long term value through executing strategies to invest and efficiently a platform that deliver attractive return and enhance our growth rate.
We have important foundational categories like fine paper in Backings that generate meaningful cash flows that we can redeploy in for targeted growth areas filtration custom engineered materials premium packaging and design and specialty coatings.
We're continuing to act on organic opportunities in these areas, while maintaining an active but cautious M&A process and recognizing it's our ability to execute well, while maintaining financial discipline that ultimately drives value.
Before wrapping up I'd like to comment on the onetime charges in the quarter.
While these include a cost for actions, we've taken to restructure optimize our business for the future. The largest impact we started from resulted from lower near term demand due to the pandemic, which triggered a partial impairment of our U.S. filtration asset.
As we've noted in the past qualification on some great has taken longer than anticipated and we've also made investments in Germany that have provided incremental capacity. Our objective is to optimize total cost of this business. These items now combined with an additional slow down due to the pandemic has extended the U.S. ramp up curve.
We continue to see transportation filtration as a strategic and attractive market our expectations artist fill the U.S. asset over the next several years and deliver our historic above market growth rate for this category I can assure you. Our teams remain very focused on this and we view it as an important catalyst for growth at Nina.
I'm sure. It was no surprise at the quarter was challenging as you've heard we've acted aggressively to protect employees support our customers manage our cost and improve our financial position, we remain well positioned in our markets and have the organizational capabilities and financial strength to address short term challenges and deliver on our law.
Long term strategies.
I've been encouraged by the sequential improvement in demand that the past few months and we'll talk more about our outlook later.
Well now turn things over to Paul to cover our financial results in detail.
Thanks, Julie and good morning, everyone.
I'd like to start off by saying, how pleased I am to be here at Nina although starting in the middle of an unprecedented pandemic is not ideal I've been impressed with the can do attitude or the team and how well Neenah has responded to the crisis I'm confident we're on the right path as they go through each segment's results I think you'll hear it's a pretty consistent story.
Significantly reduced demand due to cold that coupled with our efforts to responsibly manage operating schedules and reduce inventories lowered results and we partially offset this with a broad range of cost improvements and benefits from lower input costs.
We also focused on initiatives to deliver our targeted $50 million to cash flow benefits by the ended the year.
Very important element of this has been working capital management.
Our efforts resulted in cash generation of almost $30 million from operations for the quarter and further contributed to our solid liquidity position.
As Julie mentioned, we recorded $59 million, an impairment and other non routine charges almost all non cash. This was primarily triggered by the cobot impact onto man, which extended our U.S. filtration ramp up curve, if you're not aware in determining impairment the accounting treatment is to measure cash flows.
Over a fixed period weighted to near term results to be clear, it's a great business for us and our expectations continue to reflect filling this asset with profitable business.
Oh list of adjusting items by segment is included in our earnings release, So like to review segment results. Excluding these and then discuss a few overall items, including liquidity and our recent refinancing.
In technical products net sales of $106 million were down 28% as the global pandemic reduced end use demand there were several bright spots. However, with revenue growth in some key markets, including industrial filtration products face mask media and medical packaging.
Net sales prices were down slightly reflecting price adjustment adjusters for certain grades and a modestly lower price mix of products sold currency was also slightly unfavorable with the euro averaging one dollar and 10 cents in the quarter.
Adjusted operating income was $5 million compared with 13 million in 2019, while the decline in operating income was $8 million the combined impact from lower sales volumes and manufacturing fixed cost absorption was over $17 million. So that gives you an idea of the impressive.
I don't have cost savings and improvement that we delivered in the quarter.
Benefits from lower input costs net of selling price changes accounted for about $3 million.
In fine paper and packaging the year on year decline in revenues as expected with steeper.
Net sales of $55 million were down from 107 million in 2019, the decline was virtually all due to lower volume.
Sales in the second quarter of last year were the highest of the year. In addition, since supply chains. In this business are shorter the impact from customer inventory de stocking occurs more quickly I.
A meaningful end market for commercial print is high and advertising and marketing, which typically declines quickly in tough economic times.
Sales for premium packaging and consumer performed relatively better and we continue to grow when labels, which are used primarily for wine another spirits.
Turning to the bottom line adjusted operating profit was half a million dollars down from $16 billion last year. The caught combined impact of lower sales volume and unabsorbed fixed costs in the quarter was $19 million and this was partially offset with cost reductions and benefits from lower input.
Cost net of selling prices.
Turning to corporate items consolidated SGN, a was $21 million down 6 million from an exceptionally high quarter last year like in manufacturing, we acted aggressively to take out costs in this area and did so through a number of actions, including headcount reductions wage freezes furlough.
It's been paid caught and reduced travel.
We expect consolidated Sq day to average around $22 million per quarter for the remainder of the year. This is down from historical run rate of $25 billion and also below our previous quarterly guidance of $23 million.
Unallocated corporate costs on an adjusted basis were $4.7 million down from 5.5 million last year.
These costs are expected to average around 4.5 million per quarter in the second half of the year.
Quarterly net interest expense was $3 million in both 2020 and 2019.
In June we entered into a new 200 million dollar term loan B facility with an initial interest rate of 5% proceeds from this facility we're used to pay down borrowings on our revolver and fully redeem the $175 million of outstanding 2021 senior notes.
On July 16.
As a result of the overlap of borrowings in July 3rd quarter interest expense is expected to be $3.7 million before dropping down to a projected quarterly rate of $3.3 million.
Our tax rate in the quarter was a benefit of 19%, which was reduced by 4 million dollar increase in our valuation allowance against existing deferred tax assets, primarily due to the noncash impairment charges. We continue to project our ongoing tax rate at approximately 22%.
We ended the quarter with cash of $203 million and debt of 381 million. However, both of these numbers were inflated due to cash received from the new term loan at quarter end, reducing both balances by 75 million $175 billion to reflect the redemption cash would've been 20.
$8 million at debt 206 million.
I mentioned that cash generated from operations in the quarter was very strong with careful attention to inventory levels operating schedules and supplier terms, we generated over $20 million of cash from reduced working capital.
I'm comfortable with the quality of our receivables and inventory, especially in this environment and know that our teams are continuing to focus on further efficiency improvements in these areas.
Capital spending was $3 million down from 5 million last year year to date, we've spent 8 million and currently expect full you're spending of around $15 million. This is about half of what we consider our normal level as we've cut non critical items, while continuing to fund projects that deliver.
Were meaningful cost savings or are key to long term growth initiatives I'd like to wrap up with a few comments on our sound liquidity position.
Neatest credit facilities are in good shape, starting with the new term loan B facility that replaced our 2021 senior notes, we like the term loan b in this environment as its highly flexible and we continued to maintain our $175 million global revolving credit facility, which today is undrawn.
Both of our credit facilities are with high quality lenders and with terms, we consider to be reasonable and covenant lite.
Overall, I'm comfortable with our financial position, we ended the quarter with almost $30 million of cash on hand, a $130 million of availability on our revolver and strong processes in place to control cash during this pandemic. Thanks to Bonnie Nina has an excellent finance team.
And a proven history of financial discipline, while driving growth I can assure you that will continue I.
Im looking forward to being part of newness future and to sharing our success with you with that I'll turn it back to Julie.
Thanks, Paul I'll wrap up with a few comments on our outlook.
Everyone knows the global situation is still very fluid. However, there are some things that have more visibility and many areas under our control. So I'll start with those first as usual, we'll take our annual maintenance downs in the third and fourth quarters. While we continue to carefully manage spending. This work is required to ensure our asset.
We continue to operate safely and efficiently maintenance expense in the third and fourth quarters will each be about $1.5 million more than the second quarter as global economies recover input costs are projected to rise modestly and favorable year on year comparisons will diminish the euro.
Strengthened recently and this will benefit us from a translation standpoint with each side that change moving quarterly sales by two and a half a million dollars and operating income by half a million dollars.
As a reminder, currency impacts are almost all and technical products due to our large European presence recent rate of around 118 compared to a rate of one Ken and the second quarter.
While those items are a bit easier to predict the pace of demand recovery is more challenging including impacts of seasonality and back to school demand as noted earlier I've been encouraged by the steady improvement in both segments that we've seen over the past few months.
Third quarter sales will still be below prior year, but the percentage decline should be much improved transportation filtration is improving in Europe as their economies recover and miles driven increases and other technical products categories are picking up as well fine paper and packaging is also bouncing back and steep decline in the second phase.
Quarter helped by their short supply chain.
Looking beyond that I expect that the sequential improvement to continue technical products is a growing and resilient segment and we expect sales to fully recovered a pre pandemic level fine paper and packaging is likely to lag technical products and timing of recovery and while packaging should continue to grow the rebound and commercial print.
Will depend more on improving economies and has come as companies resume spending on marketing and other high end print needs.
During this time of uncertainty you've seen that we've addressed challenges head on by aggressively managing costs, while continuing to build on what's made neenah successful deep customer relationships superior product performance and discipline decision, making.
These values won't change nor our commitment to providing a return to shareholders through a meaningful dividend.
I'm very encouraged by how we are executing we're collaborating with customers to develop and launch innovative new products.
Implementing a neenah operating system to create long term sustainable manufacturing improvement.
Leveraging the strength of our local footprint and supply chain and pursuing opportunities and targeted growth platform.
You'll hear more about this as we continue to execute our strategy to extend our technologies and capabilities in this growth platform through both organic and inorganic opportunities that add value for our stakeholders and position us more strongly for the future.
None of this would be possible without our talented and dedicated employees their ability to work safely through the recent challenges and changes, while providing customers with the highest quality products and service and finding ways to significantly reduce cost has been remarkable as I said in may I'm excited to be part of this team and I look forward to grow their company together in the year.
The had thank you for your interest today and I'll now open up the call for questions.
As a reminder to ask a question you will need to press star one on your telephone withdraw your question press the pound or hash key please standby heavily compiled acuity roster our.
Our first question comes from Jon Tanwanteng with CJS Securities. Your line is open.
Hey, good morning, Thanks for taking my question.
Good morning.
Maybe first off I was wondering if you could talk about inventory situation or your customers. I know you mentioned a supply chains in paper short but.
Just overall did did you see restocking tailwinds.
Heading out of Q2 or into Q3, and if so how long that may be sustainable for.
Yeah, So it's a little bit different by segment you know, we I would say customer inventories have rightsized for the most part.
Where we see probably some inventories that are still a little bit heavy at our customers would be in our backings category in performance materials and so the recovery there might lag just a little bit as we head into Q3, but for the most part I think our customers have rightsize their inventory levels at this point.
Got it. Thank you and then just in terms of general trends would have you seen any places where demand is still sluggish.
Maybe like you said backings inventories might still be high.
First as a general improvement you've seen in and many other places.
Well I think I think the first place that I was talking about is probably commercial print you know the nice part about fine paper and packaging as we have nice diversity, even within fine paper and packaging. So we have a commercial print part of that business and it's driven by advertising and as you recognize as soon as a economies start.
To be challenged many companies reduce their advertising budget and where we're feeling that is still when economies start to open up an advertising, but it's hard to open up we expect that to rebound back but in commercial or in fine paper packaging. We also have our consumer business, which goes to large retailers like Amazon and target in office superstores and that's driven by.
School, and crafting and teachers and we have packaging premium packaging both of those have been more resilient. So commercial print is probably a little bit more challenge.
Diversity gives us more opportunity to rebound because of the end use markets and we have the leading position in the space. Both in the beat channel and the BSC channel, but that's that's probably we're feeling the most pressure.
And then Backings as I mentioned, just somebody that's more from just what we talked about the customer stocking and from an inventory standpoint, and I think that timing as much as anything.
Got it thank you and that's a good set for my next question in prepared calls I think you've discussed the possibility of demand destruction and commercial print business, depending on how long. The pandemic last are you seeing any evidence of that so far companies are relying more on a digital offering and or is it maybe too early to tell there.
I think it's too early to speculate at this point I think the longer that the longer duration and the deeper the declined the greater the risk of just what you described moving to different advertising modes and that would be mostly from a commercial print standpoint.
Like I said, what I like about our business is the diversity within fine paper and packaging that we have the consumer side that is healthier and rebounding a little bit quicker and the packaging side, which is a nice growth platform for us.
We're also aggressively supporting customers to help with new products and programs to drive demand and I think the other thing that important does it fine paper as a category, but under the pressure secular decline since the mid 90. So that's nothing new to US we know how to manage this business and we know how to manage it well and it generates a lot of strong cash worth it.
We then we invest.
Into other growth platform and we'll continue to manage it in that way so that it adds value for neenah and for our shareholders.
Got it and nice tribal Jelena cash flows that those in Brazil work one last for me just given that the skilled cost reductions both on the DNA on and on the manufacturing.
Should we think of your incremental margins here is as follows recover.
Yes, Hi, John.
I'll take that question. So a couple of things one of the things we quoted was about $7 million a permanent cost savings.
We expect to get on an annual run rate going forward. So.
I think we actually quoted three sets of numbers. So we had $15 million worth of cost coming out of manufacturing and that was a combination of variable costs and some fixed costs that we really drove out so that variable cost.
We'll stay out while volume is down we're going to continue to control the fixed cost where we can.
But one of the reasons when you look at our overall margin in the second quarter. This year from last year is.
Unabsorbed fixed cost and so it's still a big number when volume is down as much as we are so as we start to move up in volume, which which we are expecting to do we're going to see some margin improvement in that so then talking about some of the things we've learned on a sustainable basis, one of the numbers, we talked about was 7 million.
$1 a benefit of that we think about four of that is permanent NSG M&A and we think about the other three is going to be permanent up in manufacturing above cost of goods sold so we didnt experienced a lot of that in the quarter because a lot of that got implemented during the quarter. So we'll get some benefit from that as we roll for.
Forward, but the primary driver really seeing margin improvement when were down as much as we ours improvements in volume.
Got it appreciate the color. Thank you.
Your next question comes from Steve Chercover with da Davidson. Your line is open.
Thanks, Good morning, everyone.
So.
The decline in papers Odyssey, a source concern and I've heard you say that.
Demand for commercial should recover but is there anything you can do to accelerate the migration towards.
Ranging persuade towards packaging and other uses labels or is that kind of pushing on a rope if you try and accelerate.
Well no not accelerating growth towards those eddie's application is that pushing on it we really focused on the end users. So as we think about particularly in packaging.
We're selling to the brand manager. So if you think about that I caught tiffany's blue brand that everyone knows or that makers Mark label, we're selling to bat and brand user because it's their image that matters and that pulls demand and so.
Our selling process, how we go to market the supply chain, we use the capabilities, we have for colors and textures and supporting their brand imagery, that's what really matters for packaging and.
Just recently within the last few years, we implemented a design center within EMEA that helps create prototypes and designed to help demonstrate for those brand new there specifically in packaging, how we can support their brand imagery, which is where they gained they gain equity and value. So there's definitely efforts.
We can continue to drive from a packaging standpoint, I think that pushing on the Roque would be mark we tried to pretend there wasn't secular decline and commercial press and then there was also additional efforts as we focus on a plastic replacement alternative and I would tell you even more so during this time of coal that in warehouses.
Major concern that oftentimes leads into environmental concern very quickly for people and so plastic replacement alternative which neenah is often the preferred alternative or our media is often the preferred alternative has been up an innovation focus area for us as well.
Well I'm all for the Jihad against plastic.
Good luck there.
And then can you tell us about financial opportunity within European face masks filtration.
Can you cure.
Size the market.
Sure. So far as you know, it's a it's not a significant amount of revenue, it's probably up to $20 million annually.
And I thought our existing assets and the Europe, we have not invested in new assets in Europe, I think what that really did for that really demonstrated our technical capabilities and how quickly we were able to develop a product and qualify a highly technical it's an end 95 equivalent facemasks product in Europe to meet that demand.
Man and then Weve added.
Throughput through organic projects to grow that what the nice thing about that business for the two things its disproportionately more profitable on the bottom line. Even then the topline impact it has and secondly, it just help accelerate our growth into a greater air purification, which as a growth platform and market.
With that we've continued to evolve into and it's very defensible, we have longer term contract to make sure that it stays with us for a while so it's been a nice win for neenah, but I don't see it as a significant you know significant big market for us in the future.
Okay.
Then.
With respect to the North American automotive filtration.
I assume you're talking about Appleton right I know you're talking about album.
Yeah in the long run be able to achieve the original financial goals.
When you take a charge that I mean, it's no longer tenure animal or it's just a longer ramp.
It's really driven by the longer route. So you know we manage our filtration business like we do any business, where we have redundant capabilities and we optimize the system versus optimizing a particular asset or facility and so over the last few years as weve unlocked latent capacity in our European.
Facility and we've worked on responsibly managing entry into the U.S. and qualification has extended.
We've optimized the profitability in that system versus a particular asset by by loading some on our lower cost asset in Germany now I would tell you then what happened was one covert hit in the decline you know in the market became more significant and we did an accounting impairment test it barely triggered the accounting a pair.
Matt you know level and then from a accounting standpoint, once you trigger that it changes the calculation to an NPV.
Calculation and then the number became much larger, but putting that accounting part aside the important part for us as we're still bullish on the market on the geography on the asset the footprint our technologies the customer support and engagement that we have we hit a timing challenge because of the ramp up that has extended and then.
I would hit but it's a strong business for neenah, and a catalyst for growth and we expect to grow to the original sales of $70 million plus that we had.
And with attractive margins to support our overall technical products margins.
Okay and last year, I guess, we'll call them housekeeping just for them a slow writer can you say maintenance in Q3 in Q4 is 1.5 million higher each quarter than it was in the.
Yes session out here.
And then down driven.
And then the FX benefit.
Sorry, just repeat what you said there I guess.
Yes, what we said was for every five cent change we would pick up two and a half million dollars of sales and half a million dollars a profitability in the quarter in which that occurs.
And did you see that the Euro Delta was.
Sense.
Yes, so we closed the quarter at 110.
And so right now the euros trading in the 118 ish range. So if that were to continue through the entire quarter, then would be eight cents over five cents and you can do the math I guess.
Got it okay. Thank you.
Safe.
Sure. Thank you thanks.
Our next question comes from Chris Mcginnis with Sidoti and company. Your line is open.
Good morning, Thanks for taking my questions.
If there is.
So I just wanted there was more opportunities that you're seeing just like you wanted to the face masks.
Other opportunities the the Pandemics opening up for you than maybe we have you haven't talked about or.
Thank you just maybe think about I guess when you look at your product line do you need to add more is there are opportunities to kind of grow.
To offset kind of what's happening in the marketplace.
Yeah, I think there's a couple of things a couple of opportunities at the pandemic has opened up and we've really focused on ensuring we don't waste the crisis, both short term and long term, we talked about face mask and then more broadly I think that category air filtration, where our technologies lend themselves well to expanding into greater activity.
Patient efforts, whether that HP AC or industrial Air I think I mentioned, a couple of those in my prepared remarks, those are accelerating and demand those are for data storage is one of the unused applications. There and then the other one that I think it's worth mentioning is.
Just what I touched on earlier, it's that trend towards when health efforts and health concerns become larger share of mine.
It's quickly followed by environmental concerns and Neenah is often the preferred alternatives and so we are working closely to ensure we have the right paper based gift card styrene alternative packaging and label applications to meet that demand and then lastly, there's been this acceleration of people wanting.
The customized whether that's where they're in home use and apparel and furniture and things like that and our digital transfer products and new innovative products that we've lost under natural fibers, which are proprietary technology that as an application that lends itself very well into those markets.
As well so some of the macro trends have been accelerants that have been helpful and that will be helpful for neenah and the longer term.
Great.
And I guess.
With the expectation over things start to normalize a little bit.
So that's.
The some rationalization Q1.
Given the one right where would you need to do another.
So.
Around the rationalization.
That work.
Right.
Yeah, you know, we're always we're always evaluating our footprint and we I mentioned that were in the middle of implementing a need to operating system in a big part of that is improved productivity and one of the larger mills that we're starting implementation and is one of our larger fine paper and packaging mill. So there's a.
A lot of variables there but.
Scene is that if we get to the point, where we need to rationalize another asset as much as well as much as I hate to do that from an employee's standpoint, its been a value to Nina from a bottom line standpoint, because it just means we're able to then switched volume two assets, where we have redundant capacity and capability. So we'll continue to manage that.
Closely and when I said earlier that we know how to manage this business that some secular decline I think that's been a part of it that these we've been responsible and when we needed to move assets into and out of the system and maybe even started assets back up when it makes sense to do so.
Okay great.
Thanks for taking my questions. Good luck.
Thank you.
Our next question comes from Adam Silver with more partners. Your line is open.
Hey, guys.
Maybe item in terms of the revolver.
If I missed the stream.
It was a balance at the end in the second quarter, how much on Cesar drawn.
Bill Botti.
Did I hear that right.
Yes.
Yes, so the balance was around $10 billion at the ended the quarter and it's been paid down through liquidity that we generated in the month of July so the balances zero now.
Okay, what was LCD within the quarter.
The lines of credit at the end of the quarter I'll have to look that up I don't have that number.
Andy right now.
Very low I would think yet.
Okay. Thank you.
There are no further questions at this time I'll now turn the call back over to Bill Mccarthy for closing remarks.
Okay, well once again, thank you for your time today. Please reach out to me. If you have any questions and we hope to have the opportunity to talk to many of you at upcoming virtual conferences hosted by Jefferies D.A. Davidson Incidentally. Thank you again.
This concludes today's conference call you may now disconnect.
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