Q1 2020 Unique Fabricating Inc Earnings Call
Operator since they started conference. Please press Star then one your telephone keypad.
As a reminder, this concept being recorded I would I like to try to coupled with the whole Rob I think that's in K IR. Please go ahead Sir.
Thank you operator, I'd like to welcome everyone to unique fabricating first quarter 2020, <unk> earnings conference call.
Hosting the call today. This is Doug can you be fabricating president and Chief Executive Officer, Brian Loftus Uniques CFO.
Before I turn the call over that dog.
Everyone that matters discussed on this conference call will include forward looking statements.
<unk> Private Securities Litigation Reform Act backing you bought.
Risks and uncertainties.
Forward looking statements relate to future events, where to future financial performance and involve known and.
Uncertainties and other factors that may cause actual results.
Level of activities performance worksheet.
To be materially different from any future results level activity.
Formats weren't cheap expressed or implied treatments on todays call.
All forward looking statements are based on managements present expectations and are subject to certain risk factors uncertainties that may cause actual results.
Formats to differ materially from those expressed by such statements.
These risks and uncertainties include but are not limited to those disgusted with companies quarterly reports on form 10-K for the period ended March 31st 2020, which will be filed with the FCC pursuant to which will support you for B and in particular the section titled risks factors.
All statements on this call, including those in this mornings press release or made as of today and you need fabricating does not and.
Formation unless required by law.
In addition, certain non-GAAP financial measures will be discussed during this call. These non-GAAP measures used by management to make strategic decisions.
Forecast future results and evaluate the company's performance.
Management believes the presentation that these non-GAAP financial measures are useful to investors in understanding and assessing the company's ongoing core operation and prospects for the future.
Unless otherwise stated it should be so he financials discussed on this call will be.
On a GAAP basis full reconciliations of non-GAAP the gap fluid in the press release that was issued earlier today.
With all that that I'd now like to try to call over to Doug Doug call is yours.
Thanks, Rob.
First quarter results provides further evidence that we are only back on track. It's we improved our adjusted EBITDA a lower revenues.
Due in large part to a 1.4 million reduction in our history at a cost.
Turning sure there's been a difficult period of time, it's many of our customer shut down due to the cobot like team pandemic.
Our progress into first quarter preceded the full effect of the worst of the covenant related challenges, which will significantly impact our second core.
The results reflect the positive changes, we made to the business, which has positioned us to better weathered. The short term disruption we are facing it should benefit us significantly when this pandemic is behind us.
Hi, I'm optimistic as we move forward in fact now almost not much into my tenure or do you think fabricating and despite the unprecedented challenges at the last 100 days I'm more convinced and passionate about the bright outlook for unique fabricating over the next years, if we continue to fulfill.
Our boldly back on track.
As a result in the foundation laid in due to our creative and passionate organizational response to the recent challenges. We continue our forward momentum with a focus sense of urgency to execute a cultural organizational and operational changes necessary to achieve sustainably ambitious targets.
EBITDA improved but definitely auction sales growth that we collaborative Lisa.
We continue to have strong support from the board the bank Syndicate, the leadership team and other stakeholders for the actions undertaken in the direction you had the direction set forth.
Let me speak more about the specific cobot 19 effects on the company and a corresponding actions.
During the ongoing coping 19 outbreak when it's uncertain near mid and longer term impacts on the company our customers our suppliers in the industries. We serve we executed a comprehensive set of actions to prudently manage our resources, while keeping our customer supplied with the products. They continue to report.
We are following the guidelines concerning creating a safe work environment provided by the various governmental entities in the jurisdictions, where we operate and are taking additional measures to protect our employees.
Local government or a union representatives, it's just that several of our facilities to see our protocols.
We have passed all such where do you used to date.
Well I don't think increasing demand, we're now seeing from our customers. We are adding back resources prudently went to target to ramp up production more efficiently and productively then we operated before coded my team.
Have continued our discretionary spending rationalization reduction or elimination.
Based upon our analysis of our experience to date, we anticipate no supply chain issues impacting our ability to meet the increasing customer leases executed plans to ensure a minimal extra costs are incurred during this period of demand volatility.
As a result from our prior efforts to grow our truck and ask you did he shouldn't you be sure we expect to see possible impacts from the OEM focus on producing these vehicles.
We also expect to see benefits from increasing activity in the housing construction at home improvement markets.
During the inherent uncertainty of the unprecedented and evolving situation, including the production plans for various customers. We are unable to determine the full impact of the kobin lighting situation, what our future operations.
However, we have developed our current plans in line with the latest third party provided North America automotive production outlook.
For approximately 12.4 million units versus 16.5 billion forecast to start the year.
This indicates north America's second half light vehicle volume production to be approximately 7.2 million units for 90% of the original 2020 forecast.
Regarding the first and second quarter covert 19 impact on the business the dramatic reduction of automotive shipments in the second half of March reduce that sales by approximately 3.2 million.
For April and May respectively, we estimate that sales of 2 billion in 2.8 million, reflecting very little automotive revenue from any of our customers regardless of location.
We did continue to ship to our regular appliance consumer and medical customers joined the style, albeit at a lower than planned right.
The result was an approximate 20 million or 80% shortfall of net sales and those too much despite more than 1 million in new P.P. product sales for the health care and manufacturing sectors.
We completely shut down or Mexico operations in April and May in accordance with government mandates and dramatically reduced our operations at all other locations.
And with the demand drop.
Our Mexican operations reopened although we do spaces in June 2020.
[noise] Fortune, we estimate that sales to be substantially higher than April at night, although much lower than net sales for June 20, like team wouldn't forecast slightly above 9 million.
This is driven by substantial increases at our net sales to transportation customers and to a lesser degree our appliance business.
For the second quarter. We currently expect net sales of approximately 14 million.
Or 36% of net sales for the second quarter of 29 too.
Yes, the latest North American third party service automotive production forecast for the second accident year.
Approximately 90% of initial 2020 volume. So we will generate improved operating cash flow was a result to the actions taken today.
In summary, the Coca 19 impact on our second quarter will be significant.
But our cost reduction efforts are quick pivot to new manufacturing of PPD.
And our ability to react quickly helped us navigate the child is challenging times.
We've seen significant improvement already in June and we're confident that the second half will be better.
We believe that the worst is behind us and that we are well positioned for success.
Next I will discuss our current and future key business activities at highlights.
It's at the end of March we completed a bridal how location closure with the fight of most of production to our let's say at Georgia and cut off the road Mexico facilities.
As a result of these activities in some remaining calls for the Evansville, Indiana site closures, we recognize restructuring charges at low point ninemillion during the first quarter of 2020.
Compared to open 1 billion in the corresponding period last year.
In June we completed the sale of our own to Evansville facility friend that Oh, 0.8, 5 million and executed a sub lease agreement for a portion of the Evansville facility at least 320 22.
We have now completed all of our location restructuring activities with no expectation a few further cash restructuring cost.
We did identify an additional O point 9 million annual cost savings opportunity related to consolidating an external warehouse and let's say a into our own facilities.
This is <unk> point 2 million positive impact in the second half of 20 Twond.
We were taking significant overall additional capacity at our main 11 facilities to grow the business over the next five years.
As our organizational simplification realignment nears completion.
We have already begun to see the benefits and enhanced collaboration and problem solving with a clear eyed common understanding of the need for urgency accountability responsiveness creativity clarity and best practice sharing at all that we do.
This is perpetuating I'm really proud and our activities as part of the boldly back on track initiatives.
During the first half of 2020, we eliminated an additional 13 salaried positions and executed a reorganization and upgrade of our Mexico leadership team.
From these activities, we expect to incur Oh point, Fourmillion and severance cost and the second quarter with the resulting O point Sixmillion annual cost savings.
We continue our initiatives to bring all targeted T support and technical areas to enhance our capabilities to meet customer expectations and provide the necessary foundation for our growth plays.
With the continued development of our leadership team critical to our success restarting our comprehensive development program in the third quarter.
This program incorporates approximately 70 associates across our U.S. and Canada locations.
In April we were pleased to have blind Loftus joined unique fabricating as our new CFO.
Got it has extensive experience in manufacturing operations as well as FCC reporting and businesses of various sizes.
It's a dish and not only strengthens greatly to finance organization and leadership team, but also allows me to focus more fully on the commercial strategic and operational aspects of the cover.
At the end of gene will be bringing on board Dave's today and in the new position director of materials engineering.
In the first week of August Adam Trello will join the team as director of transportation sales.
Both positions will contribute greatly in leading our commercial activities and he is very critical areas.
With returned to revenue growth of idle aspect of meeting our ambitious targets, we ever find the approach outlet previously focusing on market share gains in existing markets, new product to materials development and further expansions into the heavy truck medical all highway and consumer markets.
We have a lot of the commercial organization of designated market leaders to spearhead these efforts in for targeted areas.
Transportation appliance.
Medical and consumer all throat.
I recently added senior sales manager, Mexico is proving beneficial to date supporting our renewed focus on sales growth in Mexico.
Despite the code 19 impacts over the last 14 weeks.
We have actively supported our customers who have continued their product development sourcing and supply chain optimization activities.
This includes an increasing interest in sourcing more product in North America as a result of the new U.S.M.C. I and other trade concerns.
Recently, we had been working before customers looking to source business, representing more than 2 million annually do you think fabricating baseball these evolving changes in their supply chain landscape.
Our competitive advantage, that's resulting from our geographical footprint.
Diverse manufacturing processes materials flexibility and available capacity allow us to effectively respond to these opportunities.
We reconfirmed that sufficient capacity exists in our manufacturing locations for us to grow our revenue over the next years with limited targeted capital expenditures focused on increasing automation, improving material utilization, reducing scrap and enhancing technology for our increased value added processes.
[music].
With our ongoing commercial and operational improvement activities, we're certain that we have opportunities to grow our share organically in each of the markets we've chosen to serve.
Our new hires will enable us to further enhance our product offerings as well as to develop longer term strategic supplier relationships.
We are confident that these additions and to further organization refinement enable us to create and communicate our unique selling boys in our existing as well as our new targeted markets.
By the end of June we love implemented our new CRM or customer relationship management tool.
Facilitate all aspects of our commercial activities.
This will improve our ability to manage the many opportunities we see inject putting further our customer relationships.
In changing we relaunched our website with the which had been in much need right a refreshed.
Overtime, but with urgency we will continue to update and augment its capabilities in user effectiveness as another step in improving our commercial presence as well as providing greater value to all our stakeholders.
In addition, we continue to pursue targeted technical collaborations with leading raw material suppliers to enhance our competitive position and to develop new product applications.
Since the end of March and through comprehensive team effort, we've been able to support the health care and manufacturing industries I supply P. P to a range of customers.
Combined with our existing medical business. These sales will total more than 1.5 million in the second quarter.
We're still evaluating the longer term potential for these new products as part of our overall growth target for the medical market to be more than 10% of our total sales in the mid term.
We've been successful and winning new business and our targeted markets as evidenced by approximately 70 million in new customer order intake or C. O a in the first half and twice what it.
Despite the overall market and customer challenges.
With our strength in engineering commercial purchasing human resources manufacturing and program management capabilities combined with our new CRM tool and web site.
I am confident that we will achieve share growth in each of our chosen markets.
We continue to develop and execute our detailed comprehensive performance improvement plans for each of our locations and functional areas that will generate positive margin impact over the next quarters as we increased production volumes, while improving our balance sheet management in generating new business opportunities.
Today unique fabricating is boldly back old try and had a strong position to take advantage of a wide range of commercial and operational improvement opportunities that will present themselves over the next slots.
I will now provide an overview of our first quarter financial results.
As you see from our performance the cost reduction the organizational efficiency and productivity improvement activities are having a meaningful impact on our business.
Net loss for the first quarter of 2020 was 1.1 million, including Oh point 9 million in restructuring expenses or Oh, 0.12 per basic and diluted share compared to a net loss of <unk> point 2 million, including Oh point 1 million enriched restructuring expenses.
Well I'll point to per basic and diluted share in the first quarter 29 team.
The increase in net loss was primarily due to the impact of lost contribution margin.
The 4.5 million lower sales.
Yeah, Good point 8 million higher restructuring charges and the O. point 6 million higher interest expense from the interest rate swap offsetting the impacts of the performance improved but.
Cost riddick reduction and organizational alignment activities.
Total debt reduced by 7.9 billion to 46.4 million as of March 31, 2020.
Compared to 54.3 million as of March 31, 29 team as the company utilized and increase in operating cash generated from earnings can decreased use of working capital.
Net sales for the quarter ended March 31 2020.
Decreased to 35 million down 11.4% for 4.5 million.
From 39.5 million during the first quarter last year.
The 4.5 million net sales decrease included 3.2 million net sales loss, resulting from cobot 19 impacts on the automotive business in the second half of March.
The remaining 1.3 million lower sales and the results of the combination of factors, including the appliance business lost from our Evansville, Indiana plant closure.
That's a 35 million net sales for the first quarter transportation represented approximately 92% other total with appliance at approximately 8%.
Gross profit for the first quarter of 2020 was 7.1 billion EUR, 20.2% of net sales compared to 8.3 million or 21% of net sales for the corresponding period last year.
The decrease in gross profit was due to lost contribution margin on the 4.5 million lower sales.
Partially offset by reduced structural and other overhead cost.
Selling general and administrative expenses were 5.9 million were 16.8% of net sales for the first quarter of 2020 compared to 7.3 million or 18.4% of that sales for the first quarter of 29 Tate.
The decrease test you know your results from several cost reductions, including management headcount commissions and professional services. In addition to the savings from plant closures.
Operating income inclusion low point 9 million restructuring expenses and put the impact of the 4.5 million decline in sales was <unk> point 3 million for the first quarter 2020, compared to <unk> point 9 million for the corresponding period last year, which included a point 1 million restructuring expenses.
The various performance improvement activities outlined previously offset the loss contribution margin from the lower sites.
Interest expense was 1.7 million for the first quarter of 2020 compared to 1.1 million for the first quarter last year.
Year over year increase was primarily due to the impact to the interest rate swap, which offsets the positive from the reduced total debt levels.
Despite the 4.5 million lower sales adjusted EBITDA for the first quarter 2020 was 3.2 million compared to 3 billion in the first quarter of 20 like tape.
This increase is the result of the ongoing realization of the performance improvement activities underway for the last several months.
It's like consequence of the unpriced it impact of the covered lighting pandemic.
We have been unable to meet with several view as originally planned in various since canceled investor conferences, it's our intent to meet with many of you virtually for if possible face to face over the next six months circumstances allow.
In the face the significant challenges over the last three months unique team as creatively and passionately engaged in moving our business forward.
We called out of this crisis as an organization, even better positioned in more capable to maximize profitable growth and create significant shareholder value.
Our team recognizes that we continue to have a unique opportunity to create something of which we can be proud.
We all can state that unique fabricating remains.
Boldly back on track.
With that we will open the call for questions operator.
Thank you.
Time, we will conduct a question answer session.
If you would like to ask the question. Please press star one well your telephone keypad.
Confirmation tollway indicate your line is in a quest in Q.
You make press star too if you like to remove your question from the Q.
Participants using speak we quit <unk> you may be necessary to pick up your handset before present this dark and once again that start one at this time one moment why we pull for first question.
My first question comes from John Noble with Taglich Brothers. Please proceed with the question.
Hi, good morning, a dog and Brian.
Thanks for taking my questions. This morning I.
I first wanted to get into a significant cut in S. DNA expenses.
It was brought down to 5.9 million in that first quarter I'm. Just curious if this is a level that we should expect going forward or obviously with the second quarter. I think you said that there were even some further cuts hard trying to get a handle on what to expect fresh DNA going forward.
As usual you always asking the questions.
What I would say is that the total decrease a will not be quite as much going forward.
Partially year over year, you're gonna have some of the cost reduction activities that were already done last year from a comparative basis.
The second thing is as you noted and what are the key focus is that I've had since I got here and as Weve discussed in these calls is that the organization needed to have.
Upgrades and certain positions Ah in so with that being said a couple of the ones that we've announced at this time and the new director of HR and the new director of purchasing that we didnt have.
You would not expect to see that level of cost savings going forward. It will still be substantial it just won't be that level.
Okay and.
You mentioned the interest rate swap it had an adverse impact on the first quarter <unk> interest expense.
I was wondering if you can actually quantify what that impact was in the it believes that its going to impact a the coming quarters.
So.
This is one of those things that as I joined and as you all my life happened to be a CPGA myself and looked into this that the decision was made by the company to not utilize hedge accounting.
Couple of years ago. When this was put into place up normally the company would use hedge accounting and these will be seen as adjustments to retain earnings and would not be flowing through the operating cost.
Unfortunately that decision was made to not do it that way and what this represents the is the future of you to what the lower interest rates now versus the fixed interest strike that we had built in to the loan agreements has an impact. So it's got an outsized view now because it's really look.
It is worth a future period.
No one knows when interest rates are going to do that if interest rates fall further, which I guess can mean going negative or you would end up having a potential further impact from this.
That's about what I can tell you. It is non cash at this point in time, keeping that it might they would eventually be a settlement period, but a it's a noncash item that hopefully won't continue to be impact in this but I can't.
At a shirts to that with obviously I'm not I'm, assuming like if interest rates stay where they are obviously I'm trying to get through the Oh, we actually impact I'm not that haven't not fixed rate swap back last year, what did that.
Impact in the second time excuse me the first quarter. If you can actually quantify that number that I'm, sorry, So point 6 million.
In the first well it was oh, Okay, Oh point that it really wasn't tied a representation of the higher interest expense because as we indicated we reduced its although that was also part of the things that was a key focus on me when I got here with reducing debt levels.
<unk> striding I have to admit that you reduce debt levels, but.
Have your interest expense.
Being higher so I guess study would be if interest rates don't change then you would not have this adjustment.
In the correct export Okay right. Okay, just wanted to make sure and Oh by the way. Thank thank you for the guidance or to put out there what you expect to for the second quarter, because I don't think anybody with expecting I'm any great number sales obviously in the second quarter. So.
Thank you for putting that out there you know I mean, it's it's obvious that the this quarter is not going to look that great, but going forward is what I really wanted to get a handle on and actually I'm speaking to that I was hoping that.
You'd be able to provide a status on a automotive programs that were lost or excuse me last.
Several launched last June I think it was about $10 million on an annual basis. So a year ago, you had those programs launched and I would assume that the for a good portion of Q1, maybe definitely Q2. They went on hold but I was curious if there might be actual some pent up demand.
In regard to that program a once the won a production levels thought to get back to normal rates.
So I got to appreciate that question and as I've tried to share and of in the best way that I can I recognize the restrictions that I have answered about communications.
Regarding those aspects.
I will say that all the program launches that have worked out okay. At this point in time there are no delays there were no delays in the first quarter and no program launch activity either delayed or pull ahead had any impact on our first core or the second quarter numbers that are provided you.
What I what I can't tell you is that and are looking at what 2020 was gonna be we certainly had built in rolling all certain programs that naturally occur and then bringing all watch programs that were there, but what is factually true from the OEM perspective, a wish that obviously flows through to the tears.
Is that they have delayed some launches.
Okay. So that would had some at negative impact of what we were looking at for the programs that we roll however, correspondingly they had extended certain programs.
Because they were not killing them.
Because they're not having to substitute program coming all play and there are some programs, where we had planned that we would be.
Taking all as the program ended so for me I don't look at either one of those is having a meaningful impact to us all on as we go forward or what I would tell you is that the Oems are continuing and they did during this.
I'll call it quiet period for production they did not reduce the activity that they had on engineering and the demand some request on at this company and others to continue the product development activities. The launch activities the quality activities, the quoting activities and issue.
Hurting and I really wanted to emphasize this in the prepared remarks and even now.
By completing test was we needed to survive.
Which was essential that but that we needed to make sure that we're positioned to be able to take advantage of what was going to be happening going forward.
And I would just say that we're in a very good position.
Be able to take advantage of that any opportunities that present themselves either due to other external factors to us for and are continuing to develop a product and in new applications for materials and even as I mentioned the medical activities that we've been underway.
Okay and actually in regard to <unk>, what you label is medical activities.
The protective a personal protective equipment.
Which basically was launched would come with 19, you put out a number $1.5 million for the second quarter and obviously it just started in this quarter. So I'm just curious if there's any other opportunities that you were currently looking at in support of the pandemic no. Your prepared remarks did.
You say you were looking to have this.
This portion of business to be about 10% of total sales is that correct, yes that is our midterm target.
And don't hold me to what midterm is whether that's a 18 months or 24 months whatever it may be but that's definitely our target about the long term target, but the midterm target for that could be 10% of our total sales. So I'm a medical really in the second quarter has two components to one we had been focused all this over the.
Last months.
Prior to coded.
And we had increased our.
Sales I'll call it in our basic medical grade, but this is very small item out what it did transpire and back to the creativity and the passion and really the organizational capability that we represented we were presented with multiple opportunities to make say shields, whereby the public announcement about this and supply.
I'd say shields into manufacturing locations.
It also into health care situations.
In this quarter and that represents the predominant part of that number.
It remains to be seen what that is gonna be going forward.
Well I say that because I don't want really knows what's going to be happening and what the the provisions are going to be go forward relative to a phase shield.
Yeah, that's going to be used this is different they face mask. Okay. However, I can say, a without providing any numbers or anything else to it.
We are very likely to be get began manufacturing face masks.
Again, a rather large quantity beginning in July the second half and ramping that up <unk>.
It remains to be saying, how large that opportunity is gonna be slide not willing to.
Indicate anything further however, I will say that when we get a better feel at a better sense of what that is gonna be and its longer term continuity, we wouldn't be making any more formal.
Communication about what that opportunities.
All right. So bottom line is I mean, this isn't just something to the filling that gap fill up.
Automotive production levels go up yeah. This is something you're going to continue going forward you see that obviously to put out a.
Target of 10%, though you see that this is gonna be meaningful business that say in another you're gonna have to two years.
Absolutely and again, it's all are learning about me in how we brought in the business. It's wonderful to put a target out on the whiteboard and say that's the target.
But you really have to have the structure in the clarity into the organization and then actually set the organization in this way that's reason that I mentioned this comment on any of them.
Script that we have decided we broke the business up into the four categories and we'll have a market leader or have a market leader in each one of these heads of markets rather than having a more diffuse why didn't we were doing it before this was not falling.
And having done this before on this slide I'm extremely confident in our ability to be able to execute this the opportunity is huge the battle for market is enormous and we consider our diverse manufacturing capabilities and our multi materials and our locations. We have every right to have.
10% or more of our sales being inside of medical.
Business.
Alright, great and thanks for taking my questions I'll get back into queue I'll open it up probably thank you.
Thank you John.
Our next question comes from Jordan, We lost with MKM means me. Please proceed with your question.
Yes, good morning, guys.
Hi, Justin.
I can just a clarification on one of Don's question in your way into at least on yet DNA.
You down to like you'll be near you up $250000 sequentially and I understand that number fluctuate a lot as you are sort of hiring various management roles.
Try to give us just a number of why do you expect is do you need to be in coming quarters.
If I heard it are picked up almost all of that except for the very first part what he said something about sequentially what was that so what I can make sure I.
Well, what I meant is that if any was up sequentially.
As you anyway was down a lot you over year, but was up sequentially and I'm, just trying to get more of and the number over where do you expect it was you need to be in the next coming quarters.
George <unk> I would love to answer and you know that I'll like to be extremely binary about communication.
Don't know that I could give you that number it today.
Because there's still several things that are in flux relative to the cobot situation the impact and 29 team excuse me in the second quarter. Some additional costs that were incurring for that for a variety of different reasons I would prefer to defer to that question. What I would just what I would say, it's again kind of what I said the job.
It is being the fundamental structural cost reductions are real and they are continuing we are adding and have added a few extra cost some of which were in the first quarter for at least two thirds. The first for some of which will be being added.
In the second quarter were looking at farther performance improvement activities to reduce SG at a cost. Additionally, and I would just prefer not to give you up okay. And then just you ask you a very simple, especially it's a good question Highpoint. It's 5.9 <unk> in the quarter do you expect it to go up in.
Coming quarters.
Yeah, I would expect dish to United Albert to go up somewhat not significantly but somewhat over the next quarter's yes that was what I was trying to indicate okay great.
Yes your question on interest expense.
If we take out the point Sixmillion <unk> is walking back.
Interest expense is 1.1, new yet.
Which annualizes to roughly <unk> point.
<unk> point, Fivemillion I'm $47 million <unk> I'm, just trying to understand that member and while it's too high given that your interest expenses would be.
You interest rate. Thank you can think setting.
Member Bank.
Yeah, So I would say a couple things one the 47 million is obviously a point in time.
If I would give you the average between you know a 12 31 and now and then try to factory and what that would be that may end up a floating interest expense in your calculation to two and over this closer you there other fees that are associated with that.
That's that's what I can tell you this fall in time, but I can't answer that further.
Okay. Okay. That's all what I'd say, that's something that we will look into also.
Okay can you talk about your relationship with your bank.
And.
And you know and tools you have new covenants because.
Let me just look at making them be here I think your leverage covenants I expected to go down to 3.25 in in the June quarter in clean the of course, that's not feasible number. So what have you renegotiated with the banks or in the process of doing.
I <unk> I appreciate the question as you can imagine since all of this you know became evident that was going to be a problem. You know really in the first part of March a into February this has been a critical part.
Part of our activities, what I can say and as I did state in the Arctic script itself.
I've told you I believe that we have an excellent relationships not only with our lead by but also with the entire bank syndicate a in its built upon a foundation of very open.
Transparent communication very early on.
I went to the bank syndicate and discuss with them the issues that I saw that we're gonna be occurring and parade previous public 8-K that was provided we were able to come to an accommodation with the bike I mean, this up right legal terms to use that to an agreement an amendment.
With the bag that that was previously provided.
It gave us a the the ability to get the S.J.P.P. loan and they were extremely supportive in those activities and very much appreciate that.
It also allowed us to take the sale of the Evansville facility that we had will be met at $850000.
And use that against our borrowing line for liquidity improvement as opposed to going against our fixed asset.
Which would have reduced debt, but certainly would not have improved liquidity and that was just tacked on at the end of that which is I think the end of 2020 through the end of 2023. They also allowed us to differ.
The principal payment that we will have to do next week as of the ended the second quarter is approximately <unk> point sevenmillion.
Relative to all of that debt that we have a and then they also get waived a review in essence or weighed the covenants for the second quarter of 29 to excuse me 2020. This was done in the very collaborative way again for full transparency and relative to your question. There's no question that.
With the second quarter sitting in the way the covenants are set.
One quarter does accomplish what needs to be accomplished so we've had these ongoing discussions with the bike and not in the said again I don't want to speak on their behalf I cannot absolutely provide any guaranteed to.
Any day, but myself and management are confident that we will not have an issue with this going forward and because of the relationship that we've developed.
Okay. Okay, I'd just point its covenants or the leverage ratios are still in place, but are you, saying if they're not in place for June bad you were working to to modify them for the second half and beyond Yep, Yeah, So and as I spoke about getting for GE means that this gets you really all the way into the.
End of the third quarter and I can assure you and interim period.
Got it theres more somewhat more I shouldn't say more clarity somewhat more clarity there without understanding about what the business requirements are and what the entire landscape is and what the USB PD Lone did and all the other activities that are out there and we won't be walking with the syndicate on a cooperative basis.
Over the next couple of months said, we have this put in place early we did this and like I said. We're ahead of this for many other companies again its witness about 8-K that we put in place and it's our intention that we will.
Deal with this early so there's not an overhang and she liked into the.
<unk> for core.
Okay I had a very simple question on the balance sheet. The capex nine it's folded into the long term debt is that correct.
Right.
I'm not sure that that I fully understand which made the capex is fold. It takes a long good bigger than you previously showed Uh huh.
And in the negotiation with the bank they allowed it to have a topic buying online that's related to certain capital expenditures.
Uh huh.
It doesn't it doesn't show up on this balance sheet.
I'm, sorry, George for interrupting yet it isn't the long term debt number absolutely no I'm tempted, okay, great [noise].
Then.
On your prepared remark you talked about $70 million new customers indicate.
The first half of the year to help us understand what does that mean, how does that can you read you would go how does that computer would you like big piece and in when you expect to.
You know just started to me like revenues.
Good.
Did you say seven or 70.
I think I said seven okay, Yeah set seven seven years, it's the right number.
Okay got so this is a a measure.
That I've used and the last company, but I was in for many many years. It provides a very simple and clear measurement Oh, a way to look at forward revenues, what essentially amounts to is taking the.
Average annual sales of a program awards.
And multiply get generally by five which is kind of the average length of a program time and that gives you a number.
Then over five years, if you look at your average of what those numbers each year that Dan already that tells you what your sales are going to be out into the future.
So it really provides a forward look.
I can tell you that I am very.
Happy and pleased with 70 million dollar number in the first half.
Recognizing all of the challenges in issues and the delays and the in the awards that not provided that are still in flux at this point in time.
To give you another way of looking at it if you if I were to be targeting $200 million in sales.
Five years from now we would need to have this number average on an annual basis 200 million per year.
And then this would fall out if you with 200 million and sales with a slight about for no drop in business that occurs the company never use this measure before so I have no way to compare but I wanted to put this out there for our investors and for our shareholders.
So that I can understand this is going to be clear metric that we're going to present going forward that will be comparable.
And we'll be in my opinion, one of the best measurements possible, how the future trajectory of the business looks so it's a first time shot for us.
Also be able to provide better information with a full implementation of our CRM tool. It goes live.
This week.
And we'll be able to provide a little bit more transparency with that but we we were able to win business in each one of the markets that I indicated in the first half of the year.
And we were able to win the programs that we were really targeted.
So I would tell you that I'm pleased with that activity and just know that we can do even more over the next 18 months.
Great and.
Yes, sure I I appreciate very much it's new measure in I think it's going to help us understand.
You don't the levels of sales activity now and like you said, it's a great indication or hopefully starting to be moving too as you know what feels could be future.
Hi, Mike.
Let's see what would.
Did you bid so what is your.
What does the metrics that whether they're they keep <unk> that you'd look at to evaluate that $7 million in orders in terms of how much you bid in terms of.
A win win in terms of the marching that you're trying to a cheap. So maybe you can help us understand a little bit more because that seems to be.
An important discussion with investors.
Hey, George Yes, I'm Gonna have to have my office check for Bugs I think because the question sure asking or.
Oh, Yes, you can imagine where all the same questions that I asked when I got here, so sometimes when you're talking I feel like a hearing myself.
Asked myself the question.
So.
The answer to that is that the systems that we currently have previously had work.
Only in capable of providing that information that you're looking for.
Which is why.
We made the decision to go full bore into installing a fully capable I'm not going to give them. An advertisement is right now about mentioning the name of the company, but a fully capable sustainable scale bolt CRM tool we've been working on this for the last four months, Okay, and so we're able to take some of the I'll call. It downtime that we had.
During cold it to make sure that we really got this thing a installed and ready to go. So your question set alight ones.
I fully can't answer those questions what I can tell you over the last six months that with maybe one exception maybe.
We want each one of the pieces of business that we were targeting and we felt like we had the right to win sometimes they're quotations that go at Georgia, which somebody is just price shopping you.
People are just doing market testing things and sometimes it's difficult to coal that shaff away from that we need to understand what the real opportunities are but our CRM to will allow us to be able to do that better so stay tuned.
Okay. Okay question, but it's absolutely the way, we're going to manage the business 100%.
But then would you guys said you find this do we did correctly is that with one exception. We want you won.
You one basically what you want it to win.
Yes.
Okay.
And that's not batteries I can say I'm pleased with that effort that the opportunities were limited.
For the reasons and that's it.
But we went out of one that business I can also take without getting in itself that I'm not going to say publicly for any number of reasons, but we have very specific criteria said relative to profit margin relative to required capex and different things associated with that opportunity calls for and selling that production.
But we are in a position that pre coated okay and that certainly continues today in which not only do we have the geographic advantage of having.
Plants in Mexico.
Two plants are three plants in the relative south okay that having three plants in the relative north.
That we have from a logistics a information.
On time delivery into OEM plants, but also the fact that we had.
I can call it excess capacity, we have sufficient capacity in each one of our locations.
That weekend take business without having to add brick and mortar and that's one of things I clearly wanted to indicate despite the plant closures that if.
Negatively impacted the net income of the business over the last years and and the the profitability the business.
We have we have reviewed this multiple times, we have sufficient brick and mortar space and primarily sufficient manufacturing capability and capacity to be able to grow the business without having to add that specific totaling for a program, yes, potentially a specific or add on piece of equipment.
For a technology that we're trying to promote yes.
But not significant capital improvements to be able to grow the business. This puts us at a better cost competitive position.
To be able to win business.
That combined with now having a fully functioning and capable purchasing department and with the AD of Dave's and Dan and I mentioned in his name as well as Adam travelers name purpose for anyone who's interested to look them up but they are both extremely capable people.
I don't know their backgrounds, well I've worked with Adam previously.
And these people fully understand what we're trying to do and we'll be able to enable us to work better with our suppliers and continue taking cost out of a raw material again, making us even more competitive as we go forward from winning new business.
Okay, Great and let me just ask you have final question I'm, sorry, so many questions, but just about customer relations.
Just given that's it.
Quicksand. So we do you think customer relations are now compared to a year ago.
I'm going to give you a direct answer I don't know a year ago.
Because I had a year ago I'm not sure out even heard of unique yet at that point. It was maybe about that time, but what I can say nine months ago relationships on better.
Okay. We have made I will focus on being easy to do business with that's one of our Bob There was a is part of the boldly back on track I met with several of the a executives at our customers.
Providing them the vision and what we're trying to do we have realign people and refocus people a in what they need to do as far as customer relationships not quality situation with our customers as good our delivery performance with our customers is good and.
There are always challenges.
Because customers don't always love their suppliers.
But overall I would say that our relationships are very good and are not a or not a hindrance to the plans or at this point.
Okay. Thank you so much for taking my question and good luck.
Thank you good to talk to you again.
Thank you at this time I would like to turn call back over to Mr. doping for closing comments.
Yeah.
So I really do appreciate the questions. They were comprehensive again that the team is energized I know that sounds a little bit.
Maybe difficult I understand out of the.
Challenges in chaos and anxiety.
That everything is done over the last but I really appreciate.
The board support the bike lead by the syndicate dike, our suppliers and all other stakeholders.
Supporting US go through this time and how really intended to do and we were able to accomplish it is to maintain a forward look.
Improving ourselves each and every day and I hate to use that term take advantage of but let's say usually opportunity to move very rapidly and aggressively into the medical.
Which was just an idea.
Literally.
Hey, Scott.
Now, it's actually something that's come into fruition and we're going to build upon that as we go forward. So again I appreciate everybody's attention in the meeting and thanks for the questions and we'll be talking with you a in the near future. Thank you.
Thank you. This does conclude today's teleconference. You may disconnect. Your lines at this time and have a greedy.
[noise].