Q2 2020 Mayville Engineering Company Inc Earnings Call

Good morning, and welcome to the May feel Engineering company second quarter Twentytwenty earnings Conference call.

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Thank you.

Welcome everyone and thank you for joining us on todays call a few quick items before we begin.

Yes. Please note the some of the information that you will hear during this call will consist of forward looking statements within the meaning of section 21 eight of the Securities Exchange Act of 1934 as amended.

Such statements express expectations Anticipations beliefs estimates intentions plans I'm forecast.

Because these forward looking statements involve risks assumptions and uncertainties, our actual results could differ materially from those in the forward looking statements.

For more information regarding such risks and uncertainties. Please see our filings with the FCC, including a filing on form 10-K for the period ended December 31st 29 team and that filing on form 10-Q, four the period ended March 31st Twentytwenty.

We assume no obligation I do not intend to update any such forward looking statements, except as required by federal Securities law.

Second this call will involve discussion of certain non-GAAP financial measures reconciliation of these measures to the closest GAAP financial measure is included in the earnings release, which is available at Mec Inc. Dot com.

Joining me on the call today, It's Bob campus, Chairman, President and Chief Executive Officer taught boats, Chief Financial Officer, and Ryan right, but he VP of strategy sales and marketing.

First Bob will provide an overview of outperformance then Todd will review, our financial results and guidance with that I'll hand, the call over to Bob.

Thank you Dan Good morning, everyone and welcome to our second quarter earnings call.

The second quarter presented our <unk> organization with both familiar and unique challenges as we continued to appropriately aligned our business with the current economic environment. Our topline performance was particularly impacted by the Corbett 19 pandemic.

What I'm pleased to see the agility and adaptability that is ingrained in Mexico action oriented culture.

I'm, especially pleased with the improvements that we implemented regarding facility in process optimization to enhance profitability and position our business for long term success.

Overall during the period, we generated net sales of 62.6 million and adjusted EBITDA of 2.3 million.

Despite both Mack anarchy customers holding be a central business designation many of our customers shut down some or all of their manufacturing facilities for nearly half of the second quarter.

Based on the customer shutdowns, we likewise, adjusted our production schedules, including temporarily holding production at some facilities. These changes required quick coordination planning realignment and action.

Mek service and delivery to our customers continue to add I levels and I was pleased with our nimble reactions.

Well, we initially increased our inventories safety levels to ensure supply in late March in early April we're now returning to appropriate levels.

As a reminder, our supply chain is heavily centered in the U.S. as our customers all began to restart at me. We're generally seeing a gradual volume increase depending on specific market and inventory conditions, albeit at lower than pre pandemic levels, which we expect.

We continue on that no near term.

Throughout the pandemic, the safety and well being up our workforce remains our top priority. Our teams have spent considerable time and resources to ensure a strong personal hygiene declined might not survive facilities and changing procedures as needed to ensure social distancing.

We also benefit greatly from the work selves, and our manufacturing facilities being naturally spaced out which limits the amount of interaction our associates have with each other on a shop floor. Those workers, who can work from home are continuing to do so and those who need to come into facilities on a regular basis.

Yes, our practicing careful social does something matters.

Given that our facilities are located in more rural areas, we have not seen a significant number of cases amongst your employees and I've only seen a handful of people test positive for coal, but 19.

All in all I believe that we've developed a process to ensure that are most valuable assets are people have a safe working environment.

Similar to many companies Rod our industry, our second quarter topline performance reflects the impact of covert related shut downs material changes to our customer production schedules that overall demand combined with ongoing inventory de stocking and several of our key end markets.

Prior to the call him at 19 pandemic.

Organization was performing well, we had essentially integrated DMP, you, which was translating into new cost savings and revenue opportunities coupled with the emerging benefits from our technology and automation investments made over the past 18 months.

In light of the current economic landscape, we continued to adjust our cost structure during the quarter.

We have spent countless hours to make our organization more efficient and aligning our structure to enhance our profitability and maximize cash flow for the near and long term.

Our largest endeavor undertaken in the second quarter was the consolidation of the capacity from our Greenwood, South Carolina manufacturing facility and the other locations.

Based on the combination of greater manufacturing capacity any efficiency from our investment in new technology, and the resulting smaller footprint requirement that consolidation of this plant became an action item for us that would deliver both short term and long term gains to prove to be.

Perfectly Frank with you this mobile something being studied before the pandemic and the decision was accelerated as the initial economic impact of the pandemic became apparent.

As a result of the capacity consolidation all components that were manufactured at this facility will now be produced at five other Mack manufacturing facilities around the country, allowing us to maintain the same capacity with a smaller and more efficient footprint.

Well with pandemic is certainly presented us a set of external challenges our team continues to proactively identify and execute on areas of potential cost savings and continuous improvement opportunities.

Throughout the majority of our end markets, we have seen lower demand as a result, but the pandemic our key commercial vehicles under construction and access equipment markets. In particular have suffered the most recently where many of our customers on these markets shut down production dark during a large portion of the second quarter.

Inventory de stocking continues to be a factor.

After initially thinking that this issue would start to be resolved by mid year. We now believe it will continue in later into the year.

While inventory de stocking has been an important factor impacting top line performance I want to reiterate that we have maintained all of our customer relationships and contracts. This means that when our customers volume returns. Our volumes will also return and we will be ready to deliver on those orders quickly.

Oh.

No we've seen build rates for the commercial vehicle market started to improve in recent weeks, including the July report just received yesterday as large fleets are continuing to order and we have reason to believe that we have reached the bottom.

We continued to be encouraged by the activity within our military segment as a certain market has stayed relatively stable during the past several months.

We believe our military business will continue to trend positively and our particularly encouraged by the order flow that we're seeing for light vehicle oriented projects.

Our sports also continues to be a bright spot as we're seeing lower dealer inventories across the sector as consumer demand outran production.

We believe that this end market will continue to be a prosperous one for us as we navigate the current environment, where consumers are staying home and engaging in many forms of outdoor recreation closer to their home.

In terms of growing into new markets on expanding market share team continued to made great progress on new business opportunities during that period.

We wrapped up a significant order for P.P. related materials during the second quarter. Since we last spoke about this opportunity at our last quarterly call. The annual volume on this order nearly quadrupled as a result of our success with this contract we anticipate that there maybe follow up orders.

Similar magnitude and the coming quarters.

We also continue to win takeover business from one of our key customers on the agricultural end markets.

That's a net initiative is trending positively and we anticipate that there will be more sizable opportunities to win in the future.

Our efforts relating to capturing additional market share and our military and markets are continuing on their upward trajectory and more substantial activity is on the horizon.

We also procured another sizable project with a prominent blue chip customer and our power sports on market relating to a new product line expansion, which is being launched this fall.

We continue to make headway regarding the outsourcing reassuring and takeover projects for both current and prospect customers.

These projects will continue to grow share with current customers. In addition to having the potential to add new customers and new markets. We expect to continue to see a growing number of potential new projects in the coming months.

We're excited about the potential for the opportunities and look forward to keeping you updated I know developments going forward.

On another note to strengthen Max capital structure.

We amended our credit agreement during the quarter to provide an extra layer of insurance and the flexibility to navigate the potential impacts of the pandemic.

Todd will discuss this topic in more detail in a few minutes, but we believe this prudent move exemplifies our conservative approach to capital management.

We also continued to diligently monitor the competitive landscape for potential acquisition opportunities that will position the organization to gain market share offer new products form no relationships with blue chip customers and enter new geographic markets well M&A activity.

The overall has been quite muted due to the pandemic. We balloon believed that there will be more consolidation over the long term as always any potential acquisition needs to fulfill a combination of the great criteria I, just mentioned and above all else needs to adhere to our strict return on and best.

Fund oriented approach.

So while these past several months have not been the easiest to navigate we continued to be focused on the matters that we can control, notably being ready to deliver best in class service to our customers when they need at the most we have done less for over 75 years, and we continue to do even in the face of it.

Her city.

Speaking to our longevity I'm proud to say that in June we were named the nations largest fabricator once again by the Fabricator magazine. This marks the 10th consecutive year that our organization has led the fab 40 less.

Been able to stay on the top of this list by always focusing on growth through our commitment to our customer success.

While we and our customers have faced more challenges recently, we have no doubt that this mindset as an important reason why we consistently prosper and we'll do so over the long term.

Before I pass the call to Todd to discuss our financial performance in more detail I want to take a moment the publicly thank our employees shareholders for the dedication and resilience that they have displayed during this difficult stretch of time. It takes a team to be successful and I appreciate your contract.

Fusion to a safe and efficient workplace and providing the excellent customer service that makes Mac. The best I know that together, we have come through this experience a much stronger team and organization. Thank you all.

With that I will now pass on the golf and Todd.

Thanks, Bob I'll begin with a look at our second quarter financial performance before providing commentary on our balance sheet liquidity and our thoughts on guidance.

As noted in our press release, we recorded second quarter net sales of 62.6 million as compared to 145.1 million for the same prior year period, a decrease of 57% decline is due to manufacturing volume reductions driven by the pandemic and continued deep customer destocking activities particular.

Early in the commercial vehicle agriculture, construction and access equipment end markets.

Even though Mac and our customers are designated as an essential business. During this pandemic many of our customers were forced to shut down production for five to six weeks on average during the quarter.

As a direct result of these customer shutdowns back also temporarily shut down some of its own manufacturing facilities in order to reduce cost and preserve cash flows.

Toward the ended the quarter when our customers reopen their manufacturing facilities. It was at lower production levels as of quarter end customer production volumes remained lower than for you bet pre pandemic levels.

It is also important to note that during the pandemic all customer relationships manufacturing programs and components produced remained intact.

[noise] manufacturing margins market loss of 1.2 billion for the second quarter 2020.

As compared to a 20.5, no doubt or gain for the same prior year period, although we employ various cost reduction efforts in the quarter that old realign our business as related cost structures. We are unable to overcome the tremendous reduction in volumes and related underabsorbed overhead.

These cost reductions are sustainable and will provide several hundred basis points of margin improvement when volumes return.

Additionally, the company incurred a $1.8 million charge the cost of sales during the quarter related to the green what facility closure and the transfer of production capacity to five other facilities.

We also expect to incur an additional point $7 million of cost to finalize these moves in the third quarter.

Profit sharing bonus and deferred compensation expenses were 1.2 million for the second quarter 2020, as compared to 22.8 million for the same prior period of course second quarter of 2019 included a 20.1 billion dollar onetime deferred compensation expense and a long term incentive plan.

Charge specific to the IPO, excluding those onetime items. These expenses decreased by $1.5 million this quarter due to the elimination of bonus and discretionary gainshare gainsharing accruals during the quarter.

Aesop expense was $8.7 million gain during the second quarter as compared to a 1.5 million dollar expense for the same prior period. Similarly, this change was due to the elimination of bonus and discretionary gainsharing accruals during the quarter.

Other selling general and administrative expenses were 4.6 million for the second quarter of 2020 asked about a 7.5 million to the same prior year period, which included 2.6 million of onetime IPO and BMP acquisition related expenses.

Excluding the onetime charges from last year. These expenses decreased point $3 million due to synergies achieved through the integration of DMP.

Lower travel expenses due to the pandemic and ongoing cost savings initiatives.

Interest expense was point Sixmillion second quarter of 2020 as compared to 2 million for the same prior period.

The $1.4 million decrease is due to our Lord debt levels this quarter as compared to 2019, and secure and lower interest rates through the amended and restated credit agreement, which was wet entered into in September of 2019.

Income tax benefit was $2.5 million during the second quarter of 2020 due to the 9.5 million dollar pre tax loss and for our federal net operating loss Carryforward was 23.6 million as of quarter end, which was driven by pretax losses incurred this quarter along with prior losses most.

Sleep on the onetime IPO and deep DMP acquisition related expenses.

The NFL does not expire and we will use it will be used to offset future earnings. We continue to anticipate our long term effective tax rate to be approximately 26%.

Adjusted EBITDA was 2.3 million for the second quarter of 2020 afterward, 18.3 million for the same prior year period.

Now, let me address our balance sheet and liquidity figures.

Cash flows provided by operating activities were 3.1 million during the first half a point 20 as compared to 6.5 million for the same prior period. The decline was due to timing of payments of accounts payable, which were offset by reductions in inventory and lower accounts receivables during the current year.

Despite very challenging quarter in first half of the year due to the aforementioned de stocking and pandemic issues I'm pleased that we're able to effectively execute our cost adjustment initiatives, while holding our debt level stable.

Capital expenditures were 3.7 million during the first half of 2020 as compared to 16.6 million for the same prior period, a decrease of $12.9 million. The decline was driven by the completion of the 2019 investment cycle, which focused on new technology and automation versus leveraging those investments in 2020.

Capital expenditures for 2020 are still expected to be in the range of $10 million to $13 million.

As previously announced the company amended as credit agreement during the quarter, we entered Indian Mamet to secure an added level of insurance against future macro economic events, which will allow us to remain focused on serving our customers and growing the business.

The amendment increases are met the maximum leverage ratio from 3.25 times, the 4.25 times through the fourth quarter of 2020.

Adjusted quarterly thereafter until returning to the original 3.25 times in the fourth quarter of 2021.

That's really plus provide in exchange for modest adjustments to pricing along with other usual and customary negative covenants the debt capacity and maturity date of the credit facility agreement was not impacted.

As of June Thirtyth White 20, total outstanding net debt was $76.7 million resulted in a leverage ratio of 2.4 times significantly lower than our covenant threshold before 0.25 times.

Now I'd like to briefly discuss our outlook for the remainder of 2020.

Based on the ongoing uncertainty of the cold cold it pandemic related economic and social impact and consistent with most of our top customers. We are not any position to update guidance today.

However, we do believe that second quarter of 2020 will be low point for the year.

For the second half of the year, we expect to see a general stabilization followed by gradual improvement and business conditions.

When looking at our performance for the first half a year, we expect to produce fairly similar result, and the second half of 2020 bullet results more evenly spread across the third and fourth quarters.

From a bottom line perspective, while third quarter, we'll have a tough comparison the same quarter last year, we do expect an easier comparison in the fourth quarter of 2020, as we reap the rewards of facility optimization.

Of course this assumes that we don't experience additional pandemic related shutdowns by our customers or significant deterioration that current economic environment.

With that said I will turn the call back over to Bob for closing remarks. Thanks for your report Todd.

Despite the ongoing challenges related to covert 19, and overall market demand I'm proud of how quickly and appropriately we took action to take the necessary measures to align our cost structure to meet today's market reality.

At Mac, we are built to adapt.

All economic circumstances, and we will continue to bring an innovative approach to making our organization stronger and more efficient.

In addition to maintaining constant communication with our key customers will continue to focus on what we can control and be dedicated towards providing our customers with industry leading value on service, we will prioritize the safety on well being of our workforce above all else and we'll focus our efforts.

Ensuring that facilities are safe and clean at all times.

All these past several months of presented us with both ongoing challenges on the exposed us to new ones I continue to have fit in our strategy and our ability to achieve our long term goals and in turn generate value for our shareholders.

With our prepared comments complete we'd like to open up the call for questions. Operator. Please go ahead.

We will now begin the question and answer session.

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At this time, we bought pause momentarily to assemble our roster.

The first question comes from mid downstream with R.W. Baird. Please go ahead.

Hey, good morning, it's Joe Grabowski on for make this morning.

Morning, Joel Joel Grant.

Good morning.

I recall that on the last call you said that aprils overall utilization was about 40%.

Can you maybe talk about how that trended during the quarter and how July luck.

Well I guess I'll tell you you've seen the results here for the second quarter and the type of volume, we add with a 57% overall decline so.

April may were tough months.

June got a little better in July that are again, so that's when we talk about seeing steady improvement that's that's what we're expecting.

Great. Okay. Thanks, and then can you can you clarify what do you mean by.

The de stocking dynamic or are the Oems.

Carrying less severe components in anticipation of production or just exactly how does de stocking work between.

Yourselves any Oems.

Well, we're basically talking about our customers' inventory finished goods inventory and the de stocking process that they're going.

They're working on to reduce the amount of inventory that they have finished goods inventory that they have in their pipeline. So.

Basically we we support their production activity, which in turn goes into those inventory levels and as either sold out of inventory or not so lot of emporia and and that creates the adjustments I go on.

Got it and you expect that.

Both the adjustments it continue for the rest of the year.

Well, perhaps at the at a level, but that's not making up much worse, but at a level that is fairly consistent until they get their inventory. They're finished goods inventory down we think we'll continue to see.

The same relative activity.

Got it okay Pan out the robust activity that that results in inventory growth for sales growth on their end.

Understood. Okay, and then maybe one more question for me.

You mentioned in your prepared remarks cross say truck orders have rebounded here the last couple of months.

How long do that translate.

True increased demand for your components from the.

From the crack <unk> class eight Oems.

Brian would you answer that question it Joe Good morning, I think.

As we got into June the classy manufacturers were beginning to ramp up and kinda increase that in into July fairly stable.

Build rates at this point I think the the April and May numbers were pretty anemic June was good July was much better I think we've got a good trend going here, we wouldn't be close to demand kind of like Bob said, our customers are carrying a lot of inventory we tend to be a just in time delivery.

Anthony so as they make changes to respond to their end market and hopefully growing retail sales will follow.

Very closely with them in terms of timing.

Got it okay, great. Thanks for taking my question.

You're welcome.

The next question comes from Andy Kaplowitz with Citi. Please go ahead.

Hey, good morning, guys have everybody as well.

Well, thanks, Andy Andy oriented.

Great. So Bob just following up on the last question around sort of cadence of Sal as I just out of curiosity like.

First the 56% decline for the quarter in July was that the sales decline much better than that at that point already now you said improved but what does improve mean versus the 56% decline for the quarter.

Yeah, I guess I guess.

That's quarter to quarter comparison, when you say, 57% and was on 57% even in June.

And so July.

Our markedly better again.

And I think and Todd's comments when you talked about.

Third and fourth quarter.

Or second half being similar to first staff, but more evenly spread I think thats a good way to think about it.

Okay, and just to clarify bother Todd does that mean, you know in terms of second half versus first half does that mean similar EBITDA I assume and means in did decent improvement need the Dalai maybe you can just clarify Todd for what you mean by similar in second half is that sales what is.

In terms bad guidance. It Thats, primarily when you look at the the volumes it'd be more consistently spread in the third and fourth quarters from an EBITDA perspective, we would expect.

That's a follow suit due to a certain degree but in Peru because of all the cost improvements we've made during the second quarter. So will yield those benefits. So second half EBITDA should be improved from the first half EBITDA.

Because of those things I just spoke of.

Sure and Todd around detrimental margins I'm, you know you did a little bit better than sort of we hadn't for the quarter. You know I think sort of in the high teens and that's something that's sustainable or shouldn't even get better here as you sort of just referred to get in south declines won't be as drastic in the second half.

Yeah, I would expect that to be better quite honestly, Andy we finished about 19% would think decremental margin quarter over quarter and historically, we've had in that you'd be 17 to 70 than half percent range and and given all the unique circumstances that would and challenges we had in the second quarter based on maybe a more normalized situation.

I would expect that decremental margin going forward to be less than the historic levels of 17%.

And again as it relates back to the all the automation them improvements we've made the integration of defiance and certainly the plant consolidations that we've done over the last 12 months. So you know we definitely made some really sustainable permanent cost reductions into our cost structure.

And then just one more from me you know you mentioned, Bob military power sports, maybe as bright spots. So I I know that passports is a decent sized push in the business can you give us more color on like kind of gross or maybe last decline that you've seen in those businesses and how much they keep country.

Tribute to to sales stabilization in the second half of this year.

Yeah, I'll make a couple of general comments, but then I'll ask Ryan that maybe comment more deeply.

There was lot of inventory that was depleted and the second quarter.

As a consumer's bought from inventory while the facilities that are typically non essential are considered non essential we're shutting down or having significant production disruption there. So they chewed up inventory and now some of that inventory is.

Is too low demand seems to be at their end at Arkansas customers and had a good level. So theres two things one is the continuing demand from their end customer and the re growth of inventory.

So those two things are going out in those markets that Andy I'd, just add a couple points a few of our customers have noted really their dealer inventories are sitting at like 20 year lows. So there's obviously some demand just too we've talked about de stocking this would be more of a restocking.

In the in the power sports space and the pandemic drove not only those that were maybe planning to buy but a lot of first time buyers entering the market or those that.

Maybe we're thinking about it sitting on the sidelines the outdoor recreation.

For families and such as brought a lot of new buyers in some markets.

The boosting unit volumes.

Thanks, guys very helpful stay well.

Thank you.

The next question is from Steven Fisher with you before.

Please go ahead.

Thanks, Good morning, I just wanted to follow up on Andy's question there on the margins.

As you guys have taken.

Back to reduce costs, just thinking about not so much of the reduction of the decrementals on downside, but maybe more as we start to come out of this over the next.

Well.

Mr product.

The margins my beyond the way up Todd you might have said something about several hundred basis points, but.

How should we think about the incrementals as we recover here in light of those cost reductions.

Well so wondering when you think it historically again, we've had incremental margins that radnet low 20% range.

Now that we've got these cost reductions and these permanent changes in place I would expect that going forward, our incremental margin will be in the higher twentys.

That ranges and also I think as you look at that into the second half of this year, knowing that we are still wrapping up the vital consolidation of our Greenwood facility in the third quarter. It will yield all those benefits initially in the quarter, but when you look at an annualized basis, we're looking at probably four to 500 basis points of true margin improved.

But when volumes return, so and when I say volumes return I look at maybe 2019 at a marker, let's say a normalized level, let's say it at that just over 500 million dollar Mark and we finished at around 10, 10.2% adjusted EBITDA, we have that pathway now getting back to those levels or maybe even less being at fifth.

Teen percent adjusted EBITDA. So we do have that line of sight and as you look into this year certainly we'll get some of that benefit, but obviously, we'll get more of that as the market rebound.

That's helpful and then the discussion over a year ago. When we started check was that in a downturn customers.

Tend to consolidate suppliers and post and events.

Now that it's really Oh.

These days.

Good.

Tony who heads towards consolidating that supply base yet.

Yeah.

This is Ryan we've definitely seen what we would call a takeover wins in that that's came from.

Multiple avenues I think now there's definitely a heightened awareness of the Oems about the financial viability of some of our competitors. We have participated in some takeover business in cases, where folks just couldn't proceed in business now they weren't overly material, but definitely a build some goodwill.

And we're the ones that folks a trust to take stuff on so our quote activity in the second quarter in the middle of the pandemic remain very strong really stronger than last year incrementally better.

First quarter, so outside of the normal new projects, we're working on I would definitely say, we see more opportunities that are kinda sexually situationally driven in the market based on economic conditions.

Great pretty helpful. Thanks, a lot.

Thank you.

The next question comes from Larry de Maria with William Blair. Please go ahead.

Hi.

Good morning, everybody right.

I know you test touched on a few of the things Uh huh.

Well these data obviously each marks a weaker and is this inventory de stocking on top of that I guess I'm unclear about how long you expect this de stocking to go on for it sounds like power sports is in good shape, but perhaps you know truck is not for example, so just flush out a little bit of.

How long it just another quarter and.

And where the biggest destocking is occurring.

Yeah, Hey, Larry This is Ryan I think you know really the setup for the year here have de stocking in in CV construction and AG.

Inventory is down in commercial vehicles, I think the industry metrics with still say, it's a little higher than anticipated, but I think with the backdrop of a stronger June and July a quarter order board. That's that's looking up.

When we think about really the construction and access equipment market, that's probably the longest.

Are the biggest headwind because that had the most most to get done coming into the year and most of our customers wouldn't really even commit if you asked in that.

Same question. So we would anticipate that to still kind of hang out there as a headwind, particularly in construction and access a little bit on AG. Although you know if you separate large from small retail sales on small AG has gotten a little better.

And most of the Oems were saying they needed some de stocking to be down there. So similar to power sports the hobby farmers small tractors turf equipment I think that's in a lot better shape, but large AG still has a little bit of work to do just because volumes have been than flat. The good news is the fleets are continuing to age at some point there.

To be a stronger replacement cycle out there that will help a consume some of that inventory.

As well.

Okay. That's very helpful. Thank you Tom cruise, maybe switch down mentioned.

Hi, waterborne looking up.

We talk about I know things improved.

And that bottom in April and you just mentioned quoting is getting better, especially for takeover business, but.

I'll just comment on July order boards, maybe how far they are down year over year or.

Sequentially.

But I think we would definitely sequentially or stronger from the second quarter I think this coming into the year, Larry when new commercial vehicle was going to be down year over year. It got worse through.

The pandemic and then the de stocking really started to turn Wuxi late third quarter last year. So in a normal course, even without Cobrand, we were expecting some some market declines.

In those areas that I would say that powersports market as a one exception.

During the lockdown.

Dealerships and falls for staying at home. So there was let's call the four to six we.

Well no activity.

In the power sports space and once folks got out lockdown.

Certainly the dealers were starting to open back up and that sequentially is certainly stronger.

I would point into higher or at least flat volumes year over year.

Okay. Thank you last question.

I apologize if you answered this already but I know you, obviously incurred restructuring and you consolidate the plans what's the absolute dollar term savings I know you're talking about margins getting from 10% 18th <unk>, 50% at those volumes or even a little bit lower but well.

[laughter].

Yes.

Keith.

Okay.

Second quarter.

Hi, This is Todd just so looking at that add to closure of other Greenwood facility. There is a lot of fixed overhead certainly that were not replacing that other facilities that will be as we distribute that work at five other locations.

I think it's important to no we haven't lost any of that business. We're retaining all of it. It's just it's going to be produce at other locations, but we will look at that to be in that probably three to maybe $4 million range on an annualized cost savings.

Really just because that the again the fixed overhead savings as well as the the people costs ever saving.

[noise], Okay that sounds like a bar thank you.

Thanks, Larry.

Yeah. Thanks again, if you have a question. Please press Star then one.

At this time, we have no further questions. So this concludes our question and answer session.

I would like to turn the conference.

Back over to Bob Kamphaus, Chairman, President and CEO.

Okay. Thank you all for your time today, we appreciate your interest the Mac and we look forward to virtually seeing some of you during jefferies' Industrial conference.

Tomorrow. So have a good then we'll chat somar as as the days go by thank you.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.