Q2 2020 Park Ohio Holdings Corp Earnings Call
Chaz.
Medical and technology end markets and supply technologies, our Chinese customers Assembly components, and alternative energy and engineered components.
Our diversity also insured over $13 million of operating cash flow during the second quarter, while continuing to make our important restructuring decisions and investing prudently in our future.
Regarding the future we saw a number of encouraging signs during the quarter, while many of our new business launches were delayed during April and May the quarter concluded with renewed excitement around these launches across all three segments.
While our $100 million plus of new business revenue, we hope to see develop fully by the end of 2020 now seems to be delayed into 2021, we believe all of those opportunities still to be vibrant and our investments around capacity during 2018 in 2019 to still be well positioned for.
Apps, even more encouraging we're viewed broadly across the industries, we serve as a strong and well positioned participant and we've seen an acceleration in new business opportunities and interest in us from customers, who are seeking long term partnerships during these difficult times.
I also want to emphasize the ongoing effort regarding our initiatives to improve long term competitiveness.
We have and will continue to challenge the costs related to our customer service model.
This crisis has provided us the opportunity to take significant and permanent actions across our business.
More importantly, we have made thoughtful and targeted investments, which have above average returns in each of the businesses.
Whether they be related to our footprint process improvements best done during a shutdown or acquiring new equipment, its deep discounts with substantial and near term saving opportunities we're focused on lowering our cost to serve.
While a great deal has been accomplished year to date on this front, we recognize the ongoing challenges in the business in the global business environment, and we'll continue to meaningfully adjust through at least the rest of the year.
Lastly, none of this gets done without leadership, our decentralize organizational model emphasizes the entrepreneurial spirit and the authority to make quick decisions, where it matters close to the customers and on the plant floor.
The second quarter was a case study and the importance of these organizational beliefs and will benefit us for some time to come.
While we cannot force our customers to buy more planes semiconductor tools snowmobiles are cars, we can continue to position ourselves for accelerating growth and enhance margins when the business environment improves.
Additionally, our strong liquidity position gives us all the tools our team needs to meet this strategic commitment.
While we continue to suspend financial guidance, we are optimistic that will deliver profitable results for the remainder of 2020.
With that I'll turn it over to Pat Fogarty.
Thanks, Matt.
Our second quarter results reflect the significant impact caused by the Cougar 19, pandemic, which negatively affected most of our locations around the world.
The impact will see most dramatically in our assembly components segment, which supplies a diverse set of products to automotive Oems and tier one tier two production plants throughout North America in Asia, which were substantially idle during the quarter.
In our supply technologies and engineered product segments.
Second quarter demand was significantly lower across most end markets around the world as the pandemic caused many plants to significantly reduce production levels or temporarily shut down.
Also during the quarter, we experienced customer delays in new equipment and aftermarket order decisions as customers manage their capital spending.
As a result, we took aggressive actions during the first quarter and throughout the second quarter to reduce operating expenses, which include a permanent head count reduction in employee furloughs impacting approximately 50% of our global workforce salary and board compensation reductions and discretionary spending cuts.
In addition, we're proceeding with the consolidation in downsizing of certain operating locations.
All of these actions taken to reduce operating costs will positively impact future margins as volumes recover.
Despite the challenges presented by the pandemic and the impact on certain end markets consolidated sales levels began to improve significantly in June.
The improved demand levels, which began in late may in throughout the month of June were across most end markets as customer locations reopened around the world.
June sales on a consolidated basis improved 78% over April sales and 58% over may sales.
We are cautiously optimistic that continued positive trends in both sales and earnings will occur throughout the second half of this year as customer production levels improve and the benefits of the implemented operational restructuring are realized.
During the second quarter, we reduced working capital by almost $20 million minimized capital spending to $4.5 million in suspended our quarterly dividend in order to preserve liquidity.
As a result of our actions we ended the quarter with relatively strong liquidity of $197 million at June thirtyth, including $52 million of cash and cash equivalents on hand, and $145 million of availability under our credit arrangements.
We fully expect our overall liquidity to increase during the second half of this year as the global economy recovers and demand for our products increases across all business segments.
Turning now to the detailed results for the quarter.
Consolidated sales were $228 million compared to $415 million last year.
The sales decline year over year was a direct result of the covert 19 pandemic, resulting in customer plant shutdowns affecting each of our business segment as I previously mentioned.
Consolidated gross margins in the second quarter were 6.2% compared to 15.9% a year ago. The margin decrease was due primarily to the lower sales levels in the 2020 period, which significantly reduced fixed cost absorption levels in most facilities.
We expect second half gross margins to improve as demand levels increase in the benefits of the cost reduction actions are realized many of the operational improvements which began in the second half through 2019 continued in the first half of this year. Despite the pandemic setback.
Our efforts to improve plant efficiencies and profitability through process changes various plant consolidation initiatives and customer and supplier price negotiations will drive improved gross margins as sales levels improve.
SGN expenses in the quarter were $35 million compared to $47 million a year ago.
SGN in 2019 included onetime expense of 4.3 million. Excluding this expense SGN a expenses decreased 18% in the second quarter.
During the second quarter, we incurred an operating loss of $21 million on an adjusted basis. The operating loss was $18 million the adjustments to GAAP earnings included onetime costs relating to the consolidation of facilities and personnel severance costs incurred during the quarter.
Our effective tax rate in the second quarter was a benefit of 36%.
Which includes the favorable effect of a net operating loss carry back under the recently enacted cares Act.
We expect our full year effective income tax rate to range from 20% 25%.
Our GAAP earnings per share was a loss of $1.38 and on an adjusted basis was a loss of $1.17 in the second quarter.
During the second quarter, we generated positive operating cash flows and free cash flow of 13.4 and $8.9 million respectively. The free cash flow during the quarter reflects our efforts to maximize cash flows and preserve our liquidity as we navigated through the current economic environment.
Capex in the quarter was reduced to $4.5 million as we aggressively controlled the level of spending during the quarter.
Capex in the second half of 2020 will approximate $10 million to $15 million, most of which is necessary to support new business previously awarded in our assembly components segment.
Moving to our individual segment results in the second quarter in supply technology sales in the quarter were $94 million compared to $162 million a year ago. The decline in sales was driven by lower customer demand across most key end markets as a direct result of the cobot pandemic.
In addition, our faster manufacturing business was significantly impacted by the reduced levels of North American automotive production in the quarter.
These decreases were partially offset by year over year sales growth in the semiconductor and the medical end markets as well as by new business generated during the quarter.
Despite the weak demand in April in the early part of May average daily sales in our supply chain management business began to improve and continue to positive trend throughout the end of June.
June average daily sales improved 31% compared to April and May averages.
Improved trends, we're seeing in most end markets with significant improvement in the recreational vehicle heavy duty truck agriculture equipment bus and coach and consumer products end markets, we anticipate that our daily.
Average sales will continue trending in a positive direction during the second half of 2020 and as the global economy recovers from the effects of the pandemic.
Segment operating income was <unk> point 3 million compared to 11.3 million a year ago, reflecting the lower sales.
In this business, we took action to reduce operating costs throughout through headcount reductions and facility consolidations and also reduced discretionary spending and working capital.
Our supply chain team continues to focus on reducing inventory levels to align with current customer demand and through innovative approaches to supplier lead times and stocking programs. We expect these efforts will have a positive effect on segment operating cash flows in the second half of the year due to the further reduction in working capital.
Also we continue to focus on new business initiatives centered around aerospace and industrial supplies, and adding new customer logos to our diverse list of customers in end markets.
Despite the economic downturn, we continue to win new business as result of these initiatives.
Moving to our assembly components segment sales were down 60% year over year, driven solely by the impact of the coated pandemic.
Most of our plant locations were significantly downsized to temporarily idled in mid March as North American auto production came to a sudden hall.
In late May OEM, and parts suppliers began to slow restarted production and at that time our facilities reopened.
Production levels and most of our plants are accelerating assuming no further shutdowns will occur. We currently expect third and fourth quarter customer demand to be significantly higher than second quarter levels.
Segment operating income margins decline year over year as results of the significant lower sales levels. We took aggressive cost reduction actions in this segment, which included a temporary lay off of the majority of our workforce, resulting from the production shut down in mid March.
Production levels at each of our facilities in North America in China significantly improved in June.
And as of June Thirtyth, we have brought back 75% of our workforce who were on temporary furloughs.
The increase in build rates and customer demand for our products will be supplemented by the increasing momentum on new product launches, which were delayed during the second quarter.
We continue to believe we are well positioned to benefit from trends in the global auto industry, which are aimed at producing deal vehicles to comply with more stringent globally emission regulations.
The use of lighter componentry cooling applications and direct injection technologies, we will continue to be a focus in the global auto market and we expect that these trends will increase our sales content per vehicle over the next several years.
And our engineered product segment sales in the second quarter was $79 million compared to 117 million last year, driven by lower demand from certain key end markets, including aerospace and defense oil and gas and rail, which affected both our industrial equipment and forged and machine products businesses.
Bookings of new equipment totaled $52 million in the first half the year compared to $100 million in the first half of 2019.
Global order activity slowed during the second quarter as a direct result of the pandemic as customers cut back their capital spending and deferred projects into future periods.
We expect bookings in new equipment in aftermarket parts and services in this segment will gradually improve in the second half of this year as customers increased their plant production during the recovery and resume their capital spending plans.
Operating income in this segment was down from the second quarter of 2019 from $11.5 million to a loss of point $8 million the decreases in year over year profit and margin were driven by the lower sales levels, which resulted in several under absorbed operations.
Corporate expenses were $5.8 million in the quarter compared to $7.5 million last year, excluding onetime severance expenses incurred during the quarter corporate expenses were down approximately 30% year over year.
The decrease was due primarily to actions taken to reduced personnel costs and control all spending levels in light of the current operating environment.
Before I turn the call back over to Matt I want to emphasize a few points mentioned in my earlier comments.
The pandemic and its effect on the global economy have challenged each of our businesses and required us to change how we operate.
We have implemented all the necessary protocols and are providing safe work environment for all of our colleagues that have returned to work.
We are seeing positive signs that the economic recovery is underway as each of our businesses reported much improved sales and earnings in June compared to April and May.
As a result, we have brought back a large percentage of furloughed employees in order to support current customer demand.
Also we have implemented several operational improvements announced the consolidation of several facilities and realign certain business processes to emerge from this down period more profitable than pre cobot levels when sales fully return.
Our liquidity continues to be strong and we have adequate cash flow and borrowing availability if necessary to continue supporting future strategic investments R&D activities and working capital needed to support future growth.
And finally based on the uncertain operating environment caused by the pandemic, we will not provide full year earnings guidance. As we have previously stated now I'll turn the call back over to Matt.
Great. Thank you very much Pat.
We'll open the conference call for questions.
Thank you, ladies and gentlemen, if you would like to ask a question at this time. Please press star one on your telephone keypad. The confirmation from the indicate that your line is in the question. Thank you. You May proceed starts and if you would like to move your question from the Q for participants you can speaker equipment and may be necessary to pick up your handset Preston sorry, Keith one moment. Please.
My question.
Thank you. Our first question comes from the line of Sarkis Sherbetchyan with B. Riley FBR. Please proceed with your question.
Thank you and good morning, Matt and Pat.
Our next can argue welcome.
Good. Thank you Im just first question here, how should we think about 35 million dollar.
She ne.
For the quarter is that kind of the run rate on a go forward basis kind of help me understand.
What the opportunities are here.
In the cost structure.
Yes.
Sarkis this is Pat.
Included in the SGN a reductions that you saw in the second quarter was a significant amount of employee salary reductions.
Which would be viewed as temporary as volumes recover and so I would expect to see an increase in SG nay as our as our revenues grow.
In addition.
When you think about global travel in our sales group.
In the second quarter sales travel.
Of entertainment expenses things of that nature were completely cut off.
Especially in April and May we have resumed our travel arrangements and visiting customers sites, where we can and so I would expect those levels to to increase.
Overall, we are going to see permanent SGN a reductions as result of employee cuts that have been made.
And so that will carry and linger.
Throughout the course of the year.
Got it and can you frame that in relation to the comments you made on.
June sales trends.
Right.
[music].
In June I think we're still going to see the benefit of the cost reductions on SGN A. I think as we move into the third and fourth quarter I think we're going to see roughly a 10% increase.
Maybe less in SGN aid, depending on where sales levels end up.
But thats, how I would look at that.
Sorry, because this is Matt I would.
I agree with everything Pat said, particularly even if you use the first quarter as a baseline we would expect on a sustained basis to be improved from that.
And to a large extent some of the investment that we are discussing any increases and that's you know Apache referring to.
Depend on on.
Continuing to see increases in business activity. So.
Again, we're pretty nimble in that area.
I think that the second quarter would demonstrate.
A low watermark.
I appreciate those comments.
In the commentary you mentioned.
Some of the capacity rationalization, maybe if you can talk about.
How youre thinking about.
Capacity kind of going forward do you foresee some more permanent rationalization and then also which segment in particular are being kind of affected the most.
Yes. Good question you know sarkis.
Your first call I'll say, something I often say.
As an investor in distressed businesses over the years and we bought some businesses with some hair on it we're always restructuring something.
It is not in our DNA to make sure that we're doing that we call. It out this quarter and in this period, because it's it's more meaningful so.
Again, what we're never in a position where we're happy.
This opportunity that's been given us and I guess, we'll use the word opportunity.
To review our overheads as it relates to current business activity in future activity has allowed us to be a little more aggressive so numerous locations around over all three business segments.
Our being reviewed and all the business are being touched in some way.
Some are adjustments relative to size of square footage in particular leases on some are complete closures. Some extend to North America, some extend to Asia and Europe. So it is very comprehensive and I would say and during this time much more strategic whereas our routine I look at.
Yes, and Unabsorbed variances and things like that is more tactical.
We're pushing the envelope in terms of what we think we can deal I continue our success with our customers. So.
A lot of things are being touched I wouldn't want to disclose what we think will be touched by the end of the year.
But it's meaningful relative to overall facility count.
I don't know Pat if you want to be more specific thats that's.
The only additional color I would give sarkis is within our for example, our supply technologies segment.
For our customers are growing and moving in and we're there to support their their needs, which often requires us to challenge as Matt mentioned, the square footage of warehouse facilities and people being able to move into locations, where we can more efficiently serve our accounts.
And so some of that in those those types of changes occur every year and so.
This year, we'll see additional movement because of lower capacity and lower needs that our customers are haven, but all in the view of being more efficient and how we service them.
And Thats at the end of the day will lower our cost.
I appreciate the comments I'm going to hop back into the queue. Thank you.
Thank you Sir.
Thank you. Our next question comes from Steve Barger with Keybanc capital markets. Please proceed with your question.
Good morning Mountain Pat.
Hi, good morning, Steve.
Happy to hear your confidence on remaining profitable in the back half just for modeling as you think about the revenue step up you're seeing the cost actions mix can you exceed the 13 cents in one Q or how should we think about results against that benchmark.
Steve I'll, let that handle that that's a bit about data I'll be honest with you. We we debated internally a little bit of how to how to address that so.
And the reality of it is is it's not just because of the volatility around co that an infection rates and customers.
That is certainly the single biggest issue for US. It's also mix and Steve you know that better than anybody.
We had some businesses that are performing exceedingly well.
On versus first quarter, and I think in the third quarter will be standouts.
We have others with higher breakeven points, even after the cost actions that we just are not going to be OLED drastically season. Some some of the new business launches or our returns so.
It's hard to get more specific than that Steve because we don't it's not just covance supply chains.
It's mix as well.
Particularly in our high margin business as the right mix and some of the engineered products group.
Changes the picture.
Meaningfully it could be that could be 10 cents by itself. So.
That's going that we're going have to wait and see but but we are comfortable to say that the trajectory and what we see already in the third quarter suggests that thats where were gone.
Great then no that's a that's encouraging to hear and Matt you said your customers see you see is strong and well positioned.
Getting you look at new business can you just expand on where you see some of the opportunities that are coming your way.
Absolutely.
I don't want to name individual customers.
But but I can comment explicitly on three relationships that come to mind in businesses, where we are there is significant and critical customers in our end markets, where we've not been their primary source and on we recognized.
That and we have had.
In this environment the unique opportunity too.
On to bid on that business and it remains to be seen how successful we are but.
We feel very good.
You know in terms of our opportunity to be viewed as a strong partner and and.
Some of our key competitors are wounded.
Again, I hate to beat the drawn but but our liquidity and our management style I think it allows for people, even though we do have a little bit of leverage allows people to see us as a long term.
Stable business so.
I am I don't want to be customer specific on the call today, but I would say.
Especially well in all three business segments, notably in assembly components and the supply technologies. We've seen you know invigorated interest from great customers and lots of new business activity.
Yeah, that's that's really great.
And.
One of the elements the growth strategy that you've talked about over the past few quarters is auto electrification and we know that most auto plant shutdown in Twoq you in the coming back up but can you talk about what if anything this whole situation means to the electrification push and any differences you're seeing in the three regions.
Well I think that there is a in my mind Theres no question.
A lot has been pushed out vis-a-vis.
Electrification.
And product launches across the board not just electrification some affords issues around the explore are well known and are impacting us today.
So it's not just electrification product launch has been pushed back.
Somewhat argue that that would include electrification to some greater extent.
I'm not.
Overly thoughtful about that today.
As you know all of our products almost all products today, and our new because that is positioned around trying to be.
You know agnostic relative to powertrain, we're not entirely there's you know, but but we are.
Thrilled to think that we're well positioned on key platforms some of those key platforms and customers.
And I include Tesla is a good customer of ours.
I will.
Thankfully succeed and we'll be there as their partner so.
Our our ongoing strategy is to make sure. We're we're positioned as as most of the OE is in my opinion still pursue.
In the near term three to five years.
A broad set of strategy. So they can they can monopolize on whatever consumer taste go chip.
An app to say, sometimes that GM is as trying to be a leader in electrification space, but there sure Sal trying to sell a lot of Thomas.
So in the near term, we're going to try and choose Domino walk at the same time.
All right. So if I step back from electrification and just talk about any powertrain can you can you talk about where you stand from a utilization standpoint in China versus Europe versus the U.S. right now and just maybe frame up how the the auto roll restart has has progressed.
While China certainly has been.
Why don't I mean, a leader in the sense that they entered the call that issue first so they've come out first.
And that certainly as I mentioned in my comments was a strength.
What a very few bright spots candidly in the in the quarter for the automotive business. So.
We we did consolidate facility in China. So we are preparing for a more of a a long haul relative to building the businesses that we.
The capacity that we built there having said that.
Our our products there continued to be well position. So we.
We're not unfortunate our new facility up in Chen tower, where.
Got some great business got some good new customers were nowhere near capacity.
But but where we're very well positioned I think our changshu facility.
Which is focused more on the on the direct injection technology again, we've got some additional capacity there.
The rollout of those technologies as a slower than we thought let's continues to be very well positioned so.
The rebound in China has benefited us, but from a capacity utilization standpoint, we're still 18 months away from I think seeing meaningful contribution.
Got it okay.
Okay. Thank you.
Thank you. Our next question comes from the line of Marco Rodriguez with Stonegate capital markets. Please proceed with your question.
Hi, Good morning, guys. Thank you for taking my questions.
No problem, Michael how are you going well done well thanks.
I was wondering if maybe you.
The process improvements and the potential permanent savings that you guys have been.
Obviously working on all of last year, and then devoting extra time given.
Closures of a lot of the facilities here. This last quarter, maybe if you can kind of help us understand once you get into a normalized environment whenever that might be and if we maybe use fiscal 19 as kind of a base year.
How does the model sort of change.
Versus that with these improvements that you've made thus far.
Marco This is Pat.
You know.
The changes that were made in the second quarter.
We're very significant whether its downsizing of facility consolidating a facility.
Changing the way, we manufacture with automation.
Narrowing aisles in a warehouse.
Taking the time now that the volumes are down to invigorated a lot of those changes and so I would say even when I look at at the things that we're doing these are permanent reductions in our cost structure and I would see in each of the segments.
There is there is.
An estimated $2 million to $3 million of permanent manufacturing cost reductions in each segment.
And as volumes come back.
We would expect those to affect our gross margin.
And so.
That's the kind of.
Things that are presidents and our managers are reviewing and looking at and implementing everyday and so is going to be meaningful.
And only time will tell on when volumes come back.
Got it very very helpful and the.
Permanent reductions that you may have taken from the head count perspective.
Because I I, if I remember hearing you correctly that you brought back the vast majority of your per load workers and has seen a expenses that should be up about 10% sequentially or so.
Have they all been brought back or have some of those furloughed employees and permanently tied just just trying to think through.
I'll, maybe that progressive in the next few quarters.
I'll I'll jump in and just mentioned Marco that.
The hourly workers disproportionately.
Hurt during this downturn so.
Generally when we talk about people, who we were trying to work from for a lower layoff. It has been hourly workers those are tied directly to production levels.
The actions now that doesn't mean that significant.
Salary adjustments and.
Permanent layoffs didn't happen in the SG SGN a ranks they did.
And I think thats, what you're trying to get your arms around in what Pat just mentioned in terms of generalizations around what we're chasing on a on a on an annual basis from each business.
Let's be clear when we say, we bring were brought back 75% of.
Half our workforce that's disproportionately.
Really works.
Got it okay understood there.
Then, Matt just coming back to your comments and answering your prior question about new business opportunities through relationships you saw.
And at the last quarter on our call we talked about.
A lot of opportunities for you basically take share and take while it from.
In particular clients and it sounds like that's sort of starting to happen here for you guys. Just kind of wondering just based on the fact that maybe some of your competitors are wounded kind of using the wording that that you may.
Are you seeing those competitors, perhaps become a little bit are rational what the pricing to try and stay relevant and how if at all has that affected your bedding.
Yeah, that's that's a really good question.
'cause, there's a dark side right that competitors being wounded on.
At this point it may be too early to tell.
Anecdotally when a nice things about our.
Talk a lot about how important diversity as many of the opportunities I'm talking about some are ever realized many are anecdotal opportunities we're seeing.
In general.
While the numbers may not be material today.
The trend I talked about as real whether or not it will be material depends a lot on.
The position of some of our competitors to defend our market position on a time, where they don't have a stronger balance sheet and no no liquidity. So on a couple of the bigger opportunities I can't comment yet to be honest with you. We have not we feel the opportunities are real we've seen the realization of some.
Candidly, we've we've had the opportunity to buy.
Yeah capacity pennies in the dollar from failed competitors so.
I think its a.
I think some of them are going to have a difficult time competing on price.
You know banks in particular, while they may be not.
Being two rigorous in terms of covenants and waivers there are unlikely to fund.
You know growth again, unless they're confident it can be profitable I think it's different right now I do but but I will tell you asked me that question on the next call and I'll tell you for sure because.
It certainly makes sense to me that.
Some of these competitors wounded as they may be are going to do everything everything they can to leverage their incumbent position. So I'm not I'm not cocky enough to say that that trend is material to our numbers.
But but the sales funnel has to start somewhere.
Right understood and so I'm, assuming that that also presents a potential opportunity for you guys at least from an M&A standpoint, I know I understand it last quarter.
Banks were really trying to help make sure everybody was staying upload I'm just kind of wondering yeah.
If the pipeline has sort of opened up a little bit more in terms of deal flow for you guys.
I want pat's comment on axes closer to it but let me just say.
Generally.
I don't want to make anyone nervous because.
Does that don't know our company while might not understand this comment we're very disciplined buyers and we believe downturns are where we build the next leg up of this business.
Either through the things, we've talked about internally or equally or more importantly, externally. So I'd be disappointed deeply disappointed if we if we didn't come out of the cycle, having a asking found some opportunities.
Pat you're closer to it in terms of flow Yeah, I think it's too early Marco I think we're going to see opportunities over the course the next six months.
Based on some of the things that Matt talked about I think deal flow has been been quiet in the second quarter for hobbyist reasons.
You know with the whether it's the federal funding that has taken place for a lot of private we owned companies.
I think thats all going to end soon in the issues that Matt.
Talked about are really going to come out in Q3 and four.
And then I think we are going to see a lot of opportunities on that front and I also think companies, especially privately owned companies are going to see I don't want this to happen again to me and I want to take the opportunity to put my company out in the market and we're going to take advantage of that.
So.
We're excited about those kinds of opportunities because as Matt mentioned, we know that's where the next leg ups going to be.
Got it very helpful. Thank you guys very much appreciate your time.
Okay Mark.
Thanks, Mark. Thank thank you we do have an additional question coming from the line of Steve Barger with Keybanc capital markets. Please proceed with your question.
Yeah, I just wanted to ask about a couple of business units and end markets towards the end of last year, you were talking about being in the right place with forging and seeing some new customers and products that were higher margin and I'm sure volumes were affected like everything else, but has anything changed about how you're thinking about the forging business in terms of ability to win new.
Customers and and new business.
Yes, the way you're familiar with the investment we made in Arkansas, Our New press line.
[music].
I would tell you that the value that's been created in particular there.
As we expected to initially be the flexibility we would have.
Two.
Take down press line number one which has been a workforce for this company for a dozen years, making us tens of millions of dollars and transfer some of that work lets a phase one was to provide allow that to happen. We you know given what's happened in the oil and gas and training market, but yeah, we got more of an opera.
Kennedy than we thought so but that doesn't mean that we havent benefited in our ability not to be earnings line, but benefited and getting the opportunity to get press line chew up and running.
And press line one refurbish so that he has been successful, albeit not not on the earnings line I'll tell you that.
I think that.
Some of the new opportunities that we hope to fill press line to with have have.
Slowed.
There are still active some of the diversification, we talked to into construction and so forth exist I think meaningful strategic discussions are going on.
But but Steve its.
Hard to Weve, a great story in the current period, given the weakness in their core markets and the and some of the delays on some of the diversification having said that.
I would tell you that it's given us a wonderful opportunity debug press line to and to refurbish Crestline. One so I'm I'm on the 14 gained as you know there's a long it's along it's again, it's a game of years not months. So.
We're not where we want to be but our strategy is intact and I think that some of our potential partners are looking at us.
We're squarely and saying before we like do you now we love you.
Help us help us move forward.
Lets say that.
We had some on the on the other side of the forging business you know again, we've been.
Some of our strategy, there as well and supply tactless built around.
This resurgence in aerospace.
We had some new opportunities in some new or some new new guys in the military space in particular, and hopefully and commercial as well and you know those hit the pause button as well so.
That's a business that we like long term, we want to invest in long term.
That may be an area, we see in an acquisition in for for the right opportunity.
But.
Some of the things that we discuss late last year I would say are strategically valley, but moving very slowly.
Got it.
And then supply Tech, we've always talked about this being a long selling cycle right. Now every company that covers pulling every lever to get cost out. So you already alluded to this but.
Can you talk about how that's playing into your ability to go out and tell that story and maybe quote on business. Even if it's a small product line just to get your foot in the door.
Yeah, no great great question on.
So I, we've talked I think Steve about the.
How that we thought differently about that go to market strategy.
Over the last couple of years and the leadership and supply technologies I think has really done the right thing.
And.
Recognizing that while we love our large multinational multi facility lots of asking you customers.
The business is built from the ground up the businesses built with $100000 customer that becomes the million dollar customer becomes a 10 million our customer so our our initiatives around new logos as I know they call it and other things related to the diversification of our of our business model.
Yeah, our going really well we are continuing to see.
New business gather and that's not just in the traditional business, which we are seeing business seeing new opportunities that he is also I think in some of the new investments.
Aerospace.
The challenge right now I mean, there's no other way to slice it.
I like the opportunities there may be there some opportunities on the on the on the aggregate acquisition side down the road challenging space, but we're in it the right way low overheads.
Good good market position, but but I will tell you.
Our MRO investment, which we've talked a lot about has benefited exactly to the point you've set.
And I think that's out whether it's as simple as seeing a you know some good fortune around PT pp, which is up a product category for us with our current customers or otherwise.
I think that we've been successful.
In terms of.
New opportunities new signings and I think that's one of the great stories and it's buried below.
The the sort of top numbers and supply technologies and I think that.
Those incremental dollars, our higher margin and I think in the third and fourth quarter, we're going to be celebrating.
That's going to be the front end of our of our train so to speak I could going forward here for that for that for the next few quarters in my opinion.
That's good commentary thank you.
Thank you we have reached the end of our question and answer session. So I'd like to turn the floor back over to management for any additional closing comments.
Great well, but.
Thank you for the Great question first of all and thank you for giving US the time to explain why it's important to be patient and why.
While the second quarter was.
Difficult financially that we think we've improved our strategic picture.
And then keep most of all for your support your time taker.
Ladies and gentlemen, this does conclude today's teleconference and webcast. Once again, we thank you for your participation and you may disconnect your lines at this time.
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