Q2 2019 Earnings Call
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Rachel Smith.
Hey, Joe Smith, and which converts company are you with points 72.
Uh huh.
What's that.
Oh yeah.
Yeah with point 72.
Yeah.
Okay, which company would you like NFS.
Unifirst holdings.
Earnings call.
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Thank you.
Good morning, everyone and thank you for joining us today, our second quarter performance was highlighted by our ability to leverage our improved mix pricing power momentum cost management and lower cost structure to grow adjusted EBITDA margin by 129 basis points year over year. Despite a 10% decline in sales. In addition, we delivered strong free cash flow on improved working capital and reduced capital expenditures.
Delivering this solid earnings margin and cash performance in the face of topline headwinds is a strong testament to the effectiveness of our vision 2020 two strategy and strategic pillars framework, which are now deeply ingrained in the inner thoughts culture and highly interconnected.
During the quarter, we continued to make solid progress executing against our strategic priorities to further transform and offices growth profile over time.
Notably.
We achieved the initial sequential benefits from our lower cost value chain structure.
Developed innovative solutions and enhance our position in attractive food health and nutrition end markets and leveraged our value selling model to continue to capture price increases.
Q2 sales were $185 million, a 10% decrease compared with the prior year quarter as our pricing power was predominantly offset.
By the planned discontinuation of low margin nutrition trading business.
As well as a general weakening of demand, including customer Destocking lost 2019 business due to Midwest flooding and continued indirect tariff effects.
GAAP net income for the quarter of $1 million or seven cents per share was down $5 million or 24 cents per share from the prior year quarter due primarily to a $6.6 million one off tax charge that mark will explain shortly.
Further there were no imbalance charges in Q2 as the situation with Mexico's natural gas network improved with the completion of the country's pipeline. This resulted in a 12% sequential reduction in the basic rate invoiced and similar year over year natural gas costs.
In Q2, adjusted EBITDA of $30 million was down less than $1 million or 3% year on year and essentially flat on a sequential basis.
Adjusted EBITDA margin of 16%, which as noted earlier was up 129 basis points compared with the prior year quarter as we benefited from lower costs, including early benefits from the new value chain cost structure.
Continued success in capturing price increases and improved mix all of which helped us offset the lower volume effects.
Now as Mark will expand upon later today, we are resetting our 2019 revenue guidance as we expect overall volumes to remain under pressure through the balance of the year due to the indirect impact from tariffs as well as general market softness related to ongoing macro environment. Uncertainties. In addition, we no longer expect to use fertilizer sales impacted by Midwest flooding to rebound in 2019. These factors will more than offset our ongoing efforts to leverage our pricing power on the revenue line.
Now even with these headwinds, though we are maintaining our EBITDA guidance for the year supported by our ongoing focus on pricing actions and cost management.
While we manage the near term by focusing on the factors that we can control we remain committed to executing on the strategic priorities that will advance in a fast on our transformational vision 2020 two journey.
So with that please turn to slide five to take a closer look at some of our key strategic pillar achievements in Q2.
In operational excellence by leveraging the benefits of the new low cost supply chain now in place we achieved initial sequential savings during the quarter.
Following the successful EMG production scale up in Q1 aquatic focus facility continues to meet target production rates.
We've continued to advance our supply plan with successful set up of third party sourced EMG for our guys more Pwc plant.
We are pleased with our progress with this project and remain on track to deliver GAAP and adjusted diluted EPS improvement of 25 cents to 27 cents per share annual run rate by year end.
In addition, as we have said before we are committed to instilling a continuous improvement culture across the organization to further optimize our operations and improve our cost structure.
With commercial excellence, our commercial organization has continued to deepen our relationships with our customers and leverage our value selling model to capture price increases have been offset effects of lower sales volumes. In fact, we just recently announced last week, our sixth consecutive quarterly price increase which will take effect August 15.
Under strategic growth, we remain focused on increasing our presence in attractive food health and nutrition markets through innovation partnerships and M&A.
In Q2, we successfully commercialized several new products to the spark program, including a new blend of fruit and vegetable derived ingredients for a leading consumer packaged goods company for an on the go Greens beverage that supports immune health in a convenient dry blend form.
Allowing derive vitamin D three product process with our die calcium phosphate that delivers the benefits of longer shelf life stability compared with other vitamin D. Three products and a new calcium complete vitamin formulation with magnesium for one of our global customers growing business in Asia.
In addition, supporting our industrial specialties business, we launched a new next generation hydrogen sulfide scavenger for asphalt applications that offers improved efficacy in a more convenient dosing form this product is already generating profitable new business.
These spark when support our strategy to shift our portfolio mix to a greater level of higher margin higher value branded ingredients and formulated solutions over time.
In further support of this strategy, we continue to actively evaluate M&A opportunities that meet our disciplined strategic and financial criteria to strengthen our FHLB platform.
Looking ahead, our focus for the balance of 2019 is to control those factors that we can control in order to manage through near term headwinds at the same time, we will execute on our strategic pillars to deliver on our profitability targets and realize our vision 2022 goals for sustainable top and bottom line growth with that ill turn the call over to Mark.
Thank you ma'am.
As Tim noted and as shown on slide six our Q2 financial performance was marked by our ability to grow our adjusted EBITDA margin. Despite a difficult year over year comparison on the top line.
Additionally, because of our ongoing focus on working capital and lower capital expenditures, we delivered a very strong free cash flow performance.
Now, let's turn to slide seven just take a closer look at the quarter details.
Sales of $185 million in the quarter were 10% lower than the prior year quarter as the 3% selling price increases were offset by 13% volume declines.
Volumes were impacted predominantly by the planned discontinuation of low margin nutrition trading business as well as a general weakening of demand, including customer Destocking, most 2019 business due to Midwest flowing and continued indirect adverse effects.
Q2 gross margin of 20% was at the highest level since Q1, 2018 and up over 200 basis points compared to the prior year quarter, reflecting the benefits of our pricing and cost containment initiatives on a sequential basis gross margin grew by 64 basis points as we benefited from an improved Mexico natural gas environment, and we realize initial benefits from our value chain optimization program.
Moving on to earnings on slide eight.
Q2, net income of $1 million was down $5 million due primarily to a 6.6 million one off tax charge related to a deduction tanks Reg regulations enacted in the current quarter retroactive to January Onest 2018.
These charges resulted from an uncompleted merger in 2018 due to administrative error committed and acknowledged by our Dutch legal counsel Krewson DVD.
More specifically in 28 team to have in a pharmacist Dutch subsidiaries were to be merged in accordance with our global simplification strategy.
Due to Houston's arrow, the merger and approval by the tranche tax inspectors did not occur until 2019.
As a result of this and a change in tax law enacted may 17th 2019 retroactive to January Onest 2018, we were subjected to the onetime tax charge for our 2018 tax year.
We have initiated a malpractice legal proceeding in the Netherlands against too soon.
Seeking reimbursement for all costs in liabilities, resulting from their administrative ever.
Moving on rail adjusted EBITDA of $30 million was down slightly year over year as lower volume of sex and higher manufacturing costs were mostly offset by higher selling prices reduced SDMA costs and input cost improvements as we saw some initial benefits of the value chain optimization program.
Adjusted EBITDA margin of 16% was up 129 basis points year over year due to improved pricing and mix as well as improvements in our cost structure.
Moving on to slide nine to review our performance by segment.
Fhm Q2 sales of $107 million represented 57% of total company sales and were down 15% overall as the 3% improvement from price increases was offset by an 18% decrease in volume.
This volume decline was due largely to the discontinuation of low margin nutrition trading business as well as general weakening of demand including customer Destocking.
Fhm Q2, adjusted EBITDA margin was 21% up 611 basis point sequentially and up 639 basis points compared with last year due to increased selling prices improved sales mix capitalized variances for the nutrition business and lower costs from the value chain optimization program.
In addition, we reclassified some profit related to certain intermediate product trim sections to downstream consuming segments that previously had been recorded in the other segment in Q1 2019.
Yes, Q2 sales of $68 million were up 1% year over year as a 3% selling price increase offset a 2% volume decline that was impacted by Midwest floating and indirect on favorable tariff impacts on our international sales from Chinese competition, redirecting, mostly technical grade products.
The highest Q2 adjusted EBITDA margin of 12% was down 320 basis points sequentially due to the planned maintenance outage in our coatzacoalcos facility.
And 409 basis points compared to last year due to higher freight costs and in order to tariff effects.
Other Q2 sales were $11 million down 25% compared with the same period last year on lower volumes due primarily to reduced coproduct and low grade acid sales.
Other adjusted EBITDA margin was negative 7% due to the reclassification noted earlier.
Year to date other margins or properly reflected at 12%.
Now turning to slide 10.
In the second quarter net interest expense of $4 million was up $1 million due to higher market interest rates.
The underlying effective Q2 tax rate was 88% higher than prior periods and expectations due to the $6.6 million onetime tax charge, excluding the impact of this charge the effective tax rate would have been 30%.
Capital expenditures of $6 million in the quarter were down significantly due to the timing of the value chain optimization project as some of the larger utilities projects at Geismar are scheduled for the second half of 2019.
We paid $9 million in dividends during the quarter as we maintained our annual dividend rate of $1.92 cents per share.
Net debt was $298 million in Q2 down $20 million year over year due to improved free cash flow.
Our net debt to adjusted EBITDA ratio was 2.4 times compared with 2.5 times last year.
Now turning to slide 11 on a GAAP basis earnings per share of seven cents decline 24 cents year over year due primarily to the 6.6 million dollar one off tax charge.
Q2, adjusted diluted EPS was 43 cents down 12 cents year over year due to a higher effective tax rate and higher interest expense.
Lower adjusted EBITDA and higher non cash stock compensation.
Moving on to Slide 12, Q2 cash from operations was $26 million and free cash flow was $20 million, both very favorable to prior year due to working capital improvements and lower capital expenditures in the second quarter of 2019.
Now turning to slide 13 too.
Muni Qaeda discontinuation of the low margin nutrition business, which is expected to impact comps through the end of the year, but less materially for the fourth quarter.
The revised revenue range also reflects our expectation that the U.S. fertilizer sales impacted by Midwest funding will not rebound in 2019 as previously expected.
In addition, we now expect market softness to continue to impact both fhm anti us volumes and we expect is pricing and volumes to continue to be affected indirectly by tariffs.
These factors will be partially offset by positive year over year revenue contribution from price increases and new product wins.
From a GAAP and cash perspective, we continue to expect costs to be lower in the second half than in the first half of this year.
Capital improvements are now expected to be $45 million to $50 million, which is 15% to 20% below 2018 capital spending. This compares to our prior expectations of spending in line with 2018 and reflects our ability to be more efficient with spending as we finalize the optimization of the value chain and manufacturing program.
It is important to emphasize that this will not be at the expense of investing in high return programs, which remains a priority.
And finally, we continue to expect the effective tax rate to operate in the 28% to 32% range, excluding the second quarter $6.6 million onetime Dutch tax charge.
With that I'll turn the call back over to Kim and thanks, Mark and before we open the call up for questions. Please turn to slide 14 is I'll highlight a few key points.
Now, although we expect to face ongoing headwinds for the balance of 2019, we are focused on controlling the factors that we can control in order to deliver adjusted EBITDA growth and margin expansion this year and advance on our vision 2020 tyranny. This includes leveraging our new lower cost value chain structure to meaningfully reduce our cost basis as we move through 2019.
Continuing to deepen our customer relationships and leverage our market leading pricing position.
Accelerating momentum behind our spark program to further grow our mix of high value at HSN business.
And pursuing additional inorganic initiatives through M&A and support our strategy to shift our mix over time to a greater level of value, adding higher margin ingredients solution.
Now a few years ago, we set out on our vision 2020 two journey to transform enough office growth and earnings profile.
There is no doubt that the current market dynamics have created unplanned headwinds that have impacted our topline goals for the year.
Despite that we are confident that we are taking the tactical and strategic actions necessary to achieve our bottom line growth goals for 2019, while forging ahead toward our longer term vision 2022 goals for sustainable top and bottom line growth.
We appreciate the ongoing support of our shareholders, our customers and employees and look forward to keeping you updated as we advance ahead.
With that we'll now open the call for questions.
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Our first question comes from the line of Brett Hundley with Seaport Global. Please proceed with your question.
Hey, good morning, everyone.
Hi, Brian how are you.
I'm good. Thank you hope you're doing well too I have a question on.
I have a question on FHLB to start and then I have a bunch of questions on the cash flow statement thereafter so.
Customer Destocking slash.
General market weakness as it relates to FH and specifically.
Can you guys just delve into.
Maybe product categories, and how long you might expect these effects to be seen and came in.
Do you think the.
Do you think that this calls into question the stabilization discussion around your phosphates business. Thank you.
No. Good question, let me just first talk overall you know in Q1, we began to see a saw softness in certain segments. We serve like firefighting due to lack of fires on the west coast and exports to Latin America due to indirect Harris and Pacsun I asked so that's part of that and the softness has now expanded across a broader set of markets impacting both the FHLB Anya segments, where we are starting to see some customers de stocking, which we believe is really due to some ongoing macro environment uncertainties as we look at our peers as well in the ingredients space as you well know Brett.
Many of US are starting to see maybe some consumer sentiment in some of these areas as we look across that so on and we see some of our own customers, where we're seeing their revenues year on year decrease for the most part the core business remains stable as price increases have pretty much covered volume decreases.
From an ethnic Gen standpoint.
You know the discontinued low margin nutrition trading business was the largest factor. So if you recall, we call that out we knew the comps would be top we did see some customers. The stocking some of it is specific to some customers. We have do have a key customer aware there are some de stocking and because of the they've just been.
Recently acquired so that is due to a a.
Sort of a specific circumstance.
But I think there's just this underlying I think this uncertainty by some of our customers, which has caused this that notwithstanding as we look to Q3, we do see a relatively strong order book.
Thank you for that that's really helpful and if I can just push in on one of the comments that you made about.
A key customer.
Destocking because they were recently acquired are you able to parse out.
Whether or not that is indeed, the I assume youre de stocking versus maybe losing business to a cheaper appear you're clearly seeing that as de stocking and not the latter.
Absolutely because weve, yes, yes, weve, okay. Both in public statements and also questions with the customer that's great that's great. Okay.
So if I can move on to some questions on on the cash flow statement.
So.
You think how to ask this so for for the full year. If we can talk about cash flow from operations.
You know in my model I kind of look at the $80 million number is.
As kind of a level to exceed or Miss if you don't want to talk to a specific number can you guys frame up.
Where you might expect.
Cash flow from operations for the year, either relative to earnings and so far as conversion or maybe even past performance.
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Yeah sure so.
As you know Brett are our first quarter is always a drain on on cash from operations right.
Because we have a number of factors hitting us there we have funding of of the bonus and retirement plans. We have a we just come off of a quarter, which is the weakest sales quarter of the year sure receipts are lower.
And a few other factors. So we typically are building off of.
A negative in the first quarter and indeed, we saw that happen again this year.
And then and then we ramp up as time goes on clearly we had a good second quarter.
Year over year was up pretty substantially.
$18 million and on a year to date basis were ahead of last year. So I would expect that we will continue to see.
Increases.
In the third quarter year over year, but of course in the fourth quarter.
Will be impacted by the fact that we had a couple of one off positive transactions last year, which would have put our operating cash flow at a higher number last year than we would expect to see this year.
Okay I appreciate those comments.
And you guys talked about pulling down capital expenditures.
A little bit this year.
We have the new number I think you said it was 45 to 50.
Could we expect that number to go.
Sub 40 in 2020.
Or should we expect some of this year to get pushed into next year is such that.
You are likely to remain above 40 million dollar spend in 2020.
So our view is that we should be right around the $40 million Mark in 2020, and then we should return back to the mid Thirtys.
Thereafter.
If you look at our reduced spending for this year. The primary reason for the for the lower expectation is is that we have seen.
Our projects that have come in related to value chain, particularly down in Mexico have come in favorable to what our estimates were at the time that we we started the projects.
So there is a little bit on one project, that's going to flip from this year into next but primarily it's because we're spending better than than anticipated so separate.
Well all I would add is as you know we've made some changes at the top of the last couple of years over our operations and this reflects that operational excellence piece, just becoming much more efficient more effective in the way we look at our capital expenditures in the way we're doing our engineering. So it's really a reflection of that by no means are we taking cutting a high return project by any means it's just yes, I think it's just more fit if you will.
No I appreciate that and a question for.
I guess the other view both of you related to that is.
You know as you do get more efficient with your spend.
And clearly you are becoming.
More efficient across the entire.
Operation and its great to see that showing in your margin structure.
[laughter].
Would you would you guys be comfortable going to a higher leverage ratio relative to what you've communicated historically as you do start to see signs of that improving free cash flow story and related to that.
If I can pull in the M&A discussion are there are there larger deal opportunities out there.
That you see say in the multi hundred million dollar revenue range.
And as it extension would these larger opportunities be.
Standalone entities or would they be part of larger businesses. So I guess two parts. There does the cash flow story make you feel better with regards to future leverage and then can you just describe the size of of M&A opportunities and where they stand. Thank you.
Good. Thank you for that question, yes, it what we we actually absolutely get more comfortable as we said gross leverage is at 2.7 times net leverage is at 2.5 times 2.4 times right now our credit facility allows up to four times gross leverage for acquisitions.
So the high end of that range is really been there for unique opportunities that often very strategic fit.
And yes, we do have in our pipeline of acquisition targets, which are on the larger side to be more transform if he wants to move that needle.
And one thing I will say is that all those that we are looking at and we are assessing our asset light I would quite a limited ongoing capital investment our cash generative in nature. So it really does present, a favorable curve for paying down debt. So we do believe on as we get into a more more positive.
Hi situation with our cash flow.
And if you link that up to the targets that we are looking at that are in that portfolio. We would become more comfortable I would say and I think there are targets out there back to your question are they are predominantly maybe smaller divisions of larger companies or Standalone. Most of the things were looking at I think we've talked about this we've talked about it externally on more privately held companies.
Standalone companies I would say Brett.
Thanks, so much I'm going to get back in the queue. Thank you.
Thank you.
Our next question comes from the line of Larry Solow with CJS Securities. Please proceed with your question.
Good morning, and thank you.
Maybe just discuss a little bit on the Larry.
Hello, Good morning, P. it sounds like on the on the revenue cycle.
Underlying growth.
[noise] nutritional piece, which obviously has been has been growing a little bit faster. So if we exclude sort of the calling activity and some of the lower margin trading business that you're exiting the as the you know what is does the core growth look at and that piece of your business.
Yeah, we actually did and that think and that's a really good question on.
Yes, we did have that this continued low margin nutrition training business, which I know we've been talking about Africa sometime but knew that the comps would really come to light in 29 team.
But we are seeing some growth and some attractive markets in the FHLB segment. Unfortunately gets math might be areas of bakery in dairy and that goes to show and appropriately reflects than the ongoing stability. If you will in that area and then the continued price price increases that we've continued to get through the FHLB segment that our customers have.
Allowed us if you will and they recognize the value proposition that we're bringing forward.
Okay, and I know on pricing, obviously, a lot of these price increases have been offset by.
Higher raw material prices, what's your outlook going forward or maybe even currently have you I assume you've seen some easing on the on the raw material side and.
Do you think you'll be able to continue to get these price increases through with sort of a slow down on the on the.
On the cost of commodity side.
Yes. So you know we captured $6 million up pricing in Q2, 2019 with a million of uranium price increases last quarter. So we are as we are lapping 2010 quarterly price increases, but we continue to see the momentum. That's that's really what I'm trying to get out there. We just announced last week, our sixth consecutive quarterly price increase which will go into effect August 15th.
And where we're hoping to get support there and if you recall, Larry and I, often say that.
Not all our pricing is going to be related to input costs has input costs have gone up we've been able to capture and more than cover that but because of some of the things were doing in the value that we bring to our customers.
Many of the rounds of price increases we've done over the six quarters have been related to that.
Freight costs are up $2 million year on year, primarily due to the supply chain optimization program that now brings MGH into guys more from multiple locations overseas.
And Mexico energy costs were similar year on year, So we've been able to cover those Marty.
In fact, if you look at the year to date, we do show that that that our total input costs are above last year, but for the quarter were actually slightly favorable to last year.
Due in part to the decline in the Mexico natural gas at command just mentioned that also getting some initial benefits on the on the value chain optimization as well.
Okay, and then I guess two questions up to more oil.
Before we get to the value chain on the on the new product contributions could I don't know if you can quantify you know sort of what percentage of your revenues from new products, maybe introduce over the last couple of years, but could you maybe sort of give us some some kind of parameter or something you know sort of how to help us gauge that you know that that you stuck to that benefit.
Or maybe going forward.
Yes.
We at this point or not.
Talking about vitality index, although I did commit to by the end of the year, we would start to give you that.
Just to give you I I put some parameters on a few hopefully it will help I looking at 2018 versus 2017 again by leveraging the skills of this broader technology organization, coupled with our spark new product development process. We grew NPD sales by two there by two thirds and working hard getting nearly 50% growth in sales from NPD in 2019 versus 28 teams and we are on track to do that.
Okay. Great. That's helpful. Thank you then just on the on the on the.
Costs and some of it looks like you've got like as you mentioned, some some expedited or a little bit earlier savings that from the value chain initiatives.
I guess that it is fair to say and is done yet.
Maybe help us.
What percentage of that sort of have you realized already or any way to sort of quantify that.
Yes. So we you know the benefits are coming through from from our Geismar now having been running on the new streams of input costs since the beginning of the year of course, the first quarters, where we're putting up in inventory at the end of the quarter. So we're seeing that that's where we're seeing the benefit come through so when you net everything out we achieved about a million dollars of improvement year over year.
From a structure, yes got it got it Okay. You may recall that we've we've said 25 to 27 cents annual run rate by the end of the year that equates to about an 8 million dollar EBITDA number.
Right, so about two quarter yeah.
Got you okay. So you're so you're sort of really getting you're getting your way there and I assume similar benefit expected this quarter or maybe even a little bit more.
I think probably similar and as we still we're still fine tuning and.
And ramping up the.
The operations there, okay and I used to I know, obviously acquisitions are hard to time and you never want to rush anything.
Just came in any thoughts on how the vision 2022, you still remain confident in getting to those numbers and again I don't necessarily think if you didn't get to those numbers it would be a negative per se depending on what else you know so.
Any thoughts on that.
Yeah, I I have always said that the absence of an announcement doesn't mean, we're not looking at just means way question for Larry and I think that's the word I want everyone to take away and and I will not rush into an acquisition just for the sake of meeting that target that absent out from <unk> from it from an inorganic growth standpoint. So we continue to remain very excited about opportunities.
We believe there are opportunities, but it's got to be the right timing and it's got to be the right acquisition.
Right No fair enough and then just last question any update on the.
The CFO search.
Yeah, you know, we continue to search and I think weve, making some good progress although I'm pleased to have more pure box sitting across from me right absolutely, Yes, [laughter] no rush no rush to kick Mark out [laughter] been terrific. He's been terrific, but I think again, we're remaining disciplined there to ensure that we find the right candidate odd that will help us take this company forward, but again Mark's doing a great job and we'll continue to do so when I have complete faith in him and I have complete faith in the process that we're running with the vendor right now got it okay. Great. Thank you I appreciate it.
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Our next question comes from the line of Curt Siegmeyer with Keybanc capital markets. Please proceed with your question.
Hey, good morning, everyone nice quarter, all things considered.
Hi, Karen.
[laughter] pretty good [laughter], Hey, commend you gave us an update and some examples around some of the progress you've made with what spark which was helpful and one of the questions I had related to that was.
Some of these benefits that that you expect to be felt as you continue to progress there.
Should we start to see that in.
The kind of reflected in volumes or is that mostly going to be.
A mix.
Slash pricing type of benefit going forward.
You know as as we as we go forward, it's really about changing the mix current that's how I think you should look at this on because again, we have we have very disciplined criteria. When we look at a new product development program to enter into our sport program cuts at that stage gate process. So weve got bars that you've got to be at or higher from a profitability or margin sand standpoint. So it's about me.
And then as we now are gaining momentum. It's also about future organic growth. Okay. Because what we're doing is obviously focusing on new product development projects on those markets that are growing on the average of 6% to 8% a year, so changing that mix changing that mix fast enough and large enough bend to me to really start to see the benefits of the organic growth.
Ah you know in 2020, I think you should really start to see some of that if you recall, we've only been at the.
Bar program 18 to 24 month, starting from scratch. So it's just great to see that I can actually talk about products that were launched that that we are launching.
Got it that's helpful.
And then if I could just follow up.
On the Capex reduction can you just remind us where maintenance level capex. It's currently.
So maintenance Capex true maintenance is in the 20 to 25 million dollar range.
20.
Got it okay. Thanks Mark.
Okay, you're welcome.
Ladies and gentlemen, we have reached the end of the question and answer session and I would like to turn the call back to Kim Ann Mink for closing remarks.
Thanks, Dana and thank you everybody for joining us today, and we really look forward to keeping you updated on our progress have a great day.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
[noise].