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Operator
Good morning, and welcome to the Rayonier Advanced Materials Second Quarter 2020 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.
I would now like to turn the call over to your host, Mr. Mickey Walsh, Treasurer and Vice President of Investor Relations for Rayonier Advanced Materials. Thank you. Mr. Walsh, you may begin.
Mickey Walsh - VP of IR & Treasurer
Thank you, operator, and good morning, everyone. Welcome again to Rayonier Advanced Materials Second Quarter 2020 Earnings Conference Call and Webcast. Joining me on today's call are Paul Boynton, our President and Chief Executive Officer; Marcus Moeltner, our Chief Financial Officer and Senior Vice President of Finance; and Frank Ruperto, our Executive Vice President of High Purity and High Yield Cellulose businesses. Our earnings release and presentation materials were issued last evening and are available on our website at rayonieram.com.
I'd like to remind you that in today's presentation, we will include forward-looking statements made pursuant to the safe harbor provisions of federal securities laws. Our earnings release as well as our filings with the SEC list some of the factors which may cause results to differ materially from the forward-looking statements we may make. They are also referenced on Slides 2 and 3 of our presentation material.
Today's presentation will also reference certain non-GAAP financial measures as noted on Slide 4 of our presentation. We believe non-GAAP financial measures provide useful information for management and investors, but non-GAAP measures should not be considered an alternative to GAAP measures. A reconciliation of these measures to their most directly comparable GAAP financial measures are included on Slide 17 through 20 of our presentation.
Now I'll turn the call over to Paul.
Paul G. Boynton - President, CEO & Director
Thank you, Mickey, and good morning, everyone. Let me first start by saying how proud I am of the way the team has operated over the past 6 months in safely supporting our customers. Managing our complex assets in a normal environment is challenging. The global COVID pandemic has added a whole new level to this complexity, and our teams have responded admirably. Throughout the pandemic, we've kept pace with the demand for all of our products, serving as a reliable source of supply to our customers and enabling them to continue to provide uninterrupted support to their critical end markets.
In product markets where we've seen demand weakness, we've been able to flex down our production to appropriate levels. In June, we successfully executed a significant planned maintenance shutdown at our Jesup facility, safely bringing in over 1,000 contractors under adherence of very strict protocols. We are planning similar maintenance outages in Fernandina and Temiscaming in the coming months.
Financially, results were pressured by the pandemic and did not meet our expectations compared to guidance, but we are seeing some signs of improvements in certain areas, which I will discuss later.
Let me first provide some highlights for the second quarter, as laid out on Page 5. Overall, we delivered $19 million of adjusted EBITDA for the quarter compared to $21 million last year. Our ongoing efforts to reduce costs helped offset pressure brought on by the COVID pandemic. We saw a significant price decline in commodity High Purity Cellulose products, viscose and fluff pulp as well as in both high-yield pulp and newsprint compared to prior year. Cellulose specialties and Forest Products volumes were impacted by reduced demand stemming from the pandemic. Corporate costs, while improved from prior year, contributed to a missing guidance primarily from noncash charges. We generated $16 million of free cash flow in the quarter as the team did a good job of minimizing CapEx and reducing working capital.
I'll now ask Marcus to go into more detail on the quarter's results, then I'll provide you with an update on key actions we're taking in response to COVID-19 and provide a perspective on our markets before opening up the call to questions. Marcus?
Marcus J. Moeltner - CFO & Senior VP of Finance
Thank you, Paul. Starting with High Purity Cellulose on Slide 6. Second quarter sales decreased by $14 million driven by a 22% decline in commodity pricing, primarily from viscose pulp, and a 16% decline in CS volumes compared to the previous guidance of an 11% to 12% decline. The accelerated volume decline was driven by reduced demand for automotive, industrial and construction ethers grades plus an additional 2% due to logistic issues, both of which are COVID-related. Declines in CS volumes were offset by a 72% increase in commodity sales volumes due to improved productivity and mix shifts from prior year.
EBITDA for the segment was $31 million, down $3 million from a year ago. Price declines were significantly offset by improved costs driven by lower wood, chemical and energy input costs as well as improved operational reliability. Compared to the first quarter of 2020, EBITDA improved by $5 million, primarily from higher commodity product sales prices and volumes as well as lower costs.
Turning to Slide 7. Sales in our Forest Products segment declined $11 million from the second quarter of 2019 driven by a 21% decline in lumber volumes as we took proactive measures to curtail operations for several weeks in the beginning of the quarter as demand for lumber dissipated at the height of the pandemic. Volume declines were partially offset by a 5% increase in sales as we were able to improve our sales mix with the reduced volumes. EBITDA for the segment improved $13 million from prior year driven by reduced costs for wood, labor, energy and duties. Additionally, prior year results included a $4 million inventory valuation adjustment, which did not repeat in 2020. As a reminder, EBITDA results include $6 million for lumber duties paid in the quarter.
Since the start of softwood lumber duties on shipments into the U.S. in 2017, we have deposited a total of $72 million of duties and accumulated approximately $3 million of interest on the deposits. In prior trade disputes, Canadian producers have historically recovered all or a vast majority of these duties upon resolution. The next step in the process will come later this year or early next year as the tariffs are expected to decline from 20% to 8% once the preliminary determination is finalized.
Turning to Slide 8. Paperboard segment sales declined $7 million as sales volumes fell 12% from prior year, primarily due to the timing of sales in the year. Meanwhile, EBITDA for this segment improved $5 million driven by lower raw material costs and reduced transportation costs.
Turning to our Pulp & Newsprint segment on Slide 9. Sales declined $22 million from prior year due to a 9% decline in high-yield pulp prices and a 19% decline in newsprint prices. Additionally, results were impacted by a 17% decline in high-yield pulp volumes due to sales timing and a 43% decline in newsprint volumes as the company elected to take market downtime due to reduced demand caused by COVID-19. EBITDA for the segment decreased by $12 million to a $4 million loss, driven by the lower sales, partially offset by reduced costs.
Turning to Slide 10. On a consolidated basis, operating income was flat to prior year at a $15 million loss. Impacts from market price and volume declines were offset by significant cost improvements from prior year. Lower input costs and the benefits of continuous improvement efforts helped offset the market headwinds.
At the early signs of the global pandemic in the first quarter, we approached our banking partners proactively to seek more operating room in the face of the significant uncertainty in the global industrial and consumer markets. In June, we finalized an amendment to our senior secured credit agreement. Key terms of the amendment are laid out on Slide 11.
In addition to improved liquidity, we obtained a larger cushion against our covenants. We also amended the definition of covenant EBITDA to carve out the noncash gain and losses associated with long-term currency fluctuations. In return, we increased the LIBOR floor on our borrowings to 1% from 0. We also agreed to limit the amount of cash that we hold on our balance sheet and the amount of standby letters of credit that we can issue. In addition, we agreed to incremental reporting obligations and paid a consent fee. Overall, the amendment provides us with the increased covenant headroom and added liquidity needed to manage through uncertain market conditions spurred on by the COVID-19 pandemic.
Turning to Slide 12. Total debt remained at $1.1 billion. We have moved to a gross leverage test as part of our recent amendment. Based on our LTM covenant EBITDA of $122 million, our gross secured leverage ratio finished at 4.8x compared to a covenant requirement of not more than 6.2x, while the interest coverage ratio ended the quarter at 2.0x compared to a covenant of 1.6x, a 20% cushion to the covenant. We ended the quarter with $166 million of liquidity, including $49 million of cash, $98 million available on our revolving credit facility and $19 million from our factoring facility in France. Liquidity improved $21 million from the prior quarter driven by $16 million of free cash flow in the quarter and the amendment to our credit agreement.
With that, I'd now like to turn the call back over to Paul.
Paul G. Boynton - President, CEO & Director
Thanks, Marcus. Turning to Page 13. As noted, we've taken decisive action in response to the COVID-19. First and foremost, safety has been and will continue to be our overriding priority. We have implemented exacting protocols in all our facilities to protect our employees and our operations. Our team's strict adherence to protocol has helped mitigate the spread of the virus and its impact on our employees and operations. Office and support staff continue to work remotely in most areas, including our Jacksonville, Florida headquarters and other global offices.
Second, to control costs and minimize pandemic-driven losses, we have taken certain curtailment measures with respect to both our newsprint and lumber facilities. While our lumber assets are back to operating near capacity, we are currently addressing weakness in the newsprint market by matching our production to market demand. We will continue to monitor these and other assets to assess whether business conditions warrant implementation of additional measures.
Third, we are focused on maximizing cash flow and liquidity. As Marcus highlighted, our credit agreement amendment provides us with further financial flexibility and improved liquidity. We are executing against our cost savings initiatives and remain on track to reduce costs by $20 million to $25 million in 2020, excluding the benefits of market tailwinds for raw materials. Additionally, we remain intensely focused on free cash flow generation, including prudent deployment of essential CapEx and rigorous management of inventory levels. Finally, we expect to receive a significant cash benefit later in the year in the form of a $31 million tax refund, largely attributable to CARES Act features passed earlier this year.
Wrapping up on Page 14. The COVID-19 pandemic has kept our earnings well below our potential. We are taking the necessary actions to manage through its impact to benefit the economic recovery on the back end. As the industry leader and owner of 5 of the 8 global manufacturing lines dedicated to cellulose specialties, we are uniquely positioned to benefit from the turn. We have been encouraged that our go-to-market strategy implemented in 2019 has helped stabilize cellulose specialty prices in 2020.
Our HPC assets also produced approximately 500,000 tons of commodity viscose, fluff and other pulp products. These products have been significantly impacted by current market conditions and are trading roughly $135 to $250 per ton below 5-year historical average prices. Normalizing for these sales prices would generate $80 million to $95 million of incremental EBITDA through price improvement alone.
In our Forest Products segment, we are seeing significant market improvement. A robust repair and remodel market has helped foster recovery in the early second quarter, and rebounding in housing start levels have allowed this momentum to continue. As a result, prices for lumber were up considerably in July compared to the second quarter. Our order file remains strong with bookings out over 6 weeks. Additionally, we expect duties on sales to the United States from our Canadian mills to be reduced to 8% from 20% later this year or early next year. Given that half our lumber sales come from the United States, this could provide a welcome benefit to earnings.
In Paperboard, we continue to experience stable sales volumes. Paperboard margins may experience some pressure as pulp prices are expected to rise based on the forecast of many analysts. However, we would expect this pressure to be more than offset by rising prices for our high-yield pulp products. And as noted earlier, newsprint remains under pressure. And we are constraining our newsprint production to meet demand and minimize losses in this product category.
Irrespective of the market environment, we remain focused on taking costs out of the business through our continuous improvement program. Our commitment is to remove costs out of the business each year at a level sufficient to offset inflationary pressure. As mentioned previously, we are focused on maximizing free cash flow through minimizing working capital and efficiently allocating capital to maintain our assets. Lastly, we are continuing to evaluate our portfolio and monitor capital markets for opportunities to increase liquidity and extend maturities. We are confident that we will emerge a stronger, more resilient company.
With that, operator, please open up the call to questions.
Operator
(Operator Instructions) Our first question comes from the line of John Babcock with Bank of America.
John Plimpton Babcock - Associate
Just wanted to start out here, I mean, as we think about earnings and the potential to improve from here, what opportunities does Rayonier have to increase EBITDA beyond the cyclical improvements in its various commodities? I mean I know you talked about getting $80 million to $95 million from the improvement in commodity products pricing and then also the kind of $20 million to $25 million in cost reductions for this year but wanted to see what else you might have in your arsenal here.
Paul G. Boynton - President, CEO & Director
Yes. John, thanks for the question. John, if you remember, at the beginning of the year, we kicked off a program we are calling internally, Act Now, right? And so that was a real big push. And with that are 4 different key elements, right? Operating cost improvement, we talked about, about a $15 million target; our corporate cost elimination, $10 million to $15 million, both of those were on a strong target to achieve, if not exceed. We also talked about CapEx reduction of $10 million to $15 million. And again, I think we're on pace to improve upon that. And then finally, on working capital improvement, we talked there's an opportunity out there of $25 million. I think that's the one area we're a bit behind on, and that's largely related to COVID and moving inventories around. But I think the improvement in the back half of the year is there, and we're going to continue to target that. So I think good success on things that we're controlling in the immediate future.
As we look beyond that, right, you mentioned, right, just restoring commodity markets will improve pricing significantly and therefore, EBITDA alone. We continue to have a lot of focus on new product efforts. And we've got some opportunities out there. And again, it's going to be somewhat COVID-related as these opportunities come around for these new products just as the markets return. And of course, as you've heard in the past, John, we've worked hard and we continue to work hard to stabilize our cellulose specialty business and improve pricing there, which this year, we're doing to stabilize. It should be slightly up for the year as we indicated, if not flat. And again, we hope we can continue down that path as well. So I think we have a lot of fronts here, both internally and externally with the markets to improve EBITDA going forward. And if you -- keep in mind, just 24 months ago, we were well above a $300 million EBITDA. So we are certainly under significant pressure at the current time. But I think we're doing a good job of managing through it, and we do see an opportunity to improve upon that as the years combine in the near future.
John Plimpton Babcock - Associate
Okay. That's helpful. And then kind of with regards to 3Q, I guess, particularly, it seems like you did pretty well on the cost side. Might you be able to parse out how much was from low raw material costs versus the continuous improvement efforts?
Paul G. Boynton - President, CEO & Director
Yes. Let me ask Marcus to give you a little flavor on that. Marcus, if you would?
Marcus J. Moeltner - CFO & Senior VP of Finance
Yes. John, on Page 10, you saw the bridge that we set out. So costs quarter-over-quarter, in the year '19 versus '20, around $46 million in savings. And the synergy piece is probably the smaller side of that $46 million, call it, maybe $5 million for that quarter. We continue to see gains on wood, chemicals and some energy inputs. And remember, we're anniversarying some higher costs on wood last year that we had down in the U.S. south. And also the productivity impact that we had up north in Temiscaming.
John Plimpton Babcock - Associate
Is it possible to get a breakdown across kind of wood, chemicals and the energy inputs?
Marcus J. Moeltner - CFO & Senior VP of Finance
The -- like to give you some perspective, say, for the High Purity Cellulose segment in the bridge there, wood was in the range of $2 million; energy, about $1 million; and then some chemicals. But we can certainly give you that after the call, that detail.
John Plimpton Babcock - Associate
Okay. That would be great. And then I also want to just check, did RYAM experience any disruption in operations at its mills from the coronavirus, both in 2Q and also, has it had any issues in July?
Paul G. Boynton - President, CEO & Director
Yes. So for the most part, no disruptions in HPC at all, in our high-purity business or paperboard or high yield pulp. We had some disruption on transportation on all of those, actually, but not in the actual asset itself. When it comes to the actual asset itself, the disruption is really around the curtailments that we talked about in newsprint as well as the sawmills. We took those assets actually down significantly in -- early in the quarter, taking out maybe up to 1/3 of our volume capacity as a result of the COVID. And then the balance, again, is really disruption based on either transportation or, as we talked about, just overall demand in the high-purity area, and you saw that impact our volumes for the quarter.
John Plimpton Babcock - Associate
Okay. And so that volume, I assume that's -- kind of that 2% in HPC, that was from logistics issues? And on that, I mean, will you get that volume back? Or is that volume that's, I guess, lost for now?
Frank A. Ruperto - EVP of High Purity & High Yield Cellulose Business
On the logistics side, that would have rolled from one quarter to the next quarter. That's really shipping delays. I think the broader decrease from the 11 to 12 that we put out last quarter to the 16, the other half of that really is what we're seeing, reduced forecast from our customers as they've seen some demand weakness in their end markets, specifically in the construction and the industrial and automotive sectors. The one thing I would say, though, is that it feels like most of that reduction was communicated kind of in the second half of Q2, and things feel a bit more stable now as we're looking out through the rest of the year. That being said, the one thing that we continue to see is uncertainty and customers' concerns about uncertainty on how quickly economies recover and where governments put money to work to drive those economic recoveries.
John Plimpton Babcock - Associate
Okay. And then just my last question. Apologies for all these. But just quickly, I guess, I want to kind of confirm here. So one of your peers ultimately took a pretty significant downtime or, I guess, has curtailed production on one of their mills. I'm sure you've read about this. I wanted to see if there are any sort of commercial opportunities here for RYAM and how you're kind of reading that situation.
Paul G. Boynton - President, CEO & Director
Yes. Let's give 2 answers to that. I'll start and let Frank continue. And first of all, yes, you've talked about some HPC, high-purity capacity, going out of the market. And certainly, we're prepared for all scenarios as well. And however, I think we've been very fortunate. With the quality of our products and the strength of our customer relations, we've continued to see volume come in even at the commodity level where a lot of the volume, particularly in the viscose area, has actually evaporated, disappeared. We continue to have good steady orders come across. So that's been helpful. I think it supports our overall cellulose specialties business when our customers see the stability of our assets.
Now taking advantage of these opportunities, let me just turn it over to Frank, and maybe he can comment on that.
Frank A. Ruperto - EVP of High Purity & High Yield Cellulose Business
Yes, I think, John, the closures have been relatively recent, and it's a bit early to call any real change in the market. Remember that most facilities that tend to close or take downtime, it happens after inventory has been built, or they keep some key supply lines that supply important customers relatively whole. That said, we have seen some modest opportunity to step into supply chain disruptions that the closures have caused and believe that we will benefit in the future. To what extent, it's still to be seen. We've kept all of our lines open, as Paul said, given our ability to place all of our tons due to quality of these commodity grades and long-term relations we have.
I would tell you that security of supply has become more important in many of our customers' eyes and that we believe that customers should be putting a premium on the ability to have a stable and secure supply source. So I think that will help us going forward. It's just too early to tell how long some of these assets will be down and the inventory work-throughs and recovery from the demand side, how that will impact more broadly. But obviously, it should be a positive for us. The magnitude is really the question.
Operator
Our next question comes from the line of Steven Chercover with D.A. Davidson.
Steven Pierre Chercover - MD & Senior Research Analyst
So just a couple of questions on lumber to start. In Québec, I believe the whole province basically takes a 2-week holiday in August. So when lumber's going parabolic, like it is currently, can you convince the guys, and I guess, guys and gals, to stay on the job? Like how much production will you lose if I'm correct about this kind of global vacation?
Paul G. Boynton - President, CEO & Director
Yes. No, you're correct about that. Obviously, you're of Canadian background, you know that it's a big time to take off at the July time frame. And right now, that time is past us. So we got all our assets up and running full. We did take our normal downtime. We try to keep as many assets up and running as we could, Steve. If you look at what we're expecting, we took substantial downtime in April, right? So we took over 50,000 (sic) [50 million] board feet out of the market at that time. And if you look at the balance of the year, we'll have a stronger back half of the year than the first half as a result of that curtailment, but we won't quite come up to last year volume levels, so just to kind of put that in perspective. But obviously, we're running well now, and we're trying to do everything we can to take advantage of it. As discussed, we're out there in our order files significantly. Typically, we'd be a couple of weeks out. Right now, we're out to mid-September, if not later. And so we're trying to take advantage of the strength of the market and continue to place orders out there. But a significant change in volume in the back half of the year outside of normal capacity just won't happen. It'd be more in the normal lines of what we've seen in the past years.
Steven Pierre Chercover - MD & Senior Research Analyst
Well, I mean, if you did 180 million board feet in Q2 of last year and 134 million in Q3, I mean, could we kind of not flip-flop it because of the holiday but be kind of north of 150 million board feet, and the good news is you're running as the prices have gone up? Maybe just give us -- help us with the sensitivity, like the leverage that you have.
Marcus J. Moeltner - CFO & Senior VP of Finance
Steve, if you look at our disclosures, we quote a rated capacity of 755 million feet for our lumber mills. Two of those mills are on 3 shifts. So if I state those on -- all of them at a 2-shift basis, you're around 640 million feet of annualized volume. And as Paul mentioned, we took close to a month out with the 50 million feet.
Steven Pierre Chercover - MD & Senior Research Analyst
Yes. But I'm not talking about Q2. I'm talking about Q3 when prices are good. So let's say, you get 150 million board feet in Q3, prices are up on -- quarter-over-quarter, what, $100, $150 a thousand?
Marcus J. Moeltner - CFO & Senior VP of Finance
If you look at the quoted print right now, they're up over that. But yes.
Paul G. Boynton - President, CEO & Director
Yes, those are good numbers.
Marcus J. Moeltner - CFO & Senior VP of Finance
Good numbers.
Paul G. Boynton - President, CEO & Director
Yes. So Steve, look, I think your numbers are in the right ballpark, right? So if you put out there 150 million a quarter, I think that's right. We'll try and push up and above beyond that. We've got very low inventories coming into the quarter, but we'll do everything we can to take advantage of the market. As you said, you got to strike while the iron's hot, right? So we're trying to do that.
Steven Pierre Chercover - MD & Senior Research Analyst
Okay. And then what are the chances that you'll recover the duties within the next 12 months? I mean the duties going down, as they are imminently, from 20% to 8% is kind of an acknowledgment that the duties shouldn't have been there in the first place. Can you handicap the potential of a recovery?
Marcus J. Moeltner - CFO & Senior VP of Finance
Steve, we've been monitoring, right? The preliminary determination was supposed to be confirmed into September, October. And Washington's had 2 successive delays now. So again, that's why we're messaging back end of this year, possibly early next year, to have those rates confirmed, at which time we would then depositing at the lower rate. And the cash deposits would continue to accrue. But as you know, it's going to take some time to have a resolution on the file, right?
Paul G. Boynton - President, CEO & Director
Yes. So whether that's 12 months, 24 months, it should be in that time frame, Steve. But to say that it's going to be in a certain time is going to -- is difficult.
Marcus J. Moeltner - CFO & Senior VP of Finance
But it continues to grow, right, Steve, $72 million now that we've deposited.
Steven Pierre Chercover - MD & Senior Research Analyst
Yes. I mean the precedent is that, ultimately, you get it back. That would be nice for you guys. Okay. Well, switching gears a wee bit to the CARES Act and the tax refund that you're anticipating this year. Just want to confirm, that's your money, right? That is not a COVID loan or anything?
Marcus J. Moeltner - CFO & Senior VP of Finance
No. Steve, the genesis of that program is to obviously give assistance to industry. So that's related to 2019 nonoperating losses that can be carried back to 2014. So that is clearly cash. That's a cash refund for the company.
Steven Pierre Chercover - MD & Senior Research Analyst
Okay. And then my last question, I think it was March of 2019 when you did your Analyst Day, you talked about your reconfigured mill system, or I think Temiscaming was taken out of high-purity cellulose, for instance. So have you seen the anticipated cost and/or commercial benefits that you hoped for? I mean does that show up in the $46 million cost benefit? Because I thought that was mainly just wood and energy, et cetera, chemicals.
Frank A. Ruperto - EVP of High Purity & High Yield Cellulose Business
I'll touch on the commercial side and let Marcus touch on the cost side, Steve. On the commercial side, we have started to see commercial benefits of that as we've started to move some of the specialties out of the Temiscaming mill. We've clearly seen a benefit to having capacity to run into other new product opportunities as well as just run the viscose pulp on a more stable basis over that time. And you've seen better reliability of operations in that facility this year, which has been helpful with less grade changes and the like. So that's been a positive. I'd also say that a major part of that realignment was moved in our Sea Line in Jesup to fluff pulp. And the spread of profitability on fluff over viscose this year, given how weak viscose has been, has been meaningful for us. And so that has been a very positive move of that as well. And we've had some other smaller moves that have helped us free up capacity to pursue opportunities as we move forward in the future on high-IV ethers and other areas. So overall, it's been working well. It takes some time to move grades around, but we've seen tangible benefits this year to date.
Marcus J. Moeltner - CFO & Senior VP of Finance
And Steve, to Frank's comments, right, as we simplify the production wheel for these facilities, there's obviously efficiencies for the mill. So if you look at the bridge that we set out for HPC, you can see the $24 million in cost improvement year-over-year. Of that, $7 million was wood, chemicals was about $10 million and maybe $2 million of energy. The balance of that is kind of that operational improvement as you stabilize an operation with a more predictable grade run, right, less grade changes. So that's where that shows up in.
Operator
Our next question comes from the line of Paul Quinn with RBC Capital Markets.
Paul C. Quinn - Director of Paper and Forest Products & Paper and Forest Products Analyst
Let's start with lumber. You mentioned rated capacity 755 million. Did I understand that, that includes the 2 mills on the 3 shifts? And which mills are those?
Marcus J. Moeltner - CFO & Senior VP of Finance
Yes. So La Sarre and Chapleau are on 3 shifts in that 755 million, Paul.
Paul C. Quinn - Director of Paper and Forest Products & Paper and Forest Products Analyst
Okay. And then you're confirming that you're running right now, your run rate in August is basically full on, right, it's at that -- closer to the 755 million level?
Marcus J. Moeltner - CFO & Senior VP of Finance
No, at the lower level. The 2-shift configurations, call it, the 640 million that we mentioned.
Paul C. Quinn - Director of Paper and Forest Products & Paper and Forest Products Analyst
Okay. Okay. So right now, La Sarre and Chapleau aren't running 3 shifts. They're running 2 shifts?
Marcus J. Moeltner - CFO & Senior VP of Finance
Correct.
Paul C. Quinn - Director of Paper and Forest Products & Paper and Forest Products Analyst
Okay. Got it. Is there any intention for those mills, given that we're at record lumber prices, to move to 3 shifts?
Paul G. Boynton - President, CEO & Director
Yes. Look, Paul, we would like to. Probably the biggest constraint in both those communities is just labor. We're competing against a really strong labor market with strong mining. So we've got to run these assets safely. And so we've decided it's most optimal right now to run them at 2 shifts. As soon as we think we can with the right personnel, we'll try and switch it back to 3. But right now, we're running at the 2-shift level.
Marcus J. Moeltner - CFO & Senior VP of Finance
And Paul, as you know, we deployed some strategic capital at our saw lines. So we got a couple of new saw lines, Chapleau and Cochrane. So year-over-year, we should pick up those benefits on volume.
Paul C. Quinn - Director of Paper and Forest Products & Paper and Forest Products Analyst
Okay. And then on the newsprint, you're running it to, I guess, your order file cap. But what is it running? Is it running like at 50%? Is it running at 75%? What's it running?
Paul G. Boynton - President, CEO & Director
Yes. Let's just look at that. So we've got 2 lines there. We took, again, a pretty substantial curtailment in the second quarter, probably taking out, percent-wise, Marcus?
Marcus J. Moeltner - CFO & Senior VP of Finance
We took about equivalent to 1.5 months, 28,000.
Paul G. Boynton - President, CEO & Director
Yes. So about 50% in the second quarter and this quarter as well. We've come back on one line, also running a second line for a little bit. So it's going to be in between that. Again, as we kind of commented several times, we're just going to have to keep flexing to the market to make sure that we stay optimal. We think we can shift that facility to make sure it's in the black, the way we run it. So that obviously is our goal. But as you know, the newsprint market has been severely hit, and so we've just adjusted our output of that so that we're producing the profitable grades and serving customers that are in the delivery radius that makes sense to us, and we'll continue to do that so that we stay, again, in the black. There'll be some times we'll probably flex up to run both lines, flex back down to run one line, and maybe we'll take them both back down again if the markets don't improve. But -- so we're running it as flexible as we can to optimize our cash.
Marcus J. Moeltner - CFO & Senior VP of Finance
And Paul, the cap operation has its summer shutdown always budgeted in July, which we pursued.
Paul C. Quinn - Director of Paper and Forest Products & Paper and Forest Products Analyst
Okay. That's helpful. And I suspect you've got lumber mills in the area that supply chips to cap. Is there any risk that those mills have to shut because cap's not running full?
Paul G. Boynton - President, CEO & Director
No. I don't see that issue. We're very well balanced when it comes to chips going in different directions and got good relationships out there if we need to move more out of this facility. We've been able to do that so far, and I don't see that as an issue going forward. Obviously, it's one of the constraints we'll continue to watch and to monitor and to flex to, but we don't have that as an issue on our plans going forward.
Paul C. Quinn - Director of Paper and Forest Products & Paper and Forest Products Analyst
Okay. And then just on the adjusted EBITDA, that corporate line ballooned out again at $16 million. Is there anything negative? Is there anything notable in the quarter? What should we expect going forward?
Marcus J. Moeltner - CFO & Senior VP of Finance
Yes. Paul, it's Marcus. The -- as you know, we've got certain liabilities in Canada that are not hedged: pension, lease obligations. And as the dollar strengthened, we had around $4.5 million on remeasurement that came back on that.
Paul C. Quinn - Director of Paper and Forest Products & Paper and Forest Products Analyst
Okay. So that's something -- and then going forward, I guess, we got to worry about that line with an appreciating Canadian dollar, right, which is exactly what we're seeing right now?
Marcus J. Moeltner - CFO & Senior VP of Finance
Yes. So we caught up the lion's share of what happened in first quarter. But as Paul mentioned, one of the key areas of focus was to pursue the $10 million reduction on our corporate costs. So we still feel good about that $50 million number on an annual basis.
Paul C. Quinn - Director of Paper and Forest Products & Paper and Forest Products Analyst
Okay. And just while I think about it, on the lumber side, you mentioned the 2 saw lines coming in. Any other major capital that's coming in the lumber operations over the next 6 months?
Paul G. Boynton - President, CEO & Director
No. And then that investment that was referenced there is projects that we initiated quite some time ago to really improve the operational costs of those facilities and take advantage of some things. But -- so those are projects that have been in the works here for a while now, Paul. There's nothing else that we had put in place for this year at all. So these are continuing from past year.
Operator
Our next question comes from the line of Paretosh Misra with Berenberg.
Paretosh Misra - Analyst
Maybe first of all, can you give us an update on your joint venture with LignoTech? How is that performing, what's the capacity utilization and if you think any difference in performance second half versus first half that we should think of?
Paul G. Boynton - President, CEO & Director
Yes. Thanks, Paretosh. Look, the program as a whole, as you know, we've talked about in the past, has probably underperformed our expectation there. We've probably taken $1 million loss on it in a quarter. If there's some positive news out there, and there is, is that some of the capacity in the lignin area has come out of the market, particularly, I'm referencing a South African asset that is not running now. We've seen that tighten up supply a bit. And with that, we're starting to see the volume, corresponding volume roll into the LignoTech Florida facility. So that's been, again, a positive here in recent time. And I think it'll be a little bit more time for the pricing to catch up to where we expect it to be. But right now, we are now seeing volumes closer to kind of planned levels than -- and that was missing in the past as the products has been kind of slowly ramping into the market and mainly because of an oversupplied market. And so with that tightening up, I think we're going to see some improved volumes. And I think after that, the hope is we see kind of the elevated pricing that comes with improved volumes.
Paretosh Misra - Analyst
Got it. That's good to hear. And then on the maintenance outage side, how are your plans for the second half, particularly in the High Purity Cellulose business? Is there more outage in the second half or -- than first half? Or how should we think of that?
Paul G. Boynton - President, CEO & Director
Yes. So we noted we've taken some downtime for maintenance already at Jesup. We've got a planned outage in our Fernandina facility. I guess it starts this coming weekend. It's 2 weeks down. And then in September, we'll be taking Temiscaming down. So we have 2 more outages coming up, Fernandina and Temiscaming, in the next 2 consecutive months.
Paretosh Misra - Analyst
Got it. And I guess just last one. Are you seeing any incremental new opportunities for cellulose in the packaging side of the business? Any new packaging applications?
Paul G. Boynton - President, CEO & Director
I would say not substantially as far as cellulose into packaging. There are some products of cellulose going into that. It's a real small amount. But I don't see that as a significant opportunity for us, Paretosh or for anybody, into any kind of volume per se.
Operator
(Operator Instructions) Our next comes from the line of Roger Spitz with Bank of America.
Roger Neil Spitz - Director and High Yield Research Analyst
First off, maybe I missed it. What is your 2020 CapEx guidance right now?
Marcus J. Moeltner - CFO & Senior VP of Finance
The -- Roger, it's Marcus. We previously said that we would target $90 million for the year. But as Paul mentioned, we're being quite prudent in the deployment of our capital. And year-to-date, our CapEx is obviously at a lower run rate. But as you know, it has some correlation to maintenance outages. And we just completed Jesup, and as Paul mentioned, we've got Fernandina and Temiscaming coming on. So you should look at it as up from the first part of this half year. But certainly, we're being prudent on the amount that we deploy.
Roger Neil Spitz - Director and High Yield Research Analyst
Okay. And in terms of working capital, it sounds like you probably don't want to give a 2020 working capital guidance of inflow and outflow. But if you do, please provide. But I guess what I was interested in was the working capital, there wasn't an inflow in the second quarter. Given all your volume's down, I would have expected -- and presumably, raw materials down, I would have expected a working capital inflow.
Marcus J. Moeltner - CFO & Senior VP of Finance
So again, Roger, it's Marcus. The -- we focused on drawing down our inventories, so effectively moved a lot of that inventory into receivable. And then we hope to bring that receivable down and continue our progress towards the working capital target that we mentioned that Paul alluded to. So again, we're focused on that. It's more difficult in this COVID environment, but a lot of it moved into receivable.
Roger Neil Spitz - Director and High Yield Research Analyst
Okay. And then lastly, just out of curiosity, is there any ability to use viscose-grade dissolving wood pulp in any ether-grade CS end markets? And I don't mean to just completely go from one to the other but like mix in a few percent or up to 10% or something like that in an end market that customers might elect to do. Or can they do that? Or is it -- does it just not work? It's too hard to specify that in for their customers, your customers' customers?
Paul G. Boynton - President, CEO & Director
Yes. I'll let Frank expand on this as well, I'll take a shot at it. I'd say for the most part, it doesn't move very well into the high end. It can a little bit here and there in different applications. But for the most part, the viscose pulp, the lower-purity pulps that are out there, are being made for the textile markets, right? And so it tends to stay focused there. So I don't think we see a lot of migration back and forth. At cellulose specialties, it's certainly one of the things our customers will try to do, is to do everything they can to figure out how to optimize their costs. So they're always looking at opportunities like that. But I'm not aware of any major breakthrough in that regard and don't expect any. Frank?
Frank A. Ruperto - EVP of High Purity & High Yield Cellulose Business
Yes. No, I'd agree. I think customers are always looking to find ways to lower overall input costs, but product quality and performance issues tend to pop up on lower-quality, lower-grade pulps. What we do see more often, though, is CLP, cotton lint pulp, is often used in ethers applications because there's very high alpha and has good brightness and the like. And a lot of our focus has been on developing products that can go after that market. Two benefits to that: one is, obviously, it can expand our volumes in the CS arena significantly; second is it doesn't impact the competitive landscape because we're not pulling share from other DWP producers. We're focused more on pulling share from cotton lint, and that is something that is a key focus of ours as we move forward, especially out of Tartas who have developed some very, very high-viscosity products there as well as trying to work with Fernandina to do similar things. So we are seeing some of that as an opportunity. But on the first question, no, it's minor, and it's typically not all that productive.
Operator
We have reached the end of our question-and-answer session. I'd like to turn the call back over to Mr. Boynton for any closing remarks.
Paul G. Boynton - President, CEO & Director
Yes. Thank you, everybody, for your time today. Appreciate it. These are challenging markets, but we just want to make sure our investment communities are aware that we're taking action to ensure our success as a company, and I think [we believe in this milestone]. So again, thank you for your time today.
Operator
Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.