Schnitzer Steel Industries Inc (SCHN) 2020 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Schnitzer Steel Second Quarter of Fiscal 2020 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

It is now my pleasure to introduce Michael Bennett, Investor Relations.

Thank you, Andrew, and good morning. I'm Michael Bennett, the company's Senior Director of Investor Relations. I am happy to welcome you to Schnitzer Steel's earnings presentation for the second quarter of fiscal 2020. In addition to today's audio comments, we have issued our press release and posted a set of slides, both of which you can access on our website at schnitzersteel.com or www.schn.com.

Before we start, let me call your attention to the detailed safe harbor statement on Slide 2, which is also included in our press release and in the company's Form 10-Q, which will be filed later today. As we note on Slide 2, we may make forward-looking statements on our call today, such as our statements about our targets, volume growth and future margin expansion. Our actual results may differ materially from those projected in our forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statement is contained in Slide 2 as well as our press release of today and our Form 10-Q.

Please note that we will be discussing some non-GAAP measures during our presentation today. We've included a reconciliation of those metrics to GAAP in the appendix to our slide presentation.

Now let me turn the call over to Tamara Lundgren, our Chairman and Chief Executive Officer. She will host the call today with Richard Peach, our Chief Financial Officer and Chief of Corporate Operations.

Thank you, Michael. Good morning, everyone. Thank you all for joining us on our second quarter fiscal 2020 conference call.

While I'd normally start the call today by focusing on the strong second quarter performance we just delivered, I'm going to start instead by discussing the actions that we've taken in connection with the COVID-19 outbreak. I'll then review our second quarter results and brief you on the strategic initiatives we have underway. Richard will follow with more detail on our segment performance, our CapEx investments and our capital structure. I'll wrap up, and then we'll take your questions. And given the heightened level of uncertainty caused by the COVID-19 outbreak, we will not be providing any forward-looking guidance.

Let's turn now to Slide 4. In a shockingly short amount of time, COVID-19 has created a global health and economic crisis. We are committed to doing whatever we can to provide support to our employees and our customers, suppliers and communities during this time. We are included in the critical infrastructure sector and related supply chain as defined by the U.S. Department of Homeland Security, and we are considered an essential business by state and local government authorities in the U.S., including Puerto Rico and Canada. As a result, our facilities have continued operating.

As always, ensuring the health and welfare of our employees and all who visit our sites is our top priority. Accordingly, we are following all CDC and state and local health department guidelines, and we've implemented infection control measures at all of our sites, travel and meeting restrictions and other social distancing measures. We are encouraging all employees to practice good hygiene and to stay home and seek medical attention if they feel sick. We realize that this situation is stressful for all, and we are actively communicating with our employees regarding resources we can provide in support of their physical and mental well-being.

I am very proud of the extraordinary efforts of all our employees. You have not missed a beat in transitioning to a new normal working environment, whether that means new protocols in operations or working remotely from home. At the same time, you've shown enormous generosity, whether in donating masks to local hospitals, providing support to local food banks and the American Red Cross or supporting one another as situations change. Your actions have reflected the collaboration, innovation and resilience that define our culture and our company.

I also want to especially highlight the work of our frontline team members who have deployed new work processes to protect our employees and all visitors to our sites while continuing to work safely and deliver improved safety performance. Fiscal '19 was the safest year recorded in our company's history, and we have continued to make progress by further improving our TCIR and LTIR trends through the first half of this fiscal year.

To all our employees listening to the call this morning, it has been inspiring to see you execute on our mission to support our country's critical infrastructure and essential businesses. I want to thank you again for everything that you are doing for our country, our communities and our company.

In addition to safety, our commitment to our other multiyear sustainability goals, as shown on Slide 5, is even more important in today's environment. These goals are focused on conserving resources; reducing waste and emissions; maintaining an ethical, engaged and inclusive workplace; and giving back to the communities where we operate. During the quarter, we were recognized by several very well-respected organizations for various aspects of our sustainability program. And I want to acknowledge the contributions of all our teammates as these honors reflect your commitment to our core values and culture.

so let's turn now to Slide 6. The rapidly evolving environment that we are in today presents unique and unprecedented challenges. It's worth noting, however, that we are a company that was founded in 1906, and we've experienced downturns and volatility from the Great Depression to the Great Recession. There's a legacy at our company of facing challenges head on and navigating through the toughest of times. We have a strong balance sheet with low net leverage and interest expense and significant cash on hand to weather declines in demand.

We also have a strong track record of delivering positive through-the-cycle operating cash flows. It's worth noting that we have historically generated significant operating cash flow in declining markets through the reduction of working capital, which provides a natural hedge against the risk of lower earnings. Equally as important, we benefit from an operating platform where the majority of our costs are variable, and we have multiple levers available to us to manage through this challenging period. We have reduced our CapEx forecast by 30% in light of known and probable delays, and our productivity improvement program, which we announced in October, is on track to deliver $15 million of benefits we targeted for this fiscal year.

In addition, in light of softening demand and lower supply flows, we've reduced operating hours at some of our sites and have also reduced other variable costs associated with lower volumes. Right now, none of us can say when the pandemic will be over or what additional adjustments may be required. However, the actions that we've taken over the past several years have prepared us to move quickly and effectively as the situation requires.

So now let's turn to Slide 7 to review our second quarter results. Earlier this morning, we announced our fiscal '20 second quarter adjusted earnings per share of $0.31. Both our divisions delivered solid operating results, and I'd like to start by mentioning a few of our key achievements in the quarter.

First, AMR delivered operating income per ferrous ton of $23, a significant improvement versus the first quarter. The team did an outstanding job navigating through a volatile quarter, in particular. I'd like to note their strong execution of our major productivity initiatives and their ability to continue to diversify our sales. We shipped our ferrous and nonferrous products to 20 countries in Q2.

Second, CSS achieved operating income of $4 million. This was in line with Q1 despite lower finished steel prices, higher scrap input costs and the adverse impact from their planned maintenance outage. Sales volumes at CSS were up 37% year-over-year amidst robust construction demand in our West Coast markets and relatively mild winter weather.

And third, our strong focus on working capital management enabled us to deliver positive operating cash flow, notwithstanding higher prices for raw materials. And the second quarter also marked the issuance of our 104th consecutive quarterly dividend.

Let's now turn to Slide 8 to review market trends and conditions in more detail. As you can see in the upper left-hand chart, ferrous scrap prices rose steadily during the first 2 months of the quarter before softening in February. Since the end of the quarter, however, both export and domestic prices have fallen significantly as the auto, oil and gas, construction and manufacturing sectors have slowed down in response to COVID-19. And while we continue to see inquiries for export ferrous shipments on both the East and West Coast, there is a risk that temporary or extended disruptions at destination ports may delay shipping activity.

Turning to nonferrous prices. As you can see in the lower left-hand corner of this slide, during the first half of Q2, prices rose from decade-low levels before retreating. They are now hovering around levels that we last saw in 2016. Similar to the ferrous markets, the recent price movements have largely been influenced by declining industrial global demand. Not surprisingly, supply flows for both ferrous and nonferrous materials since the end of the quarter have also slowed due to reduced generation of materials and weaker flows of materials as a result of COVID-19.

Let's turn now to Slide 9 to discuss some of the longer-term trends underlying demand for scrap. There is a significant degree of uncertainty in near-term market conditions due to COVID-19. We have seen softening demand trends and supply chain issues, including reduced availability of containers and other logistics constraints.

Despite the current volatility, however, the long-term drivers of scrap demand remain intact due to the greater emphasis on recycling, the continued growth in global EAF steelmaking capacity and the increased metal intensity of lower carbon-based economies. While none of us knows when the COVID pandemic will end, we are managing all the aspects of our business within our control, and we are continuing to move forward with a number of strategic initiatives that will drive long-term growth.

So now let's turn to Slide 10 to review these actions. Our strategic initiatives address 3 dynamics: cyclicality, structural change and long-term drivers of scrap demand. We are addressing each of these dynamics through programs focused on productivity improvements and advanced organizational change, technology investments and increasing the products and services that we can offer to our customers.

So let's discuss each of these in order. At the beginning of our fiscal year, we announced a productivity improvement program centered on delivering benefits from production and functional cost efficiencies, improved asset management and logistics. The benefits and cost savings from this program have been largely completed. In order to provide greater focus through the cycle on our strategy and growth and enable greater focus on the critical drivers of our business, we will be transitioning from the multidivisional organizational structure, which is currently in place, to a more simplified operating model. We refer to this new model as the "One Schnitzer" model as it will move us to a functionally based integrated organization. We will consolidate our operations, sales, services and other functional capabilities at an enterprise level.

We are excited about this transition and believe that this new structure will enable us to create a dedicated platform to accelerate growth in products and services, to further standardize our operations to ensure our low-cost operating position and promote operational excellence, to solidify the productivity and cost efficiency benefits announced in October that have been substantially completed and to increase the connectivity between shared services and operations. We expect to transition to this new operating model over the remainder of fiscal 2020 and to report our financial results in a single segment, commencing with the first quarter of fiscal 2021.

Second, as Richard will describe in more detail, our investments in advanced metal recovery technologies continue to move forward, although we may see some near-term equipment delivery and permitting delays due to COVID-19. Once these projects are completed, we will be able to improve the efficiency of our processes, increase our throughput, extract more materials from our shredding process and meet global metal content and quality requirements on a cost-effective basis. Importantly, these investments will also support our sustainability objectives of increasing recycling and reducing waste.

And the third leg of our strategic growth initiative is focused on increasing our sales, products and services. Over the course of the last several years as our ferrous, nonferrous and Pick-n-Pull volumes have grown, we've also seen an increasing demand from our customers for a wider range of products and services, including furnace-ready nonferrous products and recycled auto parts as well as logistics and related services to help them improve the sustainability of their own supply chains. Together, we believe that these initiatives position us well to significantly grow our revenues, improve our margins and continue generating strong operating cash flow through the cycle.

So now let me turn it over to Richard for a more detailed review of our segment performance and our strategic CapEx investments. Richard?

Thank you, Tamara, and good morning. I'll begin with a review of our cash flow and capital structure on Slide 11.

Operating cash flow in the second quarter was $6 million and for the first half of fiscal '20 was $17 million. At the end of the quarter, our net debt was $132 million, our net leverage ratio was 16%, and our ratio of net debt to adjusted EBITDA was 1.2x.

Our revolving credit facility is $700 million and does not mature until the end of our fiscal 2023.

Given uncertainties caused by COVID-19, on April 1, we increased our borrowings under our facility by $250 million to provide us with additional liquidity and financial flexibility. Including the drawdown, we now have cash on hand of approximately $300 million.

Capital expenditures in the second quarter totaled $13 million. And for the fiscal year-to-date, our total CapEx was $37 million. As Tamara mentioned, we've also taken action to reduce our annual CapEx by almost 30% or $35 million and now expect to spend a total of up to $90 million in fiscal '20. This new total includes $50 million on growth projects, and the balance of $40 million is for maintaining the business, including $10 million on environmental projects. Adjusted corporate costs in the second quarter were $9 million, and our effective tax rate was an expense of 28%.

During the quarter, we made significant progress in implementing productivity initiatives, which we announced last October. We are targeting realized benefits of $15 million in fiscal 2020, of which $6 million has been achieved in the year-to-date, including $4 million in the second quarter. These savings are coming primarily from lower SG&A in AMR.

In connection with these productivity initiatives, we incurred restructuring charges and other exit-related costs of approximately $5 million in the second quarter. These charges are excluded from our adjusted EPS.

As we transition to our new operating model, we will be ensuring that in coming months, we'll provide more detail on the reporting implications of our new organization structure. Our enterprise-level reporting will still include revenues, costs, EBITDA and earnings. We also plan to continue reporting operating statistics, including volumes and selling prices for our major products as well as expected benefits and returns for our strategic initiatives.

Now turning to the next slide. I'd like to provide an update on the status of our technology strategy. We are continuing our focus on progressing our major strategic initiatives to replace, upgrade and add to our nonferrous metal recovery technologies. Our plan includes zorba separation capabilities, advanced sorting equipment and technologies for clean copper recovery. The new equipment is being installed in our major facilities on both the East and West Coasts of the United States. Once implemented, these new technologies will allow us to generate greater metal yields, reduce processing costs and improve the quality of our products.

We also expect to produce more furnace-ready products and that the new technology will allow us to convert zorba to twitch, copper, brass, zinc, stainless steel and other saleable metals. We expect our aggregate capital investment to be in the range of $75 million to $85 million, with $10 million already spent in fiscal '19, up to $40 million to be spent in fiscal '20 and the balance of the total in fiscal '21. In accordance with our strategic plan, we continue to place priority on progressing the implementation of these new technologies.

Our new copper recovery plants were already complete and operational, and other installations planned for fiscal '20 are well advanced. However, in the current COVID-19 situation, some disruption to our projects is inevitable and there may be delays to receiving remaining equipment, obtaining necessary permits and reduced availability of outside contractors.

Once the new nonferrous technology is fully implemented, we expect the benefit to operating income to be at least $8 per ferrous ton. This translates to an annual benefit of approximately $40 million, consistent with our long-term target of ferrous volumes of 5 million tons. We also expect an average payback of 3 years and a return on investment which is significantly in excess of our cost of capital.

Now let's turn to Slide 13 to discuss our ferrous sales platform. In the second quarter, we continued to put strong focus on optimizing our global sales reach and on diversification. We delivered our products to customers in several continents, including Asia, South America and Europe as well as the U.S. and Canada.

Despite winter seasonality, the higher price environment led to a sequential improvement in supply flows. And similar to the first quarter, we sold almost 2/3 of our ferrous products to the export market, with the remainder domestically, including to our own mill. Since the end of the quarter, some governments have implemented restrictions in response to COVID-19, and we continue to monitor these developments.

Now let's turn to Slide 14 for an update on nonferrous. The structural changes in the market for recycled nonferrous products have included Chinese tariffs and increasingly restrictive quotas for Chinese scrap importers. Recently, China announced the removal of tariffs on certain metal scrap imports from the U.S.

China has also developed new quality standards for imported scrap. Although uncertainties remain, we understand these new standards will be implemented this year on July 1. Thereafter, we understand nonferrous products that meet the new definition of raw material and comply with the new quality standards may be eligible for import into China without quota limits.

These structural changes reinforce the importance of our technology strategy and our sales diversification, and in the first half, we shipped 92% of our nonferrous products to countries other than China. We've also expanded our customer base, and we sold our nonferrous products to 13 countries in the second quarter. These included India, South Korea, Malaysia, Taiwan and Thailand. Having a diversified sales strategy is beneficial given the potential for disruption from COVID-19.

Now let's turn to Slide 15 to discuss the operating trends at AMR. In the second quarter, AMR's adjusted operating income was $20 million or $23 per ton. This represented a significant improvement in sequential performance. Increased demand resulted in net selling prices for our ferrous shipments moving sequentially higher by 14%.

Ferrous sales volumes also increased sequentially by 2%, and the improved market conditions led to increased supply flows despite the adverse impact of winter seasonality. AMR had a positive impact from average inventory accounting of approximately $4 per ton, which compared to a detriment of $5 per ton in the first quarter. The improvement in AMR performance also included benefits of higher prices for platinum group metals and from productivity initiatives, which led to a sequential reduction in AMR's SG&A.

Now let's move to Slide 16 and discuss operating trends in CSS. CSS' second quarter operating income was $4 million, which was in line with the previous quarter. Performance benefited sequentially from a higher contribution from recycling operations, increased finished steel sales volumes and from productivity initiatives. Recycling revenues were 10% higher sequentially primarily due to a flow-through of the higher scrap price environment.

Finished steel sales volumes in the second quarter were also sequentially higher by 13% amid robust construction demand and relatively mild winter weather. These benefits were offset sequentially by approximately $1 million of planned maintenance and by margin compression caused by the decrease in average net selling prices for finished steel products.

I'll now turn the presentation back over to Tamara.

Thank you, Richard. Our strong second quarter results reflect the resiliency of our operations and the ability of our team to navigate well during an improving but still volatile quarter. Both divisions achieved higher sales volumes and benefited from strong execution of the productivity initiatives we implemented during the quarter. In addition, our strong focus on working capital management enabled us to deliver positive operating cash flow, notwithstanding higher prices for raw materials. While the near-term outlook is uncertain, our team is experienced in managing what we can control in the short term while continuing to execute on our longer-term initiatives.

I am very proud of how our company is reacting to this worldwide crisis, adapting to new ways of working and demonstrating the resilience and resolve that has been a hallmark of our company for over a century. By acting decisively, making the right immediate moves and asking the critical long-term questions, we will be stronger when this is all over. To all our employees, thank you for everything that you are doing to remain safe, to keep your families and friends safe and to support your colleagues, your communities, our company and our country.

Now operator, let's open up the call for questions.

(Operator Instructions) And our first question comes from the line of Matthew Korn with Goldman Sachs.

It's great to hear everyone sounding so healthy and good. Congratulations on the quarter. It's bittersweet that we seem to be coming from such great conditions as the calendar year started off into this uncertainty. Could you comment a little bit right now just on some of the conditions on the ground? You mentioned your facilities are open.

Are you running within a reduced workforce? Are you seeing any absenteeism? Any competition? Are there any shredders being closed? What are you seeing there? And then as far as reduction in flows, again, maybe some comments there, what you're seeing, how we might be able to quantify or frame that versus last quarter versus last year. Any of that would be helpful.

Sure. Thank you, and it's good to hear you as well, Matt. Glad that all is well.

To date, as we said in our prepared remarks today, COVID-19 has had limited impact on our operations. The most prevalent lever that we have been utilizing has been reduced operating hours. And as you may well imagine with our regional model, we have the flexibility to adjust operations at various sites and redirect flows. So we've seen limited date -- or limited impact to date on operations.

Supply flows is a bit different. I mean we clearly have seen supply flows weaken in certain regions but not uniformly across the country. For the month of March, we were for ferrous pretty much flat year-over-year, but clearly, the last 10 days or so, we saw a decreasing trend. April domestic prices haven't settled yet, as you know. And while scrap flows are lower generally due to reduced generation and some constrained logistics, we are hopeful that the April domestic pricing, when it does settle, will not exacerbate the lower supply that we've already begun to see.

All right. Good to hear. We'll keep watch. My other question -- Richard, love your comment here. Thanks again for the update on the technology and what you plan on doing. How do you think about the viability of the cost savings measures that you're putting in place that can be executed over the course of this year, even if volumes and activity levels really do profoundly decline at least in the near term?

Matt, glad to hear your voice. We've a lot of levers that we can access. As we said in our remarks, we've substantially completed the $15 million of benefits that we announced back in October for this year. We've got $6 million in the year-to-date. The actions have already been taken. So we'll see the balance of that in the remainder of the year.

Looking ahead, the majority of our costs are variable. So as Tamara said, we're already in a position to flex hours and shifts and other production-dependent costs. Our scrap costs are variable so we have the opportunity to adjust those for changes in the market and the significant minority of our production costs and SG&A are variable as well. So there is an opportunity to take actions there.

On the balance sheet side, as we mentioned, we've reduced our CapEx by 30%. And we continue to actively manage our working capital, including our inventory, our receivables and our payables. So there's, in summary, a lot of levers, and we are already very active on that side.

And our next question comes from the line of Tyler Kenyon with Cowen.

Hope everybody is healthy and safe. Just wanted to lead off here with a question on PGM products. I've never specifically heard you call out benefits or headwinds from that category. I was just curious if you could describe a bit more about what's happening there and how to think about how much that is contributing to spreads currently.

Sure.

Tyler, it's Richard. Yes. In terms of the improvement sequentially in operating income from the first quarter to the second quarter, the significant majority of the improvements in profitability came from a combination of better spreads from the ferrous market improvement and the benefit from average inventory accounting. But there were other contributory benefits from productivity improvements and higher platinum group metals. But these were the minority in terms of the improvement quarter-over-quarter.

As you know, there's many components in a car, and we are a spread business so part of the cost of a car includes the value of the different components, including the platinum group metals. And of course, when we sell these, we aim to make a spread. And with the prices of platinum group metals increasing during the second quarter, we obtained the benefit which we called out.

Okay. Got it. That's helpful. And then with ferrous and nonferrous volumes kind of already tracking below last year year-to-date and I imagine that there's more pressure here in the back half of the year, fiscal year that is, I mean, how should we be thinking about the operating leverage? Should volumes slow pretty significantly? I mean I know, in the past, you've mentioned every $1 -- or call it every 100,000 tons change in the volume should impact your operating leverage by about $1 per ton, EBIT per ton that is. So your productivity improvement targets appear unchanged, it looks like. So wondering if there's some action you can take or are taking that could help mitigate some of that impact.

Yes. Yes, Tyler. As I said to Matt, we've got a lot of levers on the cost side. The significant majority of our costs are variable. Scrap costs are variable. We have significant amount of variable cost in the production areas, in SG&As. So there's plenty of action we are already taking and can take to adjust our variable cost if flows continue to weaken. And our productivity initiatives, of course, these address our fixed costs because they seek to make permanent changes in our cost base for future operating leverage.

Okay. And then just on the CapEx, the change -- the $35 million reduction for fiscal year 2020. Should we be thinking about that $35 million reduction shifting into 2021 for now? Richard, I'm not sure if you offered any specifics on that yet.

Yes. You're correct to note we've reduced by $35 million. So that $35 million will likely shift into fiscal '21, but it could push out some costs that were planned from then into the following year, too. So it's just really pushing out relative to the COVID-19 situation. It doesn't necessarily mean a big increase in fiscal '21. And although -- having said that, to the extent our growth CapEx is less in fiscal '20, of course, we'll make up the balance in fiscal '21.

Okay. And then lastly, just given the challenges that appear on the horizon here, wanted to ask about your commitment to the dividend and then also maybe how we should be thinking about share repurchases in light of the current market environment.

Sure. I'll take that. Tyler, based on everything that we are seeing today and the actions we've taken and the plans that we have, we don't anticipate any changes in our capital allocation priorities, which are balanced. And they're balanced among maintaining and investing in our business, reducing our debt and returning capital to our shareholders.

(Operator Instructions) Our next question comes from the line of Michael Leshock with KeyBanc Capital Markets.

So I just wanted to continue on the CapEx side. Growth CapEx was cut up by about $20 million, and so now you're looking at about $40 million given the COVID demand shock. Can you talk as to what projects that -- you're prioritizing given that lower level of spending? So is that lower level of spending across all projects? Or are there are some that you're prioritizing over others?

Michael, it's Richard here. Of course, these nonferrous technology projects are long-term investments, but the COVID-19 situation does mean we've begun to see some delays. They're not impacting any one project in particular. It's more a situation where all or most of the projects are being impacted by, for example, the impact on permitting or equipment deliveries or availability of outside contractors. So we continue to push on with what we can control, but we have seen some delays that are related to the current situation, which is why we've reduced our expected CapEx.

I would mention though, on the growth CapEx, it's actually, on the technology projects, a $10 million change from our last projection on those growth CapEx projects. So we continue to monitor the situation, but we're focused on our long-term nature of these investments and continuing to execute on our strategic objectives.

Okay. Great. And then -- so what's the timeline now on getting the $8 a ton benefit in profits given those CapEx deferrals? Has that been pushed out as well?

No, we're still sticking with our expectation that we can complete the projects by the end of the first half of fiscal '21. Although having said that, some of the individual projects within the program will be subject to some delay within that time period because of the current situation. But we're going to continue to monitor how it goes. And if there's any change in our overall target date, we'll be sure to update you on future calls.

Got it. And then just given the intensifying COVID material handling restrictions in Asia, along with the global non-ferrous demand weakness on the auto fallout, can you talk about how you're navigating some of those obstacles going forward?

Sure. What we are seeing is that export demand is weaker. But there continue to be inquiries from customers across our major markets. And most of the people that we are speaking to today want to maintain operations even if they're at a reduced level because they want to be able to restart operations quickly when the pandemic is past us. And the ports that we're shipping to are still operational, although discharge may be slower due to reduced personnel. So as I mentioned before, as supply flows are down, we're seeing export demand continue. But I think everything is at a bit of a slower pace, a little lower levels and a little bit being executed more slowly.

Okay. Great. I appreciate that color. And then just lastly for me, I know there's a lot of uncertainty right now. But just given the levels of activity you've seen in the past month or so and your ability to take out costs, do you expect AMR to be profitable in the third quarter?

As we started with the first bit of our prepared remarks, we're not providing an outlook at this time. But what we have shared with you and what Richard has repeated a few times now this morning is we've got multiple levers. And we benefit from a platform where the majority of our costs are variable. So if we see an extended slowdown, there are a lot of levers that we can pull, flex hours and shifts and scrap costs and SG&A and productivity and the like.

And I'm showing no further questions at this time. So with that, I'll turn the call back over to Tamara Lundgren for closing remarks.

Thank you, Andrew, and thank you, everyone, for joining us on our call today. These are very volatile and uncertain times, and we wish for all of you to continue to take care of yourselves and your loved ones, and we look forward to speaking with you again in June. Thank you very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.