Rayonier Advanced Materials Inc.
Q3 2016 Earnings Call Transcript

Published: 1 Nov 2016

[Operator:]

Greetings and welcome to Rayonier Advanced Materials Third Quarter 2016 Teleconference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to turn this call over to your host, Mr. Mickey Walsh, Treasurer and Vice President of Investor Relations. Thank you. Sir, you may begin.

[Mickey Walsh:]

Thank you, Rob, and good morning. Welcome to Rayonier Advanced Materials third quarter 2016 earnings call and webcast. Joining me on today's call are Paul Boynton, our Chairman, President and Chief Executive Officer; and Frank Ruperto, our Chief Financial Officer. Our earnings release and presentation materials were issued yesterday afternoon 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 actual results to differ materially from the forward-looking statements we may make. They are also referenced on slide 3 of our presentation material. Today's presentation will also reference certain non-GAAP financial measures as noted on slide 2 of our presentation material. 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 pages 15 through 19 of our presentation. At this time, I would like to turn the call over to Paul for his opening remarks.

[Paul G. Boynton:]

Hey, thanks, Mickey and good morning, everyone. I'm going to start today's call highlighting some of the achievements of the quarter before turning it over to Frank to review our financial results. Yesterday afternoon, we reported third quarter earnings that put us on track to exceed the high end of our previously announced full year guidance. The main driver of the strong performance has been the teams' relentless focus on our Transformation Initiative, which continues to deliver lower costs, higher productivity, and enhanced profitability. This is a testament to the dedication, focus and energy that our employees have demonstrated to strengthen our culture of continuous improvement. Additionally, in the quarter, we raised $173 million of cash through an equity offering, materially reducing leverage and positioning the company for accelerated investments and growth opportunities that will drive long term stockholder value. With that, let me turn it over to Frank to review the financials.

[Frank A. Ruperto:]

Thank you, Paul. Let's look at slide 4 to review our financial highlights for the quarter. Sales for the quarter totaled $207 million, 19% below third quarter 2015. The decrease was driven by 8% lower cellulose specialty prices, 13% lower CS volumes, as well as lower commodity volumes. The decline in CS prices and volumes are in line with our full year guidance. As we previously commented, we had a very strong quarter in the same period 2015, and therefore, the volume declines appear more concentrated in this quarter. Commodity volumes were negatively impacted in the quarter by a change in mix from absorbent materials to commodity viscose, as well as lower production volumes due to an unplanned outage. Sales for the nine months were $638 million, 9% below the prior year period. The decrease in sales was driven by 7% lower prices on CS and 5% decrease in CS volumes. As a reminder, the full year 2016 CS prices are expected to be 6% to 7% below 2015 levels, while CS volumes are expected to get down 4% to 5%. Reported net income for the quarter of $22 million declined $10 million, compared to $32 million in the prior year period. For the nine-month period, net income was $62 million, up $20 million from the prior year period. Pro forma for one-time adjustments were primarily related to the asset write-down in 2015 and the gain on extinguishment of debt in 2016. Pro forma net income decreased $11 million and $4 million from the prior year quarter and year-to-date periods, respectively. Operating income for third quarter 2016 was $41 million, $17 million less than third quarter 2015 and $19 million less than third quarter 2015 pro forma results. Year-to-date operating income was $112 million, $22 million greater than 2015 year-to-date and $6 million below year-to-date 2015 pro forma operating income. Prior year pro forma adjustments primarily relate to an asset impairment from our Jesup plant realignment. Our quarter and year-to-date variance analyses for pro forma operating income and the relevant price and volume statistics are provided on slides 5 and 6. As shown on page 5, drivers for the third quarter and year-to-date variances were similar. Decrease in CS prices lowered third quarter operating income by $16 million and year-to-date results by $38 million. Volumes and sales mix impacted operating income by $22 million and $17 million for the third quarter and year-to-date 2016, respectively. As you can see on slide 6, CS sales volume for the third quarter was 116,000 tons, 17,000 tons below the prior year, while commodity volumes were 49,000 tons, 12,000 tons less than the prior year. For the nine-month period, CS volumes declined by the same 17,000 tons to 335,000 tons, while commodity volumes increased 5,000 tons from the prior year to 179,000 tons. The prior year period benefited from exceptionally strong CS sales volumes, which drove substantial operating income in last year's third quarter. The decrease in commodity volumes is the result of a change in mix to increasing commodity viscose volumes which have lower production rates as well as the previously mentioned unplanned outage during this year's third quarter, offset in part by an increasing commodity volumes from improved production efficiencies. The net result is that we now expect commodity volumes to be relatively flat in 2016 relative to 2015. Back on page 5, costs for the quarter and year-to-date periods were favorable $17 million and $43 million, respectively. Lower costs were driven primarily through our cost improvement initiatives. For the year-to-date period, cost reductions were aided by favorable chemical market pricing. SG&A and other costs for the quarter and year-to-date periods were favorable $2 million and $6 million, respectively. As depicted on page 7, in 2015, we began a four-year plan to achieve $125 million to $140 million of cost improvements from our 2014 cost base. In 2015, we captured $35 million of these cost improvements. Through the first three quarters, we have captured all $40 million of this year's targeted cost improvements, bringing our 21-month total savings to approximately $75 million. As such, we anticipate achieving 2016 annual cost improvements of $45 million to $50 million. Savings for the quarter from our Transformation Initiative were derived cross all functions of the reorganization. From fiber through pulp production, we have optimized raw material usage and gained productivity. We're producing savings from energy efficiencies and chemical usage through the implementation of more than a dozen projects. In supply chain and wood procurement, we have removed waste in our inventory handling and transportation processes, and improved our wood yield. And at corporate, we continue to focus on lean processes to reduce costs. Pro forma EBITDA for the quarter and year-to-date were at $64 million and $176 million, respectively. EBITDA results were positively impacted by the factors previously discussed under operating income. We anticipate net income, operating profit, and EBITDA to be lower in the fourth quarter than in the first three quarters of 2016, due to the timing of the Fernandina Beach plant's scheduled extended maintenance outage, rising raw material costs in chemicals and energy, and our typical higher benefit costs in the fourth quarter. However, as shown on slide 8, given the solid results to-date created by our Transformation Initiative and focus on continuous improvement, we are raising guidance for 2016 pro forma EBITDA to $215 million to $225 million, an increase of $20 million from prior guidance. In addition to cost improvements, we remain focused on driving cash flow. As shown on slide 9, we generated $181 million of operating cash flow and $123 million of adjusted free cash flow year-to-date. With strong free cash flow driven by solid EBITDA results, positive working capital benefits, and lower cash taxes, we are raising annual adjusted free cash flow guidance to $125 million to $130 million, an increase of $20 million to $25 million. Over the past two years, our ability to make meaningful growth investments in our business has been impeded due to weaker end markets which left us with higher leverage levels than planned at the time of separation. Solid EBITDA and strong free cash flow generation, coupled with proceeds from the issuance of our preferred stock offering have allowed us to reduce net debt to $471 million. As a result, we ended the quarter with $556 million of liquidity, including $320 million of cash and $236 million available under our revolving credit facility after taking into account outstanding letters of credit. These initiatives provide us with significantly more flexibility which will enable us to make investments to grow and diversify our business. At this point, let me turn the call back over to Paul.

[Paul G. Boynton:]

Thanks, Frank. Let me first make some comments regarding market conditions as summarized on slide 10. In our cellulose specialties business, we continue to see demand weakness for acetate products, due to the fact that tow demand, at best, has been relatively flat. And the inventory destocking in China continues, primarily through reduced imports of non-Chinese produced acetate tow. We have noted that while non-acetate demand growth slowed over the past several years, we now see signs of a more robust demand with capacity expansions underway in ethers and engine filtration segments as well as increased demand for tire cord. On the supply side, excess capacity and the relative strength of the U.S. dollar have allowed our competitors to be more aggressive. These supply and demand dynamics have had a negative impact on our price and volume performance from 2014 through 2016, although, we believe we have maintained a relative market share in this period. With these factors, we expect to see price pressure throughout the markets we serve as competitors vie for increased volumes. As we previously stated, we expect acetate prices to be down approximately 2% in 2017, based upon contractual terms for the majority of our acetate volumes. Discussions for other volumes are ongoing as customary at this time of the year. In 2017, through differentiated product value and services, we expect to increase sales of non-acetate cellulose specialty volumes at prices above commodity grades, but below acetate. This mix shift may impact the overall cellulose specialties pricing for 2017. We plan to provide aggregate 2017 volume and price guidance in our January call as we have in prior years after all negotiations have concluded. In our commodity business, we're seeing improvement in the viscose markets as expected, while absorbent materials are experiencing modest pressure as incremental capacity comes online. Our operations have the flexibility to produce either commodity viscose or absorbent materials, as such; we're able to flex our production to take advantage of market conditions. The execution on our cost improvement initiative mitigated a significant portion of the impact from price declines over the past two years and fundamentally reset our cost structure to be even more globally competitive and we've dramatically reduced our debt. But we recognize that cost improvements alone won't lead to the long-term success we plan to achieve for our stockholders. This requires an investment in assets, research, development, people and partnerships to foster growth and create product diversification. With our newly reset balance sheet, we are expanding from our two strategic initiatives, our transformation and new product innovation to four pillars of EBITDA growth as noted on page 11. The transformation pillar will remain a critical core component of the overall strategy. We've done a tremendous job thus far in this initiative, but we also realize we have a lot more to achieve to reach our full goal, and incremental improvements will only get more difficult. Innovation remains the second pillar of our EBITDA growth strategy. We're committed to expanding our business through value-added products derived from a range of platforms as shown on slide 12, rather than just pushing undifferentiated offerings on price alone. To date, we've made significant progress in developing and implying proprietary technologies to new products in most of the end market segments we serve. Many of these have been introduced to the customers and these customers have been busy with lab and manufacturing trials which now has led to initial commercial orders. For example, our scientists have created a new ethers product, under the banner Project Sapphire, (14

[Operator:]

Thank you. At this time, we will be conducting a question-and-answer session. Our first question comes from Bill Hoffmann with RBC Capital Markets. Please proceed with your question.

[Bill Hoffmann:]

Yeah. Thanks and good morning.

[Paul G. Boynton:]

Good morning, Bill.

[Bill Hoffmann:]

First question just quickly on Fernandina, was it down in the third quarter or you expect down (17

[Frank A. Ruperto:]

It was down both in the third quarter and fourth quarter. So, the shutdown span both quarters.

[Bill Hoffmann:]

Okay. So, when I look at the unit cost per ton in the third quarter here, it's obviously an impressive improvement over prior quarter. So, is there anything else going on in there or is it something that we can think about on more of a run rate basis going forward?

[Frank A. Ruperto:]

Yeah. What I think you'll see, Bill, is that the unit cost in third quarter will be better than the unit cost in the fourth quarter. Obviously, the shutdown will impact that unit cost for two reasons

[Bill Hoffmann:]

And plus normal seasonality.

[Frank A. Ruperto:]

Yeah. Plus normal seasonality in the fourth quarter. I think going forward; our goal is to continue to lower our unit costs across the board with our Transformation Initiative as we go forward into next year.

[Bill Hoffmann:]

Great. Thanks. And then just final question to Paul. You talked about some of these mix opportunities. Any guess or guidance that you can give to us on – thoughts on how much of that can offset the decline in acetate volumes?

[Paul G. Boynton:]

No. I mean, again, we've been working really hard on putting out differentiated offerings into the marketplace and we noted there that we should expect to see some gains in 2017. We'll give you, Bill, all that color in our January call.

[Bill Hoffmann:]

Okay. And then, you also made some reference to pricing the product, because – that pricing is versus commodity viscose as opposed to acetate pricing?

[Paul G. Boynton:]

Yeah. So, as we pick up some of these gains on these new products and offerings into the market, just making a note that, they're likely going to be priced at below acetate, but better than commodity type levels. So with that, you may see bit of a mix shift affecting price.

[Bill Hoffmann:]

Got it. Perfect. No. That's what we would expect. Thank you. That's it.

[Paul G. Boynton:]

Right. Thanks, Bill.

[Operator:]

Our next question comes from Roger Spitz with Bank of America Merrill Lynch. Please proceed with your question.

[Roger Neil Spitz:]

Thank you and good morning. Can you describe the CS pricing fell this quarter versus Q2, what was going on there? Is that somehow a negative mix or an adverse FX impact?

[Frank A. Ruperto:]

No. We would not have an FX impact on our pricing from that perspective. So, it is all mix driven.

[Roger Neil Spitz:]

Okay. Within acetate, were you doing more ethers or can you elaborate on that at all?

[Frank A. Ruperto:]

I think it's generally within the CS buckets. And if you remember, Roger, what we see in the first quarter, we see some spillover volumes coming into the first quarter from a pricing perspective, it typically doesn't go into the second quarter, but I haven't looked at it that closely, but we would see some mix between quarters.

[Roger Neil Spitz:]

Okay. So, it could be some spillover. Okay. Fine. And talking about some of your CS contracts, you don't have to talk to any particular one, but may be as a general rule, can you speak to how they work? Do they typically have for each year – each contract have a min/max volume, although, those min/maxes may contractually change in that contract as you go from one year to the next? Is that sort of how it works?

[Frank A. Ruperto:]

Yeah. I think that's a fair representation. Again, we've got contracts out there and we've (21

[Roger Neil Spitz:]

Very good. And lastly, you may not want to give 2017 CapEx guidance, but can you speak to it in very broad terms? Will it be similar to the 2016 guidance?

[Paul G. Boynton:]

No. We've talked about this before Roger. I think typically our maintenance CapEx is going to be $50 million to $60 million range. And given that there is no Fernandina Beach shutdown next year, we'll probably be closer to the lower end of that. But we also will evaluate what I'd call return or strategic projects as those come up for review. These are additional projects beyond maintenance that help our cost position or do other things for us. And to the extent that we have any of those, the CapEx will be higher, but I think the way to think about is maintenance in the $50 million to $60 million range and we typically – if we've got a big project, we'd tell everyone about that as when we knew about it.

[Roger Neil Spitz:]

Great. Thank you very much.

[Operator:]

Our next question comes from Chip Dillon with Vertical Research Partners. Please proceed with your question.

[Chip Dillon:]

Good morning, Paul and Frank.

[Paul G. Boynton:]

Good morning, Chip.

[Chip Dillon:]

First question is on – actually just a follow-up on the CapEx question. I know you've talked a bit about the lignin project, and of course, that might technically not be CapEx, it could be contributing to a JV, but how does that stand and what's sort of the next decision point on that?

[Paul G. Boynton:]

Yeah. So, Chip, that project is right on track. We noted in our last call that we're expecting permits by year end. We're still sitting in that position. We still expect them by year end. With that, we look forward to moving forward with the support of both boards of both companies with construction starting in the January timeframe, New Year timeframe. It's about 18 months to get this project up into commercial order, so we would expect mid-2018. So, again, we're right on track. We're waiting on the final permits. It's not yet officially approved. We're still again waiting on these permits to come through and then we can move forward. So, $110 million investment – again, we're 45% of that ownership, and Frank, I don't know if you want to comment on the capital side of that.

[Frank A. Ruperto:]

Yeah. We'll be looking at – or we are looking at financing alternatives to fund a portion of that at the JV level. Chip, we haven't finalized that, but once we do, we'll give some more guidance around that. But think about our share of that $110 million roughly, and then we'll finance a chunk of that at the JV level hopefully.

[Chip Dillon:]

Got you. So, it could be possible that you might only need to put in 10 or 15 (24

[Paul G. Boynton:]

Yeah. It could be. I mean, we haven't finalized any of that at this point, so – but it would be less than the proportional share depending on what the level of financing we got at the project.

[Chip Dillon:]

Okay. And then moving along, you had another great quarter cost wise. I know you're pointing out how they fell – I think, it's $17 million year-to-year, $43 million year-to-date. And how much of that would you say was chemicals and other purchased raw materials? And how much was it – might have been maintenance and other things you can control?

[Frank A. Ruperto:]

Yeah. If you're looking at our cost savings for the year, the way I'd think about it, Chip, is through the first three quarters of the year are Transformation Initiatives. So, these are things we think we can control, right? These are specific projects we go in to save money on. That was roughly $25 million of the total. And then on other things we can control, we had another $15 million of what we call these legacy, these projects that we put in place in 2015 that are just paying off now. So, that's the $40 million of savings we had targeted at the beginning of the year, which we said we've gotten all of that. We've got roughly, what I'd call, tailwinds of approximately $5 million-ish for the nine months, and it's split kind of evenly between chemicals and energy.

[Chip Dillon:]

Okay. Gotcha. And then, could you comment on – I know that back – a month or two ago, some of the papers out, they were talking about a permit situation with this Judge Schroer, I said her name, (26

[Paul G. Boynton:]

Yeah. So, Chip, you're referencing our permit through the Georgia EPD and our Jesup, Georgia plant and facility. We've operated there for decades under EPD issued permits. And EPD issued another permit for us in December of 2015, which again was a result of years of work by them and consulting with us, and going through public comment and reviewed by the U.S. EPA. Once that was issued though that in January, right following that the Altamaha Riverkeeper issued a lawsuit against the EPD for issuance of that permit. So, that's what you're referencing. It's gone through a legal process with the Georgia State Office of Administrative Hearings. And in that the judge rejected almost all of our claims and arguments, and actually, she ruled mostly in favor of off the permit, but she did also rule that under certain low flow conditions that the affluent may have a reasonable potential to violate applicable rules for color and odor. And so, this is not an issue about public health or anything else, it's about color and odor. And so, she pushed it back to the Georgia EPD for issuance of a new permit. And we believe that the permit is absolutely consistent with the facts and the law. And so, we decided we're going to defend that. And so, we appealed the decision as did the Georgia EPD, and we just did that this past week. Until this is resolved which, again, I can't tell you so much on the timing, because it's a little bit variable, we'll continue to operate as we always have under our existing permit and – which we have full right to. So, that's kind of where it stands, and hopefully, that's helpful to give you a little bit of color on it.

[Chip Dillon:]

That is good. And real quickly one last one. Can you give us a rough guess as to kind of – do you think your specialties volume will equal or maybe exceed what you end up with this year, I'm talking 2017? And if so, could you just give us an idea of how much that mix could change? In other words, if acetate, for example is 80% this year, would it be 70% next year if you kept volume the same or could it move around more than that?

[Paul G. Boynton:]

Yeah. So, Chip, we're in all those discussions right now and I noted that we've made some gains outside of acetate, but we'll finalize all that and put it into our January call. I think it's too early to predict how some of these discussions are going to come out.

[Chip Dillon:]

Okay. Thank you.

[Paul G. Boynton:]

Sure.

[Operator:]

Our next question comes from Paul Quinn with RBC Capital Markets. Pleased proceed with your question.

[Paul Quinn:]

Yeah. Thanks very much. Morning, Frank. Morning, Paul. Just maybe, Frank, just clarifying this Fernandina Beach shut, was it more in Q4 as opposed to Q3? I'm just trying to understand the cost for Q4?

[Frank A. Ruperto:]

Yeah. It's going to ultimately be a little bit more in Q4, if you remember as we came through the end of that shutdown; we had a hurricane roll through. So, we had to wait a little bit on the startup of that asset, not materially, but it cost us couple of days several – some period of time to get that up and running again. So, it extended a little bit further into the fourth quarter, particularly because of that then it would have otherwise.

[Paul Quinn:]

Okay. And then you've given us a pricing expectation for acetate in 2017 down 2%. What are we looking at on the volume side?

[Frank A. Ruperto:]

Yeah. And we haven't given you that. So, we will give you an update on that on January, Paul. We're still in those discussions on – actually on everything that we don't have contracted still out there in discussion, both acetate and non-acetate products. And again, we've mentioned some gains that we've able to put in the bag for 2017 in non-acetate, but we're still finalizing both non-acetate as well as acetate.

[Paul Quinn:]

Okay. And then maybe just taking a look at viscose market prices have come up this year. How do you look at the sustainability of that? And then flipping it over to fluff pulp markets, what you've seen in that market as well?

[Frank A. Ruperto:]

Yeah. So, we have seen some pretty good rise in the viscose market. If you look at downstream a bit for those – for viscose and you look at the viscose staple fiber prices and continuous filament out there, that's up actually about 30%-plus. It's given back a little bit here lately, with that viscose pulp prices since January has been10%-plus type of range. So, some pretty healthy gains. Volume continues to be strong out there, kind of at the 5% type of level, and we've actually seen some announced expansion again for the markets for these products. So, again, we expect that to continue to be relatively strong and make some gains. On the flipside, on absorbent materials asking that, we continue to see some modest pressure out there as incremental capacity has come on. So, what do we do, right? So, we got the ability to flex back and forth. So, you should continue to look at us to make more viscose out there into the market. We did that in 2016 relative to 2015 and we'll do even more in 2017 relative to 2016. So, we'll continue to push in that direction.

[Paul Quinn:]

Okay. And then just lastly, I'm kind of tweaked on this Project Sapphire, (32

[Paul G. Boynton:]

So, it's right in in kind of the high-end ethers, it's a good quality product. Again, our comments out there that this is a – we think they offer a unique value to existing performance levels that are out there. So – and right now, we're just in the discussions of trials, but we're getting very positive feedback and we hope to translate that positive feedback into some commercial sales here in the near future.

[Paul Quinn:]

Is that an industrial or a food or a pharmaceutical end use?

[Paul G. Boynton:]

It could be across the board, but it's going to be at – a good quality end ethers.

[Paul Quinn:]

All right. That's all I had. Best of luck guys.

[Paul G. Boynton:]

Thanks.

[Frank A. Ruperto:]

Thank you.

[Operator:]

Our next question comes from John Babcock with Bank of America Merrill Lynch. Please proceed with your question.

[John P. Babcock:]

Hey. Good morning, everyone. Quick question, kind of following up from Paul's there. When you talk about pressures from the stronger U.S. dollar, is that impacting you from both the volume and price perspective or is that leaning one way or the other?

[Frank A. Ruperto:]

Yeah. I mean, we certainly see it on the price side. And so, therefore, if you want to maintain your business out there, you got to lower price or it will affect your volume. So, we're seeing it on both sides of the equation. Some areas we decided, okay, we're not going to pursue. Other areas, we have decided to, well, (34

[John P. Babcock:]

Okay. Thanks for that. And then with regards to the 2016 EBITDA guidance. What has to go right ultimately to get you to the top end of that guidance range and also are there any notable items in 4Q that we should be incorporating into our model? Obviously, there is the hurricane impact, but if there's anything else there, I'll be curious to hear about those too?

[Frank A. Ruperto:]

Yeah. And (34

[John P. Babcock:]

Okay. And with commodity product pricing coming down during the quarter, it sounds like you guys improved the mix into the viscose category, but at the same time, I mean pricing overall looks like came down $25 from 2Q. I assume that commodity viscose, those are at higher price point than fluff pulp, but generally I mean could you kind of give us some sense as far as what drove that pricing decline there from quarter to quarter?

[Paul G. Boynton:]

Yeah. John, I don't have that exact detail what drove that specifically, but I'm sure it's a bit of mix between not only existing customers in both fluff and viscose, but also just that mix between the two of them. Again, the fortunate thing is we can move back and forth. And what we really are focusing on less so on the actual price and more on the margin optimization between those two commodity lines, and we'll continue to work to optimize that margin as we go forward. And again, right now that pushes us more towards the viscose market, and so that we can bring more – add some (36

[John P. Babcock:]

Okay. And then just last question I had just on the fluff pulp markets there. What is the general – what are the fundamentals like in that market right now? I mean, does it feel like it's softened significantly since last quarter and earlier in the year or...

[Paul G. Boynton:]

Yeah. I would say, we certainly see out there and hear out there the effects of oncoming capacity, right? So I would say – I think you said softened significantly, I'd say, it's being pressured modestly. We've been out there in discussions with some new agreements and we see some pricing that indicates that there is pressure out there. And again, further just saying, okay, let's continue to lean on the viscose side of the equation.

[John P. Babcock:]

And just being curious, is that on both kind of the higher end fluff pulp side of the range or also even towards the lower kind of commodity greater fluff pulp?

[Paul G. Boynton:]

Yeah. I'd say, you'd see it across the spectrum there of the fluff market.

[John P. Babcock:]

Okay. I appreciate it. Thanks.

[Paul G. Boynton:]

Sure. You're welcome.

[Operator:]

There are no further questions. At this time, I will turn the call back to Paul Boynton for closing remarks.

[Paul G. Boynton:]

Well, thank you. And thanks, everyone for joining us today. And let me just say, our team's ability to drive results on our strategy has been very impressive. We're well on our way to improving our business through cost improvements and aggressive debt reduction in order to achieve a appropriate capital structure, positioning us well to be the long term market leader. I'm confident in our ability to develop internal and external opportunities to grow and diversify our business and create value for our stockholders. We look forward to updating you on our progress in a timely manner as we move forward. Thanks. Have a good day.

[Operator:]

This concludes today's teleconference. Thank you for your participation. You may disconnect your lines and have a great day.