Earnings Call: Q1 2020

May 5, 2020

Good morning, everyone. Thank you for joining us for DuPont's first quarter 2020 earnings conference call. We are making this call available to investors and media via webcast. In our comments during this conference call. These slides are posted on the Investor Relations section of DuPont's website and through the link to our webcast. Joining me today on the call are Ed Drayen, Chief Executive Officer and Lori Koch, our Chief Financial Officer. Please read the forward looking statement disclaimer contained in this slide. During our call, we will make forward looking statements regarding our expectations or predictions about the future. Because these statements are based on current assumptions and factors that involve risks and uncertainty, our actual performance and results may differ materially from our forward looking statements. Our 2019 Form 10 K as updated by our current and periodic reports includes detailed discussion of principal risks, and uncertainties, which may cause such differences. Unless otherwise specified, all historical financial measures presented today exclude significant items. We will also refer to non GAAP measures, a reconciliation to the most directly comparable GAAP financial measure included in our press release. I'll now turn the call over to Ed. Thanks, Leland, and good morning, everyone, and thank you for joining us. This is obviously an unprecedented time, and I hope you all safe and well. Today, we will walk through the discipline plan we are executing as we navigate the current environment, including our overall approach to protecting the health and safety of our employees and maintaining our supply chains and operations. Protect our balance sheet and generate cash because of these swift actions, we are on solid footing are well prepared to handle the uncertainty on certain times ahead. We will also provide comments on the first quarter results, color on market dynamics in April as well as our current assumptions for the next few months. Since the outset of this pandemic, our priorities have been clear, beginning with the safety and well-being of our employees. We have taken aggressive steps to protect our employees by restricting access to our sites, implementing enhanced cleaning protocols, performing contact tracing among our employees, administering quarantines where needed, and implementing work from home protocols where possible. I want to acknowledge the tremendous efforts across our organization and overcoming the challenges created by the pandemic. The determination of our employees from Across the Globe to maintain business continuity has enabled us to continue to be a reliable supplier for our customers, and the vast majority of our plant sites have been being essential in their local jurisdictions and have continued to operate. As a result, many of our manufacturing or other necessary personnel deserve particular recognition. There extraordinary dedication in this incredibly challenging environment has enabled us to keep our sites and supply chains operating. Our second priority for matching in these difficult times. In fact, we have been successful in maintaining our operating base during the global pandemic with only a handful of our manufacturing locations shut down by local restrictions over the past few months And currently, operations are restricted at only 2 of our 170 manufacturing sites. We have begun longer term planning for eventual return to the work for nonmanufacturing employees which will be done in accordance with all relevant government requirements and continued emphasis on health, safety and the overall well-being of our employees customers and communities. Our 3rd area of focus has been bolstering our already strong balance sheet financing our liquidity position and implementing plans to generate and preserve cash. We will provide more detail on these actions in a moment. Lastly, we continue to do our part to help combat this pandemic. We have donated over 140,000 tyvek garments and thousands of gallons of hand sanitizer to healthcare and other frontline workers. We have also used our 3 d printing capabilities to make face shields for local hospitals that were experienced as shortages and partnered with Cummins to use DuPont filtration technology to augment the supply of N95 respirator masks. We have also announced a number of initiatives to increase the supply of protective garments, by more than 15 by more than $9,000,000 per month, primarily by shifting production away from non healthcare markets. And launching the tieback together campaign, which enables the production of 5,000,000 to 6,000,000 additional garments per month through the rapid development of a safe, easy to use version of 5x. And by empowering others to join DuPont and protecting frontline responders with free access to our designs and usage instructions. These are unprecedented times and I am personally engaged in the day to day work to respond quickly to the changing environment. We take our designation as an essential business very seriously and are committed to doing all we can to support our employees our customers, our partners, our shareholders and the communities in which we operate. Slide 3 details the series of actions we have been operating against since the pandemic spike in mid March. The senior leadership team and I are on top of these items daily to ensure we remain well positioned. We have analyzed a number of stress case scenarios and are confident we are making the right decisions to ensure we are favorably positioned to weather an unlikely steep and prolong downturn, while also being equipped to return to growth when the market recovers. Our playbook for this environment is straightforward, improved cash generation through working capital improvement, and deferral of certain capital expenditures, brings in our liquidity position and optimize the cost structure of the company. We will provide more color on broad and simulated severe downturn cases to ensure we could protect the company. We are also staying keenly focused on the downside risk in automotive, aerospace, oil and gas and other industrial markets. With nearly 15% of our sales connected to the automotive industry, This is the largest area of exposure for us, particularly within our Transportation And Industrial segment. The numbers are unprecedented, with global auto builds down 24% in the first quarter and the latest estimates suggest the global auto build be down more than 40% in the second quarter. In light of this, we developed a plan in the 1st quarter begins slowing and idling certain facilities in our network. Primarily factories in our Transportation And Industrial segment, in order to align our supply with market demand. Taking these actions will provide significant working capital improvement through inventory reductions over the course of the year, but will translate into near term earnings headwinds as 6 costs that would otherwise be absorbed in inventory will now flow directly to earnings. For T and I, a very weak top line, driven by the expected decline in auto builds as well as year over year price declines coupled with the charges associated with these plant shutdowns is expected to result in decremental margin and T and I of approximately 55% to 65% in the 2nd quarter. These are not easy decisions, but the confidence to react quickly and decisively is critical and we will continue this mindset as we move forward. Let me turn it over to Lori for additional color on the other actions we have taken as well as a few comments on the first quarter. Thanks, Seth. Slide 4 highlights our strong liquidity position. We have always valued a strong balance sheet and that mindset led our action as the severity of the downturn came into focus in mid March. We thought the certainty of access to liquidity well as a firm plan for refinancing our November 2020 bond maturities by quickly putting the wheels in motion to obtain bank finance as commercial paper and credit markets were initially constrained. In facility, which replaced the $750,000,000 facility that was set to expire in June. While we expected to remain untapped, extending and enlarging this facility provides greater certainty to meet our general business needs. We also obtained a $2,000,000,000 delayed draw term loan to ensure we had a path to pay off the November maturity, but have since replaced the bank commitment with a short dated bond, which I will discuss on the next slide. With these new credit facilities in place, and our strong cash position we feel very comfortable with our liquidity. We also have opportunities ahead of us for further cash generation through working capital improvement and proceeds from divestitures. Key area for improvement and expect to deliver more than $500,000,000 of working capital improvement in the year, and we are off to a nice start in the 1st quarter by reducing our use of cash by $300,000,000 versus the prior year. Each to deliver our working capital improvements, including inventory reductions through initiatives such as SKU rationalization, and shifting from a make to stock model to a make to order model in certain businesses. Within accounts receivable, our teams have increased our focus on tax to accounts and across both accounts receivable and accounts payable, we continue to optimize terms with our customers and vendors. In the quarter, we closed the sale of our Compound Semiconductor Solutions business generating over $400,000,000 in gross proceeds. We are also taking the prudent action to pull back on certain CapEx reducing our spend by about $500,000,000 versus the prior year. We elected in mid to late March to pause share buybacks after we had repurchased approximately $230,000,000 in the quarter. While shareholder remuneration remains a critical component of our financial policy, this was a practical action at the time in order to conserve cash. Lastly, our board recently approved the 2nd quarter dividend of $0.30 a share. We remain committed to our dividend and are confident that we will be able to maintain it through these challenging times. Moving to Slide 5. As I mentioned, Just last week, we launched a successful $2,000,000,000 bond offering, which has replaced the delayed draw bank facility we previously secured. The proceeds of this 3 year bond offering will be used to satisfy the debt maturities that become due in November of this year. The newly issued bond has a stated maturity of 2023, but includes a provision that accelerates the maturity when we close the IFS transaction. With the receipt of a special cash payment from the NND and IFS deal, we remain committed to paying down our debt by $5,000,000,000. With this deleveraging payment, we will have no long term debt maturities until the end of 2023. Getting bonds in place to pay off the November maturities will be net neutral to our debt position as of the end of the year and significantly improve our liquidity position. We have a manageable debt load and we are in a position to maintain a strong balance sheet, both now and post the NNB IFS transaction. We continue to hold strong investment grade ratings from each of the leading rating agencies and intend to maintain the balanced financial policy that has positioned us well. Turning to Slide 6. We remain committed to delivering our structural cost savings targets. In March, we indicated that we would be doubling the incremental cost actions that we plan to deliver in 2020 from approximately $90,000,000 to 180,000,000. We are not impacting the long term growth the savings we have identified are targeted at reducing functional G and A costs, thus maintaining our investments in sales and R and D. We plan to maintain our competitive level of R and D spend of approximately $900,000,000 in 2020, which will help to ensure that we are well positioned for growth once market recover. These cost reductions will enable us to achieve a best in class functional cost structure. In addition to the structural cost savings, we took a number of actions to control cost increases, including the decision to forgo merit increases for 2020, and implementing a hiring freeze. We're also seeing reductions in costs associated with capital projects as we pull back on our capital and lower spending across the company. These actions were implemented quickly and we are seeing the benefit. Before turning it to Ed, I will comment on the first quarter results on Slide 7. Our teams executed well to deliver a solid quarter above our expectations in each of our core segments. We delivered net sales of 5 point $2,000,000,000, down 4% in total and down 2% organically with price flat and volume down 2%. We saw strong demand across a number of key end markets, including protective garments, water filtration, electronics and probiotics. Gross margin improved more than 150 basis points on a year over year basis on favorable mix and the benefits from our productivity actions. Operating EBITDA was $1,300,000,000, down 8% from the year ago period, driven primarily by the absence of $75,000,000 discrete gains in S And C And E And I, as well as lower volume in price in T And I. Adjusted EPS of $0.84 per share was down 9%. Turning to Slide 8 for more detail on this segment. The solid 4th quarter results in our Nutrition And Bioscience business are clear in the numbers. Solid top line growth and robust operating leverage led to an operating EBITDA margin improvement of more than 200 basis points. The operating leverage in N And B was primarily driven by the recovery of the probiotics business, which delivers a margin above the segment average. Probiotics had its strongest quarter ever as key initiatives to strengthen the North America market were implemented and consumer demand for immune health strengthened globally. N and D also saw increasing demand in food and beverage, home and personal care and animal nutrition market, a trend we continue to see in April. Likewise, 8% organic top line growth in our E and I segment was a solid result. Strength in the quarter was led by double digit growth in interconnect solutions, driven by higher material content in premium, next generation smartphones and high single digit growth in Semiconductor Technologies, on new technology ramps within logic and foundry, coupled with robust demand for memory in servers and data centers. These areas of strength were more than offset by the absence of a $50,000,000 prior year gains, resulting in operating EBITDA decline of 12%. The results of our T and I business were generally as we had anticipated with a very difficult environment for both price and volume. As Ed mentioned, we expect further challenges looking forward as the audit industry slows dramatically as a result of the COVID-nineteen pandemic. We delivered net sales of $1,100,000,000, which included a volume decline of 8% and a price decline of 4%. We anticipate a similar year over year pricing trend in the second quarter. Within S And C, demand for pet protective garments was robust, leading to a 55% increase in garment sales versus last year. Our tieback team is working tirelessly to get our protective garments in the hands of healthcare and other frontline workers. Including in many instances donations of these garments. Speed and availability of personal protective equipment, and we are taking great effort to prohibit opportunistic pricing of these vital supplies. Despite the strength of protective garments, sales in the Safety Solutions business declined mid single digits as demand weakened across industrial, aerospace, and defense markets as a result of the COVID 19 pandemic and challenges in the oil and gas industry. Similarly, shelter solutions sales declined low single digits as construction activity was impacted by state home orders issued across the globe. Demand continued to be strong in Water Solutions, which drove mid single digit organic growth in the quarter. SNC operating EBITDA margin of 28 0.8% was the highest it had been in several quarters, driven by the continued focus on price improvement, cost actions and productivity. Versus first quarter 2019, operating EBIT was down due to the absence of a $26,000,000 gain, which was recognized in the prior year. Turning to the adjusted EPS bridge on Slide 9, you'll see that our adjusted EPS declined 9% to $0.84 per share for the first quarter. Organic top line growth in our E and I and N and B segments as well as further execution of our cost savings and productivity actions, was not able to offset the $0.06 headwind we saw from nylon pricing pressure in our T and I segment as well as the absence of prior year gains in our E and I at and C segments, which reduced adjusted EPS by $0.08. Below the line, we saw a 500 basis point increase to our base tax rate driven by discrete items in the first quarter. We expect our full year base tax rate to be in the range of 21% to 23% driven by the first quarter discrete items. With that, I'll turn it back to Ed. Slide 10 shows the progress we have made since announcing the NMB and IFF transaction last year. I remain very excited to bring these 2 businesses together to create a global leader since the announcement of a transaction in mid December, teams have been hard at work. As I told you in January, the executive steering team and leaders for key work streams, including separation and integration, par financials, IT separation and stand up, legal entity work, and talent selection are in place, and things are progressing as planned. In fact, as of March, we have received antitrust clearance here in the U. S. And our draft EU filing was submitted on April 20th and we are now working with the European Commission to formally notify the transaction and obtain antitrust clearance. We will file our initial registration statement with the SEC in the coming days. Also, the new leadership team will be announced later this month. And IFF intends to hold its shareholder vote in September. In summary, the teams are energized and all the critical milestones remain on track for a Q11 2021 closing. Let me wrap up with a few comments on what we saw in April as well as our expectations for the second quarter. We are seeing robust demand continuing within several key end markets such as water filtration, food and beverage, probiotic, electronics and protective garments. There are some increased demand in these markets as a result of the pandemic, but these businesses are market leaders in their space. There is undoubtedly underlying growth driving these results as well. However, as we have highlighted, these areas of strength are expected. Be more than offset by the well known softness in automotive, aerospace, oil and gas and other industrial markets. In April, our sales were down low to mid teens percent versus last year. Earlier, I mentioned the actions we're taking to run our T and I business for cash through this period of significant demand weakness. These actions will result in near term earnings headwinds as fixed costs and otherwise would have run the inventory will flow directly to earnings. Likewise, actions to pull back our production will lead to lower utilization in several industrial businesses within our SNC segment. All in, we expect our 2nd quarter decremental margins to be in the range of 45% to 55% from lower volume, nylon pricing pressure lower utilization and costs associated with idling facilities. Excluding our decision to idle facilities, our decremental margins would be in the range of 35% to 40%. While it is still impossible to predict timing our markets will eventually stabilize and return to growth. And we will be well positioned for the recovery In the interim, we will continue to prioritize the safety and health of our employees, safely maintain our operations, strengthen our balance sheet and partner with other industry leaders to combat this pandemic. I'll now turn it over to Leland to open up for Q And A. Thanks, Ed. Before we move to the Q And A portion of our call, I would like to remind you that our forward looking statements apply to both our prepared remarks and the following Q And A. Thank you. Our first question will come from Steve Tusa with JP Morgan. Hey guys, good morning. Good morning. Good morning, Steve. A lot of companies are calling out, like gargantuan temporary cough savings, you know, 3M talked about $350,000,000, $400,000,000 or something in the second quarter alone. Honeywell talked about like a $1,000,000,000 I see kind of the structural cost, which is positive, obviously, because that kind of, you know, carries forward. Can you maybe frame anything that may be temporary that can kind of defend the margins in the near term? Yes. Steve, thanks for the question. And obviously, we've spent a lot of time on this topic. So, as you know, we upped our structural cost savings in the last month or so from 90,000,000 to 180,000,000 In addition to that, remember that we have another $165,000,000 that is a structural change to the cost of the the business that's coming out from the DowDuPont merger and putting those businesses together. So in total, we have about 300 and give or take $30,000,000 coming out of the system permanently. On top of that, we have about another $80,000,000 to a $100,000,000 of what I would call opportunities that are T And E Reduction, external contractor spend that our facilities And we've eliminated the merit increases. We freeze hiring. So things that were in our plans are about another give or take, easy to $100,000,000 that won't get spent that was baked into the plan. So, when you kind of sit back and look at it, we have benchmarked every function in the company, every business in the company and we are getting the G and A expenditures to best in class benchmarking, with the best companies out there. Remember that 4 years ago when I arrived, we took about $1,000,000,000 of structural cost out of DuPont. And during the DowDuPont merger, we took another $1,000,000,000 of structural costs out of the business on top of what we're now presently doing. So I think if you look at it, we're going to benchmark very, very well through this. And again, I wanted to really attack structural costs so that they're permanent in the business. Another point though that I would make We did not touch the growth programs in the company. We left all of our sales organizations totally intact and we left all of our R and D spend, which is 4% of sales, $900,000,000, totally intact. And by the way, I think we're running our R and D machine very, very well. We benchmark every single program. What's the return going to be on the program? Are we spending what we said is the timing, the timing we said it would be. So we're going to come out of the downturn, I think, in a very strong position. We're still cranking out a lot of new products through this. So I think we balanced this thing very well. Our next question will come from Scott Davis with Melius Research. Hi. Good morning, Ed. Good morning, Laurie. Good morning. Hey, Scott. Nice to hear your voices. Hope everybody's doing okay. Yeah. Good to hear you also. Yeah. I was encouraged by that comment on April down low teens and I guess my question, I was hoping you could give us some granularity on perhaps by segment on what those numbers were. Because that does sound like a pretty a pretty good result versus what we're hearing from others so far, at least. Yes. Thanks, Scott. So, as we mentioned on the call, April was down kind of low to mid teens. It was a similar result that we saw in Q1 kind of carry into April. So we saw continued strength in E and I continued strength in N and B. The strength in E and I is primarily coming again, from semiconductors as we see increased usage in the data, and server space. T and I and S and C were down, more than what they were down in Q1, you know, in line with what you would expect with what's going on in automotive. You know, automotive right now, we expect it to be down about 45% in Q2 versus down 25% in Q1. In SNC, continued strength in Tyvek within the garment space. So garments alone, which are about 3rd. Historically of Tyvex, they kinda come up now to almost half of Tyvex. We're up about 55% in the quarter, so really nice strength there. And we've announced capacity expansion to enable that to continue to grow into Q2. But the headwinds that we're seeing in aerospace and oil and gas are more than offsetting that well as construction with all the state home orders. So net net, April down, as we had mentioned about low to mid teens with very similar end market results, what we saw in 1. Our next question will come from Vincent Andrews with Morgan Stanley. Thank you, and good morning, glad everyone's well. And I appreciate a shout out to New York City in the cover slide. I assume that's not a coincidence. Maybe just a follow-up on the transportation and maybe just a follow-up on the transportation industrials. You said bills were down 24% in 1Q, but your volume was only down 8%. Was that sort of a trade loading of some sort? Does that have to reverse in the second quarters such that your auto performance would actually be much worse than that 40% that you're seeing in decline in global auto builds? Yeah. So I think, so underneath the 12% down, 8% volume that we've recorded in TNI. So there was strength we saw in the healthcare segment that offset some of the weakness that we saw in mobility solutions. And this mobility would have been down more than the more than the results that we reported for the quarter. Having said that, though, we continue to, expect to see our performance out teasing auto bills just driven by the content or vehicle. So we've given a number in the past about 1.5 times that we would look to see auto vails just driven by, the extra material content that we have as we see ramps towards, light weighting as well as, is electric vehicle. So that's kind of what led to our results throughout pace. There is a little bit of a timeline between when you see auto bills decline and when you see back the chain where we primarily fell into with our polymers. So we did see a little bit of the acceleration in Q1 as people were loading their supply chains in advance of the downturn. So I think our results in Q2 and more mirror what you're seeing from an end market perspective. Yes. And just to add on to that, to make it clear, this is a business in TNI that we are truly running for cash performance in this period of time. So we have purposely are hurting our earnings by $90,000,000 to $100,000,000. If we kept running the facilities, As they do, for instance, in the semiconductor industry, our earnings would literally be $90,000,000 to $100,000,000 better. But we're gonna draw down the supply chain here and generate 200,000,000 to $250,000,000 of cash performance in the company. So we will be temporarily shutting down about city in the business. And I think it's the right decision, a smart decision to do that, and we'll come out of it stronger and have a better up kick when things return a little bit more to normal. And your next question will come from Steve Byrne with Bank of America. Near term focus on these urgent issues like, the coronavirus. I just wondered if that impacted any progress you made on your PFAS liabilities, not didn't hear much about that and just wanna know whether or not you could give us an update on that, on the arbitration with Chemours, the litigation the Ohio MDL and any movement towards getting a little more collaborative, on this front? Yes. Thanks for the question, Steve. So on the PFOA front, as you know, we had the 2 trials of the case, the small amount of cases remaining. My personal opinion is there will be a settlement there. We'll get those cases in Ohio behind us. And I'm highly confident that will occur. As you know, Kumar's the judge ruled in our favor this will go to arbitration. Chemours did appeal that to the port. But you know, the law so heavily on our side on this issue that, arbitration will occur here. As I've said before, I like the arbitration process just because it a quicker process than going through the court system. So we feel very, very good about that. But again, my opinion is There probably will be a settlement with Chemours that will occur here at some point in time where we'll renegotiate, the agreement we have between the companies. There are some very key guideposts in any agreement that we would come up with that are important to us. It will not be in we will not do an uncapped deal And it would be a deal that would play out over multiple, multiple years because I don't see any liabilities on PFOA that are significant at any point in time, but there will be liabilities that will play out over years as we do remediation at these certain sites and all that. And then one other point I would just make you know, remember that I think a lot of the hoopla around PFOA with us and I certainly acknowledge this that it's a little bit of a cloud over us is that we are being named in a fair amount of the firefighting phone cases, but It's very important. And I know Steve, you've written extensively about this. We never made firefighting foam. We had one surfactant that was used for 10 years out of a 70 year period. So I think we're a very, very minor player, if at all. In firefighting foam. And I think the biggest issue for DuPont is to get out of those cases and be able to wrap that up. I think it's the biggest thing because the rest of the PFOA is very limited to 4 manufacturing sites where we used it in the process, in the manufacturing. So again, that will play out over the next year or so. But on the other two items, the Ohio 1, the Moores 1, I think you'll see, some action there in the coming months. Next question will come from John Inch with Gordon Haskett. Good morning, everybody. Good morning, guys. You have a prominent, I'll just say a prominent reputation as a deal guy. However, I think folks often forget you kind of cut your teeth in operations at Motorola. How have you and Lori gone about coming up with more than double the cost saves versus prior management in only a few short weeks months? And often companies that start down more of a heavy lifting restructuring path, I think financial services, lots of different sectors. They actually find there's more and more that they could do without sacrificing core ops or productivity or the quality or whatever, are you guys funding similar opportunities as you go through the processes or is it still kind of a little bit too early to make that judgment call? Yes. Thanks for the question, John. And Laurie jump in in a minute also if you would like. And, Barri, thank you for saying, you know, about working on costs and operations. That's actually what I like to do the most even though maybe reputationally, it's different than that. I love running the businesses. So I mean, I'm a big believer in benchmarking. I'm a big believer in keeping G and A costs, really lean and mean. By the way, I've talked to many CEOs during the COVID 19 here, and I actually think we're finding additional ways to potentially structurally save costs in the company. I'm pretty impressed at how efficient we're running company, in the stay at home policy for most of our non manufacturing employees. So I think there's some lessons we're going to learn there on our real estate footprint as we move forward. But we always intended, to take out more costs and remember when NMB leaves the portfolio, it's important that we reduce our G and A cost structure in a company so that we're still best in class when that revenue and EBITDA leads the company. So what we've done is we've really bench marked very significantly around what are we going to look like post the N and B transaction? One of the other things we're doing on the, which will probably translate into better costs is we're really going through the company and looking at every single S Ku and the company and really looking at a rationalization there. I've done this in every other company I run-in there's always very significant opportunity. We've already completed it in our water business. And we've taken the margins up 1000 basis points, in the water business. And a big part of that was the rationalization of SKUs through the business. So that's the kind of the path that Lori and I are on right now in the company. And I think we'll continue to get opportunities from that. Laura, you want to comment? Yes. I think, our next area of focus, we've obviously run a lot of cost out as far over the last few years that we're looking and shifting the focus towards COGS. So, there are definitely areas of opportunities in COGS. We spend about $13,000,000,000, $14,000,000,000 there. There's opportunities to increase our reliability, increase our uptime, increase our yield. So that's definitely an excellent area of focus for us help us to continue to expand margins. Our next question will come from Jeff Sprague with Vertical Research. Thanks. Good morning, everyone. Hope everyone's well. Thanks, Chad. Just kind of thinking about the trajectory of this thing. Obviously, a lot of your businesses are fairly short cycle. So it's unclear how much visibility you have. But, do you see April being the low watermark, in terms of kind of sales declines or are we looking at kind of the possibility that auto stays weak and some of the pockets of like electronics maybe soften up a bit. And maybe as part of that answer, Ed, you made a comment about planning for kind of an unlikely steep and prolonged downturn. Obviously, none of us have a crystal ball here, but would appreciate your perspective on really what you think this does look like kind of the path back up and out of this current drawdown? Yes. Let me hit the high level scenarios planning we did first, Jeff, and I appreciate the question. And by the way, I was a CEO through the 'eight, 'nine, and, Jeff, you know this. I took over type go in 2002 on the brink of bankruptcy. So I've done a lot of scenario planning in the past and never thought I'd have to do it again, but we actually did two cases for for ourselves and for our board that we presented to the board of directors. And by the way, I don't plan on this happening at all, but it was truly just scenario planning. We did a scenario where what if revenue was down 30% for at least 1 year. We did 20% down on volume, 10% down on price, which would practically, the world would be coming to an end, but we did it anyway just to say, Hey, here's how the P and L would look. Here's how our cash position would look. And by the way, we would be fined through a period like that. We did another scenario, and I don't even want to say this one to you, but it was even worse than the 30 percent 1. Let me just say it that way that we also presented to the board. And I'm just a big believer in, you know, don't be naive here. If things are tough for a longer period, how do you run the company through it and make sure the company is healthy? So I feel very, very comfortable with where we sit and where we put the liquidity of the company through this scenario. And oh, by the way, when the NMBIA F Deal happens, we get $7,300,000,000 of cash. And as Lori mentioned in her prepared remarks, We're going to use $5,000,000,000 of that to pay down. Debt, so we'll be in a normal operating environment. Our our debt profile will actually be better than it is in current DuPont. And remember, we will still have two point $3,000,000,000 of excess cash left over from that $7,300,000,000 that we'll have available to us. So we're going to be in just a phenomenal a position from that standpoint. Laurie, would you like to comment a little more detail? Yes. So I think, to your question on the 2nd quarter, so, you know, we do at this point where we see the 2nd quarter as the lowest through the year. So, as we mentioned, the sales in April were down low to mid teens. We have a hard time seeing total Q2 sales being worse than down mid teens. So as we see it now, the Q2 should be a low point. Yes, I think also, you mentioned the E and I business. I could see the semi business, obviously, the downturn a little bit, going maybe into the third quarter. You know, it's been running very robust in the first quarter. It's running robust in the second quarter, but all indicators are that that will turn down a little bit. So I could see that happening. But as Laurie just said, I think mid teens down on revenue is probably the bottom, of what we're seeing based on what we know as of today. And your next question will come from David Begleiter with Deutsche Bank. And Laurie, just on CapEx, good morning. On the CapEx reductions, what types of projects? I assume growth projects are being cut back. I assume these are temporary deferrals and are you running close to maintenance levels at these current CapEx guidance targets? Thank you. Yes, so high level David. Thank you for the question. So last year, we spent $1,500,000,000 on CapEx and we planned on spending $1,300,000,000 this year. And remember, we're higher than our D and because we had 3 or 4 key growth projects all hitting at the same time that we feel really good about. So that's the reason for the one 25 last year and even higher this year or high for us at 1.3 this year. We have reduced that to $1,000,000,000. So 15 last year down to $1,000,000,000 this year. By the way, everything that we've delayed is simply a delay. We're not cancelling it, because we want to turn these back up when appropriate. But the 2 of the bigger ones that we, cut back one was, Tyvek line 8, which is our biggest CapEx program by far. It's over $400,000,000. And we spent a fair amount on that last year. That will come online. In a couple of years. That is a big, big project for us. And the demand on Tyvek even ex storm, it's because of medical supplies and all that. Is, very important to us. So anyway, that was one. We cut back on our Kapton, expansion just temporarily, that was another one. And some of our maintenance CapEx, we slowed down just a little bit also. So that's what gets us down to the $1,000,000,000. One thing we did not touch at all And I certainly would never do this. Is any of our safety programs that we're spending CapEx on at our facilities? We've maintained that at 100% of the spend level. And then another area I'd say is the other big one besides slowing down a couple of the growth projects was some of our ERP, pro software programs. We also slowed those down. They're nice to have from an efficiency standpoint, but we're 6 months later on and it's not the end of the world. So that's kind of the big buckets on what we did. And by the way, as we see things pick up, obviously, we'll go right back to spending against those growth programs? Yes. If I can just quickly comment on the Tyvect line 8 that we had to pause due to some regulations in Luxembourg construction is taking place. I mean, we did mention our prepared remarks just to reiterate that we were able to put in place some incremental capacity expansions to be able to meet the current tieback demand. So we not only, added in the, in the 1st quarter alone. We usually have about 15,000,000 garments. We went up to 25,000,000 garments, and that was through a combination of incremental capacity remapped in, our current asset as well as pulling products from non healthcare market. In the second quarter, we announced our tieback together campaign will allow us to add another $5,000,000 to $6,000,000 garment. So we've got, new capacity coming online even though we delayed the start up of the new line because of the regulations going on in Luxembourg. And our next question will come from Jonas Oxgaard with Bernstein. Hi. Good morning. Good morning, Janice. I was wondering if about your, your, your cash use, your buybacks. I mean, at what point would you feel comfortable resuming the buybacks again. I'm not really asking for a specific week, but like how are you thinking about it? Yeah, I certainly haven't thought about it in weeks yet, so we did about $230,000,000 of buyback in the first quarter of 6,100,000 shares. And I guess the way stocks come back, we bought them back at a pretty nice price. So I obviously feel good about that. And as we said, we suspended it. We have not canceled it. If things are picking up through the second half of the year, we'll certainly look at share buyback again. As I said a few minutes ago, the balance sheet is in great shape. We're going to get the cash from the the IFFN and B transaction. So, we know that's coming at the beginning of next year. So we'll be in a strong position to reassess that with the board. So it's really just to spend for the time being, make sure things don't get worse here. And as Laurie said, I think hopefully the 2nd quarter is the low quarter. Maybe drift obviously into the 3rd quarter, but pick up from there and then we have that money coming from the deal. Bobby, I'd also just mention on the NB and IFF front. As we said in our prepared remarks, we are in great shape. I talked to Andreas, the CEO of IFF, every single week. Us with the EU now. And as you know, on this deal, there really is no antitrust issues. So all the teams are right on schedule. Which is pretty amazing considering a lot of work at home policy going on right now at both of the companies. So we will definitely progress on the schedule. We're on for a February 1 close and we're going to have the shareholder vote, in September. And, I feel good, great about that. And we also have a shareholder that owns, give or take, 23%, 24% of the shares voting in favor of the deal. So, you know, just in great shape. Your next question will come from John McNulty with BMO Capital Markets. Yeah, good morning. Thanks for taking my question. So with the, with some of the economies starting to open up a little bit. I guess, can you speak to whether you're seeing any incremental demand pull? And I guess to that, you spoke earlier in the call as to maybe there little bit of inventory to kind of work through, whether it was yours or your customers in the auto side. Can you speak to kind of a broader the broader situation with regard to inventories and what you're seeing in the channels and how long it may take to actually work through that? Yes, I'll let Lori answer the second part of that. Let me just touch on the first part of your question, John, and give you kind of one a data point, the China economy is coming back first. And by the way, interesting, within 3 weeks of the, you know, being able to come back in facilities were up and running after the new year. It was very impressive by including one in Wuhan that we have. So we're pretty much back to, and I'm not quite full capacity, but Darren, you're close to it. With our 13 production facilities in China. But let me give you a data point. In the first quarter, in China. Our sales were down organically 1%, which actually surprised me that it was that good. Considering we were shut down for a few extra weeks. But in April, our sales are up 6% to 7% in China. So we're clearly seeing the comeback there And again, things aren't totally back to normal over there, but from a minus 1 to a plus 6 or 7, is pretty impressive. Just to give you a little more granular around that. And similar to comments, Laurie made a little bit ago, E and I is up double digit. N and B is up double digit. And by the way, the real performance in NMB is probiotics in China is double digit growth and T and I and S and C are kind of flat. So that's kind of the breakdown of it. So as you see economies, everyone getting out of their homes again and the economy is starting to work. That's the numbers we're seeing over in the China market Laura, you want to comment? Yes, I think, you know, the inventory discussion is best had within T and I and E and I, as you had mentioned. So, T and I, we talk the beginning of that call. Potentially, there was a little bit of pre buying in Q1, into the polymer chain that caused our results to be a little better than where the auto builds were. You know, one of the key indicators that we look at in China is the vehicle alert index. It measures kind of inventory in the chain at the dealer level. And we did see some normalization as we got towards the end of 20 team and into January. And then it, and then it spiked to a pretty high amount, I think, in the 80 in February, and then came back down nicely in March. And so I think Right now, as we see it, there's not a lot of excess inventory in the auto chain. Obviously, we're just having issues with demand, with auto lows down 45% in Q2. On the E and I side, I would say there is some of the customer building, their supplies to ensure that they had adequate safety stocks that had benefited Q1, probably benefiting a little bit of Q2, especially within the semi chain. So I think those are kind of the landscape of inventory. So So probably about normal, there were some spikes in Q1 in TNI that were actually normal and probably a little bit elevated in E and I. And our next question will come from Buck Koort with Goldman Sachs. Thank you very much. Good morning. Good morning. I want to ask, I saw you guys had a net price mix was flat. Wondering if you could comment a little bit, I guess, in T and I and S and C, you do have some petrochemical backbones. What did the raw material bill look like in the first quarter? And I guess we're still seeing some softness in nylon and some other things. So how do you sort of see that price mix development into the middle part of the year? Yes. So, the majority of our benefit from lower rod within the oil dynamics would be within TNI and SNC. So from a full year perspective, we do expect, if oil price were to kind of stay where it is, about a $200,000,000 benefit in raw primarily in those two segments, we're actually seeing some raw headwinds within N And D and some of the food based ingredients. So pricing in T and I in Q1 was down 4%. That's primarily nylon. It was actually a little bit better than what we would have thought to given, demand was a little bit lower. And we had a better mix of nylon sales. If you recall last quarter when we, when we did earnings, we talked about pricing, headwinds being from 2 components. 1, actual nylon price decreases and 2, unfavorable nylon mix as we sell more of the opportunistic nylon. So in Q1, we actually didn't sell as much opportunistic volume for that benefit. To price a little bit. Within SNC, we continue to do really well with driving value and use pricing. We continue to see price lift within SNC in Q1. So we'll expect that dynamic to continue into Q2. Back to T and I real quick. So sequentially, we do see nylon price declining again into Q2. We see a similar kind of down mid single digit price overall in T and I in Q2. Sequentially, I think the most of the headwinds will be mainly behind us as we get through Q2. And as we go to the back half of the year, we should be about flat from an all on price perspective. Next question will come from John Roberts with UBS. Thanks. I'm glad you all sound well. Ed, the T and I segment, the T and I segment was originally part of New Dow and then it was moved to DuPont after it was thought to be a better fit with DuPont. I just could we revisit the thinking on that? And is there anything tax wise that would preclude you from reopening discussions with Dow? Yes. So remember what we really We still did move a key part of the T and I business, over to Dow. Which really fit more with them with exactly what they did. So we kept the part. And again, it's 60 percent of TNI is auto, but we're DuPont's a big player obviously in the in the auto end market. Not just in the T and I business. So strategically, I think the fit with us was better. There. But remember, the other 40% of the TNI business is other really great end markets. As Laurie mentioned, one of them being a medical which has held up obviously very, very well through this period of time. So, you know, look, I'll just say overall, I like where the DuPont portfolio is. Having said that, we always have optionality in the portfolio. I think we're aware of every possible scenario out there. And if something down the road, looks like it'll create significant value for us. I. E. The N. B. I. F. Field, we certainly will look at it. We're not wed things being exactly the way they are. Our key is to create shareholder value over the long term. Having said that in the environment we're in right now, Lori and I and the team are very focused on the operations of business generating cash and we're really spending our time on that at this point in time. But I would highlight just on the deal front. It's interesting to note, and I'm not surprised by this at all, that the value of the NMB deal is almost exactly where we announced the deal. When we announced that the value of N And B was $26,200,000,000 I didn't actually rack and stack it in the last day, but it's somewhere in the 25.5 a $1,000,000,000 range, where the stock price is trading at. So, and again, not surprised by that because the NMB business, as you could see in the first quarter had a tremendous quarter. We had 3 percent organic growth in the business. So those type of businesses are going to hold up extremely well in any environment economically. And I think therefore afford a nice multiple in that sector, which I think it deserves So when you really then look at it, most of you about all of you have written about this when you look at remain co DuPont, and want to trade that on a multi bit basis. It's pretty incredible to disconnect that sits there. So I think therein lies a big opportunity And our final question will come from Chris Parkinson with Credit Suisse. Great. Thank you. Thanks for speaking me in, and I'm glad to hear everybody's doing alright given the circumstances. Laurie hit on this a little. Thank you. Laurie did hit on this a little, but just as it pertains to the Safety And Construction segments, just given the differential current growth rates across the sub segments, you just offer some additional framework on how we should be thinking about the mix effects and the potential for decremental margins And then also just any insights on just how you're still thinking about the longer term margin profile of that business? Thank you very much. Yes. So we had posted really strong margins in Q1 as we had mentioned, so 28.8% I mean, a piece of that was the favorable mix that we're seeing. So tieback is towards the high end of our segment margins when you compare it across the different businesses in SNC. So the the highlights within SNC continue to be Tyvex and our water solutions for So really nice growth. I think 6% organically, 14% as reported with the benefits of the water acquisitions that we made at the end of the quarter. The headwinds are obviously within Shelter, which is in the low end of the margins for the business. So it would be below segment margins. As well as where we sell into oil and gas and and aerospace. So the detrimental margins, in S And C for the quarter would be a little worse than what we mentioned underlying for the company, really primarily as from slowing down some production sites. So we had mentioned within TNI that we're actually taking idle mills of about 90 to 100,000,000 dollars that are flowing directly into COGS and down to the point where we need to take idle mills, but therefore, we are having a lower volume run across our plants causing higher unit rates, which are what causing the decrementals to be a little bit worse than what we said for the total company. But continue to see longer term the ability to drive those 28 percent, 29 percent segment margins, for SCC. Thank you everyone for joining our call. For your reference, a copy of the transcript will be posted on DuPont's website. This concludes our call. Again, that does conclude our conference call for today. Thank you for your participation. You may now disconnect.