Earnings Call: Q1 2020

Apr 30, 2020

Good morning, and welcome to the Olin Corporation First Quarter 2020 Earnings Conference Call. All participants will be After today's presentation there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Steve Keenan, Olin's Director of Investor Relations. Please go ahead, Steve. Good morning, everyone, and thank you for joining us today. Before we begin, let me remind you that this presentation, along with the associated slides and question and answer session following our prepared remarks, will include statements regarding estimates of future performance. Please note that these are forward looking statements and that actual results could differ materially from those projected. Some of are described without limitations in the Risk Factors section of our most recent Form 10 K, the first quarter of 2020 Form 10 Q, and in yesterday's first quarter earnings press release. A copy of today's transcript and slides will be available on our website the investor section under past events. The earnings press release and other financial data and information are available under press releases. With me this morning is John Fisher, Olin's Chairman, President and Chief Executive Officer Pat Dawson, Executive Vice President, Corporate Strategy And International Jim Barlick, Executive Vice President and Chief Operating Officer and Todd Slater, Vice President and Chief Financial Officer. We will begin with our prepared remarks, and thereafter, we will be happy to take your questions. I'll now turn the call over to John Fisher. Tom? Thank you, Steve, and good morning, everyone. The response to the coronavirus did not have a significant impact on Olin's results in the first quarter of 2018. The epoxy business did have mandatory manufacturing plant closures and operating reductions in Asia, which reduced 1st quarter 2020 epoxy segment earnings by approximately $3,000,000. These epoxy resin manufacturing plants had resumed operations by the end of the first quarter of 2020. All Olin Manufacturing Facilities Worldwide the exception of those undergoing planned maintenance turnarounds. Our operations are among businesses that have been considered essential by government and public health authorities. I will begin today's presentation with Olin's view on near term market dynamics, followed by a discussion of the key highlights from Olin's first quarter and close with a detailed review of each business segment. During the second half of March and into April, only began to experience reduced demand across our portfolio. Corning demand from Urethane and isocyanates customers has declined and there have been discussions of extended outages later in the year. Especially in the isocyanate space. Hydrochloric acid has experienced a significant decline in demand tied to weakness in the oil and gas sector. Ethylenedichloride, which is an export product for Olin, has also declined, and we expect the proxy resin demand to decline in May June from 1st quarter levels. The lower demand levels and major planned maintenance outages in the First And Second quarters for Coronator organics, vinyls and epichlorohydrin have caused chlor alkali operating rates in our system to decline from 2019 While sales of bleach and chlorine into disinfectants is unclear. 80% level across the regions in which we operate. We believe the recent price increase announcements are supported by these market conditions The Winchester business began to experience increased commercial demand during the first quarter, and that is continuing. This improved demand combined with the 4th quarter start of the Lake City Army contract should result in a meaningful year over year increase in Winchester 2020 adjusted EBITDA. $8,000,000. During the quarter, Olin experienced one time events that reduced adjusted EBITDA by approximately $13,000,000. The unplanned events included a European phenol supplier force majeure that reduced epoxy resin production, the Canadian rail blockades that forced the shutdown of our Canadian chlor alkali facility and the COVID 19 related plant closure for EDC, hydrochloric acid and caustic soda was a primary driver of our lower quarter over quarter adjusted EBITDA. Chlor alkali segment pricing was approximately $26,000,000 lower sequentially. The lower chlor alkali pricing was partially offset by pricing improvement and lower raw material costs in epoxy also included approximately $50,000,000 of planned maintenance turnaround costs. As a point of reference, fourth quarter 20 19 planned maintenance turnaround costs were approximately $27,000,000. Now, I'll provide a bit more detail for each of our business starting with chlor alkali products and vinyls on Slide 4. First quarter 2020 adjusted EBITDA for our chlor alkali products and vinyls segment was $84,200,000, representing a 41% sequential decline from the fourth quarter of 2019. This reduction reflects declines in product pricing and higher maintenance turnaround costs. For the first quarter of 2020, caustic soda price an Olin system declined approximately 8% when compared to the fourth quarter of 2019. At the same time, ethylenedichlorine experienced approximately 14% lower pricing sequentially and hydrochloric acid pricing declined by approximately 25 percent. The business experienced overall demand in the first quarter of 2020 similar to 4th quarter 2019 levels. The second quarter chlor alkali products and vinyls adjusted EBITDA will include approximately $40,000,000 of costs associated with planned maintenance turnaround at our vinyl chloride monomer facility in Freeport, Texas. Now let's take a closer look at the changing chlor alkali chlorine and caustic supply demand balance. And that is on Slide 5. As we have discussed on previous calls, In 2019, chlor alkali products and vinyls business experienced an imbalance in demand that favored chlorine. Operating rates were driven by stronger construction and durable goods demand and relatively weaker caustic soda demand. This resulted in caustic soda pricing declines throughout 2019 and into the first quarter of 20 20. Current indications are that the imbalance that we have seen over the last year and a half in favor of chlorine is reversing. We expect chlorine demand into vinyls, urethanes and isocyanates to decline significantly, reducing North American and global chlor alkali industry rates. As the chart indicates, there will be locations are less impacted. The combination of reduced operating rates and shifting demand is expected to lead caustic soda favorable imbalance. Now we'll look at caustic soda pricing on Slide 6. During the first quarter of 2020, industry caustic soda prices continued to decline, and Olin's caustic soda pricing declined to approximately 8% when compared to first quarter, reflecting the tightening of caustic soda supply and demand. Export caustic soda price indices increased sequentially by 6 dollars during the first quarter and an additional $85 by $20 per ton in April. Olin has announced additional caustic soda price increases totaling $140 per ton for May June. We expect lower North American chlor alkali industry operating rates during the second quarter to reduce the caustic soda supply, which is expected to support improved caustic soda pricing. Now let's move to the performance of our Epoxy segment, which is on Slide 7. During the first quarter of 2020, Olin's epoxy business generated adjusted EBITDA of $33,200,000. Our European epoxy business experienced a force majeure declaration by a phenol supplier during the first quarter, which reduced epoxy resin and epoxy resin precursor production at our Stata Germany facility. The epoxy business also faced the manufacturing plant closures and operating reductions Asia due to the COVID-nineteen virus. These issues reduced their 2020 epoxy segment earnings by approximately $10,000,000. The epoxy business was able to partially offset these first quarter challenges through sequentially higher epoxy volumes higher product pricing from its automotive, industrial coatings and oil and gas related customers in both Europe and North America. Lower raw material costs primarily benzene and propylene are expected to provide epoxy adjusted EBITDA will include approximately $15,000,000 of costs associated with the planned maintenance turnaround at our Freeport, Texas epichlorohydrin plant. We will now oxy resin pricing improved sequentially from fourth quarter 2019 levels due to tight supply conditions. To lower raw material costs, primarily benzene and propylene together with an expected weaker resin demand environment in Europe and North America are expected to pressure a proxy resin pricing during the second quarter. Moving on to our Winchester business, which is summarized on slide 9. For the 3rd consecutive quarter, the Winchester business experienced year over year improvement in segment earnings. In the first quarter of 2020, Winchester experienced a 20% increase in sales compared to the same quarter last year. Resulting in a 31% year over year increase in first quarter adjusted EBITDA. Winchester experienced a $20,000,000 increase in sales commercial ammunition customers and a $10,000,000 increase in sales to law enforcement and military customers. The first quarter has continued into second quarter. Reflecting this improved level of demand, Winchester's commercial ammunition backlog has more than doubled since this time last year. Our ammunition plants are currently increasing operating rates to meet the stronger demand. Finally, Winchester announced price increases ranging from 4 to 6 Lake City project. Winchester is now 5 months away from assuming operational control of the U. S. Army, Lake City Army, ammunition manufacturing facility. This multiyear contract is expected to increase Winchester's annual revenue by $450,000,000 to $550,000,000, and contribute adjusted EBITDA of transition costs and invest approximately $80,000,000 in working capital as part of this contract acquisition. This world scale facility will benefit from more than a century of Winchester operational knowledge and experience. Likewise, Winchester will benefit from the scale and the incremental ammunition production capacity offered by this facility and its dedicated workforce. And with that, I'd like to turn the call over to Salazar, Olin's Chief Financial Officer. Todd? Thanks, John. We have placed a premium on preserving and enhancing our liquidity given that the near term demand outlook for our chemicals business is unclear. We've initiated several ongoing actions that we believe will mitigate partially mitigate the impact of the economic decline on our financial performance and also enhance our financial position. Several of these actions and our liquidity resources are included on Slide 11. Our cash and cash equivalents at March 31, were $195,000,000. Olin has senior unsecured revolving credit facility with commitments of $50,000,000 under our receivables financing agreement. And during April, we expanded our receivables financing agreement an additional $100,000,000. We also have the ability to increase our accounts receivable factoring arrangements, which ultimately can accelerate the timing of cash receipts and enhance our cash position. Neither of these receivable program impact our senior credit facility debt ratio covenants. We are continuing to evaluate all sources and uses of cash, including expanding our leasing portfolio, alternatives available to us under our senior credit facility, early retirement of outstanding debt and the ability to access the high yield debt markets. We have of manageable towers of debt with staggered maturities in future years. We are executing a strategy to improve our working capital and manage our balance sheet to maximize our financial flexibility. By approximately $150,000,000, which would result in an approximately $250,000,000 of incremental cash flow for March 2020 levels. We are forecasting capital spending to be in the 250 to $275,000,000 range in 2020, which is approximately $125,000,000 lower. Than prior year levels. Reduction in capital spending in 2021. In late 2020 beginning in 2021, we expect incremental annual cash generation from the initiatives track is transitioning from a toll manufacturing arrangement that has been in place since the acquisition. To a direct customer sale agreement beginning on January 1, 2021. The VCM facility is 1 of 2 operations that has had the most significant impact on our chlor alkali products and vinyls results. The full year effect of the new Lake City U. S. Army ammunition contract and the expected $35,000,000 reduction in costs from the previously announced permanent shutdown of a chlor alkali plant with a capacity of 230,000 tons and Olin's Vanality and chloride production facility, both in Freeport, Texas. These closures are expected to be completed before the end of 2020. And these closures will allow Olin to optimize its chlor alkali operations and cost structure in Freeport, Texas. And the winding down of the multi year information technology project to integrate the acquired Dow chlorine products businesses will reduce spending by approximately $110,000,000 between capital expense. These cash flow enhancements of approximately $200,000,000 provides significant incremental cash flows to Olin independent of industry conditions. Finally, on Thursday, April 23, Olin's Board of Directors declared a dividend of $0.20 on each share of Olin common stock. The dividend is payable on June 10th, 2020 to shareholders of record at the close of business on May 11th, 2020. This is the 306 the 3 74th consecutive quarterly dividend to be paid by the company. Operator, we are now ready to take questions. You. At this First question comes from Don Carson with Susquehanna Financial. Please go ahead. Thank you. A couple of questions. Todd, on the financing of the $493,000,000 payment to Dow for the final ethylene tranche, how do you anticipate funding that? And at current rates and access to markets, are you still anticipating, calling your high yield bonds and refinancing those? Don, the, as far as the Dow bonds, they do, as you know, become callable in October, but they are not due until 2023 or 2025. Given the lack of visibility and our outlook for our chemical businesses, we will continue to evaluate all, optional uses of cash in this environment. As far as the Dow ethylene payment, we would fully expect, based on our liquidity and availability under the revolver and AR, the expansion of our AR securitization, AR factoring and the various other items that I had just went through in our prepared remarks, to be able to fund the Dow payment at the end of the year. And John, a follow-up on caustic outlook, saw that the index went up $20 for April. What's your expectation for, May June. And if you could sort of expand on what kind of price strength you see in caustic as we swing back to from chlorine over weighting to caustic over weighting? Well, I think our view of it is reflected by increase out there for June 1. And when, as I said in the remarks, we're looking at 70% to 80% allocation on caustic soda as we speak. So I think we, at least in the short run, are bullish on caustic pricing. Thank you. Next question comes from Hassan Ahmed from Alemet Global. Please go ahead. Good morning, guys. Just a question around what you guys are seeing in terms of chlor alkali or chloravinyls, sort of capacity restarts, particularly in China. Obviously all of this charter out there about China sort of beginning to open up again and the like. But obviously, the cost curve today is quite different. Oil has come down, come down hard, but clearly that doesn't impact the chlor alkali market that much particularly keeping in mind how coal exposed Fluoravinal production is in China. So just would love to hear your thoughts about or their facilities that you're hearing about in China, which are delaying their restart, curtailing their restart, maybe even considering sort of shuttering some facilities and the like, just your thoughts, China specific about the supply situation and maybe a little more on the global side of things as well. It's a bit of a choppy picture, as you might imagine, in China. I think that, there were some initial restarts with, of the chlorine and chlorine derivatives being, a little bit stronger. So there were some, there was restarts and so forth, but then you also hear about restart and shutdowns, that, that had taken place. So I think China is exactly where you would expect them to be, which is trying to restart and gradually, refilling supply lines and so forth. And that's, that's up and as you might expect in some of the, the chlor alkali side of things. I don't know. I think that around the world, Right now in terms of operating rates, you know, you hear operating rates that are in the 75% range or so And it's interesting that that seems to be something that you hear in a lot of different regions. So, I don't have a lot of specific sites inside of China, but very choppy, which is exactly what you would expect. Understood. Understood. And as a follow-up, on the raw material side of things, again, coming back to the oil team, oils come down, a lot of people fearing that they'll be fairly deep sort of production cuts on the shale side of things and associated with these and cuts maybe the natural gas market tightens and nat gas prices go up a fair bit. How are you guys thinking about Natgas as it pertains to you guys as a raw material. I mean, are you in the camp that you think that maybe in the near to medium term natural gas prices do go up. And what are your thought processes about maybe even locking hedging or locking into sort of prices as we see them where they are today. Hassan, this is Todd. As you may know, we do hedge, natural gas as a proxy our energy, as you know, 70% of our energy cost comes from natural gas. Generally, how we are hedged is about the quarter out. We are very heavily hedged and that we have a rolling hedge program, to insulate us from, price spikes, we, you would think we've taken advantage of some of the low prices and the low futures that you saw, late in the first quarter. And so we are a hedger, and that process has continued. Very helpful. Thanks so much guys. The next question comes from Kevin McCarthy with Vertical Research Partners. Percent. To the extent that you have glean some market intelligence? Are your competitors on similar levels of order control at this point for caustic? Kevin, would you repeat the question? We didn't hear the first part of it. Apologies. The question related to your order control level for cost SOTA in the range of 70% to 80%. Just wondering if your competitors are similarly in a position where they have to adopt similar programs and restrict, supply of caustic at this point on similar levels. Kevin, this is Jim. Yeah, I think that everybody's in some restrictive, some level of restriction. That's what you're seeing. You see the pullback on the chlorine side of things, obviously on PVC, extreme pullbacks there. And that imbalance that was, favorable to the chlorine side of things some months ago is now shipped thing to the other side of that. So very low chlorine demand, vinyls demand and so forth is pulling everything back. So everybody's on some degree of limitation on a going forward basis. Okay. That's helpful. And then I had a second question for Todd on the liquidity side. On Slide 11, I didn't see any mention of a $1,200,000,000 delayed draw term loan facility. Is that facility still available to Olin? And if so, perhaps you could address what degrees of freedom you might have available to you in terms of how to deploy any proceeds from that? Kevin, the delayed draw term loan is available to Olin. As the current agreement stands, it is available only to call the Dow bonds. But as you made, as you heard us comment, in our we're evaluating everything, including alternative, alternatives available under our senior credit facility. Thank you for that clarification. The next question comes from Mike Sison with Wells Fargo. Please go ahead. So, quick question on the on Slide 5 in terms of the U. S. Caustic demand by any use. The, the areas that you have flat, urethanes, auto, aluminum, inorganic, It seems to me that a lot of other companies are saying those are those are down. So maybe could you give a little bit of a color of why that, that could be flattish in 2Q? Mike, this is Jim. Yeah, I think what we're trying to do here is to get the momentum or the, that the change that's taking place. And so, you know, might talk about alumina or so forth that's been down. That's why we have it yellow here. It's remaining relatively steady to where it has been. So what you should take away, from this really, I mean, the whole takeaway from this slide is simply that On the left hand side, of that the chlorine demand, there's a lot of red, there's significant pullback in go forth, whereas on the caustic side of things, there's a lot less, concern. It doesn't mean that demand hasn't dropped, but on a relative basis, the caustic side of the equation is increasing. So it's more of a momentum chart than anything, that and again, the math takeaway is for red, more yellow on the left hand side, which says heavy pullback as opposed to the caustic side, where you've got some resiliency. Understood. And then it's probably difficult to answer in this at this time. But when you think about the longer term view for caustic and chlor alkali and hopefully we get out of this these doldrums pretty quickly, how do you sort of rebuild some of the chlor alkali EBITDA power and I don't know if there's sort of a normalized level you think you should be at at some point in time and obviously, I'm not asking for exactly when, but how do you see that segment sort of rebuilding the EBITDA over time? I would go back to what we presented in February of 2019 in our Investors Day where we talked about whatever that might be, you're going to get demand growth on both sides of the molecule that are not going to be supported by supply. And I actually think an event like we're undergoing right now where you've got a significant pullback in demand is going to lower the probability of additional chlor alkali capacity getting built in the near term The next question is from Neil Kumar with Morgan Stanley. Please go ahead. I was wondering if you could just help frame for us the different moving pieces for the second quarter. What type of headwind do you expect from EDC with prices going off point a bit over the last month or so. And do you expect that as well as lower chlor alkali operating rates to largely offset the benefit from the $20 cost of price improvement in April, I guess before considering any potential May or June increased? What I would say about EDC Neil is that the majority of the EDC that Olin sells is sold under contract. So the prices that you've seen published We are going to experience on a lag basis. We really only sell in the spot market opportunistically and obviously at the prices seen recently, that wouldn't qualify as an opportunity. So I think the the negative from EDC for us in Q2 is not going to be quite as dramatic as it might look like. There is obviously a demand question, and we talked about lower demand pretty much across the portfolio. I would say at the end of the day, I think Worst case, EDC and the other negatives on group chlorine side will be off will offset the better caustic and the first tranche of caustic. Okay, thanks. That's helpful. And then based on previous downturns, How long do you expect the demand imbalance between chlorine and caustic to last? Is there anything different with this downturn with respect to how end market demand is evolving that may allow to persist beyond that typical duration? What I would say about this downturn past compared to the prior ones is this was very abrupt. I mean, I don't think anybody's ever experienced an a global stop on the, on the economy. Usually, there was, you know, we experienced cyclical wind down of chlorine demand where housing starts to weaken before the broader economy. That takes place over 12 to 18 months. We ended up in a 12 to 18 month period where caustic was tight. And then the broader economy rolled over. And then typically, Although this didn't happen in 2000, the post 2008, chlorine recovers first. I'm not sure how any of this necessarily comes back and in what sequence. I would just say caustic demand added core is more resilient than chlorine demand at its core. The next question comes from Frank Mitsch with Fermium Research. Please go ahead. Yes, good morning. And I really appreciated the heat map on Slide 5. John, I want to come back to the comment about 70% to 80% order on caustic. Is that was that just an April comment or was that for the entirety of 2Q? And can we assume that, that you don't have any spot availability on caustic right now? I think based on the outlook that we have for Q2, we will remain on order control for the entire period and your comment on spot is absolutely accurate. We have no spot to sell. All right. Thank you. Thank you. And Todd, I wanted to come back to the, to the comment about perhaps not prepaying the notes that are due or that are callable in October. I understand that it everybody's visibility is very poor right now. But given the fact that there is some financing in place to to, to take those out. I mean, more is it more likely, that, come year end, those will be retired or or how do we think about the probabilities? And I understand it's kind of difficult given the visibility, but I just wanted to if you could offer a little more color, that'd be great. Frank, this is John. I think the other thing we need to keep in mind here as we look forward is there's a pretty significant bond call premium that goes with that. Which is an immediate use of cash versus a long term, it takes us over a year to get the benefit of the bonds on a net cash basis. So that's the other element that we have to look at is where are we from a cash perspective? And previous questioner asked about the Dow payment, which is obviously due at the end of the year, which is a big number. Frank, the Dow bonds are not at all or nothing called. You can call, you know, any portion of that $1,200,000,000 and you can call it at any time. Right. After October 15th. Got you. Very helpful. Thank you. The next question comes from Eric Petrie with Citi. Please go ahead. Interesting, that in the U. S. And Europe caustic prices are going up, but I was taking a look at China caustic soda export prices and they've actually trended lower to the low $200 per ton range. So do you see any export arbitrage from China and the rest of the world and taking share and potentially putting a cap on potential price realizations? Eric, this is Jim. I spoke earlier about the dynamics that are taking place in China and China did start up and they had some, they ran some of the chlorine, chlorine derivatives and the caustic market, was not there initially, so they did do some exports. Now what you've seen over the last month is that the export market in Asia in general started off low and it moved up about $70 over the course of the month of April. I think what you're seeing is that a little bit of excess caustic that there was in China work itself off. China is a relatively small exporter in the whole scheme of things relative to what they used to be. They've reduced their exports by about 60% over last 3 to 4 years. So, and only the plants on the coast can actually export. So, you may see something a parcel here or there show up, but I don't think it's going to impact, the shortness and the dramatic pullback that we've seen on operating rates over the next few of April. Okay, helpful. Secondly, a competitor announced a plant shutdown for 3 weeks due to weak core alkali market conditions, could only consider doing the same or fast tracking your closures at Freeport, Texas? I think that, what we're going to do is basically take a look at the demand. I mean, we're already mean, we're already we already said that we're on order control and so forth. We look at our assets all the time. And what we're going to do is to take a look to see how demand materializes. We're really only, a month or so into this severe downturn. And so we'll assess assess what we need to do over the next several months. The next question comes from Mike Leithead with Barclays. Thanks guys and good morning. Good morning. I just wanted to return to slide 5 and maybe ask Mike Sison's question in another way on the caustic soda side. I guess, I understand the resilience for packaging or detergent applications but I'm struggling and is not meaningfully falling off in 2Q when U. S. GDP is minus 30. So can you just give us more color on what you're seeing in your order book for caustic and some of those more cyclical end markets? Well, I'll specifically address the alumina aluminum market and quite honestly, those markets have been relatively soft for the last year to year and a half. And so we're not seeing any trend change from where they have been. In fact, they've been relatively consistent. And I think you'll hear that is that that in, whether it's in Latin America, whether it's in China, wherever the, the, the alumina plants are, they're actually running consistently. So That's what we're, that's what we're saying. There's not a change relative to where they have been over the last few quarters. Clearly, automotive has been down some period of time as well. So, although it's certainly yellow, it's not a major change from where they have been rating. So that's the way to read the chart. Got it. Okay. That's helpful. And then question for Todd, you obviously highlighted a number of different levers you're pulling to free up liquidity, but you haven't talked about the dividend at all. So I guess how sacrosanct do you consider paying the quarterly dividend? This is John, and I'll answer that question. I'd start by saying dividend decision is a board decision. It's not a management decision. I would say also that if you look at Olin over a long span of time, the dividend has been a key component of our shareholder value proposition. Obviously, we paid a quarterly dividend for something in excess of 90 consecutive years. So I would never say never, but I would say it is a key component of our shareholder value proposition, management and the board are aligned on that. And we obviously just declared the normal dividend that will be payable in June. Thank you. The next question comes from John Roberts with UBS. Please go ahead. Great. Thank you. And I'm glad you're all well. It's been a while since Winchester was the largest operating earnings item in our model. Does social distancing impede your ability to interact with the current Lake City people And are you reimbursed for any additional costs there, if it slows you down? And I couldn't remember is Lake City highly automated like your new plant or is it very people intensive like your old plant? The Lake City plant was built by the army in 1945. It looks much more like the old plant than the new plant. The social distance within the plant is not as big an issue as you might think because it's it's the pieces of equipment are relatively well spaced to start with. And that plant plus all of our plants are undergoing temperature monitoring on the way in. So there has not been a big issue there and we have not been constrained in terms of our ability to interact. We had most of the people signed up that we need to go forward on October 1st well before we actually entered into the restrictions we're living under today. Great. And then the $75,000,000 for the VCM contract, how is that impacted by lower oil? So ethane is obviously much less advantage. It might be disadvantaged temporarily here. But, is that a Shintech degradation to earnings or an Olin degradation to earnings if ethane is less advantaged? I'm not going to discuss the details of the contract other than to say the biggest piece of the contract is that there's a pretty significant contract minimum for Olin. And as we look at the contract over the span of 10 years, which is what the contract is for. We think an average return on that contract is $75,000,000. Thank you. The next question comes from Travis Edwards with Goldman Sachs. Please go ahead. Hey, good morning and thanks for the time. Quickly, we can appreciate the benefits of taking over that Dow VCM contract. And I guess just as we're looking at EBITDA sensitivity and liquidity for our estimates for 2020, just wondering Is there any scenario in which you would or could delay that payment, and maybe push it out further and just take it over later? Or is that for sure happening in 2020? I would say, I think for any number of reasons, we would prefer that that payment happen. Got it. Okay. That's helpful. And then, also can appreciate that there's a lot of uncertainty around conditions over the next couple of months. You mentioned a few factors that you're considering to improve liquidity, but maybe just hoping to get a bit more color on how you're thinking about those various levers in the context of the financial covenant that you have or the maintenance covenant that you have, just as you're thinking about upcoming cash outflows, I guess maybe worded another way, what gives you confidence in your ability to fund some of these larger outflows, just, while remaining in compliance on that front? Any color there would be really Appreciate it. Thank you. I guess I would say very broadly that the financial or the agreements that are in place with our bank group, we are we have we work with our bank group on a regular basis and they are aware of the situation we're in, we're aware of the situation we're in. And there's a great deal of cooperation to ensure that the payments that need to get made get made. Awesome. Got it. Thanks for the color. Appreciate the time. The next question is from Patrick Fritz with Bank of America. Thank you. Does the 2020 working capital reduction of $150,000,000 include the one time Lake City working capital build of $80,000,000 other words, it would have been negative 230 reduction without the Lake City build? No, it does not include that. Okay. And secondly, can you comment on the driver of the significant increase in, other current liabilities in March versus December? Please? Roger, this is Todd. That is, that is the the current portion, the from moving up from long term to current, the Dow ethylene payment. Understood. Thank you very much. The next question comes from Brian Lawley with Barclays. Please go ahead. Hey, good morning guys. How are you? Good. Maybe just a quick follow-up. I know it's been a couple of times, but on the existing $2,000,000,000 facility with the $1,200,000,000 delayed draw. If I could just dig in a little bit, is it fair to say that the maintenance covenant at this point might be an issue and that if you did get to October, do you expect you'd be able to draw down on that or maybe are when you assume that there might be some tightness in that we would need to potentially see an amendment from your banking group, maybe last year some ratio headroom versus a smaller facility size with no direct plans. On that refi, I know it's been asked a few different ways, but I just want to follow-up. The way the facility is structured today, it would not have an effect on the covenant because we would draw that down. And it's specifically designed to be used to call the Dow bond, the bonds that were issued with the Dow transaction. So you'd it'd be neutral on debt. I think the question But I guess Could you just follow-up on that? I mean, if you were to use those proceeds, it wouldn't you're saying it wouldn't impact the ratio. And I guess if that's the case, is there some reason why you wouldn't do it. I do appreciate the cash outlay for redemptions, but obviously those are expensive and the loan is much cheaper from an interest expense standpoint. I just want to kind of get your thought process around potentially delaying some of that. Again, appreciating the conservative messaging around uses of cash. I guess I'd come back to what we've said several times and we said in the remarks. The outlook that we have today is very unclear. And we don't know Got it. And then maybe just one quick follow-up. You do mention the high yield bond market being accessible. Again, we generally agree with that. I guess, how might we about your interest level and coming to the high yield market? And to that end, would you maybe be open to talking about how much secured capacity you might have, if you chose to use that as an avenue, obviously those deals that have been fairly topical over the last month, as you'd imagine, come with lower interest Is that something you're thinking about and how much would you have in terms of room under your various agreements as you think about liability management moving forward? So much. I would say we listed all of the things we're looking at as options to enhance and ensure liquidity over both the near term and the longer term. Okay, understood. Thanks so much. The next question comes from Alex Yemerov with KeyBanc. Please go ahead. Thank you. Good morning, everyone. Thank you for providing the 70% to 80% caustic soda allocation number. If we assume that the typical allocation would be 100% or a little higher, can we then in that your volumes, in the second quarter could be down roughly 25% or if not, how should we think about sequential volumes in your chlor alkali segment? Well, we said that volumes were going to be down, but we also talked about the fact that we had we have more turnarounds in Q2 than anything else. So volumes were going to be down anyway. But just, is there any way to quantify that maybe including or excluding the effect of the turnarounds Is that 25% math that I just went through? Your 70% to 80% allocation compared to a typical 100 does that, is that a reasonable logic to apply here or not for some reason? I don't think as it relates to Q2, it's reasonable because of the magnitude of the turnarounds that we have. Okay, understood. And then is there any way you could quantify your epoxy volumes in the second quarter, maybe if you look at your April order book compared to Q1 or from in any other way? What we said was and this is the best quantification we can give is we expect we started to see volumes for May June decline. And I would say prior to that, the volumes were relatively similar across January through April. Understood. Thanks a lot. The next question is from Matthew Deo with Bank of America. Please go ahead. Good morning. In the spirit of assessing avenues to boost liquidity, I wanted to ask about Winchester. And that business recovers when you start booking profits against Lake City, would you look at monetizing that? Maybe later this year or next year as a way to generate cash? I know in the past you've considered it not core. What I would say is everybody in Olin would admit that there is no synergy between a commodity chemical company and the Winchester business as it's configured today. I would tell you that it is vitally important to the long term success of Winchester to affect an orderly transition and startup of the Lake City contract, and that is what we're focused on right now. Okay. Fair enough. And if I look at Slide 12, you listed a number of, kind of discrete tailwinds for next year's cash flow and $200,000,000, but those numbers add up to a number much higher than $200,000,000. So I'm just wondering if there's some of offsetting headwind to cash flow that were not not listed or that was maybe a math error or maybe I'm just missing something? This is Todd. The numbers listed there include pretax items as well as capital So you, the incremental cash flow generation of $200,000,000 is an after tax number of real cash in our pocket to be able to utilize. The next question comes from Arun Viswanathan with RBC Capital Markets. Please go ahead. Great, thanks. Good morning. Hope you're all well. I guess, I just wanted to ask about caustic soda pricing. You noted some recent momentum due to lower operating rates, which could continue. In the near term. I guess I just wanted to understand the dynamic between, domestic contract pricing and export pricing. So In response to an earlier question, we noted that Asian prices were in the, $200 to $300 level and we know that contract prices here are considerably above that in the $500 to $600 per ton level. Could you just remind us why that is? And what supports the domestic contract price so high, I guess included in that, maybe if you could just weave in your thoughts on why that would and coal that's coming? The export price in Asia is not a delivered price to the United States or a delivered cost to the United States. You are probably looking at, depending on where you're shipping from, a $150 of OSHA freight. That would deliver it to a U. S. Port. The then you'd have to put it into a terminal. You'd have to get it out the terminal and incur another shipment to get it to the majority of the customers who are, you know, in the Mississippi River Valley, etcetera. So that is why, you know, the arbitrage from China is not as evident as you might think. And that is very similar to the reason we always believe that the export price in general from the U. S. Gulf Coast is can be lower and not tear down the U. S. Domestic price because the export price has put it on a boat and send it someplace where it gets unloaded versus delivering to a customer who takes 10 railcars of caustic, somewhere inland in the United States every day. And that's a different logistics trail with a different cost structure. Okay, that's helpful. And And again, just to understand this, have you seen any change in the cost curve, with the reduction in, oil prices that we've observed over the last month or 2? No, I think your last comment was last month or 2. So I don't think that there's a dramatic change in cost curves or anything to take place in very short period of time. So, we'd have to see whether anything is sustained or not but not in the short term. This concludes the question and answer session. I would like to now turn the conference over to John Fisher for closing remarks. Yes, I'd like to thank everybody for joining us today and we look forward to talking to you in about 3 months about our second quarter. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now all disconnect.