SLCA (2020 - Q3)

Greetings and welcome to the U.S. Silica Third Quarter 2020 Earnings Conference Call. Due to unforeseen system wide technical difficulties, our presentation needed to be pushed back. Thank you for your patience. As a reminder this conference is being recorded. I would now like to turn the conference over to your host, Mr. Arjun Sreekumar, Director of Investor Relations for U.S. Silica. Thank you. You may begin. Arjun Sr

Thanks. Good morning everyone and thank you for joining us for U.S. Silica’s third quarter 2020 earnings conference call. With me on the call today are Bryan Shinn, Chief Executive Officer; and Don Merril, Executive Vice President and Chief Financial Officer. Before we begin, I would like to remind all participants that our comments today will include forward-looking statements, which are subject to certain risks and uncertainties. For a complete discussion of these risks and uncertainties we encourage you to read the company’s press release and our documents on file with the SEC. Additionally, we may refer to the non-GAAP measures of adjusted EBITDA and segment contribution margin during this call. Please refer to today’s press release or our public filings for a full reconciliation of adjusted EBITDA to net income and the definition of segment contribution margin. And with that, I would now like to turn the call over to our CEO, Mr. Bryan Shinn. Bryan?

Thanks Arjun and good morning everyone. Hope you and your loved ones remain safe and healthy as the world continues to navigate the ongoing COVID-19 pandemic. Through this uncertain time, we have continued to prioritize the safety and health of our colleagues and remain focused on following all appropriate health and safety guidelines. Thankfully, we've not had any significant virus related health issues at U.S. Silica in 2020, and I'm also proud to report that our year-to-date safety performance continues to be industry leading with an all-time company low total injury rate. The U.S. economy is recovering from recent lows and while the macroeconomic environment remains challenging, we delivered outstanding results during the third quarter. For the company, third quarter volumes increased 18% sequentially, with both operating segments, industrials and oil and gas up substantially. Adjusted EBITDA for the quarter was $51.3 million, up 26% sequentially driven by increased profits in both operating segments. In industrials, we delivered a strong rebound in sales volumes with both whole grain and ground silica up meaningfully as demand rebounded in core markets, including glass, building products, and automotive. Filtration volumes and profitability were down slightly during the quarter, due largely to reduced demand for certain food and beverage products as many consumers continue to avoid bars, restaurants, and sporting venues. Moving to our oil and gas segment, customer while completion activity increased significantly during the quarter. In fact, since May, each consecutive month has set a net addition of frac crews. We estimate there are now greater than 125 active frac crews in the U.S., more than double the 50 to 60 crews in service during the May trough. Improving dynamics in the energy markets contributed to a 15% sequential increase in our oil and gas sales volumes to 1.3 million tons, and sandbox load volumes surged 74% during the quarter due to strong activity in multiple basins. Contribution margin for the oil and gas segment was $31.5 million, up 20% sequentially driven by increased sales volumes and a benefit from the renegotiation of railcar lease liabilities. More broadly I'm very pleased with the progress we're making on our three key strategic priorities, which are one, prioritizing cash generation; two, sustainably growing the industrial business; and three, repositioning the oil and gas segment. Let's talk for a minute on each of those three. On prioritizing cash generation, we've taken decisive actions to reduce cash costs across the enterprise. We slashed both our active oil and gas capacity and 2020 CAPEX budget by 75%, reduced our headcount by approximately 50%, temporarily cut executive pay by up to 20%, and instituted a freeze on discretionary spending. We've also made substantial progress working with our railcar -- partners to implement lease modifications, and we now expect to reduce cash spend related to railcar operating leases by approximately $15 million in 2021 and approximately $50 million through 2024, resulting in significant additional cash that could be allocated to capital priorities including paying down debt. At the same time, we're collecting customer shortfall penalties and leveraging the CARES Act to maximize our cash tax refunds. We received $37 million in tax refunds in the second quarter and assuming that we receive our additional $40 million in refunds in Q4, we could end 2020 with an equal or greater cash balance than we had at 2019 year end. On our second priority, growing the ISP business, we have focused on increasing production capacity at flagship industrial facilities, including our state of the art Millen, Georgia plant, where we produce high margin products, including EverWhite Cristobalite and White Armor Cool Roof Granules. Commercialization of EverWhite, a key ingredient in quartz countertops in modern homes, is moving forward with major customers. During the quarter, we were also successful in additional trials for our blood plasma filtration product line and are awaiting production orders from key multinational biopharma customers. These products are examples from our industrial new product pipeline, which is valued at approximately $200 million and annual contribution margin at maturity. Finally, our third priority and that's repositioning the oil and gas business, we've made cost as variable as possible in that business to maximize our flexibility and responsiveness to changing market conditions. I'm pleased with the progress our teams continue to make on rationalizing cost through a variety of actions, including in-depth plant and department cost reductions, enhancing purchasing management, property tax reductions, and plant efficiency gains. We've already achieved nearly $40 million in targeted savings year-to-date from this important work. As a result of these and other efforts we believe that our operations are currently positioned at the lowest end of the cost curve in key markets such as the Permian. A combination of very low production cost, proximity to well completion activity, our Sandbox Last Mile Delivery System, and outstanding service all support lower break evens for our energy customers. I'd like to conclude my prepared remarks this morning with market commentary starting with industrial. As noted in our press release today, we expect Q4 ISP segment volumes to be down 5% to 10% sequentially, and underlying contribution margin dollars to decline by roughly 10% due to typical business seasonality. For 2021, while there is economic uncertainty ahead, our base case is that industrial segment volumes and contribution margin dollars will continue to outperform GDP trends. In oil and gas segment, we forecast a rise in fourth quarter volumes in the range of 20% to 30%, driven by an expected increase in completion activity as operators continue to draw down inventories of drilled but uncompleted wells. Adjusting for the aforementioned non-recurring third quarter rail lease benefit, the segments contribution margin is expected to increase approximately 5% to 10% sequentially. Looking further out to 2021 our base case scenario assumes continued economic recovery, leading to a more balanced crude oil market, which should drive increased completion activity, frac sand demand, and pricing stabilization. We estimate that as much as 75% of Permian sand capacity is currently idle and don't expect much reactivation in 2021, given where that capacity is positioned on the cost curve and the lack of capital access by many competitors. For Sandbox we expect a continued rebound in loads and profitability with increasing well completion activity. We also believe that the upcoming June 2021 deadline for our well side operations to be in full compliance with the new lower OSHA dust standards should support further customer conversions to Sandbox. And with that, I'll now turn the call over to Don. Don.

Thanks Bryan and good morning, everyone. I will begin by reviewing our operating segment results. Third quarter revenue for the industrial and specialty products segment of $110.1 million was up 10% versus the second quarter of this year and down 8% compared with the same quarter last year. Third quarter results were driven by a 21% sequential rebound in ISP volumes as we saw gains in most of the markets we serve. The oil and gas segment revenue was $66.3 million, down 8% sequentially and representing a decline of 73%% compared with the third quarter of 2019. The decline in sequential revenue is mostly due to the $16.7 million customer shortfall penalties recorded in the second quarter, offset by the increase in activity in the third quarter, as Bryan outlined earlier. On a per ton basis, contribution margin for the industrial and specialty products segment was $44.26, virtually flat sequentially and down 5% when compared with the third quarter of 2019. I had fee contribution margin dollars increase 21% versus the second quarter of this year again, led by the 21% increase in volume and the impact of our rail lease liability re-measurement of $2.4 million. Looking ahead to the fourth quarter, we now expect the underlying contribution margin in our ISP segment to decline about 10%, which represents the typical seasonality of the segment after the strong performance in the third quarter. The oil and gas segment contribution margin on a per ton basis was $24.55 compared with the $23.53 for the second quarter of 2020. The third quarter was positively impacted by the re-measurement of our rail lease liability. Basically, the contribution margin in the oil and gas segment included $18.2 million, which represents the impact on the net present value of the liability associated with our rail cars. This is a result of our diligent work during the past few quarters to defer cash payments over the next several years in order to preserve cash, which is a top priority to U.S. Silica. Additionally, lower fund cost, particularly at our Mamita [ph] facility, helped our overall profitability in the second quarter [ph]. As stated earlier, the second quarter profitability was positively impacted by $16.7 million of customer shortfall penalties. Adjusting for the specific benefits mentioned above for the last two quarters, the oil and gas segment normalized results would be a 40% increase in contribution margin dollars and a 21% increase in contribution margin per ton quarter-over-quarter. Let’s now look at total company results. Selling, general, and administrative expenses in the third quarter of $27.2 million represented a decrease of 30%, compared with the second quarter of 2020. The decrease in SG&A was primarily due to the write off of legal expenses in quarter two of this year related to the unsuccessful defense of the two of our patented in the oil and gas segment. Additionally, we continued to reduce our spending to better align with business conditions. However, we have seen a more robust recovery than anticipated previously and now expect our run rate SG&A expenses to be similar to the third quarter for the next few quarters. Depreciation, depletion, and amortization expense in the third quarter totaled $40.1 million, an increase of 8% compared with the second quarter of 2020, driven by some accelerated depreciation in Sandbox business, our growth projects in our ISP segment, as well as continued maintenance capital. We expect depreciation, depletion, and amortization to be flat in the fourth quarter compared with the third quarter. Our effective tax rate for the quarter ended September 30, 2020 was a benefit of 22%. The company believed its full year effective tax rate would be a benefit of approximately 24%. Turning to the balance sheet, the company had $134.9 million in cash and cash equivalents and $49.6 million available under its credit facility. As I spoke about on our second quarter conference call, we are still anticipating tax refunds from the IRS related to the CARES Act. At this time we expect that refund to be approximately $40 million. However, the receipt of these funds may be delayed until 2021 due to the backlog at the IRS. Our net debt as of quarter end was approximately $1.1 billion. Capital expenditures in the third quarter totaled $4.5 million and were mainly related to our growth projects in our ISP segment and maintenance spending across our network. Finally, we are still in our budget process for 2021, but our initial expectation is for capital expenditures to be in the range of $30 million to $40 million. Most of our growth CAPEX will be earmarked for ISP projects that will serve to expand our higher margin products and allow us to enter higher growth markets. As I have noted in the past we intend to keep our capital expenditures within our operating cash flows in 2021 and our biggest corporate priority remains generating free cash flow and deleveraging our balance sheet. And with that, I'll turn it back over to Bryan.

Thanks, Don. Operator, would you please open the lines for questions?

[Operator Instructions]. Your first question comes from the line of Kurt Hallead with RBC Capital Markets. Please proceed with your question.

Hey, good morning.

Good morning, Kurt. And I guess to you and all the folks on the call, apologies for the delay this morning. A technical difficulty with the service provider and other sort of telecom issues we're hearing across the Northeast and elsewhere. So thanks for your patience.

Well, at the very least right, what this pandemic has taught all of us is the need to be adaptable and flexible right.

There you go, Amen.

Keep things in perspective. All good. So appreciate the color and the commentary. Looks like you got a lot of momentum on the frac side of the business, specifically in Sandbox. So I was just hoping you can kind of flesh that out a little bit more for us. You mentioned a pretty significant increase in volumes through Sandbox in the quarter. So, just maybe a little bit more color about working around what you think kind of drove that? And just riding in that context, you also referenced the OSHA Act and that implementation by mid-year next year. So if you saw a 74%% increase in Sandbox in the third quarter of this year, what could that mean for Sandbox volumes going into next year?

Thanks for the question, Kurt. And when we look at term -- as you said loads are up about 74% in Q3, and I'm pleased to report that Q4 is off to a really strong start. October has been a good month I think here, and I think we'll see really strong volumes closing out the year. Just in general, we're seeing a lot of strength in the oil field part of our business, and we could talk more about that as we go here. I think, what we were finding is we've got a lot of advantages with Sandbox. The combination with arrows up is serving us very well. Customers really like the choice between those two offerings and right now between the sort of legacy Sandbox and legacy Arrows Up we think we have about a 30% to 33% market share. So let’s call it maybe about a third of the market. So I think the offerings that we have is one really positive thing that we've seen. The second is, as you probably know, it's been a fairly tight trucking market during the last several months here. And that's an area where Sandbox really has a big advantage since we are so efficient and flexible, our math has been pretty consistent that we need about 70% fewer trucks with Sandbox versus some of the other solutions that are out there. You also mentioned the looming OSHA deadline. We've seen some customers who are sort of waking up to that. That's going to be a big problem for them. And actually we have some customers who never used Sandbox before who would come to us and are now trying out our solution. So I feel like there's lots of tailwinds that the macro for oil is pretty positive right now just based on what we're hearing from customers and then Sandbox has a lot of very specific advantages. So it seems like things are moving our way in Sandbox.

Okay, that's great. Appreciate that. So on the ISP front, given the pipeline there you kind of referenced $200 million of annual contribution margin at maturity. So, can you give us some sense on what that timeframe might be to get to that maturity point?

Sure. So we've got a number of projects in our development pipeline. Some pretty exciting things, some of it's already happening. So I mentioned in my prepared remarks our EverWhite Cristobalite orders for that product line are really strong right now. And we have some new products that are ready to launch in the next few months, actually in that product line. So we'll start to see that coming into earnings. The White Armor solar reflective roofing is really getting traction with customers and the orders are off the charts for that. We're really keeping our facility where we manufacture those products very busy. Some of our higher tech products, the blood plasma filtration, we've now gotten qualified at a couple of big biopharma customers. So I think we'll start to see the initial orders for those products coming in in the next couple of quarters. We have also just launched a breakthrough product that is based on diatomaceous earth that is going into consumer products, and there's some pipeline filling going on there with our large customer. But, I think we'll see that in the coming quarters in earnings as well. And then we have some of the really cool things. One that I'm very excited about is a breakthrough line of additives that we have for various polymers and rubber compounding. Now, that's probably a few quarters away before we start to see that, maybe as long as 12 months, because there's testing involved in that. But there's a lot of things in the pipeline. It's not like it's filled with things that just aren't going to happen for four or five years either. There are a lot of things that are happening right now.

Okay, that's good color. I kind of put that -- trying to put that in context, right, because your contribution margin dollars for ISP on 2020 kind of tracking out to be getting up to that $200 million range. So it looks like you can almost double your contribution margin from this business. So I am just kind of curious whether or not that was like a is that a three-year window, is that a five-year window, something along those lines?

I think that's probably in the three to five-year window Kurt, I would say. And the thing I really like about this pipeline, too, is that it's got a lot of sort of -- to use a baseball analogy, a lot of singles that are relatively easy if you doubled and tripled and a couple of real home runs in there that let us go after big established existing product lines where we don't play today, where there's no real competition. So we kind of come in to open space for us. It's not like we're competing against our traditional sand producers or diatomaceous earth producers there, because either our manufactured kind of performance products that are very specialized and targeted to go after some of these end users or some of those are sort of multibillion dollar end users in terms of value. So very exciting things in the pipeline. And I think investors will start to see in the coming quarters the power of what we have here.

Okay, that's great. Just one last thing, just what do you think your debt reduction could be in 2021?

Don, maybe you take that one.

Yeah, look I think in 2021 our goal is to be free cash flow positive and we're going to use those dollars over our capital spending to reduce debt. I'm not sure it'll be overly significant in 2021, but when you get into it you really start to see the earnings generation, 2022 to 2024 is when you're going to start to see debt reduction.

That's great. I appreciate that color and the answers. Thanks, guys.

Thanks Kurt.

Your next question comes from the line of John Letizia with Stifel. Please proceed with your question.

Hi guys. Thanks for taking my call, I am on for Stephen today. Can you just help us understand looking at history and the ISP segment generally grows at a little higher rate than GDP. Can you help frame your expectations for outperformance in 2001?

So as I think about the ISP business, as you said we've traditionally been a GDP plus kind of a grower. And I think we'll continue with that in terms of the base of the business. And so there we're growing with the market obviously, and then we're getting some additional price just because of the specialty nature of what we sell. And I think on top of that, you'll see these new products kind of coming in as a new wedge. So I hope we can really accelerate the trajectory of the ISP business over the coming years. And I was looking back over the quarter and just to give you a sense of some of the things that are going on here, we actually signed 11 large new multi-year contracts in the industrial space during the quarter and we have another 20 that are under negotiation. So this tends to be a place where we have blue chip customers, big multinational companies that we do business with. We signed a lot of long-term contracts there and unlike oil and gas where the times kind of go up and down and contracts but sometimes it mean a lot and sometimes they don't. The industrial deal is a deal. So these are very solid contracts. We already have a significant portion of our current contribution margin contracted for multiple years out. And so you layer on top of that all these new products and new offerings and I'm pretty excited about where we can go over the next, let's say, three to five years in terms of taking this business.

Great, thanks. And just shifting focus a little, can you talk about the impact on the recent Frac Sand bankruptcies and the supply and demand outlook for pricing?

Sure, sure, so the bankruptcies are interesting. I think that we get asked a lot, so what does it mean for U.S. Silica, obviously, a couple of our large competitors have gone through bankruptcy. One's come out, one will I assume, come out in the near future. I think, practically speaking, I don't think there's going to be much impact there quite honestly. While those competitors have reduced their debt, interest expense and their railcar operating lease liabilities we've lowered our costs as well. And as we mentioned in our prepared remarks, we've worked very hard with our railcar lessors and I think been able to come to a good place in terms of where we are going forward with them and do it in a way that didn't require us to go through some kind of restructuring to get those cost reductions. I think most people thought when we started off down that road that it would be perhaps impossible to get that done. So I feel like that's been a big advantage for us. Also, when you think about the bankruptcies, it's created a lot of doubt in the minds of customers. And I think we've been a beneficiary of that uncertainty. We've seen some customers come to us and say they want to start doing more business with U.S. Silica because they viewed us as a kind of long term stable player in and around the industrial space for sure. I think the second part of your question was around pricing. Again, I don't think that the bankruptcy itself of our competitors is really going to impact pricing in any meaningful way. I believe if things tighten up, which we projected that they will over the next year or so, that should be constructive for pricing again with COVID asterix around everything. But right now things are moving pretty hard in the oil-field, lot of demand were to the point where to meet the demand that's being forecasted by our customers, we're probably going to have to reactivate some capacity that we turned down. So it feels like we're coming into a much more robust market in 2021 and usually those kind of markets are for folks that are positioned like we are also constructive for pricing.

Great, thank you very much, guys.

Okay, thanks.

Your next question comes from the line of Dan Kutz with Morgan Stanley. Please proceed with your question.

Hey, thanks, good morning.

Good morning Dan.

So, I guess my first question, I just wanted to kind of dive in a little deeper on some of the cost cutting commentary that you made, the progress that you've made, wondering kind of if there's any incremental cost cutting opportunities that you guys would see should the world play out as you envisioned now and if there is any additional levers that you'd have to pull, kind of should the macro backdrop prove more challenging versus your base case right now? Thank you.

Sure. So maybe just to give you some background Dan on what we've done, I'm really pleased with the progress that our teams are making. We've tallied up almost $40 million in savings so far this year. And of course, we're always working for more and trying to turn over every rock that we can. I would say that the major areas that we focused on are in depth plant by plant reviews and really, really dug very deeply there. We've gone through every department, every kind of center in the company. We've done a lot of purchasing. We're finding ways to get property tax saving, plant efficiency improvements, you name it, right. So quite a lot of that's gone into that almost $40 million of cost savings that we've seen so far. As we mentioned on our prepared remarks, very successful with this rail lease car -- railcar lease renegotiation. We expect to save about 15 million in cash next year and almost $50 million cumulatively through 2024. So really excited about that. If you think about the other things out there in terms of category that we continue to look at, obviously procurement is a large one. We still spend a lot on logistics and then we have far flung operations at over 31 mine sites across the country. So I'm sure there's still opportunities there and things that we're still finding, like, for example, we found a way to save $2 million in better management and maintenance of our heavy mobile equipment. And for that, heavy mobile equipment is code for all the yellow iron that works out in the mine site. So even though we've been doing this for over a century, we're still finding ways to save costs there. We save 3.5 million in operational efficiencies at one of our large sites. So all kinds of things still in play and our team is constantly in search of the next piece of savings that we can get.

Great. Thank you, that's helpful color. And my next question is in your ISP segment in light of the comment about you kind of continue to expect that it will outperform for us GDP, I was wondering if we could kind of go a level deeper and if you could talk about maybe which of the business lines in that segment are kind of higher or lower betas and which segments could benefit more from the reopening and which segments might be more defensive and kind of hold up better should things kind of take another write down? Thanks a lot.

It's a great question. So if you look at the major segments that we have, we still sell a lot into housing and automotive. I would say somewhere around a third of what we sell into industrials today is levered into those sectors. So we watch those very, very closely. I think, both of those are a set up for continued strength here going forward. We also do a lot more now with the acquisition of EP Minerals in 2018, so a lot more in the food segment. So every bottle of beer that you drink, almost everyone is filtered with products that we make every glass of wine, all the alcohol is produced, all the soda that all of us drinks, a lot of the sugar products that go into that are filtered and clarified with the products that we make in the sort of corn wet milling to get all the sugars out. So we're pretty heavily into that. I think we're getting more into the biopharma business with our high end -- ultra high-end filtration products of blood plasma is the first place that we're penetrating, but we're quickly moving into bio enzymes and other markets there in the healthcare industry. And also within healthcare, a lot of the glass products that we make ultimately find their way into the healthcare line as well. So we're levered somewhat to healthcare and biopharma more on an increasing basis. As I look out in the future a lot of the places that we're targeting, these really exciting high growth segments are more kind of broadly based, which I like because it's got more stability. And we're talking about additives that go into coatings, polymers, resins, rubber compounding, and reach into all kinds of end uses and segments there. So a lot of the work that we're doing in the future, a lot of the exciting growth will be coming in those areas for sure. And one of the things I like about that growth is that typically we are moving into established markets where we have a kind of a breakthrough product that we can make for a relatively low cost and sell against an incumbent product, not a product that is very expensive. We can come in and offer 80 or 90% of the performance for 50% of the price. And I've been doing this for a long time. And my experience is when you have those kind of products, you get customers' attention real fast because you can basically provide equivalent performance for big cost savings. And so that's part of the value proposition that we'll provide with a lot of these new products that we have in our in our pipeline.

Really appreciate all that color. Thanks a lot. Turn it back.

Thanks Dan.

[Operator Instructions]. Your next question comes from the line of Lucas Pipes with B. Riley Securities. Please proceed with your question.

Hey, good morning guys. This is actually Dan [ph] Thanks for taking my questions. I just wanted to sort of a high level -- hey guys, maybe some encouraging to see that frac activity is rebounding here from 2Q, just maybe some commentary on where specifically we're seeing that rebound more or less maybe by basin and then by product type in basin versus [indiscernible] specifically do you have any commentary on the more natural gas heavy basins are kind of rebounding more quickly as natural gas prices nearing on $3 here? So thanks.

Sure, so it's been very interesting Dan and quite honestly the market has picked up on the oil and gas side faster than I might have expected. And you see that kind of volumes that we had up this quarter, 15% and our outlook for next quarter is up 20% to 30% and just based on October, maybe that outlook is already a bit conservative and customers seem very, very bullish right now. So I think that's all positive specifically where it's kind of the usual suspects that you might imagine Permian Basin is coming up. It will probably be one of the leaders in the recovery here. We are seeing some strength in the Northeast. As you said, I feel like the gas prices are driving, that. We're also starting to see some of the first reopenings out West so we're seeing demand come back a little bit in the Bakken, a little bit in the DJ. So I think there's a broader recovery that's going on here. It's not like it's just the Permian or just the Northeast. And I would say there's still a lot of focus on local sand for sure. But we are seeing a little bit of demand pickup for northern White Sand as well. So that's encouraging.

Awesome, thanks. That's really good color. Just wanted to switch to a capital allocation question here. I know you guys are just kind of focused on getting through this really tough period right now. But if we fast forward to next year, things improve. We've got reasonable confidence that everything's behind us. Any updated thoughts on like dividends versus buybacks, like when you put the dividend back in place or realize that’s Board decision, but where you see that adverse buyback shares at these levels and then maybe mix in some commentary on debt repurchases as well to their trading and pretty steep discount? Thank you.

Sure. So the way I look at it and I think I can speak for the Board on this, is that our number one priority is to have the cash to repay debt. So we're very focused on that. At the same time, we do have these attractive industrial opportunities that will require some capital. So I think those are the top two things for us. Make sure we have the cash and the kind of net debt ultimately as we look out into say 2024, that we feel comfortable that we can handle dealing with our debt at that point. At the same time, it's kind of a symbiotic relationship if we make some strategic investments in the industrial business and those pay off as we expect, then we'll be able to generate more cash, right. So we're focused really on those two areas. We haven't really talked lately about share repurchases or some of the other things that we could do with capital. I feel like we're fairly tightly focused right now.

Awesome, thanks, that's all I had. I appreciate the color and I'll turn it over.

Okay. Ladies and gentlemen, we have reached the end of the question-and-answer session and I would like to turn the call back to Mr. Bryan Shinn for closing remarks.

Well thanks operator. I'd like to close today's call by reiterating a few key points. The first is that we delivered another strong financial quarter and substantially beat expectations on the strength of structural cost reductions, which we talk about on the call here, a strong execution in oil and gas, so congratulations to our oil and gas team for a great quarter, and a rebound in the industrial business across multiple of our end use segments. Sales were up substantially in both operating segments in Q3 and as I mentioned a couple of times on this call, we look like we're set up really well for strong performance again in Q4. I feel like we moved swiftly and decisively to reduce cost this year. We shared a number of examples on the call today and I feel like we are well positioned for success in 2021 and the coming years with all the growth opportunities we have in our pipeline across a diverse set of markets and end users that we spoke of today. We are also carefully managing cash and liquidity to Dan’s questions just a minute ago and we're very focused on that cash generation and being able to pay down debt while we still invest appropriately in our industrial businesses. And then the last thing that's really important is continuing to prioritize the health and safety of our colleagues. Our team I think has done an outstanding job this year and we are on track not only for the best annual company safety performance in history but also on track to do a really good job managing all the challenges that have come with the COVID-19 virus. So given that I'm really proud of what our team has accomplished so far this year and certainly look forward to speaking with all of you again next quarter. Have a great day and please stay safe.

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.