Ampco-Pittsburgh Corporation

Good day and welcome to the AMCO Pittsburgh Corporation first quarter 2020 earnings results conference call. All participants will be in listen-only mode. If you need assistance, please signal a conference specialist by pressing the star key followed by zero. 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 Melanie Strawson, Director of Investor Relations. Please go ahead.

Thank you, Sarah, and good morning to everyone joining us on today's first quarter 2020 conference call. I'm joined by Brett McBrayer, our Chief Executive Officer, and Mike McCauley, Senior Vice President, Chief Financial Officer, and Treasurer. Also joining us on the call today are Sam Lyons, President of Union Electric Steel Corporation, and Terry Tenney, President of Air and Liquid Systems Corporation. Before we begin, I would like to remind everyone that participants on this call may make statements or comments that are forward-looking and may include financial projections or other statements of the corporation's plans, objectives, expectations, or intentions. These matters involve certain risks and uncertainties, many of which are outside of the corporation's control. The corporation's actual results may differ significantly from those projected or suggested in any forward-looking statement due to a variety of factors, including those discussed in the corporation's most recently filed Form 10-K and subsequent filings with the Securities and Exchange Commission. We do not undertake any obligation to update or otherwise release publicly any revision to our forward-looking statement. A replay of this call will be posted on our website later today and remain available for two weeks following the conclusion of the call. To access the earnings release or the webcast replay, please consult the Investors section of our website at amcopgh.com. With that, I'll turn the call over to Brett McBrayer, AMCO Pittsburgh CEO.

Thank you, Melanie. Good morning and welcome to our call. One of the core values of our business is to protect the safety and health of our employees and to ensure that we protect the environment and the communities where we operate. Our environmental record continues to be outstanding as we maintain our incident-free trend through 2019 and into the first quarter of this year. Additionally, our lost time rate and our recordable injury rate improved in the quarter, decreasing by 15% and 40% respectively. I'm excited about the actions we are taking to further improve our performance and the dedication of our employees to help us create an injury-free workplace. Our business and that of our customers are considered essential for the guidelines established by the Department of Homeland Security. We continue to follow the requirements and practices outlined by government, state, and local officials where we operate around the globe protect our employees, their families, and our vendors and customers. We are grateful but not surprised by the engagement of our employees to work safely during these unusual and challenging circumstances. As I've noted in previous calls, we've taken many actions to improve the profitability of Amco Pittsburgh, including divestitures, efficiency improvements, and cost reductions across all areas of our business. These efforts returned our business to profitability in the fourth quarter of 2019. With many actions still in progress, we further improved on our performance in the first quarter of this year, recently announcing an earnings per share of 33 cents and an improvement in operating income of 43% from quarter four of 2019 to quarter one this year, excluding unusual items our adjusted operating income from continuing operations improved by 85% sequentially. Mike McCauley, our CFO, will share more details regarding our results later in the call. I'd now like Terry Kinney, president of Air and Liquid Systems, and Sam Lyon, president of Union Electric Steel, to share the improvements in their group's performance. Terry?

Thank you, Brett, and good morning. First quarter sales for the air and liquid processing segment increased slightly when compared to the same period last year. The growth in sales of heat exchangers and custom air handling equipment was partially offset by a minor decrease in sales of centrifugal pumps. Segment operating income for the quarter improved by 20% compared to the same period last year. The favorable results reflect the impact of increased sales prices, an improved product mix, and savings generated by the process improvement efforts at all three businesses. The air and liquid processing segment backlog increased to $57.4 million, led by strong orders for heat exchangers and centrifugal pumps. This backlog is the highest in more than 10 years. The three businesses that make up the air and liquid processing segment have continued to manufacture throughout the COVID-19 pandemic. This is possible only through the hard work and dedication of all of our employees. The focus of all three businesses is to keep our employees safe while servicing our customer needs and continuing to drive process improvements and cost reduction efforts.

Thank you, Terry. I will now turn the call over to Sam Lyon. Sam.

Thanks, Brett, and good morning. Throughout the first quarter, our focus continued on safety, cost reductions in the US and Europe, and restructuring activities in the UK and Sweden. Our operations in Sweden turned profit for Q1. This improvement, along with record operating income in our Slovenian operations and strong performance from our operations in the US and China, allowed the segment to deliver an income from continuing operations of $4.6 million in the quarter. Excluding insurance proceeds, operating income was $3.8 million in the first quarter versus $2.7 million in Q4 of 19 on the same basis. This operating income was achieved with $5 million lower revenue. Now I'd like to highlight some improvements that we made in the US and Sweden during the quarter. In the U.S., our focus is on maintenance and the cost for quality. Our actions in the quarter resulted in an $800,000 reduction in maintenance spend when compared to the last year. We achieved this reduction by taking a more proactive approach in our activities. Year to date, 45% of our maintenance tasks were planned versus 20% the prior year. We have assembled a team focused solely on this activity. They look at the most critical assets and analyze the failure potential and the impact of that failure. The items determined to be most at risk are reworked or mitigation plans are put in place such as critical spares. I'm very excited about the potential of this effort. From a quality perspective, several large issues have been improved upon and we are running at a $1.7 million favorable annualized cost of quality rate when compared to the prior year. Like the maintenance team, the critical quality issues were identified and resolved and corrective actions were put into place. I will now move to the improvements in our Swedish operations. In prior calls, I stated that we had identified $2 million of improvement activities exclusive of the reorganization of the sales and operations teams in Europe. These improvement activities targeted raw material savings, process improvements, and the cost of poor quality. In the first quarter, the team delivered over $1.3 million of savings when compared to Q1 of 2019 and $800,000 of savings when compared to Q4 of 2019, far exceeding the original goal. The majority of the $2.9 million of restructuring savings will start to be realized during Q2 of this year. Looking ahead to the next two quarters, we expect to complete the restructuring of our European operations and will continue to focus on our maintenance and quality improvements. We continue to address the safety and well-being of our employees and vendors as we confront the new and changing realities of operating in the current COVID-19 environment. We will also be laser focused on cash due to the uncertainties in the market. We have already taken steps to conserve cash, including the implementation of furloughs in the United States, UK, Slovenia, and Sweden, taking advantage of the Social Security tax deferral in the United States, deferring merit increases in the U.K., and deferring growth cap access in the U.S. We expect these actions will save over $10 million in 2020. Thank you, Sam.

At this time, Mike McCauley will share more detail regarding our financial performance for the quarter. Mike?

Thank you, Brett. My commentary today includes the use of certain non-GAAP financial measures. I refer you to our disclosures regarding non-GAAP financial measures and the related non-GAAP financial measures reconciliation schedule included in our Q1 2020 earnings release issued this morning. Q1 2020 continued and in fact improved upon the return to profitability for Amco Pittsburgh from last quarter. This was the first time dating back to 2014 that the corporation has reported positive income from continuing operations for consecutive quarters. AMCO's net sales from continuing operations for the first quarter of 2020 were $91.1 million. This compares to net sales from continuing operations for the first quarter of 2019 of $107.5 million. Net sales in the forced and cast engineered product segment of $68.8 million for the first quarter of 2020 declined approximately 19% compared to the prior year quarter due to a lower volume of shipments of mill rolls, both forged and cast, and of forged engineered products. Net sales for the air and liquid processing segment for the first quarter of 2020 of 22.3 million increased slightly compared to the prior year period. Gross profit as a percentage of net sales was 23.0% for the first quarter of 2020 versus 16.1% for the first quarter of 2019. The improvement is primarily attributable to the forest and cast engineered product segment, which is benefiting principally from a lower cost structure due to the sale of the Avonmore facility last year, lower raw material costs, and improved manufacturing and operating efficiencies. Additionally, the Forest and CAST engineered product segment received business interruption insurance proceeds of $0.8 million in the first quarter of 2020 from a 2018 insurance claim. These insurance proceeds were recorded as a reduction to cost of products sold in the current quarter. For the air and liquid processing segment, gross profit increased slightly. benefiting primarily from changes in the product mix and cost efficiencies. Selling and administrative expenses of $11.8 million or 13% of net sales for the first quarter of 2020 were down compared to $13.9 million or 12.9% of net sales for the first quarter of 2019. We were able to deliver approximately a 15% year-over-year reduction in SG&A expense for the quarter principally due to lower employee-related costs, in part due to completed reduction in force actions from 2019, lower professional fees, as well as lower volume-related commissions expense. Depreciation and amortization expense of $4.7 million for the first quarter of 2020 was down compared to $5.3 million for the first quarter of 2019, principally due to the 2019 divestiture of the Avonmore Castrol Plan. Income from continuing operation on an as-reported GAAP basis for the first quarter of 2020 was $4.4 million, including the $.8 million benefit for the business interruption proceeds. This compares to a loss from continuing operations in the prior year quarter of $12 million, which included an impairment charge of $10.1 million, $.9 million of restructuring-related costs, and approximately $2.2 million in excess carrying costs of the Avondamore PA Castrol facility divested in 2019, excluding the unusual items as defined in the non-GAAP financial measures reconciliation schedule included with our earnings release. Non-GAAP adjusted income from continuing operations for the first quarter of 2020 was approximately $3.6 million. This reflects an improvement of approximately $2.3 million compared to the prior year quarter on the same non-GAAP basis. The improvement is principally attributable to the implementation of manufacturing and operating efficiencies, along with the completion of selected reduction and force actions across the organization. Other income expense net worsened for the first quarter of 2020 when compared to the prior year quarter due to higher foreign exchange losses and unrealized losses on rabbi trust investments, which are principally due to market disruptions caused by the COVID-19 pandemic. The income tax benefit for the first quarter of 2020 includes a benefit of approximately $3.5 million due to the expanded tax loss carryback provisions made possible by the CARES Act. We have already filed for that refund. Although we had this benefit on the tax line, the net effect of COVID-19 related items throughout our Q1 P&L was about neutral. The foreign exchange transaction loss, unrealized lost on rabbi trust investments, Certain bad debt and slow-moving inventory reserves, which we increased in the quarter in the Forged and Cast Engineered product segment, and some lower sales in that segment towards the end of March, were all related in whole or in part to market impacts driven primarily by COVID-19. Collectively, these items approximately offset the tax benefit from the CARES Act. At the bottom line, the corporation reported a gap net income attributable to Amco Pittsburgh of $4.1 million or 33 cents per common share for the first quarter of 2020. This compares to a net loss of $15.1 million or $1.21 per share for the first quarter of 2019, which included an impairment and restructuring related expenses totaling 88 cents per share plus the net loss from discontinued operations last year of 18 cents per share. Here's some detail on business segment results. In the forged and cast engineered product segment, Q1 2020 net sales of 68.8 million declined approximately 19% versus prior year due to a lower volume of shipments of mill rolls, both forged and cast, and forged engineered products, offset slightly by a more favorable product mix. However, the segment's operating results improved significantly for the first quarter of 2020 compared to prior year, which included the impairment charge and the excess carrying costs of Avonmore. Additionally, the current year quarter benefited from the proceeds from the business interruption insurance claim, manufacturing efficiency improvements from a lower cost structure, and actions taken in the prior year, as well as raw material costs and lower commissions expense. Partially offset by the effect of the lower sales volume and reserves established for anticipated bad debts and slow-moving inventory for certain of the segment's oil and gas customers, linked in part with expectations associated with the COVID-19 pandemic. Net sales of 22.3 million for the air and liquid processing segment in the first quarter of 2020 were slightly higher than the comparable prior year period. Sales for the air handling and heat exchange businesses were higher than a year ago as a result of higher volume of shipments. Sales of pumps were slightly below the prior year period due to lower shipments to U.S. Navy shipbuilders. The segment's operating results improved for the first quarter of 2020 compared to prior year, primarily due to more favorable product mix and cost reductions. Backlog at March 31, 2020 approximated $278 million, a decrease from $321 million at December 31, 2019. The decrease is principally due to lower backlog for cast roles and a decline in foreign exchange rates used to convert the backlog of the corporation's foreign subsidiaries into the U.S. dollar. Lower exchange rates at March 31, 2020, when compared to the earlier period, reduced backlog by about $10 million. Backlog for the air and liquid processing segment improved due to strong water intake for heat exchangers and centrifugal pumps. Next, here are a few balance sheet and cash-related items for continuing operations. Accounts receivable of $75.2 million at March 31, 2020 decreased by $6.6 million compared to December 31, 2019, primarily attributable to lower sales in the latter part of first quarter 2020 compared to the latter part of fourth quarter 2019. Improved collections and an increase in the corporation's allowance for doubtful accounts provisions. Inventories of $82.4 million at March 31, 2020, were flat compared to December 31, 2019. Accounts payable of $36.2 million at March 31, 2020, increased by $2.9 million compared to March 31, 2019. Capital expenditures for the first quarter of 2020 were $1.9 million, primarily for the Forged and Cast Engineered product segments. Cash and cash equivalents for continuing operations of $13.9 million at March 31, 2020, increased compared to the December 31, 2019 balance. Net cash flows provided by operating activities was a strong $12.2 million for Q1 2020. Drawings on the AMCO revolving credit facility were $31.5 million at March 31, 2020, which is down $2.8 million versus December 31st, 2019. The decrease in revolver borrowings reflects improved operating results in lower investment and trade working capital. Total debt at March 31st, 2020 was $68.2 million and is down 2.6 million from the December 31st, 2019 balance in line with the revolver decrease. At March 31, 2020, in addition to the cash balance, the corporation also has remaining availability on the revolver of about $31 million, an improvement of approximately $4 million compared to availability at December 31, 2019. I will now turn the call back over to Brett for some closing remarks. Thank you, Mike.

Our improvement actions are continuing throughout the year as we simplify and right-size our business for long-term and sustaining profitability. We continue to identify new leverage points to sustain our positive trajectory. I'm excited about the actions that are currently underway. The impact of COVID-19 is difficult to predict at this time. However, we know the coming quarters will be challenging. Our linear cost structure and the improvement actions we are continuing to implement position us to better weather the evolving effects of the pandemic going forward. Thank you. At this time, we'll now take questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. Our first question comes from Mark Rodriguez with StoneGate Capital Markets. Please go ahead.

Good morning. Thank you for taking my questions. Hey, I was wondering if you can maybe talk a little bit about the cadence that you saw through the quarter, just what sort of happened with the booking of revenues in terms of the disruptions you may have seen from coronavirus, and then also if you can maybe talk a little bit about what your order book looks like today and how that kind of cadence is coming along.

Yeah, this is Sam. The majority, some of our bigger customers, were delayed in placing their 2021 allocation even prior to the COVID-19 situation. And so they were, that would typically have been in our backlog, and it's not. And then when COVID-19 happened, they're reassessing their needs for the remainder of this year, and then what will push into 2019. So that's really the reason why the backlog is lighter than typical.

Got it, okay. And then if maybe, I think you touched on this a little bit with the balance sheet and the cash flow pretty strong in the quarter, but maybe if you can just talk a little bit more about your expectations for cash flows for this fiscal year. Not necessarily looking for guidance, but just kind of trying to get a better sense as far as what your liquidity situation looks like, what you might be expecting from maybe a base case type scenario. And if you can discuss your expectations on working capital and capex expectations for the coming fiscal year.

Okay, Marius, Mike. Yeah, good question. You know, as we entered into, as we end Q1, we're in a pretty solid liquidity position. Availability on the revolver is up. We ended Q1 with a strong sales month in March, increasing collateral on the accounts receivable on the line. We have done things to respond to the impact in the second quarter. We've curtailed some operations temporarily, and we shut some plants temporarily to manage through in the early part of Q2. That has basically, you know, we've been able to successfully managing our cash flow. And in the first part of Q2, we've been harvesting cash. And we've been using it to pay down the credit line. So we've been actually very effectively managing cash in the early part of the quarter. So I feel pretty solid right now. And then as we look forward into the future, you can just basically follow our largest customers and what's happening on the steel side. You can imagine some demand is getting pushed out. We're trying to manage that with our customers. But I do believe what we're going to see is less working capital demand. And I think we're going to, as I indicated, we're going to be liquidating some working capital. We are managing our cost structure against that as well. So, you know, I think we have, as we get into the second half of the year, visibility becomes even more difficult like most companies. And so we don't give earnings guidance, especially most companies are pulling earnings guidance that used to give it because there's so much uncertainty. Our view is that we will see an impact here in the second and third quarter. but we are managing our cash and our working capital should come down. And with your question on CapEx, we have definitely reduced our spending on CapEx and our expectations for the year, given the pandemic, are to significantly reduce our capital expenditures and focus those dollars on maintenance requirements, basically, sustaining type of investments in the machinery.

Got it. I'll jump back into your thing.

Our next question comes from Justin Bergner with G-Research. Please go ahead.

Good morning. Good morning, Justin. How are you, Brett? How are you, Mike?

Good.

First question just is on the benefit under the CARES Act. So given what I've heard from other companies, so that $3.5 million includes both the benefit from the reversal of the valuation allowance and sort of the markup of NOLs booked at 21% to the 35% that you can look back against. Correct me if I'm wrong there. And then what is the cash refund you're expecting from the CARES Act this year and potentially early next year versus that 3.5 million?

Good questions. Basically, the CARES Act has enabled the carryback of an additional two years, so it goes up to a five-year carryback allowance, which means that if you had net operating losses that you were carrying forward you can now pause and take a step back, look back five years. And when we do so, we take our 2018 results and go back to 2013 when we were profitable. We have done certain, you know, normally it's a two-year carryback opportunity in normal times. And we've used that effectively over time. But as we look where the opportunity lies for us, if we take our 2018 results losses and apply them, reach back five years, we can harvest some NOLs of about $3.5 million if we can reach those back to our 2013 period when we had profit. And so we've already filed for that refund. So that's $3.5 million. We think we may get that. We're estimating here, but it may take, say, 90 days or so for them filing the refund. And we already have filed that refund. So You know, best case, maybe trying to rough this out when that money might come in, probably we're guessing around July maybe. If things go well with the government and the IRS and, you know, maybe a 90-day estimate might not be unreasonable. So that's one piece of it. The other piece of it is that the CARES Act also allows for some other benefits that are to accelerate some other benefits like alternative minimum tax benefits refunds that you're eligible for, but you have to wait. The CARES Act allows those to be refundable now. That's pretty small for us, a couple hundred thousand. So we're expecting that to add, and that's part of our refund request as well. So we're thinking about $3.7 million or so should come in in the summer on the refund. That's how that plays out.

Okay.

And we're basically, we get to record the benefit in the current period tax provision because we book a current receivable for it.

Okay, that's helpful. So I guess, yeah, so the tax benefit sort of, the cash benefit matches that $3.5 million to a head. Yes. The other question I – well, two more questions, I guess. Next would be, you know, you've talked in prior calls about pursuit of sort of new business and new end markets. I realize, you know, it's a tough time to be pursuing new business, but any updates there?

Yeah, on the FortuneCast engineer product side, we were heavily reliant on oil and gas, and as you all know, that's pretty well dead at this point with – I mean, the rig count from a year ago is down 56% at this time, from 990 to 408. And we're actually starting to see that increase. As we were predicting on the prior calls, we're starting to see activity increase in January, February, a lot of increase coming in, and now that is not. But at the same time, we've really been going after bar distribution markets and infrastructure and industrial gearing type of markets. And we have enough opportunities in there to really and trials being run to offset what we were expecting in oil and gas. So yet to be seen that the trials are successful, but we do have a lot of activity occurring with 10 or 12 different customers.

Okay, great. Thank you for that color. And then lastly, the other question related to just the restructuring. You talked about a $2.9 million benefit, I think, from restructuring Europe How much of that has – you said, I guess, 1.2 million of savings have been realized year on year. Is that all Sweden-related, or is that mainly Sweden-related? How does that break out across facilities?

Well, the 1.3 million is just cost savings related on raw materials and process efficiency, so that has nothing to do with restructuring. The restructuring, we probably have already seen, you know, $500,000 of it. And that's an estimate. And really the reason why it's not done at this point is it's difficult in Sweden, more difficult in Sweden to the severance period and how long you have to give warnings and dealing with the unions. But all of that's complete. And most of the people start coming out in May and June timeframe. It'll be pretty well completed. And the majority of that remaining is Sweden.

Okay. Thanks for taking my questions. Thanks. Thank you.

Again, if you'd like to ask a question, please press star, then 1. Our next question comes from David Wright with Henry Investment Trust. Please go ahead.

Good morning. Brett, congratulations to you and your team. You're continuing to make the progress that you said you were going to make, and it's a good report this morning. So thanks for the good job. Thank you, Des. A question for Terry. Just remind me, on the pumps that you make for the U.S. Navy, which ships do you make pumps for?

Buffalo Pumps has some services on virtually all of the combatants in the U.S. Navy. The combatant specifications are significantly more severe than the cargo ships and the tankers and the supply ships, and that's where our focus is. So we're on virtually all of the combatants that are in current construction today.

Surface ships only, correct?

That is correct.

Okay, thank you. Two for Sam. Just for clarification, you alluded to something you guys talked about on the last call, which was... rural customers not having placed their full-year orders. Do you think that those orders are going to be placed or that there just won't be any this year because of all of the disruptions?

I wish I knew the answer to that. You know, listening to the earnings calls of our customers, like ArcelorMittal, for example, in the U.S.' 's heavily reliant on automotive, so that's obviously been slow to restart, and we're seeing deferrals. Nucor and Steel Dynamics are more in the construction space, and that has not slowed down at this point in time. They're not as big of customers for us, but they're still out there. We're starting to see Italy open back up. There was a period of time where we weren't shipping any rules. Our Slovenian operation ships quite a bit into Italy, and that has started again. It will certainly be lighter, and I think there will be deferrals from 20 to 21, but that will be yet to be seen over the next two or three weeks as our customers assess their inventory and what they need for the remainder of the year and early next year.

When you say over the next few weeks, is there sort of an order period that if you don't make orders by X that there aren't going to be any?

No. I mean, for most of our – for a lot of our products, we're in the three or four month to be able to deliver if we got an order today. The large rolls is further out, but we're booked pretty solid on large rolls through almost October or November, so there's still time. They're just – you know, everybody's just assessing, as you can imagine – what their order book is, and what their needs would be, and they're also trying to manage their cash just like we are. So it enrolls a capital item for many of these customers, but they're going through that analysis currently.

Okay, and then second question for you, Sam. We've had a lot of shutdowns and some announces as permanent, and then there will be restarts. Can you characterize between North America and Europe? Has the impact on your role business been different in one geography versus the other, or is the experience pretty identical?

It's pretty identical other than it's phased. I mean, Europe was first. probably two, three weeks ahead. And then the U.S. is lagging. But again, the one bright spot in the U.S. is construction. And that kind of – a general economic downturn, construction lags because all those projects are already started. And then, believe it or not, Tin used for cans and things like that, people are using a lot more of that. So volume there is stable to up. But again, the big sectors such as automotive and white goods have taken a pause.

Okay. And then one for Mike. The Rabbi Trust, do they relate to asbestos reserves or something else?

No, David, the Rabbi Trust is in place to cover the non-qualified CERT plan that's in place. So it's a non-qualified retirement plan, and we have a trust in place. And it's relatively small, about $4 million or so. It's down because of the asset mix. There's a fair bit of it in equities. And with the equity market taking a hit, and barge especially, the value of that, we have to mark to market that asset because it is a corporate asset subject to the credit risk of the corporation. So it becomes a corporate asset even though it's a trust that's dedicated for the use of an old CERT plan. Under the accounting guidance, we have to market those assets to market rather than defer them into AOCI.

Okay, great. All right, thank you very much.

Our next question is a follow-up from Marco Rodriguez with Stonegate Capital Markets. Please go ahead.

Hi, yes, I just wanted to follow up in regard to the European restructuring issue. I think you mentioned on a prior answer to a prior question, you recognize about a half a million in savings from the restructuring, the European adjustments, I believe in the past you had forecast for about a $4 million annualized run rate in fiscal 20. And if I heard you correctly, you should realize that come Q2, Q3 this year?

Q2, the $3 to $4 million was restructuring plus $1 million in kind of quality avoidance cost savings issues. And we've actually been able to do more on the quality side. And then also the restructuring piece was close to $3 million on its own. But yeah, the majority of that, two-thirds or so or three-quarters of that will start to be realized in Q2.

Got it. And if you could also remind us the phase one reduction plan that you are looking to take out $2 million in expenses, that has been completed. And then if also you could talk a little bit about last quarter, you talked about reducing corporate expenses in the ballpark of 10 to 15%. Are we hitting that target yet? Or is there some more room to grow there?

The $2 million on the raw material process improvement quality, yeah, we achieved a

That was supposed to be $2 million annualized, and we achieved $1.3 million in the first quarter, so we're seeing a much bigger impact. Now, that will be tamped down in Q2 and Q3 because the volumes are significantly down in the Sweden plant. But once it ramps back up, we will see more like a $3 million or $4 million kind of annualized savings from those improvements.

And I'll let you get the end of this. Yeah, and Marco, it's Mike on the corporate saving. The corporate, as we entered the year, we said that we expected 2020's corporate expenses, corporate SG&A, to be down about 10 to 15%, and we are definitely right in line with that right now.

Got it. Thanks a lot, guys. Appreciate it.

Okay. Thanks.

This concludes our question and answer session, and the conference has also now concluded. Thank you for attending today's presentation.