Ladies and gentlemen, thank you for standing by and welcome to the TimkenSteel Q1 2020 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers’ presentation there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ms. Jennifer Beeman. Please go ahead.

Good morning, and welcome to TimkenSteel's first quarter 2020 conference call. I'm Jennifer Beeman, Senior Manager of Communications and Investor Relations for TimkenSteel. Joining me today is Terry Dunlap, Interim Chief Executive Officer and President; Kris Westbrooks, Executive Vice President and Chief Financial Officer; as well as Tom Moline, Executive Vice President of Commercial. You all should have received a copy of our press release, which was issued last night. During today's conference call, we may make forward-looking statements as defined by the SEC. Our actual results may differ materially from those projected or implied due to a variety of factors, which we describe in greater detail in yesterday's release. Please refer to our SEC filings, including our most recent Form 10-K and Form 10-Q and the list of factors included in our earnings release, all of which are available on the TimkenSteel website where non-GAAP financial information is referenced, additional details and reconciliations to its GAAP equivalent are also included in the earnings release. With that, I'd like to turn the call over to Terry. Terry?

Thank you, Jennifer, and thank you to everyone for joining us this morning and for your interest in TimkenSteel. Let me begin with a word about safety and our COVID-19 actions. First, I'm extremely proud that during this challenging time, we achieved some of the best safety results in company history, including our lowest OSHA recordable rate on record. I am thankful for the ongoing commitment and focus of our employees to keep everyone safe and healthy every day, every shift. Regarding the COVID-19 crisis, as you know, TimkenSteel has been designated an essential business by the Ohio governor and the Department of Homeland Security. As such, the company has continued to operate uninterrupted from the beginning of the pandemic providing products that are vital to the safety and security of our country. The TimkenSteel team has performed admirably to keep employees safe in our factories and operating. In early March, we created a cross-functional COVID-19 team to lead our response and work collaboratively across the company to ensure the health and wellbeing of our employees. Employees who can work from home are doing so, and employees onsite are strictly following safe workplace practices established by the CDC, U.S. Department of Labor and Ohio Department of Health. We have added enhanced cleaning procedures in all plants and offices, encouraged employees to be vigilant with their personal hygiene, workplace hygiene and physical distancing, and we regularly reinforced the message that no one should come to work sick. In the last two months, we performed hundreds of audits in our plants to ensure we remain diligent in these efforts. We are communicating regularly with our workforce and often with the community regarding the impacts of COVID-19 and have established communication channels to alert us in real time to any concerns or areas in need of attention. This includes engagement with the United Steelworkers and local government and health officials. In addition, we have also taken actions to support our community and medical professionals including the donation of N95 respirators, first-aid kits, and other supplies to local health care and community organizations. Again, an extraordinary effort by our organization under extremely challenging circumstances. I sincerely want to thank our 2,200 employees and their families for their dedication and resilience during these challenging times. I am particularly proud of the operations team, who remained onsite, working safely to serve our customers. Now onto the business results and highlights of the quarter. From a financial and operational perspective, I'm encouraged that we achieved our first quarter guidance for shipments, net income and EBITDA. To early March the quarter unfolded much as we had expected until the pandemic resulted in customer slowdowns during the final three weeks of the month. In addition, cash flow continues to be especially positive. In the first quarter, we generated $61 million of positive free cash flow and over $90 million during the past six months. This is the highest free cash flow generation we have achieved in any quarter as a standalone company. We continued our focus on proactively and responsibly reducing inventories across the business, working closely with customers and suppliers as well as improving numerous internal business practices. In addition, we've implemented improved accounts receivable and payable processes, closed non-performing businesses, and sold non-core assets. Equally important, we continue to improve the overall liquidity position and pay down an additional $30 million of debt in the first quarter. For the quarter, total shipments increased 19% versus the previous quarter with improvements in all market segments. We got off to a good start during the first two and a half months of the year, but as I mentioned, COVID-19 restrictions began to suppress demand over the final weeks of the quarter, especially in our automotive business, where the OEMs and suppliers have implemented widespread shutdowns. Our team will remain in daily contact with automotive customers to understand the ramp up plans and specific inventory needs in May, June and beyond. Our industrial customer business was not as significantly impacted by COVID-19 in the first quarter as many of our large customers remained open. Our shipments to industrial customers increased 13% versus the prior quarter. In recent weeks, we have seen slowdowns in order demand from our industrial customers and distributors as they align their inventories with customer demand, but there are pockets of strength in this business, especially in the defense end market, which has remained steady. In our energy business, first quarter shipments were up 75% from a very weak 2019 fourth quarter. Recently, we have seen a significant reduction in energy market demand driven by record low oil prices and excess inventories of oil and gas products. Overall, we estimate the COVID-19 related impact on our first quarter 2020 results was approximately $10 million in lost sales, primarily due to the sharp decline in automotive. The pandemic's impact on our second quarter, remainder of the year and beyond remains unknown, but at a minimum we expect customer demand to be sharply lower in the second quarter of 2020. In response to the significant reduction in customer demand resulting from the COVID-19 crisis, we have taken additional actions to further reduce operating expenses, conserve cash and maximize liquidity, including reducing my pay as well as senior executives’ base salaries by 20% and other executives’ base salaries by 10%. This was effective May 1st. Our Board of Directors has elected to reduce their cash retainer by 20%, which began in the second quarter of 2020 and reduce the value of their annual equity grant by 20%. We will suspend the company's 401(k) plan matching contributions for our salaried employees, effective June 1st. In early April, we began implementing unpaid rolling furloughs for approximately 80% of salaried employees. We expect this to continue throughout the second quarter. We have aggressively reduced production schedules at all plants to align operations with customer demand resulting in the temporary layoff of manufacturing employees. And as you would expect, we have also reduced our planned 2020 capital expenditures to a maximum of $25 million, a $5 million reduction from our previously stated guidance. In addition to cost reduction actions related to COVID-19, we continued to take actions and have made progress on our profitability improvement plan. We completed the previously announced closure of the TimkenSteel material services facility in Houston in the first quarter of 2020. We expect to realize approximately $8 million in annualized savings going forward. In addition, we sold $8.9 million in machinery, equipment and excess inventory in the quarter. In February, we restructured our commercial organization to improve efficiency and response times to customers. In addition to the operational improvements, these actions will drive approximately $2 million in incremental annual savings. Over the past year and a half, TimkenSteel's workforce has been reduced by 25% as a result of numerous cost reduction and restructuring actions implemented to improve the efficiency and cost competitiveness of our business. A majority of these actions took place prior to the COVID-19 crisis. Overall, we remain confident in our ability to deliver the approximately $70 million of run rate savings, which we discussed in previous calls. Turning to growth plans, the expansion project in our value-added components facility near Dayton, Ohio remains on time and on budget. This investment is being made to support growth with strategic automotive customers in our value-added components business. While two of our customers have pushed out program launch dates 30 to 60 days due to COVID-19, we fully expect qualification trials and production ramp-up schedules to proceed in the second half of the year. Regarding scrap pricing, the three city average of American Metal Market number one busheling index rose another $30 in the first quarter, continuing the upward movement that began in November of 2019. In the latter half of the quarter, the decrease in the supply of busheling due to the automotive plant shutdowns continued to drive busheling scrap prices higher, while the price for obsolete scrap began to drop in part due to lower steel mill production rates around the country. Our expectation is that busheling prices will continue to see substantial increases, while obsolete scrap will rise in a more moderate fashion. With that, I'll turn it over to Kris, who will walk you through the numbers. Kris?

Thanks Terry, and good morning, everyone. I would also like to express my gratitude to our employees for their commitment to a healthy and safe working environment, while actively engaging with our customers, suppliers and other partners. Moving now on to financial matters. In the second half of 2019, we initiated a project to improve our working capital efficiency. As the first quarter evolved, we realized significant benefits from this hard work as evidenced by our first quarter of 2020 free cash flow of $60.9 million. The timing of this work was ideal as we entered what we believe will be a very challenging second quarter with a higher than historical level of cash and the most available liquidity since the inception of the company. In the last six months, we've generated over $90 million of free cash flow and approximately $110 million in cash from operations. As Terry mentioned, we accomplished our first quarter shipments, net income and EBITDA guidance. In the coming months, in light of COVID-19, our actions remain focused on cost reduction, cash preservation and ensuring near-term financial stability which will serve the company as the market begins to recover. On a GAAP basis, our first quarter of 2020 net loss was $19.9 million. Excluding certain items, the adjusted net loss was $11.3 million in the quarter. Adjusted EBITDA was $9 million in the first quarter, at the high end of our guidance range. First quarter financial results represented a significant improvement from the larger net loss and negative EBITDA that we reported in the fourth quarter of 2019. Moving to the drivers of the first quarter results, shipments of 213,400 tons were 19% higher versus the fourth quarter of 2019. This higher level of shipments drove an improvement in adjusted EBITDA of approximately $6 million. From an end market perspective, shipments to mobile on-highway customers were 88,800 tons in the quarter, a 9% increase over the fourth quarter of 2019. Normal seasonal improvements in the quarter were partially offset by the negative impact of COVID-19 in March of 9,000 tons or approximately $10 million of lost revenue. Shipments of 81,200 tons to industrial and 18,400 tons to energy were also positively impacted by normal seasonality in the quarter, and billet shipments were 25,000 tons in the quarter. The impact from COVID-19 on our industrial and energy shipments in the first quarter was minimal. Price and mix declined in the first quarter with an EBITDA impact of approximately $4 million compared to the fourth quarter of last year. Lower 2020 contract pricing, given underlying market pressures as well as higher shipments of OCTG billets negatively impacted price and mix. Surcharge revenue of $45.9 million in the quarter was an improvement of $11.3 million compared to the fourth quarter of 2019, but $43.8 million below the first quarter of 2019. Lower ship tons as well as a decline in the surcharge revenue per ton on a lower number one busheling scrap index negatively impacted surcharge revenue in comparison to the first quarter of 2019. Manufacturing costs benefited by approximately $8 million, primarily from improved fixed cost leverage compared with the fourth quarter of 2019. Melt utilization remained low at 47% in the first quarter, but was up from 35% in the fourth quarter of 2019. Additionally, first quarter cost reduction actions in the areas of maintenance and outside services will benefit future periods as inventory is sold. SG&A expense for the quarter was $23.4 million, and it was relatively consistent with the prior year first quarter and reflects an increase in bad debt expense and variable compensation substantially offset by lower wages and benefits as a result of the company's restructuring actions. Moving on to cash and liquidity, our total available liquidity was $290 million at the end of the first quarter of 2020, an improvement of $60 million since the end of 2019. The increased liquidity was a result of inventory reductions in all categories, effective management of receivables and payables and the continued benefit of prior year cost reduction actions. These significant actions enabled us to generate $60.9 million of free cash flow in the first quarter and close the quarter with $65.5 million of cash. Additionally, cash proceeds from asset sales during the quarter contributed to our improved liquidity. Our team remains focused on liquidating the remaining assets in the closed Texas facility to generate additional cash. Overall, our liquidity position at the end of March remains sufficient, and we will continue to take the necessary actions to conserve cash and aggressively reduce costs in the months ahead. From a pension plan perspective, the company recorded a noncash remeasurement loss of $9.5 million in the first quarter of 2020. It has been excluded from our adjusted EBITDA results. The remeasurement of the U.S. salaried pension plan obligation and assets was driven by 2020 lump sum payments projected to exceed the sum of service and interest costs. Going forward in 2020, we will be required to remeasure our U.S. salaried pension plan on a quarterly basis. Following this first quarter remeasurement, the total funded status of all company pension plans was approximately 85% as of March 31, 2020, down slightly from the end of 2019. There are no additional required pension contributions in 2020, following approximately $1 million contributed in the first quarter. Although it's still too early to determine the extent and duration of the COVID-19 impact on our business and the overall economy, we've experienced a significant decline in customer shipments in April. Order bookings have also declined as a result of customer production downtime and reduced demand. From a supplier perspective, we've not experienced a significant disruption in our raw material supply chain to date and remain in close contact with our supplier network. Over the past month, we've taken quick and decisive action to reduce operating expenses and defer cash expenditures with the objective of maximizing our available liquidity. First, from a manufacturing perspective, we've aggressively reduced production schedules to align with customer demand and related downtime in this COVID-19 environment while continuing to provide uninterrupted customer service. In April, our melt utilization was 25% to support 32,000 ship tons in the month. We anticipate our melt utilization rate and shipments to remain low in May as well. Plant operating schedules are being reviewed weekly and revised as necessary to support demand. Our production schedule will be heavily dependent on when the automotive supply chain ramps up. During planned downtime periods, our operations team is working diligently to reduce variable costs, which represent approximately 71% of our total plant costs. Second, from an employee actions perspective, as Terry mentioned, we've implemented demand-related employee furloughs in April and May for approximately 80% of our salaried staff. Next week, for example, we have approximately 450 salaried employees on unpaid furlough. We estimate that the furlough actions in April and May will save over $2 million. We will continue to monitor our order book in the coming weeks and adjust furlough plans going forward as necessary. Additionally, the base salaries of our leadership team were reduced and cash and equity compensation to the Board of Directors were similarly reduced. In total, the Board and leadership team cash compensation reductions will save approximately $800,000, assuming the reductions continue for the remainder of 2020. These compensation actions will be reevaluated as business conditions improve. Lastly, from an employee actions perspective, we made the difficult decision to suspend the company matching contributions to our salaried employee 401(k) retirement accounts effective June 1. This action is estimated to save approximately $1.9 million for the remainder of 2020. You can find further details on these employee compensation actions in the Form 8-K that we filed yesterday with the SEC. Switching gears now to the recent government legislation relief and the impact on our company and employees. The most significant benefit that we've identified to date from the legislation is the social security payroll tax deferral option that was part of the CARES Act. We began to take advantage of the payroll tax deferral option in April, and expect this to result in deferred cash payments of approximately $7 million to $10 million for the remainder of 2020 to be paid in two equal installments at the end of 2021 and 2022. Regarding available loan programs, the company evaluated the programs and does not believe that we qualify at this time. From an employee perspective, individuals on furlough are now eligible for an additional $600 per week of unemployment compensation afforded by the CARES Act. To wrap up the COVID-19-related actions, we're reducing our full year 2020 planned CapEx spending to a maximum of $25 million, a reduction of $5 million from our earlier guidance. Previously, we quantified $70 million of run rate savings to be delivered in 2020 from our prior year cost reduction actions. Over half of these savings are attributable to structural changes we've implemented in our business, such as the 25% reduction in our workforce since the beginning of 2019, closure of the Texas facility and changes in pension and retiree medical plans. A portion of the savings are attributable to purchasing activities and manufacturing operations. We've implemented many of the actions required to realize these savings. However, the savings are dependent on a reasonable level of purchasing activity and plant utilization. As the market begins to recover, we expect to deliver on the $70 million of run rate savings. Additionally, we're currently evaluating additional restructuring actions to further improve our cost structure in the current economic environment. As these plans are finalized, we will communicate the details. Given the uncertainty around the extent and duration of COVID-19 and its related impact on the company, we've suspended providing quarterly guidance at this time. This wraps up my prepared remarks and now we would like to open up the call for questions.

Your first question comes from the line of Seth Rosenfeld from Exane BNP. Your line is now open.

Good morning, thank you for taking my questions today. Two different questions, please. First, on working capital and then secondly, with regards to some of the labor cost savings. On working capital, can you just give us a little bit more color, if possible, with regards to the drivers of that working capital release in Q1 and certainly, a very positive and very strong performance in that period. I want to better understand how sustainable that is medium term. I guess are you expecting further release into Q2 given the sharply lower volumes? But assuming we got back to more decent volumes in the second half of the year, would we require more of a cyclical reinvestment over that time period? And then secondly, with regards to the manufacturing staff reductions you've seen given the low utilization rates, can you again just give us a bit more color on what portion of the manufacturing staff has currently been temporarily laid off and also the union response for these efforts? Thank you so much.

Great. Thanks, Seth. So on working capital, we've taken numerous actions, as Kris pointed out in his comments, on every front. We've gotten a lot of the low-hanging fruit that was available to us over the last six months, but there's plenty more opportunity, and we're working on those every day across the business in all areas of inventory. So we think there is more to be had for sure in improving our processes and the way we run the business. Some of the easier targets have been taken care of, and the work has been ongoing for six months. So we think we have more opportunity as we go forward. But certainly, we're into some of the more difficult actions that we have to be taking and the business practice changes going forward. Secondly, on the manufacturing cost side, I'm going to let Kris talk about this one. But I can tell you that in working with the United Steelworkers, we meet with them constantly every week. I personally talk to them on a very frequent basis, and they have been nothing but totally supportive of everything we're doing and all the work that's going on to keep the company operating and keep it running well. Over the COVID period, they've been incredibly supportive and helpful, couldn't be better partners throughout this whole thing. They fully understand the volume activities related to COVID too. So full support from the union. Kris, you want to pick up on some of the manufacturing cost questions?

Yes. I mean the head count moves that we've made are being managed week to week. So a lot of those actions that we're taking can be changed as necessary as demand gets adjusted. That's been our focus here as we continue to balance production with demand. And then just to add a little bit on the working capital side, we do feel like the changes that we've made are sustainable. As the business continues to improve, there will be a need to invest some as you buy and then ultimately sell to the customers, but we feel like we can manage through that. And the processes that we put in place here will benefit us into the future.

Thank you. Just one follow-up on working capital then. We would generally expect a quite sizable release of working capital into Q2 given the color on reduced utilization rates and shipments. Are you expecting to achieve additional working capital on a cyclical basis in Q2? Or has some of that perhaps been pulled forward into Q1 already? Thank you.

Seth, yes, we've taken as much action as we can here in the first quarter. I'm optimistic that there could be some additional opportunities, but it all remains to be seen on how the demand environment progresses throughout the quarter. So we're not going to comment on specifics or even directionally here in the second quarter, but we did work really hard in the first quarter to deliver as much as we could, and we believe that there are some opportunities still.

Great, thank you.

You're welcome.

Your next question comes from the line of Tyler Kenyon from Cowen. Your line is now open.

Hey, good morning. Hope you're all doing well. Wondering if you could comment a little bit more on what utilizations look like today. I think Kris, you mentioned utilizations were around 25%. And wondering if you could help us try to understand as well just kind of the shipment volume impact here quarter-to-date and how that transgressed through April and into May here?

Kris, do you want to grab that one?

Yes, no problem. You are right, Tyler. I did mention April at 25% and indicated that May was going to be low as well. We're looking at our production schedule every week and taking outages as necessary to match that demand environment. The shipments that we had in the month of April of 32,000 are pretty small in comparison to what our original business plans were. I indicated that I expect that to remain low into May as well. Mobile shipments, specifically in the month of April were very light, whereas industrial and some energy held up better than you may expect, but it was the mobile that was down so significantly as all those automotive facilities were shut down. So as those begin to open back up, we expect that our production also and our shipments will ramp in a similar fashion, although it's going to take some time and be dependent on where that automotive inventory moves and how it gets sold into the consumers.

Got it. Perfect. Thanks.

Yes, Tyler, just to add on. You read the same stuff we do about the automotive ramp up. And that was really the biggest impact by far. So we're paying really close attention with our customers about their ramp plans for May. Every day, there's new news about it and what the pacing is and what the inventory levels are like. So we can't be any more proactive than staying close to customers to be aligned and aligning our factory operations with what they're telling us and what they need. We expect that to be a normal course of business for the next couple of months.

And just on automotive, can you share a little bit about what you're hearing from your customers right now, I mean we've all been reading about the expectation for these plants to restart middle of May. Are you seeing any improvement yet in quoting or bookings? And do you sense that the OEMs are sitting on some inventories that they need to burn through first before you realize any upside in shipments?

Tom, do you want to take that one?

Yes. I will offer some color on that. Good morning, everyone. As Kris was alluding to, the mobile on-highway market was down in the quarter, and that was largely a result of the COVID-19 pandemic that led to the auto OEM shutting down their transmission, engine and assembly plants in the latter half of March as well as the dealerships closing. The annualized light vehicle sales rate for the quarter dropped to approximately 15.2 million units. That's down 10.5% from the 2019 sales rate of approximately 17 million units. Now our volumes were actually up 9% relative to the last quarter, primarily driven by the normal seasonality improvements that Kris mentioned and a few new program launches. And again, as Kris stated, our volume would have increased and been up approximately 20% without the 9,000 ton shipment loss at the end of March due to the plant closures. Now the OEM and tier suppliers are suggesting that plant restarts range from early to late May, and we are seeing that activity start to happen. They are also suggesting a gradual ramp-up to full production that could span several weeks, and that would include the impact of about one to two weeks of inventory in the supply chains for both long product and value-add component products. The current light vehicle sales and production forecast for 2020 is 12.5 million and 12.2 million units, respectively, and that is down 25% relative to 2019. Now the OEMs still need Governor approval and United Auto Worker Agreement for safe startup and operational protocols. On a positive note, light vehicle sales in April were actually a bit better than what was forecasted. The forecast was for a 4.7 million unit annualized rate; they actually sold at an 8.6 million annualized rate. Incentives, good full-size pickup truck activity and efficient online sales were key drivers to coming in a bit better than forecast. Obviously, mix is key to our participation in auto markets. Passenger car sales continue to be sluggish relative to total sales. Our participation is mainly in truck, SUV and CUVs. So our exposure to declining passenger car market really is very modest. From our perspective, the automotive market was in good shape prior to COVID-19. Our volumes were increasing significantly relative to recent quarters, but there's still just an extraordinary level of uncertainty due to COVID-19 right now, making it very difficult to forecast. Demand will certainly be lower in Q2. We have to watch how the auto plant restarts progress, their ability to operate safely and see how interested consumers will be in buying vehicles going forward. As Terry stated, we are staying very close to our customers, watching indicators at the macro level as well as the micro level. We will stay in close contact with customers and continue to work alongside them to fulfill their material requirements. We will, no doubt, be ready when they are ready to start ramping up their production.

Thanks very much.

Your next question comes from the line of Justin Bergner from G. Research. Your line is now open.

Good morning, Terry. Good morning, Kris. I thought I'd just start and delve a little into the CARES Act. Just to make sure I understood, the primary benefit that you guys outlined is the social security payroll tax deferral and you mentioned the $7 million and the $10 million. How are those separate? Are you effectively pushing out $17 million in cash outflows from 2020, 2021, and 2022?

Yes. So it was $7 million to $10 million. $7 million is the low end of the range, $10 million is the high end of the range depending on compensation and benefits for the rest of this year. And that gets pushed into the end of 2021 and 2022.

Got you. All right. And then are you able to look back any of the NOLs that you have on your sheet as per the CARES Act into past profitable years? Or is that provision something you don't see yourself as being eligible for?

Not as big of a benefit for us because we haven't been a taxpayer since the spin-off, given our NOLs. So we still have a very high level of NOLs here at the end of March. There will be some impact, that could grow, but not a recapture of any prior taxes given our position.

Okay. Understood. Just wanted to confirm that. And in terms of the additional cost savings that you quantified, you quantified, I guess, $2 million in cost savings, I think, in April and May from the furloughs and about $2 million from suspending the 401(k) through the end of the year. I just want to make sure those are the right numbers. The other actions that you outlined, do you want to sort of quantify the savings there as well for sort of a total incremental number of savings that you might be tracking for 2020?

Yes. If you add up the actions that we announced and I summarized in my release, it's about $5 million of cost benefits and cash benefits here as we complete 2020 for the items that you mentioned. Now the furlough estimate that we included in there, it's about $1 million a month. I've only included April and May, and we're continuing to evaluate our demand levels and could make adjustments to that plan as we get into June. So every month of additional furloughs, call it $1 million of incremental savings. But right now, I've captured $2 million for two months in that $5 million estimate. The 401(k) that you mentioned is approximately $2 million for the rest of 2020, assuming it continues. And the last piece was the salary reductions that will be reevaluated as business conditions improve, and that's about $800,000 of cash there as well. So those items are what adds up to the $5 million. Now the actions we're taking within manufacturing to align with demand, I didn't put numbers on those. Those are typically fairly significant benefits as you try to align that production with demand and reduce cost.

Okay. Thank you. You made a comment earlier that energy markets were not doing as badly as might be expected and the first quarter volumes were up sequentially, although the base pricing was meaningfully down sequentially. Any sort of color on what that statement means? Is it forward-looking or just more backward-looking that would be helpful?

Yes, Tom, you want to grab that one?

Thanks. Again, yes, the energy market was decent in the first quarter. Operators constrained their spending in the back half of 2019, focusing heavily on reducing their inventories. They started to come back into the market in Q1, and our volumes were up 64% relative to last quarter. Now percentage-wise, that's a big increase, but we were coming off very low volume levels in Q4 of last year. We were also able to pick up some additional OCTG spot billet business in Q1. But the energy market is, without question, weakening again. Most of our customers are operating in the COVID environment. Volumes have been impacted by reduced consumption rate of petroleum-based products, which is largely COVID related. And more impactful are the macroeconomic factors currently in play. Oil inventory levels are high and prices are low. U.S. rig counts have dropped approximately 50% from earlier in the year to approximately 400 and could go lower in the second half. Oil prices are approximately $25 a barrel and forecasted to be approximately $30 a barrel in the second half. Again, there is an extraordinary level of uncertainty due to COVID-19 and the macroeconomic factors, making it difficult to forecast, but in this environment, investments in exploration of oil and gas are likely to be severely curtailed and would not be expected to recover in the near term. The pricing average values that you saw in energy for the first quarter were actually aligned pretty closely with what we had expected and forecasted. I have to be cautious with those as they are heavily influenced by mix — a mix of product type, alloy content, heat treat requirements — and in the energy sector, in particular, we had a larger volume percentage of billets than what we had forecasted. The energy products that were more traditional were more focused on products not requiring heat treatment, less completion type products. So those average values that you saw in Q1 are pretty indicative of what I would expect going forward in a lower demand environment.

Thank you for that great detail. Just lastly, you mentioned a 30 to 60 day delay, I think, in automotive programs. Were you referring to the new sizable contract there that you expected to deliver beginning in the second half of this year, I think on the order of $35 million of revenue in the second half as envisioned a quarter ago? Or are you referring to something else?

Those were the launches we talked about with our value-add business in the last quarter. They've been pushed out. As you would expect, the plants are down. Two of the ones we talked about are fully expecting to pick right back up with the 30 to 60 day delay. So nothing too extreme at this point, which is good news, but we’ll keep talking with them every day to make sure those plants are still intact, and we think we'll be right back at it in the second half of the year with both of those launches. We're not able to talk about either one in detail due to confidentiality issues with customers. But given everything else that's going on with the automotive industry, not bad.

Thank you for answering my questions.

You're welcome.

Thanks, Justin.

There are no further questions at this time. I will turn the call back over to Jennifer Beeman. Please go ahead.

Thank you so much for joining us today. Stay healthy, and that concludes the call. Thank you so much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.