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Edited Transcript of ATU earnings conference call or presentation 25-Jun-20 3:00pm GMT

·51 mins read

Q3 2020 Enerpac Tool Group Corp Earnings Call BUTLER Jul 6, 2020 (Thomson StreetEvents) -- Edited Transcript of Enerpac Tool Group Corp earnings conference call or presentation Thursday, June 25, 2020 at 3:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Barbara G. Bolens Enerpac Tool Group Corp. - Executive VP & Chief Strategy Officer * John Jeffrey Schmaling Enerpac Tool Group Corp. - Executive VP & COO * Randal Wayne Baker Enerpac Tool Group Corp. - President, CEO & Director * Ricky T. Dillon Enerpac Tool Group Corp. - Executive VP & CFO ================================================================================ Conference Call Participants ================================================================================ * Allison Poliniak-Cusic Wells Fargo Securities, LLC, Research Division - Senior Equity Analyst * Ann P. Duignan JP Morgan Chase & Co, Research Division - MD * Deane Michael Dray RBC Capital Markets, Research Division - MD of Multi-Industry & Electrical Equipment & Analyst * Jeffrey David Hammond KeyBanc Capital Markets Inc., Research Division - MD & Equity Research Analyst * Justin Laurence Bergner G. Research, LLC - VP * Mircea Dobre Robert W. Baird & Co. Incorporated, Research Division - Associate Director of Research and Senior Research Analyst * Stanley Stoker Elliott Stifel, Nicolaus & Company, Incorporated, Research Division - VP & Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by. Welcome to Enerpac Tool Group's third quarter earnings conference Call. (Operator Instructions) As a reminder, this conference is being recorded June 25, 2020. It is now my pleasure to turn the conference over to Barb Bolens, EVP, Chief Strategy Officer. Please go ahead, Ms. Bolens. -------------------------------------------------------------------------------- Barbara G. Bolens, Enerpac Tool Group Corp. - Executive VP & Chief Strategy Officer [2] -------------------------------------------------------------------------------- Thanks, Donna. Good morning. And thank you for joining us for Enerpac Tool Group's Third Quarter 2020 Earnings Conference Call. On the call today to present the company results are Randy Baker, President and Chief Executive Officer; Rick Dillon, Chief Financial Officer; and Jeff Schmaling, Chief Operating Officer. Also with us are Bobbi Belstner, Director of IR and Strategy; Fab Rasetti, General Counsel; and Bryan Johnson, Chief Accounting Officer. Our earnings release and slide presentation for today's call are available on our website at enerpactoolgroup.com in the Investors section. We are also recording this call and will archive it on our website. Please go to Slide 2. During today's call, we will reference non-GAAP measures, such as adjusted profit margins and adjusted earnings. You can find a reconciliation of non-GAAP measures to GAAP in the schedules to this morning's release. We would also like to remind you that we will be making statements in today's call and presentation that are not historical facts and are considered forward-looking statements. We are making those statements pursuant to the safe harbor provisions of federal securities law. Please see our SEC filings for the risks and other factors that may cause actual results to differ materially from forecasts, anticipated results or other forward-looking statements. Consistent with how we have conducted prior calls, we ask that you follow our 1 question, 1 follow-up practice in order to keep today's call to an hour and also allow us to address questions from as many participants as possible. Thank you in advance. Now I'll turn the call over to Randy. -------------------------------------------------------------------------------- Randal Wayne Baker, Enerpac Tool Group Corp. - President, CEO & Director [3] -------------------------------------------------------------------------------- Thanks, Barb, and good morning, everybody. We're going to start today over on Slide 3. Before we review the quarter, I'd like to spend a few minutes discussing the very difficult environment we're in today. Enerpac Tool Group is focusing on items we can control in the short term to ensure safety of our employees and position the company as strongly as possible for when the markets recover. Our plants around the world have been considered essential businesses and have remained in production with use of extra safety measures. Over 60% of our workforce remain at home, working effectively with new video conferencing technology. Surprisingly, it has been very effective, in some respect, has increased the efficiency of meetings and the frequency our teams are discussing critical strategic issues. Additionally, we have suspended all nonessential travel, the only exception being specific customer requests. Our cost control measures have been focused on providing short-term relief to the extreme decline in sales volume. Permanent cost measures announced in '19 and '20 have been accelerated to eliminate nearly $33 million of structural and redundant costs. And lastly, we have accelerated the Enerpac manufacturing footprint rationalization. Our global team have also focused on supporting our communities through protective equipment, engineered and manufactured by Enerpac. Without exception, our company has maintained our commitment to safety and supporting our communities in which we live. As we begin to emerge from the stay-home orders around the world, we are preparing our sites and our employees to safely work within the new environment. And as always, we will follow local governmental guidelines to ensure minimal potential for exposure. Then moving over to Slide 4. As we entered the third quarter, the impact of COVID-19 was isolated to Asia and had a meaningful impact to our earnings in the second quarter. As we progressed through March, the world became fully affected, and our order rate experienced a dramatic plus 40% decline. The decline in April was consistent with other conditions reported by industrial peers in calendar Q2. In early April, we passed through the low point and gradually began to improve through the month. The trough order rate occurred when both Europe and North America were feeling the full effect of the stay-home orders, resulting in minimal retail activity. At the same time, our distributors became very cash conscious and only ordered minimal inventory to fulfill immediate retail demand. During the quarter, we believe a significant destocking occurred in the channel, which has not been replaced to date. As we progress through the first few weeks of the fourth quarter, the order demand has continued to grow but is still at a normal -- it's still well below a normal run rate for this time of year. Additionally, as oil and gas prices recover due to production cuts and improved demand, we believe our service sales will return to a normal level. From a projection standpoint, we believe the recovery will be gradual through the coming quarters, provided a resurgence in the virus does not occur and a return to a stay-home order happens. Then moving over to Slide 5. Our third quarter was one of the most volatile we've seen on record. Our core sales declined by 38%, comprised of 35% down in products and 47% decline in service. As earlier mentioned, we focused on items we could control through short-term cost actions, constraining inventory and providing the best customer contact possible. As a result, our cash flow in the quarter was a positive $11 million, and we maintained our leverage at 1.8x despite the dramatic decline in sales. Additionally, our proactive efforts to amend our credit facility covenants and repay our senior notes has strengthened our liquidity position. Our efforts to constrain cost helped to maintain our decremental margin level of 35%, which was at the low end of our expected range. And we accomplished all this without sacrificing our ability to continue to execute our strategy. On the regional side, North America and Europe experienced a sales decline of approximately mid-30%. China began to recover early in the quarter, while the rest of Asia slowed, resulting in a decline in the low 30% range. But the most difficult region was our Mideast operations, which was affected by oil and gas pricing and COVID-19, resulting in a high 50% decline. Then moving on to Slide 6. Despite the severe impact to our business in the quarter, we were able to continue to execute our long-term strategy. Our investments in organic growth have become even more important in the current market environment. New product development contributed 6 new product families and over 10% of our sales in the quarter. Our commercial teams have become very creative in their efforts to connect with our distributors through training and application engineering. We have trained more people in the last 90 days via web conferencing than is normally accomplished in many combined quarters. I'm very proud of the team's commitment to the Enerpac Tool Group and maintaining a high level of support despite these trying times. From an M&A perspective, we believe our growth strategy to develop or acquire technology remains valid. However, we are waiting for an inflection point, which clearly indicates a return to a normal business environment. There are many tool categories which will add significant value to our company through an acquisition or product development, which remains a top priority on our capital allocation strategy. Our permanent cost actions -- our permanent cost reductions implemented or announced in 2019 and '20 have totaled approximately $33 million, and our temporary actions in Q3 contributed $12 million and an expected additional $8 million to $9 million in Q4. We have taken swift action to improve our structure and rightsize the business while positioning the company for growth when the markets return to normal. I'll turn the call over to Jeff now to provide some additional insights in our performance during the quarter, and then I'll come back after Rick Dillon to give some closing remarks. Thanks, Jeff. Over to you. -------------------------------------------------------------------------------- John Jeffrey Schmaling, Enerpac Tool Group Corp. - Executive VP & COO [4] -------------------------------------------------------------------------------- Thanks, Randy, and good morning. I'd like to provide some additional color on our business from a regional view, comment on some of our key verticals as well as what we saw going on in our distributor channel during the third quarter. I'll also give a quick update on some trends we're seeing here at the start of the fourth quarter. We're starting on Slide 7. As Randy mentioned, all of our regions felt the full impact of COVID for most of the quarter, beginning in late March. In the Americas, Europe, Middle East and most of Southeast Asia, April and May saw the biggest negative effect, offset slightly by China's recovery from the COVID impact, which started in late March and continued into April and May. Looking at the core Enerpac product business first, order rates in the Americas troughed in late April. Across our key verticals, we saw some strength in power generation with a few nice wins with some large nuclear product orders as well as some service contracts as several large sites executed their shutdowns. We also had some nice wins in rail from maintenance equipment despite the overall reduction in rail transport. Our General Industrial and oil and gas verticals were down significantly given the reduction in maintenance activity. From a distribution standpoint, most all our distributors remained opened as essential businesses. However, like us, most of their staffs work remotely and end-user contact was extremely limited. Also like us, cash preservation was a major driver, and most distributors were reluctant to bring on inventory. We did see an uptick in the percent of direct shipments in the quarter, which is an indication that some destocking of the channel probably occurred. We do think, however, that this will provide some nice opportunities for restocking once our distributors are more confident in their business outlook, and we're already seeing some of this here in early June. While quarantined, our marketing and commercial teams used the opportunity to launch new virtual training content and conduct thousands of training hours for both our own team as well as our distributor sales force. The team showed a lot of creativity to engage with participants, many of them building training studios in their own garages and doing live training throughout the entire quarantine period. We're really excited about the level of engagement with our distributors, and we think we'll have a much better trained sales force, both internally and externally, as a result to help us sell more Enerpac product when activity picks up and we reengage with our customers. Shifting to Europe. The story was much the same, although businesses and borders shut down earlier than the U.S., especially in Southern Europe. Sales troughed in April, and we saw modest improvement in May. Within our verticals, we had some nice wins in power gen, especially in wind, as a result of several years of hard work by the team. These orders positioned us really well with some of the largest -- one of the largest wind turbine manufacturers as well as a large installation contractor to provide lifting and positioning equipment for some of the very large turbines being installed these days. In Asia Pacific, we saw China come back online as we progressed through the quarter at the same time as the rest of Southeast Asia and Australia went into shutdown. Many of our large distributors in the region closed completely due to country restrictions on business activity. Orders were closed and flights into countries were very limited as well, making it difficult to ship product into certain areas. It's only been in the last few weeks that our distributors have begun to reopen and local governments have allowed more activity. Moving on to Slide 8 and our service business. The COVID disruption, combined with the dramatic drop in oil and gas prices across the quarter, created a double black swan event. Our Middle East region was hit especially hard, and our service sales in total were down in the mid-40s to 50% range. Over the -- the year-over-year decline -- about 1/3 of the year-over-year decline was due to a very tough comparable from our extremely strong Q3 in 2019, specifically some large projects that we knew weren't going to repeat this year. The combination of border closings and inability to mobilize service teams and equipment in the Middle East as well as the Caspian drove the balance of the decline in regular activity in what is normally our heavy spring maintenance period for our customers. We continue to see borders closed in the region and believe it will be some time before we see activity get back to normal levels. There were a few bright spots, however, in the U.S. Gulf and the North Sea, and we were awarded a few nice service projects that we'll be executing here in the fourth quarter. As we have turned our service focus more towards downstream and MRO, we are somewhat reassured that most of the work that came out of Q3 seems to have been delayed, not canceled. So we are busy working with our customers to understand their rescheduling and help themselves -- help them get ready for 2021. Shifting over to our Cortland business. Our sales declined in the low 20% range. While we had some nice product orders in our ropes business, sales into verticals, such as shipping, were very slow. Within our medical business, the order pipeline continues to be very healthy. However, we did experience some COVID-related delays in material supply with 1 customer and the pushout of some orders due to lower demand for components driven by low hospital bed availability, which affected non-COVID-related procedures. In summary, for the regions, I can tell you that we worked very hard for all the orders we got in Q3. As we progressed through June, we are very encouraged to see signs of recovery in our product business. We've come off the bottom of the depressed order rates we saw in April and May, which were at times in excess of 40% and are seeing sequential improvements week-over-week as we progress into Q4. On Slide 9, we've provided a weekly order rate chart that shows, in a little more detail, product orders troughing in April, holding steady in May and now showing a nice ramp upward. To date, in June, we've seen our product order rates, on average, about 20% below that of June in 2019 versus the deeper declines we saw throughout Q3. This comes as we see our customers coming back to work, construction sites reopening, distributors turning the lights back on and the general level of activity starting to pick up. Barring a resurgence of the virus and any associated shutdowns or other foreseen disruptions, we're optimistic that we will continue to see improving levels of activity. We do realize, however, that the recovery may not be linear. It may take some time before we return to our pre-COVID business activity, and we have little visibility of the timing of that. On Slide 10, we have included a chart with a range of projections of industrial output by economists at some of the largest financial institutions. As you can see, the dispersion of opinions on whether we will see growth or contraction in the coming quarters is very wide, which confirm the lack of clarity around the future direction of our end markets at this time. Thanks, and I'll now turn the call over to Rick for a financial review. -------------------------------------------------------------------------------- Ricky T. Dillon, Enerpac Tool Group Corp. - Executive VP & CFO [5] -------------------------------------------------------------------------------- Thanks, everyone, and let's turn to Slide 11 for third quarter results. Excluding the impact of strategic exits and during the economic shutdown, sales were down 38%, and that's against the record level sales reported in the third quarter of fiscal 2019 and down 24% sequentially. IT&S core product sales were down 36%, service was down 47% and Cortland was down 21%. As Randy noted, NPD was greater than 10% of our product sales for the third consecutive quarter, which helped drive sales activity in the middle of the global shutdown. We had a positive $2 million impact from the acquisition of HTL. Adjusted EBITDA margin was 7%, with decremental margins in line with our expectations. The effective tax rate for the quarter was a negative 7%, resulting in an adjusted EPS of a negative $0.06. Turning to Slide 12. The sales waterfall is just an illustration of what happened in the quarter. Randy and Jeff have already reviewed what we saw in each of our regions, so I won't spend any time here. I would just qualify that the service decline consists of 2 elements: the 17% decline associated with known mega projects that would not repeat in 2020 that were in our 2019 results and a 36% -- sorry, a 30% decline as a result of the pandemic and oil price shock. So let's move on to the adjusted EBITDA waterfall on Slide 13. Adjusted EBITDA margin was at 6.5% versus 18.8% in the prior year. As we've noted, the decremental margin for the quarter was 35% at the low end of our expected range of 35% to 45%. The decline in product sales volume and the impact on our manufacturing facilities weighed heavily on our EBITDA margins. We announced temporary COVID-19 cost actions that generated $12 million in savings during the quarter. Those actions included employee furloughs, bonus suspension, T&E restrictions and application for certain government stimulus funds. We received approximately $2 million in government funds from our international location. These funds are largely tied to wage reimbursements for otherwise furloughed employees. We have received no stimulus dollars in the U.S. to date. As we head into our fourth quarter, assuming no meaningful additional government stimulus funds from our international locations, we anticipate additional savings from our temporary COVID actions of $8 million to $9 million. Our previously announced permanent restructuring actions resulted in $4 million in year-over-year savings in the current quarter, and we anticipate $5 million in savings in the fourth quarter. That gives us a total of approximately $13 million to $14 million in temporary and permanent savings expected in the fourth quarter. We are evaluating the nature and timing of any additional temporary actions based on market conditions. If we turn to Slide 14, we can quickly revisit our structural cost progression. We will complete all of the actions associated with the $10 million savings we announced on our last call in the fourth quarter. We are reviewing additional structural cost opportunities and accelerating our Enerpac footprint optimization. We'll have more information on these actions during our fourth quarter call. As Randy noted, at the end of fiscal 2020, we will have reduced our structural costs by $33 million. Again, this is about positioning ourselves to accelerate into growth and margin expansion when the market returns. If you turn to Slide 15 on liquidity, we generated approximately $11 million in cash during the quarter versus $44 million in the third quarter of fiscal 2019. A lower cash generation is obviously reflective of the $27 million reduction in EBITDA and the impact of working capital between years. Accounts receivable collection activity remained strong in the quarter. We will continue to monitor our customer collection activity by region for aging deterioration or credit/liquidity concerns. Inventory levels increased by $1 million during the quarter. As sales volume accelerated to the trough, we saw inventory levels increasing during the quarter, peaking in about early May. We were able to take immediate action to slow down production levels and inbound inventories. These actions allowed us to lever out inventory by the end of the quarter, and pending demand levels, we could see a reduction in inventory as high as $8 million to $10 million in the fourth quarter. This is a surgical task of meeting current demand, positioning ourselves for a recovery while managing inventory quantities and cash flow now. If we turn to Slide 16, we can walk through what we are seeing from a global supply chain and logistics perspective and the specific actions we are taking. Let's start by level setting on our spend profile. On a normalized global direct third party spend, our spend range ranges from $150 million to $160 million. We have a supplier footprint that is relatively balanced with our regional sales. So what are we seeing in the market as a result of COVID 19. From a supply chain perspective, no real disruptions or significant price or cost pressures. Commodity prices remain down year-over-year. We have not lost any suppliers or had any shortages, strong long-term relationships with our suppliers is helping us during the crisis, and all of our suppliers are focused on liquidity, seeking volume and open to pricing discussions to incentivize orders. From a logistics perspective, we are able to move product both in and outbound, although we saw restrictions during the quarter as countries closed their borders. We did not have any significant disruptions. We did see reduction in number of shipping vessels and containers, and we have had some delays but nothing significant. Availability of air freight can cause rates to be anywhere from 2 to 6x normal rates. Our third quarter airfreight was approximately $800,000. However, that reflects a 60% increase year-over-year on lower volume. On normalized volume, we do approximately $3 million to $4 million of airfreight in a year. Rates are expected to stabilize as countries reopen and shipping volumes normalize. Other than airfreight, we saw no significant cost increases. We've taken several actions in this area as we respond to the crisis. Over the last few months, we completed the transformation of what was an Asia sourcing office into a global procurement function headquartered in Dubai. This allows us to centralize supplier management and spending controls and has allowed us to take swift actions during these times. In terms of direct actions, we have suspended all purchase orders and temporarily reduced safety stock levels. These measures were necessary to allow inventory flow to catch up with current demand. As noted, we have long-standing, close relationships with our suppliers and are working closely with them to ensure we are able to release purchase orders as demand recovers. Given our size and relative volume requirements, we are willingly accepting some single-sourced arrangements to create critical mass and drive quality standards at our preferred strategic suppliers. To manage the risk, we have prequalified multiple suppliers for critical commodities by product family and continuously monitor all suppliers to ensure ability to shift production in a crisis situation in a matter of weeks, minimizing the need to identify, test and qualify new suppliers under pressure. We also are continuing to negotiate cost reductions with our suppliers these actions are volume dependent and will impact us favorably as we return to growth. So these actions, along with getting boots back on the ground, capturing all available sales and driving new product vitality give us confidence in our ability to manage our working capital levels during these times. If we go back to Slide 15, we ended the quarter with $164 million in cash, which is about where we started the quarter. Our leverage sits at 1.8x trailing 12-month EBITDA, consistent with the 1.8x in Q3 of 2019 and 1.3x as of the end of the second quarter. Our interest rate coverage ratio is 3.6x TTM EBITDA as of the end of the third quarter. We completed the voluntary redemption of our 5.625% senior notes on June 15. This was funded by drawing $295 million on our revolving credit facility or the $286 million principal and $7 million of accrued interest on the indentures. The revolver has a variable interest rate that currently sits at 1.56%. On an annual basis, at current rates, this will result in over $10 million in interest savings and a pro forma interest coverage ratio of 8.8x. The draw on the revolver on June 15 was a debt-for-debt transaction. Our borrowing capacity under the revolver, which is tied to our maximum leverage of 3.7x, was not impacted by the debt-for-debt exchange. We will continue to focus on proactively managing our balance sheet and liquidity. We view cash and our liquidity as one of the strongest assets we have during the crisis. We have used available cash to advance our capital allocation priorities this year with the $33 million acquisition of HTL and $28 million in share repurchases, including the $10 million in shares repurchased early in the current quarter. As we said in early April, we will conserve cash during this crisis, limiting all discretionary spend, including capital expenditures. We have suspended all additional share repurchases during this period of uncertainty. We believe we are in a strong financial position, and we remain diligent in the management of our capital going forward. With that, I'll turn the call back to you, Randy. -------------------------------------------------------------------------------- Randal Wayne Baker, Enerpac Tool Group Corp. - President, CEO & Director [6] -------------------------------------------------------------------------------- Thanks, Rick. Turning over to the final slide on Page 17. We'll continue to suspend our guidance until we see improved and stabilized market conditions. Current order trends are pointing towards recovery. However, the potential for a resurgence is a real possibility and it can't be ignored. As we progress through the quarter, we'll be looking for stabilization in inbound wholesale orders and indication of strengthening retail demand. And as earlier mentioned, we will remain committed to our strategy and continued success of the Enerpac Tool Group. We are affirming our commitment to the organic growth, improving our margins to achieve our stated goals. From a capital allocation perspective, we will continue to focus on maintaining a strong balance sheet, investing in ourselves, and as the normal business environment recovers, we will return value to shareholders through opportunistic share buybacks and reactivate -- proactive acquisition plans, which supports our tool expansion strategy. And operator, with that, let's open it up for questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) First question is coming from Stanley Elliott of Stifel. -------------------------------------------------------------------------------- Stanley Stoker Elliott, Stifel, Nicolaus & Company, Incorporated, Research Division - VP & Analyst [2] -------------------------------------------------------------------------------- Randy, when you talk about visibility in the business, do you feel like -- I mean, can you talk about the visibility, I guess, on the service side now that some of these economies are starting to reopen? You mentioned some of these more delays as opposed to flat-out cancellations? Just trying to get a flavor for how that could end up coming back. -------------------------------------------------------------------------------- Randal Wayne Baker, Enerpac Tool Group Corp. - President, CEO & Director [3] -------------------------------------------------------------------------------- Well let me start off on a quick answer, and then I'm going to turn it over to Jeff to give you some more insights. But when you think about any maintenance activity, maintenance is not something that you can just give up on, unless you're going to walk away from a particular asset. And we've got energy customers, whether it's wind, nuclear, oil and gas facilities, refineries that need to be maintained. Now during the shutdown, those sites, in many respects, were closed and you had people that were not able to travel intercountry. And so that's part of the pushout and the constraints. So Jeff, maybe you can give us some insights on some of the particulars in the country? -------------------------------------------------------------------------------- John Jeffrey Schmaling, Enerpac Tool Group Corp. - Executive VP & COO [4] -------------------------------------------------------------------------------- Yes. You kind of took the words out of my mouth. But early on in the crisis, the maintenance activities that were scheduled were not necessarily -- we just physically weren't able to do them because the sites were closed down. So the volume is still continuing to flow through many of those facilities and the maintenance forecast to happen. It's just a question of rescheduling it. So as I mentioned in my comments, we're just trying to keep up with all of our major customers and understand, as they reopen and as they allow travel, what that scheduling looks like. -------------------------------------------------------------------------------- Stanley Stoker Elliott, Stifel, Nicolaus & Company, Incorporated, Research Division - VP & Analyst [5] -------------------------------------------------------------------------------- Great. And then on the prior calls, you guys have talked about kind of differences between some of the larger and smaller regional distributors. I apologize if you said it earlier. Did that dynamic still play into this particular quarter or the weakness across the board? And have you seen any of the smaller kind of mom-and-pop dealers have to shut their doors or anything of that nature? -------------------------------------------------------------------------------- Randal Wayne Baker, Enerpac Tool Group Corp. - President, CEO & Director [6] -------------------------------------------------------------------------------- Nobody has shut their doors. In many respects, those dealers were considered essential business, so they could operate, if they'd chose to do so. Clearly, they took a cash-conscious approach, which meant as they got retail demand, they certainly would fulfill it and should get a direct ship from Enerpac. And that's, I think, Jeff mentioned in his comments that we had an increase in our direct shipments. And so it's a great way for us to have a visibility into the health of those distributors. The larger ones seem to fare better in terms of looking over the horizon on managing their inventory and staying committed to being a major player in the industrial tool market. But clearly, I think the smaller player that had a -- less access to a balance sheet cash, they were being very conscious of not increasing inventory levels. -------------------------------------------------------------------------------- John Jeffrey Schmaling, Enerpac Tool Group Corp. - Executive VP & COO [7] -------------------------------------------------------------------------------- Yes. I guess, just an additional comment on that one. Depending upon the distributor, whether it was large or small, also the breadth of their own product line and what they offer into the industry kind of dictated a lot on how their activity levels went. If they were in the PPE business or if they were servicing some of those things that were going on during the shutdowns, they were faring a little bit better and were a little more active. So... -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- Our next question is coming from Jeff Hammond of KeyBanc Capital Markets. -------------------------------------------------------------------------------- Jeffrey David Hammond, KeyBanc Capital Markets Inc., Research Division - MD & Equity Research Analyst [9] -------------------------------------------------------------------------------- So just on the June trend, certainly encouraging. Can you just talk about what is coming back the strongest? What feels the most sustainable? And then maybe just speak to the oil and gas piece within that, if that's lagging? -------------------------------------------------------------------------------- Randal Wayne Baker, Enerpac Tool Group Corp. - President, CEO & Director [10] -------------------------------------------------------------------------------- Well, certainly, the region that has responded quickest has been European operations, particularly Northern Europe. As Southern Europe came back in the business, that's picked up as well. That has definitely been the first mover from either North America, South America or Europe. Certainly, Asia, China had recovered first out of everybody. And then it's rolled through most of Southeast Asia and Australia, which are starting to come back to life. And then I think the one to watch, but certainly, it's a much lower impact to our revenue base, is our South American operations. That is definitely coming to a peak. And so I think those areas are going to be effective. We do a lot of business in Chile and Peru as well, and I think from a lesser extent. But Brazil is in tough shape right now. -------------------------------------------------------------------------------- Jeffrey David Hammond, KeyBanc Capital Markets Inc., Research Division - MD & Equity Research Analyst [11] -------------------------------------------------------------------------------- Okay. And then in the bridge, can you just talk about how you're thinking about temp costs into 4Q, restructuring savings into 4Q? And can you just walk through this manufacturing variance number, the $8.8 million, what that was? -------------------------------------------------------------------------------- Ricky T. Dillon, Enerpac Tool Group Corp. - Executive VP & CFO [12] -------------------------------------------------------------------------------- Sure. Starting with manufacturing. As this thing accelerated in April, we were able to scale our production down, not as fast as it troughed. But as we slowed down shifts and also did what we needed to do to operate and ensure the safety of our employees, that made us a little more inefficient as we staggered shifts. And then as we got to the trough, we had to do more furloughs to kind of slow down demand. So the under absorption that you see is kind of the global combination of all of those activities. I will say now we've gotten to a point, and Jeff can comment on this as well, where we are -- we've got more of a flow, although it'd be lower, more consistency in our operations and are monitoring demand accordingly. From a savings perspective, as I mentioned -- and help me out with the question, but as I mentioned, we see the restructuring coming through $4 million here in Q3, $5 million in the back half of -- I'm sorry, in Q4. And then the temporary savings layered in, $12 million, actually a little bit higher than we may have had for Q3, largely attributable to the incremental stimulus funds and then a $9 million here or so in Q4. Jeff, do you want to add anything on operations? -------------------------------------------------------------------------------- John Jeffrey Schmaling, Enerpac Tool Group Corp. - Executive VP & COO [13] -------------------------------------------------------------------------------- No. I think you captured it. It's just been a clutch and pedal -- catch and break type thing as we go through the quarter. But as we're seeing demand, especially from some of the larger distributors, stabilize a little bit, we're able to predict that -- how we bring folks back and be a little bit more predictable on the manpower side. -------------------------------------------------------------------------------- Operator [14] -------------------------------------------------------------------------------- Your next question is coming from Allison Poliniak of Wells Fargo. -------------------------------------------------------------------------------- Allison Poliniak-Cusic, Wells Fargo Securities, LLC, Research Division - Senior Equity Analyst [15] -------------------------------------------------------------------------------- Just want to revisit the destocking. Some of the destocking, restocking inflection is starting to happen. Do you guys have any sense of is it just a sort of a safety inventory rebuild? Or are there some demand drivers, albeit slow, coming back? Just trying to get a sense of how I should maybe think. I know it could be volatile, the restocking, coming out of this, or if there's some real demand drivers driving some of that volume? -------------------------------------------------------------------------------- Randal Wayne Baker, Enerpac Tool Group Corp. - President, CEO & Director [16] -------------------------------------------------------------------------------- We have reasonably good visibility to some of our dealer inventories in North America. It's less such in Europe and in Asia and other parts of the world. We know that the destocking was significant out of the people that we do have clarity to. I think that what you found with those distributors, and Jeff touched on it, depending on what else they sell, they were probably focusing on things that are coming off the shelf faster, particularly if they're touching any consumer-based products and things that they know they can buy and turn quickly. So from our perspective, we want to make sure that our fastest-moving products are back in front of those customers. And then from a manufacturing standpoint, we don't let our lead times progress. So the potential, we help competitors penetrate our market space. So it's something I know Jeff and the entire team are working very hard on trying to understand how much inventory position while maintaining a view on not overstocking ourselves and constraining our cash. So it is a very tough balancing act right now, Allison, but we think we have a reasonably good plan on how to come out of this thing pretty strong and make sure our distributors are ready to go back to work. -------------------------------------------------------------------------------- Allison Poliniak-Cusic, Wells Fargo Securities, LLC, Research Division - Senior Equity Analyst [17] -------------------------------------------------------------------------------- Great. And then just another question on that services. You talked about, obviously, regions understandably being closed. Is there a risk that there could be a regional competitor that takes over that? If -- obviously, that maintenance needs to get done. Or are these committed contracts with you that are just essentially delayed right now? Just trying to understand. -------------------------------------------------------------------------------- Randal Wayne Baker, Enerpac Tool Group Corp. - President, CEO & Director [18] -------------------------------------------------------------------------------- Yes. Allison, I -- certainly, there's always a competitive threat, but I think the good news is we're very well positioned in the countries that I referenced. And it feels like our relationships with our customers are holding up, and we're just really talking about when, not if. So yes, I worry about competition, but -- always, but in this case, I think we're relatively confident in being part of the rescheduled activities. -------------------------------------------------------------------------------- Operator [19] -------------------------------------------------------------------------------- Our next question is coming from Ann Duignan of JPMorgan. -------------------------------------------------------------------------------- Ann P. Duignan, JP Morgan Chase & Co, Research Division - MD [20] -------------------------------------------------------------------------------- I'm a little bit confused about the Q4 savings. Did you say that you will -- temporary savings will be $8 million to $9 million incremental on top of the $12 million that you had in Q3 or $8 million to $9 million absolute, and then add the $4 million to $5 million, so you get to $13 million to $14 million? I'm just trying to make sure I get my model right here. -------------------------------------------------------------------------------- Ricky T. Dillon, Enerpac Tool Group Corp. - Executive VP & CFO [21] -------------------------------------------------------------------------------- No. The $8 million to $9 million will be incremental to the roughly $12 million in Q3 if you think about that as almost the same, excluding the government stimulus. -------------------------------------------------------------------------------- Ann P. Duignan, JP Morgan Chase & Co, Research Division - MD [22] -------------------------------------------------------------------------------- I'm sorry, so it's $20 million in temporary savings for Q4? -------------------------------------------------------------------------------- Ricky T. Dillon, Enerpac Tool Group Corp. - Executive VP & CFO [23] -------------------------------------------------------------------------------- No. The Q4 will have a $9 million in temporary savings. -------------------------------------------------------------------------------- Ann P. Duignan, JP Morgan Chase & Co, Research Division - MD [24] -------------------------------------------------------------------------------- Okay. I just wanted to make sure I got that right. And then maybe you could help us. If we look at the decremental gross margin, I know your EBITDA margin decrementals were at the low end, the gross margin decremental, you gave us some insights into why that was 55%. But could you just remind us of your gross margin, how much is fixed and how much is variable? I mean how much control do we have over the gross margin side of things if volumes don't recover, or don't recover as quickly? -------------------------------------------------------------------------------- Ricky T. Dillon, Enerpac Tool Group Corp. - Executive VP & CFO [25] -------------------------------------------------------------------------------- Sure. First, the mix piece is really the driver in why you see kind of that decremental so high. Although you have service down, but when you look at the waterfall, with so much product coming down, it's going to weigh heavier on your margin than if you had an equal mix. And then also, if you recall from our prior year discussion, those megaprojects that were in the prior year number really came at a higher margin. And so it's kind of the combined effect on our gross margins. Fixed and variable, we -- I don't really view any of our costs as fixed, and so we're going after as much as possible in those 2 categories. We look at it in terms of direct, indirect and all the costs associated with employees and some -- all of those variable moves. Our facility-type costs are somewhat fixed. I would say, we view all of our costs as variable other than the depreciation, amortization and rate, and so that probably gives you almost an 80% variable. It's just how quickly you can move and act on those costs. And we say evaluating future options or opportunities from a temporary cost savings, that includes going after some of those costs other than the ones at a rate that we can't get at. -------------------------------------------------------------------------------- Ann P. Duignan, JP Morgan Chase & Co, Research Division - MD [26] -------------------------------------------------------------------------------- Okay. That's helpful color. And then forgive me for my memory is kind of short-lived these days, but the mega projects that you referred to last year, were they specific to fiscal Q3? Or did they flow into Q4, too? Should we watch out for tough comps in Q4 also? -------------------------------------------------------------------------------- Ricky T. Dillon, Enerpac Tool Group Corp. - Executive VP & CFO [27] -------------------------------------------------------------------------------- No. When we -- these were really Q1, Q2, Q3 of last year. Q4, really, they kind of normalized out. So we had outsized growth all last year on the service side of the business, really driven by those mega projects. By the time we got to Q4, they all somewhat wrapped up for us in Q3, a lot of them kind of ended in Q3. -------------------------------------------------------------------------------- Operator [28] -------------------------------------------------------------------------------- Our next question is coming from Mig Dobre of Robert W. Baird. -------------------------------------------------------------------------------- Mircea Dobre, Robert W. Baird & Co. Incorporated, Research Division - Associate Director of Research and Senior Research Analyst [29] -------------------------------------------------------------------------------- I wanted to ask maybe a couple of questions about Slide 14, the EBITDA margin expansion journey. And I appreciate all the detail there. It looks a little bit different than what we had last quarter. So I guess my first question is in terms of the structural cost takeouts, has there been something incremental that was done versus kind of what we previously have known? And then I'm wondering, as you were talking about the incremental margins going forward 2021 to 2024, can you give us a sense for how these temporary cost takeouts might be coming back into the business? Is this something that maybe resets with the new fiscal year and sort of wages normalize and such? Or is this more volume related? And kind of how you're thinking about rephasing those expenses back in? -------------------------------------------------------------------------------- Ricky T. Dillon, Enerpac Tool Group Corp. - Executive VP & CFO [30] -------------------------------------------------------------------------------- Yes. Sure. So from a -- just looking at the slide, what we did there, the slide originally referenced the midpoint of the guide that we pulled last quarter. So we just took the slide and level set to actual 2019 results. And that first step, the 200 to 300 basis points, is what was known to be included in terms of actions in our 2020 estimates. And so that's really the only change to the top half of that slide. When you think about the cost progression, there have been no changes to the actions. We're -- that first box underneath the progress in 2020, that $15 million is the -- $12 million to $15 million of Hydratight restructuring that we announced in '19, we said we'd be at the top end of that range. The structural cost reduction is the $10 million we announced last quarter, and the remaining $3 million of ECS stranded costs, which were in our first quarter of this year before the deal closed, and then the $5 million is the Cortland plant consolidation. Another $5 million possible with the Enerpac plant optimization, and that will accelerate, and we're looking for that to be done in early fiscal 2021. When you think about the temporary actions that we did, those are -- those actions really level set and end in each quarter. And so in Q4, those will be the actions we announced in the middle of Q3. Those will -- those specific actions will come to an end at the end of Q4. And as we've said, if we need to take other temporary actions, we would. But you should assume that we'd get back to kind of a normal cost run and temporary actions for now are there. Unless we see similar volume that we saw in Q3, then we'll go back and we'll announce new or incremental temporary actions. What we have factored in the numbers we gave you are the actions we already announced. They're just split just on timing between the execution of them between Q3 and Q4. -------------------------------------------------------------------------------- Mircea Dobre, Robert W. Baird & Co. Incorporated, Research Division - Associate Director of Research and Senior Research Analyst [31] -------------------------------------------------------------------------------- I see. And given where June is trending and that you have $8 million to $9 million of temporary savings in Q4 versus, call it, $12 million in the prior quarter, should we expect decremental margins to be sort of what? I mean I would infer that it would be much, much better, correct me if I'm wrong. -------------------------------------------------------------------------------- Ricky T. Dillon, Enerpac Tool Group Corp. - Executive VP & CFO [32] -------------------------------------------------------------------------------- On -- well we'd love the trend to get even better for the rest of the quarter. And obviously, if we can see an improvement in the top line, it will help us on a decremental side of things. But you will see the $9 million in savings going through. -------------------------------------------------------------------------------- Mircea Dobre, Robert W. Baird & Co. Incorporated, Research Division - Associate Director of Research and Senior Research Analyst [33] -------------------------------------------------------------------------------- Got it. And then lastly, going back to this trends in June on your Slide 9. I guess when I'm looking at this chart and thinking about your comments, what I'm wondering here is if what we're seeing in June is truly indicative of what is happening with end market demand. Or if as I think somebody brought up earlier, we were kind of looking at a bit of a restock and if there is some of this deferred activity that may be made, call it, April, it may look worse than it actually was, now starting to benefit June a little bit. So can you sort of separate out what you think is true end market activity versus maybe some of the swings that are kind of hard for us to see from the outside? -------------------------------------------------------------------------------- Randal Wayne Baker, Enerpac Tool Group Corp. - President, CEO & Director [34] -------------------------------------------------------------------------------- Well it's always difficult to have full clarity to the wholesale to the retail activity. Our regional salespeople, and we have multiple calls during a week, we talk through that aspect of how are they seeing their markets and what are the order rates, and we have a daily view on order rates globally. So we have a fairly strong visibility of our processes. But you never have 100% of idea whether that's going straight into inventories to restock them or they're ordering it from a known retail opportunity. I do think in this current environment, our dealers are still conservative. And I think that the true order demand in the marketplace is starting to drive the order rates coming to us. And I think that's the strongest element. Now once we get into the latter part of the quarters and our distributors start feeling more confident about how the markets have responded and the stability of their markets, then that's when I think you'll see a restock start to occur. But you don't want to be 100% clear on when that's going to happen until you see some stability out of all of these regions. -------------------------------------------------------------------------------- Mircea Dobre, Robert W. Baird & Co. Incorporated, Research Division - Associate Director of Research and Senior Research Analyst [35] -------------------------------------------------------------------------------- And on the service side, Randy? -------------------------------------------------------------------------------- Randal Wayne Baker, Enerpac Tool Group Corp. - President, CEO & Director [36] -------------------------------------------------------------------------------- Well the service side, you probably have a little bit better visibility of the restart of those projects. Jeff, I know that in the North Sea, we've seen some rescheduling now start as well as some of the Mideast operations have started to reschedule major activities, so do you want to jump in on that one? -------------------------------------------------------------------------------- John Jeffrey Schmaling, Enerpac Tool Group Corp. - Executive VP & COO [37] -------------------------------------------------------------------------------- Yes. We are getting some emergent work, I mentioned in my comments, a couple of nice orders in the Gulf -- U.S. Gulf and in the North Sea. The North Sea is interesting in particular. There was a pretty major shutdown of the pipeline planned, which we were going to participate in, in Q4. The major shutdown has been kind of delayed, but we are getting some orders for service work despite that, so that's been nice. I wanted to circle back to your previous question, actually, Mig. We've gotten very granular on how we're tracking order rates. Randy mentioned daily, and he wasn't kidding. We're looking at the dollars coming in daily. The other metrics we're tracking our actual number of calls and actual number of discrete orders. Not just the dollars, but the actual number of discrete orders. And I guess, anecdotally, I'm hopeful that this is not just destocking -- or restocking that we're seeing here in June because the number of calls, the number of discrete orders is ticking up from what we saw in the trough in late April, early May. So that gives me some confidence that there is actually some retail happening, not just restocking. So... -------------------------------------------------------------------------------- Mircea Dobre, Robert W. Baird & Co. Incorporated, Research Division - Associate Director of Research and Senior Research Analyst [38] -------------------------------------------------------------------------------- Okay. But I'm sorry, just to clarify this on the service side, you talked about maintenance being pushed out. I just want to understand if what you're seeing here in June is converting on some of that maintenance that's been pushed out that was kind of in the backlog and now it's finally starting to happen a little bit? Or if what you're saying here is that you're actually winning some new business that's unrelated to that and what's in your backlog that's still to be converted at a point in time down the line? -------------------------------------------------------------------------------- John Jeffrey Schmaling, Enerpac Tool Group Corp. - Executive VP & COO [39] -------------------------------------------------------------------------------- Yes. I think we're starting to see the beginnings of some of those orders that were delayed coming in. I would be -- I wouldn't say they're significant at this point, but we are starting to see a few of those get turned back on. So I think Q4 is going to be the real -- we'll be able to answer that question much better at the end of Q4. -------------------------------------------------------------------------------- Operator [40] -------------------------------------------------------------------------------- Our next question is coming from Deane Dray of RBC Capital Markets. -------------------------------------------------------------------------------- Deane Michael Dray, RBC Capital Markets, Research Division - MD of Multi-Industry & Electrical Equipment & Analyst [41] -------------------------------------------------------------------------------- I appreciate that characterization of a double black swan event. I'm not -- I don't think I've heard that one before, but it does seem appropriate. And then just you guys should get a shout-out for the decrementals holding in close to what you ahead guided to and cash flow. So those are certainly signs of good execution. Just on the look forward, I know we've parsed out June closely here on this call, and I understand completely why because that's kind of the first sign of a better uptick here. Is just -- since you're tracking it daily, do the order sizes give you any information in terms of this is restock or not, just if you look at order size? -------------------------------------------------------------------------------- Randal Wayne Baker, Enerpac Tool Group Corp. - President, CEO & Director [42] -------------------------------------------------------------------------------- What we do try to segment out, Deane, is for any large heavy lifting orders that tend to be large in size and large in dollars that sometimes can skew those numbers a little bit. So we try to look at, did that have a meaningful impact? What we're looking for is high quantities of our highest profitability, cylinders, pumps, the core of our product line, that's what we're looking for is those types of orders flowing through our system at a much faster rate. And so we track it daily, and we try to share as much as we could, what we've seen as of now. But as I've mentioned, it's dependent on whether things are going to stay open. We have to see stability there. -------------------------------------------------------------------------------- Deane Michael Dray, RBC Capital Markets, Research Division - MD of Multi-Industry & Electrical Equipment & Analyst [43] -------------------------------------------------------------------------------- Yes. That's clear. I appreciate all that color. And then on a look forward, if there is some form of stimulus spending coming through Congress, we've seen this pattern before, everyone's going to look for shovel-ready projects. Bridges typically get included in that. That's a sweet spot for Enerpac. What's your characterization of what would be called shovel-ready projects where things could start in the next couple of quarters? -------------------------------------------------------------------------------- Randal Wayne Baker, Enerpac Tool Group Corp. - President, CEO & Director [44] -------------------------------------------------------------------------------- Well I mean, I think that term is used probably to excite people that don't understand what it means to mobilize a construction job site. And I think you characterize it properly. When -- you think back in history, when the T-21 builds were released that had major infrastructure build-outs in the highway system in the U.S., it will take about 2 to 3 quarters to start feeling the impact either in construction machinery. And where you really see it first is in the rental fleets because those contractors that get earthmoving jobs are going to go rent product first. So you'll see a drawdown of the rental availability from the major rental houses. I personally would love to see a stimulus build that would be meaningful infrastructure build in the country because it would help a lot of localized economies because when you do a major road job or a bridge rebuild, it affects a lot of peripheral businesses, not just the construction firms that are doing the work. So it would definitely help Enerpac and a lot of other companies, so let's keep our fingers crossed that we do something there. -------------------------------------------------------------------------------- Deane Michael Dray, RBC Capital Markets, Research Division - MD of Multi-Industry & Electrical Equipment & Analyst [45] -------------------------------------------------------------------------------- Great. And just last one for me, and I know it's a bit of an unfair question. But on M&A, I know it's on hold. But you did say at some point when there's signs of an inflection point, you could be back in an acquisition mode. How do you characterize the inflection point? Is it just more books coming through? And is it -- are there any other indicators that you look for? And maybe it's financing. But what is the inflection point from an M&A standpoint that you look for? -------------------------------------------------------------------------------- Randal Wayne Baker, Enerpac Tool Group Corp. - President, CEO & Director [46] -------------------------------------------------------------------------------- Well I think in the current environment, we need to look for, obviously, stabilization of inbound wholesale orders. We need to see a normalized run rate, which is within the pressure wave of what we see on a 5-year average for a particular week, month and a quarter where we know it looks like it should. Number two, we need to see clear changes in the infection rates around the world and changes in how localized governments are viewing the potential for a resurgence and going back to a lockdown order. Nobody wants to go there again. But clearly, if you had a state or a country that had a massive infection rate, their hospitals are becoming overrun and unable to keep up with the demand, those local governments are going to have to do something to protect their people. And at that point, they'll have no choice but to go back into a stay-at-home order. We need to see some stability in the health of our countries and where we operate to make sure that, that doesn't reoccur. And we're going -- we're starting to see that in some parts of the world, but Brazil is a great example, don't think it's over until it's over. And everybody needs to get beyond this pretty quickly. -------------------------------------------------------------------------------- Operator [47] -------------------------------------------------------------------------------- Excuse me, speakers, do you have time for one last question today? -------------------------------------------------------------------------------- Barbara G. Bolens, Enerpac Tool Group Corp. - Executive VP & Chief Strategy Officer [48] -------------------------------------------------------------------------------- We do -------------------------------------------------------------------------------- Operator [49] -------------------------------------------------------------------------------- Last question today is coming from Justin Bergner of G Research. -------------------------------------------------------------------------------- Justin Laurence Bergner, G. Research, LLC - VP [50] -------------------------------------------------------------------------------- Very good question -- I'm sorry, very good answer on the last question, better than most public health officials would have given. Just 2 clarifying questions to wrap up. The manufacturing variance at negative $8.8 million, I mean, should I read that slide in a way to suggest that if you were actually flatlining production at current levels, you could have eliminated most of that $8.8 million in manufacturing variances, that it was really tied to the deceleration in demand? Or any more clarity there would be helpful as to how to understand that part of the waterfall. -------------------------------------------------------------------------------- Ricky T. Dillon, Enerpac Tool Group Corp. - Executive VP & CFO [51] -------------------------------------------------------------------------------- Sure. Well there's 2 elements in there. There's the manufacturing piece and the service piece. And in this particular quarter, service also weighs in year-over-year heavily. And so we talked earlier about labor and constraints within regions. As the maintenance projects push out, there is an under absorption that's running through that manufacturing variance. And so the -- as you look at it, can you -- I wouldn't make the leap -- correlate between the -- I think you said $24 million in volume impact on EBITDA, I wouldn't correlate that volume would be, call it, $9 million of manufacturing variances and make that leap just yet. So said differently, that's a hard analysis to make, and we wouldn't zero out our production, but constrain production. So that's a hard analysis to make. -------------------------------------------------------------------------------- Justin Laurence Bergner, G. Research, LLC - VP [52] -------------------------------------------------------------------------------- Okay. And then just lastly, now that you're entirely debt funded on the revolver, is that sort of a temporary arrangement, given low variable interest rates? I mean if you wanted to do M&A activity, would you move to sort of term it out under -- or some -- term out some of it under a new issuance? Or is that sort of a medium-term balance sheet structure you see as possible focusing on the... -------------------------------------------------------------------------------- Ricky T. Dillon, Enerpac Tool Group Corp. - Executive VP & CFO [53] -------------------------------------------------------------------------------- Well certainly, in this environment, the low interest rates are appealing. In terms of long-term capital structure, no, we don't intend to sit in the revolver indefinitely. Obviously -- no, not obviously. If we do meaningful acquisition, to Randy's point, when we do turn that corner, we would then start to look at, depending on the size of acquisition, what we would do from a long-term capital structure. There's nothing -- we're not under pressure to do that. We don't -- as Randy noted, we don't have significant or any acquisitions on the table right now, so we're really just in a position to take advantage of the low interest rates. We do have, under our existing credit facility, the ability to move this into a term right now if we wanted to, but we're taking advantage of the environment. And for -- just given our liquidity, there's a lot we can do acquisition-wise in the type of smaller tuck-in acquisitions without needing to access that more permanent capital. So got a lot of flexibility, like the position we're in, and we'll monitor rates and the capital markets to make the appropriate decisions at the appropriate time. -------------------------------------------------------------------------------- Operator [54] -------------------------------------------------------------------------------- At this time, I would like to turn the floor back over to management for any additional or closing comments. -------------------------------------------------------------------------------- Randal Wayne Baker, Enerpac Tool Group Corp. - President, CEO & Director [55] -------------------------------------------------------------------------------- Okay. Well, thank you, everybody, for joining today's call. We'll look forward to speaking with you after our fourth quarter. And I hope everybody is healthy, and stay safe. Thank you very much. -------------------------------------------------------------------------------- Operator [56] -------------------------------------------------------------------------------- Thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time, and have a wonderful day.