U.S. Markets closed

Edited Transcript of LKSD.N earnings conference call or presentation 8-Aug-19 12:30pm GMT

Q2 2019 LSC Communications Inc Earnings Call

CHICAGO Aug 16, 2019 (Thomson StreetEvents) -- Edited Transcript of LSC Communications Inc earnings conference call or presentation Thursday, August 8, 2019 at 12:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Andrew B. Coxhead

LSC Communications, Inc. - CFO

* Janet M. Halpin

LSC Communications, Inc. - Senior VP of IR & Treasurer

* Thomas J. Quinlan

LSC Communications, Inc. - Chairman, CEO & President

================================================================================

Conference Call Participants

================================================================================

* Charles S. Strauzer

CJS Securities, Inc. - Senior MD of Sales & Trading and Analyst

* Michael McCaffery;Shenkman Capital Management, Inc.;Vice President

* William McGoldrick Mastoris

Robert W. Baird & Co. Incorporated, Research Division - High Yield Desk Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Welcome to the LSC Communications Second Quarter 2019 Earnings Conference Call. My name is Elisa, and I will be your operator for today's call.

We have just a few announcements before we begin. (Operator Instructions)

The slides will advance automatically throughout the presentation. If your screen freezes or the slides do not appear to be advancing as they should, please try exiting the session and restarting as it may be an issue with your connectivity. At the bottom of your screen, you will find a Help icon for technical assistance. (Operator Instructions)

Please note this conference is being recorded. I will now turn the call over to Janet Halpin. You may begin.

--------------------------------------------------------------------------------

Janet M. Halpin, LSC Communications, Inc. - Senior VP of IR & Treasurer [2]

--------------------------------------------------------------------------------

Thank you, Elisa. Good morning, everyone, and thank you for joining LSC Communications' Second Quarter 2019 Results Conference Call. This morning, we released our earnings report, a copy of which can be found in the Investors section of our website at www.lsccom.com.

During this call, we'll refer to forward-looking statements that are subject to uncertainty. For a complete discussion, please refer to the cautionary statement included in our earnings release and further detailed in our Form 10-K filed on February 19, 2019, as well as in our other periodic filings with the SEC.

Further, we will discuss non-GAAP financial information. We believe the presentation of non-GAAP results provides you with useful supplementary information concerning the company's ongoing operations and is an appropriate way for you to evaluate the company's performance. They are, however, provided for informational purposes only. Please refer to the reconciliation of GAAP to non-GAAP results included in the earnings release schedule as well as the appendix to the webcast presentation that is posted to LSC website.

We are joined this morning by Tom Quinlan, Drew Coxhead and Kent Hansen. I will now turn the call over to Tom.

--------------------------------------------------------------------------------

Thomas J. Quinlan, LSC Communications, Inc. - Chairman, CEO & President [3]

--------------------------------------------------------------------------------

Thank you, Janet. Good morning, everyone. Given the multitude of recent events, I want to leave plenty of time for your questions, but I wanted to start off by outlining some steps we have already taken to better position the company going forward.

First, we addressed the need for additional liquidity by amending our credit agreement. This amendment provides us the financial flexibility we need to take the necessary strategic actions to address the change in demand that we are seeing in parts of the business while continuing to deliver high-quality and superior service to our clients.

Secondly, we recently announced the planned closure of our production facility in Torrance, California. We have entered into an agreement to sell the land and building in Torrance, and we expect to receive net proceeds of approximately $35 million by the end of the year.

These are just 2 of many actions we are taking to improve margins and reduce leverage in the near term. We understand that time is of the essence and that we need to continue taking quick and decisive actions to deliver long-term value for all of our stakeholders.

Now I will hand the call over to Drew to take us through the details of our second quarter results, and then we will open it up for questions. Drew?

--------------------------------------------------------------------------------

Andrew B. Coxhead, LSC Communications, Inc. - CFO [4]

--------------------------------------------------------------------------------

Thank you, Tom.

Our second quarter results are consistent with the preliminary results we announced on July 23. Our Book and Office Products segments performed in line with expectations in the second quarter. However, second quarter results were negatively impacted by the significant volume decline in Magazines, Catalogs and Logistics that more than offset the solid performance in the other segments.

Consolidated net sales for the second quarter were $869 million, a decrease of 7.7% from the second quarter of 2018. Adjusting for the impact of acquisitions, dispositions, changes in pass-through paper sales and foreign exchange rates, our organic net sales decline was 4.2%. We reported a second quarter GAAP net loss of $24 million compared to net income of $8 million in the second quarter of 2018.

The GAAP net loss for this year's second quarter includes the impact of a $17 million pretax impairment of intangible assets in the Magazines, Catalogs and Logistics segment as well as $6 million of pretax restructuring charges and $5 million of pretax merger transaction costs.

Second quarter non-GAAP adjusted EBITDA was $53 million compared to $77 million in the second quarter of 2018. Non-GAAP adjusted EBITDA margin in the quarter of 6.1% was 210 basis points lower than the second quarter of last year. The decrease in non-GAAP adjusted EBITDA margin was primarily due to the significant volume declines in Magazines, Catalogs and Logistics, an unfavorable mix of work in the Book segment and wage increases implemented in response to the tight labor market conditions affecting certain of our manufacturing and distribution facilities. These factors were partially offset by strong margin performance in Office Products and cost control initiatives at both the operating and the corporate level.

Now I will discuss net sales, income from operations and non-GAAP EBITDA performance for each of the segments.

Net sales in our Magazines, Catalogs and Logistics segment were $380 million in the second quarter of 2019, a decrease of 5.3% from last year's second quarter. After adjusting for the impact of acquisitions, dispositions and pass-through paper sales, year-over-year net sales decreased by 8.8% on an organic basis. This organic decline reflects the volume declines driven by the impact of digital disruption on demand for printed materials.

For the Magazines, Catalogs and Logistics segment, GAAP loss from operations was $42 million compared to a net loss from operations of $6 million in the second quarter of 2018. Segment non-GAAP adjusted EBITDA in the quarter was negative $9 million, and non-GAAP adjusted EBITDA margin was negative 2.4%. The non-GAAP adjusted EBITDA margin decreased 610 basis points compared to the second quarter of 2018. The margin decline reflects the significant drop in volume during a period where we were not able to move quickly to reduce costs due to restrictions and uncertainties related to a planned merger and an unfavorable mix of work.

For the Book segment, we had a 5.1% organic increase in net sales for the quarter. The organic increase was driven by strong performance across multiple products. We saw particular strength in K-12 education Book volume related to new adoptions in Texas and California, solid performance across the trade vertical as well as growth in our services offerings. For the Book segment, GAAP income from operations was $18 million compared to income from operations of $19 million in the second quarter of 2018. Segment non-GAAP adjusted EBITDA in the quarter was $32 million, and non-GAAP adjusted EBITDA margin was 11.1%. The non-GAAP adjusted EBITDA margin decreased 210 basis points compared with the second quarter of 2018, primarily due to wage increases we have implemented to attract and retain employees in facilities most impacted by the tight labor market.

Net sales in the Office Products segment were $139 million, a decrease of 9.7% from the second quarter of last year. After adjusting for the impact of changes in foreign exchange rates, sales decreased by 9.5%, primarily related to reduced volume in low-margin commodity products, partially offset by the impact of price increases to pass along the higher costs for material and freight, continued strong growth in the e-commerce channel and a favorable mix between branded and private label product sales during the quarter.

Office Products income from operations was $13 million, flat with the second quarter of 2018. Non-GAAP adjusted EBITDA in the Office Products segment was $17 million for the quarter, also flat compared to last year's second quarter. Non-GAAP adjusted EBITDA margin increased 120 basis points to 12.2% due to a combination of price increases to pass through higher material costs, the favorable mix of branded versus private label sales and synergy actions associated with the acquisition of Quality Park.

Free cash flow for the second quarter was a positive $6 million compared to a usage of $19 million in the second quarter of last year, and free cash flow for the 12 months ended June 30, 2019, was $116 million. The improvement in free cash flow for the quarter was primarily driven by working capital improvement.

Capital spending in the quarter was $21 million, up $4 million from last year's second quarter as we continue to invest in automation, productivity and cost savings initiatives.

As of June 30, 2019, our gross leverage was 3.45x. We expect our leverage to be approximately 3x at the end of the year as free cash flow generation, net proceeds from the merger termination fee and the Torrance sale will reduce leverage.

At June 30, 2019, net available liquidity was $60 million, with $150 million drawn on our $400 million revolving credit facility. As discussed earlier, the company amended its credit agreement effective August 5, 2019. If the amendment were in effect as of June 30, 2019, net available liquidity would have increased to $126 million. We believe the amendment provides us with the financial flexibility needed to implement our restructuring and cost-reduction plans to drive significant margin improvement going forward.

The maturity date of the revolving credit facility remains September 30, 2021, and the outstanding principal amount, required amortization payments and maturity date of the term loan facility remain the same.

We estimate that our net pension liability, including both the qualified and nonqualified plans, was approximately $100 million as of June 30, 2019, an improvement of $37 million from December 31, 2018. We estimate that our qualified pension plan funded status improved to 99.4% as of June 30, 2019, a 170 basis point improvement since the beginning of the year.

Also, as a reminder, there are no funding requirements related to the qualified plan for 2019, and the nonqualified pension plan obligations are paid as they become due. We continue to expect to make cash payments of approximately $6 million related to the nonqualified plan in 2019.

Lastly, I'll share some more detail on the full year 2019 guidance that reflects the impact of the expectation for the continued negative trends in the MCL segment in the second half of the year.

Moving to the specifics of the guidance, which is consistent with the guidance that we announced on July 23. First, we expect net sales between $3.45 billion and $3.55 billion for the year. We expect non-GAAP adjusted EBITDA to be between $200 million to $240 million for the year. We expect net pension income to be $35 million, excluding pension settlement charges. We expect our non-GAAP adjusted EBITDA, excluding net pension income, to be between $165 million to $205 million. Depreciation and amortization is expected to be in the range of $155 million (sic) [$115 million] to $125 million. We expect interest expense to be $75 million to $79 million. Our full year non-GAAP effective tax rate is now expected to be in the range of 30% to 35%. We expect capital expenditures to be in the range of $75 million to $85 million. We expect free cash flow to be between $60 million and $100 million. The free cash flow guidance includes the $45 million of gross proceeds received in connection with the merger agreement termination, less estimated transaction cost of $20 million to $25 million. The $35 million expected net proceeds from the sale of the land and building in Torrance, California is not included in free cash flow but will be used to reduce debt. We expect full year average diluted shares outstanding to be 34 million to 35 million.

And with that, I'll return the call to Tom for some closing comments.

--------------------------------------------------------------------------------

Thomas J. Quinlan, LSC Communications, Inc. - Chairman, CEO & President [5]

--------------------------------------------------------------------------------

Thanks, Drew. Before we open up the line for questions, we would like to thank all the employees and clients for their dedication through all the merger-related news. And with that, operator, we will now open up the line for questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) And our first question comes to us from Charlie Strauzer from CJS.

--------------------------------------------------------------------------------

Charles S. Strauzer, CJS Securities, Inc. - Senior MD of Sales & Trading and Analyst [2]

--------------------------------------------------------------------------------

So Tom, if you can maybe expand a little bit more on some of the actions you can take to kind of keep the delevering process underway here. And maybe I know you can't really get to the specifics on closures and other things like that, but maybe a little bit more color there on the road map, if you could.

--------------------------------------------------------------------------------

Thomas J. Quinlan, LSC Communications, Inc. - Chairman, CEO & President [3]

--------------------------------------------------------------------------------

Yes. Sure, Charlie. Thank you. So look, I think when you think about it, as we said here last October in the fourth quarter, we knew we had to have a backup plan just in case the transaction got blocked and/or something else may pop up. So we did this in primarily 2 ways.

First, we've brought in an outside company last year in the fourth quarter to help us look at the entire platform to see where we could become more efficient and shift the company's culture, the way we think about costs and how it could even bring more efficiencies to the platform. If the deal went forward, we would turn over the findings at the closing of the transaction. If the deal did not go forward, we would have a plan at least that we could immediately put in place to get back the time we lost operating under the interim operating covenants that were required under the transaction.

I think I've talked to some of you, we called the project EDGE, which stands for employee driven to generate excellence. It's working. The effort involved the entire workforce. Ideas were generated at the facility level. And in painstaking detail, we reviewed all these ideas. There's a rigorous process in place to make sure we implement approved ideas and track the savings that we're going to get from these ideas. So we feel pretty good as far as where that is. There's discipline in it. There's consistency, and we're doing it in an organized manner. So we expect to generate again improved -- as Drew said, improved margins there, generate free cash flow.

But the second way in which we look is we wanted to be prepared if, in fact, we were going to remain a stand-alone company is something that I'll call game theory. The announcement today of the closing of the Torrance facility was part of those efforts that we contemplated. When you think about it, we're 15 days since the announcement that the deal will not go forward, and we've already executed on the closure of a facility, which will be monetized for a significant amount of money. And then over the next couple of months, we're going to continue to execute on these initiatives that we developed over the last 9 months. And again, some of them that you'll see are going to happen in quick fashion. Certain of these facilities are in good locations and feels that we'll be able to act quickly on those, others may not be, may take longer, but we've identified opportunities on the balance sheet to generate cash. Those are going to be a little bit more complex and will take a little longer to come to fruition. But we're looking for quick wins, quick paybacks and continue to improve the platform to make sure that we can sustain long-term growth.

--------------------------------------------------------------------------------

Charles S. Strauzer, CJS Securities, Inc. - Senior MD of Sales & Trading and Analyst [4]

--------------------------------------------------------------------------------

And if you look at the other assets that you have, I mean, obviously, Book is performing well. Magazines, Catalogs and Logistics is not. Office Products seems to be holding up okay. I mean it's basically -- if anyone came to you with a bid, would you entertain pretty much a bid for any piece of the company? Or is it just certain pieces that you wouldn't touch?

--------------------------------------------------------------------------------

Thomas J. Quinlan, LSC Communications, Inc. - Chairman, CEO & President [5]

--------------------------------------------------------------------------------

Yes. Look, Charlie, we always look at everything that we have. I mean we're not -- we run this as good fiduciaries. I would tell you, look, what's broke right now is the Magazines, Catalogs and Logistics segment that we got to fix. To your point, Books and Office Products are doing well. We got to get them to do even better.

I underestimated the back half drop-off in magazines and catalogs, on top of the decline that we experienced in 2018, it's not cyclical. It is structural, and we've got to go ahead and make sure that we go after the costs on the platform that we didn't over the last 9 months to get it back to where it needs to go. We've got a great -- we've got 8 of the top 10 publishers that are on our platform, which is great. But they're also, as you're reading in the advertisements, in the paper, a lot of their publications are going digital. We're a huge player in the small magazine publisher area. Large extents, they're doing better, and we've got to continue to make sure we're there for that.

Catalogs are thinner. There's still catalogs, but they're much thinner. There are a lot more direct mail going out, which we don't play in. And then quite frankly, look, over the last 9 months, a lot of clients have put decisions on hold. Because of the uncertainty of the transaction, those clients now are engaging us with new opportunities, and we've got to go ahead and get those and bring those in.

And if you look at the first -- if you look at the second quarter, as Drew said, we're down $24 million in EBITDA. We're down $24 million in Magazines, Catalogs and Logistics. We haven't talked in a year to you. And we changed the way -- June can't have changed the way we report our numbers, how we've segmented. So I think we've got more transparency, more clarity to you. So you can see that. We've got a broken part of the business that we're going to go ahead and fix and again hopefully take account the benefits that we're seeing from Books and Office Products as we go through things.

--------------------------------------------------------------------------------

Operator [6]

--------------------------------------------------------------------------------

(Operator Instructions) Our next question comes to us from Bill Mastoris from Baird.

--------------------------------------------------------------------------------

William McGoldrick Mastoris, Robert W. Baird & Co. Incorporated, Research Division - High Yield Desk Analyst [7]

--------------------------------------------------------------------------------

Tom, on the road map to returning to your target leverage. I'm wondering how much is -- of that is -- are operational improvements? How much of that might be more asset sales, whether facilities or businesses? And then on the cost reduction side, is that going to involve a lot of cash restructuring charges? And I'm sure that was part of the motivation for the credit amendment. And then also, if you could just comment on maybe the amount of energy away from the operations that was consumed by the Quad merger, that would be greatly appreciated. And were there any lost customers that might have maybe gone another way because of that?

--------------------------------------------------------------------------------

Thomas J. Quinlan, LSC Communications, Inc. - Chairman, CEO & President [8]

--------------------------------------------------------------------------------

Yes. Thank you. I mean what I would tell you as far as -- starting maybe in reverse order from what you asked, salespeople and operation people, especially as most of you know, if you are the target, obviously personalize things and worry about what it means for them. So we had that. I would say that we did lose some salespeople.

The good part is on end of July, we started getting phone calls back from some of those people who said, "Hey, look, we're going to remain by ourselves. Like you to come back." So that was good. So there's an energized sales force, fully engaged. The leadership team's aligned and motivated and driven to make this work.

We didn't -- I wouldn't say we lost customers, but I would say customers are -- customers, for what we're playing in right now, are having difficult times still transitioning from physical to electronic. And we've got -- we're right in the midst of that. But the good part is in what we do, they make money off of. So we've got to continue to make sure that we can go ahead and have them -- have their revenues increased and make sure that they're able to continue to have good businesses as people think about the supply chain here.

I would say, I think the first part of your question, look, we -- I would say that nothing that we're looking at is going to impact our core business as it relates to asset sales. There are some noncore sales of assets that we're looking at that we're going through. But the bulk of where we're going to get the free cash flow is going to come from, what I'll say, cost savings as a result of being more efficient and then looking at some of the facilities that we have in certain locations that we think we can monetize.

--------------------------------------------------------------------------------

William McGoldrick Mastoris, Robert W. Baird & Co. Incorporated, Research Division - High Yield Desk Analyst [9]

--------------------------------------------------------------------------------

And what would be that time line eventually to getting back to your target leverage range? You'll be 3x at the tail end of the year. I mean are we looking at a 2- to 3-year time horizon? Or is this a much longer grind?

--------------------------------------------------------------------------------

Andrew B. Coxhead, LSC Communications, Inc. - CFO [10]

--------------------------------------------------------------------------------

Bill, this is Drew. I want to address a couple of your things. So yes, we do expect to be at 3x at the end of the year. We expect to make continued progress from there and put out specific guidance for the future years, but we'll continue to progress towards that range. It's obviously going to take some time. It's not an overnight effort. But we do think that the actions we're taking will drive some significant improvement in the margin performance in the near term.

I wanted to address your question about restructuring costs, too. There will be, we expect, some uptick in restructuring costs as you look into the rest of this year and look forward into next year, we do expect those costs to be higher than what we've historically seen in terms of cash restructuring costs. We did in the credit agreement amendment get some more flexibility to do that, as you mentioned, both just from what were the actual headline number of the financial covenants, but also we were able to make a change in how EBITDA is calculated so that we can have more flexibility to do restructuring versus acquisitions and synergies. So total add-backs to EBITDA under the agreement are the same, but we have more flexibility to do the restructuring kinds of things that we really do need to do to drive the margins back to where they should be in Magazines, Catalogs and Logistics.

--------------------------------------------------------------------------------

Thomas J. Quinlan, LSC Communications, Inc. - Chairman, CEO & President [11]

--------------------------------------------------------------------------------

And Bill, look, with this tremendous urgency to take cost out to decrease leverage, deliver on our guidance that we've shown you, at the same time, we're going to continue to empower employees to make sure the processes we have are needed and continue to look to eliminate anything right now that's unneeded.

--------------------------------------------------------------------------------

William McGoldrick Mastoris, Robert W. Baird & Co. Incorporated, Research Division - High Yield Desk Analyst [12]

--------------------------------------------------------------------------------

Okay. And Tom, maybe following up on your response to one of my questions, and that is how much of that digital business are you capturing when some of your customers are making that transition?

--------------------------------------------------------------------------------

Thomas J. Quinlan, LSC Communications, Inc. - Chairman, CEO & President [13]

--------------------------------------------------------------------------------

On the Book side, we've got, what I'll call -- we like to call the Harvest platform. It really allows publishers a unified platform where they can store, manage and distribute their content efficiently. Through Harvest, publishers distribute their content with us to over 200 channel partners. It's customized. It's managed metadata for each channel. We're able to monitor the sales across channels so they can allow quick reactions. If they lose their box on one of the sites, the buy box, and other exceptions, we're able to go ahead and show them the new tools -- with new tools, how they can go ahead and have that changed. We've got the, what I'll call, the unique IntercepTag solution, which is really that we've set up to allow publishers to help identify piracy in the market and paves the way for direct linkage to know your customer. So I think on the Book side, we're really -- we're positioned really well there to handle that.

Magazine side, we've got some tools there. We've made an investment in a company called MAZ that helps us there.

On the catalog side, really excited about what our Digital Lizard platform can do from that standpoint because we can have, what I'll call, not direct mail piece, it's something more involved than a direct mail piece, but allows the buyer -- the retail and the buyer to have a direct connection. And we can track that as that goes forward.

So again, I think we're -- we do some things really, really well. We're going to continue to do those things really well. We've got to continue to get this platform to be where the costs match the revenues. And right now, it's not.

--------------------------------------------------------------------------------

Operator [14]

--------------------------------------------------------------------------------

(Operator Instructions) Our next question comes from Michael McCaffery from Shenkman Capital.

--------------------------------------------------------------------------------

Michael McCaffery;Shenkman Capital Management, Inc.;Vice President, [15]

--------------------------------------------------------------------------------

I was wondering if -- can you frame the asset sale expectations for us? At least in the short term, you indicated that much like the Torrance situation, you're focused on some short-term or near-term singles, some quick wins. Is there any way you can frame expected proceeds and over what -- over the next couple of quarters, how to think about that?

--------------------------------------------------------------------------------

Thomas J. Quinlan, LSC Communications, Inc. - Chairman, CEO & President [16]

--------------------------------------------------------------------------------

Yes, Mike. What I would say come November, we should be able to come back to you. As I said, the urgency that we have to where we have some other numbers to talk to you about and other valuations that we have, trust me, we get it, and we're looking at as quickly as we can.

With all that said, as Drew said, we're looking at 3x, which we feel good about at the end of the year. We want to beat that. So what is it that we've got to do both from an EBITDA standpoint as well as from an asset sales standpoint, what I'll say is build trust with you because we -- I know rightfully so, lost it so what is it that's going to take for us to get that back? And I think as we get to first week in November, we'll be able to come back to and share with you what I would say, hopefully, is a lot more of what we've been working on.

--------------------------------------------------------------------------------

Michael McCaffery;Shenkman Capital Management, Inc.;Vice President, [17]

--------------------------------------------------------------------------------

Okay. And I guess a similar question on the OpEx side. Is there a certain cadence we should think about as far as cost reductions?

--------------------------------------------------------------------------------

Thomas J. Quinlan, LSC Communications, Inc. - Chairman, CEO & President [18]

--------------------------------------------------------------------------------

Yes. If the cadence is -- if by that you mean, are we going to have these announcements that are going to come out periodically, am I going to put a number out there? No, that will not take place. But on the earnings call, we will continue to be transparent and candid. Again, I think the way we've broken out our reporting allows you really clearly visibility that we see taking place in the business. So you'll be able to see what you got there.

And again, I think as you think about Magazines, Catalogs and Logistics, let's not lose sight, logistics did really well. Logistics really had a good first half of the year compared to when I think you comp against some other companies that are out there that play in this market. We've done a really good job of reducing costs while building in industry best practices. We benefited from a very strategic approach to the transportation market by focusing on balancing current market favorability with a desire to maintain long-term strategic partnerships. George Zengo and Pat Galvin had done a great job of making that happen. We've done acquisitions there. We've integrated them. We're reaping the benefits from that. We've got to look for other things to do in logistics. We've got reverse logistics going on with a major retailer, which is starting to pay some dividends. What more can we do outside the physical print from a logistics standpoint, so there are some exciting things there.

--------------------------------------------------------------------------------

Michael McCaffery;Shenkman Capital Management, Inc.;Vice President, [19]

--------------------------------------------------------------------------------

I guess the cadence question, I guess part of that was I would assume that there are certain personnel decisions that have been made or going to be made in terms of workforce reduction. And so is that something that has -- should we expect that to happen immediately? Obviously, some of the other cost initiatives will probably take some time to achieve, but I would imagine, at least on the employee side that would be typically is one of the first things that happens.

--------------------------------------------------------------------------------

Thomas J. Quinlan, LSC Communications, Inc. - Chairman, CEO & President [20]

--------------------------------------------------------------------------------

Yes, look, we're -- we follow the warrant notice, obviously, like everyone else does. And when we have those situations, we obviously have to announce that publicly. We're a manufacturing company at the end of the day. We're not, what I'd say, the support staff is not a lot. So -- and these are serious decisions we go through, and there's -- you're never going to hear me get ahead of it because I don't think that's fair to anybody. But look, when we announced -- when you see plant closures, Torrance is probably -- approximately 200 people in Torrance. So I mean, not a good day, not a good day for them but -- or us and not decisions that we take lightly likely, but those things are now what we're looking at across the platform as you think about where our revenue has fallen off.

--------------------------------------------------------------------------------

Operator [21]

--------------------------------------------------------------------------------

(Operator Instructions) At this time, I see no further phone questions. However, I do see that there may be some web questions, Janet. I'd like to turn the call back over to you.

--------------------------------------------------------------------------------

Janet M. Halpin, LSC Communications, Inc. - Senior VP of IR & Treasurer [22]

--------------------------------------------------------------------------------

Thank you, Elisa. At this point, I don't think we'll be taking any further questions.

--------------------------------------------------------------------------------

Thomas J. Quinlan, LSC Communications, Inc. - Chairman, CEO & President [23]

--------------------------------------------------------------------------------

Thank you, everybody, for joining and appreciate it, and we look forward to talking to you in early November. Thank you.

--------------------------------------------------------------------------------

Operator [24]

--------------------------------------------------------------------------------

Thank you, ladies and gentlemen. This concludes today's webcast. We appreciate your participation. You may now disconnect.