Good morning, and welcome to the Rayonier Advanced Materials Second Quarter 2020 Earnings Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open to your questions with instructions follow at that time. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Mr. Mickey Walsh, Treasurer and Vice President of Investor Relations for Rayonier Advanced Materials. Thank you, Mr. Walsh, you may begin.

Thank you, operator, and good morning, everyone. Welcome again to Rayonier Advanced Materials’ second quarter 2020 earnings conference call and webcast. Joining me on today’s call are Paul Boynton, our Chairman, President and Chief Executive Officer; Marcus Moeltner, our Chief Financial Officer and Senior Vice President of Finance; and Frank Ruperto, our Executive Vice President of High Purity and High Yield Cellulose businesses. Our earnings release and presentation materials were issued last evening and are available on our website at rayonieram.com. I’d like to remind you that in today’s presentation, we will include forward-looking statements made pursuant to the Safe Harbor provisions of federal securities laws. Our earnings release as well as our filings with the SEC list some of the factors, which may cause actual results to differ materially from the forward-looking statements we may make. They are also referenced on Slide 2 and 3 of our presentation material. Today’s presentation will also reference certain non-GAAP financial measures as noted on Slide 4 of our presentation. We believe non-GAAP financial measures provide useful information for management and investors, but non-GAAP measures should not be considered an alternative to GAAP measures. A reconciliation of these measures to their most directly comparable GAAP financial measures are included on Slides 17 through 20 of our presentation. Now, I’ll turn the call over to Paul.

Thank you, Mickey, and good morning, everyone. Let me first start by saying how proud I am of the way the team has operated over the past six months in safely supporting our customers. Managing our complex assets in a normal environment is challenging. The global COVID pandemic has added a whole new level to this complexity and our teams have responded admirably. Throughout the pandemic, we’ve kept pace with the demand for all of our products, serving as a reliable source of supply to our customers and enabling them to continue to provide uninterrupted support to their critical end markets. In product markets where we’ve seen demand weakness, we’ve been able to flex down our production to appropriate levels. In June, we successfully executed a significant plan maintenance shutdown at our Jesup facility safely bringing in over a 1,000 contractors under adherence a very strict protocols. We are planning similar maintenance outages in Fernandina and Temiscaming in the coming months. Financially, results were pressured by the pandemic and did not meet our expectations compared to guidance, but we are seeing some signs of improvements in certain areas, which I will discuss later. Let me first provide some highlights for the second quarter as laid out on Page 5. Overall, we delivered $19 million of adjusted EBITDA for the quarter compared to $21 million last year. Our ongoing efforts to reduce costs help offset pressure brought on by the COVID pandemic. We saw significant price decline in commodity High Purity Cellulose products. This goes in fluff pulp as well as in both high yield pulp and newsprint compared to prior year. Those are the specialties enforced products volumes were impacted by reduced demand stemming from the pandemic. Corporate costs while improved from prior year contributed to a missing guidance, primarily from non-cash charges. We generated $16 million of free cash flow in the quarter, as the team did a good job of minimizing CapEx and reducing working capital. I’ll now ask Marcus to go into more detail on the quarters’ results. Then I’ll provide you with an update on key actions we’re taking response to COVID-19 and provide a perspective on our markets before opening up the call to questions. Marcus?

Thank you, Paul. Starting with High Purity Cellulose on Slide 6, second quarter sales decreased by $14 million, driven by 22% decline in commodity pricing, primarily from viscose pulp and a 16% decline in CS volumes, compared to the previous guidance of an 11% to 12% decline. The accelerated volume decline was driven by reduced demand for automotive, industrial and construction ethers grades, plus an additional 2% due to logistic issues, both of which are COVID related. Declines in CS volumes were offset by a 72% increase in commodity sales volumes due to improved productivity and mixed shifts from prior year. EBITDA for the segment was $31 million, down $3 million from a year ago. Price declines were significantly offset by improved costs, driven by lower wood, chemical and energy input costs as well as improved operational reliability. Compared to the first quarter of 2020, EBITDA improved by $5 million, primarily from higher commodity product sales prices and volumes as well as lower costs. Turning to Slide 7. Sales in our Forest Products segment declined $11 million from the second quarter of 2019, driven by a 21% decline in lumber volumes, as we took proactive measures to curtail operations for several weeks in the beginning of the quarter, as demand for lumber dissipated at the height of the pandemic. Volume declines were partially offset by 5% increase in sales, as we were able to improve our sales mix with the reduced volumes. EBITDA for the segment improved $13 million from prior year driven by reduced costs for wood, labor, energy and duties. Additionally, prior year results included a $4 million inventory valuation adjustment, which did not repeat in 2020. As a reminder, EBITDA results include $6 million for lumber duties paid in the quarter. Since the start of softwood lumber…

Hey, thanks, Marcus. Turning to Page 13. As noted, we’ve taken decisive action in response to the COVID-19. First and foremost, safety has been and will continue to be our overriding priority. We have implemented exacting protocols in all our facilities to protect our employees and our operations. Our teams strict adherence to protocol has helped mitigate the spread of the virus and its impact on our employees and operations. Office and support staff continue to work remotely in most areas, including our Jacksonville, Florida headquarters and other global offices. Second, to control costs and minimize pandemic driven losses, we have taken certain curtailment measures with respect to both our newsprint and lumber facilities. While our lumber assets are back to operating near capacity, we are currently addressing weakness in the newsprint market by matching our production to market demand. We will continue to monitor these and other assets to assess whether business conditions warrant implementation of additional measures. Third, we are focused on maximizing cash flow and liquidity. As Marcus has highlighted, our credit agreement amendment provides us with further financial flexibility and improved liquidity. We are executing against our cost savings initiatives, and remain on track to reduce costs by $20 million to $25 million in 2020, excluding the benefits of market tailwinds for raw materials. Additionally, we remain intensely focused on free cash flow generation, including prudent deployment of essential CapEx and rigorous management of inventory levels. Finally, we expect to receive a significant cash benefit later in the year in the form of a $31 million tax refund, largely attributable to CARES Act features passed earlier this year. Wrapping up on Page 14, the COVID-19 pandemic has kept our earnings well below our potential. We are taking the necessary actions to manage through its impact to…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of John Babcock with Bank of America. Please proceed with your question.

Hey, good morning, and thanks for taking my questions. Just wanted to start out here, I mean, as we think about earnings and the potential to improve from here. Opportunities does Rayonier have to increase EBITDA beyond the cyclical improvements in its various commodities. I mean, I know you talked about getting $80 million to $95 million from the improvement in commodity products pricing, and then also the kind of $20 million to $25 million in cost reductions for this year. But wanted to see, what else you might have in your arsenal here?

Yes. Hey, good morning, John. Thanks for the question. John, if you remember, at the beginning of the year, we kicked off a program, we are calling internally act now, right. And so that was real big push. And with that four different key elements, right. Operating cost improvement, we talked about $15 million target, corporate cost elimination $10 million to $15 million. Both of those were on a strong target to achieve, if not exceed. We also talked about, CapEx reduction of $10 million to $15 million. And again, I think we’re on pace to improve upon that. And then finally on working capital improvement, we talked to as an opportunity out there, $25 million. I think that’s one area we’re a bit behind on, and that’s largely related to COVID and moving inventories around. But I think the proven in the back half of the year is there and we’re going to continue to target that. So I think good success on things that we’re controlling in the immediate future. As we look beyond that, right, you mentioned right, just restoring commodity markets will improve pricing significantly and therefore EBITDA alone. We continue to have a lot of focus on new product efforts. And we’ve got some opportunities out there. And again, it’s going to be somewhat COVID related as these opportunities come around for these new products, just as the markets return. And of course, as you’ve heard in the past, John, we’ve worked hard and we continue to work hard to stabilize our cellulose specialty business and improve pricing there, which this year we’re doing a stabilized, it should be slightly up for the year as we indicated it’s not flat. And again, we hope we can continue down that path as well. So I think we had a lot of fronts here, both internally and externally with markets to improve EBITDA going forward. And if you keep in mind, just 24 months ago, we were well above a $300 million EBITDA. So we are certainly under significant pressure at the current time, but I think we’re doing a good job at managing through it. And we do see an opportunity to improve upon that as the years combine in the near future.

Okay. That’s helpful. And then kind of, with regards to 3Q, I guess, particularly, it seems like you did pretty well on the cost side. Might you be able to parse out how much was from what raw material cost versus the continuous improvement efforts?

Yes. Let me ask Marcus to give you a little flavor on that. Marcus, if you would.

Yes. Good morning, John. On Page 10, you saw the bridge that we set out. So costs quarter-over-quarter in the year 2019 versus 2020, around $46 million in savings. And the synergy piece is probably the smaller side of that, $46 million, call it, maybe $5 million for that quarter. We continue to see gains on wood, chemicals and some energy inputs. And remember, we’re anniversarying higher costs on wood last year that we had down in the U.S. south and also the productivity impact that we had up north in Temiscaming.

Is it possible to get a breakdown across kind of wood, chemicals and the energy inputs?

Like, to give you some perspective, say for the high-purity cellulose segment in the bridge there. Wood was in the range of two, energy about one and then some chemicals, but we can certainly give you that after the call that detail.

Okay. That’d be great. And then I also want to just check, did RYAM experience any disruption in operations that it smells from the coronavirus both in 2Q and also has it had any issues in July?

Yes. So for the most part, no disruptions in HPC at all in our high purity business or paperboard or high yield pulp, we had some disruption on transportation. On all of those actually, but not in the actual assets itself, when it comes to the actual assets itself, disruption is really around the curtailments that we talked about newsprint, as well as sawmills. We took those assets to actually down significantly in early in the quarter, taking out maybe up to a third of our volume capacity as a result of the COVID. And then the balance again is really disruption based on either transportation or as we talked about just overall demand in the high purity area and you saw that impact our volumes for the quarter.

Okay. And so that volume, I assume that’s kind that 2% in HPC that was from logistics issues. And on that, I mean, will you get that volume back or is that volume that’s, I guess, lost for now.

On the logistics side, that would have rolled from one quarter to the next quarter. That’s really shipping delays. I think the broader decrease from the 11 to 12 that we put out last quarter to the 16, the other half of that really is what we’re seeing reduced forecast from our customers as they’ve seen some demand weakness in their end markets. Specifically, in the construction and the industrial and automotive sectors, the one thing I would say though, is that it feels like most of that reduction was communicated kind of in the second half of Q2 and things feel a more stable now. As we’re looking out through the rest of the year, that being said, the one thing that we continue to see is, uncertainty – and customers concerns about uncertainty on how quickly economies recover and where governments put money to work to drive those economic recoveries.

Okay. Thank you. And then just last question and apologies for all these. But just quickly, I guess, I want to kind of confirm here, so what are your peers ultimately took pretty significant downtime. Or I guess has curtailed production on the mills. I’m sure you’ve read about this. I wanted to see if there are any sort of commercial opportunities here for RYAM and how you’re kind of reading that situation.

Yes. Let’s give two answers to that. I’ll start and let Frank continue. And first of all, yes, so you’ve talked about some HPC, high purity capacity going out of the market. Certainly, we’re prepared for all scenarios as well. And however, I think we’ve been very fortunate with the quality of our products and the strength of our customer relations. We’ve continued to see volume come in, even at the commodity level, where a lot of the volume, particularly in the viscose area has actually evaporated disappeared. We continue to have good steady orders come across. So that’s been helpful. And I think it supports our overall cellulose specialties business, when our customers see the stability of our assets. Now taking advantage of these opportunities, let me just turn it over to Frank and maybe he can comment on that.

Yes. I think, John, the closures have been relatively recent and it’s a bit early to call any real change in the market. Remember that, most of the facilities that tend to close or take downtime is, it happens after inventory has been built or they keep some key supply lines that supply important customers relatively whole. That said, we have seen some modest opportunity to step into supply chain disruptions that the closures have caused and believe that we will benefit in the future. To what extent, it’s still to be seen. We’ve kept all of our lines open. As Paul said, given our ability to place all of our tons due to quality of these commodity grades in the long-term relations we have. I would tell you that security of supply has become more important than many of our customers size and that we believe that customers should be putting a premium on the ability to have a stable and secure supply source. So I think that will help us going forward. It’s just too early to tell how long some of these assets will be down and the inventory work-throughs and the re recovery from the demand side how that will impact more broadly, but obviously, it’s – it should be a positive for us. The magnitude is really the question.

Okay. Thank you.

Thanks, John.

Thank you. Our next question comes from the line of Steve Chercover with D.A. Davidson. Please proceed with your question.

Thanks. Good morning, everyone.

Good morning, Steve.

So just a couple of questions on lumber to start. In Quebec, I believe the whole province basically takes two week holiday in August. So when Lumber’s going parabolic, like, it is currently. Can you convince the guys and I guess guys and gals to stay on the job? Like, how much production will you lose if in fact – if I’m correct about this kind of global vacation?

Yes. You’re correct about that. Obviously, your Canadian background – it’s a big time to take off at the July timeframe. And right now that time has passed us. So we’ve got all our assets up and running full. We did take our normal downtown. We tried to keep as many assets up and running as we could. Steve, if you look at, what we’re expecting, we took substantial downtime in April, right. So we took over a 50,000 board feet out of the market at that time. And if you look at the balance of the year, we’ll have a stronger back half of the year than the first half as a result of that curtailment, but we won’t quite come up to last year volume levels. So just to kind of put that in perspective, but obviously we’re running well now. And we’ll try and do everything we can to take advantage of it. As discussed, we were out there in our order files significantly. Typically, we’d be a couple of weeks out. Right now, we’re out to mid-September if not later. And so we’re trying to take advantage of the strength of the market and continue to place orders out there. But a significant change in volume in the back half of the year, outside of normal capacity just happened. It’d be more in normal lines, what we’ve seen in the past years.

Well, I mean, if you did 180 million board feet, a huge hue of last year and 134 in Q3. I mean, could we kind of not flip flop, but because of the holiday, but be kind of north of 150 million board feet. And the good news is, you’re running as the prices have gone up, maybe just give us – help us with the sensitivity, like the leverage that you have.

Steve, if you look at our disclosures, we quote a rated capacity of 755 million feet for our lumber mills. Two of those mills are on three shifts. So if I state those on all of them at a two shift basis, you’re around 640 million feet of annualized volume. And as Paul mentioned, we took close to a month of with the 50 million.

I’m not talking about Q2. I’m talking about Q3 when prices are good. So – let’s say, you get a 150 million board feet in Q3, prices are up on quarter-over-quarter, $100, $150 a thousand.

If you look at the quoted print right now, they’re up over that. But yes, those are good numbers, good numbers.

Yes. So Steve, look, I think your numbers are in the right ballpark, right. So if you put out there 150 million a quarter, I think that’s right. Try and push up and above, beyond that. We’ve got very low inventories coming into the quarter, but we’ll do everything we can to take advantage of the market. As you said, we get a strike where they are in top, right. So we’re trying to do that.

Okay. And then, what are the chances that you’ll recover the duties within the next 12 months? I mean, the duties going down as they are imminently from 20% to 8% is kind of an acknowledgement that the duties shouldn’t have been there in the first place. Can you handicap the potential over recovery?

Steve, we’ve been monitoring, right, the preliminary determination. It was supposed to be confirmed into September, October. And Washington’s had two successive delays now. So again, that’s why we’re messaging back end of this year, possibly early next year to have those rates to confirmed, at which time we would then depositing at the lower rate. And the cash deposits would continue to accrue. But as you know, it’s going to take some time to have a resolution on the file, right

So whether that’s 12 months, 24 months should be in that timeframe Steve, but to say that it is going to be in a certain time, it’s going to – it’s difficult. But it continues to grow right, Steve, 72 million now that we’ve deposited.

Yes, I mean, the precedent is that ultimately get it back. That would be nice for you guys. Okay. Well, switching gears a bit to the CARES Act and the tax refund that you’re anticipating with this year. Just want to confirm that’s your money, right. That is not a COVID loan or anything.

No. Steve, the genesis of that program is to obviously give assistance to industry. So that’s related to 2019 non-operating losses that can be carried back to 2014. So that is clearly cash. That’s a cash refund for the company.

Okay. And then my last question, I think it was March 2019, when you did your Analyst Day, you talked about you reconfigured mill system, where I think Temiscaming was taken out of high purity cellulose, for instance. So have you seen the anticipated cost and/or commercial benefits that you hoped for? I mean, does that show up in the $46 million cost benefit? Because I thought that was mainly just wood and energy, et cetera, chemicals.

I’ll touch on the commercial side. I’ll let Marcus touch on the cost side, Steve. On the commercial side, we have started to see commercial benefits of that as we’ve started to move some of the specialties out of the Temiscaming mill. We’ve clearly seen a benefit to having capacity to run into other new product opportunities, as well as just run the viscose pulp on a more stable basis over that time. And you’ve seen better reliability of operations in that facility this year, which has been helpful with less grade changes in the light. So that’s been a positive. I’d also say that a major part of that realignment was moving our sea line in Jesup to fluff pulp. And the spread of profitability on fluff over viscose this year given how weak viscose has been meaningful for us and so that has been a very positive move of that as well. And we’ve had some other smaller moves that have helped us free up capacity to pursue opportunities as we move forward in the future on high IV ethers and other areas. So overall, it’s been working well. It takes some time to move grades around, but we’ve seen tangible benefits this year to date.

Okay, thanks.

Nice comments, right. As we simplify the production wheel for these facilities, obviously efficiencies for the mill. So if you look at the bridge that we set out for HPC, you can see the $24 million in cost improvement year-over-year. Of that $7 million was wood, chemicals was about $10 million and maybe $2 million of energy. The balance of that is kind of that operational improvement as you stabilize an operation with a more predictable grade run, right, less grade changes. So that’s where that shows up then.

Okay. Thanks, guys. Stay safe.

Thank you. Our next question comes from the line of Paul Quinn with RBC Capital Markets. Please proceed with your question.

Yes. Thanks very much, guys.

Good morning.

Good morning.

Let’s start with lumber. You mentioned grade capacity 755. Did I understand that, that includes the two mills on the three shifts? And which mills are those?

Yes. So La Sarre and Chapleau are on three shifts in that 755, Paul.

Okay. And then you’re confirming that you’re running right now, your run rate in August is basically full on, right? It’s at that closer to the 755 level.

No, at the lower level. The two shift configurations, call it, the 640 that we mentioned.

Okay. So night now La Sarre and Chapleau are running three shifts or running two shifts.

Correct.

Okay, got it. Is there any intention for those mills, given that we’re at record lumber prices, to move to three shifts?

Yes. Look, Paul, we would like to. Probably the biggest constraint in both those communities is just labor. We’re competing against a really strong labor market with mining. So we’ve got to run these assets safely. And so we’ve decided it’s most optimal right now to run them two shifts. As soon as we think we can with the right personnel, we’ll try and switch it back to three. But right now, we’re running at the two-shift level.

And Paul, as you know, we deployed some strategic capital at our saw lines. So we got a couple of new saw lines, Chapleau and Cochrane. So year-over-year, we should pick up those benefits on volume.

Okay. And then on the newsprint, you’re running it to, I guess, your order file cap. But where is it running? Is it running like 50%? Is it running at 75%? What’s it running?

Yes. Let’s just look at that. So we’ve got two lines there. We took, again, a pretty substantial curtailment in the second quarter, probably taking out, percent wise, Marcus?

We took about equivalent to 1.5 months, 28,000.

Yes, so about 50% in the second quarter. This quarter as well. We’ve come back on one line, also running a second line for a little bit. So it’s going to be in between that. Again, as we kind of commented several times, we’re just going to have to keep flexing to the market to make sure that we stay optimal. We think we can shift that facility to make sure it’s in the black, the way we run it. So that’s obviously is our goal. But as you know, the newsprint market has been severely hit, and so we’ve just adjusted our output of that so that we’re producing the profitable grades and serving customers that are in the delivery radius that makes sense to us, and we’ll continue to do that so that we stay, again, in the black. There’ll be some times we’ll probably flex up, run both lines, flex back down to run one line, and maybe we’ll take them both back down again if the markets don’t improve. But – so we’re running it as flexible as we can to optimize our cash.

And Paul, the cap operation has its summer shutdown, always budgeted in July, which we pursued.

Okay, that’s helpful. And I suspect you’ve got lumber mills in the area that supply chips to cap. Is there any risk that those mills have to shut because cap’s not running full?

No, I don’t see that issue. We’re very well balanced when it comes to chips going in different directions and got good relationships out there if we need to move more out of this facility. We’ve been able to do that so far, and I don’t see that as a issue going forward. Obviously, it’s one of the constraints we’ll continue to watch to monitor in the flex to, but we don’t have that as an issue on our plans going forward.

Okay. And then just on the adjusted EBITDA, the corporate line ballooned again is $16 million. Is there anything negative? Is there anything notable in the quarter? What should we expect going forward?

Yes. Paul, it’s Marcus. The – as you know, we’ve got certain liabilities in Canada that are not hedged: pension, lease obligations. And as the dollar strengthened, we had around $4.5 million on remeasurement that came back on that.

Okay. So that’s something – and then going forward, I guess, we got to worry about that line with an appreciating Canadian dollar, right, which is exactly what we’re seeing right now?

Yes. Yes. So we caught up the lion’s share of what happened in first quarter. But as Paul mentioned, one of the key areas of focus was to pursue the $10 million reduction on our corporate costs. So we still feel good about that $50 million number on an annual basis.

Okay. And just while I think about it, on the lumber side, you mentioned the two saw lines coming in. Any other major capital that’s coming in the lumber operations over the next six months?

No. And then that investment that was referenced there is projects that we initiated quite some time ago to really improve the operational costs of those facilities and take advantage of some things. But – so those are projects that have been in the works here for a while now, Paul. There’s nothing else that we had put in place for this year at all. So these are continuing from the past year.

All right. That’s all I had. Thanks so much.

Thanks, Paul.

Thank you. Our next question comes from the line of Paretosh Misra with Berenberg. Please proceed with your questions.

Thank you. Good morning, everyone. Maybe first of all, can you give us an update on your joint venture with LignoTech? How is that performing? What’s the capacity utilization? And if you think any difference in performance second half versus first half that we should think of?

Yes. Thanks, Paretosh. Look, the program as a whole, as you know, we’ve talked about in the past, has probably underperformed our expectation there. We’ve probably taken $1 million loss on it in a quarter. If there’s some positive news out there, and there is, is that there some of the capacity in the Ligno area has come out of the market, particularly, I’m referencing a South African asset that is not running now. We’ve seen that tighten up supply a bit. And with that, we’re starting to see the volume, corresponding volume roll into the LignoTech Florida facility. So that’s been, again, a positive here in recent time. And I think it’ll be a little bit more time for the pricing to catch up to where we expected to be. But right now, we are now seeing volumes closer to kind of plan levels than, and that was missing in the past as the products has been kind of slowly ramping into the market and mainly because of an oversupplied market. And so with that tightening up I think we’re going to see some improved volumes. And I think after that, we see kind of the elevated pricing that comes with improved volumes.

Got it. That’s good to hear. And then on the maintenance outage side, how are your plans for the second half, particularly in the high-purity cellulose business? Is there more outage in the second half or than first half? Or how should we think of that?

Yes. So we noted we’ve taken some downtime for maintenance already at Jesup. We’ve got a planned outage in our Fernandina facility. I guess, it starts this coming weekend. It’s two weeks down. And then in September, we’re taking Temiscaming down. So we have two more outages coming up, Fernandina and Temiscaming in the next two consecutive months.

Got it. And I guess just last one. Are you seeing any incremental new opportunities for cellulose in the packaging side of the business? Any new packaging applications?

I would say not substantially as far as cellulose into packaging. There are some products of cellulose going into that. It’s a real small amount. But I don’t see that as a significant opportunity for us, Paretosh, or for anybody into any kind of volume per se.

Understood. Thanks, guys. Good luck for everything.

Yes.

Sure, thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Roger Spitz with Bank of America. Please proceed with your questions.

Thanks. Good morning.

Good morning, Roger.

First off, maybe I missed it. What is your 2020 CapEx guidance right now?

Yes. Roger, it’s Marcus. We previously said that we would target $90 million for the year. But as Paul mentioned, we’re being quite prudent in the deployment of our capital. And year-to-date, our CapEx is obviously at a lower run rate. But as you know, it has some correlation to maintenance outages. And we just completed Jesup, and as Paul mentioned, we’ve got Fernandina and Temiscaming coming on. So you should look at it as up from the first part of this half year. But certainly, we’re being prudent on the amount that we deploy.

Okay. And in terms of working capital, it sounds like you probably don’t want to give a 2020 working capital guidance of inflow and outflow. But if you do, please provide. But I guess what I was interested in was the working capital, there wasn’t an inflow in the second quarter. Given all your volumes down, I would expect it – and presumably, raw materials down, I would expect a working capital inflow.

So again, Roger, it’s Marcus. The – we focused on drawing down our inventories. So effectively moved a lot of that inventory into receivable. And then we hope to bring that receivable down now and continue our progress towards the working capital target that we mentioned that Paul alluded to. So again, we’re focused on that. It’s more difficult in this COVID environment, but a lot of it moved into receivable.

Okay. And then lastly, just out of curiosity, is there any ability to use viscose grade having our pulp in any ether grade CS end markets? And I don’t mean to just completely go from one to the other. But like mix in a few percent or up to 10% or something like that in end market that customers might elect to do? Or can they do that? Or is it – does it just not work? It’s too hard to specify that in for their customers, your customers’ customers?

Yes. I’ll let Frank expand on this as well. I’ll take a shot at it. I’d say for the most part, it doesn’t move very well into the high end. It can a little bit here and there in different applications. But for the most part, the viscose pulp, the lower purity pulps that are out there, are being made for the textile markets, right? And so it tends to stay focused there. So I don’t think we see a lot of migration back and forth. At the cellulose specialties, it’s certainly one of the things our customers will try to do is do everything they can to figure out how to optimize their costs. So they are always looking at opportunities like that. But I’m not aware of any major breakthrough in that regard and don’t expect any. Frank?

No, I’d agree. I think customers are always looking to find ways to lower overall input costs, but product quality and performance issues tend to pop up on lower-quality, lower-grade pulps. What we do see more often, though, is CLP, cotton lint pulp, is often used in ethers applications because there’s very high alpha and has good brightness and the like. And a lot of our focus has been on developing products that can go after that market. Two benefits to that. One is, obviously, it can expand our volumes in the CS arena significantly. Second is it doesn’t impact the competitive landscape because we’re not pulling share from other DWP producers. We’re focused more on pulling share from cotton lint, and that is something that is a key focus of ours as we move forward, especially out of Tartas, who have developed some very, very high viscosity products there, as well as trying to work with Fernandina to do similar things. So we are seeing some of that as an opportunity. But on the first question, no, it’s minor, and it’s typically not all that productive.

Got it. Thank you for that.

We have reached the end of our question-and-answer session. I’d like to turn the call back over to Mr. Boynton for any closing remarks.

Yes. Thank you, everybody, for your time today. Appreciate it. These are challenging margins, but we just want to make sure our investment communities where they’re taking action to ensure our success as a company, and I think we’re reaching milestones. So again, thank you for your time today.

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.