Warrior Met Coal, Inc. (NYSE:HCC) has released its first-quarter financial results for 2024, revealing a mix of achievements and challenges. The company saw a 9% increase in sales volume to 2.1 million short tons and a 17% rise in production volume.
Despite the strong operational performance and progress on the Blue Creek growth project, Warrior Met Coal experienced a decrease in net income to $137 million and a slight decline in total revenues to $504 million, attributed to lower average net selling prices and higher cash cost of sales.
Key Takeaways
- Warrior Met Coal's sales volume rose to 2.1 million short tons, up 9% year-over-year.
- Production volume increased by 17% to the same figure of 2.1 million short tons.
- Net income fell to $137 million, with total revenues reaching $504 million.
- The Blue Creek growth project is advancing, with production expected to start in Q2 2026.
- Adjusted EBITDA was reported at $200 million, down from $259 million in the previous year's quarter.
- The company anticipates weaker demand in Q2 but expects improvement in the second half of the year.
Company Outlook
- Warrior expects to produce about 200,000 short tons of High Vol A steelmaking coal in H2 2024.
- The Blue Creek project is on track, with spending projected at $325 million to $375 million for 2024.
- Weaker demand is expected in Q2, especially from Asian markets, but a rebound is expected later in the year.
Bearish Highlights
- Lower average net selling prices contributed to the decrease in net income and revenues.
- Cash cost of sales rose to $284 million, or 57% of mining revenues, up from the prior year's 46%.
- The company faces longer transit times impacting transportation costs due to global logistics issues.
Bullish Highlights
- Strong demand from contracted customers persists despite a broader market correction.
- Significant progress on key milestones for the Blue Creek project suggests future growth potential.
- The company maintains a robust total available liquidity of $801 million.
Misses
- Total revenues slightly lower by $6 million compared to Q1 2023.
- Adjusted EBITDA decreased to $200 million from $259 million year-over-year.
Q&A Highlights
- Warrior Met Coal plans to canvass customers for selling test and smaller volumes of coal in H2.
- Spot volumes are projected to be 25% for the year, with the majority destined for Asian markets.
- The adoption of a poison pill provision is seen as a standard defensive measure with shareholder backing.
Warrior Met Coal's first-quarter performance demonstrates resilience in operational efficiency, with increased sales and production volumes. However, the financials reflect the impact of market corrections and higher costs.
The company remains focused on its strategic Blue Creek project, expecting to start reaping its benefits in the coming years. Despite anticipated weaker demand in the near term, Warrior Met Coal is positioning itself to meet future market demands, particularly in Europe and South America, while navigating current challenges in global logistics and market pricing.
InvestingPro Insights
Warrior Met Coal, Inc. (NYSE:HCC) has demonstrated a strong operational performance in Q1 2024, though it faced some financial headwinds. To provide further context to the company's current financial health and future outlook, here are some key metrics and insights from InvestingPro:
InvestingPro Data:
- Market Cap (Adjusted): $3,550M
- P/E Ratio: 7.43, indicating a potentially undervalued stock compared to the industry average
- Revenue Growth (Quarterly) for Q1 2024: -1.17%, reflecting the slight decline in total revenues mentioned in the article
InvestingPro Tips:
- Warrior Met Coal holds more cash than debt on its balance sheet, suggesting a strong financial position to weather market volatility.
- The company has delivered a high return over the last year, with a 1 Year Price Total Return of 105.67%, showcasing its strong performance and investor confidence.
Investors interested in a deeper analysis can find over 11 additional InvestingPro Tips for Warrior Met Coal at https://www.investing.com/pro/HCC, which could further inform investment decisions. To access these insights, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Full transcript - Warrior Met Coal Inc (HCC) Q1 2024:
Operator: Good afternoon. My name is Megan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Warrior First Quarter 2024 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session [Operator Instructions]. This call is being recorded and will be available for replay on the company's Web site. Before we begin, I have been asked to note that today's discussion may contain forward-looking statements, and actual results may differ materially from those discussed. For more information regarding forward-looking statements, please refer to the company's press releases and SEC filings. I have also been asked to note that the company has posted reconciliations of the non-GAAP financial measures discussed during this call in the tables accompanying the company's earnings press release located on the Investors section of the company's Web site at www.warriormetcoal.com. In addition to the earnings release, the company has posted a brief supplemental slide presentation to the Investors section of its Web site at www.warriormetcoal.com. Here today to discuss the company's results are Mr. Walt Scheller, Chief Executive Officer; and Mr. Dale Boyles, Chief Financial Officer. Mr. Scheller, you may begin your remarks.
Walt Scheller: Thanks, operator. Hello, everyone. And thank you for taking the time to join us today to discuss our first quarter 2024 results. After my remarks, Dale will review our results and additional detail, and you will have the opportunity to ask questions. We delivered very strong results for the first quarter, driven by our operational performance. The volume of steelmaking coal that we produced reached levels not seen since 2020. We took advantage of the inventory levels we had built over the preceding quarters to generate over $104 million in cash from operations, which we primarily used to invest in our Blue Creek growth project and return additional cash to stockholders. We also made excellent progress on Blue Creek, meeting several key milestones as we advanced the development of this world class growth project that has the potential to transform our company. First, let me provide an overview of the steel and steelmaking coal markets during the first quarter from Warrior's perspective. The first quarter was predominantly marked by a strong correction in pricing that started in early March and quickly accelerated. The rapid change in market sentiment was driven by a combination of macro factors. On the demand side, we observed the sudden retreat of demand interest from China and India. On the supply side, several loaded vessels were resold by end users, increasing available supply in an environment that was already experiencing additional supply availability. The softness in India demand was largely attributed to the slowdown in projects associated with the upcoming national elections in April through early June. In China, lower demand was a result of continued weakness in the property and construction segments that China is struggling to improve despite numerous stimulus efforts. As we've continued to observe for several quarters, demand from our contracted customers remained strong for the quarter, while our traditional markets offer limited spot sale opportunities. We were extremely pleased by the performance of our rail partner during the first quarter as we were able to navigate the temporary loss of the barging system without any impact to our customers and with minimal impact to our costs. The authorities responsible for the repairs on the Demopolis lock continue to guide towards a restart of river operations by the latter part of the second quarter. Likewise, we continue to see benefits from our collaboration with our terminal partner in Mobile to improve this performance, which has resulted in strong performance outcomes throughout the first quarter. As previously mentioned, the major met coal indices experienced a steep correction in the latter part of the first quarter. Our primary index, the PLV FOB Australia ended the first quarter at $2.22 per short ton, which was $72 per short ton lower than its December 31st value and $85 lower than the peak of $307 per short ton achieved in early January. Likewise, the PLV CFR China Index experienced a $68 per ton decline during the same period, closing the first quarter at a price of $2.33 per short ton. Similar declines were observed with the second tier indices, which also displayed lower relativities in relation to the PLV Index, averaging around 83% for the first quarter. As we've said on prior earnings calls, now that Mine 4 has transitioned to a High Vol A quality and more volume is being sold into Asia, our overall targeted average net selling price is 85% to 90% of the PLV FOB Australian Index. We achieved a performance level of 84% in the first quarter, which is a function of product mix, geography and freight rates. According to the World Steel Association Monthly Report, global pig iron production decreased by approximately 1.4% for the first three months of 2024 as compared to the prior year period. The month of March was the fourth consecutive month in which global production increased on an average daily basis, excluding Chinese production. Chinese pig iron production was 2.9% lower in this period compared to last year. Excluding Chinese production, the rest of the world's production grew 1.9%, primarily in Asia and a few countries in Europe. India steel production continued to grow at stable rates, increasing by 3.4% for the same period. Now turning back to our first quarter results. Our first quarter sales volume of 2.1 million short tons was 9% higher than the comparable quarter last year. This volume included the 129,000 tons that shifted into the first quarter from the fourth quarter of last year as previously disclosed. The overall increase was primarily driven by the additional production volumes due to the return of workers following the conclusion of the labor strike in the second quarter of 2023. Our sales by geography in the first quarter breaks down as follows: 44% into Europe, 18% into South America and 38% into Asia. As we've previously noted, demand from the Asian steel producers has been growing over the past several quarters, resulting in Asian sales up 17 percentage points in 2024 over the same quarter last year, while sales from our traditional markets were lower primarily due to weak spot markets. Our spot volume was 37% in the first quarter 2024, which was higher than the 29% in the first quarter of last year. For the full year, we expect our spot volume to be approximately 25% of total sales volume. Production volume in the first quarter was 2.1 million short tons compared to 1.8 million short tons in the same quarter 2023, representing a 17% increase. This was the highest quarterly production output over the last three years. Both mines operated at higher capacity levels in this first quarter compared to the same quarter last year as a result of the additional employees that returned following the conclusion of the labor strike. The higher sales over production volumes in the first quarter drove our coal inventory down to 892,000 short tons from 968,000 at the end of 2023. Our headcount was 33% higher at the end of the first quarter 2024 compared to last year's first quarter. As previously mentioned, the majority of this increase was related to the end of the labor strike. In our 2024 outlook, we had budgeted hiring 250 people in the business with approximately 100 of those people at the Blue Creek Mine. As of the end of first quarter 2024, we're on schedule with our overall hiring and plan to begin accepting applications for positions at the Blue Creek Mine in the second quarter. During the first quarter, we spent $102 million on CapEx and mine development. CapEx spending was $100 million, which included $69 million on the Blue Creek project. Mine development spending on the Blue Creek project was $2 million during the first quarter of 2024. Now, I'd like to provide you with a more detailed view on our Blue Creek growth project, including updates on our excellent development progress in the first quarter and what comes next. We accomplished key milestones on the major components for seam access, surface infrastructure and coal transportation. The seam access components, including the production slope, service shaft, ventilation shaft, remain on schedule for completion late in second quarter of this year, which we expect to allow us to begin development of the initial longwall panel with the first continuous miner unit in the third quarter of this year. We're extremely excited that the panel development is scheduled to begin on the originally expected timeline and we are on track to produce approximately 200,000 short tons of High Vol A steelmaking coal in the second half of 2024. The development tons produced from the second half of this year through the first half of 2025 are expected to be sold in the second half of 2025 after the preparation plant comes online. In addition, work continued on the surface infrastructure and coal transportation components and that work remains on schedule. On the surface infrastructure, excellent progress continued on the building of the preparation plant and related material handling belt system. The bathhouse, warehouse and electrical substation should be completed during the second quarter of this year. The coal transportation components are also on schedule and noticeable progress continued on the run of mine belt structure, the clean coal belt structure and rail and barge loadouts. On the financial side, Warrior invested $69 million during the first quarter 2024 on the development of Blue Creek, which brings the project to date spending to $435 million. The company expects to spend approximately $325 million to $375 million in 2024 on the continued development of the Blue Creek reserves. We remain focused on tight capital discipline, ensuring the project will be completed with on our reset baseline cost estimate on the original schedule, including the longwall start up in the second quarter 2026. Blue Creek represents one of the last remaining untapped premium, high quality, High Vol A coal reserves in the US, which should achieve premium prices. Warrior expects incremental annualized production of 4.8 million short tons of premium High Vol A steelmaking coal after the start up of the longwall, which the company expects will enhance and strike and strength and it's already strong global cost curve positioning and deliver incremental profit and cash flows. I'll now ask Dale to address our first quarter results and additional detail.
Dale Boyles: Thanks, Walt. For the first quarter of 2024, the company recorded net income on a GAAP basis of $137 million or $2.62 per diluted share compared to net income of $182 million or $3.51 per diluted share in the same quarter of 2023. Non-GAAP adjusted net income for the first quarter, excluding the nonrecurring business interruption expenses, was $2.63 per diluted share. This compares to adjusted net income of $3.57 per diluted share in the same quarter of 2023. These decreases quarter-over-quarter were primarily driven by the 9% lower average net selling price, higher cash cost of sales and lower results from our gas business, partially offset by 9% higher sales volumes. We reported adjusted EBITDA of $200 million in the first quarter of 2024 compared to $259 million in the same quarter of last year. Our adjusted EBITDA margin was 40% in the first quarter of 2024 compared to 51% in the same quarter of last year. As I previously mentioned, these decreases quarter-over-quarter were primarily driven by the 9% lower average net selling price, higher cash cost of sales and lower results from our gas business, which were partially offset by 9% higher sales volumes. Total revenues were $504 million in the first quarter compared to $510 million in the first quarter of 2023. This overall decrease of $6 million was primarily due to the 9% decrease in average net selling prices, offset by the 9% increase in sales volume and lower demurrage and other charges. Demurrage and other charges were $3 million lower compared to 2023's first quarter. Demurrage and other charges resulted in an average net selling price of $234 per short ton in the first quarter of 2024 compared to $257 per short ton in the same quarter of last year. Other revenues, mainly from our gas businesses, were lower in the first quarter of 2024 compared to the same quarter of last year, primarily due to a 34% decrease in natural gas prices between the periods. The Platts Premium Low Vol FOB Australian Index price was relatively stable for much of the first quarter until early March when the index corrected sharply downward. The Index price averaged $279 per short ton for the first quarter, which on average was $33 per short ton lower compared to the same quarter of 2023. We primarily target pricing our Mine 7 premium product from this Index, which represents about 70% of our volumes. We primarily target the East Coast High Vol A Index for our Mine 4 high quality product, which is approximately 30% of our volumes. However, we do use other indices from time-to-time to price our products, especially into Asia, which may be priced on a delivered or CFR basis. Cash cost of sales in the first quarter of 2024 was $284 million or 57% of mining revenues compared to $232 million or 46% of mining revenues in the first quarter of 2023. Of the $52 million increase in cash cost of sales, $22 million of the increase was driven by the 9% increase in sales volumes. The remaining increase in cash cost of sales of $30 million was due to higher royalty cost resulting from higher royalty rates in the areas currently being mined and higher labor and supply related costs on higher production. The higher labor related costs were primarily due to the employees returning from the labor strike that ended in 2023 and additional wage increases. Our headcount was 33% higher in the first quarter this year compared to last year's first quarter. In addition, costs were higher in the first quarter this year due to higher spending of about $1 per ton on a higher mix of rail transportation and higher repairs and maintenance, all of which should be temporary. In addition, mine development credits were lower now than Mine 4 is producing from the North Portal area of the mine. Overall transportation and royalty expenses were 39% of our cash cost of sales per short ton in the first quarter of this year on lower average net selling prices compared to 42% in the same quarter last year. Cash cost of sales per short ton, FOB port, was approximately $133 in the first quarter of this year compared to $119 in the first quarter of 2023. On a per ton basis, transportation costs were about $1 higher due to the higher rail mix, which was mostly offset by lower average net selling prices. Likewise, royalty costs were lower on lower average net selling prices but were higher on a per ton basis of $3. This was due to the higher royalty rates in the areas currently being mined versus last year's first quarter royalty rates. Our cost of production was 61% of our total cash cost per short ton compared to 58% last year. The higher cost of production was primarily due to higher labor related costs of $4 per ton, temporarily higher repairs and maintenance costs of $2 per short ton and fewer mine development credits accounted for the remaining amount of the increase. SG&A expenses were about $19 million or 3.7% of total revenues in the first quarter of 2024 and were slightly higher than 2023's first quarter of 2.8%, primarily due to an increase in employee related expenses. Interest income earned on cash investments was lower in the first quarter of this year, primarily due to lower invested cash balances. Our interest expense was lower primarily due to the early retirement of debt in August of 2023. Our low effective tax rate reflects expense on lower pretax income compared to the first quarter of last year. Our tax expense reflects an income tax benefit for depletion expense and foreign derived intangible income. Turning to cash flow. During the first quarter of 2024, free cash flow was $2 million. This was a result of cash flows generated by operating activities of $104 million less cash used for capital expenditures and mine development of $102 million. Free cash flow was $108 million lower than 2023's first quarter, primarily due to higher accounts receivable of $115 million and higher Blue Creek CapEx spending. Free cash flow in the first quarter of 2024 was negatively impacted by an $86 million increase in net working capital from the end of 2023. Increase in net working capital was primarily due to the previously mentioned increase in accounts receivable and higher sales volumes, partially offset by lower inventories. Our total available liquidity at the end of the first quarter of 2024 was $801 million and consisted of cash and cash equivalents of $694 million and $107 million available under our ABL facility. Now let's turn to our outlook and guidance for the full year 2024. We have reaffirmed our outlook for the full year as outlined in our earnings release. While our second quarter volumes could be seasonally lower than the first quarter due to weak spot demand from our traditional markets and Asia and in particular India, we expect better demand in the second half of the year. Our contracted volume in our traditional markets remains strong. I'll now turn it back to Walt for his final comments.
Walt Scheller: Thanks, Dale. Before we move on to Q&A, I'd like to make some final comments. We expect demand from world's largest met coal import regions to remain softer throughout the second quarter. On one hand, India's steel demand is expected to be subdued until later in the summer as the country awaits the completion of its national election process and the impact of the monsoon season. On the other hand, China is harder to predict but the absence of convincing improvements in their property and construction segments are leading us to remain cautious. We also expect global met coal supply to be strong during the second quarter as is normally the case. We expect disruptions caused by the Baltimore bridge collapse to be manageable by the industry and should be contained within the second quarter. For these reasons, we expect pricing to remain lower for the second quarter compared to the first quarter, potentially challenging some of our peers who are higher cost and marginal producers. Although, we have good visibility into our contracted volumes, spot opportunities are expected to remain scarce and mostly skewed towards the Pacific Basin where current pricing levels and freight costs are driving lower than desired average net selling prices. For these reasons, we will continue to be patient when possible and seek opportunities to maximize average net selling prices for Warrior, even if we need to temporarily manage higher than normal inventory levels. While we're well prepared to address a variety of market conditions, we are also extremely excited and laser focused on the disciplined development of our world class Blue Creek reserves. As mentioned earlier, we continue to make excellent progress in developing Blue Creek. We are on track for the first development tons from continuous miner units in the third quarter 2024 with the longwall scheduled to start up in the second quarter of 2026. With that, we'd like to open the call for questions. Operator?
Operator: [Operator Instructions] Your first question comes from the line of Lucas Pipes with B. Riley Securities.
Lucas Pipes: Well, Dale, for my first question, I want to touch a little bit on the nearer term outlook. It sounded like by the sound of your kind of closing comments there, Walt, that in Q2, we should expect lower shipments, but your realizations to kind of continue that favorable trend from Q1. So I wondered if you could maybe expand on that a little bit, would appreciate your thoughts.
Walt Scheller: I think that's accurate. I think that when we look at the second quarter and where demand is and what's going on globally, we expect prices to stay relatively stable. And our production profile, as we said, we look at the whole year and we look at sales and production for the second quarter. We just think it's -- first quarter was really strong and we need to be a little cautious in the second quarter.
Lucas Pipes: And in terms of sales, should we think of it being less than production?
Walt Scheller: No, I'm not saying it will be less than production. I just think that first quarter was pretty strong. We had the two rollover vessels that went into the first quarter then I got added in there. And we're just always kind of cautious as to where we'll be for the quarter.
Lucas Pipes: But that 85% to 90% realization on the benchmark, that's the right way to think about it?
Walt Scheller: Yes.
Lucas Pipes: And in terms of your kind of market outlook, you commented there's still some risks out there. And I just wondered if you could maybe speak to where things might be getting a little bit better, where they're still more challenged?
Walt Scheller: I just think, as I said with India, I think India is a real bright spot, but I think we've got to let them get through the elections and through the monsoon season. What we're seeing in Europe is, again, contracted volumes are moving very well, they’re in in the South America and just spot opportunities are pretty thin in those areas and then we're really just -- we don't have a whole lot of confidence in what will happen in China.
Lucas Pipes: And then one last one around Blue Creek. So congrats on the progress to date. And you mentioned kind of all of the pieces are lined up for starting the longwall panel development later this year. And I wondered if you could remind us what production you expect through these development panels in 2024? And then I think you mentioned a number for 2025. But if you could remind me of that, I would appreciate it. And then if you could also explain the sales implication from those development tons, both this year and next year that would be very helpful.
Walt Scheller: We should mine a couple of 100,000 tons this year and that'll just be from the CM units as they start to ramp up. We'll have to start one and then shortly thereafter after we clear a little more room. We'll start a second then after we clear a little more room, we'll start a third unit. So by the year end, we should be running three continuous miner units and have about 200,000 tons clean equivalent on the ground. And that coal will remain on the ground until we get the prep plant up and running, which will be the middle of year. And in the meantime, by then next year we're looking at probably a total of about 1 million tons produced off the CM sections. But we'll start to move that coal when the preparation plant comes online, which should be midyear. So that's when we should start looking at moving that coal into the market and selling that coal in the back half of ‘25.
Operator: Your next question comes from the line of Nathan Martin with The Benchmark Company.
Nathan Martin: Congrats on the strong operational performance. And maybe just to follow-up Lucas' last question there, targeted prep plant start up. I think you said second half of '25 and maybe to move some of those tons. When do you expect to have your rail loadout and barge loadout in place at that point or would you be looking to truck coal? Just any more details there would be great.
Walt Scheller: I think in the back half, we'll still be working on the -- I think we'll be running trucks over to a train loadout at that point on the back half of the year next year, while we continue to complete the overland belt to the rail loadout. By barge, I'm not as certain by barge when we'll start moving some of those tons by barge. But I know we'll be able to -- our expectation is we'll be moving to the rail loadout as soon as the preparation plant starts up.
Nathan Martin: And then maybe just kind of a modeling question, and sorry if I missed it. I know you guys mentioned the capture rate of 84% in your prepared remarks for the first quarter. Could you kind of walk us through how you get to that 84% just so we can be clear?
Dale Boyles: It's really just our average net selling price divided by the average of the index for the quarter. Just try the easy way to model it. [Multiple Speakers] $279, yes the calendar average…
Nathan Martin: I apologize for cutting off. What were the numbers again?
Dale Boyles: So our net average selling price of $234 in short tons divided by $279, which was the average on a short term basis for the first quarter.
Nathan Martin: And then maybe just an update on logistics. How are kind of the upgrades at the port progressing? I think you guys said they did pretty well this quarter. I know you said rail is exceptional. But are you seeing any effects from the Panama Canal or the Red Sea, just curious there.
Walt Scheller: Well, as far as what's going on in Mobile, things are going very well. The improvements they've made have made a huge difference in the efficiency down at Port of Mobile. For our customers, what we're still seeing with the issues in the Red Sea is longer transit times for that coal to get to customers and the same thing is with the Panama Canal. So we're seeing longer transit times, which can then also impact transportation costs. But that's really been the impact and that's been going on for a couple of quarters now.
Nathan Martin: And maybe just one more. I mean, Walt, you mentioned in your prepared remarks on the labor front regarding hiring. What kind of progress have you guys made at the existing mines? I think you said 250 total, maybe 100 of that at Blue Creek. And how has the initial reception been to Blue Creek as you start your hiring ramp up there?
Walt Scheller: Well, I'll tell you, we are -- naturally, we have a schedule and a budget on what we expect and we are right on budget for where we expected to be year-to-date. And what we're seeing in terms of people looking toward Blue Creek is we're seeing a strong reception of those of applicants for those roles. So we're pretty happy with where things are right now and we think we're right on schedule.
Operator: [Operator Instructions] Your next question comes from Katja Jancic with BMO Capital Markets.
Katja Jancic: Regarding the Blue Creek incremental volume, do you expect to contract that incremental volume next year once you start selling in the second half or is that going to be more spot exposed?
Dale Boyles: I think what we'll be doing there is going out and canvassing customers to see who's interested in trying the product. And so, I think it will be contracted. It's not going to go out -- I don't think it will go out into the spot market. It will be people getting test volumes and smaller volumes, so they can see what the product's like.
Katja Jancic: And maybe just as a follow-up, I'm assuming it's going to be tracking more the East Coast High Vol A Index. Is that fair?
Dale Boyles: Yes.
Operator: Your next question comes from the line of Lucas Pipes with B. Riley Securities.
Lucas Pipes: The first one, just a reminder, I think we discussed this three months ago, but looking for a quick update. In terms of kind of the split between CFR and FOB business, by Mine No. 7, Mine No. 4, what's the rough breakdown today?
Dale Boyles: I think you can look at -- when we talk about where the coal’s flowing to the -- all coal flowing into Europe, which was 44% for the quarter is all FOB. Everything going to South America, which was 17%, 18%, that's all FOB and probably a much smaller percentage going into Asia is FOB. So the remainder -- everything else going into Asia would be CFR is India.
Lucas Pipes: And so for the rest of the year, we can probably just call this kind of roughly constant?
Dale Boyles: Our expectations are we get back to spot cargos of 25% where we were much higher than that in the first quarter. So I guess our expectation right now at least is that we'll have a little higher volumes going into Europe and South America. I mean that could change. But I think right now, given the information we've shared with you, our expectation is those numbers in the Europe and South America increase on a percentage basis a little bit.
Lucas Pipes: And is that for the remainder of the year or for Q2 specifically?
Dale Boyles: That's for the remainder of the year. We said we expected spot volume to be 25% for the year and I think you can expect the spot volumes will almost completely be going into Asia.
Lucas Pipes: And then, I noticed recently on the results of the proxy vote that a proposal related to poison pill bylaw provision was adopted. And I wondered if you could may be share a little bit how this came about and if there was any specific catalyst that drove that?
Dale Boyles: You know what, I think just looking at that provision, I think a lot of shareholders just think that's kind of commonplace. The biggest thing that we didn't think is commonplace in that provision or request was the request that it’d be put into the bylaws. But we've gone out -- every time we've done anything, we've gone out and asked for shareholder approval anyway. So it wasn't something that we really thought was necessary because we've been doing it in the past anyway.
Operator: At this time, there are no further questions. I will now turn the call back over to Mr. Scheller for any comments.
Walt Scheller: That concludes our call this afternoon. Thank you again for joining us today, and we appreciate your interest in Warrior.
Operator: Thank you. And that concludes today's conference. Thank you all for participating. You may now disconnect.
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