John Fortson: Ian, it’s just a very slow process, right? I mean, we unfortunately don’t control it, right? It’s one of those few variables that we can’t really control. We have a very active dialogue with the regulators. We’re talking to them almost continuously. So, what we’re doing is we’re continuing to work with customers to try and drive and get them interested and test. And then we obviously put these things into the certification process. Where we’re having the most success, really, frankly, is some in our — mostly in our pavement technologies business, some other commercial, industrial applications, oil field and others. But it’s encouraging because as these certifications and we’re able to clear, I mean, I think we’re going to see us be able to have more success, but look, we’re managing it. We’re going as fast as we can. And we feel good about the progress relative to what we can actually do.
Ian Zaffino: Okay, great. Thank you very much.
Operator: The next question comes from Jon Tanwanteng from CJS Securities. Jon, your line is open, please go ahead.
Jon Tanwanteng: Hi, good morning. Thank you for the questions and congrats on a nice carbon materials quarter. I was wondering if you could talk a little bit more about the mix shift towards hybrids and possibly away from large trucks and SUVs where I think you’ve traditionally had more content. Has that factored into what you’ve seen in the quarter and are the ASPs on the hybrids comparable to the content — excuse me, the content levels there comparable to what you saw in those larger vehicles?
Ed Woodcock: Yes, so we love F-150s. We love full-size trucks. We have a significant amount of content on them because they have large fuel tanks and generate a lot of vapors coming out of them. But that being said, even with smaller vehicles, the heat of the vehicle can drive more emissions coming out of the fuel tank as well. So, it depends really on the type of vehicle and the design that they’ve got and the space that they have to have. And in a lot of cases, they have to put additional content on a canister with additional honeycombs so that they can meet the requirements that the EPA has in place.
Jon Tanwanteng: Okay, got it. And then just a quick question on the Industrial Specialties business. I was wondering if you could comment on the profitability on that two-thirds of that $100 million, if you’re making any money on that, if it’s relatively neutral–
Rich White: It worked against us. We would have been better if we didn’t have it.
John Fortson: The source subject here, John.
Jon Tanwanteng: Fair to say its loss-making then?
John Fortson: Yes.
Mary Hall: No, well, we’re talking about the two-thirds that we’re keeping.
John Fortson: Are you talking about the one-third that we give?
Mary Hall: Are you talking about the one-third or the two-third, John?
Jon Tanwanteng: No, the two-thirds? I know the one-third isn’t so great.
Mary Hall: Yes, the two-thirds is the stuff that’s making money.
John Fortson: Yes. Right. Sorry about that. Make sure you get that straight. We would prefer–
Jon Tanwanteng: Can you talk about — quantify [Indiscernible]?
John Fortson: What’s that?
Jon Tanwanteng: Is it possible to quantify or ballpark the degree of profitability on those sales?
Mary Hall: No, we don’t get into EBITDA at the product line.
John Fortson: And it’s too convoluted, John. I mean, look, the best way to describe it is that the two-thirds that we kept are — that Mary’s referring to is stuff that we continue to be — we expect to be recurring. These are markets that we’re going to continue to participate in. The one-third that came out of DeRidder wind-down was effectively loss selling because we were exiting those markets and as we talked about, we’re exiting markets that are lower-margin, not things that we consider attractive going forward, right? But you’re going to have a hard time with that time in this quarter because this is the first quarter before things get rolling.
Mary Hall: Right. And I understand that in the Performance Chemicals results for the next couple of quarters will be hard to see in spec because paving season kicks in and you’ve got road technologies and their profitability profile kicking in. But really all we can say is the two-thirds that we kept, we kept it because it’s making money.
John Fortson: Right.
Jon Tanwanteng: Fair enough. Thank you.
Operator: Next question comes from Mike Sison at Wells Fargo. Mike, your line is open, please go ahead.
Mike Sison: Hey, nice start to the year. I guess for Performance Chemicals, is the way to look at if you add back the $26.5 million loss to EBITDA and that net number is kind of what the ongoing entity is sort of producing? So, it’s kind of a 10% EBITDA margin for Q1, but that should scale up as road technologies kicks in gear in 2Q and 3Q?
John Fortson: I don’t think that’s the way to look at it, right? I mean, I would argue the other way, right? Meaning that if you wanted to look at it from a cash basis, right, the business lost about $30 million this quarter, right? The negative 10% of EBITDA loss plus the [Indiscernible]
Mary Hall: Plus the CTO.
John Fortson: Right. The CTO results. Now, we are — and you’ll see this in the 10-Q and all of Phil Platt’s incredible disclosure, but we are — the excess CTO that we are buying, we are going ahead and marking that to market or what we think is a more reasonable price. So, you’re going to see that run through as sort of a noncash charge that will fall through, not in the EBITDA, but in the other income and expense, right? And also in the statement of cash flow, right? The CTO that we’re running through, we’re running through a cost and that’s going to impact the profitability of the segment, right? So, you just have to kind of look at those. When I look at it, right — and then we offset that with the sales, right, the CTO that we do.
So, you look at this quarter, we had kind of $20 million of cash losses. That’s a function of the hit that we were paying to our supplier offset by the sales that we were able to make in the market. And they were not one-for-one. So — but in the quarter, we lost $20 million on that sort of netting out. And then on top of that, there was about a $6.8 million adjustment as we took the write-down on the excess that we’re still holding to bring it down. So, going forward through our P&L and our statement of cash flow, to the extent we do, do resales now and we get better than where we’ve marked it to, it’ll be up or down, but it’ll be less volatile, right? But you need to understand that we’re going to continue to be taking excess CTO for a while.
