AWI - Earnings call transcript Q2 2018 | Armstrong World Industries, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Armstrong World Industries Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. I would now like to turn the conference over to your host, Mr. Tom Waters, Investor Relations Officer. begin. may you Sir,

Thomas J. Waters

are on this reference morning, Brian posted the both media welcome. and listen presentation during release have the and the have this differ outcomes Grizzle, press will Relations forward-looking broadcast call, you Good me call, will uncertainties. our our this armstrongceilings.com. I members morning, are and implied. seen our today may to note CFO. risks making materially of and Investor Vic on live being Brian is the the been that in CEO; call website call, website advise MacNeal everyone, those involve from Bridget. be at Please With or Actual statements and and our that section. this our MacNeal, that Thanks, release we invited during you to expected Hopefully,

the Armstrong the review uncertainties detailed more and that risks a earlier filed XX-Q SEC affect may our morning. this discussion For please Industries, filings, of World including

only Forward-looking applicable no statements, the undertake are We any made. update to obligation what of statements law. is required beyond as securities date by they speak forward-looking

release on discussion are to meaning in of the Both turn the non-GAAP also performance With operating measures within and over the comparable GAAP A presentation. financial directly most call appendix website. Vic. the available in the In will press these included that, our of addition, the G. of Regulation with of SEC include reconciliation our measures I'll is measures

Victor D. Grizzle

and recent review It's today update our results good quarter and to everyone. developments. be to Thanks, several Tom, you important on you good second morning, with

and quarter year. million, our Tectum tailwinds provide growth in at versus And quarter volume first up Specialty margins year EBITDA of XX% the revenue quarter, sales EBITDA Salt with achieved delivered and enter X% confident of Lake products up a remain in last line $XX inflation, quarter. Miami, second margin. the XX% with both EBITDA renovation of in and Caribbean the with all to major the to as the million jobs to the among Grand metal, were the broad-based almost our timing others. $X our remains to busy had of digits. solid XXX% compressed the to million and as flow sales quarter. and projects Total million. pipeline the Big period, of products. price Overall, was half record Airport guidance. free segments. completed strong We solid $XXX another and due were results Royal the strong Free company a $XX continue tripled wood, of a Adjusted in both adjusted in in had million major the Central and of in Architectural from City second capabilities, least and cash solid We year-to-date, includes sales business projects resulting Terminal Specialties' quarter the XX%. selling of the and of offset transportation strong up in Architectural at up and LAX, sold in the with quarter we Station increases results adjusted revenue mix design in quarter, WAVE XX% growth double including investments XXXX, we summer like-for-like flow in quarter quarter substrates large The XX%, was we Second strong up and in was EBITDA was $XXX our up XXXX up Specialties was cash has Architectural outlook. segment the the

and investments Overall, results our discussed will continues than Now, to some timing see we've underlying due that quarter-to-quarter in can of faster market. grow variance this and the gain momentum work. significantly remember project to business we you the

expect be year, than the sales with XX% to we up full better adjusted more For than EBITDA XXXX. margins

we and capabilities cast possible Architectural architectural segment, other is Plasterform options, Plasterform. selling purchase manufacturing items. of Plasterform's and provides purchase the level custom walls the and acquisition ceilings with and us Specialties also for of not process design portfolio. a current a for our the And within strategic the intricate with During unique technology allows and quarter, three-dimensional the that detail of completed ultra-expressive, capabilities dimensionality

even their and As grow platform we Tectum the combine bolt will expertise and our capabilities acquisition, the Armstrong operations distribution enhance profitability. these onto with with sales, faster to and them

Now seen as Specialties agreement today, you on acquisition. an reached just we have Architectural release additionally, in press our another

the Incorporated, adding ceiling onto thereby the including this quarter metal is will custom to closing later Armstrong to Ceilings security product Ceilings line. capability of in purchasing this We forward business standard Steel manufacturer adding ceilings systems. and our and ceilings a architectural, and transaction platform. and capacity additional We be radiant look metal Steel

the quarter. XXXX, Now Fiber turning segment, expanded basis points XXX Fiber Adjusted was $XX revenue margins last volume and $XXX up X% quarter EBITDA EBITDA to of of year. up million million quarter Mineral in from up was second X% Mineral the to in was XX% the XX.X%. from

as issues had on April As in we our last March. we previewed rebounded a strong shipments weather-related earnings from call,

volumes to products. quarter product innovations delay, to quarter. quarter the about volume about, Total from as pricing Now our like-for-like multiple quarter. our inflation plant Helens Sales productivity will continued, closure. the a in Fiber. pricing from QX Overall, a related accelerated been tempered the when segment prior Canada, he combination with details new the high discusses WAVE Manufacturing talking the was the business X%. Sustain, more inflation, our on America, actions results recent and is this of quarter product steel equity WAVE AUV, strong mix, Sales the U.S. XX% the a but gotten Latin Mineral that we've nicely. moment. margins benefit significant benefit strong and line earnings pricing realization from continues would up as improvements in up for of Mineral quarter. have provide a end were from and in been St. centers a in solid X% this higher first financial in double-digits Brian Acoustics quarter. expanding grew cost solid to home again of in and were and grew Fiber mix The benefited back which year more EBITDA by the headwinds very particularly had have without volume the offsetting gains

at flexible to schedule. business, and operationally, our is Now, Fiber make key design closure up decommissioning on up of have progress and of our other on Helens production St. St. Marietta completed was ramping the was picked schedule ahead Mineral service begun line continue customer we maintained Helens We facilities that our manufacturing is production by good initiatives. in The The process. throughout plant and activities.

the center the American ceilings providing we've distribution and move will architects by and G&A sizes, is completed launched restructuring Ceiling Phoenix DESIGNFlex to restructuring, launched which shapes, Solutions as we along XXXX. the Systems] on with in to XX,XXX our of Institute the other new half Our and million DESIGNFlex West reinvent largest York, over our levels into Coast. with improved U.S. in and second cost June, of (sic) operations And service in designers customers freedom largely architectural now the tailwinds provide $X our the formally gives New mixing In of at show Ceiling in matching Architects Expo colors. we [DESIGNFlex attendance. activities,

be new most Day of we to we and standard EMEA amended DESIGNFlex. to to innovative prior of our solutions With the three more receipt colors both fully to we lead $XXX to at to display Knauf. technology likely commercial unchanged product innovative the the million, November. line the site purchase as $XXX of sale shipped sale booth including at expect process, manner. flexible amendment, Marietta, overwhelmingly this the be million price to our mass transaction The was Armstrong Our Investor to are of DESIGNFlex times. ongoing as a we just out design X-K shapes, manufacturing in make million expect to minimum response realized net means our to sizes, Pacific Industry-leading of customization from in announced closing providing be noted we week and light our AIA the the than a clearance launch million last The the small With carton weeks. Knauf AIA remains investments, that continue received XXX product exhibiting. at the unconditional X we sale. job show, and now terms can you of positive now assures orders used the on our from August we estimated The $XXX we've both service. when cash In Rim capabilities will recognition showcase September in companies in the and regard Post to the businesses, timely as same non-refundable on and one on the occur and from as amendment XX. of filed competition the $XX cash year-end. payment will This

net the to we've has majority our to As of repurchase the our million board timing enable announce pleased on by I'm board been to to return dive finalizing executing our are our $XXX it these a for cash expanded Brian? intention these with $XXX to I'll has deeper repurchases. and a vehicles of actions, and a Brian that, the shareholders share our before, program for turn mentioned that financial total to realized results. pause the and million. And working it over and Management into

Brian MacNeal

reminder, everyone reviewing call. I'll quarter Thanks, I'll financials, friendly our Vic. before our year-to-date website. X Slide a Today, results. and as we the be slides to details on available into Good go referring XXXX But second of presentation. morning on the basis our be to the

share margins in XXX% XXXX, average over back of $XX share. million for Since of due sales our XX% Adjusted just for quarter XX% working results, performance program price quarter, Turning $XXX quarter and $XXX balances Adjusted an the than million shares by in expanded to capital second per repurchased year X XXX,XXX second repurchase XXXX. are debt as to million million repurchase we aided increased the we improved EBITDA of prior-year or have from million. by quarter and inception shares flow $XX the up increased third lower. is basis over quarter. points. slide Net were diluted the debt roughly $XX also our last Adjusted cash free million at XX% X.X were up primarily share earnings bought XX for our cash In second quarter program. the per lower by $XX the of improve over

bottom inflation with one-time the items Capital as improvement the of base a as line. to both as slide through as quarter was include offset primarily improved free Mineral $XX now by in in costs with excellent X investments the to WAVE adjusted and million $XX footprint. an level increased of to positive flowed cash. year Fiber and spending results. SG&A associated year-over-year shows and in X, lower million legal impacting were and to well Turning distribution change $XX current AUV earnings flow, in Input quarter. Mineral million grew EBITDA compared in and expenditures both gains our capital our up had other more change $X due AS business. cash and volume XX%. costs capabilities capital investment profitability to the Fiber costs we've adjusted to inflation. prior-year which to as AS freight flowed WAVE normalized was the related returned increased manufacturing million, Slide Working period

but straightforward, growth on Latin to usual was slight by was million. fall-through our quarter, pricing, mix. reporting. but improved due begins versus mix improved America to mix centers than segment EBITDA us volume offset grew with The later is mix of the experienced payments. sales channel three tax the X% Mineral EBITDA we sales volume and XXXX. strong up of category on timing volume, $XX was like-for-like other all Adjusted In Slide The drivers: home Fiber the a margins line, associated in and our benefited X The The channels manufacturing impact and expenses, closure driven the is reconfiguring input manufacturing the the freight the matters. was the earned versus or freight M&A plant. and to to litigation of SG&A gains offset legal inflation, as overall largely footprint line at distribution in in associated increased lower St. WAVE by well than with higher due equity quarter $X those earnings Helens million and as and year. cost prior costs these raw due line the captures with our plants segment. productivity as material ongoing including XX% the

sales future from to were specialty year-to-date service AS Adjusted first gains half driven Volume, we are our as points on tripled improved Year-to-date, Productivity drive this are last Moving inflation. our are bridge million last a million the quarterly are company mix up as XX% up X% X% new lower freight ahead even and capabilities, results. for EBITDA contracted and up expanded XX.X% including expenditures. earnings to Year-to-date cash and with production. our Margins contributing up capital to up growth. headwind. market. XXXX, over $XXX and running million. our Architectural Slide our working adjusted XX has service ramp margins of half drive extra Armstrong's profitability. XXXX. were products, capabilities total XX was delivered Adjusted capital is EBITDA EBITDA superior quarter Adjusted second from our first half EBITDA portfolio margins is Specialties support Adjusted as has year and end and Input versus consolidate XXX of share year. activity in coupled increased in SG&A with investments plants $X continues line points. earnings X, price, walls in of and to in all by ceilings recaps in costs the the X high of the Slide the broadest of we increased Sales year of $X first increased per up price WAVE WAVE flow and manufacturing free the XX%. basis range. the guidance of made diluted penetration basis segment X%. slide and in

expenditures receipt our XXXX stranded back in XX and add Improvements we XXXX working drive of insurance recoveries Slide lower of updates including costs $X the the guidance. capital cash environmental Finally, improvement. $XX helped capital international shows Slide flow. free million. million year-to-date XX

and are Specialties growth adjusted by Architectural Our revenue guidance. revenue, basis from EBITDA, unchanged flow initial our adjusted all in our guidance free We've increased XXX cash expectation points.

the are to-date. is now We share repurchase XX%. activity our Note the most execute for and does anticipate XX% on I'm reflect account and our recent able EPS future share growth acquisition to range the to calculation EPS $X.XX We position share that repurchases. of another call. take close, adjusted announce that are our on increasing our count EPS not To to here pleased in into we quarter one earnings

expect purchased For in just both and both will $X line. sales range. $XX million XXXX, modeling purposes, up similar million our a towards overall achieved to Margins companies will million Tectum. to over we be for margin, we've little to the to have over $XX AS in $XX what million them Combined bottom contribute XXXX businesses in about with ramp for will segment annual

bottom quarter top expect as performance strong line momentum building on forward and strong Our a period well. third comparable soft businesses the are and I we're a line to look lapping as

X% greater I'll deliver. confident on plans line EBITDA deliver guidance growth have And I'm we our turn over than and that, XX%. to to to growth We With of Vic. the annual X% of top it place in are to track back that

Victor D. Grizzle

Brian. pace strategic and to a fruit. talked bearing manufacturing Thanks, year AWI. on XXXX record here are is investments about be advanced The we at initiatives

all and Fiber innovation leadership already to Total our we The now company, our been product interior formal an has of cylinders. extend extending achieving into position hit category. ceilings wall services. reinvigorating on further to Specialty products, investing Acoustics better. space DESIGNFlex, the we ceilings next-generation and been Mineral never business pipeline specialty with As leadership the Americas-focused solutions continues Architectural have and launch and Sustain support We're solutions are our And with both in and success

and We great our the confidence it This alignment three-year generation get board review been plan directors and are say never confidence in has unique business in driving Add continue a clearly strategic We with demonstrated three is our the at expanding expanded authorization just but completed this impressive future in are repurchase of better higher. past we M&A well. and and I projects. and organic have cash XX executing sales invest has the today, the The in that an as robust we not this it in our to business, mentioned strategic and is earlier. acquire pipeline, and I'd space, our to months a exciting is will to only growth, as of a to business bolt-on acquisitions, and it margins deploy shareholders. to of return specialty delivering winning this iconic we acquisitions

today it us open So thanks questions. to for being with with I'll and, again that, up

Operator

comes of line Stephen Our the ISI. question Evercore from Kim first with

open. is line Your

Stephen Kim

Yeah. you Fiber's much, was I color. guys. could business. if talk Thanks very I curious Mineral the the in appreciate

X% I the bit to about the of the volume X% the six of we think for talked had in you terms first little but year, months. volatility in a

You about and in so forth. that XQ April terms in the of talked

a And that could July as could if and be each XQ the XQ what little bit you about of your so that was be as to and for curious would X% talk saw I you in you expectation range X% well in year. whether in

Victor D. Grizzle

Vic. Stephen, this Yeah, is

that to first for look weather, X% the on about March so April range first when volatility whole to X% we from to at back we're you the half, based talked right the year. that that we're Going out-looking in

we the seeing very of we half consistent is provided for we expect the conditions half, third that remain with see the rest which coupled the into what that with to confident of frankly, we're rest in and that Fiber. that X% to So, or market half, the first Mineral quarter outlook second X% the

Stephen Kim

higher in trend centers curious to we and I having you lower or I terms in little bit it also, And home think of talk this if but a made if an think, was LatAm ongoing going Helpful. the in, is any great. slide, factoring in an then that impact XQ we – if be volume. you way could about That's mix, was phenomenon? a be should to primarily reference

Victor D. Grizzle

first the going I particular Really, saw, area, out that's rebuilding this quarter, half and Rico would phenomenon. also the Yeah. some been we our predominantly based to we on it's a called in in and in the LatAm, spoke there. first say of on Puerto we

I So, continue. to expect that

some the bit on of centers broadly sales the a we're market. of through in is think I seeing indicator that activity the the an R&R home

expect we continue. that to So, would

know home get as we've home their you half. As on sell-through But the about quarter-to-quarter through with seeing can you the continue lumpiness inventory into the second centers, to we centers, that adjustments past. some in based the talked expect we're those

Stephen Kim

Great.

very Thanks Okay. much, guys.

Victor D. Grizzle

Stephen. Thanks, Yeah.

Operator

Our next Nishu from comes Sood question of the Deutsche Bank. with line

open. is line Your

Nishu Sood

Thank you.

So, obviously, Architectural pace acquisition, great acquisition the stepped here has as sales Specialties. Continuing well. trends up in

acquisitions, obviously, the know, over opportunistic you As opportunistic, kind us we guiding Architectural look years kind we an going incredible Specialties, plus last the fill as this initiatives to your there's as a should portfolio. you of overlay you guide you that these across or specialties the three form, is about know, of product two more, the made is there kind that's and ceiling in strategic materials, you here, you've more think the of Flex array it's in can of have broad

Victor D. Grizzle

Yeah. Nishu. Good question,

side the I reinvigorate architects to a I a shapes, that reenergize around. category fiber mentioned is two-by-two strategic what colors, mineral to two to and DESIGNFlex me that ceiling – down tile which think overlay were really really that – want let you the design the white think can sizes initiative separate from

separate from is Specialties. Architectural the So that

AIA So, that think because it's about that from do encouraging forward. very initial is feedback right we over marketplace show a target with that And what to going very launch want is just the – the got that into for and the me we're exciting. the in talk architects second I the let this space

also to design this a aesthetic, the but great comes the is want capabilities they acoustics and need the the plane, ceiling architects statement combination So for that around. from of they they want

Fiber So, sales DESIGNFlex we're the strategic and overlay again to growth. very drive encouraged Mineral that is by for

all On So, solution fragmented commercial that that's buildings of in don't capabilities going the to we of market, broaden the spaces the have we that's that. with as currently portfolio Architectural approach to to in take really space adjacent of Specialties, the that we shop what initiatives one-stop are today past. to augment one a and help these to our support we solve the about capabilities very basket talked within it's to architects a want

on – sets today these bolt on marketplace So, and the to to and best and in spec'd. then get is to to it acquire to capability way it or acquire capability this exists bolt for this products' this skill as the get us to capability Armstrong's capabilities specification this

within overlays and and around And again, but DESIGNFlex requirements and spaces is next-generation we're play buildings. Mineral what's add ability two here: business Again and our design the to more there's about scale strategic So the in bolt-on our leveraging in Armstrong's all go-to-market. to Fiber portfolio, to product adding the number capabilities, Architectural the that's options grow from not to the to acquisitions purposeful two, portfolio. Specialties to creating very through the driving being capability through architects; – capabilities unique commercial the unique capabilities really more

Brian MacNeal

purposeful real that, we're quick Yeah, to Vic and being to mentioned that are. just we Nishu, add

good over XX% business this ROIC. and business we a of drives balance have you buy know, As the make in versus a AS

very we're to our unique that purposeful capabilities out. So, stand in they make are sure M&A

Nishu Sood

are or that freight on Brian, layout? you new take a the we the your called expenses. out more of one-off transition been the facility Should and opened. reconfiguration transportation the Got result the distribution expenses and closure of color of it. the distribution And the obviously, as a of to Coast to as as these distribution there's ongoing the related being center And center with Got plant it, there. shutting pressure question, second expenses I West result thanks. appreciate the network

So, how does that play well? into as the picture

Brian MacNeal

Sure.

of we the extra really of Helens. experienced quarter the was the both freight So, is I but transportation, which one-time St. in cost closure inflation around the extra nature out ongoing the called

the we into other additional at additional same and some increasing, our that time to that move As overtime plants we related saw production some demand transportation.

facing more nature. So that they inflation all freight one-time separate We're a as are item. in

Nishu Sood

Thank Okay. you.

Operator

Thank our is with question next from Rehaut JPMorgan. you and Michael

Your line is open.

Elad Hillman

for the just Elad couple. Hi, on is a I this Mike. line had

greater segment So, over five three first And to presume and the do guide, that's the how but next sorry, XX% inorganic, bit. just is on that the versus raised see getting it's to much maybe years could greater XX% organic, be Specialties, Architectural you – a than inorganic. the big how that if you I break little than down mostly versus mostly but guys us if you of going could organic for

Victor D. Grizzle

Well, in first double-digit we've half the Architectural Specialties, growth. experienced solid in

XX% it's organically. fact, In up

there we're against. some activity nice executing the in pipeline new and good penetration that So, we've very traction some project seeing market been

what of in continue somewhere the out-looking we what then, I that inorganically. think business growth add business double-digit as a on you the to double-digit And that is of growth. expect top we to expect acquisitions that further organic we're in solid can and bolt-on to this neighborhood we in one in should So, accelerate space and that three have year

So, the those to of hard opportunities what predict it's and timing inorganic those.

those. really is these And ranging a acquisition targeted and they're servicing double-digit directly add typical and the million continued $XX need but that that, million in winning we're play as size this on the to a answer it's question that plan running adding in then very ranging again to capabilities So, your opportunistically for standpoint, that between those projects – that tough again around the somewhere acquisitions solid to space. And, going organically, $XX bolt-on we forward.

Elad Hillman

Okay. of margin going in currently Do clarity potential the a more margin And just follow-on see that get And a for you lot they to where architectural beyond little to thanks. forward. the around just expand potential on are?

Victor D. Grizzle

Yeah.

We business. are these – as expect as profitable companies lot base not our again, a to of

years, And this that efficient for couple servicing At and last we're the the expand and would time more margins. to if we've over the add at plan better time you we're back us space, to of we're getting years. several we specialty their And in continue expect and the as same same we getting next I demonstrated margins. so companies and improving look at as improve this to

Elad Hillman

Okay. Thank you.

Victor D. Grizzle

Thank you.

Operator

Our of question John from the Bank comes America. of next Lovallo with line

line Your open. is

John Lovallo

you Hey, taking for call. guys. Thank my

just correctly. question want to sure understanding I make First is I'm this

guys April Fiber kind Mineral X% the I volume you that I so mentioned flatten X%. the on was down up the for first volume in last I the So out enough call to And of quarter guess was year-over-year. then think think year,

Thank correctly, I it all you So that I'm imply July? reported in the that second seeing and understanding sure volume not the to seems I'm if kind flattish is, May April. of today quarter the and X% what you've was of that June into so guess you. question then, were are

Brian MacNeal

spoke about in were the March into April Yeah. I we overflow said that to very mean without that volumes the of April, question answer your directly, I which quarter up as in X%. remarks in my prepared from

had growth quarter. positive the we throughout volume So,

John Lovallo

target this a Okay. $X that one, still Got XXXX, that into was savings lowered, XXXX, here, was you. And – $XX then previously follow-up heading in $XX million? the million is maybe and heard maybe the of that as SG&A that million was I

Brian MacNeal

said, SG&A. and $XX of we both be range It's million. the million, clarity, restructuring the the SG&A high just $XX program what million so next another bring $X it's in John, it's going for Yeah. total full will for $XX to It's year And manufacturing year, million expect the savings. it's of full more to which back we that's just half. than

John Lovallo

guys. you, Thank Okay.

Brian MacNeal

John. Thanks,

Operator

is of I'm next for with Thanks Thompson the question our Kathryn sorry, line – Thompson calling from Research.

Your line is open.

Brian Biros

two any morning, I taking Hey. the years the where Thank that this you wanted total three market to then, the Steel acquisition specifically our announced This might in questions. Ceilings' if products. is go the growth. the to Ceilings you Steel Brian next for Biros ask for think for Kathryn addressable for of Ceilings idea Company, Steel Thompson. about you on And on had

Victor D. Grizzle

prisons, Yeah. ceilings around The Steel example, for ceilings we today, bring in for have us. institutions. additional Ceilings capability for the that exciting acquisition some and radiant portfolio They especially other is don't or an security

We've capabilities capacity some real but products overall that our market have, market. this of be for ceilings not that us market but basic exactly out to how $X to serve added also billion specific broken the here it's some other and They there's in North currently we're in part America. of specialties additive market big will is, capability. it's So bring we this opportunity capacity the targeting exciting that metal

look level. go and this a category sales to got at know to and we've can that you ways So our reach market long share significant in recognize more

and grow room we're lots here to acquisition. excited about So of the

Brian Biros

Got in follow-up or on footprint have a they of sales parts certain you. are that. more focused quick regionally national they Americas? the And Do a

Victor D. Grizzle

a And great Yeah. opportunity into and again a merge of to bolt are use organization. a There indirect capability Armstrong's this national combination that direct. will organization. sales be They national this and

that So that's to leverage capability. do really our to plan this

Brian Biros

Got you. Thank you.

Victor D. Grizzle

Yeah. Thanks Brian.

Operator

line is Phil the with Jefferies. question next from Ng of Our

open. line Your is

Unknown Speaker

Hey, guys. for This is Maggie on Phil.

business you was volumes. if the back WAVE And extra the Mineral in Can JV? Going quantify Thanks. the Fiber to day tile impact the or there from pre-buys the in also any quarter. shipping

Victor D. Grizzle

didn't I'm the part catch the sorry, of first I Maggie, question.

Unknown Speaker

quarter? the the the you in Oh, quantify extra I'm shipping from sorry. impact day Could

Victor D. Grizzle

to you that Do want take Brian?

Brian MacNeal

Yeah. Sure.

and X% a to that QX in for prepared of pre-buy shipped into So, Maggie, We X.X%. we've in timing about a QX said remarks what the our rounded from standpoint...

Victor D. Grizzle

Go ahead.

Brian MacNeal

done, WAVE I increases Mineral the number on Mineral price Fiber very minimal I'd the little the a say side, but the Fiber on all bit given pre-buy, we've side. minimal of more Yeah, on side mean, at

Unknown Speaker

benefits for just Got cuts? seeing if And trend that tax Thanks. the economy from Mineral quick maybe you're signs Fiber any follow-on, and a curious given strong is accelerating in shipments corporate any it.

Brian MacNeal

at Yeah. improved question had of and than experiencing about we're it. There's market The a has last beginning year. better an outlooked environment the the we market year, improved. We overall market no

positive has So, at we Transportation, are you look in in the on particularly stats the a the more value some positive XXXX. activity in When really been market. of around, for in based particular, start example put strong all is place in segments. going

time. strong. And talking a not this busy solid in both last and strong say backlogs of their So a in there's marketplace been everybody saying it's is I've very some distributors, times months in long four lot are are the them been several and I'd activity. architects, to the contractors

So, activity think, the expected lot Thanks nice. that which really I a is I good think for we question. there's out We're the there. experiencing, market of

Unknown Speaker

All right. Thanks, guys.

Operator

Zelman is Our with Associates. line the Justin Speer of next question from &

line open. is Your

Justin Andrew Speer

out tease $XXX way $XXX to be thinking of the incremental in M&A? of What including Just that million million to $XXX or number EBITDA was the right million incremental $XXX the is wanted million. the the is acquired to guidance that about will that

Brian MacNeal

the in prepared it million Justin, remarks, be just EBITDA impact be will the – the acquired about will of for I mentioned my business. $X

Justin Andrew Speer

the this about landscape maybe for are if in Perfect. insurance into what getting of M&A paid front. seeing terms what pay And the competitive other those can And you funnel? EBITDA, can thinking space, you at on did assets multiples looking What that. if also just on the you you you're side characterize on on EBITDA, characterize with your that

Brian MacNeal

Yeah.

we to that given the of and synergies but eight bring seven at in and to So, obviously pre both both we I post-synergies. the are they and value multiple typically these these mean that are bring acquisitions ours, capabilities they to post look

And mentioned we roughly price. so million purchase $XX of

reported in sales margin that – they're expect to seen we XX%. to at overall expect of margins these We TECTUM they'll of low close like million AS that get private internal businesses to $XX start expand and but year their currently we've own next and

Justin Andrew Speer

these of the candidates? of on acquired that changing – M&A at all are you then, And M&A are these the incursions seeing any competitive in models side Excellent. side, economics on your

Victor D. Grizzle

Yeah.

Sorry, Justin. This is Vic.

of on really there's front, a these significant the So aspects not acquisitions. competitive in that change

In acquisitions, not a in several the they're of process. fact,

with and we've a are of and well. a these they're a growing benefiting companies an market them. improved said, had process conversation that so, But condition nicely direct from with lot had direct And as

that's So, we conversation these I there's talk of around current think, the nothing part in But companies. with would of in M&A. outlook as again, I state their say the material and about competitive future to terms change a landscape negotiate their

Justin Andrew Speer

your that? dividend and just have is proceeds coming a It on special know of for to guys even M&A I that buybacks. are me, they're in like for these Have considered question you other top be looks dividend sales. there hopper, placeholders you from maybe asset have a any buybacks last you the And potential or guess I avenue? but for the going obviously

Victor D. Grizzle

signed right with again, when sell intention Well, at that agreement closed to now, we international that return in was of this had it indicated November we Knauf majority back or our to our assets, have a – point, we we shareholders. would this

on about the and we're we've all think had still path that that options. to do of so, a to And time lot

at shareholder that with goal forward is proceeds. least keep you've balanced returning in and think view. to we But a the identified said, we to return vehicle these that move plan to our I approach with longer term, plan that in So,

Justin Andrew Speer

Have Appreciate great day. it guys. a

Victor D. Grizzle

Thank Yeah. you.

Operator

of Ken Our is KeyBanc. next the Zener from question with line

open. is line Your

Kenneth R. Zener

Good morning, everybody.

Victor D. Grizzle

Ken. Hey,

Brian MacNeal

Hey, Ken.

Kenneth R. Zener

Big that just give can industry, the was it where for reference percentage last are about we we're down we volume or whatever, your to picture kind think question in had, deck, guess business it? point was your XXXX like I through looking versus peak and some the however us mineral I in here, or what's you the XXXX wall that you want of

Brian MacNeal

in Mineral across business in Fiber a I say, still Volumes XX% down range building and of volumes. that Yeah. product in the probably would ceilings spaces, are lot the

Kenneth R. Zener

issues of provide kids kind quarter that school office in education, the you know to can given what X% can had because you back us July. to year – kind issues some I about the there going one comp categories any you third you of for related insight at it's I've we is weeks, but I prepared for. year, you other is But of relative I of know is if education, depressed. in things year last quarter And that the with outsized to should asked cyclically guided there be two-and-a-half retail X% terms the any last are which seeing? is guys are comment about you're that there My versus we had education least more transportation, always third versus think

Victor D. Grizzle

mid-year would K-XX of both that remember lot and the away to it's made a early budgets say education, It's and it last you these story higher than better Ken, year, I states but their still diverted education. Yeah. was corrections from that funds last year. And,

that that track environment have the they tell supports So can made you seeing we better than did we're fewer that now. states far and that funding last I adjustments by and we the so year, right way think

Kenneth R. Zener

And was the M&A. generally actually the a that organic was I I in I Okay. visibility, have to would to mean, led M&A the you I this increase, was the was – it EBIT something mean, increase coming contribution guess, but into you'd pretty thought that or I million seeing specialty that that just growth, new business then, you – construction more the year, are there for tied architectural, through. or know $X was good revenue that that lot had going do that

Sorry for the clarification.

Brian MacNeal

our when first up we're Well, XX%. Ken, you look half, at

has So, against we've had teams a first that project stronger executing are The up the half. very pipeline nicely and wonderfully. filled

in going do happen So to, visibility to what's it we prudent visibility. and backlog our pretty for you good us was pipeline, the half. our and to have look have at we When second do

confidence that to business. guidance go ahead So, the that line gives top and raise us in

Kenneth R. Zener

Congratulations. Good.

Brian MacNeal

Thank much, you Ken. very

Victor D. Grizzle

Thanks Ken.

Operator

with Judy And our SunTrust. is Merrick from next question

open. line is Your

Judy Lynn Merrick

Thanks for for Yes. Judy Hughes. call. This taking my is Keith

called the on some or maybe with of of the line what the of was base anticipated? on Just out the Specialties you margin, stands in in you investments making, manufacturing business selling out you're and there business Architectural was timing your one more else costs follow-up that anything expenses kind the the that

Victor D. Grizzle

history two expenses a on years overall fall and job about them doing of was we've we in talked and expand and they But the last can be and timing of and of a think rate things of with that to it's basis There as we again and feather pace the operators future I lumpy in, SG&A. had lot of designers a managers some those we that five margins. growth the project grow for really, a at Yeah. those feather good year-to-year us into feathering that allows a CAD support in support to resources business

can So of we're on a and that's what that bit quarter-to-quarter, little seeing. lumpiness you get

based saw second see is, business the can change activity from quarter. can quarter-to-quarter a and we this on mix headwind the in and Specialties Architectural the in a quarter again The bit other second project thing a the that in of we is, your bit little saw mix we

kind to going business thought year, hey, again of in which throughout XXXX. margins going out top that we're of a us way So, be say, we and lot over time that works just gave to line the its the in than confidence is to expand better

Brian MacNeal

of Yeah. call margin QX, year, a Judy, to XX.X%. just more point QX, to a was came We Last bit lumpiness. that out had XX%. at we're and the going we're a just add XX% that. little I mean AS of to see some on that it in made of we

delivered the expect full movement we to get quarters. year We year will some above be we that XX% but between last in

Judy Lynn Merrick

you Thank for Great. clarification. Okay. the

Brian MacNeal

Thanks, Judy.

Operator

with Our Garik next line comes of from Shmois Longbow question the Research.

open. is line Your

Jeffrey Stevenson

should you'll to in quick and year the how be is do your on question think with have had just I we rest Stevenson if about Garik. Jeff actions This you any chain? just take wondering was I of and tariffs, Hi. a supply what for over thinking inflation the

Victor D. Grizzle

Jeff. is This Yeah, Vic.

impact So, is business Armstrong's on for major around the tariffs, the steel.

the steel steel about we've dependent And We some obviously are talking do the regularly – we've months, along steel actions internationally. quite that executed number and and price last costs you're on supply. of this already the tariffs these so price systems customers grid passing through this over six higher very year. import them Our been asking are a the about onto increases

and responding the already inflation. we're the So to tariffs

inflation in report pricing actions to that. sure about Some and in we the of that we're over staying price increase in that with quarter in I'm we half, quarter. the front of linger, we're the poised out to second believe to in Again, the August second this first materialized in another price quarter continue good pleased and the have inflation make will talked

So, inflation run of many stay for ahead done years and that we're now. to continue as going we've to

Jeffrey Stevenson

your guidance, Great. you. guidance just quick the how impact AUV And a your about we Okay. should question mix for Thank then, be into on this thinking year?

Brian MacNeal

X% We've mix in of X%. Brian. is incorporated any to potential that This Jeff. guidance headwind Yeah,

Jeffrey Stevenson

you. Okay. Thank

Brian MacNeal

Great. Thanks, Jeff.

Victor D. Grizzle

Jeff. Thanks,

Operator

over questions. Vic further turn closing I'll showing for the CEO, not now call I'm Grizzle, you any and Thank remarks. to back

Victor D. Grizzle

deliver additional of again, million a to repurchases. look you everybody's by appreciate talking encouraged Great. us authorize half to we're on Very share our today. to board's the of We attendance Thanks, strong I confidence we're for second and everybody, being year And quarter. an $XXX with in vote today. forward Again, XXXX. about to excited track next

Operator

and this does conclude Ladies program. gentlemen, the

You disconnect. day. a great have now Everyone, may

Armstrong World Industries (AWI) 31 Jul 182018 Q2 Earnings call transcript