Armstrong World Industries, Inc. Earnings Call Nuggets: Ceilings, Wood Flooring Business
On Monday, Armstrong World Industries, Inc. (NYSE:AWI) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Kathryn Thompson – Thompson Research Group: First is on ceilings, two somewhat tied together. First, how much did a softer Europe impact ceiling demand in Q1, and also we know that there is a February mid-single digit price increase for building products, will this be enough to offset cost increases, and where can we see the trends for expectations for typical lag time, before this increase impact numbers?
Matthew J. Espe – CEO: We didn’t see – the ceilings performance in Europe from a volume perspective really didn’t affect our revenue in the first quarter against our expectations. I mean, most of the pressure, we saw in the first quarter from a volume perspective, I think, Tom mentioned in his remarks, were in the U.S. and most of those were related to kind of the softness in the Northeast market. We continue to see a very robust Russia, CIS, and for architectural specialties in particular really strong in Middle East.
Thomas B. Mangas – SVP and CFO: Yeah, we were – so relative to the March miss versus our guidance, Europe was not a driver, but relative to prior year, Europe was down as ceiling is about 3%. On the point on recovering commodities, yes, I mean, I think, we feel bullish that the pricing we’ve taken last year and continuing through the increase we took in the first quarter will continue to keep us at pace with inflation that we’re seeing across the Building Products input materials.
Wood Flooring Business
Robert Wetenhall – RBC: Could you guys provide a little bit more color in terms of what’s happening with the Wood Flooring business, and is there – should we be anticipating that some of the issues that you faced in the first quarter are now fixed, and accordingly should we be looking for better sales volume and stronger margin performance in 2H?
Matthew J. Espe – CEO: Yeah. Bob. It was a combination of a couple things. We took inventory down at the end of last year and early this year, and it frankly had much stronger demand in wood than we had forecast or expected. Overall, we saw strength in resi in the fourth quarter last year and continue to see it in the first quarter of this year. So, we’re ramping we need to get the inventory in place. Then we had some yield issues in one of the plants. Frank expects or anticipates that the service issues will be resolved in the quarter; that will be back within the quarter in terms of our regular service levels. We are looking at a stronger wood year than we had originally thought. So, we’re optimistic that we will continue to this rate in the balance of the year. Frank, I don’t know if you want to add anything?
Frank J. Ready – EVP and CEO, Armstrong Floor Products Worldwide: I think well said, if you probably remember, we are adding crews in three of our plants that will be added beginning May 1st really throughout the month in May. So, we should see an appreciable improvement as we go through the second quarter.
Robert Wetenhall – RBC: That’s helpful. On just a follow-up question, are you guys comfortable in terms of progress with your cost reduction program and the pace of development in the new plants you are building?
Matthew J. Espe – CEO: Yes. At this point, we are confident in the incremental savings this year that $185 million total and the plant are on track. No issues there.