Armstrong Flooring, Inc.
Q2 2017 Earnings Call Transcript

Published: 7 Aug 2017

[Operator:]

Greetings, and welcome to the Armstrong Flooring’s Second Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Doug Bingham, Vice President, Treasury and Investor Relations, for Armstrong Flooring. Thank you. You may begin.

[Douglas Bingham:]

Thank you for joining us today for Armstrong Flooring's second quarter 2017 earnings conference call. Today's call is hosted by Chief Executive Officer, Don Maier; and Interim Chief Financial Officer, Kim Boscan. We trust you have seen our second quarter press release this morning. Additionally, a copy of the slide presentation to accompany this call is available on the Investors section of our website at www.armstrongflooring.com. I refer you to Slide 2 of that presentation and advise you that during this call we will be making forward-looking statements that involve risks and uncertainties. Actual outcomes may differ materially from those expected or implied. For a more detailed discussion of the risks and uncertainties that may affect Armstrong Flooring, please review our SEC filings. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking statements beyond what is required by applicable securities law. In addition, our discussion of operating performance will include non-GAAP financial measures within the meaning of SEC Regulation G. A reconciliation of these measures to the most directly comparable GAAP measures is included in the press release and in the appendix of this presentation. With that, I will now turn the call over to Don.

[Donald Maier:]

Thank you, Doug. Good morning, everyone, and thank you for joining us for our second quarter 2017 earnings call. Today, I will discuss our operating highlights and business activity. Kim will then cover additional details on our financial results and outlook, before I offer closing remarks. After our prepared remarks, we will open up the call to answer your questions. Turning to Page 3, which provides some key highlights and recent updates. During the second quarter, our sales were challenged by soft demand in our legacy categories, primarily residential sheet and wood flooring. Second quarter 2017 adjusted EBITDA was $25.1 million, which compared to $32.6 million in the prior year quarter. This performance was impacted by lower sales; however we did benefit from continued productivity improvements, including strong performance in our LVT manufacturing facility and SG&A savings. While we made additional progress on our strategic priorities, and produced another quarter of strong growth in LVT we were disappointed with our overall results. As a result, today we announced additional actions and updates on the initiates we are taking to address sustained challenges in our legacy business, and to reweigh our portfolio towards more attractive categories. In response to our challenging results, which we expect to continue through year-end, we are taking active steps to transition our company to deliver on our medium-term goals. We are intensifying our efforts on innovation-based growth initiatives. We are taking a harder line on cost, and we are rationalizing our manufacturing footprint. In the second quarter, we completed as planned the previously announced organizational realignment of our go to market structure, which now better aligns our selling effort with customers and remains on track to generate $6 million to $7 million of annual SG&A savings. Also in June, we completed the acquisition of Mannington’s VCT assets, which improves our capacity utilization in this important category, as we expect to increase sales using our existing production facilities. Finally, today we announced the planned closing of two wood flooring facilities, which we expect to improve our cost position in the wood flooring segment. We ended the quarter with a solid balance sheet to support these and other growth and profit objectives. We are actively working to build value in our company through all avenues and our conservatively levered balance sheet affords us the flexibility to accomplish this. During the quarter, we produced $33 million of free cash flow, which we used along with cash on hand in our ABL facility to repurchase $9.5 million of shares through our $50 million share repurchase program and to complete the acquisition of Mannington’s VCT assets. We remain confident in our ability to produce another year of positive free cash flow, and continue to view repurchase as an effective way to deliver additional value to shareholders, alongside our efforts to transition our company to deliver on our medium-term objectives. I will now walk you through our planned actions in more detail, while tying back to our strategic objectives, which remains firmly in place as the building blocks of our strategy. Turning to our go-to-market realignment on Slide 4, during the second quarter we completed this realignment, which combined our residential and commercial go-to-market structures to provide enhanced [important] responsiveness to our distributors, retailers and contractors. This initiative made a lot of sense from an operational and financial standpoint. On the operational side we improved our competitive positioning through more streamlined customer communications. This also allowed us to better support existing product lines and new product rollouts. From a financial standpoint, our cost structure is better aligned with the current environment and we continue to expect $6 million to $7 million in annual savings from this action. Moving to our acquisition update on Page 5. We are pleased to complete the acquisition of Mannington’s VCT assets in June of 2017 as planned. The addition of this business has quite a number of benefits to our vinyl composition tile or VCT business. VCT is a significant category within the hard surface flooring industry, especially commercial end-markets. It also represents one of the more profitable businesses within a well structured category. That is a core demand base that favors the strong value proposition offered by VCT. So we now have a greater opportunity to leverage our strong history and deep expertise in VCT to serve this category more effectively. We estimate that the acquisition would have added $20 million in annualized pro forma VCT sales to our business. As a result, we will be able to significantly improve capacity utilization levels in our VCT plant network as we ramp production of Mannington’s product lines using our own production capacity and go-to-market structure. We expect these compelling attributes of the transaction to drive accretive benefits to our adjusted EBITDA beginning in 2018. Looking at our manufacturing facility update on Page 6. we announced the closing of two wood plants. As a reminder, our plan for our wood business is centered on improving profitability over the next several years to establish a more profitable foundation on which to grow. The planned closing of these two manufacturing facilities, one each in solid and engineered wood is directly aligned with that goal. While plant closures are always a tough decision given the impact to employees, we remain committed to the long-term viability of this business. This initiative is designed to better align our manufacturing capacity with current customer demand and leverage our productivity benefits realized across our wood flooring operations in recent years. We expect to generate a favorable return on this action as we incur pre-tax cash cost of $3 million to $5 million, while generating benefits of $8 million to $10 million of annualized adjusted EBITDA. In summary, as we have discussed today we are confident in our ability to drive our strategic priorities in the medium-term. We are committed to our growth strategy, while also taking the necessary actions to revitalize our legacy business. We are finding new growth opportunities. We are reducing our SG&A and we are improving the capacity utilization within our plant network through acquisitions and plant closures. We look forward to executing on all of our objectives as we build upon our strong brand and market leadership to drive shareholder value. I will now turn the call over to Kim to walk through the details of our financial performance.

[Kimberly Boscan:]

Thank you, Don and good morning to those on the call today. I will begin with a review of our financial results on Page 7. Second quarter 2017 net sales were down approximately 8% with impacts felt in both our wood flooring and resilient line segments due to volume declines and competitive price pressure. In resilient, net sales were down 3.6% due to lower volume and price from market pressures in legacy products, primarily resilient sheet. Most of this pressure was in residential end markets, where our commercial end markets were relatively stable for a second consecutive quarter. This shift in consumer preference to LVT continues to pressure the traditional categories, which still comprise the majority of our resilient segment sales. Additionally, as mentioned in our prior call, residential sheet shipments were significantly impacted by lower sales in the strategic retail customer channel, which we expect to continue to be a headwind through the fourth quarter. Due to competitive pressures on price, we were unable to realize the benefits from our recently announced price increase on residential sheet. Double-digit volume growth in LVT from both sourced and manufactured products partially offset traditional resilient volume declines, while positively augmenting our mix. In wood, net sales of $109.5 million were down 15% compared to the prior year largely due to lower volumes in solid wood. In the prior year second quarter, volumes benefited from conventional activity, which did not occur in the second quarter of 2017. Market pressures on price persisted primarily driven by continued competition in the distribution channel. Total adjusted EBITDA decreased $7.5 million to $25.1 million compared to the prior year’s quarter. The decline was entirely due to lower sales, which more than offset a relatively strong $11 million improvement from continued manufacturing productivity gains, and lower SG&A spending. Resilient adjusted EBITDA improved to $23.7 million compared to $23 million in the prior year quarter with segment adjusted EBITDA as a percent of net sales of 12.6%, representing an 80 basis point improvement from the prior year quarter. Our SG&A savings in this segment, along with lower unit cost in our LVT manufacturing operation and strong productivity throughout the network helped to blunt the impact of lower net sales. In addition, raw material costs continue to rise, so we have announced another 3% to 6% price increase effective in the fourth quarter for our legacy commercial products to offset some of these inflationary impacts. Wood adjusted EBITDA was $1.4 million as compared to $9.6 million in the prior year quarter as lower net sales and the impact of a severe weather event at one of our plants more than offset productivity gains. Lumber costs remained fairly steady in 2017, but we continue to expect unit lumber costs flowing through our P&L to be unfavorable year-over-year in 2017. Turning to our cash flow on Page 8. In the second quarter of 2017, we produced $33 million of free cash flow as compared to a $46 million outflow in the first quarter. As a reminder, our first half outflow of $13 million included $8 million of capital spend from projects at the end of last year, where the commitment occurred in 2016, but the cash settlement did not occur until 2017. That said, first half cash flow performance is consistent with our plan to deliver positive free cash flow for the full year of 2017. During the quarter, we repurchased approximately $9.5 million worth of AFI stock, bringing our total repurchases since inception of this store buyback program to 14.4 million, representing approximately 3% of shares outstanding. We believe our active $50 million repurchase program provides an additional avenue to build value, while we continue to invest in our transformational initiatives. We funded the acquisition of Mannington’s VCT assets with cash on hand and availability on our ABL facility to end the quarter with $91 million of debt, and $39 million of cash. We are pleased to complete this transaction, while preserving a strong balance sheet, which provides us with ample liquidity to pursue our growth objectives and the flexibility to invest in our business. Turning to our full year 2017 outlook on Slide 9. As we have discussed today, our results continue to be impacted by challenges to our top line. We expect shifting consumer preferences and competitive pressures in our legacy category to continue to weigh on our results in the back half of 2017. As a result we are revising our full year 2017 adjusted EBITDA outlook, which we now expect to be in the range of $60 million to $70 million. We do not expect our acquisition of Mannington’s VCT assets to have any material impact to adjusted EBITDA for the full year 2017 as we integrate it. This acquisition remains on track to be accretive in 2018. We are driving profitably through added efficiencies and improved utilization of our existing facility and [selling infrastructure]. We now expect capital expenditures for 2017 to be about $45 million with maintenance CapEx approximating 2% to 2.5% of sales and the balance of the spending on high return investments. We anticipate that 2017 will be another year of positive free cash flow. I will now hand the call back to Don for closing comments.

[Donald Maier:]

Thanks Kim. Turning to our medium term financial goals on Slide 10. As we mentioned last quarter, we believe we have a clear strategy with multiple levers to achieve a 10% adjusted EBITDA margin by 2020 through a combination of incremental sales, productivity, plant rationalization, SG&A savings and opportunistic acquisitions. On our call today, we discussed a range of business updates, which reinforces our commitment to that margin target under a range of growth scenarios. We are confident in our ability to execute and we will continue to pursue a variety of strategic options to improve our performance in all categories that we serve. Continuous innovation and durability and design across all major wood and resilient categories remains a central part of our strategy to improve our mix of sales from higher growth products, while maintaining strong competitive positions in legacy categories. Even as we work to rationalize our manufacturing capacity, we continue to pursue innovation across multiple categories with the goal of providing an even more competitive line-up of winning products for our customers. Over the medium term, we expect free cash flow generation to grow with adjusted EBITDA, which will further bolster our strong capital position. This expanding capital base will allow us to invest in attractive opportunities to improve returns, including growth initiatives, share repurchases and M&A. we plan to accomplish this while keeping within our targeted leverage ratio of 1.5x to 2x EBITDA and preserving ample liquidity to invest in internal projects and other value enhancing initiatives. We look forward to building additional value through our unique opportunities. Operator, we are now ready to take questions.

[Operator:]

[Operator Instructions] Our first question comes from the line of Keith Hughes with SunTrust Robinson Humphrey. Please proceed with your question.

[Keith Hughes:]

Thank you. A couple of questions on the wood business, number one, with the planned closures what will that bring your capacity utilization to given kind of the run rate of sales we saw in the second quarter?

[Donald Maier:]

Good morning Keith. Obviously the goal here is to improve the profitability of our wood business, and this capacity improvement brings us to I think the appropriate level, which makes the cost performance of the plants optimal and allows us to be as creative in driving profitable growth out in the wood business.

[Keith Hughes:]

Okay, and the [sales] were pretty big here, and you talk a little bit about that in the slides, can you give us any more detail about within engineered and solids, what happened – I mean, the market has been kind of waiting for you for a while, but this quarter [indiscernible]?

[Donald Maier:]

We really mentioned a couple of things. First of all, on the solid side of the business, we had a major ASA customer that has decided not to do any promotional activities with any of their flooring suppliers, between now and the end of the year. And this has been traditionally an area, where we have done quite a bit of promotional activity, so we look forward to them getting back into promotional moves, and we believe that that will correct itself over time. Well, as well, have had some inventory adjustments in the solid side by another one of our large ASA customers, which we discussed in the last earnings call. That continued in the quarter. On the engineered side of the business, as we have discussed, we are really focused on driving profitability of that segment. This has caused us to evaluate parts of that business, and where appropriate to make the right trade-off between volume versus our incremental margin we can drive from the sales that has impacted that.

[Keith Hughes:]

Okay, and then you talked about raw material pressure and price increases not going in [indiscernible], I believe, manufacturing and input cost was a positive for the resilient segment, can you give us some sort of indication of what the just pure input cost hit was in the quarter and what you are thinking for the second half?

[Douglas Bingham:]

Yes. Keith this is Doug. That line of manufacturing input cost is not only the input cost, but also we get some of the benefits from the overlap of the LVT ramp up in there as well. So what we have seen is that resilient prices do – the raw materials do look like they are likely to increase as we move into the back half of the year, which is why we announced the commercial price increase, which will be effective in October.

[Donald Maier:]

Yes, and just to add a highlight there, we as you know announced a commercial resilient price increase back at the beginning of the year. Last week we announced another increase, counter to where we achieved the realized price increase on the residential sheet side. We historically have had better luck in realizing the price increase on commercial.

[Keith Hughes:]

Okay, just – actually one final question back to wood, according to the math, you got six plants left, what is the split of those between engineered and solid?

[Donald Maier:]

Yes. So one of those plants is engineered. The others are solid.

[Keith Hughes:]

The others are solid, okay. And that one engineered is in Pennsylvania, correct?

[Donald Maier:]

No, the engineered is in Somerset, Kentucky.

[Keith Hughes:]

Kentucky, okay. Thank you.

[Operator:]

Thank you. Our next question comes from the line of Mike Wood with Nomura Instinet. Please proceed with your question.

[Unidentified Analyst:]

Hi, this is actually Mason on for Mike. Where is the Mannington acquisition in the Rock integration and have you seen VCT synergies yet or do you expect these in the back half?

[Donald Maier:]

Yes. So, on the Mannington acquisition, that was complete, the transaction was completed in June. As we indicated at that time, we believe there's a ramp up that will occur over the third quarter. And that will then start seeing the incremental nature of that business heading in the fourth quarter. As a result of that, we don’t see any EBITDA impact in 2017 but as we've indicated we expect it to be accretive than 2018.

[Unidentified Analyst:]

Okay. And how is the Lancaster plant running in terms of your efficiency and when we'd see the biggest ramp in productivity from the plant?

[Kimberly Boscan:]

Yes. So, we are very pleased with the progress that we've made with that plant. Clearly, if you look at first half of '17 versus prior year, because of the comparison to a plant that was still ramping up, the incremental improvements are greater than what we expect in the second half. We continue to drive continuous improvement in other productivity initiatives in that plant just as we do elsewhere. So, per active the purposes last quarter, we declared the plant up and running and complete but our work continues just as we do in all of our plants to continue to drive productivity.

[Unidentified Analyst:]

Okay, great. Thank you.

[Operator:]

Thank you. Our next question comes from the line of Alvaro Lacayo with Gabelli & Company. Please proceed with your question.

[Alvaro Lacayo:]

Good morning, guys.

[Donald Maier:]

Good morning.

[Kimberly Boscan:]

Good morning, Alvaro.

[Alvaro Lacayo:]

Just a question on the medium term goals and the commentary around reading reaching that 10% EBITDA margin with several different growth scenarios. Maybe if you could just big picture talk about, you've decided to take some action on these Wood plants. But what big picture what are their levers are left in order to sort of run rationalize the footprint and continue to take cost out of the business to better reposition yourself?

[Donald Maier:]

Yes. Thanks, Alvaro. So, we're as we said not pleased with the results in the quarter but hopefully you're seeing quite a list of actions that we're taking to transition the company in the portfolio towards that 10% EBITDA margin. It's all of the levers still have opportunities, obviously first and foremost we're continuing to drive our growth initiatives primarily focused on LVT but also in accretive solutions like the Mannington VCT acquisition. We are continuing to work on our SG&A and aligning that with the business and meaningful modifications that we've announced today on our Wood facilities. We mentioned that the residential sheet component continue to be a challenge for us and while we had nothing to share with you in this call, we look forward to update you as we deal with our strategic options with that business.

[Alvaro Lacayo:]

It is the, would you categorize so the two Wood plants and the $8 million to $10 million in savings on the residential sheet side is the opportunity for cost take out similar magnitude or is there a bit of a different dynamic there when you think about that business?

[Donald Maier:]

Yes. I prefer to defer that to would I've been into announce this time other than clearly this is first and foremost on our radar and something the executive team is very focused on.

[Alvaro Lacayo:]

Got it, okay. And then just with the VCT acquisition, it's going to take a little bit to ramp up. Do you have an order of magnitude in terms of integration cost, how much it's going to cost you to sort of get everything to position to set it up for growth?

[Donald Maier:]

So, what we have shared on that is that that's the counter balance we're seeing in 2017 and we expect to be through those costs as we enter into 2018.

[Alvaro Lacayo:]

Okay. Thank you, very much.

[Donald Maier:]

Thanks, Alvaro.

[Operator:]

Thank you. Our next question comes from the line of Jim Barrett with CL King & Associates. Please proceed with your question.

[Jim Barrett:]

Good morning, everyone.

[Donald Maier:]

Good morning.

[Jim Barrett:]

It's a question whether you've done or Kim, the value that was assigned to Mannington's contractual arrangements. Can you discuss what those arrangements are, who they are with and some more color on that?

[Donald Maier:]

So, I guess the important elements of the acquisition or we have purchased the assets and we have acquired the equipment that Mannington had to produce VCT. We are not, we moving that plant. We are consolidating that capacity into our existing facilities. And obviously then we're building value by converting those customers that we're buying Mannington VCT over to our strong VCT.

[Kimberly Boscan:]

Jim, so that's just an important point to note as Don said. These are we didn’t take the distributors, the Mannington distributors. Right, so we're building the sales through our channel.

[Jim Barrett:]

Okay, understood. So, there's the $36 million invested in the Mannington assets. Does this enable the company to avoid future capital spending they otherwise would incur and if so could you give us a sense of what sort of CapEx avoidance there is by virtue of acquiring these hard assets?

[Donald Maier:]

So, there are a number of pieces of that line that are envisioned to be used internally. The value of that is I would say the minimum installed and wouldn’t impact future capital spending greatly.

[Jim Barrett:]

Okay. And then Don, my final question on Mannington. On a rear view basis you have you're estimating $20 million worth of sales. Could you give us any sense as to what the incremental margins AFI would expect to generate if it maintain those level of sales?

[Donald Maier:]

Yes. So, what we have shared is our normal margins in flow throughout is in the 20% to 30% range and we've indicated the VCT is well above our average margin. So, obviously a bit towards the upper edge line of those EBITDA, our gross margins.

[Jim Barrett:]

Okay, very good and thank you very much.

[Donald Maier:]

Thank you.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from the line of Scott Rednor with Zelman & Associates. Please proceed with your question.

[Scott Rednor:]

Hi, good morning, Don.

[Donald Maier:]

Good morning.

[Scott Rednor:]

Question on the Wood announcements today. From our perspective, from a outsider's perspective, solid actions make a lot of sense. But on then your North side, I guess I just want to understand a little further, that's been a business you guys have been growing very rapidly and then how to read or onshore some capacity a few years ago. So, can you maybe just divulge deeper into the reduction of the engineered Wood side in terms of your capacity?

[Donald Maier:]

Yes. So, the facility, the Vicksburg facility was a supply facility for our Somerset Kentucky plant. So, we are shifting the supply of the core materials to other sources which is allowing us to reduce this part of our footprint. We are continuing to focus on improving the profitability of our engineered business. We are pleased with the progress we've made on the South side, we have not made the progress we need on the engineered side. So, combined with this as I discussed in prior calls, we are continuing to supply more of our engineered products to Asian supply chains and we will continue to add activity. So, while we see a continued presence here domestically, we will be sourcing a larger percent of our volume over time from Asia.

[Scott Rednor:]

Got it, that makes sense. And then the LVT side, can you guys maybe just clarify what double digit growth is, how fast it is and Don how do you feel about your capacity situation on LVT?

[Donald Maier:]

Yes. So, our comments are meant to be a bit vague as we don’t want to do any competitive signaling but we believe that we are executing well on our strategy to win in LVT and I'll let you read between the lines on that. On a capacity standpoint, we have a combination of both domestically produced as well as sourced products, again largely from Asia. And that's allowed us to move quickly to build what we believe to be the most comprehensive line in the industry. As we have those segments grow and justify the business of additional capacity here in the United States, we obviously have the balance sheet to be able to execute on that.

[Scott Rednor:]

Thank you for taking my questions.

[Donald Maier:]

Thank you.

[Operator:]

Thank you. Our next question comes from the line of John Baugh with Stifel. Please proceed with your question.

[John Baugh:]

Good morning and thanks for taking my questions, Don, Kim. I was wondering if you could would the Wood restructuring that you're doing here, is there a -- I assume there's some level of reduced theoretical capacity. My question is how we think about legacy in terms of a percentage of the future mix and yes I know I'd have to be careful because the VCT business you're bringing in I guess legacy but very profitable and seemingly doing okay in terms of at least a earnings contribution. I'm trying to get a sense for the mix, as we look at a year or two and maybe even contemplate whatever you're looking at residential sheet as to where we might see the mix of the overall revenues. It's a legacy or struggling business versus growing?

[Donald Maier:]

Thanks, John. So, first of all on the Wood capacity portion of your question. There is a component that is meaningful here which is our ongoing productivity improvements that we've seen across our entire network of facilities and a combination of that along with our decisions around if you will exiting on profitable parts of the business have combined with an overall shift in the market demand from side to engineer to relatively up the opportunity to make this consolidation on the solid side of the equation. I just addressed the actions that we're taking along the lines of up-sourcing on the engineered side. So, we believe we have ample capacity with our strategies for both the Wood and solid business to serve the markets and do it in a more profitable manner as a result of these actions. The second part of your question was really around the legacy portfolio and the main portions of what we're focused on within the legacy portfolio are residential sheet and our Wood business as we discussed. Again, we are very focused on dealing with a fairly difficult industry structure on residential sheet. And we have to say a very large component of our growth portfolio. And so, while we are pleased with the progress and improvements that we're seeing on areas like LVT and the acquisition of the Mannington business on VCT. Those tailwinds are being offset by the headwinds that we're seeing on the sheet side of the business, residentially and so we're very focused on improving that situation and look forward to updating you on that in the future.

[John Baugh:]

Okay. Thanks for that. And then on the solid, I know demands been weakened that area in general, at least these are the engineered for sure and not sure if Wood isn’t seeding share a little bit to some of the other hard surface categories as well. But I'm curious as to whether you're seeing any competitive changes there or not or it sounds like a couple of your customers did some unusual timing, things with promotions. So, I'm just trying to get a better sense for the decline in demand there and how you sort of see that unfolding in the next 12 to 24 months.

[Donald Maier:]

Yes. So, I think the overall demand picture has been a little softer than anticipated. That was reflected in the Kathleen report that came out a few months ago. And having said that with the increase in volume coming in from Asian suppliers, that's created a very competitive situation out in the marketplace. I would just leave it at that. So, again we're pleased in that environment that we've been able to drive the improvements in our solid Wood business and are focused on growing that business. Our attention on the engineered side is improving the returns on that business before we put a foot on the pedal to drive volume increases.

[John Baugh:]

So, sorry, Don. Did you say they were imports of solids coming in pressuring our market here?

[Donald Maier:]

No, that kind of was really focused at the engineered.

[John Baugh:]

Okay. That's what I thought, okay. And then just lastly on the $40 million VCT Mannington, I just want to be clear. Is that the run rate of sales going into the purchase or is that your expectation of what you hope to achieve over the next say 12 months?

[Donald Maier:]

So, we're bound by confidentiality agreements with Mannington. So, what we provided is what we believe our sales of the Mannington products would have been had that business been part of Armstrong for the past 12 months. So, our portion of that and I guess you can extrapolate that forward into the future based on how you load that into your models.

[John Baugh:]

That's helpful. And then is the reading too much into the Mannington that will drag Q3 but then help Q4, so it's an offset for the back half Bingham was worried about?

[Donald Maier:]

Yes. It's kind of a push and I would just -- I would focus on 2018.

[John Baugh:]

Okay. Thank you and good luck.

[Donald Maier:]

Thank you.

[Operator:]

Thank you. Mr. Maier, there are no further questions at this time. I'll turn the floor back to you for final remarks.

[Donald Maier:]

Thank you, operator. And thank you everyone for joining us today. We truly appreciate your interests in Armstrong Flooring. As always we look forward to updating you on future calls. Have a great day.

[Operator:]

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.