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Edited Transcript of AFI earnings conference call or presentation 6-Aug-19 2:00pm GMT

Q2 2019 Armstrong Flooring Inc Earnings Call

LANCASTER Sep 5, 2019 (Thomson StreetEvents) -- Edited Transcript of Armstrong Flooring Inc earnings conference call or presentation Tuesday, August 6, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Dominic C. Rice

Armstrong Flooring, Inc. - Chief Product Officer & Senior VP of Global Operations

* Douglas B. Bingham

Armstrong Flooring, Inc. - Senior VP, CFO & Treasurer

* Larry S. McWilliams

Armstrong Flooring, Inc. - Chairman & Interim CEO

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Conference Call Participants

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* Alvaro Lacayo

G. Research, LLC - Research Analyst

* John Allen Baugh

Stifel, Nicolaus & Company, Incorporated, Research Division - MD

* Justin A. Speer

Zelman & Associates LLC - MD of Research

* Michael Robert Wood

Nomura Securities Co. Ltd., Research Division - Research Analyst

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Presentation

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Operator [1]

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Greetings and welcome to Armstrong Flooring Second Quarter 2019 Earnings Call. (Operator Instructions) And as a reminder, this conference is being recorded.

I'd now like to turn the conference over to Doug Bingham, Chief Financial Officer. Thank you. Please go ahead.

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Douglas B. Bingham, Armstrong Flooring, Inc. - Senior VP, CFO & Treasurer [2]

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Thank you for joining us today for Armstrong Flooring's Second Quarter 2019 Earnings Conference Call. I am joined by our Chairman and Interim CEO, Larry McWilliams; our Chief Product Officer and SVP of Global Operations, Dominic Rice; and our SVP of North American Sales, Brent Flaharty. We trust you have seen our 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 statement beyond what is required by applicable securities laws.

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 Larry.

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Larry S. McWilliams, Armstrong Flooring, Inc. - Chairman & Interim CEO [3]

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Thank you, Doug. Good morning, everyone, and thank you for participating on our second quarter 2019 earnings call. On the call today, I will be discussing our operating highlights and business activity. Doug will then cover additional details regarding our financial results before I offer some closing remarks and open the call for questions.

During the past several months, I, along with Armstrong team, have been working hard to address the continuing trend of challenging industry dynamics and soft market conditions. We have a number of initiatives underway to improve our execution and financial performance. We are focused on innovation and serving our valued customers to drive profitable growth in every facet of our operations.

During the second quarter, our customers continued to reduce inventory from elevated levels in previous quarters. This destocking activity represented the tail end of demand pull-forward into 2018, ahead of the initial wave of tariffs on Chinese imports implemented late last year.

We believe we ended the quarter with channel inventory at more sustainable levels. That said, the destocking activity, combined with softer end market demand, adversely impacted second quarter sales, particularly in our residential categories. In this environment, the team did a good job of delivering stronger adjusted EBITDA margin and free cash flow in the second quarter.

However, our year-to-date performance does not mirror all the internal efforts that are being made to grow our business and get the portfolio in the right place as we look forward. We are driving innovation to bring new products to market. We are working closely with customers to implement price actions in response to input cost pressures. And we are achieving productivity gains in our facilities and realizing cost savings and overhead to right size our operations. These actions, together with our strategic priorities, support our confidence in the potential of our business to generate more favorable results.

In LVT, we continue to rapidly shift our portfolio emphasis to Rigid Core products, such as our Essentials product line as we stay at the forefront of the innovation curve.

Our award-winning Diamond 10 Technology continues to appeal to a wide range of customers, and we are working rapidly to apply it to -- on to even more product lines within our portfolio.

In VCT, we recently added Diamond 10 Technology to our non-PVC product, providing enhanced durability and ease of installation in addition to its strong sustainability attributes.

As we continue to introduce a steady stream of products, we are tightly coordinating our marketing efforts with distributors to more effectively grow our market presence, especially in commercial.

We are committed to improving our performance in all product categories through innovation and cost efficiencies. We have a strong balance sheet to invest in our business as we take advantage of significant opportunities ahead. We look forward to our internal efforts becoming more evident in our results as we continue to execute on our objectives.

Before I pass the call to Doug, I would like to mention that I am working with the Board to fill the permanent CEO role. We are making good progress, and we will keep you updated as appropriate.

In the interim, I am committed to working with the talented teams across our business along with our customers and suppliers to facilitate a seamless transition.

I'll now turn the call over to Doug to walk through the details of our current financial performance.

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Douglas B. Bingham, Armstrong Flooring, Inc. - Senior VP, CFO & Treasurer [4]

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Thank you, Larry. I'll begin with a review of our second quarter results on Slide 5. For the second quarter 2019, net sales were down 11.7% to $178 million as compared to $201 million in the prior year quarter, including an unfavorable impact of 110 basis points from changes in currency exchange rates. The decrease in net sales was largely due to lower volumes and unfavorable mix in almost all product categories. Volumes were affected by distributor destocking and soft end market conditions similar to last quarter. The factors were more pronounced on the residential side of our business, including residential LVT.

The effect on commercial sales was less severe, partly attributable to the emphasis of our strategy on that end market. Selling prices were up modestly year-over-year in response to inflationary pressures from tariffs.

Our second quarter 2019 adjusted EBITDA was $20 million as compared to $20.7 million in the second quarter of 2018. This decline in adjusted EBITDA was primarily due to lower net sales. This was partially offset by lower SG&A spending and improved productivity. The lower reported SG&A spend included a $2.5 million benefit related to an early sublease termination fee by the owners of our former Wood business. As a percent of sales, adjusted EBITDA was 100 basis points higher year-over-year.

In the distributor channel, we believe the customers have largely worked down unusually high levels of inventory purchased ahead of tariffs on Chinese imports last year. That said, the general uncertainty around the ultimate outcome of U.S.-China trade negotiations has continued to influence normal seasonal buying patterns.

Our several rounds of price increases since October 2018 have allowed us to partly blunt the impact of inflation due to tariffs. In May, we announced additional price actions on select products in response to the U.S. decision to raise tariffs on Chinese flooring imports from 10% to 25%. We have worked closely with our customers to minimize the impact to their supply chains from recent price increases, while providing us an opportunity to help offset these cost increases.

During the second quarter, we generated operating cash flow of approximately $29 million. Consistent with our expectation, the main driver of our operating cash flow in the second quarter was a reduction in working capital as we drove down a significant working capital build in the first quarter.

For the quarter, we invested $7 million in CapEx, which remained below our run rate depreciation. During the quarter, we were pleased to return excess capital to our shareholders through the repurchase of 4.5 million shares for a net purchase price of approximately $50 million. This repurchase activity fully utilized the remaining unused portion of our share repurchase authorization.

We ended the quarter with a strong balance sheet, providing us with flexibility to invest in initiatives and growth avenues that make sense for our business.

Our capital allocation objectives remain unchanged with our focus on maintaining the business, funding internal growth initiatives and pursuing M&A opportunities that support our growth strategy.

Moving to our full year outlook. We have moderated our adjusted EBITDA expectations for the full year, which we now expect to be in the range of $46 million to $54 million.

While we believe elevated inventory levels in the channel have been largely worked down, unfavorable market conditions are likely to pressure results into year-end.

As a reminder, for quarterly balancing into year-end, our prior year comparison is relatively tougher in the third quarter, given the significant prebuy activity in September 2018.

While our full year outlook has been tempered, we anticipate that pricing actions, productivity gains and other cost savings will allow us to achieve our full year objectives.

We remain committed to growing our adjusted EBITDA margin to 10%. However, based on our revised 2019 expectations in the light of persistent market challenges, at this time, we believe it will take longer to achieve than initially expected. As such, a 10% margin level is a more attainable target as we look beyond 2020.

On the P&L, our effective tax rate could change significantly quarter-to-quarter, but we continue to expect our tax rate to be approximately 25% in 2019.

In regard to cash flow, we continue to expect capital expenditures of approximately $30 million for the year.

Maintenance CapEx should continue to approximate 2% to 3% of sales with the balance of the spending budgeted for high-return investments. We expect to build cash as we progress through the balance of the year.

With that, I will now hand the call back to Larry for closing comments.

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Larry S. McWilliams, Armstrong Flooring, Inc. - Chairman & Interim CEO [5]

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Thanks, Doug. As we have discussed today, our team has been focused on executing our key initiatives. We are working to improve our growth trajectory and augment our margin profile. We have a strong portfolio of award-winning products, and our team is committed to expanding its leadership positions in the resilient flooring industry. We are working closely with our customers to maintain strong relationships at exceptional levels of service. We aim to accelerate positive momentum in our business over the long term as we build upon our strong brand and market leadership to drive returns for our shareholders.

Operator, we are now ready to take questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Alvaro Lacayo with G. Research.

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Alvaro Lacayo, G. Research, LLC - Research Analyst [2]

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So I wanted to start with just the revenue outlook? And if you could talk about the first half, what you think growth rates -- how much they were impacted by this inventory build that seems to be reducing? And what are your expectations for the second half? And if you could just provide color by subsegment, LVT, VCT and resilient sheet?

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Douglas B. Bingham, Armstrong Flooring, Inc. - Senior VP, CFO & Treasurer [3]

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Sure. Yes. So as I commented earlier, we did see continued inventory destocking. For the first half, it was -- roughly, half of the sales change was due to the destocking activity, fairly similar in Q1 and in Q2. Within the categories, it was more pronounced in the residential categories as opposed to the commercial categories, both the destocking as well as the softer end market drawdown that we saw.

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Alvaro Lacayo, G. Research, LLC - Research Analyst [4]

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What are the expectations for the second half baked into your guide?

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Douglas B. Bingham, Armstrong Flooring, Inc. - Senior VP, CFO & Treasurer [5]

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Sure. Yes. So we did indicate that it will be a relatively tougher comparison in Q3, just given that there was a large inventory build last year around the tariffs that we don't expect to repeat this year. And then Q4, we had a little bit of inventory drawdown, kind of, coming off the Q3 peak but not too heavy.

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Alvaro Lacayo, G. Research, LLC - Research Analyst [6]

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With regards to your fixed cost footprint today, how would you categorize it? Is it fully rationalized or do you see opportunities there? And are there any updated commentary around reconfiguring existing capacity?

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Douglas B. Bingham, Armstrong Flooring, Inc. - Senior VP, CFO & Treasurer [7]

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Yes. So we are constantly evaluating our footprint for opportunities. As volumes continue to decline, we will certainly take action when it's appropriate. We basically look at it on a cash basis. So at the point where the plant is going to stop generating positive cash flow that's the time that we would take action on it. Based on our -- what we see out in the marketplace more broadly with the sourcing opportunities that are available in China, we think there are good opportunities to source LVT products and Rigid products from suppliers overseas. And so that will be our focus more on the sourcing element rather than the domestic manufacturing of LVT, just given that evolving R&D curve and the expansion of the supply chain that's moving beyond China at this point.

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Alvaro Lacayo, G. Research, LLC - Research Analyst [8]

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Got it. And the $4.7 million in strategic projects that's part of the adjusted EBITDA. Can you maybe talk about what you're doing, what the payback period is? And then from a price-cost perspective, have you been able to offset the first 10% round already today? Or are you still lagging a little bit, that original 10% of tariffs?

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Douglas B. Bingham, Armstrong Flooring, Inc. - Senior VP, CFO & Treasurer [9]

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Yes. So we took some actions, as you know, back in last year. We were able to get partial offset on those. We were also able to get some supplier concessions, which helped to offset as well. The second round that's gone into place, we've announced price increases. It's been kind of a mixed bag, what the competitive response has been on that. And so we continue to work to price our products appropriately and work with our suppliers to offset the cost impact.

Your question on the strategic projects and cost reduction initiatives, a fairly large piece of that $4.7 million is the severance related to the separation of our former CEO.

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Operator [10]

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Our next question is from the line of Michael Wood with Nomura.

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Michael Robert Wood, Nomura Securities Co. Ltd., Research Division - Research Analyst [11]

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I first wanted to ask about the 10% margin goal that you said was pushed out beyond 2020. Still curious to here line of sight in terms of getting there. It does still seem like a stretch? And are there any main flooring product categories that you might need to exit in order to reach that 10% goal?

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Douglas B. Bingham, Armstrong Flooring, Inc. - Senior VP, CFO & Treasurer [12]

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Yes. That's a good question, Mike. I think as we look at that, we still feel that, that's an appropriate target for us to get to, the timing of it is a little more uncertain at this point.

Looking at our product portfolio, there are certainly some products that are above that, that we feel comfortable with, and we'll continue to expand. Other product categories are a little more challenged. It's possible that we may, over time, exit some of those or reduce their relative weighting in the portfolio. But I don't think it's a precondition that we get us in any of the existing products to get to that 10%.

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Michael Robert Wood, Nomura Securities Co. Ltd., Research Division - Research Analyst [13]

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Okay. Can you also give us an update on the lockout at the Lancaster facility, what product line that is? And is it interrupting production or having a profit impact at all for you?

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Dominic C. Rice, Armstrong Flooring, Inc. - Chief Product Officer & Senior VP of Global Operations [14]

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Mike, Dominic Rice here, thanks for the question. So at our Lancaster floor plant, we produce both LVT and residential sheet vinyl. We continue to operate the plant with both salaried staff and temporary labor. And so we have not seen and don't anticipate any interruption to our -- the service to our customers with those products.

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Michael Robert Wood, Nomura Securities Co. Ltd., Research Division - Research Analyst [15]

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Okay, great. And just finally, can I ask in terms of post the Dutch tender offer, how are you feeling in terms of comfort with your leverage? And are there any large capital opportunities that may be in front of you now in terms of either larger productivity or restructuring initiatives or any other growth investments?

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Douglas B. Bingham, Armstrong Flooring, Inc. - Senior VP, CFO & Treasurer [16]

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I think we're still comfortable with the leverage that we've got. Where we're at now, we've got about $28 million of net debt. So we're still pretty comfortable on the leverage ratio. If there are projects that come up that are meaningful, we'll certainly discuss those. We do feel like we've got adequate dry powder to address any opportunities to invest that come up.

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Operator [17]

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

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Justin A. Speer, Zelman & Associates LLC - MD of Research [18]

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I appreciate the color on the revenue growth. But in terms of the EBITDA margins implied in the back half, I guess, maybe you could help us unpack that a little bit. The EBITDA -- or maybe looking at it differently, the SG&A level at $27 million on an adjusted basis, how should we think about that on a quarterly run rate basis into the back half?

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Douglas B. Bingham, Armstrong Flooring, Inc. - Senior VP, CFO & Treasurer [19]

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Yes. So our SG&A in this quarter was a little lower than normal because of that $2.5 million lease breakage fee. But other than that, it's a relatively good baseline. We've still got some income related to the DSI of the Wood business in there, but we've also got some expense running through as well.

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Justin A. Speer, Zelman & Associates LLC - MD of Research [20]

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So I don't -- for the full year, I guess, what kind of SG&A margin are you looking at for the full year, as you think about your guidance?

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Douglas B. Bingham, Armstrong Flooring, Inc. - Senior VP, CFO & Treasurer [21]

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Yes. So we've baked in our SG&A expectations into that guidance. Based on the Q1 and the Q2 that you've seen, kind of adjusting for some of those onetimers or unusual items would be fairly typical for what we'd expect in the back half.

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Justin A. Speer, Zelman & Associates LLC - MD of Research [22]

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Okay. And then the other element to this was on the gross margin side of things. As you think about your raw materials, and I know there's a lot of like moving parts with tariffs and underlying demand trends, but as you think about your mapping, how should we think about raw materials being a tailwind in the back half? Do you think you can hold on to those? And how much tailwind do you expect in the back half from raw materials?

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Douglas B. Bingham, Armstrong Flooring, Inc. - Senior VP, CFO & Treasurer [23]

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Yes. So I'll kind of set aside the tariff piece because that's kind of its own animal. Raw materials have been fairly flattish for us. They're down from the peaks that they hit in 2018. So we should get some tailwinds from those. Transportation, likewise, we had some improvement in Q2, so we're not facing the same pressures that we were previously.

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Justin A. Speer, Zelman & Associates LLC - MD of Research [24]

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Okay. So some tailwinds there potentially. And then the other element that I'd like -- I'd be curious to get your thoughts with the tariffs now, particularly on the largely imported LVT product, how do you think about the momentum of demand now that you may have some of the economics of LVT maybe not as friendly relative to where they were before the tariffs stepping up? How do you think about your overall portfolio as you think about LVT portion of your business and the non-LVT portion of your business into the back half and into next year?

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Douglas B. Bingham, Armstrong Flooring, Inc. - Senior VP, CFO & Treasurer [25]

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Yes. We still really like the portfolio that we've got in LVT. We're constantly looking at new ways that we can expand the portfolio. And Larry mentioned in his remarks, the introduction of elements, which will be, I think, a great -- excuse me, essentials, which will be a great product in the marketplace. The dynamics out in the industry right now on LVT, there is a lot of noise because of the tariffs. But we think the fundamentals are still there. It's a great product, and we expect that people will continue to adopt that.

With the cost impacts from the tariffs, if that is something that ends up slowing down the growth rates of LVT, given that we do have a large domestic portfolio of other products, that's not necessarily a bad thing for us.

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Justin A. Speer, Zelman & Associates LLC - MD of Research [26]

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I guess, from your perspective, are you injecting any of that kind of dynamism in your guidance? Or is it -- is -- in terms of the revenue growth implied in your guidance, I guess, think stripping out the inventory element. What do you think underlying demand looks like for your flooring products into the back half?

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Douglas B. Bingham, Armstrong Flooring, Inc. - Senior VP, CFO & Treasurer [27]

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Yes. We've kept a fairly consistent view from kind of looking at what last year was just on a little lower base, it's how we view it.

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Justin A. Speer, Zelman & Associates LLC - MD of Research [28]

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And last question for me is just in terms of -- or last 2 questions. I have 2 more questions. On cash conversion side, do you think you can generate positive free cash flow for the full year '19 based on the way things are falling? Or do you think it might be a tough put from here?

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Douglas B. Bingham, Armstrong Flooring, Inc. - Senior VP, CFO & Treasurer [29]

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Yes. So what we said is that we feel strongly that we'll continue to generate cash in the remaining quarters of the year. But as you know, we had kind of a large headwind in Q1.

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Justin A. Speer, Zelman & Associates LLC - MD of Research [30]

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Okay. And then -- and the last question for me in terms of filling the permanent CEO role in terms of those discussions, do you have any good candidates and are those candidates from within the industry?

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Larry S. McWilliams, Armstrong Flooring, Inc. - Chairman & Interim CEO [31]

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Yes. This is Larry. We are very active in the process. We're well through the process now. We are seeing some very, very good candidates. I won't comment on their backgrounds, but I'm very pleased with where we are in getting a new CEO in place.

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Operator [32]

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Our next question comes from the line of John Baugh with Stifel.

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John Allen Baugh, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [33]

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I was wondering on flexible LVT, which you're making in your Lancaster plant, is demand for that still growing? And what's the status of the, sort of, line utilization on flexible LVT?

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Dominic C. Rice, Armstrong Flooring, Inc. - Chief Product Officer & Senior VP of Global Operations [34]

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John, thanks for the question. It's Dominic here. Certainly, and primarily on the residential side, Rigid is more of a growth catered grade and flex. But flexible LVT remains, particularly in some segments, the preferred product of choice. Then notably in commercial, it -- commercial remains primarily a flexible LVT, and a significant part of our Lancaster plant is devoted to servicing the commercial segment with our flexible LVT.

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John Allen Baugh, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [35]

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So was flexible caught up in all this destocking and whatnot? Because more of that's made, I believe, in the U.S. than certainly Rigid?

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Dominic C. Rice, Armstrong Flooring, Inc. - Chief Product Officer & Senior VP of Global Operations [36]

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Yes. There was -- the -- both the stocking up and the destocking activity was across the broad LVT portfolio, both Rigid and flexible.

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John Allen Baugh, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [37]

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Okay. And any comment, Doug, you used to kind of call it legacy products, but obviously, non-LVT Resilient tile, sheet vinyl and VCT, any comment there? Because I wouldn't think those products would be as greatly impacted by the Rigid Core Chinese imports, but I may be wrong on that.

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Douglas B. Bingham, Armstrong Flooring, Inc. - Senior VP, CFO & Treasurer [38]

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Yes. So we haven't really seen a marked change in kind of the market dynamics for those legacy products. I think they all continue to be impacted by LVT in one form or another. The Rigid impact, as Dominic mentioned, is probably more pronounced on the residential products like residential sheet. But certainly, LVT, the flexible form impacts VCT as well.

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John Allen Baugh, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [39]

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Good. And do I construe your comments around the sourcing more or not producing much is that your efforts to try to convert, I think, the old engineered wood plants to make it Rigid core LVT that that's essentially what, abandon process? Or you're not going to, I assume, try to make SPC here in the U.S.

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Douglas B. Bingham, Armstrong Flooring, Inc. - Senior VP, CFO & Treasurer [40]

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Yes. As it stands now, as we've looked at it, the -- we'll continue to look for opportunities to use our existing assets, but the development in the overseas markets around SPC continues to evolve and produce some pretty phenomenal products. And as far as the tariff concern has evolved, what we're seeing is a lot of Chinese manufacturers are starting production in countries like Vietnam and other areas that would not be impacted by the tariffs.

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John Allen Baugh, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [41]

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Okay. And currently on that topic, what amount, if any, are you sourcing LVT from outside of China currently? Or is this all kind of in development and discussion more than actual at this point?

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Douglas B. Bingham, Armstrong Flooring, Inc. - Senior VP, CFO & Treasurer [42]

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Yes, I'd say it's more in development discussion. There is some minimal amounts, but it's primarily in China at this point.

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John Allen Baugh, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [43]

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Okay. And finally, we've heard that the less price increase announced by the big players, yourself included, in Shaw and Mohawk on LVT is, as I think, the words you used is sort of uncertain? Or we're going to have to see how it all shakes out, primarily because there were still inventory brought in, particularly from many smaller players that was perhaps delaying the implementation of that price increase? Is that -- to have that kind of ride in, where do you think we are time-wise in the running through that lower-cost of pre-tariff inventory in the United States?

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Douglas B. Bingham, Armstrong Flooring, Inc. - Senior VP, CFO & Treasurer [44]

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Yes, I think you've got the right perspective there. The channels from us and from others, everybody was buying a lot of material ahead of the tariffs. I think at this point, we indicated that from what we see in our own space, the inventory is getting to better levels. There may be still a few pockets that are a little bit high. But given that the tariffs just increased in about 2 months ago, there's probably still a little bit of time before all that pre-tariff inventory is out of the system.

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Operator [45]

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We have a follow-up question from line of Alvaro Lacayo with G. Research.

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Alvaro Lacayo, G. Research, LLC - Research Analyst [46]

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I just had a question on VCT. In the past, you've talked about kind of a low single-digit volume decline, offset by solid pricing, wanted to get your thoughts on whether anything has changed from that kind of level of demand. And then secondly, the $2.5 million that you received relative to the Wood divestiture, is that part of adjusted EBITDA? I just wanted to be clear on that.

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Douglas B. Bingham, Armstrong Flooring, Inc. - Senior VP, CFO & Treasurer [47]

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Yes. So the $2.5 million that is part of our adjusted EBITDA. The -- your other question, sorry, Alvaro, I forgot the other question.

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Alvaro Lacayo, G. Research, LLC - Research Analyst [48]

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Just VCT, in the past, we've discussed it as being -- given that you are by far the largest player, you had -- it was a category with low single-digit volume declines, but a lot of it offset by good pricing, and I wanted to get an update on the dynamics, if that still holds or if there's been a change.

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Dominic C. Rice, Armstrong Flooring, Inc. - Chief Product Officer & Senior VP of Global Operations [49]

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Alvaro, it's Dominic. Thanks for the question. No, we continue to see that to be a fairly consistent dynamic with VCT.

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Operator [50]

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We have now reached the end of our question-and-answer session. I would like to turn the floor back to Larry McWilliams for closing comments.

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Larry S. McWilliams, Armstrong Flooring, Inc. - Chairman & Interim CEO [51]

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Thanks, everyone, for joining us today. We appreciate your interest in Armstrong Flooring, and we look forward to updating you in future calls.

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Operator [52]

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Thank you, ladies and gentlemen. This concludes today's teleconference. You may disconnect your lines at this time. And thank you for your participation.