AMWD
#Good morning.
Two points I would draw you back to.
If you went back a year and looked at Q3 of fiscal year 2014, one of the things you would have heard the team talk about at that point in time was accruing infrastructure we put in place for our new construction business.
And that was a pretty severe drag on margin in that particular quarter.
At this point in time we've now grown into that structure.
It was a drag on our first quarter and our second quarter result, but we've essentially grown back into that structure.
So that's one comment.
The second would be with respect to inflationary impacts.
A year ago we were taking pretty big increases.
And that pressure has slowed.
So that would be the other piece.
Yes, you know, to kind of forecast the housing industry has been quite a challenge for everybody involved, and there's a lot of factors that obviously we look at and I know others look at.
We constantly reported and consistently reported that we are over indexing in that market.
Obviously with the builders that we do business with, we have teamed up with some of the best builders in the country and they are over indexing in their markets.
Also the geographic regions in which we have historically played have been over indexing relative to the U.S. as a whole.
And then our market share, as well as substantially improved over the past five-years.
So as you look at those, our market share, we do expect to continue over index I think there will be slowing impacts out there.
Both regionally as we just discussed, whether that is Texas, Florida or Phoenix or some of the major markets we play we are starting to see some variation in those markets.
Also our accounts will get tougher and tougher when we talk about market share gain.
We've gained most of that market share in the past five years, and we're taking advantage of that market share growth and we a re continuing to grow market share, but it will be a slower pace than we've done in the past.
So in general I do expect us to continue to over index but I do expect the incremental amount that we do over index will be less than what we've done in the past.
Thanks.
This is <UNK>, <UNK>.
Primarily if you look at what a lot of analysts are talking about out there, and we obviously read what's being projected for calendar year 2015 primarily related to new construction.
And obviously there's a strong correlation as new construction, you know, improves and certainly remodel improves, because you assume there's a domino impact of people buying up and so forth.
Some of the projections we're seeing out there, and obviously it's a large range from 8% even as high as 27% to 30% when you talk to some folks.
We spent quite a bit of time in the past couple months in preparation for our budget as <UNK> mentioned.
[K biz] several weeks ago and spending time at a lot of our builders.
And there tends to be I guess a little more conservatism on the builder side if you talk directly to the builders, with regard to some of their numbers compared to what you may hear from the industry analysts and so forth.
At the end of the day if you look at some of the economic underpinnings of that key variable that we track closely and that's first time home buyers.
Some builders are starting to talk about ramping up for that, but for the most part a lot those economic indicators just have not changed enough in our opinion to really go out and kick start anything significant in that market.
And they're vital.
They are view truly vital to get this thing going at full speed so it can be self supporting within its own self where people can be allowed to buy up.
It supports the remodel industry, et cetera.
The government is taking action.
You're seeing it whether it's FHA premiums, et cetera, that there are things that are improving, small banks are starting to lessen their lending requirements and so forth, but it's still early stages.
Longer term we still remain very optimistic.
We do expect to see continued growth in this calendar year.
I just say we're going to be a little bit more on the conservative side compared to some of the high numbers we're hearing out there.
Yes.
Yes, a lot of variables but if you compare this recovery to prior recoveries, and one of the key bottlenecks that remains, it is the ability of the first time home buyer to get back into the market.
It is an entry level home but that allows other folks that's want to potentially sell to move up.
Even allows baby boomers to move down.
It's just that domino impact of what this industry needs to really get into full motion.
That first time home buyer, as a relative percent of the total, is still quite a bit lower than it was back in the, say, 2006 time frame.
The coming quarter or quarter three.
It's actually interesting, the dealer channel, once again, hard to get exact science in those.
But the dealer channel did not perform as high as we initially hoped.
And at the end of the day, some of it was for good reasons.
We actually saw a lot of dealers that due to their success the past couple years were more willing to take a couple weeks off for Christmas, and literally just shut their doors and go on vacation, and that did impact some of the numbers.
They continue to over index as <UNK> said, though, relative to the home center market, primarily just due to the a flew answer of the customers walking in the door.
The average price of the cabinet they sell is quite a bit higher.
And so they continue to do better, continue to over index ,and we do expect continued higher growth out of that dealer channel.
Our challenges, obviously Waypoint is still a new brand for us.
We're growing it in the dealer channel, but relative to our total makeup we will over index as a whole just because we have more weighting in the home center market.
I'll talk a little bit about the business as a whole.
It's definitely on our plan, you know, still early, so we're definitely beyond the stages of covering our overhead costs with regard to our SG&A and so forth.
We are happy with the margins.
I think our opportunity is to go out and grow the business.
We have large number of dealers out there.
Now it really comes down to penetrating within those dealers and obviously with that comes the incremental margin.
We're not where we want to be on margin yet, but the opportunity to improve certainly remains.
Yes I would ---+ this is <UNK> ---+ I would add that the ---+ on a like versus like product basis, the market's pretty efficient.
And we see similar margins on similar products, but as <UNK> mentioned the difference is the dealer channel has a tendency to sell a higher mix.
So as that grows as part of our overall business, it will help re-weight the average of the margin up.
But it's more due to the mix than a like versus like.
The market is pretty efficient.
For the most part you will typically see a pick up in promotions relative to the spring selling season.
That's what's budgeted in ours and certainly most others in the industry, as you move into it.
I don't predict it's going to mean anything outside of what we would typically see in our Q4, relative to promotion.
We've actually been fairly consistent on our side.
You just get a lot of variance when you look at a competitor-by-competitor standpoint.
We've seen a little bit of uptick relative to the few competitors out there.
Nothing that I would say is out of the ordinary, though for coming into the spring selling season.
We haven't quite finished the look forward on those respective measures.
With respect to material inflation it has somewhat slowed.
It wasn't zero in the quarter, we still had an impact in our fiscal third quarter, but the pace is certainly slowed down.
Fuel is certainly down, as well, which helps from a transportation perspective.
That was a slight benefit for us in the quarter, as well.
We're starting our process now as we go through our budget exercise and looking external data to tell us what we think the most likely fuel price will be going forward.
So nothing really specific there to offer other than we're in the midst of doing our ground work on that.
Let me [jump at one] First of all make sure we're ---+ right now not anticipating we're going to see any type of relief relative to, you know, potentially positive impact of inflation.
We are going to see continued inflation into our fiscal year 2016.
The question is how much.
What <UNK> was referring to for our Q3 is inflation was less than what we initially forecasted, which was a benefit for us, but some of the preliminary numbers I have seen for our fiscal year 2016 still show fairly significant inflation into our next ---+ our fiscal year 2016.
And we don't have that detail yet.
Thank you.
Since there are no additional questions this concludes our call.
Again thank you for taking time to participate, speaking on behalf of the management of American Woodmark we appreciate your continuing support.
Thank you and have a good day.
