Armstrong World Industries Inc (AWI) 2016 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Armstrong World Industries Inc. first-quarter 2016 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 be given at that time. (Operator Instructions). As a reminder, this conference call is being recorded.

I would now like to turn the conference over to our host for today, Kristy Olshan, Director of Investor Relations. You may begin.

Good morning and welcome. Please note that members of the media have been invited to listen to this call and the call is being broadcast live on our website at Armstrongceilings.com.

With me today are Vic Grizzle, our CEO, and Brian MacNeal, our CFO. Hopefully you have seen our press release this morning and both the release and the presentation Brian MacNeal will reference during this call are posted on our website in the investor relations section.

I 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 World Industries, please review our SEC filings including the 10-Q filed earlier this morning. Forward-looking statements speak only as of the date they are made. 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 with the most directly comparable GAAP measures is included in the press release and in the appendix of the presentation. Both are unavailable on our website.

With that I will turn the call over to Vic.

Thanks, Kristi, and good morning, everyone, and welcome to our first post separation earnings call. I would like to begin by saying that I am really thrilled to be the new Armstrong World Industries CEO. As many of you know, I've been leading our ceilings business for the past five years and you also know what a great business this is. I am truly excited about the possibilities that we have with our leadership position and now as a standalone publicly traded Company.

And you should know that beyond myself there is a highly capable and highly energized organization that is here and they are already off and running.

This morning I am pleased to share with you a brief overview of our first-quarter results and provide some perspective on the market conditions we are seeing and our outlook for the rest of the year. I will then turn the call over to Brian MacNeal, our CFO, who will walk you through a more detailed discussion of the quarterly results and our guidance.

Before we get into the first-quarter results I would like to make a few comments. We have recently and successfully completed the separation of our legacy flooring business and I want to take this opportunity to wish our friends and colleagues in the flooring business much success as they look forward to the opportunities ahead of them as a new independent public company.

I would also like to take this opportunity to thank my leadership team and all of the Armstrong team members who have worked tirelessly to complete the transaction while remaining focused on serving our customers and not allowing themselves to become distracted by the separation process. They have done a terrific job.

Armstrong World Industries is now a pure play global leader in the design and manufacture of innovative ceiling and wall solutions. As a smaller more agile company, we are focused on opportunities to grow and with the strength of our position we are uniquely positioned to capture these opportunities. Given our standout leadership position, we will grow by leveraging our deep customer relationships and strong innovation pipeline to sell into more spaces and sell a more complete suite of Armstrong products into every space. My leadership team and the entire organization are aligned to this mission, a mission to create a ceiling solution for every space.

I would like to now turn to our first-quarter results. Since the separation wasn't completed until the beginning of the second quarter, our earnings release materials include results from the flooring business. We will touch briefly on our consolidated results for the quarter but are not going to spend time discussing floorings results since they released their results earlier this morning and have already had their call.

For the first quarter, consolidated AWI reported sales of $572 million or up $20 million, just over 3.5% from the prior year. On a comparable foreign exchange basis, sales were up almost 6% driven by the strength in the Americas across both the ceilings and the flooring businesses. Consolidated adjusted EBITDA of $81 million was up $9 million or 13% from the prior year due to strong volume growth in the Americas, lower input costs and strong earnings from our WAVE joint venture.

Now specifically in our ceilings business, reported sales were down just over 1.5% driven entirely by foreign exchange. On a comparable foreign exchange basis, sales were up just over 1% as broad-based volume growth in the Americas and continued improvement in our average unit value was partially offset by volume declines in the Europe and Pacific regions. Adjusted EBITDA of $73 million was down $2 million or 3% from the prior year due to the integration of corporate functions into the business.

On a comparable cost basis when adjusting for the corporate cost absorbed by the business adjusted EBITDA improved 13% and margins expanded globally by 270 basis points. Brian will provide more details of this when he reviews the financials.

The first-quarter results confirm the strength of our Americas business as well as the challenges and opportunities that we have in our international operations.

In our Americas ceilings business, sales were up almost 6% on a comparable foreign exchange basis. The majority of sales improvement was driven by mid single-digit volume growth that was broad-based across multiple regions and across the entire product line. We believe some of this volume strength is the result of softer first-quarter 2015 comparables where we experienced weaker demand due to the weather. Nevertheless, we were encouraged by the broad-based nature of the market strength and with the continuation of improvement in our average unit value.

Growth in premium products continued to exceed the growth we saw at the low-end of the product portfolio. However the difference here in the first quarter was the strong growth at the low-end of the product range indicating a pickup in the R&R sector. Because of the growth in the low-end of the product portfolio, our AUV improvement year-over-year was limited. With the benefits of stronger volumes and solid productivity we had strong earnings performance and expanded adjusted EBITDA margins by 300 basis points.

Turning now to the EMEA region, on a comparable foreign exchange basis, sales were down 9%. Most countries within the region had a slow start to the year but the majority of the year-on-year decline continued to be driven by weaker markets in the Middle East and Russia. This extended period of low oil prices has negatively impacted market growth opportunities in the form of project delays particularly in the Middle East. The market in Russia also remains challenging and was down double digits in Q1.

But I have to say I continue to be pleased with how the team is executing as they continue to gain share in a tough market.

Our operations in the Pacific Rim performed as expected with sales on a comparable foreign exchange basis down 2%. This was driven by a continuation of the trends we experienced in the latter part of 2015 with ongoing softness in the China office market which represents the majority of our opportunity there. Australia had a strong start to the year and India got off to a relatively slow start.

We had a strong quarter across many of our growth initiatives including architectural specialty products and our recently launched total acoustics line of products. I'm happy to report that since we launched our total acoustics line last fall, first-quarter sales were solidly ahead of our expectations as the value proposition has resonated well with our customers. In fact, they have begun changing existing specifications to incorporate these new innovative products. Our WAVE joint venture also delivered a record earnings quarter driven by strong US commercial volumes and strength in the component solutions like drywall grid.

Turning now to our market outlook. In the Americas, we continued to see sequential improvement in volumes from new construction start activity dating back to 2014 and 2015 and we believe this will continue for the balance of 2016. We believe the growth in year-on-year volume will likely moderate as we progress throughout the year due to the progressive improvement in volumes we experienced in the back half of last year. The broad-based first-quarter volume growth points to improvement in the repair and remodel activity which is encouraging but the underlying fundamentals remain uneven and will likely result in choppy R&R activity from quarter to quarter.

Our international regions will continue to be challenged by sluggish end markets particularly the emerging markets highly impacted by lower commodity prices. The first-quarter results continue to emphasize the importance of addressing our local cost structure in these regions. As previously reported, we have executed cost reduction actions in both the international regions in the fourth quarter of last year which helped offset market softness we experienced in the first quarter. We have more to do here and we will continue to implement our action plans to improve our operations and lower costs in these regions.

In April the volume activity has continued to be positive. Accordingly, we are maintaining the 2016 guidance we provided at our separation and business update meeting in March.

I highlighted earlier that we will grow by leveraging our strong innovation pipeline to provide our customers with industry-leading innovative products. I'm excited about the launch of our new sustained product line that we introduced to the market just last week. These high-performance ceiling solutions meet the most stringent sustainability compliance and transparency standards in the market today. With our new sustained program, we have optimized our ingredients to support the design of healthy buildings. This was a significant innovation accomplishment and I am pleased that our customers now have complete acoustical control with our total acoustics solutions plus through our sustained program products, they have a pathway to provide for healthier buildings.

It is this kind of innovation leadership that enables Armstrong to make a difference in the lives of people where they live, work, play, learn and heal.

With that I will turn the call over to Brian for a detailed review of the quarter.

Thanks, Vic. Good morning to everyone on the call. As a new AWI CFO, I am excited to share the details of our first-quarter results with you this morning. I will be referring to the slides available on our website.

First I will cover the consolidated results of the flooring and ceiling businesses pre-separation for Q1 and then discuss results of the new AWI on a standalone comparable cost basis. Kristy already covered slides two and slide three is an explanation regarding our standard basis of the presentation. You will note on slide three that our standard basis of presentation has generally not changed however in 2016, costs that had previously been included in our corporate unallocated segment were pushed down into both the ceilings and flooring businesses in preparation of the separation. The results that I will discuss on the standalone ceilings business on slides six and seven include approximately $17 million of corporate costs in 2016 that were held constant in 2015 to facilitate comparability between the periods.

Starting with slide four, consolidated sales of $577 million were up almost 6% versus 2015 on a comparable foreign exchange basis. Adjusted EBITDA and adjusted EPS improved by 13% and 34% respectively. The primary difference to our reported results is driven by separation related expenses and the non-cash impact of our US pension plan.

Free cash flow for the quarter was a use of $75 million, an increased use of $33 million from last year. I will discuss more details on free cash flow in a moment.

Net debt was down $75 million driven by debt repayments over the last 12 months. In the chart on the bottom of slide four, you will note the sale of an adjusted EBITDA change by segment versus the prior year period. On a comparable foreign exchange basis, sales in the resilient and wood flooring segments were up 6% and 18% respectively driven by strength in both the residential and commercial businesses. Adjusted EBITDA for the resilient segment of $4 million was down $7 million from the prior year. Much of this is due to the integration of corporate function into the business.

Adjusted EBITDA for the wood business of $5 million improved by $4 million versus the prior year period driven by the margin benefit of higher volumes and lower input costs. Worldwide building products sales were up 1% on a comparable foreign exchange basis versus the prior period and adjusted EBITDA was down $2 million due to the integration of corporate function into the business and the corresponding standalone cost of $14 million. I will talk more about the ceiling business results on a comparable adjusted basis on upcoming slides.

You can see the unallocated corporate segment shows a $14 million improvement versus the prior year period as these costs were push down into both ceilings and flooring businesses in preparation for the separation. As Vic noted, we have completed the separation of the flooring business. The new AFI management team held a separate earnings call earlier today, thus a more robust and detailed review of AFI's first quarter as a standalone company can be found on their website at Armstrongflooring.com.

Turning now to slide five, you can see on a consolidated free cash flow for the quarter versus last year. We typically use cash in the first quarter as receivables grow off a low year-end level, we make prior year annual incentive payments and as we build inventories for increased summer activities. While cash earnings were similar last year, working capital was a drain on cash in the quarter primarily due to higher payments for annual incentive plans primarily driven by flooring performance and payments in preparation for separation.

The other detractor to cash flow was made up of a variety of items such as sales of property, plant and equipment in the prior year that did not recur in this year.

Turning now to slide six, building products key metrics. I would like to remind you that the basis of presentation reflects the push down of almost $17 million of corporate costs into the business in the first quarter of 2016 in preparation of the separation. The $17 million includes $3 million of depreciation expense. These costs were held constant in 2015 to facilitate comparability between periods. Approximately 70% of the costs were SG&A and the remainder impacted cost of goods sold.

You see on the bottom of the slide, the adjustments we need to EBITDA and operating income including these corporate expenses in 2015 and the non-cash impact of our US pension expense with a reconciliation to our reported building products segment operating income of $51 million in the quarter. On a comparable foreign exchange basis, sales were up just over 1%. Vic covered the drivers of the sales change so I won't spend much time on them here.

On a comparable cost basis, adjusted operating income and adjusted EBITDA improved by 18% and 13% respectively and we expanded margins globally by 270 basis points behind strong growth in the Americas.

Slide seven provides additional color on the building products segment results. Globally, ceiling sales were up 1% on a comparable foreign exchange basis as volume and AUC both improved. Sales in the Americas were up almost 6% driven by mid single-digit volume growth which was mostly offset by double-digit sales declines in key geographies in EMEA regions such as the Middle East and Russia and mixed results in the Pacific Rim region.

AUV improved; however while we had volume growth across the portfolio, volume strength at the low-end of our product range and the one-time impact from the release of merchandising funds associated with a large retail customer in the Americas impacted year-on-year comparisons. These factors combined with a deflationary backdrop impacted our AUV performance.

On a comparable cost basis, you can see the drivers of profitability on the bottom of the slide. AUV was lower year-on-year impacted by the factors I just outlined and was exacerbated by the unfavorable country mix in the EMEA region as softness in the highly profitable Middle East region hurt margin fall through.

Volume positively contributed to profitability although much of the strength in America's volume was offset by weakness in our international operations. On a comparable cost basis, both SG&A and manufacturing and input costs positively contributed to improvements in profitability year on year. Lower energy costs and prior SG&A cost reduction actions in our international operations were significant drivers.

As Vic highlighted, these cost reduction actions helped our first-quarter results. However particularly in EMEA, they were not enough to offset the market softness. Profitability in the Pacific Rim improved and these actions helped offset market weakness and manufacturing and input costs contributed to margins.

Our WAVE JV delivered record first-quarter earnings as they benefited from volume strength in the Americas and lower direct costs specifically for steel. On a global basis, adjusted EBITDA margins improved 270 basis points and margins here in the Americas improved by 300 basis points.

Slide eight outlines the guidance for 2016 that we provided at our separation and business update meeting in March which we reaffirm today. We expect to deliver revenue growth of 3% to 7% and adjusted EBITDA of $310 million to $330 million. We continue to expect adjusted free cash flow in the range of $80 million to $100 million excluding the cash impact of separation.

The cash impact of separation is expected to range from $50 million to $60 million. As a reminder, this guidance is presented on a standalone basis and excludes the first-quarter results delivered by the flooring business. While sales growth of 1% in the first quarter was disappointing driven by the volume declines in our international operations, the mid single-digit volume growth in Americas is encouraging and translated to adjusted EBITDA growth. We expect our AUV achievement to improve as we progress throughout the year driven by continued strength in our premium offerings and as one timers impacting AUV in the first quarter such as the release of merchandising funds abate.

We expect the sequential improvement we saw in the first quarter in our international businesses to continue and will remain focused on identifying actions to improve EBITDA performance in these regions as we progress throughout the year.

We continue to expect $42 million of standalone corporate costs excluding the non-cash impact of our US pension and a 1% to 2% of cost savings over inflation. We will continue to invest modestly in sales and marketing to support our total solution selling capabilities and the new product initiatives. On a standalone basis, we anticipate SG&A will be in the range of 18% to 19% of net sales. We expect interest expense to be in the range of $30 million to $35 million excluding the $11 million charge that we reported in the first quarter related to the settlement of interest-rate swaps incurred in connection with the refinancing of our new $1 billion credit facility.

We successfully completed the refinancing on April 1 and our new facility is comprised of a $200 million revolving credit facility, a $600 million Term Loan the maturing in 2021 and a $250 million Term Loan B maturing in 2023. As of April 1, we had total debt of $885 million.

Now there are a lot of moving pieces this quarter with the separation and Kristy and I will be available to follow up questions after the call.

Finally, I would like to note that beginning in the second quarter historical results for the flooring business will be moved to discontinued operations and building products will report the following segments, Americas, EMEA and Pac Rim.

With that, I will turn it back over to Vic.

Thanks, Brian. With that, we are happy to take questions.

(Operator Instructions). Dennis McGill, Zelman & Associates.

Thank you. The first question just touched on that last point you made there. So the segments going forward just to understand how this will look beginning next quarter, you will have three segments, those three segments will give both revenue and operating profit and then the $42 million of corporate will be its own line item just to clarify?

Yes, Dennis, this is Brian. Yes, we are going to report just three segments. Now we will still have a corporate unallocated in 2016 but it was largely driven by the separation activity. So, yes, all of that corporate unallocated from prior years will be pushed back into the segments.

Sorry, just to clarify, so the corporate will sit within those segments or will sit outside the segments like you previously did?

The ongoing cost of corporate get pushed into the segments but just to be clear, there will still be a corporate unallocated but it will all be beta or separation related activity.

Okay, understood. So once you get past that corporate unallocated, it goes away.

Correct.

Okay, understood. And then so along those lines, can you just maybe talk to the relative trends? I think you mentioned North America apples-to-apples margin being up about 300 basis point year-over-year. Can you talk to what you saw in the international segments with the topline pressure there?

Yes, Dennis, this is Vic. Let me take that. The first quarter for the Americas was a strong quarter obviously, really hitting on really all cylinders as we talked about even growth at the lower end of the market or the product portfolio so that was very encouraging.

Internationally, we are obviously not happy with the topline results but it was really centered around two markets, Russia and the Middle East. And so the rest of the markets delivered about what we expected to see. I think the Middle East, we saw some additional project delays based on the situation there. And then Russia got off to a really slow start and actually gained momentum in the quarter and I think for the year, we are going to end up about where we expected them to be. So again, it is concentrated in those two markets for us internationally.

China again pretty much where we expected it to be, a little soft in the office segment and as we outlooked in our investor day presentation, we are not expecting these markets to heal very quickly. I did mention in my opening remarks how India got off to a slower start which is one of our largest markets in the region now but we do expect again for the whole year for us to be on track in where we expected that market to perform.

So I think from a margin standpoint how that fell through to EBITDA which I think is more your question, Dennis, it finished pretty close to what we expected because we took the cost actions that we were proactive with in the fourth quarter and we had talked about. So with those, we were able to offset a lot of the softness that we saw in those markets. And again on the bottom line, we finished about where we expected it to be.

Again, we are not pleased with that result and we are still working hard to get these markets back or this whole region back to covering its cost of capital for those investments that we have made there. That is our focus so there is more to do as I mentioned but no surprise on the bottom line really in the international regions.

George Staphos, Bank of America Merrill Lynch.

Good morning. It is actually Alex Wong on for George. Thanks for taking the question. A question on the top line, if we look at the full-year guidance I think of 3% to 7% and it was up about 1% in the first quarter ex currency, what one or two factors do you expect to materialize to accelerate the growth over the balance of the year? I assume there is some easing from more favorable FX trends but with the challenges in EMEA and Pac Rim and you also referenced some tougher comp sequentially if you could just provide a little more color there?

Yes, I think the one thing that will help us get back there is a continuation of what we are seeing in the Americas volume which was strong although the year-over-year comparisons will moderate as I said because of the base period comparisons. But as long as that continues, as we are expecting that will be very helpful obviously.

And then in the international segments again, a lot of the segments that make up our international segments got off to a slower start and accelerated through the quarter and continued into April. So again, there is no reason to believe that this won't continue. We have some pretty good visibility outside of those two regions, Middle East and Russia that I mentioned earlier, that give us a reasonable expectation to continue to be on track for our guidance on the top line.

Nishu Sood, Deutsche Bank.

Thank you. Vic, the comment you made about the lower price points, the repair and remodeling coming back on commercial is encouraging. I was wondering if we could talk through some of the implications of that? The 1% to 3% AUV growth that is expected or baked into the guidance for this year, does it provide -- does that become a challenge with the remodeling coming back?

And also on WAVE, how does the recovery of the repair and remodeling volumes if it continues, how does it affect WAVE? WAVE has obviously been a terrific performer. Does it provide a headwind as it does with the AUV on the WAVE earnings?

So first, on the low-end again, the growth there is very encouraging. As you know the fundamentals in the market drive the R&R sector and those continue to be very uneven and inconsistent across. So for us to have broad-based activity and I mean broad-based across the regions in the US, as you remember in prior calls, we have talked about how uneven and choppy it has been. That was a big difference for us in terms of the uniformity of that across the regions and across the portfolio like we mentioned. So that is very encouraging for us and it is obviously at lower price points and so it becomes a mix headwind.

But the offsetting thing to that that we are expecting continues the growth at the high-end of the market. So that will keep us in the range and we are very encouraged by what we see at the high-end of the margin, both our architectural specialty products as well as the products like the total acoustics that we talked about in the last quarter. We continue to see the traction at that high-end of the market that I think will continue to at least partially offset that nice volume growth at the lower end.

I did outlook an issue that we do expect some choppiness through the year in terms of the R&R sector just based on the fundamentals and where we are so we will keep a close eye on that obviously but we are expecting that to moderate as well as we go through the remainder of the year.

Ken Zener, KeyBanc Capital Markets.

Good morning, everybody. I wonder, just looking at your comments and in the K that you guys have, obviously the widespread higher volume in the US, good thing. You said even at these lower end which I assume we are talking about education, probably some state infrastructure type stuff.

I was just going to say you are right, it was broad-based. I think from a segment standpoint.

This shouldn't be interpreted negatively but I think it is certainly part of a theme that you talked about in the past because there was bit -- I think for the first quarter here a bit of unfavorable AUV in that segment. Could you just kind of walk us through -- I know you have high operating leverage in the business but could you talk about how you would expect this broad-based recovery coming into those lower price points to impact the AUV going forward, the average price?

Yes, again, part of the impact on the AUV was merchandising funds for one of our large retail customers, it is a one-time expense that happens every so often. It hit the first quarter and so I think you are seeing a little bit of that drag in the first quarter. That will obviously go away.

Again growth at the low end of the market, we expect that to remain choppy through the rest of the year. And I think again with consistent growth at the high-end of the market, we should still be within our range on AUV. That is our expectation at this point. So that is in the Americas.

And again the other part that is sitting this AUV number is this international mix that had a pretty good impact on our AUV as well. So it is those factors that are effectively AUV today. Our price was positive in the Americas and so we again we remain on track to deliver that range on AUV.

Keith Hughes, SunTrust Robinson Humphrey.

Thank you. Just kind of building on your last answer, Vic, if we look within the Americas, how much was price up and then what were the negative offsets with these customer promotion funds and the mix impact?

So, Keith, we are not breaking out price specifically but price was not down in the quarter, it was positive in the quarter. The international mix was about one-third of it. The merchandising funds was about another third of it and then the growth, the higher growth at the lower end providing a little bit of a mix headwind in the Americas was the other third.

Stephen Kim, Barclays.

Thanks very much, guys. I guess the question I had was related to the input costs and productivity. Was wondering if you could give a breakdown of the relative sizes of those two components? And then just a clarifying question regarding your previous answer, the lower end mix, is that lower margin also?

Let me answer the first one first, Stephen. It is not necessarily lower margin percentages. They are obviously at the price points you will have different margin dollar contributions at the different price points. But it is not necessarily a lower margin percent. That is a very important question. I'm glad you asked that.

In terms of productivity and deflation, we really had a good contribution from both of them, nice natural gas deflation as well as some raw material deflation which coupled with our consistent productivity gains that we have been delivering every quarter together is really the driver of the 270 basis points of margin improvement in the business in the quarter.

Kathryn Thompson, Thompson Research Group.

Thanks for taking my questions today. Just with rapidly rising steel costs since the start of this year, how will that impact your WAVE earnings contribution for 2016?

Yes, Catherine, one of the things that we are enjoying now is the lower steel input prices and that really helped drive some of our margins in our WAVE joint venture through the first quarter. You are right, prices are going up, we have announced a price increase effective May 1. I want to make sure I got that date right. So and it looks like the industry is following that price increase based on these steel prices so our plan is to stay ahead of the steel price inflation with price increases in the market.

Michael Rehaut, JPMorgan.

Good morning. It is Jason Marcus in for Mike. Going back to the input and productivity costs for a second. I just wanted to get a sense as to how you are thinking about that in the context of the full-year guidance if you are expecting things to remain stable from where they are or if it makes sense some further improvement?

And then also on the SG&A side, I think last quarter you talked about a 20% reduction in EMEA. I just wanted to see if that was completed and if you have any other cost actions in mind for the upcoming quarters?

So on the input and productivity, we were happy to see the first-quarter performance. I think we will see some of that slow down as far as deflation in the rest of the year but still be in a somewhat deflationary period on the full-year.

Then on SG&A, the 20% you referenced was specifically over in China and that has been completed. Some of the cost actions we took in Europe are also completed and we mentioned before that we are in the process of idling one of our China plants in Wujiang.

So more to come there. I think the topline performance as we mentioned in our prepared remarks isn't where it needs to be in our international group and so we are continuing to look at other actions there to offset that softness.

Garik Shmois, Longbow Research.

Good morning. It is David MacGregor on for Garik Shmois. Vic, congratulations on getting this done, doing it on your own. Best of luck.

A question on the mix issue and wanted to just explore if you would the competitive factors that are flowing in the market at both at the high end and the low end? And you noted the strength of low end in the mix. Was there a market share negative dynamic for you at the high end of the mix in the quarter and maybe just talk a little bit about how the competitive environment is evolving?

The competitive environment is pretty consistent. In the new construction part of the market and if that is the fastest-growing part of the market, the projects are visible, everybody is fighting for those projects and we fight vigorously on those projects as our competitors do too. So that has not really changed. There is no real material difference in the competitive landscape when it comes to fighting for every project.

So I think that is an important note. I also think that from a share gain standpoint and I have said this many times before, share doesn't move materially over short periods of time in this market. In fact Armstrong has had a 50% market share in the Americas market for over 30 years so it just doesn't change very rapidly and it certainly hasn't changed at the high end of the market. Certainly with our innovative new product launches that we have had in the last six months and we are going to continue to launch those latest being the sustained platform, we are going to continue to reinforce our leadership position at the high end of the market.

Matt McCall, BB&T Capital Markets.

Back to the international business a second, it sounds like you have completed some moves, think you said there is more to come there. Can you talk about what was the profitability? I think somebody asked this earlier, I didn't catch the answer. What was the profitability in Q1 and then what is the international profitability that is baked into the EBITDA guidance for the year? And ultimately where can those margins go just from structural moves without any real topline improvement?

Matt, this is Brian. We are going to show those splits of the segment starting in Q2. As we showed in our investor presentation, there was minimal EBITDA contribution from that international business and these actions we outlined both at the investor call and today have roughly a two-year payback. We are using some of that benefit to offset the soft market in 2016 and we expect it to contribute more fully in 2017.

Sam Eisner, Goldman Sachs.

Good morning, everyone. So going back to the WAVE comments, if I look at your 10-Q, it looks as though WAVE is up $9 million of gross profit on $7 million of revenue. Pretty exceptional gross margins there. So I am curious what do you have embedded for either incrementals for that business for the rest of the year? And then in addition if I look at your adjusted EBITDA midpoint of around 320, up about $24 million year on year, curious how much of that is strictly related to WAVE deflation or WAVE tailwinds? Thanks.

Sam, this is Brian. So remember what we show in the 10-Q is actually full WAVE contribution so at a 50-50, we get about half of that. So as we move forward and look to the rest of the year, WAVE benefited greatly from the volume especially in the Americas as we noted earlier and they've got some good guys in the quarter around steel, there is some headwinds there with steel prices going up but we believe we've got the right position and pricing actions prepared to help continue that benefit we saw in WAVE.

Jim Barrett, CL King & Associates

Good morning, everyone. Brian, a question for you. The $50 million to $60 million in cash separation charges, would you give us an update as to how much has been incurred through Q1 and how much would you expect to spend in Q2 and beyond?

In Q1, Jim, we had $15 million of cash related to that and so we are still holding the $50 million to $60 million for the full year. Obviously that's flowing through tables and accruals and so forth. So $15 million of cash in the first quarter.

Keith Hughes, SunTrust Robinson Humphrey.

Thank you. You referred in the guidance about $40 million of -- $42 million I think of corporate costs for the year. There is $17 million according to this footnote and this result. Are some of those one time or corporate cost pulled forward? Can you give me some sort of discussion?

Yes, Keith, this is Brian. So as you look at the 17, back out the $3 million of depreciation which is you previously recorded in corporate, another $3 million for the non-cash pension to get down to about $11 million. If it is even across the four quarters you get the $44 million, we have put out there $42 million. So there is a little bit of movement in between the quarters but that is the logic to get to the full year.

This does conclude our question-and-answer session. I would now like to turn the call back over to Vic Grizzle, President and CEO for any further remarks.

I just want to say thanks again everybody for joining us today and for your interest in the new Armstrong World Industries. We are excited about our possibilities as a pure play ceilings company and what our strong leadership positions provides us is a platform. And the strong start to the year in the Americas in particular and our continued ability to expand margins in this business are encouraging and we are going to remain focused on delivering our 2016 plan. We look forward to updating you on our future calls and I want to say thanks again and have a good afternoon.

Ladies and gentlemen, thank you for participating on today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.