GMS Inc (GMS) 2017 Q3 法說會逐字稿

Good day, and welcome to the GMS fiscal third-quarter 2017 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Rodney Noseia, Investor Relations. Please go ahead.

Good morning, and thank you for joining us today for GMS' earnings conference call for the third quarter ended January, 31, 2017. I'm joined by Mike Callahan, President and CEO; and Doug Goforth, CFO. In addition to the third-quarter press release issued this morning, we have posted presentation slides to accompany this call in the Investors section of our website at www.GMS.com.

Turning to slide 2, on today's call, Management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. Examples of forward-looking statements include those related to net sales, gross profit, and capital expenditures, as well as non-GAAP financial measures such as adjusted EBITDA, adjusted net income, and base business sales. In addition, statements regarding potential acquisitions and future greenfield locations are forward-looking statements, as well as statements regarding the markets in which the Company operates, and the potential for growth in the commercial, residential, and repair and remodeling, or R&R, markets. As a reminder, forward-looking statements represent Management's current estimates. The Company assumes no obligation to update any forward-looking statements in the future.

Listeners are encouraged to review the more detailed discussions related to these forward-looking statements contained in the filings with the SEC, including the definitions and reconciliations of non-GAAP measures. Note that references on this call to FY17 relate to the year ending April 30, 2017, and references to the third quarter relate to the quarter ended January 31, 2017.

With that, I will now turn the call over to Mike.

Thank you, Rodney, and thank you everyone for joining us today. On our call, I will discuss our most recent operating highlights and acquisitions. Doug will then provide details on our financial results and our capital resources. After our prepared remarks, we will open up the call for your questions.

Now turning to slide number 3, our diversified growth strategy drove improvement across all of our metrics during the quarter. We produced another quarter of record results, with net sales growing 33.8% year over year to $562.5 million. Our national scale, differentiated service model, and successful acquisition strategy has driven considerable momentum in our business, resulting in double-digit gains in net sales for the 23rd straight quarter. In our base business, net sales increased 15.5%. Stronger residential and commercial activity, combined with accretive share gains, allowed us to out-pace the market. This underlying improvement in our operations is quite encouraging, and we also benefited from one extra shipping day during the quarter.

Now, acquisitions completed over the past two years have contributed to approximately 60% of net sales growth during the quarter. We made one acquisition in the third quarter, which marked our entry into Indiana, and shortly after the end of the quarter we closed an additional transaction which expanded our operations in Hawaii.

Net income increased significantly to $8.2 million during the third quarter, over the same quarter last fiscal year, driven by strong sales and margin gains. Our gross margin of 33% rose 110 basis points, helped by pricing discipline, improved purchasing opportunities, and mix. That pushed us above our longer-term target of 32.5%. This solid gross margin performance is a valuable strength in our business, and directly contributed to the 58.4% increase in third-quarter adjusted EBITDA to $40.7 million, compared to the third quarter of FY16.

Now since our IPO, we have made significant operational progress, as demonstrated by increasing sales, expanding margins, and multiple acquisitions. We are accomplishing this while further strengthening our balance sheet and improving our credit metrics. During the third quarter, we took further steps to improve our liquidity, with an expansion of our ABL credit agreement to $345 million from $300 million, and under more favorable terms to GMS. Our leverage profile continues to improve, with our net debt to pro forma trailing 12-month adjusted EBITDA ratio standing at 3.1 times, providing us with the balance sheet strength to continue to advance our growth strategy.

Looking more broadly at our multiple growth drivers on slide number 4, over the past 12 months we have had a strong run, with core market share gains, new branch openings, and strategic acquisitions, all of this aided by favorable underlying commercial and residential demand. Our balanced exposure to the commercial and residential markets provides us with wider access to project activity, which is driving positive results. Wallboard and other product sales have benefited from stronger residential activity, while ceiling and steel-framing volumes have benefited significantly from the pick-up in commercial activity. Rising commercial activity is also having a positive impact on wallboard and other products, as well. Through a combination of these factors and the layering-in of acquisitions completed during the past two years, we have grown net sales to $2.4 billion on a pro forma basis in the third-quarter trailing 12-month period. This has produced pro forma adjusted EBITDA of $194.4 million during that same period, compared to $150.3 in FY16. We believe that our multiple growth drivers provide us with a very sustainable path to continued success on the top and on the bottom line.

In the third quarter, residential demand continued to outpace commercial activity in many markets, and we grew faster than the market. This trend was consistent over the past 12 months, resulting in notable share gains in our largest business, wallboard. Acquisitions accelerated our organic momentum, increasing our wallboard share by 120 basis points to 14.3% during calendar 2016, as compared to 13.1% in calendar year 2015. As I have discussed today, these share gains are driving steady margin expansion from national scale advantages and efficiently managed operations. I am extremely pleased with our progress to date in FY17, and we have a very firm base of activity, which we believe will allow us to maintain the solid momentum in margin expansion into the fourth quarter and in FY18.

Now turning to the acquisitions on slide number 5. Since the beginning of the third quarter 2017 we have made two very complementary acquisitions. The first opportunity fit within our objective to acquire leading local distributors as footholds in targeted new markets. The second was a bolt-on transaction that helped us to deepen our presence in an existing market, and expand our service capabilities. Now I will provide a little bit more detail on both of these great companies.

In December, we acquired Interior Product Supply, or IPS, as they are called, which marked our entry into the Indiana market. IPS is a leading supplier of interior building supplies to professional contractors throughout Northeastern Indiana, and we could not think of a better partner to facilitate our entrance into this market. The highly skilled IPS team's dedication of quality service, led by a motivated Management team, fit like a glove onto our platform. In February, we enhanced our presence in Hawaii with the acquisition of Grabber Construction Products' Hawaii-based distribution business, a highly regarded supplier of fasteners and drywall-related products based in Honolulu. Grabber materially expanded our footprint, our physical facility, and the product offering in the state. Combined with the backing of our national resources and support, we have a greatly enhanced operation to grow our local share.

Our robust deal activity since the start of FY17 really builds on a very long history of successful transactions. Our seasoned operators and employee-centric culture allows us to source, purchase, and on-board these transactions, in order to quickly realize the benefits of our national scale and to retain key team members. Accordingly, we expect accretive acquisitions to continue to supplement our strong organic growth moving forward. While several of our 2017 acquisitions required significant and materially increased revenue on a comparable basis, we have the capital resources to continue accessing this robust acquisition pipeline, yet stay within our target range of purchase price multiples and prudent leverage ratios.

Now with that, I will turn the call over to Doug to further discuss our growth strategy, our third-quarter financial results, and our capital resources. Doug?

Thanks, Mike.

Beginning with third-quarter financial results on slide 6, our versatile approach to win new business, complete accretive acquisitions, and outpace the tail winds of stronger demand are driving very positive results in our business. We had a lot of success during the quarter, with sales growth of 33.8% to $562.5 million, and adjusted EBITDA growth of an even more impressive 58.4% to $40.7 million. We increased base business sales during the quarter by 15.5% year over year, with double-digit increases in each product category, led by other product revenues. We had a marginal benefit from one additional shipping day, with 62 days in the third quarter 2017, compared to 61 days in third quarter 2016.

Looking at a more detailed breakdown of base business and total sales growth by product, wallboard volumes increased by 30.5% in the third quarter compared to the third quarter of FY16, including 15.6% base business improvement. This drove wallboard net sales up 29.5% year over year, while wallboard price was down slightly year over year. It was relatively stable on a sequential basis, compared to the second quarter of FY17.

In our exclusively commercial focus business, our ceiling sales increased during the quarter by $16.4 million, or 25.1% year over year, including a 16.5% increase on a base business basis. Ceiling grid volumes had another quarter of growth, and ceiling tile volumes saw good pull-through demand from higher grid activity in recent quarters. Both ceiling grid and ceiling tile also benefited from improved year-over-year pricing. Steel framing increased during the quarter by $27.6 million, or 41.8% year over year, including 16.6% on a base-business basis, mainly driven by stronger volume and price gains. Stronger sales, combined with increased product margins, helped drive an increasing gross margin of 110 basis points to 33% for the quarter. Our national scale, diverse product categories, and disciplined cost controls continue to drive improved performance in our business, and margin expansion in all product categories. This improvement was mainly attributable to pricing discipline, improved purchasing opportunities, and mix.

We continue to make strategic investments in equipment, technology, and branch talent, including product sales specialists to support expanded opportunities. These investments have been paying off with higher gross profit dollars, and during the quarter we further benefited from modest SG&A leverage. As a result, we grew adjusted EBITDA by a solid 58.4% to $40.7 million, with our adjusted EBITDA margin of 7.2%, up 110 basis points from the prior-year period. We expect to grow our business based on our accretive investments, which we expect will allow us to leverage our SG&A over time to continue to drive additional EBITDA gains.

Moving to other product sales on slide 7. Our sales continue to be led by the exceptional momentum in our Other Products group, which includes joint compound, tools and fasteners, insulation, and various other construction products. During the quarter, Other Product net sales increased 43.4% year over year, or 19.2% on a base-business basis. This growth highlights the strength in our one-stop-shop solution for customers by supplying nearly everything that our typical specialty contractor customer needs on a job site. As an example, during the third quarter we expanded third-party sales from our internal distribution operation for tools and safety products. The significant pull-through force of wallboard, ceilings, and steel framing sales was also a driving factor of outside performance in this quarter, along with price optimization on certain products, and retail showroom expansions and re-sales.

On slide 8, we take a deeper look at our gross margin performance. The stable improvement in our gross margin is a significant contributor to our adjusted EBITDA growth. Our national scale, comprehensive product offering, balanced end markets exposure, and accretive acquisition strategy have given us a more resilient demand profile across multiple points of the cycle, resulting in a very stable gross margin profile. In the third quarter of FY17, on a trailing 12-month basis, our gross margin was 32.8%. This was 90 basis points above FY16, and 380 basis points above FY12, which has been achieved through rising sales and a focus on procurement costs.

Most of our wallboard suppliers implemented price increases in late January 2017, which, combined with strengthening end-market conditions, has allowed us to raise price with our customers. With that said, we would like to emphasize in the bottom right chart that our ability to deliver strong gross margin performance is not dependent on higher wallboard price, or any one product in our portfolio. Again, our ability to deliver solid gross margin performance is not dependent on higher wallboard price, or any one product in our portfolio. As you can see in the top right chart, our margin has generally trended higher, with overall rising sales. This clearly demonstrates our ability to steadily grow profitability through our specialty distribution market leadership, diversified mix of businesses, and proven operating strategies.

Turning now to our capital structure on slide 9. At January 31, our net debt to pro forma adjusted EBITDA stood at 3.1 times, stable sequentially compared to the prior two quarters, and down from 4.3 times as of April 30. Liquidity in the business remained strong, with $10.6 million of cash on hand, and $214 million available on our credit facility as of January 31. During the quarter, we expanded the borrowing capacity of our ABL agreement to $345 million from $300 million, lowered the applicable annual rate by 25 basis points, and extended the term until November 2021. We remain committed to improving and preserving our financial flexibility to execute our growth objectives. We've made tremendous strides to strengthen our capital position during the past several years, and will continue to take proactive steps to further improve leverage metrics.

Regarding cash flow, during the first nine months of FY17 we more than doubled our operating cash flow to $36.4 million, compared to $17.9 million in the same period last year. Third-quarter CapEx remained below 1% of sales, which we continue to expect to range from $8 million to $10 million per annum going forward, consistent with the prior year.

In summary, we are extremely pleased with our progress during FY17 and over the past 12 months. As we have discussed today, our multiple growth drivers have increased sales to approximately $2.4 billion on a trailing 12-month basis pro forma, representing approximately 27.7% growth year over year on a pro forma basis. We believe net sales will continue to grow in the coming quarter and into 2018.

While our gross margin in FY17 has performed better than our current expectation of 32.5%, we continue to see that margin level as the appropriate near-term expectation. We remain focused on driving higher gross profit dollars to outpace strategic SG&A investments and spend. This will allow us to grow adjusted EBITDA while improving our adjusted EBITDA margin as a percent of net sales year over year. Given our position as a leading specialty distributor, we believe we can accomplish this profitable growth in a lower-risk, more efficient manner as we complete FY17, and look ahead to FY18. Mike?

Thanks, Doug.

In conclusion, and looking at slide number 10, again thank you for joining us today. We have worked very hard to profitably grow our Company for more than 45 years, with an objective to be among the best specialty distributors in the business. More recently, since our IPO, we have added to our list of accomplishments with strong double-digit sales growth for consecutive quarters, and a 60 basis-point improvement in trailing 12-month adjusted EBITDA as a percent of sales.

Since our IPO we have added nearly 20 branches, including 16 from very complementary acquisitions, to end the quarter with over 200 branch locations. As a result, we have further solidified our position as the leading North American specialty distributor of wallboard, ceilings, and complementary interior construction products. In addition to this progress, we have improved our leverage metrics, and expanded our capital base on more favorable terms to fuel our future growth. In February, we successfully completed a secondary offering, which has allowed additional investors to participate in the very exciting story that continues to unfold here at GMS. We are very focused on driving value for our shareholders, and we truly believe that we are well situated to sustainably produce above-market growth through our relentless focus on operational excellence, and our customer-centric differentiated service offering.

With the continued dedication of our talented and highly motivated colleagues throughout the country, we believe we have the right strategy, along with a very strong capital base, to expand our industry-leading positions at attractive margins, and continue to pursue accretive acquisitions. Again, we sincerely appreciate your interest in our Company, and look forward to fielding some of your questions this morning.

Operator, we are now ready to open the call up for questions.

(Operator Instructions)

We will take our first question from Mike Dall of Barclays. Please go ahead.

Hi, good morning. This is Matt Bouley on for Mike today. Thank you for taking our questions.

Hi, Matt, how are you doing?

Hi, good. I wanted to start out with a question on gross margins and the ability you mentioned to push product margins, regardless of what's happening with the manufacturer price increases. Mike or Doug, would you be able to elaborate a little bit on just how the procurement and pricing optimization strategies you're doing have gotten margins to where they are today? And then how you see those factors playing into the fourth quarter, and in the context of your longer-term target? Thank you.

Sure Matt, this is Doug. I alluded to it somewhat in my comments. In the third quarter we had not only the disciplined pricing, but we had some purchasing opportunities that we were able to capitalize on, particularly around some of our product annual calendar rebate programs that we were able to really kind of maximize that.

We've talked about before, our purchasing group here, which controls the national relationships with the wallboard guys, has just done a phenomenal job working with all of our divisions to make sure that from a price standpoint we're optimizing our purchases. Those guys work together closely, regularly updating each other on how we're trending, et cetera, to make sure we get there. Then, once they achieve the current year's goals, they work on expanding those goals for the next calendar year.

On a pricing point of view, with our Level IX pricing tool in our ERP system, that really helps the divisions maximize their price. They have tiered pricing for different products and customers. It gives the guys right there on the spot, when they're quoting work, the recommended prices.

It doesn't require them to take that, because this is a local business, they make those decisions. But it certainly flags when there's exceptions where we're not taking that price. It goes up to the managers who are running those places locally, and they pay pretty close attention to that. That's making sure that particularly on those other product categories that we're really getting the appropriate price from our customers to pay for our service.

Yes, and I would emphasize, too, the other product components, the other product sales growth, and the opportunities there. We're really just plowing the surface on that at this point, too. We see a lot of additional opportunity and growth in that component, as well.

Okay, got it. Thank you for that. For my follow-up, I wanted to ask about the M&A market, and how deal multiples are trending? Have you sensed any changes in the competitive environment for deals, and how is your sourcing of deals progressing this year? Thank you.

Okay, Matt. Yes, this is Mike. I'll tell you the truth, it's been pretty consistent. I think we probably are competing on acquisitions with the same -- probably the same players, and have not seen any shifts there. I think the multiples are relatively consistent -- have not seen a big change in that.

As far as the pipeline goes, it is really consistent this year to last and the year before. We probably have 15 to 20 active discussions or active opportunities at varying stages in the process at any one point in time. That really hasn't shifted. I think the market is going to continue to consolidate, and we intend to take a leading position in that consolidation.

That's great. Thanks, guys.

Thanks.

We will move on to our next question from Bob Wetenhall from RBC Capital Markets. Please go ahead.

Hi, Mike, Doug, good morning.

Hi, Bob, how you been?

I'm real well, thanks. You guys posted terrific base business growth. It sounds from your prepared commentary that the residential side is booming, and you're also seeing an up-tick in commercial.

Can you give us a little bit more granularity around what you're seeing in the field? Is this something that was consistent with your internal forecast, or ahead of what you were expecting? How do you see this unfolding during the rest of the calendar year?

Well, we actually got a little bit of feedback from some of our guys in the field. I would say that as a just a general statement, particular in some of the bigger major metro markets, we're seeing significant activity and up-tick in Class A construction space. That drives obviously the full complement of products, from ceiling, steel, wallboard, you name it. That seems to be a common story throughout the country. I think that's definitely a big factor.

Of course, we continue to see work around any college cities or towns, or military bases, and that kind of thing. That tends to drive a lot of the commercial activity, as well. I would say it's probably consistent with where we thought this market was going to head. It may be a little bit better. But it's certainly a pleasant surprise, if it's a surprise, because we definitely have seen some strong backlog, and really continuing strong quote activity, to tell you the truth.

Bob, we've been telling you guys forever that ceilings is a double-digit business, right? (laughter) Don't model that, but as Mike -- just to add to that. The thing about the Class A and the expansion there is, that's obviously higher-end product going in there. You've got not only higher-end ceiling tiles, but also higher-end grid, et cetera, so that's a driver.

Then Mike talked about a lot of the big projects that are going on really all over the country. Almost all of our divisions saw double-digit growth, particularly on commercial products.

It's really, you can follow the cranes there. If you look at a place like Seattle, and see just how many cranes they have going out there, particularly compared to their share of all the cranes in North America, that's really in those areas, in those markets, where we have a meaningful presence. That's where we're seeing it.

Speaking of tech companies, you guys have a growth margin like Facebook. I mean, 33% is pretty sweet. If you see wallboard pricing stick, and you also get customary increases in ceiling grid and tile, how much more room to run do you have on the growth line?

You are making some SG&A growth investment, but the 7% margin's great for a distributor. What can that go to if the recovery unfolds, and is it going to be driven more by benefit from gross margin contributions and more leveraging SG&A?

I'll let Mike take the question, but I just want to hit on one thing. That was 7% for the quarter. We're an 8% EBITDA business right now, over 8%. That third quarter is our trough quarter, because even though it was a mild winter, it's still a traditionally slower time of year. That's really when our EBITDA as a percent of sales tends to be at its lowest point. Our expectation is to jump back up to what we saw in the previous quarters, first and second quarters. Then, as we talked about, we will continue to accelerate in the future. Mike?

Yes, Bob, as far as the pricing of the up side opportunities, we certainly -- it would be our goal to continue. I think it's highly possible for us to continue to expand the profitability base.

As far as the pricing goes, we still maintain the position that the manufacturers are very firm in holding the price. We're up. Our prices are up, and we're quoting the up number to all of our customers.

As far as pricing goes, A, we think it's very solid right now. We think we will continue to generate operating leverage from our SG&A investments, and our EBITDA can continue to expand. I think we're in a very good position, as we talked about earlier.

I would add that just as some of the public manufacturers have said, it's really April when you're going to find out what's going to --

What's going to settle, yes.

You got a view on magnitude of price increases that you guys are up across the network? Is it mid-single digit, low teens, ball park?

No, we would rather talk to that in April time frame.

Yes, I would agree.

Fair enough. One other question. Your Other Products segment is showing explosive growth. What are the specific items that you sell in that product line, and why is the growth so extraordinarily strong?

Well, that includes insulation, tools, fasteners, joint cement, specialty products like [EFUS] and things such as that. I'll tell you the truth, I think a lot of it just comes with the fact that we've just put a lot of energy and focus on our retail showrooms. You've seen those. They really do showcase the broad array of products that we can offer.

We put some corporate resources, and frankly, we put incentive programs in the field level to help drive those sales, with specialty sales people who really do focus on growing that product line. We're really fighting that battle on a number of fronts, and I think we're generating very positive returns as a result of the focus on that.

The model's working, you shaved off 1.5 turns of leverage in a year, basically, and you've still got the M&A program. What's your leverage target? Once you get there, what are you going to do with the extra free cash flow you have?

Thanks, and good luck. Congrats on a great quarter.

Thanks, Bob.

Well, as we've talked about short term, our priority are acquisitions, CapEx, and then paying down debt. Longer term, both Mike and I believe that the appropriate leverage target for the Company is less than 2.5 times. That's when we'll turn around and flip it that where the acquisition pace has slowed down to maybe two or three a year, and we're focused more on paying down debt, then CapEx, then the acquisitions. That's where we're at, and we can get there pretty quickly once the acquisition has slowed down.

Operator, next questions please? Next?

All right. We'll move on to our next question from David Manthey from Baird. Please go ahead.

Good morning, guys. Last quarter you implied that steel framing pricing, I believe, was up a double-digit number. I'm wondering if you can give us an idea of what it looked like this quarter?

Also on ceilings, I think you mentioned you're getting some positive pricing there. Any bigger-than-a-bread-box information about this quarter?

Both ceilings and steels on a price basis were up about between 3% and 4% on average from last year. The rest of the increase was --

Volume-related.

Was volume, yes.

Okay, all right. Then price aside, you mentioned some of the Class A, which is probably leading to a positive mix there. Could you talk about the mix of products, whether you're seeing stronger 1/2-inch, 5/8-inch, any increase in mold-resistant product? Anything else that would be helping that price mix variable?

5/8-inch was up a little bit in some of the specialty products, but I wouldn't say meaningfully. It was really more impactful on the ceilings and the grid side of things.

Yes, I think we're seeing a continued growth -- first of all, the Class A space is going to command -- I think Doug touched on this earlier -- a higher value, AUV type of product price. You're going to have higher-end product going in.

Frankly, the AS products, the architectural specialty products, continue to grow. We've got a lot of focus on that, and the guys are hitting some pretty good home runs, with some very significant work out there on the AS arena, as well.

We'll move on to our next question, Keith Hughes from SunTrust. Please go ahead

Thanks, this is Judy in for Keith.

Hi, Judy.

Good morning. If I could just put in one more on the ceilings. You talk about the pick-up in the commercial environment and the Class A space. What about just for the renovation, or is this -- those types of projects and that kind of activity, or versus big projects and big jobs?

It's really -- on Class A, it's really both, Judy. I'm sure you being here in Atlanta, you know some of the bigger projects that are going on. Georgia-Pacific is re-doing their tower, so there is a mix of both new and R&R. Particularly, there's just a lot of companies that I think feel comfortable now in investing in on the R&R side of things. Again, that tends to be higher-end product.

Of course, that plays to our sweet spot in terms of service and deliveries, because a lot of those jobs require after-hour stocking, and delivery to an existing structure and the like. It really does play into our service model, as far as our capabilities to do whatever we need to do at night or in the morning, or whatever to get the job done.

We've also -- particularly in this market -- benefited a lot from the stadium work, as both of those guys are getting pretty close to completion, particularly the SunTrust Stadium, which we had a lot of work go into in the third quarter.

Okay, great. Then just one more on the Other products, the good growth you saw there. It seems like it's a combination of a lot of things, aside from just the pull-through of the complementary products. How far are you on the retail initiative that you talked about last year, expanding those showrooms on that?

Our marketing group has assisted with about 40 locations at this point, and that some of the -- targeting some of the larger locations, obviously. But we've also had some of our divisions that have done a lot of things on their own, and I'm not really sure what that number is. But I would say we're probably about -- maybe 30% through where we need to be.

Yes, I would agree, 30% to 40% at most. The exciting thing about that, too, is so many of these acquisitions, we have an opportunity to -- we bring companies into the fold, and they see what we're doing with the retail showrooms. We have an opportunity to really refresh their inventory offering, and in most cases expand the show room.

It creates a whole new energy level and enthusiasm at those businesses, and frankly helps to drive our tool source warehouse subsidiary to continue to drive more product sales through our networks. It's really a great symbiotic relationship between the acquisitions and the expansion of that other product category.

Okay, good point. Thanks, guys.

Thanks, Judy.

We'll take our next question from Kevin Hocevar from Northcoast Research. Please go ahead.

Hi, good morning guys, and nice quarter.

Thanks you.

I was wondering if you could help me. On slide 6, you show that your base business wallboard volume was up 15.6%, and that the base business wallboard sales were up 13%. If I'm reading that right, I think it implies price and mix were a 2.6% headwind. Am I reading that right? If so, how much of that is like-for-like price, versus geographic or product mix?

Your number on price is pretty close, yes. In terms of -- what was -- I'm sorry, repeat your question on --?

Yes, so of that -- call it 2.6% -- how much is like-for-like price, versus geographic or product mix, between 1/2-inch 5/8-inch? How much was price versus mix?

As we talked about earlier, the mix -- at least between 1/2-inch and 5/8-inch didn't really change that much read, and on a geographic basis not really that changed. It's really just overall product price changes.

Got you, okay. I was curious with -- how does -- the wallboard manufacturers are likely seeing inflation with paper prices that have gone up a lot. Does that -- how does that factor into your conversations with them as time progresses? Do you expect that to have a factor on the price of wallboard as we progress through the year?

Well, I would say that certainly raw materials costs -- not just paper, but energy and the like -- they've experienced increases in all of those areas. That's a lot of the conversation we have with our customers in trying to explain why we're going up.

Frankly, I think that as paperboard or paper costs continue to go up they're going to have the same issues to deal with. I would anticipate more prices going forward. Whether that happens in the year, I don't know about that. But they certainly I think have left the door open that if there were a rapid rise in cost, they would leave that door open.

Got you, okay. Then curious if in terms of your inventories, were you able -- I think last quarter you said it was tough to do any pre-buy of wallboard because it was going out the door as quick as you were getting it in. It looked like your inventory, at least on a per-branch basis, was up a little bit, but not a whole heck of a lot.

Was that -- did that remain the case throughout the quarter, or were you able to do any pre-buy ahead of that price increase? I'm wondering if you could comment on if there was any pre-buy activity ahead of the wallboard price increase?

It was fairly limited. We had a little bit. But again, the product was still turning 14 times a year at wallboard, so it's still that same situation. It's just really hard to get any really meaningful amount of extra inventory ahead of a price increase.

Got you. Okay, all right, thank you very much.

Thank you.

This does conclude today's question-and-answer session. I'd like to turn it back to Mike Callahan for any additional or closing remarks.

Again, we really appreciate your participation on our call today, and we look forward to reporting next quarter's results. Thank you.

This does conclude today's presentation. Thank you for your participation, you may disconnect.