禮恩派 (LEG) 2014 Q1 法說會逐字稿

Greetings and welcome to the Leggett & Platt first-quarter 2014 conference call.

(Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David DeSonier, Senior Vice President, Strategy and Investor Relations for Leggett & Platt Incorporated. Thank you, sir. You may begin.

Good morning and thank you for taking part in Leggett & Platt's first-quarter conference call. With me this morning are the following:. Dave Haffner, our Board Chair and CEO; Karl Glassman, who is President and Chief Operating Officer; Matt Flanigan, our Executive Vice President and CFO; and Susan McCoy, our Staff VP of Investor Relations. Perry Davis, who is Senior Vice President of the Company, and President of the Residential Furnishing Segment, is also joining us this morning to participate in Q&A.

The agenda for our call this morning is as follows: Dave Haffner will start with a summary of the major statements we made in yesterday's press release; Matt Flanigan will discuss financial details and address our outlook for 2014; Karl Glassman will provide segment highlights; and finally, the group will answer any questions that you have.

This conference is being recorded for Leggett & Platt and is copyrighted material. This call may not be transcribed, recorded, or broadcast without our express permission. A replay is available from the IR portion of Leggett's website.

We posted to the IR portion of the website a set of PowerPoint slides that contain summary financial information, along with segment details. Those slides supplement the information we discuss on this call, including non-GAAP reconciliations.

I need to remind you that remarks today concerning future expectations, events, objectives, strategies, trends, or results, constitute forward-looking statements. Actual results or events may differ materially due to a number of risks and uncertainties, and the Company undertakes no obligation to update or revise these statements. For a summary of these risk factors and additional information, please refer to yesterday's press release, and the section in our 10-K entitled Forward-Looking Statements. I will now turn the call over to Dave Haffner.

Thank you, Dave. Good morning, everyone, and thank you for participating in our call.

Yesterday, we reported record first-quarter earnings of $0.37 per share, a 12% increase versus EPS of $0.33 in the first quarter of 2013. This increase reflects an improved mix of sales across our business units and a small gain from the sale of a building.

These factors were partially offset by the earnings impact of lower same-location sales. Same-location sales decreased 3% during the quarter, primarily from lower volume in store fixtures and commercial vehicle products, versus strong prior-year comps in both businesses, in addition to weather-related demand weakness in the US bedding and wire markets. These declines were partially offset by continued growth in automotive, residential furniture, and international spring.

Consistent with market and public Company commentary over the past few months, virtually all of our US-based businesses were negatively impacted in the first quarter by extreme winter weather. These impacts included softer-than-expected market demand, production and transportation inefficiencies, and higher energy costs. Weather-related issues subsided in the latter part of the quarter and sales momentum improved notably.

Following a very soft January and February, March same-location sales were up 6%, and April sales should be positive as well. Karl will discuss the various business impacts in his comments.

Despite the first-quarter challenges, the EBIT margin, adjusted to exclude the $4-million building gain, remained at the level achieved in the first quarter of 2013. The Company has a high priority on margin enhancement, and has engaged in many continuous improvement, lean manufacturing, and cost-containment initiatives throughout the enterprise.

We assess our overall performance by comparing our total shareholder return to that of peer companies on a rolling three-year basis. Our target is to achieve TSR in the top one-third of the S&P 500 over the long term, which we believe will require an average TSR of 12% to 15% per year. So far for the three-year period that will end on December 31, of 2014, we have generated TSR of 22% per year on average, which places us just above midpoint of the S&P 500 companies.

I will now turn the call over to Matt Flanigan who will discuss some additional financial details, along with our outlook for 2014. Matt?

Thank you, Dave. Good morning, everyone. Increases in working capital from very low end 2013 levels led to negative operating cash of $20 million for the first quarter. This compares with positive operating cash of $24 million in the first quarter of 2013.

Working capital typically increases in the first quarter, and operating cash is normally at its lowest quarterly levels of the year due to the seasonal pattern of our businesses. This year, there was a larger number than usual in working capital of these factors. Accounts receivable were impacted by the timing of sales in the quarter, and growth in businesses in geographies that typically have longer payment terms.

As Dave stated earlier, sales improved as the first quarter progressed, contributing to increased receivables towards the end of the quarter. Inventory also increased in the first quarter, primarily from specific opportunistic raw material purchases, ramp-up of new product lines, and weather-related transportation delays.

We continue to gradually optimize accounts payable levels, but the rate of incremental improvement has slowed. We ended the first quarter with days payable outstanding at 43 days, which represented a four-day improvement compared to last year. With these increases, we ended the quarter with working capital at 13.3% of annualized sales, slightly above the 12.9% we reported in the first quarter of 2013, but still well below our 15% target.

Based upon our current annual forecast and our normal seasonality, we expect to again generate operating cash of over $350 million for the full year. Dividends should require about $170 million of cash in 2014, and capital expenditures should approximate $100 million. Our depreciation and amortization expansion total about $120 million.

With current capacity utilization rates still relatively low, our need to invest in additional productive capacity is limited. We continue to make investments for maintenance, efficiency improvement, and growth in businesses and product lines where sales are strong. As volumes improve, we expect capital expenditures levels to increase, but longer term, they will likely remain at or below total depreciation and amortization.

Our incentive plans emphasize returns on capital, which include net fixed assets and working capital. This emphasis, we believe, helps ensure that we are efficiently utilizing our asset base, and investing capital dollars where the highest return potential exists. Returns should continue to improve as we expand EBIT margins while controlling invested capital.

In February, we declared a quarterly dividend of $0.30 per share and extended our record of consecutive annual dividend increases to 43 years. At yesterday's closing price of $33.74, the current yield is 3.6%, which is the fourth highest among the 54 companies that comprise the S&P 500's dividend aristocrats.

In other uses of cash, we repurchased 1.5 million shares of our stock in the first quarter and at average price of $30.25, and issued 1 million shares. Consistent with our stated priorities for the use of excess cash flow, we will prudently buy back our stock, bearing in mind our level of cash generation, other potential opportunities to strategically grow the Company, and the overall outlook for the general economy. We have a standing authorization from the Board to repurchase up to 10 million shares each year, but have established no specific repurchase commitment or timetable.

Our financial base remains very strong, and this gives us considerable flexibility when making capital and investment decisions. We ended the quarter with net debt to net capital of 31.5%, which is near the conservative end of our long-standing target range of 30% to 40%.

We continue to expect sales growth to accelerate in 2014, and EBIT margins to expand. Reflecting recent strength in key markets, we have raised the low end of our prior earnings-per-share guidance by $0.05, while leaving sales guidance unchanged. Specifically, we still anticipate sales of $3.85 billion to $4.05 billion, or 3% to 8% growth, versus 2013.

We now expect 2014 earnings per share of $1.70 to $1.85, which would represent another year of record earnings from continuing operations. This compares to adjusted continued operations EPS of $1.54 in 2013.

I will now turn the call over to Karl who will provide some additional segment comments.

Thank you, Matt and good morning. In the residential furnishing segment, same-location sales increased 2% in the first quarter. Volume trends were mixed across the segment.

In our US spring business, sales decreased 4%. Inner spring unit volumes were down 6%; however, growth in comfort core inner spring category continued, with those higher priced and higher margin units up 19% during the quarter.

Box spring volume decreased 1%. Sales grew 10% in international spring, primarily from market-share gains and increased comfort core sales in Europe.

In furniture components, sales increased 6% in the first quarter, volume in our seating and sofa sleeper businesses grew 6%, and motion hardware unit volume was up 5%. Adjustable bed units were up slightly in the quarter. New adjustable bed programs have begun to ramp up and this should drive significant volume growth in the back half of the year.

Weather negatively impacted most of our US-based residential businesses early in the quarter, but especially our bedding-related operations and carpet cushion. Volume improved across the segment as the quarter progressed, and stronger demand patterns should continue as we move through the second quarter.

Segment EBIT and EBIT margin for the quarter increased versus first quarter of 2013, primarily from higher sales and cost improvements. A $4 million gain from a building sale in the current quarter was largely offset by the non-reoccurrence of a $3 million hurricane-related insurance gain last year.

In the commercial fixture and component segment, same-location sales decreased 22% in the first quarter. Store-fixture sales declined significantly due to the non-reoccurrence, as expected, of certain major retailer programs from early 2013. Volume and office furniture components grew 4% during the quarter, from a combination of new programs and improved market demand.

Segment EBIT and EBIT margin decreased versus the first quarter of 2013, primarily due to lower sales. We are disappointed with the current year demand levels in store fixtures.

In the second quarter, the group sales are forecasted to be approximately $25 million lower than they were in the second quarter of 2013, due to the non-reoccurrence of major retailer programs. In the past year, we have refocused our sales efforts in an attempt to decrease customer concentration and seasonality in this business. While we believe we are making progress with new customers, many expected new programs have been slow to start. In response, we are reducing costs in each operation to offset some of the earnings impact from very soft sales.

In the industrial materials segment, first-quarter same-location sales decreased 12%, primarily from lower unit volumes in wire and rod. EBIT and EBIT margin for the segment decreased during the quarter.

In many of the segments' operations, but especially in wire and rod, sales volume, product efficiency, transportation, and energy costs were negatively impacted by extreme weather. These issues have begun to subside, as we move into the second quarter.

In addition, metal margins continued to be under pressure in the first quarter, as market conditions did not allow us to fully recover higher scrap costs. But we expect improvements in the back half of the year, as overall steel market conditions improve. Our domestic aerospace business, which resides in this segment, continues to perform very well, and earnings should further benefit in 2014 as we fully integrate our European acquisitions.

In the specialized product segment, same-location sales grew 6% in the first quarter. Automotive sales increased 17% from a combination of expanded content, participation in new vehicle platforms, and demand strength in each of our major geographic markets. Same-location sales increased 3% in machinery.

In commercial vehicle products, sales declined significantly, versus a strong first quarter of 2013. The segment's EBIT and EBIT margin increased during the quarter, primarily from higher sales in the non-reoccurrence of a litigation accrual from the first quarter of last year.

With those comment, I will turn the call back over to Dave Haffner.

Thank you, Karl. As we look ahead at the balance of 2014 and beyond, we continue to be very encouraged by the opportunities we are seeing in many of our markets. WIth consumer confidence in housing generally on an upward track, our residential furniture components and bedding businesses are poised to benefit as demand in those end market improves. Expected global growth in the automotive production, along with new programs that we are winning should support strength in that business for the next several years.

The outlook for the office furniture industry anticipates improving long-term demand, and consumer-specific programs should augment that growth for us -- excuse me, customer-specific programs. And customer backlogs in aerospace support industry demand strength in that business for several years into the future. And with those upbeat closing comments, I will turn it back over to David DeSonier.

That concludes our prepared remarks. We appreciate your attention, and we will be glad to answer any questions. In order to allow everyone an opportunity to participate, we request that you ask your single best question and then voluntarily yield to the next participant. If you have additional questions, please re-enter the queue, and we will answer all of the questions that have you. Christine, we're ready to begin the Q&A.

(Operator Instructions)

Our first question comes from the line of Josh Borstein with Longbow Research. Please proceed with your question.

Good morning, everyone. Thank you for taking my questions here. In the industrial materials segment, if you back out the aerospace business, it looks like margins in the rest of the segment were perhaps mid single digits. Can you talk about the current steel costs, the traction on some of the price increases you recently placed into the market, and also your expectations for metal margins over the next quarter or two?

Yes, Josh, good morning, this is Karl. As you'll recall, that scrap cost increased pretty significantly in November and December of last year. And reactive to that, we implemented price increases in both wire and rod, and actually extended into the wire-based component side of our businesses. All of those increases stuck and are in place as we speak.

Scrap has continued to inflate, or I should say re-inflate in April and May, so we have announced a new round of price increases in both rod and wire. So we expect the metal margin, while it improved as the first quarter progressed, that it will improve in the second quarter. But the real upside in that segment is in Q3 and Q4, where last year, at that time, selling prices were significantly depressed by the importation in the market of some very low-cost Chinese rods, while scrap moved about flat.

So those rods depress selling prices, an anti-dumping suit was filed against the Chinese for dumping significant quantity of rods. Those rods have stopped coming into the US. So we expect metal margin re-expansion, certainly, to be somewhat significant in the back half of the year.

Thank you for that. So you have price increases, in wire and rod, you have additional price increases coming in, did you also have price increases in downstream products?

We did in the first quarter, primarily in our US-based bedding businesses, and those were certainly implemented and we were successful as we are each time we have raw material inflation.

Okay. Great. Thank you for that. And then just a follow-on to the bedding that you touched on. You also talked about positive momentum as the quarter progressed. Does that refer to the US international comfort cores or traditional inner spring or a combination of all of them?

Well, Josh, this is Perry Davis. I will answer that question. We did see an uplift in US spring as the quarter progressed. If you look back in January, a lot of this weather-related -- we were off in terms of inner springs in the neighborhood of 11% in January; in February, about 9%; and then in March, about 1%. So the quarter finished about 6%.

If you look internationally, though, Karl made reference to the fact that our European spring division had a particularly good quarter. We have had growth there in the first quarter of the year, of about 14%, close to it. Our Latin spring operations are performing well, although somewhat smaller than European spring, but about 20% growth in terms of units there. In both markets, along with US spring, we're seeing a real explosion in the comfort core product category.

Okay, and on the springs, units you said were down 6%. Box springs were down only 1%. What accounts for the variance between those two things?

A couple of things: we have seen a trend over the last few months that has began to impact the numbers in terms of steel wire foundations in the marketplace. Some of the, I will call it second-tier or third-tier bedding manufacturers that are our customers have begun to put steel back in their lines and replace some of what formally had been a wood foundation. So we have seen some growth there.

And then the other part of it is just some mix shifts between customers, where we have more or less penetration with regards to inner springs and box springs.

Great. I will hop back in the queue. Thank you very much.

Our next question comes from the line of Keith Hughes with SunTrust Robinson Humphrey. Please proceed with your question.

Thank you, a couple of questions. One within the furniture components business, that's a very strong number, given where discretionary spending was in the first quarter. Do you think that number is going to accelerate in terms of growth as you go through the rest of the year?

Keith, this is Perry. I do think that we will continue to see strong growth in our furniture component business, particularly domestically. If you go back and look at the first quarter, our US-based mechanism and business grew significantly more so than our international business. At the recent high-point market, the mood was upbeat amongst most all of the upholstered motion manufacturers, and we think we have significant growth opportunities for the remainder of the year in that business unit.

Keith, this is Karl. I will add that our people in our home furniture business has done a really good job of product development and innovation. We are gaining some market share, and have an ability, because of some patents being issued, to push back some low cost, low performance Chinese mechanisms that were being shipped into this country. So the market is very robust. Our shares are growing and our people are doing really a solid job in that business.

And in mattress components, have you turned positive here in April? Has the trend continued, the progression you gave earlier?

Well, I wish I could say we had; it has not. We had a bit of an anomaly. In the first week of April, we just saw a significant downturn in our sales. Since then, they have rebounded and we have been maintaining a pace along with last year since then. But that first week, really for whatever reason, dropped. Some of it could have been a little bit weather-related, but really, we're pretty much past that at this point. So on a per-day basis, during April, our shipments at this point are all circa 7% on inner spring volume, but a lot of that, again, goes back to that first week of the month, and since then, the trends have been good.

And Perry, that's all US-oriented.

That's all US-oriented. Our sales internationally in Europe and in Latin America continue at a pace well above last year.

And final question on it. You raised the low end of the guidance. I know you had the asset of the building sale in the quarter. Was that the driver or are there other factors that caused to you raise the limit?

That wasn't the primary factor, Keith. As you know, what we do is we ask each and every profit center to go back and recheck or reanalyze their expectation for the quarter. We do that on a monthly basis. And there were some significant margin enhancing initiatives that are coming to bear.

We've got some incremental volume. Karl discussed these in the past, that are now starting to reach stride, which is really helpful in some of those businesses. So the upshot of it is we take that whole pot of re-forecast and bring it forward. Then we will take a look, test it at our level here, in this room, for credibility, do some expected-value analysis on it, and the numbers are better than what we originally had by somewhat. And we've got a quarter behind us, and we should have a little more insight. So it was just a matter of analytical analysis and coming up with what appears to be a better number.

Thank you.

Our next question comes from the line of Daniel Moore with CJS Securities. Please proceed with your question.

Good morning.

Hi, Dan.

Is it possible to quantify the impact that weather had in the quarter on inner spring sales in the US? And the same question for wire and rod sales.

Dan, this is Karl. I don't know how we would do that. Really, from an US inner spring, we would have to compare it to macro market demand in a normalized environment, and there is a lot of other noise going on as it relates to tax refunds and a lot of other things. So it would be difficult.

On the wire rod side, that weather had a significant selling price -- or sales trend impact, but more importantly, was a huge issue as it relates to cost. Our total energy costs were up about $3 million, year on year. Most of that was experienced in industrial. Many of our facilities across the country in industrial and really, residential, were shut down for days on end. But the big steel mill in Sterling, Illinois, actually went through a 24-hour period of curtailment that was imposed on them by the electric utility. So it is difficult.

Matt made reference to our working capital numbers. Our inventories are a little longer than we would expect, especially in industrial material. There is wire and -- I'm sorry, rod on the ground at that steel mill that we were unable to ship because of the lack of availability of rail cars. So that helps us from a guidance perspective going forward.

Very good, and that leads into the next question. Obviously, your confidence has increased with regards to the guidance on EPS. Given the start to the year on revenue, is the high end of the range still as realistic as it was as when you went into the year? I'm just wondering why there wasn't maybe a tweak with regards to the range of guidance for the full year, for revenue.

Dan, I would answer that question, I think that there is a higher probability that we will hit the top end of the range on EPS than the probability that we will hit it on sales.

And Dan, this is Dave. As you would expect, we take that same forecasted income statement from everybody, and roll it up. We would rather be a bit conservative than the other way, and so we effectively used what people rolled up to us for that. And so hopefully it will be better than that, but again, we wanted to use the algorithm that we use as the mechanism for making that forecast.

Margins are enhanced several places throughout the enterprise. And the guys won't admit it necessarily very directly, but the revenue is probably a little conservative, but we're not willing at this point to bump the top line. In 90 days, we will have a much better feel and if it needs to go up, we will definitely bump it up at that point.

Dan, this may help a little bit. To put things, as you know, we don't give quarterly guidance, so you can't hold us accountable for consensus. But our internal forecast for the first quarter was sales of $955 million, even though consensus was $972 million. We knew that the first quarter was going to be soft from a store fixtures and a CVP perspective.

Our consensus on -- our roll-up aggregated forecast for the first quarter, and this goes back to when we gave guidance in January was for $0.37, remembering our sales came in much softer than we originally forecasted. So roll that all together, through the process that Dave spoke to, and we thought our first quarter was pretty darn good, and have every expectation that our margins will improve at a greater rate in the back half than we originally forecasted.

Extremely helpful. I will try more and jump back in queue. Talk a little bit about the acquisition landscape. I know it is always tough to say, but what are you seeing out there, your confidence around being able to allocate capital with regard to M&A through the balance of the year?

I will take the first stab at it, Dan, and then if Matt or Karl want to comment, they can. There are some projects, there are some initiatives that are in the works right now, and you are right, we can't talk about them, but we like the opportunity to critically invest dollars over there before we buy shares back, as long as it meets our criteria. And there is a few that look like they're really good investments for our shareholders. I will also say that they're spread out amongst some of the various segments. Obviously, we're not looking to grow parts of our Company that are underperforming, but parts of the Company that are doing very well, we are.

And then also, I know this is not very helpful, Dan, but I will also say that it is not limited to just acquisitions here, in the United States; we're looking at some other opportunities outside the country, too. Do you guys have other things you could add?

No, we're pleased with the activities that are in the pipeline.

Yes.

Very good. Appreciate it.

Our next question comes from the line of Budd Bugatch with Raymond James. Please proceed with your question.

Good morning, everyone. This is Bobby Griffin filling in for Budd. Thank you for taking my questions.

Hi, Bobby.

Could you guys comment a little bit on the CVP business? I know it was up against a tough comp in quarter one, but how does the outlook for that business look going forward? And did your comps get easier in the remaining part of the year?

Bobby, this is Karl. The second quarter comp is forecast versus last year's actual. We expect that sales will be about $3 million less this year than last. Then the comps get much easier as the year progresses.

From a CVP perspective, our opportunity more is bottom line than top at this point. We have a facility that is -- has not been performing well. It is starting to slightly improve, but we need to see continued improvement in that particular facility.

Perfect. And then maybe a additional question on the commercial fixtures unit. It is going up against another tough head wind in Q2, but in Q3 and Q4, could we start to see something get a little more normalized there and maybe even see some organic growth there in that segment?

Bobby, if you take the forecast out of 2Q, then I would say the back half is going to be about flat with last year, remembering that there is not much volume. It is really a third-quarter business; there is not a lot of volume that is shipped in the fourth quarter. So the third quarter for that business is always the big quarter. And right now, that forecast would look like it is about on par with third quarter last year.

All right. That answers my questions. Best of luck going forward. I appreciate it.

(Operator Instructions)

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

Good morning, Leggett team, and I think an admirable job in a tough environment.

Thank you, John.

Automotive, could we get a sense from you, and I know there is some considerable lead times in terms of the future, of what, if we assume flat vehicle production around the world, what your revenue gain would be in terms of content, mix, price, or whatever is going on there?

That is a good question. It is one -- it is sort of like what momentum do you have if everything stopped right now. And it is a significant number. I don't know how to quantify it.

I would ballpark it at about 10%. So put it in the terms that you ask, if the market grows 4%, we should grow 14% ballpark. It changes over time, but we feel pretty comfortable that we will exceed the market growth somewhat significantly.

And that's, I assume, that's a calendar '14 comment, I assume, Karl. And is there any look into '15 or '16?

No, my comment was looking into '15, '16. Those programs run out, that there is an expectation that macro market will grow in that 3% to 4% range, so my 10% delta certainly is alive and well for '14, should be in good shape for '15; '16, we start to lose some visibility, but we certainly continue to gain content.

John, you have heard us say before that there are a couple of positive factors that give us some gearing there. One is just overall content.; the average Leggett content of an automotive or light truck interior is going up. And then secondly, some of that functionality --or comfort and functionality is being built into a standard specification in more vehicles, so we get a double positive there.

The other thing I would mention is that -- and we are all -- or most of us, are significantly impressed with the rate of growth of the Asian automotive build, and the percentage of market share that we enjoy. The team has done, as Karl mentioned, the team has done an outstanding job of gaining new awards all over the world, but in Asia, it is almost staggering. It is so good.

So anyway, I hope I didn't jinx us, but all of those things bode very well, and that's why I was as positive in my commentary on automotive initially in the conference call.

Great. Thank you. And my follow-up is on the import duties on springs. Can you just update us on the status of that whole situation? Thank you.

John, this is Perry. As you may or may not be aware, the Sunset review for the anti-dumping issue related to inner springs from China, Vietnam, and South Africa, was reaffirmed on April 11. So that Sunset review, actually at an accelerated pace that was reaffirmed, overwhelmingly by the ITC, and so that will extend for another five years.

Five years. Great. Thank you for that color. Good luck.

Our next question comes from the line of Herb Hardt with Monness, Crespi and Hardt. Please proceed with your question.

Good morning. My question is, I noticed that your equity is lower this quarter than it was in the December quarter, and also a year ago. Yet you have been profitable during the whole period. What is the accounting on that?

Herb, that is basically reflecting share repurchase activity and the impairment that we incurred at the end of last year, $65 million-ish. But those are the two big aspects.

Okay. Thank you.

Our next question is a follow-up question from Josh Borstein with Longbow. Please proceed with your question.

On the adjustable foundations you saw a slight uptick, much better than what you were seeing in the previous year. Is that some of the positive impacts from the recent initiatives you took? I know you mentioned that would be more back-half loaded, but have you started to see it here in 1Q?

Josh, very little of it. Really, what we saw in 1Q was strength by our -- of our historic business. Those two new large programs are just starting to ship now. They won't be fully floored until just prior to Memorial Day. So it was just a recovery of our historic customers.

Okay. Thank you.

We're very, very enthused about that business, though, that the products were, as you saw it, the Las Vegas furniture market, extremely well received. So from a historic basis, new programs, new products, and then just the demographic trends that we're very, very bullish on adjustables going forward, and that is part of the optimism in our guidance.

Okay, great. And on the office furniture piece, recently the office furniture Company has reported some pretty positive numbers. What is your sense for 2Q that you're getting from your office furniture customers right now? Do you think trends appear to be accelerating maybe beyond BIFMA low single digit forecast for the year?

As you know Josh, that the current BIFMA forecast is for shipments of just a little bit more than 3%. I would expect our business would exceed that, as it did in the first quarter. So we're very bullish on that industry.

BIFMA's forecast was much higher than ratcheted down, probably adjusted for weather. I would expect that their forecast, at least for 2014, would increase with the next print. And as you know, they're in print at double digits in 2015. So we will see. But we are very bullish on the office industry, but more importantly, our position within that industry.

And the new programs that you mentioned, could you dig into any detail about what those entail?

They're customer specific, so we don't generally go there. A lot of it is product-development based, new programs that will be launched at NEO-CON. So we feel very comfortable with where we are. But I can't tell you about specific programs.

And then a last one for me, on the slide deck with the guidance, I notice you took back the contribution margin back to 30% versus 25% that you had in your last quarter slide deck. And I thought that lower contribution margin last quarter was to account for pricing. Has the dynamic changed at all? What accounts for taking that contribution margin back up to 30%?

Josh, I think it has more to do with where we see our sales coming from. We have, as we saw in the first quarter, we have a good mix of revenues going on with where the growth is the strongest. And where we've got some softness, contribution margins, across our businesses, as you know, vary. Some of them are higher than others, so I think that is a bigger issue than really in price. And as you know, this is our best guess at this point in year as to how earnings and where the contributions are going to come from.

Okay. And with respect to guidance, do you still anticipate that the midpoint the same growth rates per segment that you discussed in the -- on the last conference call?

Let me go through that with you real quick, Josh, because no, we would have had a little bit of a shift in that, I think. In residential, at the mid point of our guidance, we would be looking at revenue growth somewhere in the 4% to 5% range. Commercial, we would now expect to be negative, down somewhere in the mid single-digit range, maybe 6%, 7% negative. Industrial up, somewhere in the 6% to 7% range, with about half of that coming from acquisitions. And specialized up mid teens on the strength that we have been talking about in automotive.

And that basically, if you roll all that together, would get you back to around a 5% to 5.5% revenue growth at the midpoint of our guidance.

That's really very helpful. Thank you very much, and good luck.

Thank you. We have no further questions at this time. I would now like to turn the floor back over to management for closing comments.

We appreciate your participation and we will talk to you again next quarter. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.