Q1 2022 Simpson Manufacturing Co Inc Earnings Call
[music].
Greetings and welcome to Simpson Manufacturing Company, Inc. First quarter 2022 earnings Conference call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded I would now like to turn the conference over to your host Kim Orlando with Auto Investor Relations. Please go ahead.
Good afternoon, ladies and gentlemen, and welcome to the Simpson manufacturing company first quarter 2022 earnings Conference call.
Any statements made on this call that are not statements of historical fact are forward looking statements.
Such statements are based on certain estimates and expectations and are subject to a number of risks and uncertainties.
Actual future results may vary materially from those expressed or implied by the forward looking statements.
We encourage you to read the risks described in the Companys public filings and reports, which are available on the SEC's or the company's corporate website.
So to the extent required by applicable securities laws, we undertake no obligation to update or publicly revise any of the forward looking statements that we make here today.
Whether as a result of new information future events or otherwise.
Please note that the company's earnings press release was issued today at approximately 415 P M Eastern time.
The earnings press release is available on the Investor Relations page of the company's website.
Our Dr Simpson Mfg dotcom.
Today's call is being webcast and a replay will also be available on the Investor Relations page of the company's website.
Now I would like to turn the conference over to Karen Colonias, Simpson's Chief Executive Officer.
Thanks, Kim and good afternoon, everyone and thank you for joining us today.
I'll begin with an overview of our first quarter financial results and performance drivers before turning to an update on our key growth initiatives and capital allocation priorities.
Brian will walk you through our financials and updated fiscal 2020 twenty-two business outlook in greater detail.
We delivered strong financial and operational performance in the first quarter.
Net sales of $493 $6 million increased 42% over the prior year period.
Sales growth was primarily driven by the four product price increases we implemented in April June August and October of 'twenty, 'twenty, one to offset rising raw material costs.
The price increases ranged from mid single digits to mid teens, depending on the product mix of our wood connectors fasteners and concrete products in the United States.
While our sales benefited from higher volumes in our home Center channel, which includes both our home center and co op customers and it's where we see much of our repair and remodel and DIY business.
This was offset by softer volumes through our other distribution channels.
As such volume was flat year over year.
Our consolidated net sales in Europe for the first quarter grew 16, 2% year over year also due primarily to product price increases in response to rising material costs through 2020 one.
Our consolidated gross margin supported by our product price increases through 130 basis points to 48%.
Compared to 46, 7% in the year ago period.
As a result, we grew our income from operations of $124.4 million and generated strong earnings per diluted share of $2.18.
Brian will elaborate further on our margin expectations for the remainder of the year.
I'd like to thank our entire Simpson strong tie team for their solid operational execution.
We appreciate your dedication to serving our customers and remaining on track with our company ambitions.
Those ambitions being to strengthen our values based culture.
Be the partner of choice.
Be the innovation leader in the markets we operate.
Continue our above market growth relative to U S housing starts.
Expand our operating income margin to remain within the top quartile of our proxy peers.
And expand our return on invested capital to remain within the top quartile of our proxy peers.
Overall, we are confident that we remain on track to achieve our company ambitions.
Now more specifically I'd like to discuss our progress regarding ambition number for <unk>.
Continuing our track record of above market growth relative to U S housing starts.
To achieve this we're focused on growing in the OEM.
R&R DIY space and mass timber markets.
Where we are striving to be a leader in engineered load rated construction fastening solutions.
Given that each of these markets have a broader product opportunity for fastening solutions.
We are also focused on building our presence in concrete construction.
As well as solutions for structural steel construction.
New market for Simpson.
And finally, we're working to become a leader in building technology space, which supports all of our key growth initiatives.
We've made significant progress over the past year to support these different end users and distribution channels.
<unk> and our efforts with the realignment of our sales teams to more specifically focus on the five end use markets.
Residential commercial OEM.
National retail and building technology.
Which has led to new customer and project wins within each of our five key growth initiatives.
I'd like to provide just a few examples of these developments during the first quarter of 2022.
With the national retail market, our focus on growing in the R&R and DIY space.
Combined with our ongoing efforts to continually improve execution with our retail customers.
The reset of certain of our fastener sets with one of our key customers.
The new fastener sets will include products, such as our quick drive auto feed.
Driving system and our outdoor accents.
Promoting further visibility of the breadth of line of Simpson products.
Within the commercial market will continue to expand our offerings, including the expansion of our structural steel product line.
We had some notable wins and progress pertaining to structural steel.
Our structural steel solutions are being used in the construction of 10 recreational and amusement locations in the United States two of which have already been delivered.
Additionally, our structural steel solutions are being used in the construction of 50 electric vehicle charging stations throughout the United States.
I'd like to reiterate that these are just a few select examples of our progress on our growth initiatives in Q1 within our five end use markets.
We believe advancements in these end markets and growth initiatives will contribute to our above market growth in fiscal 2022 and beyond.
Our future growth and diversification efforts were further supported by the acquisition of the Taco group.
A leader in 16, and fastening solutions, primarily for commercial building construction market throughout Europe , which closed on April 1st of 2022.
We are very pleased to officially welcome the Taco employees to the Sympson family.
Over the past few months our team has been working closely with many of their talk was managers and leaders as they engage in pre closing activities, including integration and planning for synergies and detailed initiatives.
Our cultures, both built on high quality products and customer service have fostered strong teamwork and collaboration.
We believe at Taco is extensive and complementary product offering will strengthen our overall product portfolio in Europe .
Enabling us to deliver even more value to our customers.
Importantly, the acquisition further diversifies, our business away from U S housing starts.
While we continue to benefit from solid ongoing demand for U S. Housing. We now believe approximately 50% of our business is reliant on U S housing starts compared to.
Approximately 60% pre acquisition.
Which helps further balance and diversify our business to be more resilient throughout industry cycles.
One important item to note is that we have suspended all business activity within Russia, and Belarus by halting all product sales and shipments.
We estimate the revenue impact will be less than $5 million.
Additionally, we've donated $100000 to the international Rescue Committee, which is currently in Poland supporting displaced children and families. Our thoughts are with the people of the Ukraine and everyone affected by the war.
Now turning to capital allocation.
Our priorities in 2022 are centered on organic growth returning value to our stockholders in the form of quarterly dividends and selectively repurchasing of our shares.
While focusing on repaying the debt, we incurred to finance the acquisition of the Taco.
In regard to growth we remain dual focused on both organic growth and M&A opportunities. We are investing in areas such as engineering marketing.
Sales personnel and testing capabilities across many areas of our business.
We also plan to invest in facility expansions to support our growth.
While we are primarily concentrated on the integration of the Taco. We may also consider opportunities that would promote product line expansion in order to develop complete solutions for the markets in which we operate.
As well as opportunities in areas that support our key growth initiatives.
In summary, we are extremely pleased with our first quarter solid results and while we continued to experience headwinds from continued increases in raw material costs.
As well as impacts for our customers from tightening labor and supply chain conditions.
We believe the underlying demand in our key markets and regions should remain strong throughout 2022.
I would like to once again, thank and acknowledge all of the Simpson strong tie employees for their commitment to health and safety and outstanding customer service as we work toward our mission of providing the highest quality solution sets to build safer stronger structures.
I would also like to thank our customers suppliers and stockholders for your continued support of Simpson.
Now I'll turn the call over to Brian who will discuss our first quarter financial results and our 2022 outlook in a greater detail.
Thank you Kevin and good afternoon, everyone I'm pleased to discuss our first quarter financial results with you today.
Before I begin I'd like to mention that unless otherwise stated all financial measures discussed in my prepared remarks today refer to the first quarter of 2022, and all comparisons will be year over year comparisons versus the first quarter of 2021 .
Okay.
Now turning to our first quarter results.
As Karen highlighted our consolidated net sales increased 42% $493 $6 million.
Within the North America segment, net sales increased 46% to $438 $7 million, primarily due to the four price increases we implemented in 2021 to offset rising raw material costs.
In Canada, our net sales also increased due to product price increases and were partially offset by lower sales volumes in Europe net sales increased 16, 2% to $51.5 million, primarily due to product price increases.
Rich.
We offset by the negative effect of $3 $7 million and foreign currency translation related to Europe's currencies weakening against the United States dollar.
Wood construction products represented 88% of total sales.
There to 87%.
Concrete construction products represented 12% of wholesales compared to 13%.
Consolidated gross profit increased by 45, 9% to $236 $8 million, which resulted in another strong gross margin quarter at 48%.
When compared to the first and fourth quarters of 2021, our gross margin expanded by 130 basis points and 60 basis points respectively.
On a segment basis, our gross margin in North America increased to 49, 7% compared to 48, 5% primarily due to the continued benefit of the aforementioned price increases, which contributed to lower overhead and labor costs as a percent of sales par.
Partially offset by higher raw material costs.
We set ourselves.
However in Europe , our gross margin declined slightly to 33, 9% from 34, 4%, primarily due to higher factory and tooling costs.
While our inventory levels at March 31 were relatively flat in terms of pounds on hand compared to March 31 last year.
The dollar value of our inventories approximately 50% higher which will be reflected in our cost of goods sold in the coming quarters.
From a product perspective, our first quarter gross margin on wood products was 48, 1% compared to 46, 6% in the prior year quarter.
It was $46 90 per cent for concrete products compared to 42, 5% in the prior year quarter.
Now turning to our first quarter costs and operating expenses.
Operating expenses were $106 $5 million, an increase of $12 $5 million or approximately 13, 3%.
As a percentage of net sales total operating expenses were 21, 6%.
<unk> of approximately 540 basis points.
3rd% to 27%.
Primarily due to the increased spend relative to the increased revenues.
Our first quarter research and development.
Engineering expenses increased 8.7% to $15.9 billion, primarily due to personnel and compensation related costs, including investments related to our growth initiatives.
Selling expenses increased 19, 5% to $36 $8 million due to expenses associated with personnel compensation.
And trade shows.
On a segment basis selling expenses in North America were up 22, 5% and in Europe . They were up five 1%.
General and administrative expenses increased 10, 7% to $53 $8 million, primarily due to personnel legal and professional fees not associated with the acquisition of a telco.
Ongoing strength in our topline and gross margin fueled an 86, 2% increase in consolidated income from operations to $124 $4 million from $68 $4 million.
In North America income from operations increased 85, 9%.
$135 $7 million.
Primarily due to higher gross profit, which was partially offset by higher operating expenses.
And cash profit sharing mainly for favorable operating performance.
Europe reported a loss from operations of $1 $4 million compared to income from operations of $2 $3 million.
Primarily due to professional fees of $7 million associated with the Taco truck.
Injection offset by a $1.1 million gain on the sale of a property.
On a consolidated basis, our operating income margin of 25, 2% increased by approximately 550 basis points.
From 19, 7%.
I will discuss our operating margin outlook for the remainder of fiscal 2022 shortly.
Our effective tax rate decreased to 23, 7% from 24, 3%.
Due to a higher windfall tax benefits on the vesting of restricted stock units during the first quarter of 2022 compared to 2021.
Accordingly, net income totaled $94 $6 million or $2.18 per fully diluted share compared to $54 million or $1.16 per fully diluted share.
Now turning to our balance sheet and cash flow.
Our balance sheet remained healthy at March 31, 2022, cash and cash equivalents totaled $984 $4 million.
The significant increase in cash.
As a result of our amended and restated credit agreement with our Bank group.
For approximately $700 million in borrowings to finance a significant portion of the purchase price will be.
Taco acquisition.
The amended and restated credit agreement provides for $250 million in borrowings from our revolving credit facility and $450 million from our term loan and as of March 31, 2000 $20 million to $200 million on our primary credit line was available for borrowing.
For the fiscal year, ending December 31, 2022, we anticipate our interest expense on.
On the outstanding loans will be approximately $11 million after giving effect to interest hedges and amortization of bank fees.
Our inventory position at March 31 was $443 $4 million, which was relatively flat compared to our balance at December 31 2021.
<unk> of higher priced inventory was offset by reduced inventory pounds on hand, primarily in North America.
We continue to be diligent in regard to our.
Our inventory purchases through careful management and purchasing practices.
Striving to maintain high levels of customer service and on time delivery standards, which are key tenets of our value proposition.
We generated strong cash flow from operations of $44 $7 million for the first quarter of 2022 compared to $17 $8 million.
As Karen highlighted we remain dedicated to supporting the growth of our business as well as providing strong capital returns to our stockholders through both dividends and share repurchases.
Focusing on repaying the debt, we incurred to finance the acquisition of a taco during the first quarter, we invested $17 $8 million for capital expenditures and paid $10 $8 million in dividends.
Additionally, we repurchased 194745 shares.
Our common stock at an average price of $109 28 per share for a total of $21 $3 million.
As of March 31, 2022, we had approximately $78 $7 million available under our $100 million share repurchase authorization, which remains in effect through the end of 2022.
Next I'd like to discuss some updates dorf 2022 financial outlook.
Our latest outlook reflects the acquisition of a Taco, which closed on April <unk> 2022.
One quarter of our actual results.
And our latest expectations regarding demand trends.
Raw material input costs and operating expenses.
Based on business trends and conditions as of today April 25th.
We are revising our guidance for the full year ending December 31 2022.
We now expect our operating margin to be in the range of 19% to 20% compared to our previous estimate of 17, 5% to 19%.
Which did not include the acquisition of the Taco Bell.
Our revised guidance is mostly attributable to an improved outlook for the overall market and Simpson.
In addition, our guidance includes projected results before he taco, including approximately 15 million to $17 million in integration and transaction costs.
We are reiterating our 2022 effective tax rate estimate to now include the Taco of 25, 5% to 26, 5%.
Both federal and state income tax rates and assuming no tax law changes are enacted.
And we continue to expect capital expenditures to be in the range of 65 billion to <unk>.
$70 million.
With integration activities well underway, we're in the process of assessing the tacos capex needs in support of its operations and will provide additional detail in the coming quarters.
We continue to estimate roughly 20% of our capex will be dedicated to maintenance with the remainder focused on growth to maximize efficiencies expand our manufacturing footprint and invest in our key growth initiatives.
Before we conclude I'd like to provide some additional color on our increased 2022 operating margin outlook.
Well our material prices have continued to rise even following the pullback we saw towards the end of last year.
Guest earlier, we implemented four product price increases in 2021 in an effort to offset these costs.
Yeah.
And as a result, we estimate the cumulative top line impact from these price increases will be approximately $300 million in 2022.
As a reminder, the impact from averaging raw material costs.
Typically lags our price increases.
While we continue to expect our cost of goods sold will increase significantly as we worked through our on hand inventory and buy raw material at prices higher than our historical averages. We believe this impact will become much more apparent in the second half of 2022.
In addition, as mentioned earlier, we anticipate we will incur approximately $15 million to $17 million in integration and transaction costs.
Related to the Taco acquisition of which $8 million to $10 million are incremental expenses.
In summary.
We were very pleased to start 2022 off strong with solid first quarter financial results and the successful acquisition of a Taco earlier this month.
We remain very excited about our expanded product breadth and service offerings and the associated prospects for incremental growth.
Our industry, leading position geographic reach and diverse product offerings.
And with our strong balance sheet gives us confidence in our ability to maintain operational excellence.
With that I'd like to turn the call over to the operator to begin the Q&A session.
Operator.
Thank you.
At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star.
Keys, one moment, please while we poll for questions.
Our first question comes from Daniel Moore with CJS Securities. Please proceed with your question.
Thank you and good afternoon, Karen and Brian Thanks for taking the questions and congrats on obviously exceptional results.
First is on the guide the revised 22 operating income margin guide if we excluded the Taco would it still be generally in that 19% to 20% range higher or lower.
Yes, Dan it would be.
In that in that same ballpark range.
Got it and you.
You tried to give some color and its appreciated but just trying to understand the difference between the view now and kind of to you two months ago or so what's different in the macro environment, the ore or the environment for Simpson.
Is it more just a function of kind of initial conservatism.
Well I think couple of things one was.
Obviously, a little more line.
Your line of sight into the year and seen the demand trends that came through in Q1.
And then our continued.
Work on our forecasting and modeling.
Within our business, but.
But largely due to the.
The forecast that we're seeing based on talking with customers.
Vendors throughout the year.
Q1 was a little better than planned as well.
Okay.
And maybe one or two moral shift gears to a telco.
Now how would you describe the environment you know if you.
In Europe , specifically, Italy, France their their core markets today compared to maybe last summer when you announced the deal or demand levels higher or lower.
You know just.
Any changes in the operating environment there to speak of.
Yeah, I'll take that one.
You know, where we are still seeing some pretty nice demand in Europe , obviously, a little bit of Choppiness based on what's going on and then with Russia, and Ukraine, but we still based on the forecasting information that we get from industry you're in.
The European market, it's still looking like there's some strong demand in our residential and also some pretty good demand in the commercial market, which is where taco is.
Got it and lastly, again related to Taco.
If if not sort of a volume growth projection, you've given us good color on pricing here in North America, how do we think about the pricing that's come through in their business either in the back half of 'twenty, two or into the back half of 'twenty one into 'twenty two you know what.
What type of uplift what should we expect from a taco year over year from price. Thanks again.
So from a pricing perspective, they tend to put any price increases in place in Europe , I think Youre aware you can only do it a couple of times a year.
And certainly as we've looked at and worked with them last year. Those prices were put in place to cover their rising material costs also.
So.
They would continue or we would continue that process now as we see any material fluctuations, but again pretty limited in the European market to two times, a year to being able to put any price increase in place and some of the countries to allow a little more frequent there but.
They've got a very complex SKU mix Hmm.
And different pricing approach.
They do a lot of quoting for.
Particular, commercial jobs and applications to the contractors that they sell to.
So, it's but they definitely try to capture rising material costs.
Into their selling prices as well.
Yeah.
Okay. That's helpful I'll circle back with any follow ups. Thank you.
Thanks, Dan.
Yeah.
Your next question comes from Tim Weiss with Baird. Please proceed with your question.
Hey, good afternoon, everyone.
Jim.
Yeah.
Hello.
Just maybe starting on I'm, just kind of price cost and I just wanted to make sure I understand it is there an underlying improvement kind of baked into your outlook.
Or is there some sort of kind of shift that maybe some of the <unk>.
<unk> impact from normalization actually kind of fall in 'twenty three.
Just want to make sure that you know just kind of clarify that.
Well Q1, as I mentioned, a moment ago Q1 was a little better.
From a volume perspective than what we had thought hitting coming out of last year.
One of the interesting things that we're seeing is two two.
Various factors influencing construction such as lack of labor.
The so.
Supply chain efforts it seems like seasonality is less.
Impactful than it had been to our business in prior years, one our dependence on housing as we've noted is.
As ive been decreasing but also just builders beam.
Very.
Oh, we book, maybe that's not the right way to say it but they're there they're often.
Commenting to us that they're sold through their 2022.
Releases and they're they're just building them. So it feels like there's a little less seasonality built into that and as we think about our business going forward.
Again that are a little better than Q1.
Versus last year, and then just the continued complexity in our business around.
Our our skews the steel that we use some steel some products, we're returning a lot faster than others. So it creates.
The.
That dynamic of trying to pinpoint when that.
Gross margin.
Cost of sales impact would be so just a little better.
View now versus four or five months ago, or a few months ago coupled with.
Just that it was.
A little less little less little less seasonality in our business, which helps overhead absorption in the factories.
Definitely okay. Okay. No that's really helpful and I guess it is volume growth was better in the first quarter than they did maybe you thought I mean, what's kind of baked in now you know to your outlook for volume growth for 'twenty two.
It's.
Still.
Amid little mid to high single digits from a volume perspective.
We are seeing though April .
It's a little softer than we thought but as we look at the balance of the year and I remember last year, we had some interesting volume.
Running through due to buying patterns of some of our customers.
The comparative will be.
It would be.
Yeah.
More interesting, but just from a.
Fiscal year 2022.
You know that mid to low mid to high single digits is where were expecting.
Okay. Okay. Good.
And then I guess on the Congo, just two clarification questions. So.
He's a taco being reported on a GAAP basis and if it is what's the intangible amortization number.
And that we should we should think about being included in it and the operating margin guidance.
So the only numbers right now that we own.
Honestly, a taco there there's zero other than the transaction fees that we called out separate.
On the operating expense line there's no.
<unk> impact in the P&L revenue expenses because.
The acquisition was April one.
On a go forward basis.
The operating margin guidance assumes.
A right now a very high level estimate for intangible amortization.
That we are spending Oh.
Yeah.
Hello.
Aw quarters fine tuning the fair value.
The purchase price allocation.
Valuation.
To really fine tune that so right now we just have some high level.
What's baked into that operating margin.
Our guide that we provided.
Okay. So I can tell you that estimate.
Yesterday, but it's going to change.
It's.
It's in the tens of millions for intangible amortization, we just there's a lot of assets the value whether it would be.
Purchased intangibles step up in fair value and in other assets that would roll through so.
It's a very high level estimate at this point.
Okay. Okay, no that's fine I mean, but the 19% to 20% includes.
The charges.
Include the intangible amortization.
Well at least at least what you're estimating okay Gotcha and then what would you think that the revenue contribution for Taco should be per quarter.
Per per quarter, we're still.
Dialing that in but for the balance.
'twenty one.
Two.
Okay.
It's.
It should be about should be a little north of $220 million for the balance for the <unk>.
Second third fourth quarters.
Of the year.
Okay. Good.
Great well, thanks for the time, guys, who could work on everything.
Thanks, Thanks, Tim.
Okay.
Our next question comes from Kurt Yinger with D. A Davidson. Please proceed with your question.
Great. Thanks, and good afternoon, everyone.
Hi, Kurt Kurt Hi, I, just wanted to unpack the comments I guess on the volume side first and hoping you could maybe provide a bit more color on the demand trends between distribution and kind of the dealer channel as well as the home center customers and Karen If I heard you right I thought you said that.
We're kind of flat year over year, and and relative to expectations. It sounded like that was better. So I just wanted to understand whether that was kind of a specific comp issue related to some home center strength in Q1 of last year or kind of what to make of that flat volume.
Yeah, Kurt I think it has to do a quite a bit with what was happening. This time last year right we had.
Now say April price increase so I think we had some pre buying that went in a little bit of pre buying too.
Help us offset that price increase in 2021.
We also had quite a bit of concerns about.
On supply chains, and I think a lot of customers were just.
Basically making sure they had product available. So it's a it's pretty choppy for us based on again, the price increases and all the things that were going on with supply chain.
Ticket at a really nice quarter over quarter quarter over year over year.
View.
We did see.
A little bit of increase in our home center volume, but as we had said in the third quarter of last year that volume had decreased so we see home centers kind of.
Trying to do a little bit of an increase in their volume before any spring or summer business that comes in.
And basically a little bit down in our other distribution channels.
Got it Okay, and then Brian you kind of touched on maybe a bit softer than expected April I mean was that primarily on the home center side, maybe with a little bit of a delay.
In spring in certain geographies or is that on some of those channels that would serve the new construction market as well.
Yeah, Curt that was.
Total not broken down by quite channel.
In that regard so we look at our daily sales trends and in total in.
And that was where that comment came from so not specific to any particular channel at this point.
Okay got it and then just just last one.
I know, it's still early on but relative to the 500 basis points of of European kind of operating export.
Expansion.
I expect within a taco.
Any sense of kind of what the baseline to built that off of is.
So when we were commenting on that one late last year. It was around a high single digit.
Simpson European business.
Yeah through believe it was we were analyzing those forecasts.
During the fourth quarter.
Last year so.
Some of that high single digit was the base.
That that we were looking out there.
Okay, Alright, great well I appreciate all the color and I'll turn it over thank you.
Thanks Kurt.
Yeah.
Our next question comes from Julio Romero with Sidoti. Please proceed with your question.
Hey, good afternoon, Kevin Brian .
Hi, Julio.
So you you had mentioned raw materials continue to rise in the quarter are you considering or expecting.
Any additional price increases in and if so what's your sense of how well the market is going to be able to absorb additional price increases.
Yeah, that's a great great question, we certainly saw steel.
Start to come down a little bit at the end of.
The fourth quarter, and maybe even slightly early into January .
And then as things kind of changed in Russia, and Ukraine, we've actually seen it pick back up again.
And but as we've always stated we need to ensure that whatever those price changes are sustainable before we go to the effort of making significant changes in our price structure and certainly creating a lot of that work for our customers. So at this point, we're obviously watching it but we do not at this point.
Have any any thoughts on price increases going in place unless of course, it really changes dramatically, but currently it looks like well stay status quo is where we are right now, yes, there could be a little bit of pricing in Europe , yeah, working through a little bit different there. So Karen I think I'm, mostly talking about North America correct.
Okay.
And there may be so I appreciate it.
Sorry, one last thing on that there may be small slices of our business.
On a particular product category that we might need.
Need a little bit of pricing.
Price increase on but nothing significant on there.
And in the U S.
Okay No I appreciate the color there.
It makes sense that you guys are being thoughtful about about everything there.
The can you maybe speak to what Youre hearing from.
Your customers and just.
Just the sentiment in regards to the outlook for for new single family versus multifamily construction.
Yeah I think.
As Brian mentioned.
Many of our customers have already.
Sold out their releases for the year. So there's still the demand and you know there's the same elements that everyone is concerned about our increasing our interest rates.
You know certainly what's going on in the overall economics.
But our customers are clearly, saying they still have demand.
And I think their sentiment is that are they feel pretty good about both multifamily and single family as we go through the rest of 2022.
As you know Julio for us.
We put our products in both single family and multifamily. So when we look at housing starts.
Even though we break it out by geography, because we've talked about the content we put in.
Multifamily starts are good for US also because we've put quite a bit of content in those starts.
Yeah.
Okay understood and just over on the Taco.
Can you expand on your commentary with regards to the integration costs that you expect in the $8 million to $10 million of incremental expenses.
I wasn't quite sure what.
What are they incremental to or the incremental to your initial expectations just.
Any clarification there.
Good point, so the $7 million that we booked in Q1, it's incremental on that.
So the $15 million to $17 million total for the year.
So got you for it.
More detail on that.
That wouldn't make sense on that one.
Okay. So working with consultants so part of that is the.
The amount that we paid to our investment banker to.
On on close of the deal.
When the deal was closed in there the.
A lot of efforts around integration.
Consulting there there may be costs associated with some of the activities.
And the integration and then as well as.
All the other.
Other costs that come with them.
The added financial reporting requirements.
Additional audits our valuation work.
Yeah.
There's some some.
Integration of systems to be able to provide each.
Provide their their locations.
Buying demands or what have you with with their counterparts.
Port location, so just general activities associated with.
I put the two organizations are more closely together.
Got it that's really helpful and one last one for me is.
Are you you spoke earlier about how the first quarter of last year, you had seen some pre buying in advance of a price increase just remind us if.
What you had seen in the second quarter of last year, just as we come up on the quarterly comp.
If you saw any any pre buying or abnormal volume activity as well in the prior year quarter.
Yeah, I mean us as we've always talked about them.
We need to give our customers somewhere between a 30 to 60 day notification of a price increase we always try and put things in place.
To stop pre buying but of course, that's almost impossible to stop 100%.
And we did have a price increase that we implemented in June so we would've had a little bit of P. Buying that also happened in second quarter.
Very helpful. Thanks, very much for taking my questions.
Yeah. Thanks.
Ladies and gentlemen, we have reached the end of the question and answer session and this concludes today's conference you may disconnect. Your lines at this time. Thank you all for your participation.
Yeah.
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