Continental Building Products Inc (CBPX) Q4 2018 Earnings Conference Call Transcript

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Continental Building Products Inc (NYSE: CBPX)Q4 2018 Earnings Conference CallFeb. 21, 2019, 5:00 p.m. ET

Contents:

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  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings. And welcome to the Continental Building Products Fourth Quarter and Full Year 2018 Earning Conference Call. At this time, all participants are in a listen-only mode.(Operator Instructions)

It is now my pleasure to introduce your host Rodny Nacier, Investor Relations. Thank you. Please begin.

Rodny Nacier -- Investor Relations, ICR, LLC

Thank you for joining us for Continental Building Products' fourth quarter and full year 2018 earnings conference call. I'm joined by Chief Executive Officer, Jay Bachmann; and Chief Financial Officer, Dennis Schemm.

Before we begin, I'd like to remind you, management's 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 statements regarding our industry, business strategy and expected performance, such as expected -- expectations with respect to revenue, gross margins, operating income and cash flow, as well as non-GAAP financial measures such as adjusted EBITDA. These statements, which may occur during our prepared remarks or during the question-and-answer session, may be identified by words such as expects, should, anticipates, intends, estimates, believes, or similar expressions that are used in connection with any discussion of future financial and operating performance.

Forward-looking statements represent management's current estimates in light of currently available information and the Company assumes no obligation to update any forward-looking statements in the future. Forward-looking statements are subject to uncertainty and we encourage you to review the Company's past and future filings with the SEC including, without limitation, the Company's Form 10-K and 10-Qs, which identify the specific risk factors that may cause actual results to differ or differ in a material way from those described in these forward-looking statements.

In addition, during this call, certain financial performance measures may be discussed that differ from comparable measures contained in our financial statements prepared in accordance with US Generally Accepted Accounting Principles referred to by the Securities and Exchange Commission as non-GAAP financial measures. We believe these non-GAAP financial measures assist management and investors in evaluating our performance and preparing period-to-period results of operations in a more meaningful and consistent manner, as discussed in greater detail in our earnings release. Our earnings release also includes a reconciliation of these measures.

I will now turn the call over to Jay.

James Bachmann -- President and Chief Executive Officer

Thank you, Rodny. Good afternoon, everyone, and thank you for joining us today for our fourth quarter and full year 2018 earnings call. Today, I will discuss our strategy, operating highlights and business activity. Dennis will then discuss additional details on our financial results, balance sheet and the outlook. After our prepared remarks, we will open up the call for your questions.

Over the last five years, we have worked very diligently on our culture of continuous improvement in doing things the Bison Way with a focus on three main core competencies, safety, customer service and operational discipline. I am proud of our people, the results that we have delivered and the platform we've built to generate tremendous value in our Company.

Not only have our fundamental values guided us to a successful track record over the last five years, but they provided the roadmap to deliver another year of strong results for the full year 2018, in which we produced record full year net sales of $528 million, delivered substantial improvement in net income increasing 24% to $74 million and we generated significant operating cash flow surpassing the $100 million mark for the third year in a row. This strong cash flow from operations allowed for additional repurchases of shares and investment in high return capital projects.

For the full year, we repurchased 2.3 million shares for approximately $66 million. The benefit to our shareholders was evident in the additional accretion to earnings, which rose by 52% to a record $2.02 for the full year, outpacing growth in net income during that same period. During the year, we continue to invest cash back into the business through high return capital spending. Through December 2018, we have delivered $4 million in cost improvements. Our focused spending on high return projects coupled with our Bison Way continuous improvement efforts is a key part of our strategy to manage costs and continue to strengthen our low cost advantage.

Turning to operating metrics. In 2018, our full year volume was up 3% year-over-year. In the fourth quarter, shipments were flat versus last year. Our strongest market continued to be the Southeast propelled by new residential construction. While there is uncertainty in the construction end markets, we agree with our customers that commercial construction continues to advance and that an underlying need for new housing remains, particularly at the more affordable entry levels. For 2019, we believe that new housing starts along with R&R and commercial will support industry wallboard volume growth to be up in the low-single digits for the full year 2019. In response to an environment where inflation continues to climb, we have announced to our customers a price increase effective March 1st. We look forward to discussing this price increase with you in more detail after the release of our first quarter 2019 financial results.

I would like to give an update on our Buchanan facility. As previously announced in January, our Buchanan plant experienced a significant equipment malfunction resulting in an outage at the plant. No injuries occurred from this event and I want to thank our associates for keeping safety as a top priority both at the time of the incident and now during the course of repairs.

While the Buchanan plant is down, we have increased production at our other plants and readjust the logistics to lessen the impact on customers from the lost production. Now that the suddenness of this event has passed, we have made a more refined estimate assessment of the time and resources needed to perform the repairs and expects start-up of the plant by mid-March. To our customers, I apologize for the disruption and I thank you for your support and understanding during this time.

In summary, while I feel proud of our past and what we have been able to accomplish over the last five years, I am even more positive about our future and how we are positioned to provide tremendous value to our customers, employees and stakeholders. Because of the investments we have made in our people and our focus on doing things the Bison Way, our business is well-positioned to generate significant cash flows, fortify our low-cost position and deliver tremendous value enhancing results, including stock buybacks and high return capital investments.

I'll now turn the call over to Dennis to provide additional details on our financial results, balance sheet and outlook.

Dennis Charles Schemm -- Senior Vice President and Chief Financial Officer

Thank you, Jay, and good afternoon to everyone on the line. I'll -- first detail results for the quarter and provide some comments on the balance sheet and liquidity, and then I will conclude by providing some additional perspective for the full year 2019. 2018 delivered another year of earnings growth and balance sheet improvement. We had good momentum into the fourth quarter with net sales increasing by 7% to $141 million on the strength of mill net price. Mill net price saw a 6.5% increase to $154.20. On a sequential basis, average mill net price was essentially flat when compared to the third quarter of 2018.

Gross margin in the quarter was flat at 28.1% as compared to the prior year quarter as higher price offset inflation on our cost of goods sold. For the full year, gross margin was 28%, compared to 26%, primarily due to higher volumes and pricing, partially offset by higher freight, raw material inflation and labor costs. Inflation for the quarter was roughly 6% and for the full year, overall cost of goods sold inflation was approximately 3%.

Looking forward, we expect to experience additional cost of goods sold inflation between 4.5% and 6.5% as freight, raw materials and labor all move higher. In order to combat the rising inflationary headwinds, we will continue to seek cost reductions through our Bison Way continuous improvement actions and through deploying capital to high return capital investments to not only reduce existing costs, but to avoid future inflationary pressures.

SG&A as a percentage of sales improved to 7.5%, compared to 7.9% in the prior year quarter. For the full year, SG&A improved to 7.6% of net sales, compared to 7.7% in the prior year, with both the quarter and full year benefiting from disciplined control of overhead costs.

In an effort to further reduce interest expense and improve cash flows, in December 2018, we swapped a portion of our term debt with lower costing industrial bonds associated with our high return capital spending. These swaps are expected to result in $200,000 to $300,000 in savings annually.

For the fourth quarter, interest expense decreased 18.3% to $2.3 million, compared to $2.8 million in the prior year quarter. For the full year, interest expense decreased 12.9% to $10.3 million, compared to $11.8 million in the prior year. The improvement in both periods is due to additional interest income, capitalized interest and lower spreads related to debt repricing. This decrease in the interest expense in the quarter and year were partially offset by a rise in LIBOR. 2018 effective tax rate was 21.7%, compared to 21.7% for 2017.

Moving onto the balance sheet and liquidity metrics. On December 31, 2018, we have cash on hand of $102.6 million, total debt of $268.9 million and $73.6 million of availability on the credit facility. During the quarter, we generated $46.8 million in cash flow from operations due to strict working capital discipline and invested $9.6 million in capital assets. For the full year 2018, net cash provided by operating activities totaled $131 million and capital investments totaled $31 million, up $9 million from the prior year, which is in line with our expectations.

During 2018, we returned a significant portion of operating cash flow to shareholders through stock repurchases. During the fourth quarter, we repurchased approximately 1.3 million shares of common stock, with an aggregate value of $38.3 million. For 2018, aggregate repurchase activity totaled 2.3 million shares with an aggregate value of $65.7 million. Additionally, we have repurchased 192,000 shares, with an aggregate value of $5 million in Q1 2019. As we move forward, the $300 million repurchase program provides us with approximately $126 million of remaining availability after accounting for the $174 million already repurchased since the inception of our buyback program.

At year end, our net leverage ratio stood at a low of 1.1 times, providing us with a very flexible balance sheet to accomplish our value add objectives. We are very pleased with this operational and financial progress. The solid improvement is a direct reflection of the Company's effective operating strategy, reliable execution, low cost efficient assets and dedication to excellence.

I will now provide some select insight regarding expectations for the full year 2019. SG&A is expected to be in the range of $40 million to $42 million. Cost of goods sold inflation per unit is expected to be at 4.5% to 6.5%. We expect to partly offset this inflation by approximately $3 million of savings from high return capital investments. Total capital expenditures are expected to be in the range of $28 million to $32 million. Maintenance CapEx is expected to be approximately $14 million to $16 million. High return capital spending is expected to be in the range of $14 million to $16 million. Depreciation and amortization is expected to be in the range of $43 million to $45 million. And the effective tax rate is expected to be in the range of 21% to 22%.

We expect industry wallboard growth in the low single digits for the full year of 2019. For Continental, we expect volume growth in line with the industry, less the loss volumes in February and March associated with Buchanan plant outage. Keep in mind that these loss volumes will be addressed through our business interruption claim.

Now, I would like to provide some perspective on the financial impact of the Buchanan plant being offline. The Company has property damage coverage and business interruption coverage under our insurance policy for the plant with a $250,000 deductible. Relative to our coverage, we expect to be reimbursed for cost associated with the repairs of the Buchanan facility and for the loss of sales associated with this event. Based on this, we do not foresee this event having a material adverse impact on our cash flows or earnings for the full year 2019. However, we do expect timing differences in the periods between when we receive insurance funds versus when the losses were incurred. We expect the impact of business interruption and the cost of repairs will mostly be incurred in the first quarter 2019. Given the time needed for processing the insurance claim, we anticipate that the insurance proceeds will extend beyond the first quarter.

In summary, we executed our strategy during 2018. We look forward to getting our Buchanan plant up and running, maximizing our service to customers and accomplishing our 2019 objectives. I thank the entire Continental team for their hard work and efforts to deliver results that support our long-term growth initiatives and value to shareholders.

Thank you again for joining us today. Operator, we are now ready to take any questions.

Questions and Answers:

Operator

Thank you. (Operator Instructions) And thank you. Our first question comes from the line of Phil Ng with Jefferies. Please proceed.

Philip H. Ng -- Jefferies LLC -- Analyst

Hey, guys. You saw a pretty heavy pre-buy ahead of the January increase last year. Can you just give us sense how it started off this year and how it's tracking. And are you expecting to see a little more activity given your Buchanan plant down for a few months?

James Bachmann -- President and Chief Executive Officer

So when I take a look at pre-buy, there definitely has been some pre-buy as we go into the March 1st price increase. At this point, it's hard to give a number, I would say, as to what that amount is. From an impact for us, there's not a lot of pre-buy that normally takes place in the Northeast just given the size of those warehouses. So really what we're seeing is there will be more in the Southeast, North Central where that impact would be had.

Philip H. Ng -- Jefferies LLC -- Analyst

Got it. And maybe from an inflation standpoint, you're forecasting still pretty noticeable step-up year-over-year. Could you kind of parse out what are some of the big buckets whether it's syn gyp, energy? And then, in conjunction with that, some of the freight bottlenecks you called out last year, has that started to level off? Thanks.

Dennis Charles Schemm -- Senior Vice President and Chief Financial Officer

Hey, Phil. This is Dennis. Thanks for your question. We are seeing inflation affecting us similar to that which we saw in Q4 2018. So we saw about 6% in Q4 2018. For 2019, we are expecting inflation in the range of 4.5% to 6.5%. And as you know, we like to give the bucket of COGS inflation to make it more efficient and simple, but the bottom-line is, yeah, we are seeing inflation in higher freight, both inbound and outbound. We're seeing higher raw material costs and we're seeing higher fixed costs as well.

Philip H. Ng -- Jefferies LLC -- Analyst

Got it. Thanks a lot guys.

James Bachmann -- President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Keith Hughes with SunTrust. Please proceed.

Joshua -- SunTrust Robinson Humphrey, Inc. -- Analyst

Hi. This is Joshua (ph) on for Keith Hughes. So just kind of follow-up on that, 4Q you guys had really good volume and were you guys impacted at the -- did you have any pre-buy in 4Q that may have happened, because you outperformed the industry by quite a bit?

James Bachmann -- President and Chief Executive Officer

So when you look at fourth quarter, I mean, well, what I have to do is first say, that I give a lot of credit to our teams and what we've been doing from a servicing side with our customers. So I give them a lot of credit with the relationships they've created. When I look at market share, frankly, that -- (ph) the action always move up or down within a percentage point, which is, what we're seeing here. So you do have fluctuations in the quarter. For me, I look at it where we -- we were able to have flat volumes and gained mill net pricing increasing by about 6.5% from the same quarter last year. To me, all that together meant was a nice success for the quarter.

Joshua -- SunTrust Robinson Humphrey, Inc. -- Analyst

Okay. Great. And then kind of on channel inventory, understanding the Northeast is more same day and stuff like that. But in terms of inventory in the channel, what are you guys seeing there?

James Bachmann -- President and Chief Executive Officer

When you say inventory in the channel, you're talking about what is in the distributor warehouses?

Joshua -- SunTrust Robinson Humphrey, Inc. -- Analyst

Yes.

James Bachmann -- President and Chief Executive Officer

So, again, if you're looking at Northeast, it is -- the footprint of these warehouses is very small. So to your point, there's just not a whole lot of days inventory that can hold in there and that's why that's one of the areas to where you'll sometimes see job sites being served directly just because it's an area of the country that is very difficult to go ahead and have warehousing used as a base.

Joshua -- SunTrust Robinson Humphrey, Inc. -- Analyst

Okay. Great. Thanks.

James Bachmann -- President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Garik Shmois with Longbow Research. Please proceed.

Garik Simha Shmois -- Longbow Research LLC -- Analyst

Hi. Thanks. Just wondering in your end market assumptions for 2019 and your outlook for volumes staying up low-single digits. Can you just talk about what you're expecting for residential, commercial, and repair and remodel?

James Bachmann -- President and Chief Executive Officer

Yeah. I mean, we're expecting to see growth across all of those segments, right? So in new resi, it's going to be low-single digits there, new commercial, looking at low-single digits and we feel good again about repair and remodel given where we are in this housing cycle. There still seems to be a nice increase in pricing for homes, and therefore, the repair and remodel work continues. So we're expecting to see growth low-single digits across all three of those segments.

Garik Simha Shmois -- Longbow Research LLC -- Analyst

Okay. And as far as the high return projects that you're outlining to $3 million, is that whole $3 million hitting right away in the beginning of the year or is that going to be feathered in as the year progresses?

James Bachmann -- President and Chief Executive Officer

Yeah. That's a great question, Garik. So that will be feathered in during the year, you'll see that come in, we'll provide you with even more guidance and color on that as we start to go through the year. Bottom-line is, some of that will be dependent upon the timing and off the commissioning of some of these projects. But we feel very good about the $3 million and that's why we wanted to come out with that.

Garik Simha Shmois -- Longbow Research LLC -- Analyst

Okay. Thank you.

Operator

Thank you. Our next question comes from the line of Matthew Bouley with Barclays. Please proceed.

Christine Cho -- Barclays Bank PLC -- Analyst

Hi. This is Christine Cho on for Matt. Thanks for taking the questions.

James Bachmann -- President and Chief Executive Officer

Good to hear you.

Dennis Charles Schemm -- Senior Vice President and Chief Financial Officer

Hello.

Christine Cho -- Barclays Bank PLC -- Analyst

My first question is on your outlook for volumes in the first quarter. Outside of the pre-buy and given the slowdown in new residential in late 2018, how are you thinking about volume growth specifically in the first quarter?

Dennis Charles Schemm -- Senior Vice President and Chief Financial Officer

When we go ahead and look overall, I'd say, we give guidance for the year. We don't get it down to that level on a quarter basis. To your point, you've had some slowdown in housing that occurred in the second half and a lot of what I'm seeing now is homebuilders switching over to some of the more affordable entry level houses and that's starting to take hold. So I would say, globally, for the year, we're still looking at that low single-digit growth on the wallboard side in the industry. How it breaks down by quarter, we'll see how it handle -- how it plays out. Just the other -- the only other point would be first quarter is a small quarter for us just given the winter months and the level of construction.

Christine Cho -- Barclays Bank PLC -- Analyst

Got it.

James Bachmann -- President and Chief Executive Officer

And the final point I'd like to make on that, as well as with the Buchanan facility being down, clearly we're going to be down some volume there associated with that event. So I just want to make sure you take that into consideration as well.

Christine Cho -- Barclays Bank PLC -- Analyst

Okay. And then actually on the Buchanan plant closure, from a market perspective, what do you think the implications will be on price in the overall market and for Continental, how should we think about mix and your overall average selling price?

James Bachmann -- President and Chief Executive Officer

Sure. So when you take a look at Buchanan, I would say that with it being down, even though it's significant for us relative to the market, I mean the plant itself is not huge relative to the market. So our focus overall is on the March 1 increase for where we serve to get that into place. In terms of the mix side, really when I take a look at mix, there's not a whole lot of impact that we have. The one caution I would say is that in the Northeast we do have a higher five ace (ph) product mix, which is normally about a $20 spread over the 0.5-inch mix, which is more dominated in our other locations. So that could have a little bit of a mix impact on us in the first quarter.

Christine Cho -- Barclays Bank PLC -- Analyst

Thank you.

James Bachmann -- President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Nishu Sood with Deutsche Bank. Please proceed.

Marius Cornel Morar -- Deutsche Bank AG -- Analyst

Hi. This is Marius for Nishu.

James Bachmann -- President and Chief Executive Officer

Hi, Marius.

Marius Cornel Morar -- Deutsche Bank AG -- Analyst

Hi. Thank you for taking my question. Could you give us some insight into the -- some of the capital spending projects that you're planning for 2019?

James Bachmann -- President and Chief Executive Officer

Oh! Sure. So very consistent with what we have lined out in prior discussions relative to the high return CapEx. I mean, we're really looking at ways in which to improve our raw material cost, improve distribution cost and then also look at energy savings as well. And so, you're going to see spend allocated to do those things for us, right? Also, automation would be another piece where we can improve our cost structure.

Marius Cornel Morar -- Deutsche Bank AG -- Analyst

All right. Thank you for that.

James Bachmann -- President and Chief Executive Officer

You're welcome.

Marius Cornel Morar -- Deutsche Bank AG -- Analyst

And then, how much of the Buchanan capacity were you able to meet from the other two plants so far, if you could give us some insights there just in terms of size? Are we talking like 10%, 20% just an estimate?

Dennis Charles Schemm -- Senior Vice President and Chief Financial Officer

Sure.

James Bachmann -- President and Chief Executive Officer

Sure. So if you -- just to give you kind of a sense of scale. You take a look in 2018, Buchanan was producing and selling approximately 10 million square feet per week, just to give you a baseline. The reality is obviously we're not at those levels as we try to serve that market from our other two plants. I can't give you a percentage at this point only because we're going through that process now and we'll be working with our insurance carrier as we submit the claim and so we are through that process, we'll be able to give you some better guidance come the end of the first quarter hopefully.

Marius Cornel Morar -- Deutsche Bank AG -- Analyst

Appreciate it. Thank you.

James Bachmann -- President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Mike Dahl with RBC Capital Markets. Please proceed.

Michael Glaser Dahl -- RBC Capital Markets, LLC -- Analyst

Hi. Thanks for taking my questions.

James Bachmann -- President and Chief Executive Officer

Hi, Mike

Michael Glaser Dahl -- RBC Capital Markets, LLC -- Analyst

Just a just a follow-up question on that. I guess in your market assumptions and your assumptions specifically then for CBPX volumes to be in line with the industry for the full year less this temporary loss business. If -- can you give us a sense of whether it's your expectation as the plant comes back online you'll immediately go back to your typical market share or do you anticipate that there could be some longer lasting share implications in the affected region just given kind of the time of year and people contracting out jobs?

James Bachmann -- President and Chief Executive Officer

Sure. So I would say that the short answer is, we don't expect to lose share because of this. That said, we don't take our customers for granted. So a lot of the work we're doing now from the logistics side and serving side as to do everything we can to work with them, including even planning for future jobs that they are doing. So I would say with the relationships we have we should maintain our share.

Michael Glaser Dahl -- RBC Capital Markets, LLC -- Analyst

Got it. Okay. And then a related question, talk about the focus on the March 1 pricing and I think some of the questions we've DONE have been whether capacity coming down is helpful for pricing. You've kind of addressed that a little bit earlier. But I guess I want to ask it a different way. And given you are experiencing some service disruptions to your customers, does that actually have an effect of -- as you look at pricing specifically to the Northeast, are you going to go ahead with the full price increase or do you think there is going to be -- have to be some level of negotiation given the service disruptions?

James Bachmann -- President and Chief Executive Officer

So I would say, when I look at the March 1 increase, we are going to go forward with the March 1 increase and then, obviously, as we go through that process, we'll be happy to give you a further update at the quarter end as we put that in place with the disruptions there given that we're only now talking a couple of weeks in the March, frankly, I don't see that being a big impact.

Michael Glaser Dahl -- RBC Capital Markets, LLC -- Analyst

Okay. And if I could sneak one last one in from a modeling standpoint. You mentioned the timing differential between the upfront expenses and the proceeds. Is there anything you can help us in terms of quantification for what's be thinking about from a modeling standpoint for 1Q and the recovery in kind of 2Q, 3Q?

James Bachmann -- President and Chief Executive Officer

Yeah. At this point, Mike, it's really difficult to do that. I prefer not to get into those details. Similar to litigation, it's not in our best interest to offer up more information on volume, pricing timing impacts. I think the key messages that I'd want you to walk away with is, we have insurance, we have it for property damage, we have it for business interruption. We don't expect to see any significant adverse impact to EBITDA for the full year. We do expect there to be timing differences in the periods between when costs are incurred and reimbursements received, and I'm sure we will have more clarity around this when we release Q1 earnings.

Michael Glaser Dahl -- RBC Capital Markets, LLC -- Analyst

Got it. Okay. Thank you.

James Bachmann -- President and Chief Executive Officer

Okay.

Dennis Charles Schemm -- Senior Vice President and Chief Financial Officer

Thank you.

Operator

Thank you. We ask that you please limit yourself to one initial and one follow-up question. Our next question comes from the line of Matt McCall with Seaport Global Securities. Please proceed. Matt McCall...

James Bachmann -- President and Chief Executive Officer

Hey, Matt. Are you there?

Reuben Garner -- Seaport Global Securities LLC -- Analyst

Good evening, guys. It's Reuben on for Matt. I got...

James Bachmann -- President and Chief Executive Officer

Hey, Reuben.

Reuben Garner -- Seaport Global Securities LLC -- Analyst

I got kicked off the line for a second. So if I repeat any questions, apologies. So, you said low single-digit wallboard industry growth this year. Did you or can you parse out your kind of end markets, whether it's commercial, new residential, R&R and even thoughts on Canada for us?

Dennis Charles Schemm -- Senior Vice President and Chief Financial Officer

You bet, Ruben. So, this is Dennis. And so, yeah, we are -- we expect to see growth across all three of the end markets, right? So, on the new residential side, shaping up well, low single-digit growth there. We're seeing low single-digit growth in the commercial, new commercial sector. And then across the R&R spectrum of both residential and commercial, we're seeing good low single-digit growth there as well.

Reuben Garner -- Seaport Global Securities LLC -- Analyst

Okay. And then, two very quick clarification questions. One, did you see -- I think you said residential paused in the fourth quarter. Did you see a similar pause in commercial spending as well?

Dennis Charles Schemm -- Senior Vice President and Chief Financial Officer

We really didn't hit. It was more of a slowdown, yeah, and it was kind of small in the residential side, not on the commercial side.

Reuben Garner -- Seaport Global Securities LLC -- Analyst

Okay. And then, Dennis, sorry, sneaking one in. Just the cost of goods inflation 4.5% to 6.5%, you said on a per unit basis. Is that a change in the way you guys have talked about in the past or is that the same thing? I just don't recall you saying per unit in the past?

Dennis Charles Schemm -- Senior Vice President and Chief Financial Officer

Yeah. We -- that is very, very consistent with how we've been explaining it in the past as well, Ruben. So I apologize...

Reuben Garner -- Seaport Global Securities LLC -- Analyst

Okay.

Dennis Charles Schemm -- Senior Vice President and Chief Financial Officer

...if maybe one quarter we slipped, but, yeah, we've been trying to remain really disciplined on that.

Reuben Garner -- Seaport Global Securities LLC -- Analyst

No, no, no. I just wanted to be clear. I appreciate it. Thank you guys very much.

Dennis Charles Schemm -- Senior Vice President and Chief Financial Officer

Okay.

Operator

Thank you. Our next question comes from the line of Scott Schrier with Citi. Please proceed.

Scott Evan Schrier -- Citigroup Inc. -- Analyst

Hi. I want to ask a little bit about the quarter. So, it looks like -- as you said volumes came in a bit better than what I think folks were expecting. You were able to hold price. So it looks like the revenue was higher than what consensus expectations were, but EBITDA was a little bit below. So is that -- was there anything unexpected or maybe a ramp-up in some costs that happened earlier than you had anticipated in the quarter, anything we should consider there that impacted the results?

Dennis Charles Schemm -- Senior Vice President and Chief Financial Officer

Yeah. That's -- it's a great question. And so the real issue was, I was calling for $5 million in savings for high return CapEx. We came in at $4 million in savings. And the bottom-line reason for that was tariffs associated with some of our raw materials and proprietary blends and so that ended up hurting us and that was the main driver.

Scott Evan Schrier -- Citigroup Inc. -- Analyst

Got it. And then for my follow-up, more on the cost side. It seems like we've been hearing a little bit about certain costs pressures abating as of late, which might suggest a little less than the inflation that you were talking about. So is there any implication there on the syn gyp side that maybe you're -- I know in the past you've talked about having to go further out to secondary and then tertiary sources. Is there anything to read into that supply of syn gyp. It's not that it's scarce but you're just continuing to have to go further out to get it?

James Bachmann -- President and Chief Executive Officer

Real consistent again, we've been telling the story of higher gypsum costs, because we're -- as we produce more then we're going out to our secondary sources more. The secondary sources are further away, so that's a higher freight impact and they're a little bit more expensive than our primary sources. That cost of inflation will continue. And our estimates remain pretty much the same as what we were saying last year. And then you continue to see inflation across those buckets of cost of goods that we've been preparing for you for an efficiency standpoint. So other raw materials, we continue to see inflation there. Fixed costs, we continue to see inflation there as well.

Operator

And thank you. Our next question comes from the line of Josh Wilson with Raymond James. Please proceed.

Joshua Kenneth Wilson -- Raymond James & Associates, Inc. -- Analyst

Good evening, Jay and Dennis. Thanks for taking my questions.

Dennis Charles Schemm -- Senior Vice President and Chief Financial Officer

Good evening.

James Bachmann -- President and Chief Executive Officer

Hey, Joshua. How are you?

Joshua Kenneth Wilson -- Raymond James & Associates, Inc. -- Analyst

I am well. How are you?

James Bachmann -- President and Chief Executive Officer

I am great. Thank you. Thanks for your questions.

Joshua Kenneth Wilson -- Raymond James & Associates, Inc. -- Analyst

A couple of for me here. First, you talked about regional differences and volume with the Southeast being stronger. Any differences in price regionally?

Dennis Charles Schemm -- Senior Vice President and Chief Financial Officer

There is some differences in price and a lot of this is -- that deals with the product mix involved. So, again, what we find in the Northeast, which is a heavier five ace market just because of the commercial code requirements there, you normally see the five ace being used because of that, about a $20 spread higher for that product relative to the 0.5-inch that would be more predominant, say, in the Southeast.

Joshua Kenneth Wilson -- Raymond James & Associates, Inc. -- Analyst

Sorry. I didn't phrase that well. So outside of mix on a like-for-like basis of the 6.5%, what is it sort of some of the (ph) better regions than others?

Dennis Charles Schemm -- Senior Vice President and Chief Financial Officer

There -- you do have some of that, but frankly, we don't get into that level of detail for competitive reasons.

Joshua Kenneth Wilson -- Raymond James & Associates, Inc. -- Analyst

Okay. And then you did a good job giving us some color on the channel inventory dynamics in the Northeast. Can you give us any similar color on the other regions?

James Bachmann -- President and Chief Executive Officer

Sure. So if you look at North Central, Southeast, because of some of the larger warehouses they have there, that's where you can see some inventory build that they will do in advance of the price increase. At this stage, I can't pin down the amount. Normally, it takes some time to figure out that, what that is, as that burn takes place after March 1. But certainly, those are the locations that have some of the larger facilities.

Joshua Kenneth Wilson -- Raymond James & Associates, Inc. -- Analyst

If I could just sneak in a housekeeping one with Dennis. The jump in accounts payable, what was the story there year-on-year?

Dennis Charles Schemm -- Senior Vice President and Chief Financial Officer

So it's really just fine-tuning of our management of our working capital. So not only DSO, we pay a lot of attention there looking at paying our payables on time, just really honing in on what we can do to manage working cap.

Joshua Kenneth Wilson -- Raymond James & Associates, Inc. -- Analyst

Okay. Good luck with the next quarter.

Dennis Charles Schemm -- Senior Vice President and Chief Financial Officer

All right. Thank you.

James Bachmann -- President and Chief Executive Officer

Thank you.

Operator

Thank you. We have reached the end of our Q&A session. Allow me to hand the floor back over to management for closing remarks.

James Bachmann -- President and Chief Executive Officer

Well, we appreciate everybody joining us tonight for our conference call and look forward to speaking with you again at the end of the first quarter.

Operator

Thank you. This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.

Duration: 39 minutes

Call participants:

Rodny Nacier -- Investor Relations, ICR, LLC

James Bachmann -- President and Chief Executive Officer

Dennis Charles Schemm -- Senior Vice President and Chief Financial Officer

Philip H. Ng -- Jefferies LLC -- Analyst

Joshua -- SunTrust Robinson Humphrey, Inc. -- Analyst

Garik Simha Shmois -- Longbow Research LLC -- Analyst

Christine Cho -- Barclays Bank PLC -- Analyst

Marius Cornel Morar -- Deutsche Bank AG -- Analyst

Michael Glaser Dahl -- RBC Capital Markets, LLC -- Analyst

Reuben Garner -- Seaport Global Securities LLC -- Analyst

Scott Evan Schrier -- Citigroup Inc. -- Analyst

Joshua Kenneth Wilson -- Raymond James & Associates, Inc. -- Analyst

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