Question-and-Answer Session
Operator
(Operator instructions) Our first question is coming from Robert Felice with Gabelli & Company. Please state your question.
Robert Felice – Gabelli & Company
Hey guys, just a couple of quick questions. First, what was the magnitude of your second quarter raw material cost increases and how much pricing did you get? So, in other words, I'm curious to get my hands around the delta between the two of the price cost gap.
Ron Naples
Mark, why don’t you give figures on that?
Mark Featherstone
Yes. For the first half of this year, we're looking at higher cost compared to last year in the range of $12 million or $13 million, and the under recovery was probably between $1 million and $2 million. And as we discussed, we're looking for – we have already implemented price increases to get that back in the third quarter. However, because raw material price has continued to escalate in the third quarter, we're looking at additional price increases as well beyond that.
Ron Naples
We think though that going into the second half of the year that we should be able to see a little more gross margin recovery than we see, in terms of the percentage than the kind of decline you've seen in the first half of the year.
Robert Felice – Gabelli & Company
Well, you mentioned a cumulative $40 million of cost increases that you'll experience this year and you received $12 million or $13 million of that so far. So you've got $27 million or $28 million left. Do you have pricing in place enough to fully offset that and to also cover the $1 million or $2 million delta from the first half, or you need to go out in the market with additional price increase?
Mark Featherstone
As I mentioned, I'm sorry Ronald, I (inaudible) we do have a lot of price increases that went into effect July 1 and some more going into back on August 1. But we are going back for additional price increases, because as I mentioned, we have raw materials continue to escalate into the third quarter as well.
Ron Naples
Yes. I think the point here is that $40 million that we've talked about, that of course is we can't know that number specifically yet. That's based on projections given what we know has already come down to track and we expect to come down the track further. Of course we have to stay responsive to the market as they actually develop. But all of our regions are working hard on making sure that we're able to keep our margins in good shape even in the face of these increases. So as Mark said, we've got increases that we planned in the last quarter that are going into effect early in the third quarter. And we will be implementing other increase to try to do our best to stay ahead of the kind of escalation that we see coming. Of course, it's always built around working with our customers to find the right way to get this done, because we're serious about the notion of – the question here is the kind of value we can deliver to our customers and we will really focus hard trying to make sure that is understood in our customers.
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