Question-and-Answer Session
Operator
(Operator instructions) Your first question comes from Michael Rehaut with J.P. Morgan.
Ray Onard – J.P. Morgan
Hi guys, and this is actually Ray Onard [ph] for Mike.
Jeff Lorberbaum
Good morning.
Ray Onard – J.P. Morgan
Just trying to drill down more on the Unilin margin there, you know, up very strongly both year-over-year and sequentially, just wondering if you could provide some additional color there what drove the quarter. Then also looking out in the back half of the year, you know given the European holiday and potentially customers trading down with a continued negative mix shift, how do you see the margins kind of playing out there, and should we kind of be expecting a sequential decline there, or can you guys maintain that double-digit margin in Unilin?
Jeff Lorberbaum
Let us see if we can answer that for you. You know, we started out in the first quarter of the year with the sales level down in the period as well as declining, reducing the inventories in the period. As we came into the second quarter we had higher plant operating level, which helped with the sequential volume improvement that went along with it. During the quarter we also had, we are able to reduce some of the marketing and maintenance expenses, which we pushed out. Some of them will hit in the third quarter and impact the third quarter results.
In addition, we have had some lower raw material costs in the quarter, and signed some new licenses as well during the period. As we look forward, we don't believe that we can sustain these unusually good results that we had in the period. What we believe is that the third quarter is going to be, after the struggle with the holiday impacts in Europe's and we're making the assumptions that the volume is going to be impacted a little more than usual, and the downtime because of the inventory levels, and normal other things would be run less, so we will run the plants less than we had in the second quarter. In addition, we are assuming that there is continued pressure in market pricing, especially in the board part of our business.
And then we talked about the cuts in marketing and maintenance costs being pushed from the second quarter, some of those falling into the third, and then the royalties, which we get, we are assuming the industry volumes going to continue under pressure and impact those. So we think that the margin sequentially will not be able to be maintained at those highs levels.
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