Atkore International Group Inc. (ATKR) Q1 2019 Earnings Conference Call Transcript

ATKR earnings call for the period ending December 28, 2018.

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Atkore International Group Inc.  (NYSE:ATKR)
Q1 2019 Earnings Conference Call
Feb. 06, 2019, 8:00 a.m. ET

Contents:

Prepared Remarks:

Operator

Greetings, and welcome to the Atkore International First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.

(Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Keith Whisenand Vice President of Investor Relations. Thank you, Mr. Whisenand, you may begin.

Keith Whisenand -- Vice President of Investor Relations

Thank you and good morning everyone. With me today are Bill Waltz President and CEO, as well as David Johnson, Chief Financial Officer.

I would like to remind everyone that during this call, we may make projections or forward-looking statements regarding future events or future financial performance of the Company. Such statements involve risk and uncertainties such that actual results may differ materially. Please refer to our 10-Q and today's press release which identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements.

With that, I'll turn it over to Bill.

William E. Waltz -- President and Chief Executive Officer

Thanks Keith and good morning everyone. It feels like we just had our end of year 2018 earnings call since it was just over 60 days ago. So I'll be brief and let David hit some of the financial details you want to hear about.

Looking at our results on Slide 3 and 4; largely the quarter ended as we expected and our strategy continues to deliver impressive improvements. We delivered net sales of $452 million, adjusted EBITDA of $70 million and adjusted net income per share of $0.74. These results are up 9%, 20% and 32% versus last year.

Looking at the highlights for the quarter, we delivered organic net sales growth of 7%. We did see volume strengthen in key categories like PVC conduit and specialty cable, where we get above average margin, but overall volume was lighter than our expectations. This is primarily due to the year-over-year difference from many of our distributors push from a year ago to achieve calendar year-end rebates.

If you recall, we're lapping a difficult comparison as that annual rebate driven buy-in drove 9% Raceway volume growth in Q1 of fiscal 2018. And, once again, this has no impact on our view of the market for the full year and we are still expecting 2% to 4% volume increases from the construction markets.

I'm proud to report our pricing initiatives in our MP&S segment caught up with the cost curve in the quarter. Overall, the pricing environment was stronger than we guided in November and we do not expect to see price versus cost to be a net headwind this year. I mentioned adjusted net income per share was up an impressive 32%. It's important to understand that this growth was despite a $5 million earnings headwind driven by last year's deferred tax revaluation.

Finally, we repurchased 1.2 million shares on the open market, taking advantage of the market volatility over the last quarter and fully utilizing the balance of the $75 million repurchase plan our Board approved in August of 2017.

In summary, Q1 was another strong quarter and we continue to see a strong 2019 ahead of us. As I've mentioned in the past, it's the team, the culture and the Atkore business system that together continue to provide the discipline to deliver on our commitments to our customers as well as our shareholders.

With that, I'll turn the call over to David, who will walk us through our financials in more detail and provide additional insights into the quarter.

David P. Johnson -- Chief Financial Officer

Thanks, Bill, and good morning to everyone. Moving to our consolidated first quarter results on Slide 3, net sales were $452 million, up 7% organically after normalizing for net acquisitions and foreign exchange. In the quarter, this increase was driven by higher average selling prices as well as focused effort on driving a favorable mix.

Net volume, excluding net acquisitions, was down 3%, reflecting the year-over-year distributor rebate impact that Bill mentioned in our Electrical Raceway segment and flat volume for MP&S. To total Atkore, the net acquisition impact added 2% to the top line in the quarter.

During the quarter, we incurred input cost increases of $27 million year-over-year. Through initiatives, we successfully increased our average selling prices $40 million resulting in a net $13 million (ph) favorable EBITDA impact. We've broken out those items on the adjusted EBITDA bridge on Slide 3.

As we have previously mentioned, we pass these costs through to our customers in price. Net sales and cost of goods sold increased in equal amounts, unfavorably impacting the resulting margin percentages. On a constant input cost basis, our adjusted EBITDA percent would have been up 235 basis points versus Q1, 2018.

Gross profit was $110 million for the first quarter, up 14% or $13 million compared to the same period in 2018, driven primarily by price and mix versus cost. Adjusted EBITDA was $70 million, up $12 million or 20% versus last year. Our net acquisitions account for $1 million of the increase to adjusted EBITDA in the quarter. These increases were partially offset by volume, inflation, variable compensation and growth investments we've made in the business.

Our net income on a GAAP basis was $27 million, down slightly versus the first quarter of 2018. As Bill mentioned, the deferred tax accounting for the federal tax reform favorably impacted net income last year by $4.8 million. In addition, our interest expense is $5.6 million unfavorable mainly due to our Q2 FY '18 stock repurchase from CD&R. Adjusted EPS was $0.74, up 32% from the first quarter 2018.

Moving to our Electrical Raceway segment on Slide 5; net sales increased by $27 million or 8.5% to $343 million. Our recent acquisitions, all of which are reported in Electrical Raceway, increased segment net sales in the quarter by $30 million or 4%. Organic volumes were down approximately $11 million or 3% in the quarter, driven by the year-over-year differences in distributors managing year-end rebates.

Higher average selling prices had a favorable impact to revenue of about $25 million or 8%. Adjusted EBITDA was $69 million, up $12 million or 22% compared to last year. The acquisitions account for $2 million of the adjusted EBITDA increase. Adjusted EBITDA margin increased by 220 basis points with price, execution, accretive acquisition margins, and favorable mix driving the improvement.

Moving on to our Mechanical Products & Solutions segment on Slide 6, net sales in the quarter were up $10 million or 10% to $109 million. Volumes were flat, prices increase added 15% and the divestiture of the flexible sprinkler business reduced net sales by 5%.

Adjusted EBITDA of $11 million was flat compared to last year. However, normalized for the divestiture, MP&S adjusted EBITDA grew by 10%. Adjusted EBITDA margin is below the first quarter of 2018 by 100 basis points. The mix impact from the Flexhead divestiture accounts for 50 basis points of the reduction and although our pricing initiatives have caught up to the steel cost curve, the margin percentages are negatively impacted by passing through the significant steel increases.

Turning to our balance sheet and cash flows on Slide 7; the balance of cash and cash equivalents at the end of the quarter was $76 million. Net cash flow from operating activities for the quarter was $40 million. Finally, our net debt of $829 million and leverage ratio, which we define as net debt to trailing-12 months adjusted EBITDA, was 2.9 times. As we've communicated in the past, our long-term goal is to move this metric back to the low 2 times range.

Now I'll turn the call to Bill for our guidance update.

William E. Waltz -- President and Chief Executive Officer

Thanks, David. Moving to our 2019 guidance on Slide 8, our view on the construction markets has not changed for this year and we still expect the Electrical Raceway to be up 2% to 4% in 2019. And although we expect strong industrial markets, we are seeing projects move forward slower than we originally anticipated and we are lightening our view on MP&S volumes. We now expect MP&S volumes to be up 2% to 4%. Even with that adjustment to volume, Atkore's proven pricing and mix discipline is allowing us to raise the full-year guidance for both segments and overall Atkore.

Our 2019 guidance is as follows. For the Electrical Raceway segment, we expect adjusted EBITDA range to be between $270 million and $290 million. For our MP&S segment, we expect adjusted EBITDA to be between $55 million and $60 million. For total Atkore, we expect 2019 adjusted EBITDA to be between $290 million and $310 million. We estimate our adjusted EPS to be between $3.05 and $3.35. Interest expense will be approximately $52 million and after our latest repurchases, our fully diluted share count will be 48 million shares. Our tax rate will be about 25% for the full year. CapEx is expected to be between $35 million and $40 million.

Turning to the second quarter guidance for total Atkore, our adjusted EBITDA range is between $69 million and $75 million and our adjusted EPS range is between $0.70 and $0.80. And so, after a strong Q1, we are set up for another quarter of double-digit growth in both metrics at our midpoints.

On a side note, I also wanted to inform you of two recent resolutions that just came into effect. The first is the approval by our Board of Directors for a new $50 million share repurchase plan. Secondly, shareholders voting from our annual meeting resulted in an approval that declassify the Board of Directors for Annual elections by the 2022 Annual Meeting, eliminate super majority voting requirements and replace plurality voting with majority voting in uncontested elections of the Directors.

These improvements in our governance processes make us more shareholder-friendly and are a continuation of Atkore's evolution as a public company without private equity ownership. We are pleased with these results, which we feel demonstrate the confidence from our shareholders and the Board of Directors and Management and our overall strategic direction at Atkore.

And lastly, that confidence is an extension of our own team's focus to ensure we deliver upon the commitments we set forth and enable us to raise our full year guidance.

With that, operator, please open the call to questions.


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Questions and Answers:

Operator

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions) Our first question comes from the line of Andrew Kaplowitz with Citi. Please proceed with your question.

Andrew Kaplowitz -- Citi -- Analyst

Hey, good morning guys.

William E. Waltz -- President and Chief Executive Officer

Good morning Andy.

David P. Johnson -- Chief Financial Officer

Good Morning.

Andrew Kaplowitz -- Citi -- Analyst

Bill, can you give us more color regarding how to think about the peak tailwind of price versus cost within your two segments. If we look at steel front, since its continued drop -- as you guys know since the spring of last year, but we know there is a lag between pricing and inflation or deflation, particularly in MP&S. I think though you just said that you caught up early even in MP&S in terms of price versus cost and that you wouldn't have a headwind now in terms of price versus cost. But given the lag in how deflation can affect the P&L, could you actually have a positive benefit now versus the $5 million to $10 million headwind that you previously guided to last quarter for the year?

William E. Waltz -- President and Chief Executive Officer

Yeah, So, Andy, I'll start to address and you can follow up or David. We -- as we go into the year, as the last several years, we've done a really good job with pricing. I think last year, just to give a perspective; we did such a great job as we set our guidance that with a couple one-time things like PVC, Hurricanes and things, we just were not sure to go, can we lap year-over-year.

But as we get into the year, as you noted with MP&S doing a really good job, I think our Electrical Raceway has always done a good job that instead of seeing it from a comp perspective year-over-year that we do expect to now have it as a net zero basically. And again, I think we've proven whether commodities go up or down there can always be a lag, but we've been very effective, tariffs, no tariffs, commodities up or down, steel, copper, PVC continuing, over time, to increase our spreads and therefore our EBITDA.

Andrew Kaplowitz -- Citi -- Analyst

Okay. And maybe if I could shift gears and ask you about Electrical Raceway volume. Obviously the down 3%, maybe slightly below expectations, but you're still guiding at 2% to 4%, is there anything that you're seeing as we are here in Q2 that gives you the confidence to sort of get back into the range? I know you said you faced difficult compare versus the rebates last year, but as you guys know, it's been sort of a little weak-ish on the volume side for the last few quarters. So how do we get confidence that you're sort of going to get out of the muck there?

William E. Waltz -- President and Chief Executive Officer

Yeah, it's a great question Andy. And yeah, every -- first for the markets and then Atkore, every indication are that 2% to 4%; Architectural Billings Index around a 54%, the last I saw. Dodge would tell us that same 2% to 4%. I think every public corporation that's guided has guided in that range, give or take, they may put revenue in. And remember, we separate out volume from price. So, our number could be a little bit lower and still be better when we put, for example, this quarter and price.

And then, as you addressed and our public information is, we did have a tough comp last year. So 9% up, where distributors bought ahead, we didn't see it this last quarter for a couple reasons. One, they had already hit a (inaudible). Two, as you addressed in your first question, commodities are dropping in price.

So where distributor and/or a contractor can manage their inventory down whether it's steel dropping 10%, 15%; copper down 10% year-over-year, they have and that's I guess what pushed our volume. But it gives us a reasonable strength as we get into the end of this year that we are seeing the volumes rebound and we feel comfortable with our guidance at 2% to 4% up for fiscal 2019 because of that.

Andrew Kaplowitz -- Citi -- Analyst

And Bill, even last quarter you talked about slight market share declines, either kind of keeping up or maybe slight decline in Electrical Raceway. Is that still what's going on when I look at that negative 3%? Is it maybe...

William E. Waltz -- President and Chief Executive Officer

No.

Andrew Kaplowitz -- Citi -- Analyst

You're higher priced or -- no.

William E. Waltz -- President and Chief Executive Officer

No, I don't. I think that's a great question and I think even there to put -- continue to crystallize the information, as I had mentioned in the past, there may be some slight market share. But again we're talking basis points here. The other thing as we've articulated in the past and we continue to do really well is the mix. So there are products I called out. I'm hesitant with thinking competitors are listening the call. But we did list out things like specialty cable and some of our PVC products where we specifically targeted products with higher margin and we actually grew share in those and I could mention other products or I'm aware of others. We're some of the very basic products. I am willing to give up share in something below our average margin to pick up.

So it's kind of anti that net balance but I think the team has very specific plans. They have it targeted by account with value props they're going after it. I fly from here tonight to meet with all of our agents at a National Convention and I'm sure that will be a very specific part of our conference discussions, how we continue on this strategy that's working really well.

David P. Johnson -- Chief Financial Officer

And one thing I'll just add on that mix Andy. If you look at our EBITDA bridge, you will see that the volume/mix EBITDA impact is only $1 million and actually that rounded to $1 million. It was only about $600,000 to $700,000 on $11 million in volume. And again, that just shows the mix impact of -- we did had higher volumes, more profitable products in some of our product lines and a little bit less volume, I would say in our less profitable and that mix effect really put the EBITDA impact as a pretty minor impact on $11 million.

Andrew Kaplowitz -- Citi -- Analyst

Thanks guys.

William E. Waltz -- President and Chief Executive Officer

Thanks, Andy.

Operator

Thank you. Our next question comes from the line of Deane Dray with RBC Capital Markets. Please proceed with your question.

Geoffrey Kwan -- RBC Capital Markets -- Analyst

Hi guys, this is Geoffrey on for Deane. Now that your net leverage is around 3 times I know some investors are growing concerned about peak cycle. So given the newly issued buyback authorization, how do you view buyback versus debt pay down in this environment?

David P. Johnson -- Chief Financial Officer

Yeah. So in this environment and I believe, like we've said before, it's a balance of tuck-in M&A. We do want to make sure that our buybacks offset dilution, which we've already done for this year and then the rest will be, I would say leverage toward debt reduction. I think when we look at where we are in the cycle and what have you. We have talked about allocating a little bit more to debt reduction.

We know it's public, if you look at our financials, that we have debt repayment that we have to make in Q2 of $24 million, mainly because we had excess cash at the end of last year. So you will see us paying that down in Q2. Q2 typically is not our highest cash flow month, but we do feel like we're still going to have pretty strong cash flow in Q2 especially versus Q2 last year.

And the second half is where we really have our opportunities to, again, allocate that capital, I would say -- I'd like to say more to debt reduction, but I would also say that our M&A opportunities are still pretty robust. The pricing is still reasonable from where we've seen it in the past and we will still take advantage of small tuck-in acquisitions where we feel it's the best thing to do for the business long-term.

Geoffrey Kwan -- RBC Capital Markets -- Analyst

Okay, great. And then would it still be a good framework to think about a $100 million, $150 million on M&A deployment annually?

William E. Waltz -- President and Chief Executive Officer

That's a broad range Andy (ph), but I think over to your question, and David's answer, shorter term that may be more at the top end as there are -- because of -- I'll just add color, internal CapEx where we can get a two year return top priority and that's in the guidance that $30 million, $40 million; I think we have a more specific number, but gives you a feel.

From there, as David said, I think we're going to shift a little bit more to get that debt ratio down with using cash and then continue to do tuck-ins, but where the teams really focus now and specifically people use different words, but tuck-ins, that $20 million, $25 million type of company. Just so synergistic that fits in with our lines, fits exactly through the same agents going through the same distributors with high growth potential, specifiable products. That's the type of things -- our team does an amazing job with the pipeline. But we are being very specific because we do have the opportunity to continue to de-lever well, and we're going to take advantage of that with the cash we're generating.

Geoffrey Kwan -- RBC Capital Markets -- Analyst

That's great. Thank you.

William E. Waltz -- President and Chief Executive Officer

Great, thanks, Geoff.

David P. Johnson -- Chief Financial Officer

Thank you.

Operator

Thank you. (Operator Instructions) Our next question comes from the line of Peter Lennox-King with UBS. Please proceed with your question.

Peter Lennox-King -- UBS -- Analyst

Good morning. Thanks for taking the questions.

William E. Waltz -- President and Chief Executive Officer

Good morning.

Peter Lennox-King -- UBS -- Analyst

So, if we could start maybe with seasonality, it looks like you've got some seasonality shifts within the segments on the EBITDA line relative to last year. So in MP&S, it looks like this year EBITDA will be about 43% H1 versus H2 being balanced. But last year it was much more front-loaded about 50%, 54%, 55%. So a good deal lower, and I'm just wondering about the underlying dynamics there. Is it a price/cost effect or are you simply more optimistic about MP&S in the second half?

William E. Waltz -- President and Chief Executive Officer

Yeah, I think there is a couple of things, but one of the things driving as you're looking at the numbers is also just the commodity prices. So as commodity prices go down, that's driving a little bit of the numbers. From there, I don't know from the team, there is nothing major we're seeing at this stage.

Peter Lennox-King -- UBS -- Analyst

Okay. Okay, thanks. And it's interesting because the effective of the shift is not as pronounced, but it's the reverse in Raceway where you have a little bit more front loaded than you were last year. Again, that might be -- there might be a commodity.

William E. Waltz -- President and Chief Executive Officer

Yeah, I think (multiple speakers) Yes, it's the pricing. Let's put it this way, in our -- some of our products, PVC for example, just one sub segment. Obviously there's seasonality there, but I don't think gets elicit (ph) from our guidance. There is no hockey stick or anything else versus just, hey how's the team's bottom-up look at things, and then from there, it's the noise of, you know the price seen, what's commodities doing in different things and mixing like that. So, some timing of projects being shifted out, but nothing, I just take say Peter, but nothing really to read into other than think we've give an accurate guidance.

Peter Lennox-King -- UBS -- Analyst

Okay, great, great. And maybe staying on MP&S for a moment, you cited slower industrial -- a slower pace of industrial development project?

William E. Waltz -- President and Chief Executive Officer

Yeah.

Peter Lennox-King -- UBS -- Analyst

Behind the volume -- the volume guide decreased for this segment, what do you think is driving the slower pace that you're seeing there? Is it just caution from your customers or are there (multiple speakers) you'd call out?

William E. Waltz -- President and Chief Executive Officer

No. Oh yes, a great question, just because of clarifying. No, it's been more projects being pushed out. And trust me, if you think about the logical question when the project gets pushed out, like well great, you raise your second half then, and then you get into going just you realize labor shortages and when a project gets pushed out, will they always be behind. So we are being prudent, but I think accurate in our numbers, just to go, hey if some of these projects that they thought would get done in six months are taking nine mines, what's that mean. So, just as things continue to shift. But the activity out there, and again across all facets right now, is pretty strong; so just timing.

Peter Lennox-King -- UBS -- Analyst

Okay. Okay. And then one last one if I could, I'm sure this is a topic that where you sit is the -- maybe you're tired of hearing about it or thinking about it, but the weather. I imagine you're happy to be through the polar vortex there. As we roll through Q2 for you, is there any notable impacts or lasting impacts that you'd call out? I know you've got a number of production and distribution facilities throughout the Midwest and upper Midwest, and I'm wondering if there's anything that -- whether you (multiple speakers) are you closing any production or anything on that front?

William E. Waltz -- President and Chief Executive Officer

No, nothing. Yes, I guess a little later I can tell you about my airplanes stories but no; for in all sincerity, Peter, no. Did we shut down a facility for a day because of the nice, as you were -- polar vortex, but that was only a partial and there's always weather, there's always holidays and Chinese New Year and they are built into our comps and we're pretty convinced that we'll deliver on our forecasts.

Peter Lennox-King -- UBS -- Analyst

Okay, that's helpful, thanks very much guys.

William E. Waltz -- President and Chief Executive Officer

Awesome questions. Thanks.

Operator

Thank you. Our next question comes from the line of Rich Kwas with Wells Fargo. Please proceed with your question.

Deepa Raghavan -- Wells Fargo. -- Analyst

Good morning. This is Deepa Raghavan for Rich Kwas. Hope you're doing well today.

William E. Waltz -- President and Chief Executive Officer

Yeah. Good morning Deepa.

Deepa Raghavan -- Wells Fargo. -- Analyst

Good morning, Bill. So, a few from me too; I'll start with the guidance spread. I mean $0.30 spread. I mean you would already have, I mean on the EPS line and we are already pretty much halfway through. I mean you guided to Q2 already. I see that you're trying to keep your $0.10 spread per quarter.

But if I look back last year this time, I mean you're probably guiding to a $0.10 granted it was a different CEO, Tim, and now you guided with a $0.10 spread, tighter spreads. But are, is there any, is it just a function of your comfort with a wider spread or is it, are there more puts and takes this year versus last year, and that's why you're keeping this wide spread? And if there are puts and takes, what are some of those that are tied to the low end of your EPS guide or to the high end of your EPS guide?

David P. Johnson -- Chief Financial Officer

Yeah, Deepa, I don't think there's anything that's unusual to keep those spread kind of where it is. When we look at our adjusted EBITDA, which then translates of course into our adjusted EPS (ph) of $69 million to $75 million range, $6 million on the size business we have, given all the dynamics that we can imagine you deal with. We just feel it's prudent to have that kind of a range to make sure, again, that we're guiding prudently and make sure we are within the range for our guidance when the quarter end. So...

Deepa Raghavan -- Wells Fargo. -- Analyst

Oh OK. So there is just -- so nothing all right. So let me ask you...

David P. Johnson -- Chief Financial Officer

That $6 million obviously is not that much of a...

Deepa Raghavan -- Wells Fargo. -- Analyst

Yeah, it doesn't, yeah.

David P. Johnson -- Chief Financial Officer

It's a fairly tight range, I must say.

Deepa Raghavan -- Wells Fargo. -- Analyst

Yeah that I agree. So it looks like it's a little bit more below the line. But, OK, so last quarter -- when you gave initial guides last quarter, you were giving us your vertical outlooks, you gave us 2% to 4% non-res; 4% to 5% Industrials; and resi is flat to 3%. Any of these, you feel a little less confident now or a little bit more confident now and if you can just give us some color, that will be helpful. And this is particularly -- I asked this particularly because your peer Hubbell yesterday took down some of their market outlooks so...?

William E. Waltz -- President and Chief Executive Officer

Yeah. No, a great question Deepa. It's kind very consistent. Overall, there is obviously sub segments we can all redodge of different market segments, departments or whatever that are -- continue to be forecasted down, but it's such a small segment for us, less than 10% that it's not really a significant impact. Obviously things like warehouses and offices and manufacturing dodge and we see strength in 2019 and then also data centers.

I don't have specific numbers because we sell, again, through distributors that resell. But as we are working in projects and David and I are working with our sales team, our general management, we'll be targeting whether it's Facebook or Google and where is the next data center or even when we're out looking at M&A and they're talking about what they're working on.

So those are some of the markets that are pretty active right now. But you know when you net it all together since we serve so many markets, that's where we get the confidence in the 2% to 4% overall growth for us.

Deepa Raghavan -- Wells Fargo. -- Analyst

Okay, OK. But largely, you're not necessarily changing. You wouldn't like change any of that outlooks that you gave last quarter?

William E. Waltz -- President and Chief Executive Officer

No, it's the same guides. Yeah, even it go -- it's the same 2% to 4% with -- it's the earlier questions, I think it was from Andy and so forth that hey, we were a little light in the quarter, we knew Q1 was going to be tough comp and we still fell in that 2% to 4% range.

Deepa Raghavan -- Wells Fargo. -- Analyst

Okay.

David P. Johnson -- Chief Financial Officer

Deepa, if go to our guidance sheet of our presentation, we do show a little bit of a change in our MP&S guidance.

Deepa Raghavan -- Wells Fargo. -- Analyst

Right, that's why I was asking you?

David P. Johnson -- Chief Financial Officer

Down to 2% to 3%, But I think, Bill had mentioned earlier that that's basically timing of projects and where we see that some of these projects take a little bit longer than we first initially thought. Perhaps, what we typically see and are attributing that to contractor availability so on and so forth. So that's why we've adjusted that numbers slightly.

Deepa Raghavan -- Wells Fargo. -- Analyst

Okay. Okay, so industrials maybe slightly lower versus prior but not necessarily because of demand slowdown. It's more like in the supply constraints?

David P. Johnson -- Chief Financial Officer

Exactly, correct.

Deepa Raghavan -- Wells Fargo. -- Analyst

Your EBITDA outlook stayed pretty strong, which is great. I mean you raised it by $5 million. Now, that seems to be more driven by pricing than volume, just given where your Q1 performance stands, but the commentary that you provided us suggests that you're expecting some volume pickup too later on in the year. But within that $5 million raise, is there a way for us to parse out maybe how much -- what percent of that was pricing versus volume. Is there anything -- any guidelines, generally, two-third was pricing; one-third was what?

Anything, any metrics that we could think about, especially because we would assume that pricing is going to moderate from here, you know your ER have seen double digit pricing, your MP&S probably has maybe one more quarter left. But how do we think about that $5 million raise in EBITDA even after I flow -- I mean I flowed through some in Q1, but what's volume versus pricing in there?

David P. Johnson -- Chief Financial Officer

Deepa, broadly speaking, the increase is due to better pricing and so we did initially guide that we have an unfavorable situation year-over-year. We're seeing that that definitely got better. Volume is just, again, slightly less than our prior guidance for MP&S. So, if you just kind of net that slightly down volume in MP&S and higher pricing you get to the $5 million increase in the midpoint of the guide.

Deepa Raghavan -- Wells Fargo. -- Analyst

Got it. So it's all pricing, OK, all right. My, just housekeeping question, maybe more -- just more clarification question, so if the tariffs were to go to 25% from here, I mean is there any impact we should be thinking about? Is it contemplated in the guide at all or no?

David P. Johnson -- Chief Financial Officer

I mean, I think you have to -- the tariffs move, I think we've communicated before that the direct tariff impact on our business is very minimal. We do import some products from China also from India. But by and large those products are also imported by our competitors. So it's pretty much of a situation where the industry for those products are all imported, all imports on place. We all had the same cost/price dynamics. So we really feel if it went to 25%, the overall impact on our business is very -- pretty minimal.

Deepa Raghavan -- Wells Fargo. -- Analyst

Pretty minimal, alright thank you.

William E. Waltz -- President and Chief Executive Officer

(multiple speakers) You I'll just echo, I apologize, David there on effect who picks up the question. But yeah, it's such a small wee, very low single digit of any product we import. It's all -- we are a manufacture here in the States and we buy steel, copper and so forth. It's that single-digit percent of products we bring in. If anything using that question, Deepa, as plug for some -- any sell side, by side that would be concerned about a company in the volatility of tariffs. We've proven that it is just -- it's not if I pick my top 50 subjects something I lose sleep on.

David P. Johnson -- Chief Financial Officer

Not a key risk.

William E. Waltz -- President and Chief Executive Officer

Yeah, it's not a key risk.

Deepa Raghavan -- Wells Fargo. -- Analyst

Got it. Thank you so much for the color.

William E. Waltz -- President and Chief Executive Officer

Thanks Deepa.

David P. Johnson -- Chief Financial Officer

Thank you.

Operator

Thank you. (Operator Instruction) There are no further questions at this time. I'd like to turn the floor back over to Mr. Waltz for closing comments.

William E. Waltz -- President and Chief Executive Officer

Great. Thank you, Devon. Before we conclude, let me summarize four key takeaways from Atkore first quarter. First, we delivered and exceeded our earnings. Second, we continue to execute well on our key initiatives. Third, we are managing price index with targeted product categories very well. And fourth, the markets continue to look good for 2019.

With these four factors in mind, we are confident in delivering upon our commitments and are pleased to increase our guidance for the full year. With that, I want to thank you for your support and interest in Atkore. I look forward to speaking with you during our next quarterly performance call. This concludes the call for today.

Operator

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

Duration: 37 minutes

Call participants:

Keith Whisenand -- Vice President of Investor Relations

William E. Waltz -- President and Chief Executive Officer

David P. Johnson -- Chief Financial Officer

Andrew Kaplowitz -- Citi -- Analyst

Geoffrey Kwan -- RBC Capital Markets -- Analyst

Peter Lennox-King -- UBS -- Analyst

Deepa Raghavan -- Wells Fargo. -- Analyst

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