Q4 2019 Earnings Call

February 26, 2020

[music].

Operator: Ladies and gentlemen, thank you for standing by and welcome to the fourth quarter 2019 Interface Inc. earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Christine Needles, Corporate Communications. Please go ahead.

At this time, all participants are in listen only mode.

After the speakers presentation, there will be a question and answer session.

To ask a question during the session you'll need to press star one on your telephone.

If you require any further assistance please press star zero.

I would now like to hand, the conference over to your speaker today, Kristine needles corporate communications.

Please go ahead.

Christine Needles: Good morning and welcome to Interface's conference call regarding fourth quarter and full year 2019 results, hosted by Dan Hendrix, Chairman and CEO, and Bruce Hausmann, Vice President and CFO. During today's conference call, any management comments regarding Interface's business, which are not historical information, are forward-looking statements within the meaning of the Securities Act of 1933 as amended and the Securities Exchange Act of 1934 as amended by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements regarding the intent, belief, or current expectations of our management team, as well as the assumptions on which such statements are based.

Good morning, and welcome to interfaces conference call regarding fourth quarter and full year 2019 resolved hosted by Dan Hendrix, Chairman and CEO and burst Hausman, Vice President and CFO. During today's conference call any management comments regarding interfaces business, which are not historical information are forward looking.

Statements within the meaning of the Securities Act of 1933 as amended and the Securities Exchange Act of 1934 as amended by the private Securities Litigation Reform Act of 1995.

Forward looking statements include statements regarding the intent belief or current expectations of our management team as well as the assumptions on which such statements are based.

Christine Needles: Any forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could cause actual results to differ materially from any such statement, including risks and uncertainties associated with the economic conditions in the commercial interiors industry and risks related to lawsuits, investigations, or similar legal proceedings that we are subject to from time to time, as well as the risks and uncertainties discussed under the heading Risk Factors in Item 1A of the company's annual report on Form 10-K for the fiscal year ended 30 December 2018, and is updated by the additional risk factor included in Part II, Item 1A of the quarterly report on Form 10-Q for the quarter ended 29 September 2019, which have been filed with the Securities and Exchange Commission. We direct all listeners to those documents.

Any forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could cause actual results to differ materially from any such statement, including risks and uncertainties associated with the economic conditions in the commercial interiors industry and risks related to lawsuits, investigations, or similar legal proceedings that we are subject to from time to time, as well as the risks and uncertainties discussed under the heading Risk Factors in Item 1A of the company's annual report on Form 10-K for the fiscal year ended 30 December 2018, and is updated by the additional risk factor included in Part II, Item 1A of the quarterly report on Form 10-Q for the quarter ended 29 September 2019, which have been filed with the Securities and Exchange Commission. We direct all listeners to those documents.

Any forward looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could cause actual results could differ materially from any such statements.

Putting risks and uncertainties associated with the economic conditions in the commercial insurers industry and risks related to lawsuits investigations or similar legal proceedings that we are subject to from time to time as well as the risks and uncertainties discussed under the heading risk factors and item one eight of the company's annual report on form 10-K for the fiscal year.

Our ended December 32018, and its updated by the additional risk factor included in part to item one eight of the quarterly report on form 10-Q for the quarter ended September 29, 2019, which have been filed with the Securities and Exchange Commission, we direct all listeners to those documents the company assumes no responsibility.

Christine Needles: The company assumes no responsibility to update or revise forward-looking statements made during this call and cautions listeners not to place undue reliance on any such forward-looking statements. Management's remarks during this call also refer to certain non-GAAP measures. The most comparable GAAP measures, as well as the reconciliation of the non-GAAP measures to the most comparable GAAP measures, is contained in the company's earnings release and Form 8-K furnished with the SEC today, which explains why Interface believes presentation of these non-GAAP measures provides useful information to investors, as well as any additional material purposes for which Interface uses these non-GAAP measures, each of which can be accessed in the investor relations section of the company's website, www.interface.com. Lastly, this call is being recorded and broadcasted for Interface. It contains copyrighted material and may not be re-recorded or rebroadcasted without Interface's express permission.

The company assumes no responsibility to update or revise forward-looking statements made during this call and cautions listeners not to place undue reliance on any such forward-looking statements. Management's remarks during this call also refer to certain non-GAAP measures. The most comparable GAAP measures, as well as the reconciliation of the non-GAAP measures to the most comparable GAAP measures, is contained in the company's earnings release and Form 8-K furnished with the SEC today, which explains why Interface believes presentation of these non-GAAP measures provides useful information to investors, as well as any additional material purposes for which Interface uses these non-GAAP measures, each of which can be accessed in the investor relations section of the company's website, www.interface.com. Lastly, this call is being recorded and broadcasted for Interface. It contains copyrighted material and may not be re-recorded or rebroadcasted without Interface's express permission.

The update or revise forward looking statements made during this call and caution listeners not to place undue reliance on any such forward looking statements.

Management's remarks during this call also refer to certain non-GAAP measure the most comparable GAAP measures as well as a reconciliation of the non-GAAP measures that most comparable GAAP measures is contained in the Companys earnings release and form 8-K furnished with the FCC today, which explains why interface believes presentation of these non-GAAP measures provide useful.

Information to investors as well as any additional material purposes for which interface uses these non-GAAP measures each of which can be accessed in the investor Relations section of the company's website www dot interface dotcom.

Lastly, this call is being recorded and broadcast it for interface. It contains copyrighted material I may not be recorded or rebroadcast without interfaces expressed permission your participation on the call confirms your consent to the company's taping and broadcasting of it.

Christine Needles: Your participation on the call confirms your consent to the company's taping and broadcasting of it. Now I'd like to turn the call over to Dan Hendrix, Chairman and CEO.

Your participation on the call confirms your consent to the company's taping and broadcasting of it. Now I'd like to turn the call over to Dan Hendrix, Chairman and CEO.

Now I'd like to turn the call over to Dan Hendrix, Chairman and CEO.

Dan Hendrix: Thank you. Good morning, everyone, and thanks for joining our call today. I joined Interface 37 years ago with leading the company as CEO from 2001 to 2017 and as CFO for 15 years before that. I've continued to be involved with the company as the board chairman, and very fortunate now to have the opportunity to serve as CEO again while we search for a successor. Our search for a new CEO will be a thoughtful process, one that will allow us to focus on executing our financial, operational, and sustainability goals. Over the past several years, we've made exciting progress across the business and have become a much stronger organization as a result.

Thank you.

Good morning, everyone and thanks for joining our call today I joined interface 37 years ago, what we use a company and C O from 2001 to 2017.

As CFO for 15 years before that I continue to be involved with the company has the board chairman and very fortunate to have the opportunity to service. The again, what we search for a successor.

Our search for a new CEO will be thoughtful process, one that will allow us to focus on executing our financial operational and sustainability goals.

In the past several years, we made exciting progress across the business.

I have become a much stronger organization as a result were continued run the strategy that we've been successfully executing for the last three years focus on growing the top one taking market share optimizing our S. Today.

Dan Hendrix: We're continuing to run the strategy that we've been successfully executing for the last three years, focused on growing the top line, taking market share, optimizing our SG&A, and we will continue to execute on the important initiatives that we put in place in response to the changing market. I recently returned from an inspiring sales and management meeting with our teams in the Americas and Europe, and I cannot be more optimistic about the future of this company. It is a really great time to be at Interface. Our new leader in the Americas is someone who is well known and well respected by our team. Jim Poppens was integral in the restructuring and commercial success of our forward business and instrumental in driving our global marketing initiatives. We expect a seamless transition and a strong momentum with this welcome change.

We're continuing to run the strategy that we've been successfully executing for the last three years, focused on growing the top line, taking market share, optimizing our SG&A, and we will continue to execute on the important initiatives that we put in place in response to the changing market. I recently returned from an inspiring sales and management meeting with our teams in the Americas and Europe, and I cannot be more optimistic about the future of this company. It is a really great time to be at Interface. Our new leader in the Americas is someone who is well known and well respected by our team. Jim Poppens was integral in the restructuring and commercial success of our forward business and instrumental in driving our global marketing initiatives. We expect a seamless transition and a strong momentum with this welcome change.

We will continue to execute on the important initiatives that we put in place in response to the changing market.

Mr. Germany is buying sales and management meetings with our teams in the Americas in Europe, and I could not be more optimistic about the future of this company. It is a really great Tom to be an interface.

Our new leader and Americas, someone who is well known well respected by our team Jim Poppins was integral in the restructuring and commercial success airport business and instrumental in driving our global marketing initiatives, we expect a seamless transition and a strong momentum with this welcome change.

Dan Hendrix: In Europe, I believe we have the strongest sales and leadership teams in that region than we've ever had in the history of the company. I feel strongly that this is a growth region for us, particularly in the UK, where Brexit uncertainty is lifting and our sales team is positioned for success. We're executing on industry-leading innovations. We're investing approximately $50 million over three years in manufacturing, including tufting technology that will give us a new design capability and a new backing system to further separate us in the marketplace. But before I talk about what's ahead, let me first share with you the results of our fourth quarter and full year of 2019.

In Europe, I believe we have the strongest sales and leadership teams in that region than we've ever had in the history of the company. I feel strongly that this is a growth region for us, particularly in the UK, where Brexit uncertainty is lifting and our sales team is positioned for success. We're executing on industry-leading innovations. We're investing approximately $50 million over three years in manufacturing, including tufting technology that will give us a new design capability and a new backing system to further separate us in the marketplace. But before I talk about what's ahead, let me first share with you the results of our fourth quarter and full year of 2019.

In Europe, I believe we had the strongest cells and leadership teams in that region. We've ever had in the history. The company I feel strongly that this is a good region for us, particularly in the UK Brexit uncertainty is listening and ourselves team is positioned for success.

We're executing on industry, leading innovations, we're investing approximately $50 million over three years in manufacturing, including Tufting technology that will give us a new design capability and any backing system to further separate us in the marketplace.

But before I talk about what's ahead, let me first share with you the results of our fourth quarter. It full year 2019.

Dan Hendrix: We delivered another solid quarter with net sales up 1% versus the fourth quarter last year and organic sales up 2%, ending full year 2019 with net sales up 14% and organic sales up 2% versus the prior year. Fourth quarter GAAP EPS was up 155% versus Q4 last year, while adjusted EPS was up 12% versus the fourth quarter last year. GAAP earnings per share for the full year 2019 was up 60% versus 2018, and adjusted earnings per share was up 7% versus the prior year. I want to thank the entire Interface team for a strong finish to the year and your steadfast commitment to delivering on our strategic and financial goals. Our core carpets business had a solid fourth quarter, contributing equally to organic growth with our expanding resilient business. Carpets remains a solid foundation for the company.

We delivered another solid quarter with net sales up 1% versus the fourth quarter last year and organic sales up 2%, ending full year 2019 with net sales up 14% and organic sales up 2% versus the prior year. Fourth quarter GAAP EPS was up 155% versus Q4 last year, while adjusted EPS was up 12% versus the fourth quarter last year. GAAP earnings per share for the full year 2019 was up 60% versus 2018, and adjusted earnings per share was up 7% versus the prior year. I want to thank the entire Interface team for a strong finish to the year and your steadfast commitment to delivering on our strategic and financial goals. Our core carpets business had a solid fourth quarter, contributing equally to organic growth with our expanding resilient business. Carpets remains a solid foundation for the company.

We delivered another solid quarter was that sales up 1% versus the fourth quarter last year inorganic sales up 2% <unk> full year 2019, with net sales up 14% inorganic sales up 2% versus the prior year.

Fourth quarter GAAP EPS was up 155% versus Q4 last year, while adjusted EPS was up 12% versus the fourth quarter last year.

GAAP earnings per share for the full year 2019 was up 60% versus 2018 and adjusted earnings per share was up 7% versus the prior year.

I want to thank the entire interface team for a strong finish the year and your steadfast commitment to delivering on our strategic and financial goals.

Our core carpet tile business had a solid fourth quarter contributing equally the organic growth without spending resilient business.

Carpet tile remains a solid foundation for the company, how resilient business continued to be a key driver of growth.

Dan Hendrix: Our resilient business continues to be a key driver of growth. LVT had another strong quarter as we expand our product offerings to reach new market opportunities in this high-growth category. Our higher-margin 3-millimeter LVT products are meeting customer needs in the healthcare, multifamily, and tenant improvement segments and providing a new cross-selling opportunity. We're on track to reach a $100 million run rate in LVT in the first half of 2020, exceeding our initial expectations and taking share in this fast-growing commercial flooring category. Our rubber business had a solid fourth quarter, also exceeding our growth expectations for the year, and I'm pleased with the progress we've made on integrating Nora into the operations and the sales organization. We're continuing to strengthen our cross-selling efforts and joint marketing efforts as we expand opportunities across our product categories and segments, particularly in healthcare and education.

Our resilient business continues to be a key driver of growth. LVT had another strong quarter as we expand our product offerings to reach new market opportunities in this high-growth category. Our higher-margin 3-millimeter LVT products are meeting customer needs in the healthcare, multifamily, and tenant improvement segments and providing a new cross-selling opportunity. We're on track to reach a $100 million run rate in LVT in the first half of 2020, exceeding our initial expectations and taking share in this fast-growing commercial flooring category. Our rubber business had a solid fourth quarter, also exceeding our growth expectations for the year, and I'm pleased with the progress we've made on integrating Nora into the operations and the sales organization. We're continuing to strengthen our cross-selling efforts and joint marketing efforts as we expand opportunities across our product categories and segments, particularly in healthcare and education.

Albuquerque had another strong quarters will expand our product offerings to reach new market opportunities, it's hard goods category.

Our margin three millimeters LPG products are meeting customer needs in the healthcare multi family into an improvement segments in providing a new cross selling opportunity.

We're on track to reach 100 million dollar run rate and LPG in the first half of 2020 exceeding our initial expectations and taking share and this fast growing commercial flooring category.

Rubber business that is solid fourth quarter also exceeded our growth expectations for the year and I'm pleased to progress we've made on integrating nor into the operations and the sales organization.

[noise], we're continuing to strengthen our cross selling efforts in joint marketing efforts as we expand opportunities across our product categories and segments, particularly in healthcare and education.

Dan Hendrix: By expanding our product portfolio beyond soft surface, we have increased our addressable market and positioned our sales team to bring a variety of solutions to our customers and meet their diverse flooring needs across a wide range of market segments. From a manufacturing standpoint, our productivity initiatives are generating our targeted results. GAAP gross margin was 40% in the fourth quarter, with adjusted gross margin at 40.4%, up 80 basis points versus Q4 adjusted gross margin last year. Expenses were in line with expectations during the quarter, allowing us to deliver GAAP operating income of $28 million in the fourth quarter, or 8.2% of net sales, and adjusted operating income of $42 million, or 12.2% as a percentage of sales. This is gratifying performance, especially considering we had a $4 million negative translation in currency impact in operating income for the year.

By expanding our product portfolio beyond soft surface, we have increased our addressable market and positioned our sales team to bring a variety of solutions to our customers and meet their diverse flooring needs across a wide range of market segments. From a manufacturing standpoint, our productivity initiatives are generating our targeted results. GAAP gross margin was 40% in the fourth quarter, with adjusted gross margin at 40.4%, up 80 basis points versus Q4 adjusted gross margin last year. Expenses were in line with expectations during the quarter, allowing us to deliver GAAP operating income of $28 million in the fourth quarter, or 8.2% of net sales, and adjusted operating income of $42 million, or 12.2% as a percentage of sales. This is gratifying performance, especially considering we had a $4 million negative translation in currency impact in operating income for the year.

Expanding our product portfolio beyond soft surface, we have increased our addressable market and position our sales team to bring a variety of solutions to our customers meet their diverse learning needs across a wide range of market segments.

Hi, manufacturing standpoint on productivity initiatives are generating our targeted results.

GAAP gross margin was 40% in the fourth quarter with adjusted gross margin at 40.4 person huh.

80 basis points versus Q4, adjusted gross margin last year.

Actually had expenses were in line with expectations during the quarter, allowing us to liver GAAP operating income of 28 million in the fourth quarter or 8.2% that sales and adjusted operating income of 42 million or 12.2 as a percentage of sales.

This is gratifying performance, especially considering we had a $4 million negative translation currency impact and operating income for the year.

Dan Hendrix: Now I'll turn it over to Bruce for more detailed discussion of our fourth quarter and year results. Over to you, Bruce.

Now I'll turn it over to Bruce for more detailed discussion of our fourth quarter and year results. Over to you, Bruce.

Now I'll turn it over to Bruce for more detailed discussion of our fourth quarter and year results a reverse.

Bruce Hausmann: Thank you, Dan, and good morning, everyone. Fourth quarter net sales were $339 million, up 1% over the prior year period. Currency translation had a negative impact on fourth quarter net sales of $5 million, or 150 basis points year over year. Organic sales were up 2%, which was in line with our expectations. Our legacy Interface business in the Americas had a strong finish to the year, up 4% compared to the fourth quarter last year, with continued strong growth in LVT and solid carpet sales. Legacy Interface sales in EMEA were up 1% in local currency, but down 2% in US dollars due to currency headwinds driven by the euro to USD and pound sterling to USD exchange rates versus prior year.

Thank you Dan and good morning, everyone fourth quarter net sales were 339 million up 1% over the prior year period currency translation had a negative impact on fourth quarter net sales of 5 million or 150 basis points year over year and organic sales were up 2%, which was in line with.

Patients.

Our legacy interface business in the Americas had a strong finish to the year up 4% compared to the fourth quarter last year with continued strong growth in LPG and solid carpet tile sales legacy interface sales in EMEA were up 1% in local currency, but down 2% in us dollars due to currency headwinds driven by the euro.

So to U.S.T. income Sterling to you as the exchange rates versus prior year.

Bruce Hausmann: Legacy Interface sales in Asia Pacific were up 2% in local currency compared to fourth quarter last year, but were flat in US dollars, largely due to the Australian dollar to USD exchange rate versus last year. In our global market segments, fourth quarter growth was driven by office, education, and healthcare. Fourth quarter gross profit margin was 40%, up 390 basis points versus fourth quarter gross profit margin last year. Adjusted gross profit margin was 40.4%, which was an 80 basis point improvement over adjusted gross profit margin last year. We're realizing the productivity savings of our Troup County optimization initiatives in the Americas, which we completed at the end of 2019. SG&A expenses were $95 million in the fourth quarter, or 28.1% of sales, which were in line with our expectations.

Legacy Interface sales in Asia Pacific were up 2% in local currency compared to fourth quarter last year, but were flat in US dollars, largely due to the Australian dollar to USD exchange rate versus last year. In our global market segments, fourth quarter growth was driven by office, education, and healthcare. Fourth quarter gross profit margin was 40%, up 390 basis points versus fourth quarter gross profit margin last year. Adjusted gross profit margin was 40.4%, which was an 80 basis point improvement over adjusted gross profit margin last year. We're realizing the productivity savings of our Troup County optimization initiatives in the Americas, which we completed at the end of 2019. SG&A expenses were $95 million in the fourth quarter, or 28.1% of sales, which were in line with our expectations.

Well I get the interface sales in Asia Pacific were up 2% in local currency compared to fourth quarter last year, but were flat in us dollars largely due to the Australian dollar two newest the exchange rate versus last year and in our global market segments fourth quarter growth was driven by office education and health care.

Fourth quarter gross profit margin was 40% up 390 basis points versus fourth quarter gross profit margin last year. Adjusted gross profit margin was 40.4%, which was an 80 basis point improvement over adjusted gross profit margin last year.

We're realizing the productivity savings of our Troup County optimization initiatives in the Americas, which we completed at the end of 2019.

Fuel expenses were 95 million in the fourth quarter or 28.1% of sales, which were in line with our expectations.

As part of our previously announced restructuring plan, we recorded a 9 million restructuring charge in the fourth quarter. The charge is comprised of 8.8 million of severance charges in connection with the reduction of approximately 105 positions primarily in our each AAA business and a 200000 dollar charge from early termination of two office leases.

Bruce Hausmann: As part of our previously announced restructuring plan, we recorded a $9 million restructuring charge in Q4. The charge was comprised of $8.8 million of severance charges in connection with the reduction of approximately 105 positions, primarily in our EMEA business, and a $200,000 charge from early termination of two office leases in Shanghai and in the UK. These charges were offset by a reversal of certain 2018 restructuring accruals of $1.7 million for a net restructuring charge of $7.3 million. We expect this restructuring plan to yield annualized savings of approximately $6 million to be realized across fiscal years 2020 and 2021. In addition, we recorded a non-cash charge of $5 million in Q4 related to adjusting the carrying value of certain insurance-related assets. Operating income was $28 million for Q4 compared with $4 million in the prior year period.

As part of our previously announced restructuring plan, we recorded a $9 million restructuring charge in Q4. The charge was comprised of $8.8 million of severance charges in connection with the reduction of approximately 105 positions, primarily in our EMEA business, and a $200,000 charge from early termination of two office leases in Shanghai and in the UK. These charges were offset by a reversal of certain 2018 restructuring accruals of $1.7 million for a net restructuring charge of $7.3 million. We expect this restructuring plan to yield annualized savings of approximately $6 million to be realized across fiscal years 2020 and 2021. In addition, we recorded a non-cash charge of $5 million in Q4 related to adjusting the carrying value of certain insurance-related assets. Operating income was $28 million for Q4 compared with $4 million in the prior year period.

In Shanghai and in the UK.

Charges were offset by a reversal certain 2018 restructuring accruals of 1.7 million for net restructuring charge of 7.3 million. We expect this restructuring plan to yield annualized savings of approximately 6 million to be realized across fiscal years 2020 in 2021.

In addition, we recorded a non cash charge of 5 million in the fourth quarter related to adjusting the carrying value of certain insurance related assets.

Operating income was 28 million for the fourth quarter compared to 4 million in the prior year period. Adjusted operating income was 42 million in Q4 2019, compared to 37 million last year and fourth quarter net income was $16 million for 28 cents per diluted share up 155% compared to net income of six.

Bruce Hausmann: Adjusted operating income was $42 million in Q4 2019, compared to $37 million last year. Fourth quarter net income was $16 million, or $0.28 per diluted share, up 155% compared to net income of $6 million, or $0.11 per diluted share last year. Adjusted net income was $27 million, or $0.46 per diluted share in Q4 2019, compared to $24 million, or $0.41 per diluted share last year, representing 12% growth. Adjusted EBITDA was $54 million in Q4, which was approximately the same as Q4 last year. Now looking at full year results, net sales were $1.3 billion in 2019, up 14% compared to $1.2 billion in 2018. Organic sales were up 2% for the year. Gross margin was 39.1% in 2019, and adjusted gross margin was 39.6%, which was up 90 basis points versus adjusted gross margin last year.

Adjusted operating income was $42 million in Q4 2019, compared to $37 million last year. Fourth quarter net income was $16 million, or $0.28 per diluted share, up 155% compared to net income of $6 million, or $0.11 per diluted share last year. Adjusted net income was $27 million, or $0.46 per diluted share in Q4 2019, compared to $24 million, or $0.41 per diluted share last year, representing 12% growth. Adjusted EBITDA was $54 million in Q4, which was approximately the same as Q4 last year. Now looking at full year results, net sales were $1.3 billion in 2019, up 14% compared to $1.2 billion in 2018. Organic sales were up 2% for the year. Gross margin was 39.1% in 2019, and adjusted gross margin was 39.6%, which was up 90 basis points versus adjusted gross margin last year.

Million or 11 cents per diluted share last year. Adjusted net income was 27 million or 46 cents per diluted share in Q4, 2019 compared to $24 million for 41 cents per diluted share last year, representing 12% growth.

Adjusted EBITDA was 54 million in Q4, which was approximately the same as Q4 last year now looking at full year results net sales were 1.3 billion in 2019 up 14% compared to 1.2 billion in 2018 organic sales were up 2% for the year.

Gross margin was 39.1% in 2019 in adjusted gross margin was 39.6%, which was up 90 basis points versus adjusted gross margin last year.

As to your expenses were 382 million per 28.4% of sales compared to asked you to expenses of 327 million for 27.8% of sales last year and full year operating income was 131 million in 2019 compared to 76 million in 2018 adjusted operating income was 150.

Bruce Hausmann: SG&A expenses were $382 million, or 28.4% of sales, compared to SG&A expenses of $327 million, or 27.8% of sales last year. Full year operating income was $131 million in 2019, compared to $76 million in 2018. Adjusted operating income was $150 million in 2019, up 12% versus adjusted operating income of $134 million last year. Net income was $79 million, or $1.34 per share in 2019, compared with $50 million, or $0.84 per share in 2018. Adjusted net income was $93 million, or $1.59 per share in 2019, compared with adjusted net income of $89 million, or $1.49 per share in 2018, which represented a 7% year-over-year growth in adjusted earnings per share. Now moving over to the balance sheet and cash flows. Our balance sheet is strong, and we remained committed to a disciplined deleveraging plan.

SG&A expenses were $382 million, or 28.4% of sales, compared to SG&A expenses of $327 million, or 27.8% of sales last year. Full year operating income was $131 million in 2019, compared to $76 million in 2018. Adjusted operating income was $150 million in 2019, up 12% versus adjusted operating income of $134 million last year. Net income was $79 million, or $1.34 per share in 2019, compared with $50 million, or $0.84 per share in 2018. Adjusted net income was $93 million, or $1.59 per share in 2019, compared with adjusted net income of $89 million, or $1.49 per share in 2018, which represented a 7% year-over-year growth in adjusted earnings per share. Now moving over to the balance sheet and cash flows. Our balance sheet is strong, and we remained committed to a disciplined deleveraging plan.

Million in 2019 up 12% versus adjusted operating income of 134 million last year.

Net income was 79 million or $1.34 per share in 2019, compared with $50 million per 84 cents per share in 2018, and adjusted net income was 93 million or $1.59 per share in 2019, compared with adjusted net income of 89 million per $1.49 per share in 2018.

The 7% year over year growth in adjusted earnings per share.

Now moving over to the balance sheets and cash flows our balance sheet is strong and we remain committed to a disciplined deleveraging plan, we generated 17 million of cash via working capital in the fourth quarter and reduced total debt by $30 million well ending the year with 81 million of cash on hand, and 596 million of gross.

Bruce Hausmann: We generated $17 million of cash via working capital in the fourth quarter and reduced total debt by $30 million, while ending the year with $81 million of cash on hand and $596 million of gross debt. Net debt, or gross debt minus cash on hand, was $515 million. Our liquidity also remains very strong, with $277 million of borrowing availability under our revolving credit facility at the end of the year. Adjusted EBITDA was $200 million at the end of 2019, resulting in a leverage ratio at the end of the year of 2.6x, which is calculated as net debt divided by adjusted EBITDA. Please note that some of these are non-GAAP measures, so as a reminder, please refer to our reconciliation tables in our press release to reconcile GAAP to non-GAAP measures.

We generated $17 million of cash via working capital in the fourth quarter and reduced total debt by $30 million, while ending the year with $81 million of cash on hand and $596 million of gross debt. Net debt, or gross debt minus cash on hand, was $515 million. Our liquidity also remains very strong, with $277 million of borrowing availability under our revolving credit facility at the end of the year. Adjusted EBITDA was $200 million at the end of 2019, resulting in a leverage ratio at the end of the year of 2.6x, which is calculated as net debt divided by adjusted EBITDA. Please note that some of these are non-GAAP measures, so as a reminder, please refer to our reconciliation tables in our press release to reconcile GAAP to non-GAAP measures.

Net net debt or growth at minus cash on hand was 515 million. Our liquidity also remains very strong with 277 million of borrowing availability under our revolving credit facility at the end of year.

Adjusted EBITDA was 200 million at the end of 2019, resulting in a leverage ratio at the ended the year of 2.6 times, which is calculated as net debt divided by adjusted EBITDA.

Please note that some of these are non-GAAP measures. So as a reminder, please refer to our reconciliation tables in our press release to reconcile GAAP to non-GAAP measures.

Interest expense was 5 million in the fourth quarter compared with 6 million in Q4 last year and for your interest expense was 26 million in 2019 versus $15 million last year, depreciation and amortization was $45 million for the year compared to 39 million last year and as anticipated capital expenditures were 75.

Bruce Hausmann: Interest expense was $5 million in the fourth quarter, compared with $6 million in Q4 of last year, and full year interest expense was $26 million in 2019 versus $15 million last year. Depreciation and amortization was $45 million for the year, compared to $39 million last year, and, as anticipated, capital expenditures were $75 million in 2019, compared to $55 million last year. In addition to the increased investments we've made to optimize our Americas manufacturing operations, we're making exciting new investments in our technology that Dan would like to share with you. Dan?

Interest expense was $5 million in the fourth quarter, compared with $6 million in Q4 of last year, and full year interest expense was $26 million in 2019 versus $15 million last year. Depreciation and amortization was $45 million for the year, compared to $39 million last year, and, as anticipated, capital expenditures were $75 million in 2019, compared to $55 million last year. In addition to the increased investments we've made to optimize our Americas manufacturing operations, we're making exciting new investments in our technology that Dan would like to share with you. Dan?

Million in 2019 compared to $55 million last year. In addition to the increased investments we've made to optimize our Americas manufacturing operations, we're making exciting new investments in our technology that Dan who would like to share with you Dan.

Thanks Bruce.

Dan Hendrix: Hi, thanks, Bruce. As we progressed into 2020, my focus has been on driving the top line and growing sales, reducing SG&A as a percentage of sales, and paying down debt. We have a robust pipeline of new product designs and innovations in both the hard and soft flooring categories. New cutting-edge tufting technology allows us to design products with dynamic pile heights and patterns reminiscent of handwoven and flat weave rugs. We have a renewed focus on key strategic growth opportunities, including segment penetration, particularly in healthcare and education, and a diversified pricing strategy. We are accelerating cross-selling opportunities across our product portfolio and across market segments, and we remain focused on driving productivity in the selling system.

As we progressed into 2020 my focus is to be on driving the topline.

And grown sales, reducing SGN as percentage of sales and paying down debt.

We have a robust pipeline of new product designs and innovations in both the hard and soft foreign categories.

New cutting edge Tufting technology allows us to design products with dynamic file heights and pattern reminiscent of handwoven and flat we've rugs.

We have renewed focus on key strategic growth opportunities, including segment penetration, particularly in healthcare and education.

And a diversified pricing strategy.

We are accelerating cross selling opportunities across our product portfolio and across market segments, and we remain focused on driving productivity and the selling system.

Now, we think about the outlook for the full year 2020.

Dan Hendrix: Now, as we think about the outlook for the full year 2020 and continue to build on our strategic agenda, we are targeting to achieve organic sales growth of 2% to 4% and adjusted earnings per share of $1.60 to $1.70 in 2020. Capital expenditures are forecasted at $50 million to $60 million for the year. Our 2020 effective tax rate is anticipated to be approximately 28%, and our diluted share count is anticipated to be approximately 59.5 million shares. Also note that 2020 is a 53-week fiscal year for Interface, with the extra week reflected in the first quarter. With regard to China and the coronavirus crisis, we temporarily closed our manufacturing facility and local offices in China for an extended New Year holiday in accordance with government requirements, lasting from 24 January 2020 through 9 February 2020.

Now, as we think about the outlook for the full year 2020 and continue to build on our strategic agenda, we are targeting to achieve organic sales growth of 2% to 4% and adjusted earnings per share of $1.60 to $1.70 in 2020. Capital expenditures are forecasted at $50 million to $60 million for the year. Our 2020 effective tax rate is anticipated to be approximately 28%, and our diluted share count is anticipated to be approximately 59.5 million shares. Also note that 2020 is a 53-week fiscal year for Interface, with the extra week reflected in the first quarter. With regard to China and the coronavirus crisis, we temporarily closed our manufacturing facility and local offices in China for an extended New Year holiday in accordance with government requirements, lasting from 24 January 2020 through 9 February 2020.

It continues to build on our strategic agenda, we're targeting to achieve organic sales growth of 2% to 4% and adjusted earnings per share of $1.60 to $1.70 and 2020.

Capital expenditures are forecasted at 50 to 60 million for the year.

Our 2020 effective tax rate is anticipated to be approximately 28% and our diluted share count is anticipated to be approximately 59.5 million shares.

Also note that 2020 is a 53 week fiscal year for interface with the extra week reflected in the first quarter.

With regard to China, and the Corona virus prices, we temporarily closed our manufacturing facility and local offices in China for an extended new your holiday in accordance with government requirements lasting from January 24 through February nine.

During this time, our manufacturing facility in Thailand absorbed the production required to service customers Norman supplied from our China facility.

Dan Hendrix: During this time, our manufacturing facility in Thailand absorbed the production required to service customers normally supplied from our China facility. While our manufacturing operations have resumed production, and limitations on movement in the region are expected to be temporary, the sales and supply chain disruption and related financial impact will continue to evolve. The impact is already evident in our year-to-date Asia Pacific orders results, and we anticipate that our Asia business could experience sales decline as much as 10% to 20% below plan for the first half of the year. The health and safety of our colleagues and their families is of utmost importance. We will continue to monitor the situation and provide an update on the outlook of our next earnings call. Thank you again to the global Interface team for another solid quarter and strong finish to 2019.

During this time, our manufacturing facility in Thailand absorbed the production required to service customers normally supplied from our China facility. While our manufacturing operations have resumed production, and limitations on movement in the region are expected to be temporary, the sales and supply chain disruption and related financial impact will continue to evolve. The impact is already evident in our year-to-date Asia Pacific orders results, and we anticipate that our Asia business could experience sales decline as much as 10% to 20% below plan for the first half of the year. The health and safety of our colleagues and their families is of utmost importance. We will continue to monitor the situation and provide an update on the outlook of our next earnings call. Thank you again to the global Interface team for another solid quarter and strong finish to 2019.

Well I manufacturing operations have resumed production limitations on movement in the region are expected to be temporary the sales and supply chain disruptions and related financial impact will continue to evolve.

The impact is already evident in our year to date age specific orders results and we anticipate that our Asia business could experience sales decline as much as 10% to 20% below plan for the first half of the year.

The health and safety, if our colleagues and their families is up most important we will continue to monitor the situation and provide an update on the outlook of our next earnings call.

Thank you again to the global interface team for another solid quarter and strong finish to 2019.

And thank you to our customers and shareholders, who continued support interface and our climate take back mission.

Dan Hendrix: Thank you to our customers and shareholders who continue to support Interface in our Climate Take Back mission. Before we get into Q&A, I know you're likely to have questions about the lawsuit that was filed by a former CEO. We have no comments at this pending litigation beyond the company statement that was issued on 17 February. With that, I'll open it up for questions.

Thank you to our customers and shareholders who continue to support Interface in our Climate Take Back mission. Before we get into Q&A, I know you're likely to have questions about the lawsuit that was filed by a former CEO. We have no comments at this pending litigation beyond the company statement that was issued on 17 February. With that, I'll open it up for questions.

Before we get into Q and I know you're lucky to have questions about the lawsuit that was filed by former CEO.

We had no comments at this pending litigation beyond the company statements that was issued on February 17, with that I'll open up for questions.

Thank you as a reminder to ask your question you will need to press star one on your telephone.

Operator: Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, please press the pound or hash key. Our first question today comes from Katherine Thompson from Thompson Research Group. Please go ahead.

Withdraw your question please press the pound or hash key.

Our first question today comes from Kathryn Thompson from Thompson Research Group. Please go ahead.

Hi, Good morning, this is actually Brian bias on for Katherine Thanks for taking my questions.

Brian Biros: Hey, good morning. This is actually Brian Biros on for Katherine Thompson. Thank you for taking my questions. I guess can we start on the corona impact you called out in the press release and also the prepared remarks? I guess if you're able to maybe provide more color on, is the impact only being seen in the Asian region, or is it any impact in the other regions for you guys? And is that carbon's facility in China you mentioned, is that back to full operations, or is it just open but still not 100% back yet?

I guess can we start on the trying to impact you called out in the press release and also the.

We have remarks, I guess, maybe provide more color on the impact only being seen in Asian region or is it any impact and the other regions for you guys.

And is that carpet tile facility in China, you mentioned is that back to full operations or is opened but still not 100% back yet.

Hey, Brian as Bruce Alstom and good morning.

Bruce Hausmann: Hey, Brian. This is Bruce Hausmann. Good morning. So the impact is only being seen in Asia right now, and the plant that we have in China is back up and running. And I guess what I would just sort of say on the coronavirus issue is that it is evolving every single day, as you know from the front page of the newspaper. But so far, so good. We have not had any impact on our supply chain. And so far, so good that we think we're hopeful that for the full year we can recover the impact that we're seeing. However, in the first half, as we mentioned, we could see an impact on the top line of 10% to 20% of the Asian operations. And Asia is about $200 million in revenue, just to quantify that for you, just to put some bands around it.

So the impact is only being seen in Asia, right now and the.

Plant that we Havent, China is back up and running.

And I guess, what I would just sort of say in the Corona virus.

No issue is that it is evolving every single day as you know from the front page in the newspaper.

But so far so good we have not had any impact in our supply chain.

And so far so good.

That.

We think we're hopeful that for the full year, we can recover the impact that we're seeing however, the first half as we mentioned we could see an impact on the topline of 10% to 20% of the Asian operations and Asia is about 200 million in revenue just to quantify that for you just put some bands around it.

Got it thank you.

Brian Biros: Got it. Thank you. I guess a quick follow-up on the, I think, $50 million in CapEx you guys mentioned for 2019 through 2021 spend on the manufacturing innovations. You gave some color in the prepared remarks. Can you maybe think just help us think about kind of what the benefits are for that going forward and whether that's mostly a margin savings play, or maybe there's some revenue add there from maybe the product's more environmentally friendly or something, or if that opens up new end markets or customers? I guess some clarity on what that looks like going forward, impact to Interface would be helpful.

A quick follow up.

I think 50 million in Capex you guys mentioned for 2019 through 2021 spend on the manufacturing innovations, yes, some color in the fed remarks.

Anything just help us think about kind of what the benefits are for that going forward and whether thats, mostly a margin savings play or maybe there's some revenue add there from maybe at the products more environmentally friendly or something.

And that new end markets are customers some clarity on.

What that looks like going forward impact to interface avail sure Yeah. Yeah. This is Dan.

Dan Hendrix: Sure. Yes. Yeah, this is Dan. We are investing in a backing system that will give us the lowest carbon footprint product in our industry. Climate change is a really big deal to our customer base, particularly end users and our design group. They're starting to measure specifications with carbon in the spec. And so it is an innovation that I think will actually grow the top line with specs that will hold. Gensler came out with its E3, which they actually calculate carbon, embedded carbon, in their buildings. So I think we're way ahead of the game here. We already had the lowest carbon products, but this will give us. Actually, we hope to get to negative carbon products eventually. And then on the tufting side, it's a product technology called TruTuffed, and it gives you a design and a style that's not in the marketplace today.

We are investing in a banking system that will give us the lowest carbon footprint product in our industry.

Climate changes are really big deal to our customer base, particularly in users and our design group.

They are starting to measure specifications when carbon in the spec and so it is an innovation that I think we'll actually.

Grow the top line with the specs that will hold against our came out with its eathree, which they actually calculate carbon embedded carbon and up in their buildings.

So I think we're way ahead of the game here.

We already had a lowest carbon products, but this will give us actually.

We hope to get to negative carbon products eventually.

And then on the Tufting side, it's a it's a product and technology called true to up and it gives you know design and the style does not in the marketplace. Today I don't if you remember when we introduce tapestry in the day. This is similar to that technology a lot more exciting. So these these investments really aren't on the gross profit line, they're actually going out and getting sales.

Dan Hendrix: I don't know if you remember when we introduced Tapestry in the day. This is similar to that technology, a lot more exciting. So these investments really aren't on the gross profit line. They're actually going out and getting sales.

I don't know if you remember when we introduced Tapestry in the day. This is similar to that technology, a lot more exciting. So these investments really aren't on the gross profit line. They're actually going out and getting sales.

[music].

Honestly, there I'll get back thank you. Thanks.

Brian Biros: Understood. Good to hear. I'll get back to the queue. Thanks.

Thanks.

Dan Hendrix: Thanks.

Our next question comes from Michael Blood from Nomura Instinet. Please go ahead.

Operator: Our next question comes from Michael Wood from Nomura Instinet. Please go ahead.

Hi, Dan welcome back your role CEO.

Brian Biros: Hi, Dan. Welcome back to your role as CEO.

Michael Wood: Hi, Dan. Welcome back to your role as CEO.

Thank you first question Yeah first question I just wanted to see if you could provide some color on your gross margin outlook in SGN, a within guidance and on SG. They in particular, how should we think about first quarter comparisons given that large investment that elevated SG name in one Q 19.

Dan Hendrix: Thank you.

Brian Biros: First question. Yeah, first question. I just wanted to see if you could provide some color on your gross margin outlook and SG&A within guidance. On SG&A in particular, how should we think about first quarter comparisons given that large investment that elevated SG&A in Q1 2019?

Michael Wood: First question. Yeah, first question. I just wanted to see if you could provide some color on your gross margin outlook and SG&A within guidance. On SG&A in particular, how should we think about first quarter comparisons given that large investment that elevated SG&A in Q1 2019?

Hey, Mike the Bruce Ausman. So as you can see from a press release, we're providing guidance for full year topline of 2% to 4%.

Bruce Hausmann: Hey, Mike. This is Bruce Hausmann. So as you can see from our press release, we're providing guidance for full year, top line of 2% to 4%. We're providing EPS guidance of $1.60 to 1.70. We're providing CapEx guidance as well as tax rate and share count. What we're not doing is we're not breaking that down by quarter, and we're not necessarily breaking that down by components of the income statement, gross profit versus SG&A. We're really focused on making sure we hit the top line number and making certain that we hit the bottom line number without trying to break apart the pieces.

Inviting EPS guidance of $1.60 to $1.70, we're providing capex guidance as well as tax rate.

And so in this and share count.

What we're not doing is we're not breaking that down by quarter, and we're not necessarily breaking that down by components of the income statement gross profit versus SGN a.

We're really focused on making sure we hit the topline number and making certain that we hit the to hit the bottom line number without trying to break apart the pieces, but one of the thing Mike is that I think our as soon as a percentage sales is too high we need to grow into our estimate number and we need to reduce as a percentage.

Dan Hendrix: Right. One of the things, Mike, is that I think our SG&A as a percentage of sales is too high. We need to grow into our SG&A number, and we need to reduce it as a percentage. We've created a lot of muscle in this company, which I'm excited to actually get back in there and run the company with the muscle we've created through a lot of investments. But we need to grow the top line and look at white spaces within the new LVT rubber markets that we have cross-selling opportunities with our modular carpet business. So I think we're going to try and focus on improving the top line in this company and taking share. We've never really gone after a dealer market, particularly in the United States, that I think we really need to go after and focus on.

We've we've created a lot of muscle of this company, which I'm excited to actually get back in there and run the company with a muscle we've created through a lot of investments.

So we need it we need to grow the topline and look at white spaces within the new LBC rubber markets that we have cross selling opportunities with our modular carpet business.

Well I think we're going to try and focused on.

Improving the topline in this company and taking share.

We've never really gone after a dealer market.

Ignited states that uptick we really need to go after and focus on.

So I'm I'm actually focused on running the plan that we have it's a great strategic plan that we put in place the last three years.

Dan Hendrix: So I'm actually focused on running the plan that we have. It's a great strategic plan that we put in place the last three years. We built a lot of muscle in the selling organization. We just need to get productivity out of our selling group. And I think we're going to focus on design as well as the company because I think design is how you drive specs as well. So to me, it's really about driving the operating income line, driving the top line, and growing into our SG&A.

So I'm actually focused on running the plan that we have. It's a great strategic plan that we put in place the last three years. We built a lot of muscle in the selling organization. We just need to get productivity out of our selling group. And I think we're going to focus on design as well as the company because I think design is how you drive specs as well. So to me, it's really about driving the operating income line, driving the top line, and growing into our SG&A.

We've done a lot of Muslims selling organization, we just need to get productivity out of our selling group.

And I think we're going to focus on design as well as a company because I think design is how you drive specs as well so.

To me, it's really about driving operating income line and drop in driving the topline and growing interest in.

Okay and in fourth quarter, you didn't see any acceleration organic sales. Despite the fact that you had that large project that was creating an unfavorable headwind.

Brian Biros: Okay. And in Q4, you didn't see any acceleration in organic sales despite the fact that you had that large project that was creating an unfavorable headwind in the prior quarters. Can you just talk about what kind of offset that in Q4 in terms of your core organic growth? Was it Asia weakness that you saw or something else that took away?

Michael Wood: Okay. And in Q4, you didn't see any acceleration in organic sales despite the fact that you had that large project that was creating an unfavorable headwind in the prior quarters. Can you just talk about what kind of offset that in Q4 in terms of your core organic growth? Was it Asia weakness that you saw or something else that took away?

The prior quarters can you just talk about what.

End of offset that in fourth quarter in terms of your core organic growth was it Asia weakness that you saw us or something else.

Took away.

Yes, Mike This is Bruce just to clarify we actually did have.

Bruce Hausmann: Yeah, Mike. This is Bruce. Just to clarify, we actually did have a headwind in Q4 related to that large order that we were lapping as a comparable from the year 2018. So similar to Q2 and Q3, there was a headwind that we saw in Q4. It just wasn't quite as large. But we did come in right where we thought we would. We came in with 2% organic growth, which is exactly where we thought we would come in for the quarter.

A headwind in Q4 related to that large order that we were.

That was a newer lapping is a comparable from 2000 a year 2018, so similar to Q2 in Q3, a there wasn't headwinds that we saw in Q4. It just wasn't quite as large but we did come in right, where we thought we would we came in with 2% organic growth was which is exactly where we thought we would come.

And for the quarter.

Okay and I was just finally talking about what drove the higher.

Brian Biros: Okay. Can you just finally talk about what drove the higher tax rate? I'm sorry.

Michael Wood: Okay. Can you just finally talk about what drove the higher tax rate? I'm sorry.

Tax rate I'm sorry.

You mean.

Go ahead sorry.

Dan Hendrix: No, go ahead. Sorry.

I just wanted to ask within your guidance, just yeah, you're guiding to pretty high tax rate versus what you had 19 in prior years.

Brian Biros: I just wanted to ask within your guidance, just your guidance at a pretty high tax rate versus what you had in 2019 and prior years. And I'd appreciate those other comments that you had, Dan, on organic sales, but then the tax rate question. Thank you.

Michael Wood: I just wanted to ask within your guidance, just your guidance at a pretty high tax rate versus what you had in 2019 and prior years. And I'd appreciate those other comments that you had, Dan, on organic sales, but then the tax rate question. Thank you.

I appreciate those other comments you had Dan on on organic sales within the tax rate question. Thank you.

I'm sorry, Mike are you asking about to 2019 tax rate are you asking about the 2020 guidance tax rate.

Dan Hendrix: I'm sorry, Mike. Are you asking about the 2019 tax rate, or are you asking about the 2020 guidance tax rate?

Bruce Hausmann: I'm sorry, Mike. Are you asking about the 2019 tax rate, or are you asking about the 2020 guidance tax rate?

A 2020, a you're guiding to 28% if I if I'm not mistaken I think you ended and adjusted effective around 23 for 2019. So just wondering why is a big increase.

Brian Biros: 2020, you're guiding to 28%, if I'm not mistaken. I think you ended an adjusted effective around 23 for 2019. Just wondering why the big increase.

Michael Wood: 2020, you're guiding to 28%, if I'm not mistaken. I think you ended an adjusted effective around 23 for 2019. Just wondering why the big increase.

Yes. Good question you might remember we had a couple of.

Dan Hendrix: Yeah. It's a good question. You might remember we had a couple of pickups in 2019. One was related to the Bentley Prince Street business that is a discontinued operation, and we talked about that in the prior quarter. That was a one-time pickup that does not recur in 2020. The other thing that we're seeing, just like every other global company, is just some erosion of the tax reform benefits around the global intangible tax, the so-called GILTI tax, and also the FDII tax. We're seeing some erosion in some of those components as tax reform sort of continues to bake into the income statement and continues to get codified around the world.

Bruce Hausmann: Yeah. It's a good question. You might remember we had a couple of pickups in 2019. One was related to the Bentley Prince Street business that is a discontinued operation, and we talked about that in the prior quarter. That was a one-time pickup that does not recur in 2020. The other thing that we're seeing, just like every other global company, is just some erosion of the tax reform benefits around the global intangible tax, the so-called GILTI tax, and also the FDII tax. We're seeing some erosion in some of those components as tax reform sort of continues to bake into the income statement and continues to get codified around the world.

Pickups in 2019 like one was related to the Bentley Prince Street.

The business that is a discontinued operation.

And we've talked about that as the prior quarter. So that was a onetime pickup that does not recur in 2020.

And the other thing that we're seeing just.

Just like every other global company is just some erosion of the tax reform benefits around the global intangible tax the so called guilty tax and also the BD tax were seeing some erosion in some of those components as tax reform Sorta continues to bake into the income statement.

Continues to all this continues you could codified around the world.

Okay. Thank you.

Brian Biros: Okay. Thank you.

Michael Wood: Okay. Thank you.

Our next question comes from Keith Hughes from Suntrust. Please go ahead.

Operator: Our next question comes from Keith Hughes from SunTrust. Please go ahead.

Thank you questions on Nora Nora due in the quarter year over year.

Keith Hughes: Thank you. Questions on Nora. How would Nora do in the quarter, year over year?

A key to Bruce Lora continues to stay on track with our acquisition model and our expectations that we had when we announced the deal.

Bruce Hausmann: Keith, this is Bruce. Nora continues to stay on track with our acquisition model and our expectations that we had when we announced the deal. We just continue to be so pleased with the progress around that acquisition and the pace of integration. And we're continuing to methodically integrate that business so that we're one company with three product lines. And so right on target with what we said it would be.

We just continue to be so pleased with the progress.

Around that acquisition and the pace of integration and we're continuing to methodically integrate that business. So that were one company with three product lines.

And so.

Right on target again to be Jackie This is Dan.

Dan Hendrix: Yeah. Keith, this is Dan. I'd also say that as I get out and go see our various businesses, and I'm actually headed to Salem tomorrow to talk to the Nora people, the cross-selling opportunities between Nora and Interface are really exciting to me. We've never been really strong in healthcare on the modular carpet side, and they're very strong in healthcare. So I think we're going to focus on the education part and the healthcare part for cross-selling. And in the outlying markets, we're also giving our salespeople all three products. So I think the cross-selling, we haven't realized that to the extent I think we can. But I'm excited about that opportunity for us.

I'd also say that.

As I get out and go see or the various businesses and I'm actually had a disabled tomorrow to talk to the norm people the cross selling opportunities between Nora and interface or really.

Siding committed.

We've never been really strong in health care on the modular carpet side, another very strong in health care.

Right and we're going to focus on that the education part in the health care apart from cross selling and outline markets were also given our salespeople all three products. So I think the cross selling we haven't realized that too. So I think we can.

But I'm I'm excited about that opportunity for us.

Okay and.

Keith Hughes: Okay. And you had talked in the numbers about resilience, half the organic growth being out of resilience. I assume LVT was up strong again in the quarter. Is that fair to say?

You had talked in the numbers about resilient half your organic growth being out of resilient I assume LPT was up stronger down in them in the quarters oversight.

We continue we continue to see fantastic momentum and LPG and.

Dan Hendrix: Yeah. We continue to see fantastic momentum in LVT. We're right on track, Keith, to where we had anticipated with that to be a $100 million business run rate in 2020, which is absolutely fantastic with the creative margins.

Bruce Hausmann: Yeah. We continue to see fantastic momentum in LVT. We're right on track, Keith, to where we had anticipated with that to be a $100 million business run rate in 2020, which is absolutely fantastic with the creative margins.

We're right on track keys to where we had anticipated that to be 100 million dollar business run rate in 2020, which is absolutely fantastic with accretive margins.

Okay.

Keith Hughes: Okay. And you guys, from revenue guidance in the release, did that assume this decline in Asia that you had talked about earlier? Seems like that's about a point of what you're talking about.

And the government revenue guidance in the release does that assume this decline in Asia.

Talked about earlier.

Hi, guys about a point, what you're talking about.

Yes, well I would say that eat despite what's going on with Asia. The decline in sales were up 4% in orders.

Dan Hendrix: Yeah. Well, I would say that despite what's going on with Asia and the decline in sales, we're up 4% in orders to date this quarter. So I'm excited about the other markets, Europe, the United States, and Americas.

To date this quarter, so I'm excited about the other markets Europe in the United States in Americas.

Okay I just finally the question on our carpet tile is like it was up a little bit which is a good bit about where this industry is at this point.

Keith Hughes: Okay. And I guess finally, the question on carpet tile because that gives up a little bit, which is a good bit about where this industry is at this point. Do you have? It feels like some share gain here. Do you have any feel what markets you're doing best in carpet tiles in North America?

Do you have feels like some share gain here you have any feel what markets you're investing in carpet tiles North America.

Well I would say that that we are actually investing in than the I don't know if you remember we did the non office segments, but we're actually going after the education hospitality and healthcare markets with modular carpet and with the resilient part of our business.

Dan Hendrix: Well, I would say that we are actually investing in the. I don't know if you remember when we did the non-office segments, but we're actually going after the education, hospitality, and healthcare markets with modular carpet and with the resilient part of our business. And we've never really gone into a lower product category. We've actually forfeited that market. And I think we're determined to figure out how to sell into that market, particularly in the United States.

And I, we've never really gone into lower product categories, we've actually forfeited that market in.

And I think we're determined to figure out excel into that market, particularly United States.

Okay. Thanks very much.

Keith Hughes: Okay. Thank you very much.

Thanks.

Dan Hendrix: Thanks.

Our next question comes from John Baule from Stifel. Please go ahead.

Operator: Our next question comes from John Baugh from Stifel. Please go ahead.

Thank you good morning and.

John Baugh: Thank you. Good morning. I add my welcome back, Dan, as well. Let's jump right in. I wanted to maybe discuss the 2% to 4% organic growth guide for '20s. Could you provide any color because that's a little bit of an acceleration where we just completely aware that would either come from geographically or product-wise, Dan?

And my welcome back then as well.

Let's jump right in I wanted.

Maybe discuss the 2% to 4%.

Organic growth guide for 20 is could you provide any color.

Because that's a little bit of an acceleration, where we're just complete where that would either come from geographically or product was Dan.

Yeah, I think well I'm excited about the European business, which is kinda odd once people are excited about Europe.

Dan Hendrix: Yeah. Well, I'm excited about the European business, which is kind of odd. A lot of people aren't excited about Europe. We've invested in a lot of what I call commercial leaders. We have five new commercial leaders in Europe. I just think we're poised to take share in the European market and also capitalize on the fact we've got hard surfaces now there. I think the US has got pretty good momentum going as well, particularly with the Nora integration and the cross-selling. We built a lot of muscle the last two or three years in sales tools and productivity tools. We put in Salesforce. We put in Interface Advance. I just think we're ready to capitalize on some of that. I think it's US, and I think it's Europe as well.

We've invested in lot of what I call commercial leaders, we have five new commercial leaders in Europe and I, just think we're poised to take share in the European market and also capitalize on the fact, we've got hard surfaces now there.

And I think the U.S.

He's got pretty good momentum going as well, particularly with the Nora integration the cross selling.

We've got a lot of muscle the last two or three years and sales tolls and productivity tools.

We put in sales force, we put an interface advance.

And I think we're ready to capitalize on some of that so I think its U.S.. So I think it's Europe as well.

Okay.

John Baugh: Okay. And then what, if anything, is going on with LVT sales around the world? You mentioned $100 million. I assume that's consolidated. What are you seeing around the globe in that product category?

And then what if anything is going on with Lv T. sales around the World you mentioned, the 100 million I assume this consolidated was wondering what are you seeing around the globe and the product category.

John as Bruce Aspen.

Bruce Hausmann: John, this is Bruce Hausmann. The sales just continue to accelerate. And we have not seen any stopping in terms of the momentum of that product line globally, which is great.

You know the sales just continue to accelerate.

And we can we have not seen any stopping in terms of the momentum of that product line globally, which is great. Yeah, I wouldn't say that we've adopted an earlier in the United States.

Dan Hendrix: Yeah. I would say that we've adopted it earlier in the United States. Europe was following the US from an adoption standpoint. Asia is next to come. So I think Europe's going to see some pretty good LVT growth as well, and rubber growth.

In Europe was following the U.S. on the adoption standpoint, and Asia is next to come.

So I think Europe is going to see some pretty good obviously growth as well and rubber growth.

And is there any change in the.

John Baugh: Is there any change in the go-ahead, sir?

Sure.

No we introduced that first in the United States than Europe, and Asia, So you've got to adoption that.

Dan Hendrix: No, no. We introduced it first in the United States, then Europe, and then Asia. So you've got an adoption that the US should be ahead of everybody else because they got it first.

Yet U.S. should be ahead of everybody else because they've got to first.

Understood and then is there any margin profile change in the LTT business.

John Baugh: Understood. And then is there any margin profile change in the LVT business?

John This is Bruce so you know.

Bruce Hausmann: John, this is Bruce. So as we mentioned last quarter, we launched some 3-millimeter LVT. That actually comes at a slightly higher margin than some of our previous product lines. So not only are we able to bring additional LVT product to market, but we continue to be able to bring it to market at very competitive and strong margins.

As we mentioned last quarter, we launched some three more three millimeter LBG that actually comes at a slightly higher margin than some of our previous product lines. So not only are we seeing are we able to our we bring additional LPG product to market, but we continue to be able to bringing to market add very.

Competitive and at a strong margins.

Okay.

John Baugh: Okay. And then lastly, just to clarify, you used to give out sort of a backlog number. I didn't see that. I guess you're not doing that. But you did comment, I think your orders were up 4%. Is that a consolidated comment? And what period is that through? Thank you.

And then lastly, just to clarify you used to go out sort of a backlog numbers.

See that I guess, you're not doing that but did comment I think your orders were up 4% is that a consolidated come in and then what period as the through thank you.

John This is Bruce so the 4% number is year to date.

Bruce Hausmann: John, this is Bruce. So the 4% number is year to date. Orders are up, total company. We don't provide backlog. You guys have heard me talk about this previously. It's not necessarily indicative of the future. It's just sort of a you snap the line and you look at your backlog, which is why we don't necessarily talk about it. It's one component of many components about where that future of revenue growth is going to come from.

Orders are up total company.

We don't provide backlog. It's you know you guys have heard me talk about this previously I don't it it's not necessarily indicative of the future just sort of a new snap the line look at your backlog.

Which is why we don't necessarily talk about it. It's one component of many components about where that future of revenue growth is going to come from.

Thanks for answering my questions are good luck.

John Baugh: Thanks for answering my questions, and good luck.

Thank you John Thank you John.

Dan Hendrix: Thank you, John.

Bruce Hausmann: Thank you, John.

Our next question comes from David Macgregor from Longbow Research. Please go ahead.

Operator: Our next question comes from David MacGregor from Longbow Research. Please go ahead.

Good morning, everyone and welcome back.

David MacGregor: Yeah. Good morning, everyone. Welcome back, Dan.

Thank you.

Dan Hendrix: Thank you.

I guess, just what we're on orders.

David MacGregor: Just, I guess, while we're on orders, a lot of talk on the last quarter's call about orders. The observation was made that the patterns had become increasingly choppy. So I thought maybe just to start with if you could update us just on cadence within the quarter, how orders had looked. And if you saw sort of the velocity of the orders, it seems to be picking up a little bit. But has it stabilized in terms of the flow, or is it still very choppy? And just talk a little bit about what you're seeing in terms of the quality of the order book.

A lot of talk over the last quarter's call but orders.

The observation was made that patterns have become increasingly choppy. So I thought maybe start with.

If you could update us just on cadence within the quarter, how orders had locked and if you saw the.

Sort of the velocity of the orders.

Seems to be picking up a little bit but.

As it stabilized in terms of the floors are still very choppy and.

Just talk a little bit about what you're seeing in terms of the quality of the order book.

Yes.

Bruce Hausmann: Yeah.

Bruce Hausmann: Yeah. David, this is Bruce. I think that was a word I think I was the one who said the word choppy. I think that people read too much into that. When you look week to week, things bounce around. It's just been a smooth progression throughout the quarter, is the way I would sort of describe it. I think looking at it up 4%, that's a good number for us year to date. Yeah, it is. One thing, it was in the script, but we had a sales meeting in the United States. It was one of the best sales meetings I've probably ever attended. Then I went to a management meeting, the top 125 in Europe. Those two groups are very optimistic about what's going on in their geographic regions, and pretty excited about going out and being able to grow the top line.

David This is Bruce I think that was a word I think I was the one who said the word choppy and I think that people read too much into that.

Dan Hendrix: David, this is Bruce. I think that was a word I think I was the one who said the word choppy. I think that people read too much into that. When you look week to week, things bounce around. It's just been a smooth progression throughout the quarter, is the way I would sort of describe it. I think looking at it up 4%, that's a good number for us year to date. Yeah, it is. One thing, it was in the script, but we had a sales meeting in the United States. It was one of the best sales meetings I've probably ever attended. Then I went to a management meeting, the top 125 in Europe. Those two groups are very optimistic about what's going on in their geographic regions, and pretty excited about going out and being able to grow the top line.

When you when you look week to week Numb things bounce around you know it's been a smooth progression throughout the quarter is what are the way I would sort of describe it and I think you know looking at it up 4%. That's a that's a good number for us a year to date.

And one thing I was in the scrip.

But we had a we had a sales meeting in the United States is one of the best sales meetings I've probably ever attended.

And then I went to management meeting the top hundred 25 in Europe.

And those two groups are very optimistic about what's going on in their geographic regions and pretty excited about going out and be able to grow the top line. So that that's sort of gives me a little bit of encouragement about the first.

Dan Hendrix: So that sort of gives me a little bit of encouragement about the first, we haven't been up 4% in orders. That's a good sign for us.

So that sort of gives me a little bit of encouragement about the first, we haven't been up 4% in orders. That's a good sign for us.

We have been up 4% in orders that's that's a good sign for us.

The observation I think Bruce you May do call. It 4% was across the company is a much disparity in that number if you looked at region by region.

David MacGregor: The observation, I think, Bruce, you made the call at 4% was across the company. Is there much disparity in that number if you look at region by region?

You don't normally give out order growth rates on a geographic basis. However, given all the sensitivity around growing the virus items. This quarter I'd like to just tell you that orders are down 8% year to date in Asia, but for total company, they're up for which obviously means that there you know we're seeing strong order growth in your.

Dan Hendrix: David, we don't normally give out order growth rates on a geographic basis. However, given all the sensitivity around coronavirus, this quarter, I'd like to just tell you that orders are down 8% year to date in Asia. But for total company, they're up 4%, which obviously means that we're seeing strong order growth in Europe and in the Americas.

Bruce Hausmann: David, we don't normally give out order growth rates on a geographic basis. However, given all the sensitivity around coronavirus, this quarter, I'd like to just tell you that orders are down 8% year to date in Asia. But for total company, they're up 4%, which obviously means that we're seeing strong order growth in Europe and in the Americas.

And in Americas, right, Yes, I would expect that Asia.

David MacGregor: Right. Yeah. I would expect that in Asia. You talked about cross-selling as well. And it sounds like an exciting opportunity. But frankly, it's an opportunity we've been talking about for over a year now. Maybe could you just update us in terms of is there a metric you're using in terms of specified wins that have both hard and soft content? Or what's the metric you're using on that, Dan? And could you update us on it?

From a cross selling as well.

Sounds like an exciting opportunity, but frankly its opportunity we've been talking about for over a year now.

Maybe could you just update us in terms of.

So we're a metric you're using in terms of specified wins that have both hard and soft content or it's a metric you're using on that and could you update us on block well to me to me. We were we've really hadn't been focused on cross selling as we've been focused on trying to actually get nor settled into the interface culture and vice versa.

Dan Hendrix: Well, to me, we really hadn't been focused on cross-selling. We've been focused on trying to actually get Nora settled into the Interface culture and vice versa. And it takes a while to get the cross-selling, actually get the people identified, get the products identified, get even markets identified. And me stepping in here in the last six weeks, I think we finally got all that right. We got the people identified. They're going to actually carry the three products. So I'd say that we always had a cross-selling opportunity, but I think we're able to execute it better now given that we've had 18 months to get it going to me.

And it takes a while to get the cross selling actually get the people to identify get the products identified getting the market's identified.

And maybe stepping in here in the last six weeks I think we finally got all that right. We've got the people identified.

I'm going to actually carry the three products, so I'd say that.

We always had a cross selling opportunity, but I think we're.

Able to execute better now given that we've had 18 months to get it going Tonight.

Okay.

David MacGregor: Okay. Just last question for me on the Carbon Negative products initiative. I think the conversation had been around $15 to 20 million of cost reduction benefits overlapping 2020 and 2021. Is that still $15 to 20 million? Is that still a good number to use?

Just last question for me on the carbon products initiative.

I think you had the conversation has been around 15 to 20 million and cost reduction benefits overlapping 20, and 21 is that still 15 to 20 million. So still a good number to use.

Yeah, I think well based on the carbon negative side of equation that one that is closer to 10.

Dan Hendrix: Yeah. Well, based on the Carbon Negative side of the equation, that one is closer to 10. I'm not familiar with the other five million where that comes from, except we've got a lot of improvement in the manufacturing that we're targeting. So yeah, that whole pipeline is probably more like 15 million. And David, this is Bruce. Just to clarify, that's the kind of savings that bleeds in not just this year, but it bleeds into next year.

I'm not familiar with the other 5 million when that comes from extent, we've got a lot of improvement in the manufacturing that we're targeting so yes that whole pipeline is probably more like 50 million any David. This is Bruce just to clarify you know that's that's the kind of savings that bleeds in not just this year, but that bleeds into next year 21, Yes, I think you did a good that last.

Bruce Hausmann: And David, this is Bruce. Just to clarify, that's the kind of savings that bleeds in not just this year, but it bleeds into next year.

David MacGregor: 2021. Yeah. I think you did give that last quarter as well. One more, if I could, just on the balance sheet. You thought you could get it down to 2.0x by the end of 2020. Is that still the goal?

Quarter as well one more thing, but just on the balance sheet. You thought you could go down to 2.0 times by the end of a 20 is that still the goal.

You talked about net debt to EBITDA good correct yeah.

Dan Hendrix: You're talking about net debt to EBITDA, David?

Bruce Hausmann: You're talking about net debt to EBITDA, David?

David MacGregor: Correct.

Dan Hendrix: Yeah. Let me just say this. We are very, very focused on continuing to deleverage the company. So we're right on track with where we said we would be, being at 2.6 as we ended up this quarter, which is fantastic. And we're going to continue focusing on deleveraging. We do have a goal of getting down to 2.0 by the end of this year. But I just wanted to say for everybody's benefit that deleveraging the balance sheet is a very, very keen focus of ours. Yeah. I want to echo that.

Bruce Hausmann: Yeah. Let me just say this. We are very, very focused on continuing to deleverage the company. So we're right on track with where we said we would be, being at 2.6 as we ended up this quarter, which is fantastic. And we're going to continue focusing on deleveraging. We do have a goal of getting down to 2.0 by the end of this year. But I just wanted to say for everybody's benefit that deleveraging the balance sheet is a very, very keen focus of ours.

That is we are.

I'll, let me just say this we are very very focused on continuing to deleverage. The company. So we're super we're right on track with where we said we would be being at 2.6 as we ended up this quarter, which is fantastic and we're going to continue focusing on de leveraging.

We do have a goal of getting down to 2.0 by by the end of this year, but I just wanted to just say for everybody's benefit that deleveraging. The balance sheet is is a very very keen focus farce, yeah I want to echo the.

Dan Hendrix: Yeah. I want to echo that.

Thank you very much shown.

David MacGregor: Thank you very much, gentlemen.

Thanks.

Dan Hendrix: Thanks.

Oh no further questions in queue at this time I'll turn the call back for closing remarks.

Operator: We have no further questions in queue at this time. I'll turn the call back for closing remarks.

Yeah, well. Thank you all for lets you would call. It's a it's it's good to be back for me.

Dan Hendrix: Yeah. Well, thank you all for listening to the call. It's good to be back for me in this role. I'm looking forward to having this year be a great year. I hope to talk to you next quarter. Thanks.

In this role and I'm looking forward to having distributed great year.

And I Hope you talked you next quarter. Thanks.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

[music].

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