Q1 2020 Earnings Call
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It sounds like the hand, the conference or what are your speaker today, Kristine needles director corporate communications.
Thank you. Please go ahead.
Good morning, and welcome to interfaces conference call regarding first quarter 2020 result hosted by Dan Hendrix, Chairman and CEO and Bruce How Smith, Vice President and CFO. During today's conference call any management comments regarding interfaces business, which are not historical information our forward.
Within the meaning of the securities active 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, our management team as well as the assumptions on which such statements are based.
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 statements.
Including risks and uncertainties associated with the ongoing cobot, 19, pandemic, including interruptions to our manufacturing operations and reduced demand for our product.
Economic conditions in the commercial interiors industry and risks related to lawsuits investigation and 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 one eight of the company's annual report on form 10-K for the fiscal year ended December 29, 2019, which has been filed with the Securities and Exchange Commission, we direct all listeners to that documents the company assumes no response.
Its ability to 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 measures. The most comparable GAAP measures as well as a reconciliation of non-GAAP measures to the most comparable GAAP measures is contained in the Companys earnings release form 8-K furnished with the FCC today, which explains why interface believe 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 any 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 and may not be recorded or rebroadcast did without interfaces expressed permission 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.
Okay. Thank you Christine.
Good morning, Thanks for joining our call today.
Okay every one of their families for sake of.
So before we jump into our first go results I want to give you some contracts related to current business conditions now we're navigating through the covenant light team can Dennis.
Bill can set the bar employees is our first and foremost concern as we work to ensure the strength and stability about business.
Spreads minor disruptions in operations over the past few months, but I'm pleased to say that our primary manufacturing facilities.
Fully operational.
We talk a lot interface about airport, that's leading industry to love. The we're seeing are in action as our team stepped up to revise their customers and support communities.
Around the world many of those continue working remotely as we aligned with local requirements and our factories, especially you adapt and are working environment surrogates transmission grid well continue operations.
That includes carefully calling procedures for social good syncing increase cleaning and best practices that allow us to keep our plants running and meet our customer commitments.
Robert Dodd manufacturing is well positioned concern customers around the world. It extensive capabilities that we can flex to mitigate interruptions has been met coal.
I'm proud of the agility and ingenuity of our selling organization. They found new inside the ways to connect with our customers.
In fact with reduced travel and remote working we've been able to conduct the designer since that's far more frequently.
We haven't taken anything whitening in terms of the business impacted the pandemic our management team back to swiftly to align our cost structure the declining demand to protect the foundation of our company.
We've taken steps to reduce cost to rightsize the business, while maintaining our competitive edge.
Continuing to innovate and launch new products that position us for a long term success.
We took a hard look at all discretionary spending reviewed our strategic projects.
Making specific choices about wants to do and more importantly, what not to do.
Introduce voluntary redundancies furloughs in other time in paper production programs, while participating at various government sponsored wage support programs.
Boy retention schemes and subsidy programs outside United States.
We've also implemented voluntary separations as needed to rightsize the organization.
We've also been scare reproduction or manufacturing facilities to meet demand.
One of interfaces shrinks is its ability to flex production up and down as needed.
And lucky 70% of the cost structure and our carbon coal plants is variable.
In addition, we suspended merit based pay increases in for one Kagan nonqualified segments plant company matching contributions.
We also anticipate a significant benefit from lower performance based compensation.
Variable commission compensation, but all of these activities, we've taken $80 million out of our full year cost structure or 20% over last year and eight days.
We're diligently managing our cash flow ending the quarter with 309 million of liquidity.
Comprises 73 million of cash on hand, and 236 million a borrowing availability under our revolving credit facility.
We've reduced capital spending plans for the year and anticipate that working capital reductions will help on declining profitability.
We've weathered economic downturns in the past and benefited from a strong purpose center core.
This pandemic is uniquely challenging and while we can't predict what the future holds I.
I know the interfaces they resilient company that is built to last.
With that I'd like to turn it over to Bruce to discuss our first quarter results. This.
Thank you Dan and good morning, everyone. We had strong start to the year what began to see impacts of the covert night Union endemic of the first quarter progressed and government orders were issued around the globe. Our global operations experienced a wide spectrum of local government directive from geography is were social distancing and other measures will recur.
Wired, but construction, we're still considered essential.
All shelter in place locked down we're commerce was essentially stopped but the government's explicit direction.
More severe the walk down the more severe we saw a precipitous decline in revenue.
Fortunately were most we've seen customers delayed projects not cancel them. Our backlog is up approximately 45 million from where it was at the end of 2019.
Good how the minimum there'll be pressure on second quarter earnings are there for orders were down approximately 32% and this phenomenon was fairly broad based with orders down approximately 37% in the Americas, 28% in EMEA and 28% in Asia Pac.
Sources of optimism for us all the growing backlog a customer base is mostly delaying orders not canceling them and find the stabilization in our recent four week moving average sequential order trends.
In fact reading starting to see sequential order trends turn up in geographies, where a lot down and restrictions HM like Australia, China in Germany.
We particularly see resilient than a rubber business north is benefiting from a strong pipeline of large healthcare education and life Sciences projects. The continued weak supported major markets.
Context in mind, there's more information on our first quarter results.
Another reminder, fiscal 2020, there's a 53 week Yorker interface. The first quarter of 2020 had 14 weeks versus 13 weeks in the first quarter 2019.
Net sales in Q1, 2020 were down 3% versus the prior year period, including the extra fiscal week in Q1, 2020 organic sales were down 2%, which excluded the negative currency translation impact of $5 million in the corner.
Sales, our Americas business declined 2% in the first quarter with strong January February results also quite sharp declines in March.
William Wong maintains a strong growth pattern throughout the quarter with the clients concentrated in carpet tile.
Sales were up 5% than local currency, but up 2% the U.S. dollars due to currency headwinds.
Similar to our Americas business strong January and February results were negatively impacted by declines in March resilient flooring drove growth, particularly rubber in key markets, such as healthcare education and industrial.
Sales in Asia Pacific were down 13% in local currency compared to first quarter last year, but were down 20% in us dollars largely due to the weaker Australian dollar our Australian business had a strong start to the year and ended the quarter up double digits in local currency. Despite flat performance in March, but our Asian business.
On the other had was impacted by the pandemic earlier in the quarter and was down significantly.
On a global market segments hospitality living in education are the strongest grew up in Q1.
We're encouraged by our gross margins despite double digit percentage production declines in the quarter, resulting from temporary plant closures that several of our corporate office guilty that's different periods throughout the quarter.
First quarter gross profit margin was 39.7% up 60 basis points versus the first quarter gross profit margin last year.
An adjusted gross profit margin was 40.1% 30 basis point improvement over adjusted gross profit margin last year.
<unk> expenses were 88 million in the first quarter or 40.4% of sale.
Just a few next question were 86 million grew 29.9% himself.
Given macro economic conditions that we saw northern Asia in Q1, along with significant declines in equity market valuations, we determine indicators of goodwill impairment and after discussions with our external auditors and revealed the accounting literature. We performed requires analysis that resulted in a 121 million charge.
Permit the goodwill and intangibles.
As a non cash charge.
Including the noncash impairment charge you recognize them operating loss of 94 million in the first quarter compared with operating income of 60 million in Q1 last year. Adjusted operating income was 29 million up 60% versus operating income of 18 million in the first quarter last year.
We recorded a net loss of 102 million in the first quarter and a loss of $1.75 per diluted share. Adjusted net income was 19 million for 32 cents per diluted share in Q1, 2020, compared to 8 million or 14 cents per diluted share last year.
Adjusted EBITDA was 35 million in Q1 up 10% versus 31 million last year.
Lastly, our balance sheet remains strong as we vigil when we manage cash through this period of declining demand.
No. The first quarter is typically a period, where we have heavy use of cash as we fund bonus payments and other prepaid expenses like insurance and taxes, we ended the quarter with a healthy balance of cash on hand and strong liquidity.
Net debt or gross debt minus cash on hand was 555 million in the last 12 month of adjusted EBITDA was $203 million at the end of Q1, resulting in a net leverage ratio of 2.7 times calculated net debt divided by adjusted EBITDA.
Interest expense was 6 million in the first quarter compared to 7 million in Q1 of last year depreciation and amortization was 11 million consistent with last year capital expenditures were 22 million in Q1 2020 compared to 29 in the first quarter of last year inline with our expectations.
With that I'd like to turn the call back over to Dan.
Hi, Thank you Bruce as you've heard we've effectively maintain margins in the first quarter and if that could quickly to protect the underlying fundamentals of the business.
However, as Bruce mentioned, we are seeing significant declines demand as we move through Q2 in varying degrees around the world depending on the severity of dependent.
There are some bright spots the water intake activity in our backlog is elevated.
We expect a uniquely challenging environment in the second third quarters because of that combined with its never get level uncertainty in the market in general yeah, withdrawing our 2020 guidance.
As described earlier, we've adjusted our cost structure and have taken significant steps to align our business with declining demand.
We anticipate our cost reduction initiatives to result in total year as she any expenses of approximately 320 million to 330 million.
We've also moderated our capital spending and anticipate 45 million to 50 million of capital spending, including planned investments and backing and tufting technology in the Americas.
Going forward or maintenance Capex run rate should be around 20 million annually, we will continue to rightsize our spending as this year unfolds.
You know our fundamentals are strong.
As is our culture, we will continue to invest in our climate sit back mission.
According to launch of an industry, leading carbon negative product later this year.
This is an exciting innovation that will allow us to continue to partner closely with our customers <unk>.
Good news, our carbon footprints and address climate change.
This is a win win for the planet and our business says we will also be reducing manufacturing costs with this investment.
Cobot 19 will change office and other built based design needs.
Rarely.
Longer term.
Were inside that show, we have already begun working with our customers to develop for installations.
Help in design for social decision.
Roger carbon told rubber and there will be Ci products provide enhanced way finding.
Placemaking zone creation in transit flow Guinea people on space important visual cues to maintain social distance while working effectively.
No problem the across industry as we all of that he's new workplace requirements.
In fact, we're making immediate changes in our own headquarters in Atlanta that we plan to share with our customers as an early club sorry.
While the commercial 40 markets overall faces significant challenges, we do see continued interest in a relatively products, particularly in segments, such as healthcare education and life Sciences.
Nor products are well suited for health care space is because of their durability seamless installations ability to mitigate infection risk issues.
I've been pleased to see our team move quickly.
To support hospital conversion projects like the one in Miami Beach Convention Center in the first Corona bars Tritan hospital located.
China.
It's a point of pride to be able to support these types of 12 line afterwards.
Without a doubt.
We know that the pandemic is changing the world and that business must adapt.
No future.
His during these times that we can use our size and speed of execution to our advantage.
Evolving our strategy to these new requirements is they didn't though.
Leading the way with our own innovative new products and solutions.
In closing I want to thank our employees around the world for their commitment to our business and purpose.
Your health and safety net of your families is so important I'm incredibly proud of your adaptability and resilience.
Thank you also to our customers and shareholders, who continue to support in place.
We remain confident there we have what it takes emerged from this prices and a stronger and more nimble company than ever before.
I'll open it up for questions.
Right.
Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad. Your first question comes from Kathryn Thompson with Thompson Research Your line is.
Hi, Thank you for taking my questions today.
First that the many changes she made in response to kept that night team you talk about any changes that may end up being semi permanent or this is a trend that we've seen with so many companies that have been forced to be nimble to adjust but then when the dust settles, there's a realization that some to changes maybe.
Or permit.
But also maybe enhancing in terms of how the company operates went for thank you.
Yeah, Hey, Catherine.
You know, we're looking at how to redesign interface I think every companies looking to how to redesign or in a lot of these costs will obviously be permanent reductions I can't give you a number.
The variable comp part will not that will bounce back.
But we're looking at the whole organization about how them do knew what was going to act and you know my goal is always trying to drive as DNA down to 30% is too high.
My goal is to drive it close for 27%.
And I'd just add to that Dan. Good morning, Catherine you know some of these changes are going to be permanent for customers, which we view as an opportunity to bring new products and to help them in new ways to design their office in this new environment that we're in so interestingly enough. You know we view covert 19, obviously, there's a lot of headwinds and a lot of challenges that.
The business and the and the global economy is going through but I think we can make some pay out of this for the business, yes for sure.
Yeah, I think this place actually to interfaces strength.
Catherine that we've always been very innovative company and we tend to.
We love changes the company not it will adapt better than most of this new world.
Okay perfect.
Appreciate any color you gave on write down a in your prepared commentary it could she's flush out a little bit more because she really gave two buckets follow on equity value and Asia, but is there any relation to Nora.
And just kind of the timing and magnitude <unk> flushing out the components of that write down. Thank you.
Catherine This is Bruce interesting you leave enough as we mentioned in our prepared remarks. Nora is doing is incredibly resilient through an environment. Like this you have to think about goodwill is sort of like a bucket of water where all of the goodwill since inception of the company is combined into one bucket now than we do allocated among regions, we allocated among Americas EMEA.
In Asia Pac and you know, there's some fairly I'm sure you're conversant with this there's some fairly technical accounting literature that governs. This you have to go through your steps and since we saw the cobot 19 fairly early in our business in Q1 with Asia, and some triggering stuff happening on in particularly in China.
You know that made us be a little bit proactive around that analysis and so we weren't really closely with our external auditors and we took a really hard look at the accounting literature that governs that went through our quantitative analysis you know the as a result of that's you know we follow the literature and we did take that is if we did take that goodwill impairment charge.
But I just want to make sure that's your where it's a noncash charge a benefit that you know comes off the balance sheet.
Okay, and then a final question put a day and really more focused on your U.S. business.
Yeah, we we've heard a really kind of confirming what you said about healthcare education or do you have to categories I'm seeing some good demand.
There's actually.
Given backlogs.
Some of your simplex and the industry, having a little bit of a hard time meeting demand.
Seems completely counterintuitive to employment numbers I wanted to see our you are you seeing a similar trend in your business, particularly for your Georgia operations.
And maybe flesh out just what you're seeing and trenches ability to meet demand given the realities her face in the marketplace.
Well I know I.
We have a very flexible plant in Georgia, obviously, we only have one plant it's Andrews County.
We haven't had really any issues with shuts down some of our competitors have had issues with shutdowns.
Particularly in the United States. So we.
We can definitely ramp up to meet demand you can imagine some of the markets have been hit the hardest New York City, Boston, then hit really hard in our east as is our West coast business, We can't ship it in West Coast. The orders are really good.
So we don't really have a problem meeting demand and fulfilling our backlog its matter.
Cities opening up where we can actually do commerce and ship.
Catherine This is Bruce I would just add to that no one of the strengths that I've noticed an interface through this whole process is just the flexibility of our plants globally to flex up and down based on demand and we've seen that around the world. We've seen that in Australia, we've seen that in China, we've seen that hit in the U.S. and that's one of the thank our costs.
Colleagues, who are probably listen to this call. It now at their amazing capabilities at flexing up and down as needed. So the other thing I would add too and we mentioned this in the prepared remarks, you know the more severe the walk down the more severe or is the more difficult to spend to get product to the customers, but when they walk down the east we're able to get that product that's because the customers.
To take delivery of it I mean, we haven't we haven't had any any supply chain issues with our suppliers correct at all so.
Yeah, we were very fortunate with our supply chain and that's true as well Catharine its lv T.N., Robert So we've been fortunate not that those disruptions.
Perfect. Thank you very much and good luck.
Thank you.
Your next question comes from Mike of Nomura. Your line is over.
Good morning, and thanks for all the information on April.
First can you update us on whether or not in this scenario. They that you're currently looking out with the April order trends, whether or not you envision, reaching any covenant limits and whether or not you've had any preliminary discussions with lenders on getting those waived.
Yeah, Mike. This is Bruce we have no indication of a tripping covenants in Q2.
Yeah, we're obviously keeping a close eye on that to see what the implications are for Q3 in Q4, we've had really good open dialogue with our banking group, a and who remain incredibly supportive we have over a 20 year relationship with them and you know their feedback to us and say, let US know we're here to support you if you need to.
Go back if things get worse in Q3 in Q4, we need to go back and acid discussions. Please let us know want to continue supporting interface, yeah, and just to keep tax inversion Arnaud taxing. Thus the thing that gives our bank a lot of solace is that we have a lot of liquidity, we have 309 million of liquidity and so we don't have to go back to the bank Seth.
Oh solves that have been working with Dan said, we've done a really good job at acting quickly it taking costs out of the business and the right areas.
So that you know I think it's their feedback to us it's been it gives us comfort that you've got a really solid management team, that's a that's being proactive and making the right and then.
Basically controlling your own destiny.
Thanks for that and Dan I recall, historically demand volatility would cause some pretty major manufacturing inefficiencies given oh, you know the changeovers that they have to occur can you talk about how manufacturing different now in terms of handling that demand volatility given the troup county initiatives that you've worked.
John I, just love to hear what's changed what you'd expect for Decrementals shorter term.
Well you know we created the long term the long run plan in the short run plant.
Actually modernized Troup County.
Say that Oh wait when when production went down 25% and you throw out the Bentley Broadline business I think we saw 200 basis points and degradation in the gross profit line.
But our our mix is different today L. B T is a big part of the mix that's hard gross profit margins than we have enough the carpet tile business.
To me that the nor a rubber business is high margin business as well and it's got a pretty good demand strength, so I'm pretty confident that Argos profit long as it's going to is going to hold up in a really good way for us.
Great. Finally, you'd mentioned you were seeing some delays, but no cancellations in backlog I'm front from just your historical work dealing with that didn't do cancellations typically occur upfront or is there still potential that the delayed work could get canceled. Thank you.
Yeah, I would say that when they or when they enter the order. It. So it's a contractors or purchase order that goes with it and they have they have a project they want to finish and I would say that the sum of finishing projects standpoint historically they they finished the refurbishment project, where they finished the new build out so I don't I don't anticipate a lot of cancer.
License related to our business, we never have to see now I don't think we're going to sit at this time either.
Alright, Thanks, good luck.
Thanks, Mike.
Your next question comes from John Baugh Stifel. Your line is.
Thank you a good morning, and hope you all are well, let's see let's start with.
I don't know pre fire is and I understand that that's different in Asia versus Americas, and timing, but trying to get a sense as you look the Q1.
Where where are your carpet tile business was tracking well pre pre virus impacts and how much that impacted the quarter thereafter and of course, you've got an extra week in there. So I assume there's some kind of high single digit benefit if I were trying to adjust.
Apples to apples.
Yeah. John This is Bruce you know when we started the year January and February you are we started off superstrong very very strong year and Ah you know we as you mentioned you know.
We saw some.
Iris stuff going on in China in early Q1, but if you think about it Europe in Americas. It was a great start to the year as it were really started setting and inflow things down was really in later in March which is why where we provide and so much commentary about Q2 is wanted you to have the heads up that.
There will be pressure on Q2, because that's when all the lockdowns came in place and I guess.
And as I look at this you know we have so many supported customers. There's so much activity out there. It seems to me the biggest indicator is house, how severe slot, though and then when does the walk down the piece and that's one of the biggest indicators to me is when the business comes back and and a into pieces of business.
Yeah.
Yeah, what we're talking again, well, yeah, we're seeing that in markets, where they're using a lot now.
We're seeing the return of business I wouldn't say the normal loans, but it's bouncing is starting to move and back yeah exactly like that gives me a lot of encouragement yep.
Okay, and and maybe help us the you mentioned $45 million backlog. So what what is that and that's a March 31, I assume what does that percentage change year over year, and then maybe square that up with the.
Commentary around.
You know what's transpired in orders in April and then.
Yeah, we've seen a really ugly A.B. I indication, which is I guess, an early early indication of what future orders might be.
Yeah, I'm, just trying to get a sense, where you think the orders are around the business actually bought on many and going to improve from here forward. It sounded like that's the case last few weeks or if we expect some sort of out month or quarter impact from baby I coming off thank you.
John This is Bruce I'll, just a few points and I'll hand, it off the Dan for more.
Color, Jim the 45 million is actually as of the Underfed of April pardon me. So if you look at our how how much our backlog is up at the end of April that's the number.
And I think but the point, we're trying to make there is that again at the risk of being repetitive once the once when the when the lockdowns happen the customers aren't able to take the product, but when they easily because the product out. So we're seeing a lot of pent up activity that we're able to deliver on a once things he had on.
Okay, that's great I don't have any commentary on avionics.
I can imagine that's down right now I mean, nothing like that was working right now [laughter], what does that percentage Bruce is a 45 million.
What is the 45 as a percentage of total backlog.
I guess, it's probably around 20 fiveish with it.
For 200.
Yes, it ended the year okay.
Okay, No as I had obviously with the bar gentleman markets open up that gives us the heads that we can shift into the second quarter and Sonic stuff.
Got it and then my last question simply around free cash flow for the year, you've obviously.
Going through the first quarter, which is I believe historically or big use quarter, how Ah obviously is contingent on where orders.
Revenue and earnings at all those things, but I'm just trying to get a sense from the latter nine months of 20, whether you think you'll be a cash shoes or or neutral or may be generate.
[music].
Yeah. John This is Bruce so one of the key headlines I want to reiterate does that we are vigilantly managing cash we're looking at it twice a week and we're looking at and uses of cash we're looking and liquidity and we're looking at opportunities to free up working capital and I'm sure you saw that in our Q1 results from freed up.
You know, nor which is normally a big use of cash quarter for us we did a nice job managing working capital for example, freeing up 32 million in working capital on the accounts receivable, which were watching very closely as well as inventory. So we think that we're going to be a generator of cash this year.
And we're going to do that in a variety of ways, we're going to do that by managing our expense or expenses in line with our revenue reality and we're going to do that by looking continuing to look for working capital opportunities and we're going to control our destiny, who want as we go through this.
Right, Thanks for that color and good luck.
Thanks.
Your next question comes from Keith Hughes of Suntrust. Your line is open.
Thank you.
Looking at stuck in the maybe third quarter, given where revenues that what kind of decrementals on EBITDA, our EBIT margin or are you expecting to see.
So.
That's a really good question, we were trying to giving that give you an indication are under pressure around Q2, you know with orders I'll just reiterate the numbers of total company orders down at the end of April 32%. It really depends on how quickly these locked down to east and as we mentioned, we've got that backlog that once the customer could take product.
Deal that we can be better that's revenue that comes right out of the gate and as these locked down to easily in certain geographies. We're already seeing orders start to pick up so it really depends on how all of that plays out and I'll just get back to controlling our own destiny. If that is not coming to fruition I'm you know, we've already taken $80 million costs.
Although the business and you know, we'll just how we're going to keep an eye on that well continue to rightsize. The continued to rightsize it based on where the top lines going the one thing that I do want to keep as I like our manufacturing profile.
Down or up to their carpet tile business. The main thing I have no good margin level. So I like where we are on that part of it yeah, Keith as Bruce again, so just to give you a number on that how about 70% of our costs in our carpet tile plant or variable so.
As were as we're able to and we have as we mentioned earlier really nimble structure, where the plants are demonstrating their ability to him to flex up and down depending on demand and so that gives us a lot of none of that oftentimes we talk about the S. DNA line, but to Dan's point, there's a lot of flexing that goes on on the cost of goods sold.
It has 70% those costs are variable comp plans so.
Okay, I'm kind of switching to the April comment the 32% decline is there a notable difference in the decline between carpet tile, nor a and LBC.
Huh.
You know what will be key is actually growing which is super encouraging norphlet continues to.
Due to its to stay strong, especially in those long term specification contracts that continued to be supported around healthcare life Sciences government jobs.
Which is great the resiliency.
Both of both North and Lv T has been fantastic I would say carpet tile has been the one that's been you know has been this office as you can probably imagine and as you know a good portion of our business. There was made to order. So it's not surprising and that's why we're encouraged when the Lockups east that made to order business.
Coming back and still is still down in the service Melissa.
Yep.
I'm sorry, I was on loss you are saying Lv tdrs off in April as Nora up in April.
Nor is slightly down in April.
I mean that would imply your carpet tile business is off.
50%, 60% so from what does that I've got no.
No it's down into Thirtys, Yeah you.
Still okay remember that the core of the.
Okay, all right I'll.
I'll talk to you about the offline and I guess final question.
You had given us the North America shipments a should be given us the the number of by region for the first quarter.
Got to North America positive to encourage in Europe. All those include the extra week is that correct.
They do.
Okay, alright, thanks very much.
Like Keith.
[noise] again, if you would like to ask a question for a star them. There number one on your telephone keypad.
Next question comes from David Mcgregory of Longbow Research. Your line is open.
Yes, good morning, everyone I'm just a few questions for me first of all can we talk about raw materials. This year I know you.
As a lot recycled fiber, but also you know you're purchasing commodities.
And where if you could just give us a some help on how we should think about your expected 20 raw material cost line.
You know I anticipate our raw material cost coming down, particularly with yarn and are backing anything tied to oil prices. There's a there's the delay when that happens, but when we actually baking in.
Pretty good raw material price increases going into the year and I think we'll get a benefit that we'll see some raw material price decreases this year.
To the extent of it depends on what oil prices then what the man does.
So you're saying that decrease.
Yes.
Anticipate though.
Okay.
Yeah, no more presses too much further but is it could you give us any sense a magnitude round out do you expect it to be a substantial decrease or are we thinking something a little more incremental.
I would say incremental today.
Defense you know we have a pricing that's tied to you know capital out of town or in the pricing in dialogue.
Lot of six six and so the delay and that's about three months and so we'll see the second half where that would that actually plays out.
But I expect it not to be.
Significant but it won't be incentives going either it's gonna be a benefit to us.
Okay.
Production curtailments, how should we think about production curtailments through Twoq, and Threeq, you and especially for Q as well I guess.
Well, we're well you know were flexing the manufacturing to demand I would say what we're on short times within a couple of our plants.
Where we're ramping up our Americas plant today to meet some of the demand as the markets up enough.
But to give you a percentage of what the curtailment is we're just meeting demand based on what we are around the world Our China plant is backup and supply the China market.
Australia is on is on a short shift, but now it's actually ramping up as well. So it's kind of hard to tell you around the world, where that's going to be.
But we're going to flex it to the man and we're hoping that we'll see a bounce back and taking a third quarter.
Are you up and running in Europe.
Oh, Yeah, yes, we are.
Okay.
I guess just on Europe, I guess, what insights are you able to draw from you know your experience there over the last couple of months that might help you in terms of.
The three opening here in North America.
Yeah. There are just starting you know the UK is just now considering opening up Spain is now opening up as well and Italy, we're seeing a little bit of positive activity. There, France is still very wells not very much shutdown. So we don't really have a really good insight into Europe, yet so we're starting to see it will benefit in the UK.
We'll benefit in Spain, and Germany, and in Germany, yet and in Germany as well those are the markets I would tell you China, we're starting to see that that actually come back and that gives me a lot of encouragement as that market of though.
Hi, Thanks, a lot Shaw.
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