Good morning, my name is James and I will be your conference operator today. At this time, I’d like to welcome everyone to the Interface fourth quarter and fiscal year 2018 earnings call. All lines have been placed on mute to prevent any background noise, and after the speakers’ remarks there will be a question and answer session. If you’d like to ask a question during this time, simply press star then the number one on your telephone keypad. If you’d like to withdraw your question, press the pound key. Thank you. Christine Needles with Corporate Communications, you may begin your conference.

Thank you. Good morning and welcome to Interface’s conference call regarding fourth quarter and fiscal year 2018 results, hosted by Jay Gould, President and CEO, and Bruce Hausman, 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. Forward-looking statements 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 economic conditions in the commercial interiors industry and our expectations regarding our acquisition of nora systems, 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 December 31, 2017 and quarterly report on Form 10-Q for the quarter ended July 1, 2018, which have been filed with the Securities and Exchange Commission. We direct all listeners to those documents. 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 directly comparable GAAP measures as well as a reconciliation of the non-GAAP measures to the most comparable GAAP measures is contained in the company’s earnings release and Form 8-K filed with the SEC yesterday, 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 broadcast for Interface. It contains copyrighted material and may not be rerecorded or rebroadcast without Interface’s express 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 Jay Gould, CEO.

Good morning. Thank you for joining our fourth quarter and year-end results call. We have four objectives for this call: first, to tell you about our strong results in 2018. 2018 was a great year for Interface and it positions us well for 2019. Secondly, we plan to share an update with you on the progress of Interface’s sustainability journey. Thirdly, we’ll share some information about how we’re thinking about the next four to six years and our financial objectives over that time frame, and lastly we’ll provide the building blocks for our 2019 outlook. Let’s jump into 2018. I’m pleased to say that by executing on our strategy and expanding our product portfolio with the acquisition of nora, we exceeded our full year outlook, generating 26% growth in adjusted EPS of the year. I want to thank the global Interface team for delivering another solid quarter in Q4 that allowed us to accomplish our full year commitments. We delivered net sales of $1.2 billion in 2018, up 18% versus last year, including $113 million of sales from nora. Organic sales were up 7%, which was at the top end of our projected range. Adjusted gross margin landed right in our anticipated range with full-year adjusted gross margin of 38.7%, and we managed SG&A expenses within our target range of 27.3%. These results brought our full-year adjusted EPS to $1.49, up 26% over prior year. We also finished the year strong with fourth quarter net sales of $337 million, up 27% versus last year, and organic sales growth of 2%. Our fourth quarter adjusted gross margin of 39.6% was up 140 basis points versus the fourth quarter of last year. Adjusted SG&A expense was 28.5% of sales in the fourth quarter, and we delivered adjusted earnings per share of $0.41 in the fourth quarter. Also, organic orders returned to positive territory in the fourth quarter. They were up 4% versus the fourth quarter of last year. I’m really pleased to see our value creation strategy is generating results and I’m looking forward to another strong year in 2019. We recently convened our global selling organization in Atlanta for the first time in over 20 years, and we had three core objectives: one, to fully integrate the nora sales team into the Interface family and to accelerate our cross-selling processes. Secondly was to advance our selling system transformation to ensure our 2019 route to market strategies were fully seated, and thirdly was to engage every frontline seller in our sustainability mission. Climate Take Back, which is activated through our carbon neutral flooring program. I couldn’t be more excited about the talented team, the energy and the passion that we have to outperform our industry. I’m also excited that our innovation product pipeline promises to fuel our growth and help us win in the marketplace. With that, I’d like to turn the call over to Bruce for a deeper dive into 2018 results. Bruce, please go ahead.

Thanks Jay, and good morning everyone. As a reminder, since we completed the acquisition of nora on August 7, 2018, we’ve incorporated nora into our metrics as of that date. In addition, please refer to the reconciliation tables in our press release to reconcile GAAP to non-GAAP figures referenced on this call. Fourth quarter results included $12 million of nora purchase accounting amortization that impacted the gross profit line, and $1 million of nora transaction expenses recorded on the SG&A line. In addition, we recorded $20.5 million of restructuring and asset impairment charges in the fourth quarter as part of our restructuring plan that we announced in December. I’ll discuss the restructuring plan in further detail shortly. Now let’s take a closer look at fourth quarter results. Fourth quarter net sales were $337 million, up 27% over the prior year, and organic sales increased 2% year-over-year. Breaking down our revenue into more detail, LVT drove organic growth as we lapped an incredibly strong fourth quarter last year in our carpet business, and nora contributed $71 million of sales in the quarter. Organic sales in the Americas were up 1% compared to the fourth quarter last year and in EMEA organic sales grew 6% year-over-year in local currency, or 3% in U.S. dollars. Organic sales in Asia Pacific were down 4% compared to fourth quarter last year, driven by Australia which was lapping a very challenging comp with double digits in the fourth quarter of last year. In our global market segment, growth was driven by corporate office, education, and hospitality in the fourth quarter. Q4 gross margin was 36.1%, which included $12 million of nora purchase accounting amortization. Adjusted gross margin was 39.6%, a 140 basis point year-over-year improvement on that line. Later in the call, we’ll provide gross margin…

Thank you, Bruce. Over the past 25 years, we’ve been on a sustainability mission to eliminate the negative impact producing flooring products has on the earth. From a simple question from a customer back in 1994, we created a movement to literally change how the industrial world thought about manufacturing practices, material choices, and supply chain management. Over time, we’ve increased our use of renewable energy to 88% globally. We’ve reduced our greenhouse gas emissions by 96% and we’ve reduced our carbon footprint by 60%. What seemed nearly impossible 25 years ago, Mission Zero has become a core part of Interface and a core promise we’ve made to our customers, and it also serves as a point of differentiation in the market. In 2018, we launched an industry first. Every product that we sell globally is carbon neutral. Twenty-five years of hard work to eliminate our carbon footprint and for the small remaining amount we purchase offsets - forestry, wind and carbon capture projects around the world, and as of January 1, this includes our nora products. We intend to make sustainability matter even more, and we plan to focus on carbon in this conversation. In 2016, we launched a new sustainability mission, Climate Take Back, and we are bringing a voice of aspiration and optimism to global warming. Our carbon neutral flooring program provides us a great start and we’re just getting started. Our innovation pipeline provides promise that we can go from doing no harm to having positive impact, climate positive products. The world is awakening to the reality of our environmental issues, global warming. Increasingly, our customers are talking about embedded carbon in building products. We will provide products and services that make a difference. We will help them create a climate fit for life. Now I’d…

[Operator instructions] Your first question comes from the line of Kathryn Thompson from Thompson Research Group. Go ahead, please, your line is open.

Hey, good morning, this is Brian Biros on for Kathryn. Thanks for taking my questions. Wanted to ask about LVT for the year. I think previous guidance was $50 million for 2018, and I think last quarter you guys said you were on track or even maybe a little ahead of that pace. Just wanted to see where that came out for the full year. I assume you hit the target, maybe even exceeded it. Any color on how that shaped out would be appreciated.

Yes, we did exceed it. You probably know that product lines aren’t a reporting category for us, but I’ll give you a couple data points, Brian, so you can triangulate that. I think we’ve said previously that we did $25 million in 2017 of LVT, and that LVT represented roughly half of our 7% organic growth this year, so call that roughly $35 million. If you add those two numbers together, you come up with a neighborhood of $60 million, which is a pretty good guess.

And Brian, I’d just add - this is Bruce, we continue to be on track as we look forward to 2020. We want the LVT business to be a $100 million business by 2020, so as you think about prospectively what does this mean for Interface, you can kind of draw a straight line from where we are here to our 2020 goal. We feel really confident in achieving that goal right now. The LVT business is doing extremely well.

Got you. I think that addressed my next question, that would have been what would the target be for 2019, but I guess the $60 million this year, looking at $100 million in 2020, straight line would be $80 million for 2019. Is that a rough way to think about it?

That’s a good way to think about it, and I think that we’re well on track to be on those numbers.

Got you. Last one from me, for the organic guide for 2019, similar to the same question, could you add any color on how that breaks out between LVT and carpet, whether that’s even between the two or is LVT really driving the sales and carpet is steady? What does that look like for you guys?

Brian, this is Bruce Hausman. It’s relatively half and half. That’s our expectation, is we’re going to get about half that growth out our carpet and about half that growth out of LVT.

Sounds good, thank you.

Your next question comes from the line of David MacGregor from Longbow Research. Go ahead, please, your line is open.

Yes, good morning guys. Can we dig in on the first quarter and the investments that you said you’d come back to in the Q&A section? Could you just provide some elaboration, and then I’ll have some follow-up questions.

Sure. As I said, there were three things that we did in the first quarter that brings our EPS outlook down from the $0.25 we delivered last year. One was this global sales summit, so we brought our people together to really fully integrate nora into the Interface family, so in most markets around the world, that means the nora people are actually fully integrated in our selling structure. In markets of scale, so in the U.S., Germany and China, the organizations are still separate but we have working processes together to drive collaborative selling. That was one reason. The second reason is to really make progress on our route to market strategies and how we’re using our new selling methodology, which we call Interface Advance, which is showing great promise by the way, I’m super excited about the productivity that we’re driving through our selling organization. You and I talked about this in the past, David. Thirdly--sorry, the second thing that impacted us quarter over quarter was that nora cost us $0.07, and that’s driven off of nora’s seasonality. nora makes no operating income in the first quarter and we have $7 million of interest expense, so that’s a step back year over year. Again, we fully expect to achieve incremental $0.10 a share for the full year, which means in quarters two, three and four, we’ll generate $0.17 combined. The third thing impacting us year over year is just slower growth in the core because we’ve got some big overlaps from last year. Full year, we expect core growth in the 2 to 4%.

So if I just recap that, David, it’s $0.10 from the global summit - again, a one-time non-recurring investment that we made in the quarter, $0.07 due to seasonality related to nora which we’re going to pick back up in Q2, Q3 and Q4, it’s just a temporary difference inside the year, and then $0.03 for seasonality in the legacy Interface business. Recall we had a huge Q4 of last year that we’re lapping. We are still projecting to have good solid growth in the core for the year. It’s just the timing of when it’s coming in from a quarterly spread perspective this year.

Okay. I realize you’ve gotten away from reporting orders, but would you talk about just general trends and whether you’re seeing acceleration or deceleration?

We actually did put that in our press release because we got a lot of pushback in not reporting orders, so fourth quarter--

At the end of the fourth quarter, orders were up 4%.

Yes, quarter over quarter up 4%, organic.

Okay, and what percentage of your wins this quarter would have included LVT, and how does that differ from a year ago?

Well, it continues to grow - I’ll say that as a starting point. One of the things we’re finding is LVT is really helping us open doors, particularly in education. We’re expecting to have a big education year in 2019, which is one of the reasons why we’re more bullish as we head into the second quarter, and we’re seeing some early wins on that.

Okay. Can you talk about your free cash flow expectations for 2019?

Sure. David, we don’t normally give guidance as a number, but what we do is we give the building blocks. If you take the building blocks of how to build the income statement that Jay spoke to and that’s in our press release around the top line growth, the margin structure, the SG&A, and then obviously interest expense, you’re going to obviously come up with a net income number. Depreciation and amortization will be roughly $45 million next year - you can add that back, that’s obviously a non-cash item, but then the cash item that hits the cash flow is $65 million to $75 million of capex next year, and roughly $35 million of that is maintenance capex and the rest is the investments that we’re making in the business as part of--that’s obviously generating this productivity gain.

Okay. How are you thinking about future deleveraging of the balance sheet, and are there targets for 2019 and 2020?

Yes, I’m sure you did the math. On a pro forma basis, our leverage ratio is 2.5, and we continue to be in a great position to continue delivering down to a 2-ish type of number by the end of the year. We feel really, really good about the strength of the balance sheet. We feel really good about our capital structure, the strength of that, around the liquidity that we have, the availability around the revolver, and we feel really good about our optimization of capital and our ability to de-lever as well as invest in the business simultaneously.

Okay, great. Thanks very much, guys.

Your next question comes from the line of Michael Wood from Nomura Instinet. Go ahead, please, your line is open.

This is Ryan Cohen on for Mike. Just a quick clarification. The 4% organic order growth, that was quarter over quarter or year over year?

Quarter over quarter.

Okay, perfect.

Fourth quarter of ’18 over fourth quarter of ’17.

Yes, so year over year growth.

Okay. Then is it fair to say you’re seeing improving order trends so far in January and February?

They’re on track, yes.

Okay, and then just maybe your thoughts quickly on price cost in 2019, what’s going on with benzene and labor?

Well, what I would say is the combination of productivity and pricing will yield about $20 million. We’re anticipating about $10 million of inflation, so net-net we’re expecting from the combination of those three things about $10 million of improvement.

And Ryan, that’s the all-in number. That’s benzene, that’s all of our raws. We’re looking at about a $10 million number, which we’re going to--as Jay just mentioned, we’re going to offset with productivity initiatives and other means.

Thank you.

Yes, things like pricing.

Again as a reminder, if you’d like to ask question, please press star followed by the number one on your telephone keypad. Your next question comes from the line of Keith Hughes from SunTrust. Go ahead, please, your line is open.

Thank you, this is actually Judy in for Keith. Just to follow up on the last question, was you input cost inflation about where you thought it was in 2018, around $8 million to $10 million, similar to what you expect for 2019?

Yes Judy, this is Bruce. I’m delighted to tell you that input cost inflation in 2018 was exactly where we thought it would be. There were no surprises. We came in right on track, and again we were able to offset that through productivity and pricing initiatives, which was a great outcome. Obviously, you can see that on our gross margin line.

Okay, great. In the fourth quarter, you highlighted the gross margin improvement, the productivity, and also the nora accretion. Can you expand on what the major drivers you see for getting to 40% in ’19 and the ultimate 42% goal for 2020?

Well, the primary driver is actually our U.S. manufacturing optimization project, which is we’re now in our third year of three years and doing that, so we plan to complete that project. That’s a big driver of our savings for next year.

Okay, great. Thank you.

Thanks Judy.

There are no further questions at this time. I turn the call back over to our presenters.

Well, thank you once again for your participation. Very excited at how we ended 2018, off to a solid start in 2019, and we think it’s going to be another very good year for us. Appreciate your continued investment into the company. Thank you very much.

This concludes today’s conference call. You may now disconnect.