Interface Inc (NASDAQ:TILE) Q1 2018 Earnings Conference Call - Final Transcript

Apr 26, 2018 • 09:00 am ET

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Interface Inc (NASDAQ:TILE) Q1 2018 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

Thank you. [Operator Instructions] Our first question comes from Kathryn Thompson of Thompson Research. Your line is open.

Analyst
Kathryn Ingram Thompson

Hi. Thank you for taking my question today. For the large customer order that you discussed in the prepared commentary, is this for a one-time event or a part of a larger initiative that would play out through the year and possibly beyond that?

Executive
Jay Gould

Well, it's certainly part of our broader strategic initiative on behalf of that customer, although we're seeing major resets of their stores during the second and third quarter, which will have primary P&L impact.

Analyst
Kathryn Ingram Thompson

Okay. And appreciate the color on orders, so two things with that, follow-ups on that. First, any color on the first few weeks of this quarter in terms of order trends? And then also the make up of LVT versus carpet tile for orders that --the 12% order growth? Thanks.

Executive
Jay Gould

Yes, Kathryn. We've seen that order strength continue here in the early weeks of the second quarter. And it's really balanced 50-50 between carpet tile and LVT. So, we are very pleased with the kind of robustness of demand right now.

Analyst
Kathryn Ingram Thompson

And then finally, inflation has been a theme for pretty much this entire earnings season, particularly in building products and materials. Could you give your thoughts on a little bit more specificity of inflation impact in the quarter?

Why you think that $10 million in inflation cost for the full year is still intact? And what you are doing and what you have done to help combat inflation in your core raw materials?

Executive
Jay Gould

I think that's a great question, Kathryn. And it's really how we distinguish ourselves from any of our competitors, is that because of our use of recycled materials, we are less impacted by some of the inflationary pressures than some of our competitors.

So, we are seeing that recycled products are not --input costs are not increasing at the same rate as virgin. So, it's our long-term strategy to get off of virgin products. So, we are seeing less input cost pressure I think than some of our primary competitors.

That said, the outlook for the year, we originally said it will be $8 million to $12 million. We are still feeling that's the right range. Might be on the higher end of that. We are protecting ourselves for that with the combination of our pricing and our productivity initiatives.

We still feel confident that we can offset the input cost inflation and still achieve our 39.0% to 39.5% gross margin target. However, we might be on the lower end of that. So, that's how we are modeling business right now.

Analyst
Kathryn Ingram Thompson

Okay. Thank you so much.

Executive
Jay Gould

Thanks, Kathryn.

Operator
Operator

Our next question comes from Michael Wood of Nomura. Your line is open.

Analyst
Michael Wood

Hi. Good morning. Congratulations on the orders. First question I wanted to ask about some details on LVT. I'm curious what you are seeing in terms of the more high design offerings that you rolled out later last year versus