David Foshee – VP Dan Hendrix – Chairman & CEO Patrick Lynch – SVP & CFO.

Mike Wood – Macquarie Josh Borstein – Longbow Research Keith Hughes – SunTrust Robinson Humphrey Sam Darkatsh – Raymond James John Baugh – Stifel Nicolaus Glenn Wortman – Sidoti Matt McCall – BB&T Capital Markets Kathryn Thompson – Thompson Research Group.

Welcome to the second quarter 2014 Interface, Inc earnings conference call. My name is Thinisha and I will be your operator for today. (Operator Instructions). I would like to turn the call over to your host for today Mr. David Foshee. Please proceed..

Thank you, Operator. Good morning and welcome to Interface's conference call regarding second quarter 2014 results. Joining us from the company are Dan Hendrix, Chairman and Chief Executive Officer; and Patrick Lynch, Senior Vice President and Chief Financial Officer. Dan will review highlights from the quarter, as well as Interface's business outlook.

Patrick will then review the company's key performance metrics and financial results. We will then open the call for Q&A. A copy of the earnings release can be downloaded off the Investor Relations section of Interface's website. An archived version of this conference call will also be available through that website.

Before we begin formal remarks please note that during today's conference call management's 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 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 29, 2013, which has been filed with the Securities and Exchange Commission.

We direct all listeners to that document. Any such forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995. 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 refer to certain non-GAAP measures. A reconciliation of these non-GAAP measures to the most comparable GAAP measures is contained in the company's results release and Form 8-K filed with the SEC yesterday.

These documents can be found on the Investor Relations portion of the company's website, www.interfaceglobal.com. Lastly please note that this call is being recorded and broadcasted for Interface. It contains copyrighted material and may not be rerecorded or rebroadcasted 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 Dan Hendrix. Please go ahead, sir..

Thank you David. Good morning everyone. I’m pleased with the sequential progress we have made from the first quarter to the second. As we really begin to see our business shape up the way we expected from the start of the year.

In our call last quarter I made a few points about the strong undercurrents in our business and as under current started to flow through in our results for the second quarter.

The biggest top line stories, the continued growth and momentum we’re seeing in our European business with the corporate office segment is coming on strong in several of our primary markets, in particularly the UK, Ireland and Germany.

Even better our second quarter order growth in Europe outpaced our sales growth which gives us further optimism about the second half of the year. Our America’s business also continued its recent string of steady of growth with nearly all of it coming in the non-office segments like hospitality, retail and education.

Corporate office sales grew at a moderate rate which means we’re seeing the growth in this business without a true rebound in our bread and butter office segment and we believe we are outperforming the rest of the commercial industry. Like Europe our second quarter order growth in Americas also outpaced sales growth.

Results in Asia-Pacific business were a bit of a mixed bag, in Australia we’re seeing the recapture of market share fall in a tough startup of our new plant Minto as revenue approached the pre-fire run-rate. China sales also showed improvement after the slow start we saw in the first quarter.

Southeast Asia was essentially even year-over-year due in part to political tensions in Thailand but we still made sequential progress over the first quarter. We’re also seeing pockets of growth in other parts of Asia. FLOR was a disappointment in the second quarter mostly due to underwhelming results from our summer sale event.

As we mentioned in our press release changes are underway including renewed emphasis on attracting new customers, opening more stores and driving overall sales growth and profitability. I really like this business and we got many of the right pieces in place with our brand, our products and our sales channels.

The key at this point is to drive customer traffic to those channels. We made sequentially improvement on our gross margin in the second quarter compared with the first but it was down year-over-year. The margin pressure comes from a few different challenges that we’re addressing.

First is a Company that leads with design we’re seeing and increase the number of different SKUs specified on customer orders. This translates into shorter less efficient manufacturing runs in our plants.

Second, innovative new product such as planks and tapestry (indiscernible) add to the complex for our manufacturing processes and the resulting learning curve involved for our production teams. And third the startup of our new Australian plant and rebalance in production among our three plants in Asia-Pacific has impacted margin.

Australia results begin to normalize in the second quarter and we expect to complete the ramp up and rebalancing in the third quarter. We have a number of lean manufacturing initiatives and new technologies that we’re implementing to address margin pressures and we’re making progress but it simply takes time for these improvements to take hold.

In addition we’re doing all of this without the benefit of a rebound in the higher margin office market in the U.S. We believe there is pent-up demand in the U.S. office segment and that rebound is on the horizon. We should unlock more value in our gross margin.

SG&A declined as percentage of sales year-over-year, we will continue to keep a close watch on these expenses in relation to our sales growth. At the bottom-line we’re pleased with our improvement in earnings per share from the first quarter to the second quarter and it is also is up versus the second quarter last year.

Looking ahead, I like our prospects going into the second half of the year. Our Europe business is the best it's been in years. The strong top line growth in improving profitability profile. Our Americas business is growing despite a lack luster market without the help of an office segment rebound which is yet to materialize which we believe is coming.

Australia is beginning to normalize as we complete the ramp up of our new Minto plant and recapture market share. Our product innovations have been very successful with great results from our plants and tapestry design products. We have several new product designed specifically for hospitality and other non-office segments.

The order trend has been healthy hitting an all-time record in point to an improving top-line of third quarter. We’re still well below the record high watermark for orders in Europe so we believe there is plenty of headroom for growth there.

We have work to do on FLOR and we need to execute our initiatives to expand gross margin while containing SG&A but overall I feel pretty good about the remainder of the year. With that I will turn it over to Patrick..

Thank you and good morning everyone. I will take a few minutes to walk through the financial highlights for the first quarter, sales in the second quarter of 2014 were up 7% to 260.6 million compared with 243 million in the second quarter of 2013. On a consolidated basis there was not a significant currency impact on sales for the quarter.

Due to the items Dan has discussed already we saw a gross margin decline of 34.7 for the second quarter of 2014 versus 35.4 in the second quarter of 2013. I want to point out the 60 basis points improvement versus the first quarter of 2014 and we expect to see margin expansion continue for the remainder of the year.

Dan has already given you the highlights of the sales comparisons which is that a little color, we saw an increase in the Americas of about 6% in total with the largest gains being in the hospitality up 30%, retail up 21% and education up 7%. Only the government segment down 4%, saw sales decline more than a margin amount.

In addition the corporate office market in the Americas was flat for the second quarter in a row. On the first quarter call we discussed our excitement about the acceleration in sales in the European basis and second quarter did not disappoint as sales increased 15% in U.S. dollars, and 9% in local currency.

The corporate office segment experienced a significant increase in 18% in U.S. dollars or 13% in local currency and the order momentum suggest continued success in the region. Overall we’re very pleased with what our European business has done thus far this year. Turning to Asia-Pacific, we’re happy to see a 5% sales increase in total in the region.

This was primarily due to the results in Australia where we saw a 9% increase in U.S. dollars and 15% in local currency. We feel like we’re on track as they are to the pre-fire sales levels in Australia. We hope to see continued sales and operating margins in Australia as we continue on to the balance of the year.

Asia was essentially flat year-over-year with small sales increase in China offset by Southeast Asia and a slight decline in our Indian market. The sales increases in Asia-Pacific region were largely within the non-office segment as well.

We continue to make good progress on the SG&A front showing good year-over-year and sequential improvement as a percentage of sales. For the second quarter SG&A was 25.3 versus 26.5 in the second quarter last year and 28.6 in the first quarter of this year.

Due to the factors discussed above, operating income in the second quarter was 24.3 million or 9.3%, compared with 28 million or 9% of sales in the second quarter last year. Dan and I both have mentioned we feel pretty about the progress we have made in controlling SG&A in Q2.

We still have ways to go in connection with our continued approach to optimize our cost structure. We expect to restructure and charge in Q3 of around 3 million to 5 million related to some of the organization in our FLOR business as well as some reorganizations in our overseas businesses as well.

Interest expense in the second quarter was 5.4 million versus 5.9 million last year, depreciation amortization was 7.2 million compared with 9 million last year. CapEx were 13 million compared with 18.9 million last year. We expect CapEx again to be in the 40 million to 45 million for the full year.

Turning to balance sheet, we had 50 million in cash compared with 61.4 million at the end of second quarter last year. Inventories were a 172.5 million versus a 157.7 million and DSOs were 47.9 days versus 45.3 days in the year ago period and inventory turns were 4 in the second quarter this year, as same as last year. That concludes my remarks.

Operator I would like to open the call up for questions please..

(Operator Instructions). Your first question will come from the line of Mike Wood from Macquarie. Please proceed..

On the SG&A front, you mentioned the objective to keep it in check over the rest of the year.

Could you help us quantify that how much variability might there be based on however sales pans out and within the margin question, the gross margin is being down year-over-year is that still the Asian plant rebalancing? Has that being fully rectified by the quarter end or was it reflected in your 2Q results?.

Yes, I think the SG&A level we will continue to hang around this level. I think maybe a little bit higher than the Q2 range that was 65 to 68 in Q2 or probably move that up a little bit to maybe 66 to 70ish range in Q3 in the balance of the year on some projected increases in sales.

Still planning on for the second half of the year to be mid to high single digit kind of growth, top line for the remainder of the year. So as a percentage we still like to see that down in the low 25s for the balance of the year.

As it relates to gross margin in Q2 actually, no it wasn’t related to our Asia-Pacific operations at all and in fact we saw nice rebalancing in Q2 and embedded [ph] down all of the kind of the startup issues that we had in Q1 related to the Minto ramp up and then the slowdown in our Thailand facility and in fact saw nice gross margin expansion on a sequential basis there in Q2.

Most of the kind of results gross margin compression really came out of our Americas business in Q2, as kind of a little bit, we had a little bit more of non-corporate office market business in Q2 where the margins are a little bit more compressed in particular in our services business, that handles a lot of our large national retail accounts.

Again our office market was flat again for the second quarter in a row in 2014 and we really just haven't seen the corporate office market come through as we had anticipated at the beginning of the year where those the margin profile there is a little bit better than some of the multi-family hospitality and services components of our business.

That’s really where gross margins came up a little short in Q2..

Okay can you also give the July update and if you could break out the 10% order growth for 2Q by region that would be helpful. Thank you..

Q2 July trend was in total down about 4%, the mix across the geographies, the Americas was up 2%. Europe was down 10%, and Asia-Pacific is flattish here in July. I do want to call out though in our European business we do have a systems conversion going on this past weekend so we didn’t enter orders for a couple of days last week.

So, probably more realistically down mid-single digit here and in early part of July than the European business. The breakout of the Q1 10% order trend was Americas up 10, Europe up 15, and Asia-Pacific was flat..

Your next question will come from the line of Josh Borstein from Longbow Research. Please proceed..

Can you talk about the progression of the quarter, how it played out if you saw any significant differences in the months that might indicate where the business is heading over the next few months?.

I would say if you look kind of at the order pattern throughout the quarter, April was up mid-single digits, May was really strong 15 plus and then June is kind of settled back in around mid to high single digit kind of order growth.

So we had a little bit of volatility but the momentum really has been fairly consistent really for the balance of the year..

Okay.

And Dan when you say the rebound in office in the Americas is coming, what indicators are you looking at to give you that suggestion? What are you seeing there that might suggest that the rebound is on its way?.

The thing that I look at is the activity, the projects that we’re actually working on and our pipeline is pretty robust and that’s been frustrated because it really hasn’t broken loose yet. I think the bps [ph] numbers will indicate the something.

But if you talk to our sales force and you look at the regions and look at the architectural billing and indexing what’s going on with architects and -- our people feel like it's coming, it just hasn’t really -- the projects haven't come through yet. Sample orders are up, projects we’re working on are up, the pipeline is pretty robust.

We’re here waiting for that to break loose a little bit..

And then just last on the gross margin, how should we think about it for the balance of year or for the full year rather with respect to kind of the informal 100 basis points of gross margin improvement that we had talked about earlier..

Yes I mean I think the progression will continue through the balance of the year. I think we will see some margin expansion through the balance of the year. I think we have the Asia-Pacific things situation sorted out, the rebalancing -- the momentum in the European business continues.

The question mark really for the balance of the year is how much of this corporate office market with higher margin profile business will come through and that’s to be determined but I still think that there is expansion for the balance of the year probably now might not be the full 100 basis point but we might be in the 75ish basis point improvement for the full year..

And then if I can just sneak one more in the business in Australia bounced back nicely, is that mostly macro or have you also taken back share from what you seeded from the fire?.

Yes, I think it's a combination of both. I think it's some share gains and service and delivery times being collapsed now, the ability to recapture some market share that we have lost and I think the general tones across the Australian economy have been decent to good.

So it's been a combination of both really that I think it has helped the Australian business in total..

Your next question will come from the line of Keith Hughes from SunTrust. Please proceed..

Two questions, one on FLOR, what kind of performance did you see from the unit in second quarter or first half, however you want to deal with that and what kind of restructuring or type of things we’re looking at? And then number 2 in the corporate office space, are there any signs in the order pattern or at least your indication with customers that in the U.S.

corporate office that’s going to improve in the second half of this year..

Well as it relates to FLOR in particular, I’m not sure when you use the term units, I don’t think you are talking about the division in total, you know we saw sales down and operating loss of $1.7 million for the quarter. If you’re drilling down in particularly on the stores.

The stores themselves is flattish on a year-over-year kind of same store sales basis and just eked out a mild profitability 1% as a group of on a forward basis.

So that’s a little bit of color around on FLOR, in particular you know the reorganization you know we’re just going to look at what leverage or infrastructure costs or synergies that might exist there, see what opportunities we can probably try to do more with less across that segment..

SG&A, a hard look at SG&A, is that a fair way to --.

Yes in particular, yes. Probably SG&A dollars and so forth on the corporate office market..

Yes in office market I mean we have been waiting for the rebound really probably for the last three quarters. And everybody is waiting on the rebound, you are waiting on the rebound and just the activity is really good but it just really hasn’t come through in the form of order set. People are still delaying projects and not letting go orders..

Your next question will come from the line of Sam Darkatsh from Raymond James. Please proceed..

If we could continue a little bit on FLOR, Dan.

The integrating of the business and saving some money on the cost side is good, what are you seeing? I know you’re changing management so you may not have done a complete deep dive yet but what needs to happen or change from marketing standpoint specifically? How are you -- you mentioned the summer sale that perhaps it was a little disappointing.

Where do you see a go to market strategy that may differ from how you’re marketing currently?.

We have tried a lot of things around our customers, around the catalogs, around the web, around social media and I just don’t think we have been nearly as effective as we can be. So a lot of the focus on really had to go out to our customers.

How to make the catalog more effective and how to create a mailing list that creates transactions and so we’re going to look at really what’s going on in the marketing side to drive customers.

I believe that the stores are right, we created a brand, the product I think belongs in the phone and if we can get somebody to walk in that store typically they would buy or if they get to the web they buy, the conversion is pretty good. It's just we don’t have enough customers going through those channels and we need to drive that.

So the plan is really acquisition of customers..

So how do you now look at the right size of that business either whether you want to talk about it from a store base or a sales base store owned versus franchise? I mean how do you look at the prospect of FLOR having going through some of the growing pains you’ve now?.

I think there is 30 major markets in United States we need to be in and so we’re going to look at getting into some other markets that I think we need to be in. But the store footprint is not a 100 stores I mean it's probably 30 major markets that we think we should be in and I think it's a real web play for us.

As people get comfortable with FLOR -- doesn’t really have to go to a store so we’re looking at what goes on that geographical zip codes around driving business through the web and through the store. We need to just drive more people there because we will convert them to customers if we can get them in there..

And next question, Patrick, it appears as though consensus expectations for 2015 are assuming roughly a 30% incremental margin. I know you’ve talked in the past 20% to 25%. Should we -- where would you feel comfortable from an incremental.

I know a part of that is going to have to do with volumes, higher volumes higher leverage but where do you feel comfortable right now from an incremental margin standpoint?.

It's a good point. Historically that’s where we have tried to position the business around the 20% to 25% levels that’s kind of what we kind of gear towards internally around compensation structures and otherwise. So yes 20% to 25% incremental contribution margins overall is an area where we’re much more comfortable..

Okay. And last question if I can sneak it in. Europe really has -- seems like it's turned to corner.

Is it beyond UK or is this just UK just kicking it right now?.

It's a combination of most of our major markets, the UK, Ireland, the Baltic [ph] region and some strength out of our German business as well. We’re still seeing (Technical Difficulty) in France which is a key market but starting to see some signs of improvement there as well. But those are the big drivers for our European business..

Where is the SG&A right now in Europe? Is sub-30 now?.

Right at it. It's 29 in the second quarter..

Your next question comes from the line of John Baugh from Stifel. Please proceed..

I wanted to just confirm or feel back Patrick, you made a 75 bps comment on gross margin.

Is that for the year? I think you did 35.5 last year so you’re guiding north of 36 for the year basically?.

Yes we’re still trying to work towards that for the balance of the year..

Okay. And then I was wondering if we could talk about SG&A and you mentioned Europe there, so we’re getting leverage I presume on SG&A in Europe.

Could you just go around the key business areas and talk about SG&A, where you’re getting leverage and where you’re not currently and how that may look in second half?.

We’re continuing to see good SG&A really management. We had a nice -- pretty robust flow through in our European business as you can imagine, the last question, we finished around 29% but we had really good incremental contribution margins across the European business in Q2.

The Americas business continues to manage SG&A very well at 21% kind of levels and Asia-Pacific overall was in the 25% range which historically is where they have been. So the SG&A management globally really has been pretty good and the leverage in Europe was great, the leverage across Asia and Americas was decent..

I assume it was negative in FLOR?.

Yes..

I would John, if you looked at the SG&A, we really need to work on it. China is high, Europe is coming down in FLORs as we need to do some things in FLOR to drive SG&A down as a percent of sales..

And then could we talk just a second about the trends you are seeing and you mentioned a little more complex product offering, have you seen the mix of your business move to more custom work or is that a result of the product complexity and sort of how do you see that shaping up about the next 12 to 18 months and what can you really do to address it if we’re moving towards a more custom trend, more samples, more complex product lines?.

I wouldn’t say necessarily custom. I would say that -- just take a 5000 in our [ph] order.

We used to have two SKUs on it and if you remember we started driving design by tile and created out of standard products that you actually design your own floor and that is created where that 5000 order [ph] might have 9 or 10 SKUs on it which means you have shorter order runs and so as you have this make to order business then the runs get shorter, it creates some complexity, you have to learn how to deal with it within the plans.

That’s the biggest sort of trend change within that--.

If you answered that though Dan, maybe you just have to charge more in other words there is only so much you can do with a short order --.

You’re actually looking at how to charge more for shorter runs and custom orders, yes we have actually put in some of the minimums into that to deal with that complexity..

And just a last house-keeping, any update Patrick on free cash flow for the year?.

Nothing further to comment, I mean we’re just continuing. We should see some nice cash flow generation through this back half of the year as inventory levels continue to come down or will start to come down through the back half of the year as we traditionally generate cash in the back half of the year..

And we refinance when?.

It's to be determined but they are callable on December 1st..

Your next question will come from the line of Glenn Wortman from Sidoti. Please proceed..

Do you have any thoughts on what’s been holding back the corporate office market? It sounds like you are expecting share to improve but -- anything you can point to that maybe it's been stopping things to-date?.

No. I mean I think part of it has to do with what’s going on with creating density.

There has been some articles around density as people -- corporations are trying to put more people in less space and I think, there was an article on Wall Street Journal that pointed to this turn is coming it just hasn’t happened yet but your guess is as good as mine about Corporate America needs to start letting go some of its cash and invest in its businesses and that hasn’t happened yet..

Again and you mentioned you’re so well below the record number of orders for Europe, how far below are you?.

Well it's not orders but top line. We’re still about trending towards about €40 million top line below the prior peak in 2007..

(Operator Instructions). Your next question comes from the line of Matt McCall from BB&T Capital Markets. Please proceed..

So maybe it might help me, can you run through the geographies as the percent of revenue geography and then you have given some detail around the margin structure between the geographies but maybe just an overview -- what does that look like? Percent of revenue and in margins by geography?.

Americas is 55%, Europe generally 30%, Asia-Pacific 15%, margin profile is EBIT margin in Q1 in Americas was 11.5%, Europe was right at 10% and Asia-Pacific as a growth was about 7% with Australia up over 10% and Asia in mid-single digits kind of range EBIT profiles..

Okay and you mentioned Australia was getting back to pre-fire revenue run-rate.

What about the margins there? Where were they I think you said just now 10% but where can they go and when can they get there?.

I think we’re starting to -- its only two quarters post new facility and still it did a great job on a sequential basis and trending nicely. I think there is still 15% is in the cards.

I don’t probably see that this year but the model is built around 15% plus operating income there and depending on where the trajectory of the top line is, we can see it next year..

Okay. And then, let’s see, you talked about restructuring charge I think it was FLOR restructuring, you also mentioned some overseas initiatives.

What’s the anticipated savings there and what’s the timing of that savings?.

We won't realize the savings until probably early part of 2015. There is still some things to be determined in some areas but I think the overall savings in total will probably be 1 to 1 basis, maybe 3 million to 4 million in total, maybe a little bit more of the total restructuring charge..

And my last one kind of ties all this together, so if we’re going to get 3 million to 4 million in savings from FLOR in Europe, Australia is going to see an accelerating margins as you ramp that plan. You get the elimination of the mix assuming the corporate office market plays out.

Why wouldn’t the incremental be better than 20% – 25%? Is your core incremental just on your fixed cost is 20% to 25%, you get all these things on top of it.

Why wouldn’t the incremental margin next year be better into that normalized range?.

I mean it's certainly a potential. I just like to -- our expectations in kind of the way we built the business unit around to give them an opportunity there kind of reinvest in other strategic initiatives that they see that we kind of build our business model around a 20% to 25% structure.

But it's potentially could be better depending on where we selectively choose to make investments perhaps like there..

One final one, the SG&A savings you’ve given, a few comments there but what’s the -- can you give more examples of exactly what’s going, what you’re doing? Whether cuts are coming or are they cuts? Is it just management [ph]?.

We’re not in a position to discuss the particulars on the conference call right now..

I meant more in the past, what’s happened like what did you do to get to 66 million?.

Most of it is just been curbing incremental spend..

Your next question comes from the line of Kathryn Thompson from Thompson Research Group. Please proceed..

Just first focusing on pricing, but also just one generally talking about how much pricing in this recovery has been important to you? Have you been able to gain pricing or pricing recovery is more of a function of mix versus just overall strength and likeness of the end market to take additional prices. Thank you..

Sure. I mean pricing across all regions with maybe the exception of Asia were all up in the 3% to 4% range, 2% to 3% range. Asia was down 1.7% on a year-over-year basis. I think pricing has been a combination of price increases through product introductions that we have done.

But it also has been a bit of mix shift to mid to higher end kind of price points particularly in our tapestry and some of our plank products where those are in the value chain mid of mid to high end price points. So it's been a little bit of both..

Would you say that your end market has been rolling to take pricing and have you seen any change in behavior in terms of pricing patterns this year?.

We haven't really seen a significant change in pricing. I think the behavior has been the same. Pricing is always a challenge all the time but I would say the attitude has been fairly consistent than it has been in the past..

Dan Hendrix:.

:.

(Technical Difficulty) This pricing really is more important than volume and is there changes in pricing that would indicate either a positive or negative in terms of (indiscernible) the recovery. I think you answered my question. Thank you..

Your next is a follow-up from Josh Borstein from Longbow Research. Please proceed..

Just another question on the hospitality sector, another good quarter there.

What are you seeing in terms of the business? Are these growth rates you think are sustainable in the near term?.

Yes I would say that the hospitality roll out globally has been at least in the United States has been really successful. We’re starting to win some major projects around the carpet tile particularly around planks in that space.

So I think the hospitality market which has an extremely low penetration of carpet tile is going to grow, the penetration of that and we’re going lay it. So I think the growth rates for us in the next three years are going to be pretty robust..

And do you think it's getting easier to make the case for carpet tile in the hospitality industry?.

Yes I think it's becoming an accepted platform..

Is it becoming more accepted now at least you had some success in the lower to mid-price point hotels.

Is it becoming any more acceptable in the high-end?.

We’re having success in both. We just got a pretty major order from the Waldorf [ph] which is a pretty high-end brand. They are doing the hotel rooms and the corridors with our product..

And then could you just remind us what you think the penetration is for carpet tile in hospitality and what the opportunity might be?.

The penetration in this is very low, it's probably less than 5% in that space. The market is about a $1 billion market globally for soft floorcovering and so we think the market opportunity is pretty nice..

All right gentlemen we have no more questions in the queue. So I would like to turn the conference back over to Dan Hendrix for any closing remarks..

Thank you for listening to our second quarter call and we will talk to you in the third quarter. Thanks..

Ladies and gentlemen that will conclude today’s conference. Thank you for your participation. You may now disconnect. Have a great day..