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Interface (NASDAQ:TILE)
Q4 2018 Earnings Conference Call
Feb. 20, 2019 9:00 a.m. ET

Contents:

Prepared Remarks:

Operator

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. [Operator instructions] Thank you.

Christine Needles with Corporate Communications, you may begin your conference.

Christine Needles -- Senior Director, Global Communications and Public Relations

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 Hausmann, vice president and CFO. During today's conference call, any management comments regarding Interface's business which are not historical information are forward-looking statements. 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 expectation 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 earning 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 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 Jay Gould, CEO.

Jay Gould -- President and Chief Executive Officer

Good morning. Thank you for joining our fourth-quarter and year-end results call. We have four objectives for this call. First, 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 years 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 for 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 at 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 the positive territory in the fourth quarter. They were up 4% versus the fourth quarter of last year. And 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.

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 front-line 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. So with that, I'd like to turn the call over to Bruce for a deeper dive into 2018 results.

Bruce, please go ahead.

Bruce Hausmann -- Vice President and Chief Financial Officer

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 asset -- 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. And 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 were 2% -- 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 that grew double-digits in the fourth quarter of last year. And in our global market segments, 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 guidance. But the headline is our productivity initiatives are on track in our core carpet tile business, LVT margins continue to be strong and nora is providing some accretion. SG&A expenses were $97 million in Q4.

And adjusted SG&A, which excludes $1.2 million of nora transaction costs, was $96 million or 28.5% of sales, which was right in line with expectations as we strike the balance between investing in the business for future growth, while also managing and optimizing our SG&A spend. Fourth-quarter operating income was $4 million, compared with $31 million in the prior-year period. Adjusted operating income was $37 million, up 21%, compared to $31 million last year. In Q4, we recorded net income of $6 million or $0.11 per diluted share, compared to the net income of $4 million or $0.07 per diluted share in Q4 of last year. And adjusted net income was $24 million or $0.41 per diluted share versus adjusted net income of $20 million or $0.32 per diluted share in Q4 of last year.

Again, this represents a 28% increase in adjusted EPS year over year. Adjusted EBITDA was $54 million in Q4 or 16% of sales, compared to $41 million or 15% of sales in Q4 of last year. This represents a 32% increase in adjusted EBITDA and 100 basis points of improvement in adjusted EBITDA margin. Turning to the full-year results.

Net sales were $1.2 billion in 2018. That was up 18%, compared with $996 million in 2017. Nora contributed $113 million of sales in the year and organic sales were up 7% over the prior year. Gross margin was 36% in 2018.

Excluding nora purchase accounting amortization, adjusted gross margin was 38.7%, which was consistent with our expectations. SG&A expenses were $328 million or 27.8% of sales. And adjusted SG&A expenses, which exclude $5.3 million of nora transaction expenses, were $322 million or 27.3% of sales, which, again, was consistent with our expectations. Full-year operating income was $76 million in 2018, compared to $112 million in 2017. And adjusted operating income was $134 million in 2018, up 13% versus adjusted operating income of $119 million in 2017.

Net income was $50 million or $0.84 per share in 2018, compared with $53 million or $0.86 per share in 2017. And adjusted net income was $89 million or $1.49 per share in 2018, compared with adjusted net income of $73 million or $1.18 per share in 2017. This represents a 26% year-over-year increase in adjusted earnings per share. Moving to the balance sheet and cash flow statement.

We ended the year with $81 million of cash on hand, $619 million of debt, and strong liquidity with $286 million available under our revolving credit facility. As discussed, our net income was $50 million in 2018. And our adjusted EBITDA for 2018, as you can see from our press release, was $186 million. This adjusted EBITDA only includes nora contribution with a stub period in which we owned nora in 2018.

As you can see in our press release, our pro forma adjusted EBITDA, which includes 2018 adjusted EBITDA for nora for the full year as if we had closed on January 1, 2018, was $210 million. Net debt was $538 million at the end of 2018. Interest expense was $6 million in the fourth quarter, compared with $2 million in Q4 of last year. And full-year interest expense was $15 million in 2018, compared to $7 million of last year. These increases were due to the financing of the nora acquisition with debt.

And depreciation and amortization was $39 million for the year, compared to $30 million last year. Capital expenditures were $55 million in 2018 compared to $30 million last year. Now I'm going to talk a little bit about the restructuring plan. As previously announced, we adopted a new restructuring plan in December of 2018.

And as part of that plan, we recorded a $20.5 million restructuring and asset impairment charge in the fourth quarter. The charge was comprised of $10.8 million of severance, $8.5 million of asset impairment charges and $1.2 million of other charges. The plan includes the writedown of certain obsolete, underutilized and impaired information technology and manufacturing assets. On the IT side, this is specifically related to our sales transformation work as we implement our new CRM platform and retire our old and obsolete CRM system.

And on the manufacturing side, this is all in keeping with our supply chain excellence initiatives as we continue to reengineer and modernize our manufacturing operations. Through our strategic review process, we also identified a few key areas where we need to more closely align our people with our strategy, resulting in a reduction of approximately 200 positions globally. And the roles we're eliminating are located around the globe in a variety of functions. Part of this realignment includes the relocation and consolidation of our Interface and nora offices in the U.K. We are not closing any plants.

We are relocating an office in the U.K. to get closer to our customers. This goes back some time, though we still had an office and sales resources located in a former factory site at Shelf in West Yorkshire. We're closing this office and relocating those positions to Birmingham and London to streamline operations and to get closer to our customers.

There are gross savings generated by this plan, but as we optimize SG&A, we're going to redeploy those dollars and align resources to the company's strategy. Hence, we're going to reinvest essentially all of the anticipated savings from these actions to areas of the company that can drive incremental growth and continue delivering on our strategic pillars. These investments will start immediately in 2019, yielding negligible net savings on the company's income statement. In addition, our overall staffing levels will remain essentially flat to the 2018 level as we reinvest in growth. We expect to be substantially complete with this plan in the first half of 2019.

And we'd be happy to take more questions on this topic during the Q&A portion of our call. And now, I'd like to turn the call back to Jay.

Jay Gould -- President and Chief Executive Officer

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. 25 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 product. 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 like to take a step back and talk about how we're progressing on our current financial goals and discuss where we see the business going over the next four years to six years. In 2015, when I first arrived, we set out a plan to expand gross margins from 34% at the end of 2014 to 40% by 2020.

And also targeting adjusted operating income margins to increase from 8% in 2014 to 13% by 2020. I'm pleased to say that we're making excellent progress on these goals. Ending 2018 with adjusted gross margin of 38.7%, and adjusted operating income margin of 11.4%. As we've laid out in our investor deck, our vision at Interface is to become the world's most valuable interior products and services company. And we're running the company through a five-pillared strategy: grow the core carpet tile business; build a resilient flooring business; execute on our supply chain productivity; optimize our SG&A resources; and do all this through the underpinnings of leading a world-changing sustainability movement.

Our strategy is simple and it's clear and it's working in the marketplace. We have been gaining market share in carpet tile. With the launch of LVT and the nora acquisition, we're well on our way in building a scalable, resilient flooring business that's highly profitable, has a strong gross margin and really moves the dial for us. In fact, our served market is -- has expanded from approximately $4.2 billion a couple of years ago to an estimated $8.5 billion today.

We're also very pleased with the progress of our supply chain initiatives that are truly delivering on the P&L. And we've significantly improved the efficiency and the effectiveness of our SG&A spend. And on top of all that, through our climate take back mission, we are driving the industry to consider carbon as a resource and doing our part to reverse global warming. Given where we are today and the strategic goals we've set forth, over the next four years to six years, we will be planning to achieve 42% gross margins, 15% operating margin and 19% EBITDA margin. So now let's turn our attention to 2019.

As we continue to build on our strategic agenda and integrate nora into our business, we are targeting to achieve the following results in 2019: organic sales growth from carpet and LVT up 2% to 4%. And total net sales growth including nora of 16% to 18%; secondly, adjusted gross profit margin of 40% to 40.5%, which represents 130 to 180 basis points of margin expansion; and adjusted SG&A expenses of 28% to 28.5%. Full-year interest and other expenses are projected to be $28 million to $29 million, which includes interest expense related to funding of the nora acquisition. The full-year effective tax rate is anticipated to be approximately 28% as we incorporate a full year of nora on the P&L.

Capital expenditures for the full year are forecasted to be $65 million to $75 million. This includes approximately $35 million of maintenance capital plus investment capital to fund productivity initiatives that yield gross margin expansion, additional sales productivity and other attractive initiatives that are fueling our value-creation strategy. So I would say that fiscal year 2019 looks very solid. However, like last year, our quarterly delivery will be choppy. Q1 adjusted EPS will be down versus prior year by $0.13 to $0.16.

And this is driven by three factors: first, we held a Global Sales Summit that cost us $0.10 per share. This is a one-time nonrecurring expense and SG&A; secondly, nora cost us $0.07 in the quarter versus last year. For the full year, nora will generate an incremental $0.10 EPS. So that means in quarters two through four, we expect $0.17 EPS from nora; our organic growth rate in the first quarter will be 1% to 2% versus our full-year outlook of 2% to 4%.

And total full-year growth including nora of 23% to 27%. Given our momentum, 2019 looks really promising. The midpoint of our building blocks shows double-digit EPS growth. Now I know many of our analysts are attending the Builders' Show in Las Vegas.

But James, could you open the line up for questions, please? 

Questions and Answers:

Operator

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

Brian Biros -- Thompson Research Group -- Analyst

Hey, good morning. This is Brian Biros on for Kathryn. Thank you for taking my questions.

Jay Gould -- President and Chief Executive Officer

Good morning, Brian.

Brian Biros -- Thompson Research Group -- Analyst

I wanted to ask about LVT for the year. I think previous guidance was $50 million for 2018. I think last quarter, you guys said you were on track or maybe even 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.

Jay Gould -- President and Chief Executive Officer

Yes, we didn't exceed it. You probably know the product lines aren't a reporting category for us. But I'll give you a couple of data points, Brian, to -- so you can triangulate that. I think we 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. So if you add those two numbers together, you'd come up with the neighborhood of $60 million, which is a pretty good guess.

Bruce Hausmann -- Vice President and Chief Financial Officer

And Brian, I would just add, this is Bruce. We continue to be on track as we look forward to 2020. We want the LVT business to be $100 million business by 2020. And 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.

Brian Biros -- Thompson Research Group -- Analyst

Gotcha. I think that addressed my next question, that would have been, what would the target be for 2019? But I guess, it was $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?

Bruce Hausmann -- Vice President and Chief Financial Officer

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

Brian Biros -- Thompson Research Group -- Analyst

Gotcha. And last one for 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 kind of really driving the sales and carpet is steady? What does that look like for you guys?

Bruce Hausmann -- Vice President and Chief Financial Officer

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

Brian Biros -- Thompson Research Group -- Analyst

All good. Thank you.

Operator

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

David MacGregor -- Longbow Research -- Analyst

Yes, good morning, guys.

Jay Gould -- President and Chief Executive Officer

Good morning, David.

David MacGregor -- Longbow Research -- Analyst

Can we dig in on the first quarter and the investments that you said you'd come back to in the Q&A section? Just provide some elaboration and then I'll have some follow-up questions.

Jay Gould -- President and Chief Executive Officer

Sure. Well, as I said, there were three things that we did in the first quarter that brings the -- 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 into 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. So 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.

And then thirdly -- well, sorry, the second thing that impacted us quarter over quarter was that nora cost us $0.07. And that's been driven off of nora seasonality. So 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. And the third thing impacting us kind of 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%.

Bruce Hausmann -- Vice President and Chief Financial Officer

So if just -- going to recap that, David, it's $0.10 from the Global Summit, again a one-time nonrecurring investment that we made in the quarter. $0.07 due to seasonality of -- related to nora, which we're going 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 expecting to have good solid growth in the core for the year. It's just the timing of when it's kind of coming in from a quarterly spread perspective this year.

David MacGregor -- Longbow Research -- Analyst

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

Jay Gould -- President and Chief Executive Officer

We actually did put that in our press release because we got a lot of push back in not reporting orders. So fourth quarter...

Bruce Hausmann -- Vice President and Chief Financial Officer

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

Jay Gould -- President and Chief Executive Officer

Yes. So -- and quarter over quarter up 4%, organic.

David MacGregor -- Longbow Research -- Analyst

OK. And what percentage of your wins this quarter would've included LVT? And how does that differ from a year ago?

Jay Gould -- President and Chief Executive Officer

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. So 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.

David MacGregor -- Longbow Research -- Analyst

OK. And could you talk about your free cash flow expectations for 2019?

Bruce Hausmann -- Vice President and Chief Financial Officer

Sure. So David, we don't normally give guidance as a number, but what we do is, we give the building blocks. So 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 and 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-ish million next year.

You can add that back. That's obviously a noncash item. But then the cash item that hits cash flow, it's $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 those productivity gains.

David MacGregor -- Longbow Research -- Analyst

OK. How are you thinking about future deleveraging of the balance sheet? And are there targets for 2019 and '20?

Bruce Hausmann -- Vice President and Chief Financial Officer

Yes, you know, I'm sure you did the math. On a pro forma basis, our leverage ratio is 2.5 times. And we continue to be in a great position to continue delevering down to a two-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 to capital and our ability to delever as well as invest in the business simultaneously.

David MacGregor -- Longbow Research -- Analyst

Great. Thanks very much guys.

Jay Gould -- President and Chief Executive Officer

Thanks, David.

Operator

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

Unknown speaker

This is Ryan calling in for Mike. Just a quick clarification. Those 4% organic order growth, that was quarter over quarter or year over year?

Jay Gould -- President and Chief Executive Officer

Quarter over quarter. Fourth quarter of '18, fourth quarter of '17.

Bruce Hausmann -- Vice President and Chief Financial Officer

Yes. So year-over-year growth. Yes.

Unknown speaker

And then is it fair to say you're seeing improving order trends so far in January and February?

Jay Gould -- President and Chief Executive Officer

We're on track, yes.

Unknown speaker

OK. And then just maybe your thoughts quickly on price cost in 2019. What's going on with benzene and labor?

Jay Gould -- President and Chief Executive Officer

What we're saying, 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.

Bruce Hausmann -- Vice President and Chief Financial Officer

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 -- that Jay just mentioned, we're going to offset with productivity initiatives and other means. Yes, things like pricing.

Unknown speaker

Thank you.

Operator

[Operator instructions] Your next question comes from the line of Keith Hughes from SunTrust. Go ahead, please. Your line is open.

Unknown speaker

This is actually Judy Ann in for Keith. And just follow-up on the last question, was your input cost inflation about where you thought it was in 2018, around $8 million to $10 million kind of similar to what you expect for 2019?

Bruce Hausmann -- Vice President and Chief Financial Officer

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. So we came in right on track.

And again, we were able to offset that through productivity and pricing initiatives, which was a great outcome. And obviously, you can see that on our gross margin line.

Unknown speaker

OK, great. And then in the fourth quarter, you highlighted the gross margin improvement, the productivity, and also, like the nora accretion. Can you expand on what the major drivers of -- you see for getting the 40% in '19? And the ultimate 42% goal for 2020?

Jay Gould -- President and Chief Executive Officer

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

Unknown speaker

OK. Great. Thank you.

Jay Gould -- President and Chief Executive Officer

Thanks, Judy.

Operator

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

Jay Gould -- President and Chief Executive Officer

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.

Operator

[Operator signoff]

Duration: 35 minutes

Call Participants:

Christine Needles -- Senior Director, Global Communications and Public Relations

Jay Gould -- President and Chief Executive Officer

Bruce Hausmann -- Vice President and Chief Financial Officer

Brian Biros -- Thompson Research Group -- Analyst

David MacGregor -- Longbow Research -- Analyst

Unknown speaker

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