Thank you, operator and good morning everyone and thank you for joining us. Today, I am joined by Nancy Taylor, Chairperson of the Board of Directors; Charles Tyson, our Interim President and Chief Customer Experience Officer; and Nancy Walsh, our Chief Financial Officer.

As we begin, let me reference the Safe Harbor provisions of the U.S. securities laws for forward-looking statements.

This conference call may contain forward-looking statements that are subject to significant risks and uncertainties, including the future operating and financial performance of Lumber Liquidators. Although Lumber Liquidators believes that the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectations or any of its forward-looking statements will prove to be correct.

Important risk factors that could cause actual results to differ materially from those reflected in the forward-looking statements are included in Lumber Liquidators’ filings with the SEC. This information contained in this call is accurate only as of the date discussed.

Investors should not assume that the statements will remain operative at a later time and Lumber Liquidators undertakes no obligation to update any information discussed in this call. Now, I am pleased to introduce Ms.

Nancy Taylor, Chairperson of the Lumber Liquidators’ Board of Directors. Nancy?

Thank you, Paul and good morning everyone. As Paul said, I am Nancy Taylor, Chairperson of the Board of Directors.

As announced on February 6, Dennis Knowles resigned from his position as President and CEO. On behalf of the Board, I would like to express our appreciation for Dennis’ commitment to the company over the last 4 years and his steady hand and tireless efforts in the face of many challenges during his tenure as CEO.

We wish him well. The Board is committed to doing a thorough search of internal and external candidates to identify the best candidate to lead the company and create a path towards enhanced shareholder value.

Until the new CEO was named, Charles Tyson has been named Interim President and Principal Executive Officer in addition to his role as Chief Customer Experience Officer. He and Nancy Walsh, our CFO, have agreed to take on additional responsibilities during the search period.

The Board appreciates Charles and Nancy’s willingness to take on these additional responsibilities and we are confident in the senior leadership team’s ability to guide the organization and continue progress on the transformation strategy and key initiatives laid out by the company. We are encouraged by the opportunities we see ahead to enhance shareholder value.

After the prepared remarks are completed, I will remain on the call in case there are follow-up questions regarding the leadership change that I am able to answer. As I am sure you will understand at this time there is not much that I can add given that we are in the early stages of this process.

On behalf of the Board, I would like to thank you for your interest in Lumber Liquidators and I will now turn the call over to Charles. Charles?

Thank you, Nancy. It’s my honor and privilege to take on this interim role.

I would also like to thank Dennis for his dedication to the company and his work to position us for success. I am excited about the opportunities I see for us to leverage our solid foundation, execute our transformation plan and deliver shareholder value.

We will act with urgency to drive both growth and improved profitability and establish our brand as a value leader in the hard surface flooring marketplace. Now, to the results, Q4 sales were in line with our guidance as our overall value proposition resonates with consumers and we experienced a more supportive macro environment than in the first half of the year as many housing metrics turned positive and fostered demand.

We saw continued strength in vinyl products with relative weakness in bamboo and laminate, mirroring recent industry trends. As a result, our merchants broadened our vinyl selection during the quarter adding product that provides consumers with a compelling price and quality continuum in this fast growing and competitive category.

In addition, we recently launched a new hardwood set that offers fresh, trend-right styles and positions us well to serve those customers who want the aesthetics and value of a hardwood floor. These are just a couple of examples of the actions we are taking to ensure our stores are well-positioned to capitalize on consumer preferences and broader market trends.

We had a solid October yard sale, which is one of our two largest events of the year. I am pleased with how this event leveraged our evolving marketing efforts to attract customers to our stores.

In addition, our Pro sales remained strong as we benefited from efforts by our retail sales team to develop stronger relationships with our Pros. We are also focused on continuing to refine our assortment, specifically on project completers to meet the needs of a Pro.

These were focus areas in 2019 and they will remain so in 2020 and beyond. Looking at our installation sales, we continue to view our installation services as an important component of our go-forward brand value proposition as we work to broaden our consideration among flooring consumers.

To enhance our surface offering, as we mentioned last quarter, we rolled out our online assessment tools automating the scheduling of the first step in an installed project. Following the launch in October, we saw customers engage through this channel and have seen encouraging results with this online service as we continue to make the process easier for our customers, installers and employees.

On the margin front, in 2019, we faced the challenging impact of tariffs on a significant percentage of our product. We started the year with clear objectives to improve margin through vendor negotiations and alternative country sourcing that would lead to lower costs.

We also had a specific initiative in place to deliver efficiency in our supply chain to enhance margins. Our teams made meaningful progress throughout the year working collaboratively with vendors to mitigate the tariffs in addition to moving sourcing to lower cost, lower tariffed countries.

As a result, we have a more diverse supplier base and more options to further diversify. Through most of 2019, nearly all of the benefits gained from our margin enhancing efforts were offset by the negative impact of the tariffs.

The recent tariff exclusions, however, have allowed our efforts to be more apparent in our Q4 results. In addition, our more traditional cost-out efforts will continue in 2020 as we aim to further identify opportunities for alternative country sourcing and leverage our scale to support margin growth.

Our outlook anticipates the continuation of the current Section 301 tariffs as well as the continuation of the current exclusion on vinyls and engineered-click products through the end of 2020. However, 2019 proved we must remain nimble to react to changes in tariffs as well as their impacts on the competitive marketplace.

As just one example, we along with others in the industry have applied for additional exclusion on Chinese imports. And while not embedded in our outlook, these exclusions could further change the market dynamic if received during the year.

Through all of the changes in 2019, we remain focused on ensuring we delivered solid value through competitive prices, accessible expertise and the trend-right assortment. Our evolving marketing message is value-driven and no longer focuses only on price, but emphasizes quality, service and selection in our stores and online.

We are receiving positive feedback on our new ad campaign and we will continue to build on our marketing momentum in 2020 within the context of our plans for overall brand evolution. Finally, we also continue to develop and deliver digital tools that enhance the shopping experience and differentiate us from the competition.

Following the path of a flooring project journey, the recent launch of our Floor Finder digital tool simplifies the product selection process. And once narrowed, consumers can use the Picture It!

visualizer tool to digitally see selections in their own home. With an informed view, the customer can choose to schedule an installation assessment online or engage with our store associates who can help refine the product selection and complete the sale.

Used together, these tools engage customers early in their project, simplify their purchase decision, and keep them engaged throughout their flooring journey. This allows customers the ability to make informed flooring decision when and how they want.

As I reflect on 2019, we made progress in our transformational plan and had varying degrees of success with our three key areas of focus: increasing profitability, driving traffic and transactions, and enhancing the customer experience. First, on the profit front, as I have described, our merchants and sourcing teams work diligently with our vendor partners to lower product costs and these efforts became more apparent with the tariff exclusions.

We also work to rationalize SG&A throughout 2019. We streamlined organizations and work to align our corporate structure with our vision of the future.

Second, our efforts to drive traffic and transactions fell short of what we have planned as transaction trends remained negative through the year. While the growth of our web and installed sales work against this metric, we were still disappointed with our results.

This will be a key focus for the management team over the coming years. Third, we enhanced the customer experience through the work I described to improve our digital tools to engage customers early in their journey as well as our work to broaden the reach of our brand.

We also improved product availability through store-specific inventory investments to increase the breadth of take with product. In the end, we made progress in 2019, but we clearly have more work to do.

As such, our initiatives are not changing in 2020. Specifically, we remain focused on improving operational effectiveness to drive bottom line profit, improving our customer experience and driving traffic and transactions in our stores and online.

But operational effectiveness and enhanced profit will come from continued improvement in gross margins as well as diligent management of expenses. We are also committed to ensuring our capital investments deliver solid returns to shareholders.

Second, in the coming year, we are accelerating our efforts to improve our customer experience, including the continued revitalization of our brand. Core to that effort is delivering a quality trend-right assortment that offers broad selection and great value.

In addition, we are focused on giving consumers the right guidance and partnership through every project by creating awareness of and access to expertise and knowledge both in stores and through our digital tools. As we have said, a key priority going into 2020 remains driving traffic and transactions in our stores.

That will come through successfully engaging in existing consumers at every step of their flooring journey and providing exceptional value in the marketplace. Turning to our outlook for 2020, we expect to grow sales by executing on a transformational plan aided by a moderately more supportive macroeconomic environment than we experienced in 2019.

We also intend to open 50 new stores in 2020 bringing value to flooring customers in new markets and further penetrating existing markets. Expected sales growth, along with our work to expand gross margin and focus on managing expenses, will yield a solid improvement in operating margin in 2020.

Our expectation is that adjusted operating margin will grow to between 2.7% and 3.5% in 2020, which is up from 2.3% in 2019. Before handing the call over to Nancy, I wanted to briefly share our viewpoint on the coronavirus.

First, our thoughts go out to those being personally impacted by this outbreak, including our representative office employees in Shanghai. Thankfully none of our employees have been infected, but like many others, the outbreak is causing meaningful disruption to daily life.

We obtained nearly half of our merchandise from Asia and most of that is sourced from China. As such, we are closely monitoring the coronavirus situation, including the actions taken by authorities to compact the spread of the virus which includes extended quarantines and restrictions on travel of people and goods.

The near-term risk is the potential disruption to our supply chain. We are currently unable to predict the full impact of these potential disruptions, how and in what manner competitors will be affected or the reaction of consumers.

Merchandise on hand and already in route should allow us to avoid a material impact in the first quarter of 2020. However, depending on the length and severity of the situation, we could see a material impact beginning as early as the second quarter and such impact could continue for weeks or months.

We are monitoring on a daily basis and evaluating what actions to take to respond to potential disruptions. We are committed to executing the next steps of our transformational plan that includes ensuring we are responsive to market trends and customer preferences while focusing on driving profitability.

I look forward to sharing our progress through the year. I will now turn the call over to Nancy Walsh to share the financial details of the quarter.

Nancy?

Thank you, Charles and good morning everyone. In the fourth quarter, net sales were $274 million, an increase of 1.8% over last year and comparable store sales increased 0.4% versus the year ago.

The overall net sales increase was driven by 1.8% growth in merchandise sales and a 2.4% increase in service sales. Our comp increase was the result of a 2.9% increase in our average transaction value offset by a 2.5% decrease in transaction count.

Gross profit for the fourth quarter of 2019 increased $16 million compared to the fourth quarter of 2018. Q4 2019 was negatively impacted by countervailing duty rate changes and Q4 2018 was positively impacted by classification adjustments related to the harmonized tariff schedule.

Without these items, adjusted gross profit increased approximately $18 million. Gross margin for the quarter was 40.9% compared to 35.7% in the same quarter a year ago.

Adjusted gross margin grew to 41% from 35.1% in the prior year period. The increase in adjusted gross margin was primarily driven by the tariff exclusion announced in November 2019.

We recognized approximately $13 million of gross profit in the fourth quarter of 2019 related to recoveries associated with relevant products sold through November 2019. We also reduced the carrying cost of inventories by approximately $12 million related to relevant products held for sale as of December 1 which began benefiting adjusted gross profit in December as those products are sold.

Q4 was also favorably impacted by a larger mix of higher margin manufactured products, reduced discounting in the stores, merchandising cost out efforts and retail price increases earlier in 2019. SG&A expense for the fourth quarter was $93 million compared to $151 million in the fourth quarter last year.

SG&A in both quarters included incremental legal as well as other costs and credits related to lawsuits, investigations and certain other legal matters with the most substantial being $61 million in accruals related to legal settlements recorded in Q4 of 2018. Items for both periods are adjusted in the non-GAAP reconciliation section of the press release.

When excluding these items from both periods, adjusted SG&A expense for the quarter was $93 million or 33.9% of sales, an increase of $5.4 million and up 130 basis points on a percent to sales basis versus the same quarter a year earlier. The increase in adjusted SG&A dollars was primarily due to higher advertising, additional costs related to 6 net new stores compared to the fourth quarter a year ago, higher year-over-year incentive compensation and equity accruals and costs related to the corporate headquarters relocation that occurred in the fourth quarter of 2019.

We remain focused on identifying expense savings opportunities by finding synergies across the business and driving efficiency in everything we do. For the fourth quarter, we recorded operating income of $19 million compared to an operating loss of $55 million in Q4 of 2018.

After adjusting for the items noted previously, adjusted operating income was $19 million in the fourth quarter compared to $6.7 million last year. The year-over-year increase was driven by the retroactive tariff exclusion as well as additional efforts to enhance gross profit partially offset by an increase in adjusted SG&A.

We recorded income tax expense of $2.4 million for the quarter, up significantly from 2018 driven by an increase in taxable earnings leading to the complete depletion of the company’s federal NOLs. Finally, earnings per diluted share were $0.57 for the quarter versus a loss per share of $1.99 in the year ago quarter.

On adjusted basis, Q4 earnings per diluted share were $0.56 this year compared to $0.17 last year. Looking briefly at full year results, total sales increased 0.7% with a comp sales decline of 1%, adjusted gross profit grew $17.8 million to 37% of sales, adjusted SG&A grew $13.2 million to 34.7% of sales, and adjusted operating profit grew $4.5 million, up approximately 40 basis points as a percent of sales to 2018.

Adjusted earnings per share was $0.58 versus $0.57 in 2018. Turning to the balance sheet, inventory at the end of the fourth quarter was $286.4 million, down $20.5 million from Q3 and down $31.9 million from the end of 2018.

The quarter-over-quarter and year-over-year reductions were driven by the impact of the tariff exclusions on the carrying cost of inventory as well as our ongoing operational efforts to improve inventory efficiency and drive improvement in inventory turnover. We ended the quarter with $82 million outstanding under our credit agreement, which was down $7.5 million compared to Q.

During the fourth quarter, we funded $1 million related to the Gold settlement. Looking forward, while the exact timing will be driven by the Court, we currently expect to fund remaining $13 million of the Gold settlement as well as $4.75 million related to the Kramer settlement in 2020.

In addition, we anticipate receiving a total of approximately $25 million from U.S. customs related to tariff exclusion refunds.

Those funds are expected to be received throughout the first half of 2020. Our liquidity position remains strong as our core operations continue to generate solid cash flow.

As of December 31, we had liquidity of $111 million consisting of availability under our credit agreement of $102 million and cash of $9 million. Cash generated by operations net of unusual items allows us to make strategic investments in the business while also reducing debt and further improving liquidity over time.

Turning to our 2020 outlook, we expect low to mid single-digit percentage growth in total sales compared to last year and comparable store sales growth in the low single-digits. Our sales outlook includes the positive impact of the leap year, which will benefit Q1 total and comp sales growth by approximately 80 to 100 basis points and full year growth by an estimated 20 to 25 basis points.

In addition, cycling the network security incident that occurred in Q3 of 2019 should benefit sales growth in Q3 2020. As a result of these two factors, we currently expect our 2020 sales and comp growth percentage to be higher in Q1 and Q3 relative to Q2 and Q4.

We expect to deliver adjusted operating margin of 2.7% to 3.5% of revenue as we delivered higher gross margins, reflecting the work of the team over the last 12 to 18 months to lower product cost. In addition, we expect SG&A leverage to sales to support adjusted operating margin growth.

Our outlook assumes the continuation of Section 301 tariffs at 25% on currently tariffed Chinese imports, while also assuming tariff exclusions granted in 2019 on vinyl and engineered-click product remain in effect for all of 2020. On the investing side, we plan to open approximately 15 new stores in 2020.

We expect capital spending of $19 million to $21 million as we opened new stores and invest in revenue and profit-driving initiatives. We transitioned back to a federal cash taxpayer in 2019 and expect that to continue in 2020 as we completely depleted our federal NOLs in 2019 and expect taxable income to grow.

We currently anticipate an approximate 24% effective tax rate and cash taxes of approximately $11 million in 2020. In addition, we expect cash paid for interest to be in the $3 million to $3.5 million range.

Thank you all for your time this morning. With that, I will hand it back to the moderator to open the call to questions.

Hey, guys. This is actually Michael Kessler on for Simeon.

Thanks for taking your questions. First, I wanted to ask on the outlook, the $25 million in receivables that you are booking right now for next year, is that included as far as you are covering that in your 2020 outlook?

And if it is, would it be fair to – if we are thinking about kind of the underlying or kind of go-forward EBIT margin to exclude that $25 million? And if we do, is there anything else that we should be considering as we are going through that work?

So, the $25 million of receivable that we are planning is factored into the cash flow and we should use that as you are taking a look at 2020, we expect that to arrive on the first half of this year.

Okay. So just to confirm then, the EBIT margin outlook that you are planning for next year, it is contemplating that you receive that in next year’s results?

It’s a balance sheet item and the impact of the tariff exemption that was identified in November that is contemplated to flow-through 2020. We factored that into our forecast.

So the margin impact that we are receiving from that is built into the guidance that we have provided today.

Okay. Alright, got it.

That’s helpful. Thanks.

And then just a follow-up on the top line, so wanted to ask, I guess, what gives you confidence as far as your low single-digit comp guide to accelerate from the slightly negative comp in 2019, what are the key factors that you would expect to drive that? And as a reminder, can you let us know if you have quantified how much 2019 comps benefited from higher retails as a result of tariffs?

Thanks guys.

Hey, Michael, it’s Charles. Thanks for the question.

Yes, so we have been working diligently on our strategic pillars for the last 12 months. And as the management team is focused on executing our current strategy, we see a number of drivers on the top line and they come in a number of specific areas.

We have talked a lot about both our brand work and our digital work ensuring that the customer experience is a guided experience bringing customers into our brand. And we are seeing good success in growth of our digital business, up 32% last year.

And the teams are doing a lot of work both on re-platforming to improve that experience as well as enhance our digital marketing capabilities. 85% of our customers start their journey online.

And so we see that as being an important part of our longer term growth strategy as well as digital work that we are driving through our install business which today is continues to grow and will remain growth driver for us next year. We have talked a lot about our emphasis on our Pro business and how we continue to build relationships around our stores and we were happy with our Pro penetration and growth in the fourth quarter and continue to build initiatives that will allow our brand to be more relevant to Pros as we move through next year.

Obviously, we continue with our new stores. We opened 15 stores in ‘19 and that comp benefit will start to flow through this year.

We also have the 1 extra day at the end of this year which is built into the comp performance and also anniversary our event in August of last year from the systems perspective that help us benefit. But I think the real thing I would have you focus on is that we are staying extremely focused on the initiatives that we have aligned around and getting our organization to focus with urgency and with accountability to deliver our plan and that works both from a corporate office perspective and the field.

So hopefully, Michael, that answers that part of your question. In terms of what we see in pricing, we actually saw a moderate increase in our ASP in the fourth quarter and we continue to see rational pricing in the marketplace.

Obviously, we will react to wherever we see changes from a competitive perspective to drive our value position in the marketplace. Okay, thanks for your question.

Thank you.

Hi, good morning. So I have a few questions.

I will go through them quickly. But first, I guess from a bigger picture perspective, how do you balance – how should we expect you to balance the initiatives you continue to pursue against securing new senior leadership?

In other words, what I am saying is are you looking for – is there any holding back on some of these initiatives to wait through new leadership to sort of say put their own stamp on this or are you pushing ahead with everything you had planned previously?

Brian, it’s a great question. I will tell you that the board and the senior leadership team are aligned moving forward with our initiatives.

We spent a lot of time discussing that as a group. We aligned on our planning process for 2020 prioritizing where our capital investment spend is going to be and our OpEx and investment spend is going to be.

And we are not going to take our foot off the gas in delivering the investments and the initiatives both from a field perspective and a corporate perspective. And so you should feel confident that there is not going to be a pause button here.

This is heads down driving with urgency to deliver an outcome for our plan in 2020 against the guidance that we have given you.

Got it. That’s very helpful.

Second question, I appreciate the commentary you made both in your release and in your prepared comments regarding the coronavirus and the supply chain disruptions, obviously it’s a very fluid situation. But I was wondering if you can make a little more color just in terms of what you are seeing as far as activity or maybe said better re-ramping activity at the supply partners you have within China?

Yes. So, we are working obviously on a daily basis with all of our suppliers and we really got a dedicated team on the ground and they obviously have been reacting in a very difficult environment for them personally and have been extremely pleased with how they have given us insights as to what is happening.

To your point, it’s fluid. It’s changing by the day.

I can confirm that all of our pre-Christmas holiday shipments left Asia on time and we have received shipments post Chinese New Year, clearly, the same visibility that most industries are reporting. There is still a limit on transportation across provinces in China.

Our density of factories is fairly heavily concentrated around Shanghai, which has a different set of regulations on shipment and more broadly across China. So, we are watching delivery availability of drivers to be able to make containers for the port.

Second as you can see and it’s publicly available, the migration of factory workers has not been completed this year, you can actually track online the difference between last year and this year. Most of our factories are up and operational, but waiting for old full factory workers to return.

I think the third unknown and this is for every industry is our suppliers are working with their sub-suppliers to understand their supply chains. And we obviously are meeting on a daily basis to understand what their net supply chain looks like in terms of delivery of broad components to ensure that future orders are going to be executed.

As I said in my prepared remarks, based on inventory on the order, pre-Chinese New Year and are current on hands, we did not see any material impact in Q1 and we are managing the visibility as everyone else is across the whole of Asia to understand what potential impact will be and how we will react to that. Across what we have is a broad portfolio of products that are not solely reliant on origination from Asia.

Hopefully, that gives you a little insight, Brian.

No, it’s very helpful. And then the last question I have, this will be a quick one, but there has been a lot of talk about weather and having won the warmest winters on record here of United States.

I know in the past weather has impacted sales trends at Lumber. So any commentary how this weather has affected Q4 sales and what we are seeing so far in Q1?

Yes. So, Brian, just as a policy going forward, we are not going to comment intra-quarter anymore on what’s happening with sales impact.

From my perspective in this business, yes, you may have 1 or 2 days of snow days in a very tight regional area like Minnesota. But our teams are focused on delivering particularly to our Pros, who keep their inside, building projects, restoration projects, working through the winter.

So no material impact in the fourth quarter plus or minus that was attributable to weather.

Okay, very helpful. Thanks.

Thanks, Brian.

Thanks a lot and good morning. My first question is around your margin guidance 2020 you gave a little bit of color around your expectation for material improvements in gross margin, if you could give a little bit more color there that would be helpful?

In other words, can you walk us through the major puts and takes to the gross margin improvement from 2019 to 2020?

Sure. For the quarter, as we talked about, we saw an increase from about 35% to 41% for the quarters year-over-year.

The majority of that obviously was driven by the tariff exclusion, but was also supported by the mix of higher margin products as well as all the good work we have been doing on the cost-outs from a sourcing perspective and then some reduced discounting in the stores. For the full year, we saw some of that same mix more heavily weighted towards anything other than the tariffs as that was a Q4 primarily hit.

Great. As we look to 2020, however, Nancy, can you walk us through the puts and takes to get to your implied gross margin expectations?

I think from a margin perspective that’s not – it’s generally something that we provide from a guidance perspective. I think if you take a look at the margin assumptions that we have for the full year, because we put the cost reduction impact that was going in 12 to 18 months just at the beginning of the tariffs that now that good work is showing, that can be representative of what we are looking for in 2020.

Okay. And a follow-up question related to pricing and your product costs, as you have seen the cost reductions associated with tariff exclusions, are you capturing additional margin on those specific products still and you are expecting those strong margins to persist through 2020 in your guidance?

Yes, I will take that. Sorry, we didn’t catch your name.

So I know this isn’t Seth. So what we are doing clearly is looking at the competitive pricing environment.

And as others have said, there has been some pricing that has moved back to the street, but we have also been driving an initiative from a product cost out and an alternative country sourcing perspective that really had nothing to do with the tariffs. This started 18 months ago in terms of looking at a long-term view of our profitability as a company.

And the sourcing teams and the merchant teams did an outstanding job of working with our suppliers strategically to continue to improve our long-term cost position. And that work will continue as we move into 2020.

Obviously, the tariffs put another set of urgency around that work and we will continue to work like we do strategically with all of our vendors on coming up with the best value proposition for our customers.

Got it. As it relates to the inventory position that you are in right now, are you in line with your expectations for the end of the fourth quarter, excluding the reduction associated with the tariff exclusion?

And how does that leave you positioned as we think about the second quarter given the potential for limited supply?

Yes. So as it relates to our ending inventory positions, our inventory management teams and supply chain teams did a good job of ensuring that we came slightly under our plan for 2019 we continue to work as we talked about on previous calls on inventory rationalization projects across our supply chain and in our stores that continued to improve our inventory productivity and manage our inventory turns as I said before we are not going to discuss the detail of future quarters and what we are going to against our plan we have an inventory initiative that initiative is been on the way for the last six months and we are pleased with the progress that that team has made.

Got it. Last question bigger picture Charles as you take on this interim role just trying to get a sense from you what Lumber Liquidators means to you I mean how is the value proposition of all over time and where you ultimately want to go?

Yes, so that’s a great question and I thank you for it. So look when I started with the company I spent a lot of time in stores before I even decided to join the company and the one thing that just excites me about us our team members in the field are experts in selling flooring and when you think about a core customer that we are going off the they value that expertise and so if you join a company where you have a energy level and expertise level in the leadership level that can engage with customers around their products and I see that everyday when I look at the reviews first thing I do in the morning is come and look at a reviews and send out comments to our field we have customers that are absolutely delighted both on the installation and on the DIY side and on the pro-side and so as we build the capabilities around re-branding our marketing messaging as we build digital capabilities to enhance the customer experience we build out a pro programs to really drive relationships and stickiness with pros around the stores I am as excited today as I was when I joined the company 18 months ago so hope that give you a little bit of insight into the passion and energy that this management team has to execute against our plan

Excellent. Thanks a lot and good luck.

Thank you.

Thanks for taking my question this morning. If we look at the luxury vinyl tile, luxury vinyl plank part of your business, how much of that has production which is at risk to disruption?

The majority of our vinyl production is in China today. And there is some alternatives that are outside of China, but the majority is in China.

Obviously, we have a product portfolio approach to how we manage the business. We have been doing a lot of work around our hardwood business.

This company had a legacy of hardwood. We have seen declining market share as we said on previous calls for the last 3 years and we have taken share in wood over the last quarter.

So, we are looking at categories that customers find us as a destination to lean into, but as our 10-K shows, 41% of our product manufactured product, a portion of that is from China from a vinyl perspective. You didn’t ask about laminate, where others do have a significant importation of laminate from China.

All of our laminate products is either from North America or from Europe. So we are protected on our laminate business from that perspective.

Got it. And then bigger picture question as the Board considers candidates for CEO, what are the – on a permanent basis, what are the key factors, what are the key background elements and skill sets that the board is looking for?

What I would – this is Nancy Taylor, the Chair of the Board. I don’t want to get into specific criteria, but what I will say is that again, the Board is supportive of the transformation strategy and we are looking for a leader who can embrace that and accelerate that strategy.

Understood. Thank you.

Thanks, Laura.

Hi good morning everyone. Charles, I wanted to ask you on the shift with the marketing strategy, we have been talking throughout 2019 about a change in the content and then I believe it was Q4, I was going to see the first stages of changing in the media mix.

So as we stand here today, your Q4 transaction comp is still down 2.5% kind of in line with prior quarters, do you feel like you should be seeing some benefit to traffic now and maybe at one point in 2020, you think about reevaluating that marketing strategy?

Yes. So, Peter, couple of things.

All of this work was deeply seated in customer research and insights. To identify those segments of customers that really value what it is that Lumber Liquidators does really well.

And when we start to talk about our invest that improve a customer that really gives us credit for our high touch consultative selling. We need to be able to tell that broader story.

The data clearly shows that those customers that have experienced the brand have the high resonance to the brand. Customers that have never experienced the brand have a different attitude towards the brand.

So moving a brand attitudinally takes time. And so what the new marketing messaging is really focusing on is talking about quality, it’s talking about breadth of assortment and it’s talking about service.

And also if you look historically where this brand has driven, it’s been primarily around price. And so as we start to remix and tell our brand story, along with competitive pricing, we are getting positive feedback, particularly from our field organization on the customers that they are seeing coming in reacting to our marketing.

And we will continue to build on those efforts along with the work that we are doing online from a digital perspective. So often in the marketing you don’t see, because it’s very targeted and how that really defines our attack to drive traffic over time, both online and in our stores.

So hopefully that gives you an insight about how we are thinking about both the strategy and the longer term execution outcomes of that strategy.

Yes, that is helpful. And I know over the last couple of years, there has been some discussion at least on these calls around the Lumber Liquidators brand itself and the name of the company, is there any reconsideration of re-branding the company today just given the focus on as you say quality, breadth and service where the name liquidators almost sort of screams value and pricing?

Yes. So that’s great question.

So as I said before, we have done significant amount of work and research around the brand which obviously includes the name, but it’s not just about the name. If you have been looking at our brand logos and if you have been looking at our advertising you will see we have added flooring company to make sure that there is relevance between Lumber Liquidators and flooring which is what we sell.

If you look online and in our television advertising you will see us using llfloors.com as a domain to drive attention to us as a flooring company. We are continuing to drive our creative approach as I just talked about and we are under discussions to look at how we want to evolve our brand into the future.

And as we come into future quarters and we are doing that work, we will have more discussions with you about the evolution of our brand.

Okay, thank you. And I wanted to ask a financial question for Nancy, just going back to the tariff exclusion, so if we understand there was $13 million of benefit from recoveries and then there was a portion of $12 million from reduced carrying cost, can you help us understand maybe what amount of that $12 million was recognized in the fourth quarter as we understand what’s going to flow-through into 2020?

Well, the $13 million was reflected on the income statement and the $12 million was a reduction in our inventory cost, which based on what you saw year-over-year reduction, that’s a combination of what Charles just talked about as well as those reduced costs from the inventory. Does that answer your question?

You said the product sales started in December on that reduced inventory, so that’s why I was thinking, it was only a partial benefit in Q4. So is it a partial benefit or was it full $12 million reflected in Q4?

Well, as it went back to September of 2018, approximately 80% of the benefit we received in Q4 was related to historical periods, 20% roughly went into the actual quarter itself.

Okay. And then lastly on that, I guess there has been some questions around what’s going to drive your EBIT margin this year, because I think it’s coming in better than what the Street expected, but the challenge I think this would be in Q4 of lapping this large, sort of call it one-time benefit.

Is there any consideration of how you get over that hurdle with Q4 or should we certainly plan for Q4 margins to be down in 2020?

Well, again, I am not really going to break it out by quarter, but when we talk about the previous 12 to 18 months and all the efforts that we are putting into cost reductions just about the time that the tariffs were hitting that kind of masked the work that we had done, now that those tariffs have been excluded, we are seeing really what we consider our real run-rate. And there maybe some fluctuation throughout the year based on some of the information that you are talking about on a quarter basis but again, if you look at the full year for ‘19, we believe because we have gone in and negotiated the cost reductions and really tried to make the supply chain efficient that, that represents a good run-rate for us.

Okay, that’s helpful. Thank you very much and good luck for the team.

Thanks, Peter.

Thank you. Great turnaround.

Just had a quick question, if you can delve a little bit more into the process of hiring a new CEO, timing and so on, just want to get a little more on that and if you could give us any insight on Dennis’ departure?

This is Nancy Taylor again. So we are – as I said in my remarks, we are early in the process.

We have retained the search firm. It’s difficult to say at this point how long that process will take.

Certainly, it will be quite a number of months. And there is not really a lot for me to add regarding Dennis departure.

Again, we are very appreciative of all the – of the heavy lifting that Dennis did while he was here as the CEO and as we mentioned we feel like it’s a good time to transition to new leadership.

I know you are thinking it’s going to be an external candidate most likely?

No, we are doing a thorough search and we are considering internal as well as external candidates.

Including Mr. Tyson?

I am not going to comment specifically on candidates.

Okay, thank you very much.

Thank you, operator. I’d like to thank all of our fantastic associates for their hard work during 2019 and our vendor partners for their continued support.

Again, I am honored and privileged to take on my interim role and lead our strong organization into new heights and delivering against our goals for 2020. Thank you again for your interest in Lumber Liquidators and we look forward to updating you on our progress next quarter.

Have a great day.