The Bottom Line 9-6

With the Labor Day holiday wrapped up, the week kicked off with Ferguson (LSE: FERG) once again in the news. Coming perhaps no surprise to anyone following this story (although the timing perhaps is earlier than expected), Ferguson announced its intentions to separate its U.K. operations, which have been contributing very little to overall company earnings and accounts for ~13% of total revenues. In conjunction with this news, Ferguson also announced that its CEO will step down in November 2019, with the President of U.S. operations, Kevin Murphy, taking over the helm. This week, TRG also reviewed takeaways from marketing with Owens Corning (OC) and Interface (TILE) management, in addition to assessing Masonite’s (DOOR) new CEO. For TILE, in particular, we focused on why the company is so beaten up, falling 50%+ since April 2018 and 30%+ since February 2019. We focused on a recessionary sensitivity analysis. The worst case scenario (volumes down 10% & EBIT margins equaling the lowest point of the Great Recession) implies ~17% downside to TILE’s stock based on Friday’s stock price. So still downside but limited to some extent. Keep an eye in coming weeks on early feedback from TRG’s Q3’19 “Survey Season”, the first of which will be our RV Dealer Survey. Anyone who has spent time in Nashville knows that the city has a penchant for tearing down buildings, opening spaces to support the breakneck speed of construction this city has seen over the past 7-8 years. TRG’s picture of the week is the latest spectacle - Vanderbilt’s demolition of Carmichael Tower 3.

Leisa Childers