Interface, Inc. (Nasdaq: TILE), a worldwide commercial flooring company and global leader in sustainability, today announced results for the fourth quarter and full fiscal year ended January 2, 2022.
Highlights:
Fourth Quarter:
- Net sales increased 23% versus the prior year period to $340 million
- GAAP SG&A expenses reduced to 26% of net sales; adjusted SG&A expenses to 24% of net sales
- GAAP earnings per share of $0.37; adjusted earnings per share of $0.47
- Orders increased 19% versus the prior year period
Fiscal Year:
- Net sales increased 9% year-over-year to $1.2 billion
- GAAP SG&A expenses reduced to 27% of net sales; adjusted SG&A expenses to 26% of net sales
- GAAP earnings per share of $0.94; adjusted earnings per share of $1.23
- Net repayment of $56 million of debt; leverage reduced to 2.5x net debt-to-adjusted EBITDA
- FY 2021 orders increased 13% versus prior year; backlog remains strong
“We had a strong finish to fiscal 2021 as demand for our unique carbon neutral and carbon negative products continues to grow. Fourth-quarter orders increased 19% and net sales grew 23% versus the prior year period, driven by strength across all product categories. I continue to be impressed by our team’s ability to navigate through a difficult year marked by inflation and supply chain headwinds. We successfully mitigated the negative impact on margins and, as promised, we materially and sustainably reduced SG&A expenses as a percentage of net sales,” said Dan Hendrix, Chairman and CEO of Interface. “Significant wins throughout the year drove progress on our Climate Take Back™ journey, underpinning our position as a leader in carbontech. As businesses increasingly adopt carbon reduction goals, we are in the best industry position to fulfill this growing and important need in the marketplace.”
“We carry this strong momentum into 2022 as our disciplined capital allocation strategy and strong cash generation have laid a solid foundation for growth in 2022 and beyond. In 2021, we generated $87 million of cash from operations and repaid $56 million of debt, reducing leverage to 2.5x net debt-to-adjusted EBITDA. We expect to further reduce leverage to approximately 2.0x net debt-to-adjusted EBITDA by the end of 2022,” added Bruce Hausmann, CFO of Interface.
Fourth Quarter 2021 Financial Summary
Sales: Fourth quarter net sales were $339.6 million, up 22.6% versus $276.9 million in the prior year period with growth across all product categories.
Gross profit margin was 35.7% in the fourth quarter, an increase of 78 basis points from the prior year period. Adjusted gross profit margin was 36.1%, an increase of 67 basis points from adjusted gross profit margin for the prior year period as price increases began to offset higher labor, freight and raw material costs.
Fourth quarter SG&A expenses were $87.4 million, or 25.7% of net sales, compared to $77.3 million, or 27.9% of net sales in the fourth quarter last year. Adjusted SG&A expenses were $81.6 million, or 24.0% of net sales in the fourth quarter 2021, compared to $72.7 million, or 26.2% of net sales, in the fourth quarter last year.
Operating Income: Fourth quarter operating income was $33.9 million, compared to operating income of $20.9 million in the prior year period. Current year operating income includes severance, asset impairment and other charges. Prior year operating income includes severance, asset impairment and other charges as well as a reversal of a portion of previously recognized restructuring charges. Fourth quarter 2021 adjusted operating income (AOI) was $41.1 million versus AOI of $25.6 million in the fourth quarter of 2020.
Net Income and EPS: On a GAAP basis, the Company recorded net income of $21.8 million in the fourth quarter of 2021, or $0.37 per diluted share, compared to the fourth quarter 2020 GAAP net income of $19.6 million, or $0.33 per diluted share. Fourth quarter 2021 adjusted net income was $27.8 million, or $0.47 per diluted share, versus the fourth quarter 2020 adjusted net income of $16.0 million, or $0.27 per diluted share.
Adjusted EBITDA: In the fourth quarter of 2021, adjusted EBITDA was $52.8 million. This compares with adjusted EBITDA of $37.2 million in the fourth quarter of 2020.
Fiscal Year 2021 Financial Summary
Sales: Net sales for fiscal year 2021 were $1,200.4 million, versus $1,103.3 million in the prior year. The prior year included 53 weeks of net sales and a strong pre-pandemic first quarter, versus fiscal year 2021 that included 52 weeks of net sales and a recovering commercial market.
Gross profit margin was 36.0% for fiscal year 2021, a decrease of 117 basis points from the prior year. Adjusted gross profit margin was 36.5%, a decrease of 119 basis points from adjusted gross profit margin for the prior year due to higher labor, freight and raw material costs.
SG&A expenses for fiscal year 2021 were $324.3 million, or 27.0% of net sales, compared to $333.2 million, or 30.2% of net sales in the prior year. Adjusted SG&A expenses were $316.1 million, or 26.3% of sales, for fiscal year 2021 compared to $305.5 million, or 27.7% of net sales, in the prior year.
Operating Income: Operating income for fiscal year 2021 was $104.8 million, compared to operating loss of $39.3 million in the prior year. Operating income for 2021 includes previously announced charges related to the closure of the Company’s manufacturing facility in Thailand, severance, asset impairment and other costs. Prior year operating income includes a $121.3 million non-cash charge for impairment of goodwill and intangible assets, primarily driven by global impacts of the COVID-19 pandemic. AOI was $122.3 million for fiscal year 2021 versus $110.5 million in the prior year.
Net Income and EPS: On a GAAP basis, the Company recorded net income of $55.2 million in fiscal year 2021, or $0.94 per diluted share, compared to fiscal year 2020 GAAP net loss of $71.9 million, or a loss of $1.23 per diluted share. Adjusted net income for fiscal year 2021 was $72.3 million, or $1.23 per diluted share, versus fiscal year 2020 adjusted net income of $67.2 million, or $1.15 per diluted share.
Adjusted EBITDA: In fiscal year 2021, adjusted EBITDA was $169.4 million. This compares with adjusted EBITDA of $145.7 million in fiscal year 2020.
Cash and Debt: The Company had cash on hand of $97.3 million and total debt of $518.1 million at the end of fiscal year 2021, compared to $103.1 million of cash and $576.6 million of total debt at the end of fiscal year 2020.
Fully diluted share count at the end of the fourth quarter of 2021 was 59.1 million shares
Fourth Quarter 2021 Segment Results
At the beginning of 2021, the Company expanded its financial reporting into two operating and reportable segments: 1) Americas (AMS) and 2) Europe, Africa, Asia and Australia (collectively EAAA). The realignment solely impacts the Company’s segment reporting and there is no change to previously reported consolidated results. Segment AOI includes allocations of corporate SG&A expenses.
AMS Results:
- Q4 2021 net sales were $190.8 million, up 35.1% versus $141.2 million in the prior year period primarily due to the recovering commercial market.
- Q4 2021 orders were up 32% compared to the prior year period.
- Q4 2021 operating income was $27.0 million compared to $21.1 million in the prior year period.
- Q4 2021 AOI was $30.4 million versus $21.3 million in the prior year period.
EAAA Results:
- Q4 2021 net sales were $148.8 million, up 9.7% versus $135.7 million in the prior year period.
- Currency fluctuations had an approximately $3.9 million negative impact on Q4 2021 sales as compared to Q4 2020 sales due to weakening of the Euro and Australian dollar against the U.S. dollar.
- Q4 2021 orders were up 7% compared to the prior year period.
- Q4 2021 operating income was $6.9 million compared to operating loss of $0.1 million in the prior year period.
- Q4 2021 AOI was $10.7 million versus $4.3 million in the prior year period.
Fiscal Year 2021 Segment Results
AMS Results:
- Net sales for fiscal year 2021 were $651.2 million, up 9.7% versus $593.4 million in the prior year. The prior year included 53 weeks of net sales, and a strong pre-pandemic first quarter, versus fiscal year 2021 that included 52 weeks of net sales and a recovering commercial market.
- Operating income for fiscal year 2021 was $81.4 million compared to $73.2 million in the prior year.
- AOI for fiscal year 2021 was $85.0 million versus $89.1 million in the prior year.
EAAA Results:
- Net sales for fiscal year 2021 were $549.2 million, up 7.7% versus $509.8 million in the prior year primarily due to recovering commercial markets and favorable currency fluctuations. The prior year period included 53 weeks of net sales, and fiscal year 2021 included 52 weeks.
- Currency fluctuations had an approximately $21.5 million positive impact on net sales in fiscal year 2021 as compared to the prior year, primarily due to the strengthening of the Euro, British Pound sterling, Chinese Renminbi and Australian dollar against the U.S. dollar.
- Operating income for fiscal year 2021 was $23.4 million compared to an operating loss of $112.5 million in the prior year. Fiscal year 2020 included a non-cash goodwill and intangible asset impairment charge of $118.6 million.
- AOI for fiscal year 2021 was $37.3 million versus $21.4 million in the prior year.
Outlook
There continues to be a significant level of disruption in the global supply chain. As the Company continues to monitor this situation, it is anticipating:
For the first quarter of 2022:
- Net sales of $275 million to $285 million.
- Adjusted gross profit margin of 35.0% to 37.0%.
- Adjusted SG&A expenses of approximately $80 million.
- Adjusted Interest & Other expenses of approximately $7.5 million to $8.0 million.
- Fully diluted weighted average share count at the end of the first quarter of 2022 of approximately 59.3 million shares.
For the full fiscal year 2022:
- Year-over-year net sales growth of approximately 7.0% to 9.0%.
- Adjusted gross profit margin of 35.5% to 36.5%.
- Adjusted SG&A expenses that are approximately 26.0% of net sales.
- Adjusted Interest & Other expenses of approximately $31 million.
- An adjusted effective tax rate for the full year of 2022 of approximately 27%.
- Capital expenditures of approximately $30 million.
The full text of Interface’s 4Q21 earnings release, including all tables, and an archived replay of the company’s Mar. 1 conference call may be accessed at https://investors.interface.com.
About Interface
Interface, Inc. is a global flooring company specializing in carbon neutral carpet tile and resilient flooring, including luxury vinyl tile (LVT) and nora® rubber flooring. We help our customers create high-performance interior spaces that support well-being, productivity, and creativity, as well as the sustainability of the planet. Our mission, Climate Take Back™, invites you to join us as we commit to operating in a way that is restorative to the planet and creates a climate fit for life.
Learn more about Interface at interface.com and blog.interface.com, our nora brand at nora.com, our FLOR® brand at FLOR.com, and our Carbon Neutral Floors™ program at interface.com/carbonneutral. Learn more about our carbon negative products at interface.com/carbonnegative.
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