Interface Reports Second Quarter 2020 Results
Interface, Inc. (Nasdaq: TILE), a worldwide commercial flooring company and global leader in sustainability, today announced results for the second quarter ended July 5, 2020.
- Strong liquidity of $331 million at quarter end comprised of $92 million in cash and $240 million of borrowing availability under the revolving credit facility
- Amended credit facility includes financial covenant flexibility through first quarter of 2022
- Q2 2020 GAAP earnings per share of $0.08; Q2 2020 adjusted earnings per share of $0.27
- Cash provided by operating activities of $48 million
- Continued expense reductions and financial prudence during COVID-19 period
“During the second quarter, Interface managed through significant headwinds related to the global pandemic and resulting economic fallout by significantly reducing expenses and increasing our financial flexibility. We generated strong cash flow from operations of $48 million in the quarter, while pivoting our sales team to focus on more robust industries during this period, including healthcare and education. We also amplified our omni-channel marketing strategies, including online sales, in our FLOR business,” said Dan Hendrix, Chairman and CEO of Interface.
“We will continue our efforts to expand market share during this difficult period through our targeted product innovation investments and focused sales and marketing initiatives. We remain committed to further improving the sustainability of our products, and we are on track to deliver our first-ever carbon negative carpet tile this year. We are encouraged by the early response from our customers as we prepare to bring our new non-vinyl and bio-based backing offerings to market before the end of 2020,” he concluded.
“We continue to closely manage our cash flow and maintain solid liquidity during this ongoing period of softened demand,” added Bruce Hausmann, CFO of Interface. “We ended the second quarter with $92 million of cash on hand and $240 million of borrowing availability under our revolver. In addition, we recently amended our credit facility providing for enhanced financial covenant flexibility through the first quarter of 2022. Our net debt to adjusted EBITDA ratio was 2.9x at the end of Q2 2020.”
Second Quarter 2020 Financial Summary
Sales: Second quarter net sales were $260 million, down 27% versus $358 million in the prior year period. Declines in carpet tile were somewhat moderated by lesser declines in resilient flooring.
Gross profit margin was 37.5% in the second quarter, a decrease of 190 basis points from the prior year period. Adjusted gross profit margin was 38.0%, a decrease of 170 basis points over adjusted gross margin for the prior year period.
Second quarter SG&A expenses were $80 million, or 30.9% of sales, compared to $98 million, or 27.4% of sales in second quarter last year. Adjusted SG&A expenses were $71 million, or 27.4% of sales in second quarter 2020.
Operating Income: Second quarter operating income was $17 million, compared to operating income of $43 million in the prior year period. Second quarter 2020 adjusted operating income was $27 million versus adjusted operating income of $44 million in second quarter last year.
Net Income and EPS: On a GAAP basis, the company recorded net income of $5 million in the second quarter of 2020, or $0.08 per diluted share, compared to second quarter 2019 GAAP net income of $29 million, or $0.50 per diluted share. Second quarter 2020 adjusted net income was $16 million, or $0.27 per diluted share, versus second quarter 2019 adjusted net income of $30 million, or $0.51 per diluted share.
Adjusted EBITDA: In the second quarter of 2020, adjusted EBITDA was $38 million. This compares with adjusted EBITDA of $57 million in second quarter last year.
Cash and Liquidity: The company had cash on hand of $92 million and total debt of $620 million at July 5, 2020, compared to $81 million of cash and $596 million of total debt at the end of fiscal year 2019.
First Half 2020 Financial Summary
Sales: For the first six months of 2020 net sales were $548 million, down 16% versus $655 million in the prior year period.
Gross profit margin was 38.6% in the first six months of 2020, a decrease of 70 basis points from the prior year period. Adjusted gross profit margin was 39.1%, a decrease of 70 basis points over adjusted gross margin for the prior year period.
SG&A expenses for the first half of 2020 were $168 million, or 30.6% of sales, compared to $198 million, or 30.2% of sales in the prior year period. Adjusted SG&A expenses were $157 million, or 28.7% of sales for the first half of 2020.
Operating Income: For the first six months of 2020, operating loss was $76 million. Adjusted operating income was $57 million for the first half of 2020. This compares with operating income of $59 million and adjusted operating income of $63 million during the first six months of 2019.
Net Income and EPS: On a GAAP basis, the company recorded a net loss in the first half of 2020 of $97 million, or $1.67 per diluted share, compared to GAAP net income of $37 million, or $0.61 per diluted share in the first half of 2019. Adjusted net income in the first six months of 2020 was $35 million, or $0.59 per diluted share, versus adjusted net income of $39 million, or $0.65 per diluted share in the prior year period.
Adjusted EBITDA: In the first half of 2020, adjusted EBITDA was $72 million. This compares with adjusted EBITDA of $87 million in the prior year period.
Given the continued disruption of the global economy due to COVID-19, and the significant level of uncertainty created by the global pandemic, Interface is not providing fiscal year 2020 guidance.
The company has implemented several cost reducing initiatives to align with reduced customer demand and anticipates full year 2020 adjusted SG&A expenses of approximately $320 million. In addition, the company has moderated its capital spending plans and currently anticipates capital expenditures of $45 – $50 million for the full year 2020.
As previously reported in the 2019 year-end earnings release, the company has reclassified and standardized cost categories globally as part of the implementation of a global financial consolidation system and the integration of nora®. The company determined that this change better reflects how management views and operates the business. This change results in the reclassification of certain expenses between Cost of Sales and Selling, General & Administrative expenses. Starting in the first quarter of 2020, the reclassifications are presented retrospectively to make all periods comparable.
The full text of Interface’s 2Q20 earnings release, including all tables, and a replay of the company’s Aug. 7 conference call webcast may be accessed at https://investors.interface.com.
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.
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