Interface Reports Third Quarter 2020 Results
Interface, Inc. (Nasdaq: TILE), a worldwide commercial flooring company and global leader in sustainability, today announced results for the third quarter ended October 4, 2020.
Quarterly Highlights:
- Strong liquidity of $378 million at quarter end comprised of $104 million in cash and $275 million of availability under the revolving credit facility
- Q3 2020 GAAP earnings per share of $0.10; Q3 2020 adjusted earnings per share of $0.28
- Cash generated by operating activities of $65 million
- Repaid $43 million of debt during the quarter
- Launched world’s first carbon negative carpet tile, measured cradle to gate
“During the third quarter, we intensified our focus on new product innovation, our customers and investing in initiatives to position Interface for long-term success, while remaining focused on the operational and financial levers within our control. Our operations teams have done an outstanding job of providing best-in-class service and ensuring safety, while flexing our cost structure to maintain healthy margins. We generated $65 million of cash from operations and repaid $43 million of debt during the quarter,” commented Dan Hendrix, Chairman and CEO of Interface.
“Looking forward, we are encouraged by recent data points and positive trends in our end markets indicating early signs of stabilization. We reached an important sustainability milestone with the launch of our carbon negative carpet tile during the quarter and have been encouraged by early demand from our customers. We remain committed to product innovation and expanding our presence in a diversified group of end markets with strong growth potential,” Mr. Hendrix concluded.
“We effectively controlled costs and closely managed our cash flow during this ongoing period of softened demand,” added Bruce Hausmann, CFO of Interface. “Looking ahead, we expect the fourth quarter to track similarly to the third quarter. Encouragingly, third quarter orders were up 11% on a sequential basis compared with the previous quarter.”
Third Quarter 2020 Financial Summary
Sales: Third quarter net sales were $279 million, down 20% versus $348 million in the prior year period. Declines in carpet tile were somewhat moderated by lesser declines in LVT and rubber.
Gross profit margin was 36.7% in the third quarter, a decrease of 280 basis points from the prior year period. Adjusted gross profit margin was 37.2%, a decrease of 270 basis points over adjusted gross margin for the prior year period.
Third quarter SG&A expenses were $88 million, or 31.6% of net sales, compared to $93 million, or 26.8% of net sales in third quarter last year. Adjusted SG&A expenses were $75 million, or 27.1% of sales in third quarter 2020.
Operating Income: Third quarter operating income was $16 million, compared to operating income of $44 million in the prior year period. Third quarter 2020 adjusted operating income was $28 million versus adjusted operating income of $46 million in third quarter last year.
Net Income and EPS: On a GAAP basis, the company recorded net income of $6 million in the third quarter of 2020, or $0.10 per diluted share, compared to third quarter 2019 GAAP net income of $26 million, or $0.45 per diluted share. Third quarter 2020 adjusted net income was $17 million, or $0.28 per diluted share, versus third quarter 2019 adjusted net income of $28 million, or $0.47 per diluted share.
Adjusted EBITDA: In the third quarter of 2020, adjusted EBITDA was $37 million. This compares with adjusted EBITDA of $56 million in third quarter last year.
Cash and Debt: The company had cash on hand of $104 million and total debt of $580 million at October 4, 2020, compared to $81 million of cash and $596 million of total debt at the end of fiscal year 2019.
First Nine Months 2020 Financial Summary
Sales: For the first nine months of 2020, net sales were $826 million, down 18% versus $1 billion in the prior year period.
Gross profit margin was 38.0% in the first nine months of 2020, a decrease of 140 basis points from the prior year period. Adjusted gross profit margin was 38.5%, a decrease of 130 basis points from adjusted gross margin for the prior year period.
SG&A expenses for the first nine months of 2020 were $256 million, or 31.0% of sales, compared to $291 million, or 29.0% of sales in the prior year period. Adjusted SG&A expenses were $233 million, or 28.2% of sales for the first nine months of 2020.
Operating Income or Loss: For the first nine months of 2020, operating loss was $60 million. Adjusted operating income was $85 million for the first nine months of 2020. These figures compare with operating income of $103 million and adjusted operating income of $108 million during the first nine months of 2019.
Net Income and EPS: On a GAAP basis, the company recorded a net loss in the first nine months of 2020 of $92 million, or $1.56 per diluted share, compared to GAAP net income of $63 million, or $1.06 per diluted share in the first nine months of 2019. Adjusted net income in the first nine months of 2020 was $51 million, or $0.88 per diluted share, versus adjusted net income of $67 million, or $1.13 per diluted share in the prior year period.
Adjusted EBITDA: In the first nine months of 2020, adjusted EBITDA was $108 million. This compares with adjusted EBITDA of $144 million in the prior year period.
Outlook
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 $310 million. In addition, the company has moderated its capital spending plans and currently anticipates capital expenditures of $60 million for the full year 2020.
Cost Reclassifications
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 3Q20 earnings release, including all tables, and an archived replay of the company’s Nov. 6 conference call webcast 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.
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