ATLANTA, July 29, 2015 /PRNewswire/ -- Interface,
Inc. (Nasdaq: TILE), a worldwide carpet tile company and global
leader in sustainability, today announced results for the second
quarter ended July 5, 2015.
"Consistent with our strategy, we are driving improvement in
profitability by expanding gross margins and taking share in a
rebounding corporate office market," said Daniel T. Hendrix, Chairman and Chief Executive
Officer of the Company. "In local currencies, our sales were
up a healthy percentage across all divisions, primarily due to
robust corporate office segments in the U.S. and Europe as well as our continued resurgence in
Australia. We increased gross margins dramatically in each of
our business units, as a result of our lean manufacturing
initiatives, higher manufacturing volume, improved selling prices,
and lower raw material costs and usage. As anticipated,
currency headwinds took a heavy toll on our top line and operating
income, but we still finished with earnings per share that tied our
all-time record in the fourth quarter of 2007."
SECOND QUARTER 2015 FINANCIAL SUMMARY &
HIGHLIGHTS
Sales: With foreign currency held neutral, sales in
the 2015 second quarter increased 10.4% to $287.7 million, versus $260.6 million in the prior year period. As
reported in U.S. dollars, sales for the second quarter of 2015 were
up 1.2% to $263.6 million.
- Second quarter sales in our Americas business increased 9.5% on
a currency neutral basis compared with the prior year period, led
by the continued rebound of the corporate office market (up 12%),
along with more modest gains in non-office segments (up 3% in the
aggregate). Within the non-office segments, sales improvements in
the education (up 9%), hospitality (up 55%) and government (up 4%)
markets were partially offset by declines in the retail (down 12%)
and healthcare (down 9%) segments. FLOR recorded its highest ever
second quarter sales, up 3.9% compared with the second quarter last
year, primarily due to improvements in web sales. Currency
fluctuations negatively impacted 2015 second quarter sales in the
Americas by approximately $3.9
million, resulting in a year over year gain of 7.0% in U.S.
dollars.
- In local currency, our Europe
business had the highest growth rate, with sales up 15.7%, mainly
due to strength in the U.K., Ireland and Germany. The increase in local currency was
driven by the corporate office market (up 21%), partially offset by
a modest decline in non-office segments (down 3% in the aggregate),
mostly due to austerity measures within the government sector.
Currency had a $15.7 million negative
impact on our 2015 second quarter sales in Europe, resulting in a year over year decline
of 6.6% in U.S. dollars.
- Our sales in the Asia-Pacific
region in the second quarter of 2015 were up 4.1% in local currency
compared with the prior year period, led mainly by 14% growth in
Australia and 6% growth in
China, offsetting a 35% decline in
Southeast Asia. In U.S. dollars,
our Asia-Pacific sales in the
second quarter of 2015 were down 6.2%, mostly due to a $4.2 million negative currency impact in
Australia.
Operating Income: Second quarter 2015 operating
income increased to $33.2 million, up
330 basis points to 12.6% of sales, compared with $24.3 million, or 9.3% of sales, in the second
quarter last year. Currency fluctuation negatively impacted
2015 second quarter operating income by $3.4
million. Gross profit margin was 38.4% in the second
quarter of 2015, up 370 basis points compared with 34.7% in the
prior year period. SG&A expenses were $68.0 million, or 25.8% of sales, in the second
quarter of 2015, versus $66.0
million, or 25.3% of sales, in the second quarter of
2014. The year over year SG&A percentage increase was due
to higher incentives as a result of the improved performance levels
in the current period.
Net Income: Net income during the second quarter of
2015 increased to $21.7 million, or
$0.33 per share, compared with net
income of $13.1 million, or
$0.20 per share, in the second
quarter last year.
Patrick C. Lynch, Senior Vice
President and Chief Financial Officer, commented, "We're seeing
strong demand in almost all areas of our operating footprint, and
market data shows that we're gaining significant market share in
the U.S. and Europe. We're also regaining market share in
Australia, with our plant now
fully operational versus the prior year and more than offsetting
the negative currency impacts on its gross margin. Our
business generated a substantial amount of cash during the quarter,
versus a similar sized use of cash in the second quarter last
year. In the back half of the year, SG&A expenses will
remain an area of focus for us, as we continue to strike an
appropriate balance between cost control and funding a few select
growth initiatives in burgeoning markets."
Year to Date 2015 Financial Results
Sales: For the first six months of 2015, sales
increased 4.4% to $500.5 million,
compared with $479.6 million in the
first six months last year. On a currency neutral basis,
sales in the first half of 2015 were $543.8, up 13.4% compared with the first half of
2014.
Operating Income: Operating income for the 2015
six-month period was $54.6 million,
or 10.9% of sales, versus $36.4
million, or 7.6% of sales, in the first six months of
2014. In the first six months of 2015, currency fluctuations
had a negative impact of $5.6 million
on operating income.
Net Income: The Company reported net income of
$34.0 million, or $0.51 per share, for the first six months of
2015. This compares with net income of $17.1 million, or $0.26 per share, in the first six months of
2014.
Mr. Hendrix concluded, "While we're pleased with our reported
improvements across almost all financial metrics, the negative
currency impacts are masking much of the underlying health and
growth of our business. For example, as reported in U.S.
dollars, second quarter orders were down 1% year over year, but
were actually up 7% to $300 million
on a currency neutral basis versus a record prior year comparison,
which points to continuing strong demand. Based on the
rebound we're seeing in the corporate office markets in the U.S.
and Europe, which seem to be in
the early stages of recovery, along with potential market share
gains, we believe we have headroom for additional sales growth in
the second half of the year. We remain focused on innovations
throughout the organization, particularly in manufacturing and new
product development. We also believe our gross margin is
sustainable, and perhaps could see further improvement as our
strategic initiatives continue to take hold. Notwithstanding
the currency headwinds, we're proud of the progress we've made on
profit enhancement and we're excited about our prospects for the
remainder of the year."
Webcast and Conference Call Information
The Company will host a conference call tomorrow morning,
July 30, 2015, at 9:00 a.m. Eastern Time, to discuss its second
quarter 2015 results. The conference call will be
simultaneously broadcast live over the Internet. Listeners
may access the conference call live over the Internet at the
following address:
http://edge.media-server.com/m/p/vs2wmxpo or through the Company's
website at:
http://www.interfaceglobal.com/Investor-Relations.aspx. The
archived version of the webcast will be available at these sites
for one year beginning approximately one hour after the call
ends.
Interface, Inc. is the world's largest manufacturer of modular
carpet, which it markets under the Interface and FLOR
brands. The Company is committed to the goal of sustainability and
doing business in ways that minimize the impact on the environment
while enhancing shareholder value.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995:
Except for historical information contained herein, the other
matters set forth in this news release are forward‑looking
statements. The forward-looking statements set forth above
involve a number of risks and uncertainties that could cause actual
results to differ materially from any such statement, including
risks and uncertainties associated with economic conditions in the
commercial interiors industry as well as the risks and
uncertainties discussed under the heading "Risk Factors" included
in Item 1A of the Company's Annual Report on Form
10-K for the fiscal year ended December 28,
2014, which discussion is incorporated herein by this
reference, including, but not limited to, the discussion of
specific risks and uncertainties under the headings "Sales of our
principal products have been and may continue to be affected by
adverse economic cycles in the renovation and construction of
commercial and institutional buildings," "We compete
with a large number of manufacturers in the highly competitive
commercial floorcovering products market, and some of these
competitors have greater financial resources than we do," "Our
success depends significantly upon the efforts, abilities and
continued service of our senior management executives and our
principal design consultant, and our loss of any of them could
affect us adversely," "Our substantial international operations are
subject to various political, economic and other uncertainties that
could adversely affect our business results, including by
restrictive taxation or other government regulation and by foreign
currency fluctuations," "The worldwide financial and credit
crisis could have a material adverse effect on our business,
financial condition and results of operations," "Concerns regarding
the European sovereign debt crisis and market perceptions about the
instability of the euro, the potential re-introduction of
individual currencies within the Eurozone, or the potential
dissolution of the euro entirely, could adversely affect our
business, results of operations or financial condition," "Large
increases in the cost of petroleum-based raw materials could
adversely affect us if we are unable to pass these cost increases
through to our customers," "Unanticipated termination or
interruption of any of our arrangements with our primary third
party suppliers of synthetic fiber could have a material adverse
effect on us," "We have a significant amount of indebtedness, which
could have important negative consequences to us," "The market
price of our common stock has been volatile and the value of your
investment may decline," "Our earnings in a future period could be
adversely affected by non-cash adjustments to goodwill, if a future
test of goodwill assets indicates a material impairment of those
assets," and "Our Rights Agreement could discourage tender offers
or other transactions for our stock that could result in
shareholders receiving a premium over the market price for our
stock." Any forward-looking statements are made pursuant to
the Private Securities Litigation Reform Act of 1995 and, as such,
speak only as of the date made. The Company assumes no
responsibility to update or revise forward-looking statements made
in this press release and cautions readers not to place undue
reliance on any such forward-looking statements.
- TABLES FOLLOW –
Consolidated
Condensed Statements of Operations
|
Three Months
Ended
|
Six Months
Ended
|
(In thousands,
except per share data)
|
7/5/15
|
6/29/14
|
7/5/15
|
6/29/14
|
|
|
|
|
|
Net Sales
|
$ 263,637
|
$ 260,624
|
$ 500,541
|
$ 479,616
|
Cost of
Sales
|
162,385
|
170,239
|
313,857
|
314,545
|
Gross Profit
|
101,252
|
90,385
|
186,684
|
165,071
|
Selling, General
& Administrative Expenses
|
68,033
|
66,042
|
132,065
|
128,701
|
Operating Income
|
33,219
|
24,343
|
54,619
|
36,370
|
Interest
Expense
|
1,790
|
5,420
|
3,678
|
10,918
|
Other Expense
(Income)
|
(446)
|
(128)
|
826
|
(154)
|
Income Before Taxes
|
31,875
|
19,051
|
50,115
|
25,606
|
Income Tax
Expense
|
10,153
|
5,980
|
16,071
|
8,510
|
NET INCOME
|
$
21,722
|
$
13,071
|
$
34,044
|
$
17,096
|
|
|
|
|
|
Earnings Per Share –
Basic
|
$0.33
|
$0.20
|
$0.51
|
$0.26
|
|
|
|
|
|
Earnings Per Share –
Diluted
|
$0.33
|
$0.20
|
$0.51
|
$0.26
|
|
|
|
|
|
Common Shares
Outstanding – Basic
|
65,995
|
66,473
|
66,208
|
66,472
|
Common Shares
Outstanding – Diluted
|
66,044
|
66,550
|
66,253
|
66,558
|
|
|
|
|
|
Orders from
Continuing Operations
|
$ 277,700
|
$ 280,700
|
$ 537,200
|
$ 520,800
|
Consolidated
Condensed Balance Sheets
|
|
|
|
(In
thousands)
|
|
7/5/15
|
12/28/14
|
Assets
|
|
|
|
Cash
|
|
$ 71,821
|
$ 54,896
|
Accounts
Receivable
|
|
137,546
|
157,093
|
Inventory
|
|
164,205
|
142,167
|
Other Current
Assets
|
|
31,606
|
30,512
|
Total Current
Assets
|
|
405,178
|
384,668
|
Property, Plant &
Equipment
|
|
216,681
|
227,347
|
Other
Assets
|
|
148,306
|
162,899
|
Total
Assets
|
|
$
770,165
|
$
774,914
|
|
|
|
|
Liabilities
|
|
|
|
Accounts
Payable
|
|
$ 56,273
|
$ 49,464
|
Accrued
Liabilities
|
|
80,421
|
94,323
|
Current Portion of
Long-Term Debt
|
|
7,500
|
--
|
Total Current
Liabilities
|
|
144,194
|
143,787
|
Long-Term
Debt
|
|
251,615
|
263,338
|
Other Long-Term
Liabilities
|
|
58,457
|
61,150
|
Total
Liabilities
|
|
454,266
|
468,275
|
Shareholders'
Equity
|
|
315,899
|
306,639
|
Total Liabilities and
Shareholders' Equity
|
|
$
770,165
|
$
774,914
|
Consolidated
Condensed Statements of Cash Flows
|
Three Months
Ended
|
Six Months
Ended
|
(In
millions)
|
7/5/15
|
6/29/14
|
7/5/15
|
6/29/14
|
|
|
|
|
|
Net Income
|
|
$ 21.7
|
|
$13.1
|
|
$34.0
|
|
$17.1
|
Depreciation and
Amortization
|
|
7.8
|
|
6.7
|
|
15.5
|
|
13.3
|
Stock Compensation
Amortization
|
|
4.6
|
|
0.5
|
|
9.1
|
|
2.7
|
Deferred Income Taxes
and Other Non-Cash Items
|
|
4.9
|
|
0.4
|
|
9.3
|
|
0.2
|
Change in Working
Capital
|
|
|
|
|
|
|
|
|
Accounts
Receivable
|
(14.7)
|
|
(20.5)
|
|
15.2
|
|
(12.4)
|
|
Inventories
|
(4.8)
|
|
(2.0)
|
|
(27.1)
|
|
(21.9)
|
|
Prepaids and Other
Current Assets
|
2.7
|
|
(0.1)
|
|
(2.3)
|
|
(0.1)
|
|
Accounts Payable and
Accrued Expenses
|
6.5
|
|
5.3
|
|
(2.8)
|
|
1.9
|
|
Cash Provided from
Operating Activities
|
|
28.7
|
|
3.4
|
|
50.9
|
|
0.8
|
Cash Used in
Investing Activities
|
|
(8.1)
|
|
(13.7)
|
|
(12.6)
|
|
(23.7)
|
Cash Used in
Financing Activities
|
|
(8.1)
|
|
(2.4)
|
|
(18.5)
|
|
(0.2)
|
Effect of Exchange
Rate Changes on Cash
|
|
0.2
|
|
0.2
|
|
(2.9)
|
|
0.2
|
Net Increase
(Decrease) in Cash
|
|
$12.7
|
|
$(12.5)
|
|
$16.9
|
|
$(22.9)
|
Reconciliation of
Non-GAAP Performance Measures to
|
GAAP Performance
Measures
|
(In millions,
except per share amounts)
|
|
|
|
Three Months
Ended
7/5/15
|
Net Sales with
Foreign Currency Held Neutral
|
$287.7
|
Impact of changes in
foreign currency
|
24.1
|
Net Sales
As Reported
|
$263.6
|
|
|
|
Six Months
Ended
7/5/15
|
Net Sales with
Foreign Currency Held Neutral
|
$543.8
|
Impact of changes in
foreign currency
|
43.3
|
Net Sales
As Reported
|
$500.5
|
|
|
|
Three Months
Ended
7/5/15
|
Operating Income
with Foreign Currency Held Neutral
|
$36.6
|
Impact of changes in
foreign currency
|
3.4
|
Operating Income
As Reported
|
$33.2
|
The Company believes that the above non-GAAP performance
measures, which management uses in managing and evaluating the
Company's business, may provide users of the Company's financial
information with additional meaningful bases for comparing the
Company's current results and results in a prior period, as these
measures reflect factors that are unique to one period relative to
the comparable period. However, these non‑GAAP performance
measures should be viewed in addition to, and not as an alternative
for, the Company's reported results under accounting principles
generally accepted in the United States. Tax effects
identified above (when applicable) are calculated using the
statutory tax rate for the jurisdictions in which the charge or
income occurred.
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SOURCE Interface, Inc.