Interface Reports Second Quarter 2019 Results
Atlanta -- Interface announced results for the second quarter ended June 30, 2019. Net sales for Q2 were reported as up 26%, while organic sales rose 2%. Q2 GAAP EPS was $0.50, up 43% year-over-year; Q2 adjusted EPS was $0.51, up 21% year-over-year.
"We delivered solid results in the second quarter, with organic sales growth of 2%, in line with our expectations," said Jay Gould, CEO of Interface. "Our strategy to expand into the high growth resilient flooring segment is paying off as LVT drove organic growth in the second quarter. Furthermore, our nora® rubber flooring business, which we acquired in August 2018, contributed $76 million of net sales during the second quarter and grew 11% in local currency year-over-year."
"Despite a slow-growth macro environment, we enter the back half of 2019 as a stronger company," Gould continued. "Our Carbon Neutral Floors program helped drive market share gains in key markets, including the U.S., U.K., Germany, and India. Customers have positively responded to our move into resilient flooring: LVT and rubber. Those two product lines are now approximately 25% of our revenue and both grew at double digit rates in local currency. First half gross profit margin was 38.8%, up 10 basis points versus the comparable prior year period. First half adjusted gross margin was 39.3%, up 60 basis points versus last year, and our planned second half productivity initiatives are anticipated to drive adjusted gross profit margin at or above 40%. First half SG&A was also in-line with expectations and, importantly, our selling system transformation is on track, with roughly 75% of our front line sales people now live on our new CRM platform. With this momentum, we are well-positioned to capture growth in the second half of the year."
Second quarter net sales were $358 million, up 26% versus $284 million in the prior year period. Organic sales were up 2% year-over-year driven by growth in LVT. Nora contributed $76 million of net sales in the quarter, up 5% compared to the stand-alone business last year. In local currency, nora grew 11% in Q2 2019 versus the stand-alone business in the same period last year.
Gross profit margin was 38.8% in the second quarter, which included $1 million of nora purchase accounting amortization—an increase of 30 basis points from the prior year period. Adjusted gross profit margin was 39.1%, an increase of 60 basis points over adjusted gross margin for the prior year period.
Second quarter operating income was $43 million, compared with $34 million in the prior year period. Second quarter 2019 adjusted operating income was $44 million, up 20% versus adjusted operating income of $37 million in the second quarter last year. Second quarter SG&A expenses were in line with expectations at $96 million, or 26.8% of sales.
The company recorded net income in the second quarter of 2019 of $29 million, or $0.50 per diluted share, compared to second quarter 2018 net income of $21 million, or $0.35 per diluted share. Second quarter 2019 adjusted net income was $30 million, or $0.51 per diluted share, compared to second quarter 2018 adjusted net income of $25 million, or $0.42 per share. In the second quarter of 2019, adjusted EBITDA was $57 million, up 20% compared to $48 million in the prior year period.
"This was a solid quarter of execution for us, as we continued to focus on our operational disciplines and supply chain efficiencies. We remain focused on driving margin expansion, reducing leverage, and deploying capital efficiently," said Bruce Hausmann, CFO of Interface.Looking ahead to the full year of 2019, Interface is targeting to achieve: total net sales growth of 14 – 15%; organic sales growth of 2 – 3%; adjusted gross profit margin to increase 100 to 150 basis points versus prior year which equates to 39.7 – 40.2%; adjusted SG&A expenses of approximately 28.5% as a percentage of net sales; full year company interest and other expenses are projected to be $32 – $34 million, and the effective tax rate is anticipated to be approximately 25%. Diluted share count is anticipated to be approximately 60 million shares. Capital expenditures for the full year are forecasted to be $65 – $75 million.
Looking at the second half of 2019, the company anticipates fourth quarter adjusted EPS to be higher than third quarter adjusted EPS by approximately 3 – 5 cents.
For more information, visit investors.interface.com.