Interface, Inc. (TILE), a worldwide modular flooring company and global leader in sustainability, today announced results for the third quarter ended October 1, 2017.

"We delivered another solid quarter consistent with our expectations and in line with full year commitments. Organic order growth increased 6.5% versus last year driven equally by our core carpet tile and our new LVT product lines," said Jay Gould, CEO of Interface. "Despite input cost inflation, our gross margin was solid because of strong productivity initiatives. And, our operating margin increased to 12% as we held SG&A to 26.3% of sales. Our value creation strategy is yielding the expected results."

Third quarter highlights include:

On a GAAP basis, net sales grew 3.7% year over year. Organic sales, which adjusts for the impact of foreign currency fluctuations and exiting the FLOR specialty retail stores, grew 3.9% year over year. Organic order growth was 6.5% year over year.
Gross margin remained in line with expectations at 38.3%.
SG&A of $67.6 million, or 26.3% of net sales, was on pace with the Company's full year target.
Operating income margin of 12.0% was an increase of 160 basis points over the third quarter last year.
The Company completed an additional $25 million of stock repurchases in the third quarter, executing on the previously announced $100 million share repurchase program.

With the fundamentals in place, Interface affirms its full year plan targeting 3-4% top line growth, 38.0-38.5% gross margin, and $260-265 million in SG&A expenses for 2017.

Third Quarter 2017 Financial Summary & Highlights

Sales: On a GAAP basis, third quarter net sales were $257.4 million, up 3.7% over the prior year period on broad-based growth, with all regions showing improvement during the quarter.

Organic order growth, which adjusts for the impact of foreign currency fluctuations and exiting the FLOR specialty retail stores, was up 6.5% year over year. Both the core carpet tile business and the new LVT modular resilient flooring business contributed relatively evenly to organic order growth.

Operating Income: Third quarter operating income was $30.9 million, or 12.0% of sales, compared with operating income of $25.7 million, or 10.4% of sales, in the prior year period.

Gross margin was 38.3% for the third quarter, an increase of 90 basis points over the prior year period. This increase is a result of productivity enhancements delivering margin expansion greater than the negative margin impact of exiting the FLOR specialty retail stores.

The Company continues to effectively manage expenses with third quarter SG&A of $67.6 million, or 26.3% of sales, compared to $67.2 million, or 27.0% of sales, in the third quarter of 2016. This improvement as a percent of sales is due to enhanced spending discipline, as well as repurposing SG&A from the exited FLOR specialty retail stores to the core carpet tile business and recently launched LVT business.

Net Income: Net income during the third quarter of 2017 was $19.4 million, or $0.32 per diluted share, an increase over the prior year period net income of $15.9 million, or $0.25 per diluted share.

Year to Date 2017 Financial Results

Sales: On a GAAP basis, for the first nine months of 2017, net sales were $730.2 million, up 1.5% compared with $719.1 million during the same period last year. Organic sales, which adjusts for the impact of foreign currency fluctuations and exiting the FLOR specialty retail stores, grew 3.0% over the same period.

Operating Income: On a GAAP basis, the Company reported year to date 2017 operating income of $79.3 million, or 10.9% of sales, which included previously announced restructuring and asset impairment charges. Excluding these charges, year to date 2017 operating income was $86.6 million, or 11.9% of sales, versus $78.6 million, or 10.9% of sales in the same period of 2016.

Net Income: On a GAAP basis, the Company reported net income of $48.9 million, or $0.78per share, for the first nine months of 2017, which included previously announced restructuring and asset impairment charges. Excluding these charges, the Company reported net income of $53.6 million, or $0.86 per share, for the first nine months of 2017 versus $49.5 million, or $0.76 per share, for the first nine months of 2016.