Interface, Inc., today announced results for the second quarter ended June 30, 2019.

Second Quarter Highlights:

Q2 net sales up 26%; Q2 organic sales up 2%
Q2 GAAP EPS of $0.50, up 43% year-over-year; Q2 adjusted EPS of $0.51, up 21% year-over-year
Strong balance sheet. Total debt of $672 million; net debt of $588 million
2019 fiscal year outlook targeting net sales growth of 14 - 15%, including currency headwinds of 200 basis points

"We delivered solid results in the second quarter, with organic sales growth of 2%, in line with our expectations. 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," said Jay Gould, CEO of Interface.

"Despite a slow-growth macro environment, we enter the back half of 2019 as a stronger company. 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," noted Gould.

Second Quarter 2019 Financial Summary

Sales: 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.

Operating Income: 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.

Net Income and EPS: 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.

Adjusted EBITDA: Adjusted EBITDA was $89 million for the first six months of 2019, compared to $82 million in the prior year period.

Fiscal Year 2019 Outlook

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.