First quarter net sales were $288 million, down 3% versus $298 million in the prior year period. Organic sales were down 2% year-over-year with solid growth in resilient flooring being offset by a decline in carpet tile.
Gross profit margin was 39.7% in the first quarter, an increase of 60 basis points from the prior year period. Adjusted gross profit margin was 40.1%, an increase of 30 basis points over adjusted gross margin for the prior year period.
First quarter SG&A expenses were $88 million, or 30.4% of sales, compared to 33.6% in the prior year period. Adjusted SG&A expenses were $86 million, or 29.9% of sales in first quarter 2020.
"Globally, the Interface team is doing an incredible job of managing through this unprecedented time. The health and well-being of our employees is our top priority as we stay open for business to support our customers. While we have experienced short-term disruptions in some of our manufacturing operations around the world, we continue to deliver for our customers and have uncovered new and valuable ways to connect with them in these unique circumstances, further strengthening our relationships," Hendrix added. "In my nearly 40 years with Interface, we have successfully navigated several economic downturns. I'm confident that with our strong foundation, talented team and a continued focus on our core strategy, we can drive meaningful growth in the long-term and come out on the other side as a stronger company."
"In addition to our focus on long-term growth and profitability, we have quickly activated plans to closely manage expenses, cash flows, and overall liquidity," added Bruce Hausmann, CFO of Interface. "We are prudently managing our cash during this period. Even though the first quarter is typically a heavy cash use period for us, we ended the quarter with $73 million of cash on hand and $236 million of borrowing availability under our revolver. Our net debt to adjusted EBITDA ratio was 2.7x at the end of Q1 2020."
In the first quarter of 2020, the company recorded a non-cash charge for impairment of goodwill and intangible assets of $121 million, primarily driven by the global impacts of the COVID-19 pandemic. In addition, the company recorded a $1 million reduction of previously recognized restructuring charges due to a decline in anticipated cash payments. The company also elected to change its method of accounting for forfeitures of share-based awards, and as a result, the cumulative effect of this change in accounting principle of $1 million was recognized in SG&A expense in the first quarter 2020.
Operating Income: Including the impairment charge and other items described above, first quarter operating loss was $94 million, compared to operating income of $16 million in the prior year period. First quarter 2020 adjusted operating income was $29 million, up 60% versus adjusted operating income of $18 million in the first quarter last year.
Net Income and EPS: On a GAAP basis, the company recorded a net loss in the first quarter of 2020 of $102 million, or $1.75 per diluted share, compared to first quarter 2019 GAAP net income of $7 million, or $0.12 per diluted share. First quarter 2020 adjusted net income increased to $19 million, or $0.32 per diluted share, versus first quarter 2019 adjusted net income of $8 million, or $0.14 per diluted share.
Adjusted EBITDA: In the first quarter of 2020, adjusted EBITDA increased to $35 million from $31 million in the prior year period.
Cash and Liquidity: The company had cash on hand of $73 million and total debt of $627 million at April 5, 2020, compared to $81 million of cash and $596 million of total debt at the end of fiscal year 2019.
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 has withdrawn its fiscal year 2020 guidance.
Cost Reductions
The company has implemented several cost reducing initiatives to align with anticipated customer demand including a voluntary separation program, temporary furloughs and other time-and-pay reduction programs, involuntary separations where necessary to streamline roles and responsibilities, and various other cost avoidance initiatives. The company also has suspended merit-based pay increases, as well as 401(k) and non-qualified savings plan (NSP) company matching contributions, and is expected to benefit from lower than originally anticipated performance-based compensation and variable compensation. In addition, the company has moderated its capital spending plans and currently anticipates capital expenditures of $45 - $50 million for the full year 2020.