Interface, Inc., today announced results for the fourth quarter ended January 3, 2021.
Quarterly Highlights:
Strong liquidity of $398 million at quarter end comprised of $103 million in cash and $295 million of availability under the revolving credit facility.
Q4 2020 GAAP earnings per share of $0.33; Q4 2020 adjusted earnings per share of $0.27.
Cash generated by operating activities of $22 million in Q4 2020.
"We continued to generate solid cash flow during the fourth quarter, despite operating in a soft demand environment due to the COVID-19 pandemic. We are encouraged by the accelerated pace of vaccinations globally and remain hopeful that people can return to a sense of normalcy," said Dan Hendrix, Chairman and CEO of Interface. "Selling activity has increased in recent weeks including a growing number of engagements and RFPs, a ramp up in sample activity and an increase in the number of return-to-work and renovation planning discussions. Our sales team is reporting an increase in overall conversations, offering a glimpse into the anticipated stabilization of our end markets. We are also seeing early signs of recovering demand in certain geographic regions including APAC and Europe and believe weakness in the U.S. market has bottomed out."
Hendrix continued, "As companies increasingly step up to address climate change with their own public carbon-focused stakeholder commitments, Interface is well positioned to offer high-design solutions that also advance these low-carbon goals. We are the only company in the space to offer a diverse portfolio of carbon neutral flooring products and cradle-to-gate carbon negative carpet tile products. In addition to other growth drivers, these products give our sales team a competitive advantage in the RFP process. We are encouraged by the growing demand for our carbon negative products, particularly from large global technology companies who are in expansion mode and eager to prioritize the sustainability of flooring products to meet their carbon commitments. The Interface team is passionate about sustainability and I would like to thank them for their perseverance this past year."
"We enter 2021 from a position of competitive and financial strength. Our balance sheet remains strong, bolstered by $119 million of cash generated from operations in 2020, and the significant reductions we made to our cost structure to create greater earnings potential as our end markets recover. We continue to have a tight handle on the operational and financial levers within our control and are well positioned for anticipated growth in the back of 2021," added Bruce Hausmann, CFO of Interface.
Fourth Quarter 2020 Financial Summary
Sales: Fourth-quarter net sales were $277 million, down 18% versus $339 million in the prior year period. Declines in carpet tile were somewhat moderated by lesser declines in LVT and rubber flooring.
Gross profit margin was 35.0% in the fourth quarter, a decrease of 560 basis points from the prior year period. Adjusted gross profit margin was 35.5%, a decrease of 550 basis points from adjusted gross margin for the prior year period.
Fourth quarter SG&A expenses were $77 million, or 27.9% of net sales, compared to $98 million, or 28.8% of net sales in fourth quarter last year. Adjusted SG&A expenses were $73 million, or 26.2% of sales in fourth quarter 2020.
Operating Income: Fourth quarter operating income was $21 million, compared to operating income of $28 million in the prior year period. Fourth quarter 2020 adjusted operating income was $26 million versus adjusted operating income of $42 million in fourth quarter of 2019.
Net Income and EPS: On a GAAP basis, the company recorded net income of $20 million in the fourth quarter of 2020, or $0.33 per diluted share, compared to fourth quarter 2019 GAAP net income of $16 million, or $0.28 per diluted share. Fourth quarter 2020 adjusted net income was $16 million, or $0.27 per diluted share, versus fourth quarter 2019 adjusted net income of $27 million, or $0.46 per diluted share.
Adjusted EBITDA: In the fourth quarter of 2020, adjusted EBITDA was $37 million. This compares with adjusted EBITDA of $53 million in the fourth quarter of 2019.
Cash and Debt: The company had cash on hand of $103 million and total debt of $577 million at January 3, 2021, compared to $81 million of cash and $596 million of total debt at the end of fiscal year 2019.
Fiscal Year 2020 Financial Summary
Fiscal year 2020 includes 53 weeks, whereas fiscal year 2019 includes 52 weeks.
Sales: For the twelve months of 2020, net sales were $1.103 billion, down 18% versus $1.343 billion in the twelve months of 2019.
Operating Income or Loss: For the twelve months of 2020, the company reported operating loss of $39 million, compared with operating income of $131 million in the prior year period. Adjusted operating income was $110 million for 2020 versus adjusted operating income of $150 million in the twelve months of 2019.
Net Income and EPS: On a GAAP basis, the company recorded a net loss in 2020 of $72 million, or $1.23 per diluted share, compared to GAAP net income of $79 million, or $1.34 per diluted share in 2019. Adjusted net income in 2020 was $67 million, or $1.15 per diluted share, versus adjusted net income of $93 million, or $1.59 per diluted share in the prior year period.
Adjusted EBITDA: Adjusted EBITDA was $146 million for the twelve months of 2020, compared to adjusted EBITDA of $197 million in the prior year period.
Outlook
In the first quarter of 2021, the company anticipates net sales to decline both sequentially and year over year due to customary seasonality, continued effects of the COVID-19 pandemic, and the fact that the first quarter of 2020 had fourteen weeks of activity versus thirteen weeks of activity in the first quarter of 2021.
Net sales anticipated to decline sequentially from the fourth quarter of 2020 to the first quarter of 2021 by approximately $25 million.
First quarter 2021 adjusted gross profit percentage anticipated to be approximately 37% - 38%.
Adjusted SG&A expense for the full year of 2021 is anticipated to be approximately $330 million.
First quarter 2021 adjusted SG&A expense is anticipated to be approximately one fourth of $330 million.
Interest & Other expense is anticipated to be $8-9 million per quarter in 2021.
Adjusted effective tax rate for the full year of 2021 is anticipated to be approximately 27%.
Fully diluted share count at the end of 2020 was 58.7 million shares.
Capital expenditures are anticipated to be approximately $30 million for full year 2021, as the company has moderated capital spending plans
