"We started off 2019 with another solid quarter, in line with our expectations. We continue to deliver on our value creation strategy and remain on track to achieve our 2019 objectives," said Jay Gould, CEO of Interface. "First quarter organic sales were up 2% as anticipated. The marketplace response to our Carbon Neutral Floors™ program has been very positive, allowing us to take share in carpet tile in key markets and drive growth in LVT. The integration of nora systems into the Interface family is generating promising results with nora® rubber flooring sales up 9% in local currency versus the prior year period. Our strategic investment in nora, the transformation of our selling system, and advancements in our manufacturing capabilities are successfully fueling growth. Overall, we delivered adjusted EPS of $0.14."
First Quarter 2019 Financial Summary
Sales: First quarter net sales were $298 million, up 24% versus $241 million in the prior year period. Organic sales were up 2% year-over-year .
Nora contributed $60 million of net sales in the quarter, up 9% in local currency compared to the stand-alone business in first quarter of 2018.
Operating Income: First quarter operating income was $16 million, compared with $23 million in the prior year period. First quarter 2019 adjusted operating income was $18 million. As expected and previously communicated, Interface's first quarter adjusted operating income included a non-recurring investment to bring the company's global sales organization together to accelerate the nora integration, advance its selling system transformation, and engage every front-line seller in the company's sustainability mission – Climate TakeBack™ – which is activated through its Carbon Neutral Floors program.
Gross profit margin was 38.8% in the first quarter, which included $2 million of nora purchase accounting amortization. Adjusted gross profit margin was 39.4%, an increase of 50 basis points over gross margin for the prior year period.
First quarter SG&A expenses were in line with expectations at $99 million, or 33% of sales.
Net Income and EPS: The company recorded net income in the first quarter of 2019 of $7 million, or $0.12 per diluted share, compared to first quarter 2018 net income of $15 million, or $0.25 per diluted share. First quarter 2019 adjusted net income was $8 million, or $0.14 per diluted share.
Adjusted EBITDA: In the first quarter of 2019, adjusted EBITDA was $31 millioncompared to $34 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, including nora, of 14 – 16%, which includes 200 basis points of currency headwinds.
Organic sales growth from carpet and LVT of 2 – 4%
Adjusted gross profit margin of 40 – 40.5%
Adjusted SG&A expenses of 28 – 28.5% as a percentage of net sales
Full year company interest and other expenses are projected to be $29 million to $30 million, and the effective tax rate is anticipated to be approximately 28%. Diluted share count is anticipated to be approximately sixty million shares. Capital expenditures for the full year are forecasted to be $65 million to $75 million.
For the remaining portion of the year, the company anticipates adjusted EPS to be spread relatively evenly in the second, third and fourth quarters.