Interface(US:TILE)2024-08-06 20:21Financial Performance - Consolidated net sales for Q2 2024 were $346.6 million, a 5.2% increase from $329.6 million in Q2 2023, driven by higher customer demand in the education and corporate office segments [86]. - Consolidated operating income for Q2 2024 was $38.2 million, up from $28.9 million in Q2 2023, attributed to increased sales and higher gross profit margins [86]. - Consolidated net income for Q2 2024 was $22.6 million, or $0.38 per diluted share, compared to $15.8 million, or $0.27 per diluted share in Q2 2023 [86]. - For the first six months of 2024, consolidated net sales were $636.4 million, a 1.8% increase from $625.4 million in the same period last year [87]. Cost and Expenses - Gross profit margin for Q2 2024 improved to 35.4%, up from 33.9% in Q2 2023, due to lower raw material costs and higher sales pricing [99]. - Consolidated cost of sales for Q2 2024 was $224.0 million, a 2.9% increase from $217.8 million in Q2 2023, with cost of sales as a percentage of net sales decreasing to 64.6% [96]. - Selling, general and administrative (SG&A) expenses for Q2 2024 decreased to 24.4% of net sales, down from 25.9% in Q2 2023, reflecting lower professional fees and severance costs [100]. - Interest expense for Q2 2024 was $6.2 million, a decrease of $2.1 million from Q2 2023, primarily due to lower outstanding term loan borrowings [103]. Segment Performance - AMS segment net sales for Q2 2024 were $215.0 million, a 6.8% increase from $201.3 million in Q2 2023, driven by higher sales volume and pricing [105]. - AOI for the AMS segment in Q2 2024 was $26.9 million, up 12.1% from $24.0 million in Q2 2023, with AOI as a percentage of net sales increasing to 12.5% from 11.9% [107]. - EAAA segment net sales for Q2 2024 were $131.6 million, a 2.6% increase from $128.3 million in Q2 2023, primarily due to higher sales volume [109]. - AOI for the EAAA segment in Q2 2024 was $12.7 million, a significant increase of 230.8% from $3.8 million in Q2 2023, with AOI as a percentage of net sales rising to 9.6% from 3.0% [111]. Cash Flow and Liquidity - As of June 30, 2024, the company had $94.2 million in cash and $291.0 million of additional borrowing capacity under its Facility [114]. - Cash provided by operating activities for the six months ended June 30, 2024, was $34.2 million, a decrease of $13.8 million from the prior year [117]. - Cash used in investing activities for the six months ended June 30, 2024, was $11.6 million, an increase of $6.8 million from the prior year [118]. - The company anticipates that cash flows from operations will be sufficient to meet foreseeable cash requirements, although they can be affected by raw material availability and demand [119]. Market Risks and Economic Factors - Macroeconomic challenges, including inflation and geopolitical tensions, may adversely affect future performance, prompting the company to evaluate its cost structure and manufacturing footprint [90]. - As of June 30, 2024, a hypothetical immediate 100 basis point increase in interest rates would result in a net decrease of $10.6 million in the fair value of fixed rate long-term debt [124]. - Conversely, a 100 basis point decrease in interest rates would lead to a net increase of $11.1 million in the fair value of fixed rate long-term debt [124]. - A 10% decrease in foreign currency exchange rates against the U.S. dollar would decrease the fair value of financial instruments by $10.4 million, while a 10% increase would increase it by $12.7 million [124]. Internal Controls and Legal Matters - The company's disclosure controls and procedures were deemed effective as of the end of the reporting period, providing reasonable assurance that objectives are met [127]. - There were no changes in internal control over financial reporting during the last fiscal quarter that materially affected the controls [127]. - The evaluation of controls is performed under the supervision of the President and Chief Executive Officer and the Vice President and Chief Financial Officer [126]. - The company is involved in legal proceedings that may arise in the ordinary course of business [129].