Interface(US:TILE)2024-11-05 21:06Financial Performance - Consolidated net sales for the quarter ended September 29, 2024, were $344.3 million, an increase of 10.7% compared to $311.0 million in the same quarter last year[95]. - Consolidated operating income for the third quarter of 2024 was $42.2 million, up from $31.0 million in the third quarter of 2023, driven by higher sales and gross profit margin improvements[95]. - Consolidated net income for the quarter was $28.4 million, or $0.48 per diluted share, compared to $9.9 million, or $0.17 per diluted share, in the same period last year[95]. - For the first nine months of 2024, consolidated net sales reached $980.6 million, a 4.7% increase from $936.4 million in the same period last year[96]. - Consolidated operating income for the first nine months of 2024 was $104.8 million, compared to $69.4 million in the same period last year, reflecting higher sales and gross profit margin improvements[96]. Gross Profit and Expenses - Gross profit margin for the third quarter of 2024 was 37.1%, up from 35.5% in the same period last year, primarily due to lower costs driven by raw material cost deflation[106]. - Selling, general and administrative (SG&A) expenses for the third quarter of 2024 increased by $6.2 million (7.8%) compared to the same period last year, but as a percentage of net sales, SG&A decreased to 24.8% from 25.5%[107]. Tax and Legal Matters - The effective tax rate for the three months ended September 29, 2024, was 21.2%, significantly lower than 38.7% for the same period in 2023, due to various tax benefits[112]. - The company is involved in legal proceedings that may arise in the ordinary course of business[145]. Cybersecurity and Macroeconomic Factors - The company experienced a cybersecurity event in November 2022, with $0.5 million recovered in costs during the nine months ended September 29, 2024, and anticipates further recoveries through insurance[97]. - Macroeconomic challenges, including inflation and geopolitical tensions, may adversely affect future performance, prompting the company to evaluate its cost structure and manufacturing footprint[98]. Segment Performance - AMS segment net sales for Q3 2024 reached $210.2 million, a 17.9% increase from $178.2 million in Q3 2023[114]. - AMS segment AOI for Q3 2024 was $32.2 million, reflecting a 38.0% increase from $23.3 million in Q3 2023, with AOI as a percentage of net sales rising to 15.3% from 13.1%[117]. - EAAA segment net sales for Q3 2024 were $134.1 million, a 1.0% increase from $132.8 million in Q3 2023, with currency fluctuations contributing approximately $1.6 million to sales[119]. - EAAA segment AOI for Q3 2024 increased by 24.9% to $11.3 million from $9.0 million in Q3 2023, with AOI as a percentage of net sales rising to 8.4% from 6.8%[121]. - AOI in EAAA for the first nine months of 2024 increased by 86.9% to $31.4 million from $16.8 million in the prior year, with AOI as a percentage of net sales rising to 8.1% from 4.3%[122]. Cash Flow and Financial Position - As of September 29, 2024, the Company had $115.6 million in cash and $41.2 million in term loan borrowings, with additional borrowing capacity of $299.3 million[124]. - Cash provided by operating activities for the nine months ended September 29, 2024, was $110.4 million, a decrease of $3.8 million from the prior year[128]. - Cash used in investing activities increased to $16.7 million for the nine months ended September 29, 2024, compared to $10.6 million in the prior year[129]. - Cash used in financing activities was $89.5 million for the nine months ended September 29, 2024, an increase of $8.7 million from the prior year[130]. Market Risk and Controls - As of September 29, 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[137]. - Conversely, a 100 basis point decrease in interest rates would lead to a net increase of $7.0 million in the fair value of fixed rate long-term debt[137]. - A 10% increase or decrease in foreign currency exchange rates against the U.S. dollar would result in a respective change of $12.9 million in the net fair value of financial instruments[138]. - There were no changes in internal control over financial reporting during the last fiscal quarter that materially affected the controls[143]. - 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[142]. - The company utilizes sensitivity analysis to measure the impact of market risk on fair values of market sensitive instruments[135]. - The company does not expect significant impacts on the fair value of debt instruments due to changes in interest rates, although interest expense may be affected[136]. - The discussion of market risk is based on the nine months ended September 29, 2024, with reference to the Annual Report for the fiscal year ended December 31, 2023[134]. - The evaluation of controls was performed under the supervision of the President and Chief Executive Officer and the Vice President and Chief Financial Officer[140].