Interface Inc.

11/10/2026 | Press release | Distributed by Public on 11/10/2026 15:58

Quarterly Report for Quarter Ending October 4, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our discussions below in this Item 2 are based upon the more detailed discussions about our business, operations and financial condition included in our Annual Report on Form 10-K for the fiscal year ended December 28, 2025, under Part II, Item 7 of that Form 10-K. Our discussions here focus on our results during the quarter and nine months ended October 4, 2026, or as of, October 4, 2026, and the comparable periods of 2025, and to the extent applicable, any material changes from the information discussed in that Form 10-K or other important intervening developments or information since that time. These discussions should be read in conjunction with that Form 10-K for more detailed and background information. The nine-month period ended October 4, 2026 includes 40 weeks and the nine-month period ended September 28, 2025 includes 39 weeks. The three-month periods ended October 4, 2026 and September 28, 2025 both include 13 weeks.
Executive Overview
During the quarter ended October 4, 2026, we had consolidated net sales of $366.7 million, up 0.6% compared to $364.5 million in the third quarter last year as favorable prices were partially offset by lower sales volume and the deferral of certain retail market segment renovation projects into future periods. Consolidated operating income was $56.3 million for the third quarter of 2026 compared to $53.4 million in the third quarter last year, primarily due to higher gross profit margin mostly driven by favorable product mix partially offset by higher tariff costs. Consolidated net income for the quarter ended October 4, 2026, was $39.2 million, or $0.67 per diluted share, compared to $46.1 million, or $0.78 per diluted share, in the third quarter last year. Prior year net income was impacted by an income tax benefit related to certain deferred tax adjustments. See Note 12 entitled "Income Taxes" of Part 1, Item 1 of this Quarterly Report on Form 10-Q for additional information.
During the first nine months of 2026, we had consolidated net sales of $1,093.5 million, up 5.4% compared to $1,037.5 million in the first nine months of last year, primarily due to higher customer demand partially driven by an extra week in the first nine months of 2026 compared to the first nine months of 2025. Consolidated operating income was $163.6 million for the first nine months of 2026, compared to $128.6 million in the same period last year, primarily due to higher sales and higher gross profit margin driven by IEEPA tariff refunds as discussed below and favorable product mix. Consolidated net income for the nine months ended October 4, 2026, was $114.2 million, or $1.95 per diluted share, compared to $91.7 million, or $1.55 per diluted share, in the same period last year.
Impact of Macroeconomic Trends
Macroeconomic conditions including inflation, energy market volatility, interest rates, evolving trade policies and tariffs, supply chain challenges, financial pressures in the commercial office market, and geopolitical conflicts may increase our costs and impact the demand for our products, which may adversely affect our future financial performance. We continue to evaluate our cost structure and global manufacturing footprint to identify and activate opportunities to reduce costs and optimize operating efficiency.
In 2025, the U.S. government imposed a series of higher tariffs on goods imported into the U.S. As a result, the Company incurred higher tariff costs on rubber and luxury vinyl tile products imported into the U.S. in the second half of fiscal year 2025 and in the first nine months of 2026. In February 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") were invalid. During the second quarter of 2026, the Company recognized approximately $15.6 million in refunds for tariffs previously paid under the IEEPA. These refunds were recognized as a reduction to cost of sales in the consolidated condensed statements of operations. The Company also recorded approximately $0.5 million of interest income associated with these tariff refunds, presented as a reduction to interest expense, net in the consolidated condensed statements of operations. As of October 4, 2026, any outstanding requests for IEEPA tariff refunds are not material.
Analysis of Results of Operations
Consolidated Results
The following table presents, as a percentage of net sales, certain items included in our consolidated condensed statements of operations for the three-month and nine-month periods ended October 4, 2026 and September 28, 2025:
Three Months Ended Nine Months Ended
October 4, 2026 September 28, 2025 October 4, 2026 September 28, 2025
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 59.4 60.6 58.5 61.2
Gross profit 40.6 39.4 41.5 38.8
Selling, general and administrative expenses 25.2 24.8 26.5 26.4
Operating income 15.4 14.6 15.0 12.4
Interest/Other expense, net
1.0 1.3 1.0 1.9
Income before income tax expense 14.4 13.3 14.0 10.5
Income tax expense 3.7 0.6 3.6 1.7
Net income 10.7 % 12.7 % 10.4 % 8.8 %
Consolidated Net Sales
Below is information regarding our consolidated net sales, and analysis of those results, for the three-month and nine-month periods ended October 4, 2026, and September 28, 2025:
Three Months Ended Percentage
Change 		Nine Months Ended Percentage
Change
October 4, 2026 September 28, 2025 October 4, 2026 September 28, 2025
(in thousands) (in thousands)
Consolidated net sales $ 366,736 $ 364,526 0.6 % $ 1,093,471 $ 1,037,461 5.4 %
For the quarter ended October 4, 2026, consolidated net sales increased $2.2 million (0.6%) versus the comparable period in 2025, mostly due to higher average sales prices (approximately 1%) partially offset by lower sales volume. Currency fluctuations had no material impact on consolidated net sales for the third quarter of 2026 compared to the same period last year. On a market segment basis, the sales increase was primarily in the corporate office, education, and healthcare market segments, partially offset by lower sales in the retail market segment.
For the nine months ended October 4, 2026, consolidated net sales increased $56.0 million (5.4%) versus the comparable period in 2025, primarily due to higher sales volume (approximately 3%) partially driven by an extra week in the first nine months of 2026, higher average sales prices (approximately 1%), and favorable currency fluctuations of approximately $19.9 million (approximately 2%) from the strengthening of the Euro and Australian dollar against the U.S. dollar. On a market segment basis, the sales increase was primarily in the corporate office, healthcare, and education market segments.
Consolidated Cost and Expenses
The following table presents our consolidated cost of sales and selling, general and administrative expenses for the three-month and nine-month periods ended October 4, 2026, and September 28, 2025:
Three Months Ended Percentage
Change 		Nine Months Ended Percentage
Change
October 4, 2026 September 28, 2025 October 4, 2026 September 28, 2025
(in thousands) (in thousands)
Consolidated cost of sales $ 217,991 $ 220,894 (1.3) % $ 639,921 $ 634,889 0.8 %
Consolidated selling, general and administrative expenses 92,436 90,272 2.4 % 289,995 273,938 5.9 %
Consolidated Cost of Sales
For the quarter ended October 4, 2026, consolidated cost of sales decreased $2.9 million (1.3%) compared to the third quarter of 2025, primarily due to lower sales volume partially offset by higher tariff costs ($1.7 million). Currency translation had no material impact on consolidated cost of sales in the third quarter of 2026 compared to the same period last year. As a percentage of net sales, our cost of sales decreased to 59.4% for the third quarter of 2026 versus 60.6% for the third quarter of 2025.
For the nine months ended October 4, 2026, consolidated cost of sales increased $5.0 million (0.8%) versus the comparable period in 2025, primarily due to higher sales partially offset by the impact of IEEPA tariff refunds. Currency translation had a negative impact on consolidated cost of sales for the first nine months of 2026 and partially increased our costs by approximately $13.0 million (2.1%) compared to the same period last year. As a percentage of net sales, our cost of sales decreased to 58.5% for the first nine months of 2026 versus 61.2% for the first nine months of 2025.
Consolidated Gross Profit
For the quarter ended October 4, 2026, gross profit, as a percentage of net sales, was 40.6% compared with 39.4% in the same period last year. The increase in gross profit percentage was primarily due to favorable product mix and pricing (approximately 1%) partially offset by higher tariff costs.
For the nine months ended October 4, 2026, gross profit, as a percentage of net sales, was 41.5% compared with 38.8% in the same period last year. The increase in gross profit percentage was primarily due to lower costs (approximately 1%) driven by IEEPA tariff refunds, higher sales volume and product mix (approximately 1%), and higher average sales prices (approximately 1%).
Consolidated Selling, General and Administrative ("SG&A") Expenses
For the quarter ended October 4, 2026, consolidated SG&A expenses increased $2.2 million (2.4%) versus the comparable period in 2025, primarily due to higher employee labor and benefits costs of $3.3 million partially offset by lower variable compensation of $1.8 million. Currency translation had no material impact on consolidated SG&A expenses in the third quarter of 2026 compared to the same period last year. As a percentage of net sales, SG&A expenses were 25.2% for the third quarter of 2026 and 24.8% for the third quarter of 2025.
For the nine months ended October 4, 2026, consolidated SG&A expenses increased $16.1 million (5.9%) versus the comparable period in 2025. Currency translation had a negative impact on consolidated SG&A expenses of approximately $4.1 million (approximately 2%) in the first nine months of 2026 compared to the same period last year. SG&A expenses were higher for the first nine months of 2026 primarily due to (i) higher variable compensation of $9.0 million; (ii) higher employee labor and benefits costs of $5.7 million; (iii) higher advertising costs of $2.0 million mostly driven by a new product launch; and (iv) higher professional fees of $2.3 million. These increases were partially offset by lower severance costs of $2.4 million due to employee reduction initiatives recognized in the comparable prior year period. As a percentage of net sales, SG&A expenses increased to 26.5% for the first nine months of 2026 versus 26.4% for the first nine months of 2025.
Interest Expense
During the quarter ended October 4, 2026, interest expense was $2.2 million, a decrease of $2.0 million from the comparable period in 2025, primarily due to lower outstanding borrowings as our formerly outstanding senior notes were redeemed in December 2025. For the nine months ended October 4, 2026, interest expense was $7.3 million, a decrease of $5.8 million from the comparable period in 2025, primarily due to lower outstanding borrowings as discussed above.
Provision for Income Taxes
The effective tax rate for the three and nine months ended October 4, 2026, was 25.9% and 25.2%, respectively, compared to 4.8% and 16.5% for the same periods in 2025. The increase in the effective tax rate for the three and nine months ended October 4, 2026, compared to the same periods in the prior year was primarily due to statutory tax rate changes requiring the remeasurement and adjustment of deferred taxes which resulted in a tax benefit in fiscal year 2025, partially offset by an increase in deductions related to foreign-derived income. See Note 12 entitled "Income Taxes" of Part 1, Item 1 of this Quarterly Report on Form 10-Q for additional information.
Segment Operating Results
AMS Segment - Net Sales and Adjusted Operating Income ("AOI")
The following table presents AMS segment net sales and AOI for the three-month and nine-month periods ended October 4, 2026, and September 28, 2025:
Three Months Ended Percentage Change Nine Months Ended Percentage Change
October 4, 2026 September 28, 2025 October 4, 2026 September 28, 2025
(in thousands) (in thousands)
AMS segment net sales $ 219,364 $ 218,614 0.3 % $ 662,701 $ 637,994 3.9 %
AMS segment AOI(1)
41,229 40,476 1.9 % 126,111 109,184 15.5 %
(1) Includes allocation of corporate and global support SG&A expenses. Excludes restructuring, asset impairment, severance, and other, net. See Note 10 entitled "Segment Information" of Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.
During the third quarter of 2026, net sales in AMS increased 0.3% versus the comparable period in 2025, primarily due to higher average sales prices partially offset by lower volume. On a market segment basis, the AMS sales increase was primarily in the education, corporate office, and healthcare market segments partially offset by a decrease in the retail market segment.
During the first nine months of 2026, net sales in AMS increased 3.9% versus the comparable period in 2025, primarily due to higher sales volume and higher average blended sales prices on favorable price / mix. On a market segment basis, the AMS sales increase was primarily in the corporate office, healthcare, and education market segments.
AOI in AMS increased 1.9% during the third quarter of 2026 compared to the prior year period, primarily due to higher gross profit margin driven by higher average sales prices partially offset by higher tariff costs. As a percentage of net sales, AOI increased to 18.8% during the third quarter of 2026 compared to 18.5% in the same period last year.
AOI in AMS increased 15.5% during the first nine months of 2026 compared to the prior year period, primarily due to higher sales and higher gross profit margin mostly driven by the impact of IEEPA tariff refunds and product mix. As a percentage of net sales, AOI increased to 19.0% during the first nine months of 2026 compared to 17.1% in the same period last year.
EAAA Segment - Net Sales and AOI
The following table presents EAAA segment net sales and AOI for the three-month and nine-month periods ended October 4, 2026, and September 28, 2025:
Three Months Ended Percentage Change Nine Months Ended Percentage Change
October 4, 2026 September 28, 2025 October 4, 2026 September 28, 2025
(in thousands) (in thousands)
EAAA segment net sales $ 147,372 $ 145,912 1.0 % $ 430,770 $ 399,467 7.8 %
EAAA segment AOI(1)
15,993 13,670 17.0 % 38,783 26,325 47.3 %
(1) Includes allocation of corporate and global support SG&A expenses. Excludes restructuring, asset impairment, severance and other, net and purchase accounting amortization. See Note 10 entitled "Segment Information" of Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.
During the third quarter of 2026, net sales in EAAA increased 1.0% versus the comparable period in 2025, primarily due to higher sales volume and favorable currency fluctuations of approximately $1.0 million (0.7%) from the strengthening of the Australian dollar against the U.S. dollar partially offset by the weakening of the Euro against the U.S. dollar. On a market segment basis, the EAAA sales increase was primarily in the public buildings market segment partially offset by decreases in transportation and education market segments.
During the first nine months of 2026, net sales in EAAA increased 7.8% versus the comparable period in 2025, primarily due to higher sales volume and favorable currency fluctuations of approximately $19.6 million (4.9%) from the strengthening of the Euro and Australian dollar against the U.S. dollar. On a market segment basis, the EAAA sales increase was primarily in the corporate office, public buildings, and education market segments.
AOI in EAAA increased 17.0% during the third quarter of 2026 versus the comparable period in 2025, primarily due to higher sales and higher gross profit margin driven by production efficiencies and favorable product mix. Currency fluctuations had no material impact on EAAA AOI for the third quarter of 2026 compared to the same period last year. As a percentage of net sales, AOI increased to 10.9% during the third quarter of 2026 compared to 9.4% in the same period last year.
AOI in EAAA increased 47.3% during the first nine months of 2026 versus the comparable period in 2025, primarily due to higher sales and gross profit margin as discussed above. Currency fluctuations had a positive impact on AOI of approximately $3.0 million (5.2%) for the first nine months of 2026 compared to the same period in 2025. As a percentage of net sales, AOI increased to 9.0% during the first nine months of 2026 compared to 6.6% in the same period last year.
Financial Condition, Liquidity and Capital Resources
General
At October 4, 2026, the Company had $81.1 million in cash. At that date, the Company had $128.6 million in term loan borrowings, $1.7 million in revolving loan borrowings, and $0.6 million in letters of credit outstanding under our Facility. As of October 4, 2026, we had additional borrowing capacity of $247.7 million under the Facility. We anticipate that our liquidity is sufficient to meet our obligations for the next 12 months, and we expect to generate sufficient cash to meet our long-term obligations.
Balance Sheet
Accounts receivable, net, were $176.7 million at October 4, 2026, compared to $174.5 million at December 28, 2025. The increase of $2.3 million was primarily due to the impact of higher net sales as a result of increased customer demand during fiscal year 2026.
Inventories, net, were $305.4 million at October 4, 2026, compared to $275.0 million at December 28, 2025. The increase of $30.4 million was primarily due to higher finished goods inventory driven by increased production volumes and higher customer demand.
Analysis of Cash Flows
The following table presents a summary of cash flows for the nine-month periods ended October 4, 2026 and September 28, 2025, respectively:
Nine Months Ended
October 4, 2026 September 28, 2025
(in thousands)
Net cash provided by (used in):
Operating activities $ 138,187 $ 118,596
Investing activities (31,607) (25,477)
Financing activities (94,729) (13,995)
Effect of exchange rate changes on cash (2,097) 9,005
Net change in cash and cash equivalents 9,754 88,129
Cash and cash equivalents at beginning of period 71,323 99,226
Cash and cash equivalents at end of period $ 81,077 $ 187,355
Cash provided by operating activities was $138.2 million for the nine months ended October 4, 2026, which represents an increase of $19.6 million from the prior year comparable period, primarily attributable to higher net income for the nine months ended October 4, 2026, partially offset by a higher use of cash related to inventory build as discussed above.
Cash used in investing activities was $31.6 million for the nine months ended October 4, 2026, which represents an increase of $6.1 million from the prior year comparable period, primarily attributable to a continued capital investment in manufacturing automation and robotics solutions during the first nine months of 2026.
Cash used in financing activities was $94.7 million for the nine months ended October 4, 2026, which represents an increase of $80.7 million from the prior year comparable period. The year-over-year increase was primarily due to higher repayments of borrowings under the Facility, including a prepayment of $40.6 million on the outstanding term loan borrowings. The increase was additionally driven by higher repurchases of common stock during the first nine months of 2026 compared to the prior year.
Share Repurchases
In May 2022, the Company adopted a share repurchase program in which the Company is authorized to repurchase up to $100 million of its outstanding shares of common stock. The program has no specific expiration date. During the nine months ended October 4, 2026, the Company repurchased 771,125 shares of common stock at a weighted average price of $26.90 per share pursuant to this program.
Outlook
Based on our third quarter and year to date 2026 results, we anticipate revenue growth for fiscal year 2026 compared to the prior year comparable period. However, during the third quarter of 2026, we experienced softer conditions in EAAA, particularly in Europe, which contributed to lower year over year orders received for that area, which may negatively impact future net sales. We also anticipate that our fourth quarter 2026 will be impacted by higher input costs amid increased global macroeconomic uncertainty.
Cash flows from operations, cash and cash equivalents, and other sources of liquidity are expected to be available and sufficient to meet foreseeable cash requirements. However, the Company's cash flows from operations can be affected by numerous factors including raw material availability and cost, and demand for our products.
Backlog
As of October 19, 2026, the consolidated backlog of unshipped orders was approximately $256.7 million. As disclosed in our Annual Report on Form 10-K for the fiscal year ended December 28, 2025, backlog was approximately $222.8 million as of February 2, 2026. Historically, backlog is subject to significant fluctuations due to the timing of orders for individual large projects. Disruptions in supply and distribution chains or delays in construction projects and flooring installations worldwide have caused, and may continue to cause, fluctuations in our backlog.
Forward-Looking Statements
This report contains statements which may constitute "forward-looking statements" within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. Words such as "believes," "anticipates," "plans," "expects," "projects," "estimates" and similar expressions are intended to identify forward-looking statements. Forward-looking statements include statements regarding the intent, belief or current expectations of our management team, as well as the assumptions on which such statements are based. Any forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could cause actual results to differ materially from those contemplated by such forward-looking statements.
Forward-looking statements in this report include, without limitation, any statements regarding our anticipated revenue growth for fiscal year 2026; the anticipated impact on our fourth quarter 2026 results from higher input costs amid increased global macroeconomic uncertainty; the sufficiency of our liquidity, cash flows from operations, cash and cash equivalents, and other sources of liquidity to meet our obligations and foreseeable cash requirements; our expectation that we will remain in compliance with the covenants under our Syndicated Credit Facility; the expected timing of recognition of unrecognized share-based compensation expense; the expected impact of the OECD Pillar Two global minimum tax rules; and the effects of inflation, energy market volatility, interest rates, evolving trade policies and tariffs, supply chain challenges, financial pressures in the commercial office market, geopolitical conflicts and other macroeconomic factors.
Important factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include risks and uncertainties associated with the following:
•competition in the highly competitive floorcovering products market, including from competitors with greater financial resources, and challenges competing on price, product design or sustainability;
•non-cash impairment charges to goodwill or other intangible assets;
•our dependence on our senior management, our principal design consultant and other key personnel, and disruption from changes within our sales organization;
•changes in U.S. and foreign trade policies and tariffs, including retaliatory tariffs;
•economic, political, regulatory and other uncertainties associated with our substantial international operations, including recent softer conditions in our European business and the potential for continued sales deterioration in that market;
•risks related to our backlog, which historically has been subject to significant fluctuations due to the timing of orders for individual large projects, disruptions in supply and distribution chains or delays in construction projects and flooring installations worldwide, and which may not be fully realized into revenue;
•large increases in the cost of our raw materials, energy, shipping costs, duties or tariffs that we are unable to offset or pass through to our customers;
•the termination or interruption of our arrangements with our primary suppliers of synthetic fiber, luxury vinyl tile or other key raw materials;
•disruptions, increased costs, customer complaints or warranty claims resulting from changes to our facilities, manufacturing processes, product construction and product composition;
•losses from natural disasters, acts of war, terrorism, catastrophes, fire, adverse weather conditions, pandemics, unstable geopolitical situations or other unexpected events;
•volatility in the market price of our common stock;
•adverse economic conditions and cycles affecting the new construction and renovation markets, particularly the corporate office market segment;
•disruptions to or failures of the information technology systems we use, including as a result of cybersecurity incidents;
•changes to environmental laws, regulations and industry standards regarding climate change and other sustainability matters, and our ability to meet our sustainability targets and commitments;
•the conflicts between Russia and Ukraine and in the Middle East;
•fluctuations in foreign currency exchange rates;
•our substantial indebtedness, our ability to generate sufficient cash flow to service it and comply with the covenants in our debt agreements, and our ability to incur additional indebtedness;
•litigation and claims; and
•other factors set forth under the title "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 28, 2025, as the same may be amended or supplemented in any subsequent Quarter Reports on Form 10-Q.
In addition, factors currently unknown to us could cause actual results to differ materially from our forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.
Interface Inc. published this content on November 10, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 10, 2026 at 21:58 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]