- Operating Income Up 34% Year-Over-Year to $21.2 million -
- Second Quarter Orders Up 17% Year-Over-Year -
- Second Quarter Sales Up 14% Year-Over-Year -
ATLANTA, July 27 /PRNewswire-FirstCall/ -- Interface, Inc.
(Nasdaq: IFSIA), a worldwide floorcoverings and fabrics company, today
announced results for the second quarter ended July 3, 2005.
Second quarter 2005 results included a 14.0% increase in sales to
$246.5 million, from $216.2 million in the year ago period. Operating income
was $21.2 million in the 2005 second quarter, a 33.7% increase over operating
income of $15.9 million in the second quarter 2004. As a percentage of sales,
operating income improved to 8.6% in the second quarter of 2005 versus 7.3% of
sales in the year ago period.
Pursuant to the provisions of the American Jobs Creation Act of 2004, the
Company repatriated $10.5 million of earnings from foreign subsidiaries during
the second quarter of 2005. This plan takes advantage of the Company's
ability to initiate such a transaction at a substantially reduced tax rate,
provided the repatriation occurs before the end of 2005. Consequently, the
Company recorded a tax charge of approximately $1.6 million, or $0.03 per
share, in the second quarter related to the repatriation. After this charge,
income from continuing operations for the 2005 second quarter was $3.9
million, or $0.08 per share.
As announced in the third quarter of last year, the Company made the
decision to exit the owned dealer business. Consequently, it is reporting the
results of operations for its owned Re:Source dealers (as well as a small
Australian dealer business and a small residential fabrics business) as
"discontinued operations," in accordance with accounting standards. In the
2005 second quarter, these operations yielded an after-tax operating loss of
$9.8 million, and the Company recorded a $1.6 million after-tax loss on the
disposal of certain of these operations. As a result, the Company's net loss
for the second quarter of 2005 was $7.4 million, or $0.14 per share, compared
with a net loss of $0.2 million, or $0.00 per share, in the second quarter of
2004.
"We are very pleased with our results for the quarter, which reflected
healthy top-line growth and profitability improvements across nearly all of
our businesses and regions," said Daniel T. Hendrix, President and Chief
Executive Officer. "Our results speak to the success we are achieving in our
markets, the strength of our brands and our segmentation strategy, and the
earnings leverage built into our company. Our modular business continued to
lead the way, as the Americas, Asia-Pacific, and European regions all produced
double-digit growth in sales and operating income during the quarter.
Additionally, we were encouraged to see continued recovery in the corporate
office market and considerable success in the retail space market, which
helped drive consolidated orders up 17% to $262 million, compared with the
second quarter of last year."
Mr. Hendrix continued, "Interface continues to lead and shape the modular
carpet market, which is expanding in virtually all parts of the world. Our
segmentation strategy is working well, enabling us to gain market share and
deliver worldwide modular sales growth of 20% year-over-year. Revenues in our
fabrics business were up 6%, largely due to the improving corporate office
market reflected in sales to OEM customers, and we expect improved
profitability in this business during the second half of the year. In our
Bentley Prince Street broadloom business, orders were up 9%, and we are
confident that our initiatives to cut costs and increase manufacturing
efficiencies in this business will lead to continued profit improvements as we
move through the rest of the year."
Patrick C. Lynch, Vice President and Chief Financial Officer of Interface,
commented, "The combination of higher revenues and the sustained reduction in
our cost base resulted in increased operating leverage and profitability. Raw
material costs stabilized during the quarter, which allowed our price
increases to take hold and offset the cost increases we had experienced in the
preceding six months. As a result, gross margin in the second quarter
improved to 31.3% from 30.9% in the second quarter of 2004. We also have now
completed the divestiture of our dealer businesses, in line with our stated
timeline, and we expect to realize additional cost structure efficiencies and
improvements in our cash flow in the second half of the year."
For the first six months of 2005, sales were $481.3 million, compared with
$426.2 million for the same period a year ago, an increase of 12.9%.
Operating income for the 2005 six-month period increased to $38.4 million,
versus operating income of $29.6 million for the comparable 2004 six-month
period. Income from continuing operations for the first six months of 2005
increased to $6.9 million, from $2.2 million in the prior year period.
Mr. Hendrix concluded, "We continue to be bullish about the momentum we
have in our business and our prospects. Our focus will remain on leveraging
the leading position of our core modular carpet business and enlarging our
presence in all market segments worldwide, while at the same time taking the
additional actions necessary to ensure that improvements in our fabrics and
broadloom businesses continue throughout the year. We believe that with the
execution of our business strategy, and the ongoing strengthening of our
markets, we can continue to generate top-line growth while expanding
profitability in all areas of our business."
The Company will host a conference call tomorrow, July 28, 2005, at
9:00 a.m. Eastern Time, to discuss its second quarter 2005 results. The
conference call will be simultaneously broadcast live over the Internet.
Listeners may access the conference call live over the Internet at
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-
eventDetails&c=112931&eventID=1098475 or through the Company's website at
http://www.interfaceinc.com/results/investor/. The archived version of the
conference call will be available at these sites beginning approximately one
hour after the call ends through July 28, 2006 at 11:59 p.m. Eastern Time.
Interface, Inc. is a recognized leader in the worldwide interiors market,
offering floorcoverings and fabrics. The Company is committed to the goal of
sustainability and doing business in ways that minimize the impact on the
environment while enhancing shareholder value. The Company is the world's
largest manufacturer of modular carpet under the Interface, InterfaceFLOR,
Heuga, Bentley and Prince Street brands, and, through its Bentley Mills and
Prince Street brands, enjoys a leading position in the high quality, designer-
oriented segment of the broadloom carpet market. The Company is a leading
producer of interior fabrics and upholstery products, which it markets under
the Guilford of Maine, Toltec, Intek, Chatham and Camborne brands, and
provides specialized fabric services through its TekSolutions business.
Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995: Except for historical information contained herein, the other matters
set forth in this news release are forward-looking statements. The forward-
looking statements set forth above involve a number of risks and uncertainties
that could cause actual results to differ materially from any such statement,
including risks and uncertainties associated with economic conditions in the
commercial interiors industry as well as the risks and uncertainties discussed
under the heading "Safe Harbor Compliance Statement for Forward-Looking
Statements" included in Item 1 of the Company's Annual Report on Form 10-K for
the fiscal year ended January 2, 2005, which discussion is incorporated herein
by this reference, including, but not limited to, the discussion of specific
risks and uncertainties under the headings "We compete with a large number of
manufacturers in the highly competitive commercial floorcovering products
market, and some of these competitors have greater financial resources than we
do," "Sales of our principal products have been and may continue to be
affected by adverse economic cycles in the construction and renovation of
commercial and institutional buildings," "Our success depends significantly
upon the efforts, abilities and continued service of our senior management
executives and our principal design consultant, and our loss of any of them
could affect us adversely," "Our substantial international operations are
subject to various political, economic and other uncertainties that could
adversely affect our business results, including by restrictive taxation or
other government regulation and by foreign currency fluctuations," "Our
Chairman, together with other insiders, currently has sufficient voting power
to elect a majority of our Board of Directors," "Large increases in the cost
of petroleum-based raw materials, which we are unable to pass through to our
customers, could adversely affect us," "Unanticipated termination or
interruption of any of our arrangements with our primary third-party suppliers
of synthetic fiber could have a material adverse effect on us," "We have a
significant amount of indebtedness which could have important negative
consequences to us," and "Our Rights Agreement could discourage tender offers
or other transactions for our stock that could result in shareholders
receiving a premium over the market price for our stock." Any forward-looking
statements are made pursuant to the Private Securities Litigation Reform Act
of 1995 and, as such, speak only as of the date made. The Company assumes no
responsibility to update or revise forward-looking statements made in this
press release and cautions readers not to place undue reliance on any such
forward-looking statements.
Consolidated Condensed Statements of Operations
(In thousands, except per share data)
Three Months Ended Six Months Ended
07/03/05 07/04/04 07/03/05 07/04/04
Net Sales $246,545 $216,213 $481,260 $426,246
Cost of Sales 169,317 149,355 332,893 294,567
Gross Profit 77,228 66,858 148,367 131,679
Selling, General &
Administrative Expenses 56,005 50,988 109,974 102,120
Operating Income 21,223 15,870 38,393 29,559
Interest Expense 11,506 11,552 23,084 23,357
Bond Offering Cost -- -- -- 1,869
Other Expense, Net 268 532 868 1,322
Income Before Taxes 9,449 3,786 14,441 3,011
Income Tax Expense 5,509 1,282 7,578 793
Income from Continuing
Operations 3,940 2,504 6,863 2,218
Discontinued Operations,
Net of Tax (9,763) (2,663) (14,525) (5,406)
Loss on Disposal, Net of Tax (1,598) -- (1,935) --
Net Loss $(7,421) $(159) $(9,597) $(3,188)
Earnings (Loss) Per Share
- Basic
Continuing Operations $0.08 $0.05 $0.13 $0.04
Discontinued Operations (0.19) (0.05) (0.28) (0.10)
Loss on Disposal (0.03) -- (0.04) --
Earnings (Loss) Per Share
- Basic $(0.14) $(0.00) $(0.19) $(0.06)
Earnings (Loss) Per Share
- Diluted
Continuing Operations $0.08 $0.05 $0.13 $0.04
Discontinued Operations (0.19) (0.05) (0.28) (0.10)
Loss on Disposal (0.03) -- (0.03) --
Earnings (Loss) Per Share
- Diluted $(0.14) $(0.00) $(0.18) $(0.06)
Common Shares Outstanding
- Basic 51,398 50,581 51,362 50,474
Common Shares Outstanding
- Diluted 52,481 51,905 52,622 52,009
Orders from Continuing
Operations 261,600 223,800 522,200 461,500
Continuing Operations Backlog
(as of 07/03/05 and 01/02/05,
respectively) 103,200 87,500
Consolidated Condensed Balance Sheets
(In thousands) 07/03/05 01/02/05
Assets
Cash $22,441 $22,164
Accounts Receivable 150,750 142,228
Inventory 149,579 137,618
Other Current Assets 27,188 22,756
Assets of Businesses Held for Sale 13,867 42,788
Total Current Assets 363,825 367,554
Property, Plant & Equipment 181,312 194,702
Other Assets 310,211 307,542
Total Assets $855,348 $869,798
Liabilities
Accounts Payable $59,855 $46,466
Accrued Liabilities 86,437 86,856
Liabilities of Businesses Held for Sale 457 5,390
Long-Term Debt 9,824 --
Senior and Senior Subordinated Notes 460,000 460,000
Other Liabilities 74,626 76,908
Total Liabilities 691,199 675,620
Shareholders' Equity 164,149 194,178
Total Liabilities and Shareholders' Equity $855,348 $869,798
Consolidated Condensed Statements of Cash Flows
(In millions)
Three Months Ended Six Months Ended
07/03/05 07/04/04 07/03/05 07/04/04
Net (Loss) $(7.4) $(0.2) $(9.6) $(3.2)
Adjustments for
Discontinued Operations 11.4 2.7 16.5 5.4
Income from Continuing
Operations, Net of Tax $4.0 $2.5 $6.9 $2.2
Depreciation and
Amortization 8.1 8.5 16.2 17.8
Deferred Income Taxes and
Other Non-Cash Items (5.1) (4.5) (10.7) (4.5)
Change in Working Capital
Accounts Receivable (11.1) (7.0) (12.1) (1.8)
Inventories 0.7 0.4 (15.5) (12.8)
Prepaids (0.6) 1.2 (6.2) (3.3)
Accounts Payable and
Accrued Expenses 16.2 3.2 16.1 3.7
Cash Provided from (Used in)
Continuing Operations 12.2 4.3 (5.3) 1.3
Cash Provided from (Used in)
Operating Activities of
Discontinued Operations 1.8 (5.4) 7.9 (8.2)
Cash Provided from (Used in)
Operating Activities 14.0 (1.1) 2.6 (6.9)
Cash Provided from (Used in)
Investing Activities (7.0) (3.0) (11.0) (9.4)
Cash Provided from (Used in)
Financing Activities (6.4) 2.3 10.5 28.8
Effect of Exchange Rate
Changes on Cash (1.3) 0.2 (1.8) 0.1
Net (Decrease) Increase in Cash $(0.7) $(1.6) $0.3 $12.6
Consolidated Condensed Segment Reporting
(In millions)
Three Months Ended Six Months Ended
07/03/05 07/04/04 %Change 07/03/05 07/04/04 % Change
Net Sales
Modular Carpet $163.7 $137.0 19.5% $317.2 $270.2 17.4%
Bentley
Prince Street 29.5 29.3 0.7% 57.6 56.3 2.3%
Fabrics Group 49.5 46.9 5.5% 98.0 93.7 4.6%
Specialty
Products 3.8 3.0 26.7% 8.5 6.0 41.7%
Total $246.5 $216.2 14.0% $481.3 $426.2 12.9%
Operating
Income (Loss)
Modular Carpet $21.4 $14.4 $37.9 $27.5
Bentley
Prince Street 0.5 (0.6) 1.0 (0.9)
Fabrics Group 0.1 2.0 1.1 3.4
Specialty
Products 0.2 (0.1) 0.4 --
Corporate
Expenses and
Eliminations (1.0) 0.2 (2.0) (0.4)
Total $21.2 $15.9 $38.4 $29.6
SOURCE Interface, Inc.
CONTACT:
Daniel T. Hendrix
President and Chief Executive Officer
Patrick C. Lynch
Chief Financial Officer
both of Interface, Inc.
+1-770-437-6800
Christine Mohrmann
or Jim Olecki
Financial Dynamics
+1-212-850-5600
for Interface, Inc.
Web site: http://www.interfaceinc.com
(IFSIA)