- Operating Income Up 29% Year-Over-Year -
- $0.10 Diluted Earnings Per Share -
ATLANTA, Oct. 26 /PRNewswire-FirstCall/ -- Interface, Inc.
(Nasdaq: IFSIA), a worldwide floorcoverings and fabrics company, today
announced results for the third quarter ended October 2, 2005.
Third quarter 2005 results included a 9.5% increase in sales to $243.9
million, from $222.8 million in the year ago period. Operating income was
$20.5 million in the 2005 third quarter, a 28.9% increase over operating
income of $15.9 million in the third quarter 2004. As a percentage of sales,
operating income improved to 8.4% in the third quarter versus 7.1% of sales in
the year ago period. Net income for the quarter was $5.1 million, or $0.10
per diluted share, compared with a net loss in the prior year period of $47.8
million, or $0.92 per diluted share. (Included in the Company's results for
the third quarter 2004 is an operating loss related to discontinued operations
of $4.1 million as well as write-downs associated with these operations for
the impairment of assets and goodwill of $17.5 million and $29.0 million,
respectively, as previously announced. Continuing operations yielded income
of $2.4 million, or $0.05 per diluted share, in the third quarter 2004.)
"Third quarter performance represents another significant step forward for
Interface, as we continued to generate solid year-over-year growth in both
sales and operating income, even in the face of higher raw material prices,
the impact of the tragic events in the Gulf Coast region, and tougher year-
over-year comparables," said Daniel T. Hendrix, President and Chief Executive
Officer. "These results are indicative of the several positive trends we are
seeing in the industry and the momentum we are now generating in all of our
businesses. The improving U.S. office market, the ongoing success of our
market segmentation strategy, and the increasing popularity of carpet tile as
the floorcovering of choice continue to fuel growth for our Company. Our
modular business once again generated impressive returns, with double digit
sales growth in the U.S., record third quarter growth in Asia-Pacific, and
strengthening demand in Europe. We also are upbeat about the performance of
our fabrics and broadloom businesses in the third quarter, as sales and
operating income increased significantly in each. Given these results, we
believe our Company is beginning to hit on all cylinders."
Mr. Hendrix added, "Our segmentation strategy continues to pick up steam
around the world, with particular success in the modular carpet segment. With
effective execution of this strategy, we are leading and shaping the modular
market, while also forming relationships with new customers, such as
automobile manufacturers, on the fabrics side of our business. For the third
quarter, worldwide modular sales grew 12% year-over-year. The strong order
trend we saw in our fabrics business at the end of the second quarter
continued into the third quarter, and the ongoing strength of the corporate
office market led to a 7% increase in fabrics sales year-over-year. Sales
from our Bentley Prince Street broadloom business also increased during the
third quarter, which led to its fifth consecutive quarter of profitability."
Patrick C. Lynch, Vice President and Chief Financial Officer of Interface,
commented, "While there has been some degree of uncertainty surrounding oil
prices and the supply of raw materials in our industry, we have taken steps to
help offset these issues, including flowing through price increases to counter
higher raw material costs. In addition, the profitability improvements in our
fabrics and broadloom businesses led to gross margin expansion to 31.4% in the
third quarter from 29.4% in the third quarter of 2004."
For the first nine months of 2005, sales were $725.2 million, compared
with $649.1 million for the same period a year ago, an increase of 11.7%.
Operating income for the 2005 nine-month period increased to $58.9 million,
from $45.4 million in the comparable 2004 nine-month period. Income from
continuing operations was $12.2 million, or $0.23 per diluted share, in the
first nine months of 2005. This compares with income from continuing
operations of $4.6 million, or $0.09 per diluted share, in the year ago
period.
Mr. Hendrix concluded, "As we move into the fourth quarter, we are
encouraged with the level of order activity and we continue to be optimistic
about the future. Although increasing raw material costs will remain a
challenge in the near term, we believe that the product pricing and supply
chain actions we have taken -- coupled with the benefits we are reaping from
our decade-long journey toward sustainability -- position us well for further
progress. While our leading presence in the worldwide modular carpet market
continues to be the main driver of growth for Interface, our market
segmentation strategy and ongoing cost management initiatives have led to
higher sales levels and significant improvements in profitability in our
fabrics and broadloom businesses. We believe that we can continue to generate
top-line growth while improving profitability in all areas of our business.
During the fourth quarter, we expect continued sales growth and margin
expansion."
The Company will host a conference call today, October 26, 2005, at 5:00
p.m. Eastern Time, to discuss its third 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=1148621 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 October 26, 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, 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 Nine Months Ended
10/02/05 10/03/04 10/02/05 10/03/04
Net Sales $243,898 $222,822 $725,158 $649,068
Cost of Sales 167,357 157,298 500,250 451,865
Gross Profit 76,541 65,524 224,908 197,203
Selling, General &
Administrative
Expenses 56,029 49,645 166,003 151,765
Operating Income 20,512 15,879 58,905 45,438
Interest Expense 11,402 11,395 34,486 34,752
Bond Offering Cost -- -- -- --
1,869
Other Expense, Net 171 288 1,039 1,610
Income Before Taxes 8,939 4,196 23,380 7,207
Income Tax Expense 3,602 1,826 11,180 2,619
Income from Continuing
Operations 5,337 2,370 12,200 4,588
Discontinued Operations,
Net of Tax (216) (50,661) (14,741) (56,067)
Gain (Loss) on Disposal,
Net of Tax -- 465 (1,935) 465
Net Income (Loss) $5,121 $(47,826) $(4,476) $(51,014)
Earnings (Loss) Per
Share - Basic
Continuing Operations $0.10 $0.05 $0.24 $0.09
Discontinued Operations -- (1.01) (0.29) (1.11)
Gain (Loss) on Disposal -- 0.01 (0.04) 0.01
Earnings (Loss) Per
Share - Basic $0.10 $(0.95) $(0.09) $(1.01)
Earnings (Loss) Per
Share - Diluted
Continuing Operations $0.10 $0.05 $0.23 $0.09
Discontinued Operations -- (0.97) (0.28) (1.08)
Gain (Loss) on Disposal -- 0.00 (0.03) 0.01
Earnings (Loss) Per
Share - Diluted $0.10 $(0.92) $(0.08) $(0.98)
Common Shares
Outstanding - Basic 51,648 50,558 51,457 50,537
Common Shares
Outstanding - Diluted 53,444 52,099 52,779 52,038
Orders from Continuing
Operations $252,400 $238,900 $769,800 $700,500
Continuing Operations
Backlog (as of
10/02/05 and 01/02/05,
respectively) $102,300 $89,100
Consolidated Condensed Balance Sheets
(In thousands)
10/02/05 01/02/05
Assets
Cash $32,166 $22,164
Accounts Receivable 142,623 142,228
Inventories 146,393 137,618
Other Current Assets 27,903 22,756
Assets of Businesses Held for Sale 12,439 42,788
Total Current Assets 361,524 367,554
Property, Plant & Equipment 180,332 194,702
Other Assets 308,815 307,542
Total Assets $850,671 $869,798
Liabilities
Accounts Payable $55,737 $46,466
Accrued Liabilities 75,069 86,856
Liabilities of Businesses Held for Sale 442 5,390
Long-Term Debt 14,594 -
Senior and Senior Subordinated Notes 460,000 460,000
Other Liabilities 75,585 76,908
Total Liabilities 681,427 675,620
Shareholders' Equity 169,244 194,178
Total Liabilities and Shareholders' Equity $ 850,671 $869,798
Consolidated Condensed Statements of Cash Flows
(In millions)
Three Months Ended Nine Months Ended
10/02/05 10/03/04 10/02/05 10/03/04
Net Income (Loss) $ 5.1 $(47.8) $(4.5) $(51.0)
Adjustments for
Discontinued Operations 0.2 50.2 16.7 55.6
Income from Continuing
Operations, Net of Tax $ 5.3 $2.4 $12.2 $4.6
Depreciation and
Amortization 7.1 8.4 23.3 26.2
Deferred Income Taxes
and Other Non-Cash
Items 0.2 3.5 (10.6) (1.0)
Change in Working Capital
Accounts Receivable 7.8 (1.9) (4.3) (3.7)
Inventories 2.9 9.5 (12.6) (3.3)
Prepaids (1.4) 2.8 (7.6) (0.5)
Accounts Payable and
Accrued Expenses (13.7) (30.6) 2.4 (26.9)
Cash Provided from
(Used in) Continuing
Operations 8.2 (5.9) 2.8 (4.6)
Cash Provided from
(Used in) Operating
Activities of
Discontinued Operations 2.0 (4.4) 10.2 (12.6)
Cash Provided from
(Used in) Operating
Activities 10.2 (10.3) 13.0 (17.2)
Cash Provided from
(Used in) Investing
Activities (6.9) 1.5 (17.9) (7.9)
Cash Provided from
(Used in) Financing
Activities 6.6 (0.2) 17.2 28.6
Effect of Exchange Rate
Changes on Cash (0.5) 0.1 (2.3) 0.2
Net Increase (Decrease)
in Cash $9.4 $(8.9) $10.0 $3.7
Consolidated Condensed Segment Reporting
(In millions)
Three Months Ended Nine Months Ended
10/02/05 10/03/04 % Change 10/02/05 10/03/04 % Change
Net Sales
Modular Carpet $ 157.9 $141.4 11.7% $475.2 $411.6 15.4%
Bentley Prince
Street 32.1 31.7 1.3% 89.6 88.1 1.7%
Fabrics Group 49.9 46.7 6.9% 147.9 140.3 5.4%
Specialty
Products 4.0 3.0 33.3% 12.5 9.1 37.4%
Total $ 243.9 $222.8 9.5% $725.2 $649.1 11.7%
Operating Income
(Loss)
Modular Carpet $18.1 $17.2 $56.0 $44.7
Bentley Prince
Street 0.8 0.7 1.8 (0.2)
Fabrics Group 1.9 (1.5) 3.0 1.8
Specialty
Products 0.2 (0.2) 0.6 (0.2)
Corporate
Expenses and
Eliminations (0.5) (0.3) (2.5) (0.7)
Total $20.5 $15.9 $58.9 $45.4
SOURCE Interface, Inc.
CONTACT:
Daniel T. Hendrix
President and Chief Executive Officer. or
Patrick C. Lynch
Chief Financial Officer
+1-770-437-6800
or Christine Mohrmann
or Jim Olecki
both of Financial Dynamics for Interface, Inc.
+1-212-850-5600
Web site: http://www.interfaceinc.com
http://www.interfaceinc.com/results/investor
(IFSIA)