- Second Quarter Sales (Excluding Sold European Fabrics Business) Up 12.2%
Year-Over-Year
- Second Quarter Orders Up 13.4% Year-Over-Year to $276 million
ATLANTA, July 25 /PRNewswire-FirstCall/ -- Interface, Inc.
(Nasdaq: IFSIA), a worldwide floorcoverings and fabrics company, today
announced results for the second quarter ended July 2, 2006.
Sales in the 2006 second quarter rose 5.0% to $258.7 million from $246.5
million in the year ago period. As previously announced, the Company sold its
European fabrics business during the 2006 second quarter. Excluding sales
from this business in both periods, the Company's sales for the 2006 second
quarter were $258.7 million, a 12.2% increase compared with $230.6 million in
the second quarter of 2005. Operating income for the 2006 second quarter was
$21.1 million, versus $21.2 million in the year ago period. Excluding results
from the European fabrics business in both periods, as well as a loss of $1.7
million on the disposal of the business in the 2006 second quarter, operating
income for the second quarter of 2006 was $22.8 million, versus operating
income of $20.9 million a year ago, an increase of 9.1%. Please see the
attached tables for a reconciliation of results including and excluding the
European fabrics business.
The Company reported net income for the 2006 second quarter of $5.9
million, or $0.11 per diluted share, versus a net loss of $7.4 million, or
$0.14 per diluted share in the second quarter a year ago. The Company's 2006
second quarter results include the previously mentioned loss on the European
fabrics business disposal of $1.7 million, or $0.03 per diluted share, as well
as other expenses of $0.5 million, or $0.01 per diluted share, for premiums
paid in connection with the Company's repurchase of $23 million of its 7.3%
Senior Notes during the 2006 second quarter. The Company's 2005 second
quarter results include a loss from discontinued operations of $9.8 million,
or $0.19 per diluted share (net of tax), a loss on disposal of discontinued
operations of $1.6 million, or $0.03 per diluted share (net of tax), and a tax
charge of approximately $1.6 million, or $0.03 per share, related to the
repatriation of foreign earnings.
"We are pleased with our results for the second quarter, as we
successfully executed against our goals, and the improving trends we are
seeing in the industry continue to validate our strategy," said Daniel T.
Hendrix, President and Chief Executive Officer. "Overall sales increased
despite challenging year-over-year comparables, and order activity further
strengthened, with orders up 13% to $276 million over last year's second
quarter. This growth was realized across all of our geographic regions due to
the continued outstanding performance of our modular carpet business, driven
by the ongoing recovery within the corporate office market and the success of
our market segmentation strategy. We also are particularly pleased with the
performance of our Bentley Prince Street business, which posted strong growth
for the quarter."
Mr. Hendrix continued, "Modular carpet continues to gain acceptance around
the world and Interface is leading the industry and shaping the growth of this
market. Worldwide modular sales increased 14% during the second quarter,
leading to record operating income for this business segment. We also
continued to execute on our strategy in our Bentley Prince Street business, as
sales increased 15% and profitability increased substantially. The sole
disappointment this quarter was our fabrics business, which continues to lag
behind our expectations. During the quarter, disruptions in yarn supply,
manufacturing inefficiencies resulting from the shut-down of our East Douglas
plant, and higher raw material costs combined to have a significant negative
impact on our results in this business. We are addressing these issues within
our fabrics business, and expect profitability to improve in the second half
of the year."
Patrick C. Lynch, Vice President and Chief Financial Officer of Interface,
commented, "Driven by our increased sales volume, we saw improved results for
the business. Selling, general and administrative expenses increased in the
second quarter, reflecting the planned investments we are making in our
residential flooring business, and in expanding our sales force and enhancing
our marketing programs. We believe we're already benefiting from these
investments in the form of increased orders. As a percentage of sales, SG&A
expenses in the 2006 second quarter were level with the year ago period at
22.6%. During the second quarter, we also took steps to enhance our financial
strength, as we repurchased $23 million in bonds during the period."
For the first six months of 2006, sales were $509.3 million, compared with
$481.3 million for the same period a year ago, an increase of 5.8%. Excluding
results from the Company's European fabrics business in both periods, sales
for the 2006 six-month period were $492.0 million compared with $448.6 million
last year, an increase of 9.7%. Operating income for the 2006 six-month
period was $17.8 million, versus operating income of $38.4 million for the
comparable 2005 six-month period. Excluding results from the Company's
European fabrics business in both periods, as well as a charge for impairment
of goodwill of $20.7 million, restructuring charges of $3.3 million, and the
loss of $1.7 million on the previously mentioned European fabrics business
disposal, operating income in the first half of 2006 was $42.4 million,
compared with $37.0 million in the year ago period, an increase of 14.6%. The
net loss for the first six months of 2006 was $11.2 million, or $0.21 per
share, compared with a net loss of $9.6 million, or $0.18 per diluted share,
for the 2005 first half. The loss for the 2005 period includes a loss from
discontinued operations of $14.5 million, or $0.28 per diluted share, and a
loss on disposal of $1.9 million, or $0.03 per diluted share.
Mr. Hendrix concluded, "We are excited about our future, and particularly
the third quarter, based on the current order activity, our backlog, and the
trends we are seeing in the marketplace. Most of our businesses are growing
in line with our goals, and our primary focus in the short term is to improve
the profitability of our fabrics business. Over the longer term, we will
continue to leverage the benefit of improving market conditions, the rebound
in the corporate office market, and our segmentation strategy to exploit the
growth of the worldwide modular carpet market, and focus on paying down debt.
At the same time, we also will continue to improve our financial position to
support our organic growth initiatives."
The Company will host a conference call tomorrow, July 26, 2006, at 9:00
a.m. Eastern Time, to discuss its second quarter 2006 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=1350637 or through
the Company's website at http://www.interfaceinc.com/results/investor/. The
archived version of the webcast will be available at these sites for one year
beginning approximately 1 hour after the call ends.
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 InterfaceFLOR Commercial,
FLOR, Heuga and Bentley Prince Street brands, and, through its Bentley Prince
Street brand, enjoys a leading position in the high quality, designer-oriented
segment of the broadloom carpet market. The Company's InterfaceFabric
business is a leading producer of interior fabrics and upholstery products,
which it markets under the Guilford of Maine, Chatham and Terratex brands, and
provides specialized automotive textile solutions.
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 "Risk Factors" included in Item 1A of the Company's Annual
Report on Form 10-K for the fiscal year ended January 1, 2006, 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 Three Months Ended Six Months Ended
data) 07/02/06 07/03/05 07/02/06 07/03/05
Net Sales $258,678 $246,545 $509,312 $481,260
Cost of Sales 177,511 169,317 349,163 332,893
Gross Profit 81,167 77,228 160,149 148,367
Selling, General & Administrative
Expenses 58,381 56,005 116,683 109,974
Impairment of Goodwill - European
Fabrics -- -- 20,712 --
Restructuring Charges -- -- 3,260 --
Loss on Disposal - European Fabrics 1,723 -- 1,723 --
Operating Income 21,063 21,223 17,771 38,393
Interest Expense 10,936 11,506 22,168 23,084
Other Expense, Net 453 268 981 868
Income (Loss) Before Taxes 9,674 9,449 (5,378) 14,441
Income Tax Expense 3,768 5,509 5,798 7,578
Income (Loss) from Continuing
Operations 5,906 3,940 (11,176) 6,863
Discontinued Operations, Net of Tax (21) (9,763) (27) (14,525)
Loss on Disposal - Discontinued
Operations, Net of Tax -- (1,598) -- (1,935)
Net Income (Loss) $5,885 $(7,421) $(11,203) $(9,597)
Earnings (Loss) Per Share - Basic
Continuing Operations $0.11 $0.08 $(0.21) $0.13
Discontinued Operations -- (0.19) -- (0.28)
Loss on Disposal -- (0.03) -- (0.04)
Earnings (Loss) Per Share - Basic $0.11 $(0.14) $(0.21) $(0.19)
Earnings (Loss) Per Share - Diluted
Continuing Operations $0.11 $0.08 $(0.21) $0.13
Discontinued Operations -- (0.19) -- (0.28)
Loss on Disposal -- (0.03) -- (0.03)
Earnings (Loss) Per Share - Diluted $0.11 $(0.14) $(0.21) $(0.18)
Common Shares Outstanding - Basic 53,375 51,398 52,995 51,362
Common Shares Outstanding - Diluted 54,996 52,481 52,995 52,622
Orders from Continuing Operations* 275,900 243,200 532,000 501,100
Continuing Operations Backlog
(as of 07/02/06 and 07/03/05,
respectively)* 118,500 99,500
* Orders from Continuing Operations in the 2005 three-month and six-month
periods, and Continuing Operations Backlog as of July 3, 2005, exclude the
European fabrics business, which was sold in April 2006.
Consolidated Condensed Balance Sheets
(In thousands) 07/02/06 01/01/06
Assets
Cash $27,347 $51,312
Accounts Receivable 143,769 141,408
Inventory 142,766 130,209
Other Current Assets 25,615 21,164
Assets of Businesses Held for Sale 3,107 5,526
Total Current Assets 342,604 349,619
Property, Plant & Equipment 180,338 185,643
Other Assets 291,296 303,728
Total Assets $814,238 $838,990
Liabilities
Accounts Payable $52,525 $50,312
Accrued Liabilities 83,425 85,581
Liabilities of Businesses Held for
Sale 1,855 4,214
Long-Term Debt 1,573 --
Senior and Senior Subordinated Notes 427,250 458,000
Other Long-Term Liabilities 67,669 68,807
Total Liabilities 634,297 666,914
Shareholders' Equity 179,941 172,076
Total Liabilities and Shareholders' Equity $814,238 $838,990
Consolidated Condensed
Statements of
Cash Flows Three Months Ended Six Months Ended
(In millions) 07/02/06 07/03/05 07/02/06 07/03/05
Net Income (Loss) $5.9 $(7.4) $(11.2) $(9.6)
Adjustments for
Discontinued Operations 0.0 11.4 0.0 16.5
Net Income (Loss) from
Continuing Operations $5.9 $4.0 $(11.2) $6.9
Depreciation and
Amortization 7.7 8.1 15.9 16.2
Deferred Income Taxes
and Other Non-Cash Items (5.4) (5.1) (5.6) (10.7)
Impairment of Goodwill
and Restructuring
Charges -- -- 23.4 --
Change in Working Capital
Accounts Receivable (4.6) (11.1) (9.6) (12.1)
Inventories (2.1) 0.7 (21.9) (15.5)
Prepaids (0.2) (0.6) (4.4) (6.2)
Accounts Payable and
Accrued Expenses 20.7 16.2 3.5 16.1
Cash Provided from
(Used in) Continuing
Operations 22.0 12.2 (9.9) (5.3)
Cash Provided from
Operating Activities of
Discontinued Operations -- 1.8 -- 7.9
Cash Provided from
(Used in) Operating
Activities 22.0 14.0 (9.9) 2.6
Cash Provided from
(Used in) Investing
Activities 20.0 (7.0) 8.8 (11.0)
Cash Provided from
(Used in) Financing
Activities (36.0) (6.4) (24.2) 10.5
Effect of Exchange Rate
Changes on Cash 0.9 (1.3) 1.3 (1.8)
Net (Decrease) Increase
in Cash $6.9 $(0.7) $(24.0) $0.3
Consolidated Condensed Segment Reporting
(In millions)
Three Months Ended Six Months Ended
07/02/06 07/03/05 %Change 07/02/06 07/03/05 %Change
Net Sales
Modular
Carpet $186.5 $163.7 13.9% $352.4 $317.2 11.1%
Bentley
Prince
Street 33.9 29.5 14.9% 63.0 57.6 9.4%
Fabrics
Group 35.5 49.5 (28.3%) 88.0 98.0 (10.2%)
Specialty
Products 2.8 3.8 (26.3%) 5.9 8.5 (30.6%)
Total $258.7 $246.5 5.0% $509.3 $481.3 5.8%
Operating
Income
(Loss)
Modular
Carpet $23.6 $21.4 $44.3 $37.9
Bentley
Prince
Street 1.7 0.5 2.2 1.0
Fabrics
Group (3.0) 0.1 (26.4) 1.1
Specialty
Products 0.0 0.2 0.0 0.4
Corporate
Expenses
and
Eliminations (1.2) (1.0) (2.3) (2.0)
Total $21.1 $21.2 $17.8 $38.4
Reconciliation of Non-GAAP Performance Measures to GAAP Performance
Measures
(In millions)
Three Months Ended
07/02/06 07/03/05 %Change
Operating
Income
Excluding
European
Fabrics
and Loss on
Disposal $22.8 $20.9 9.1%
Operating
Income -
European
Fabrics -- 0.3
Loss on
Disposal of
European
Fabrics (1.7) --
Operating
Income - as
Reported $21.1 $21.2
Three Months Ended Six Months Ended
07/02/06 07/03/05 %Change 07/02/06 07/03/05 %Change
Net Sales
Excluding
European
Fabrics $258.7 $230.6 12.2% $492.0 $448.6 9.7%
Net Sales -
European
Fabrics -- 15.9 17.3 32.7
Net Sales -
as Reported $258.7 $246.5 $509.3 $481.3
Six Months Ended
07/02/06 07/03/05 %Change
Operating
Income
Excluding
European
Fabrics,
Impairment
of Goodwill,
Loss on
Disposition
and
Restructuring
Charge $42.4 $37.0 14.6%
Operating
Income -
European
Fabrics 1.1 1.4
Impairment of
Goodwill (20.7) --
Loss on
Disposition (1.7) --
Restructuring
Charge (3.3) --
Operating
Income - as
Reported $17.8 $38.4
The Company believes that the above non-GAAP performance measures, which
management uses in managing and evaluating the Company's business, may provide
users of the Company's financial information with additional meaningful bases
for comparing the Company's current results and results in a prior period, as
these measures reflect factors that are unique to the current period relative
to the comparable prior period. However, these non-GAAP performance measures
should be viewed in addition to, and not as an alternative for, the Company's
reported results under accounting principles generally accepted in the United
States.
SOURCE Interface, Inc.
CONTACT:
Daniel T. Hendrix,
President and Chief Executive Officer,
or
Patrick C. Lynch,
Chief Financial Officer,
both of Interface, Inc.,
+1-770-437-6800;
Christine Mohrmann,
or Jim Olecki,
both of Financial Dynamics
+1-212-850-5600
Web site: http://www.interfaceinc.com
http://www.interfaceinc.com/results/investor
(IFSIA)