- Third Quarter Orders Increase 20%
- Third Quarter Net Income Increases 78% to $9.1 Million
ATLANTA, Oct. 25 /PRNewswire-FirstCall/ -- Interface, Inc.
(Nasdaq: IFSIA), a worldwide floorcoverings and fabrics company, today
announced results for the third quarter ended October 1, 2006.
For the 2006 third quarter, sales increased 18.4% to $270.6 million from
$228.5 million in the third quarter of 2005. Operating income for the third
quarter of 2006 was $25.0 million, an increase of 27.6% over operating income
of $19.6 million in the same period a year ago. As a percentage of sales,
operating income in the third quarter of 2006 improved to 9.2% from 8.6% in
the third quarter of 2005. (The above results for the 2005 third quarter, and
percentages derived from such amounts, exclude the Company's European fabrics
business, which as previously announced was sold in April 2006. Including the
European fabrics business, sales and operating income were $243.9 million and
$20.5 million, respectively, in the third quarter of 2005. Please see the
attached tables for a reconciliation of GAAP results including the European
fabrics business and non-GAAP results excluding such business, as well as,
with respect to certain measures, restructuring and goodwill impairment
charges and a loss on the sale of the European fabrics business, as described
below.)
Net income for the 2006 third quarter rose 77.8% to $9.1 million, or $0.17
per diluted share, versus net income of $5.1 million, or $0.10 per diluted
share, in the 2005 third quarter.
"The strong performance we have seen throughout 2006 accelerated in the
third quarter," said Daniel T. Hendrix, President and Chief Executive Officer.
"Our sales growth was driven by solid performance across all of our geographic
regions, as the corporate office market recovery continued, and our modular
carpet and broadloom businesses gained additional share in the marketplace.
Even more encouraging was the outstanding order growth we achieved during the
quarter, as orders increased 20% over year-ago levels to their highest point
since 2000. This is a testament to the strength of our markets, the quality of
our products and our sales force, and the continually growing demand for
modular carpet in the marketplace."
Mr. Hendrix continued, "Our modular carpet business once again led the way
during the quarter, showing strong sales growth as carpet tile continues to
gain acceptance across all market segments. We also saw excellent performance
within our Bentley Prince Street business, as sales grew 16% and profitability
more than doubled from year ago levels. We are very pleased with the
continued significant improvements we've made in this business as we execute
on our strategy. Within our U.S. fabrics business, sales were up 6% versus
year-ago levels. In addition, the actions we are taking to improve
manufacturing efficiencies have begun to take hold, and its operating loss
narrowed considerably on a sequential basis."
Patrick C. Lynch, Vice President and Chief Financial Officer, commented,
"The 2006 third quarter represented another strong quarter of financial
performance. On a GAAP basis, we were able to convert an 11.0% increase in
sales into a healthy 21.9% increase in operating income. Although our
selling, general and administrative expenses increased in dollar terms to
support our higher sales levels during the quarter, these expenses declined as
a percentage of sales from 23.0% a year ago to 22.3% in the 2006 third
quarter. Overall, we believe we are in excellent financial position to
continue solid execution of our organic growth strategy."
Sales for the first nine months of 2006 were $779.9 million, an increase
of 7.6% over sales of $725.2 million in the first nine months of 2005.
Excluding results from the Company's European fabrics business in both
periods, sales for the 2006 nine-month period were $762.6 million compared
with sales of $677.1 million a year ago, an increase of 12.6%. Operating
income for the first nine months of 2006 was $42.8 million, versus operating
income of $58.9 million in the first nine months of 2005. Excluding the
results of the Company's European fabrics business from both periods and
one-time items during the 2006 period (the one-time items in 2006 were 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 2006 nine-month
period was $67.4 million, or 8.8% of sales, versus $56.5 million, or 8.3% of
sales in the comparable period last year.
For the 2006 nine-month period, the Company reported a net loss of $2.1
million, or $0.04 per diluted share, versus a net loss of $4.5 million, or
$0.08 per diluted share in the 2005 nine-month period. Included in the
Company's results for the first nine months of 2006 are an impairment of
goodwill of $20.7 million (or $0.39 per diluted share after tax),
restructuring charges of $3.3 million (or $0.04 per diluted share after tax),
a loss on the disposal of the European fabrics business of $1.7 million (or
$0.03 per diluted share after tax), and other expenses of $0.9 million (or
$0.01 per diluted share after tax) for premiums paid in connection with the
Company's repurchase of $38.5 million of its 7.3% Senior Notes. The Company's
results for the first nine months of 2005 included a loss from discontinued
operations of $14.7 million (or $0.28 per diluted share after tax), a loss on
disposal of discontinued operations of $1.9 million (or $0.03 per diluted
share after tax), and a tax charge related to the repatriation of foreign
earnings of approximately $1.6 million (or $0.03 per diluted share).
Mr. Hendrix concluded, "Based on our strong order growth, we remain very
optimistic about our fourth quarter. The recovery we've seen to date in the
office market appears to be continuing, and the ongoing success of our market
segmentation strategy is driving solid demand for our products in other areas
of the marketplace. We remain well positioned as the market leader to
continue taking advantage of emerging sales opportunities and executing our
plans for growth."
The Company will host a conference call tomorrow, October 26, 2006, at
9:00 a.m. Eastern Time, to discuss its third 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=1402271 (please copy and paste into your
browswer) 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, 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 data)
Three Months Ended Nine Months Ended
10/01/06 10/02/05 10/01/06 10/02/05
Net Sales $270,612 $243,898 $779,924 $725,158
Cost of Sales 185,278 167,357 534,441 500,250
Gross Profit 85,334 76,541 245,483 224,908
Selling, General &
Administrative Expenses 60,331 56,029 177,014 166,003
Impairment of Goodwill -
European Fabrics -- -- 20,712 --
Restructuring Charges -- -- 3,260 --
Loss on Disposal -
European Fabrics -- -- 1,723 --
Operating Income 25,003 20,512 42,774 58,905
Interest Expense 10,504 11,402 32,672 34,486
Other Expense, Net 381 171 1,362 1,039
Income (Loss) Before
Taxes 14,118 8,939 8,740 23,380
Income Tax Expense 5,012 3,602 10,810 11,180
Income (Loss) from
Continuing Operations 9,106 5,337 (2,070) 12,200
Discontinued Operations,
Net of Tax -- (216) (27) (14,741)
Loss on Disposal -
Discontinued Operations,
Net of Tax -- -- -- (1,935)
Net Income (Loss) $9,106 $5,121 $(2,097) $(4,476)
Earnings (Loss) Per Share
- Basic
Continuing Operations $0.17 $0.10 $(0.04) $0.24
Discontinued Operations -- -- -- (0.29)
Loss on Disposal of
Discontinued Operations -- -- -- (0.04)
Earnings (Loss) Per Share
- Basic $0.17 $0.10 $(0.04) $(0.09)
Earnings (Loss) Per Share
- Diluted
Continuing Operations $0.17 $0.10 $(0.04) $0.23
Discontinued Operations -- -- -- (0.28)
Loss on Disposal of
Discontinued Operations -- -- -- (0.03)
Earnings (Loss) Per Share
- Diluted $0.17 $0.10 $(0.04) $(0.08)
Common Shares Outstanding
- Basic 53,454 51,648 53,175 51,457
Common Shares Outstanding
- Diluted 55,070 53,444 53,175 52,779
Orders from Continuing
Operations* 287,040 240,062 819,099 724,166
Continuing Operations
Backlog (as of 10/01/06
and 10/02/05,
respectively)* 132,065 98,668
* Orders from Continuing Operations in the 2005 three-month and
nine-month periods, and Continuing Operations Backlog as of October 2,
2005, exclude the European fabrics business, which was sold in April
2006.
Consolidated Condensed Balance Sheets
(In thousands) 10/01/06 01/01/06
Assets
Cash $28,897 $51,312
Accounts Receivable 159,184 141,408
Inventory 149,775 130,209
Other Current Assets 24,973 21,164
Assets of Businesses Held for Sale 3,049 5,526
Total Current Assets 365,878 349,619
Property, Plant & Equipment 183,060 185,643
Other Assets 292,525 303,728
Total Assets $ 841,463 $ 838,990
Liabilities
Accounts Payable $55,119 $50,312
Accrued Liabilities 83,267 85,581
Liabilities of Businesses Held for Sale 1,679 4,214
Long-Term Debt 21,541 --
Senior and Senior Subordinated Notes 419,510 458,000
Other Long-Term Liabilities 66,553 68,807
Total Liabilities 647,669 666,914
Shareholders' Equity 193,794 172,076
Total Liabilities and Shareholders' Equity $ 841,463 $ 838,990
Consolidated Condensed Statements of Cash Flows
(In millions)
Three Months Ended Nine Months Ended
10/01/06 10/02/05 10/01/06 10/02/05
Net Income (Loss) $9.1 $5.1 $(2.1) $(4.5)
Adjustments for Discontinued
Operations -- 0.2 -- 16.7
Net Income (Loss) from
Continuing Operations $ 9.1 $ 5.3 $(2.1) $12.2
Depreciation and Amortization 7.0 7.1 22.9 23.3
Deferred Income Taxes and
Other Non-Cash Items 0.2 0.2 (5.4) (10.6)
Impairment of Goodwill and
Restructuring Charges -- -- 23.4 --
Change in Working Capital
Accounts Receivable (13.5) 7.8 (23.1) (4.3)
Inventories (5.9) 2.9 (27.8) (12.6)
Prepaids 0.6 (1.4) (3.8) (7.6)
Accounts Payable and
Accrued Expenses (1.0) (13.7) 2.5 2.4
Cash Provided from (Used in)
Continuing Operations (3.5) 8.2 (13.4) 2.8
Cash Provided from Operating
Activities of Discontinued
Operations -- 2.0 -- 10.2
Cash Provided from (Used in)
Operating Activities (3.5) 10.2 (13.4) 13.0
Cash Provided from (Used in)
Investing Activities (7.4) (6.9) 1.4 (17.9)
Cash Provided from (Used in)
Financing Activities 12.5 6.6 (11.7) 17.2
Effect of Exchange Rate
Changes on Cash -- (0.5) 1.3 (2.3)
Net Increase (Decrease)
in Cash $ 1.6 $9.4 $(22.4) $10.0
Consolidated Condensed Segment Reporting
(In millions)
Three Months Ended Nine Months Ended
10/01/06 10/02/05 % Change 10/01/06 10/02/05 % Change
Net Sales
Modular Carpet $ 193.6 $ 157.9 22.6% $546.0 $475.2 14.9%
Bentley Prince
Street 37.1 32.1 15.6% 100.1 89.6 11.7%
Fabrics Group 36.4 49.9 (27.1%) 124.4 147.9 (15.9%)
Specialty Products 3.5 4.0 (12.5%) 9.4 12.5 (24.8%)
Total $ 270.6 $ 243.9 11.0% $779.9 $725.2 7.6%
Operating Income
(Loss)
Modular Carpet $24.3 $18.1 $68.6 $56.0
Bentley Prince
Street 2.2 0.8 4.5 1.8
Fabrics Group (0.5) 1.9 (26.9) 3.0
Specialty Products 0.1 0.2 0.1 0.6
Corporate Expenses
and Eliminations (1.1) (0.5) (3.5) (2.5)
Total $25.0 $20.5 $42.8 $58.9
Reconciliation of Non-GAAP Performance Measures to GAAP Performance
Measures
(In millions)
Three Months Ended Nine Months Ended
10/01/06 10/02/05 % Change 10/01/06 10/02/05 % Change
Net Sales Excluding
European Fabrics $270.6 $228.5 18.4% $762.6 $677.1 12.6%
Net Sales - European
Fabrics -- 15.4 17.3 48.1
Net Sales - as
Reported $270.6 $243.9 $779.9 $725.2
Three Months Ended
10/01/06 10/02/05 % Change
Operating Income
Excluding European
Fabrics and Loss
on Disposal $25.0 $19.6 27.6%
Operating Income -
European Fabrics -- 0.9
Operating Income -
as Reported $25.0 $20.5
Nine Months Ended
10/01/06 10/02/05 % Change
Operating Income
Excluding European
Fabrics, Impairment
of Goodwill, Loss
on Disposition and
Restructuring Charge $67.4 $56.5 19.3%
Operating Income -
European Fabrics 1.1 2.4
Impairment of
Goodwill (20.7) --
Loss on Disposition (1.7) --
Restructuring Charge (3.3) --
Operating Income -
as Reported $42.8 $58.9
Three Months Ended
10/01/06 10/02/05 % Change
Net Sales Fabrics
Segment Excluding
European Fabrics $36.4 $34.5 5.5%
Net Sales - European
Fabrics -- 15.4
Net Sales - Fabrics
Segment as Reported $36.4 $49.9
Three Months Ended
10/01/06 10/02/05 % Change
Operating Income
(Loss) Fabrics
Segment Excluding
European Fabrics $(0.5) $1.0 (150%)
Operating Income -
European Fabrics -- 0.9
Operating Income (Loss)
- Fabrics Segment
as Reported $(0.5) $1.9
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,
Vice President and Chief Financial Officer,
both of
Interface, Inc.,
+1-770-437-6800;
or Christine Mohrmann
or Jim Olecki,
both of
Financial Dynamics,
+1-212-850-5600,
for Interface, Inc.
Web site: http://www.interfaceinc.com
http://www.interfaceinc.com/results/investor
(IFSIA)