ATLANTA, Georgia, October 23, 2002 -- Interface, Inc. (Nasdaq: IFSIA), a worldwide commercial interiors products and services company, today reported results for the third quarter ended September 29, 2002.
Consistent with the Company's prior announcement, sales in the third quarter were $235.4 million, compared with $263.1 million in the third quarter 2001. Operating income was $6.0 million in the third quarter, versus operating income of $10.7 million, before a restructuring charge, in the same period a year ago. (In the third quarter 2001, the Company recorded a non-recurring pre-tax restructuring charge of approximately $62.1 million, or $0.83 per diluted share after tax.) Net loss for the third quarter 2002 was $2.7 million, or $(0.05) per diluted share, compared with third quarter 2001 net income of $0.7 million, or $0.01 per diluted share, before the restructuring charge. (Including the restructuring charge, net loss for the third quarter 2001 was $41.3 million, or $(0.83) per diluted share.)
While the Company's carpet tile business continued its positive momentum during the third quarter, sustained economic pressure and poor industry conditions led to lower than projected results in other business segments. Performance in these other businesses was negatively affected by declining sales volumes. The results in the fabrics business, while consistent with the overall decreased demand levels in the commercial furniture market, also were impacted significantly by production overcapacity. In that regard, the Company stated that its board of directors has approved a previously announced plan to rationalize manufacturing facilities in its fabrics division and further reduce its work force in both U.S. and international operations, primarily in the fabrics division.
The Company's carpet tile business experienced continued growth during the third quarter of 2002, with orders in the U.S. increasing 5% sequentially and 11% year-over-year. Strong sales volumes for carpet tile in the U.S. and Asia contributed positively to top-line performance, helping to stabilize
margins both domestically and abroad. Interface's carpet tile business continues to lead the corporate market segment, and the Company made significant progress during the third quarter to capitalize on non-corporate opportunities.
Daniel T. Hendrix, President and Chief Executive Officer, commented, "Our third quarter results are consistent with the preliminary results we released on October 15, 2002, and reflect the continued softness in the economy. While the market environment remains challenging, we are taking proactive steps to ensure the health and vitality of our business. We are rationalizing manufacturing facilities in our fabrics division, as well as reducing work force, which are expected to result in at least $20 million of annual cost savings. This restructuring initiative will help match our cost structure to current demand levels and improve our profitability."
For the first nine months of 2002, sales were $710.4 million, compared with $856.9 million for the same period a year ago. Operating income for the nine-month period in 2002 was $28.7 million, versus operating income of $39.2 million, before the restructuring charge, for the comparable 2001 nine-month period. The loss for the nine-month period in 2002, prior to the cumulative effect of the accounting change relating to goodwill impairment required by Statement of Financial Accounting Standards ("SFAS") No. 142, was $2.1 million, or $(0.04) per diluted share. (After the cumulative effect of the SFAS No. 142 accounting change, net loss for the first nine months of 2002 was $57.5 million, or $(1.15) per diluted share.) This compares with net income of $6.4 million, or $0.13 per diluted share, before the restructuring charge, in the third quarter 2001. (Including the restructuring charge, net loss for the first nine months of 2001 was $35.6 million, or $(0.71) per diluted share.)
In accordance with its prior statement, the Company declared no dividend for the third quarter 2002.
Mr. Hendrix also stated, "At Interface, our products continue to generate very positive feedback from the marketplace. In particular, our carpet tile segment continues to grow in popularity, and is taking market share in the areas of education, healthcare and hospitality. We believe that our market segmentation strategy will further enhance the industry-leading reputation and growing financial strength of our Company."
Mr. Hendrix concluded, "Based on current economic conditions, we expect fourth quarter 2002 earnings before the planned restructuring charge to range between break-even and a loss of five cents per diluted share, and revenues to be between $230 million and $240 million. We are confident that Interface is moving in the right direction, and we look forward to seeing positive results as our strategic initiatives take hold and market conditions improve."
Interface, Inc. is a recognized leader in the worldwide commercial interiors market, offering floorcoverings, fabrics, interior architectural products and specialty chemicals. 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, 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 provides specialized carpet replacement, installation, maintenance and reclamation services through its Re:Source Americas service network. The Company is a leading producer of interior fabrics and upholstery products, which it markets under the Guilford of Maine, Stevens Linen, Toltec, Intek, Chatham, Camborne and Glenside brands. In addition, the Company provides specialized fabrics services through its TekSolutions business; produces raised/access flooring systems under the TecCrete, TecFlor, TecSteel and InterCell brands; markets modular wiring systems under the Interface PeoplePower brand; and produces adhesives and chemicals used with commercial interiors products and in various rubber and plastic products.
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" in Item 1 of the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 2001, 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 may be affected by cycles in the construction and renovation of commercial and institutional buildings," "Our continued success depends significantly upon the efforts, abilities and continued service of our senior management executives and our design consultants," "Our substantial international operations are subject to various political, economic and other uncertainties," "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 our arrangement with our primary third-party supplier of synthetic fiber could have a material adverse effect on us," "Our Rights Agreement, which is triggered if a third party acquires beneficial ownership of 15% or more of our common
stock without our consent, could discourage tender offers or other transactions 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.
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