Interface Reports Third Quarter 2005 Results

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October 26, 2005

- 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- or through the Company's website at 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 &
     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          --           --           --           --
    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
      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

      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%
       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
      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
       Products          0.2      (0.2)                0.6      (0.2)
       Expenses and
      Eliminations      (0.5)     (0.3)               (2.5)     (0.7)
    Total              $20.5     $15.9               $58.9     $45.4

SOURCE Interface, Inc.


Daniel T. Hendrix
President and Chief Executive Officer. or
Patrick C. Lynch
Chief Financial Officer

or Christine Mohrmann
or Jim Olecki
both of Financial Dynamics for Interface, Inc.

Web site:

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