- First Quarter Sales Up 6.8% Year-Over-Year -
- First Quarter Gross Profit Margin Expands to 31.5% -
ATLANTA, April 26 /PRNewswire-FirstCall/ -- Interface, Inc.
(Nasdaq: IFSIA), a recognized leader in the worldwide interiors market, today
announced results for the first quarter ended April 2, 2006.
Sales in the 2006 first quarter rose 6.8% to $250.6 million from $234.7
million in the year ago period. Fluctuations in currency exchange rates
adversely impacted first quarter 2006 sales by 3%, compared with the prior
year period. As announced earlier this week, the Company sold its European
fabrics division, and in conjunction with the sale recorded a pre-tax, non-
cash write-down for the impairment of goodwill of $20.7 million, or $0.39 per
share, in the first quarter of 2006. As also previously announced, the
Company is reducing operating costs within its North American fabrics business
by closing its East Douglas, Massachusetts manufacturing facility and
integrating those operations into the Company's Elkin, North Carolina
manufacturing facility. As a result, the Company recorded a non-recurring
pre-tax restructuring charge of $3.3 million, or $0.04 per share, in the 2006
first quarter. These two developments led to the Company's operating loss of
$3.3 million in the 2006 first quarter, compared with operating income of
$17.2 million in the first quarter of 2005. Excluding the one-time goodwill
impairment and restructuring charges, operating income in the first quarter of
2006 was $20.7 million, an increase of 20.4% over the 2005 first quarter.
Net loss for the 2006 first quarter was $17.1 million, or $0.32 per share,
versus a net loss of $2.2 million, or $0.04 per diluted share, in the first
quarter a year ago. (The Company's 2005 first quarter results included a loss
from discontinued operations of $4.8 million, or $0.09 per diluted share, net
of tax, and a loss on disposal of $0.3 million, or $0.01 per diluted share,
net of tax.) Not including the goodwill impairment and restructuring charges,
net income in the first quarter of 2006 was $5.7 million, or $0.11 per share.
This compares with income from continuing operations of $2.9 million, or $0.06
per share, in the first quarter a year ago.
"We are encouraged with our results for the first quarter, as we were able
to garner a 6.8% increase in overall sales, despite the currency impact, and a
20.4% improvement in operating income, excluding the two non-recurring items,"
said Daniel T. Hendrix, President and Chief Executive Officer. "Our modular
business continues to drive our growth. Worldwide modular sales increased
8.1% during the seasonally slower first quarter, and its operating income
increased 25.5%. This is indicative of our leadership position in this
business, the burgeoning popularity of modular carpet, the success of our
market segmentation strategy, and the positive trends we continue to see in
the corporate office market. Sales growth was strong across all geographic
regions, and we were particularly pleased to see double-digit sales growth in
Europe, as economic conditions continue to improve there."
Patrick C. Lynch, Vice President and Chief Financial Officer of Interface,
commented, "Reflecting our focus on cost containment, gross profit margin
expanded to 31.5%, versus 30.3% a year ago, despite increases in the cost of
petroleum-based raw materials. We also were encouraged to see the level of
order activity remain high during the first quarter, indicating strong future
demand."
Mr. Hendrix concluded, "The first quarter -- which seasonally is a slower
period for us -- was a good start to the year, and we are very optimistic
about the coming quarters, based on current order activity. The sale of our
European fabrics division will enable us to repay debt and reinvest in our
other businesses, and the actions we are taking in our North American fabrics
business are consistent with our commitment to improve the profitability of
that division. Our primary focus will remain on leading and shaping the
growth of the worldwide modular carpet market across all regions, and
returning our Bentley Prince Street and North American fabrics businesses to
historical levels of profitability."
The Company will host a conference call tomorrow, April 27, 2006, at 9:00
a.m. Eastern Time, to discuss its first 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=1302011 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 Interface, InterfaceFLOR,
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 is a leading producer of
interior fabrics and upholstery products, which it markets under the Guilford
of Maine and Chatham 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 "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 Three Months Ended
(In thousands, except per share data) 04/02/06 04/03/05
Net Sales $250,634 $234,715
Cost of Sales 171,652 163,576
Gross Profit 78,982 71,139
Selling, General & Administrative Expense 58,302 53,969
Impairment of Goodwill 20,712 --
Restructuring Charges 3,260 --
Operating Income (Loss) (3,292) 17,170
Interest Expense 11,232 11,578
Other Expense (Income), Net 528 600
Income (Loss) Before Taxes (15,052) 4,992
Income Tax Expense 2,030 2,069
Income (Loss) from Continuing Operations (17,082) 2,923
Discontinued Operations, Net of Tax (6) (4,762)
Loss on Disposal, Net of Tax -- (337)
Net Loss $(17,088) $(2,176)
Earnings (Loss) Per Share -- Basic:
Continuing Operations $(0.32) $0.06
Discontinued Operations -- (0.09)
Loss on Disposal -- (0.01)
Earnings (Loss) Per Share -- Basic $(0.32) $(0.04)
Earnings (Loss) Per Share -- Diluted:
Continuing Operations $(0.32) $0.06
Discontinued Operations -- (0.09)
Loss on Disposal -- (0.01)
Earnings (Loss) Per Share -- Diluted $(0.32) $(0.04)
Common Shares Outstanding -- Basic 52,608 51,326
Common Shares Outstanding -- Diluted 52,608 53,079
Orders from Continuing Operations
(Currency Adjusted) 261,621 257,905
Continuing Operations Backlog (as of 04/02/06
and 01/01/06, respectively) 105,553 104,079
Consolidated Condensed Balance Sheets
(In thousands)
04/02/06 01/01/06
Assets
Cash $20,349 $51,312
Accounts Receivable 147,363 141,408
Inventory 150,275 130,209
Other Current Assets 25,650 21,164
Assets of Businesses Held for Sale 3,343 5,526
Total Current Assets 346,980 349,619
Property, Plant & Equipment 186,020 185,643
Other Assets 285,914 303,728
Total Assets $818,914 $838,990
Liabilities
Accounts Payable $60,795 $50,312
Accrued Liabilities 59,750 85,581
Liabilities of Businesses Held for Sale 2,429 4,214
Long-Term Debt 14,133 --
Senior and Senior Subordinated Notes 450,000 458,000
Other Long-Term Liabilities 68,204 68,807
Total Liabilities 655,311 666,914
Shareholders' Equity 163,603 172,076
Total Liabilities and Shareholders' Equity $818,914 $838,990
Consolidated Condensed Statements of Cash Flows Three Months Ended
(In millions) 04/02/06 04/03/05
Net (Loss) $(17.1) $(2.2)
Adjustments for Discontinued Operations 0.0 5.1
Net Income (Loss) from Continuing Operations $(17.1) $2.9
Depreciation and Amortization 8.2 8.1
Deferred Income Taxes and Other Non-Cash Items (0.2) (5.7)
Impairment of Goodwill and Restructuring Charges 23.4 --
Change in Working Capital
Accounts Receivable (5.0) (1.0)
Inventories (19.8) (16.2)
Prepaids (4.2) (5.7)
Accounts Payable and Accrued Expenses (17.2) 0.0
Cash Used in Continuing Operations (31.9) (17.6)
Cash Provided from Operating Activities of
Discontinued Operations 0.0 6.2
Cash Used in Operating Activities (31.9) (11.4)
Cash Used in Investing Activities (11.1) (4.0)
Cash Provided From Financing Activities 11.7 17.0
Effect of Exchange Rate Changes on Cash 0.4 (0.5)
Net Increase (Decrease) in Cash $(30.9) $1.1
Consolidated Condensed Segment Reporting Three Months Ended
(In millions) 04/02/06 04/03/05 % Change
Net Sales
Modular Carpet $165.9 $153.5 8.1%
Bentley Prince Street 29.1 28.0 3.9%
Fabrics Group 52.5 48.5 8.2%
Specialty Products 3.1 4.7 (34.0%)
Total $250.6 $234.7 6.8%
Operating Income (Loss)
Modular Carpet $20.7 $16.5
Bentley Prince Street 0.5 0.5
Fabrics Group (23.4) 1.0
Specialty Products 0.1 0.2
Corporate Expenses and Eliminations (1.2) (1.0)
Total $(3.3) $17.2
Reconciliation of Non-GAAP Performance Measures to GAAP Performance
Measures
(In thousands, except per share data)
Three Months Ended 04/02/06
Operating Income, Excluding Impairment
and Restructuring Charges $20,680
Impairment of Goodwill (20,712)
Restructuring Charge (3,260)
Operating Loss, as reported $(3,292)
Three Months Ended 04/02/06
Net Income, Excluding Impairment and
Restructuring Charges $5,743
Impairment of Goodwill (20,712)
Restructuring Charge, Net of Tax (2,119)
Net Loss, as reported $(17,088)
Three Months Ended 04/02/06
Earnings Per Share, Excluding Impairment
and Restructuring Charges $0.11
Impairment of Goodwill (0.39)
Restructuring Charge, Net of Tax (0.04)
Loss Per Share, as reported $(0.32)
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
or Christine Mohrmann
or Jim Olecki
of Financial Dynamics,
+1-212-850-5600,
for Interface, Inc.
Web site: http://www.interfaceinc.com
http://www.interfaceinc.com/results/investorm /
(IFSIA)