- First Quarter Adjusted Sales Increase 19.7%
- Year-Over-Year Order Growth of 21.5% -
ATLANTA, April 25 /PRNewswire-FirstCall/ -- Interface, Inc.
(Nasdaq: IFSIA), a worldwide floorcoverings and fabrics company, today
announced results for the first quarter ended April 1, 2007.
Sales for the first quarter of 2007 increased 19.7% to $279.3 million from
sales of $233.3 million in the year ago period, after exclusion of revenues
from the Company's European fabrics business that were present in the first
quarter of 2006. Including the European fabrics business, which was sold in
April 2006, sales increased 11.4% from $250.6 million in the first quarter of
2006.
Excluding certain one-time items (detailed below) from each period,
operating income for the first quarter of 2007 increased 24% to $24.2 million,
or 8.7% of sales, from $19.5 million, or 8.4% of sales, in the first quarter
of last year. The one-time items in the first quarter of 2007 were an
impairment charge of $48.3 million related to the Company's U.S. fabrics
business and a $1.9 million loss on the disposal of assets in its specialty
products business, while the one-time items in the first quarter of 2006 were
the results from the Company's European fabrics business and a $3.3 million
restructuring charge relating to its U.S. fabrics business. Including those
items, the Company reported an operating loss for the 2007 first quarter of
$26.0 million, compared with an operating loss of $3.3 million in the same
period in 2006. Net loss was $40.6 million, or $0.68 per share, in the 2007
first quarter, versus a net loss of $17.1 million, or $0.32 per share, in the
2006 first quarter. (Please see the attached tables for a reconciliation of
GAAP and non-GAAP results.)
"Setting aside the one-time charges, we had a great start to 2007, even
though the first quarter seasonally has been our slowest time of the year,"
said Daniel T. Hendrix, President and Chief Executive Officer. "Our improving
sales performance reflects the success we are experiencing across our primary
market segments, as growth in our non-office commercial segments, and
particularly in hospitality and education facilities, outpaced the growth of
the recovering corporate office market. Perhaps the most exciting news,
though, is that orders received during the quarter were up 21.5% to $288
million, which is the highest mark reached in more than six years."
Patrick C. Lynch, Senior Vice President and Chief Financial Officer,
commented, "Our modular carpet business was the principal driver of our
growth, with sales increasing 24% and orders increasing 26% compared with the
same period last year. Sales of modular carpet increased across all key
regions, with the Americas and Europe leading the way, as we built upon our
leadership position in this growing market category. The strong sales
performance in modular carpet resulted in excellent profitability growth for
the business. We also continued to see robust sales improvement in our
Bentley Prince Street business, which was up 24% and continued to gain market
share. Bentley Prince Street's operating income doubled over the prior year,
despite some isolated manufacturing inefficiencies due to a changeover in
materials processing, and we expect to see further profitability growth
throughout 2007. We were disappointed with the performance of our fabrics
business, which reported an operating loss during the quarter due to costs
associated with headcount reductions and continued manufacturing
inefficiencies resulting from our plant consolidation program. While we are
continuing with our plans to improve the performance of this business, we also
are exploring possible strategic options, and our analyses have led us to
conclude that it is necessary to record an impairment charge for the first
quarter."
Mr. Hendrix concluded, "The outlook for our core businesses remains very
positive, and we have positioned ourselves well to benefit from the market
opportunities we helped create and are now seeing come to fruition.
Specifically, we are benefiting from the secular market shift toward modular
carpet and the continuing recovery of the office market. Further, our
segmentation strategy has been successful and we are benefiting from our
presence in these other commercial and residential markets, on a global basis.
Looking forward, we remain optimistic about the strength of the office market,
especially in the U.S. and Europe, the prospects for our segmentation strategy
to further drive sales growth across our key markets, and the progress of our
product introductions in the residential market. Through the first three
weeks of our second quarter, sales and order activity continue to be strong."
The Company will host a conference call tomorrow, April 26, 2007, at 9:00
a.m. Eastern Time, to discuss its first quarter 2007 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=1533916 (Due to length of URL, please copy and
paste into browser.) 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 December 31, 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 renovation and construction 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," "Large increases in the cost
of petroleum-based raw materials could adversely affect us if we are unable to
pass these cost increases through to our customers," "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," "The market price of our common stock has been
volatile and the value of your investment may decline," "Our earnings in a
future period could be adversely affected by non-cash adjustments to goodwill,
if a future test of goodwill assets indicates a material impairment of those
assets," "Our Chairman, together with other insiders, currently has sufficient
voting power to elect a majority of our Board of Directors," 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) 04/01/07 04/02/06
Net Sales $279,283 $250,634
Cost of Sales 191,108 171,652
Gross Profit 88,175 78,982
Selling, General & Administrative Expense 64,029 58,302
Impairment of Intangible Assets 48,322 20,712
Loss on Disposition - Specialty Products 1,873 --
Restructuring Charges -- 3,260
Operating Loss (26,049) (3,292)
Interest Expense 9,120 11,232
Other Expense (Income), Net 436 528
Loss Before Taxes (35,605) (15,052)
Income Tax Expense 5,011 2,030
Loss from Continuing Operations (40,616) (17,082)
Discontinued Operations, Net of Tax -- (6)
Loss on Disposal, Net of Tax -- --
Net Loss $(40,616) $(17,088)
Loss Per Share - Basic:
Continuing Operations $(0.68) $(0.32)
Discontinued Operations -- --
Loss on Disposal -- --
Loss Per Share - Basic $(0.68) $(0.32)
Loss Per Share - Diluted:
Continuing Operations $(0.68) $(0.32)
Discontinued Operations -- --
Loss on Disposal -- --
Loss Per Share - Diluted $(0.68) $(0.32)
Common Shares Outstanding - Basic 59,951 52,608
Common Shares Outstanding - Diluted 59,951 52,608
Orders from Continuing Operations* 288,474 237,455
Continuing Operations Backlog
(as of 04/01/07 and 04/02/06, respectively)* 119,185 101,700
* Prior year figures have been adjusted for the sale of the European
Fabrics business.
Consolidated Condensed Balance Sheets
(In thousands) 04/01/07 12/31/06
Assets
Cash $64,724 $110,220
Accounts Receivable 158,161 159,430
Inventory 160,893 147,963
Other Current Assets 29,972 28,776
Assets of Businesses Held for Sale 1,590 2,570
Total Current Assets 415,340 448,959
Property, Plant & Equipment 195,455 188,725
Other Assets 253,906 290,656
Total Assets $864,701 $928,340
Liabilities
Accounts Payable $62,831 $56,601
Accrued Liabilities 81,624 101,493
Liabilities of Businesses Held for Sale 1,362 1,512
Long-Term Debt -- --
Senior and Senior Subordinated Notes 395,665 411,365
Other Long-Term Liabilities 87,193 82,975
Total Liabilities 628,675 653,946
Shareholders' Equity 236,026 274,394
Total Liabilities and
Shareholders' Equity $864,701 $928,340
Consolidated Condensed Statements
of Cash Flows
(In millions) Three Months Ended
04/01/07 04/02/06
Net Loss $(40.6) $(17.1)
Depreciation and
Amortization 8.6 8.2
Deferred Income Taxes
and Other Non-Cash Items (1.0) (0.2)
Impairment of Assets,
Disposals and
Restructuring Charges 50.2 23.4
Change in Working Capital
Accounts Receivable 0.6 (5.0)
Inventories (13.9) (19.8)
Prepaids (0.7) (4.2)
Accounts Payable and
Accrued Expenses (15.2) (17.2)
Cash Used in Operating
Activities (12.0) (31.9)
Cash Used in Investing
Activities (18.2) (11.1)
Cash Used in/Provided
by Financing
Activities (15.5) 11.7
Effect of Exchange
Rate Changes on Cash 0.2 0.4
Net Increase (Decrease)
in Cash $(45.5) $(30.9)
Consolidated Condensed
Segment Reporting Three Months Ended
(In millions) 04/01/07 04/02/06 % Change
Net Sales
Modular Carpet $205.2 $165.9 23.7%
Bentley Prince Street 36.1 29.1 23.9%
Fabrics Group 35.8 52.5 (31.8%)
Specialty Products 2.2 3.1 (30.4%)
Total $279.3 $250.6 11.4%
Operating Income (Loss)
Modular Carpet $26.8 $20.7
Bentley Prince Street 1.0 0.5
Fabrics Group (50.3) (23.4)
Specialty Products (1.8) 0.1
Corporate Expenses and
Eliminations (1.7) (1.2)
Total $(26.0) $(3.3)
Reconciliation of Non-GAAP Performance Measures to GAAP Performance
Measures
(In thousands, except per share data)
Three Months Three Months
Ended Ended
04/01/07 04/02/06
Operating Income, Excluding Impairment,
European Fabrics Operations, Loss on
Disposal and Restructuring Charges $24,146 $19,544
Impairment of Assets (48,322) --
European Fabrics Operations -- (19,576)
Loss on Disposal - Specialty Products (1,873) --
Restructuring Charge -- (3,260)
Operating Loss, as reported $(26,049) $(3,292)
Three Months Three Months
Ended Ended
04/01/07 04/02/06
Net Sales, Excluding European Fabrics $279,283 233,343
Sales- European Fabrics -- 17,291
Net Sales, as reported $279,283 $250,634
Three Months Three Months
Ended Ended
04/01/07 04/02/06
Fabrics Segment Operating Loss Excluding
Impairment, European Fabrics Operations
and Restructuring Charge $(2,035) $(542)
Impairment of Assets (48,322) --
European Fabrics Operations -- (19,576)
Restructuring Charge -- (3,260)
Fabrics Segment Operating Loss,
As Reported $(50,357) $(23,378)
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,
Senior Vice President and Chief Financial Officer,
+1-770-437-6800,
both of Interface, Inc.;
or Christine Mohrmann or Bob Joyce,
+1-212-850-5600,
both of Financial Dynamics, for Interface, Inc.