- Fourth Quarter Sales Increase 13.5% and Operating Income Increases 28.1% -
- Fourth Quarter EPS Up 91% to $0.21 -
ATLANTA, Feb. 21 /PRNewswire-FirstCall/ -- Interface, Inc.
(Nasdaq: IFSIA), a worldwide floorcoverings and fabrics company, today
announced results for the fourth quarter and full year ended December 31,
2006.
Sales for the fourth quarter of 2006 increased 20.4% to $295.9 million
from sales of $245.7 million in the year ago period, after exclusion of
revenues from the Company's European fabrics business that were present in the
fourth quarter of 2005. Including the European fabrics business, sales
increased 13.5% from $260.6 million reported in the fourth quarter of 2005.
Operating income for the fourth quarter of 2006 increased 32.7% to $29.6
million from operating income of $22.3 million reported in the year ago
period, excluding results from the Company's European fabrics business from
the fourth quarter of 2005. Including the European fabrics business,
operating income increased 28.1% from $23.1 million in the same period in
2005. As a percentage of sales, operating income in the fourth quarter of
2006 improved to 10.0% from 8.9% in the fourth quarter of 2005. Net income
for the 2006 fourth quarter rose 111.5% to $12.1 million, or $0.21 per diluted
share, versus net income of $5.7 million, or $0.11 per diluted share, in the
2005 fourth quarter. (Please see the attached tables for a reconciliation of
GAAP results including the European fabrics business and non-GAAP results
excluding such business.)
"We are pleased to report one of the best fourth quarters in our history,
finishing a year of continuously improving performance," said Daniel T.
Hendrix, President and Chief Executive Officer. "These results are a
testament to the dedication and hard work of our employees worldwide."
Mr. Hendrix continued, "Our modular carpet business continued to lead our
strong performance and achieved a 27% increase in sales compared with the year
ago period. Sales were strong across all key regions with the positive trends
in Europe providing the most significant driver of growth geographically. In
addition, operating income from the modular carpet business increased 39%,
primarily due to higher sales volume. Sales in our Bentley Prince Street
business improved 7% during the quarter. We are pleased with its progress to
date and expect improvement throughout 2007. Our fabrics business generated a
modest operating loss, but it improved on a sequential basis and we continue
to take actions to increase its manufacturing efficiencies."
Patrick C. Lynch, Vice President and Chief Financial Officer, commented,
"As a result of the improved sales and actions taken to increase efficiencies
in our business, we increased our fourth quarter operating profit margin by
110 basis points compared with the same period last year, enabling us to
report a 28.1% increase in operating income. One particular highlight in the
quarter is that our modular carpet segment reached a 13.6% operating profit
margin. We also took steps to strengthen our balance sheet during the fourth
quarter, raising $79 million from our equity offering that will primarily be
used to reduce our outstanding debt, and generating $30 million in net cash
flow from operating and investing activities. Supported by the execution of
our market segmentation strategy and the ongoing recovery in the office
market, orders during the fourth quarter increased by 11% compared with a
strong order period last year. We concluded the year with a stronger
financial platform from which to grow our business in 2007."
Sales for full year 2006 were $1.1 billion compared with sales of $922.8
million a year ago, an increase of 14.7%, excluding results from the Company's
European fabrics business in both periods. Including the European fabrics
business, full year 2006 sales of $1.1 billion represent an increase of 9.1%
over sales of $985.8 million in 2005. Operating income in 2006 was $97.0
million, or 9.2% of sales, versus $78.9 million, or 8.5% of sales in the
comparable period last year, 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-reported European fabrics business disposal. Reported
operating income for the full year 2006 was $72.4 million, a decrease of 11.7%
from operating income of $82.0 million in 2005.
For the full year 2006, the Company reported net income of $10.0 million,
or $0.18 per diluted share, versus net income of $1.2 million, or $0.02 per
diluted share, in 2005. As noted above, included in the Company's results for
the full year 2006 are an impairment of goodwill of $20.7 million (or $0.37
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 $1.0 million (or $0.01 per diluted share after tax) for premiums
paid in connection with the Company's repurchase of $46.6 million of its 7.3%
Senior Notes. The Company's results for the full year 2005 included a loss
from discontinued operations of $14.8 million (or $0.28 per diluted share
after tax), a loss on disposal of discontinued operations of $1.9 million (or
$0.04 per diluted share after tax), and a tax charge related to the
repatriation of foreign earnings of approximately $3.4 million (or $0.06 per
diluted share).
Mr. Hendrix concluded, "Over the past three years, we have made tremendous
progress in expanding and further penetrating our end markets, strengthening
our balance sheet, and focusing on our core businesses. Modular carpet
continues to take market share from other floorcoverings, and Interface is
best positioned to capitalize on this secular market shift. Looking forward,
we remain very optimistic about the ongoing recovery we see in the office
market, especially in the U.S. and Europe, and we expect our segmentation
strategy to continue driving demand for our products in other market segments.
Through the first seven weeks of our first quarter, which is seasonally our
weakest, business has remained robust. We are looking forward to a successful
year where we will leverage our position as a market leader to take advantage
of emerging sales opportunities in our key markets."
The Company will host a conference call tomorrow, February 22, 2007, at
9:00 a.m. Eastern Time, to discuss its fourth quarter and full year 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=1475531 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 the Company's prospectus
supplement dated November 6, 2006, filed with the Securities and Exchange
Commission, 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 the 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 may continue to be 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 Statements
of Income (in thousands,
except per share data)
Three Months Ended Twelve Months Ended
31-Dec-06 1-Jan-06 31-Dec-06 1-Jan-06
Net Sales $295,918 $260,608 $1,075,842 $985,766
Cost of Sales 201,806 180,819 736,247 681,069
Gross Profit 94,112 79,789 339,595 304,697
Selling,
General and
Administrative
Expenses 64,524 56,693 241,538 222,696
Impairment of
Goodwill -- -- 20,712 --
Restructuring
Charges -- -- 3,260 --
Loss on Disposal
- European
Fabrics -- -- 1,723 --
Operating
Income 29,588 23,096 72,362 82,001
Interest
Expense 9,532 11,055 42,204 45,541
Other Expense
(Income), Net (43) (106) 1,319 933
Income
Before
Taxes 20,099 12,147 28,839 35,527
Income Tax
Expense 8,006 6,381 18,816 17,561
Income
from
Continuing
Operations 12,093 5,766 10,023 17,966
Discontinued
Operations,
Net of Tax (4) (50) (31) (14,791)
Loss on Disposal,
Net of Tax -- -- -- (1,935)
Net Income $12,089 $5,716 $9,992 $1,240
Earnings (Loss) Per
Share - Basic
Continuing
Operations $0.21 $0.11 $0.18 $0.35
Discontinued
Operations -- -- -- (0.29)
Loss on Disposal -- -- -- (0.04)
Earnings (Loss) Per
Share - Basic $0.21 $0.11 $0.18 $0.02
Earnings (Loss) Per
Share - Diluted
Continuing
Operations $0.21 $0.11 $0.18 $0.34
Discontinued
Operations -- -- -- (0.28)
Loss on
Disposal -- -- -- (0.04)
Earnings (Loss) Per
Share - Diluted $0.21 $0.11 $0.18 $0.02
Common Shares
- Basic 56,824 51,834 54,087 51,551
Common Shares
Outstanding
- Diluted 58,653 53,171 55,713 52,895
Orders from
Continuing
Operations $282,100 $254,900 $1,102,000 $998,400
Continuing
Operations
Backlog (as
of 12/31/06
and 01/01/06,
respectively) $114,300 $104,000
Consolidated Condensed Balance Sheets
(In thousands) 31-Dec-06 1-Jan-06
Assets
Cash $110,220 $51,312
Accounts
Receivable 159,430 141,408
Inventory 147,963 130,209
Other
Current Assets 28,776 21,164
Assets of
Businesses
Held for Sale 2,570 5,526
Total Current Assets 448,959 349,619
Property, Plant &
Equipment 188,725 185,643
Other Assets 290,656 303,728
Total Assets $928,340 $838,990
Liabilities
Current
Liabilities $159,606 $140,107
Long-Term Debt -- --
Senior and
Senior Subordinated Notes 411,365 458,000
Other Liabilities 82,975 68,807
Total Liabilities 653,946 666,914
Shareholders' Equity 274,394 172,076
Total Liabilities
and Shareholders' Equity $928,340 $838,990
Consolidated Condensed Statements of Cash Flows Twelve Months Ended
(In millions) 31-Dec-06 1-Jan-06
Net Income $10.0 $1.2
Depreciation, Amortization and other non-cash 31.2 31.5
Deferreds and other non-cash items (9.1) 12.4
Impairment of Goodwill and Restructuring Charges 23.4 --
Change in Working Capital
Accounts Receivable (21.4) (7.7)
Inventories (24.2) 2.8
Prepaids (6.0) (2.7)
Accounts Payable and Accrued Expenses 26.2 11.8
Cash Provided from Operating Activities
of Continuing Operations 30.1 49.3
Cash Provided from (used in) Operating
Activities of Discontinued Operations -- 12.0
Cash Provided from Operating Activities 30.1 61.3
Cash Used in Investing Activities (12.6) (30.6)
Cash Provided from Financing Activities 39.0 0.9
Effect of Exchange Rate Changes on Cash 2.4 (2.5)
Net Increase in Cash $58.9 $29.1
Consolidated Condensed Segment Reporting
(In millions)
Three Months Ended Twelve Months Ended
31-Dec-06 1-Jan-06 % Change 31-Dec-06 1-Jan-06 % Change
Net Sales
Modular
Carpet $217.7 $171.0 27.3% $763.7 $646.2 18.2%
Bentley
Prince
Street 37.8 35.5 6.5% 137.9 125.2 10.1%
Fabrics
Group 36.8 51.0 (27.8)% 161.2 198.8 (18.9)%
Specialty
Products 3.6 3.1 16.1% 13.0 15.6 (16.7)%
Total $295.9 $260.6 13.5% $1,075.8 $985.8 9.1%
Operating Income
(Loss)
Modular
Carpet $29.7 $21.4 $98.3 $77.4
Bentley
Prince
Street 1.5 1.7 5.9 3.5
Fabrics
Group (0.3) 1.3 (27.3) 4.3
Specialty
Products 0.3 0.0 0.3 0.6
Corporate
Expenses and
Eliminations (1.6) (1.3) (4.8) (3.8)
Total $29.6 $23.1 $72.4 $82.0
Reconciliation of Non-GAAP Performance Measures to GAAP Performance
Measures
(In millions)
Three Months Ended Twelve Months Ended
12/31/06 1/01/06 % Change 12/31/06 1/01/06 % Change
Net Sales
Excluding
European
Fabrics $295.9 $245.7 20.4% $1,058.5 $922.8 14.7%
Net Sales -
European
Fabrics -- 14.9 17.3 63.0
Net Sales -
as Reported $295.9 $260.6 $1,075.8 $985.8
Three Months Ended
12/31/06 1/01/06 % Change
Operating
Income
Excluding
European
Fabrics $29.6 $22.3 32.7%
Operating
Income
- European
Fabrics -- 0.8
Operating
Income
- as Reported $29.6 $23.1
Twelve Months Ended
12/31/06 1/01/06 % Change
Operating
Income
Excluding
European
Fabrics,
Impairment of
Goodwill, Loss
on Disposition
and
Restructuring
Charge $97.0 $78.9 22.9%
Operating
Income
- European
Fabrics 1.1 3.1
Impairment of
Goodwill (20.7) --
Loss on
Disposition (1.7) --
Restructuring
Charge (3.3) --
Operating
Income
- as Reported $72.4 $82.0
Three Months Ended
12/31/06 1/01/06 % Change
Net Sales
Fabrics Segment
Excluding
European
Fabrics $36.8 $36.1 2.0%
Net Sales
- European
Fabrics -- 14.9
Net Sales
- Fabrics
Segment as
Reported $36.8 $51.0
Three Months Ended
12/31/06 1/01/06 % Change
Operating
Income
(Loss)
Fabrics
Segment
Excluding
European
Fabrics $(0.3) $0.5 (160%)
Operating
Income
- European
Fabrics -- 0.8
Operating
Income
(Loss)
- Fabrics
Segment
as Reported $(0.3) $1.3
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.
CONTACT: Daniel T. Hendrix
President and Chief Executive Officer
Patrick C. Lynch
Vice President and Chief Financial Officer
(770) 437-6800
Financial Dynamics
Christine Mohrmann, Bob Joyce
(212) 850-5600
SOURCE Interface, Inc.