- Sales Increase 19.3% Year-Over-Year -
- Record Income From Continuing Operations of $15.2 Million, or $0.25 Per
Diluted Share -
- Record Operating Margin of 12.4% -
ATLANTA, Oct. 24 /PRNewswire-FirstCall/ -- Interface, Inc.
(Nasdaq: IFSIA), a worldwide floorcoverings company, today announced results
for the third quarter ended September 30, 2007.
Sales for the third quarter of 2007 increased 19.3% to $279.5 million from
sales of $234.2 million in the year ago period. As previously announced, the
Company sold its fabrics division in July 2007, and therefore the financial
statements for the third quarter of 2007, and all other periods presented, now
reflect the fabrics division as discontinued operations.
Operating income for the third quarter of 2007 increased 36.1% to $34.8
million, or 12.4% of sales, which is a record operating margin for the
Company. This compares with operating income of $25.5 million, or 10.9% of
sales, in the third quarter of last year. Income from continuing operations
was $15.2 million in the 2007 third quarter, which also is a record high for
the Company, compared with income from continuing operations of $9.5 million
in the third quarter of 2006. The results for the third quarter 2007 included
expenses on an after-tax basis of $0.7 million, or $0.01 per diluted share,
for premiums paid in connection with the previously announced redemption of
the Company's 7.3% Senior Notes, versus $0.1 million on an after-tax basis for
premiums paid on repurchases of those notes in the prior year period.
Including results of discontinued operations, net income was $8.6 million, or
$0.14 per diluted share, in the 2007 third quarter, compared with net income
of $9.1 million, or $0.17 per diluted share, in the 2006 third quarter.
"We are very pleased with our performance during the third quarter of
2007, in which we saw strong growth in revenue and record levels in operating
margin and income from continuing operations," said Daniel T. Hendrix,
President and Chief Executive Officer. "Driven by the continuing strength of
the corporate office market and our segmentation strategy, our modular
business continued its strong performance in the period, as revenues grew more
than 20% to record levels across each of our key geographic regions of the
Americas, Europe and Asia-Pacific."
Patrick C. Lynch, Senior Vice President and Chief Financial Officer,
commented, "We are extremely pleased with the results of the quarter,
particularly with respect to our modular carpet segment. Sales in that
segment increased 25.5% year-over-year with its operating income increasing
44.9%. In our Bentley Prince Street segment, overall revenues were modestly
lower compared with the third quarter of 2006. However, the modular component
within the Bentley Prince Street segment had strong sales growth, which was
in-line with the demand we are seeing in our modular carpet segment and
indicative of the shift we have seen in the broader market to modular
solutions. We reported operating income of $1.3 million in the Bentley Prince
Street segment, which is down from the prior year period primarily as a result
of the investment we are making in the installation of a new carpet tile
backing line at the plant. During the quarter, we also continued to improve
our balance sheet with the reduction of outstanding debt by $81 million,
mostly due to our redemption of the outstanding 7.3% Senior Notes."
For the first nine months of 2007, sales were $787.9 million, compared
with $655.5 million for the same period a year ago, an increase of 20.2%.
Operating income for the 2007 nine-month period was $90.0 million, versus
operating income of $69.7 million for the comparable 2006 nine-month period.
Income from continuing operations was $37.6 million, or $0.61 per diluted
share, in the 2007 nine-month period, compared with income from continuing
operations of $23.4 million, or $0.43 per diluted share, in the same period a
year ago. The results for the first nine months of 2007 included expenses on
an after-tax basis of $0.9 million, or $0.02 per diluted share, for premiums
paid in connection with the redemption of the Company's 7.3% Senior Notes,
versus $0.5 million, or $0.01 per diluted share, on an after-tax basis for
premiums paid on repurchases of those notes in the first nine months of 2006.
Including results of discontinued operations, the Company recorded a net loss
for the first nine months of 2007 of $31.1 million, or $0.50 per diluted
share, compared with a net loss of $2.1 million, or $0.04 per diluted share,
for the 2006 first nine months.
Mr. Hendrix concluded, "As we enter the fourth quarter, which typically is
our best quarter of the yearly cycle, I believe the opportunities for our
business have never been better. We continued to see solid order growth in
the third quarter, with consolidated orders increasing 10% year-over-year and
modular carpet segment orders increasing 14% year-over-year. While this is
somewhat more moderate growth compared with what we experienced in the second
quarter of 2007, we believe the second quarter orders were positively affected
by an announced price increase and by our bigger presence in the institutional
marketplace which has a busy buying season during that time of the year. In
the first few weeks of the fourth quarter, consolidated order growth rates
have climbed back over the 15% level. Overall, we are growing our share in an
expanding market, we continue to benefit from the secular shift toward modular
applications through our segmentation strategy and from the penetration of
carpet tile in emerging geographic markets, and we have a healthy backlog of
orders. With this momentum, we are looking forward to a great finish on the
year."
The Company will host a conference call tomorrow, October 25, 2007, at
9:00 a.m. Eastern Time, to discuss its third 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=1669286 (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 the world's largest manufacturer of modular carpet,
which it markets under the InterfaceFLOR, FLOR, Heuga and Bentley Prince
Street brands, and, through its Bentley Prince Street brand, enjoys a leading
position in the designer quality segment of the broadloom carpet market. 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.
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.
- TABLES FOLLOW -
Consolidated Condensed Statements of Operations
(In thousands, except per share Three Months Ended Nine Months Ended
data) 09/30/07 10/01/06 09/30/07 10/01/06
Net Sales $279,471 $234,221 $787,925 $655,539
Cost of Sales 181,542 154,309 514,543 431,995
Gross Profit 97,929 79,912 273,382 223,544
Selling, General & Administrative
Expenses 63,179 54,377 181,558 153,832
Loss on Disposal - - Specialty
Products -- -- 1,873 --
Operating Income 34,750 25,535 89,951 69,712
Interest Expense 8,643 10,504 26,924 32,672
Other Expense, Net 1,281 372 2,316 1,090
Income Before Taxes 24,826 14,659 60,711 35,950
Income Tax Expense 9,620 5,175 23,113 12,561
Income from Continuing
Operations 15,206 9,484 37,598 23,389
Discontinued Operations, Net of Tax (6,650) (378) (68,660) (23,763)
Loss on Disposal - - Discontinued
Operations, Net of Tax -- -- -- (1,723)
Net Income (Loss) $8,556 $9,106 $(31,062) $(2,097)
Earnings (Loss) Per Share - Basic
Continuing Operations $0.25 $0.18 $0.62 $0.44
Discontinued Operations (0.11) (0.01) (1.13) (0.45)
Loss on Disposal -- -- -- (0.03)
Earnings (Loss) Per Share - - Basic $0.14
$0.17 $(0.51) $(0.04)
Earnings (Loss) Per Share - - Diluted
Continuing Operations $0.25 $0.17 $0.61 $0.43
Discontinued Operations (0.11) -- (1.11) (0.44)
Loss on Disposal -- -- -- (0.03)
Earnings (Loss) Per Share - - Diluted $0.14
$0.17 $(0.50) $(0.04)
Common Shares Outstanding - - Basic 60,711
53,454 60,448 53,175
Common Shares Outstanding - - Diluted 61,860
55,070 61,590 54,750
Orders from Continuing Operations* 271,951 247,207 833,713 686,764
Continuing Operations Backlog
(as of 09/30/07 and 10/01/06,
respectively)* 142,706 122,601
* Orders from Continuing Operations and Continuing Operations Backlog
exclude all activity related to the Fabrics Group business segment, which was
sold in the third quarter of 2007.
Consolidated Condensed Balance Sheets
(In thousands) 09/30/07 12/31/06
Assets
Cash $77,530 $109,157
Accounts Receivable 166,254 143,025
Inventory 124,432 112,293
Other Current Assets 24,860 28,634
Assets of Businesses Held for Sale 2,212 158,322
Total Current Assets 395,288 551,431
Property, Plant & Equipment 152,902 134,631
Other Assets 275,080 242,278
Total Assets $823,270 $928,340
Liabilities
Accounts Payable $60,408 $49,542
Accrued Liabilities 106,675 98,702
Current Portion of Long-Term Debt -- --
Liabilities of Businesses Held for Sale 1,520 22,934
Total Current Liabilities 168,603 171,178
Long-Term Debt 7,169 --
Senior and Senior Subordinated Notes 310,000 411,365
Other Long-Term Liabilities 81,412 71,403
Total Liabilities 567,184 653,946
Shareholders' Equity 256,086 274,394
Total Liabilities and Shareholders'
Equity $823,270 $928,340
Consolidated Condensed Statements of
Cash Flows
(In millions)
Three Months Ended Nine Months Ended
09/30/07 10/01/06 09/30/07 10/01/06
Net Income (Loss) $8.5 $9.1 $(31.1) $(2.1)
Adjustments for Discontinued
Operations 6.7 0.4 68.7 25.5
Net Income (Loss) from Continuing
Operations $15.2 $9.5 $37.6 $23.4
Depreciation and Amortization 5.1 5.0 17.1 15.8
Deferred Income Taxes and Other
Non-Cash Items 1.9 (1.4) 1.9 (7.1)
Change in Working Capital
Accounts Receivable (11.5) (12.4) (19.5) (21.3)
Inventories 5.3 (5.3) (10.8) (23.7)
Prepaids 3.5 0.6 5.2 (2.5)
Accounts Payable and Accrued
Expenses 4.2 (2.1) 12.5 2.9
Cash Provided from (Used in)
Continuing Operations 23.7 (6.1) 44.0 (12.5)
Cash Provided from (Used in)
Operating Activities of
Discontinued Operations (5.1) 3.8 (1.9) 3.3
Cash Provided from (Used in)
Operating Activities 18.6 (2.3) 42.1 (9.2)
Cash Provided from (Used in)
Investing Activities 49.0 (7.4) 17.9 1.4
Cash Provided from (Used in)
Financing Activities (81.0) 12.5 (94.3) (11.7)
Effect of Exchange Rate Changes on
Cash 1.6 0.0 2.7 1.2
Net (Decrease) Increase in Cash $(11.8) $2.8 $(31.6) (18.3)
Consolidated Condensed Segment Reporting
(In millions)
Three Months Ended Nine Months Ended
09/30/07 10/01/06 %Change 09/30/07 10/01/06 %Change
Net Sales
Modular Carpet $242.9 $193.6 25.5% $673.7 $546.0 23.4%
Bentley Prince Street 36.6 37.1 (1.3%) 112.1 100.1 12.0%
Specialty Products -- 3.5 * 2.2 9.4 (76.6%)
Total $279.5 $234.2 19.3% $788.0 $655.5 20.2%
Operating Income
(Loss)
Modular Carpet $35.2 $24.3 44.9% $93.6 $68.6 36.4%
Bentley Prince Street 1.3 2.2 (40.9%) 4.2 4.5 (6.7%)
Specialty Products -- 0.1 * (1.8) 0.1 *
Corporate Expenses
and Eliminations (1.7) (1.1) (54.5%) (6.0) (3.5) (71.4%)
Total $34.8 $25.5 36.5% $90.0 $69.7 29.1%
* Not meaningful
SOURCE Interface, Inc.
CONTACT:
Daniel T. Hendrix,
President and Chief Executive Officer
or,
Patrick C. Lynch,
Senior Vice President and Chief Financial Officer,
both of
Interface, Inc.,
+1-770-437-6800,
Christine Mohrmann or, Bob Joyce, both of
FD,
+1-212-850-5600
Web site: http://www.interfaceinc.com
http://www.interfaceinc.com/results/investor