EX-99.1 2 press-release.htm PRESS RELEASE DATED APRIL 25, 2007 REPORTING FIRST QUARTER FINANCIAL RESULTS Press Release dated April 25, 2007 reporting first quarter financial results


CONTACT:  
Daniel T. Hendrix
 
President and Chief Executive Officer
 
Patrick C. Lynch
 
Senior Vice President and Chief Financial Officer
 
(770) 437-6800
   
 
Financial Dynamics
 
Christine Mohrmann, Bob Joyce
 
(212) 850-5600

FOR IMMEDIATE RELEASE


INTERFACE REPORTS FIRST QUARTER 2007 RESULTS

--First Quarter Adjusted Sales Increase 19.7% --
-- Year-Over-Year Order Growth of 21.5% --

ATLANTA, Georgia, April 25, 2007 - 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.)


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“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.”

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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 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.


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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,
    
119,185
    
101,700
  
respectively)*
            

* Prior year figures have been adjusted for the sale of the European Fabrics business.



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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
  
Three Months Ended
  
(In millions)
  
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
)


 





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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 Ended 04/01/07
  
Three Months Ended 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 Ended 04/01/07
  
Three Months Ended 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 Ended 04/01/07
  
Three Months Ended 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.


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