ATLANTA, Georgia, October 15, 2002 -- Interface, Inc. (Nasdaq: IFSIA), a worldwide commercial interiors products and services company, today announced that it expects to report lower revenue and a net loss for the third quarter ended September 29, 2002. Based on preliminary data, the Company expects third quarter revenue of between $230 million and $235 million and a net loss of between $2.75 million and $3.25 million, or $(0.05) to $(0.06) per diluted share.
Daniel T. Hendrix, President and Chief Executive Officer, stated, "We are disappointed that the continued weakness in the economy and a lack of improvement in industry conditions have resulted in lower than forecasted third quarter results. The commercial sector has yet to see the stabilization that was predicted for the second half of fiscal 2002, which in turn led to declining sales in certain business units, including broadloom, fabrics, raised flooring, and our Re:Source Americas service business. Profitability was negatively affected by the under-absorption of manufacturing costs, primarily due to lower sales volumes and significant reductions in inventories during the third quarter. Our raised flooring business, which is strongly tied to new construction, continued to suffer as commercial development activities remained sluggish."
Mr. Hendrix commented further, "We continue to be encouraged by the growing positive momentum of our modular carpet business, which showed both sequential and year-over-year increases in billing and orders during the third quarter of 2002. Our strength in the carpet tile segment is evidenced by Interface recently being named the number one carpet manufacturer in the categories of service, quality, performance and overall business experience in a survey of top design firms conducted by Floor Focus magazine. We also are pleased that the Company generated $20 million in free cash flow during the third quarter, and we expect to generate a similar amount in the fourth quarter. The Company used $5 million in cash to repurchase 9½% senior subordinated bonds in the third quarter and had approximately $17 million in cash on the balance sheet as of the end of the quarter, with no bank debt outstanding under its $100 million revolving credit facility."
Interface also announced that the Company plans, subject to final board approval, to further rationalize manufacturing operations in its fabrics division, and further reduce its work force in both U.S. and international operations, beginning in the fourth quarter of fiscal 2002. This initiative is expected to generate more than $20 million per year in cost savings and reduce headcount by approximately 300 employees. In connection with these activities, the Company expects to incur a pre-tax restructuring charge of approximately $18 million. The restructuring charge will be comprised of approximately $8 million of cash expenditures primarily for severance benefits, and approximately $10 million of non-cash charges, primarily for the write-down of the carrying value and disposal of certain manufacturing assets, including buildings and equipment. The Company anticipates that the restructuring will be completed by the end of the second quarter 2003.
Interface also stated that it will suspend repurchasing bonds and its dividend payments in order to ensure compliance with restrictions resulting from the fixed charges coverage ratio contained in the indentures for two of its outstanding series of public bonds.
Mr. Hendrix concluded, "We continue to make progress in strengthening our profitable carpet tile business and streamlining our business model, despite a challenging operating environment. During the third quarter, we were pleased to see the successful results of our market segmentation strategy, with increased activity in the education, retail and government sectors. The market segmentation strategy is only one way in which Interface is adjusting its operations toward the goals of increased sales, efficiency and profitability, as well as reducing the Company's dependence on cyclical corporate spending. The restructuring in our fabrics division and work force reductions that are planned to begin in the fourth quarter are further examples of the Company's commitment to building a lean and resilient business that will be well positioned to capitalize on the improvement in the economy when it occurs."
In conjunction with this release, Interface will hold a conference call on Wednesday, October 16, 2002, at 9:00 a.m. Eastern Time. This call will be simultaneously broadcasted live over the Internet. Listeners may access the call live, or archived through October 23, 2002 at 6:00 p.m. Eastern Time, over the Internet at http://www.firstcallevents.com/service/ajwz367914820gf12.html.
Please allow at least 15 minutes prior to the call to visit the site and download and install any necessary audio software.
The Company expects to report actual results for the third quarter on October 23, 2002, after the close of the market.
Interface, Inc. is a recognized leader in the worldwide commercial interiors market, offering floorcoverings, fabrics, interior architectural products and specialty chemicals. 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, Heuga, Bentley and Prince Street brands, and through its Bentley Mills and Prince Street brands, enjoys a leading position in the high quality, designer-oriented segment of the broadloom carpet market. The Company provides specialized carpet replacement, installation, maintenance and reclamation services through its Re:Source Americas service network. The Company is a leading producer of interior fabrics and upholstery products, which it markets under the Guilford of Maine, Stevens Linen, Toltec, Intek, Chatham, Camborne and Glenside brands. In addition, the Company provides specialized fabrics services through its TekSolutions business; produces raised/access flooring systems under the TecCrete, TecFlor, TecSteel and InterCell brands; markets modular wiring systems under the Interface PeoplePower brand; and produces adhesives and chemicals used with commercial interiors products and in various rubber and plastic products.
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 "Safe Harbor Compliance Statement for Forward-Looking Statements" in Item 1 of the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 2001, 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 may be affected by cycles in the construction and renovation of commercial and institutional buildings," "Our continued success depends significantly upon the efforts, abilities and continued service of our senior management executives and our design consultants," "Our substantial international operations are subject to various political, economic and other uncertainties," "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 our arrangement with our primary third-party supplier of synthetic fiber could have a material adverse effect on us," "Our Rights Agreement, which is triggered if a third party acquires beneficial ownership of 15% or more of our common stock without our consent, could discourage tender offers or other transactions 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.