Daniel T. Hendrix
President and Chief Executive Officer
Patrick C. Lynch
Chief Financial Officer
Christine Mohrmann, Marco Lima, Lindsay Hatton
Media contact: Jason Rando
ATLANTA, Georgia, February 19, 2003 - Interface, Inc. (Nasdaq: IFSIA), a worldwide commercial interiors products and services company, today announced results for the fourth quarter and fiscal year ended December 29, 2002.
Additionally, the Company announced its intent to sell or otherwise create a joint venture or strategic alliance for its raised flooring business, Interface Architectural Resources. This business represented approximately 2.4% and 4.0% of revenue for the full years 2002 and 2001, respectively. The discussion of results in this release, except for net loss, excludes the Company's raised flooring business.
In the fourth quarter 2002, the Company's sales were $232.3 million, compared with $240.4 million in the fourth quarter 2001. In connection with its previously-announced restructuring initiative designed to further rationalize manufacturing operations in its fabrics division and further reduce worldwide workforce, the Company recorded a non-recurring pre-tax restructuring charge of $23.4 million, equivalent to $0.31 per share after-tax, during the fourth quarter 2002. Operating income, excluding the restructuring charge in each respective period, was $7.4 million in the fourth quarter 2002, versus $10.1 million in the fourth quarter 2001. (In the fourth quarter 2001, the Company recorded a non-recurring pre-tax restructuring charge of $2.9 million, or $0.02 per share after tax.)
Loss from continuing operations was $1.8 million, or $0.04 per share, in the fourth quarter 2002, compared with income from continuing operations of $1.6 million, or $0.03 per share, in the fourth quarter 2001, excluding the respective restructuring charges. With the respective restructuring charges included, the Company's continuing operations recognized a loss of $17.4 million for the fourth quarter 2002, compared with a loss from continuing operations of $0.3 million for the fourth quarter 2001.
As required by Statement of Financial Accounting Standards (“SFAS”) No. 144, entitled “Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company reported the results of operations for the raised flooring business as “discontinued operations.” Included in those results is an impairment loss of $18.3 million associated with the write-down of the carrying value of the assets of that business to their net realizable value. As a result, the net loss was $30.2 million, or $0.60 per share, during the fourth quarter 2002, compared with net loss of $0.7 million, or $0.01 per share, during the fourth quarter 2001.
“Our results from continuing operations, excluding the previously-announced restructuring charge, are in line with expectations, and reflect the prolonged downturn in industry conditions,” commented Daniel T. Hendrix, President and Chief Executive Officer. “Our Company's fundamentals remain strong, however, as evidenced by our ability to generate free cash flow in excess of $17 million in the fourth quarter of 2002 and $39 million for the year. In addition, despite a difficult business environment, our efforts to penetrate new market segments yielded positive results during the fourth quarter. We also are encouraged by the strong improvement in our international operations, led by our Asia-Pacific business, where sales in the fourth quarter of 2002 grew approximately 30% versus fourth quarter 2001, and 10% versus third quarter 2002.”
Regarding the Company's raised flooring business, Mr. Hendrix stated, “In order to intensify our focus on strategic assets that offer more immediate opportunities for growth and profitability, we have decided to divest or otherwise find a strategic alliance for our raised flooring business. This business has been profitable for us in the past, but out of all of our businesses it has been hit perhaps the hardest by the economic downturn. While we truly believe our raised flooring business produces great products and will return to profitability when the economy picks up, we can no longer wait for the rebound in the market for its products. The intended transaction also will help us achieve our goal of generating free cash flow. We already have begun marketing efforts, and our preliminary discussions with potential suitors have been encouraging.”
Sales for the 2002 fiscal year were $924.1 million, compared with $1,058.8 million in 2001. Operating income, excluding the respective restructuring charges in each year, was $38.6 million in 2002, versus $53.5 million in 2001. As noted above, the Company recorded a restructuring charge of $23.4 million, or $0.31 per share after-tax, in 2002, while restructuring charges in 2001 were $54.6 million, or $0.72 per share after-tax.
For the 2002 fiscal year, loss from continuing operations before the cumulative effect of the SFAS No. 142 accounting change, excluding the restructuring charge, was $2.1 million, or $0.04 per share. (During 2002, the Company's implementation of SFAS No. 142 resulted in a $55.4 million after-tax write-down (or $1.10 per share), primarily related to the impairment of goodwill.) This compares with income from continuing operations for the 2001 fiscal year, excluding restructuring charges, of $8.7 million, or $0.17 per share. Including the respective restructuring charges in each period, loss from continuing operations before the cumulative effect of the SFAS No. 142 accounting change was $17.8 million, versus loss from continuing operations of $25.9 million in fiscal 2001. Net loss for the full year 2002 was $87.7 million, or $1.75 per share. This compares with 2001 net loss of $36.3 million, or $0.72 per share, including restructuring charges.
Mr. Hendrix commented further, “From an overall market perspective, we continue to be an industry leader. We are vigorously pursuing opportunities through our market segmentation strategy, and have increased our marketing efforts to raise awareness of our products in existing as well as less-penetrated markets. As for operations, the implementation of the restructuring initiatives announced in the third quarter of 2002 are well underway. We believe that these restructuring efforts will generate significant cost savings and position the Company for growth when the economy improves.”
He concluded, “We expect that market conditions will remain challenging in the first quarter of 2003. Our Company is well-positioned, however, to continue generating strong cash flows in 2003, and our goal is to generate between $30 million and $40 million in free cash flow during the year.”
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 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.
Interface, Inc. Reports Fourth Quarter and Year-end 2002 Results