- Operating Income Up 29% Year-Over-Year -
- $0.10 Diluted Earnings Per Share -
ATLANTA, Oct. 26 /PRNewswire-FirstCall/ -- Interface, Inc. (Nasdaq: IFSIA), a worldwide floorcoverings and fabrics company, today announced results for the third quarter ended October 2, 2005.
Third quarter 2005 results included a 9.5% increase in sales to $243.9 million, from $222.8 million in the year ago period. Operating income was $20.5 million in the 2005 third quarter, a 28.9% increase over operating income of $15.9 million in the third quarter 2004. As a percentage of sales, operating income improved to 8.4% in the third quarter versus 7.1% of sales in the year ago period. Net income for the quarter was $5.1 million, or $0.10 per diluted share, compared with a net loss in the prior year period of $47.8 million, or $0.92 per diluted share. (Included in the Company's results for the third quarter 2004 is an operating loss related to discontinued operations of $4.1 million as well as write-downs associated with these operations for the impairment of assets and goodwill of $17.5 million and $29.0 million, respectively, as previously announced. Continuing operations yielded income of $2.4 million, or $0.05 per diluted share, in the third quarter 2004.)
"Third quarter performance represents another significant step forward for Interface, as we continued to generate solid year-over-year growth in both sales and operating income, even in the face of higher raw material prices, the impact of the tragic events in the Gulf Coast region, and tougher year- over-year comparables," said Daniel T. Hendrix, President and Chief Executive Officer. "These results are indicative of the several positive trends we are seeing in the industry and the momentum we are now generating in all of our businesses. The improving U.S. office market, the ongoing success of our market segmentation strategy, and the increasing popularity of carpet tile as the floorcovering of choice continue to fuel growth for our Company. Our modular business once again generated impressive returns, with double digit sales growth in the U.S., record third quarter growth in Asia-Pacific, and strengthening demand in Europe. We also are upbeat about the performance of our fabrics and broadloom businesses in the third quarter, as sales and operating income increased significantly in each. Given these results, we believe our Company is beginning to hit on all cylinders."
Mr. Hendrix added, "Our segmentation strategy continues to pick up steam around the world, with particular success in the modular carpet segment. With effective execution of this strategy, we are leading and shaping the modular market, while also forming relationships with new customers, such as automobile manufacturers, on the fabrics side of our business. For the third quarter, worldwide modular sales grew 12% year-over-year. The strong order trend we saw in our fabrics business at the end of the second quarter continued into the third quarter, and the ongoing strength of the corporate office market led to a 7% increase in fabrics sales year-over-year. Sales from our Bentley Prince Street broadloom business also increased during the third quarter, which led to its fifth consecutive quarter of profitability."
Patrick C. Lynch, Vice President and Chief Financial Officer of Interface, commented, "While there has been some degree of uncertainty surrounding oil prices and the supply of raw materials in our industry, we have taken steps to help offset these issues, including flowing through price increases to counter higher raw material costs. In addition, the profitability improvements in our fabrics and broadloom businesses led to gross margin expansion to 31.4% in the third quarter from 29.4% in the third quarter of 2004."
For the first nine months of 2005, sales were $725.2 million, compared with $649.1 million for the same period a year ago, an increase of 11.7%. Operating income for the 2005 nine-month period increased to $58.9 million, from $45.4 million in the comparable 2004 nine-month period. Income from continuing operations was $12.2 million, or $0.23 per diluted share, in the first nine months of 2005. This compares with income from continuing operations of $4.6 million, or $0.09 per diluted share, in the year ago period.
Mr. Hendrix concluded, "As we move into the fourth quarter, we are encouraged with the level of order activity and we continue to be optimistic about the future. Although increasing raw material costs will remain a challenge in the near term, we believe that the product pricing and supply chain actions we have taken -- coupled with the benefits we are reaping from our decade-long journey toward sustainability -- position us well for further progress. While our leading presence in the worldwide modular carpet market continues to be the main driver of growth for Interface, our market segmentation strategy and ongoing cost management initiatives have led to higher sales levels and significant improvements in profitability in our fabrics and broadloom businesses. We believe that we can continue to generate top-line growth while improving profitability in all areas of our business. During the fourth quarter, we expect continued sales growth and margin expansion."
The Company will host a conference call today, October 26, 2005, at 5:00 p.m. Eastern Time, to discuss its third quarter 2005 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=1148621 or through the Company's website at http://www.interfaceinc.com/results/investor/. The archived version of the conference call will be available at these sites beginning approximately one hour after the call ends through October 26, 2006 at 11:59 p.m. Eastern Time.
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 Interface, InterfaceFLOR, 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 is a leading producer of interior fabrics and upholstery products, which it markets under the Guilford of Maine, Chatham and Camborne brands, and provides specialized fabric services through its TekSolutions business.
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" included in Item 1 of the Company's Annual Report on Form 10-K for the fiscal year ended January 2, 2005, 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 construction and renovation 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," "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 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," 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 Condensed Statements of Operations (In thousands, except per share data) Three Months Ended Nine Months Ended 10/02/05 10/03/04 10/02/05 10/03/04 Net Sales $243,898 $222,822 $725,158 $649,068 Cost of Sales 167,357 157,298 500,250 451,865 Gross Profit 76,541 65,524 224,908 197,203 Selling, General & Administrative Expenses 56,029 49,645 166,003 151,765 Operating Income 20,512 15,879 58,905 45,438 Interest Expense 11,402 11,395 34,486 34,752 Bond Offering Cost -- -- -- -- 1,869 Other Expense, Net 171 288 1,039 1,610 Income Before Taxes 8,939 4,196 23,380 7,207 Income Tax Expense 3,602 1,826 11,180 2,619 Income from Continuing Operations 5,337 2,370 12,200 4,588 Discontinued Operations, Net of Tax (216) (50,661) (14,741) (56,067) Gain (Loss) on Disposal, Net of Tax -- 465 (1,935) 465 Net Income (Loss) $5,121 $(47,826) $(4,476) $(51,014) Earnings (Loss) Per Share - Basic Continuing Operations $0.10 $0.05 $0.24 $0.09 Discontinued Operations -- (1.01) (0.29) (1.11) Gain (Loss) on Disposal -- 0.01 (0.04) 0.01 Earnings (Loss) Per Share - Basic $0.10 $(0.95) $(0.09) $(1.01) Earnings (Loss) Per Share - Diluted Continuing Operations $0.10 $0.05 $0.23 $0.09 Discontinued Operations -- (0.97) (0.28) (1.08) Gain (Loss) on Disposal -- 0.00 (0.03) 0.01 Earnings (Loss) Per Share - Diluted $0.10 $(0.92) $(0.08) $(0.98) Common Shares Outstanding - Basic 51,648 50,558 51,457 50,537 Common Shares Outstanding - Diluted 53,444 52,099 52,779 52,038 Orders from Continuing Operations $252,400 $238,900 $769,800 $700,500 Continuing Operations Backlog (as of 10/02/05 and 01/02/05, respectively) $102,300 $89,100 Consolidated Condensed Balance Sheets (In thousands) 10/02/05 01/02/05 Assets Cash $32,166 $22,164 Accounts Receivable 142,623 142,228 Inventories 146,393 137,618 Other Current Assets 27,903 22,756 Assets of Businesses Held for Sale 12,439 42,788 Total Current Assets 361,524 367,554 Property, Plant & Equipment 180,332 194,702 Other Assets 308,815 307,542 Total Assets $850,671 $869,798 Liabilities Accounts Payable $55,737 $46,466 Accrued Liabilities 75,069 86,856 Liabilities of Businesses Held for Sale 442 5,390 Long-Term Debt 14,594 - Senior and Senior Subordinated Notes 460,000 460,000 Other Liabilities 75,585 76,908 Total Liabilities 681,427 675,620 Shareholders' Equity 169,244 194,178 Total Liabilities and Shareholders' Equity $ 850,671 $869,798 Consolidated Condensed Statements of Cash Flows (In millions) Three Months Ended Nine Months Ended 10/02/05 10/03/04 10/02/05 10/03/04 Net Income (Loss) $ 5.1 $(47.8) $(4.5) $(51.0) Adjustments for Discontinued Operations 0.2 50.2 16.7 55.6 Income from Continuing Operations, Net of Tax $ 5.3 $2.4 $12.2 $4.6 Depreciation and Amortization 7.1 8.4 23.3 26.2 Deferred Income Taxes and Other Non-Cash Items 0.2 3.5 (10.6) (1.0) Change in Working Capital Accounts Receivable 7.8 (1.9) (4.3) (3.7) Inventories 2.9 9.5 (12.6) (3.3) Prepaids (1.4) 2.8 (7.6) (0.5) Accounts Payable and Accrued Expenses (13.7) (30.6) 2.4 (26.9) Cash Provided from (Used in) Continuing Operations 8.2 (5.9) 2.8 (4.6) Cash Provided from (Used in) Operating Activities of Discontinued Operations 2.0 (4.4) 10.2 (12.6) Cash Provided from (Used in) Operating Activities 10.2 (10.3) 13.0 (17.2) Cash Provided from (Used in) Investing Activities (6.9) 1.5 (17.9) (7.9) Cash Provided from (Used in) Financing Activities 6.6 (0.2) 17.2 28.6 Effect of Exchange Rate Changes on Cash (0.5) 0.1 (2.3) 0.2 Net Increase (Decrease) in Cash $9.4 $(8.9) $10.0 $3.7 Consolidated Condensed Segment Reporting (In millions) Three Months Ended Nine Months Ended 10/02/05 10/03/04 % Change 10/02/05 10/03/04 % Change Net Sales Modular Carpet $ 157.9 $141.4 11.7% $475.2 $411.6 15.4% Bentley Prince Street 32.1 31.7 1.3% 89.6 88.1 1.7% Fabrics Group 49.9 46.7 6.9% 147.9 140.3 5.4% Specialty Products 4.0 3.0 33.3% 12.5 9.1 37.4% Total $ 243.9 $222.8 9.5% $725.2 $649.1 11.7% Operating Income (Loss) Modular Carpet $18.1 $17.2 $56.0 $44.7 Bentley Prince Street 0.8 0.7 1.8 (0.2) Fabrics Group 1.9 (1.5) 3.0 1.8 Specialty Products 0.2 (0.2) 0.6 (0.2) Corporate Expenses and Eliminations (0.5) (0.3) (2.5) (0.7) Total $20.5 $15.9 $58.9 $45.4
SOURCE Interface, Inc.
Daniel T. Hendrix
President and Chief Executive Officer. or
Patrick C. Lynch
Chief Financial Officer
or Christine Mohrmann
or Jim Olecki
both of Financial Dynamics for Interface, Inc.
Web site: http://www.interfaceinc.com