Interface Reports Fourth Quarter and Fiscal Year 2013 Results

ATLANTA, Feb. 19, 2014 /PRNewswire/ -- Interface, Inc. (Nasdaq: TILE), a worldwide carpet tile company and global leader in sustainability, today announced results for the fourth quarter and fiscal year ended December 29, 2013.

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"We had a reasonably good finish to the year, as our expectations for fourth quarter growth were somewhat tempered by the softened order level we saw for a few weeks in the previous quarter," said Daniel T. Hendrix, Chairman and Chief Executive Officer of the Company.  "The most encouraging sign of the fourth quarter was the continued progress within our European business, where we were pleased to see our primary markets continue to recover and our sales comparison turn positive for the first time in two years.  Our Americas business continued its gradual but steady growth in the fourth quarter, gaining additional share in a U.S. commercial market that has yet to see a true rebound.  In Asia-Pacific, sales declined primarily as a result of the lingering effects of last year's plant fire in Australia, but we also reached a final settlement with our insurance company regarding the fire claim, resulting in a gain during the fourth quarter.  We also commenced operations at our new manufacturing facility located near Sydney, Australia during the first week of January, which should improve service levels in the region going forward." 

FOURTH QUARTER 2013 FINANCIAL SUMMARY & HIGHLIGHTS

Sales:  Sales for the fourth quarter of 2013 were $251.7 million, a slight uptick from sales of $249.6 million in the fourth quarter of 2012. 

  • Sales in our Americas business increased 3.1% year over year.  Most of the growth occurred in the residential market segment (up 55%), primarily within with our FLOR consumer business.  FLOR sales were up 25% versus the fourth quarter last year, due primarily to the larger FLOR store footprint and increased web traffic, with same store sales up 44% year over year.  The corporate office segment continued its gradual recovery (up 3%) and all other non-office segments were about even year over year, with the exception of the education segment (down 9%).   
  • Our Europe division continued its steady improvement, with sales essentially pulling even with the prior year period in local currency and up 4% as reported in U.S. dollars.
  • Sales in the Asia-Pacific region were down 13%, due to a combination of macroeconomic conditions, currency impacts, and the lingering effects of the 2012 fire at the plant in Australia.

Operating Income:  Operating income in the fourth quarter of 2013 was $32.0 million, or 12.7% of sales, including a gain of $7.0 million (or $0.05 per share after-tax) from the final settlement of our insurance claim regarding last year's fire in Australia.  Excluding this gain, operating income in the quarter was $25.0 million, or 10.0% of sales.  This compares with operating income in the 2012 fourth quarter of $21.9 million, or 8.8% of sales, excluding a $2.3 million restructuring charge and $0.8 million of Australia fire expenses in that period.  Including those charges and expenses, operating income in the fourth quarter last year was $18.8 million, or 7.5% of sales.

Income from Continuing Operations:  The Company reported income from continuing operations of $15.3 million, or $0.23 per diluted share, in the fourth quarter of 2013.  Included in this result were the aforementioned gain related to our insurance claim as well as $1.7 million, or $0.02 per diluted share, of debt retirement costs largely arising from our previously announced bond redemption that was completed during the quarter.  Excluding the insurance gain and the debt retirement costs, income from continuing operations was $13.0 million, or $0.20 per diluted share, during the 2013 fourth quarter.  This compares with income from continuing operations in the fourth quarter last year of $10.4 million, or $0.16 per diluted share, excluding the above-mentioned restructuring charge and Australia fire expenses.  With the restructuring charge and fire expenses, fourth quarter 2012 income from continuing operations was $7.4 million, or $0.11 per diluted share.

Net Income:  Including all items discussed above, net income during the fourth quarter of 2013 was $15.3 million, or $0.23 per diluted share, versus $7.4 million, or $0.11 per diluted share, in the fourth quarter last year.

Patrick C. Lynch, Senior Vice President and Chief Financial Officer, commented, "We're pleased with our further expansion of gross margin during the quarter, coming in at 36.5%.  This improvement was somewhat offset by higher SG&A expenses due to enhanced sales and marketing initiatives at FLOR and higher incentive-based compensation.  Toward the end of the quarter, we received $22.3 million as a final payment in settlement of our Australian fire insurance claim, resulting in a gain of $7.0 million, or $0.05 per share after tax.  With this final payment, the aggregate proceeds received on the claim totaled approximately $76.7 million. While the proceeds were not specified as being related to any particular aspect of our claim, we estimate that they were comprised of approximately $42.3 million for property, plant and equipment, $22.9 million for incremental production and other costs arising from the fire, and $11.5 million for lost profits."

FISCAL YEAR 2013 FINANCIAL RESULTS

Sales:  For the full year 2013, sales were $960.0 million, compared with $932.0 million in 2012, an increase of 3.0%.  Fluctuations in currency exchange rates negatively impacted 2013 sales by less than 1% relative to the prior year. 

Operating Income:  Operating income for 2013 was $95.6 million, or 10.0% of sales, including the gain of $7.0 million from the settlement of our fire insurance claim.  Excluding this gain, operating income for 2013 was $88.7 million, or 9.2% of sales.  In 2012, excluding restructuring and asset impairment charges totaling $19.4 million and $1.7 million of expenses related to the Australia fire, operating income was $85.8 million, or 9.2% of sales.  Including all items, last year's operating income was $64.6 million, or 6.9% of sales.

Income from Continuing Operations:  The Company reported 2013 income from continuing operations of $48.3 million, or $0.73 per diluted share, which includes the above-described fire insurance settlement, debt retirement costs and a previously-reported tax dispute resolution benefit of $1.9 million.  Excluding those items, income from continuing operations for 2013 was $44.1 million, or $0.67 per diluted share.  For 2012, excluding restructuring and asset impairment charges and Australia fire expenses, income from continuing operations was $39.4 million, or $0.60 per diluted share (with these items included, it was $22.9 million, or $0.35 per diluted share). 

Net Income:  Including all items, the Company reported 2013 net income of $48.3 million, or $0.73 per diluted share.  In 2012, including the items discussed above as well as a loss from discontinued operations of $17.0 million, net income was $5.9 million, or $0.09 per diluted share.

Mr. Hendrix concluded, "We are carrying good momentum into 2014, with orders firming in the Americas and Europe, and we're seeing a much improved pipeline of project activity compared with a year ago.  We have, however, seen some impact in the first six weeks from extreme winter weather in the U.S. and an early Chinese New Year.  The positive trends in the U.K., Holland and Germany bode well for our European business, although markets in Southern Europe are lagging behind the rest of the region.  In the U.S., leading indicators suggest the economic recovery will remain gradual, but we believe market share gains will keep us ahead of the pace of the overall economy.  We expect market conditions in Asia-Pacific to be mixed, with Australia being a soft point, although the recent startup of our new plant near Sydney and our industry-leading sales force have us poised to regain market share in the country.  Gross margin will be impacted at the beginning of 2014 as we rebalance production among our three Asia-Pacific manufacturing facilities, but we do see headroom for margin expansion over the course of the year.  We also will keep our SG&A expenses in check as our top line develops throughout the year."

Webcast and Conference Call Information

The Company will host a conference call tomorrow morning, February 20, 2014, at 9:00 a.m. Eastern Time, to discuss its fourth quarter and fiscal year 2013 results.  The conference call will be simultaneously broadcast live over the Internet.  Listeners may access the conference call live over the Internet at the following address: http://edge.media-server.com/m/p/guo8wbrr/lan/en or through the Company's website at: http://www.interfaceglobal.com/Investor-Relations.aspx. The archived version of the webcast will be available at these sites for one year beginning approximately one hour after the call ends.

Interface, Inc. is the world's largest manufacturer of modular carpet, which it markets under the Interface and FLOR brands. 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 30, 2012, which discussion is incorporated herein by this reference, including, but not limited to, the discussion of specific risks and uncertainties under the headings "The ongoing worldwide financial and credit crisis could have a material adverse effect on our business, financial condition and results of operations," "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," "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," "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," "Concerns regarding the European sovereign debt crisis and market perceptions about the instability of the euro, the potential re-introduction of individual currencies within the Eurozone, or the potential dissolution of the euro entirely, could adversely affect our business, results of operations or financial condition," "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," 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

Three Months Ended

Twelve Months Ended

(In thousands, except per share data)

12/29/13

12/30/12

12/29/13

12/30/12






Net Sales

$ 251,689

$ 249,595

$ 959,989

$ 932,020

Cost of Sales

159,818

164,497

618,880

614,841

    Gross Profit

91,871

85,098

341,109

317,179

Selling, General & Administrative Expenses

66,827

63,224

252,433

231,358

Restructuring and Asset Impairment Charges

--

2,339

--

19,425

    Expenses (Gain) Related to Australia Fire

(6,954)

768

(6,954)

1,748

    Operating Income

31,998

18,767

95,630

64,648

Interest Expense

5,442

5,892

23,810

25,024

Debt Retirement Costs

1,667

--

1,667

--

Other Expense, Net

630

697

1,149

1,521

    Income Before Taxes

24,259

12,178

69,004

38,103

Income Tax Expense

8,923

4,786

20,749

15,204

    Income from Continuing Operations

15,336

7,392

48,255

22,899

Discontinued Operations, Net of Tax

--

--

--

(16,956)

Net Income

$  15,336

$   7,392

$   48,255

$   5,943






Earnings (Loss) Per Share – Basic





Continuing Operations

$ 0.23

$ 0.11

$ 0.73

$ 0.35

Discontinued Operations

--

--

--

(0.26)

Earnings (Loss) Per Share – Basic

$ 0.23

$ 0.11

$ 0.73

$ 0.09






Earnings (Loss) Per Share – Diluted





    Continuing Operations

$ 0.23

$ 0.11

$ 0.73

$ 0.35

Discontinued Operations

--

--

--

(0.26)

Earnings (Loss) Per Share – Diluted

$ 0.23

$ 0.11

$ 0.73

$ 0.09






Common Shares Outstanding – Basic

66,301

65,964

66,194

65,767

Common Shares Outstanding – Diluted

66,412

66,119

66,297

65,900






Orders from Continuing Operations

253,700

230,700

993,400

965,200

 

Consolidated Condensed Balance Sheets




(In thousands)


12/29/13

12/30/12

Assets








Cash


$ 72,883

$ 90,533

Accounts Receivable


131,936

137,313

Inventory


149,643

141,176

Other Current Assets


33,643

61,629

Total Current Assets


388,105

430,651

Property, Plant & Equipment


230,845

165,725

Other Assets


199,190

192,991

Total Assets


$818,140

$789,367





Liabilities




Accounts Payable


$ 52,515

$ 56,292

Accrued Liabilities


77,672

93,036

Current Portion of Long-Term Debt


--

8,110

Total Current Liabilities


130,187

157,438

Senior and Senior Subordinated Notes


247,500

275,000

Long-Term Debt


26,326

--

Other Long-Term Liabilities


73,340

61,227

Total Liabilities


477,353

493,665

Shareholders' Equity


340,787

295,702

Total Liabilities and Shareholders' Equity


$ 818,140

$ 789,367

 

 


Consolidated Condensed Statements of Cash Flows

Twelve Months Ended

(In millions)

12/29/13

12/30/12




Net Income


$ 48.3


$ 5.9

Adjustments for Discontinued Operations


--


(17.0)

Net Income from Continuing Operations


$ 48.3


$ 22.9

Depreciation and Amortization


32.6


30.0

Deferred Income Taxes and Other Items


10.2


(12.0)

Cash Received from Insurance Company


26.0


--

Change in Working Capital





Accounts Receivable

3.7


21.1


Inventories

(10.6)


1.1


Prepaids

(25.4)


(11.9)


Accounts Payable and Accrued Expenses

(17.3)


(4.3)


Cash Provided from Operating Activities


67.5


46.9

Cash Provided By (Used in) Investing Activities


(65.8)


7.8

Cash Used in Financing Activities


(16.8)


(15.9)

Effect of Exchange Rate Changes on Cash


(2.5)


1.1

Net Increase (Decrease) in Cash


$(17.6)


$39.9

 

Reconciliation of Non-GAAP Performance Measures to GAAP Performance Measures
(In millions, except per share amounts)

 


Twelve Months

Ended

Twelve Months

Ended


12/29/13

12/30/12

Operating Income, Excluding Restructuring Charges

  and Gain (Expenses) Related to Australia Fire

$88.7

$85.8

Restructuring Charges

--

(19.4)

Gain (Expenses) Related to Australia Fire

7.0

(1.7)

Operating Income, As Reported

$95.6

$64.6








Twelve Months

Ended

Twelve Months

Ended


12/29/13

12/30/12

Income From Continuing Operations, Excluding

  Restructuring Charges, Gain (Expenses) Related to

  Australia Fire, Debt Retirement Costs and Tax

  Dispute Resolution

$44.1

$39.4

Restructuring Charges (net of tax of $4.9 million in 2012)

--

(14.5)

Gain (Expenses) Related to Australia Fire (net of tax of $3.6 million in 2013 and $0.2 million in 2012)

 

3.3

 

(2.0)

Debt Retirement Costs (net of tax of $0.6 million in 2013)

(1.0)

--

Tax Dispute Resolution

1.9

--

Income from Continuing Operations, As Reported

$48.3

$22.9








Twelve Months

Ended

Twelve Months 

Ended


12/29/13

12/30/12

Diluted Earnings Per Share From Continuing

  Operations, Excluding Restructuring Charges,

  Gain (Expenses) Related to Australia Fire, Debt

  Retirement Costs and Tax Dispute Resolution

$0.67

$0.60

Restructuring Charges, After Tax

--

(0.22)

Gain (Expenses) related to Australia Fire, After Tax

0.05

(0.03)

Debt Retirement Costs, After Tax

(0.02)

--

Tax Dispute Resolution

0.03

--

Diluted Earnings Per Share From Continuing

  Operations, As Reported

$ 0.73

$0.35








Three Months

Ended

Three Months

Ended


12/29/13

12/30/12




Operating Income, Excluding Restructuring Charges

  and Gain (Expenses) Related to Australia Fire

$25.0

$21.9

Restructuring Charges

--

(2.3)

Gain (Expenses) Related to Australia Fire

7.0

(0.8)

Operating Income, As Reported

$ 32.0

$18.8








Three Months

Ended

Three Months

Ended


12/29/13

12/30/12

Income from Continuing Operations, Excluding

  Restructuring Charge, Gain (Expenses) Related to

  Australia Fire and Debt Retirement Costs

$13.0

$10.4

Restructuring Charge (net of tax of $0.6 million)

--

(1.7)

Gain (Expenses) Related to Australia Fire (net of tax of $3.6 million in 2013 and $0.5 million in 2012)

3.3

(1.3)

Debt Retirement Costs (net of tax of $0.6 million)

(1.0)

--

Income from Continuing Operations, As Reported

$15.3

$7.4








Three Months Ended

Three Months Ended


12/29/13

12/30/12

Diluted Earnings Per Share from Continuing

  Operations, Excluding Restructuring, Charge Gain

  (Expenses) Related to Australia Fire and Debt

  Retirement Expenses

$0.20

$0.16

Restructuring Charge, After Tax

--

(0.03)

Gain (Expenses) Related to Australia Fire, After Tax

0.05

(0.02)

Debt Retirement Costs, After Tax

(0.02)

--

Diluted Earnings Per Share from Continuing

  Operations, As Reported

$0.23

$0.11

 

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 one period relative to the comparable 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.  Tax effects identified above (when applicable) are calculated using the statutory tax rate for the jurisdictions in which the charge or income occurred.

SOURCE Interface, Inc.



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