Interface Reports Third Quarter 2010 Results

-- Sales and Orders Increase 16% and 20%, respectively --

-- Operating Income Increases to $28.0 million --

-- $0.19 Earnings Per Share --

Oct 27, 2010, 16:00 ET from Interface, Inc.

ATLANTA, Oct. 27 /PRNewswire-FirstCall/ -- Interface, Inc. (Nasdaq: IFSIA), a worldwide floorcoverings company and global leader in sustainability, today announced results for the third quarter ended October 3, 2010.  

Sales for the third quarter of 2010 were $252.7 million, compared with sales of $218.4 million in the third quarter of 2009, an increase of 15.7%.  Third quarter operating income improved 48.2% to $28.0 million, or 11.1% of sales, compared with operating income of $18.9 million, or 8.7% of sales, in the prior year period.  Net income attributable to Interface, Inc. was $12.1 million, or $0.19 per diluted share, in the third quarter of 2010, compared with $5.5 million, or $0.09 per diluted share, in the third quarter of 2009.  

"We turned in another strong performance as positive momentum continued in our business in the third quarter," said Daniel T. Hendrix, President and Chief Executive Officer.  "We once again achieved significant year-over-year increases in overall sales, margins and earnings, as we gained additional market share and benefited from the ongoing secular shift toward carpet tile.  Our sales continued to be driven by recovering demand from the corporate office market globally, as well as strong results in the hospitality, education and government sectors.  Geographically, the sales environment in the emerging markets, particularly in China and India, was increasingly robust while performance in the Asia-Pacific region also remained strong overall.  Demand in North America continued to improve as our U.S. modular sales reached an all-time record level.  In Europe, our cost control initiatives, combined with improving demand in the office market, led to increased sales and market share gains as well as a significant improvement in profitability.  In addition, Bentley Prince Street experienced sales increases in carpet tile which, along with the impact of cost reduction initiatives, resulted in this business turning a profit for the quarter."

Patrick C. Lynch, Senior Vice President and Chief Financial Officer, commented, "The third quarter was another strong quarter from a financial perspective.  The recovery in demand coupled with cost control initiatives drove the increases in revenues and profitability.  With the prudent actions that we took as the downturn hit, we believe that we are now in a strong financial position to execute against our strategic plans and selectively reinvest in the opportunities we see in the marketplace.  We are optimistic about the impact that our recent capital allocation decisions will have on our business – in particular, our new carpet tile plant in China that is coming on line in the fourth quarter, and a planned roll-out of additional FLOR stores over the next year.  We generated strong cash flow during the quarter and remain focused on managing our debt level and continuing to improve our profitability by leveraging our leaner cost structure on increased sales."

For the first nine months of 2010, sales were $696.5 million, compared with $629.0 million for the same period a year ago, an increase of 10.7%.  Operating income for the 2010 nine-month period (excluding a previously announced $3.1 million restructuring charge in the first quarter of 2010) was $66.4 million, or 9.5% of sales.  These figures compare with operating income for the 2009 nine-month period of $44.6 million, or 7.1% of sales (excluding the previously announced income of $5.9 million from patent litigation settlements and restructuring charges of $7.6 million).  Including all items in both periods, operating income for the 2010 nine-month period was $63.3 million, or 9.1% of sales, compared with operating income for the 2009 nine-month period of $42.9 million, or 6.8% of sales.  Net income attributable to Interface, Inc. in the first nine months of 2010 was $21.6 million, or $0.34 per diluted share, compared with net income attributable to Interface, Inc. in the year-ago period of $5.0 million, or $0.08 per diluted share.  Included in the Company's results were bond retirement expenses of $1.1 million and $6.1 million in the first nine months of 2010 and 2009, respectively, associated with the Company's previously-announced repurchases of its publicly-traded bonds.

Mr. Hendrix concluded, "We are very pleased with the momentum we're seeing in our business.  Orders grew 20% in the third quarter to our highest level in eight quarters, and our backlog has increased nearly $38 million since the beginning of 2010.  As a result, we feel well-positioned as we approach the end of the year.  The trends in the marketplace, such as the release of pent-up demand from the global office market, the vibrant emerging markets, and the ongoing secular shift toward carpet tile all play into our core competencies, and create the potential for additional market share gains and growth.  However, while we are encouraged by our recent performance, we also recognize that we continue to operate in an uncertain economic environment.  Accordingly, we remain focused on a balanced approach, managing the business to adapt to changes while also aggressively driving the secular shift toward carpet tile and expanding our leadership position in the marketplace."

The Company will host a conference call this afternoon, October 27, 2010, at 5:00 p.m. Eastern Time, to discuss its third quarter 2010 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=3417486 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 InterfaceFLOR, FLOR, Heuga and Bentley Prince Street brands, and, through its Bentley Prince Street brand, enjoys a leading position in the designer quality segment of the broadloom carpet market.  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 forwardlooking 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 January 3, 2010, which discussion is incorporated herein by this reference, including, but not limited to, the discussion of specific risks and uncertainties under the headings "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," "The ongoing worldwide financial and credit crisis could have a material adverse effect on our business, financial condition and results of operations," "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," "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 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.

- TABLES FOLLOW -

Consolidated Condensed Statements of Operations

Three Months Ended

Nine Months Ended

(In thousands, except per share data)

10/03/10

10/04/09

10/03/10

10/04/09

Net Sales

$252,724

$218,364

$696,502

$628,969

Cost of Sales

163,244

145,952

453,514

424,282

   Gross Profit

89,480

72,412

242,988

204,687

Selling, General & Administrative Expenses

61,441

53,487

176,597

160,122

Income from Litigation Settlements

--

--

--

(5,926)

Restructuring Charge

--

--

3,131

7,627

   Operating Income

28,039

18,925

63,260

42,864

Interest Expense

8,409

9,537

25,346

24,936

Bond Retirement Expenses

--

--

1,085

6,096

Other Expense (Income), Net

463

156

1,008

56

   Income Before Taxes

19,167

9,232

35,821

11,776

Income Tax Expense

6,825

3,542

13,365

5,661

   Income from Continuing Operations

12,342

5,690

22,456

6,115

Discontinued Operations, Net of Tax

--

--

--

(650)

Net Income

12,342

5,690

22,456

5,465

Net Income Attributable to Noncontrolling Interest in Subsidiary

(264)

(233)

(876)

(495)

Net Income Attributable to Interface, Inc.

$12,078

$5,457

$21,580

$4,970

Earnings Per Share Attributable to Interface, Inc. – Basic

Continuing Operations

$0.19

$0.09

$0.34

$0.09

Discontinued Operations

--

--

--

(0.01)

Earnings Per Share Attributable to Interface, Inc.– Basic

$0.19

$0.09

$0.34

$0.08

Earnings Per Share Attributable to Interface, Inc. – Diluted

   Continuing Operations

$0.19

$0.09

$0.34

$0.09

   Discontinued Operations

--

--

--

(0.01)

Earnings Per Share Attributable to Interface, Inc. – Diluted

$0.19

$0.09

$0.34

$0.08

Common Shares Outstanding – Basic

64,025

63,190

63,623

63,197

Common Shares Outstanding – Diluted

64,578

63,487

64,106

63,258

Orders from Continuing Operations

266,100

222,400

751,400

658,900

Continuing Operations Backlog (as of 10/03/10 and 10/04/09, respectively)

146,000

116,100

Consolidated Condensed Balance Sheets

(In thousands)

10/03/10

01/03/10

Assets

Cash

$ 80,854

$ 115,363

Accounts Receivable

140,759

129,833

Inventory

133,774

112,249

Other Current Assets

33,902

29,028

Assets of Businesses Held for Sale

1,500

1,500

Total Current Assets

390,789

387,973

Property, Plant & Equipment

166,093

162,269

Other Assets

174,047

176,997

Total Assets

$730,929

$727,239

Liabilities

Accounts Payable

$   48,962

$   35,614

Accrued Liabilities

111,249

101,143

Current Portion of Long-Term Debt

--

14,586

Total Current Liabilities

160,211

151,343

Senior Secured and Senior Subordinated Notes

256,127

280,184

Other Long-Term Liabilities

48,181

49,531

Total Liabilities

464,519

481,058

Shareholders' Equity

266,410

246,181

Total Liabilities and Shareholders' Equity

$ 730,929

$ 727,239

Consolidated Condensed Statements of Cash Flows

Three Months Ended

Nine Months Ended

(In millions)

10/03/10

10/04/09

10/03/10

10/04/09

Net Income

$12.3

$5.7

$22.5

$5.5

Adjustments for Discontinued Operations

--

--

--

0.7

Net Income from Continuing Operations

$12.3

$5.7

$22.5

$6.2

Depreciation and Amortization

6.4

6.9

19.3

18.9

Deferred Income Taxes and Other Non-Cash Items

0.8

0.0

0.6

1.4

Change in Working Capital

Accounts Receivable

(3.0)

(0.4)

(10.1)

27.5

Inventories

(6.5)

4.6

(20.5)

13.5

Prepaids and Other Current Assets

0.0

(5.0)

(7.4)

(1.1)

Accounts Payable and Accrued Expenses

8.9

6.3

27.2

(20.4)

Cash Provided from Operating Activities

18.9

18.1

31.6

46.0

Cash Used in Investing Activities

(8.4)

(2.7)

(20.3)

(8.5)

Cash Used in Financing Activities

(7.9)

(0.5)

(47.9)

(5.4)

Effect of Exchange Rate Changes on Cash

5.0

1.2

2.1

2.2

Net Increase (Decrease) in Cash

$7.6

$16.1

$(34.5)

$34.3

Consolidated Condensed Segment Reporting

(In millions)

Three Months Ended

Nine Months Ended

10/03/10

10/04/09

% Change

10/03/10

10/04/09

% Change

Net Sales

Modular Carpet

$226.5

$194.1

16.7%

$623.2

$557.1

11.9%

Bentley Prince Street

26.2

24.3

7.8%

73.3

71.9

1.9%

Total

$252.7

$218.4

15.7%

$696.5

$629.0

10.7%

Operating Income (Loss)

Modular Carpet

$ 29.5

$ 20.3

45.3%

$ 72.0

$ 44.5

61.8%

Bentley Prince Street

0.0

(1.0)

100.0%

(2.5)

(6.0)

58.3%

Corporate Expenses, Income and Eliminations

(1.5)

(0.4)

(275.0%)

(6.2)

4.4

(240.9%)

Total

$ 28.0

$ 18.9

48.1%

$ 63.3

$ 42.9

47.6%

Reconciliation of Non-GAAP Performance Measures to

GAAP Performance Measures

(In millions)

Nine Months Ended

Nine Months Ended

10/03/10

10/04/09

Operating Income, Excluding Restructuring Charge and Income from Litigation Settlements

$ 66.4

$ 44.6

Restructuring Charge

(3.1)

(7.6)

Income from Litigation Settlements

--

5.9

Operating Income, As Reported

$ 63.3

$ 42.9

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 nonGAAP 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.



RELATED LINKS

http://www.interfaceglobal.com