EX-99.1 2 ex99_9.htm PRESS RELEASE DATED JULY 23, 2008 ex99_9.htm



CONTACT:  
Daniel T. Hendrix
 
President and Chief Executive Officer
 
Patrick C. Lynch
 
Senior Vice President and Chief Financial Officer
 
(770) 437-6800
   
 
FD
 
Eric Boyriven, Bob Joyce
 
(212) 850-5600

FOR IMMEDIATE RELEASE


INTERFACE REPORTS RECORD SECOND QUARTER 2008 RESULTS

-- Sales up 11.3% --
-- Orders increase to $311.4 million --
-- Continued market share growth through segmentation strategy --

ATLANTA, Georgia, July 23, 2008 – Interface, Inc. (Nasdaq: IFSIA), a worldwide floorcoverings company, today announced results for the second quarter ended June 29, 2008.
 
Sales for the second quarter of 2008 increased 11.3% to $295.0 million from sales of $265.0 million in the year ago period.  Gross profit margin for the 2008 second quarter grew 90 basis points to 35.7%, versus 34.8% in the second quarter of the previous year.  Operating income for the second quarter of 2008 increased 8.2% to $33.4 million, or 11.3% of sales, compared with operating income of $30.9 million, or 11.7% of sales, in the second quarter of 2007.  Income from continuing operations for the 2008 second quarter was $15.9 million, an increase of 19.2% compared with income from continuing operations of $13.3 million in the second quarter of 2007.  Net income for the 2008 second quarter was $15.9 million, or $0.26 per diluted share.  Last year, second quarter results included a loss from discontinued operations of $12.3 million, or $0.20 per diluted share, which led to net income of $1.0 million, or $0.02 per diluted share.
 
“Our 2008 second quarter represented Interface’s best second quarter ever in terms of operating income and earnings per share, despite the challenging market and economic environment,” said Daniel T. Hendrix, President and Chief Executive Officer.  “We continued to grow our business and gain market share, as overall sales increased more than 11%, driven by our market segmentation strategy, the ongoing secular shift toward carpet tile, our presence in emerging geographic markets, and a positive currency impact.  These factors more than offset softer sales volumes in the Western Europe and U.S. corporate office markets.  SG&A expenses were up $10.5 million year-over-year, with most of the increase attributable to a $4 million currency impact and $4 million of incremental costs related to our market segmentation strategy in Europe.  We continued to see solid demand for our products, as orders grew 3% to $311 million versus the record level comparison in the second quarter last year and backlog increased 21% from the beginning of the year.  We also added $24 million in cash to the balance sheet during the quarter.”
 

 
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INTERFACE REPORTS RECORD SECOND QUARTER 2008 RESULTS
 
 
Mr. Hendrix continued, “Our modular carpet business continued its excellent performance in the second quarter with year-over-year sales growth of 15%.  Operating income in the modular business grew 12% and reflected increased sales volume, somewhat offset by the investments we are making to achieve the long-term success of our segmentation strategy in Europe.  Bentley Prince Street continued to work through operational issues associated with the ramp up of its carpet tile backing operations as well as rising raw material and energy costs.  Going forward, our focus will be on right-sizing this business to make it more profitable at existing sales levels.  On a positive note, Bentley Prince Street had a strong order backlog going into the third quarter, and the modular component of its business recorded a 23% increase in sales during the second quarter, reaffirming the broader shift we see in the marketplace to modular solutions.  And it has raised prices to offset its cost increases.”
 
For the first six months of 2008, sales were $556.7 million, compared with $508.5 million for the same period a year ago, an increase of 9.5%.  Operating income for the 2008 six-month period was $64.4 million, versus operating income of $55.2 million for the comparable 2007 six-month period (which included a loss of $1.9 million, or $0.03 per diluted share, on the disposal of its specialty products business). Income from continuing operations was $30.0 million, or $0.48 per diluted share, in the 2008 six-month period, compared with income from continuing operations of $22.4 million, or $0.36 per diluted share, in the same period a year ago.  Net income also was $30.0 million, or $0.48 per diluted share, in the first six months of 2008.  Including results of discontinued operations, net loss for the first six months of 2007 was $39.6 million, or $0.64 per diluted share.
 
Mr. Hendrix concluded, “Given the broader macroeconomic conditions, we’re largely pleased with our second quarter performance, and notwithstanding the slowing conditions in the Western Europe and U.S. corporate office markets, we’re encouraged by our future prospects.  We believe the ongoing shift in the marketplace to carpet tile, the continued success of our U.S. segmentation strategy, which has allowed us to build a growing presence in markets such as hospitality and education, and our international diversification serve to position us well for future growth.  Our ongoing investments to advance our segmentation strategy in Europe are expected to further reduce our exposure to the corporate office market and open additional growth opportunities in that region.  And, we’re moving forward with plans to expand our global presence by building a carpet tile plant in China.  We believe we have the right strategy in place, and are confident in our business as we enter the second half of 2008.”
 
 
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INTERFACE REPORTS RECORD SECOND QUARTER 2008 RESULTS
 
 
 
 
The Company will host a conference call tomorrow, July 24, 2008, at 9:00 a.m. Eastern Time, to discuss its second quarter 2008 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=1896394 or through the Company’s website at http://www.interfaceinc.com/results/investor/.  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 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, 2007, 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 renovation and construction 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,” “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, together with other insiders, 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 -
 
 
 

          
 
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INTERFACE REPORTS RECORD SECOND QUARTER 2008 RESULTS

 
Consolidated Condensed Statements of Operations
  
Three Months Ended
    
Six Months Ended
  
(In thousands, except per share data)
  
06/29/08
    
07/01/07
    
06/29/08
    
07/01/07
  
                         
Net Sales
   $ 295,005     $ 264,962     $ 556,741     $ 508,454  
Cost of Sales
     189,712       172,737       357,182       333,001  
Gross Profit
     105,293       92,225       199,559       175,453  
Selling, General & Administrative Expenses
     71,857       61,332       135,152       118,379  
Loss on Disposal – Specialty Products
     --       --       --        1,873  
Operating Income
     33,436       30,893       64,407       55,201  
Interest Expense
     8,108       9,161       15,936       18,281  
Other Expense, Net
     248       612       611        1,035  
Income Before Taxes
     25,080       21,120       47,860       35,885  
Income Tax Expense
     9,204       7,797       17,862        13,493  
Income from Continuing Operations
     15,876       13,323       29,998       22,392  
Discontinued Operations, Net of Tax
     --        (12,325 )      --       (62,010 )
Net Income (Loss)
   $ 15,876     $ 998     $ 29,998     $ (39,618 )
                                 
Earnings (Loss) Per Share - Basic
                                
Continuing Operations
   $ 0.26     $ 0.22     $ 0.49     $ 0.37  
Discontinued Operations
     --        (0.20 )     --       (1.03 )
Earnings (Loss) Per Share – Basic
   $ 0.26     $ 0.02     $ 0.49     $ (0.66 )
                                 
Earnings (Loss) Per Share – Diluted
                                
Continuing Operations
   $ 0.26     $ 0.22     $ 0.48     $ 0.36  
Discontinued Operations
     --        (0.20 )     --        (1.00 )
Earnings (Loss) Per Share – Diluted
   $ 0.26     $ 0.02     $ 0.48     $ (0.64 )
                                 
Common Shares Outstanding – Basic
     61,523       60,322       61,425       60,210  
Common Shares Outstanding – Diluted
     62,065       61,571       62,098       61,435  
                                 
Orders from Continuing Operations*
     311,400       302,000       593,800       556,600  
Continuing Operations Backlog (as of 06/29/08 and 07/01/07, respectively)*
                     154,400       148,200  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
________________
 
* Orders from Continuing Operations and Continuing Operations Backlog exclude all activity related to the Fabrics Group business segment, which was sold in the third quarter of 2007.

 
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INTERFACE REPORTS RECORD SECOND QUARTER 2008 RESULTS

 
Consolidated Condensed Balance Sheets
            
(In thousands)
  
06/29/08
    
12/30/07
  
Assets
            
Cash
   $ 83,616     $ 82,375  
Accounts Receivable
     175,263       178,625  
Inventory
     152,039       125,789  
Other Current Assets
     29,618       24,848  
Assets of Businesses Held for Sale
     4,566       4,792  
Total Current Assets
     445,102       416,429  
Property, Plant & Equipment
     170,618       161,874  
Other Assets
     263,610       256,929  
Total Assets
   $ 879,330     $ 835,232  
                 
Liabilities
                
Accounts Payable
   $ 64,531     $ 57,243  
Accrued Liabilities
     117,049       120,388  
Current Portion of Long-Term Debt
     --       --  
Liabilities of Businesses Held for Sale
     44       220  
Total Current Liabilities
     181,624       177,851  
Long-Term Debt
     --       --  
Senior and Senior Subordinated Notes
     310,000       310,000  
Other Long-Term Liabilities
     53,139       53,239  
Total Liabilities
     544,763       541,090  
Shareholders’ Equity
     334,567       294,142  
Total Liabilities and Shareholders’ Equity
   $ 879,330     $ 835,232  
 
 
 
Consolidated Condensed Statements of Cash Flows
  
Three Months Ended
    
Six Months Ended
  
(In millions)
  
06/29/08
    
07/01/07
    
06/29/08
    
07/01/07
  
                         
Net Income (Loss)
         $ 15.9           $ 1.0           $ 30.0           $ (39.6 )
Adjustments for Discontinued Operations
           --             12.3             --             62.0  
Net Income from Continuing Operations
         $ 15.9           $ 13.3           $ 30.0           $ 22.4  
Depreciation and Amortization
           5.5             5.6             12.0             12.0  
Deferred Income Taxes and Other Non-Cash Items
           1.7             0.0             3.1             0.0  
Change in Working Capital
                                                        
Accounts Receivable
     (14.1 )             (8.7 )             7.1               (8.0 )        
Inventories
     (2.3 )             (1.3 )             (23.3 )             (16.1 )        
Prepaids
     (2.0 )             1.6               (3.7 )             1.7          
Accounts Payable and Accrued Expenses
     29.3               25.5               (4.0 )             8.3          
Cash Provided from Continuing Operations
             34.0               36.0               21.2               20.3  
Cash Provided from (Used in) Operating Activities of    Discontinued Operations
             --               (1.7 )             --                3.2  
Cash Provided from Operating Activities
             34.0               34.3               21.2               23.5  
Cash Provided from (Used in) Investing Activities
             (8.3 )             (12.9 )             (18.5 )             (31.1 )
Cash Provided from (Used in) Financing Activities
             (1.7 )             2.2               (2.8 )             (13.3 )
Effect of Exchange Rate Changes on Cash
             0.4               0.7               1.4               1.1  
Net Increase (Decrease) in Cash
           $ 24.4             $ 24.3             $ 1.3             $ (19.8 )
 

 
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INTERFACE REPORTS RECORD SECOND QUARTER 2008 RESULTS

Consolidated Condensed Segment Reporting
(In millions)
   
Three Months Ended
        
Six Months Ended
      
   
06/29/08
    
07/01/07
    
% Change
  
06/29/08
    
07/01/07
    
% Change 
Net Sales
                                    
Modular Carpet
   $ 259.3     $ 225.6       14.9 %   $ 485.4     $ 430.8       12.7 %
Bentley Prince Street
     35.7       39.4       (9.4 %)     71.3       75.5       (5.6 %)
Specialty Products
     --       --       --       --       2.2       *  
Total
   $ 295.0     $ 265.0       11.3 %   $ 556.7     $ 508.5       9.5 %
                                                 
Operating Income (Loss)
                                                
Modular Carpet
   $ 35.3     $ 31.6       11.7 %   $ 66.2     $ 58.4       13.4 %
Bentley Prince Street
     0.2       2.0       (90.0 %)     1.8       3.0       (40.0 %)
Specialty Products
     --       --       --       --       (1.8 )     *  
Corporate Expenses and Eliminations
     (2.1 )     (2.7 )     22.2 %     (3.6 )     (4.4 )     18.2 %
Total
   $ 33.4     $ 30.9       8.2 %   $ 64.4     $ 55.2       16.7 %
 
* Not meaningful
 
 
#    #   #
 
 
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