-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, G7oBFj1rrMVweXz1QvNsq9RemSvTHIxebTIqy4ApQ67UyDs2uRm8YKaeCFMYMorb xw9+L+Qj4LdVCLu6B1JmjQ== 0000950144-95-001455.txt : 19950518 0000950144-95-001455.hdr.sgml : 19950518 ACCESSION NUMBER: 0000950144-95-001455 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950402 FILED AS OF DATE: 19950517 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERFACE INC CENTRAL INDEX KEY: 0000715787 STANDARD INDUSTRIAL CLASSIFICATION: CARPETS AND RUGS [2273] IRS NUMBER: 581451243 STATE OF INCORPORATION: GA FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12016 FILM NUMBER: 95540467 BUSINESS ADDRESS: STREET 1: ORCHARD HILL RD STREET 2: P O BOX 1503 CITY: LAGRANGE STATE: GA ZIP: 30241 BUSINESS PHONE: 4043196471 FORMER COMPANY: FORMER CONFORMED NAME: INTERFACE FLOORING SYSTEMS INC DATE OF NAME CHANGE: 19870817 10-Q 1 INTERFACE, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q /X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarterly Period Ended April 2, 1995 Commission File Number 0-12016 ------------------------------ INTERFACE, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) GEORGIA 58-1451243 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2859 PACES FERRY ROAD, SUITE 2000, ATLANTA, GEORGIA 30339 --------------------------------------------------------- (Address of principal executive offices and zip code) (404) 437-6800 ---------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ----- Shares outstanding of each of the registrant's classes of common stock at May 10, 1995: Class Number of Shares - ---------------------------------------------- ---------------- Class A Common Stock, $.10 par value per share 15,175,728 Class B Common Stock, $.10 par value per share 3,074,625 Page 1 of 13 Pages The Exhibit Index appears at page 12. 2 INTERFACE, INC. INDEX
Page ---- Part I. FINANCIAL INFORMATION Item 1. Consolidated Condensed Financial Statements Balance Sheets - April 2, 1995 and January 1, 1995 3 Statements of Income - Three Months Ended April 2, 1995 and April 3, 1994 4 Statements of Cash Flows - Three Months Ended April 2, 1995 and April 3, 1994 5 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II. OTHER INFORMATION Item 1. Legal Proceedings 10 Item 2. Changes in the Rights of the Company's Security Holders 10 Item 3. Defaults by the Company on Its Senior Securities 10 Item 4. Submission of Matters to a Vote of Security Holders 10 Item 5. Other Information 10 Item 6. Exhibits and Reports on Form 8-K 10
2 3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS INTERFACE, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(In thousands) - ------------------------------------------------ April 2, January 1, ASSETS 1995 1995 - ------------------------------------------------ --------- ---------- CURRENT ASSETS: Cash and Cash Equivalents $ 1,782 $ 4,389 Escrowed and Restricted Funds 2,538 2,663 Accounts Receivable 135,854 133,536 Inventories 135,990 132,650 Deferred Tax Asset 3,767 3,767 Prepaid Expenses 18,896 15,110 -------- -------- TOTAL CURRENT ASSETS 298,827 292,115 PROPERTY AND EQUIPMENT, less accumulated depreciation 155,986 152,874 EXCESS OF COST OVER NET ASSETS ACQUIRED 211,207 202,852 OTHER ASSETS 40,541 40,093 -------- -------- $706,561 $687,934 ======== ======== LIABILITIES AND COMMON SHAREHOLDERS' EQUITY - ------------------------------------------------ CURRENT LIABILITIES: Accounts Payable $61,606 $59,702 Accrued Expenses 44,459 56,940 Current Maturities of Long-Term Debt 400 853 -------- -------- TOTAL CURRENT LIABILITIES 106,465 117,495 LONG-TERM DEBT, less current maturities 221,377 209,663 CONVERTIBLE SUBORDINATED DEBENTURES 103,925 103,925 DEFERRED INCOME TAXES 20,422 17,761 -------- -------- TOTAL LIABILITIES 452,189 448,844 -------- -------- Redeemable Preferred Stock 25,000 25,000 Common Stock: Class A 1,876 1,871 Class B 308 308 Additional Paid-In Capital 94,808 93,450 Retained Earnings 138,827 136,343 Foreign Currency Translation Adjustment 11,299 (136) Treasury Stock, 3,600 Class A Shares, at Cost (17,746) (17,746) -------- -------- $706,561 $687,934 ======== ========
See accompanying notes to consolidated condensed financial statements. 3 4 INTERFACE,INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED) (In thousands except per share amounts)
Three Months Ended April 2, April 3, 1995 1994 -------- -------- Net Sales $191,327 $160,719 Cost of Sales 132,972 112,375 ------- ------- Gross Profit on Sales 58,355 48,344 Selling, General and Administrative Expenses 44,962 37,905 ------- ------- Operating Income 13,393 10,439 Other (Expense) Income - Net (6,917) (6,044) ------- ------- Income before Taxes on Income 6,476 4,395 Taxes on Income 2,460 1,583 ------- ------- Net Income 4,016 2,812 Less: Preferred Dividends 437 438 ------- ------- Net Income Applicable to Common Shareholders $ 3,579 $ 2,374 ======= ======= Primary Earnings Per Common Share $ 0.20 $ 0.14 ======= ======= Weighted Average Common Shares Outstanding 18,191 17,309 ======= =======
See accompanying notes to consolidated condensed financial statements. 4 5 INTERFACE, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended ----------------------- April 2, April 3, (In thousands) 1995 1994 -------- -------- Operating Activities: Net income $ 4,016 $ 2,812 Adjustment to reconcile net income to cash provided by operating activities: Depreciation and amortization 7,401 6,853 Deferred income taxes 2,532 (154) Cash provided by (used for): Accounts receivable 2,161 (1,656) Inventories 522 (7,647) Prepaid and other (2,777) (2,382) Accounts payable and accrued expenses (14,712) (9,685) -------- -------- (857) (11,859) -------- -------- Investing Activities: Capital expenditures (5,238) (4,824) Acquisitions of businesses 0 (643) Other (1,336) (100) -------- -------- (6,574) (5,567) -------- -------- Financing Activities: Net borrowing of long-term debt 5,641 16,151 Issuance of common stock 421 328 Dividends paid (1,531) (1,486) -------- -------- 4,531 14,993 -------- -------- Net cash provided by operating, investing and financing activities (2,900) (2,433) Effect of exchange rate changes on cash 293 98 -------- -------- Cash and Cash Equivalents: Net increase (decrease) during the period (2,607) (2,335) Balance at beginning of period 4,389 4,674 -------- -------- Balance at end of period $ 1,782 $ 2,339 ======== ========
See accompanying notes to consolidated condensed financial statements. 5 6 INTERFACE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS NOTE 1 - CONDENSED FOOTNOTES As contemplated by the Securities and Exchange Commission instructions to Form 10-Q, the following footnotes have been condensed and, therefore, do not contain all disclosures required in connection with annual financial statements. Reference should be made to the notes to the Company's year-end financial statements contained in its Annual Report to Shareholders for the fiscal year ended January 1, 1995, as filed with the Securities and Exchange Commission. NOTE 2 - INVENTORIES Inventories are summarized as follows:
April 2, January 1, 1995 1995 --------- ---------- Finished Goods $ 75,522 $ 74,542 Work-in-Process 23,049 20,250 Raw Materials 37,419 37,858 --------- ---------- $ 135,990 $ 132,650 ========= ==========
NOTE 3 - EARNINGS PER SHARE AND DIVIDENDS Earnings per share are computed by dividing net income applicable to common shareholders by the combined weighted average number of shares of Class A and Class B common stock outstanding during the particular reporting period. The computation does not include a negligible dilutive effect of outstanding stock options. Neither the Convertible Subordinated Debentures issued in September 1988 nor the Series A Cumulative Convertible Preferred Stock issued during June 1993 were determined to be common stock equivalents. In computing primary earnings per share, the preferred stock dividend reduces income applicable to common shareholders. Primary earnings per share are based upon 18,191,000 shares and 17,463,000 shares, respectively, for the periods ended April 2, 1995 and April 3, 1994. For the periods ended April 2, 1995 and April 3, 1994, fully diluted earnings per common share were antidilutive. For the purposes of computing earnings per share and dividends paid per share, the Company is treating as treasury stock (and therefore not outstanding) the shares that are owned by a wholly-owned subsidiary (3,600,000 Class A shares, recorded at cost). 6 7 INTERFACE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS __________________________________________ The financial information included in this report has been prepared by the Company, without audit, and should not be relied upon to the same extent as audited financial statements. In the opinion of management, the financial information included in this report contains all adjustments (all of which are normal and recurring) necessary for a fair presentation of the results for the interim periods. Nevertheless, the results shown for interim periods are not necessarily indicative of results to be expected for the year. 7 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS. The Company's net sales increased $30.6 million (19.0%) for the quarter ended April 2, 1995, compared with the same period in 1994. The increase was primarily attributable to (i) sales generated by Prince Street Technologies, Ltd., which was acquired during March 1994, (ii) increased sales volume in the Company's floorcoverings operations in the United States, United Kingdom, Southeast Asia and Greater China, (iii) continued improvement in unit volume in the Company's interior fabrics operations and, (iv) the strengthening of certain key currencies (particularly the British pound sterling, Dutch guilder and Japanese yen) against the U.S. dollar, the Company's reporting currency. These increases were offset somewhat by a decrease in floorcoverings sales volume in Japan, Australia and certain markets within Continental Europe. Cost of sales decreased as a percentage of sales for the quarter ended April 2, 1995, compared with the same period in 1994. The decrease was due primarily to (i) a reduction of manufacturing costs in the Company's carpet tile operations (particularly the U.S manufacturing facility) as the Company implemented a make-to-order ("mass customization") production strategy, leading to increased manufacturing efficiencies, and an attendant shift in product mix to higher margin products, (ii) the weakening of the U.S. dollar against certain key currencies which lowered the cost of U.S. produced goods sold in export markets, and (iii) decreased manufacturing costs in the Company's interior fabrics business as a result of improved manufacturing efficiencies. These benefits were somewhat offset by raw material price increases in the interior fabrics and chemical operations and the acquisition of Prince Street, which, historically, had a higher cost of sales ratio than the Company. Selling, general and administrative expenses as a percentage of sales decreased to 23.5% for the three months ended April 2, 1995, compared to 23.6% for the same period in 1994, primarily as a result of increased sales. Other expense increased $.9 million for the quarter ended April 2, 1995 compared to the same period in 1994, primarily due to an increase in funded bank debt along with an increase in U.S. interest rates. Due, by in large, to the aforementioned factors, the Company's net income increased 50.8% to $3.6 million for the first quarter of 1995, from $2.4 million for the same period in 1994. LIQUIDITY AND CAPITAL RESOURCES. The primary uses of cash during the period have been (i) $.9 million associated with operating activities, (ii) $5.2 million for additions to property and equipment in the Company's manufacturing facilities, and (iii) $1.5 million for dividends paid. These uses were funded, in part, by $5.6 million from long-term financing and a $2.6 million reduction of cash and cash equivalents. 8 9 The Company, as of April 2, 1995, recognized an $11.4 million decrease in foreign currency translation adjustment compared to that of January 1, 1995. This improvement in translation adjustment was largely due to a significant quarter-end strengthening of the British pound sterling and the Dutch guilder compared to the U.S. dollar. The adjustment to shareholders' equity was converted by the guidelines of the Financial Accounting Standards Board (FASB) 52. The Company employs a variety of off-balance sheet financial instruments to reduce its exposure to adverse fluctuations in interest and foreign currency swap agreements and foreign currency exchange contracts. At April 2, 1995, the Company had approximately $45 million (notional amount) of foreign currency hedge contracts outstanding, consisting principally of forward exchange contracts. These contracts serve to hedge firmly committed Dutch guilder, German mark, Japanese yen, French franc, British pound sterling and other foreign currency revenues. At April 2, 1995, interest rate and currency swap agreements related to certain foreign currency denominated promissory notes effectively converted approximately $23 million of variable rate debt to fixed rate debt. At April 2, 1995, the weighted average fixed rate on the Dutch guilder and Japanese yen borrowings was 7.43%. The interest rate and currency swap agreements have maturity dates ranging from six to twelve months. The Company continually monitors its position with, and the credit quality of, the financial institutions which are counterparties to its off-balance sheet financial instruments and does not anticipate nonperformance by the counterparties. In January 1995, the Company amended its existing revolving credit and term loan facilities. The amendment provided for, among other things, (i) an increase in the revolving credit facility from $125 million to $200 million (including a letter of credit facility of up to $40 million), (ii) a decrease in the secured term loans from approximately $135 million to $50 million, and (iii) a new accounts receivable securitization facility of up to $100 million. Additionally, the term of the agreement has been extended to June 30, 1999 for the revolving credit facilities, and December 31, 2001 for the term loans. Management believes that the cash provided by operations and available under long-term loan commitments will provide adequate funds for current commitments and other requirements in the foreseeable future. 9 10 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is not aware of any material pending legal proceedings involving it or any of its property. ITEM 2. CHANGES IN THE RIGHTS OF THE COMPANY'S SECURITY HOLDERS None ITEM 3. DEFAULTS BY THE COMPANY ON ITS SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are filed with this report: Exhibit Number Description of Exhibit ------ ---------------------- 27 Financial Data Schedule (for SEC use only). (b) No reports on Form 8-K were filed during the quarter ended April 2, 1995. 10 11 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INTERFACE, INC. Date: May 15, 1994 By:/s/ Daniel T. Hendrix ---------------------------- Daniel T. Hendrix Vice President (Principal Financial Officer) 11 12 EXHIBIT INDEX
EXHIBIT DESCRIPTION OF EXHIBIT SEQUENTIAL NUMBER PAGE NO. 27 Financial Data Schedule 13 (for SEC use only)
12 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF INTERFACE, INC. FOR THE PERIOD ENDING APRIL 2, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1995 APR-02-1995 4,320 0 142,355 6,501 135,854 298,827 335,247 179,261 706,561 106,465 325,350 25,000 0 2,184 227,188 706,561 191,327 191,327 132,972 177,934 (7) 0 (6,910) 6,476 2,460 4,016 0 0 0 4,016 0.20 0.20
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