28.10.04

28.10.2004: Meldung: Interface, Inc.: Third Quarter 2004 Results

Wednesday October 27, 4:51 pm ET
- Third Quarter Sales Up 11.7% Year-Over-Year -
- Third Quarter Orders Up 17.6% Year-Over-Year -
- Income From Continuing Operations of $2.4 million, or $0.05 per share -

ATLANTA, Oct. 27 / Interface, Inc. (Nasdaq: IFSIA - News), a worldwide interiors products and services company, today announced results for the third quarter ended October 3, 2004.

The Company also announced its intent, in line with its strategy to concentrate on its core capabilities, to exit its owned Re:Source dealer businesses. The owned Re:Source dealers are part of a broader network comprised of owned and aligned dealers that sell and install floorcovering products. The discussion of results in this release, except for net loss, excludes the Company"s owned Re:Source dealer businesses.

Third quarter 2004 results include an 11.7% increase in sales to $222.8 million, from $199.5 million in the year ago period. Operating income was $15.9 million in the third quarter 2004, a 43.2% increase over operating income of $11.1 million in the third quarter 2003. Income from continuing operations was $2.4 million, or $0.05 per share, in the third quarter 2004, compared with income from continuing operations of $146,000, or $0.00 per share, in the third quarter 2003.

As required by accounting standards, the Company reported the results of operations for its owned Re:Source dealer businesses as "discontinued operations." Included in those results is an operating loss of $4.1 million as well as write-downs for the impairment of assets and goodwill of $17.5 million and $29.0 million, respectively. As a result, the Company"s net loss for the third quarter 2004 was $47.8 million, or $0.92 per fully diluted share, compared with a net loss in the third quarter 2003 of $13.4 million, or $0.26 per fully diluted share.

"Through the continued strength of our worldwide modular business during the third quarter, we were able to attain sequential and year-over-year growth in both sales and operating income, as well as continue to gain market share," said Daniel T. Hendrix, President and Chief Executive Officer. "While the corporate office market has been gradually improving, we are pleased to have achieved these results despite the lack of a sizeable recovery in this market. Order activity remained strong during the quarter, reflecting the increasing momentum we are seeing in our business segment initiatives, and that order trend has continued up through the present. For the third quarter, orders were up 18% to $239 million, compared with the third quarter of last year."

Mr. Hendrix continued, "Interface continues to lead and shape the growth of the modular carpet market. Our segmentation strategy has more than doubled our opportunity in the commercial carpet market, and has enabled us to deliver worldwide modular sales growth and broadloom sales growth of 13% and 12%, respectively, year-over-year. The education, retail, government and residential market segments produced particularly encouraging results during the third quarter. In addition, our fabrics business experienced a 5% increase in sales, year-over-year, primarily driven by an increase in its contract market sales. We are pleased with our success in further penetrating these markets and capitalizing on the sales opportunities they present."

For the first nine months of 2004, sales were $649.1 million, compared with $570.3 million for the same period a year ago, an increase of 13.8%. Operating income for the 2004 nine-month period increased to $45.4 million, from $19.4 million in the comparable 2003 nine-month period (after a pre-tax restructuring charge of $4.6 million, or $0.09 per share after-tax, in that 2003 period). Income from continuing operations during the first nine months of 2004 was $4.6 million, versus a loss from continuing operations of $8.6 million, after the restructuring charge, in the first nine months of 2003. Including the results of the discontinued operations of the owned Re:Source dealer businesses, the Company reported a net loss of $51.0 million, or $0.98 per fully diluted share, for the first nine months of 2004. This compares with net loss of $29.2 million, or $0.58 per fully diluted share, for the first nine months of 2003, after the restructuring charge.

With respect to the Re:Source dealers, Mr. Hendrix commented, "While our aligned distribution channel remains an important part of our strategy, we have made the decision to exit the owned distribution business. The driving force behind this decision was our need to stop the losses this business has realized over the past few years. In addition, this move will reduce our cost structure and working capital requirements, thus improving our cash flow and leaving a more streamlined Interface that will be able to better capitalize on future opportunities. To date, we have been successful in selling three of our fifteen dealer locations, and have plans of exiting the remaining locations in an orderly fashion."

Mr. Hendrix concluded, "Looking to the fourth quarter, we are encouraged by our results for the third quarter and with the progress we are making through our strategic initiatives. Our market segmentation efforts and ongoing cost management program have led to higher sales levels and significant improvements in profitability, while increasing our market presence in both the corporate and non-corporate office markets. As we move into the fourth quarter, we will continue to build on our leadership position in the modular market and take the necessary steps toward further strengthening our operations. Based on the present trends, we expect continued sales growth and margin expansion in the fourth quarter."

The Company will host a conference call tomorrow, October 28, 2004, at 9:00 a.m. Eastern Time, to discuss its third quarter 2004 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=954176 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 28, 2005 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, 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, Toltec, Intek, Chatham and Camborne brands. The Company provides specialized carpet replacement, installation, maintenance and reclamation services through its Re:Source Americas service network. In addition, the Company provides specialized fabric services through its TekSolutions business and produces InterCell brand raised/access flooring systems.

Consolidated Statements of Income

(in thousands, except
per share data) Three Months Ended Nine Months Ended
3-Oct-04 28-Sep-03 3-Oct-04 28-Sep-03

Net Sales $222,822 $199,502 $649,068 $570,330
Cost of Sales 157,298 142,137 451,865 406,566
Gross Profit 65,524 57,365 197,203 163,764
Selling, General and
Administrative
Expenses 49,645 46,265 151,765 139,838
Restructuring Charge - - - 4,555
Operating Income 15,879 11,100 45,438 19,371
Interest Expense 11,395 11,033 34,752 31,426
Bond Cost - - 1,869 -
Other Expense 288 (148) 1,610 1,410
Income (Loss) Before
Taxes on Income 4,196 215 7,207 (13,465)
Tax Expense (Benefit) 1,826 69 2,619 (4,887)
Income (Loss) from
Continuing Operations 2,370 146 4,588 (8,578)
Discontinued Operations,
Net of Tax (21,617) (4,709) (27,023) (11,751)
Loss on Disposal,
Net of Tax 465 (8,825) 465 (8,825)
Impairment of Goodwill,
Net of Tax (29,044) - (29,044) -
Net Loss $ (47,826) $(13,388) $(51,014) $(29,154)

Earnings (Loss) Per
Share - Basic
Continuing Operations $0.05 $ - $0.09 $(0.17)
Discontinued Operations(0.43) (0.09) (0.53) (0.23)
Loss on Disposal 0.01 (0.18) 0.01 (0.18)
Impairment of Goodwill (0.58) - (0.58) -
Earnings (Loss) Per
Share - Basic $(0.95) $(0.27) $(1.01) $(0.58)

Earnings (Loss) Per
Share - Diluted
Continuing Operations $0.05 $ - $0.09 $(0.17)
Discontinued Operations(0.42) (0.09) (0.52) (0.23)
Loss on Disposal 0.01 (0.17) 0.01 (0.18)
Impairment of Goodwill (0.56) - (0.56) -
Earnings (Loss) Per
Share - Diluted $(0.92) $(0.26) $(0.98) $(0.58)

Common Shares
Outstanding - Basic 50,558 50,273 50,537 50,247
Common Shares
Outstanding - Diluted 52,099 50,970 52,038 50,529

Orders from Continuing
Operations $238,800 $203,100 $751,500 $637,000
Continuing Operations
Backlog (as of 10/3/04
and 9/23/03,
respectively) $109,000 $74,400


Consolidated Condensed Balance Sheets
(In thousands) 3-Oct-04 28-Dec-03
Assets
Cash $19,700 $15,990
Accounts Receivable 135,650 131,851
Inventory 135,579 133,022
Other Current Assets 17,147 21,738
Assets of Business Held for Sale 44,717 93,405
Total Current Assets 352,793 396,006
Property, Plant & Equipment 196,057 208,178
Other 99,242 98,888
Goodwill 197,111 191,202
Total Assets $845,203 $894,274

Liabilities
Accounts Payable $52,115 $57,371
Accrued Liabilities 49,045 70,206
Liabilities of Business Held for Sale 7,131 11,590
Total Current Liabilities 108,291 139,167
Long-Term Debt 16,116 -
Senior and Senior Subordinated Notes 460,000 445,000
Deferred Income Tax 31,518 31,683
Other Long-Term Liabilities 59,695 59,691
Total Liabilities 675,620 675,541
Shareholders" Equity 169,583 218,733
Total Liabilities and Shareholders" Equity $845,203 $894,274


Consolidated Condensed Statements of Cash Flows
(in millions)
Three Months Ended Nine Months Ended
10/03/04 09/28/03 10/03/04 09/28/03

Net (Loss) $(47.8) $ (13.4) $(51.0) $(29.2)
Depreciation, Amortization
and other non-cash 8.4 7.4 26.2 25.7
Deferreds and other
non-cash items 53.9 6.5 54.6 25.9
Change in Working Capital
Accounts Receivable (1.4) (4.9) (3.7) (34.1)
Inventories 12.3 5.8 (3.3) (7.7)
Prepaids 3.1 3.6 (0.5) 1.1
Accounts Payable and
Accrued Expenses (16.0) (4.8) (26.9) 2.1
Cash Provided from
Operating Activities 12.5 0.2 (4.6) (16.2)
Cash Provided from
Operating Activities
of Discontinued
Operations (8.9) 10.2 (13.2) 0.6
Cash Provided from
Operating Activities 3.6 10.4 (17.8) (15.6)
Cash Used in Investing
Activities 1.4 1.3 (7.9) (4.7)
Cash Provided from
Financing Activities (0.2) (16.0) 28.6 5.7
Effect of Exchange Rate
Changes on Cash - 0.8 0.2 1.1
Net Increase (Decrease)
in Cash $4.8 $(3.5) $3.1 $(13.5)


Consolidated Condensed Segment Reporting
(In millions)

Three Months Ended Nine Months Ended

10/03/04 09/28/03 % Change 10/03/04 09/28/03 % Change
Net Sales
Modular Carpet $ 141.3 $124.7 13.3% $411.6 $355.0 15.9%
Broadloom 31.8 28.4 12.0% 88.1 79.4 11.0%
Fabrics Group 46.7 44.5 4.9% 140.3 128.8 8.9%
Specialty Products 3.0 1.9 57.9% 9.1 7.1 28.2%
Total $ 222.8 $199.5 11.7% $649.1 $570.3 13.8%

Operating Income (Loss)
Modular Carpet $17.3 $12.1 $44.6 $32.2
Broadloom 0.7 1.0 (0.2) (2.5)
Fabrics Group (1.6) (1.5) 1.9 (8.3)
Specialty Products (0.2) - (0.2) 0.2
Corporate Expenses
and Eliminations (0.3) (0.5) (0.7) (2.2)
Total $15.9 $11.1 $45.4 $19.4


Source: Interface, Inc.
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