Interface, Inc. (Nasdaq: IFSIA), a recognized leader in sustainable floorcoverings, announced first quarter results. Sales rose 6.8% to $250.6 million from $234.7 million in the year ago period, but currency exchange rates adversely impacted sales by 3%, compared with the prior year period.
As announced earlier this week, the Company sold its European fabrics division, and in conjunction with the sale recorded a pre-tax, non- cash write-down for the impairment of goodwill of $20.7 million, or $0.39 per share, in the first quarter of 2006.
As also previously announced, the Company is reducing operating costs in its North American fabrics business by closing its East Douglas, Massachusetts manufacturing facility and integrating those operations into the Company’s Elkin, North Carolina manufacturing facility.
As a result, the Company recorded a non-recurring pre-tax restructuring charge of $3.3 million, or $0.04 per share, in the 2006 first quarter. These two developments led to the Company’s operating loss of $3.3 million in the 2006 first quarter, compared with operating income of $17.2 million in the first quarter of 2005. Excluding the one-time goodwill impairment and restructuring charges, operating income in the first quarter of 2006 was $20.7 million, an increase of 20.4% over the 2005 first quarter.
Net loss for the 2006 first quarter was $17.1 million, or $0.32 per share, versus a net loss of $2.2 million, or $0.04 per diluted share, in the first quarter a year ago. Not including the goodwill impairment and restructuring charges, net income in the first quarter of 2006 was $5.7 million, or $0.11 per share. This compares with income from continuing operations of $2.9 million, or $0.06 per share, in the first quarter a year ago.
“We are encouraged with our results for the first quarter, as we were able to garner a 6.8% increase in overall sales, despite the currency impact, and a 20.4% improvement in operating income, excluding the two non-recurring items,” said Daniel T. Hendrix, President and Chief Executive Officer. “Our modular business continues to drive our growth. Worldwide modular sales increased 8.1% during the seasonally slower first quarter, and its operating income increased 25.5%. This is indicative of our leadership position in this business, the burgeoning popularity of modular carpet, the success of our market segmentation strategy, and the positive trends we continue to see in the corporate office market. Sales growth was strong across all geographic regions, and we were particularly pleased to see double-digit sales growth in Europe, as economic conditions continue to improve there.”
Mr. Hendrix concluded, “The first quarter — which seasonally is a slower period for us — was a good start to the year, and we are very optimistic about the coming quarters, based on current order activity. The sale of our European fabrics division will enable us to repay debt and reinvest in our other businesses, and the actions we are taking in our North American fabrics business are consistent with our commitment to improve the profitability of that division. Our primary focus will remain on leading and shaping the growth of the worldwide modular carpet market across all regions, and returning our Bentley Prince Street and North American fabrics businesses to historical levels of profitability.”
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, InterfaceFLOR, Heuga and Bentley Prince Street brands, and, through its Bentley Prince Street brand, 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 and Chatham brands, and provides specialized fabric services through its TekSolutions business.
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