form10-q.htm
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 5, 2009
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)
(770)
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 þ No o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Date File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files). Yes o No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
Large
accelerated filer þ
|
Accelerated
filer o
|
Non-accelerated
filer o
|
Smaller
reporting company o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No
þ
Shares
outstanding of each of the registrant's classes of common stock at May 8,
2009:
|
Class
|
|
Number of Shares
|
|
|
Class
A Common Stock, $.10 par value per share
|
|
|
56,465,832 |
|
|
Class
B Common Stock, $.10 par value per share
|
|
|
6,735,612 |
|
INTERFACE,
INC.
INDEX
|
|
PAGE
|
PART
I.
|
FINANCIAL
INFORMATION
|
|
|
Item
1.
|
Financial
Statements
|
3
|
|
|
Consolidated
Condensed Balance Sheets – April 5, 2009 and December
28, 2008
|
3
|
|
|
Consolidated
Condensed Statements of Operations - Three Months Ended April 5, 2009 and
March 30, 2008
|
4
|
|
|
Consolidated
Statements of Comprehensive Income (Loss) – Three Months Ended April 5,
2009 and March 30, 2008
|
5
|
|
|
Consolidated
Condensed Statements of Cash Flows – Three Months Ended April 5, 2009 and
March 30, 2008
|
6
|
|
|
Notes
to Consolidated Condensed Financial Statements
|
7
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and
Results of Operations
|
21
|
|
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
26
|
|
|
|
|
|
Item
4.
|
Controls
and Procedures
|
26
|
|
|
|
PART
II.
|
OTHER
INFORMATION
|
|
|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
26
|
|
|
|
|
|
Item
1A.
|
Risk
Factors
|
26
|
|
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
26
|
|
|
|
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
26
|
|
|
|
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
26
|
|
|
|
|
|
Item
5.
|
Other
Information
|
26
|
|
|
|
|
|
Item
6.
|
Exhibits
|
30
|
PART I -
FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
INTERFACE,
INC. AND SUBSIDIARIES
CONSOLIDATED
CONDENSED BALANCE SHEETS
(IN
THOUSANDS)
|
|
APRIL 5, 2009
|
|
|
DECEMBER 28, 2008
|
|
|
|
(UNAUDITED)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
Cash
and Cash Equivalents
|
|
$ |
54,888 |
|
|
$ |
71,757 |
|
Accounts
Receivable, net
|
|
|
113,118 |
|
|
|
144,783 |
|
Inventories
|
|
|
124,811 |
|
|
|
128,923 |
|
Prepaid
and Other Expenses
|
|
|
22,321 |
|
|
|
21,070 |
|
Deferred
Income Taxes
|
|
|
6,755 |
|
|
|
6,272 |
|
Assets
of Business Held for Sale
|
|
|
2,150 |
|
|
|
3,150 |
|
TOTAL
CURRENT ASSETS
|
|
|
324,043 |
|
|
|
375,955 |
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, less
accumulated depreciation
|
|
|
157,891 |
|
|
|
160,717 |
|
DEFERRED
TAX ASSET
|
|
|
46,473 |
|
|
|
42,999 |
|
GOODWILL
|
|
|
74,844 |
|
|
|
78,489 |
|
OTHER
ASSETS
|
|
|
48,643 |
|
|
|
47,875 |
|
TOTAL
ASSETS
|
|
$ |
651,894 |
|
|
$ |
706,035 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts
Payable
|
|
$ |
41,811 |
|
|
$ |
52,040 |
|
Accrued
Expenses
|
|
|
80,455 |
|
|
|
102,592 |
|
Current
Portion of Long-Term Debt
|
|
|
141,803 |
|
|
|
-- |
|
TOTAL
CURRENT LIABILITIES
|
|
|
264,069 |
|
|
|
154,632 |
|
|
|
|
|
|
|
|
|
|
SENIOR
NOTES
|
|
|
-- |
|
|
|
152,588 |
|
SENIOR
SUBORDINATED NOTES
|
|
|
135,000 |
|
|
|
135,000 |
|
DEFERRED
INCOME TAXES
|
|
|
7,500 |
|
|
|
7,506 |
|
OTHER
|
|
|
37,065 |
|
|
|
38,872 |
|
TOTAL
LIABILITIES
|
|
|
443,634 |
|
|
|
488,598 |
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS’
EQUITY:
|
|
|
|
|
|
|
|
|
Preferred
Stock
|
|
|
-- |
|
|
|
-- |
|
Common
Stock
|
|
|
6,319 |
|
|
|
6,316 |
|
Additional
Paid-In Capital
|
|
|
341,076 |
|
|
|
339,776 |
|
Accumulated
Deficit
|
|
|
(69,931 |
) |
|
|
(65,616 |
) |
Accumulated
Other Comprehensive Income – Foreign Currency Translation
Adjustment
|
|
|
(49,193 |
) |
|
|
(42,210 |
) |
Accumulated
Other Comprehensive Income – Pension Liability
|
|
|
(27,861 |
) |
|
|
(28,770 |
) |
TOTAL
SHAREHOLDERS’ EQUITY – Interface, Inc.
|
|
|
200,410 |
|
|
|
209,496 |
|
Noncontrolling
interest in subsidiary
|
|
|
7,850 |
|
|
|
7,941 |
|
TOTAL
SHAREHOLDERS’ EQUITY
|
|
|
208,260 |
|
|
|
217,437 |
|
|
|
$ |
651,894 |
|
|
$ |
706,035 |
|
See
accompanying notes to consolidated condensed financial
statements.
INTERFACE,
INC. AND SUBSIDIARIES
CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN
THOUSANDS EXCEPT PER SHARE AMOUNTS)
|
|
THREE MONTHS ENDED
|
|
|
|
|
|
|
|
|
|
|
APRIL 5, 2009
|
|
|
MARCH 30, 2008
|
|
|
|
|
|
|
|
|
NET
SALES
|
|
$ |
199,308 |
|
|
$ |
261,736 |
|
Cost
of Sales
|
|
|
136,139 |
|
|
|
167,470 |
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT ON SALES
|
|
|
63,169 |
|
|
|
94,266 |
|
Selling,
General and Administrative Expenses
|
|
|
54,371 |
|
|
|
63,295 |
|
Restructuring
Charge
|
|
|
5,724 |
|
|
|
-- |
|
OPERATING
INCOME
|
|
|
3,074 |
|
|
|
30,971 |
|
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
7,673 |
|
|
|
7,828 |
|
Other
Expense (Income)
|
|
|
(750 |
) |
|
|
188 |
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAX EXPENSE
|
|
|
(3,849 |
) |
|
|
22,955 |
|
Income
Tax Expense (Benefit)
|
|
|
(476 |
) |
|
|
8,658 |
|
|
|
|
|
|
|
|
|
|
Income
(Loss) from Continuing Operations
|
|
|
(3,373 |
) |
|
|
14,297 |
|
Loss
from Discontinued Operations, Net of Tax
|
|
|
(650 |
) |
|
|
-- |
|
Loss
on Disposal of Discontinued Operations, Net of Tax
|
|
|
-- |
|
|
|
-- |
|
NET
INCOME (LOSS)
|
|
|
(4,023 |
) |
|
|
14,297 |
|
|
|
|
|
|
|
|
|
|
Net
Income Attributable to Noncontrolling Interests in
Subsidiary
|
|
|
(129 |
) |
|
|
(175 |
) |
NET
INCOME (LOSS) ATTRIBUTABLE TO INTERFACE, INC.
|
|
$ |
(4,152 |
) |
|
$ |
14,122 |
|
|
|
|
|
|
|
|
|
|
Earnings
(Loss) Per Share Attributable to Interface, Inc. Common Shareholders –
Basic
|
|
|
|
|
|
|
|
|
Continuing
Operations
|
|
$ |
(0.06 |
) |
|
$ |
0.23 |
|
Discontinued
Operations
|
|
|
(0.01 |
) |
|
|
-- |
|
Loss
on Disposal of Discontinued Operations
|
|
|
-- |
|
|
|
-- |
|
Earnings
(Loss) Per Share Attributable to Interface, Inc. Common Shareholders –
Basic
|
|
$ |
(0.07 |
) |
|
$ |
0.23 |
|
|
|
|
|
|
|
|
|
|
Earnings
(Loss) Per Share Attributable to Interface, Inc. Common Shareholders –
Diluted
|
|
|
|
|
|
|
|
|
Continuing
Operations
|
|
$ |
(0.06 |
) |
|
$ |
0.22 |
|
Discontinued
Operations
|
|
|
(0.01 |
) |
|
|
-- |
|
Loss
on Disposal of Discontinued Operations
|
|
|
-- |
|
|
|
-- |
|
Earnings
(Loss) Per Share Attributable to Interface, Inc. Common Shareholders –
Diluted
|
|
$ |
(0.07 |
) |
|
$ |
0.22 |
|
|
|
|
|
|
|
|
|
|
Common
Shares Outstanding – Basic
|
|
|
61,770 |
|
|
|
62,725 |
|
Common
Shares Outstanding – Diluted
|
|
|
61,770 |
|
|
|
63,135 |
|
See
accompanying notes to consolidated condensed financial
statements.
INTERFACE,
INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(IN
THOUSANDS)
|
|
THREE MONTHS ENDED
|
|
|
|
|
|
|
|
APRIL 5, 2009
|
|
|
MARCH 30, 2008
|
|
|
|
|
|
|
|
|
Net
Income (Loss)
|
|
$ |
(4,023 |
) |
|
$ |
14,297 |
|
Other
Comprehensive Income, Foreign Currency Translation
|
|
|
|
|
|
|
|
|
Adjustment
and Pension Liability Adjustment
|
|
|
(7,294 |
) |
|
|
13,333 |
|
Comprehensive
Income (Loss)
|
|
$ |
(11,317 |
) |
|
$ |
27,630 |
|
Comprehensive
Loss (Income) Attributable to Noncontrolling Interests in
Subsidiary
|
|
|
91 |
|
|
|
(747 |
) |
Comprehensive
Income (Loss) Attributable to Interface, Inc.
|
|
$ |
(11,226 |
) |
|
$ |
26,883 |
|
See
accompanying notes to consolidated condensed financial
statements.
INTERFACE,
INC. AND SUBSIDIARIES
CONSOLIDATED
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN
THOUSANDS)
|
|
THREE MONTHS ENDED
|
|
|
|
APRIL 5, 2009
|
|
|
MARCH 30, 2008
|
|
OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
(4,023 |
) |
|
$ |
14,297 |
|
Loss
from discontinued operations
|
|
|
650 |
|
|
|
-- |
|
Income
(loss) from continuing operations
|
|
|
(3,373 |
) |
|
|
14,297 |
|
Adjustments
to reconcile income (loss) to cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
6,248 |
|
|
|
6,495 |
|
Deferred
income taxes and other
|
|
|
(4,531 |
) |
|
|
1,152 |
|
Working
capital changes:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
30,143 |
|
|
|
21,226 |
|
Inventories
|
|
|
2,289 |
|
|
|
(21,000 |
) |
Prepaid
expenses
|
|
|
(4,320 |
) |
|
|
(1,665 |
) |
Accounts
payable and accrued expenses
|
|
|
(27,734 |
) |
|
|
(33,333 |
) |
|
|
|
|
|
|
|
|
|
CASH
USED IN OPERATING ACTIVITIES
|
|
|
(1,278 |
) |
|
|
(12,828 |
) |
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(5,557 |
) |
|
|
(6,014 |
) |
Other
|
|
|
874 |
|
|
|
(4,194 |
) |
|
|
|
|
|
|
|
|
|
CASH
USED IN INVESTING ACTIVITIES
|
|
|
(4,683 |
) |
|
|
(10,208 |
) |
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Repurchase
of senior notes
|
|
|
(10,325 |
) |
|
|
-- |
|
Proceeds
from issuance of common stock
|
|
|
-- |
|
|
|
818 |
|
Dividends
paid
|
|
|
(162 |
) |
|
|
(1,888 |
) |
|
|
|
|
|
|
|
|
|
CASH
USED IN FINANCING ACTIVITIES:
|
|
|
(10,487 |
) |
|
|
(1,070 |
) |
|
|
|
|
|
|
|
|
|
Net
cash used in operating, investing and
|
|
|
|
|
|
|
|
|
financing
activities
|
|
|
(16,448 |
) |
|
|
(24,106 |
) |
Effect
of exchange rate changes on cash
|
|
|
(421 |
) |
|
|
1,025 |
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS:
|
|
|
|
|
|
|
|
|
Net
change during the period
|
|
|
(16,869 |
) |
|
|
(23,081 |
) |
Balance
at beginning of period
|
|
|
71,757 |
|
|
|
82,375 |
|
|
|
|
|
|
|
|
|
|
Balance
at end of period
|
|
$ |
54,888 |
|
|
$ |
59,294 |
|
See
accompanying notes to consolidated condensed financial statements.
INTERFACE,
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1 –
CONDENSED FOOTNOTES
As
contemplated by the Securities and Exchange Commission (the “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 Company’s year-end
financial statements and notes thereto contained in its Annual Report on Form
10-K for the fiscal year ended December 28, 2008, as filed with the
Commission.
The
financial information included in this report has been prepared by the Company,
without audit. 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 full year. The December
28, 2008, consolidated condensed balance sheet data was derived from audited
financial statements, but does not include all disclosures required by
accounting principles generally accepted in the United States.
As
described below in Note 8, the Company has sold its Fabrics Group business
segment. The results of operations and related disposal costs, gains
and losses for this business are classified as discontinued operations for all
periods presented.
Additionally,
certain prior period amounts have been reclassified to conform to the current
period presentation.
NOTE 2 –
INVENTORIES
Inventories
are summarized as follows:
|
|
April 5, 2009
|
|
|
December 28, 2008
|
|
|
|
(In
thousands)
|
|
Finished
Goods
|
|
$ |
69,236 |
|
|
$ |
72,495 |
|
Work
in Process
|
|
|
21,908 |
|
|
|
21,610 |
|
Raw
Materials
|
|
|
33,667 |
|
|
|
34,818 |
|
|
|
$ |
124,811 |
|
|
$ |
128,923 |
|
NOTE 3 –
EARNINGS (LOSS) PER SHARE
The
Company computes basic earnings (loss) per share (“EPS”) attributable to common
stockholders by dividing income from continuing operations attributable to
common stockholders, income from discontinued operations attributable to common
stockholders and net income attributable to common stockholders, by the
weighted-average common shares outstanding including participating securities
outstanding, during the period as discussed below. Diluted EPS
reflects the potential dilution beyond shares for basic EPS that could occur if
securities or other contracts to issue common stock were exercised, converted
into common stock or resulted in the issuance of common stock that would have
shared in the Company’s earnings.
In the
first quarter of 2009, the Company adopted FSP EITF No. 03-6-1, which
requires the Company to include all unvested stock awards which contain
non-forfeitable rights to dividends or dividend equivalents, whether paid or
unpaid, in the number of shares outstanding in our basic and diluted EPS
calculations when the inclusion of these shares would be dilutive. As
a result, the Company has included all of these outstanding restricted stock
awards in our calculation of basic and diluted EPS for the first quarter of
2008. Because the Company was in a loss from continuing operations
position for the first quarter of 2009, these participating securities were not
included in the determination of EPS because to do so would be
anti-dilutive. FSP EITF No. 03-6-1 also requires additional
disclosure of EPS for common stock and unvested share-based payment awards,
separately disclosing distributed and undistributed earnings. Distributed
earnings represent common stock dividends and dividends earned on unvested
share-based payment awards. Undistributed earnings represent earnings that were
available for distribution but were not distributed. Common stock and
unvested share-based payment awards earn dividends equally as shown in the table
below:
|
|
Three Months Ended
|
|
|
|
April 5, 2009
|
|
|
March 30, 2008
|
|
Earnings
(Loss) Per Share from Continuing Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
Earnings (Loss) Per Share Attributable to
|
|
|
|
|
|
|
Common
Stockholders:
|
|
|
|
|
|
|
Distributed
Earnings
|
|
$ |
-- |
|
|
$ |
0.03 |
|
Undistributed
Earnings (Loss)
|
|
|
(0.06 |
) |
|
|
0.20 |
|
Total
|
|
$ |
(0.06 |
) |
|
$ |
0.23 |
|
|
|
|
|
|
|
|
|
|
Diluted
Earnings (Loss) Per Share Attributable to
|
|
|
|
|
|
|
|
|
Common
Stockholders:
|
|
|
|
|
|
|
|
|
Distributed
Earnings
|
|
$ |
-- |
|
|
$ |
0.03 |
|
Undistributed
Earnings (Loss)
|
|
|
(0.06 |
) |
|
|
0.19 |
|
Total
|
|
$ |
(0.06 |
) |
|
$ |
0.22 |
|
|
|
|
|
|
|
|
|
|
Earnings
(Loss) Per Share from Discontinued Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted Earnings (Loss) Per Share Attributable to
|
|
|
|
|
|
|
|
|
Common
Stockholders:
|
|
|
|
|
|
|
|
|
Distributed
Earnings
|
|
$ |
-- |
|
|
$ |
-- |
|
Undistributed
Earnings (Loss)
|
|
|
(0.01 |
) |
|
|
-- |
|
Total
|
|
$ |
(0.01 |
) |
|
$ |
-- |
|
|
|
|
|
|
|
|
|
|
Basic
Earnings (Loss) Per Share
|
|
$ |
(0.07 |
) |
|
$ |
0.23 |
|
Diluted
Earnings (Loss) Per Share
|
|
$ |
(0.07 |
) |
|
$ |
0.22 |
|
For the
three months ended April 5, 2009 and March 30, 2008 there was no significant
amount of income or loss attributable to participating securities from
continuing operations, and there was no significant amount of net income or loss
attributable to participating securities. As discussed above,
participating securities were not included in the determination of EPS for the
three months ended April 5, 2009, as their inclusion would be
anti-dilutive.
The
weighted average shares for basic and diluted EPS were as follows:
|
|
Three Months Ended
|
|
|
|
April 5, 2009
|
|
|
March 30, 2008
|
|
Shares
for Basic Earnings (Loss) Per Share (including participating securities
for the three months ended March 30, 2008)
|
|
|
61,770 |
|
|
|
62,725 |
|
Dilutive
effect of stock options
|
|
|
-- |
|
|
|
410 |
|
Shares
for Diluted Earnings (Loss) Per Share
|
|
|
61,770 |
|
|
|
63,135 |
|
As the
Company was in a loss from continuing operations position for the three months
ended April 5, 2009, any potential common shares and participating securities
would be anti-dilutive and therefore were not included in the
calculation. For the three months ended March 30, 2008, options to
purchase 195,000 shares of common stock were not included in the computation of
diluted earnings per share as their impact would be anti-dilutive.
NOTE 4 –
SEGMENT INFORMATION
Based on
the quantitative thresholds specified in Statement of Financial Accounting
Standards (“SFAS”) No. 131, “Disclosures about Segments of an Enterprise and
Related Information,” the Company has determined that it has two reportable
segments: (1) the Modular Carpet segment, which includes its InterfaceFLOR,
Heuga and FLOR modular carpet businesses, as well as its Intersept antimicrobial
sales and licensing program, and (2) the Bentley Prince Street segment, which
includes its Bentley Prince Street broadloom, modular carpet and area rug
businesses. The majority of the operations of the Company’s former
Specialty Products segment, which included Pandel, Inc., a producer of vinyl
carpet tile backing and specialty mat and foam products, were sold in
2007. As a result of this sale, the Company no longer has a Specialty
Products segment. In 2007, the Company also sold its former Fabrics
Group business segment (see Note 8 for further
information). Accordingly, the Company has included the operations of
the former Fabrics Group segment in discontinued operations.
The
accounting policies of the operating segments are the same as those described in
the Summary of Significant Accounting Policies contained in the Company's Annual
Report on Form 10-K for the fiscal year ended December 28, 2008, as filed with
the Commission. Segment amounts disclosed are prior to any elimination entries
made in consolidation, except in the case of net sales, where intercompany sales
have been eliminated. The chief operating decision maker evaluates performance
of the segments based on operating income. Costs excluded from this profit
measure primarily consist of allocated corporate expenses, interest/other
expense and income taxes. Corporate expenses are primarily comprised of
corporate overhead expenses. Thus, operating income includes only the costs that
are directly attributable to the operations of the individual
segment. Assets not identifiable to any individual segment are
corporate assets, which are primarily comprised of cash and cash equivalents,
short-term investments, intangible assets and intercompany amounts, which are
eliminated in consolidation.
Segment
Disclosures
Summary
information by segment follows:
|
|
Modular
Carpet
|
|
|
Bentley
Prince Street
|
|
|
Total
|
|
Three
Months Ended April 5, 2009
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$ |
176,452 |
|
|
$ |
22,856 |
|
|
$ |
199,308 |
|
Depreciation
and amortization
|
|
|
4,581 |
|
|
|
646 |
|
|
|
5,227 |
|
Operating
income (loss)
|
|
|
6,698 |
|
|
|
(2,986 |
) |
|
|
3,712 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended March 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$ |
226,073 |
|
|
$ |
35,663 |
|
|
$ |
261,736 |
|
Depreciation
and amortization
|
|
|
3,593 |
|
|
|
508 |
|
|
|
4,101 |
|
Operating
income
|
|
|
30,866 |
|
|
|
1,589 |
|
|
|
32,455 |
|
A
reconciliation of the Company’s total segment operating income, depreciation and
amortization, and assets to the corresponding consolidated amounts
follows:
|
|
Three Months Ended
|
|
|
|
April 5, 2009
|
|
|
March 30, 2008
|
|
|
|
(In
thousands)
|
|
DEPRECIATION
AND AMORTIZATION
|
|
|
|
|
|
|
Total
segment depreciation and amortization
|
|
$ |
5,227 |
|
|
$ |
4,101 |
|
Corporate
depreciation and amortization
|
|
|
1,021 |
|
|
|
2,394 |
|
Reported
depreciation and amortization
|
|
$ |
6,248 |
|
|
$ |
6,495 |
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME
|
|
|
|
|
|
|
|
|
Total
segment operating income
|
|
$ |
3,712 |
|
|
$ |
32,455 |
|
Corporate
expenses and other reconciling amounts
|
|
|
(638 |
) |
|
|
(1,484 |
) |
Reported
operating income
|
|
$ |
3,074 |
|
|
$ |
30,971 |
|
|
|
April 5, 2009
|
|
|
December 28, 2008
|
|
ASSETS
|
|
(In
thousands)
|
|
Total
segment assets
|
|
$ |
538,558 |
|
|
$ |
569,913 |
|
Discontinued
operations
|
|
|
2,150 |
|
|
|
3,150 |
|
Corporate
assets and eliminations
|
|
|
111,186 |
|
|
|
132,972 |
|
Reported
total assets
|
|
$ |
651,894 |
|
|
$ |
706,035 |
|
NOTE 5 –
LONG-TERM DEBT
The
Company maintains a domestic revolving credit agreement (the “Facility”) that
provides a maximum aggregate amount of $100 million of loans and letters of
credit available to us at any one time (subject to a borrowing base) with an
option for us to increase that maximum aggregate amount to $150 million (upon
the satisfaction of certain conditions, and subject to a borrowing base).
The Company is presently in compliance with all covenants under the Facility and
anticipates that it will remain in compliance with the covenants for the
foreseeable future. As of April 5, 2009, there were zero borrowings
and $9.1 million in letters of credit outstanding under the
Facility. As of April 5, 2009, the Company could have incurred $42.1
million of additional borrowings under the Facility (this amount would have been
$49.4 million with the receipt of a landlord lien waiver that we expect to
receive for one inventory location).
Interface
Europe B.V. (the Company’s modular carpet subsidiary based in the Netherlands)
and certain of its subsidiaries maintain a Credit Agreement with ABN AMRO Bank
N.V. Under this Credit Agreement, ABN AMRO provides a credit facility for
borrowings and bank guarantees in varying aggregate amounts over
time. As of April 5, 2009, there were no borrowings outstanding under
this facility, and the Company could have incurred €10.0 million (approximately
$13.2 million) of additional borrowings under the
facility. Subsequent to the end of the quarter, on April 24,
2009, this facility was amended and restated. See Note 13
(“Subsequent Event”) for further information.
Other
non-U.S. subsidiaries of the Company have an aggregate of the equivalent of $9.8
million of lines of credit available. No amounts were outstanding
under these lines of credit as of April 5, 2009.
As of
April 5, 2009, the estimated fair values (based on then-current market prices)
of the Company's 9.5% Senior Subordinated Notes due 2014 and the 10.375% Senior
Notes due 2010 were $95.9 million and $136.1 million, respectively.
NOTE 6 –
STOCK-BASED COMPENSATION
Stock Option
Awards
SFAS
No. 123R, “Share-Based Payments,” which revises SFAS No. 123, “Accounting
for Stock-Based Compensation” requires that the Company measure the cost of
employee services received in exchange for an award of equity instruments based
on the grant date fair value of the award. That cost will be
recognized over the period in which the employee is required to provide the
services – the requisite service period (usually the vesting period) – in
exchange for the award. The grant date fair value for options and
similar instruments will be estimated using option pricing
models. Under SFAS No. 123R, the Company is required to select a
valuation technique or option pricing model that meets the criteria as stated in
the standard, which includes a binomial model and the Black-Scholes model. The
Company continues to use the Black-Scholes model. SFAS No. 123R requires that
the Company estimate forfeitures for stock options and reduce compensation
expense accordingly. The Company has reduced its stock compensation expense by
the assumed forfeiture rate and will evaluate experience against this forfeiture
rate going forward.
During
the first three months of 2009 and 2008, the Company recognized stock option
compensation costs of $0.3 million and $0.1 million,
respectively. The remaining unrecognized compensation cost related to
unvested awards at April 5, 2009, approximated $2.1 million, and the
weighted average period of time over which this cost will be recognized is
approximately two years.
The fair
value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions used for grants issued in the first three months of fiscal years
2009 and 2008:
|
|
Three
Months Ended
April 5, 2009
|
|
|
Three
Months Ended
March 30, 2008
|
|
Risk
free interest rate
|
|
|
1.60 |
% |
|
|
3.90 |
% |
Expected
life
|
|
5.5 years
|
|
|
3.25 years
|
|
Expected
volatility
|
|
|
61 |
% |
|
|
61 |
% |
Expected
dividend yield
|
|
|
2.6 |
% |
|
|
0.57 |
% |
The
weighted average grant date fair value of stock options granted during the first
three months of fiscal year 2009 was $1.91 per share.
The
following table summarizes stock options outstanding as of April 5, 2009, as
well as activity during the three months then ended:
|
|
Shares
|
|
|
Weighted
Average
Exercise Price
|
|
Outstanding
at December 28, 2008
|
|
|
679,000 |
|
|
$ |
7.43 |
|
Granted
|
|
|
1,020,000 |
|
|
|
4.30 |
|
Exercised
|
|
|
-- |
|
|
|
-- |
|
Forfeited
or canceled
|
|
|
36,000 |
|
|
|
6.93 |
|
Outstanding
at April 5, 2009 (a)
|
|
|
1,663,000 |
|
|
$ |
5.73 |
|
|
|
|
|
|
|
|
|
|
Exercisable
at April 5, 2009 (b)
|
|
|
573,000 |
|
|
$ |
7.22 |
|
(a) At
April 5, 2009, the weighted-average remaining contractual life of options
outstanding was 7.0 years.
(b) At
April 5, 2009, the weighted-average remaining contractual life of options
exercisable was 2.4 years.
At April
5, 2009, the aggregate intrinsic value of in-the-money options outstanding and
options exercisable was $0.1 million and $0.1 million, respectively (the
intrinsic value of a stock option is the amount by which the market value of the
underlying stock exceeds the exercise price of the option).
Cash
proceeds and intrinsic value related to total stock options exercised during the
first three months of fiscal years 2009 and 2008 are provided in the following
table:
|
|
Three Months Ended
|
|
|
|
April 5, 2009
|
|
|
March 30,
2008
|
|
|
|
(In
thousands)
|
|
Proceeds
from stock options exercised
|
|
$ |
-- |
|
|
$ |
818 |
|
Intrinsic
value of stock options exercised
|
|
$ |
-- |
|
|
$ |
1,133 |
|
The
Company did not recognize any significant tax benefit with regard to stock
options in either period presented.
Restricted
Stock Awards
During
the three months ended April 5, 2009, and March 30, 2008, the Company granted
restricted stock awards for 27,000 and 1,012,000 shares, respectively, of Class
B common stock. These awards (or a portion thereof) vest with respect
to each recipient over a two to five-year period from the date of grant,
provided the individual remains in the employment or service of the Company as
of the vesting date. Additionally, these shares (or a portion
thereof) could vest earlier upon the attainment of certain performance criteria,
in the event of a change in control of the Company, or upon involuntary
termination without cause.
Compensation
expense related to restricted stock grants was $0.3 million and $3.9 million for
the three months ended April 5, 2009, and March 30, 2008,
respectively. SFAS No. 123R requires that the Company estimate
forfeitures for restricted stock and reduce compensation expense
accordingly. The Company has reduced its expense by the assumed
forfeiture rate and will evaluate experience against this forfeiture rate going
forward.
The
following table summarizes restricted stock activity as of April 5, 2009, and
during the three months then ended:
|
|
Shares
|
|
|
Weighted
Average
Grant
Date
Fair Value
|
|
Outstanding
at December 28, 2008
|
|
|
1,550,000 |
|
|
$ |
12.70 |
|
Granted
|
|
|
27,000 |
|
|
|
4.31 |
|
Vested
|
|
|
149,000 |
|
|
|
9.13 |
|
Forfeited
or canceled
|
|
|
-- |
|
|
|
-- |
|
Outstanding
at April 5, 2009
|
|
|
1,428,000 |
|
|
$ |
12.97 |
|
As of
April 5, 2009, the unrecognized total compensation cost related to unvested
restricted stock was $10.0 million. That cost is expected to be
recognized by the end of 2012.
The
Company recognized a tax benefit of approximately $1.2 million related to
restricted stock during the three months ended March 30, 2008. No
significant tax benefit was recognized for the three months ended April 5,
2009.
NOTE 7 –
EMPLOYEE BENEFIT PLANS
The
following tables provide the components of net periodic benefit cost for the
three-month periods ended April 5, 2009, and March 30, 2008,
respectively:
|
|
Three Months Ended
|
|
Defined Benefit Retirement Plan
(Europe)
|
|
April 5, 2009
|
|
|
March 30, 2008
|
|
|
|
(In
thousands)
|
|
Service
cost
|
|
$ |
514 |
|
|
$ |
697 |
|
Interest
cost
|
|
|
2,478 |
|
|
|
3,314 |
|
Expected
return on assets
|
|
|
(2,394 |
) |
|
|
(3,865 |
) |
Amortization
of prior service costs
|
|
|
20 |
|
|
|
-- |
|
Recognized
net actuarial (gains)/losses
|
|
|
413 |
|
|
|
364 |
|
Net
periodic benefit cost
|
|
$ |
1,031 |
|
|
$ |
510 |
|
|
|
Three Months Ended
|
|
Salary Continuation Plan
(SCP)
|
|
April 5, 2009
|
|
|
March 30, 2008
|
|
|
|
(In
thousands)
|
|
Service
cost
|
|
$ |
81 |
|
|
$ |
67 |
|
Interest
cost
|
|
|
271 |
|
|
|
237 |
|
Amortization
of transition obligation
|
|
|
55 |
|
|
|
55 |
|
Amortization
of prior service cost
|
|
|
12 |
|
|
|
12 |
|
Amortization
of (gain)/loss
|
|
|
69 |
|
|
|
74 |
|
Net
periodic benefit cost
|
|
$ |
488 |
|
|
$ |
445 |
|
NOTE 8 –
DISCONTINUED OPERATIONS
In 2007,
the Company sold its Fabrics Group business segment. Current and
prior periods have been restated to include the results of operations and
related disposal costs, gains and losses for this business segment as
discontinued operations. In addition, assets and liabilities of this
business segment have been reported in assets and liabilities held for sale for
all reported periods.
Summary
operating results for the above-described discontinued operations are as
follows:
|
|
Three Months Ended
|
|
|
|
April 5, 2009
|
|
|
March 30, 2008
|
|
|
|
(In
thousands)
|
|
Net
sales
|
|
$ |
-- |
|
|
$ |
-- |
|
Loss
on operations before taxes on income
|
|
|
(1,000 |
) |
|
|
-- |
|
Tax
benefit
|
|
|
350 |
|
|
|
-- |
|
Loss
on operations, net of tax
|
|
|
(650 |
) |
|
|
-- |
|
The loss
on operations reflects charges taken to reduce the carrying value of long-lived
assets to their approximate fair market value.
Assets
and liabilities, including reserves, related to the above-described discontinued
operations that were held for sale consist of the following:
|
|
April 5, 2009
|
|
|
December 28, 2008
|
|
|
|
(In
thousands)
|
|
Current
assets
|
|
$ |
-- |
|
|
$ |
-- |
|
Property
and equipment
|
|
|
2,150 |
|
|
|
3,150 |
|
Other
assets
|
|
|
-- |
|
|
|
-- |
|
Current
liabilities
|
|
|
-- |
|
|
|
-- |
|
Other
liabilities
|
|
|
-- |
|
|
|
-- |
|
NOTE 9 –
RESTRUCTURING CHARGES
2008
Restructuring Charge
In the
fourth quarter of 2008, the Company committed to a restructuring plan intended
to reduce costs across its worldwide operations, and more closely align the
Company’s operations with demand levels. The reduction of the
demand levels is primarily a result of the worldwide recession and the
associated delays and reductions in the number of construction projects where
the Company’s carpet products are used. The plan primarily consists
of ceasing manufacturing operations at its facility in Belleville, Canada, and
reducing its worldwide employee base by a total of approximately 530 employees
in the areas of manufacturing, sales and administration. In
connection with the restructuring plan, the Company recorded a pre-tax
restructuring charge in the fourth quarter of 2008 of $11.0
million. The Company records its restructuring accruals under the
provisions of SFAS No. 146, “Accounting for Costs Associated with Exit or
Disposal Activities” or SFAS No. 112, “Employer’s Accounting for Post-Employment
Benefits, an Amendment of FASB Statements No. 5 and 43,” as
appropriate. The restructuring charge is comprised of employee
severance expense of $7.8 million, impairment of assets of $2.6 million, and
other exit costs of $0.7 million (primarily related to lease exit costs and
other closure activities). Approximately $8.3 million of the
restructuring charge will be cash expenditures, primarily severance
expense. Actions and expenses related to this plan were substantially
completed in the first quarter of 2009, and the plan is expected to yield
annualized cost savings of approximately $30 million.
A summary
of these restructuring activities is presented below:
|
|
Total
Restructuring
Charge
|
|
|
Costs
Incurred
in 2008
|
|
|
Costs
Incurred
in 2009
|
|
|
Balance
at
April 5, 2009
|
|
|
|
(in
thousands)
|
|
Facilities
consolidation
|
|
$ |
2,559 |
|
|
$ |
2,559 |
|
|
$ |
-- |
|
|
$ |
-- |
|
Workforce
reduction
|
|
|
7,751 |
|
|
|
1,464 |
|
|
|
2,964 |
|
|
|
3,323 |
|
Other
charges
|
|
|
665 |
|
|
|
-- |
|
|
|
205 |
|
|
|
460 |
|
|
|
$ |
10,975 |
|
|
$ |
4,023 |
|
|
$ |
3,169 |
|
|
$ |
3,783 |
|
The table
below details these restructuring activities by segment:
|
|
Modular
Carpet
|
|
|
Bentley
Prince Street
|
|
|
Corporate
|
|
|
Total
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
amounts expected to be incurred
|
|
$ |
10,710 |
|
|
$ |
120 |
|
|
$ |
145 |
|
|
$ |
10,975 |
|
Cumulative
amounts incurred to date
|
|
|
6,967 |
|
|
|
120 |
|
|
|
105 |
|
|
|
7,192 |
|
Total
amounts incurred in the period
|
|
|
2,944 |
|
|
|
120 |
|
|
|
105 |
|
|
|
3,169 |
|
2009
Restructuring Charge
In the
first quarter of 2009, the Company adopted a new restructuring plan, primarily
comprised of a further reduction in the Company’s worldwide employee base by a
total of approximately 290 employees and continuing actions taken to better
align fixed costs with demand for its products on a global level. In
connection with the new plan, the Company recorded a pre-tax restructuring
charge of $5.7 million, comprised of $4.0 million of employee severance expense
and $1.7 million of other exit costs (primarily including costs to exit the
Canadian manufacturing facilities, lease exit costs and other
costs). Approximately $5.2 million of the restructuring charge
will involve future cash expenditures, primarily severance
expense. Actions and expenses related to this plan were substantially
completed in the first quarter of 2009, and the plan is expected to yield
annualized cost savings of approximately $17 million.
A summary
of these restructuring activities is presented below:
|
|
Total
Restructuring
Charge
|
|
|
Costs
Incurred
in 2009
|
|
|
Balance
at
April 5, 2009
|
|
|
|
(in
thousands)
|
|
Facilities
consolidation
|
|
$ |
970 |
|
|
$ |
573 |
|
|
$ |
397 |
|
Workforce
reduction
|
|
|
3,970 |
|
|
|
629 |
|
|
|
3,341 |
|
Other
charges
|
|
|
784 |
|
|
|
76 |
|
|
|
708 |
|
|
|
$ |
5,724 |
|
|
$ |
1,278 |
|
|
$ |
4,446 |
|
The table
below details these restructuring activities undertaken in 2009 by
segment:
|
|
Modular
Carpet
|
|
|
Bentley
Prince Street
|
|
|
Corporate
|
|
|
Total
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
amounts expected to be incurred
|
|
$ |
5,309 |
|
|
$ |
415 |
|
|
$ |
-- |
|
|
$ |
5,724 |
|
Cumulative
amounts incurred to date
|
|
|
1,167 |
|
|
|
111 |
|
|
|
-- |
|
|
|
1,278 |
|
Total
amounts incurred in the period
|
|
|
1,167 |
|
|
|
111 |
|
|
|
-- |
|
|
|
1,278 |
|
NOTE 10 –
SUPPLEMENTAL CASH FLOW INFORMATION
Cash
payments for interest amounted to $15.8 million for both of the three month
periods ended April 5, 2009, and March 30, 2008, respectively. Income
tax payments amounted to $5.5 million and $4.7 million for the three months
ended April 5, 2009, and March 30, 2008, respectively.
NOTE 11 –
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June
2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff
Position No. EITF 03-6-1, “Determining Whether Instruments Granted in
Share-Based Payment Transactions are Participating Securities” (“FSP EITF
03-6-1”). The FASB declared that unvested share-based payout awards that contain
non-forfeitable rights to dividends or dividend equivalents (whether paid or
unpaid) are participating securities and shall be included in the computation of
EPS pursuant to the two-class method under SFAS No. 128, “Earnings Per Share,”
when dilutive. FSP EITF 03-6-1 became effective for the Company on December 29,
2008. The adoption of this standard had the impact of a $0.01 per
share reduction of diluted earnings per share for the first quarter of
2008. See Footnote 3, “Earnings (Loss) Per Share,” for more
discussion on the adoption of this standard.
In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles.” This statement identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (“GAAP”)
in the United States. The FASB believes that the GAAP hierarchy
should be directed to entities because it is the entity (not its auditor) that
is responsible for selecting accounting principles for financial statements that
are presented in conformity with GAAP. The FASB does not believe this
statement will result in a change in current practice. SFAS 162 became effective
November 15, 2008.
In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative instruments
and Hedging Activities.” The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable better understanding of the effects on
financial position, financial performance, and cash flows. The
effective date is for fiscal years and interim periods beginning after November
15, 2008. The adoption of this standard did not have a significant
impact on the Company’s consolidated financial statements because the Company is
not a party to any significant derivative transactions.
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment to ARB No. 51.” SFAS
No. 160 establishes standards of accounting and reporting of noncontrolling
interests in subsidiaries, currently known as minority interest, in consolidated
financial statements, provides guidance on accounting for changes in the
parent’s ownership interest in a subsidiary and establishes standards of
accounting of the deconsolidation of a subsidiary due to the loss of
control. SFAS No. 160 requires an entity to present minority
interests as a component of equity. Additionally, SFAS No. 160
requires an entity to present net income and consolidated comprehensive income
attributable to the parent and the minority interest separately on the face of
the consolidated financial statements. This standard became effective
beginning with the Company’s fiscal year 2009 and interim periods
thereof. The adoption of this standard resulted in a reclassification
of $7.9 million of minority interest to equity as of December 28, 2008 and April
5, 2009. The Company also has adjusted its consolidated condensed
statements of operations for the periods presented to reflect the income from
the minority interest as a component of net income. The adjustment
resulted in a $0.1 million increase in other income for the three months ended
April 5, 2009, and a $0.2 million decrease of other expense in the three months
ended March 30, 2008.
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations.” SFAS No. 141R requires the acquiring entity to
recognize and measure at an acquisition date fair value all identifiable assets
acquired, liabilities assumed and any noncontrolling interest in the
acquiree. The statement recognizes and measures the goodwill acquired
in the business combination or a gain from a bargain purchase. SFAS
No. 141R requires disclosures about the nature and financial effect of the
business combination and also changes the accounting for certain income tax
assets recorded in purchase accounting. This standard is effective
for the fiscal year beginning after December 15, 2008. The adoption
of this pronouncement did not have any significant impact on the Company’s
consolidated financial statements.
In
September 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements.” This statement defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
and expands disclosures about fair value measurements. For financial
assets subject to fair value measurements, SFAS No. 157 is effective for fiscal
years beginning after November 15, 2007. In November 2007, the FASB
granted a deferral for the application of SFAS No. 157 with regard to
non-financial assets until fiscal years beginning after November 15,
2008. The adoption of the pronouncement for financial assets did not
have a material impact on the Company’s consolidated financial
statements. The Company’s annual fair value measurement of its
reporting units under step 1 of the SFAS No. 142 goodwill impairment test
represents the only significant fair value measurement on a recurring basis for
which the Company expects to be impacted by the adoption of SFAS No. 157 with
regard to non-financial assets in 2009. In addition, any fair value
measurements related to long-lived asset impairments under SFAS No. 146,
“Accounting for Costs Associated with Exit or Disposal Activities,” would be
subject to the provisions of SFAS No. 157 as well. The adoption of
this standard did not have a significant impact on the Company’s consolidated
financial statements.
NOTE 12 –
INCOME TAXES
In July
2006, the FASB issued FASB Interpretation (“FIN”) No. 48, “Accounting for
Uncertainty in Income Taxes.” In summary, FIN 48 requires that all tax
positions subject to SFAS No. 109, “Accounting for Income Taxes,” be
analyzed using a two-step approach. The first step requires an entity to
determine if a tax position is more-likely-than-not to be sustained upon
examination. In the second step, the tax benefit is measured as the largest
amount of benefit, determined on a cumulative probability basis, that is
more-likely-than-not to be realized upon ultimate settlement. FIN 48 was
effective as of January 1, 2007, with any adjustment in a company’s tax
provision being accounted for as a cumulative effect of accounting change in
beginning equity. On January 1, 2007, the Company adopted the
provisions of FIN 48. As required by FIN 48, the cumulative
effect of applying the provisions of the Interpretation have been reported as an
adjustment to the Company’s retained earnings balance as of January 1,
2007. The Company recognized a $4.6 million increase in its liability
for unrecognized tax benefits with a corresponding decrease to the fiscal year
2007 opening balance of retained earnings. There have been no
material changes to the Company’s unrecognized tax benefits during the three
months ended April 5, 2009. As of April 5, 2009, the Company had
approximately $7.4 million accrued for unrecognized tax benefits.
NOTE 13 –
SUBSEQUENT EVENT
On April
24, 2009, Interface Europe B.V. (our modular carpet subsidiary based in the
Netherlands) and certain of its subsidiaries entered into an amended and
restated Credit Agreement with ABN AMRO Bank N.V. Under the Credit
Agreement (which replaces the prior credit agreement with ABN AMRO Bank, N.V.
executed on March 9, 2007), ABN AMRO provides a credit facility, until further
notice, for borrowings and bank guarantees in varying aggregate amounts over
time as follows:
Period
|
|
Maximum
Amount in Euros (in
millions)
|
May
1, 2009 – September 30, 2009
|
|
€
|
32 |
|
October
1, 2009 – September 30, 2010
|
|
|
26 |
|
October
1, 2010 –September 30, 2011
|
|
|
20 |
|
October
1, 2011 –September 30, 2012
|
|
|
14 |
|
From
October 1, 2012
|
|
|
8 |
|
Interest
on borrowings under the facility is charged at varying rates computed by
applying a margin of 1% over ABN AMRO’s euro base rate (consisting of the
leading refinancing rate as determined from time to time by the European Central
Bank plus a debit interest surcharge), which base rate is subject to a minimum
of 3.5% per annum. Fees on bank guarantees and documentary letters of
credit are charged at a rate of 1% per annum or part thereof on the maximum
amount and for the maximum duration of each guarantee or documentary letter of
credit issued. A facility fee of 0.5% per annum is payable with
respect to the facility amount. The facility is secured by liens on
certain real property, personal property and other assets of our principal
European subsidiaries. The facility also includes certain financial
covenants (which require the borrowers and their subsidiaries to maintain a
minimum interest coverage ratio, total debt/EBITDA ratio and tangible net
worth/total assets) and affirmative and negative covenants, and other provisions
that restrict the borrowers’ ability (and the ability of certain of the
borrowers’ subsidiaries) to take certain actions.
NOTE 14 –
SUPPLEMENTAL CONDENSED CONSOLIDATING GUARANTOR FINANCIAL STATEMENTS
The
Guarantor Subsidiaries, which consist of the Company’s principal domestic
subsidiaries, are guarantors of the Company’s 10.375% senior notes due 2010 and
its 9.5% senior subordinated notes due 2014. These guarantees
are full and unconditional. The Supplemental Guarantor Financial
Statements are presented herein pursuant to requirements of the
Commission.
INTERFACE,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE
THREE MONTHS ENDED APRIL 5, 2009
|
|
GUARANTOR
SUBSIDIARIES
|
|
|
NON-GUARANTOR
SUBSIDIARIES
|
|
|
INTERFACE,
INC.
(PARENT
CORPORATION)
|
|
|
CONSOLIDATION
AND ELIMINATION ENTRIES
|
|
|
CONSOLIDATED
TOTALS
|
|
|
|
(IN
THOUSANDS)
|
|
Net
sales
|
|
$ |
119,316 |
|
|
$ |
103,508 |
|
|
$ |
-- |
|
|
$ |
(23,516 |
) |
|
$ |
199,308 |
|
Cost
of sales
|
|
|
91,421 |
|
|
|
68,234 |
|
|
|
-- |
|
|
|
(23,516 |
) |
|
|
136,139 |
|
Gross
profit on sales
|
|
|
27,895 |
|
|
|
35,274 |
|
|
|
-- |
|
|
|
-- |
|
|
|
63,169 |
|
Selling,
general and administrative expenses
|
|
|
20,201 |
|
|
|
29,125 |
|
|
|
5,045 |
|
|
|
-- |
|
|
|
54,371 |
|
Restructuring
charge
|
|
|
3,460 |
|
|
|
2,264 |
|
|
|
-- |
|
|
|
-- |
|
|
|
5,724 |
|
Operating
income (loss)
|
|
|
4,234 |
|
|
|
3,885 |
|
|
|
(5,045 |
) |
|
|
-- |
|
|
|
3,074 |
|
Interest/Other
expense
|
|
|
4,184 |
|
|
|
1,236 |
|
|
|
1,503 |
|
|
|
-- |
|
|
|
6,923 |
|
Income
(loss) before taxes on income and equity in income of
subsidiaries
|
|
|
50 |
|
|
|
2,649 |
|
|
|
(6,548 |
) |
|
|
-- |
|
|
|
(3,849 |
) |
Income
tax (benefit) expense
|
|
|
6 |
|
|
|
302 |
|
|
|
(784 |
) |
|
|
-- |
|
|
|
(476 |
) |
Equity
in income (loss) of subsidiaries
|
|
|
-- |
|
|
|
-- |
|
|
|
1,612 |
|
|
|
(1,612 |
) |
|
|
-- |
|
Income
(loss) from continuing operations
|
|
|
44 |
|
|
|
2,347 |
|
|
|
(4,152 |
) |
|
|
(1,612 |
) |
|
|
(3,373 |
) |
Loss
on discontinued operations, net of tax
|
|
|
-- |
|
|
|
(650 |
) |
|
|
-- |
|
|
|
-- |
|
|
|
(650 |
) |
Net
income (loss)
|
|
|
44 |
|
|
|
1,697 |
|
|
|
(4,152 |
) |
|
|
(1,612 |
) |
|
|
(4,023 |
) |
Net
income attributable to noncontrolling interests
|
|
|
-- |
|
|
|
(129 |
) |
|
|
-- |
|
|
|
-- |
|
|
|
(129 |
) |
Net
income (loss) attributable to Interface, Inc.
|
|
$ |
44 |
|
|
$ |
1,568 |
|
|
$ |
(4,152 |
) |
|
$ |
(1,612 |
) |
|
$ |
(4,152 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATING BALANCE SHEET
APRIL 5,
2009
|
|
GUARANTOR
SUBSIDIARIES
|
|
|
NON-GUARANTOR
SUBSIDIARIES
|
|
|
INTERFACE,
INC.
(PARENT
CORPORATION)
|
|
|
CONSOLIDATION
AND ELIMINATION ENTRIES
|
|
|
CONSOLIDATED
TOTALS
|
|
|
|
(IN
THOUSANDS)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
-- |
|
|
$ |
34,458 |
|
|
$ |
20,430 |
|
|
$ |
-- |
|
|
$ |
54,888 |
|
Accounts
receivable
|
|
|
47,045 |
|
|
|
64,048 |
|
|
|
2,025 |
|
|
|
-- |
|
|
|
113,118 |
|
Inventories
|
|
|
71,153 |
|
|
|
53,658 |
|
|
|
-- |
|
|
|
-- |
|
|
|
124,811 |
|
Prepaids
and deferred income taxes
|
|
|
9,345 |
|
|
|
14,029 |
|
|
|
5,702 |
|
|
|
-- |
|
|
|
29,076 |
|
Assets
of business held for sale
|
|
|
-- |
|
|
|
2,150 |
|
|
|
-- |
|
|
|
-- |
|
|
|
2,150 |
|
Total
current assets
|
|
|
127,543 |
|
|
|
168,343 |
|
|
|
28,157 |
|
|
|
-- |
|
|
|
324,043 |
|
Property
and equipment less accumulated depreciation
|
|
|
80,500 |
|
|
|
71,993 |
|
|
|
5,398 |
|
|
|
-- |
|
|
|
157,891 |
|
Investment
in subsidiaries
|
|
|
258,280 |
|
|
|
183,938 |
|
|
|
28,624 |
|
|
|
(470,842 |
) |
|
|
-- |
|
Goodwill
|
|
|
6,954 |
|
|
|
67,890 |
|
|
|
-- |
|
|
|
-- |
|
|
|
74,844 |
|
Other
assets
|
|
|
7,962 |
|
|
|
12,087 |
|
|
|
75,067 |
|
|
|
-- |
|
|
|
95,116 |
|
|
|
$ |
481,239 |
|
|
$ |
504,251 |
|
|
$ |
137,246 |
|
|
$ |
(470,842 |
) |
|
$ |
651,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
$ |
43,304 |
|
|
$ |
68,132 |
|
|
$ |
152,633 |
|
|
$ |
-- |
|
|
$ |
264,069 |
|
Senior
subordinated notes
|
|
|
-- |
|
|
|
-- |
|
|
|
135,000 |
|
|
|
-- |
|
|
|
135,000 |
|
Deferred
income taxes
|
|
|
1,614 |
|
|
|
9,816 |
|
|
|
(3,930 |
) |
|
|
-- |
|
|
|
7,500 |
|
Other
|
|
|
2,676 |
|
|
|
9,078 |
|
|
|
25,311 |
|
|
|
-- |
|
|
|
37,065 |
|
Total
liabilities
|
|
|
47,594 |
|
|
|
87,026 |
|
|
|
309,014 |
|
|
|
-- |
|
|
|
443,634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling
interest in subsidiary
|
|
|
-- |
|
|
|
7,850 |
|
|
|
-- |
|
|
|
-- |
|
|
|
7,850 |
|
Redeemable
preferred stock
|
|
|
57,891 |
|
|
|
-- |
|
|
|
-- |
|
|
|
(57,891 |
) |
|
|
-- |
|
Common
stock
|
|
|
94,145 |
|
|
|
102,199 |
|
|
|
6,319 |
|
|
|
(196,344 |
) |
|
|
6,319 |
|
Additional
paid-in capital
|
|
|
191,411 |
|
|
|
12,525 |
|
|
|
341,076 |
|
|
|
(203,936 |
) |
|
|
341,076 |
|
Retained
earnings (deficit)
|
|
|
91,445 |
|
|
|
361,316 |
|
|
|
(511,150 |
) |
|
|
(11,542 |
) |
|
|
(69,931 |
) |
AOCI
- Foreign currency translation adjustment
|
|
|
(1,247 |
) |
|
|
(42,223 |
) |
|
|
(4,594 |
) |
|
|
(1,129 |
) |
|
|
(49,193 |
) |
AOCI
- Pension liability
|
|
|
-- |
|
|
|
(24,442 |
) |
|
|
(3,419 |
) |
|
|
-- |
|
|
|
(27,861 |
) |
|
|
$ |
481,239 |
|
|
$ |
504,251 |
|
|
$ |
137,246 |
|
|
$ |
(470,842 |
) |
|
$ |
651,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE
THREE MONTHS
ENDED
APRIL 5, 2009
|
|
GUARANTOR
SUBSIDIARIES
|
|
|
NON-GUARANTOR
SUBSIDIARIES
|
|
|
INTERFACE,
INC.
(PARENT
CORPORATION)
|
|
|
CONSOLIDATION
AND ELIMINATION ENTRIES
|
|
|
CONSOLIDATED
TOTALS
|
|
|
|
(IN
THOUSANDS)
|
|
Net
cash provided by (used for) operating activities
|
|
$ |
1,840 |
|
|
$ |
10,644 |
|
|
$ |
(16,455 |
) |
|
$ |
2,693 |
|
|
$ |
(1,278 |
) |
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of plant and equipment
|
|
|
(3,048 |
) |
|
|
(2,308 |
) |
|
|
(201 |
) |
|
|
-- |
|
|
|
(5,557 |
) |
Other
|
|
|
(422 |
) |
|
|
2,199 |
|
|
|
(903 |
) |
|
|
-- |
|
|
|
874 |
|
Net
cash provided by (used for) investing activities
|
|
|
(3,470 |
) |
|
|
(109 |
) |
|
|
(1,104 |
) |
|
|
-- |
|
|
|
(4,683 |
) |
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
borrowings
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
Repurchase
of senior notes
|
|
|
-- |
|
|
|
-- |
|
|
|
(10,325 |
) |
|
|
-- |
|
|
|
(10,325 |
) |
Proceeds
from issuance of common stock
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
Other
|
|
|
848 |
|
|
|
(2,075 |
) |
|
|
3,966 |
|
|
|
(2,739 |
) |
|
|
-- |
|
Dividends
paid
|
|
|
-- |
|
|
|
(46 |
) |
|
|
(162 |
) |
|
|
46 |
|
|
|
(162 |
) |
Net
cash provided by (used for) financing activities
|
|
|
848 |
|
|
|
(2,121 |
) |
|
|
(6,521 |
) |
|
|
(2,693 |
) |
|
|
(10,487 |
) |
Effect
of exchange rate change on cash
|
|
|
-- |
|
|
|
(421 |
) |
|
|
-- |
|
|
|
-- |
|
|
|
(421 |
) |
Net
increase (decrease) in cash
|
|
|
(782 |
) |
|
|
7,993 |
|
|
|
(24,080 |
) |
|
|
-- |
|
|
|
(16,869 |
) |
Cash
at beginning of period
|
|
|
782 |
|
|
|
26,465 |
|
|
|
44,510 |
|
|
|
-- |
|
|
|
71,757 |
|
Cash
at end of period
|
|
$ |
-- |
|
|
$ |
34,458 |
|
|
$ |
20,430 |
|
|
$ |
-- |
|
|
$ |
54,888 |
|
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Our
discussions below in this Item 2 are based upon the more detailed discussions
about our business, operations and financial condition included in our Annual
Report on Form 10-K for the fiscal year ended December 28, 2008, under Item 7 of
that Form 10-K. Our discussions here focus on our results during
the quarter ended, or as of, April 5, 2009, and the comparable period of 2008
for comparison purposes, and, to the extent applicable, any material changes
from the information discussed in that Form 10-K or other important
intervening developments or information since that time. These
discussions should be read in conjunction with that Form 10-K for more detailed
and background information.
Forward-Looking
Statements
This
report contains statements which may constitute “forward-looking statements”
within the meaning of the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act
of 1995. Important factors currently known to management that could cause actual
results to differ materially from those in forward-looking statements include
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 28, 2008, which discussion is
hereby incorporated by reference. The Company undertakes no obligation to update
or revise forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes to future operating results over
time.
Restructuring
Charges
2008
Restructuring Charge
In the
fourth quarter of 2008, we committed to a restructuring plan intended to reduce
costs across our worldwide operations, and more closely align our operations
with demand levels. The reduction of the demand levels is
primarily a result of the worldwide recession and the associated delays and
reductions in the number of construction projects where our carpet products are
used. The plan primarily consists of ceasing manufacturing operations
at our facility in Belleville, Canada, and reducing our worldwide employee base
by a total of approximately 530 employees in the areas of manufacturing, sales
and administration. In connection with the restructuring plan, we
recorded a pre-tax restructuring charge in the fourth quarter of 2008 of $11.0
million. We record our restructuring accruals under the provisions of
SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”
or SFAS No. 112, “Employer’s Accounting for Post-Employment Benefits, an
Amendment of FASB Statements No. 5 and 43,” as appropriate. The
restructuring charge is comprised of employee severance expense of $7.8 million,
impairment of assets of $2.6 million, and other exit costs of $0.7 million
(primarily related to lease exit costs and other closure
activities). Approximately $8.3 million of the restructuring charge
will be cash expenditures, primarily severance expense. Actions and
expenses related to this plan were substantially completed in the first quarter
of 2009, and the plan is expected to yield annualized cost savings of
approximately $30 million.
2009
Restructuring Charge
In the
first quarter of 2009, we adopted a new restructuring plan, primarily comprised
of a further reduction in our worldwide employee base by a total of
approximately 290 employees and continuing actions taken to better align fixed
costs with demand for our products on a global level. In connection
with the new plan, we recorded a pre-tax restructuring charge of $5.7 million,
comprised of $4.0 million of employee severance expense and $1.7 million of
other exit costs (primarily costs to exit the Canadian manufacturing facilities,
lease exit costs and other costs). Approximately $5.2 million of the
restructuring charge will involve future cash expenditures, primarily severance
expense. Actions and expenses related to this plan were substantially
completed in the first quarter of 2009, and the plan is expected to yield
annualized cost savings of approximately $17 million.
Discontinued
Operations
In 2007,
we sold our Fabrics Group business segment. In accordance with SFAS
No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” we
have reported the results of operations for the former Fabrics Group business
segment for all periods reflected herein, as “discontinued
operations.” Consequently, our discussion of revenues or sales and
other results of operations (except for net income or loss amounts), including
percentages derived from or based on such amounts, excludes this discontinued
operation unless we indicate otherwise.
Our
discontinued operations had no net sales and a loss of $0.7 million in the
three-month period ended April 5, 2009 (these results are included in our
statements of operations as part of the “Loss from Discontinued Operations, Net
of Taxes”). Our discontinued operations had no net sales and no
income or loss in the three-month period ended March 30, 2008.
General
During
the quarter ended April 5, 2009, we had net sales of $199.3 million, compared
with net sales of $261.7 million in the first quarter last
year. Fluctuations in currency exchange rates negatively impacted
2009 first quarter sales by 9% (approximately $23 million), compared with
the prior year period.
During
the first quarter of 2009, we had net loss attributable to Interface, Inc. of
$4.2 million, or $0.07 per share, compared with net income attributable to
Interface, Inc. of $14.1 million, or $0.22 per diluted share, in the first
quarter last year. Loss from continuing operations in the first
quarter of 2009 was $3.4 million, or $0.06 per share, compared with income from
continuing operations of $14.3 million, or $0.22 per diluted share, in the first
quarter last year.
Results
of Operations
The
following table presents, as a percentage of net sales, certain items included
in our Consolidated Condensed Statements of Operations for the three-month
periods ended April 5, 2009, and March 30, 2008, respectively:
|
|
Three Months Ended
|
|
|
|
April 5, 2009
|
|
|
March 30, 2008
|
|
|
|
|
|
|
|
|
Net
sales
|
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost
of sales
|
|
|
68.3 |
|
|
|
64.0 |
|
Gross
profit on sales
|
|
|
31.7 |
|
|
|
36.0 |
|
Selling,
general and administrative expenses
|
|
|
27.3 |
|
|
|
24.2 |
|
Restructuring
charge
|
|
|
2.9 |
|
|
|
-- |
|
Operating
income
|
|
|
1.5 |
|
|
|
11.8 |
|
Interest/Other
expense
|
|
|
3.5 |
|
|
|
3.1 |
|
Income
(loss) from continuing operations before tax expense
|
|
|
(1.9 |
) |
|
|
8.7 |
|
Income
tax expense (benefit)
|
|
|
(0.2 |
) |
|
|
3.3 |
|
Income
(loss) from continuing operations
|
|
|
(1.7 |
) |
|
|
5.4 |
|
Discontinued
operations, net of tax
|
|
|
(0.3 |
) |
|
|
-- |
|
Loss
on disposal
|
|
|
-- |
|
|
|
-- |
|
Net
income (loss)
|
|
|
(2.0 |
) |
|
|
5.4 |
|
Net
income (loss) attributable to Interface, Inc.
|
|
|
(2.1 |
) |
|
|
5.4 |
|
Below we
provide information regarding net sales for each of our operating segments, and
analyze those results for the three-month periods ended April 5, 2009, and March
30, 2008, respectively.
Net
Sales by Business Segment
Net sales
by operating segment and for our Company as a whole were as follows for the
three-month periods ended April 5, 2009, and March 30, 2008,
respectively:
|
|
Three Months Ended
|
|
|
Percentage
|
|
Net Sales By Segment
|
|
04/05/09
|
|
|
03/30/08
|
|
|
Change
|
|
|
|
(In
thousands)
|
|
|
|
|
Modular
Carpet
|
|
$ |
176,452 |
|
|
$ |
226,073 |
|
|
|
(21.9 |
%) |
Bentley
Prince Street
|
|
|
22,856 |
|
|
|
35,663 |
|
|
|
(35.9 |
%) |
Total
|
|
$ |
199,308 |
|
|
$ |
261,736 |
|
|
|
(23.9 |
%) |
Modular Carpet
Segment. For the quarter ended April 5, 2009, net sales for
the modular carpet segment decreased $49.6 million (21.9%) versus the
comparable period in 2008. This decline is primarily attributable to
the reduced order activity for renovation and construction projects as a result
of the worldwide financial and credit crisis. On a geographic basis, sales in
the Americas and Asia-Pacific were down 13.3% and 23.3%,
respectively. Sales in Europe were down 21.3% in local currency and
31.1% as reported in U.S. Dollars as a result of the continued strengthening of
the U.S. Dollar versus the Euro and British Pound Sterling. The
decline in the corporate office segment (down 28%) was the primary driver of the
decrease in sales. The impact of this decline was somewhat mitigated
as a result of our market diversification strategy, as we saw lesser decreases
in the government (6% decline) and education (13% decline) segments as well as a
slight increase in the retail segment (2% increase).
Bentley Prince Street
Segment. In our Bentley Prince Street Segment, net sales for
the quarter ended April 5, 2009 decreased $12.8 million (35.9%) versus the
comparable period in 2008. This decrease is primarily attributable to
the downturn in demand in response to the worldwide financial and credit crisis,
as well as the general market movement away from broadloom carpet and toward
carpet tile. The sales decrease at Bentley Prince
Street occurred across both corporate (down 32%) and non-corporate
segments, particularly in the healthcare (down 35%) and hospitality (down 72%)
segments.
Cost
and Expenses
Company
Consolidated. The following table presents, on a consolidated
basis for our operations, our overall cost of sales and selling, general and
administrative expenses for the three-month periods ended April 5, 2009, and
March 30, 2008, respectively:
|
|
Three Months Ended
|
|
|
Percentage
|
|
Cost and Expenses
|
|
04/05/09
|
|
|
03/30/08
|
|
|
Change
|
|
|
|
(In
thousands)
|
|
|
|
|
Cost
of sales
|
|
$ |
136,139 |
|
|
$ |
167,470 |
|
|
|
(18.7 |
%) |
Selling,
general and administrative expenses
|
|
|
54,371 |
|
|
|
63,295 |
|
|
|
(14.1 |
%) |
Total
|
|
$ |
190,510 |
|
|
$ |
230,765 |
|
|
|
(17.4 |
%) |
For the
quarter ended April 5, 2009, our cost of sales decreased $31.3 million
(18.7%) versus the comparable period in 2008. This decrease was a
direct result of the reduced net sales across our worldwide operations as
discussed above. The cost decrease was not as proportionally large as
the decrease in net sales because our restructuring initiatives discussed above
were not fully implemented for the entire quarter, resulting in an
under-absorption of fixed overhead costs associated with the lower production
volumes. As a result, as a percentage of net sales, cost
of sales increased to 68.3% versus 64.0% in the comparable period in
2008. We believe that as our restructuring initiatives are
substantially completed, our cost of sales will decline as a percentage of
net sales for the remainder of the year.
For the
quarter ended April 5, 2009, our selling, general and administrative expenses
decreased $8.9 million (14.1%) versus the comparable period in 2008. The
components of this decrease were (1) a $4.6 million reduction in selling costs
associated with the decline in sales volume, (2) a $3.7 million reduction in
marketing expense as programs were cut to better match anticipated demand, and
(3) a $1.0 million reduction in incentive compensation as performance goals were
not achieved to the same degree as they were in the comparable period in
2008. The decline in selling, general and administrative expenses was
not as proportionately large as the decline in sales because the savings related
to our restructuring plans were not fully realized in the first
quarter. As a result, as a percentage of net sales, selling, general
and administrative expenses increased to 27.3% for the three months ended April
5, 2009 versus 24.2% for the comparable period in 2008.
Cost and Expenses by
Segment. The following table presents the combined cost of
sales and selling, general and administrative expenses for each of our operating
segments:
Cost
of Sales and Selling, General and
|
|
Three Months Ended
|
|
|
Percentage
|
|
Administrative Expenses
(Combined)
|
|
04/05/09
|
|
|
03/30/08
|
|
|
Change
|
|
|
|
(In
thousands)
|
|
|
|
|
Modular
Carpet
|
|
$ |
164,444 |
|
|
$ |
195,207 |
|
|
|
(15.8 |
%) |
Bentley
Prince Street
|
|
|
25,427 |
|
|
|
34,074 |
|
|
|
(25.4 |
%) |
Corporate
Expenses and Eliminations
|
|
|
639 |
|
|
|
1,484 |
|
|
|
(56.9 |
%) |
Total
|
|
$ |
190,510 |
|
|
$ |
230,765 |
|
|
|
(17.4 |
%) |
Interest
Expenses
For the
three-month period ended April 5, 2009, interest expense decreased $0.1 million
to $7.7 million, versus $7.8 million in the comparable period in
2008. This decrease was due primarily to the lower levels of debt
outstanding on a daily basis during the first quarter of 2009 (mostly through
the repurchase of $10.8 million of our 10.375% Senior Notes in March 2009)
versus the comparable period in 2008.
Liquidity
and Capital Resources
General
At April
5, 2009, we had $54.9 million in cash. At that date, we had no
borrowings and $9.1 million in letters of credit outstanding under our domestic
revolving credit facility, and no borrowings outstanding under our European
credit facility. As of April 5, 2009, we could have incurred $42.1
million of additional borrowings under our domestic revolving credit facility
(this amount would have been $49.4 million with the receipt of a landlord lien
waiver that we expect to receive for one inventory location) and €10.0 million
(approximately $13.2 million) of additional borrowings under our European credit
facility. In addition, we could have incurred an additional $9.8
million of borrowings under our other credit facilities in place at other
non-U.S. subsidiaries.
Subsequent
to the end of the first quarter of 2009, on April 24, 2009, we expanded our
European credit facility. For a discussion of this expanded facility,
see Note 13 (“Subsequent Event”) to our consolidated condensed financial
statements in Part 1, Item 1 of this report.
Our primary sources of cash during the
three month period ended April 5, 2009 were (1) $30.1 million received as a
reduction of accounts receivable, and (2) $2.3 million as a reduction in
inventories. Our primary uses of cash during this period were
(1) $27.7 million as a reduction in accounts payable and accruals (of which
$15.8 million was related to interest payments), (2) $10.3 million
used to repurchase a portion of our 10.375% Senior Notes, and (3) $5.6 million
for additions to property, plant and equipment, primarily at our manufacturing
facilities.
Maturing
Indebtedness in Future Years
Our
domestic revolving credit facility matures in December 2012, and our outstanding
10.375% Senior Notes and 9.5% Senior Subordinated Notes mature on February 1,
2010 and February 1, 2014, respectively. We cannot assure you that we
will be able to renegotiate or refinance any of these notes or our other debt on
commercially reasonable terms, or at all, especially given the unprecedented
worldwide financial and credit crisis that developed in the second half of 2008
and its continuing impact on the availability of credit. As of April
5, 2009 we had $141.3 million outstanding of our 10.375% Senior
Notes.
With
respect to the 10.375% Senior Notes due 2010, we believe the following will
allow for the repayment or refinancing of the $141.8 million outstanding
principal amount of these notes:
·
|
Available financing in the
capital markets. We are exploring possibilities with
respect to domestic credit facilities as well as monitoring public bond
and equity markets, and we believe that there may be availability in these
capital markets in 2009, particularly in light of the aggressive
legislative and other governmental economic stimulus actions taken by the
United States and other countries around the world. We believe
the level of bond financing activity in the first four months of 2009,
particularly in the high yield bond market, has improved and reflects well
on our ability to refinance our 10.375% Senior Notes. If an
opportunity arises to refinance these notes on terms acceptable to us,
then we intend to do so. It should be noted, however, that in
these circumstances we might have to accept financing on terms which we
normally would not consider
favorable.
|
·
|
Cash on hand and cash
generation. As April 5, 2009, we had approximately $54.9 million of
cash on hand. This cash, coupled with an expected generation of
$35-$50 million of cash from operating activities in 2009, should enable
us to repay a substantial portion of these notes. As part of our efforts
to generate such cash from operations, we have undertaken significant
restructuring activities in the fourth quarter of 2008 and the first
quarter of 2009 as well as other cost-cutting initiatives that we
anticipate will generate savings of over $47 million in
2009.
|
·
|
Availability under revolving
credit lines. As of April 5, 2009, we had $42.1 million
of borrowing availability under our domestic credit facility (this amount
would have been $49.4 million with the receipt of a landlord lien waiver
that we expect to receive for one inventory location) and approximately
$23 million of borrowing availability under our international credit
facilities. These facilities bear interest at rates ranging
from 1% to 9% and represent a possible source of funds to retire a portion
of any debt that cannot be refinanced or repaid via cash on hand and cash
generation. Subsequent to the end of the first quarter, certain
of our European subsidiaries entered into an amended and restated credit
agreement which increased the maximum borrowing capacity thereunder from
10 million Euros to 32 million Euros (an increase of 22 million Euros, or
the equivalent of approximately
$30 million).
|
If we are
unable to refinance our 10.375% Senior Notes prior to February 1, 2010 on terms
favorable to us, and we are required to use all or a significant portion of our
cash on hand and credit facilities or sell assets to repay the notes, our
liquidity position may not provide sufficient funds to meet our current
commitments and other cash requirements following such a repayment
approach. In that case, we will have to consider other options to
meet our ongoing debt service obligations and other liquidity needs, such as
selling additional assets or using cash that otherwise would have been used for
other business purposes.
If we are
successful in refinancing our 10.375% Senior Notes on terms we consider
acceptably advantageous, we believe that our liquidity position will provide
sufficient funds to meet our current commitments and other cash requirements for
the foreseeable future.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our
discussion below in this Item 3 is based upon the more detailed discussions of
our market risk and related matters included in our Annual Report on Form 10-K
for the fiscal year ended December 28, 2008, under Item 7A of that Form
10-K. Our discussion here focuses on the quarter ended April 5, 2009,
and any material changes from (or other important intervening developments since
the time of) the information discussed in that Form 10-K. This
discussion should be read in conjunction with that Form 10-K for more detailed
and background information.
At April
5, 2009, we recognized a $7.0 million decrease in our foreign currency
translation adjustment account compared to December 28, 2008, primarily because
of the strengthening of the U.S dollar against the Euro, British Pound Sterling
and the Australian Dollar.
Sensitivity Analysis. For
purposes of specific risk analysis, we use sensitivity analysis to measure the
impact that market risk may have on the fair values of our market sensitive
instruments.
To
perform sensitivity analysis, we assess the risk of loss in fair values
associated with the impact of hypothetical changes in interest rates and foreign
currency exchange rates on market sensitive instruments. The market value of
instruments affected by interest rate and foreign currency exchange rate risk is
computed based on the present value of future cash flows as impacted by the
changes in the rates attributable to the market risk being measured. The
discount rates used for the present value computations were selected based on
market interest and foreign currency exchange rates in effect at April 5, 2009.
The values that result from these computations are compared with the market
values of these financial instruments at April 5, 2009. The differences in this
comparison are the hypothetical gains or losses associated with each type of
risk.
As of
April 5, 2009, based on a hypothetical immediate 150 basis point increase in
interest rates, with all other variables held constant, the market value of our
fixed rate long-term debt would be impacted by a net decrease of approximately
$6.4 million. Conversely, a 150 basis point decrease in interest rates would
result in a net increase in the market value of our fixed rate long-term debt of
approximately $6.6 million.
As of
April 5, 2009, a 10% decrease or increase in the levels of foreign currency
exchange rates against the U.S. dollar, with all other variables held constant,
would result in a decrease in the fair value of our financial instruments of
$8.9 million or an increase in the fair value of our financial instruments of
$7.2 million, respectively. As the impact of offsetting changes in the fair
market value of our net foreign investments is not included in the sensitivity
model, these results are not indicative of our actual exposure to foreign
currency exchange risk.
ITEM
4. CONTROLS AND PROCEDURES
As of the
end of the period covered by this Quarterly Report on Form 10-Q, an evaluation
was performed under the supervision and with the participation of our
management, including our President and Chief Executive Officer and our Senior
Vice President and Chief Financial Officer, of the effectiveness of the design
and operation of our disclosure controls and procedures, as defined in Rule
13a-15(e) under the Securities Exchange Act of 1934 (the “Act”), pursuant to
Rule 13a-14(c) under the Act. Based on that evaluation, our President
and Chief Executive Officer and our Senior Vice President and Chief Financial
Officer concluded that our disclosure controls and procedures were effective as
of the end of the period covered by this Quarterly Report.
There
were no changes in our internal control over financial reporting that occurred
during our last fiscal quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
PART II -
OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
We are
subject to various legal proceedings in the ordinary course of business, none of
which is required to be disclosed under this Item 1.
ITEM 1A.
RISK FACTORS
There are
no material changes in risk factors in the first quarter of 2009. For
a discussion of risk factors, see Part I, Item 1A, “Risk Factors,” in our
Annual Report on Form 10-K for fiscal year 2008.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
None
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM
5. OTHER INFORMATION
Supplemental Information
on Adoption of New Accounting Standards
We are
including this discussion to provide additional context for understanding the
impact on our financial statements for prior years of our adoption in fiscal
year 2009 of SFAS No. 160, “Noncontrolling Interests in Consolidated Financial
Statements – an amendment to ARB No. 51” (“SFAS No. 160"). As
described in Note 11 (“Recently Issued Accounting Pronouncements”) to our
consolidated condensed financial statements, SFAS No. 160 establishes standards
of accounting and reporting of noncontrolling interests in subsidiaries,
so-called “minority interest”, in consolidated financial statements, provides
guidance on accounting for changes in the parent’s ownership interest in a
subsidiary and establishes standards of accounting of the deconsolidation of a
subsidiary due to the loss of control. SFAS No. 160 requires an
entity to present minority interests as a component of equity, and it also
requires the separate presentation of the amount of net income and consolidated
comprehensive income attributable to the parent, on the one hand, from the
amount attributable to the minority interest, on the other hand, on the face of
the consolidated financial statements.
Our
adoption of SFAS No. 160 resulted in a reclassification of $7.9 million of
minority interest to equity as of December 28, 2008 and April 5, 2009, and the
adjustment of our consolidated condensed statements of operations for those
periods to reflect separately the income from the minority interest as a
component of net income. The impact of the adoption of SFAS No. 160
on the quarters ended March 30, 2008 and April 5, 2009 is already reflected in
our consolidated condensed financial statements in Part 1, Item 1 of this
report. The following table shows the impact of that adoption on line
items included in our consolidated condensed balances sheets and consolidated
statements of operations for prior years.
|
|
As of and for the Year
Ended
|
|
|
|
01/02/05
|
|
|
01/01/06
|
|
|
12/31/06
|
|
|
12/30/07
|
|
|
12/28/08
|
|
|
|
(Dollars
in thousands)
|
|
Income
(Loss) from Continuing Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
historically presented
|
|
$ |
5,936 |
|
|
$ |
15,282 |
|
|
$ |
35,807 |
|
|
$ |
57,848 |
|
|
$ |
(35,719 |
) |
Impact
of SFAS No. 160
|
|
|
450 |
|
|
|
651 |
|
|
|
428 |
|
|
|
1,124 |
|
|
|
1,206 |
|
Adjusted
for impact of SFAS No. 160
|
|
$ |
6,386 |
|
|
$ |
15,933 |
|
|
$ |
36,235 |
|
|
$ |
58,972 |
|
|
$ |
(34,513 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income (Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
historically presented
|
|
$ |
(55,402 |
) |
|
$ |
1,240 |
|
|
$ |
9,992 |
|
|
$ |
(10,812 |
) |
|
$ |
(40,873 |
) |
Impact
of SFAS No. 160
|
|
|
450 |
|
|
|
651 |
|
|
|
428 |
|
|
|
1,124 |
|
|
|
1,206 |
|
Adjusted
for impact of SFAS No. 160
|
|
$ |
(54,952 |
) |
|
$ |
1,891 |
|
|
$ |
10,420 |
|
|
$ |
(9,688 |
) |
|
$ |
(39,667 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
historically presented
|
|
$ |
194,178 |
|
|
$ |
172,076 |
|
|
$ |
274,394 |
|
|
$ |
294,142 |
|
|
$ |
209,496 |
|
Impact
of SFAS No. 160
|
|
|
4,131 |
|
|
|
4,409 |
|
|
|
5,506 |
|
|
|
6,974 |
|
|
|
7,941 |
|
Adjusted
for impact of SFAS No. 160
|
|
$ |
198,309 |
|
|
$ |
176,485 |
|
|
$ |
279,900 |
|
|
$ |
301,116 |
|
|
$ |
217,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
addition to the above adjustments, our adoption of SFAS No. 160 requires the
inclusion of the following two new line items in our consolidated statements of
operations for prior years:
|
|
For the Year Ended
|
|
|
|
01/02/05
|
|
|
01/01/06
|
|
|
12/31/06
|
|
|
12/30/07
|
|
|
12/28/08
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income attributable to noncontrolling interest in
subsidiary
|
|
$ |
(450 |
) |
|
$ |
(651 |
) |
|
$ |
(428 |
) |
|
$ |
(1,124 |
) |
|
$ |
(1,206 |
) |
Net
income (loss) attributable to Interface,
Inc.
|
|
$ |
(55,402 |
) |
|
$ |
1,240 |
|
|
$ |
9,992 |
|
|
$ |
(10,812 |
) |
|
$ |
(40,873 |
) |
As
described in Note 3 (“Earnings (Loss) Per Share”) and Note 11 (“Recently Issued
Accounting Pronouncements”) to our consolidated condensed financial statements
in Part 1, Item 1 of this report, we also adopted, in fiscal year 2009, FSP
EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment
Transactions are Participating Securities” (“FSP EITF 03-6-1”), which requires
us to include all unvested stock awards that contain non-forfeitable rights to
dividends or dividend equivalents, whether paid or unpaid, in the number of
shares outstanding for EPS calculations when such inclusion would be
dilutive. FSP EITF No. 03-6-1 also requires additional
disclosure of earnings (loss) per share for common stock and unvested
share-based payment awards, separately disclosing distributed earnings and
undistributed earnings with respect to such common stock and unvested
share-based payment awards.
The
impact of our adoption of FSP EITF 03-6-1 on the quarters ended March 30, 2008
and April 5, 2009 is already reflected in our consolidated condensed financial
statements in Part 1, Item 1 of this report. The following table
shows the impact, if any, of that adoption on basic and diluted earnings (loss)
per share (and on the number of shares used in calculating such line items) in
prior years:
|
|
As of and for the Year
Ended
|
|
|
|
01/02/05
|
|
|
01/01/06
|
|
|
12/31/06
|
|
|
12/30/07
|
|
|
12/28/08
|
|
|
|
|
|
Shares
in Basic Earnings (Loss) Per Share Calculations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historically
used
|
|
|
50,682 |
|
|
|
51,551 |
|
|
|
54,087 |
|
|
|
60,573 |
|
|
|
61,439 |
|
Impact
of FSP EITF
03-6-1
|
|
|
1,138 |
|
|
|
1,471 |
|
|
|
1,311 |
|
|
|
852 |
|
|
|
-- |
|
Adjusted
for impact of FSP EITF 03-6-1
|
|
|
51,820 |
|
|
|
53,022 |
|
|
|
55,398 |
|
|
|
61,425 |
|
|
|
61,439 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
in Diluted Earnings (Loss) Per Share Calculations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historically
used
|
|
|
52,171 |
|
|
|
52,895 |
|
|
|
55,713 |
|
|
|
61,520 |
|
|
|
61,439 |
|
Impact
of FSP EITF
03-6-1
|
|
|
735 |
|
|
|
1,060 |
|
|
|
661 |
|
|
|
418 |
|
|
|
-- |
|
Adjusted
for impact of FSP EITF 03-6-1
|
|
|
52,906 |
|
|
|
53,955 |
|
|
|
56,374 |
|
|
|
61,938 |
|
|
|
61,439 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
Earnings (Loss) Per Share from Continuing Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
historically
presented
|
|
$ |
0.12 |
|
|
$ |
0.30 |
|
|
$ |
0.66 |
|
|
$ |
0.96 |
|
|
$ |
(0.58 |
) |
Impact
of FSP EITF
03-6-1
|
|
|
(0.01 |
) |
|
|
(0.01 |
) |
|
|
(0.01 |
) |
|
|
(0.02 |
) |
|
|
-- |
|
Adjusted
for impact of FSP EITF 03-6-1
|
|
$ |
0.11 |
|
|
$ |
0.29 |
|
|
$ |
0.65 |
|
|
$ |
0.94 |
|
|
$ |
(0.58 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
Earnings (Loss) Per Share from Continuing Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
historically
presented
|
|
$ |
0.11 |
|
|
$ |
0.29 |
|
|
$ |
0.64 |
|
|
$ |
0.94 |
|
|
$ |
(0.58 |
) |
Impact
of FSP EITF
03-6-1
|
|
|
-- |
|
|
|
(0.01 |
) |
|
|
-- |
|
|
|
(0.01 |
) |
|
|
-- |
|
Adjusted
for impact of FSP EITF 03-6-1
|
|
$ |
0.11 |
|
|
$ |
0.28 |
|
|
$ |
0.64 |
|
|
$ |
0.93 |
|
|
$ |
(0.58 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
Earnings (Loss) Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
historically
presented
|
|
$ |
(1.09 |
) |
|
$ |
0.02 |
|
|
$ |
0.18 |
|
|
$ |
(0.18 |
) |
|
$ |
(0.67 |
) |
Impact
of FSP EITF
03-6-1
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
Adjusted
for impact of FSP EITF 03-6-1
|
|
$ |
(1.09 |
) |
|
$ |
0.02 |
|
|
$ |
0.18 |
|
|
$ |
(0.18 |
) |
|
$ |
(0.67 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
Earnings (Loss) Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
historically
presented
|
|
$ |
(1.06 |
) |
|
$ |
0.02 |
|
|
$ |
0.18 |
|
|
$ |
(0.18 |
) |
|
$ |
(0.67 |
) |
Impact
of FSP EITF
03-6-1
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
Adjusted
for impact of FSP EITF 03-6-1
|
|
$ |
(1.06 |
) |
|
$ |
0.02 |
|
|
$ |
0.18 |
|
|
$ |
(0.18 |
) |
|
$ |
(0.67 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amendment of Domestic
Revolving Credit Facility
On May 14, 2009, the Company entered
into a Second Amendment (the “Second Amendment”) to the Sixth Amended and
Restated Credit Agreement, among the Company, InterfaceFLOR, LLC (an indirect
subsidiary of the Company), the lenders listed therein, and Wachovia Bank,
National Association. Pursuant to the Second Amendment, which is an
amendment to the Company’s primary revolving credit facility in the United
States (the “Facility”):
·
|
Subject
to certain terms and conditions, we are now permitted under the Facility
to incur additional indebtedness represented by a series of senior notes
in an aggregate amount up to $175 million that (a) are issued no later
than February 1, 2010, (b) have a maturity no earlier than March 13, 2013,
and (c) meet certain other substantive requirements. Any such
additional senior notes may be secured or unsecured obligations, and, if
secured, such liens must be junior to the liens securing the
Facility. The net proceeds from any such additional senior
notes must first be used to repay, repurchase or otherwise discharge our
existing 10.375% Senior Notes due February 1, 2010, and must be deposited
into a specified bank account maintained at the Collateral Agent for the
Facility pending such application of the net
proceeds.
|
·
|
The
applicable interest rates for loans have been
increased. Interest on base rate loans is now charged at
varying rates computed by applying a margin ranging from 1.75% to 2.50%
(increased from the range of 0.00% to 0.25%) over the applicable base
interest rate (which is now defined as the greatest of the prime rate, a
specified federal funds rate plus 0.50%, or the one-month LIBOR rate),
depending on our average excess borrowing availability during the most
recently completed fiscal quarter. Interest on LIBOR-based
loans is now charged at varying rates computed by applying a margin
ranging from 3.25% to 4.00% (increased from the range of 1.00% to 2.00%)
over the applicable LIBOR rate (but now in no event less than the
three-month LIBOR rate), depending on our average excess borrowing
availability during the most recently completed fiscal
quarter.
|
·
|
The
unused line fee on the Facility was increased to 0.75% (up from the prior
range of 0.25% to 0.375% depending on our average excess borrowing
availability during the most recently completed fiscal
quarter).
|
·
|
The
minimum fixed charge coverage ratio set forth in the Facility’s financial
covenant (which becomes effective in the event that our excess borrowing
availability falls below $20 million) was changed from “1.00 to 1.00” to
“1.10 to 1.00”.
|
·
|
The
borrowing base was amended to remove equipment and to remove our option to
add real estate to the borrowing
base.
|
·
|
The
rights of the parties and procedures with respect to defaulting lenders
were modified and clarified in several
respects.
|
·
|
The
mortgage requirements with respect to owned real estate properties were
clarified.
|
The foregoing description is qualified
in its entirety by reference to the Second Amendment, a copy of which is filed
herewith as Exhibit 10.2.
ITEM
6. EXHIBITS
The
following exhibits are filed with this report:
EXHIBIT
NUMBER
|
|
DESCRIPTION OF EXHIBIT
|
|
|
|
10.1
|
|
Credit
Agreement, executed on April 24, 2009, among Interface Europe B.V. (and
certain of its subsidiaries) and ABN AMRO Bank N.V. (included as Exhibit
99.1 to the Company’s Current Report on Form 8-K dated April 24, 2009 and
filed on April 29, 2009, previously filed with the Commission and
incorporated herein by reference).
|
10.2
|
|
Second
Amendment to Sixth Amended and Restated Credit Agreement, dated as of May
14, 2009, among the Company, InterfaceFLOR, LLC (an indirect subsidiary of
the Company), the lenders listed therein, and Wachovia Bank, National
Association. |
31.1
|
|
Section
302 Certification of Chief Executive Officer.
|
31.2
|
|
Section
302 Certification of Chief Financial Officer.
|
32.1
|
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. §
1350.
|
32.2
|
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. §
1350.
|
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, 2009
|
By:
|
/s/ Patrick
C.
Lynch
|
|
|
Patrick
C. Lynch
|
|
|
Senior
Vice President
|
|
|
(Principal
Financial Officer)
|
EXHIBIT
INDEX
EXHIBIT
NUMBER
|
|
DESCRIPTION OF EXHIBIT
|
|
|
|
10.1
|
|
Credit
Agreement, executed on April 24, 2009, among Interface Europe B.V. (and
certain of its subsidiaries) and ABN AMRO Bank N.V. (included as Exhibit
99.1 to the Company’s Current Report on Form 8-K dated April 24, 2009 and
filed on April 29, 2009, previously filed with the Commission and
incorporated herein by reference).
|
10.2 |
|
Second
Amendment to Sixth Amended and Restated Credit Agreement, dated as of May
14, 2009, among the Company, InterfaceFLOR, LLC (an indirect subsidiary of
the Company), the lenders listed therein, and Wachovia Bank, National
Association. |
31.1
|
|
Section
302 Certification of Chief Executive Officer.
|
31.2
|
|
Section
302 Certification of Chief Financial Officer.
|
32.1
|
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. §
1350.
|
32.2
|
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. §
1350.
|