Atlanta, GA, October 25, 2006--Interface, Inc. in the third quarter reported sales that increased 18.4% to $270.6 million from $228.5 million in the third quarter of 2005.
Operating income for the third quarter of 2006 was $25.0 million, an increase of 27.6% over operating income of $19.6 million in the same period a year ago.
Net income for the 2006 third quarter rose 77.8% to $9.1 million, or $0.17 per diluted share, versus net income of $5.1 million, or $0.10 per diluted share, in the 2005 third quarter.
"The strong performance we have seen throughout 2006 accelerated in the third quarter," said Daniel T. Hendrix, president and chief executive officer. "Our sales growth was driven by solid performance across all of our geographic regions, as the corporate office market recovery continued, and our modular carpet and broadloom businesses gained additional share in the marketplace. Even more encouraging was the outstanding order growth we achieved during the quarter, as orders increased 20% over year-ago levels to their highest point since 2000. This is a testament to the strength of our markets, the quality of our products and our sales force, and the continually growing demand for modular carpet in the marketplace."
Mr. Hendrix continued, "Our modular carpet business once again led the way during the quarter, showing strong sales growth as carpet tile continues to gain acceptance across all market segments. We also saw excellent performance within our Bentley Prince Street business, as sales grew 16% and profitability more than doubled from year ago levels. We are very pleased with the continued significant improvements we've made in this business as we execute on our strategy. Within our U.S. fabrics business, sales were up 6% versus year-ago levels. In addition, the actions we are taking to improve manufacturing efficiencies have begun to take hold, and its operating loss narrowed considerably on a sequential basis."
Patrick C. Lynch, vice president and chief financial officer, commented, "The 2006 third quarter represented another strong quarter of financial performance. On a GAAP basis, we were able to convert an 11.0% increase in sales into a healthy 21.9% increase in operating income. Although our selling, general and administrative expenses increased in dollar terms to support our higher sales levels during the quarter, these expenses declined as a percentage of sales from 23.0% a year ago to 22.3% in the 2006 third quarter. Overall, we believe we are in excellent financial position to continue solid execution of our organic growth strategy."
Sales for the first nine months of 2006 were $779.9 million, an increase of 7.6% over sales of $725.2 million in the first nine months of 2005. Excluding results from the company's European fabrics business in both periods, sales for the 2006 nine-month period were $762.6 million compared with sales of $677.1 million a year ago, an increase of 12.6%. Operating income for the first nine months of 2006 was $42.8 million, versus operating income of $58.9 million in the first nine months of 2005. Excluding the results of the company's European fabrics business from both periods and one-time items during the 2006 period (the one-time items in 2006 were a charge for impairment of goodwill of $20.7 million, restructuring charges of $3.3 million, and the loss of $1.7 million on the previously mentioned European fabrics business disposal), operating income in the 2006 nine-month period was $67.4 million, or 8.8% of sales, versus $56.5 million, or 8.3% of sales in the comparable period last year.
For the 2006 nine-month period, the company reported a net loss of $2.1 million, or $0.04 per diluted share, versus a net loss of $4.5 million, or $0.08 per diluted share in the 2005 nine-month period. Included in the Company's results for the first nine months of 2006 are an impairment of goodwill of $20.7 million (or $0.39 per diluted share after tax), restructuring charges of $3.3 million (or $0.04 per diluted share after tax), a loss on the disposal of the European fabrics business of $1.7 million (or $0.03 per diluted share after tax), and other expenses of $0.9 million (or $0.01 per diluted share after tax) for premiums paid in connection with the company's repurchase of $38.5 million of its 7.3% Senior Notes. The company's results for the first nine months of 2005 included a loss from discontinued operations of $14.7 million (or $0.28 per diluted share after tax), a loss on disposal of discontinued operations of $1.9 million (or $0.03 per diluted share after tax), and a tax charge related to the repatriation of foreign earnings of approximately $1.6 million (or $0.03 per diluted share).
Mr. Hendrix concluded, "Based on our strong order growth, we remain very optimistic about our fourth quarter. The recovery we've seen to date in the office market appears to be continuing, and the ongoing success of our market segmentation strategy is driving solid demand for our products in other areas of the marketplace. We remain well positioned as the market leader to continue taking advantage of emerging sales opportunities and executing our plans for growth."
