Atlanta, GA, July 25, 2006—Interface in the second quarter reported net income of $5.9 million compared with a net loss of $7.4 million in the second quarter of 2005. Earnings were $0.11 a share in the second quarter, compared with a loss per share of $0.14 in the same period of 2005.
Sales in the quarter were up 5% to $258.7 million from $246.5 million in the year ago period.
"We are pleased with our results for the second quarter, as we successfully executed against our goals, and the improving trends we are seeing in the industry continue to validate our strategy," said Daniel T. Hendrix, president and CEO. "Overall sales increased despite challenging year-over-year comparables, and order activity further strengthened, with orders up 13% to $276 million over last year's second quarter. This growth was realized across all of our geographic regions due to the continued outstanding performance of our modular carpet business, driven by the ongoing recovery within the corporate office market and the success of our market segmentation strategy. We also are particularly pleased with the performance of our Bentley Prince Street business, which posted strong growth for the quarter."
Hendrix continued, "Modular carpet continues to gain acceptance around the world and Interface is leading the industry and shaping the growth of this market. Worldwide modular sales increased 14% during the second quarter, leading to record operating income for this business segment. We also continued to execute on our strategy in our Bentley Prince Street business, as sales increased 15% and profitability increased substantially. The sole disappointment this quarter was our fabrics business, which continues to lag behind our expectations. During the quarter, disruptions in yarn supply, manufacturing inefficiencies resulting from the shut-down of our East Douglas plant, and higher raw material costs combined to have a significant negative impact on our results in this business. We are addressing these issues within our fabrics business, and expect profitability to improve in the second half of the year."
Patrick C. Lynch, vice president and chief financial officer of Interface, commented, "Driven by our increased sales volume, we saw improved results for the business. Selling, general and administrative expenses increased in the second quarter, reflecting the planned investments we are making in our residential flooring business, and in expanding our sales force and enhancing our marketing programs. We believe we're already benefiting from these investments in the form of increased orders. As a percentage of sales, SG&A expenses in the 2006 second quarter were level with the year ago period at 22.6%. During the second quarter, we also took steps to enhance our financial strength, as we repurchased $23 million in bonds during the period."
For the first six months of 2006, sales were $509.3 million, compared with $481.3 million for the same period a year ago, an increase of 5.8%. The net loss for the first six months of 2006 was $11.2 million, or $0.21 per share, compared with a net loss of $9.6 million, or $0.18 per diluted share, for the 2005 first half.
Hendrix concluded, "We are excited about our future, and particularly the third quarter, based on the current order activity, our backlog, and the trends we are seeing in the marketplace. Most of our businesses are growing in line with our goals, and our primary focus in the short term is to improve the profitability of our fabrics business. Over the longer term, we will continue to leverage the benefit of improving market conditions, the rebound in the corporate office market, and our segmentation strategy to exploit the growth of the worldwide modular carpet market, and focus on paying down debt. At the same time, we also will continue to improve our financial position to support our organic growth initiatives."
