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 September 28, 1997April 5, 1998
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 X/X/ No / /
Shares outstanding of each of the registrant's classes of common
stock at November 7, 1997:May 11, 1998:
Class Number of Shares
----- ----------------
Class A Common Stock, $.10 par value per share 21,378,39723,262,196
Class B Common Stock, $.10 par value per share 2,752,3312,840,440
1
INTERFACE, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Balance Sheets - SeptemberApril 5, 1998 and December 28, 1997 and 3
December 29, 1996
Statements of Income - Three Months Ended 4
April 5, 1998 and 4
NineMarch 30, 1997
Statements of Comprehensive Income - Three Months Ended September 28,4
April 5, 1998 and March 30, 1997 and
September 29, 1996
Statements of Cash Flows - NineThree Months 5
Ended September 28,April 5, 1998 and March 30, 1997 and September 29,
1996
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
12
Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 1413
Item 2. Changes in Securities 14and Use of Proceeds 13
Item 3. Defaults Upon Senior Securities 1413
Item 4. Submission of Matters to a Vote of 14
Security
Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
____________________________________
THIS FORM 10-Q CONTAINS STATEMENTS WHICH MAY CONSTITUTE "FORWARD-
LOOKING"FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED BY THE PRIVATE SECURITIESSECURITIES\
LITIGATION REFORM ACT OF 1995. ANY SUCH FORWARD-LOOKING STATEMENTS
INVOLVE RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING
STATEMENTS, INCLUDING THE RISKS AND UNCERTAINTIES DISCUSSED IN THE
SAFE HARBOR COMPLIANCE STATEMENT FOR FORWARD-LOOKING STATEMENTS INCLUDED
AS EXHIBIT 99.1 TO THE COMPANY'S QUARTERLYANNUAL REPORT ON FORM 10-Q10-K FOR ITSTHE
FISCAL QUARTERYEAR ENDED MARCH 30,DECEMBER 28, 1997,
UNDER THE CAPTION "CERTAIN FACTORS AFFECTING FORWARD-LOOKING
STATEMENTS" IN ITEM 5, WHICH DISCUSSION IS INCORPORATED
HEREIN BY THIS REFERENCE.
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
ASSETS SEPTEMBERAPRIL 5, DECEMBER 28, DECEMBER 29,
- ------ 1998 1997
1996
---- ------------- ------------
CURRENT ASSETS:
Cash and Cash Equivalents $ 9,6169,352 $ 8,76210,212
Accounts Receivable 190,592 167,817184,719 177,977
Inventories 165,655 146,678191,646 157,630
Deferred Tax Asset 7,100 7,0575,176 5,156
Prepaid Expenses 28,241 22,98629,885 24,265
--------- ---------
TOTAL CURRENT ASSETS 401,204 353,300420,778 375,240
PROPERTY AND EQUIPMENT, less
accumulated depreciation 224,015 208,791239,912 228,781
EXCESS OF COST OVER NET ASSETS ACQUIRED 279,475 249,070288,425 278,597
OTHER ASSETS 46,524 51,385
--------- ---------
$ 951,218 $ 862,546
========= =========53,114 46,945
---------- --------
$1,002,229 $929,563
========== ========
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
- -------------------------------------------
CURRENT LIABILITIES:
Notes Payable $ 17,69319,922 $ 14,91822,264
Accounts Payable 78,807 74,96084,553 79,279
Accrued Expenses 90,976 70,91982,877 87,543
Current Maturities of Long-Term Debt 1,697 2,9192,950 2,751
--------- ---------
TOTAL CURRENT LIABILITIES 189,173 163,716190,302 191,837
LONG-TERM DEBT, less current maturities 301,379 254,353261,261 264,499
SENIOR SUBORDINATED NOTES 125,000 125,000
DEFERRED INCOME TAXES 26,119 23,48431,391 28,873
--------- ---------
TOTAL LIABILITIES 641,671 566,553607,954 610,209
--------- ---------
Minority Interest 3,125 3,125
Redeemable Preferred Stock - 19,7502,989 2,989
Common Stock 2,762 2,5362,961 2,776
Additional Paid-In Capital 160,346 124,557233,395 161,584
Retained Earnings 187,027 166,828206,369 197,906
Accumulated Other Comprehensive Income - Foreign Currency
Translation Adjustment (25,967) (3,057)(33,693) (28,155)
Treasury Stock, 3,600
Class A Shares, at Cost (17,746) (17,746)
--------- ---------
$1,002,229 $ 951,218 $ 862,546
=========929,563
========== =========
See accompanying notes to consolidated condensed financial statements.
3
INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
NINE MONTHS ENDED
------------------ -----------------
SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29,--------------------------
APRIL 5, MARCH 30,
1998 1997
1996 1997 1996
---- ---- ---- ------------ ---------
Net Sales $297,352 $275,041 $826,443 $717,546$318,952 $257,345
Cost of Sales 196,699 187,581 553,473 492,509211,191 174,432
-------- -------- -------- --------v
Gross Profit on Sales 100,653 87,460 272,970 225,037107,761 82,913
Selling, General and Administrative Expenses 74,056 65,910 203,867 170,887
-------- --------80,623 62,956
-------- --------
Operating Income 26,597 21,550 69,103 54,15027,138 19,957
Other (Expense) Income - Net (9,234) (9,105) (28,393) (25,683)
-------- --------(10,418) (9,543)
-------- --------
Income before Taxes on Income 17,363 12,445 40,710 28,46716,720 10,414
Taxes on Income 6,852 4,864 15,886 11,153
-------- --------6,437 4,061
-------- --------
Net Income 10,511 7,581 24,824 17,314
Less: Preferred Dividends - 433 - 1,299
-------- -------- -------- --------
Net Income Applicable to Common Shareholders $ 10,51110,283 $ 7,148 $ 24,824 $ 16,0156,353
======== ========
Basic Earnings Per Share $0.42 $0.28
======== ========
PrimaryDiluted Earnings Per Common Share $ 0.44 $ 0.34 $ 1.06 $ 0.82$0.41 $0.27
======== ========
Average Shares Outstanding -- Basic 24,279 22,584
======== ========
Weighted Average Common Shares Outstanding 24,015 20,935 23,408 19,604
======== =======-- Diluted 25,389 23,494
======== ========
See accompanying notes to consolidated condensed financial statements.
INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED
--------------------------
APRIL 5, MARCH 30,
1998 1997
Net Income $10,283 $6,353
Other Comprehensive Income, Net of Tax
Foreign Currency Translation Adjustment (5,538) (10,760)
------- ---------
Comprehensive Income $ 4,745 $ (4,407)
======= =========
See accompanying notes to consolidated condensed financial statements.
4
INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINETHREE MONTHS ENDED
-----------------
SEPTEMBER 28, SEPTEMBER 29,-----------------------------
APRIL 5, MARCH 30,
1998 1997
1996
---- ------------ ---------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 24,824(8,415) $ 17,314
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 26,263 25,041
Deferred income taxes - -
Cash provided by (used for):
Accounts receivable (21,089) (20,461)
Inventories (16,409) (9,671)
Prepaid and other (6,309) (6,112)
Accounts payable and accrued expenses 18,052 17,769
-------- --------
25,332 23,880(1,883)
-------- --------
INVESTING ACTIVITIES:
Capital expenditures (33,963) (27,795)(11,307) (11,878)
Acquisitions of businesses (34,647) (46,912)(40,853) -
Other (7,601) (3,354)(4,565) (3,257)
-------- --------
(76,211) (78,061)(56,725) (15,135)
-------- --------
FINANCING ACTIVITIES:
Net borrowing (reduction) of long-term debt 50,546 49,638(2,312) 4,455
Issuance of common stock 5,513 88168,464 3,869
Dividends paid (4,626) (4,839)(1,820) -
-------- --------
51,433 45,68064,332 8,324
-------- --------
Net cash provided by (used for) operating,
investing and financing activities 554 (8,501)(808) (8,694)
Effect of exchange rate changes on cash 300 (95)(52) (68)
-------- --------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) during the period 854 (8,596)(860) (8,762)
Balance at beginning of period 10,212 8,762 8,750
-------- --------
Balance at end of period $ 9,6169,352 $ 154-
======== ========
See accompanying notes to consolidated condensed financial statements.
5
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 notes to the
Company's year-end financial statements contained in its Annual
Report to Shareholders for the fiscal year ended December 29,
1996,28,
1997, as filed with the Commission.
The financial information included in this report has been
prepared by the Company, without audit, and should not be relied
upon to the same extent as audited financial statements. 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.
NOTE 2 - INVENTORIES
Inventories are summarized as follows:
SEPTEMBERAPRIL 5, DECEMBER 28,
DECEMBER 29,1998 1997 1996
---- ----
Finished Goods $ 92,518 $ 81,034
Work-in-Process 33,731 30,464$115,266 $91,016
Work in Process 34,022 29,094
Raw Materials 39,406 35,18042,358 37,520
-------- --------
$165,655 $146,678$191,646 $157,630
======== ========
NOTE 3 - BUSINESS ACQUISITIONS DuringAND DIVESTITURES
On December 30, 1997, the third quarterCompany completed the acquisition of
the European carpet businesses of Readicut International plc
("Readicut"), for an estimated $50 million, subject to final
adjustments. After the planned divestiture of certain assets of
Readicut, including its Network Flooring dealer division and
Joseph, Hamilton & Seaton Ltd., the Company's final investment
for the retained Readicut businesses are expected to be less than
$15 million. The retained businesses will include Firth Carpets
Ltd., based in Brighouse, West Yorkshire, a leading manufacturer
of high quality woven and tufted carpet primarily for the
contract markets; and a 40% interest in Vebe Floorcoverings BV,
located in the Netherlands, a leading manufacturer of needle
punch carpet.
In December 1997, the Company sold certain assets related to
the commercial manufacture of zinc diacrylate, a chemical
compound used in the production of golf balls, for $14.1 million
in cash. An immaterial gain was realized on the sale. The
Company generated 1997 sales of $7.9 million and operating income
of $1.1 million related to the manufacture of this chemical
compound.
During 1997, the Company acquired 100% of the outstanding
capital stock of Camborne Holdings, Ltd., a
manufacturer of interior fabrics based in West Yorkshire, U.K.,
and Facilities Resource Group, Inc., a provider of furniture
installation and related services based in Chicago, Illinois. As
consideration, the Company issued 102,562 shares of Class A
Common Stock, 127,806 shares of Class B Common Stock and paid
approximately $23 million in cash. Both of the acquisitions were
accounted for as purchases; accordingly, the results of
operations for the acquired companies are included in the
Company's consolidated financial statements from the respective
dates of the acquisitions. The excess of the purchase price over
the fair value of the net assets acquired will be amortized over
25 years.
During the second quarter of 1997, the Company acquired 100%
of the outstanding capital stock of fourfive floorcovering contractors -- Floormart, Inc., based in Glendale, California;contractors: Canaan
Corporation, based in Hamden, Connecticut; Carpet Services
6 of Tampa,
Inc., based in Tampa, Florida; Facilities Resource Group, Inc., based in
Illinois; Floormart, Inc., based in California; and Carpet
Solutions Holdings Pty Ltd., based in Brisbane, Queensland, Australia.
These contractors are engaged primarily in the installation of
commercial floorcoverings. As consideration, the Company issued
155,022257,584 shares of Class A Common Stock valued at approximately
$2.1$3.5 million and paid $5.3$11.1 million in cash. (The Company also paid $6.2 million in the
second quarter of 1997 in connection with acquisitions completed
in prior periods.) All of the acquisitions weretransactions
have been accounted for as purchases;purchases, and accordingly, the
results of operations forof the acquired companies aresince their
acquisition dates have been included inwithin the Company's consolidated
financial statements from the respective dates of the
acquisitions. The excess of the purchase price over the fair
value of the net assets acquired will be amortized over 25 years.
During fiscal 1996, the Company acquired 100% of the
outstanding capital stock (and, in one case, all of the assets)
of fifteen floorcovering contractors -- Landry's Commercial
Flooring Co., Inc., based in Oregon; Reiser Associates, Inc.,
based in Texas; Earl W. Bentley Operating Co., Inc., based in
Oklahoma; Quaker City International, Inc., based in Pennsylvania;
Superior Holdings, Inc., based in Texas; Flooring Consultants,
Inc., based in Arizona; ParCom, Inc., based in Virginia; Congress
Flooring Corp., based in Massachusetts; Southern Contract
Systems, Inc., based in Georgia; B. Shehadi & Sons, Inc., based
in New Jersey; A & F Installations, Inc., based in New Jersey;
Lasher/White Carpet Co., Inc., based in New York; Oldtown Carpet
Center, Inc., based in North Carolina; Architectural Floors, a
division of Continental Office Furniture Corp., based in Ohio;
and Floor Concepts, Inc., based in Maryland. As consideration,
the Company issued 2,674,906 shares of Class A Common Stock
valued at approximately $19.3 million, $.8 million in 7% Notes
and paid $23.0 million in cash. All of the acquisitions were
accounted for as purchases; accordingly, the results of
operations for the acquired companies are included in the
Company's consolidated financial statements from the respective
dates of the acquisitions.statements. The excess of the purchase price over the
fair value of the net assets acquired was approximately $33.9$17.5
million and is being amortized over 25 years.
In February 1996,June 1997, the Company acquired 100% of the outstanding
common stock of Renovisions, Inc.Camborne Holdings, Ltd., a nationwide
installation services firm (basedmanufacturer of
interior fabrics based in Georgia) that has pioneered
a new method of carpet replacement,West Yorkshire, U.K. for approximately
$6$19.9 million, which was comprised of $17.1 million in cash ($4 million in February 1996 and
$2 million in February
1997).127,806 shares of Class B Common Stock valued at approximately
$2.8 million. The acquisitiontransaction was accounted for as a purchase and,
accordingly, thepurchase.
The results of operations for Renovisions areof Camborne have been included inwithin
the Company's consolidated financial statements fromsince the date of acquisition.acquisition date.
The excess of the purchase price over the fair value of netthe
assets acquired was approximately $4.3$16.8 million and is being amortized
over 2540 years.
In February 1996,6
NOTE 4 - CONCURRENT PUBLIC OFFERINGS
On April 2, 1998, the Company acquired allcompleted concurrent public
offerings of $150 million aggregate principal amount of 7.30%
Senior Notes due 2008 and 1.725 million shares of Class A Common
Stock. The Company intends to use the net proceeds of both
offerings of $212.7 million to reduce amounts outstanding common stock of C-Tec, Inc., a Michigan-based
producer of raised/access flooring systems,under
its senior credit facility, and for approximately
$8.8 million (comprised of $4.5 million in cashgeneral corporate purposes,
including working capital and $4.3 million
in 6% subordinated convertible notes). The acquisition was
accounted for as a purchase and, accordingly, the results of
operations for C-Tec are included in the Company's consolidated
financial statements from the date of acquisition. The excess of
the purchase price over the fair value of net assets acquired was
approximately $3.1 million, and is being amortized over 25 years.
7future acquisitions.
NOTE 45 - EARNINGS PER SHARE AND DIVIDENDS
EarningsIn March 1997, the FASB issued SFAS 128, "Earnings per Share."
The new Standard simplifies the computation of earnings per share
areand requires presentation of two amounts, basic and diluted
earnings per share. As required by the Standard, the Company has
retroactively restated earnings per share data for all periods
presented.
Basic earnings per share is computed by dividing net income
applicableavailable to common shareholders by the combined weighted average number
of shares of Class A and Class B Common Stock outstanding during
the particular reporting period. The earnings
computation does not give effect toShares issued or reacquired during the negligible dilutive
impact of outstanding stock options. The Series A Preferred
Stock issued in June 1993 and redeemed in December 1996 (see Note
5 below) is not considered to be a common stock equivalent
because atperiod have
been weighted for the date of issuance the stated rate of interest was
greater than 66 2/3%portion of the AAA bond rate. In computing primaryperiod that they were
outstanding. Basic earnings per share has been computed based
upon 24,279,000 shares and 22,584,000 shares outstanding for the
preferred stock dividendperiods ended April 5, 1998 and March 30, 1997, respectively.
Diluted earnings per share is calculated in a manner consistent
with that of 7%basic earnings per annum
reduces income applicableshare while giving effect to all
dilutive potential common shareholders.shares that were outstanding during the
period. Diluted earnings per share has been computed based upon
25,389,000 shares and 23,494,000 shares outstanding for the
periods ended April 5, 1998 and March 30, 1997, respectively.
For the purposes of computing earnings per common share and
dividends paid per common share, the Company is treating as treasury
stock (and therefore not outstanding) the shares that are owned
by a wholly-owned subsidiary (3,600,000 Class A shares recorded
at cost).
The following is a reconciliation from basic earnings per
share to diluted earnings per share for each of the periods
presented:
(In Thousands Except Per Share)
Average
Shares Earnings
Period Ended Net Income Outstanding Per Share
- --------------------------------------------------------------------------------------------------------------------
April 5, 1998 $ 10,283 24,279 $ .42
Effect of Dilution:
Options 1,110
- --------------------------------------------------------------------------------------------------------------------
Diluted $ 10,283 25,389 $ .41
=====================================================
- --------------------------------------------------------------------------------------------------------------------
March 30, 1997 $6,353 22,584 $ .28
Effect of Dilution:
Options 740
Convertible Debt 40 170
- --------------------------------------------------------------------------------------------------------------------
Diluted $6,393 23,494 $ .27
====================================================
NOTE 56 - REDEEMABLE PREFERRED STOCK
In December 1996,COMPREHENSIVE INCOME
Effective the first quarter of 1998, the Company notifiedhas adopted FAS
130, "Comprehensive Income". This statement has established the
holdersstandards for reporting and displaying comprehensive income and its
components (revenues, expenses, gains and losses) as part of its
Series A Preferred Stocka full set of
financial statements. This statement requires that all elements of
comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. Since
this statement applies only to the presentation of comprehensive income,
it intended to redeem up to $10
milliondoes not have any impact upon results of the approximately $19.7 million (face value) Series A
Preferred Stock then outstanding. As a result of this notice,
the Series A preferred shareholders, with one exception, instead
elected to convert their shares of Series A Preferred Stock into
an aggregate of approximately 1,360,000 shares of the Company's
Class A Common Stock. The shares of Series A Preferred Stock
owned by the non-converting shareholder were redeemed for
approximately $6,000.
8operations, financial
position, or cashflows.
7
NOTE 67 - SUPPLEMENTAL GUARANTOR FINANCIAL STATEMENTS The Guarantor
Subsidiaries, which consist of the Company's principal domestic
subsidiaries, are guarantors of the Company's 7.3% senior notes due 2008
and its 9.5% senior subordinated notes due 2005. The Supplemental
Guarantor Financial Statements are presented herein pursuant to
requirements of the Commission.
INTERFACE, INC. AND SUBSIDIARIES
NOTE 6
INTERFACE, INC. AND SUBSIDIARIES
NOTE 7 - SUPPLEMENTAL GUARANTOR FINANCIAL STATEMENTS
STATEMENT OF INCOME
FOR THE NINETHREE MONTHS ENDED SEPTEMBER 28, 1997
INTERFACE, CONSOLIDATION
NON- INC. AND
GUARANTOR GUARANTOR (PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTALS
------------ ------------ ----------- ------------- ------------
(IN THOUSANDS)
Net sales $658,258 $271,032 $ - $(102,847) $826,443
Cost of sales 468,904 187,416 - (102,847) 553,473
-------- -------- ------- --------- --------
Gross profit on sales 189,354 83,616 - - 272,970
Selling, general and 138,755 54,138 10,974 - 203,867
administrative expenses -------- -------- ------- --------- --------
Operating income 50,599 29,478 (10,974) - 69,103
Other expense (income)
Interest Expense 7,890 3,238 15,175 - 26,303
Other 2,040 3,324 (3,274) - 2,090
-------- -------- ------- --------- --------
Total other expense 9,930 6,562 11,901 - 28,393
-------- -------- ------- --------- --------
Income before taxes on income
and Equity in income of 40,669 22,916 (22,875) - 40,710
subsidiaries
Taxes on income 16,098 8,396 (8,608) - 15,886
Equity in income of - - 39,091 (39,091) -
subsidiaries -------- -------- ------- --------- --------
Net income applicable to $24,571 $14,520 $24,824 ($39,091) $ 24,824
common shareholders ======== ======== ======= ========= ========
9
BALANCE SHEET
SEPTEMBER 28, 1997
CONSOLIDATION
NON- INTERFACE, INC. AND
GUARANTOR GUARANTOR (PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTALS
------------ ------------ -------------- ------------- -----------
(IN THOUSANDS)
ASSETS
Current Assets:
Cash and cash equivalents $ 4,914 $ 4,702 $ - $ - $ 9,616
Accounts receivable 131,047 79,071 (19,526) - 190,592
Inventories 112,935 52,720 - - 165,655
Miscellaneous 9,431 16,122 9,788 - 35,341
---------- -------- --------- ------------ ---------
Total current assets 258,327 152,615 (9,738) - 401,204
Property and equipment,
less accumulated depreciation 152,474 64,863 6,678 - 224,015
Investment in subsidiaries 127,062 18,200 381,670 (526,932) -
Miscellaneous 130,567 14,730 406,121 (504,894) 46,524
Excess of cost over net assets 183,858 88,694 6,923 - 279,475
acquired ---------- -------- --------- ------------ ---------
$852,288 $339,102 $791,654 $(1,031,826) $951,218
========== ======== ========= =========== =========
LIABILITIES AND COMMON
SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 12,728 $ 4,965 $ - $ - $ 17,693
Accounts payable 42,758 32,741 3,308 - 78,807
Accrued expenses 57,103 34,495 (622) - 90,976
Current maturities of long- 1,697 - - - 1,697
term debt ---------- -------- --------- ------------ ---------
Total current liabilities 114,286 72,201 2,686 - 189,173
Long-term debt, less
current maturities 227,838 37,070 304,271 (267,800) 301,379
Senior subordinated notes - - 125,000 - 125,000
Deferred income taxes 12,862 937 12,320 - 26,119
Minority interests 3,125 - - - 3,125
---------- -------- --------- ------------ ---------
Total liabilities 358,111 110,208 444,277 (267,800) 644,796
Redeemable preferred stock 57,891 - - (57,891) -
Common stock 81,704 102,199 2,762 (183,903) 2,762
Additional paid-in capital 187,195 11,030 160,346 (198,225) 160,346
Retained earnings 174,064 132,197 187,027 (306,261) 187,027
Foreign currency translation (6,677) (16,532) (2,758) - (25,967)
adjust.
Treasury stock - - - (17,746) (17,746)
---------- -------- --------- ------------ ---------
$852,288 $339,102 $791,654 $(1,031,826) $951,218
========== ======== ========= ============ =========
10
STATEMENT OF CASH FLOW
FOR THE NINE MONTHS
ENDED SEPTEMBER 28, 1997APRIL 5, 1998
INTERFACE, CONSOLIDATION
NON- INC. AND
GUARANTOR GUARANTOR (PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTALS
------------ ------------ ----------- ----------- -------------
(IN THOUSANDS)
Net sales $241,245 $117,692 $ - $(39,985) $318,952
Cost of sales 174,647 76,529 - (39,985) 211,191
------- ------- --------- -------- --------
Gross profit on sales 66,598 41,163 - - 107,761
Selling, general and 50,050 24,907 5,666 - 80,623
administrative expenses ------- ------- --------- -------- --------
Operating income 16,548 16,256 (5,666) - 27,138
Other expense (income) 3,989 2,477 3,952 - 10,418
------- ------- --------- -------- --------
Income before taxes on income
and Equity in income of 12,559 13,779 (9,618) - 16,720
subsidiaries
Taxes on income 4,874 5,295 (3,732) - 6,437
Equity in income of - - 16,169 (16,169) -
subsidiaries ------- ------- --------- -------- --------
Net income applicable to $ 7,685 $ 8,484 $10,283 ($16,169) $ 10,283
common shareholders ======= ======= ========= ======== ========
8
BALANCE SHEET
APRIL 5, 1998
CONSOLIDATION
NON- INTERFACE, INC. AND
GUARANTOR GUARANTOR (PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTALS
(IN THOUSANDS)
ASSETS
Current Assets:
Cash and cash equivalents $ 4,252 $ 6,748 $ (1,648) $ - $ 9,352
Accounts receivable 117,263 95,720 (28,264) - 184,719
Inventories 120,901 70,745 - - 191,646
Miscellaneous 9,190 19,820 6,051 - 35,061
---------- -------- ----------- ------------ ----------
Total current assets 251,606 193,033 (23,861) - 420,778
Property and equipment,
less accumulated depreciation 150,111 83,075 6,726 - 239,912
Investment in subsidiaries 138,088 15,799 373,895 (527,782) -
Other Assets 134,497 18,725 560,543 (660,651) 53,114
Excess of cost over net assets 181,397 103,192 3,836 - 288,425
acquired ---------- -------- ----------- ------------ ----------
$ 855,699 $413,824 $ 921,139 $ (1,188,433) $1,002,229
========== ======== =========== ============ ==========
LIABILITIES AND COMMON
SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 13,886 $ 6,036 $ - $ - $ 19,922
Accounts payable 35,671 48,361 521 - 84,553
Accrued expenses 43,805 52,499 (13,427) - 82,877
Current maturities of long- 1,799 1,151 - - 2,950
term debt
Total current liabilities 95,161 108,047 (12,906) - 190,302
Long-term debt, less
current maturities 240,932 78,972 344,769 (403,412) 261,261
Senior subordinated notes - - 125,000 - 125,000
Deferred income taxes 15,010 7,780 8,601 - 31,391
---------- -------- ----------- ------------ ----------
Total liabilities 351,103 194,799 465,464 (403,412) 607,954
Minority interests - 2,989 - - 2,989
Redeemable preferred stock 57,891 - - (57,891) -
Common stock 93,889 102,199 2,961 (196,088) 2,961
Additional paid-in capital 189,740 11,030 233,395 (200,770) 233,395
Retained earnings 165,712 130,603 222,580 (312,526) 206,369
Accumulated Other Comprehensive (2,636) (27,796) (3,261) - (33,693)
Income
Treasury stock - - - (17,746) (17,746)
---------- -------- ----------- ------------ ----------
$ 855,699 $413,824 $ 921,139 $ (1,188,433) $1,002,229
========== ======== =========== ============ ==========
9
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS
ENDED APRIL 5, 1998
INTERFACE, CONSOLIDATION
NON- INC. AND
GUARANTOR GUARANTOR (PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTALS
------------ ------------ ------------ -------------- ------------
(IN THOUSANDS)
Cash flows from operating activities: $ 27,5306,422 $( 29,163) $ 2,803 $ (5,001)14,326 $ - $ 25,332$(8,415)
------- --------- --------- -------- -------- -------- ------- --------
Cash flows from investing activities:
Purchase of plant and equipment (23,664) (7,602) (2,697)(6,074) (5,088) (145) - (33,963)(11,307)
Acquisitions, net of cash acquired - - (34,647)(40,853) - (34,647)(40,853)
Other - - (7,601)(4,565) - (7,601)(4,565)
------- --------- --------- -------- -------- -------- ------- --------
Net cash provided by (used in) (23,664) (7,602) (44,945)investing (6,074) (5,088) (45,563) - (76,211)
investing(56,725)
activities -------- --------------- --------- --------- -------- ------- --------
Cash flows from financing activities:
Net borrowings (repayments) (8,071) 5,115 53,502(457) 34,549 (36,404) - 50,546(2,312)
Proceeds from issuance of common - - 5,51368,464 - 5,51368,464
stock
Cash dividends paid - - (4,626)(1,820) - (4,626)(1,820)
Other - - - - -
-------- --------------- --------- --------- -------- ------- --------
Net cash provided by (used in) (8,071) 5,115 54,389(457) 34,549 30,240 - 51,43364,332
financing activities -------- --------------- --------- --------- -------- ------- --------
Effect of exchange rate change on - 300(52) - - 300(52)
cash -------- --------------- --------- --------- -------- ------- --------
Net increase (decrease) in cash (4,205) 616 4,443(109) 246 (997) - 854(860)
Cash at beginning of year 3,481 4,791 4904,361 6,502 (651) - 8,76210,212
------- --------- --------- -------- -------- -------- ------- --------
Cash at end of year $ (724)4,252 $ 5,4076,748 $ 4,933(1,648) $ - $ 9,6169,352
======= ========== ========= ======== ======== ======== ======= ========
1110
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS General
The Company's revenues are derived from sales of commercial
floorcovering products (primarily modular and broadloom carpet)
and related services, interior fabrics and specialty products.
During the quarter ended April 5, 1998 (which was a 14-week period),
the Company had revenues and net income of $319.0 million and $10.3
million, respectively, the highest in the Company's history.
The Company's business, as well as the commercial interiors
market in general, is somewhat cyclical in nature. The Company's
strong financial performance in recent years is attributable inpart
to increased U.S. demand for its products, resulting from a recovery
in the U.S. commercial office market which began in the mid-1990's.
The Company believes that this recovery will continue for a number of
years, and that all of its domestic operations will continue to benefit
from these industry developments. However, a downturn in the market
could lessen the overall demand for commercial interiors products and
could impair the Company's growth. Management believes that the impact upon
the Company of such a downturn would be less pronounced given that the
predominant portion of its sales are generated from the renovations sector
of the market as opposed to the new construction sector.
The Company's growth could also be impacted by international
developments. Specifically, countries in the Asia-Pacific region have
recently experienced weaknesses in their currency, banking and equity
markets. These weaknesses could adversely affect demand for the
Company's products. However, excluding Japan and Australia, sales in the
Asia-Pacific region represented only 1%of the Company's sales during the
quarter ended April 5, 1998. The Company engages in hedging transactions
to reduce its exposure to adverse fluctuations in foreign currency
exchange rates.
RESULTS OF OPERATIONS.OPERATIONS
For the three month and nine month
periodsquarter ended September 28, 1997,April 5, 1998, the Company's net sales increased
$22.3$61.6 million, (8.1%) and $108.9 million (15.2%)or 24%,
respectively, compared with the same periods in 1996. These
increases were primarilyfirst quarter of 1997, which was
a 13-week period. The increase was attributable to increased sales
volume (i) of products and related services in (i) the Company's floorcoveringsU.S.
floorcovering operations, due to increased demand in the U.S. for and increased
market share of its modular carpet products, as well as the acquisitions of the floorcovering contractors inadditional sales
generated by the Re:Source Americas network, (ii) the Company's specialtyof floorcovering
products division,
resultingin Europe due in part fromto the saleacquisition of specialty products throughFirth Carpets early
in the Re:Source Americas network,quarter, and (iii) in the Company's interior fabrics operations
due to increased U.S. and foreign demand for and increased market share
of its fabric products, as well as the acquisition of Camborne Holdings,
Ltd. earlyduring 1997. These increases were offset somewhat by (i) decreased
sales volume in the third quarter. TheCompany's Asia-Pacific division due to the economic
turmoil in Asia, and (ii) a weakening of certain key currencies
(particularly the Dutch guilder) against the U.S. dollar, (particularly the Dutch guilder and Japanese yen)
continue to somewhat offset the increase in sales growth.Company's
reporting currency.
Cost of sales as a percentage of sales decreased slightly
to 66.1% and 67%, respectively, for66.2% in the
three month and nine
month periodsquarter ended September 28, 1997, whenApril 5, 1998 compared to 68.2%
and 68.6% for67.8% in the same periodsperiod in 1996.1997.
The decreases are
primarilydecrease was attributable to manufacturing efficiencies resulting
from(i) economies of scale associated with
increased sales volume in the Company's "war on waste" initiativefloorcovering and interior
fabrics operations, and (ii) decreased manufacturing costs in the
Company's new modern yarn plant in itsfloorcovering and interior fabrics operations. Also,operations through the
Company's mass customization production strategy continues
toand its "war-on-waste"
initiative. The Company's interior fabrics business also experienced
decreased manufacturing costs as a result of continued efficiencies
generated from the new, state-of-the-art yarn manufacturing facility in
a shift to higher margin products.Guilford, Maine. These improved
margin levels continue to bebenefits were somewhat mitigatedoffset by the acquisitionhigher cost
of sales of the floorcovering contractorsdealers comprising the Re:Source Americas network, which historically had higher cost of sales ratios than
the Company.network.
Selling, general and administrative expenses, as a percentage of net
sales, increased to 24.9% and 24.7%, respectively,
for25.3% in the three month and nine month periodsquarter ended September 28,
1997, whenApril 5, 1998 compared to
24% and 23.8% during24.5% in the same periodsperiod in 1996.1997. The increases areincrease was attributable
primarily to (i) administrative
expenses associated with building an infrastructure to managethe continued development of the Re:Source Americas
network infrastructure and (ii) increased marketingconsulting and samplingdevelopment expenses in the Company's floorcovering operations
associated with the introductionYear 2000 initiative. The increase was somewhat
offset by the lower SG&A ratios of new products as the Company
continues to implement a mass customization strategy in both its
U.S. and its European and Asia-Pacific operations.
Fordealers comprising the three month and nine month periods ended September
28, 1997, the Company's otherRe:Source
Americas network.
Other expense increased $.1$0.9 million and
$2.7 million, respectively,in the first quarter of 1998
compared to the same periods in 1996,first quarter of 1997, due primarily due to an increase in
bank debt incurred as a result of the Company's acquisitions, as well as an increase in interest
rates.acquisitions.
11
As a result of the aforementioned factors, the Company's net income
increased 47%62% to $10.5$10.3 million and 55% to $24.8 million,
respectively, for the three month and nine month periodsquarter ended September 28, 1997,April 5, 1998,
compared to $6.4 for the same periodsperiod in 1996.1997.
LIQUIDITY AND CAPITAL RESOURCES.RESOURCES
The Company's primary sources of cash during the quarter ended
April 5, 1998 were proceeds from issuance of securities and funds
provided by operating activities. During the quarter, the Company
completed concurrent public offerings of $150 million aggregate principal
amount of 7.30% Senior Notes due 2008 and 1.725 million shares of Class A
Common Stock. The Company intends to use the net proceeds of both
offerings of $212.7 million to reduce amounts outstanding under its
senior credit facility, and for general corporate purposes, including
working capital and future acquisitions. Amounts applied to the
revolving credit portion of the facility will be available for
reborrowing.
The primary uses of cash during the nine month periodquarter ended September 28, 1997 have beenApril 5,1998 were
(i) $34.6$40 million associated with acquisitions and (ii) $34$11 million for
additions to property and equipment in the Company's manufacturing
facilities,facilities.
Management believes that cash provided by operations and (iii) $7.6 million related to
12
various depositslong-term
loan commitments will provide adequate funds for current commitments and
other long-term assets. These uses were
funded primarily by $50.5 million from long-term financing, $25.3
million from operating activities and $5.5 millionrequirements in the foreseeable future.
YEAR 2000
As is the case with other companies using computers in their
operations, the Company is faced with the task of addressing the Year
2000 issue during the next seven quarters. The Year 2000 issue arises
from the issuancewidespread use of common stock.
Cash providedcomputer programs that rely on two-digit codes
to perform computations or decision-making functions. The Company has
done a comprehensive review of its computer programs to identify the
systems that would be affected by operating activities increased to $25.3
million during the nine month period ended September 28, 1997
from $23.9 million during the corresponding periodYear 2000 issue, and is in the
prior
year.process of reviewing, on a global basis, the Company's Year 2000 position
and exposure to third party customers, distributors, suppliers, and
banking institutions. The Company has also hired an outside consulting
firm to assist in this conversion process and is beginning the process of
modifying its computer program code to the four digit fields necessary to
be Year 2000 ready.
The Company currently estimates the total cost of such modifications,
excluding the cost of modifications to program logic control systems
relative to manufacturing equipment, to be at least $19 million, although
it could be significantly more. The Company and its outside consultants
are currently evaluating the costs of modifications to these program
logic control systems. Of the total project cost, approximately $10
million is attributable to the cost of new hardware and software which
will be required in connection with the global consolidation of the
Company's management and financial accounting systems. This increase was caused primarily by increasesnew
equipment and upgraded technology will have a definable value lasting
beyond the Year 2000. In these instances, where Year 2000 compliance is
ancillary, the Company intends to capitalize and depreciate such costs.
The remaining $9 million (based on current estimates) will be expensed as
incurred. During the quarter ended April 5, 1998, the Company expensed
approximately $1.0 million in net
income,regards to such modifications. There can
be no guarantee that these estimates will be achieved and accounts payableactual results
could differ from those anticipated. Specific factors that might cause
differences include, but are not limited to, the ability of suppliers,
customers and accrued expenses.other companies on which the Company's systems rely to
modify or convert their systems to be Year 2000 ready, the ability to
locate and correct all relevant computer codes and similar uncertainties.
DERIVATIVE FINANCIAL INSTRUMENTS
The increase
was somewhatCompany employs the use of derivative financial instruments for
the purpose of reducing its exposure to adverse fluctuations in interest
and foreign currency exchange rates. While these hedging instruments are
subject to fluctuations in value, such fluctuations are generally offset
by increasesthe fluctuations in accounts receivablevalue of the underlying exposures being hedged.
The Company does not hold or issue derivative financial instruments
for trading purposes. The Company monitors the use of derivative
financial instruments through the use of objective measurable systems,
well-defined market and inventory.credit risk limits, and timely reports to senior
management according to prescribed guidelines. The Company has
established strict counterparty credit guidelines and only enters into
transactions with financial institutions of investment grade or better.
As a result, the Company considers the risk of counterparty default to be
minimal.
12
Management of the Company has developed and implemented a policy to
maintain the percentage of fixed and variable rate debt within certain
parameters. The Company enters into interest rate swap agreements, which
maintain the fixed/variable mix within these defined parameters. In
these swaps, the Company agrees to exchange, at specified intervals, the
difference between fixed and variable interest amounts calculated by
reference to an agreed-upon notional principal linked to LIBOR (London
Interbank Offered Rate). At April 5, 1998, the Company had utilized
interest rate swap agreements to effectively convert approximately $64.5
million of variable rate debt to fixed rate debt. The weighted average
rate on these borrowings was 6.6% at April 5, 1998. The interest rate
swap agreements have maturity dates ranging from five to twenty-four
months.
The purpose of the Company's foreign currency hedging activities is
to reduce the risk that the eventual local currency inflows resulting
from sales to foreign customers will be adversely affected by changes in
exchange rates. The Company enters into forward exchange and currency
swap contracts to hedge certain firm sales commitments denominated in
foreign currencies. At April 5, 1998, the Company had approximately $14.5
million (notional amount) of foreign currency hedge contracts
outstanding. The contracts served to hedge firmly committed Dutch
guilder, German mark, Japanese yen, French franc, British pound sterling,
and other foreign currency revenues. The contracts generally have
maturity dates of six to nine months.
The Company, as of September 28, 1997,April 5, 1998, recognized a $22.9$5.5 million decreaseincrease
in its foreign currency translation adjustment account compared to
thatDecember 27, 1998, because of December 29, 1996.the weakening of the Dutch guilder and
certain other currencies against the U.S. dollar. The decreaseincrease was
associated primarily with the Company's investments in certain foreign
subsidiaries located in the United Kingdom and Continental Europe. The translation adjustment
to shareholders' equity was converted by the guidelines of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards
No. 52.
The Company employs a variety of off-balance sheet financial
instruments, including foreign currency swap agreements and
foreign currency exchange contracts, to reduce its exposure to
adverse fluctuations in interest and foreign currency exchange
rates. At September 28, 1997, the Company had approximately $35
million (notional amount) of foreign currency hedge contracts
outstanding, consisting principally of currency swap contracts to
hedge firmly committed Dutch guilder and Japanese yen currency
revenues. At September 28, 1997, the Company utilized interest
rate swap agreements to effectively convert approximately $73
million of variable rate debt to fixed rate debt. The interest
rate swap agreements have maturity dates ranging from nine to
twenty-four months.
The Company continually monitors its position with, and the
credit quality of, the financial institutions which are counter-
parties to its off-balance sheet financial instruments and does
not currently anticipate nonperformance by the counter-parties.
Management believes that the cash provided by operations and
available under long-term loan commitments will provide adequate
funds for current commitments and other requirements in the
foreseeable future.
13ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.
Not applicable.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not aware of any material pending legal
proceedings involving it or any of its property.
ITEM 2. CHANGES IN SECURITIES RECENT SALESAND USE OF UNREGISTERED SECURITIES
DuringPROCEEDS
On February 24, 1998, the fiscal quarter ended September 28, 1997,Company's Board of Directors declared a
dividend of one preferred share purchase right (a "Right") for each share
of Common Stock of the Company. Each Right entitles the registered
holder to purchase from the Company issuedone one-hundredth (1/100) of a share
of Series B Participating Cumulative Preferred Stock (the "Preferred
Shares"), of the Company at a price of $180.00 per one one-hundredth of a
Preferred Share (the "Purchase Price"), subject to adjustment to the
exercise price and the number of Preferred Shares issuable upon exercise
from time to time to prevent dilution. The Rights are not exercisable
until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") have acquired beneficial ownership of 15% or more of the
outstanding Common Stock or (ii) 10 business days following the
commencement of, or announcement of an aggregateintention to make, a tender offer
or exchange offer the consummation of 230,368which would result in the
beneficial ownership by a person or group of 15% or more of the
outstanding shares of its Common Stock par(the earlier of such dates being
called the "Distribution Date").
In the event that the Company is acquired in a merger or other
business combination transaction or 50% or more of its consolidated
assets or earning power is sold after a person or group has become an
Acquiring Person, proper provision will be made so that each holder of a
Right will thereafter have the right to receive, upon the exercise
thereof at the then current exercise price of the Right, that number of
shares of common stock of the acquiring company which at the time of such
transaction will have a market value $.10of two times the exercise price of
the Right. In the event that any person or group of affiliated or
associated persons becomes an Acquiring Person, proper provision shall be
made so that each holder of a Right, other than Rights beneficially owned
by the Acquiring Person (which will thereafter be void), will thereafter
have the right to receive upon exercise that number of shares of Common
Stock having a market value of two times the exercise price of the Right.
13
Preferred Shares purchasable upon exercise of the Rights will
not be redeemable. Each Preferred Share will be entitled to a minimum
preferential quarterly dividend payment of $1.00 per share that were not registered under
the Securities Act of 1933 (the "Securities Act"). The shares,
in combination with cash, were issued as consideration in the
acquisitions of Camborne Holdings, Ltd. and Facilities Resource
Group, Inc., and were issuedbut will be
entitled to an aggregate dividend of three individuals
and entities. The market price on100 times the dates of issuance ranged
from $22.125dividend declared per
share to $24.625 per share. The salesof Common Stock. In the event of liquidation, the holders of the
above securitiesPreferred Shares will be entitled to a minimum preferential liquidation
payment of $100.00 per share but will be entitled to an aggregate payment
of 100 times the payment made per share of Common Stock. Each Preferred
Share will have 100 votes, voting together with the shares of Common
Stock. Finally, in the event of any merger, consolidation or other
transaction in which shares of Common Stock are exemptexchanged, each Preferred
Share will be entitled to receive 100 times the amount received per share
of Common Stock. These rights are protected by customary antidilution
provisions.
Prior to the Distribution Date, the Rights may not be detached or
transferred separately from registration under the Securities Act pursuantCommon Stock. The Rights will expire on
March 15, 2008 (the "Final Expiration Date"), unless the Final Expiration
Date is extended or unless the Rights are earlier redeemed or exchanged
by the Company. At any time prior to Section 4(2)the acquisition by a person or
group of affiliated or associated persons of beneficial ownership of 15%
or more of the Securities Act, or
Regulation D promulgated thereunder,outstanding Common Stock, the Board of Directors of the
Company may redeem the Rights in whole, but not in part, at a price of
$0.01 per Right (the "Redemption Price"). Immediately upon any
redemption of the Rights, the right to exercise the Rights will terminate
and the only right of the holders of Rights will be to receive the
Redemption Price. A more detailed description and terms of the Rights
are set forth in a Rights Agreement between the Company and Wachovia
Bank, N.A. as transactions by an issuer
not involving a public offering.Rights Agent.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed with this report:
EXHIBIT DESCRIPTION OF EXHIBIT
NUMBER
3.1 Composite Articles of Incorporation (composite as of September 8, 1988)
(included as Exhibit 3.1 to the Company's annual report on Form
10-K for the year ended January 3, 1993 previously filed with
the Commission and incorporated herein by reference) and
Articles of Amendment (Series A Preferred Stock Designation),
dated June 17, 1993 (included as Exhibit
4.1 to the Company's current report on Form 8-K dated
March 4, 1998, previously filed with the Commission on July 7,
1993 and
incorporated herein by reference).
3.2 Bylaws, as amended (included as Exhibit 3.2 to the Company's
quarterly report on Form 10-Q for the quarter ended April 1,
1990, previously filed with the Commission and incorporated
herein by reference).
4.1 See Exhibits 3.1 and 3.2 for provisions in the Company's
Articles of Incorporation, as amended, and Bylaws defining the
rights of holders of Common Stock of the Company.
14
4.2 Rights Agreement between the Company and Wachovia Bank, N.A.,
dated as of March 4, 1998, with an effective date of March 16,
1998 (included as Exhibit 10.1A to the Company's registration
statement on Form 8-A/A dated March 12, 1998, previously filed
with the Commission and incorporated herein by reference).
4.3 Indenture governing the Company's 9.5% Senior Subordinated Notes
due 2005, dated as of November 15, 1995, among the Company,
certain U.S. subsidiaries of the Company, as Guarantors, and
First Union National Bank of Georgia, as Trustee (included as
Exhibit 4.1 to the Company's registration statement on Form S-4,
File No. 33-65201, previously filed with the Commission and
incorporated herein by reference); and Supplement No. 1 to
Indenture, dated as of December 27, 1996 (included as Exhibit
4.2(b) to the Company's Annual Report on Form 10-K for the year
ended December 29, 1996, previously filed with the Commission
and incorporated herein by reference).
4.34.4 Form of Exchange Note (included as part of Exhibit 4.2).
10.1 Seventh Amendment to Revolving Credit Loan Agreement dated
August 5, 1997,Indenture governing the Company's 7.3% senior notes due
2008, among the Company, Interface Flooring Systems,
Inc.certain U.S. subsidiaries of the
Company, as Guarantors, and SunTrustFirst Union National Bank, Atlanta.
10.2 Shanghai Interface Carpet Co., Ltd. Joint Venture Contract dated
March 20, 1996, among Interface Asia-Pacific, Inc., BASF
Corporation and Shanghai China Textile International Science &
Technological Industrial City Development Company.
10.3 Interface, Inc. Nonqualified Savings Planas
trustee (included as Exhibit 44.1 to the Company's Registration Statementregistration
statement on Form S-8,S-3/A, File No. 333-38677,333-46611, previously filed
with the Commission and incorporated herein by reference).
10.1 Amendment to Employment Agreement of Ray C. Anderson dated
January 6, 1998
10.2 Amendment to Change in Control Agreement of Ray C. Anderson
dated January 6, 1998.
10.3 Amendment to Employment Agreement of Charles R. Eitel dated
January 6, 1998.
10.4 Amendment to Change in Control Agreement of Charles R. Eitel
dated January 6, 1998.
10.5 Amendment to Employment Agreement of Brian L. DeMoura dated
January 6, 1998.
10.6 Amendment to Change in Control Agreement of Brian L. DeMoura
dated January 6, 1998.
10.7 Amendment to Employment Agreement of Daniel T. Hendrix dated
January 6, 1998.
10.8 Amendment to Change in Control Agreement of Daniel T. Hendrix
dated January 6, 1998.
10.9 Amendment to Employment Agreement of Gordon D. Whitener dated
January 6, 1998.
10.10 Amendment to Change in Control Agreement of Gordon D. Whitener
dated January 6, 1998.
10.11 Amendment to Employment Agreement of Raymond S. Willoch dated
January 6, 1998.
10.12 Amendment to Change in Control Agreement of Raymond S. Willoch
dated January 6, 1998.
10.13 Amendment to Employment Agreement of Jeffrey A. Goldberg dated
January 6, 1998.
10.14 Amendment to Change in Control Agreement of Jeffrey A. Goldberg
dated January 6, 1998.
10.15 Amendment to Employment Agreement of Alan S. Kabus dated
January 6, 1998.
10.16 Amendment to Change in Control Agreement of Alan S. Kabus dated
January 6, 1998.
10.17 Amendment to Employment Agreement of Joyce D. LaValle dated
January 6, 1998.
15
10.18 Amendment to Change in Control Agreement of Joyce D. LaValle
dated January 6, 1998.
10.19 Amendment to Employment Agreement of John H. Walker dated
January 6, 1998.
10.20 Amendment to Change in Control Agreement of John H. Walker dated
January 6, 1998.
10.21 Amendment to Employment Agreement of John L. Partridge dated
January 6, 1998.
10.22 Amendment to Change in Control Agreement of John L. Partridge
dated January 6, 1998.
10.23 Amendment to Employment Agreement of John R. Wells dated January 6, 1998.
10.24 Amendment to Change in Control Agreement of John R. Wells dated
January 6, 1998.
10.25 Amendment to Employment Agreement of Michael D. Bertolucci dated
January 6, 1998.
10.26 Amendment to Change in Control Agreement of Michael D. Bertolucci
dated January 6, 1998.
10.27 Form of Salary Continuation Agreement.
10.28 Consent and Waiver, dated as of March 20, 1998, related to (i)
Second Amended and Restated Credit Agreement, dated as of June 25,
1997, among the Company, Interface Europe B.V., Interface
Europe, Ltd., the lenders listed therein, SunTrust Bank, Atlanta
and the First National Bank of Chicago; and (ii) Term Loan
Agreement, dated as of June 25, 1997, among the Company, the
lenders listed therein, SunTrust Bank, Atlanta and the First
National Bank of Chicago. 10.29 Agreement for the sale and purchase
of the entire issued share capital of T. F. Firth & Sons Limited, Tayrich
Limited and Vebe Floorcoverings B.V., dated as of December 5, 1997, among
Readicut International PLC, Readicut Netherlands B.V., Interface
Europe Ltd. And Interface Europe B.V.
27.1 Financial Data Schedule (for SEC use only).
(b) NoThe following reports on Form 8-K were filed during the
quarter ended SeptemberApril 5, 1998.
Date Filed Items Reported Financial Statements Filed
---------- --------------- --------------------------
March 4, 1998 Adoption of Shareholder None
Rights Plan
March 17, 1998 Commencement of Concurrent Consolidated Balance Sheets of
Public Offerings the Company and subsidiaries
as of December 28, 1997.
15
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: November 12, 1997 and December 29, 1996; and
related consolidated statements of income and cash
flows for each of the three years in the period ended
December 28, 1997
April 3, 1998 Closing of Concurrent Public None
Offerings
16
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 14, 1998 By: /s/ Daniel T. Hendrix
Daniel T. Hendrix
Senior Vice President
(Principal Financial Officer)
17
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
10.1 Seventh Amendment to Revolving Credit Loan Agreement
dated August 5, 1997, among the Company, Interface
Flooring Systems, Inc. and SunTrust Bank, Atlanta.
10.2 Shanghai Interface Carpet Co., Ltd. Joint Venture
Contract dated March 20, 1996, among Interface Asia-
Pacific, Inc., BASF Corporation and Shanghai China
Textile International Science & Technological
Industrial City Development Company.
27.1 Financial Data Schedule (for SEC use only)
Exhibit
Number Description of Exhibit
- ------- ----------------------
10.1 Amendment to Employment Agreement of Ray C. Anderson dated January 6, 1998.
10.2 Amendment to Change in Control Agreement of Ray C. Anderson dated January 6, 1998.
10.3 Amendment to Employment Agreement of Charles R. Eitel dated January 6, 1998.
10.4 Amendment to Change in Control Agreement of Charles R. Eitel dated January 6, 1998.
10.5 Amendment to Employment Agreement of Brian L. DeMoura dated January 6, 1998.
10.6 Amendment to Change in Control Agreement of Brian L. DeMoura dated January 6, 1998.
10.7 Amendment to Employment Agreement of Daniel T. Hendrix dated January 6, 1998.
10.8 Amendment to Change in Control Agreement of Daniel T. Hendrix dated January 6, 1998.
10.9 Amendment to Employment Agreement of Gordon D. Whitener dated January 6, 1998.
10.10 Amendment to Change in Control Agreement of Gordon D. Whitener dated January 6, 1998.
10.11 Amendment to Employment Agreement of Raymond S. Willoch dated January 6, 1998.
10.12 Amendment to Change in Control Agreement of Raymond S. Willoch dated January 6, 1998.
10.13 Amendment to Employment Agreement of Jeffrey A. Goldberg dated January 6, 1998.
10.14 Amendment to Change in Control Agreement of Jeffrey A. Goldberg dated January 6, 1998.
10.15 Amendment to Employment Agreement of Alan S. Kabus dated January 6, 1998.
10.16 Amendment to Change in Control Agreement of Alan S. Kabus dated January 6, 1998.
10.17 Amendment to Employment Agreement of Joyce D. LaValle dated January 6, 1998.
10.18 Amendment to Change in Control Agreement of Joyce D. LaValle dated January 6, 1998.
10.19 Amendment to Employment Agreement of John H. Walker dated January 6, 1998.
10.20 Amendment to Change in Control Agreement of John H. Walker dated January 6, 1998.
10.21 Amendment to Employment Agreement of John L. Partridge dated January 6, 1998.
10.22 Amendment to Change in Control Agreement of John L. Partridge dated January 6, 1998.
10.23 Amendment to Employment Agreement of John R. Wells dated January 6, 1998.
10.24 Amendment to Change in Control Agreement of John R. Wells dated January 6, 1998.
10.25 Amendment to Employment Agreement of Michael D. Bertolucci dated January 6, 1998.
10.26 Amendment to Change in Control Agreement of Michael D. Bertolucci dated January 6, 1998.
10.27 Form of Salary Continuation Agreement.
10.28 Consent and Waiver, dated as of March 20, 1998, related to (i) Second Amended and
Restated Credit Agreement, dated as of June 25, 1997, among the Company, Interface
Europe B.V., Interface Europe, Ltd., the lenders listed therein, SunTrust Bank,
Atlanta and the First National Bank of Chicago; and (ii) Term Loan Agreement, dated as
of June 25, 1997, among the Company, the lenders listed therein, SunTrust Bank, Atlanta
and the First National Bank of Chicago.
10.29 Agreement for the sale and purchase of the entire issued share
capitals of T. F. Firth & Sons Limited, Tayrich Limited and Vebe
Floorcoverings B.V., dated as of December 5, 1997, among
Readicut International PLC, Readicut Netherlands B.V., Interface Europe Ltd.
And Interface Europe B.V.
27.1 Financial Data Schedule.