I N T E R F A C E
Interface, Inc.
Investor Presentation
Raymond James Conference
March 2005
1
Forward Looking Statements
This presentation contains forward-looking statements, including, in
particular, statements about Interface’s plans, strategies and prospects.
These are based on the Company’s current assumptions, expectations
and projections about future events.
Although Interface believes that the expectations reflected in these
forward-looking statements are reasonable, the Company can give no
assurance that these expectations will prove to be correct or that savings
or other benefits anticipated in the forward-looking statements will be
achieved. Important factors, some of which may be beyond the
company’s control, that could cause actual results to differ materially from
management’s expectations are discussed under the heading “Risk
Factors,” included in the amendment to the Company’s registration
statement on Form S-4 filed with the Securities and Exchange
Commission on June 28, 2004, which discussion is hereby incorporated
by reference. Forward-looking statements speak only as of the date
made. The Company assumes no responsibility to update or revise
forward-looking statements and cautions listeners and conference
attendees not to place undue reliance on any such statements.
2
Business Overview
3
12%
47%
21%
1%
19%
4
Core Focused
2002 Portfolio Mix
Interface Consolidated 2004 - Portfolio Mix
TARGET Portfolio Mix
95% Commercial
5% Residential
55% Corporate Office
45% Non-Corporate
90% Refurbishment
10% New Construction
Interface Portfolio (2004)
2004 Portfolio Mix
99% Commercial
1% Residential
70% Corporate Office
30% Non-Corporate
90% Refurbishment
10% New Constructio
Modular Carpet Broadloom Carpet Fabrics Specialty Products Service (Divested in 2004)
Interface is a Leader in the Commercial Interiors Market
13%
65%
21%
1%
Top designers picked Interface brands as #1 in
four of the six categories
Interface Strengths
Market Leader in Attractive
Modular Segments
Preeminent Brands – Quality,
Reliability and Leadership
Innovative Design and
Development Capabilities
Leader in Sustainability
Made to Order / Low Cost Global
Manufacturing Capabilities
The world leader and a global manufacturer of
carpet tiles
Most recognized brands in the industry for high
quality, reliability and premium positioning in the
marketplace
Best specifying sales force in the Industry
Interface pioneered the concept of sustainability
in our industry
Strong Free Cash Flow
Generation
Interface products provide high contribution
margins
A unique “make to order” model separates
Interface from the competition
Sales Force – Established Design
Community Relationships
5
Preeminent Brands – Quality, Reliability, Design
6
Innovative Design and Development Capabilities Through Our
Differentiated Made to Order Business Approach
INVENTORY TURNS
Americas
Modular
1
12
0%
100%
Asia Pacific
Modular
Europe Modular
Fabrics
Americas
Broadloom
Operations
1.
Increase speed to market
2.
Decrease lead time to customers
3.
Promote lean manufacturing culture
4.
Increase inventory turns
5.
Lead in innovation and adaptability
Ex: Portable creels and r-coners allow us
to maximize yarn utilization and virtually
eliminate yarn waste
6.
Increase opportunities for sustainability
7.
Focus operations on continuous cost
improvement
Sales
Manufacturing will give up long production
runs and make orders within 3% of
requirement
Managing change - over time will become
more important than managing run time
The Migration to a Make to Order Model
Interface Operational Model
2004
TARGET
Asia Pacific
4.5
5.0
Europe
5.8
6.0
Americas IFS
10.0
12.0
Americas BPS
3.7
5.0
Fabrics
3.5
4.0
Interface Consolidated
4.7
5.6
Inventory Turns
7
Leader in Sustainability
Industrial Model of a Sustainable Enterprise
1.
Eliminate Waste
2.
Benign Emissions
3.
Renewable Energy
4.
Closed Loop Material Supply
5.
Resource Efficient Transportation
6.
Sensitivity Hook Up (Social
Responsibility)
7.
Redesign Commerce
Interface’s Seven Fronts of Sustainability
8
The Path Forward
9
Source: BIFMA, Raymond James Research
$(Mil)
Forecasts are pointing to a recovery
in the office furniture markets, due
primarily to strong non-residential
construction growth and an improved
employment report.
Furniture consumption and
shipments grew 5.3% and 4.8%,
respectively, year over year in the
Third Quarter of 2004.
Source: Global Insight; BIFMA
Growth for 2005 is forecasted to
be 9.2% versus 2004
30% Fall over 3 Years
06/04
12/93
06/04
12/93
BIFMA Order Trends
BIFMA Orders Year over Year Change %
-40%
-30%
-20%
-10%
0%
10%
20%
The Industry is Off from Historical Highs, but Shows Signs of a Recovery
In 2004 Interface Established the Foundation for Future Growth
Liquidity Significantly
Improved
Increased Market Share
Executed Market Segmentation
Consolidated Fixed Asset Footprint
Improved Brand Strength in ALL Businesses
Set the Foundation for Residential Growth
Simplified Business Model by Exiting the Service Business
Solidified Interface’s Position on Sustainability to Drive Growth
EXECUTE
SUSTAINABLE
GROWTH
11
$1,017
$876
$745
$767
$881
$0
$200
$400
$600
$800
$1,000
$1,200
2000
2001
2002
2003
2004
12
Note: * Platform percentage (%) growth figures are Year over Year, 2003 versus 2004
** All numbers exclude discontinued operations
Baseline
$ 881 M
Interface 2004
Emerging Markets
21% Growth
Residential
200% Growth
$ 767 M
Market Segmentation
27% Growth
Interface 2003
Corporate Office
12% Growth
Growth occurred through the execution
of Interface’s Strategic Platforms
13% off of 5
year High
Mark
(000’s)
Interface Net Sales Revenue
2000 - 2004
Interface Showed Considerable Gains over 2004 … Despite a Sluggish
Corporate Office Market
… More Growth Opportunity Still Exists
$318
$262
$223
$223
$265
31%
30%
30%
29%
30%
$0
$100
$200
$300
$400
2000
2001
2002
2003
2004
20%
25%
30%
35%
40%
45%
50%
… There still remains
substantial growth opportunity
28% off of 5 year High Mark
(000’s)
$ 94.8
$ 70.9
$ 80.0
$ 99.9
$ 133.0
Restructuring Charges
Depreciation and Amortization
EBIT; Earnings before Interest & Taxes
Interface EBITDA
2000 - 2004
69.4
4.5
24.9
31.4
60.7
42.6
40.8
32.7
33.3
34.1
21
54.6
22.4
6.2
$0
$40
$80
$120
$160
2000
2001
2002
2003
2004
$228
$203
$176
$186
$204
22%
23%
24%
24%
23%
$0
$100
$200
$300
2000
2001
2002
2003
2004
10%
15%
20%
25%
30%
35%
40%
Interface SG&A Totals and
SG&A % of Net Sales
Interface Gross Profit and
Gross Profit % of Net Sales
In the Face of a Significant Industry Downturn, Interface Grew Stronger
Market GROWTH
1983 IPO $3.5
Developed Platforms for Growth
Our Challenge is to Execute and Perform on Our
Platforms for Growth
Interface, Inc. (IFSIA) Stock Price History
14
The Path Forward will be to Continue to Capitalize on Interface’s
Platforms for Growth …
Execute Market
Segmentation
The Interface Opportunity
Residential
Growth
Capture Emerging
Markets
Advance
Sustainability
Strategic Objective
Significant economic growth forecasted
for emerging markets – China, Japan,
MEA, India and E. Europe
Carpet tile acceptance in non-corporate
office applications is gaining momentum
Fabrics segmentation opportunities exist in
automotive, industrial, and window
treatments
Large worldwide residential market
Lead the modular growth into other segments
Utilize existing technology in fabrics to
segment into these other markets
Expand Broadloom into Tenant Improvement,
Education and Healthcare
Create the master brand InterfaceFLOR
Create a high-end niche broadloom offering
with Prince Street House and Home
Lead and shape the modular growth in
Eastern Europe, the Middle East and Asia
Leverage Interface’s leadership position on
sustainability to drive business
Grow Corporate
Share
The global office market has been in a
prolonged decline and is primed for a
recovery
Lead the continuing growth of modular in
the more mature office market
Our customers want sustainable products
15
… As Well as Focus on Continued Operational Excellence
The Interface Opportunity
Tighten the
Supply Chain
Focus on
Productivity
De-Lever the
Balance Sheet
Strategic Objective
High potential for operating leverage and
strong cash flows
Capitalize on global sourcing opportunities
Continually push supply chain integration
across the business units through “make to
order” and in other areas
Capitalize on the free cash flow
characteristics of the business
Improve credit rating
Grow sales while minimizing SG&A cost
increases; only invest in growth initiatives
Realize integration savings in fabrics and
Europe modular
Current Made to Order business has moved
Americas Modular to 10 inventory
turns/year
Migrate Make to Order business model
across the entire enterprise
Recent restructuring initiatives are
continuing to yield additional annual
savings
16
2005 Tenets for Success
Continue to lead and shape the modular market expansion.
Execute segmentation in Europe – see our way to a 10%
operating income business.
Complete the service exit strategy with minimal impact on the
mills.
Continue to build out the sales and marketing infrastructure in
China.
Grow sales in broadloom to drive profitability by better
absorption of fixed costs – see our way to an 8% operating
income business.
Continue the operating improvements made in fabrics –
operating income of at least 8% will be the goal.
Continue to de-lever our balance sheet through growth in
profitability and best-in-class supply chain management.
17
2004 demonstrated great progress
in the growth of the corporate
platform
Continued maintenance of
Interface’s share in the corporate
office market, combined with
modest 5% growth in the corporate
office market itself, will produce
desired results
Corporate Office
Recovery
$ 150 M
Base Year
2003
Execution Drivers
Interface Growth Platform
Maintain or Grow Corporate Share
$ 767M
Net sales
2003
(Target)
$ 1.1B
18
Maintain or Grow Corporate Share
Commercial Office Applications
19
Interface Modular Gross Sales and Margin
2000 - 2004
Maintain or Grow Corporate Share
Modular is Taking Share
$ in Millions
% Operating
Profit Margin
Interface Modular GROWTH in 2004 was
20% - Taking share in a Specified Office
Market that is estimated to be UP 8%
Modular Operating Profit %
Actual Modular Gross Sales
Operating % TARGET of 13%
2004
2003
2002
1
Carpet Tiles
58%
56%
55%
2
Linoleum
40%
30%
24%
3
Ceramic / Porcelin
31%
33%
41%
4
Stone
31%
29%
47%
5
Vinyl
30%
25%
31%
6
Rubber
30%
27%
30%
7
Hardwood
24%
17%
30%
8
Laminate
21%
10%
17%
9
Area Rugs
20%
28%
34%
10
Cork
19%
14%
17%
11
Bamboo
16%
21%
23%
12
6' Rolls
12%
14%
13%
13
Broadloom
11%
12%
15%
1
Nylon
19%
20%
18%
2
Wool
4%
11%
13%
3
Polyester
4%
4%
3%
4
Olefin
4%
5%
1%
Fibers
Carpet Tile has remained the most often
specified product over the last several years.
Figures reflect the number of designers who are
specifying more of the products below.
Hot Products
20
SOURCE: Floor Focus 2004
$553
$480
$444
$483
$589
0
100
200
300
400
500
600
700
2000
2001
2002
2003
2004
0%
5%
10%
15%
20%
$176
$141
$116
$110
$120
0
20
40
60
80
100
120
140
160
180
200
2000
2001
2002
2003
2004
21
Actual Interface Fabrics Gross Sales
$ in Millions
Interface Fabrics Gross Sales
2000 - 2004
Actual BPS Gross Sales
$ in Millions
Bentley Prince Street Gross Sales
2000 - 2004
Maintain or Grow Corporate Share
Bentley Prince Street and Interface Fabrics are Returning to Profitability
$250
$210
$202
$188
$192
0
50
100
150
200
250
300
2000
2001
2002
2003
2004
Interface Growth Platform
Execute Market Segmentation
Execution Drivers
Segmentation is taking hold in the
U.S., with promising gains towards
our Segmentation Platform goals
Positive results are anticipated in
Europe and Asia Pacific
The Institutional (government and
education) and Healthcare segments
represent the largest global
opportunities for Interface modular
Base Year
2003
The Top FIVE Opportunities
1.
Education
2.
Retail – Instore Use
3.
Healthcare
4.
Hospitality
5.
Automotive
$ 767M
Net sales
2003
(Target)
$ 1.1B
Corporate Office
Recovery
$ 150 M
Non-Office
Commercial Market
Segmentation
$125M
22
67%
64%
58%
54%
49%
50%
33%
36%
42%
46%
51%
50%
0%
25%
50%
75%
100%
2000
2001
2002
2003
2004
Target
23
SOURCE: Floor Focus 2004
… Opportunity for Segmentation
Growth is Large in Europe and
Asia Pacific
Americas Modular Business up
22% in 2004 !!! … Due Primarily to
a Focus on Segmentation
2004
2003
Corporate
63%
75%
Education
54%
28%
Healthcare
46%
25%
Retail
35%
16%
Hospitality
26%
5%
Do NOT Specify Carpet Tile
9%
N/A
Public Spaces
6%
7%
Fitness
4%
N/A
Where are you Specifying Carpet Tile?
Although the majority of respondents are specifying
Carpet Tile for Corporate jobs, the Top 25 are also
specifying it for their projects in new markets sectors
Interface Americas Modular Sales Mix
Corporate vs. Non-Corporate 2000 - 2004
Execute Market Segmentation
Segmentation is Taking Hold in the US …
The Interface Segmentation
Strategy is Showing Results in
the United States …
Corporate Segment Sales
Non-Corporate Segment Sales
Execute Market Segmentation
Healthcare is Ready for Modular
24
US Green Buildings Council LEED certification
program will introduce building guidelines in 2004
for healthcare’s special needs.
1.
Infection control.
2.
Indoor air quality.
3.
Low VOC.
Execute Market Segmentation
Interface Modular Meets Education’s Special Needs
25
Including 2002 spending, $169 billion will have
been spent through 2004 on new, retrofit and
addition construction
1.
Antimicrobial protects products
against mold and mildew.
2.
Lasts longer than broadloom
(selective replacement).
3.
Lowers installation costs and makes
less waste.
Execute Market Segmentation
Retail and Service Buildings - Largest Commercial Floor Space
26
1.
Retail and Service floor spaces are
generally high traffic areas.
2.
Easier to isolate and repair problem spots.
3.
Less interruption of business traffic.
The tremendous amount of Retail and Service
floor space represents a huge upside
potential for Modular Carpet
Execute Market Segmentation
Hospitality Industry - Ideal Candidate For Interface Modular
27
* HYATT in Atlanta, GA
1.
Modular in Hospitality applications
makes it easier to isolate and repair any
problem spots in floor covering
2.
Estimated 7.4 million square feet of
Hospitality floor space in the U.S.
The hospitality industry has a high degree of traffic
flow and a need for quick and easy maintenance,
making Interface Modular an ideal product
28
Carpet Tile Even Works in
Common Areas
Execute Market Segmentation
Hospitality - The Hyatt Atlanta
Interface Growth Platform
Expand the Residential Business
Execution Drivers
With the entrance of InterfaceFLOR,
Prince Street House & Home and
Heuga Home Flooring, 2004 marked
the beginning for Interface in the
residential market
US residential carpet market is
approximately $11B – current tile
penetration is minimal
Base Year
2003
$ 767M
Net sales
2003
(Target)
$ 1.1B
Corporate Office
Recovery
$ 150 M
Non-Office
Commercial Market
Segmentation
$125M
Residential
Expansion
$50M
29
30
Interface Flor and Prince Street
House & Home
Positive sales trend
Growing designer registration
Interface Flor - Established branded
programs with Lowe’s, Design Within
Reach, boutique retail and others
Prince Street H&H - Currently in 256
retail store locations
The House and Home Collection is also
advancing Bentley Prince Street’s
position in the high-end niche
commercial broadloom market
The Interface brands benefit from
the “buzz” with designers that the
Flor and Heuga create
RESIDENTIAL
BRANDS
FLOR
HEUGA
PRINCE ST H&H
BENTLEY PRINCE
STREET
COMMERCIAL
BRANDS
INTERFACE and
HEUGA
COMMERCIAL
BRANDS
Interface Flor
13 Week Rolling Order Trend 2004
YE 2004
Q4 2003
Expand the Residential Business
Interface Flor and Prince Street House & Home Show Positive Results
Expand the Residential Business
The Residential Opportunity
31
Lifestyle trends
Desire for new applications
“Cocooning” trend of investing in the
home
Purchasing trends
DIY -- “Do it yourself” Design it yourself”
Internet and catalog sales on rise
Design-influenced consumer
Marketplace shift toward focus on design
Consumers desire customizable, smart and better
quality products that solve problems
32
InterfaceFLOR is being rolled out to
over 1,000 stores nationwide.
Atlanta and Los Angeles markets will
carry inventory and include advertising
campaigns.
Homeowners are able to buy Interface
Products at a growing number of
Lowe’s locations
Lowe’s for Interface Flor
Expand the Residential Business
InterfaceFLOR Roll-out to Lowe’s
Interface Growth Platform
Capture Emerging Markets
Execution Drivers
Interface took large steps towards
achieving the goals set forth in the
Emerging Markets Platform in 2004
The Asian markets continue to
represent a large sales growth
opportunity for Interface in both
Fabrics and Modular
Base Year
2003
The Top FIVE Opportunities
1.
China
2.
Japan
3.
Eastern Europe
4.
Middle East
5.
India
$ 767M
Net sales
2003
(Target)
$ 1.1B
Corporate Office
Recovery
$ 150 M
Non-Office
Commercial Market
Segmentation
$125M
Residential
Expansion
$50M
Emerging Markets
$35M
33
The China Opportunity
Capturing Emerging Markets
The China Opportunity
1.
China is the fastest growing carpet tile
manufacturing country with over 15
producers in 2004. There is a high possibility
of partnerships between USA / European
manufacturers and their Chinese counterparts.
2.
The China market for carpet tile is estimated to
reach 6.25 million meters in 2004 and grow
at a rate of 15% – 20% over the next 5 years.
3.
China is investing heavily in tufting, and
manufacturing costs are low. There is a lack of
styling, tile backing technology and quality
controls, which affords us opportunity.
4.
The China market is dominated by low priced
product. Polypropylene will remain the main
fiber used in China in 2004, but should be
moving strongly to nylon.
Interface Opportunity in China
Interface is beginning to take share
in the China market … The Modular
explosion is Underway !!!
$2,400
$4,200
$8,000
$12,000
$16,000
$0
$4,000
$8,000
$12,000
$16,000
$20,000
2003
2004
2005F
2006F
2007F
34
SOURCE: BMW Associates 2003
Gross Sales Actual (2003 and 2004) –
Forecasted Gross Sales (2005 through 2007)
$ in (000’s)
We Don’t Know How Far Modular Can Go …
35
