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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED JULY 4, 1993
COMMISSION FILE NUMBER 0-12016
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INTERFACE, INC.
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(Exact name of registrant as specified in its charter)
GEORGIA 58-1451243
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ORCHARD HILL ROAD, P.O. BOX 1503, LAGRANGE, GEORGIA 30241
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(Address of principal executive offices and zip code)
(706) 882-1891
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(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 No
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Shares outstanding of each of the registrant's classes of common stock at
August 10, 1993:
Class Number of Shares
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Class A Common Stock, $.10 par value per share 14,090,513
Class B Common Stock, $.10 par value per share 3,214,387
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INTERFACE, INC.
Part I, Item 1 of the Registrant's Form 10-Q for the quarter ended
July 4, 1993 is deleted in its entirety and the following is inserted in lieu
thereof:
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTERFACE, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(Unaudited)
(In thousands)
----------------------------------------------------------------------------- July 4, January 3,
ASSETS 1993 1993
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CURRENT ASSETS:
Cash and Cash Equivalents $ 8,418 $ 10,243
Accounts Receivable 119,299 109,343
Inventories 122,655 101,390
Deferred Tax Asset 1,517 743
Prepaid Expenses 15,617 10,712
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TOTAL CURRENT ASSETS 267,506 232,431
PROPERTY AND EQUIPMENT, less
accumulated depreciation 143,421 137,605
EXCESS OF COST OVER NET ASSETS ACQUIRED 192,539 133,321
OTHER ASSETS 33,169 30,763
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$636,635 $534,120
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LIABILITIES AND SHAREHOLDERS' EQUITY
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CURRENT LIABILITIES:
Accounts Payable 52,069 43,530
Accrued Expenses 41,462 38,642
Current Maturities of Long-Term Debt 11,188 11,425
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TOTAL CURRENT LIABILITIES 104,719 93,597
LONG-TERM DEBT, less current maturities 200,301 131,563
CONVERTIBLE SUBORDINATED DEBENTURES 103,925 103,925
DEFERRED INCOME TAXES 22,149 18,686
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TOTAL LIABILITIES 431,094 347,771
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SHAREHOLDERS' EQUITY:
Preferred Stock 25,000 -
Common Stock:
Class A 1,757 1,757
Class B 329 329
Additional Paid-In Capital 82,110 82,110
Retained Earnings 120,053 117,174
Foreign Currency Translation Adjustment (5,962) 2,725
Treasury Stock, 3,600
Class A Shares, at Cost (17,746) (17,746)
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TOTAL SHAREHOLDERS' EQUITY 205,541 186,349
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$636,635 $534,120
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See accompanying notes to consolidated condensed financial statements.
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INTERFACE, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Income
(Unaudited)
(In thousands except per share amounts)
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Three Months Ended Six Months Ended
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July 4, July 5, July 4, July 5,
1993 1992 1993 1992
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Net Sales $150,045 $149,299 $283,713 $303,789
Cost of Sales 102,602 100,423 195,035 204,711
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Gross Profit on Sales 47,443 48,876 88,678 99,078
Selling, General and Administrative Expense 36,726 37,289 69,258 75,132
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Operating Income 10,717 11,587 19,420 23,946
Other (Expense) Income - Net (6,412) (6,097) (11,722) (12,310)
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Income before Taxes on Income 4,305 5,490 7,698 11,636
Taxes on Income 1,508 2,082 2,697 4,449
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Net Income 2,797 3,408 5,001 7,187
Less: Preferred Dividends 53 0 53 0
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Net Income Available to Common Shareholders $2,744 $3,408 $4,948 $7,187
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Earnings Per Share
Primary $0.16 $0.20 $0.29 $0.42
Fully Diluted<F1>* $0.16 $0.20 $0.29 $0.42
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Dividends Per Share of Common Stock $0.06 $0.06 $0.12 $0.12
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Weighted Average Common Shares Outstanding
Primary 17,265 17,251 17,265 17,241
Fully Diluted 23,410 23,396 23,410 23,386
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<FN>
<F1>* For the three month and six month periods ended July 4, 1993 and
July 5, 1992, respectively, earnings per share on a fully diluted basis were
antidilutive.
See accompanying notes to consolidated condensed financial
statements.
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INTERFACE, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited)
Six Months Ended
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July 4, July 5,
(In thousands) 1993 1992
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Operating Activities:
Net Income $ 5,001 $ 7,187
Adjustment to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 11,993 11,328
Deferred income taxes (27) 46
Cash provided by (used for):
Accounts receivable 4,519 2,412
Inventories (2,504) 1,120
Prepaid and other (4,097) (2,222)
Accounts payable and accrued expenses (6,324) (3,443)
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8,561 16,428
Investing Activities:
Capital expenditures (6,805) (8,471)
Acquisitions of businesses (40,324) 0
Other (1,236) (1,583)
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(48,365) (10,054)
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Financing Activities:
Net borrowing of long-term debt 15,144 (2,970)
Issuance of preferred stock 25,000 0
Issuance of common stock 0 344
Dividends paid (2,072) (2,070)
Other 0 (1,276)
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38,072 (5,972)
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Net cash provided by operating,
investing and financing activities (1,732) 402
Effect of exchange rate changes on cash (93) 98
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Cash and cash equivalents:
Net increase (decrease) during the period (1,825) 500
Balance at beginning of period 10,243 10,376
Balance at end of period $ 8,418 $10,876
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See accompanying notes to consolidated condensed financial statements.
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INTERFACE, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
NOTE 1 - CONDENSED FOOTNOTES
As contemplated by the Securities and Exchange 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 January 3, 1993, as filed with the Securities and Exchange
Commission.
NOTE 2 - FISCAL YEAR END
The Company's fiscal year ends on the Sunday nearest December 31. The
fiscal year ended January 3, 1993 was comprised of 53 weeks. The fiscal year
ending January 2, 1994 will be comprised of 52 weeks; therefore, the first
quarter of fiscal 1993 was comprised of 13 weeks as compared to 14 weeks in
fiscal 1992.
NOTE 3 - INVENTORIES
Inventories are summarized as follows:
July 4, January 3,
1993 1993
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Finished Goods $ 67,784 $ 55,527
Work-in-Process 20,838 21,882
Raw Materials 34,033 23,981
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$122,655 $101,390
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NOTE 4 - BUSINESS ACQUISITIONS
The Company, through a series of stock purchases in June 1993,
acquired 100% of the outstanding capital stock of Bentley Mills, Inc.
("Bentley"), a U.S. company engaged in the manufacturing and distribution of
broadloom carpet, for the aggregate consideration of $34.0 million, which is
comprised of $9.0 million in cash and $25.0 million of Series A Cumulative
Convertible Preferred Stock. As part of the overall transaction, the Company
also repaid Bentley's existing bank debt. The Company accounted for this
transaction as a purchase. At the acquisition date, the fair value of the net
liabilities of Bentley exceeded the fair
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INTERFACE, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
NOTE 4 - BUSINESS ACQUISITIONS (Continued)
value of its net assets by approximately $23.1 million. Accordingly, the
excess of the purchase price ($34.0 million) over the fair value of net assets
acquired was approximately $57.1 million and is being amortized over 40 years.
The results of operations of Bentley have been included within the consolidated
financial statements since June 1, 1993.
The following table summarizes the pro forma results of operations of
the Company as though the Bentley acquisition had occurred at the beginning of
each of the six month periods presented:
(In Thousands, except Earnings Per Share)
Six Month Period Ended
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June 4, 1993 June 28, 1992
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Net Sales $341,729 $356,310
Net Income 6,837 6,733
Earnings Per Share
Primary .34 .46
Fully Diluted<F1>* .34 .46
<FN>
<F1>* For the six month periods ended July 4, 1993 and June 28, 1992,
respectively, earnings per share on a fully diluted basis were antidilutive.
On February 18, 1993, the Company acquired (through its fabrics
subsidiary) the fabric division assets of Stevens Linen Associates, Inc., based
in Dudley, Massachusetts, for $4.9 million. In addition, on January 14, 1993,
the Company acquired (through certain of its U.S. and French subsidiaries), for
$1.3 million, the patents, know-how and production equipment of Servoplan,
S.A., a French company, relating to the low-profile access flooring system
developed by Servoplan.
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NOTE 5 - CAPITAL STOCK
The Company issued a new Series A Cumulative Convertible Preferred
Stock in conjunction with the Bentley transaction. The Preferred Stock is
entitled to a 7% annual cumulative cash dividend that is payable quarterly.
Shares of Series A Preferred Stock are non-voting, except as required by law or
in limited circumstances to protect their preferential rights, but are
convertible into shares of the Company's Class A Common Stock at a rate of one
share for each $14.7875 of face value and accrued but unpaid dividends.
NOTE 6 - EARNINGS PER SHARE AND DIVIDENDS
Earnings per share are computed on the basis of the weighted average
number of shares of common stock outstanding during each period. Primary
earnings per share are computed by dividing net income by the weighted average
number of common shares outstanding during each period. Fully diluted earnings
per share are computed on the same basis as primary earnings per share, except
that the 8% Convertible Subordinated Debentures issued in September 1988 are
assumed to be converted to common stock and the interest thereon, net of income
tax effect, is added back to net income.
For the purpose of computing earnings per share and dividends
paid, the Company is treating as treasury stock (and, therefore, not
outstanding) 3,600,000 shares of Class A Common Stock owned by Interface
Europe, Ltd., a wholly-owned subsidiary in the United Kingdom.
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INTERFACE, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
________________________________________________________________________________
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 period. Nevertheless, the results shown are for an interim period and
are not necessarily indicative of results to be expected for the year.
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Part I, Item 2 of the Registrant's Form 10-Q for the quarter ended July 4, 1993
is deleted in its entirety and the following is inserted in lieu thereof.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS. For the three month and six month periods
ended July 4, 1993, the Company's net sales increased $.7 million (.5%) and
decreased $18.7 million (6.2%), respectively, compared to the same periods in
1992. The decrease for the six month period was primarily attributable to (i)
the strengthening of the U.S. dollar against certain key European currencies,
(ii) slow sales in the U.S., Japan and Continental Europe carpet tile markets,
accentuated by a continued recessionary climate, and (iii) competitive price
pressures, particularly in the U.S. carpet tile operations. These decreases in
sales were somewhat offset by sales generated by Bentley Mills, Inc., which was
acquired during June 1993, coupled with increased sales volume in the Company's
carpet tile operations in the Asia-Pacific, particularly Southeast Asia, and
the interior fabrics operations.
Cost of sales increased as a percentage of sales for the three and six
months ended July 4, 1993, compared with the same periods in 1992. The
increase was due primarily to (i) increased costs associated with the Company's
Netherlands manufacturing facility, which experienced unfavorable foreign
currency exchange rates in certain of its export markets, particularly the
United Kingdom, Spain, Italy and Sweden, (ii) reduced efficiencies in the
Company's carpet tile manufacturing operations as a result of a decline in unit
volumes, and (iii) competitive price pressures in the U.S..
Selling, general and administrative expenses as a percentage of sales
decreased for the three and six months ended July 4, 1993, compared to the same
periods in 1992, primarily as a result of continued cost control measures which
were implemented in 1991 and 1992 throughout the Company, particularly in
Europe.
For the three month and six month periods ended July 4, 1993, the
Company's other expense increased $.3 million and decreased $.6 million,
respectively, compared to the same periods in 1992. The decrease for the six
month period was primarily due to a reduction in outstanding bank debt, prior
to the acquisition of Bentley, coupled with a decline in overall interest
rates. The decrease in other expense associated with a decline in interest
rates and bank reduction was offset, in the three month period ended July 4,
1993, by an increase interest expense on bank debt incurred in conjunction with
the acquisition of Bentley in June 1993.
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Due, by and large, to the aforementioned factors, the Company's net
income decreased 19.5% and 31.2%, respectively, for the three months and six
months ended July 4, 1993, compared to the same periods in 1992.
LIQUIDITY AND CAPITAL RESOURCES. The primary uses of cash for the six
month period ended July 4, 1993 have been: (i) $34.1 million associated with
the acquisition of Bentley Mills, (ii) $6.8 million for additions to property
and equipment in the Company's manufacturing facilities, (iii) $4.9 million for
a business acquisition in the Company's interior fabrics division, (iv) $1.3
million for investment in patents, and (v) $2.1 million for dividends paid.
These uses of cash were funded, in part, by $25.0 million in newly issued
preferred stock, $8.6 million in operating activities and $15.1 million from
long-term financing.
The Company, as of July 4, 1993, recognized an $8.3 million decrease
in foreign currency translation adjustments compared to that of January 3,
1993, primarily due to the movement of the U.S. dollar against two key
functional currencies, the British pound sterling and the Dutch guilder. This
adjustment to shareholders' equity was converted by the guidelines of the
Financial Accounting Standards Board (FASB) 52.
The Company has amended and restated its existing revolving credit and
term loan facilities in conjunction with the purchase of Bentley Mills. The
amendment, among other things, increased the outstanding term loan by $55.0
million and reduced the revolving credit facility by approximately $25.0
million.
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.
Bentley Mills' City of Industry, California plant is located in the
San Gabriel Valley, which has been generally designated as a Superfund site.
Neither the Environmental Protection Agency nor the potentially responsible
party ("PRP") group has asserted that Bentley is a PRP in connection with such
Superfund site.
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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: February 28, 1994 By: /s/ Daniel T. Hendrix
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Daniel T. Hendrix
Vice President
(Principal Financial Officer)
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