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Interface 4th qtr sales up 2%

Thursday 23 February 2012

Interface sales for the 4th quarter of 2011 were $270.9 million, compared with sales of $265.3 million in the fourth quarter of 2010, an increase of 2.1%. As previously announced, during the 2011 fourth quarter, the company incurred a restructuring charge of $6.2 million after-tax, related to initiatives to drive manufacturing efficiencies and better align the company's expenses with the current market environment. Interface expects these actions to result in annual pre-tax cost savings of approximately $11.0 million beginning in 2012. Excluding this charge, operating income for the 2011 fourth quarter was $20.4 million, or 7.5% of sales. Including the restructuring charge, operating income in the fourth quarter of 2011 was $14.3 million, or 5.3% of sales, compared with last year's fourth quarter operating income of $29.5 million, or 11.1% of sales.
Excluding the aforementioned restructuring charge, adjusted income from continuing operations in the 2011 fourth quarter was $8.8 million, or $0.13 per diluted share. This compares with adjusted income from continuing operations in the 2010 fourth quarter of $14.3 million, or $0.22 per diluted share, which excludes pre-tax bond retirement expenses of $43.3 million in the prior year period. Including all items, income from continuing operations in the 2011 fourth quarter was $4.6 million, or $0.07 per diluted share, compared with a loss from continuing operations in the 2010 fourth quarter of $12.4 million, or $0.20 per share. Net income attributable to Interface, Inc. was $3.9 million, or $0.06 per share, in the fourth quarter of 2011, compared with a net loss attributable to Interface, Inc. of $13.3 million, or $0.21 per share, in the fourth quarter of 2010.
"We are pleased to report increased sales for the year, though sales growth moderated in the fourth quarter, reflecting the continuation of challenging market conditions and a pause in demand as customers digested uncertain macroeconomic trends at the end of the year," said Daniel T. Hendrix, Chairman and Chief Executive Officer. "In the face of difficult market conditions, we reduced SG&A expenses during the quarter, cutting $3.6 million sequentially from the third quarter level. We also progressed with our strategic investment initiatives and continued to see success from our FLOR consumer offerings, as demonstrated by its 34% increase in fourth quarter sales and the successful openings of stores in Houston and Brooklyn during the quarter."
Patrick C. Lynch, Senior Vice President and Chief Financial Officer, commented, "The impact of lower production volumes, combined with raw material pricing that remained higher throughout the quarter, resulted in gross margin pressure during the period. While we raised our sales prices in response to increased costs, these price increases only gained traction later in the period and did not fully offset the increased costs we faced. We took further restructuring actions to reduce our cost structure, and we expect to see the full benefits in 2012. We are evaluating other potential actions, including significant restructuring in our Europe modular business, to expand gross margin and enhance profitability. While market conditions remained difficult, we exited the year well-positioned financially with a solid platform from which to invest in our future."
For the full year 2011, sales were $1.1 billion, compared with $961.8 million in 2010, an increase of 9.9%. Excluding the restructuring charge in the fourth quarter, full year 2011 operating income was $93.4 million, or 8.8% of sales. This compares with full year 2010 operating income of $95.9 million, or 10.0% of sales, excluding pre-tax restructuring charges of $3.1 million incurred in the 2010 first quarter. Including the respective restructuring charges, operating income for the full year 2011 was $87.3 million, compared with operating income of $92.7 million in 2010.
Hendrix concluded, "Looking ahead, 2012 represents a combination of opportunities and challenges. We'll face some tough comparisons in the first half of the year, and we anticipate mature corporate office markets to remain choppy as customers are cautious about investing in the current macroeconomic environment. Helping to offset these challenges will be the benefits of our restructuring activities as well as our strategic investment efforts, as we continue to grow in emerging markets and gain traction in the hospitality market, and further expand our successful FLOR retail footprint. We plan to continue opening new FLOR stores and focusing on other consumer direct sales channels such as catalogues and the internet. Building on our actions in the fourth quarter, we will look for additional ways to raise our selling prices, reduce manufacturing costs and SG&A expenses, enhance the efficiency of our operations to protect margins, and ensure we are well-positioned both in the current environment and to take advantage of any sustained recovery in demand."

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