ATLANTA — October 7, 2014 — Interface, Inc. a worldwide carpet tile company and global leader in sustainability, today announced the consummation of an amendment of its existing syndicated facility agreement, effective October 3, 2014. The amendment expands the aggregate borrowing availability for revolving loans under the credit facility from $200 million to $250 million, and provides new borrowing availability for a $200 million Term Loan A which may be used to repurchase or redeem, before December 31, 2014, the Company’s existing 7.625% Senior Notes due 2018 (the “Notes”). The amendment also extends the maturity of the facility until October 3, 2019. All other terms of the facility, including covenants, interest rates and fees, remain substantially unchanged from the existing facility agreement.
Planned Bond Redemption
The Company also announced its intention to redeem the currently outstanding $247.5 million aggregate principal amount of the Notes. While the Company has not yet commenced the redemption, it expects to do so shortly and complete the redemption before the end of 2014. The planned redemption is expected to require $266 million to $268 million, depending on the date of redemption, and to be funded through a combination of Term Loan A and revolving borrowings under the expanded credit facility, and cash on hand. It is estimated that the redemption would result in $12 million to $13 million in annualized interest savings, based on current interest rates.
Share Repurchase Plan
In furtherance of its capital allocation strategy, the Company also announced that its Board of Directors has authorized a program to repurchase up to 500,000 shares of common stock per fiscal year, commencing with the 2014 fiscal year. It is anticipated that the share repurchase program will be funded through the Company’s cash on hand. Purchases made pursuant to the program will be made in either the open market or in privately negotiated transactions from time to time as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchases will be determined by the Company in its discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The program does not require the Company to repurchase any specific number or amount of shares and may be amended, suspended or discontinued at any time in the Company’s discretion and without notice.
Preliminary Third Quarter Results
The Company also announced preliminary results for the third quarter ended September 28, 2014. Based on preliminary data, the Company expects third quarter revenue to be in the range of $250 million to $255 million, compared with $255 million in the third quarter last year. In addition, the previously announced pre-tax restructuring charge in the third quarter of 2014 has been increased to an aggregate amount of $12.5 million. The charge is now comprised of approximately $9.5 million of cash expenditures, primarily for severance expenses, and approximately $3.0 million of non-cash charges for the write-down of the carrying value of impaired assets. This restructuring plan is anticipated to be substantially completed by the end of 2014, and is expected to yield annual cost savings of approximately $14 million beginning in fiscal year 2015. Excluding the restructuring and asset impairment charge, third quarter net income is expected to be between $8 million and $9 million, or $0.12 to $0.14 per diluted share. In the third quarter last year, net income was $15.0 million, or $0.23 per diluted share. Including the restructuring and asset impairment charge, the third quarter of 2014 bottom line result is expected to be between a net loss of $0.7 million and net income of $0.3 million, or $(0.01) to $0.01 per diluted share. Orders received during the third quarter of 2014 were $262 million, compared with $255 million in the third quarter last year, and backlog at the end of the third quarter was up $33 million (or 33%) compared with the beginning of the year.
“We’re pleased with the amendment to our syndicated credit agreement, which gives us the opportunity to refinance our existing debt at a substantially lower interest rate,” said Daniel T. Hendrix, Chairman and Chief Executive Officer of the Company. “These arrangements also will allow us to improve our capital structure by repurchasing shares of our common stock and thereby enhancing our earnings per share.”
Mr. Hendrix continued, “Unfortunately, our preliminary results in the third quarter have not shaped up to our expectations, starting with lighter than expected revenues primarily due to customer deferrals of order delivery dates, disruptions in yarn supply and lower order intake levels at the beginning of the quarter. These factors brought about lower manufacturing throughput and increased margin pressure, prompting us to look for deeper cost cutting as part of our restructuring efforts and resulting in a charge that is larger than our previously announced estimate. Most of the restructuring activities are within the SG&A line item, and have a payback period of less than a year, so we are currently targeting 2015 SG&A expenses to be in the neighborhood of $250 million. Our restructuring and refinancing plans, along with our healthy backlog, should put us in a much improved operating and capital structure going forward.”
Third Quarter Conference Call
Interface intends to release its definitive third quarter 2014 results on Wednesday, October 22, 2014, after the close of the market. Interface will host a conference call the next day, Thursday, October 23, 2014, that will be simultaneously broadcast live over the Internet. Detailed information regarding the third quarter conference call will be announced by the Company at a later date.
Posted October 7, 2014