Interface Sees Q3 Results Below View; Amends Credit Facility, Sets Share Buyback

(RTTNews) - Modular carpets maker Interface Inc. (TILE) on Tuesday forecast lower earnings and revenue for the third quarter compared to last year, citing an increase in one-time charges. The forecast is also below analysts' expectations. Shares of the company declined almost 18 percent in extended trades.

In addition, the company said it has amended its credit facility and plans to redeem its bonds. Further, the company's board of directors has authorized a program to repurchase up to 500,000 shares of its common stock per year.

Daniel Hendrix, Chairman and Chief Executive Officer of Interface said, "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. 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."

For the third quarter, Interface now forecasts reported earnings in a range of net loss of $0.7 million to net income of $0.3 million, or loss of $0.01 per share to net income of $0.01 per share. The forecast is based on preliminary data.

The company said its previously announced pre-tax restructuring charge in the quarter has been increased to a total amount of $12.5 million. This charge is now comprised of cash expenditures of about $9.5 million, primarily for severance expenses, and non-cash charges of about $3.0 million for the write-down of the carrying value of impaired assets.

Interface expects to substantially complete the restructuring plan to be substantially completed by the end of 2014, and to yield annual cost savings of about $14 million beginning in fiscal year 2015.

Excluding the restructuring and asset impairment charge, Interface forecasts third-quarter adjusted net income between $8 million and $9 million, or $0.12 to $0.14 per share. This compares to net income of $15.0 million, or $0.23 per share in the prior-year period.

The company now projects revenue for the quarter in a range of $250 million to $255 million, compared with revenues of $255 million in the same period last year.

On average, analysts polled by Thomson Reuters expect the company to report earnings of $0.25 per share for the quarter on revenues of $272.24 million.

Interface noted that orders received during the quarter were $262 million, up from $255 million in the third quarter last year. Backlog at the end of the quarter increased $33 million, or 33 percent, compared with the beginning of the year.

Interface also said 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. The company expects to fund the share repurchase program through its cash on hand.

Further, Interface has amended its existing syndicated facility agreement, effective October 3, 2014. The amendment expands the aggregate borrowing availability for revolving loans under the credit facility to $250 million from $200 million, and provides new borrowing availability for a $200 million Term Loan A.

The Term Loan A may be used by the company to repurchase or redeem, before December 31, 2014, its existing 7.625 percent senior notes due 2018. The amendment also extends the maturity of the facility until October 3, 2019.

Interface plans to redeem the currently outstanding $247.5 million aggregate principal amount of the notes. The company expects to commence the redemption shortly and complete it before the end of 2014.

The planned redemption is expected to require $266 million to $268 million, depending on the date of redemption. The redemption will be funded through a combination of Term Loan A as well as revolving borrowings under the expanded credit facility, and cash on hand.

Interface intends to announce its definitive third-quarter results on Wednesday, October 22, 2014, after the close of the market.

TILE closed Tuesday's regular trading session at $15.82, down $0.13 or 0.82 percent on a volume of 319,536 shares. In after-hours, the stock further declined $2.83 or 17.89 percent to $12.99.