SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarterly Period Ended June 29, 1997 Commission File Number 0-12016 ------------------------------ INTERFACE, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) GEORGIA 58-1451243 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2859 PACES FERRY ROAD, SUITE 2000, ATLANTA, GEORGIA 30339 --------------------------------------------------------- (Address of principal executive offices and zip code) (770) 437-6800 --------------------------------------------------- (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 --- --- Shares outstanding of each of the registrant's classes of common stock at August 6, 1997: Class Number of Shares ----- ---------------- Class A Common Stock, $.10 par value per share 21,095,096 Class B Common Stock, $.10 par value per share 2,952,007 1
INTERFACE, INC. INDEX PAGE PART I. FINANCIAL INFORMATION Item 1. Financial Statements 3 Balance Sheets - June 29, 1997 and December 29, 1996 3 Statements of Income - Three Months and Six Months Ended 4 June 29, 1997 and June 30, 1996 Statements of Cash Flows - Six Months 5 Ended June 29, 1997 and June 30, 1996 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of 11 Financial Condition and Results of Operations PART II. OTHER INFORMATION II. Item 1. Legal Proceedings 12 Item 2. Changes in Securities 12 Item 3. Defaults Upon Senior Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 13 Item 6. Exhibits and Reports on Form 8-K 13 _________________________________________ THIS FORM 10-Q CONTAINS STATEMENTS WHICH MAY CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED BY THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. ANY SUCH FORWARD- LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS, INCLUDING THE RISKS AND UNCERTAINTIES DISCUSSED IN THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR ITS FISCAL QUARTER ENDED MARCH 30, 1997, UNDER THE CAPTION "CERTAIN FACTORS AFFECTING FORWARD-LOOKING STATEMENTS" IN ITEM 5, WHICH DISCUSSION IS INCORPORATED HEREIN BY THIS REFERENCE. 2
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS INTERFACE, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) <TABLE> <CAPTION> (IN THOUSANDS) JUNE 29, DECEMBER 29, ASSETS 1997 1996 - ------ ------- ------------ <S> <C> <C> CURRENT ASSETS: Cash and Cash Equivalents $ 9,816 $ 8,762 Accounts Receivable 163,936 167,817 Inventories 153,383 146,678 Deferred Tax Asset 7,003 7,057 Prepaid Expenses 25,768 22,986 -------- -------- TOTAL CURRENT ASSETS 359,906 353,300 PROPERTY AND EQUIPMENT, less accumulated depreciation 216,065 208,791 EXCESS OF COST OVER NET ASSETS ACQUIRED 246,009 249,070 OTHER ASSETS 58,744 51,385 -------- -------- $880,724 $862,546 LIABILITIES AND COMMON SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Notes Payable $8,448 $14,918 Accounts Payable 73,639 74,960 Accrued Expenses 69,771 70,919 Current Maturities of Long-Term Debt 2,230 2,919 -------- -------- TOTAL CURRENT LIABILITIES 154,088 163,716 LONG-TERM DEBT, less current maturities 276,037 254,353 SENIOR SUBORDINATED NOTES 125,000 125,000 DEFERRED INCOME TAXES 24,355 23,484 -------- -------- TOTAL LIABILITIES 579,480 566,553 -------- -------- Minority Interest 3,125 3,125 Redeemable Preferred Stock - 19,750 Common Stock 2,715 2,536 Additional Paid-In Capital 153,580 124,557 Retained Earnings 178,079 166,828 Foreign Currency Translation Adjustment (18,509) (3,057) Treasury Stock, 3,600 Class A Shares, at Cost (17,746) (17,746) -------- -------- $880,724 $862,546 ======== ======== </TABLE> See accompanying notes to consolidated condensed financial statements. 3
INTERFACE, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED) <TABLE> <CAPTION> (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ---------------- JUNE 29 JUNE 30, JUNE 29, JUNE 30, 1997 1996 1997 1996 ---- ---- ---- ---- <S> <C> <C> <C> <C> Net Sales $271,746 $237,488 $529,091 $442,505 Cost of Sales 182,342 162,824 356,774 304,928 -------- -------- -------- -------- Gross Profit on Sales 89,404 74,664 172,317 137,577 Selling, General and Administrative Expenses 66,855 55,635 129,811 104,977 -------- -------- -------- -------- Operating Income 22,549 19,029 42,506 32,600 Other (Expense) Income - Net (9,606) (8,986) (19,149) (16,578) -------- -------- -------- -------- Income before Taxes on Income 12,943 10,043 23,357 16,022 Taxes on Income 4,983 4,018 9,044 6,289 -------- -------- -------- -------- Net Income 7,960 6,025 14,313 9,733 Less: Preferred Dividends -- 429 -- 866 -------- -------- -------- -------- Net Income Applicable to Common Shareholders $ 7,960 $ 5,596 $ 14,313 $ 8,867 ======== ======== ======== ======== Primary Earnings Per Common Share $0.34 $0.29 $0.62 $0.47 ======== ======== ======== ======== Weighted Average Common Shares Outstanding 23,620 19,401 23,102 18,938 ======== ======== ======== ======== </TABLE> See accompanying notes to consolidated condensed financial statements. 4
INTERFACE, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) <TABLE> <CAPTION> SIX MONTHS ENDED ---------------- JUNE 29, JUNE 30, 1997 1996 ---- ---- (IN THOUSANDS) <S> <C> <C> OPERATING ACTIVITIES: Net income $14,313 $9,733 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 16,779 16,751 Deferred income taxes 226 169 Cash provided by (used for): Accounts receivable 301 (2,697) Inventories (9,116) (8,157) Prepaid and other (3,782) (3,357) Accounts payable and accrued expenses 1,282 10,955 ------- ------- 20,003 23,397 ------- ------- INVESTING ACTIVITIES: Capital expenditures (22,038) (19,377) Acquisitions of businesses (14,698) (30,916) Other (4,366) (5,836) ------- ------- (41,102) (56,129) ------- ------- FINANCING ACTIVITIES: Net borrowing (reduction) of long-term debt 16,086 35,449 Issuance of common stock 9,458 500 Dividends paid (3,061) (3,141) ------- ------- 22,483 32,808 ------- ------- Net cash provided by (used for) operating, investing and financing activities 1,384 76 Effect of exchange rate changes on cash (330) - ------- ------- CASH AND CASH EQUIVALENTS: Net increase (decrease) during the period 1,054 76 Balance at beginning of period 8,762 8,750 ------- ------- Balance at end of period $9,816 $8,826 ------- ------- </TABLE> See accompanying notes to consolidated condensed financial statements. 5
INTERFACE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS NOTE 1 - CONDENSED FOOTNOTES As contemplated by the Securities and Exchange Commission (the "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 December 29, 1996, as filed with the Commission. 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 periods. Nevertheless, the results shown for interim periods are not necessarily indicative of results to be expected for the full year. NOTE 2 - INVENTORIES Inventories are summarized as follows: JUNE 30, DECEMBER 29, 1997 1996 ---- ---- Finished Goods $ 84,082 $ 81,034 Work-in-Process 30,623 30,464 Raw Materials 38,678 35,180 -------- -------- $153,383 $146,678 ======== ======== NOTE 3 - BUSINESS ACQUISITIONS During the second quarter of 1997, the Company acquired 100% of the outstanding capital stock of four floorcovering contractors -- Floormart, Inc., based in Glendale, California; Canaan Corporation, based in Hamden, Connecticut; Carpet Services of Tampa, Inc., based in Tampa, Florida; and Carpet Solutions Holdings Pty Ltd., based in Brisbane, Queensland, Australia. As consideration, the Company issued 155,022 shares of Class A Common Stock valued at approximately $2.1 million and paid $5.3 million in cash. (The Company also paid $6.2 million in the second quarter of 1997 in connection with acquisitions completed in prior periods.) All of the acquisitions were accounted for as purchases; accordingly, the results of operations for the acquired companies are included in the Company's consolidated financial statements from the respective dates of the acquisitions. The excess of the purchase price over the fair value of the net assets acquired will be amortized over 25 years. During fiscal 1996, the Company acquired 100% of the outstanding capital stock (and, in one case, all of the assets) of fifteen floorcovering contractors -- Landry's Commercial Flooring Co., Inc., based in Oregon; Reiser Associates, Inc., based in Texas; Earl W. Bentley Operating Co., Inc., based in Oklahoma; Quaker City International, Inc., based in Pennsylvania; Superior Holding, Inc., based in Texas; Flooring Consultants, Inc., based in Arizona; Parcom, Inc., based in Virginia; Congress Flooring Corp., based in Massachusetts; Southern Contract Systems, Inc., based in Georgia; B. Shehadi & Sons, Inc., based in New Jersey; A & F Installations, Inc., based in New Jersey; Lasher/White Carpet Co., Inc., based in New York; Oldtown Carpet Center, Inc., based in North Carolina; Architectural Floors, a division of Continental Office Furniture Corp., based in Ohio; and Floor Concepts, Inc., based in Maryland. As consideration, the Company issued 2,674,906 shares of Class A Common Stock valued at approximately $19.3 million and $.8 million in 7% Notes, and paid $23.0 million in cash. All of the acquisitions were accounted for as purchases; accordingly, the results of operations for the acquired companies are included in the Company's consolidated financial statements from the respective dates of the acquisitions. The excess of the purchase price over the fair value of the net assets acquired was approximately $33.9 million and is being amortized over 25 years. In February 1996, the Company acquired 100% of the outstanding common stock of Renovisions, Inc., a nationwide installation services firm (based in Georgia) that has pioneered a new method of carpet replacement, for approximately $6 million in cash ($4 million in February 1996 and $2 million in February 1997). The acquisition was accounted for as a purchase and, accordingly, the results of operations for Renovisions are included in the Company's consolidated financial statements from the date of acquisition. The excess of the purchase price over the fair value of net assets acquired was approximately $4.3 million, and is being amortized over 25 years. 6
In February 1996, the Company acquired all of the outstanding common stock of C-Tec, Inc., a Michigan-based producer of raised/access flooring systems, for approximately $8.8 million (comprised of $4.5 million in cash and $4.3 million in 6% subordinated convertible notes). The acquisition was accounted for as a purchase and, accordingly, the results of operations for C-Tec are included in the Company's consolidated financial statements from the date of acquisition. The excess of the purchase price over the fair value of net assets acquired was approximately $3.1 million, and is being amortized over 25 years. NOTE 4 - EARNINGS PER SHARE AND DIVIDENDS Earnings per share are computed by dividing net income applicable to common shareholders by the combined weighted average number of shares of Class A and Class B Common Stock outstanding during the particular reporting period. The earnings computation does not give effect to the negligible dilutive impact of outstanding stock options. The Series A Preferred Stock issued in June 1993 and redeemed in December 1996 (see Note 5 below) is not considered to be a common stock equivalent because at the date of issuance the stated rate of interest was greater than 66 2/3% of the AAA bond rate. In computing primary earnings per share, the preferred stock dividend of 7% per annum reduces income applicable to common shareholders. For the purposes of computing earnings per share and dividends paid per share, the Company is treating as treasury stock (and therefore not outstanding) the shares that are owned by a wholly-owned subsidiary (3,600,000 Class A shares, recorded at cost). NOTE 5 - REDEEMABLE PREFERRED STOCK In December 1996, the Company notified the holders of its Series A Preferred Stock that it intended to redeem up to $10 million of the approximately $19.7 million (face value) Series A Preferred Stock then outstanding. As a result of this notice, the Series A preferred shareholders, with one exception, instead elected to convert their shares of Series A Preferred Stock into an aggregate of approximately 1,360,000 shares of the Company's Class A Common Stock. The shares of Series A Preferred Stock owned by the non-converting shareholder were redeemed for approximately $6,000. 7
NOTE 6 - SUPPLEMENTAL GUARANTOR FINANCIAL STATEMENTS The Guarantor Subsidiaries, which consist of the Company's principal domestic subsidiaries, are guarantors of the Company's 9.5% senior subordinated notes due 2005. The Supplemental Guarantor Financial Statements are presented herein pursuant to requirements of the Securities and Exchange Commission. INTERFACE, INC. AND SUBSIDIARIES NOTE 6 - SUPPLEMENTAL GUARANTOR FINANCIAL STATEMENTS <TABLE> <CAPTION> STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 29, 1997 INTERFACE, CONSOLIDATION NON- INC. AND GUARANTOR GUARANTOR (PARENT ELIMINATION CONSOLIDATED SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTALS ------------ ------------ ----------- ----------- ------------ (IN THOUSANDS) <S> <C> <C> <C> <C> <C> Net sales $431,171 $164,124 $ - (66,204) $529,091 Cost of sales 310,931 112,047 - (66,204) 356,774 -------- -------- -------- --------- -------- Gross profit on sales 120,240 52,077 - - 172,317 Selling, general and administrative 88,846 33,590 7,375 - 129,811 expenses -------- -------- -------- --------- -------- Operating income 31,394 18,487 (7,375) - 42,506 Other expense (income) Interest Expense 5,294 2,208 9,975 - 17,477 Other 2,639 1,287 (2,254) - 1,672 -------- -------- -------- --------- -------- Total other expense 7,933 3,495 7,721 - 19,149 -------- -------- -------- --------- -------- Income before taxes on income and Equity in income of subsidiaries 23,461 14,992 (15,096) - 23,357 Taxes on income 9,262 5,727 (5,945) - 9,044 Equity in income of subsidiaries - - 23,464 (23,464) - -------- -------- -------- --------- -------- Net income applicable to common $ 14,199 $ 9,265 $ 14,313 ($23,464) $ 14,313 shareholders ======== ======== ======== ======== ======== </TABLE> 8
<TABLE> <CAPTION> BALANCE SHEET JUNE 29, 1997 CONSOLIDATION NON- INTERFACE, INC. AND GUARANTOR GUARANTOR (PARENT ELIMINATION CONSOLIDATED SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTALS ------------ ------------ --------------- ------------- ------------ (in thousands) <S> <C> <C> <C> <C> <C> ASSETS Current Assets: Cash and cash equivalents $ 4,219 $ 5,597 $ - $ - $ 9,816 Accounts receivable 119,806 62,629 (18,499) - 163,936 Inventories 107,486 45,897 - - 153,383 Miscellaneous 9,279 14,167 9,325 - 32,771 -------- -------- -------- ----------- -------- Total current assets 240,790 128,290 (9,174) - 359,906 Property and equipment, less accumulated depreciation 152,339 57,782 5,944 - 216,065 Investment in subsidiaries 108,977 17,775 381,670 (508,422) - Miscellaneous 135,498 37,108 378,702 (492,564) 58,744 Excess of cost over net assets 175,461 66,510 4,038 - 246,009 acquired -------- -------- -------- ----------- -------- $813,065 $307,465 $761,180 $(1,000,986) $880,724 ======== ======== ======== =========== ======== LIABILITIES AND COMMON SHAREHOLDERS' EQUITY Current Liabilities: Notes payable $ 8,448 $ - $ - $ - $ 8,448 Accounts payable 48,413 20,251 4,975 - 73,639 Accrued expenses 42,055 33,335 (5,619) - 69,771 Current maturities of long- 2,230 - - - 2,230 term debt -------- -------- -------- ----------- -------- Total current liabilities 101,146 53,586 (644) - 154,088 Long-term debt, less current maturities 228,684 32,842 293,678 (279,167) 276,037 Senior subordinated notes - - 125,000 - 125,000 Deferred income taxes 12,830 958 10,567 - 24,355 Minority interests 3,125 - - - 3,125 -------- -------- -------- ----------- -------- Total liabilities 345,785 87,386 428,601 (279,167) 582,605 Redeemable preferred stock 57,891 - - (57,891) - Common stock 81,704 102,199 2,715 (183,903) 2,715 Additional paid-in capital 183,612 11,030 153,580 (194,642) 153,580 Retained earnings 149,493 117,677 178,079 (267,170) 178,079 Foreign currency translation (5,420) (10,827) (1,795) (467) (18,509) adjust. Treasury stock - - - (17,746) (17,746) -------- -------- -------- ----------- -------- $813,065 $307,465 $761,180 $(1,000,986) $880,724 ======== ======== ======== =========== ======== </TABLE> 9
<TABLE> <CAPTION> STATEMENT OF CASH FLOW FOR THE SIX MONTHS ENDED JUNE 29, 1997 INTERFACE, CONSOLIDATION NON- INC. AND GUARANTOR GUARANTOR (PARENT ELIMINATION CONSOLIDATED SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTALS ------------ ------------ ------------ -------- ------ (IN THOUSANDS) <S> <C> <C> <C> <C> <C> Cash flows from operating activities: $ 17,731 $ 4,135 $ (1,863) $ - $ 20,003 -------- -------- -------- ------- -------- Cash flows from investing activities: Purchase of plant and equipment (17,937) (2,261) (1,840) - (22,038) Acquisitions, net of cash acquired - - (14,698) - (14,698) Other - - (4,366) - (4,366) -------- -------- -------- ------- -------- Net cash provided by (used in) (17,937) (2,261) (20,904) - (41,102) investing activities -------- -------- -------- ------- -------- Cash flows from financing activities: Net borrowings (repayments) 944 (738) 15,880 - 16,086 Proceeds from issuance of common - - 9,458 - 9,458 stock Cash dividends paid - - (3,061) - (3,061) Other - - - - - -------- -------- -------- ------- -------- Net cash provided by (used in) financing 944 (738) 22,277 - 22,483 activities -------- -------- -------- ------- -------- Effect of exchange rate change on cash - (330) - - (330) -------- -------- -------- ------- -------- Net increase (decrease) in cash 738 806 (490) - 1,054 Cash at beginning of year 3,481 4,791 490 - 8,762 -------- -------- -------- ------- -------- Cash at end of year $ 4,219 $ 5,597 $ - $ - $ 9,816 ======== ======== ======== ======= ======== </TABLE> 10
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 June 29, 1997, the Company's net sales increased $34.3 million (14.4%) and $86.6 million (19.6%), respectively, compared with the same periods in 1996. These increases were primarily attributable to increased sales volume in (i) the Company's floorcoverings operations (associated in part with the acquisitions of the floorcovering contractors in the Company s Re:Source Americas network), (ii) the Company's specialty products division resulting in part from the sale of specialty products through the Re:Source Americas network, and (iii) the Company's interior fabrics operations due to increased foreign demand for its products. These increases were somewhat offset by the weakening of certain key currencies (particularly the Dutch guilder and Japanese yen) against the U.S. dollar, the Company s reporting currency. Cost of sales, as a percentage of sales, decreased slightly to 67.1% and 67.4%, respectively, for the three month and six month periods ended June 29, 1997, when compared to 68.5% and 68.8% for the same periods in 1996. The decrease is primarily attributable to manufacturing efficiencies resulting from the Company's "war on waste" initiative and the new manufacturing facilities in its floorcoverings and interior fabrics operations. Also, the Company's mass customization production strategy continues to result in a shift to higher margin products. These improved margin levels continue to be somewhat mitigated by the acquisition of the floorcovering contractors comprising the Re:Source Americas network, which historically had higher cost of sales ratios than the Company. Selling, general and administrative expenses, as a percentage of sales, increased slightly to 24.6% and 24.5%, respectively, for the three month and six month periods ended June 29, 1997, when compared to 23.4% and 23.7% during the same periods in 1996. The increase is attributable to (i) administrative expenses associated with building an infrastructure to manage the Re:Source Americas network, and (ii) increased marketing and sampling expenses in the Company s floorcovering operations associated with the introduction of new products as the Company continues to implement a mass customization strategy in both its U.S. and its European and Asia-Pacific operations. For the three month and six month periods ended June 29, 1997, the Company's other expense increased $.6 million and $2.6 million, respectively, compared to the same periods in 1996, primarily due to an increase in bank debt incurred as a result of the Company's acquisitions, as well as an increase in interest rates. As a result of the aforementioned factors, the Company's net income increased 42% to $7.9 million and 61% to $14.3 million, respectively, for the three month and six month periods ended June 29, 1997, compared to the same periods in 1996. LIQUIDITY AND CAPITAL RESOURCES. The primary uses of cash during the six month period ended June 29, 1997 have been (i) $22 million for additions to property and equipment in the Company's manufacturing facilities, (ii) $14.7 million associated with acquisitions, and (iii) $4.4 million related to various deposits and other long-term assets. These uses were funded primarily by $20 million from operating activities, $16 million from long- term financing, and $9.5 million from the issuance of common stock. Cash provided by operating activities decreased to $20 million during the six month period ended June 29, 1997 from $23.3 million during the corresponding period in the prior year. This decrease was caused primarily by a decrease in accounts payable and accrued expenses and an increase in inventories. This decrease was somewhat offset by an increase in net income. The Company, as of June 29, 1997, recognized a $15.5 million decrease in foreign currency translation adjustment compared to that of December 29, 1996. The decrease was associated primarily with the Company's investments in subsidiaries located in the United Kingdom and continental Europe. The translation adjustment to shareholders' equity was converted by the guidelines of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 52. The Company employs a variety of off-balance sheet financial instruments, including foreign currency swap agreements and foreign currency exchange contracts, to reduce its exposure to adverse fluctuations in interest and foreign currency exchange rates. At June 29, 1997, the Company had approximately $40 million (notional amount) of foreign currency hedge contracts outstanding, consisting principally of currency swap contracts to hedge firmly committed Dutch guilder and Japanese yen currency revenues. At June 29, 1997, the Company utilized interest rate swap agreements to effectively convert approximately $73 million of variable rate debt to fixed rate debt. The interest rate swap agreements have maturity dates ranging from nine to twenty-four months. 11
The Company continually monitors its position with, and the credit quality of, the financial institutions which are counterparties to its off-balance sheet financial instruments and does not currently anticipate nonperformance by the counterparties. 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. In June, 1997, the Company amended its senior bank credit facilities to obtain a $50,000,000 net increase in such facilities. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is not aware of any material pending legal proceedings involving it or any of its property. ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The Company held its annual meeting of shareholders on May 20, 1997. (b) Not applicable. (c) The matters considered at the annual meeting, and the votes cast for, against or withheld, as well as the number of abstentions, relating to each matter, are as follows: (i) Election of the following directors: <TABLE> <CAPTION> Class A For Withheld ------- --- -------- <S> <C> <C> Dianne Dillon-Ridgley 21,008,640 130,095 Carl I. Gable 21,008,290 130,445 Dr. June M. Henton 21,011,790 126,945 J. Smith Lanier, II 21,008,490 130,245 Leonard G. Saulter 21,010,248 128,487 Clarinus C.Th. van Andel 21,011,290 127,445 Class B For Withheld ------- --- -------- Ray C. Anderson 2,408,832 0 Brian L. DeMoura 2,408,832 0 Charles R. Eitel 2,408,832 0 Daniel T. Hendrix 2,408,832 0 Don E. Russell 2,408,832 0 John H. Walker 2,408,832 0 Gordon D. Whitener 2,408,832 0 </TABLE> 12
(ii) Proposal to adopt the Company's Omnibus Stock Incentive Plan: For: 18,124,699 Against: 4,773,290 Abstain: 313,837 (d) Not applicable. ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are filed with this report: EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 3.1 Articles of Incorporation (composite as of September 8, 1988) (included as Exhibit 3.1 to the Company's annual report on Form 10-K for the year ended January 3, 1993 previously filed with the Commission and incorporated herein by reference) and Articles of Amendment (Series A Preferred Stock Designation), dated June 17, 1993 (included as Exhibit 4.1 to the Company's current report on Form 8-K, filed with the Commission on July 7, 1993 and incorporated herein by reference). 3.2 Bylaws, as amended (included as Exhibit 3.2 to the Company's quarterly report on Form 10-Q for the quarter ended April 1, 1990, previously filed with the Commission and incorporated herein by reference). 4.1 See Exhibits 3.1 and 3.2 for provisions in the Company's Articles of Incorporation, as amended, and Bylaws defining the rights of holders of Common Stock of the Company. 4.2 Indenture governing the Company's 9.5% Senior Subordinated Notes due 2005, dated as of November 15, 1995, among the Company, certain U.S. subsidiaries of the Company, as Guarantors, and First Union National Bank of Georgia, as Trustee (included as Exhibit 4.1 to the Company's registration statement on Form S-4, File No. 33-65201, previously filed with the Commission and incorporated herein by reference). 4.3 Registration Rights Agreement dated as of November 21, 1995, among the Company, certain subsidiaries of the Company as Guarantors and the Initial Purchasers of the Company's Notes (included as Exhibit 4.3 to the Company's registration statement on Form S-4, File No. 33-65201, previously filed with the Commission and incorporated herein by reference). 4.4 Form of Exchange Note (included as part of Exhibit 4.2). 10.1 Employment Agreement of Ray C. Anderson dated April 1, 1997 10.2 Change of Control Agreement of Ray C. Anderson dated April 1, 1997 10.3 Employment Agreement of Charles R. Eitel dated April 1, 1997 10.4 Change of Control Agreement of Charles R. Eitel dated April 1, 1997 10.5 Employment Agreement of Brian L. DeMoura dated April 1, 1997 10.6 Change of Control Agreement of Brian L. DeMoura dated April 1,1997 13
10.7 Employment Agreement of Daniel T. Hendrix dated April 1, 1997 10.8 Change of Control Agreement of Daniel T. Hendrix dated April 1, 1997 10.9 Employment Agreement of Gordon D. Whitener dated April 1, 1997 10.10 Change of Control Agreement of Gordon D. Whitener dated April 1, 1997 10.11 Employment Agreement of Raymond S. Willoch dated April 1, 1997 10.12 Change of Control Agreement of Raymond S. Willoch dated April 1, 1997 10.13 Employment Agreement of Jeffrey A. Goldberg dated April 1, 1997 10.14 Change of Control Agreement of Jeffrey A. Goldberg dated April 1, 1997 10.15 Employment Agreement of Alan S. Kabus dated April 1, 1997 10.16 Change of Control Agreement of Alan S. Kabus dated April 1, 1997 10.17 Employment Agreement of Joyce D. LaValle dated April 1, 1997 10.18 Change of Control Agreement of Joyce D. LaValle dated April 1, 1997 10.19 Employment Agreement of John H. Walker dated April 1, 1997 10.20 Change of Control Agreement of John H. Walker dated April 1, 1997 10.21 Employment Agreement of John L. Partridge dated April 1, 1997 10.22 Change of Control Agreement of John L. Partridge dated April 1, 1997 10.23 Employment Agreement of John R. Wells dated April 1, 1997 10.24 Change of Control Agreement of John R. Wells dated April 1, 1997 10.25 Employment Agreement of Michael D. Bertolucci dated April 1, 1997 10.26 Change of Control Agreement of Michael D. Bertolucci dated April 1, 1997 10.27 Second Amended and Restated Credit Agreement, dated as of June 25, 1997, among the Company (and certain direct and indirect subsidiaries), the lenders listed therein, SunTrust Bank, Atlanta and The First National Bank of Chicago 10.28 Term Loan Agreement, dated as of June 25, 1997, among the Company (and certain direct and indirect subsidiaries), the lenders listed therein, SunTrust Bank, Atlanta and The First National Bank of Chicago 27.1 Financial Data Schedule (for SEC use only). (b) No reports on Form 8-K were filed during the quarter ended June 29, 1997. 14
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: August 12, 1997 By: /s/ Daniel T. Hendrix Daniel T. Hendrix Senior Vice President (Principal Financial Officer) 15
EXHIBIT INDEX <TABLE> <CAPTION> EXHIBIT NUMBER DESCRIPTION OF EXHIBIT <C> <S> 10.1 Employment Agreement of Ray C. Anderson dated April 1, 1997 10.2 Change of Control Agreement of Ray C. Anderson dated April 1, 1997 10.3 Employment Agreement of Charles R. Eitel dated April 1, 1997 10.4 Change of Control Agreement of Charles R. Eitel dated April 1, 1997 10.5 Employment Agreement of Brian L. DeMoura dated April 1, 1997 10.6 Change of Control Agreement of Brian L. DeMoura dated April 1, 1997 10.7 Employment Agreement of Daniel T. Hendrix dated April 1, 1997 10.8 Change of Control Agreement of Daniel T. Hendrix dated April 1, 1997 10.9 Employment Agreement of Gordon D. Whitener dated April 1, 1997 10.10 Change of Control Agreement of Gordon D. Whitener dated April 1, 1997 10.11 Employment Agreement of Raymond S. Willoch dated April 1, 1997 10.12 Change of Control Agreement of Raymond S. Willoch dated April 1, 1997 10.13 Employment Agreement of Jeffrey A. Goldberg dated April 1, 1997 10.14 Change of Control Agreement of Jeffrey A. Goldberg dated April 1, 1997 10.15 Employment Agreement of Alan S. Kabus dated April 1, 1997 10.16 Change of Control Agreement of Alan S. Kabus dated April 1, 1997 10.17 Employment Agreement of Joyce D. LaValle dated April 1, 1997 10.18 Change of Control Agreement of Joyce D. LaValle dated April 1, 1997 10.19 Employment Agreement of John H. Walker dated April 1, 1997 10.20 Change of Control Agreement of John H. Walker dated April 1, 1997 10.21 Employment Agreement of John L. Partridge dated April 1, 1997 10.22 Change of Control Agreement of John L. Partridge dated April 1, 1997 10.23 Employment Agreement of John R. Wells dated April 1, 1997 10.24 Change of Control Agreement of John R. Wells dated April 1, 1997 10.25 Employment Agreement of Michael D. Bertolucci dated April 1, 1997 10.26 Change of Control Agreement of Michael D. Bertolucci dated April 1, 1997 10.27 Second Amended and Restated Credit Agreement, dated as of June 25, 1997 among the Company (and certain direct and indirect subsidiaries), the lenders listed therein, SunTrust Bank, Atlanta and The First National Bank of Chicago 10.28 Term Loan Agreement, dated as of June 25, 1997, among the Company (and certain direct and indirect subsidiaries), the lenders listed therein, SunTrust Bank, Atlanta and The First National Bank of Chicago 27.1 Financial Data Schedule (for SEC use only) </TABLE> 16