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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 2, 2000
COMMISSION FILE NO: 0-12016
INTERFACE, INC.
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(Exact name of registrant as specified in its charter)
Georgia 58-1451243
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(State of incorporation) (I.R.S. Employer Identification No.)
2859 Paces Ferry Road
Suite 2000
Atlanta, Georgia 30339
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (770) 437-6800
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Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act:
Class A Common Stock, $0.10 Par Value Per Share
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(Title of Class)
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 /_/
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /_/
Aggregate market value of the voting and non-voting stock held by
non-affiliates of the registrant as of March 28, 2000 (assuming conversion of
Class B Common Stock into Class A Common Stock): $202,795,057 (47,716,484 shares
valued at the last sales price of $4.25 on March 28, 2000). See Item 12.
Number of shares outstanding of each of the registrant's classes of
Common Stock, as of March 28, 2000:
Class Number of Shares
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Class A Common Stock,
$0.10 par value per share ......................... 45,150,760
Class B Common Stock,
$0.10 par value per share ......................... 6,664,441
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the fiscal
year ended January 2, 2000 are incorporated by reference into Parts I and II.
Portions of the Proxy Statement for the 2000 Annual Meeting of
Shareholders are incorporated by reference into Part III.
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PART I
ITEM 1. BUSINESS
General
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Interface, Inc. ("Interface" or the "Company ") is a global
manufacturer, marketer, installer and servicer of products for the commercial
and institutional interiors market. With a 40% market share, the Company is the
worldwide leader in the modular carpet segment, which includes both carpet tile
and two-meter roll goods. The Company's BENTLEY(R), PRINCE STREET(R) and
FIRTH(TM) brands are leaders in the high quality, designer-oriented sector of
the broadloom segment. The Company provides specialized carpet replacement,
installation and maintenance services through its Re:Source Americas service
network. The Company's Fabrics Group includes the leading U.S. manufacturer of
panel fabrics for use in open plan office furniture systems, with a North
American market share of approximately 57%. The Company's specialty products
operations produce raised/access flooring systems, antimicrobial additives,
adhesives and various other chemical compounds and products. These complementary
product offerings, together with an integrated marketing philosophy, enable
Interface to take a "total interior solutions" approach to serving the diverse
needs of its customers around the world.
The Company markets products in over 100 countries around the world
under such established brand names as INTERFACE(R) and HEUGA(R) in modular
carpet; BENTLEY, PRINCE STREET and FIRTH in broadloom carpets; GUILFORD OF
MAINE(R), STEVENS LINEN(TM), TOLTEC(TM), INTEK(TM), CAMBORNE(TM) and
GLENSIDE(TM) in interior fabrics and upholstery products; INTERSEPT(R) in
chemicals; and C-TEC(R), ATLANTIC(TM) and INTERCELL(R) in raised/access flooring
systems. The Company utilizes an internal marketing and sales force of over
1,100 experienced personnel (the largest in the commercial floorcovering
industry), stationed at over 100 locations in over 35 countries, to market the
Company's carpet products and services in person to its customers. The Company's
principal geographic markets are the Americas (69% of 1999 net sales), Europe
(26% of 1999 net sales), and Asia-Pacific (5% of 1999 net sales).
While the Company's net sales from U.S. operations have historically
been derived primarily from the renovation market, Interface believes that the
recovery in the U.S. commercial office market, which began in the mid 1990's,
will drive growth in the new construction market over the next several years.
From a high of nearly 24% in 1986, suburban office vacancy rates dropped to a
twelve year low of 9.0% as of March 1998 but had risen again to 10.1% as of
September, 1999, according to CB Commercial/Torto Wheaton Research. Thus,
although the U.S. commercial office market has recently experienced some
weakness in demand, the Company nonetheless believes that this weakness is
temporary and that the recovery has not yet run its course.
In its international markets, the Company expects to benefit from
increased use and acceptance of its products. In addition, the commercial office
markets in both Europe and Asia-Pacific have recently shown signs of recovery.
For 1999, the Company had net sales and net income of $1.228 billion
and $23.5 million, respectively. Net sales were composed of sales of
floorcovering products and related services ($974 million), interior fabrics
sales ($197.1 million) and raised/access flooring and other specialty product
sales ($57.1 million), accounting for 79.3%, 16.0% and 4.7% of total net sales,
respectively. The Company achieved a compound annual growth rate in its net
sales and net income (excluding the 1998 restructuring charge, discussed below)
of 11.3% and 8.8%, respectively, over the five-year period from 1995 to 1999.
Recent Developments
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In 1999, the Company introduced a new flooring product marketed under
the brand name SOLENIUM(TM). The Company believes that this new product
essentially creates a new flooring product category, as it combines the benefits
of resilient flooring products, such as hardwoods or linoleum (greater
durability and lower maintenance), with those of carpet (increased styling,
sound absorption and comfort). SOLENIUM floorcovering is manufactured from a
specialized fiber which the Company believes provides superior stain resistance
qualities. The fiber is woven to create a highly-styled textile flooring product
that is supported by the Company's NEXSTEP(R) backing.
During the fourth quarter of 1998, the Company recorded a pre-tax
restructuring charge, the first in the Company's history, of $25.3 million
($0.31 per diluted share after tax) related to plant closures and
consolidations, an aggregate headcount reduction of approximately 253 salaried
and hourly employees in Europe, Asia and the United States, and the write-down
and disposal of certain assets. The restructuring charge is comprised of
approximately $13 million of cash expenditures for severance benefits and
relocation costs and approximately $12.3 million of non-cash charges, primarily
for the write-down of impaired assets. The Company anticipates that the
restructuring will result in annual savings of approximately $8 million. Further
discussion concerning the restructuring appears in the Company's Consolidated
Financial Statements and Notes thereto contained in the Company's 1999 Annual
Report to Shareholders. See Item 8 below.
Company Strengths
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Management believes that the Company benefits from several significant
competitive advantages, which will assist it in sustaining and enhancing its
position as a market leader. The Company's principal strengths include:
STRONG BRAND NAMES WITH REPUTATION FOR QUALITY AND
RELIABILITY. The Company's products are known in the industry for their
high quality and reliability. The Company's strong brand names in
carpets, interior fabrics, and raised/access flooring systems are
leaders in the industry. INTERFACE and HEUGA are the preeminent brand
names in carpet tiles for commercial and institutional use worldwide.
The PRINCE STREET and BENTLEY brands are rated the number two and three
brands, respectively, for carpet design in the U.S. according to a 1998
survey of interior designers published in the FLOOR FOCUS industry
publication. On the international front, Firth Carpets has a reputation
in Europe for manufacturing high-quality woven and tufted products.
GUILFORD and CAMBORNE are leading brand names in their respective
markets for interior fabrics.
EFFICIENT AND LOW-COST GLOBAL MANUFACTURING OPERATIONS. The
Company's global manufacturing capabilities are an important
competitive advantage in serving the needs of multinational corporate
customers who require products and services at various locations around
the world. Global manufacturing locations enable the Company to compete
effectively with local producers in its international markets, while
also affording international customers more favorable delivery times
and freight costs. The Company's capital investment program to
consolidate and modernize the yarn manufacturing operations of its
Fabrics Group has resulted in significant efficiencies and cost
savings, as well as new product capabilities. In addition, these
investments have allowed Interface to respond to a shift in demand
towards lighter-weight, less expensive fabrics by original equipment
manufacturer (OEM) panel fabric customers.
DEDICATED DISTRIBUTION AND SERVICE CAPABILITY THROUGH
RE:SOURCE PROVIDER NETWORK. The Company's Re:Source Americas service
network includes 19 owned and approximately 78 affiliated commercial
floorcovering contractors. The Company believes that the service,
marketing and distribution capabilities added by Re:Source Americas
have resulted in (i) increased sales of Company products as contractors
in the network have begun to supply Company products on a preferred
basis, (ii) enhanced customer satisfaction by assisting customers in
the process of selecting, purchasing, installing, maintaining and
recycling carpet products, (iii) improved pricing for the Company's
floorcovering products, and (iv) increased operating margins by
consolidating administrative functions and coordinating and
streamlining sales efforts by Company and contractor sales personnel.
Re:Source Americas also provides a channel for delivery of a variety of
additional services and products offered by the Company. See
"Floorcovering Products -- Services."
STRONG CUSTOMER AND ARCHITECTURAL AND DESIGN COMMUNITY
RELATIONSHIPS. The Company focuses its sales efforts at the design
phase of commercial projects. Interface personnel cultivate
relationships both with the owners and users of the facilities involved
in the projects and with specifiers such as architects, engineers,
interior designers and contracting firms who are directly involved in
specifying products and often make or significantly influence purchase
decisions. The Company emphasizes its product design and styling
capabilities and its ability to provide creative, high-value solutions
to its customers' needs. Interface marketing and sales personnel also
serve as a primary technical resource for the Company's customers, both
with respect to product maintenance and service as well as design
matters.
AWARD-WINNING AND INNOVATIVE PRODUCT DESIGN AND DEVELOPMENT
CAPABILITIES. The Company's product design and development capabilities
give Interface a significant competitive advantage. Interface has an
exclusive consulting contract with the leading design firm David Oakey
Designs, Inc. ("Oakey Designs") to augment the Company's internal
research, development and design staff. Since engaging Oakey Designs in
1994, the Company has introduced more than 104 new carpet designs in
the U.S. and has enjoyed considerable success in winning U.S. carpet
industry design awards bestowed by the International Interior Design
Association (IIDA), particularly in the carpet tile division. In 1996,
Oakey Designs' services were extended to the Company's international
carpet operations.
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SKILLED MANAGEMENT TEAM AND COMMITTED EMPLOYEES. An important
component of the Company's competitive advantage is the continued
strengthening of its management team and its commitment to developing
and maintaining an enthusiastic and collaborative work force. The
Company has a team of skilled and dedicated executives to guide the
Company's continued growth and diversification. In addition, over the
past four years, the Company has made a substantial investment in its
approximately 7,250 employees worldwide. In 1997, for example, the
Company created an internal employee training and education team, known
as One World Learning, which implements corporate-wide learning
programs. In both 1998 and 1999, FORTUNE magazine rated Interface one
of the top 100 employers in the U.S. on the strength of the Company's
commitment to its employees. FORTUNE has also rated Interface one of
the "10 Most Admired Companies" in its industry category.
Business Strategy and Principal Initiatives
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Interface's long-standing corporate strategy has been to diversify and
integrate worldwide. The Company seeks to diversify by developing internally or
acquiring related product lines and businesses in the commercial interiors field
and to integrate by identifying and developing synergies and operating
efficiencies among the Company's products and global businesses. In continuing
that strategy, the Company is pursuing the following principal strategic
initiatives:
"MASS CUSTOMIZATION". The Company has implemented aspects of
its successful U.S. mass customization production initiative at its
floorcovering operations in Europe and Asia-Pacific and at its interior
fabrics operations. Through mass customization the Company is able to
respond to customers' requirements for custom or highly styled products
by quickly and efficiently producing both custom samples and the
ultimate products, and to more readily determine proven "winners" that
can be manufactured for inventory for broader distribution. Mass
customization was introduced to the Company's U.S. carpet tile business
in 1994, and its principal components include (i) developing a
simplified but versatile yarn utilization system, (ii) investing in
highly efficient, state-of-the-art tufting and custom sampling
equipment, and (iii) utilizing innovative design and styling to create
products. This strategy has resulted in substantial operating
improvements in the Company's floorcovering operations, including
increased margins and reduced inventory levels of both raw materials
and standard products.
GLOBAL MARKETING AND MANUFACTURING CAPABILITIES. The Company's
objective is to use the complementary nature of its product lines to
offer "total interior solutions" to its customers worldwide, meeting
their diverse needs for products and services. The Company combines its
global marketing and manufacturing capabilities to successfully target
multinational companies and compete effectively in local markets
worldwide. The Company has a seven-person global account team with
responsibility for the Company's largest multinational customers and
prospects, and it has implemented a marketing communications network to
link its worldwide marketing and sales force. The Company has also
consolidated management responsibility for certain key operational
areas, which has significantly increased global cooperation and
coordination in product planning, production and marketing activities -
in effect, "hooking it up" worldwide.
ECOLOGICAL SUSTAINABILITY THROUGH QUEST AND ECOSENSE PROGRAMS.
In January 1995, the Company began a worldwide war-on-waste initiative
referred to internally as "QUEST". Applying a zero-based definition of
waste (broadly defined as any measurable cost that goes into
manufacturing a product but does not result in identifiable value to
the customer), the Company realized an aggregate of approximately $10
million in savings in 1999. Management believes the Company can
eliminate an additional $10 million of such waste in 2000. Since its
inception in 1995, the cumulative savings attributable to the QUEST
initiative as of the end of fiscal year 1999 were $124 million. The
war-on-waste represents a first step in the Company's broader EcoSense
initiative, which is the Company's long-range program to achieve
greater resource efficiency and, ultimately, ecological
"sustainability" - that is, the point at which Interface is no longer a
net "taker" from the earth. The Company believes that its pursuit of
these initiatives provides a competitive advantage in marketing its
products to an increasing number of customers.
SELECTIVE STRATEGIC ACQUISITIONS. The Company has successfully
expanded its business and product lines through strategic acquisitions.
The Company expanded its carpet operations with the acquisitions of
Heuga Holding B.V. (now Interface Europe B.V.) in 1988, Bentley Mills,
Inc. in 1993, Prince Street Technologies, Ltd. in 1994 and Firth
Carpets Ltd. in 1998. Its interior fabrics business has been expanded
significantly with the acquisitions of certain assets of Stevens Linen
Associates, Inc. in 1993, Toltec Fabrics, Inc. and the Intek
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division of Springs Industries, Inc. in 1995, Camborne Holdings, Ltd.
in 1997 and Glenside Fabrics Limited in 1998. In addition, the
Company's acquisitions of Renovisions, Inc. in 1996 and Facilities
Resource Group, Inc. in 1997, and the formation of the Re:Source
Americas services network through acquisitions in 1996- 1999 have
enabled the Company to expand rapidly into a variety of commercial
interior services. The Company's 1998 acquisitions of the vinyl
floorcoverings business of Scan-Lock A/S and the raised/access flooring
business of Atlantic Access Flooring, Inc. have broadened the Company's
lines of floorcovering products and raised/access flooring systems,
respectively. The Company intends to continue to selectively target
companies and product lines that complement existing product lines and
further the Company's ability to provide total interior solutions for
its customers.
Floorcovering Products
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Products
The Company is the world's largest manufacturer and marketer of modular
carpet, which includes carpet tile and two-meter roll goods, with a 40%
worldwide market share. Broadloom carpet generally consists of tufted carpet
sold primarily in twelve-foot rolls. The Company's broadloom carpet operations -
Bentley Mills, Prince Street and Firth Carpets - focus on the high quality,
designer-oriented sector of the U.S. and U.K. broadloom carpet markets. The
Company also offers a vinyl hard flooring product in Europe under the brand
SCAN-LOCK(TM).
MODULAR CARPET. Marketed under the leading global brands INTERFACE and
HEUGA, the Company's free-lay modular carpet system utilizes carpet tiles cut in
precise, dimensionally stable squares (usually 50 square centimeters) to produce
a floorcovering which combines the appearance and texture of broadloom carpet
with the advantages of a modular carpet system. The growing use of open plan
interiors and modern office arrangements utilizing demountable, movable
partitions and modular furniture systems has encouraged the use of carpet tile,
as compared to other soft surface flooring products. The Company's GLASBAC(R)
technology employs a unique, fiberglass-reinforced polymeric composite backing
that allows the tile to be installed and remain flat on the floor without the
need for general application of adhesives or use of fasteners. This type of
carpet tile thus may be easily removed and replaced, permitting rearrangement of
office partitions and modular furniture systems without the inconvenience and
expense associated with removing, replacing or repairing other soft surface
flooring products, including broadloom carpeting. Carpet tile facilitates access
to sub-floor telephone, electrical, computer and other wiring by lessening
disruption of operations, and also eliminates the cumulative damage and
unsightly appearance commonly associated with frequent cutting of conventional
carpet as utility connections and disconnections are made. Because a relatively
small portion of a carpet installation often receives the bulk of traffic and
wear, the ability to rotate carpet tiles between high traffic and low traffic
areas and to selectively replace worn tiles can significantly increase the
average life and cost efficiency of the floorcovering. The Company believes
that, within the overall floorcovering market, the demand for modular carpet is
increasing worldwide as more customers recognize these advantages.
The Company uses a number of conventional and technologically advanced
methods of carpet construction to produce carpet tiles in a wide variety of
colors, patterns, textures, pile heights and densities designed to meet both the
practical and aesthetic needs of a broad spectrum of commercial interiors -
particularly offices, health care facilities, airports, educational and other
institutions, and retail facilities. The Company's carpet tile systems permit
distinctive styling and patterning that can be used to complement interior
designs, to set off areas for particular purposes and to convey graphic
information. While the Company continues to manufacture and sell a substantial
portion of its carpet tile in standard styles, an increasing percentage of the
Company's modular carpet sales is custom or made-to-order products designed to
meet customer specifications.
The Company produces and sells carpet tile specially adapted for the
health care facilities market. The Company's carpet tile possesses
characteristics - such as the use of the INTERSEPT antimicrobial,
static-controlling nylon yarns, and thermally pigmented, colorfast yarns -
making it suitable for use in such facilities in lieu of hard surface flooring.
The Company also manufactures and sells two-meter roll goods which are
structure-backed and offer many of the advantages of both carpet tile and
broadloom carpet. These roll goods are often used in conjunction with carpet
tiles to create special design effects. The Company's current principal
customers for such products are in the education, health care and government
sectors. The Company believes, however, that the demand for two-meter roll
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goods is increasing generally within the commercial and institutional interiors
market and expects two-meter roll goods to account for a growing percentage of
its U.S. modular carpet sales in the future.
BROADLOOM CARPET. The Company has garnered a significant share of the
high-end, designer-oriented broadloom carpet segment by combining innovative
product design and styling capabilities and short production and delivery times
with a marketing strategy geared toward serving and working closely with
interior designers, architects and other specifiers. Prince Street's
design-sensitive broadloom products center around unique, multi-dimensional
textured carpets with a hand-tufted look, while Bentley Mills' designs emphasize
the dramatic use of color. The PRINCE STREET and BENTLEY brands were rated the
number two and three brands, respectively, for carpet design in the U.S.
according to a 1998 survey of interior designers published in the FLOOR FOCUS
industry publication. In addition, Firth Carpets has a reputation for
manufacturing high-quality woven and tufted products, mostly using woolen spun
blends.
RESILIENT TEXTILE FLOORING. In 1999, the Company introduced SOLENIUM
resilient textile flooring, a new category of product which combines the
functional and aesthetic benefits of resilient flooring and carpet. SOLENIUM is
highly stain-resistant, has carpet-like softness, yet is as easy to maintain as
vinyl flooring. SOLENIUM is manufactured using one-third less material and
energy than carpet and is designed to be completely recyclable. The Company
believes Solenium fills an unmet need within health care, retail and education
markets.
VINYL FLOORING. In 1998, the Company acquired the flooring business of
Denmark-based Scan-Lock A/S, a manufacturer of extruded vinyl products using
recycled and post-industrial waste, and has moved this business to the U.K. The
SCAN-LOCK product is a high performance interlocking hard flooring suitable for
heavy duty applications, including factories and sports facilities.
Services
The Company provides commercial carpet installation services through
the Re:Source Americas services network. The network includes approximately 97
owned or affiliated commercial floorcovering contractors strategically located
throughout the major metropolitan areas of the United States. The network: (i)
allows the Company to monitor and enhance customer satisfaction throughout the
product ownership cycle, resulting in fewer claims; (ii) reduces the Company's
cost of selling by bolstering efforts of sales representatives at the mill level
with contractor-level support; (iii) improves pricing for products; and (iv)
achieves efficiencies by augmenting administrative functions of contractors.
The Re:Source Americas service network also provides carpet maintenance
services using the Company's IMAGE(TM) maintenance system. The IMAGE system
includes a custom-engineered maintenance methodology and a line of cleaning
chemicals manufactured by Interface Americas Re:Source Technologies, Inc. In
Europe, the Company has re-launched the European version of the IMAGE program,
pursuant to which the Company has licensed selected independent service
contractors to provide carpet maintenance services.
The Re:Source Americas service network also provides carpet replacement
services using its RENOVISIONS(R) process. This process utilizes patented
lifting equipment and specialty tools to lift office equipment and modular
workstations in place, permitting the economical replacement of existing carpet
with virtually no disruption of the customer's business. Other proprietary
products facilitate the movement of file cabinets, office furniture, and even
complete workstations, without the inefficiency and disruption associated with
unloading and dismantling the items being moved.
Finally, the Re:Source Americas service network provides a channel for
delivery of a variety of additional services and products offered by the
Company, including furniture moving and installation, furniture refurbishment,
project management, carpet reclamation and recycling through the Company's
RE:ENTRY(TM) reclamation system, adhesives manufactured by Re:Source
Technologies, specialty products manufactured by Pandel, Inc. and raised/access
flooring systems manufactured by Interface Architectural Resources, Inc.
Marketing and Sales
The Company traditionally has focused its carpet marketing strategy on
major accounts, seeking to build lasting relationships with national and
multinational end-users, and on specifiers, such as architects, engineers,
interior designers, and contracting firms who often make or significantly
influence the purchase decision. The acquisitions of Bentley Mills and Prince
Street significantly strengthened the Company's relationships with interior
designers and architects and have enhanced the Company's ability to target those
and other specifiers at the critical design stage of commercial projects. The
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Company emphasizes sales to the commercial office sector, both new construction
and renovation, as well as to health care facilities, governmental institutions
and public facilities, including libraries, museums, convention and hospitality
centers, airports, schools and hotels. The Company's marketing efforts are
enhanced by the well-known brand names of its carpet products, including
INTERFACE and HEUGA in modular carpet, and BENTLEY, PRINCE STREET and FIRTH in
broadloom carpet.
An important part of the Company's marketing and sales efforts involves
the preparation of custom-made samples of requested carpet designs, in
conjunction with the development of innovative product designs and styles to
meet the customer's particular needs. (See "Business Strategy and Principal
Initiatives", above, and "Product Design, Research, and Development", below.)
The Company's mass customization initiative simplified the Company's carpet
manufacturing operations, which significantly improved its ability to respond
quickly and efficiently to requests for samples. The turnaround time for the
Company to produce made-to-order carpet samples to customer specifications has
been reduced from an average of 30 days in 1993 to approximately 3 days in 1999,
and the average number of carpet samples produced per month has increased from
90 per month in 1993 to approximately 1,200 per month in 1999. This sample
production ability has significantly enhanced the Company's marketing and sales
efforts and has increased the Company's volume of higher margin custom or
made-to-order sales.
The Company primarily uses its internal marketing and sales force of
over 1,100 persons to market its carpet products, and it also relies on
contractors in its Re:Source Americas service network to bolster its sales
efforts. In order to implement its global marketing efforts, the Company has
product and design studios in the United States, England, France, Germany,
Spain, Norway, the Netherlands, Australia, Japan and Singapore. The Company
expects to open such offices in other locations around the world as necessary to
capitalize on emerging marketing opportunities.
Manufacturing
The Company manufactures carpet in the United States, the Netherlands,
the United Kingdom, Canada, Australia and Southeast Asia, SOLENIUM resilient
textile flooring in the United States and the United Kingdom, and vinyl flooring
in the United Kingdom. In addition to enhancing the Company's ability to develop
a strong local presence in foreign markets, having foreign manufacturing
operations enables the Company to supply its customers with carpet from the
location offering the most advantageous delivery times, exchange rates, duties
and tariffs and freight expense. The Company believes that the ability to offer
consistent products and services on a worldwide basis at attractive prices is an
important competitive advantage in servicing multinational customers seeking
global supply relationships. The Company will consider additional locations for
manufacturing operations in other parts of the world as necessary to meet the
demands of customers in growing international markets.
The environmental management systems of the Company's Northern Ireland,
West Yorkshire, England (Don E. Russell Plant), Australian, the Netherlands and
Canadian floorcoverings manufacturing facilities are certified under ISO 14001.
The Company currently obtains a significant percentage of its
requirements for synthetic fiber (the principal raw material used in the
Company's carpet products) from E.I. DuPont de Nemours and Company ("Dupont").
The Company believes that its arrangements with DuPont permit the Company to
obtain favorable terms. However, the Company currently purchases fiber from
other long-term suppliers, and there are adequate alternative sources of supply
from which the Company could fulfill its synthetic fiber requirements if its
arrangements with DuPont should change. Other raw materials used by the Company
are also readily available from a number of sources.
In 1995 and 1996, the Company implemented a manufacturing plan in which
it standardized its worldwide manufacturing procedures. In connection with the
implementation of this plan, the Company adopted global standards for its
tufting equipment, yarn systems and product styling, and changed its standard
carpet tile size from 18 square inches to 50 square centimeters. The Company
believes that changing its standard carpet tile size has allowed it to reduce
operational waste and fossil fuel energy consumption and to offer consistent
product sizing for its global customers.
The Company's significant international operations are subject to various
political, economic and other uncertainties, including risks of restrictive
taxation policies, foreign exchange restrictions, changing political conditions
and governmental regulations. The Company also receives a substantial portion of
its revenues in currencies other than U.S. dollars, which makes it subject to
the risks inherent in currency translations. Although the Company's ability to
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manufacture and ship products from facilities in several foreign countries
reduces the risks of foreign currency fluctuations it might otherwise
experience, and the Company also engages from time to time in hedging programs
intended to further reduce those risks, the scope and volume of the Company's
global operations make it impossible to eliminate completely all foreign
currency translation risks as a factor for the Company's financial results.
Competition
The commercial floorcovering industry is highly competitive. The
Company competes, on a global basis, in the sale of its floorcovering products
with other carpet manufacturers and manufacturers of vinyl and other types of
floorcoverings. Although the industry recently has experienced significant
consolidation, a large number of manufacturers remain in the industry.
Management believes that the Company is the largest manufacturer of modular
carpet in the world, possessing a global market share that is more than two
times that of its nearest competitor. However, a number of domestic and foreign
competitors manufacture modular carpet as one segment of their business, and
certain of these competitors have financial resources in excess of the
Company's.
The Company believes the principal competitive factors in its primary
floorcovering markets are quality, design, service, broad product lines, product
life, marketing strategy, and pricing. In the commercial office market, modular
carpet competes with various floorcoverings, of which broadloom carpet is the
most common. In the health-care facilities market, the Company's products
compete primarily with resilient tile. The Company believes that SOLENIUM, its
new resilient textile flooring product, and treatment of its modular carpet with
the INTERSEPT antimicrobial chemical agent are material factors in its ability
to compete successfully in the health care market. The quality, service, design,
longer average life, flexibility (design options, selective rotation or
replacement, use in combination with roll goods) and convenience of the
Company's modular carpet are its principal competitive advantages, which are
offset in part by its higher initial cost when compared to comparable grades of
broadloom carpet. The acquisitions of Bentley Mills, Prince Street and Firth
Carpets, with their broadloom carpet product lines, have enhanced the Company's
competitive position by enabling the Company to offer one-stop shopping to
commercial carpet customers and, thus, to capture some sales that would have
gone to competitors. In addition, the Company believes that its global
manufacturing capabilities are an important competitive advantage in serving the
needs of multinational corporate customers. Finally, the Company believes that
the formation of the Re:Source service provider network, and the resulting
improvement in customer service, has further enhanced the Company's competitive
position.
Interior Fabrics
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Products
The Company, through its Fabrics Group, designs, manufactures and
markets specialty fabrics for open plan office furniture systems and commercial
interiors. Sales of panel fabrics to OEMs of movable office furniture systems
constituted approximately 57% of total North American fabrics sales in fiscal
1999. In addition, the Company produces woven and knitted seating fabrics, wall
covering fabrics, wool upholstery fabrics, fabrics used for vertical blinds in
office interiors, and fabrics used for cubicle curtains in health care
facilities.
Open plan office furniture systems are typically panel-enclosed work
stations customized to particular work environments. The open plan concept
offers a number of advantages over conventional office designs, including more
efficient floor space utilization, reduced energy consumption and greater
flexibility to redesign existing space. Since carpet and fabrics are used in the
same types of commercial interiors, the Company's carpet and interior fabrics
operations are able to coordinate the color, design and marketing of both
product lines to their respective customers as part of the Company's "total
interior solutions" approach.
The Company, in recent years, has diversified and expanded
significantly both its product offerings and markets for interior fabrics. The
Company's 1993 acquisition of the STEVENS LINEN lines added decorative, upscale
upholstery fabrics and specialty textile products to the Fabrics Group's
traditional product offerings. The Company's June 1995 acquisition of Toltec
Fabrics, Inc., a manufacturer and marketer of fabric for the contract and home
furnishings upholstery markets, enhanced the Company's presence in the contract
jobber market; and its December 1995 acquisition of the Intek division of
Springs Industries, a manufacturer experienced in the production of
lighter-weight panel fabrics, has strengthened the Fabrics Group's capabilities
in that market. All of these developments have reinforced the Fabrics Group's
dominant position with OEMs of movable office furniture systems.
- 7 -
Internationally, the June 1997 acquisition of Camborne Holdings, Ltd.,
the United Kingdom's leading textile manufacturer for the office and contract
furnishings markets, has enhanced the Company's access to the European and
Asia-Pacific markets. The Camborne acquisition also added wool upholstery
fabrics specifically designed for the European market to the Fabrics Group's
product offering. In 1998, the Company acquired Glenside Fabrics Limited, a
United Kingdom based manufacturer of upholstery fabrics for the contract
furnishings and leisure markets. The Glenside acquisition further enhances the
Fabrics Group's European presence. As part of its restructuring announced in the
first quarter of 1999, the Company is in the process of consolidating Glenside's
and Camborne's manufacturing operations.
The Company manufactures fabrics made of 100% polyester, as well as
wool-polyester blends and numerous other natural and man-made blends, which are
either woven or knitted. Its products feature a high degree of color
consistency, natural dimensional stability and fire retardancy, in addition to
their overall aesthetic appeal. All of the Company's product lines are color and
texture coordinated. The Company seeks continuously to enhance product
performance and attractiveness through experimentation with different fibers,
dyes, chemicals and manufacturing processes. Product innovation in the interior
fabrics market (similar to the floorcoverings market) is important to achieving
and maintaining market share. (See "Business Strategy and Principal
Initiatives", above, and "Product Design, Research and Development", below.)
In 1997, the Company introduced its TERRATEX(R) line of panel fabrics.
The TERRATEX label is intended to denote fabrics manufactured from 100% recycled
polyester, and includes both new products and traditional product offerings. The
first fabric to bear the TERRATEX label was Guilford of Maine's FR701(R) line.
Since 1997, several fabrics, including for the first time in 2000, seating
fabrics, have carried the TERRATEX label. Each of the Fabrics Group's companies
now markets fabrics in the TERRATEX line.
The Company anticipates that future growth opportunities will arise
from the growing market for retrofitting services, where fabrics are used to
re-cover existing panels. In addition, the increased importance being placed on
the aesthetic design of office space should lead to a significant increase in
upholstery fabric sales. Management also believes that significant growth
opportunities exist in international sales, in domestic health care markets, in
contract wallcoverings, and in the provision of ancillary textile processing
services such as the lamination of fabrics onto substrates for pre-formed
panels.
Marketing and Sales
-------------------
The Company's principal interior fabrics customers are OEMs of movable
office furniture systems. The Fabrics Group sells to essentially all of the
major office furniture manufacturers. The Fabrics Group also sells to
manufacturers and distributors of wallcoverings, vertical blinds, cubicle
curtains, acoustical wallboards, ceiling tiles and residential furniture, and,
since the acquisition of Toltec Fabrics, to contract jobbers. The GUILFORD OF
MAINE, STEVENS LINEN, TOLTEC, INTEK, CAMBORNE and GLENSIDE brand names are
well-known in the industry and enhance the Company's fabric marketing efforts.
The majority of the Company's interior fabrics sales are made through
the Fabrics Group's own sales force. The sales team works closely with
designers, architects, facility planners and other specifiers who influence the
purchasing decisions of buyers in the interior fabrics segment. In addition to
facilitating sales, the resulting relationships also provide the Company with
marketing and design ideas that are incorporated into the development of new
product offerings. The Fabrics Group maintains a design studio in Grand Rapids,
Michigan which facilitates coordination between its in-house designers and the
design staffs of major customers.
The Company's interior fabric sales offices are located in New York,
New York, Grand Rapids, Michigan and the United Kingdom. The Fabrics Group also
has marketing and distribution facilities in Canada and Hong Kong, and sales
representatives in Japan, Hong Kong, Singapore, Malaysia, Korea and South
Africa. The Company has sought increasingly, over the past several years, to
expand its export business and international operations in the fabrics segment,
both to accommodate the demand of principal OEM customers that are expanding
their businesses overseas, and to facilitate additional coordinated marketing to
multinational customers of the Company's carpet business as part of the
Company's "total interior solutions" approach.
- 8 -
Manufacturing
The Company's fabrics manufacturing facilities are located in Maine,
Massachusetts, Michigan, North Carolina and West Yorkshire, England. The
production of synthetic and wool blended fabrics is a relatively complex,
multi-step process. Raw fiber and yarn are placed in pressurized vats in which
dyes are forced into the fiber. Particular attention is devoted to this dyeing
process, which requires a high degree of expertise in order to achieve color
consistency. All raw materials used by the Company are readily available from a
number of sources. The Fabrics Group also now uses 100% recycled fiber
manufactured from PET soda bottles in its manufacturing process.
In response to a shift in the Fabrics Group's traditional panel fabric
market toward lighter-weight, less expensive products, the Company implemented a
major capital investment program in 1994 which included the construction of a
new facility and the acquisition of equipment to enhance the efficiency and
breadth of the Fabrics Group's yarn manufacturing processes. The program
improved the Fabrics Group's cost effectiveness in producing such lighter-weight
fabrics, reduced manufacturing cycle time, and enabled the Fabrics Group to
reinforce its product leadership position with its OEM customers. The
acquisition of Intek in December 1995 provided the Company with immediate and
significant capabilities in the efficient production of lighter-weight, less
expensive panel fabrics and the acquisition of Camborne provided a
European-based manufacturing facility and much needed expertise in the
production of wool fabrics. The Company believes that it has recently been
successful in designing fabrics that have simplified the manufacturing process,
thereby reducing complexity while improving efficiency and quality. Through the
use of existing raw materials, new fabrics are being manufactured using the mass
customization production strategy. By employing the capabilities that are now
available with the Company's new manufacturing facility, the Company anticipates
that its ability to apply the mass customization production strategy to the
manufacture of fabrics will be expanded. See "Business Strategy and Principal
Initiatives", above.
The environmental management system of the Fabrics Group's largest
facility, in Guilford, Maine has been granted ISO 14001 certification. The
Company's East Douglas, Maine and West Yorkshire, England fabrics manufacturing
facilities are also certified under ISO 14001.
The Company offers textile processing services through the Fabrics
Group's Component Technologies division in Grand Rapids, Michigan. Such services
include the lamination of fabrics onto substrates for pre-formed office
furniture system panels, facilitating easier and more cost effective assembly of
the system components by the Fabrics Group's OEM customers.
Competition
-----------
The Company competes in the interior fabrics market on the basis of
product design, quality, reliability, price and service. By electing to
concentrate on the open plan office furniture systems segment, the Fabrics Group
has been able to specialize its manufacturing capabilities, product offerings
and service functions, resulting in a leading market position. Through Interface
Fabrics Group, Inc. (formerly Guilford of Maine, Inc. and Interface Interior
Fabrics, Inc.), Toltec Fabrics, Inc. and Intek, Inc., the Company is the largest
U.S. manufacturer of panel fabric for use in open plan office furniture systems.
Drawing upon its dominant position in the panel fabric segment and
through its strategic acquisitions, the Company has been successfully
diversifying its product offerings for the commercial interiors market to
include a variety of non-panel fabrics, including upholstery, cubicle curtains,
wallcoverings, ceiling fabrics and window treatments. The competition in these
segments of the market is highly fragmented and includes both large, diversified
textile companies, several of which have greater financial resources than the
Company, as well as smaller, non-integrated specialty manufacturers. However,
the Company's capabilities and strong brand names in these segments should
enable it to continue to compete successfully.
Specialty Products
------------------
The Interface Specialty Products Group is composed of: Interface
Architectural Resources, Inc., which produces and markets raised/access flooring
systems; Interface Americas Re:Source Technologies, Inc. (formerly Rockland
React-Rite), which develops, manufactures and markets adhesives and other
specialty chemical products and which includes the Company's INTERSEPT
antimicrobial sales and licensing program; and Pandel, Inc., which produces
vinyl carpet tile backing and specialty mat and foam products.
- 9 -
The Company manufactures and markets cable management raised/access
flooring systems through Interface Architectural Resources, Inc. The Company's
initial product offering in this sector, marketed under the INTERCELL brand, is
a low-profile (total height of less than three inches) cable management flooring
system particularly well suited for use in the renovation of existing buildings.
In 1995, the Company acquired the rights to the INTERSTITIAL SYSTEMS(TM) access
flooring product, a patented, multiple plenum system that serves to separate
pressurized, climate-controlled air flow from the electrical and
telecommunications cables included within the same access flooring system. In
February 1996, the Company acquired C-Tec, Inc., the second largest manufacturer
of raised/access flooring systems in the United States. Interface Architectural
Resources markets the successful C-TEC line of products (TEC-COR(TM) and
TEC-CRETE(R)), which combines the tensile strength of steel and the compressive
strength of concrete to create a durable, uniform and sound-absorbent panel
which is available in a variety of surfaces. In July 1998, the Company acquired
Atlantic Access Flooring, Inc., a manufacturer of steel panel raised/access
flooring systems. With the acquisition of Atlantic, the Company believes that it
now offers the broadest line of raised/access flooring systems in the industry.
The Company manufactures a line of adhesives for carpet installation,
as well as a line of carpet cleaning and maintenance chemicals, which it markets
as part of its IMAGE maintenance system. One of the Company's leading chemical
products, in terms of applicability for the commercial and institutional
interiors market, is its proprietary antimicrobial chemical compound, sold under
the registered trademark INTERSEPT(R). The Company uses INTERSEPT in many of its
carpet products and has licensed INTERSEPT to other companies for use in a
number of products that are noncompetitive with the Company's products, such as
paint, vinyl wallcoverings, ceiling tiles and air filters. In addition, the
Company produces and markets PROTEKT2(R), a proprietary soil and stain retardant
treatment, and FATIGUE FIGHTER(R), an impact-absorbing modular flooring system
typically used where people stand for extended periods.
One World Learning
- - ------------------
In 1997, the Company created One World Learning, Inc., an employee
training and education company specializing in experiential learning methods. In
addition to serving as the Company's internal learning facilitation resource,
One World Learning markets its experiential programs to other companies. One
World Learning also educates Interface associates on sustainability principles,
including those of The Natural Step founded by Dr. Karl-Henrik Robert, currently
engaged by the Company as a consultant.
Interface Research Corporation
- - ------------------------------
Interface Research Corporation ("IRC") provides technical support and
advanced materials research and development for the entire family of Interface
companies. Recent developments at IRC include NEXSTEP backing, a material based
on moisture-impervious polycarbite precoating technology combined with a
chlorine-free urethane foam secondary backing, and a recycled post-consumer,
polyvinyl chloride ("PVC") extruded sheet process that has been successfully
incorporated into the Company's modular carpet line. The Company's DEJA VU(TM)
and RECYCLEBAC(TM) products use the PVC extruded sheet and exemplify the
Company's commitment to "closing-the-loop" in recycling. With a goal of
supporting sustainable product designs in both floorcoverings and interior
fabrics applications, IRC is a frontrunner in evaluating 100% renewable polymers
based on corn-derived polylactic acid polymers for the Company's products.
IRC is the home of the Company's ECOSENSE initiative and supports the
dissemination, consultancies and technical communication of the Company's global
sustainability endeavors.
In addition, IRC's president also serves as the Chairman of the
Envirosense Consortium. IRC's laboratories provide all biochemical and technical
support to INTERSEPT antimicrobial product initiatives, which initiatives were
the basis for founding the Consortium and for its focus on indoor air quality.
See "Environmental Initiatives" below.
- 10 -
Product Design, Research and Development
- - ----------------------------------------
The Company maintains an active research, development and design staff
of approximately 100 persons and also draws on the research and development
efforts of its suppliers, particularly in the areas of fibers, yarns and modular
carpet backing materials.
Innovation and increased customization in product design and styling
are the principal focus of the Company's product development efforts. The
Company's carpet design and development team is recognized as the industry
leader in carpet design and product engineering for the commercial and
institutional markets. In cooperation with David Oakey since January 1994
(pursuant to the Company's exclusive consulting contract with Oakey Designs),
the Company has introduced over 104 new carpet designs during the last six years
and has enjoyed considerable success in winning U.S. carpet industry awards
bestowed by the IIDA.
Mr. Oakey also contributed to the Company's implementation of a new
product development concept - "simple inputs, pretty outputs" - resulting in the
ability to efficiently produce many products from a single yarn system. The
Company's mass customization production approach evolved, in major part, from
this concept. In addition to increasing the number and variety of product
designs (which enables the Company to increase high margin custom sales), the
mass customization approach increases inventory turns and reduces inventory
levels (for both raw materials and standard products) and their related costs
because of the Company's more rapid and flexible production capabilities.
Oakey Designs' services have been extended to the Company's
international carpet tile operations and its domestic and international
broadloom companies. The Company expects increased levels of innovation in
product design and development for those divisions to be achieved in the future.
Environmental Initiatives
- - -------------------------
An important initiative of the Company over the past several years has
been the development of the Envirosense Consortium, an organization of companies
concerned with addressing workplace environmental issues, particularly poor
indoor air quality. The Consortium's member organizations include interior
products manufacturers (some of which are licensees of the Company's INTERSEPT
antimicrobial agent) and design professionals. The Consortium, in conjunction
with Phillips & Linders International, recently developed an on-line continuing
education course series entitled "Fundamentals of Indoor Air Quality." The
series offers three course modules that are registered with the American
Institute of Architects' Continuing Education System. The series is being
offered in association with the faculty at the University of Florida M.E.
Rinker, Sr. School of Building Construction and School of Architecture.
In the latter part of 1994, the Company commenced a new industrial
ecology initiative called EcoSense, inspired in major part by the interest of
important customers concerned about the environmental implications of how they
and their suppliers do business. EcoSense is directed towards the elimination of
energy and raw materials waste in the Company's businesses, and, on a broader
and more long-term scale, the practical reclamation - and ultimate restoration -
of shared environmental resources. The initiative involves a commitment by the
Company (i) to learn to meet its raw material and energy needs through recycling
of carpet and other petrochemical products and harnessing benign energy sources,
and (ii) to pursue the creation of new processes to help sustain the earth's
non-renewable natural resources. EcoSense includes the Company's QUEST waste
reduction initiative, pursuant to which the Company realized an aggregate of $10
million in savings in 1999. See "Business Strategy and Principal Initiatives -
Ecological Sustainability Through Quest and EcoSense Programs".
The Company has engaged some of the world's leading authorities on
global ecology as environmental consultants. The current list of consultants
includes: Paul Hawken, author of THE ECOLOGY OF COMMERCE and THE NEXT ECONOMY;
Amory Lovins, energy consultant, co-founder of the Rocky Mountain Institute;
Hunter Lovins, President and Executive Director of the Rocky Mountain Institute;
John Picard, President of E2, American environmental consultant; David Brower,
former executive director of the Sierra Club, founder of The Earth Island
Institute; Jonathan Porritt, director of Forum for the Future; Bill Browning,
director of the Rocky Mountain Institute's Green Development Services; Dr.
Karl-Henrik Robert, founder of The Natural Step; Janine M. Benyus, author of
BIOMIMICRY; and Walter Stahel, Swiss businessman and seminal thinker on
environmentally responsible commerce.
The Company believes that its environmental initiatives are valued by
its employees and an increasing number of important customers and provide a
competitive advantage in marketing products to such customers. The Company also
believes that the resulting long-term resource efficiency (reduction of wasted
environmental resources) will ultimately produce cost savings and advantages to
the Company.
Environmental Matters
- - ---------------------
The Company's operations are subject to federal, state and local laws
and regulations relating to the generation, storage, handling, emission,
transportation and discharge of materials into the environment. Management
believes that the Company is in substantial compliance with all applicable
federal, state and local provisions relating to the protection of the
environment. The costs of complying with environmental protection laws and
- 11 -
regulations have not had a material adverse impact on the Company's financial
condition or results of operations in the past and are not expected to have a
material adverse impact in the future.
Backlog
- - -------
The Company's backlog of unshipped orders was approximately $158.3
million at February 27, 2000, compared to approximately $165.0 million at
February 28, 1999. Historically, backlog is subject to significant fluctuations
due to the timing of orders for individual large projects and currency
fluctuations. All of the backlog of orders at February 27, 2000 is expected to
be shipped during the succeeding six to nine months.
Patents and Trademarks
- - ----------------------
The Company owns numerous patents in the United States and abroad on
its modular flooring and manufacturing processes and on the use of its INTERSEPT
antimicrobial chemical agent in various products. The duration of United States
patents is between 14 and 20 years from the date of filing of a patent
application or issuance of the patent; the duration of patents issued in other
countries varies from country to country. The Company considers its know-how and
technology more important to its current business than patents, and,
accordingly, believes that expiration of existing patents or nonissuance of
patents under pending applications would not have a material adverse effect on
its operations. However, the Company maintains an active patent and trade secret
program in order to protect its proprietary technology, know-how and trade
secrets.
The Company also owns numerous trademarks in the United States and
abroad. In addition to the United States, the primary countries in which the
Company has registered its trademarks are the United Kingdom, Germany, Italy,
France, Canada, Australia, Japan, and various countries in Central and South
America. Some of the more prominent registered trademarks of the Company
include: INTERFACE, HEUGA, INTERSEPT, GLASBAC, GUILFORD, GUILFORD OF MAINE,
BENTLEY, PRINCE STREET, INTERCELL, FIRTH, CAMBORNE, GLENSIDE, TERRATEX and
FR701. Trademark registrations in the United States are valid for a period of 10
years and are renewable for additional 10-year periods as long as the mark
remains in actual use. The duration of trademarks registered in other countries
varies from country to country.
Financial Information by Operating Segments
- - -------------------------------------------
The Notes to the Company's Consolidated Financial Statements sets forth
information concerning the Company's sales, income and assets by operating
segments. See Item 8.
Employees
- - ---------
At January 2, 2000, the Company employed a total of approximately 7,250
employees worldwide. Of such employees, approximately 2,100 are clerical, sales,
supervisory and management personnel and the balance are manufacturing
personnel.
Certain of the service businesses within the Re:Source Americas service
network have employee groups that are represented by unions. In addition,
certain of the Company's production employees in Australia and the United
Kingdom are represented by unions. In the Netherlands, a Works Council, the
members of which are Company employees, is required to be consulted by
management with respect to certain matters relating to the Company's operations
in that country, such as a change in control of Interface Europe B.V. (the
Company's modular carpet subsidiary based in the Netherlands), and the approval
of such Council is required for certain actions, including changes in
compensation scales or employee benefits. Management believes that its relations
with the Works Council, the unions and all of its employees are good.
Securities Litigation Reform Act
- - --------------------------------
This Form 10-K and other statements issued or made from time to time by
the Company or its representatives contain statements which may constitute
"forward-looking statements" within the meaning of the Securities Act of 1933,
as amended, and the Securities Exchange Act of 1934, as amended by the Private
Securities Litigation Reform Act of 1995. Those statements include statements
regarding the intent, belief or current expectations of the Company and members
of its management team, as well as the assumptions on which such statements are
based. Prospective investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties, and that actual results may differ materially from those
contemplated by such forward-looking statements. Important factors currently
- 12 -
known to management that could cause actual results to differ materially from
those in forward-looking statements are set forth in the Safe Harbor Compliance
Statement for Forward-Looking Statements included as Exhibit 99.1 to this Form
10-K, and are hereby incorporated by reference. The Company undertakes no
obligation to update or revise forward-looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes to future
operating results over time.
Executive Officers of the Registrant
- - ------------------------------------
The executive officers of the Company, their ages as of March 15, 2000,
and principal positions with the Company are as follows. Executive officers
serve at the pleasure of the Board of Directors.
Name Age Principal Position(s)
---- --- ---------------------
Ray C. Anderson 65 Chairman of the Board, President and Chief Executive
Officer
Michael D. Bertolucci 59 Senior Vice President
Brian L. DeMoura 54 Senior Vice President
Daniel T. Hendrix 45 Senior Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary
John H. Walker 55 Senior Vice President
John R. Wells 38 Senior Vice President
Raymond S. Willoch 41 Senior Vice President, General Counsel and Secretary
Mr. Anderson founded the Company in 1973 and has served as the
Company's Chairman and Chief Executive Officer since its founding. Mr. Anderson
was also re-named President of the Company in August 1999 upon the departure of
the Company's former President and Chief Operating Officer. Mr. Anderson was
appointed by President Clinton to the President's Council on Sustainable
Development in 1996 and served as Co-Chair until the Council's dissolution in
June 1999. He currently serves on the Boards of numerous nonprofit
organizations.
Dr. Bertolucci joined the Company in April 1996 as President of
Interface Research Corporation and Senior Vice President of the Company. Dr.
Bertolucci also serves as Chairman of the Envirosense Consortium which was
founded by Interface and focuses on addressing workplace environmental issues.
From October 1989 until joining the Company, he was Vice President of Technology
for Highland Industries, an industrial fabric company located in Greensboro,
North Carolina.
Mr. DeMoura joined the Company in March 1994 as President and Chief
Executive Officer of Guilford of Maine, Inc. (now Interface Fabrics Group, Inc.)
and Senior Vice President of the Company. He is responsible for the Fabrics
Group, which includes the following brands: GUILFORD OF MAINE, STEVENS LINEN,
TOLTEC, INTEK, CAMBORNE and GLENSIDE.
Mr. Hendrix, who previously was with a national accounting firm, joined
the Company in 1983. He was promoted to Treasurer of the Company in 1984, Chief
Financial Officer in 1985, Vice President - Finance in 1986, and Senior Vice
President in October 1995.
Mr. Walker began his career with the Company as Financial Controller of
the U.K. Division of Heuga Holding B.V. (now Interface Europe B.V.), the
Netherlands-based carpet tile manufacturer acquired by the Company in 1988. He
later served as Vice President - Sales & Marketing of Interface Europe B.V. and
in July 1995 was promoted to the position of Senior Vice President of the
Company and President and Chief Executive Officer of Interface Europe, Inc. (now
Interface Overseas Holdings, Inc.). In his current position, he has
responsibility for the Company's floorcovering operations in both Europe and the
Asia-Pacific region.
Mr. Wells joined the Company in February 1994 as Vice President - Sales
of Interface Flooring Systems, Inc. ("IFS", the Company's principal U.S. modular
carpet subsidiary) and was promoted to Senior Vice President - Sales & Marketing
of IFS in October 1994. He was promoted to Vice President of the Company and
President and Chief Executive Officer of IFS in July 1995. In March 1998, Mr.
Wells was also named President and CEO of both Prince Street and Bentley Mills,
making him President and CEO of all three of the Company's U.S. carpet mills. In
November 1999, Mr. Wells was named Senior Vice President of the Company and
President and Chief Executive Officer of Interface Americas, thereby assuming
responsibility for all of the Company's operations in the Americas, except for
the Fabrics Group.
- 13 -
Mr. Willoch, who previously practiced with an Atlanta law firm, joined
the Company in June 1990 as Corporate Counsel. He was promoted to Assistant
Secretary in 1991, Assistant Vice President in 1993, Vice President in January
1996, and Secretary and General Counsel in August 1996. In February 1998, Mr.
Willoch was promoted to Senior Vice President.
ITEM 2. PROPERTIES
Properties
- - ----------
The Company maintains its corporate headquarters in Atlanta, Georgia in
approximately 25,000 square feet of leased space. The following table lists the
Company's principal manufacturing facilities, all of which are owned by the
Company except as otherwise noted:
Location Primary Products Floor Space (Sq.ft.)
-------- ---------------- --------------------
Bangkok, Thailand .....................................Modular carpet 66,072
Craigavon, N. Ireland......................................Modular carpet 125,060
LaGrange, Georgia..........................................Modular carpet 326,666
Ontario (Belleville), Canada...............................Modular carpet 77,000
Picton, Australia..........................................Modular carpet 89,560
Scherpenzeel, the Netherlands..............................Modular carpet; specialty products 292,142
Shelf, England.............................................Modular carpet; vinyl flooring 223,342
West Point, Georgia........................................Modular carpet 161,000
Cartersville, Georgia......................................Broadloom carpet 210,000
Cartersville, Georgia......................................Broadloom carpet 45,000
City of Industry, California ..........................Broadloom carpet 539,641
West Yorkshire, England....................................Broadloom carpet 674,666
Aberdeen, North Carolina...................................Interior fabrics 88,000
Dudley, Massachusetts......................................Interior fabrics 321,000
East Douglas, Massachusetts ...............................Interior fabrics 301,772
Grand Rapids, Michigan ................................Interior fabrics 55,800
Guilford, Maine............................................Interior fabrics 396,690
Guilford, Maine............................................Interior fabrics 96,200
Lancashire, England ...................................Interior fabrics 54,000
Newport, Maine.............................................Interior fabrics 208,932
West Yorkshire, England....................................Interior fabrics 177,000
Cartersville, Georgia .................................Specialty products 124,500
Grand Rapids, Michigan.................................Access flooring 120,000
Baltimore, Maryland....................................Access flooring 39,000
Rockmart, Georgia..........................................Chemicals 37,500
--------------------------------------
Owned by a joint venture in which the Company has a 70% interest.
Leased.
The Company maintains marketing offices in approximately 95 locations
in 39 countries and distribution facilities in approximately 40 locations in six
countries. Most of the marketing locations and many of the distribution
facilities are leased.
The Company believes that its manufacturing and distribution
facilities, and its marketing offices, are sufficient for its present
operations. The Company will continue, however, to consider the desirability of
establishing additional facilities and offices in other locations around the
world as part of its business strategy to meet expanding global market demands.
- 14 -
ITEM 3. LEGAL PROCEEDINGS
On July 28, 1998, Collins & Aikman Floorcoverings, Inc. ("CAF") -- in
the wake of receiving "cease and desist" letters from the Company demanding that
CAF cease manufacturing certain carpet products that the Company believes
infringed upon certain of its copyrighted product designs -- filed a lawsuit
against the Company asserting that certain of the Company's products, primarily
its Caribbean(TM) design product line, infringed on certain of CAF's alleged
copyrighted product designs. The lawsuit, which is pending in the United States
District Court for the Northern District of Georgia, Atlanta Division, Civil
Action No. 1:98-CV-2069, seeks injunctive relief and unspecified monetary
damages. The lawsuit also asserts other claims against the Company and certain
other parties, including for alleged tortious interference by the Company with
CAF's contractual relationship with the Roman Oakey Designs firm.
On September 28, 1998, the Company filed its answer denying all the
claims asserted by CAF, and also asserting counterclaims against CAF for
copyright infringement. The Company believes the claims asserted by CAF are
unfounded and subject to meritorious defenses, and it is defending vigorously
all the claims. At the present time, discovery has been limited by Court order
to matters relating to CAF's motion for preliminary injunction, and both the
Company and CAF have filed motions for summary judgment. As a result of
Court-ordered mediation not leading to a resolution of the disputes between the
parties, the Company expects the Court will soon set a schedule for arguments
and a hearing on the pending motions.
The Company's insurers have denied coverage under the Company's
insurance policies, which annually would otherwise provide up to $100 million of
coverage. On June 8, 1999, the Company filed suit against the insurers to
challenge that denial. That lawsuit is pending in the United States District
Court for the Northern District of Georgia, Atlanta Division, Civil Action No.
1:99-CV-1485, and is in the early stages of its proceedings. On January 20,
2000, the Company filed a motion for partial summary judgment to enforce the
insurers' obligation to defend the Company against the claims by CAF, which
motion is pending.
Both the CAF infringement lawsuit and the Company's insurance coverage
lawsuit involve complex legal and factual issues, and while the Company believes
strongly in the merits of its legal positions, it is impossible to predict with
accuracy the outcome of either such litigation matter at this stage. The Company
intends to continue its aggressive pursuit of its positions in both actions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during
the fourth quarter of the fiscal year covered by this Report.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SHAREHOLDER MATTERS
The information concerning the market prices for the Company's Class A
Common Stock and dividends on the Company's Common Stock included in the Notes
to the Company's Consolidated Financial Statements (the "Notes") in the
Company's 1999 Annual Report to Shareholders is incorporated herein by
reference. As of March 15, 2000, the Company had 404 holders of record of its
Class A Common Stock and 62 holders of record of its Class B Common Stock.
Management believes that there are in excess of 5,000 beneficial holders of the
Class A Common Stock.
During fiscal 1999, the Company issued an aggregate of 79,950 shares of
its Common Stock that were not registered under the Securities Act of 1933
("Securities Act"). The shares, in combination with cash, were issued as
consideration to four individuals in the acquisition of Premier Floors, Inc. The
market price on the date of issuance was $9.875 per share. The issuance of the
foregoing shares is exempt from registration under the Securities Act pursuant
to Section 4(2) of the Securities Act, or Regulation D promulgated thereunder,
as transactions by an issuer not involving a public offering.
- 15 -
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Information included in the Company's 1999 Annual
Report to Shareholders, being filed as Exhibit 13 hereto, is incorporated herein
by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results
of Operations ("MD&A") included in the Company's 1999 Annual Report to
Shareholders, being filed as Exhibit 13 hereto, is incorporated herein by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The information contained under the caption "Quantitative and
Qualitative Disclosure About Market Risk" included in the MD&A section of the
Company's 1999 Annual Report to Shareholders is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and the Report of Independent
Certified Public Accountants included in the Company's 1999 Annual Report to
Shareholders, being filed as Exhibit 13 hereto, are incorporated herein by
reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained under the caption "Nomination and Election of
Directors" in the Company's definitive Proxy Statement for the Company's 2000
Annual Meeting of Shareholders, to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A not later than 120 days after the end of
the Company's 1999 fiscal year, is incorporated herein by reference. Pursuant to
Instruction 3 to Paragraph (b) of Item 401 of Regulation S-K, information
relating to the executive officers of the Company is included in Item 1 of this
Report.
The information contained under the caption "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Company's definitive Proxy Statement for
the Company's 2000 Annual Meeting of Shareholders, to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A not later than 120
days after the end of the Company's 1999 fiscal year, is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained under the caption "Executive Compensation and
Related Items" in the Company's definitive Proxy Statement for the Company's
2000 Annual Meeting of Shareholders, to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A not later than 120 days after the
end of the Company's 1999 fiscal year, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained under the caption "Principal Shareholders and
Management Stock Ownership" in the Company's definitive Proxy Statement for the
Company's 2000 Annual Meeting of Shareholders, to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A not later than 120 days after
the end of the Company's 1999 fiscal year, is incorporated herein by reference.
- 16 -
For purposes of determining the aggregate market value of the Company's
voting and non-voting stock held by non-affiliates, shares held of record by
directors and executive officers of the Company have been excluded. The
exclusion of such shares is not intended to, and shall not, constitute a
determination as to which persons or entities may be "affiliates" of the Company
as that term is defined under federal securities laws.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the captions "Compensation Committee
Interlocks and Insider Participation" and "Certain Relationships and Related
Transactions" in the Company's definitive Proxy Statement for the Company's 2000
Annual Meeting of Shareholders, to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A not later than 120 days after the end of
the Company's 1999 fiscal year, is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
--------------------
The following Consolidated Financial Statements and Notes thereto of
Interface, Inc. and subsidiaries and related Report of Independent Certified
Public Accountants contained in the Company's 1999 Annual Report to
Shareholders, are incorporated by reference in Item 8 of this Report:
Consolidated Statements of Income and Comprehensive Income --
years ended January 2, 2000, January 3, 1999 and
December 28, 1997
Consolidated Balance Sheets-- January 2, 2000 and January 3, 1999
Consolidated Statements of Cash Flows -- years ended January 2,
2000, January 3, 1999 and December 28, 1997
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
2. Financial Statement Schedule
----------------------------
The following Consolidated Financial Statement Schedule of Interface,
Inc. and subsidiaries and related Report of Independent Certified Public
Accountants are included as part of this Report (see page 22)
Report of Independent Certified Public Accountants
Schedule II -- Valuation and Qualifying Accounts and Reserves
3. Exhibits
--------
The following exhibits are included as part of this Report:
Exhibit
Number Description of Exhibit
------ ----------------------
3.1 Restated Articles of Incorporation (included as Exhibit 3.1
to the Company's quarterly report on Form 10-Q for the
quarter ended July 5, 1998, previously filed with the
Commission 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 and Bylaws defining the rights of
holders of Common Stock of the Company.
4.2 Rights Agreement between the Company and Wachovia Bank,
N.A., dated as of March 4, 1998, with an effective date of
March 16, 1998 (included as Exhibit 10.1A to the Company's
registration statement on Form 8-A/A dated March 12, 1998,
previously filed with the Commission and incorporated herein
by reference).
- 17 -
4.3 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 (the "Indenture") (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); and Supplement No. 1 to
Indenture, dated as of December 27, 1996 (included as
Exhibit 4.2(b) to the Company's annual report on Form 10-K
for the year ended December 29, 1996, previously filed with
the Commission and incorporated herein by reference).
4.4 Form of Indenture governing the Company's 7.3% Senior Notes
due 2008, among the Company, certain U.S. subsidiaries of
the Company, as Guarantors, and First Union National Bank,
as Trustee (included as Exhibit 4.1 to the Company's
registration statement on Form S-3/A, File No. 333-46611,
previously filed with the Commission and incorporated herein
by reference).
10.1 Salary Continuation Plan, dated May 7, 1982 (included as
Exhibit 10.20 to the Company's registration statement on
Form S-1, File No. 2-82188, previously filed with the
Commission and incorporated herein by reference).*
10.2 Form of Salary Continuation Agreement (included as Exhibit
10.27 to the Company's quarterly report on Form 10-Q for the
quarter ended April 5, 1998, previously filed with the
Commission and incorporated herein by reference); and Form
of Amendment to Salary Continuation Agreement (included as
Exhibit 10.2 to the Company's annual report on Form 10-K for
the year ended January 3, 1999, previously filed with the
Commission and incorporated herein by reference).*
10.3 Interface, Inc. Omnibus Stock Incentive Plan (included as
Exhibit 10.6 to the Company's annual report on Form 10-K for
the year ended December 29, 1996, previously filed with the
Commission and incorporated herein by reference).*
10.4 Interface, Inc. Nonqualified Savings Plan (included as
Exhibit 4 to the Company's registration statement on Form
S-8, file no. 333-38677, previously filed with the
Commission and incorporated herein by reference).*
10.5 Third Amended and Restated Credit Agreement, dated as of
June 30, 1998, among the Company (and certain direct and
indirect subsidiaries), the lenders listed therein, SunTrust
Bank, Atlanta and The First National Bank of Chicago
(included as Exhibit 10.1 to the Company's quarterly report
on Form 10-Q for the quarter ended July 5, 1998, previously
filed with the Commission and incorporated herein by
reference).
10.6 Employment Agreement of Ray C. Anderson dated April 1, 1997
(included as Exhibit 10.1 to the Company's quarterly report
on Form 10-Q for the quarter ended June 29, 1997 (the "1997
Second Quarter 10-Q"), previously filed with the Commission
and incorporated herein by reference); Amendment thereto
dated January 6, 1998 (included as Exhibit 10.1 to the
Company's quarterly report on Form 10-Q for the quarter
ended April 5, 1998 (the "1998 First Quarter 10-Q") and
incorporated herein by reference); Second Amendment thereto
dated January 14, 1999, the form of which is included herein
as Exhibit 10.20; and Third Amendment thereto dated May 7,
1999.*
10.7 Change in Control Agreement of Ray C. Anderson dated April
1, 1997 (included as Exhibit 10.2 to the 1997 Second Quarter
10-Q, previously filed with the Commission and incorporated
herein by reference); Amendment thereto dated January 6,
1998 (included as Exhibit 10.2 to the 1998 First Quarter
10-Q and incorporated herein by reference); Second Amendment
thereto dated January 14, 1999, the form of which is
included herein as Exhibit 10.21; and Third Amendment
thereto dated May 7, 1999.*
10.8 Employment Agreement of Brian L. DeMoura dated April 1, 1997
(included as Exhibit 10.5 to the 1997 Second Quarter 10-Q,
previously filed with the Commission and incorporated herein
by reference); Amendment thereto dated January 6, 1998
(included as Exhibit 10.5 to the 1998 First Quarter 10-Q and
incorporated herein by reference); and Second Amendment
thereto dated January 14, 1999, the form of which is
included herein as Exhibit 10.20.*
- 18 -
10.9 Change in Control Agreement of Brian L. DeMoura dated April
1, 1997 (included as Exhibit 10.6 to the 1997 Second Quarter
10-Q, previously filed with the Commission and incorporated
herein by reference); Amendment thereto dated January 6,
1998 (included as Exhibit 10.6 to the 1998 First Quarter
10-Q and incorporated herein by reference); and Second
Amendment thereto dated January 14, 1999, the form of which
is included herein as Exhibit 10.21.*
10.10 Employment Agreement of Daniel T. Hendrix dated April 1,
1997 (included as Exhibit 10.7 to the 1997 Second Quarter
10-Q, previously filed with the Commission and incorporated
herein by reference); Amendment thereto dated January 6,
1998 (included as Exhibit 10.7 to the 1998 First Quarter
10-Q and incorporated herein by reference); and Second
Amendment thereto dated January 14, 1999, the form of which
is included herein as Exhibit 10.20.*
10.11 Change in Control Agreement of Daniel T. Hendrix dated April
1, 1997 (included as Exhibit 10.8 to the 1997 Second Quarter
10-Q, previously filed with the Commission and incorporated
herein by reference); Amendment thereto dated January 6,
1998 (included as Exhibit 10.8 to the 1998 First Quarter
10-Q and incorporated herein by reference); and Second
Amendment thereto dated January 14, 1999, the form of which
is included herein as Exhibit 10.21.*
10.12 Employment Agreement of Raymond S. Willoch dated April 1,
1997 (included as Exhibit 10.11 to the 1997 Second Quarter
10-Q, previously filed with the Commission and incorporated
herein by reference); Amendment thereto dated January 6,
1998 (included as Exhibit 10.11 to the 1998 First Quarter
10-Q and incorporated herein by reference); and Second
Amendment thereto dated January 14, 1999, the form of which
is included herein as Exhibit 10.20.*
10.13 Change in Control Agreement of Raymond S. Willoch dated
April 1, 1997 (included as Exhibit 10.12 to the 1997 Second
Quarter 10-Q, previously filed with the Commission and
incorporated herein by reference); Amendment thereto dated
January 6, 1998 (included as Exhibit 10.12 to the 1998 First
Quarter 10-Q and incorporated herein by reference); and
Second Amendment thereto dated January 14, 1999, the form of
which is included herein as Exhibit 10.21.*
10.14 Employment Agreement of John H. Walker dated April 1, 1997
(included as Exhibit 10.19 to the 1997 Second Quarter 10-Q,
previously filed with the Commission and incorporated herein
by reference); and Amendment thereto dated January 6, 1998
(included as Exhibit 10.19 to the 1998 First Quarter 10-Q
and incorporated herein by reference).*
10.15 Change in Control Agreement of John H. Walker dated April 1,
1997 (included as Exhibit 10.20 to the 1997 Second Quarter
10-Q, previously filed with the Commission and incorporated
herein by reference); and Amendment thereto dated January 6,
1998 (included as Exhibit 10.20 to the 1998 First Quarter
10-Q and incorporated herein by reference).*
10.16 Employment Agreement of John R. Wells dated April 1, 1997
(included as Exhibit 10.23 to the 1997 Second Quarter 10-Q,
previously filed with the Commission and incorporated herein
by reference); Amendment thereto dated January 6, 1998
(included as Exhibit 10.23 to the 1998 First Quarter 10-Q
and incorporated herein by reference); and Second Amendment
thereto dated January 14, 1999, the form of which is
included herein as Exhibit 10.20.*
10.17 Change in Control Agreement of John R. Wells dated April 1,
1997 (included as Exhibit 10.24 to the 1997 Second Quarter
10-Q, previously filed with the Commission and incorporated
herein by reference); Amendment thereto dated January 6,
1998 (included as Exhibit 10.24 to the 1998 First Quarter
10-Q and incorporated herein by reference); and Second
Amendment thereto dated January 14, 1999, the form of which
is included herein as Exhibit 10.21.*
10.18 Employment Agreement of Michael D. Bertolucci dated April 1,
1997 (included as Exhibit 10.25 to the 1997 Second Quarter
10-Q, previously filed with the Commission and incorporated
herein by reference); Amendment thereto dated January 6,
1998 (included as Exhibit 10.25 to the 1998 First Quarter
10-Q and incorporated herein by reference); and Second
Amendment thereto dated January 14, 1999, the form of which
is included herein as Exhibit 10.20.*
- 19 -
10.19 Change in Control Agreement of Michael D. Bertolucci dated
April 1, 1997 (included as Exhibit 10.26 to the 1997 Second
Quarter 10-Q, previously filed with the Commission and
incorporated herein by reference); Amendment thereto dated
January 6, 1998 (included as Exhibit 10.26 to the 1998 First
Quarter 10-Q and incorporated herein by reference); and
Second Amendment thereto dated January 14, 1999, the form of
which is included herein as Exhibit 10.21.*
10.20 Form of Second Amendment to Employment Agreement, dated
January 14, 1999, amending Exhibits 10.6, 10.8, 10.10,
10.12, 10.16 and 10.18 to this Report.
10.21 Form of Second Amendment to Change in Control Agreement,
dated January 14, 1999, amending Exhibits 10.7, 10.9, 10.11,
10.13, 10.17 and 10.19 to this Report.
10.22 Receivables Sale Agreement, dated as of August 4, 1995,
among Interface Securitization Corporation, Interface, Inc.,
Special Purpose Accounts Receivable Cooperative Corporation
and Canadian Imperial Bank of Commerce (included as Exhibit
10.26 to the Company's annual report on Form 10-K for the
year ended December 31, 1995, previously filed with the
Commission and incorporated herein by reference); and
Amendment thereto dated as of December 27, 1996 (included
as Exhibit 10.24 to the Company's Annual Report on Form
10-K for the year ended December 29, 1996, previously filed
with the Commission and incorporated herein by reference).
10.23 Receivables Sale Agreement, dated as of December 27, 1996,
among Interface Securitization Corporation, Interface, Inc.,
certain financial institutions (as bank purchasers), and
Canadian Imperial Bank of Commerce (as administrative agent)
(included as Exhibit 10.25 to the Company's annual report on
Form 10-K for the year ended December 29, 1996, previously
filed with the Commission and incorporated herein by
reference).
10.24 Split Dollar Agreement, dated May 29, 1998, between the
Company, Ray C. Anderson and Mary Anne Anderson Lanier, as
Trustee of the Ray C. Anderson Family Trust (included as
Exhibit 10.32 to the Company's annual report on Form 10-K
for the year ended January 3, 1999, previously filed with
the Commission and incorporated herein by reference).*
10.25 Split Dollar Insurance Agreement, dated effective as of
February 21, 1997, between the Company and Daniel T. Hendrix
(included as Exhibit 10.2 to the Company's quarterly report
on Form 10-Q for the quarter ended October 4, 1998,
previously filed with the Commission and incorporated herein
by reference).*
13 Certain information, as follows, contained in the Company's
1999 Annual Report to Shareholders which is expressly
incorporated into this Report by direct reference thereto.
o Selected Financial Information
o Management's Discussion and Analysis of Financial
Condition and Results of Operations
o Consolidated Financial Statements of the Company
and Report of Independent Certified Public Accoutants
thereon
21 Subsidiaries of the Company.
23 Consent of BDO Seidman, LLP.
27 Financial Data Schedule.
99.1 Safe Harbor Compliance Statement for Forward-Looking
Statements.
- - ----------
* Management contract or compensatory plan or agreement required to be
filed pursuant to Item 14(c) of this Report.
(b) Reports On Form 8-K
-------------------
No reports on Form 8-K were filed by the Company during the fourth
quarter of the fiscal year covered by this
Report.
- 20 -
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Interface, Inc.
Atlanta, Georgia
The audits referred to in our Report dated February 22, 2000 relating
to the Consolidated Financial Statements of Interface, Inc. and subsidiaries,
incorporated in Item 8 of the Form 10-K by reference to the Annual Report to
Shareholders for the fiscal year ended January 2, 2000, included the audit of
Financial Statement Schedule II (Valuation and Qualifying Accounts and Reserves)
set forth in the Form 10-K. The Financial Statement Schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on the Financial Statement Schedule.
In our opinion, such Schedule presents fairly, in all material
respects, the information set forth therein.
BDO SEIDMAN, LLP
Atlanta, Georgia
INTERFACE, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
- - ----------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- - ----------------------------------------------------------------------------------------------------------------------------
Balance, At Charged to Charged to Balance
Beginning Costs and Other Deductions End
of Year Expenses Accounts (Describe) of Year
- - ----------------------------------------------------------------------------------------------------------------------------
(In Thousands)
Allowance for accounts:
Year ended:
January 2, 2000 .................................$7,790 $ 4,565 $-- $3,558 $8,797
====== ======= === ====== ======
January 3, 1999 .................................$7,351 $ 3,882 $-- $3,443 $7,790
====== ======= === ====== ======
December 28, 1997 ...............................$7,349 $ 2,032 $-- $2,030 $7,351
====== ======= === ====== ======
Includes changes in foreign currency exchange rates.
Includes allowance of $793 at acquisition date for Camborne, Carpet
Solutions and certain of the companies in the Re:Source Americas network
during 1997; and $583 at acquisition date for Firth, Joseph Hamilton &
Seaton and certain of the companies in the Re:Source Americas network
during 1998.
Write off of bad debt.
- - ----------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- - ----------------------------------------------------------------------------------------------------------------------------
Balance, At Charged to Charged to Balance
Beginning Costs and Other Deductions End
of Year Expense Accounts (Describe) of Year
- - ----------------------------------------------------------------------------------------------------------------------------
Restructuring reserve:
Year ended:
January 2, 2000............................ $6,036 $ 1,803 $-- $7,373 $ 466
January 3, 1999.............................$ -- $13,017 $-- $6,981 $6,036
====== ======= === ====== ======
Cash payments of $6,701 and reversal of over-accrual of $672 in 1999;
cash payments of $6,981 in 1998.
(All other Schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are omitted because they
are either not applicable or the required information is shown in the Company's
Consolidated Financial Statements or the Notes thereto.)
- 21 -
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Company has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
INTERFACE, INC.
By: /s/ Ray C. Anderson
Ray C. Anderson
Chairman of the Board
President, and
Chief Executive Officer
Date: March 24, 2000
POWER OF ATTORNEY
Know all men by these presents, that each person whose signature
appears below constitutes and appoints Ray C. Anderson as attorney-in-fact, with
power of substitution, for him in any and all capacities, to sign any amendments
to this Report on Form 10-K, and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorney-in-fact may
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Capacity Date
--------- -------- ----
/s/ Ray C. Anderson Chairman of the Board, President and Chief March 24, 2000
-----------------------------------
Ray C. Anderson Executive Officer (Principal Executive Officer)
/s/ Daniel T. Hendrix Senior Vice President, Chief Financial Officer, March 24, 2000
-----------------------------------
Daniel T. Hendrix Treasurer and Director (Principal Financial and
Accounting Officer)
/s/ Brian L. Demoura Director March 24, 2000
---------------------------------
Brian L. DeMoura
/s/ John H. Walker Director March 24, 2000
-----------------------------------
John H. Walker
/s/ Dianne Dillon-Ridgley Director March 24, 2000
---------------------------------
Dianne Dillon-Ridgley
/s/ Carl I. Gable Director March 24, 2000
--------------------------------------
Carl I. Gable
/s/ June M. Henton Director March 24, 2000
------------------------------------
June M. Henton
/s/ J. Smith Lanier, II Director March 24, 2000
-------------------------------------
J. Smith Lanier, II
/s/ Thomas R. Oliver Director March 24, 2000
----------------------------------
Thomas R. Oliver
/s/ Leonard G. Saulter Director March 24, 2000
-----------------------------------
Leonard G. Saulter
/s/ Clarinus C.th. Van Andel Director March 24, 2000
-------------------------------
Clarinus C.Th. van Andel
- 23 -
Exhibit Index
Exhibit
Number Description of Exhibit
------ ----------------------
10.6 Third Amendment, dated May 7, 1999, to Employment
Agreement of Ray C. Anderson dated April 1, 1997.
10.7 Third Amendment, dated May 7, 1999, to Change in
Control Agreement of Ray C. Anderson dated April 1,
1997.
10.20 Form of Second Amendment to Employment Agreement,
dated January 14, 1999, amending Exhibits 10.6, 10.8,
10.10, 10.12, 10.16 and 10.18 to this Report.
10.21 Form of Second Amendment to Change in Control
Agreement, dated January 14, 1999, amending Exhibits
10.7, 10.9, 10.11, 10.13, 10.17 and 10.19 to this
Report.
13 Certain information, as follows, contained in the
Company's 1999 Annual Report to Shareholders which
is expressly incorporated into this Report by direct
reference thereto.
o Selected Financial Information
o Management's Discussion and Analysis of
Financial Condition and Results of Operations
o Consolidated Financial Statements of the
Company and Report of Independent Certified
Public Accoutants thereon
21 Subsidiaries of the Company.
23 Consent of BDO Seidman, LLP.
27 Financial Data Schedule.
99.1 Safe Harbor Compliance Statement for Forward-Looking
Statements.
- 24 -