<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarterly Period Ended October 4, 1998
Commission File Number 0-12016
------------------------------
INTERFACE, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
GEORGIA 58-1451243
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2859 PACES FERRY ROAD, SUITE 2000, ATLANTA, GEORGIA 30339
---------------------------------------------------------
(Address of principal executive offices and zip code)
(770) 437-6800
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes / X / No / /
Shares outstanding of each of the registrant's classes of common stock
at November 9, 1998:
Class Number of Shares
----- ----------------
Class A Common Stock, $.10 par value per share 46,779,052
Class B Common Stock, $.10 par value per share 5,607,761
1<PAGE>
INTERFACE, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <S> <S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Balance Sheets - October 4, 1998 and December 28, 1997 3
Statements of Income - Three Months and Nine Months Ended 4
October 4, 1998 and September 28, 1997
Statements of Comprehensive Income - Three Months and Nine Months 4
Ended October 4, 1998 and September 28, 1997
Statements of Cash Flows - Nine Months 5
Ended October 4, 1998 and September 28, 1997
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and 12
Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
</TABLE>
2<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
OCTOBER 4, DECEMBER 28,
1998 1997
---- ----
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $ 16,044 $ 10,212
Accounts Receivable 210,920 177,977
Inventories 200,992 157,630
Deferred Tax Asset 5,236 5,156
Prepaid Expenses 33,687 24,265
---------- --------
TOTAL CURRENT ASSETS 466,879 375,240
PROPERTY AND EQUIPMENT, less
accumulated depreciation 247,877 228,781
EXCESS OF COST OVER NET ASSETS ACQUIRED 302,435 278,597
OTHER ASSETS 57,946 46,945
---------- --------
$1,075,137 $929,563
========== ========
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes Payable $ 30,721 $ 22,264
Accounts Payable 68,776 79,279
Accrued Expenses 99,407 87,543
Current Maturities of Long-Term Debt 2,867 2,751
---------- --------
TOTAL CURRENT LIABILITIES 201,771 191,837
LONG-TERM DEBT, less current maturities 283,562 264,499
SENIOR SUBORDINATED NOTES 125,000 125,000
DEFERRED INCOME TAXES 32,479 28,873
---------- --------
TOTAL LIABILITIES 642,812 610,209
---------- --------
Minority Interest 2,989 2,989
Common Stock 5,970 2,776
Additional Paid-In Capital 231,323 161,584
Retained Earnings 228,081 197,906
Accumulated Other Comprehensive Income - Foreign Currency
Translation (15,757) (28,155)
Treasury Stock, 7,375
Class A Shares, at Cost (20,281) (17,746)
---------- --------
$1,075,137 $929,563
========== ========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
3<PAGE>
<TABLE>
<CAPTION>
INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
OCTOBER 4, SEPTEMBER 28, OCTOBER 4, SEPTEMBER 28,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $ 328,264 $ 297,352 $ 964,080 $ 826,443
Cost of Sales 215,005 196,699 637,414 553,473
--------- --------- --------- ---------
Gross Profit on Sales 113,259 100,653 326,666 272,970
Selling, General and Administrative Expenses 80,685 74,056 238,885 203,867
--------- --------- --------- ---------
Operating Income 32,574 26,597 87,781 69,103
Other (Expense) Income - Net (10,136) (9,234) (29,626) (28,393)
--------- --------- --------- ---------
Income before Taxes on Income 22,438 17,363 58,155 40,710
Taxes on Income 8,078 6,852 21,848 15,886
--------- --------- --------- ---------
Net Income $ 14,360 $ 10,511 $ 36,307 $ 24,824
========= ========= ========= =========
Basic Earnings Per Share .27 .22 .70 .53
========= ========= ========= =========
Diluted Earnings Per Share .27 .21 .69 .52
========= ========= ========= =========
Average Shares Outstanding -- Basic 52,462 48,030 51,773 46,816
========= ========= ========= =========
Average Shares Outstanding -- Diluted 54,105 48,940 52,916 47,726
========= ========= ========= =========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<TABLE>
<CAPTION>
INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
OCTOBER 4, SEPTEMBER 28, OCTOBER 4, SEPTEMBER 28,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income $ 14,360 $ 10,511 $ 36,307 $ 24,824
Other Comprehensive Income, Foreign
Currency Translation Adjustment 16,140 (7,458) 12,398 (22,910)
-------- -------- -------- --------
Comprehensive Income $ 30,500 $ 3,053 $ 48,705 $ 1,914
======== ======== ======== ========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
4<PAGE>
<TABLE>
<CAPTION>
INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
-----------------
OCTOBER 4, SEPTEMBER 28,
1998 1997
---- ----
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES: $28,419 $25,332
------- -------
INVESTING ACTIVITIES:
Capital expenditures (28,998) (33,963)
Acquisitions of businesses (62,800) (34,647)
Other (6,369) (7,601)
------- -------
(98,167) (76,211)
------- -------
FINANCING ACTIVITIES:
Net borrowing (reduction) of long-term debt 14,997 50,546
Issuance/Repurchase of common stock 68,121 5,513
Dividends paid (6,134) (4,626)
------- -------
76,984 51,433
------- -------
Net cash provided by (used for) operating,
investing and financing activities 7,236 554
Effect of exchange rate changes on cash (1,404) 300
------- -------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) during the period 5,832 854
Balance at beginning of period 10,212 8,762
------- -------
Balance at end of period $16,044 $ 9,616
======= =======
See accompanying notes to consolidated condensed financial statements.
</TABLE>
5<PAGE>
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - CONDENSED FOOTNOTES
As contemplated by the Securities and Exchange Commission (the
"Commission") instructions to Form 10-Q, the following footnotes have
been condensed and, therefore, do not contain all disclosures required
in connection with annual financial statements. Reference should be
made to the notes to the Company's year-end financial statements
contained in its Annual Report to Shareholders for the fiscal year
ended December 28, 1997, as filed with the Commission.
The financial information included in this report has been
prepared by the Company, without audit, and should not be relied upon
to the same extent as audited financial statements. In the opinion of
management, the financial information included in this report contains
all adjustments (all of which are normal and recurring) necessary for
a fair presentation of the results for the interim periods.
Nevertheless, the results shown for interim periods are not
necessarily indicative of results to be expected for the full year.
NOTE 2 - INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
October 4, December 28,
1998 1997
----------- ------------
<S> <C> <C>
Finished Goods $125,095 $ 91,016
Work in Process 32,580 29,094
Raw Materials 43,317 37,520
-------- --------
$200,992 $157,630
======== ========
</TABLE>
NOTE 3 - BUSINESS ACQUISITIONS AND DIVESTITURES
During the first three quarters of 1998, the Company acquired
four floorcovering contractors (Carpet Workshop, Inc., based in
Florida; Kustom Carpet Services, Inc., based in Washington, D.C.;
Corporate Floorworks, Inc., based in Indiana; and J. Graham Carpet
Co., Inc., based in New York), three carpet maintenance companies
(Castle Carpet Care, Inc., based in the State of Washington; G&H
Services, Inc., based in Connecticut, and Oldtown Carpet Cleaning
Services, Inc., based in North Carolina) and a floorcovering
installation company (Wallum Floors, Inc., based in New Jersey). The
Company also acquired Atlantic Access Flooring, Inc., a raised/access
flooring manufacturer based in Maryland; and the vinyl floorcoverings
business of Scan-Lock A/S, based in Denmark. As consideration, the
Company paid $12.9 million and issued 113,562 shares of Common Stock
valued at approximately $1.65 million. All transactions have been
accounted for as purchases, and accordingly, the results of operations
of the acquired companies have been included within the consolidated
financial statements since their respective acquisition dates. The
excess of the purchase price over the fair value of the net assets
acquired was approximately $8.5 million and is being amortized over 25
years.
6<PAGE>
On December 30, 1997, the Company completed the acquisition of
the European carpet businesses of Readicut International plc
("Readicut"), for approximately $50 million. The Company subsequently
sold Readicut's Network Flooring dealer division, and it is
considering the sale of certain additional assets acquired from
Readicut. The retained businesses include Firth Carpets Ltd., based
in Brighouse, West Yorkshire, a leading manufacturer of high quality
woven and tufted carpet primarily for the contract markets; and a 40%
interest in Vebe Floorcoverings BV, located in the Netherlands, a
leading manufacturer of needle punch carpet.
In December 1997, the Company sold certain assets related to the
commercial manufacture of zinc diacrylate, a chemical compound used in
the production of golf balls, for $14.1 million in cash. An
immaterial gain was realized on the sale. The Company generated 1997
sales of $7.9 million and operating income of $1.1 million related to
the manufacture of this chemical compound.
During 1997, the Company acquired 100% of the outstanding capital
stock of four floorcovering contractors: Canaan Corporation, based in
Connecticut; Carpet Services of Tampa, Inc., based in Florida;
Floormart, Inc., based in California; and Carpet Solutions Holdings
Pty Ltd., based in Queensland, Australia. These contractors are
engaged primarily in the sale and installation of commercial
floorcoverings. The Company also acquired 100% of the outstanding
capital stock of Facilities Resource Group, Inc., an office furniture
installation company. As consideration, the Company issued 515,168
shares of Class A Common Stock valued at approximately $3.5 million
and paid $11.1 million in cash. All transactions have been accounted
for as purchases, and accordingly, the results of operations of the
acquired companies have been included within the consolidated
financial statements since their respective acquisition dates. The
excess of the purchase price over the fair value of the net assets
acquired was approximately $17.5 million and is being amortized over
25 years.
In June 1997, the Company acquired 100% of the outstanding common
stock of Camborne Holdings, Ltd., a manufacturer of interior fabrics
based in West Yorkshire, U.K. for approximately $19.9 million, which
was comprised of $17.1 million in cash and 255,612 shares of Class B
Common Stock valued at approximately $2.8 million. The transaction
was accounted for as a purchase. The results of operations of
Camborne have been included within the consolidated financial
statements since the acquisition date. The excess of the purchase
price over the fair value of the assets was approximately $16.8
million and is being amortized over 40 years.
NOTE 4 - CONCURRENT PUBLIC OFFERINGS
On April 2, 1998, the Company completed concurrent public
offerings of $150 million aggregate principal amount of 7.30% Senior
Notes due 2008 and 3,450,000 shares of Class A Common Stock. The
Company used the net proceeds of both offerings of $212.7 million to
reduce amounts outstanding under its senior credit facility, and for
general corporate purposes, including working capital and
acquisitions.
7
<PAGE>
NOTE 5 - STOCK SPLIT
On June 15, 1998, the Company paid a two-for-one stock split,
effected in the form of a 100% stock dividend, to all common
shareholders of record as of June 1, 1998. In connection with the
stock split, the Company issued 29,690,566 shares of Common Stock in
the aggregate (including treasury shares). All earlier references to
shares of the Company's Common Stock contained elsewhere in these
Notes have been retroactively adjusted to reflect the stock split.
NOTE 6 - STOCK REPURCHASES
The Company has recently adopted a share repurchase program,
pursuant to which it is authorized to repurchase up to 2,000,000
shares of Common Stock in the open market over the next two years.
During the third quarter, the Company repurchased an aggregate of
175,000 shares of Common Stock under this program, at prices ranging
from $12.86 to $16.78 per share.
NOTE 7 - EARNINGS PER SHARE AND DIVIDENDS
In March 1997, the FASB issued SFAS 128, "Earnings per Share."
The new Standard simplifies the computation of earnings per share and
requires presentation of two amounts, basic and diluted earnings per
share. As required by the Standard, the Company has retroactively
restated earnings per share data for all periods presented.
Basic earnings per share is computed by dividing income available
to common shareholders by the weighted average number of shares of
Class A and Class B Common Stock outstanding during the period.
Shares issued or reacquired during the period have been weighted for
the portion of the period that they were outstanding. Basic earnings
per share has been computed based upon 51,773 shares and 46,816 shares
outstanding for the periods ended October 4, 1998 and September 28,
1997, respectively. Diluted earnings per share is calculated in a
manner consistent with that of basic earnings per share while giving
effect to all dilutive potential common shares that were outstanding
during the period. Diluted earnings per share has been computed based
upon 52,916 shares and 47,726 shares outstanding for the periods ended
October 4, 1998 and September 28, 1997, respectively. For the
purposes of computing earnings per common share and dividends per
common share, the Company is treating as treasury stock (and therefore
not outstanding) the shares that are owned by a wholly-owned
subsidiary and the shares recently repurchased in the open market (an
aggregate of 7,375,000 Class A shares recorded at cost).
8<PAGE>
The following is a reconciliation from basic earnings per share
to diluted earnings per share for each of the periods presented:
<TABLE>
<CAPTION>
(In Thousands Except Per Share)
Average
For the Nine-Month Shares Earnings
Period Ended Net Income Outstanding Per Share
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
October 4, 1998 $ 36,307 51,773 $ .70
Effect of Dilution:
Options -- 1,143
-----------------------------------------------------
Diluted $ 36,307 52,916 $ .69
=====================================================
- ------------------------------------------------------------------------------------------------------------
September 28, 1997 $ 24,824 46,816 $ .53
Effect of Dilution:
Options -- 740
Convertible Debt 120 170
-----------------------------------------------------
Diluted $ 24,944 47,726 $ .52
=====================================================
- ------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 8 - COMPREHENSIVE INCOME
Effective the first quarter of 1998, the Company has adopted
FAS 130, "Comprehensive Income". This statement has established the
standards for reporting and displaying comprehensive income and its
components (revenues, expenses, gains and losses) as part of a full
set of financial statements. This statement requires that all
elements of comprehensive income be reported in a financial statement
that is displayed with the same prominence as other financial
statements. Since this statement applies only to the presentation of
comprehensive income, it does not have any impact upon results of
operations, financial position, or cash flows.
9<PAGE>
NOTE 9 - SUPPLEMENTAL GUARANTOR FINANCIAL STATEMENTS
The Guarantor Subsidiaries, which consist of the Company's
principal domestic subsidiaries, are guarantors of the Company's 7.3%
senior notes due 2008 and its 9.5% senior subordinated notes due 2005.
The Supplemental Guarantor Financial Statements are presented herein
pursuant to requirements of the Commission.
<TABLE>
<CAPTION>
INTERFACE, INC. AND SUBSIDIARIES
NOTE 9 - SUPPLEMENTAL GUARANTOR FINANCIAL STATEMENTS
STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED OCTOBER 4, 1998
INTERFACE, CONSOLIDATION
NON- INC. AND
GUARANTOR GUARANTOR (PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTALS
------------ ------------ ------------ ------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales $751,771 $332,532 $ - $ (120,223) $964,080
Cost of sales 530,845 226,792 - (120,223) 637,414
-------- -------- ----------- ---------- --------
Gross profit on sales 220,926 105,740 - - 326,666
Selling, general and 152,397 66,320 20,168 - 238,885
administrative expenses -------- -------- ----------- ---------- --------
Operating income 68,529 39,420 (20,168) - 87,781
Other expense (income) 12,625 5,103 11,898 - 29,626
-------- -------- ----------- ---------- --------
Income before taxes on income 55,904 34,317 (32,066) 58,155
and Equity in income of
subsidiaries
Taxes on income 21,523 13,212 (12,887) - 21,848
-------- -------- ----------- ---------- --------
Equity in income of subsidiaries - - 55,486 (55,486) -
-------- -------- ----------- ---------- --------
Net income applicable to $ 34,381 $ 21,105 $ 36,307 $ (55,486) $ 36,307
common shareholders ======== ======== =========== ========== ========
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEET
OCTOBER 4, 1998
CONSOLIDATION
NON- INTERFACE, INC. AND
GUARANTOR GUARANTOR (PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTALS
------------ ------------ --------------- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C. <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 2,963 $ 5,157 $ 7,924 $ 0 $ 16,044
Accounts receivable 141,663 93,437 (24,180) 0 210,920
Inventories 131,351 69,641 0 0 200,992
Miscellaneous 10,487 26,222 2,214 0 38,923
-------- -------- -------- ----------- ----------
Total current assets 286,464 194,457 (14,042) 0 466,879
Property and equipment
less accumulated depreciation 153,236 86,350 8,291 0 247,877
Investment in subsidiaries 138,088 15,799 373,895 (527,782) 0
Miscellaneous 196,619 36,902 570,054 (745,629) 57,946
Excess of cost over net assets
acquired 178,912 110,445 13,078 0 302,435
-------- -------- -------- ----------- ----------
$953,319 $443,953 $951,276 $(1,273,411) $1,075,137
======== ======== ======== =========== ==========
LIABILITIES AND COMMON
SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 13,185 $ 17,536 $ 0 $ 0 $ 30,721
Accounts payable 39,871 27,200 1,705 0 68,776
Accrued expenses 67,680 53,156 (21,429) 0 99,407
Current maturities of long-
term debt 1,687 1,180 0 0 2,867
-------- -------- -------- ----------- ----------
Total current liabilities 122,423 99,072 (19,724) 0 201,771
Long-term debt, less
current maturities 256,905 64,310 322,451 (360,104) 283,562
Senior subordinated notes - - 125,000 - 125,000
Deferred income taxes 15,100 8,600 8,779 0 32,479
Minority Interests 0 2,989 0 0 2,989
-------- -------- -------- ----------- ----------
Total liabilities 394,428 174,971 436,506 (360,104) 645,801
Redeemable preferred stock 57,891 0 0 (57,891) 0
Common stock 93,889 102,199 5,970 (196,088) 5,970
Additional paid-in capital 189,740 11,030 231,323 (200,770) 231,323
Retained earnings 220,126 165,398 280,834 (438,277) 228,081
Foreign currency translation
adjustment (2,755) (9,645) (3,357) 0 (15,757)
income
Treasury stock, 7,375,000 Class A
shares, at cost 0 0 0 (20,281) (20,281)
-------- -------- -------- ----------- ----------
$953,319 $443,953 $951,276 $(1,273,411) $1,075,137
======== ======== ======== =========== ==========
</TABLE>
11<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS
ENDED OCTOBER 4, 1998
INTERFACE, CONSOLIDATION
NON- INC. AND
GUARANTOR GUARANTOR (PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTALS
------------ ------------ ------------ ------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by operating activities $ 7,004 $23,378 $(1,963) $ 0 $28,419
Cash flows from operating activities:
Cash flows from investing activities:
Purchase of plant and equipment (15,393) (11,886) (1,719) 0 (28,998)
Acquisitions, net of cash acquired 0 0 (62,800) 0 (62,800)
Other assets 0 0 (6,369) 0 (6,369)
------- ------- ------- ------- -------
Net cash provided by (used in) investing
activities (15,393) (11,886) (70,888) 0 (98,167)
Cash flows from financing activities:
Net borrowings (repayments) 6,991 (11,433) 19,439 0 14,997
Proceeds from issuance of common stock 0 0 68,121 0 68,121
Cash dividends paid 0 0 (6,134) 0 (6,134)
------- ------- ------- ------- -------
Net cash provided by (used in) financing
activities 6,991 (11,433) 81,426 0 76,984
------- ------- ------- ------- -------
Effect of exchange rate change on cash 0 (1,404) 0 0 (1,404)
------- ------- ------- ------- -------
Net increase (decrease) in cash (1,398) (1,345) 8,575 0 5,832
Cash at beginning of year 4,361 6,502 (651) 0 10,212
------- ------- ------- ------- -------
Cash at end of year $ 2,963 $ 5,157 $ 7,924 $ 0 $16,044
======= ======= ======= ======= =======
</TABLE>
12<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Company's revenues are derived from sales of commercial
floorcovering products (primarily modular and broadloom carpet) and
related services, interior fabrics and specialty products. During the
quarter ended October 4, 1998, the Company had revenues and net income
of $328.3 million and $14.4 million, respectively.
The Company's business, as well as the commercial interiors
market in general, is somewhat cyclical in nature. The Company's
strong financial performance in recent years is attributable in part
to increased U.S. demand for its products, resulting from a recovery
in the U.S. commercial office market which began in the mid-1990's.
Although orders for certain of the Company's products have recently
begun to slow, overall demand for the Company's products in the U.S.
continues to be solid. However, a downturn in the market could
lessen the overall demand for commercial interiors products and could
impair the Company's growth.
The Company's growth could also be impacted by international
developments. Specifically, countries in the Asia-Pacific region have
recently experienced weaknesses in their currency, banking and equity
markets. These weaknesses have adversely affected demand for the
Company's products. However, sales in the Asia-Pacific region
represented only 4% of the Company's sales during the quarter ended
October 4, 1998. Management is considering whether to rationalize and
restructure operations in certain countries where the Company has
underperformed management's expectations or where consolidation
opportunities exist.
Results of Operations
For the three month and nine month periods ended October 4,
1998, the Company's net sales increased $30.9 million (10.4%) and
$137.6 million (16.7%), respectively, compared with the same periods
in 1997. These increases were primarily attributable to increased
sales volume (i) of products and related services in the Company's
U.S. floorcovering operations, due to increased demand for and
increased market share of its modular carpet products, as well as
additional sales generated by the Re:Source Americas network, (ii) of
floorcovering products in Europe as a result of the acquisition of
Firth Carpets early in the first quarter of 1998, and (iii) in the
Company's interior fabrics operations due to increased demand for the
Company's lighter weight, higher margin fabric products. These
increases were offset somewhat by decreased sales volume (i) in the
Company's Asia-Pacific division due to the economic turmoil in Asia,
(ii) in the Company's architectural products division, and (iii) of
modular carpet products in the United Kingdom.
Cost of sales, as a percentage of sales, decreased to 65.5% and
66.1%, respectively, for the three month and nine month periods ended
October 4, 1998, when compared to 66.2% and 67.0% for the same periods
in 1997. The decrease was attributable to (i) increased profitability
in the Company's Interface Americas Workplace Solutions unit
(comprised of the Re:Source Americas network and the Company's other
service businesses), (ii) economies of scale associated with increased
sales volume in the Company's floorcovering and interior fabrics
operations, (iii) decreased manufacturing costs in the Company's
floorcovering and interior fabrics operations through the Company's
QUEST waste reduction initiative, and (iv) a favorable product mix.
13<PAGE>
The Company's interior fabrics business also experienced decreased
manufacturing costs as a result of continued efficiencies generated
from the new, state-of-the-art yarn manufacturing facility in
Guilford, Maine.
Selling, general and administrative expenses, as a percentage
of net sales, decreased to 24.6% in the quarter ended October 4, 1998
compared to 24.9% in the same period in 1997, primarily as a result of
improved cost containment measures worldwide in the third quarter.
However, the SG&A cost-to-sales ratio increased to 24.8% in the nine-
month period ended October 4, 1998 compared to 24.7% in the same
period in 1997. The increase was attributable primarily to (i) the
continued development of the Re:Source Americas network infrastructure
and (ii) consulting and development expenses associated with the Year
2000 initiative.
For the three month and nine month periods ended October 4,
1998, other expense increased $0.9 million and $1.2 million,
respectively, compared to the same periods in 1997, due primarily to
higher overall levels of bank debt incurred as a result of the
Company's acquisitions.
As a result of the aforementioned factors, the Company's net
income increased 36.6% to $14.4 million and 46.3% to $36.3 million,
respectively, for the three month and nine month periods ended October 4,
1998, compared to the same periods in 1997.
Liquidity and Capital Resources
The Company's primary sources of cash during the nine months
ended October 4, 1998 were (i) $68.1 from the issuance (net of
repurchases) of Common Stock, (ii) $28.4 from operating activities,
and (iii) $15.0 from long-term financing. The primary uses of cash
during the nine months ended October 4, 1998 were (i) $62.8 million
associated with acquisitions, and (ii) $29.0 million for additions to
property and equipment in the Company's manufacturing facilities.
Management believes that cash provided by operations and long-term
loan commitments will provide adequate funds for current commitments
and other requirements in the foreseeable future.
The Company has recently adopted a share repurchase program,
pursuant to which it is authorized to repurchase up to 2,000,000
shares of Common Stock in the open market over the next two years.
During the third quarter, the Company repurchased an aggregate of
175,000 shares of Common Stock under this program, at prices ranging
from $12.86 to $16.78 per share.
Year 2000
As is the case with other companies using computers in their
operations, the Company is faced with the task of addressing the Year
2000 issue. The Year 2000 issue arises from the widespread use of
computer programs that rely on two-digit codes to perform computations
or decision-making functions. The Company has done a comprehensive
review of its computer programs to identify the systems that would be
affected by the Year 2000 issue. The Company has retained IBM
Corporation to assist in its Year 2000 conversion process.
The Company categorizes its systems into one of two
categories: those that are linked to the Company's AS-400 computer
network ("IT Systems"), and those that are not ("Non-IT Systems").
The Company currently estimates the total cost of modifying its IT
Systems to be Year 2000 ready to be approximately $19 million. Of
such amount, approximately $10 million is attributable to the cost of
14<PAGE>
new hardware and software which will be required in connection with
the global consolidation of the Company's management and financial
accounting systems. This new equipment and upgraded technology will
have a definable value lasting beyond the Year 2000. In these
instances, where Year 2000 compliance is ancillary, the Company
intends to capitalize and depreciate such costs. The remaining $9
million (based on current estimates) will be expensed as incurred.
With respect to Non-IT Systems, the Company currently estimates the
total cost of the modifications necessary to be Year 2000 ready to be
approximately $2 million, although it could be more.
During the quarter ended October 4, 1998, the Company expensed
approximately $2.5 million in regards to modifications of both IT
Systems and Non-IT Systems. To date, the Company has expensed
approximately $5.5 million in the aggregate in regards to such
modifications. The Company currently anticipates that the
modifications to both its IT Systems and its Non-IT Systems will be
completed by the end of the second quarter of 1999, although it could
be later. The balance of 1999 will then be available for testing the
modifications, as well as for training employees in the use of new
hardware and software.
The Company is still in the process of reviewing its Year 2000
exposure to third party customers, distributors and suppliers. The
Company's most reasonably likely worst case Year 2000 scenario is that
a key supplier's systems will malfunction and, as a result, the
Company will suffer a period of business interruption during which it
is unable to meet related obligations to its customers. The Company
is currently unaware of any Year 2000 problems faced by any third
party customers, distributors or suppliers which are likely to have a
material adverse effect on the Company. However, many third parties
are reluctant to provide detailed information concerning the status of
their Year 2000 readiness, particularly if they have not completed
their analysis of their systems.
There can be no guarantee that the foregoing cost estimates or
deadlines will be achieved and actual results could differ from those
anticipated. Specific factors that might cause differences include,
but are not limited to, the ability of suppliers, customers and other
companies on which the Company's systems rely to modify or convert
their systems to be Year 2000 ready, the ability to locate and correct
all relevant computer codes and similar uncertainties. The Company is
in the process of developing contingency plans for such scenarios,
including identifying substitute suppliers for key materials.
Derivative Financial Instruments
The Company employs the use of derivative financial instruments
for the purpose of reducing its exposure to adverse fluctuations in
interest and foreign currency exchange rates. While these hedging
instruments are subject to fluctuations in value, such fluctuations
are generally offset by the fluctuations in value of the underlying
exposures being hedged. The Company does not hold or issue derivative
financial instruments for trading purposes. The Company monitors the
use of derivative financial instruments through the use of objective
measurable systems, well-defined market and credit risk limits, and
timely reports to senior management according to prescribed
guidelines. The Company has established strict counter party credit
guidelines and only enters into transactions with financial
institutions of investment grade or better. As a result, the Company
considers the risk of counter party default to be minimal.
15<PAGE>
Management of the Company has developed and implemented a
policy to maintain the percentage of fixed and variable rate debt
within certain parameters. The Company enters into interest rate swap
agreements, which maintain the fixed/variable mix within these defined
parameters. In these swaps, the Company agrees to exchange, at
specified intervals, the difference between fixed and variable
interest amounts calculated by reference to an agreed-upon notional
principal linked to LIBOR (London Interbank Offered Rate). At October 4,
1998, the Company had utilized interest rate swap agreements to
effectively convert approximately $45 million of variable rate debt to
fixed rate debt. The weighted average rate on these borrowings was
6.9% at October 4, 1998. The interest rate swap agreements have
maturity dates ranging from five to 24 months.
The purpose of the Company's foreign currency hedging
activities is to reduce the risk that the eventual local currency
inflows resulting from sales to foreign customers will be adversely
affected by changes in exchange rates. The Company enters into
forward exchange and currency swap contracts to hedge certain firm
sales commitments denominated in foreign currencies. At October 4,
1998, the Company had approximately $14.5 million (notional amount) of
foreign currency hedge contracts outstanding. The contracts served to
hedge firmly committed Dutch guilder, German mark, Japanese yen,
French franc, British pound sterling, and other foreign currency
revenues. The contracts generally have maturity dates of six to nine
months.
The Company, as of October 4, 1998, recognized a $12.4 million
decrease in its foreign currency translation adjustment account
compared to December 27, 1998, because of the strengthening of certain
currencies against the U.S. dollar. The decrease was associated
primarily with the Company's investments in certain foreign
subsidiaries located in Continental Europe. The translation
adjustment to shareholders' equity was converted by the guidelines of
the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 52.
Forward-Looking Statements
THIS FORM 10-Q CONTAINS STATEMENTS WHICH MAY CONSTITUTE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE SECURITIES ACT
OF 1933 AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED BY THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. ANY SUCH FORWARD-
LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH
FORWARD-LOOKING STATEMENTS, INCLUDING THE RISKS AND UNCERTAINTIES
DISCUSSED IN THE SAFE HARBOR COMPLIANCE STATEMENT FOR FORWARD-LOOKING
STATEMENTS INCLUDED AS EXHIBIT 99.1 TO THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 28, 1997, WHICH
DISCUSSION IS INCORPORATED HEREIN BY THIS REFERENCE.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
16
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In February 1998, the Company sent two "cease and desist"
letters to Collins & Aikman Floorcoverings, Inc. ("CAF"), demanding
that CAF cease manufacturing certain carpet products which the Company
believes infringe upon certain of its copyrighted product designs.
The Company and CAF subsequently began settlement negotiations in an
attempt to resolve the Company's claims.
On July 28, 1998, CAF filed a complaint (the "Complaint")
against the Company and certain other parties in the U.S. District
Court for the Northern District of Georgia, Atlanta Division. In the
Complaint, CAF alleges that the Company has infringed upon certain of
CAF's copyrighted product designs. The Complaint also contains a
claim against the Company for tortious interference with contractual
rights relating to a consulting agreement between CAF and David Oakey,
a former consultant of CAF and current consultant of the Company. CAF
is seeking damages and injunctive relief in connection with the
foregoing claims.
On September 28, 1998, the Company filed its Answer and
Counterclaims to the Complaint, which includes certain counterclaims
against CAF for copyright infringement. The Company continues to
believe that CAF's claims are unfounded and that the Company has
meritorious defenses to such claims. Moreover, the Company intends to
aggressively assert its claims against CAF.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
RECENT SALES OF UNREGISTERED SECURITIES
During the fiscal quarter ended October 4, 1998, the Company
issued an aggregate of 113,562 shares of its Common Stock that were
not registered under the Securities Act of 1933 (the "Securities
Act"). The shares, in combination with cash, were issued as
consideration in the acquisitions of Kustom Carpet Services, Inc. and
Oldtown Carpet Cleaning Service, Inc., to two individuals. The market
price on the dates of issuance ranged from $12.00 per share to $12.25
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.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
None
17<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed with this report:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
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).
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 (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 Split Dollar Insurance Agreement, dated effective as of February 21, 1997, among the Company and Charles R.
Eitel.
10.2 Split Dollar Insurance Agreement, dated effective as of February 21, 1997, among the Company and Daniel T.
Hendrix.
10.3
Split Dollar Insurance Agreement, dated effective as of February 21, 1997, among the Company and Gordon D.
Whitener.
27.1 Financial Data Schedule (for SEC use only).
(b) No reports on Form 8-K were filed during the quarter ended October 4, 1998.
18<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
INTERFACE, INC.
Date: November 16, 1998 By: /s/ Daniel T. Hendrix
Daniel T. Hendrix
Senior Vice President
(Principal Financial Officer)
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
10.1 Split Dollar Insurance Agreement, dated effective as of
February 21, 1997, among the Company and Charles R. Eitel.
10.2 Split Dollar Insurance Agreement, dated effective as of
February 21, 1997, among the Company and Daniel T. Hendrix.
10.3 Split Dollar Insurance Agreement, dated effective as of
February 21, 1997, among the Company and Gordon D. Whitener.
27.1 Financial Data Schedule.
</TABLE>
SPLIT DOLLAR INSURANCE AGREEMENT
THIS AGREEMENT is made and entered into on this 21st day of
February, 1997, by and between CHARLES R. EITEL (hereinafter called
"Employee"), and INTERFACE, INC. (hereinafter called "Employer").
W I T N E S S E T H :
WHEREAS, Employee is a valued employee of Employer, and Employer
wishes to retain him in its employ; and
WHEREAS, Employer, as an inducement to such continued
employment, wishes to assist Employee with his personal life
insurance program;
NOW, THEREFORE, in consideration for the covenants and mutual
promises set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which hereby are
acknowledged, Employer and Employee agree as follows:
1. POLICY. The life insurance policy to which this Agreement
relates is Policy Number 14196680 (hereinafter called the "Policy")
issued by Northwestern Mutual Life Insurance Company (hereinafter
called "Insurer") on the life of Employee with an initial face amount
of $3,029,695 and an initial annual premium of $89,602.13.
2. EMPLOYEE'S RIGHTS. Employee shall be the owner of the
Policy on his life, and may exercise all ownership rights granted to
the owner thereof by the terms of the Policy; provided, Employee will
not take any action that would impair any right or interest of
Employer in and to the Policy as provided herein. Employer's rights
in and to the Policy shall be limited to its security interest in and
to the cash surrender value of the Policy, as defined therein, and a
portion of the death benefit thereof, as hereinafter provided.
3. PREMIUM PAYMENTS. Employer shall pay to Insurer the entire
premium on the Policy as it becomes due. For purposes of this
Agreement, the term "unreimbursed premium payments" shall mean (i)
the total amount of all premiums on the Policy paid by Employer from
the date hereof, less (ii) any prior reimbursement received by
Employer from Employee.
4. EMPLOYER'S RIGHTS. Employer shall have a right to recover
its interest in the Policy as defined below. To assure recovery by
Employer of its interest in the Policy, Employee shall,
contemporaneously herewith, assign such interest in the Policy to
Employer, under the form of Collateral Assignment attached hereto as
Schedule A, which Assignment gives Employer the limited power to
enforce its right to recover its interest in the Policy. The
interest of Employer in and to the Policy shall be specifically
limited to the following rights:
(a) The right to recover the greater of (i) the amount of
its unreimbursed premium payments, or (ii) the death benefit under
the policy in excess of $1,000,000, upon the death of Employee, as
provided in paragraph 6 below; and
(b) The right to recover the unreimbursed premium payments
in the event of the termination of this Agreement, as provided in
paragraphs 8 and 9 below.
5. DIVIDENDS. Policy dividends shall be applied to purchase<PAGE>
paid-up additional insurance protection.
6. DEATH BENEFIT. Upon the death of Employee, Employer shall
be entitled to receive a portion of the death benefit provided under
the Policy equal to the greater of (i) the total amount of its
unreimbursed premium payments, or (ii) the death benefit under the
Policy in excess of $1,000,000. The balance of the death benefit
provided under the Policy, if any, shall be paid directly to the
beneficiary or beneficiaries designated by Employee, in the manner
and in the amount provided by the beneficiary designation provision
endorsed on the Policy. The beneficiary designation provision of the
Policy shall comply with the provisions of this paragraph.
7. TERMINATION EVENTS. This Agreement may be terminated,
subject to the provisions of paragraphs 8 and 9 below, by mutual
written consent of the parties. Upon the earlier of the date
(i) Employee attains age 65, (ii) Employee's employment with Employer
terminates for any reason whatsoever other than Employee's death, or
(iii) Employee surrenders or cancels the Policy, this Agreement shall
terminate automatically, subject to the provisions of paragraphs 8
and 9 below.
8. EMPLOYEE'S RIGHTS ON TERMINATION. In the event of
termination of this Agreement as provided in paragraph 7 above,
Employee shall have the right to pay to Employer, within 270 days of
the date of termination, an amount equal to Employer's unreimbursed
premium payments. Alternatively, Employee shall have the right,
within 270 days of the date of termination, to apply for a Policy
loan in an amount equal to the unreimbursed premium payments, if
available, and Employee shall direct Insurer to make the check in
payment thereof payable to Employer. Upon receipt of payment,
Employer shall execute an appropriate instrument or release of the
Collateral Assignment of the Policy and any restrictive endorsement
on the Policy. The Policy shall then belong to Employee.
9. FAILURE TO REPAY EMPLOYER. If Employee fails to pay to
Employer the amount specified in paragraph 8 above within 270 days of
the date of termination of this Agreement pursuant to the provisions
of paragraph 7 above, Employee agrees to transfer all of its right,
title and interest in the Policy to Employer by executing such
documents as are necessary to transfer such right, title and interest
to Employer.
10. ASSIGNABILITY. Either party may, subject to the
limitations of this Agreement, assign its interest and obligations
under this Agreement; provided, however, that any assignment shall be
subject to the terms of this Agreement.
11. PAID-UP ADDITIONS. Any payments under the Policy to
Employer in connection with the rights granted to Employer in the
Collateral Assignment of the Policy shall first be made from Policy
cash surrender value attributable to the paid-up additional life
insurance purchased by Policy dividends. Employee shall have no
interest in the paid-up additional life insurance protection except
to the extent the death benefit or cash surrender value thereof
exceeds the total amount of Employer's interest in the Policy.
12. INSURER'S OBLIGATIONS. Insurer shall be bound only by the
provisions of the Policy, and any payments made or action taken by it
in accordance therewith shall fully discharge it from all claims,
suits and demands of all persons whatsoever. Insurer shall in no way
be bound by, or be deemed to have notice of, the provisions of this
Agreement.
<PAGE>
13. AMENDMENT. This Agreement may not be amended, altered or
modified, except by a written instrument signed by all of the parties
hereto.
14. NOTICES. Any notice, consent or demand required or
permitted to be given under the provisions of this Agreement by one
party to another shall be in writing, shall be signed by the party
giving or making the same, and may be given either by delivering the
same to such other party personally, or by mailing the same, by
United States certified mail, postage prepaid, to such party,
addressed to his, her or its last known address as shown on the
records of Employer. The date of such mailing shall be deemed the
date of such mailed notice, consent or demand.
15. SUCCESSORS. This Agreement shall bind Employer and its
successors; Employee and his heirs, executors, administrators and
transferees; and any Policy beneficiary.
16. CONTROLLING LAW. This Agreement, and the rights of the
parties hereunder, shall be governed and construed pursuant to the
laws of the State of Georgia.
17. ERISA PROVISIONS. The following provisions are part of
this agreement and are intended to meet the requirements of the
Employee Retirement Income Security Act of 1974:
(a) Employer is hereby designated the "Named Fiduciary"
until resignation or removal by Employer's Board of Directors. As
Named Fiduciary, Employer shall be responsible for the management,
control and administration of this Agreement. Employer may allocate
to others certain aspects of the management and operation of
responsibilities of this Agreement including the employment of
advisors and the delegation of any ministerial duties to qualified
individuals.
(b) The funding policy under this Agreement is that all
premiums on the Policy be remitted to Insurer when due.
(c) Direct payment by Insurer is the basis of payment of
benefits under this Agreement, with those benefits in turn being
based on the payment of premiums as provided in this Agreement.
(d) For claims procedure purposes, the "Claims Manager"
shall be Employer.
(1) If for any reason a claim for benefits under this
Agreement is denied by Employer, the Claims Manager shall
deliver to the claimant a written explanation setting forth the
specific reasons for the denial, pertinent references to the
Agreement paragraph on which the denial is based, such other
data as may be pertinent and information on the procedures to be
followed by the claimant in obtaining a review of his claim, all
written in a manner calculated to be understood by the claimant.
For this purpose:
(A) The claimant's claim shall be deemed
filed when presented orally or in writing to the Claims
Manager.
(B) The Claims Manager's explanation shall
be in writing delivered to the claimant within 90 days of
the date the claim is filed.
<PAGE>
(2) The claimant shall have 60 days following his
receipt of the denial of the claim to file with the Claims
Manager a written request for review of the denial. The
claimant or his representative may review pertinent documents
related to this Agreement and in the Claims Manager's possession
in order to prepare the request for review.
(3) The Claims Manager shall decide the issue on
review and furnish the claimant with a copy within 60 days of
receipt of the claimant's request for review of his claim. The
decision on review shall be in writing and, if denied, shall
include specific reasons for the decision, written in a manner
calculated to be understood by the claimant, as well as specific
references to the pertinent Agreement paragraphs on which the
decision is based. If a copy of the decision is not so
furnished to the claimant within such 60 days, the claim shall
be deemed denied on review.
(4) Any payment to a claimant shall to the extent
thereof be in full satisfaction of all claims hereunder against
Employer and the Claims Manager, either of whom may require such
claimant, as a condition to such payment, to execute a receipt
and release therefor in such form as shall be determined by
Employer and the Claims Manager. If receipt and release is
required by the claimant and the claimant does not provide such
receipt and release in a timely enough manner to permit a timely
distribution in accordance with the general timing of
distribution provisions in this Agreement, the payment of any
affected distribution may be delayed until Employer and the
Claims Manager receive a proper receipt and release.<PAGE>
IN WITNESS WHEREOF the parties have signed, sealed and delivered
this Agreement in the presence of:
EMPLOYEE:
/s/ Linda J. Timmer /s/ Charles Eitel (SEAL)
Witness CHARLES R. EITEL
EMPLOYER:
INTERFACE, INC.
Karen H. Daniel
Witness
By: /s/ Raymond S. Willoch
Title: Sr. Vice Pres. & Sec.
[CORPORATE SEAL]<PAGE>
SCHEDULE A
COLLATERAL ASSIGNMENT
THIS ASSIGNMENT is made and entered into effective this 21st day
of February, 1997 by the undersigned as owner (hereinafter called
"Owner") of Life Insurance Policy No. 14196680 issued by Northwestern
Mutual Life Insurance Company (hereinafter called "Insurer") and any
supplementary contracts issued in connection therewith (said policies
and contracts being herein called the "Policy"), upon Owner's life to
INTERFACE, INC. (hereinafter called "Assignee").
W I T N E S S E T H :
WHEREAS, Owner is a valued employee of Assignee;
WHEREAS, Assignee desires to assist Owner with his personal
life insurance program by paying the premiums due on the Policy, as
more specifically provided for in that certain Split Dollar Insurance
Agreement, of even date herewith, between Owner and Assignee
(hereinafter called the "Agreement"); and
WHEREAS, in consideration of Assignee agreeing to pay said
premiums, Owner agrees to grant Assignee an interest in the Policy as
collateral security for the payment to Assignee by Owner of
Assignee's interest in the Policy (as defined in the Agreement);
NOW, THEREFORE, for value received, the undersigned hereby
assigns, transfers and sets over to Assignee, its successors and
assigns, the following specific rights in the Policy, subject to the
following terms and conditions:
1. ASSIGNMENT. This Assignment is made, and the Policy is to
be held, as collateral security for all obligations of Owner to
Assignee, either now existing or that may hereafter arise, pursuant
to the terms of the Agreement.
2. ASSIGNEE'S RIGHTS. Assignee's interest in the Policy shall
be limited to:
(a) The right to recover the greater of (i) the amount of
its unreimbursed premium payments, or (ii) the death benefit under
the policy in excess of $1,000,000, upon the death of Owner as
provided in paragraph 6 of the Agreement; and
(b) The right to recover the unreimbursed premium payments
in the event of termination of the Agreement, as provided in
paragraphs 8 and 9 of the Agreement.
3. OWNER'S RIGHTS. Owner shall retain all incidents of
ownership in the Policy; provided, however, that all rights retained
by Owner shall be subject to the terms and conditions of the
Agreement.
4. FORWARDING OF POLICY. Upon request, Assignee shall forward
the Policy to Insurer, without unreasonable delay, for any
endorsement or change of beneficiary, any election of optional mode
of settlement, or the exercise of any other right reserved by Owner
hereunder.<PAGE>
5. INSURER'S RELIANCE. Insurer is hereby authorized to
recognize Assignee's claims to rights hereunder without investigating
the reason for any action taken by Assignee, the validity or amount
of any of the liabilities of Owner to Assignee under the Agreement,
the existence of any default therein, the giving of any notice
required herein, or the application to be made by Assignee of any
amounts to be paid to Assignee. The signature of Assignee shall be
sufficient for the exercise of any rights under the Policy assigned
hereby to Assignee and the receipt of Assignee for any sums received
by it shall be a full discharge and release therefore to Insurer.
6. INSURER'S PROTECTION. Insurer shall be fully protected in
recognizing the requests made by Owner for surrender of the Policy
with or without the consent of Assignee and upon such surrender the
Policy shall be terminated and shall be of no further force and
effect.
7. END OF ASSIGNMENT. Upon full satisfaction of Owner's
obligations under the Agreement, Assignee shall reassign to Owner the
Policy and all specific rights included in this Collateral
Assignment.<PAGE>
IN WITNESS WHEREOF, Owner and Assignee have signed, sealed and
delivered this Collateral Assignment in the presence of:
OWNER:
/s/ Linda J. Timmer /s/ Charles Eitel (SEAL)
Witness CHARLES R. EITEL
ASSIGNEE:
INTERFACE, INC.
Karen H. Daniel
Witness
By: /s/ Raymond S. Willoch
Title: Sr. Vice Pres. & Sec.
[CORPORATE SEAL]
SPLIT DOLLAR INSURANCE AGREEMENT
THIS AGREEMENT is made and entered into on this 21st day of
February, 1997, by and between DANIEL T. HENDRIX (hereinafter called
"Employee"), and INTERFACE, INC. (hereinafter called "Employer").
W I T N E S S E T H :
WHEREAS, Employee is a valued employee of Employer, and Employer
wishes to retain him in its employ; and
WHEREAS, Employer, as an inducement to such continued employment,
wishes to assist Employee with his personal life insurance program;
NOW, THEREFORE, in consideration for the covenants and mutual
promises set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which hereby are
acknowledged, Employer and Employee agree as follows:
1. POLICY. The life insurance policy to which this Agreement
relates is Policy Number 14244990 (hereinafter called the "Policy")
issued by Northwestern Mutual Life Insurance Company (hereinafter
called "Insurer") on the life of Employee with an initial face amount
of $2,764,892 and an initial annual premium of $72,032.00.
2. EMPLOYEE'S RIGHTS. Employee shall be the owner of the
Policy on his life, and may exercise all ownership rights granted to
the owner thereof by the terms of the Policy; provided, Employee will
not take any action that would impair any right or interest of
Employer in and to the Policy as provided herein. Employer's rights
in and to the Policy shall be limited to its security interest in and
to the cash surrender value of the Policy, as defined therein, and a
portion of the death benefit thereof, as hereinafter provided.
3. PREMIUM PAYMENTS. Employer shall pay to Insurer the entire
premium on the Policy as it becomes due. For purposes of this
Agreement, the term "unreimbursed premium payments" shall mean (i) the
total amount of all premiums on the Policy paid by Employer from the
date hereof, less (ii) any prior reimbursement received by Employer
from Employee.
4. EMPLOYER'S RIGHTS. Employer shall have a right to recover
its interest in the Policy as defined below. To assure recovery by
Employer of its interest in the Policy, Employee shall,
contemporaneously herewith, assign such interest in the Policy to
Employer, under the form of Collateral Assignment attached hereto as
Schedule A, which Assignment gives Employer the limited power to
enforce its right to recover its interest in the Policy. The interest
of Employer in and to the Policy shall be specifically limited to the<PAGE>
following rights:
(a) The right to recover the greater of (i) the amount of
its unreimbursed premium payments, or (ii) the death benefit under the
policy in excess of $2,000,000, upon the death of Employee, as
provided in paragraph 6 below; and
(b) The right to recover the unreimbursed premium payments
in the event of the termination of this Agreement, as provided in
paragraphs 8 and 9 below.
5. DIVIDENDS. Policy dividends shall be applied to purchase
paid-up additional insurance protection.
6. DEATH BENEFIT. Upon the death of Employee, Employer shall
be entitled to receive a portion of the death benefit provided under
the Policy equal to the greater of (i) the total amount of its
unreimbursed premium payments, or (ii) the death benefit under the
Policy in excess of $2,000,000. The balance of the death benefit
provided under the Policy, if any, shall be paid directly to the
beneficiary or beneficiaries designated by Employee, in the manner and
in the amount provided by the beneficiary designation provision
endorsed on the Policy. The beneficiary designation provision of the
Policy shall comply with the provisions of this paragraph.
7. TERMINATION EVENTS. This Agreement may be terminated,
subject to the provisions of paragraphs 8 and 9 below, by mutual
written consent of the parties. Upon the earlier of the date
(i) Employee attains age 65, (ii) Employee's employment with Employer
terminates for any reason whatsoever other than Employee's death, or
(iii) Employee surrenders or cancels the Policy, this Agreement shall
terminate automatically, subject to the provisions of paragraphs 8 and
9 below.
8. EMPLOYEE'S RIGHTS ON TERMINATION. In the event of
termination of this Agreement as provided in paragraph 7 above,
Employee shall have the right to pay to Employer, within 270 days of
the date of termination, an amount equal to Employer's unreimbursed
premium payments. Alternatively, Employee shall have the right,
within 270 days of the date of termination, to apply for a Policy loan
in an amount equal to the unreimbursed premium payments, if available,
and Employee shall direct Insurer to make the check in payment thereof
payable to Employer. Upon receipt of payment, Employer shall execute
an appropriate instrument or release of the Collateral Assignment of
the Policy and any restrictive endorsement on the Policy. The Policy
shall then belong to Employee.
9. FAILURE TO REPAY EMPLOYER. If Employee fails to pay to
Employer the amount specified in paragraph 8 above within 270 days of
the date of termination of this Agreement pursuant to the provisions
of paragraph 7 above, Employee agrees to transfer all of its right,
title and interest in the Policy to Employer by executing such
documents as are necessary to transfer such right, title and interest
to Employer.
10. ASSIGNABILITY. Either party may, subject to the limitations
of this Agreement, assign its interest and obligations under this
Agreement; provided, however, that any assignment shall be subject to
the terms of this Agreement.
11. PAID-UP ADDITIONS. Any payments under the Policy to
Employer in connection with the rights granted to Employer in the
Collateral Assignment of the Policy shall first be made from Policy
cash surrender value attributable to the paid-up additional life
insurance purchased by Policy dividends. Employee shall have no<PAGE>
interest in the paid-up additional life insurance protection except to
the extent the death benefit or cash surrender value thereof exceeds
the total amount of Employer's interest in the Policy.
12. INSURER'S OBLIGATIONS. Insurer shall be bound only by the
provisions of the Policy, and any payments made or action taken by it
in accordance therewith shall fully discharge it from all claims,
suits and demands of all persons whatsoever. Insurer shall in no way
be bound by, or be deemed to have notice of, the provisions of this
Agreement.
13. AMENDMENT. This Agreement may not be amended, altered or
modified, except by a written instrument signed by all of the parties
hereto.
14. NOTICES. Any notice, consent or demand required or
permitted to be given under the provisions of this Agreement by one
party to another shall be in writing, shall be signed by the party
giving or making the same, and may be given either by delivering the
same to such other party personally, or by mailing the same, by United
States certified mail, postage prepaid, to such party, addressed to
his, her or its last known address as shown on the records of
Employer. The date of such mailing shall be deemed the date of such
mailed notice, consent or demand.
15. SUCCESSORS. This Agreement shall bind Employer and its
successors; Employee and his heirs, executors, administrators and
transferees; and any Policy beneficiary.
16. CONTROLLING LAW. This Agreement, and the rights of the
parties hereunder, shall be governed and construed pursuant to the
laws of the State of Georgia.
17. ERISA PROVISIONS. The following provisions are part of this
agreement and are intended to meet the requirements of the Employee
Retirement Income Security Act of 1974:
(a) Employer is hereby designated the "Named Fiduciary"
until resignation or removal by Employer's Board of Directors. As
Named Fiduciary, Employer shall be responsible for the management,
control and administration of this Agreement. Employer may allocate
to others certain aspects of the management and operation of
responsibilities of this Agreement including the employment of
advisors and the delegation of any ministerial duties to qualified
individuals.
(b) The funding policy under this Agreement is that all
premiums on the Policy be remitted to Insurer when due.
(c) Direct payment by Insurer is the basis of payment of
benefits under this Agreement, with those benefits in turn being based
on the payment of premiums as provided in this Agreement.
(d) For claims procedure purposes, the "Claims Manager"
shall be Employer.
(1) If for any reason a claim for benefits under this
Agreement is denied by Employer, the Claims Manager shall deliver
to the claimant a written explanation setting forth the specific
reasons for the denial, pertinent references to the Agreement
paragraph on which the denial is based, such other data as may be
pertinent and information on the procedures to be followed by the
claimant in obtaining a review of his claim, all written in a
manner calculated to be understood by the claimant. For this
purpose:
<PAGE>
(A) The claimant's claim shall be deemed
filed when presented orally or in writing to the Claims
Manager.
(B) The Claims Manager's explanation shall
be in writing delivered to the claimant within 90 days of
the date the claim is filed.
(2) The claimant shall have 60 days following his
receipt of the denial of the claim to file with the Claims
Manager a written request for review of the denial. The claimant
or his representative may review pertinent documents related to
this Agreement and in the Claims Manager's possession in order to
prepare the request for review.
(3) The Claims Manager shall decide the issue on
review and furnish the claimant with a copy within 60 days of
receipt of the claimant's request for review of his claim. The
decision on review shall be in writing and, if denied, shall
include specific reasons for the decision, written in a manner
calculated to be understood by the claimant, as well as specific
references to the pertinent Agreement paragraphs on which the
decision is based. If a copy of the decision is not so furnished
to the claimant within such 60 days, the claim shall be deemed
denied on review.
(4) Any payment to a claimant shall to the extent
thereof be in full satisfaction of all claims hereunder against
Employer and the Claims Manager, either of whom may require such
claimant, as a condition to such payment, to execute a receipt
and release therefor in such form as shall be determined by
Employer and the Claims Manager. If receipt and release is
required by the claimant and the claimant does not provide such
receipt and release in a timely enough manner to permit a timely
distribution in accordance with the general timing of
distribution provisions in this Agreement, the payment of any
affected distribution may be delayed until Employer and the
Claims Manager receive a proper receipt and release.<PAGE>
IN WITNESS WHEREOF the parties have signed, sealed and delivered
this Agreement in the presence of:
EMPLOYEE:
/s/ Karen H. Daniel /s/ Daniel T. Hendrix (SEAL)
Witness DANIEL T. HENDRIX
EMPLOYER:
INTERFACE, INC.
/s/ Karen H. Daniel
Witness
By: /s/ Raymond S. Willoch
Title: Sr. Vce President & Sec.
[CORPORATE SEAL]<PAGE>
SCHEDULE A
COLLATERAL ASSIGNMENT
THIS ASSIGNMENT is made and entered into effective this 21st day
of February, 1997 by the undersigned as owner (hereinafter called
"Owner") of Life Insurance Policy No. 14244990 issued by Northwestern
Mutual Life Insurance Company (hereinafter called "Insurer") and any
supplementary contracts issued in connection therewith (said policies
and contracts being herein called the "Policy"), upon Owner's life to
INTERFACE, INC. (hereinafter called "Assignee").
W I T N E S S E T H :
WHEREAS, Owner is a valued employee of Assignee;
WHEREAS, Assignee desires to assist Owner with his personal life
insurance program by paying the premiums due on the Policy, as more
specifically provided for in that certain Split Dollar Insurance
Agreement, of even date herewith, between Owner and Assignee
(hereinafter called the "Agreement"); and
WHEREAS, in consideration of Assignee agreeing to pay said
premiums, Owner agrees to grant Assignee an interest in the Policy as
collateral security for the payment to Assignee by Owner of Assignee's
interest in the Policy (as defined in the Agreement);
NOW, THEREFORE, for value received, the undersigned hereby
assigns, transfers and sets over to Assignee, its successors and
assigns, the following specific rights in the Policy, subject to the
following terms and conditions:
1. ASSIGNMENT. This Assignment is made, and the Policy is to
be held, as collateral security for all obligations of Owner to
Assignee, either now existing or that may hereafter arise, pursuant to
the terms of the Agreement.
2. ASSIGNEE'S RIGHTS. Assignee's interest in the Policy shall
be limited to:
(a) The right to recover the greater of (i) the amount of
its unreimbursed premium payments, or (ii) the death benefit under the
policy in excess of $2,000,000, upon the death of Owner as provided in
paragraph 6 of the Agreement; and
(b) The right to recover the unreimbursed premium payments,
in the event of termination of the Agreement, as provided in
paragraphs 8 and 9 of the Agreement.
3. OWNER'S RIGHTS. Owner shall retain all incidents of
ownership in the Policy; provided, however, that all rights retained
by Owner shall be subject to the terms and conditions of the
Agreement.
4. FORWARDING OF POLICY. Upon request, Assignee shall forward
the Policy to Insurer, without unreasonable delay, for any
endorsement or change of beneficiary, any election of optional mode of
settlement, or the exercise of any other right reserved by Owner
hereunder.<PAGE>
5. INSURER'S RELIANCE. Insurer is hereby authorized to
recognize Assignee's claims to rights hereunder without investigating
the reason for any action taken by Assignee, the validity or amount of
any of the liabilities of Owner to Assignee under the Agreement, the
existence of any default therein, the giving of any notice required
herein, or the application to be made by Assignee of any amounts to be
paid to Assignee. The signature of Assignee shall be sufficient for
the exercise of any rights under the Policy assigned hereby to
Assignee and the receipt of Assignee for any sums received by it shall
be a full discharge and release therefore to Insurer.
6. INSURER'S PROTECTION. Insurer shall be fully protected in
recognizing the requests made by Owner for surrender of the Policy
with or without the consent of Assignee and upon such surrender the
Policy shall be terminated and shall be of no further force and
effect.
7. END OF ASSIGNMENT. Upon full satisfaction of Owner's
obligations under the Agreement, Assignee shall reassign to Owner the
Policy and all specific rights included in this Collateral Assignment.<PAGE>
IN WITNESS WHEREOF, Owner and Assignee have signed, sealed and
delivered this Collateral Assignment in the presence of:
OWNER:
/s/ Karen H. Daniel /s/ Daniel T. Hendrix (SEAL)
Witness DANIEL T. HENDRIX
ASSIGNEE:
INTERFACE, INC.
/s/ Karen H. Daniel By: /s/ Raymond S. Willoch
Witness Title: Sr. Vice President & Secretary
[CORPORATE SEAL]
SPLIT DOLLAR INSURANCE AGREEMENT
THIS AGREEMENT is made and entered into on this 21st day of
February, 1997, by and between GORDON D. WHITENER (hereinafter called
"Employee"), and INTERFACE, INC. (hereinafter called "Employer").
W I T N E S S E T H :
WHEREAS, Employee is a valued employee of Employer, and Employer
wishes to retain him in its employ; and
WHEREAS, Employer, as an inducement to such continued employment,
wishes to assist Employee with his personal life insurance program;
NOW, THEREFORE, in consideration for the covenants and mutual
promises set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which hereby are
acknowledged, Employer and Employee agree as follows:
1. POLICY. The life insurance policy to which this Agreement
relates is Policy Number 14202959 (hereinafter called the "Policy")
issued by Northwestern Mutual Life Insurance Company (hereinafter
called "Insurer") on the life of Employee with an initial face amount
of $2,859,520 and an initial annual premium of $38,127.78.
2. EMPLOYEE'S RIGHTS. Employee shall be the owner of the
Policy on his life, and may exercise all ownership rights granted to
the owner thereof by the terms of the Policy; provided, Employee will
not take any action that would impair any right or interest of
Employer in and to the Policy as provided herein. Employer's rights
in and to the Policy shall be limited to its security interest in and
to the cash surrender value of the Policy, as defined therein, and a
portion of the death benefit thereof, as hereinafter provided.
3. PREMIUM PAYMENTS. Employer shall pay to Insurer the entire
premium on the Policy as it becomes due. For purposes of this
Agreement, the term "unreimbursed premium payments" shall mean (i) the
total amount of all premiums on the Policy paid by Employer from the
date hereof, less (ii) any prior reimbursement received by Employer
from Employee.
4. EMPLOYER'S RIGHTS. Employer shall have a right to recover
its interest in the Policy as defined below. To assure recovery by
Employer of its interest in the Policy, Employee shall,
contemporaneously herewith, assign such interest in the Policy to
Employer, under the form of Collateral Assignment attached hereto as
Schedule A, which Assignment gives Employer the limited power to
enforce its right to recover its interest in the Policy. The interest
of Employer in and to the Policy shall be specifically limited to the
following rights:
(a) The right to recover the greater of (i) the amount of
its unreimbursed premium payments, or (ii) the death benefit under the
policy in excess of $2,000,000, upon the death of Employee, as
provided in paragraph 6 below; and
(b) The right to recover the unreimbursed premium payments
in the event of the termination of this Agreement, as provided in
paragraphs 8 and 9 below.
5. DIVIDENDS. Policy dividends shall be applied to purchase
paid-up additional insurance protection.<PAGE>
6. DEATH BENEFIT. Upon the death of Employee, Employer shall
be entitled to receive a portion of the death benefit provided under
the Policy equal to the greater of (i) the total amount of its
unreimbursed premium payments, or (ii) the death benefit under the
Policy in excess of $2,000,000. The balance of the death benefit
provided under the Policy, if any, shall be paid directly to the
beneficiary or beneficiaries designated by Employee, in the manner and
in the amount provided by the beneficiary designation provision
endorsed on the Policy. The beneficiary designation provision of the
Policy shall comply with the provisions of this paragraph.
7. TERMINATION EVENTS. This Agreement may be terminated,
subject to the provisions of paragraphs 8 and 9 below, by mutual
written consent of the parties. Upon the earlier of the date
(i) Employee attains age 65, (ii) Employee's employment with Employer
terminates for any reason whatsoever other than Employee's death, or
(iii) Employee surrenders or cancels the Policy, this Agreement shall
terminate automatically, subject to the provisions of paragraphs 8 and
9 below.
8. EMPLOYEE'S RIGHTS ON TERMINATION. In the event of
termination of this Agreement as provided in paragraph 7 above,
Employee shall have the right to pay to Employer, within 270 days of
the date of termination, an amount equal to Employer's unreimbursed
premium payments. Alternatively, Employee shall have the right,
within 270 days of the date of termination, to apply for a Policy loan
in an amount equal to the unreimbursed premium payments, if available,
and Employee shall direct Insurer to make the check in payment thereof
payable to Employer. Upon receipt of payment, Employer shall execute
an appropriate instrument or release of the Collateral Assignment of
the Policy and any restrictive endorsement on the Policy. The Policy
shall then belong to Employee.
9. FAILURE TO REPAY EMPLOYER. If Employee fails to pay to
Employer the amount specified in paragraph 8 above within 270 days of
the date of termination of this Agreement pursuant to the provisions
of paragraph 7 above, Employee agrees to transfer all of its right,
title and interest in the Policy to Employer by executing such
documents as are necessary to transfer such right, title and interest
to Employer.
10. ASSIGNABILITY. Either party may, subject to the limitations
of this Agreement, assign its interest and obligations under this
Agreement; provided, however, that any assignment shall be subject to
the terms of this Agreement.
11. PAID-UP ADDITIONS. Any payments under the Policy to
Employer in connection with the rights granted to Employer in the
Collateral Assignment of the Policy shall first be made from Policy
cash surrender value attributable to the paid-up additional life
insurance purchased by Policy dividends. Employee shall have no
interest in the paid-up additional life insurance protection except to
the extent the death benefit or cash surrender value thereof exceeds
the total amount of Employer's interest in the Policy.
12. INSURER'S OBLIGATIONS. Insurer shall be bound only by the
provisions of the Policy, and any payments made or action taken by it
in accordance therewith shall fully discharge it from all claims,
suits and demands of all persons whatsoever. Insurer shall in no way
be bound by, or be deemed to have notice of, the provisions of this
Agreement.
13. AMENDMENT. This Agreement may not be amended, altered or
modified, except by a written instrument signed by all of the parties
hereto.<PAGE>
14. NOTICES. Any notice, consent or demand required or
permitted to be given under the provisions of this Agreement by one
party to another shall be in writing, shall be signed by the party
giving or making the same, and may be given either by delivering the
same to such other party personally, or by mailing the same, by United
States certified mail, postage prepaid, to such party, addressed to
his, her or its last known address as shown on the records of
Employer. The date of such mailing shall be deemed the date of such
mailed notice, consent or demand.
15. SUCCESSORS. This Agreement shall bind Employer and its
successors; Employee and his heirs, executors, administrators and
transferees; and any Policy beneficiary.
16. CONTROLLING LAW. This Agreement, and the rights of the
parties hereunder, shall be governed and construed pursuant to the
laws of the State of Georgia.
17. ERISA PROVISIONS. The following provisions are part of this
agreement and are intended to meet the requirements of the Employee
Retirement Income Security Act of 1974:
(a) Employer is hereby designated the "Named Fiduciary"
until resignation or removal by Employer's Board of Directors. As
Named Fiduciary, Employer shall be responsible for the management,
control and administration of this Agreement. Employer may allocate
to others certain aspects of the management and operation of
responsibilities of this Agreement including the employment of
advisors and the delegation of any ministerial duties to qualified
individuals.
(b) The funding policy under this Agreement is that all
premiums on the Policy be remitted to Insurer when due.
(c) Direct payment by Insurer is the basis of payment of
benefits under this Agreement, with those benefits in turn being based
on the payment of premiums as provided in this Agreement.
(d) For claims procedure purposes, the "Claims Manager"
shall be Employer.
(1) If for any reason a claim for benefits under this
Agreement is denied by Employer, the Claims Manager shall deliver
to the claimant a written explanation setting forth the specific
reasons for the denial, pertinent references to the Agreement
paragraph on which the denial is based, such other data as may be
pertinent and information on the procedures to be followed by the
claimant in obtaining a review of his claim, all written in a
manner calculated to be understood by the claimant. For this
purpose:
(A) The claimant's claim shall be deemed
filed when presented orally or in writing to the Claims
Manager.
(B) The Claims Manager's explanation shall
be in writing delivered to the claimant within 90 days of
the date the claim is filed.
(2) The claimant shall have 60 days following his
receipt of the denial of the claim to file with the Claims
Manager a written request for review of the denial. The claimant
or his representative may review pertinent documents related to
this Agreement and in the Claims Manager's possession in order to
prepare the request for review.
<PAGE>
(3) The Claims Manager shall decide the issue on
review and furnish the claimant with a copy within 60 days of
receipt of the claimant's request for review of his claim. The
decision on review shall be in writing and, if denied, shall
include specific reasons for the decision, written in a manner
calculated to be understood by the claimant, as well as specific
references to the pertinent Agreement paragraphs on which the
decision is based. If a copy of the decision is not so furnished
to the claimant within such 60 days, the claim shall be deemed
denied on review.
(4) Any payment to a claimant shall to the extent
thereof be in full satisfaction of all claims hereunder against
Employer and the Claims Manager, either of whom may require such
claimant, as a condition to such payment, to execute a receipt
and release therefor in such form as shall be determined by
Employer and the Claims Manager. If receipt and release is
required by the claimant and the claimant does not provide such
receipt and release in a timely enough manner to permit a timely
distribution in accordance with the general timing of
distribution provisions in this Agreement, the payment of any
affected distribution may be delayed until Employer and the
Claims Manager receive a proper receipt and release.<PAGE>
IN WITNESS WHEREOF the parties have signed, sealed and delivered
this Agreement in the presence of:
EMPLOYEE:
/s/ Karen H. Daniel /s/ Gordon D. Whitener(SEAL)
Witness GORDON D. WHITENER
EMPLOYER:
INTERFACE, INC.
Karen H. Daniel
Witness
By: /s/ Raymond S. Willoch
Title: Sr. Vice Pres & Sec.
[CORPORATE SEAL]<PAGE>
SCHEDULE A
COLLATERAL ASSIGNMENT
THIS ASSIGNMENT is made and entered into effective this 21st of
February, 1997 by the undersigned as owner (hereinafter called
"Owner") of Life Insurance Policy No. 14202959 issued by Northwestern
Mutual Life Insurance Company (hereinafter called "Insurer") and any
supplementary contracts issued in connection therewith (said policies
and contracts being herein called the "Policy"), upon Owner's life to
INTERFACE, INC. (hereinafter called "Assignee").
W I T N E S S E T H :
WHEREAS, Owner is a valued employee of Assignee;
WHEREAS, Assignee desires to assist Owner with his personal life
insurance program by paying the premiums due on the Policy, as more
specifically provided for in that certain Split Dollar Insurance
Agreement, of even date herewith, between Owner and Assignee
(hereinafter called the "Agreement"); and
WHEREAS, in consideration of Assignee agreeing to pay said
premiums, Owner agrees to grant Assignee an interest in the Policy as
collateral security for the payment to Assignee by Owner of Assignee's
interest in the Policy (as defined in the Agreement);
NOW, THEREFORE, for value received, the undersigned hereby
assigns, transfers and sets over to Assignee, its successors and
assigns, the following specific rights in the Policy, subject to the
following terms and conditions:
1. ASSIGNMENT. This Assignment is made, and the Policy is to
be held, as collateral security for all obligations of Owner to
Assignee, either now existing or that may hereafter arise, pursuant to
the terms of the Agreement.
2. ASSIGNEE'S RIGHTS. Assignee's interest in the Policy shall
be limited to:
(a) The right to recover the greater of (i) the amount of
its unreimbursed premium payments, or (ii) the death benefit under the
policy in excess of $2,000,000, upon the death of Owner as provided in
paragraph 6 of the Agreement; and
(b) The right to recover the unreimbursed premium payments,
in the event of termination of the Agreement, as provided in
paragraphs 8 and 9 of the Agreement.
3. OWNER'S RIGHTS. Owner shall retain all incidents of
ownership in the Policy; provided, however, that all rights retained
by Owner shall be subject to the terms and conditions of the
Agreement.
4. FORWARDING OF POLICY. Upon request, Assignee shall forward
the Policy to Insurer, without unreasonable delay, for any
endorsement or change of beneficiary, any election of optional mode of
settlement, or the exercise of any other right reserved by Owner
hereunder.<PAGE>
5. INSURER'S RELIANCE. Insurer is hereby authorized to
recognize Assignee's claims to rights hereunder without investigating
the reason for any action taken by Assignee, the validity or amount of
any of the liabilities of Owner to Assignee under the Agreement, the
existence of any default therein, the giving of any notice required
herein, or the application to be made by Assignee of any amounts to be
paid to Assignee. The signature of Assignee shall be sufficient for
the exercise of any rights under the Policy assigned hereby to
Assignee and the receipt of Assignee for any sums received by it shall
be a full discharge and release therefore to Insurer.
6. INSURER'S PROTECTION. Insurer shall be fully protected in
recognizing the requests made by Owner for surrender of the Policy
with or without the consent of Assignee and upon such surrender the
Policy shall be terminated and shall be of no further force and
effect.
7. END OF ASSIGNMENT. Upon full satisfaction of Owner's
obligations under the Agreement, Assignee shall reassign to Owner the
Policy and all specific rights included in this Collateral Assignment.<PAGE>
IN WITNESS WHEREOF, Owner and Assignee have signed, sealed and
delivered this Collateral Assignment in the presence of:
OWNER:
/s/ Karen H. Daniel /s/ Gordon D. Whitener (SEAL)
Witness GORDON D. WHITENER
ASSIGNEE:
INTERFACE, INC.
/s/ Karen H. Daniel By: /s/ Raymond S. Willoch
Witness Title: Sr. Vice Pres. & Sec.
[CORPORATE SEAL]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from financial
statements included in the Company's quarterly report on Form 10-Q for the
quarter ended October 4, 1998, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000715787
<NAME> INTERFACE, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1999
<PERIOD-END> OCT-04-1998
<CASH> 16,044
<SECURITIES> 0
<RECEIVABLES> 219,084
<ALLOWANCES> 8,164
<INVENTORY> 200,992
<CURRENT-ASSETS> 466,879
<PP&E> 485,710
<DEPRECIATION> 237,833
<TOTAL-ASSETS> 1,075,137
<CURRENT-LIABILITIES> 201,771
<BONDS> 408,567
0
0
<COMMON> 5,970
<OTHER-SE> 426,355
<TOTAL-LIABILITY-AND-EQUITY> 1,075,137
<SALES> 964,080
<TOTAL-REVENUES> 964,080
<CGS> 637,414
<TOTAL-COSTS> 238,885
<OTHER-EXPENSES> 2,713
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,914
<INCOME-PRETAX> 58,155
<INCOME-TAX> 21,848
<INCOME-CONTINUING> 36,307
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,307
<EPS-PRIMARY> 0.70
<EPS-DILUTED> 0.69
</TABLE>
