ABSTRACT
Interface is the world’s largest producer of carpets for the commercial sector. Tables 13–1 to 13–3 present recent financial data: profit and loss, balance sheet, and cash flow statements, while Figures 13–1 to 13–2 present key historical data: stock price, sales, and net income. The critical individual in Interface was the late Ray Anderson who founded the company in 1973. Anderson has written several books and articles (Anderson, 1999, 2007; Anderson and White 2009) explaining his radical conversion to the cause of sustainability when he realized that he and his company were a “plunderer of the earth.” They “were part of the endemic process that is going on at a frightening, accelerating rate worldwide to rob our children and all their descendents of their futures.” Anderson described this revelation as tantamount to a “spear through the heart,” and he undertook to convert his company into the world’s most sustainable enterprise. Figure 13–3 depicts Anderson’s view of the typical company of the 20th century. Figure 13–4 shows his view of how modern corporations must be redesigned to achieve sustainability, and Figure 13–5 is the final idealized output of this radical redesign. Anderson has identified seven fronts on which serious change must be achieved for sustainability: Link #1—zero waste; Link #2—benign emissions; Link #3—renewable energy; Link #4—closed loop recycling; Link #5—resource efficient transportation; Link #6—a “sensitivity hookup,” which includes service to the community and closer relations with employees, suppliers, and customers; and Link #7—a redesign of commerce itself that entails “the acceptance of entirely new notions of economics, especially prices that reflect full costs. To us, it means shifting emphasis from simply selling products to providing services; thus, our commitment to downstream distribution, installation, maintenance and recycling. These are all aimed at forming cradle-to-cradle relationships with customers and suppliers, relationships based on delivering, via the Evergreen Service Agreement™, the services our products provide, in lieu of the products themselves” (2007, pp. 104–105). In sum, Anderson’s conceptualization of the prototypical company of the 21st century is one that is “strongly service-oriented, resource-efficient, wasting nothing, solar-driven, cyclical (no longer take–make—waste linear), and strongly connected to our constituencies—our communities (building social equity), our customers, and our suppliers—and to one other (p. 105).” Interface stock price history https://s3-euw1-ap-pe-df-pch-content-public-p.s3.eu-west-1.amazonaws.com/9780203107478/c2bc82bb-d1e1-4a9f-b07e-484744df4bd9/content/fig13_1_C.jpg" xmlns:xlink="https://www.w3.org/1999/xlink"/> Interface revenues and profits https://s3-euw1-ap-pe-df-pch-content-public-p.s3.eu-west-1.amazonaws.com/9780203107478/c2bc82bb-d1e1-4a9f-b07e-484744df4bd9/content/fig13_2_C.jpg" xmlns:xlink="https://www.w3.org/1999/xlink"/> Anderson's view of the typical company of the 20th century https://s3-euw1-ap-pe-df-pch-content-public-p.s3.eu-west-1.amazonaws.com/9780203107478/c2bc82bb-d1e1-4a9f-b07e-484744df4bd9/content/fig13_3_C.jpg" xmlns:xlink="https://www.w3.org/1999/xlink"/> Anderson's view of how modern corporations should be redesigned for sustainability https://s3-euw1-ap-pe-df-pch-content-public-p.s3.eu-west-1.amazonaws.com/9780203107478/c2bc82bb-d1e1-4a9f-b07e-484744df4bd9/content/fig13_4_C.jpg" xmlns:xlink="https://www.w3.org/1999/xlink"/> Anderson's view of the sustainable corporation https://s3-euw1-ap-pe-df-pch-content-public-p.s3.eu-west-1.amazonaws.com/9780203107478/c2bc82bb-d1e1-4a9f-b07e-484744df4bd9/content/fig13_5_C.jpg" xmlns:xlink="https://www.w3.org/1999/xlink"/> Interface P&L https://www.niso.org/standards/z39-96/ns/oasis-exchange/table">
Consolidated Statements of Operations and Comprehensive Income (Loss) Interface, Inc. and Subsidiaries Consolidated Statements of Operations
Fiscal Year
2010
2009
2008
(In Thousands, Except Per Share Data)
Net sales
$
961,827
$
859,888
$
10,82,344
Cost of sales
625,066
576,871
710,299
Gross profit on sales
336,761
283,017
372,045
Selling, general and administrative expenses
240,901
218,322
258,198
Impairment of goodwill
—
—
61,213
Restructuring charges
3,131
7,627
10,975
Income from litigation settlements
—
(5,926)
—
Operating income
92,729
62,994
41,659
Interest expense
33,129
34,297
31,480
Bond retirement expenses
44,379
6,096
—
Other expense
657
576
1,652
Income from continuing operations before tax expense
14,564
22,025
8,527
Income tax expense
4,494
9,352
43,040
Income (loss) from continuing operations
10,070
12,673
(34,513)
Loss from discontinued operations, net of tax
(736)
(909)
(5,154)
Net income (loss)
9,334
11,764
(39,667)
Net income attributable to noncontrolling interest in subsidiary
(1,051)
(846)
(1,206)
Net income (loss) attributable to Interface, Inc.
$
8,283
$
10,918
$
(40,873)
Income (loss) per share attributable to Interface, Inc. common shareholders — basic
Continuing operations
$
0.14
$
0.19
$
(0.58)
Discontinued operations
(0.01)
(0.01)
(0.08)
Net income (loss) per share attributable to Interface, Inc. common shareholders — basic
$
0.13
$
0.17
$
(0.67)
Income (loss) per share attributable to Interface, Inc. common shareholders — diluted
Continuing operations
$
0.14
$
0.19
$
(0.58)
Discontinued operations
(0.01)
(0.01)
(0.08)
Net income (loss) per share attributable to Interface, Inc. common shareholders — diluted
$
0.13
$
0.17
$
(0.67)
Basic weighted average shares outstanding
63,794
63,213
61,439
Diluted weighted average shares outstanding
64,262
63,308
61,439
Source: U.S. Securities and Exchange Commission, submission by Interface of form 10-K for the period ending December 31, 2010, pp. 41–44
Interface Balance Sheet https://www.niso.org/standards/z39-96/ns/oasis-exchange/table">Interface, Inc. and Subsidiaries Consolidated Balance Sheets
2010
2009
(In Thousands)
ASSETS
Current
Cash and cash equivalents
$69,236
$115,363
Accounts receivable, net
151,463
129,833
Inventories
136,766
112,249
Prepaid expenses and other current assets
24,362
19,649
Deferred income taxes
10,062
9,379
Assets of businesses held for sale
1,200
1,500
Total current assets
393,089
387,973
Property and equipment, net
177,792
162,269
Deferred tax asset
53,022
44,210
Goodwill
75,239
80,519
Other assets
56,291
52,268
$755,4333
$727,239
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable
$ 55,859 $
35,614
Accrued expenses
112,657
101,143
Current portion of long-term debt
—
14,586
Total current liabilities
168,516
151,343
Senior notes
282,951
145,184
Senior subordinated notes
11,477
135,000
Deferred income taxes
7,563
7,029
Other
36,054
42,502
Total liabilities
506,561
481,058
Commitments and contingencies Shareholders’ equity
Preferred stock
—
—
Common stock
6,445
6,328
Additional paid-in capital
349,662
343,348
Retained deficit
(49,770)
(55,332)
Accumulated other comprehensive loss — currency translation foreign
(26,269)
(24,057)
Accumulated other comprehensive loss — liability pension
(31,196)
(33,186)
Total shareholders’ equity — Interface, Inc
248,872
237,101
Noncontrolling interest in subsidiary
—
9,080
Total shareholders’ equity
248,872
246,181
$ 755,4333 $
727,239
Source: U.S. Securities and Exchange Commission, submission by Interface of form 10-K for the period ending December 31, 2010, pp. 41–44 Interface Cash Flows https://www.niso.org/standards/z39-96/ns/oasis-exchange/table">Interface, Inc. and Subsidiaries Consolidated Statements of Cash Flows
Fiscal Year
2010
2009
2008
(In Thousands)
OPERATING ACTIVITIES:
Net income (loss)
$
9,334
$
11,764
$
(39,667)
Loss on discontinued operations
736
909
5,154
Income (loss) from continuing operations
10,070
12,673
(34,513)
Adjustments to reconcile income (loss) to cash provided by operating activities
Impairment of goodwill
—
—
61,213
Depreciation and amortization
27,927
25,189
23,664
Premium paid to repurchase senior and senior subordinated notes ….
36,374
5,264
—
Bad debt expense
2,031
2,214
4,180
Deferred income taxes and other
(6,772)
(5,634)
13,480
Working capital changes:
Accounts receivable
(21,418)
20,978
11,891
Inventories
(23,103)
20,831
(11,351)
Prepaid expenses and other current assets
(5,970)
78
5,072
Accounts payable and accrued expenses
28,241
(27,143)
(18,540)
Cash provided by operating activities
47,380
54,450
55,096
INVESTING ACTIVITIES:
Capital expenditures
(31,715)
(8,753)
(29,300)
Other
(5,328)
1,399
(4,158)
Cash used in investing activities
(37,043)
(7,354)
(33,458)
FINANCING ACTIVITIES:
Borrowing of long-term debt
275,000
144,452
—
Dividends paid
(2,721)
(634)
(7,562)
Debt issuance costs
(5,930)
(6,301)
—
Repurchase of senior and senior subordinated notes
(279,966)
(138,002)
(22,412)
Premium paid to repurchase senior and senior subordinated notes
(36,374)
(5,264)
—
Purchase of noncontrolling interest
(11,488)
—
—
Proceeds from issuance of common stock
3,103
499
1,479
Cash used in financing activities
(58,376)
(5,250)
(28,495)
Net cash provided by (used in) operating, investing and financing
activities
(48,039)
41,846
(6,857)
Effect of exchange rate changes on cash
1,912
1,760
(3,761)
CASH AND CASH EQUIVALENTS:
Net increase (decrease)
(46,127)
43,606
(10,618)
Balance, beginning of year
115,363
71,757
82,375
Balance, end of year
$
69,236
$
115,363
$
71,757
Source: U.S. Securities and Exchange Commission, submission by Interface of form 10-K for the period
ending December 31, 2010, pp. 41–44
