Interface, Inc. History

Address:

2859 Paces Ferry Road
Suite 2000
Atlanta, Georgia 30330
U.S.A.

Telephone: (770) 437-6800
Fax: (770) 437-6809

Public Company
Incorporated: 1973 as Carpets International of Georgia, Inc. Employees: 7,300
Sales: $1.28 billion (1998)
Stock Exchanges: NASDAQ
Ticker Symbol: IFSIA
NAIC: 31411 Carpet & Rug Mills; 31321 Broadwoven Fabric Mills; 325131 Inorganic Dye & Pigment Manufacturing

Company Perspectives:

Interface will be the first name in commercial and institutional interiors worldwide through its commitment to people, product and place. We will strive to create an organization wherein all people are accorded unconditional respect and dignity, one that allows each person to continuously learn and develop. We will focus on product through constant emphasis on quality and engineering which we will combine with superior attention to our customers' needs. We will honor the places where we do business by endeavoring to become the first name in industrial ecology, a corporation that cherishes nature and restores the environment. Interface will lead by example and validate by results, leaving the world a better place than when we began.

Company History:

Originally a manufacturer and distributor of carpet tile, Interface, Inc., has developed into an international presence in the commercial and institutional interiors industry. Carpet tiles, uniform floor covering modules that are easier to maintain and replace than broadloom carpet, continue to underlie Interface's business, proving popular in office design because of their flexibility in redecoration and easy removal and replacement for rewiring and other repair work. These modular carpet systems--marketed under the brand names Interface Flooring Systems and Bentley in the United States, and Heuga in Europe&mdashe used primarily in commercial and institutional settings. Interface is also the leading producer of interior fabrics for open plan office furniture systems in the United States. The fabrics for these systems, which are usually enclosed, customized work stations, are produced by the company's Guilford of Maine, Inc., subsidiary. Interface is also involved in specialty chemical production. The company's most important chemical is Intersept, an antimicrobial chemical agent used in some carpet manufacturing. Intersept is produced by another subsidiary, Rockland React-Rite, Inc. Foreign sales account for about one-third of Interface's revenue, and the company has 25 production and distribution facilities worldwide, as well as sales and marketing outposts in 110 different countries. Interface currently controls about 40 percent of the international carpet tile market.

Early History

Interface, Inc., was founded in 1973 by Ray C. Anderson, who would remain the company's chairman and chief executive officer into the late 1990s. Before founding Interface, Anderson had been working as a research manager for Milliken & Co., a privately owned textile firm. On behalf of Milliken, Anderson was sent abroad to research the technology for manufacturing carpet tiles in preparation for Milliken's prospective entry into that field. While visiting Carpets International plc (CI), a large British company specializing in carpet, Anderson was introduced to a process called "fusion bonding." Anderson immediately recognized the potential of this process for producing carpet tiles, as well as the huge market for carpet tile in the United States that had not yet been tapped. In 1973 he quit his job with Milliken & Co. in order to start his own business.

Interface first appeared as a joint venture with CI, called Carpets International of Georgia, Inc. (Cl-Georgia). Of the initial seed money for the company, $750,000 (half of the total) came from CI, the rest from Anderson and various backers mostly from his hometown of West Point, Georgia. The new company produced its first piece of carpet on New Year's Eve, 1973. On its first day of operation, CI-Georgia had only 15 employees, including Anderson. The company's first year of operation was a financial disaster. It lost $400,000 on sales of just over $800,000. Skyrocketing prices for petrochemicals, an important raw material in the carpet industry, were a large part of the problem. These price increases were the result of the 1973 oil embargo, and the recession that ensued.

On the other hand, the company's association with an established firm like CI gave it several advantages. The most important of these was access to advanced technology. CI was able to provide cutting technology superior to that of companies like Milliken, saving the company ten percent on the cost of yarn. Other technology was made available that enabled CI-Georgia to develop special bonding equipment. This equipment made it possible to install carpet tiles without glue, bonding the four-ply carpet fibers to a fiberglass backing. These contributions, along with the beginning of the office building boom, helped CI-Georgia triple its sales to $2.4 million by the end of 1975. The company also turned its first profit that year.

During the second half of the 1970s there was tremendous growth in the white-collar segment of the U.S. economy. About 800,000 office jobs per year were created between 1975 and 1980, causing huge demand for office furnishing. It was during this period that modular carpet systems became extremely popular among office managers and interior designers. Carpet tiles allowed designers to install floor coverings that were pleasing to the eye, while at the same time were easy to remove and replace, whether for cleaning, redecorating, or accessing wiring beneath the floor. By 1978, Interface's sales had reached $11 million.

In the early 1980s CI began to face fierce competition from a flood of broadloom carpet being imported into the United Kingdom. Meanwhile, the American joint venture continued to grow, with sales swelling to $57 million in 1982. As CI continued to flounder, the American firm took over ten percent of CI's equity in the company, and changed its name to Interface Flooring Systems, Inc. The two companies continued to move in opposite directions. While Interface's sales leaped again in 1983, to $80 million, CI teetered on the edge of bankruptcy. In order to avert receivership for CI, Interface concocted a plan to provide a $4 million loan convertible to 41.3 percent future equity in CI. The agreement also gave Interface the option to purchase another 8.8 percent of CI shares for about $2.3 million through 1987, the year the loan was due. Interface also went public for the first time in 1983, selling its shares over-the-counter. The company raised $14.4 million in its initial offering.

Growth through Acquisitions in the 1980s

Interface purchased CI's carpet tile division for $8.4 million in 1984, giving Interface entry into the European market for the first time. This transaction gave Interface ownership of CI's Illingworth and Debron brands of carpet. Around the same time, Interface acquired Carintusa Inc. from CI, for $440,000. Carintusa, the sole U.S. distributor of woven English-broadloom carpet manufactured by CI, was based in Los Angeles. In the same period, Interface also acquired Chemmar Associates, Inc., merging it with its Interface Research Corp. subsidiary. Chemmar was the licensor of Intersept, the antimicrobial agent developed for hospital carpets. Aided by these acquisitions, Interface's sales climbed to $107 million for 1984. By that time, after only 11 years of existence, Interface already controlled about 30 percent of the growing U.S. carpet tile market. This figure put the company in a virtual tie for the lead in market share with Milliken & Co., Anderson's former employers.

In 1985 Interface exercised its option to convert its CI promissory note, acquiring 41.3 percent of CI. The company's overseas business began to pick up around this time as well, particularly in oil-rich Middle Eastern countries. As the 1980s progressed, Interface began to diversify beyond carpets into related industries. The company purchased Guilford Industries for $97 million in 1986. Guilford was a textile company that specialized in fabrics for office furniture systems, including cubicle dividers, walls, and ceilings. This acquisition gave Interface the ability to market complete office furnishing packages, an idea that proved to be appealing to designers both domestically and abroad. Interface also began to expand its specialty chemical operations that year. Two Georgia-based companies, Rockland Corp. and React-Rite, Inc., were acquired on the last day of 1986, for a combined total of about $4 million. With the addition of these two companies, Interface improved its ability in polymer chemistry, essential to the further development of its Intersept program.

Interface swallowed up what was left of CI in 1987. CI's remaining debt was then paid off, and its broadloom carpet business sold. By this time, CI's name had been changed to Debron Investments Plc. For 1987, Interface reported sales of $267 million, nearly double the previous year's figure. During that year, the company's name was changed to Interface, Inc., and Interface Flooring Systems, Inc., was retained as the name of the company's North American carpet tile subsidiary. Interface became the undisputed world leader in carpet tiles in 1988, with the acquisition of Heuga Holdings B.V., a Dutch company with sales of more than $200 million. Heuga was one of the world's oldest manufacturers of carpet tiles. Interface had been trying to acquire the company since about 1983, when it was first put up for sale by the 13 children of Heuga's founder. At that time, Interface was not able to complete a deal. The company that did buy Heuga was subsequently acquired by Ausimont N.V., a firm that was not interested in the carpet tile business. From Ausimont, Interface purchased not only Heuga but Pandel, Inc., another wholly owned subsidiary. Heuga contributed manufacturing facilities in the Netherlands, the United Kingdom, Canada, and Australia. Pandel's U.S. plant produced carpet tile backing and mats. That company recorded sales of $10 million in 1987. The acquisition of Heuga expanded Interface's international business enormously, gaining the company contracts with a number of major British firms, as well as such prominent Japanese companies as Hitachi, Tokyo Marine, and Nomura Securities. It also helped Interface further diversify into residential carpet tile sales, which had accounted for about a quarter of Heuga's European business. With the addition of Heuga, the company's revenues jumped dramatically once again, reaching $582 million.

In early 1990 Interface acquired the assets of Steil, Inc., based in Grand Rapids, Michigan. Steil had for several years been the exclusive U.S. distributor of Guilford's open line panel and upholstery fabrics. Later that year, the company invested in Prince Street Technologies, Ltd., a producer of upper-end broadloom carpet. Prince Street, based in Georgia, received a loan from Interface in exchange for the right to acquire an equity interest. Interface generated $623 million in revenue in 1990.

More than Carpet in the 1990s

Sales shrank for the first time in the company's history in 1991, largely due to the recession in the global economy. In that year, Interface generated net income of $8.9 million on sales of $582 million. During 1991, Interface Service Management, Inc. (ISM), was formed in conjunction with ISS International Service System, Inc., a Danish firm specializing in facility maintenance. The creation of ISM enabled Interface to provide its customers with a more integrated interior system in which all of its furnishing needs could be supplied by one source. In Europe the company launched a similar project, in which independent service contractors were licensed to provide maintenance services. These contractors operated under the name IMAGE (Interface Maintenance Advisory Group of Europe). Interface also reorganized its corporate structure in late 1991. The company's operations in Asia and the Pacific Islands were unified under a new holding company, Interface Asia-Pacific, Inc. Interface Europe, Inc., was also formed, merging Interface International, Inc., which had controlled operations in the United Kingdom, with the holding company that owned Heuga and its various European subsidiaries.

By 1992, Interface's antimicrobial chemical Intersept was being used in over a dozen product categories, including paints, wall coverings, ceiling tiles, carpet, fabrics, and coating materials. The marketing of Intersept was assisted by the formation of The Envirosense Consortium, a group of companies that used Intersept in the manufacture of a variety of products. The Envirosense program was initiated as a response to increasing cases of and concern over building-related illnesses and other health concerns associated with indoor work atmospheres. Interface's sales rebounded somewhat in 1992. Sales for the year were $594 million. Net income increased by over 37 percent, to $12.3 million.

In January 1993 Interface announced that it had acquired the low-profile access flooring system of Servoplan, S.A., of France. The acquisition, through the company's U.S. and French subsidiaries, included all patents, know-how, and production equipment relating to this flooring system. Interface had previously marketed the Servoplan system in North America alone, and the positive response of its customers led the company to seek worldwide control of the system's manufacture and distribution. At the time of the acquisition, Anderson indicated that the system would be sold under the name Intercell.

The following month, Interface announced another acquisition. The company's Guilford of Maine subsidiary had acquired the fabric division assets of Stevens Linen Associates, Inc., a leading producer of panel and upholstery fabric for office furniture systems. Another acquisition occurred in June 1993, when Interface bought Bentley Mills, Inc., a manufacturer of designer-oriented broadloom carpet used for commercial and institutional settings.

New Directions for the Mid-1990s and Beyond

In the mid-1990s, Interface's chairman and CEO Ray C. Anderson emerged as an outspoken advocate of sustainability, a concept that included environmental and social responsibility. Under the influence of Anderson's crusading efforts on behalf of sustainability, the company shifted strategy, aiming to redirect its industrial practices without sacrificing its business goals. Anderson, who served as co-chair of the President's Council on Sustainable Development, wrote a book entitled Mid-Course Correction, in which he discussed his own awakening to environmental concerns and commitment to changing a business not traditionally allied with the environmentalists. Anderson was called the "Eco CEO" by Metropolis magazine.

In 1996, Charlie Eitel was named president and chief operating officer of Interface. This allowed Anderson, who remained chairman and CEO, to pursue the ecological issues that had become so important to him. Under Eitel, the company began leveraging its market share with a sales approach he called "mass customization," which facilitated rapid delivery of a wide variety of patterns, in colors selected by the customers. The owned and aligned providers of carpet and installation and other services became known collectively as the Re:Source Solutions Provider Network, and Interface began bundling installation, maintenance, reclamation, and other services with carpet sales, promoting this strategy with the slogan "This Carpet Comes Installed." Carpet adhesives and other chemical applications began to be sold under the IMAGE brand name. Intercell became part of Interface Architectural Resources, a larger effort to integrate wiring and heating, ventilation, and air conditioning under the comprehensive facility solutions that Interface offered. Under Eitel, Interface branched out into a seemingly unrelated activity: motivational seminars. These sessions originated as "Why?" conferences for promoting social bonds with designers and other customers, and the positive response to these conferences led to the formation of "one world learning," a wholly owned subsidiary dedicated to fostering organizational development through activities and discussion.

In an attempt to penetrate the health care and education markets, which generally rejected carpet in favor of hard surface floorcovering, Interface introduced Solenium in 1999. Made from PTT (polytrimethylene terepthalate), a polymer developed by Shell Labs, Solenium was a dense, lightweight material that, according to the company, combined the design, comfort, sound absorption of carpet with the practicality of hard flooring. Solenium incorporated Intersept, the company's patented antimicrobial preservative.

In its quarter-century of activity, Interface had grown into a billion dollar corporation, named by Fortune as one of the "Most Admired Companies in America" and the "100 Best Companies to Work For." With the exception of the recession year of 1991, the company was able to increase its sales every year since its founding. In the first decade of the new century, Interface would likely be able to continue this pattern of expansion, primarily by introducing its products to a wider range of commercial customers in Asia and continental Europe. In addition, Interface's specialty chemical operations seemed poised for continued growth, as public attention to occupational health increased, and the potential hazards of higher technology in the office environment, came under closer scrutiny.

Principal Subsidiaries: Interface Flooring Systems, Inc.; Interface Europe, Inc.; Interface Asia-Pacific, Inc.; Guilford of Maine, Inc.; Rockland React-Rite, Inc.; Interface Research Corporation.

Interface, Inc. History

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