Interface Inc (TILE) 2011 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Third Quarter 2011 Interface Inc. Earnings Conference Call. My name is Pamela and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) I would now like to turn the conference over to Mr. Matt Steinberg of FTI Consulting. Please proceed.

Thank you, operator. Good morning, and welcome to Interface's conference call regarding third-quarter 2011 results. Joining us from the Company are Dan Hendrix, President and Chief Executive Officer; Patrick Lynch, Senior Vice President and Chief Financial Officer. Dan will review highlights from the quarter as well as Interface's business outlook. Patrick will then review the Company's key performance metrics and financial results. We will then open the call for Q&A.

If you have not yet received a copy of the results release, which was issued after the close of the market yesterday, please call FTI Consulting at 212-850-5600, or you can get a copy off the Investor Relations section of Interface's website. An archived version of this conference call will also be available through that website.

Before we begin the formal remarks, please note that during today's conference call management's comments regarding Interface's business, which are not historical information, are forward-looking statements. Forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from any such statements, including risks and uncertainties associated with the economic conditions in the commercial interiors industry, as well as risks and uncertainties discussed under the heading, Risk Factors, in item 1-A of the Company's annual report on Form 10-K for the fiscal year ended January 2, 2011, which has been filed with the Securities and Exchange Commission. We direct all listeners to that document.

Any such forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995. The Company assumes no responsibility to update or revise forward-looking statements made during this call, cautions listeners not to place undue reliance on any such forward-looking statements.

Management's remarks during this call refer to certain non-GAAP measures. A reconciliation of these non-GAAP measures to the most-comparable GAAP measures are contained in the Company's results release and Form 8-K filed with the SEC yesterday. These documents can be found on the Investor Relations portion of the Company's website, www.interfaceglobal.com.

Lastly, please note that this call is being recorded and broadcasted for Interface. It contains copyrighted material and may not be re-recorded or rebroadcast without Interface's express permission. Your participation on the call confirms your consent to the Company's taping and broadcasting of it.

With these formalities out of the way, I'd like to turn the call over to Dan Hendrix. Please go ahead, sir.

Thank you and good morning to everyone. I'd like to start out on a personal note. Many of you may have heard that Interface's founder and chairman, Ray Anderson, passed away in early August. Ray was and remains an iconic figure in the corporate world. As non-executive chairman for the last ten years, Ray had entrusted the day-to-day running of the Company to a very capable management team. Ray was so many things, a visionary, a pioneer, an entrepreneur, an authentic and ethical leader and we feel a great loss. However, he left behind a company that is endowed with his DNA and filled with people who will carry forward his vision. I am fortunate to be one of them.

With that said, I'll move on to a quick overview of our third quarter. First the high points. Our America's modular business saw its straight quarter of year-over-year sales improvement. It had record revenues for the quarter, with particular strength in the corporate office segment. Emerging geographic markets also had record revenues in the quarter. We saw continued robust activity in China, India, the Middle East, and Latin America. The ramp up of our China plant continued and we added a second shift at the facility. This resulted in a slight loss on its operations in the quarter, which should be compensated by a profitable fourth quarter. China continues to be a significant opportunity for us and we're committed to making investments that maximize our presence there.

Despite pockets of softening demand in our larger Western European markets, overall our European business saw a double-digit increase in sales. Germany, which is the second largest carpet market in Europe and one in which carpet tile has little penetration, continued to be a robust market for us.

Our FLOR residential business saw a double-digit percentage increase in sales, giving us the breakout quarter we've been waiting on. We opened a new FLOR store in Dallas during the third quarter, bringing our total to five with plans to add stores in Houston and Brooklyn within the next few weeks. The FLOR store model is exceeding expectations with the more seasoned stores already profitable. All the stores are doing a lot to enhance the FLOR brand with our consumers and we plan on accelerating this model and we have identified additional locations that will bring our total store count to 15 by the middle of next year.

Compared sequentially with the second quarter, SG&A expenses declined as a percentage of sales and were nearly flat on an absolute dollar basis. We're continuing to focus on these costs and expect a further reduction in absolute dollars in the fourth quarter. And I'll talk about that in a minute.

Our Bentley Prince Street business continued to operate near breakeven levels despite a 7% decline in sales, mostly due to improved manufacturing efficiencies and cost cutting.

We had some dynamics going on in the third quarter that negatively impacted us as well. We saw some moderation in sales in certain mature corporate office markets outside the US, mainly in Australia, Japan, and Western Europe. However, we've optimistic this pause in growth will be short lived and we believe we are well positioned for continued long-term growth in these markets.

In Australia, which is now our second largest geographic market, we've seen a lot of growth because of construction boom that was spurred on by government stimulus packages. With that bubble of new construction and stimulus apparently behind us, our sales moderated but there's a lot of activity in the pipeline in this market, primarily coming from non-office segments.

In Japan, the decline was mostly due to the effects of the devastating tsunami earlier in the year. Our more immediate opportunity there is to streamline how we go to market, an initiative we mentioned in our last conference call and one that is being implemented this quarter.

The declines in Western Europe are largely due to macro uncertainty in Europe as customers are delaying some projects until they see how things play out with the euro zone debt situation and the proposed austerity packages.

We saw a significant increase of raw material costs during the third quarter, mostly on caprolactam and benzene, which are used in fiber production. We raised our prices twice during the quarter in response, but our sales at the increased prices won't begin to fully flow through our P&L until sometime in the fourth quarter. In addition, we are seeing some signs of relief, at least stabilization of raw material costs going forward.

Although our SG&A expenses declined as a percentage of sales, they're still too high for our current level of business. We had previously ramped up our investments over the preceding six quarters to meet the more robust demand that we were experiencing. Going forward, we will be carefully evaluating our spending and taking steps to drive these expenses downward to match regional demand levels.

So what does all this mean in the big picture? No question, it was a tough quarter as we felt the impacts of pockets of economic uncertainty that are occurring globally and we need to adapt our strategy accordingly. However, the fundamental drivers of the secular shift to modular carpet tile have not changed and we remain a leader in driving this change in the marketplace.

While pockets of our European Asia Pacific markets faced increasing pressures, our US modular segment appears to be on track to hit record sales levels during the year. And we've seen the initial signs of at least stabilization in our raw material pricing. And we should see the benefit from higher-priced products to begin to hit our results as we get converted into revenue from the backlog. And our emerging markets remain strong in growing in our overall strategy. Although we look to eliminate expenses regionally to align our business with market conditions, we will also continue to invest in the emerging markets in our FLOR store rollout.

With that, I'll turn it over to Patrick.

Thank you and good morning, everyone. I'll take a few minutes to speak about the financial highlights for the third quarter.

Sales for the third quarter of 2011 increased to 8.1% to $273.1 million from $252.7 million in the third quarter of 2010. As Dan mentioned, our sales performance was driven by record revenue in the US modular segment and the solid results in the emerging markets, partially offset by weakness in Canada, Australia, and parts of Western Europe.

Gross profit declined about 80 basis points to 34.6% compared with the third quarter of 2010, as our higher sales volumes were offset by a significant increase in raw material costs across all geographies. We've undertaken three price increases over the course of the year. Additionally, our margins were impacted due to lower fixed cost absorption associated with lower manufacturing volumes, as we attempted to bring down inventory levels. At this moment, we do not expect to announce another price increase in the fourth quarter as we expect raw material prices to moderate.

SG&A expense in the third quarter of 2011 increased to $69.1 million from $61.4 million last year. The increase in SG&A was attributable in part to higher sales volumes, investments we've made in our non-office segmentation strategy, global sales and marketing efforts, and investments in our FLOR consumer strategy in the US.

As a percentage of sales, SG&A increased to 25.3% compared with 24.3% a year ago. As Dan mentioned, our SG&A levels assumed a continued recovery in our markets that didn't materialize in all regions affecting SG&A margins. As a result, we will be implementing a restructuring plan in the fourth quarter to reduce costs across all of our businesses with a primary focus on better aligning our expenses with demand across key markets. The plan restructuring charge will include headcount reductions as well as costs to exit certain leased facilities. At this time, we expect our total restructuring charge to be between $6.5 million and $8 million with approximately $5.5 million and $6.5 million being cash costs.

We anticipate that these actions will generate annualized cost savings of about $11 million, once completed beginning in Q1 2012, of which approximately $9.5 million is expected to be through the SG&A line.

Operating income in the third quarter of 2011 was $25.3 million or 9.3% of sales compared with operating income of $28 million or 11.1% of sales from our year-ago results.

Interest expense in the third quarter was $6.4 million compared with $8.4 million in the third quarter of 2010. This reduction reflects the refinancing of most of our senior and senior subordinated notes during the fourth quarter of 2010.

Net income attributable to Interface for 2011 third quarter was $12.2 million or $0.19 per share compared with $12.1 million or $0.19 per share in the year-ago period.

Depreciation and amortization was $7.3 million in the third quarter of 2011 compared with $6.4 million in the third quarter of 2010.

Capital expenditures for the third quarter of 2011 were $11.9 million compared with $7.1 million in the third quarter of 2010. For the full year 2011, we continue to expect capital expenditures to be around $35 million to $40 million.

And I'll take a few minutes to review some of the details of our individual business segments.

Our modular carpet segment had sales in 2011 third quarter of $248.7 million, up 9.8% from the year-ago period. The increase was the result of record US sales as well as sales growth in parts of Europe. Asia Pacific remained basically flat with the year ago.

Operating income in the modular carpet segment in 2011 was $26.3 million, down from $29.5 million a year ago. As a percentage of sales, operating income for the segment was 10.6% compared with 13% in the third quarter last year. The decreased margins were the result of our strategic investment program, moderating sales environment, and significant rise in raw material costs in the quarter as well as under absorption of their fixed manufacturing costs and lower production levels.

Bentley Prince Street generated $24.4 million in the 2011 third quarter, down from $26.2 million in the third quarter of 2010. Despite the decline in sales, operating income at Bentley Prince Street was nearly breakeven in the quarter, which we see as a testament to the continued focus on cost control and efficiency improvements at Bentley Prince Street.

Turning quickly to the balance sheet, we exited the quarter with $44.4 million in cash. Our capital structure remains solid as we have over $100 million in availability under our domestic and international lines of credit and no significant debt maturities until 2018.

Now, I'll turn the call back over to the operator for your questions.

(Operator Instructions) [John Coil] of Barclays Capital.

I just wanted to get an idea of the tone of business throughout the quarter. Was there any change in sales momentum coming into this quarter in October?

I would say that the quarter progressed, it was kind of choppy. As we mentioned on our call in July that it was kind of a flattish environment through the first three weeks of July. And then we had a pretty spectacular August, up like 18% in orders in August and then had a flattish September environment. And then we see a continued kind of flat environment here in the first three weeks of October. So, it was kind of an interesting pattern to the quarter.

And by flattish, do you mean sequentially or year over year?

Year over year.

Got it. Okay and then as far as the restructuring plan, how do you see the saves flowing through? Do you expect to get the full $9.5 million of SG&A saves in '12?

Yes. We should have the full plan implemented and executed by the end of the year.

Okay. By the end of this year?

2011, yes.

Understood. Okay, thanks guys.

Kathryn Thompson of Thompson Research Group.

Could you break out sales growth for your major markets, US, Europe, and Australia? And could you also distinguish between modular versus Bentley Street?

Sure and I think we referenced this but generally the sales in the quarter in Americas were -- it was like up 8%. Europe was up around 10% in local currency up about 18% in US dollars. And then Asia Pacific was up about 5% to 6% in the quarter. This is all worldwide modular. Bentley Prince Street was down in sales roughly 6%, 7% for the quarter.

And are the Bentley sales more focused in the US?

Yes.

And so really there is a more significant drop off with Bentley in the quarter? Really what happened and how have trends progressed?

Well, Bentley Prince Street 60% is broadloom, 40% is carpet tile. And they are at the high end price points. The business, it's oftentimes, one of the first that's impacted in -- impacted more severely than others --

And how have trends progressed since the quarter end?

Prince Street during the quarter.

How have trends progressed since quarter end?

They remain probably in line with what we saw in Q3.

Okay.

Keith Hughes of SunTrust.

If you look at either orders or revenue, whichever, can you kind of contrast what the office and non-office look like in both the US and Europe?

Sure. Well the office remained pretty robust globally. The US office business was up 16% and the European office business was on a similar basis in euro terms. So the non-office segments were softer, obviously. And I would say that the turnaround has really been in the education and government sectors, which exceeded our expectations for the first two quarters of the year. We weren't particularly bullish about those segments going into the year and had certainly softened here in Q3, particularly in those two segments. And that's applicable both in the US and in Europe.

And the second question. I believe you're doing a price increase at the end of the quarter. Have your major competitors followed along?

We did implement it in Q3. We believe one followed and one did not.

That's all. Thanks.

Thank you.

Kathryn Thompson of Thompson Research Group.

Thank you. Just a clarification. You said last quarter there was about a $4 million to $5 million gross margin drag from the timing of products and raw material price increases. And that was dragging Q2. Was this more tied to -- first off, is this more tied to Bentley Street and modular or it's just equal? And then thinking about Q3, was raw material or lower utilization a greater impact on gross margins?

Well I think the comments that we referenced in the previous quarters were principally focused around the modular business.

Okay.

And that in Q2 was principally around raw materials that were largely offset by increases in selling prices. But in Q3, we had more of the under absorption of fixed manufacturing costs as we kind of leveled out production volumes in Q3 versus Q2. So, it was about kind of half and half, about 40 basis points impacted, related price increase and the other half was under absorbed fixed manufacturing overhead variances in the quarter.

Okay, great. That's helpful. Thank you.

Sam Darkatsh of Raymond James.

Couple quick questions here. First off, in the press release last night you mentioned that you were and I think also in your prepared remarks that you were reviewing your SG&A outlays. Is the restructuring actions that you're announcing today what you were specifically referring to or are there other outlays that you're reviewing that would also create potentially other savings?

There's other outlays as well.

Where, what types of functions?

Well we're reviewing -- obviously marketing costs is one that we're reviewing. We're also reviewing general administrative costs as well, what I call non-productive sales costs. We're doing an overall review of the SG&A, Sam, to reduce that again.

So what is your target either leverage or ultimate spending level for that when you are able to -- when you mentioned right sizing the cost structure, what should we be looking at for a goal there?

We've always tried to drive our SG&A costs under 24%. And we're investing a lot to drive the top line and we were getting a lot of growth in the top line, 10%, 11%. If it moderates, we'll -- we're pretty good at cutting costs as well and we'll drive it back down to 24%. That's our goal.

On the restructuring specifically, you mentioned --

$70 million to $55 million a quarter from '07 to '09.

Thanks. The restructuring itself, are you able to identify for us what functions that specifically addresses?

No, not at this point. We'd prefer to keep those rather broad and general at this time. I think we gave you some clarity that it's around $9.5 million will flow through the SG&A. The balance will flow through costs of goods sold. But those are -- it's a 100 people affected and headcount reductions and certain costs to exit other leased facilities, etc. That's all we're prepared to comment on at this time.

Okay and then talk about production versus shipments, both in the quarter and then prospectively in the Q4 and Q1? How you feel about your inventory levels and your production plans going forward.

Well our production levels -- our shipments exceeded our production levels for the quarter, slightly. We anticipate a similar pattern going into Q4. We'll be mindful of inventory levels as we track the order pattern through the balance of the year. But I would expect a similar trend into Q4 as we try to bring inventories down but try to bring them down in a judicious manner.

Has the mix within the inventories changed with respect to raw or WIP versus finished goods meaningfully?

Not materially, no.

Okay. All right, thanks, guys.

Thank you.

Matt McCall of BB&T Capital Markets.

So continuing on that last question. So it sounds like maybe a little bit of gross margin pressure continuing in Q4. You expect those inventory levels to be where you want them by the end of the quarter?

I do and I expect similar dynamics in Q4 that we had in Q3, although we'll start to see more of a benefit of our price increase flow through in Q4. We didn't fully realize in Q3. So we should get the benefit of that to offset a little bit. But, generally speaking, yes, I would expect the dynamics around gross profit margins to be about the same in Q4.

Okay, so you saw under absorption pressure. I think you were speaking on year-over-year terms, but under absorption of 40 basis points, price cost of 40 basis points. So price cost gets better. Inventories about the same. Is that the way to look at it? So is there a little bit of improvement coming in Q4 and more as we move into next year as both those issues subside?

Well, I would -- I mean, yes, generally speaking I think directionally you're right. I think we're just a little cautious about where we will be able to realize those price increases. But, generally speaking, yes, that would be the strategy for Q4.

And then there was another comment about costs coming down. I don't remember if it was you Patrick or Dan, but what is the cost opportunity as you look out. It looks like it's hard for us to track the exact pricing that you face, but what's the cost opportunity?

In terms of raw material input costs moderating?

Yes.

Yes, it's too -- it's early days right now. It's too early to tell. All we can see for now is that some of the underlying building blocks seem to be turning down. But at this time, we're not able to quantify what the impact could be in 2012, but we are hopeful that we can realize some benefits going into next year.

Okay. And then, and Dan you mentioned when you were talking about some of the areas of weakness, specifically in Japan and Australia and Western Europe. You said you assumed this is a pause in activity. I understand the secular story behind it. Is that part of it? Also understand that the near-term pressures in Japan and sounds like you're doing some things to change that. But how -- what gives you the comfort that it's a near-term pause and what does near term mean in this case?

I think I said I hope.

Okay, okay.

Near-term pause. To me there's just a lot of uncertainty going on in the Western European economies related to their whole debt crisis. I don't think they've dealt with it yet. And when that happens, corporations just sit. And that's what hurts our business the most. If corporations are downsizing and there's churn, that's good for us or if they're increasing their employment and taking on more space, that's good. But in Europe, it seems like most of the economies, our biggest markets, they're just pausing and waiting to see what's going to happen. There's clearly pent-up demand in the European markets. We have not recovered nearly where we have in the US as far as our business goes. Even though we're taking share and growing that part of the market. So, hopefully if we can get the debt crisis solved and get, what I call, their austerity programs under way then we think the business may come back. There is a lot of new construction going on in London that's supposed to hit in 2013. And that's one of our biggest markets around the world. So I do believe London will come back in 2013.

Okay, so the pause comment was more about Western Europe. What about the -- what about Australia?

I think Australia you've got -- we had a situation where you had a lot of new construction going on in Australia. And the government had a huge stimulus package around education and government. I think that bubble is behind us and now it's a market that you see the secular shift in carpet tile going on. And that's, our opportunity is to continue to play that.

Okay, all right. Thank you all.

Thank you.

John Baugh of Stifel Nicolaus.

Thanks for your comments on Ray. We will miss him. On a couple of things, FLOR you mentioned that the retail stores are doing a little better than planned. Could you just sort of refresh my memory on what the ramp of a store is like when it breaks even? What volumes are needed? And I know lease costs are different by market, but just some parameters around that.

I will tell you. When we look at the direct costs of the store, the surprising thing is that, depending on the market and the lease costs, we are starting to break even after month four or five on the direct costs. And our New York store, SoHo, is way out performing our expectations in the SoHo store. Our expectations are that we would have probably a run rate of $2 million in that store and it's probably going to be $2.5 million in that store. And our Chicago store, which is the more mature store, it's been around now a little over 2 years, it's up 50% this year over last year. And we haven't seen that stabilize at all in the top line. It continues to grow. And we introduced it in Atlanta, four months later we're breaking even in that store. So, what's encouraging to me is it really -- it hits a mark with a consumer and we're benefiting from what's going on with the FLOR and the catalog and so forth. And I'm just encouraged we can really ramp this up more quickly than I thought actually.

Is the residential business in total still losing money? If so, how much?

Yes, it is. We lost $700,000 in the third quarter and I think we'll get closer to break even in the fourth.

And then is your Thailand plant okay?

It is. It is. We're in the south and most of the flooding is in the north. Obviously it's in Bangkok, but yes, we're fine.

And then lastly, maybe for Patrick, the free cash flow. I know we've had a pretty good use of capital year to date on inventory. So where do you think that comes out for the year? And then any thoughts on CapEx for '12?

Yes, we're trying to get back to kind of level on free cash flow for the year. We had a nice -- generated about $17.5 million in Q3, targeting similar maybe slightly more free cash flow in Q4, just kind of targeted. That would bring us back to probably level for the year. CapEx right now, early days, I would say around $35+ million for 2012 CapEx.

Right. Thank you. Good luck.

Thank you.

David MacGregor of Longbow Research.

How much of the European issue might have been related back to the implementation of your new European segmentation strategy?

You talking about the non-office commercial?

Yes, I'm just trying to get a sense of maybe a great plan but it might have been disruptive in the short term. I'm just trying to get your thoughts on that.

Well, we've been investing in the non-office commercial and it's moderated. We had a pretty good run last year. This year it's -- I think it's up single digit. But it's been a pretty tough market in education and government in Europe. And that's the big part of that business over there.

Yes. Can you give us an update on your book to bill for office in Europe?

I don't -- we don't have that.

Okay. Japan, I think you were on kind of a $4 million to $6 million a year run rate. In terms of losses over there, has -- can you give us an update on that?

I think we're still at that run rate, which will be minimized with our restructuring next year.

Okay. And so we should complete the year kind of at that pace, I guess?

Yes, I think we'll still lose a little over a million in the fourth quarter there.

What can accomplish there do you think in 2012?

I think we can -- well, we're going basically restructure where it's going to be a distributor model. So our costs will be significantly less there.

Okay. My recollection is your European business is a lot more inventory intensive than the Americas. Is it fair to say that the real inventory challenge here, as we head into the end of the year, is in Europe?

No. I mean you're right in the sense that it is a more of a make-to-inventory model than we have in the US. But if you were to look at where we were on a year-over-year basis, really the increases in inventory really on a year-over-year basis have not come out of Europe. So, frankly they've been in the United States. And again those were focused primarily around service disruption issues that we were trying to avoid so that our lead times didn't get extended out beyond six weeks as well as trying to get in front of some raw material price increases. But -- and that was more focused in the US. So the challenge really in the fourth quarter is really inventory levels in the Americas.

Okay. Do you feel like you're still holding your price increases in the America for March and May?

Yes, yes, we do. Raw material price increases went up significantly in the last 90 days.

Up in the last 90 days?

Yes, input costs within our raw material base, we had a lot of pressure within the back end of second quarter and in the third quarter.

And there's obviously some lag pattern going on there, I guess.

Right.

Because a lot of these chemicals markets have come off 15%, 20% in the last 6 weeks.

Correct. The benzene and caprolactam are -- they've turned down.

Yes. Good. Thanks very much.

Thank you.

Eric Prouty of Canaccord.

Just back to the gross margin issue. As we look into next year, do you feel like you're pretty well situated from a price increase standpoint, given that rollover in price to get you back to a more normalized gross margin?

We do. We think we're positioned to strive towards 35+% gross profit margins where we are right now on a price increase basis or where our average selling price increase is trending.

Great. And then as you continue to grow the retail side of the business, will that become large enough at some point to have an overall impact on margin or is it still too small to be a needle mover on -- are they dragging down the overall corporate margin?

Well our hope is to create a business in the consumer that's -- that rivals the commercial side, 15%. And I think that ramp up is going to take -- get us into 2013 to accomplish that. But, the gross profit margin is within the retail business or consumer business are higher than in the commercial side. It's the fact that we're spending so much on SG&A to drive this business and create this business. But when we get critical mass, I think it -- when you look at the fundamentals it can create double-digit operating income as well.

Great. And then finally just on when one looks at Bentley and I don't know if you broke this out from where you're planning on doing some of the restructuring, but can Bentley for 2012 get back into the black or do you think that's all going to be rolling and driven or can you cost cut your way to profitability in that business?

I would say the Bentley Prince Street business, we've -- our goal was to get it to breakeven at $25 million. And if we can drive that $25 million a quarter, if we can drive that higher we can -- it can become profitable. To me we've done a lot to lower the breakeven points in that business and now it's getting a little bit of growth on the top line. And that's going to have to come from carpet tile.

Sure and so will most of these restructuring be on the module side, because you've already done a lot of cutting on Bentley Prince?

Yes, I would say 75% to 80% of that is on the modular side.

That's right.

Okay, great. Thanks a lot guys.

Thank you.

(Operator Instructions) Philip Volpicelli of Deutsche Bank.

This is [Sean Wondrak] sitting in for Phil. Could you provide a little more detail regarding the strength you've been seeing in the modular biz in the US? What are the drivers and do you think this is sustainable into 2012?

Well I'd say the corporate office market is what's been driving the US business. And I still think there's a lot of pent-up demand. There's also, obviously, a lot of economic uncertainty around. But yes, I mean the biggest drivers have been the office market. And hopefully that will continue. The non-office, particularly education and government, I think we'll struggle to grow that double digit in the future. I think that's a tough market right now with what's going on with our government stimulus money. But I think the corporate office market has pent-up demand and we'll -- hopefully that will continue to be robust.

Okay, thank you. And then also regarding the cost cuts and the restructuring, how long do you think this will take to actually roll out? Do you think you'll have most of it -- ?

By the end of the year.

End of the year, as in 2011?

2011.

Okay, all right. Thank you very much.

Thank you.

And with no further questions in queue, I would like to turn the call back over to management for closing remarks.

Well, thank you for listening on the call and I know it was a disappointing quarter and, hopefully, we're going to improve it going forward. Thanks.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a great day.