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Interface Sales Fall 28% in 2nd Quarter

Tuesday 28 July 2009

Interface, Inc. announced on Wednesday its results for the second quarter ended July 5, 2009.
Sales for the second quarter of 2009 were $211.3 million, compared with sales of $295.0 million in the second quarter of 2008, a decline of 28.4%. Approximately 6% of the sales decline was related to fluctuations in currency exchange rates relative to the year ago period. Operating income for the 2009 second quarter was $20.9 million, or 9.9% of sales, compared with operating income of $33.4 million, or 11.3% of sales, in the second quarter of last year.

In the second quarter of 2009, the company recorded other expenses of $6.1 million, or the equivalent of $0.06 per diluted share, associated with the completion of its previously-announced issuance of 11 3/8% Senior Secured Notes due 2013. Excluding the items described above and the bond offering expenses, net income attributable to Interface, Inc. for the 2009 second quarter was $5.1 million, or $0.08 per diluted share, compared with net income attributable to Interface, Inc. in the year-ago period of $15.9 million, or $0.25 per diluted share. Including all items, the company reported second quarter 2009 net income attributable to Interface, Inc. of $3.7 million, or $0.06 per diluted share.

\"Interface has made substantial progress during the second quarter of 2009, with sequential quarterly improvements in orders, sales and operating income in the face of a global marketplace that continues to be very challenging,\" said Daniel T. Hendrix, President and Chief Executive Officer. \"The successful implementation of our restructuring initiatives and the further development of our market diversification strategy have enabled us to improve our cost structure and operational efficiency while maintaining our competitive position in the marketplace. Even though our results compared with a record second quarter last year reflect the continued pressure of current economic conditions, the non-office segments faired reasonably well, driven mostly by the education buying season. The corporate office segment, however, continued to deteriorate, which particularly impacted our performance in Europe and the emerging markets.\"

Patrick C. Lynch, Senior Vice President and Chief Financial Officer, commented, \"Interface has taken a number of steps to significantly reduce its cost structure in light of recent global economic pressures, and most of the benefits of these actions flowed through our results for the 2009 second quarter. We also took significant steps towards our goal of strengthening our balance sheet during the period, successfully refinancing nearly all of our near-term debt maturities and ensuring we have the capital necessary to continue executing on our strategic initiatives. As a result of our focus on enhancing liquidity, managing costs and generating free cash flow, we exited the quarter with $90 million in cash.\"

For the first six months of 2009, sales were $410.6 million, compared with $556.7 million for the same period a year ago, a decrease of 26.2%. Approximately 8% of the sales decline was related to fluctuations in currency exchange rates relative to the first six months of last year. Excluding the 2009 second quarter items described above, as well as a pre-tax restructuring charge of $5.7 million in the first quarter of 2009 as previously announced, operating income and income from continuing operations for the 2009 six-month period were $25.6 million (or 6.2% of sales) and $5.9 million (or $0.09 per diluted share), respectively. These figures compare with operating income and income from continuing operations of $64.4 million (or 11.6% of sales) and $30.6 million (or $0.47 per diluted share), respectively, in the first six months of 2008. Including all items, operating income and income from continuing operations for the 2009 six-month period were $23.9 million (or 5.8% of sales) and $0.4 million (or $0.00 per diluted share), respectively. Net loss attributable to Interface, Inc. in the first six months of 2009 was $0.5 million, or $0.01 per diluted share, compared with net income attributable to Interface, Inc. in the year-ago period of $30.0 million, or $0.47 per diluted share.

Hendrix concluded, \"Our market diversification strategy and the operational initiatives that we implemented during the first half of the year have enabled us to deliver solid second quarter results. The secular shift toward carpet tile is continuing, even through the severe downturn in the global office market. We believe that by taking the appropriate actions to streamline our operations at the right time, we have protected the profitability of our business. Although we saw a recovery in orders during the quarter and are encouraged by sequential monthly sales trends, we remain cautious about the operating environment through the second half of the year, with market conditions in Europe and many emerging markets showing continued signs of weakness. Despite this, we are pleased with our ability to execute on our initiatives to realize operating efficiencies across the business, and we plan to continue to focus on managing our costs and generating strong cash flow, while at the same time enhancing our position in the marketplace through further investments in market diversification.\"

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