Ethan Allen Interiors Inc (ETD) 2006 Q3 法說會逐字稿

Good day, ladies and gentlemen. And welcome to the earnings release conference call. At this time all, participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [OPERATOR INSTRUCTIONS]

I will now like to introduce your host, Mr. Kathwari. Mr. Kathwari, you may begin.

Thank you, Pam, and good morning. I am Farooq Kathwari, Chairman and CEO of Ethan Allen. I am joined today by Jeff Hoyt, our Vice President of Finance. Today we are reporting the results for the three and nine months ended March 31, 2006. I would like to begin by providing some key financial highlights.

Please note that an the earnings release issued earlier today and in the course of my prepared remarks, reference has been made to certain non-GAAP information, which excludes effects of the restructuring and impairment charge, recorded during our first quarter ended September 30, 2005. A reconciliation of this non-GAAP information to the most directly comparable GAAP measure is available on our website.

For the quarter, delivered sales amounted to $267.1 million, an increase of 15.5% over the prior year comparable quarter. Delivered sales for the Company's Retail division increased 22.6% to $168.2 million with comparable store delivered sales increasing 15.2%. Wholesale sales increased 13.9% to $192.2 million during that same period. On a quarter-over-quarter basis, Retail written sales increased 19.5% and comparable written sales increased 12.3%.

Delivered and written sales continued to be positively impacted by many initiatives, including relocation of our stores to larger and more prominent locations. During the quarter we opened three new stores and year-to-date, we have opened twelve stores. During the five years, 59 new stores, mostly relocations, have been opened in the U.S. and about 20 smaller stores opened internationally.

Our focus on strengthening retail management has contributed to higher sales. New products or 80% during the last three years has been positively received. Credibility and efficiency of everyday best pricing has increased sales. The initiative to reduce delivery time to consumers has also benefited both written and delivered sales.

Our gross margin for quarter ending March 31 was 50.5%, as compared to 47.8% in the prior year period. The improvements in gross margin were a result of continued efficiencies at both Retail and Wholesale, higher proportion of retail sales to total sales; gross margins were also negatively impacted during the quarter by absorbing the full impact of increase in form costs. We estimate the impact during the quarter was about 1% to our consolidated gross and operating margins. Gross margin was negatively impacted by major increases in utility and health costs.

During the quarter, we operated our cased goods plant on according to our schedule to balance inventories negatively -- which negatively impacted our gross margins in the quarter and will also have some impact in the next two quarters as inventories pass through our system. The plants, as of this week, are back to full working schedule. That's the cased good plant. The upholstery plants have been working full schedule all the time.

Effective March 1, 2006, we have implemented a price increase which should yield us about 2.5% -- about 2% in the fourth quarter due to shipping backlog at older prices. The increase should counter some of the growing costs mentioned in this call.

For the current quarter, operating margin was 12.5% compared to 12.7% in the previous year quarter. The Wholesale margin amounted to 17.7% compared to 18.7% and Retail operating margin was a positive 0.1% compared to negative 0.7% last year. Factors impacting the operating margins were -- impact on gross margins as discussed earlier; increase in costs due to strengthening professional management in Retail-operated stores; costs associated with operating additional 10 net new stores by the Company division this quarter compared to previous year quarter -- as in the past, the stores taken over by the Company -- almost in all cases need major investments in improving store operations, merchandising and staffing; costs associated with the recent closing and relocations of six stores, the additional costs within the Retail division were -- continued to be incurred during the quarter; increase in freight costs to Company for imports and delivery of products to Retail networks -- we deliver our products at one delivered cost nationally, and have absorbed substantial costs in the last year; and also, the additional costs associated with increased national advertising. Despite all of these negatives, of course, we had a major increase in our gross margins.

Earnings per share for the quarter amounted to $0.59 per share, an increase of 18% or net income of $20 million. This compares to EPS of $0.50 per share at net income of $17.9 million in the prior year comparable quarter. Our net income was impacted by an increase of interest expense countered to do some degree by interest income. We had lower share count, and we also did get some benefit of a lower tax rate.

Now I will give you a very brief summary results for the nine months ended March 31, 2006, which are as follows: delivered sales amounted to $794.4 million, an increase of 12.4%. Delivered sales for Company Retail division were $506.6 million, an increase of 16.5%, with comparable delivered increasing in 12.2%. Wholesale sales increased 13.6%. Written sales for nine-month period increased 16.1% and comparable written, 11.4%. Gross margin; 50.5%, compared to 48.1%. Operating income; 13.3%, and ex-restructuring; 13.9%, versus 13.7%. Wholesale operating margins; 17.4%, and ex-restructuring; 18.2%. Year-to-date, Retail operating margin; 2.2%, versus 1.8%. EPS with restructuring charges; $1.85, with income of $63 million, versus $1.63 and income of $59.8 million. EPS excluding restructuring; $1.93, on net income of $65.9 million, compared to $1.63 and income of $59.8 million.

Our financial position has remained strong. For nine months ended March 31, 2006, we generated operating cash of $92.5 million, utilizing $51.5 million to repurchase shares of the Company's stock, $34.6 million for capital expenditures and store acquisitions and $17.2 million to pay cash dividends. Inventories at March 31, 2006, were $191.6 million, which decreased $2.9 million from December 31, 2005. EBITDA for the nine-month period, excluding restructuring and impairment charges, was $128.7 million or 16.2% of sales, as compared to $114.1 million and 16.1% of sales in the prior year period.

As we move forward, we intend to continue to make the investments and is initiatives that will position Ethan Allen as a provider of solutions and service. As I have stated in prior calls, our belief is that good customer service is a new luxury, and our focus has been to transform Ethan Allen into a service and solutions-based company. During the quarter, we introduced a new product program called American Classics, which is being shipped currently to our stores.

At this stage, I will open for questions. Pam?

[OPERATOR INSTRUCTIONS] Our first question is from Ivy Zelman.

Good morning, Ivy.

Good morning, Farooq. Great quarter. Just a few housekeeping items. Can you tell us how many plants, today, in the U.S. -- both in cased goods and upholstery, you have? And the percent that you are outsourcing?

We have eleven plants. We have four plants cased goods plus two saw mills. And we have five plants -- upholstery plants, and one accent plant. We are -- currently, we are still producing approximately 65% of the products in our U.S. plants.

And are there any expectations over the next twenty four months if that will change?

It is possible that the 65% might go somewhat lower, but we have made a major decision, and somewhat contrary to what's happening in our industry, that is to continue with maintaining a strong presence of manufacturing in the United States, balancing it of course, with what we are getting overseas. I think, yes, it is possible that it might go slightly lower. But at this stage, not too much lower.

Great. And Farooq, with respect to your sales, they're phenomenal -- looking at your written comp stores up 12.3% and just -- overall performance is spectacular, considering your competitors. With oil prices now hitting $75 a barrel, we've heard some people more cautionary about furniture; Stanley was obviously out with cautionary comments. Did you see a change in the consumer's behavior in March -- or what you've seen in April; if you can comment, please?

There is no question that the consumer is concerned. And I myself was somewhat surprised at the strength of our business in the last quarter. As you know, in January I was somewhat more conservative. And I believe that our initiatives are the ones that are resulting in our -- the increases in the business, obviously. And I would think that, yes, the consumer is somewhat more cautious. But on the other hand, the consumer confidence level is still high, and that is what really drives our business.

So you didn't see any change in the quarter, trend-wise, from the last month versus the first two months?

I think that it is still hard to say. But also, I think that the last quarter we had very, very high increases -- large increases. I don't think that that kind of increases are -- it's hard to maintain those kind of increases. But we will continue to see positive trends for us.

And with your last question -- just with respect to increasing your management; you said costs associated with that -- can you indicate how many more personnel, if anything, or was it just turnover?

Last year about this time, we started the program of strengthening our Retail division by putting in, what we call, project managers. These were people that we -- Right. -- and as you know, we replaced approximately 150 of those project managers -- we took them from designers and made them into project managers. We did really add a fair amount of costs because now these were -- these are now all on salaries. But of course, a very major benefit has been increase in sales, increase in professionalism, and a lower turnover of designers, overall.

Great. Thanks, Farooq. I will come back after everyone.

Okay, Ivy.

Our next question comes from Budd Bugatch.

Good morning, Budd.

Also good morning, Jeff and Peg. A couple of questions. Picking up on what Ivy said about -- asking about March; I know you said you were somewhat more concerned about the consumer. Did you see a slow down in incoming activity in March? Did you -- I don't think you responded to that part of her question, unless I missed it.

Budd, we had -- we continue to -- we saw progress in March. Now, is it -- it was somewhat slower than in February. But we also had the end of February, as we did the previous year also, a special finance offering in the President's Day weekend, so that makes February much stronger. But on a comparable basis of March this year to last year, we still showed positive results. However, we are also watching the consumer confidence and all other factors closely. And I cannot, at this stage, predict whether the consumer service will remain as strong as it has been in the past. But overall, we have maintained the momentum -- and as I said to Ivy, we have seen that momentum also maintained in April compared to last year. It is not at similar levels of increase that we have seen in the last -- in the quarter of -- last quarter, but it is still early, of course.

And I saw the delivered sales at the Retail up, I think, 22.5%, and the written business was up 19.5%, which would lead you to believe that the backlog may have shrunk a little bit or -- I know that is more sequentially driven, but you're delivering a little bit faster. Is that due to Mission Possible, which accelerated $10 million in the second quarter sales? And that's, I thought, was one of the reasons you were cautious about third quarter.

That's right. I was cautious about the third quarter because I was not sure of how much business we would do. But as in the third quarter, we wrote very healthy business. And that also resulted in good delivered business. Our backlog, overall, have been down and will continue to be down because as Mission Possible involves us in delivering our products faster -- and we're doing it and it has resulted -- interestingly, it has resulted in some additional costs in our upholstery operations because our -- we don't have the backlog that we used to have which maintained a steady business in upholstery. On the other hand, the benefit of delivering faster has been very, very positive for our business, especially in getting customers. And many of them, we are now finding out -- we are getting customers who in the past would not have purchased from us because of the delivery times.

I see. And what -- do you have a measure of service that you can tell you now? What's the average delivery time on upholstered and in cased goods?

I was thinking it is competitive information. If we went into our stores, they will tell you -- so most probably, it is not that competitive. We are now delivering our -- about 90% of -- we're shipping, from our distribution centers, 90% of our cased goods within thirty days. And we are shipping about 70% of our upholstery within --at this stage, about thirty days, also -- and it's custom upholstery.

And one last area of questions. You told us that the foam cost, you think, impacted your costs. You also mentioned utility, healthcare and the slower schedule. Do you have -- can you give us maybe an idea of what that may have impacted margins in the quarter?

I mentioned about -- of course, the foam had an impact of approximately 1% on our gross margins and operating margins in the quarter. I would -- the utility costs and medical costs during the quarter impacted approximately 0.5%, or one-half of 1%, to our gross margins.

All right, sir, thank you very much. Congratulations.

Thanks, Budd.

Our next question comes from Laura Champine.

Good morning.

Good morning, Laura.

You mentioned that in the fourth quarter you expect to realize a 2.5% price increase, but that that's lower than the actual level of the price increase because you're filling backlog. What is the price increases implemented March 31st?

The net -- the yield of the price increase we expect to be at 2.5% on annual basis.

Okay. Can you comment on how much pricing affected your sale -- how much of your top line growth in Q3 came from price increases, on a year-over-year basis?

I don't have the numbers, but I would think probably in the range of between 2 and 3%.

Okay. That's lower than I would have thought. One last question -- still have the majority of the cash that you raised in the debt offering on the balance sheet. What are you viewing as likely uses of that cash and the timing there of?

The timing I cannot comment on right now because I am not in a hurry to spend it. We'll spend it as makes sense. But we still have the same objective that we had previously, that is to continue to expand our business, both at the Retail -- the possibilities of expanding manufacturing, strategically, overseas as it makes sense, and also the possibility of -- as it makes sense, to repurchase our stock.

And on the expanding the Retail distribution, would that mean addition of net stores or could that mean acquisition of existing franchise stores?

Most important of that is going to be relocation of stores where we are -- that's really where -- there is 59 stores, I talked about in the United States, most of them -- 90% of them were relocations. The cost of relocating the stores -- and in our case, we have been purchasing properties and building them, and we'll continue to do that. There will be some acquisition as our -- from the time to time, as our dealers retire, we will continue to acquire those.

No huge step-up in the level of repurchases that we're already seeing? Or could we see a purchase of ten or more stores?

No, not -- there is nothing in the works. But these are something that are not really planned. As people believe that they must -- that it is time for them to exit the business -- and if we believe it makes sense, then we'll make those decisions. But we don't have any major plans.

Thank you.

Our next question comes from John Baugh.

Good morning, John.

Good morning. Congratulations. A question about the cased goods -- 32 hours. Can you explain why, with business as strong as it is, you had to curtail production there? And will there be -- now that you're running full, does it take this level of incoming written business to remain running full, going forward? Or are we looking at potential plant closing in the future, as well?

John, good question. Last year, when we were in the process of consolidating some of our plants and also transferring some products to our -- to overseas and from closed and existing plants, we decided that it would make sense for us to build inventories and also to keep the existing plants operating at full capacities because of the fact that I didn't want people to feel uncomfortable that somehow -- that we perhaps might close those plants, too. As you know, it creates a very negative impact. The result of that was we built inventories, but fortunately, we built them in all our best and the newest product lines. We intentionally built inventories, which were most probably, more than we needed. And this quarter we decided that, now that things are stabilized, we have consolidated and we've closed all the plants. We talked to all our people and said, this is a time for us to now take some breather and bring our inventories back to line, and that's what we are doing. And at this stage, we believe that we have a good opportunity of keeping the plants we have, currently, consistent with the orders that are coming in.

Okay. And then on the -- you mentioned your national advertising was up in dollars and/or percentage -- I am not sure. Could you quantify what total ad spend was, either in a percentage basis or dollars, year-over-year?

No, I cannot give you the exact numbers. What I will tell you is this last year -- this quarter we had sent -- we had subsidized the distribution of our direct mail. And this year we did not do that. Instead, we went on national television. Yes, we were higher this year and -- substantially higher than what we spent last year in national advertising.

Okay. And plans for that going forward, Farooq?

We are going to continue national advertising and a strong direct mail program. And in fact, we are also starting in a very major program starting next month on a national e-mail program. All of that will continue.

Thank you.

Our next question comes from Margaret Whelan.

Good morning, Margaret.

Good morning, Farooq. How are you?

Thank you.

Nice quarter. I am trying to get a sense for the rate of growth in sales relative to the rate of growth in your profits. I understand there is an awful lot of moving parts in the SG&A and the gross margin line, at the moment. You don't seem to be deriving incremental profit from the sales. I am wondering, at what point you think that might reverse?

You're right. With the kind of an increase we have had in sales, one would have -- we would have expected a much larger impact on our margins. But our margins were impacted by the -- by the number of things that I mentioned. And some of them are sort of extraordinary, one-time, and others are more on an ongoing basis. For instance, the quarter -- the issue of the increase in the foam costs -- we did not take a surcharge. Many, many people in our industry did that last year. We absorbed those costs. However, this increase in the prices that we took in March will, to some degree, counter that.

We also continued to have some major expenditures of some major relocations of stores. We repositioned, now, Chicago. We have repositioned Phoenix in the last year. These are major store repositions of closing of stores, getting out of inventories at a lower margin. Even though we still have going to have that -- and we'll continue, because we've got to continue to relocate stores. But I think we had some what more of an impact this last quarter than what should be normal.

Okay. I guess the question is, with all of the incremental sales you're getting from the new products, what would be your estimated margin? Aside from energy-related costs and moving these around? What should we be modeling for '07?

Well, I think that the margins that you are seeing right now, of course, are still very, very healthy.

Sure.

However, our margins of our domestic manufacturing were negatively impacted in the last six months through all of these consolidations. Just to give you a perspective, the [inaudible] plant that we consolidated last year, about $800,000 of those costs went through this last quarter, the next quarter it would be about $150,000. We are still running a lot of medical costs from all of those closed plants. And by end of the six months, most of those costs will have run out. I think that we had some extraordinary costs. And on the other hand, we have deliberately invested money in building a professional staff at Retail. And so that resulted in great sales, but it also had an impact on our cost structure. Overall, I think that we have the opportunity, as we go forward, of getting a better leverage of sales than we did in this quarter. If that's your question.

It is my question. I am just trying to figure out -- where might the margin kind of plateau or even out for the long-term, I guess, relative to the sales growth assumptions that you have?

Well, hard to say. It is going to be what's going to be. We have that opportunity, as was in the past, Margaret.

I understand. Okay. In terms of something that you can control, would be a use of cash flow. Where do you think you're going to be spending most dollars over the next couple of years?

We will continue to be -- continue to be aggressive in store relocations. We will continue to invest in technology, both in our Retail network -- which we are doing more aggressively now. We will continue to -- also, as I said earlier, we will be looking at the possibilities whether it does make sense for us to get into manufacturing overseas. We have not come to any conclusions. We are still watching the situation. And then we will also -- we have continued to pay dividends. And then, as it makes sense, we'll continue to purchase our stock. In the last nine months, we have used $50 -- $51 million to purchase our stock.

And just to clarify; in terms of the number of stores that you own -- the corporate owns around 40%, is that saturation? Or do you think you could own more, going forward?

We own right now 134 stores. 177 are owned by independents. A total of 311. I think that the Company-operated stores, they'll start -- they will creep up. More -- more importantly, we will continue to position -- transform them into better locations. We are right now, for instance, doing it in Denver. We took over a few years back and now we will relocate almost all the stores in Denver, as we have done in Phoenix and in Atlanta and Detroit, and Chicago just completed, San Francisco was completed, Cleveland was just mostly completed. So we will continue to reposition our stores. Because we have at least 100 of them to reposition. We are doing it on a gradual basis because we need to make sure we don't end up with unrented locations.

You have another 100 Company-owned stores that you could reposition?

Not -- overall.

Overall.

For instance, just to give you a perspective; in this next quarter -- fourth quarter we are going to open up about five new stores -- which are actually, we are going to open up. We have those of our independents and two by the Company, out of the three. In the independents, one is new-new, the other are relocations. The two that the Company is going to open are both relocations. We have a lot of opportunities of relocations. Keep in mind that our independent dealers -- the ones who are operating the businesses well are growing, and they want to grow, and they are relocating their stores at the same level as we are.

Sure. I got it. Thank you very much.

Okay.

Our next question comes from Joel Havard.

Good morning, Joel.

Good morning, Farooq, Jeff, Peg. Margaret kind of jumped into what I wanted to discuss here, the store break-out. You made some good points there on the end. I am very surprised to hear you say that 100 of the stores -- and make sure I caught that right, that's Company and dealer --

It is company and dealers.

-- could yet be relocated. Where do you all think about the break point? Is it a store that's ten years old, generally? Or is it a store that's of a square footage break point -- under 13,000, 14,000 feet; is it something like that?

Well, most of the stores -- of Ethan Allen stores were built in the late 60's and the 70's. And most of them were built in about 12,000 to 15,000 square feet. Locations are right for that time, but today -- the great thing about it is that we are really, almost reinventing our business by putting them in the right places, and both in terms of square footage and location. So you will continue to see that. And we have not spent a great deal of time in opening new stores, and which we do have markets of opening stores, but it's a question of focus and time and resources. And we believe that we get the best benefit of relocating what we have, rather than opening new stores and then diluting and diverting our management and resources.

Sure. Of the 100, then, that could still be replaced -- what percent of those are Company-owned?

I would say -- I don't have the exact numbers in front of me.

Sure. Just in rough terms.

About 30% or so.

Okay. It stays equivalent.

Yes.

The new footprint -- more like 18,000 to 20,000 feet.

That's right, yes.

All right. And on the dealer stores, there was a pull-back in the numbers. Is there a transitional issue there? Did you all make an acquisition in Q3 that some of those will show back up -- reopening in Q4?

Yes. We purchased two stores during the quarter.

Where were they?

They were in Colorado Springs and in California, in Los Angeles.

One store in each?

One store in each.

I see. Okay. Jeff is looking up the numbers, I guess. Do you have a price yet? You all have done some K's on these in the past? Should we wait for the 8-K?

I don't think we do 8-K's on these -- not on these relatively small acquisitions.

I know I have seen some in the past. Could you share -- was the acquisition cost in keeping with your recent acquisitions, then?

Yes, they were.

Did these two, then, hit the Company-owned bucket in Q4?

You mean Q3?

I am sorry -- these were already in Q3? Or they will show up in Q4's count?

They are in Q3's count.

They are in Q3. Got it. And I think that does it for now. Thank you all. Good luck.

All right, Joel.

Our next question comes from [Deforek Hinman].

Okay, good morning.

Hi, Farooq. I have a couple different questions. This is just asking about the cash holdings, just in a different way, maybe. In terms of the independent store count, do we have owners that have a concentration of stores, where maybe they have 5, 10, 15, 20 stores -- and we're not in discussions with them immediately about acquiring them, but down the road, maybe they're going to look to sell?

We don't have any major concentrations with any one independent dealer. The most somebody has, I think, is six stores. And our objection really is to maintain a strong presence with independent retailers. Keep in mind that most -- in fact, the average association of an Ethan Allen independent with the Company is over 30 years. So many -- almost all the independent retailers that we have started with the Company 30, 40 years back. And what's has happened in the last eight, ten years is a natural transition of many independent retailers that we have taken over, wanting to retire. And many of them, also, did not feel it was -- it made sense for them to make the major investments which was required to relocate the stores, because today, we can't afford not to do it. As that has come about -- fortunately for us, this has come about in a process which has been manageable rather than having 50 of them come at the same time.

It has been good for independent retailers, it's been good for us -- that is that we have been fair in our dealings with them, I believe. And that when they want to retire -- and our first preference for them is to find an independent retailer because I really do want independent retailers to be very strong part of Ethan Allen, because running a business of retail is not easy. It is a tough, tough business. We are returning the Retail division and we are putting our resources behind it. We are building professional staff. And in fact, we're probably over spending to make sure that we have the professional organization. So I want good retailers, and in fact, last year we sold a number of our stores to our existing retailers, as they wanted to expand. We did that also.

Can you comment a little bit on the advertising? In the calendar third quarter and fourth quarter of political election years, spot price goes up. What are our thoughts regarding that? Are we going to cut back a little bit? Or keep on the plan that we've had?

As you know, we did cut back when there was a presidential election because that was a time that was very -- it really didn't make sense to spend that money. We couldn't compete. But we we want back, immediately in -- the last year, as we felt not only because it made sense to invest but also, our product programs were in place. We are going to continue, even though I am hearing that -- the up-front market, they tell me, is going to be up 10, 15%. But we are negotiating hard to maintain the level of advertising that we have had in the past, and in fact, even increase it without spending too much more money. Our objective so far is, that in the next three quarters, we will continue with national advertising.

All right. On the last conference call you commented about employee turnovers is one of your biggest costs for your business. How do project managers embrace this new title they have? And how has that gone? And how has the turnover trend been?

It has been very, very beneficial. Our turnover trend has gone down substantially. Our ability to service the customers has increased. We are more professional. And the project managers, of course, are very deeply involved up-front and working with the customer. It's been very, very positive, both in terms of building future management. We have now a much stronger structure at Ethan Allen. And I feel more more comfortable about our Retail business than I ever have.

All right. Then last question, tax rate ticked down in the quarter. What's our expectation for the fourth quarter and maybe even '07?

It will continue to be at the levels of the third quarter. We are getting some benefits of some reduced state taxes.

And that's the same for '07, too?

At this stage, it looks like we will maintain this lower rate.

All right. Thanks, Farooq.

Our next question is from Barry Vogel.

Barry Vogel, thank you.

Hi, Barry, good morning.

Good morning, Farooq. Can you give me an idea of what your total capital expenditures and G&A would be this year?

It will be approximately -- in the range of -- around close to $42, $45 million.

And G&A?

G&A -- $21 million?

$20 to $22 million.

Yes, between -- about close to $21 million.

Now, looking at next yea,r even though you probably don't have your capital plans in front of you yet because it is premature, would you say those are good numbers for fiscal '07, approximately?

Most probably closer to $50 million -- between $50 and $60 million. That's what I would like to spend.

Okay. It is obvious you've done a terrific job in repositioning the Company over the last three years. And notwithstanding some of the cost pressures that you've had to absorb, your structure today is better than you have ever been, during the last five years, certainly. And so the outlook is quite promising. In addition, you have virtually no debt and you were very astute in locking in 5% money when you did that $200 million debt issue. I am a little perplexed as to why you stopped buying shares after you had bought in the first half about $51 million worth at an average price of about $32. And I thought you would probably continue to buy shares, in light of the outlook improving so dramatically for the Company on a fundamental basis. Could you tell me why you didn't buy any shares in the third quarter?

Barry, there is no real good reason.

I would think -- consistent with your other programs, you would have a consistent buyback program.

We are looking at it and I am in, also, watch. Even though we have done very, very well; we look at all the problems of world and take a look at the increase in the costs in oil and foam, and we look at the war still going on. And so I felt that it made sense to watch -- to wait and see what this whole economy and everything else will come out with. And we have, of course, done much better in this very difficult environment. So we're going to take a look at the timing.

I just think you should be a little bit more aggressive.

All right, Barry.

Given the changes that you have made that have been so successful.

Okay, Barry, it's good -- at least we got the money in the bank, you know?

I know. Thank you very much.

Okay, Barry. Pam, are we done?

I am not showing any further questions at this time.

All right. Thank you very much. If there is any more questions or comments, please let Peg Lupton know. Thanks very much.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the conference. You may now disconnect. Everyone have a wonderful day.