Hooker Furnishings Corp (HOFT) 2009 Q1 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to Hooker Furniture's quarterly investor conference call, reporting its operating results for the first fiscal quarter of 2009. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. Instructions will be given at that time. As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr. Larry Ryder, Executive Vice President of Finance and Administration, and CFO. Mr. Ryder, please go ahead.

Thank you, Stacy. Good morning, and welcome to our quarterly conference call to review our fiscal 2009 first quarter sales and earnings. We appreciate your participation this morning. Joining me today is Paul Toms, our Chairman, President and CEO. During this morning's call, we are comparing our operating results for the 13-week first quarter of fiscal year 2009 that began February 4, 2008 and ended May 4, 2008 to the fiscal year 2008 first quarter that began January 29, 2007 and ended April 29, 2007.

During our call today, we may make forward-looking statements which are subject to risks and uncertainties. A discussion of factors that could cause our actual results to differ materially from management's expectations is contained in our SEC filings and the press release announcing our first quarter 2009 results. Any forward-looking statements speak only as of today, and we undertake no obligation to update or revise any forward-looking statements to reflect events or circumstances after today's call. Now, let's get underway with some opening comments from Paul.

Thanks, Larry, and good morning, everyone. As we stated in our press release last night, we are not happy to be reporting profitability performance for the first quarter that's below what we have achieved recently, and what we believe we will be able to achieve again once we return to a better economic environment. As we reported, net sales of $71 million and net income of $2.6 million, decreased by 8.1% and 39.2%, respectively, from the same period a year ago. We remain confident in our business model which proved itself during extremely challenging economic and industry conditions last year. As we also referenced in the press release, we believe we are making progress on multiple operational initiatives to further improve our efficiency and service to our customers. We are continuing to invest in our business because while the economic malaise has been prolonged, we believe it is temporary. It is also critical at this time to seize every opportunity to work with our retailers, to stimulate demand while simultaneously looking for ways to reduce costs without compromising either product quality or service.

Before we get into the specifics of the quarter, I'd like to highlight a few details on some key initiatives, investments and efforts presently underway to stimulate sales at Hooker, efforts that we believe will pay dividend when demand improves. First, we have several projects underway in warehousing and distribution. By the end of this month, we expect to open a second Asian warehouse in conjunction with our second largest source plant. This will allow more of our customers to purchase a greater variety of our products at lower prices, thus enhancing their opportunities to increase profit margins. The West Coast distribution center in Carson, California that we opened in early February this year, has been well received by our western region customers. We have just expanded the number of states we are servicing from that facility from five to the ten western most states. Since the distribution center is enabling us to improve our service and delivery while reducing inland freight costs to dealers, it will enhance the value of our products in that marketplace now with an even broader group of customers.

Also in the warehousing and distribution area, we expect to open a warehouse adjacent to the source plant for Opus Designs by October, which will allow us to improve our in-stock position and enable more of our customers to purchase a greater number of Opus youth bedroom products at lower prices as well, making the Opus product line more profitable for those dealers. In regards to Opus Designs, the Company successfully completed integration of Opus into our existing operating systems during the first quarter. We have been ser servicing customers with few disruptions. Also since purchasing that business, we have integrated the sales effort and significantly improved the Opus advertising materials, photography and catalogs, and presented the product line in an attractive remodeled 6500-square foot area within the Hooker Furniture showroom at the recently concluded Spring High Point Furniture Market.

At the market, we were able to place the product line with a number of new dealers and continue to believe Opus represents a long-term opportunity to become a preferred vendor for youth bedroom furniture and also, to help us reach a younger, slightly less affluent consumer than Hooker's current core demographic. The new business development initiatives we've had underway for over a year with our senior sales executive with Bruce Cohenour, continue to result in progress in expanding our presence with targeted dealers. Under the leadership of Alan Cole, our Executive Vice President, Upholstery, Sam Moore's financial performance has been improving as a result of new product introductions, cost reductions and the pursuit of new customers we believe will generate additional sales growth. While we still anticipate a slight loss for the entire year, Sam Moore should operate at just about breakeven over the second half of fiscal year 2009.

Across the Company, we are taking measures to defer, reduce or eliminate certain spending plans in an effort to right size our cost structure to our current level of business. That being said, we are careful not to overreact. As I mentioned earlier, we don't want cost reductions to compromise product quality or service, nor do we want to jeopardize our ability to take advantage of rebounding business when it materializes. And finally, we are continuing to progress in managing our supply chain, warehousing and distribution operations, and optimizing inventory levels to current business conditions.

Let's get into more specifics for the results for the recently concluded fiscal year 2009 first quarter, which ended May 4, 2008. Fiscal 2009 first quarter net income was $2.6 million. That's a decrease of $1.7 million, compared to fiscal 2008 first quarter net income of $4.3 million. Earnings per share declined to $0.23 versus $0.33 in the fiscal 2008 first quarter. As a percent of net sales, gross profit margin increased approximately 140 basis points to 30% for the fiscal 2009 first quarter from 28.6% in fiscal 2008 first quarter. This improvement came principally as a result of product mix and significantly lower net sales of heavily discounted, discontinued domestically produced wood furniture when compared to the fiscal 2008 first quarter.

Overall operating income for the fiscal 2009 first quarter decreased by $2.2 million, or 36.4% to $4 million from $6.2 million for the fiscal 2008 first quarter. Operating margin decreased to 5.6% of net sales for the fiscal 2009 first quarter, compared to 8% in the fiscal 2008 first quarter. Selling and administrative expenses increased by $1.3 million, or 8.4% to $17.3 million in the fiscal 2009 first quarter, compared to $16 million in the fiscal 2008 first quarter, primarily because of the additional selling and administrative cost for Sam Moore, which was acquired at the close of the fiscal 2008 first quarter. This increase was partially offset by lower selling costs related to the Company's wood and Bradington-Young upholstery operations. As a percentage of net sales, fiscal 2009 first quarter selling and administrative costs increased to 24.4%, compared to 20.7% in the fiscal 2008 first quarter. The increase in selling and administrative costs as a percentage of sales, was a result of the higher expenses and lower net sales in the fiscal 2009 first quarter.

In the 2009 first quarter, the Company did not record any restructuring charges. In the comp period fiscal 2008 first quarter, the Company recorded a restructuring credit of $129,000, principally for reversal of previously accrued healthcare benefits for terminated employees at our former Pleasant Garden, North Carolina facility. Our disappointing financial performance in all of these measures we have just discussed has driven almost totally by the continuing and significant decline year-over-year in the sales, and the very difficult retail environment we are operating in.

Looking at revenues during the fiscal 2009 first quarter, consolidated net sales declined $6.3 million or 8.1% to $71 million dollar from $77.3 million in the fiscal 2008 first quarter. Excluding Sam Moore, net sales declined by $13.2 million or 17.9% in the fiscal 2009 first quarter, compared to the prior year first quarter. Excluding Sam Moore and domestically produced wood furniture, net sales declined $7 million or 9.9%, compared to the fiscal 2008 first quarter. This decline reflects the year-over-year declines in incoming order rates the Company has experienced since the fiscal 2006 third quarter, resulting from the industry-wide slowdown in business at retail. Sam Moore's net sales amounted to $6.9 million for the fiscal 2009 first quarter. Again, we acquired Sam Moore at the close of the fiscal 2008 first quarter.

While some of our revenue decrease can be attributed to our exit from domestic wood furniture production, most of it is due to the ongoing economic downturn. Continuing increases in the price of gas and food, along with tightening credit availability, the decline in housing activity, and political and financial market uncertainty are keeping consumers on the sidelines, especially for postponable large ticket purchases. Another issue I should mention that was a factor in the first quarter and will continue to be throughout the year, is that of price increases from our suppliers due primarily to rising cost of raw materials. Bradington-Young and Sam Moore experienced 5 to 7% price increases from their vendors, just after the Spring High Point Market. Hooker also experienced price increases as high as 5% earlier this year from our vendors. As a result, we instituted a modest price increase in March and will probably have another one this fall. We believe that these increases will compensate for higher cost raw materials and purchase inventory.

Looking ahead to our next quarter which will run from May 5, 2008 through August 3, 2008, we believe business conditions will remain very challenging, based on both industry forecasts for a decline in shipments and our own slower incoming order rates for the first quarter of fiscal 2009, which declined 14.2% for Hooker and Bradington-Young combined, compared to the fiscal 2008 first quarter and remain relatively flat declining by about 1.2%, compared to the prior quarter -- fourth quarter fiscal year 2008. We are implementing cost cutting measures in response to lower sales volumes, continuing to progress in managing our supply chain, warehousing and distribution operations, adjusting inventory levels to current business conditions, and continuing to make investments in our business that will position us to best leverage improving demand when that occurs. At this point, I'll call on Larry to take us through the balance sheet and cash flow statement.

Thank you, Paul. As Paul stated, we are disappointed by our decline in sales and profit, even in this tough economic environment. We do however, still strongly believe that we have established the right business model and believe we are working on the right initiatives to further refine our business model, positioning us well when business conditions improve. We believe our inventory position is appropriate for the current business conditions and we have maintained a very strong cash position.

During fiscal 2009 first quarter, we generated $8.7 million in cash flow from operations, which was used to increase our cash and cash equivalents by $5.6 million since the end of fiscal 2008 and to pay $1.2 million in dividends to shareholders. Also we used cash of $856,000 to repurchase approximately 43,000 shares of the Company's stock. We paid $655,000 for a scheduled principle payment on the Company's term loan and invested $473,000 in capital improvements. The Company ended fiscal 2009 first quarter with $38.7 million in cash and cash equivalents, which compares to $33.1 million at the end of the 2008 fiscal year. Inventories were $42.3 million, excluding $3.8 million of Sam Moore inventory at the end of the fiscal 2009 first quarter, an 8.8% decrease from $46.4 million at the end of the 2008 fiscal year.

Our continued progress in forecasting logistics and supply chain management have allowed us to decrease our inventories to what we believe are optimum levels under the current business conditions. In May 2008, a powerful earthquake struck central China. While China is a major source of supply for many of our company's imported products, none of the Company's suppliers is located in the affected area. There has been no disruption in the supply of the Company's imported products from China. At the end of fiscal 2009 first quarter, assets totaled $172.8 million, decreasing from $175.2 million at the end of fiscal 2008, primarily due to declines of $4.4 million in inventories and $3.7 million in accounts receivable, partially offset by a $5.6 million increase in cash and cash equivalents and a $530,000 increase in cash surrender value of life insurance policies.

The Company's long-term debt, including current maturities, declined by $655,000 to $7.3 million at the end of fiscal 2009 first quarter as a result of scheduled debt repayments. Since February 2007, the Company's board has approved $50 million in total authorizations to repurchase the Company's stock. Since February 2007, the Company has used $37.9 million in cash of these authorizations to repurchase over 1.8 million shares of the Company's stock at an average price of $20.93 per share excluding commissions. Currently, we have $12.1 million remaining under approved authorizations to repurchase shares in the Company's stock going forward. We continue to believe the repurchase of Hooker shares represents prudent use of the Company's cash and has enhanced shareholder value. Our continued strong financial condition and cash flow have allowed us to simultaneously take advantage of opportunities to repurchase our stock at attractive prices while continuing to invest in the Company's future growth, even in the current challenging economic environment. That concludes our formal remarks and now, I'll turn it back over to Stacy to ask for questions.

Thank you. (OPERATOR INSTRUCTIONS). We will pause for a brief moment to assemble our question roster. Well the first from Matt Mccall of BB&T Capital Markets.

Good morning. This is actually Sean Connor for Matt. The main question we've got is trying to understand the SG&A line. In trying to compare this quarter basically to the last-year period, and even really Q2 when you had Sam Moore and even a closer top line, I think the comment on the Q2 call was that that 10%-ish operating margin range could be sustainable in a similar demand environment to an improving demand environment. And I am comparing Q2 to this period, you only have $2 million off the top line, but the operating margin is almost half. Can you help us explain what the difference is in the SG&A picture in this quarter versus Q2, and even the year ago -- because Q2 already had Sam Moore involved?

Matt, I have not -- or Sean, I haven't had a chance to compare this with Q2 of last year, so it is a little bit difficult for me to answer this. But I will say that in the first quarter this year, there were some one-time charges that did enter into SG&A. I think it is important to point out that it is dangerous to start talking about one-time charges, because it seems like there's one-time charges all the time. In this particular case, we had some start-up costs in terms of photography and advertising for example for Opus. We had some costs that were incurred as a result of the start up of our California warehouse operation that of course weren't in there in either the first or second quarter of last year.

Because of the fact that -- if you will recall, the first quarter a year ago, we had just come out of the transition period. As a result, some of the year-end costs, for example auditing costs and that sort of thing and professional services, were incurred in the transition period where this year, they're incurred in the first quarter following our year-end. There's several things in there, and those expenses are not small expenses that were incurred in this quarter that shouldn't recur in second quarter this year, but do make a little bit of difference when comparing first quarter last year, or second quarter last year with this year.

Okay. Do you guys still believe that that 9 to 10% margin range is possible at a 70 or mid $70 million top line? Or do you need to get above that to get to that level again?

I think what we said last year in the third and fourth quarters is that we felt like we could continue to operate at that level of profitability, as long as demand stayed constant. I think we are in the high 70s, maybe $80 million range. And I don't think at this level, without taking cost out which we will do some of that, but I think we need for demand to improve somewhat from the current levels. But I think, mid to high $70 millions should help us. I still believe that at those levels we can attain that operating profit margin.

Okay. Just some brief comments on the demand environment. A lot of the comment is status quo, it is not getting better, it is not getting worse. Does that still hold with what you guys are seeing now? I know we are still seeing declines in rates, and we are still seeing declines on the top line. But the Q4 comp on a daily basis versus the stub period, seem like we saw a modest increase, and now we were looking at an 18% organic decline. Is there anything in the pace of orders in the first quarter or even into what you guys have seen so far this quarter that suggests that the demand is still getting worse. Or is it leveling off? Obviously, it is not getting any better from your comments.

I think demand has been worse the last couple of quarters than it was last year. I don't know that I see it deteriorating further, although we are in the absolute slowest part of the year traditionally for us,. The summer is always our weakest quarter for demand, and I certainly don't see anything that's going to change that this year. But I think conditions have deteriorated. We've had housing challenges for over a year, year and a half now. But I think the price of oil and energy and food prices, and now unemployment going up, that all of those things continue to impact consumer confidence which is at the lowest levels in what, 20 plus years. I do think demand has -- the environment has deteriorated further over the last couple el of quarters. I don't see any change this summer.

We are hopeful that in the fall it will improve slightly, in part just seasonality. I think the other thing maybe to look at in our numbers, and we try to talk about the demand for Hooker imports and Bradington-Young, excluding Sam Moore which wasn't there a year ago in the first quarter and also excluding our domestically produced wood furniture which isn't a going-forward business. If you look at that, our volume was down about 10% in those businesses in the first quarter of this year. I think orders probably comparable to that for those on going businesses. Also, I think we said in the press -- in the conference call earlier that our business sequentially first quarter this year versus fourth quarter last year, orders were down, but they were down slightly about 1 or 2%.

I do remember you saying that. Could you comment a little more on the national account initiatives? Are you starting to see the top line benefit of that yet? Or just the planning and the development of it? And I think you commented last quarter that currently your national account business is roughly 5% of your overall revenue. Once that really starts to get going, is it possible for that to double as a percent of your revenue this year to maybe 10% of overall?

I don't think it will increase that significantly this year. Part of the reason is that we have made progress and we have got probably 6 or $7 million in business that we have booked for this fall, that's probably third quarter with some of these new national accounts. But you offset that with some attrition and existing business, and I don't know that that's all going to be -- it is incremental, but it's going to be offset some by deteriorating business maybe with existing accounts.

We are making progress. I think at this point it is, there have been a few shipments to large new customers, but I would say the full impact of that will start to occur in the third quarter. Then how much impact will those new placements have this year, you will get the floor sample impact and maybe a reorder or two. But I think hopefully in a full-year and the next fiscal year, we would see the benefit. And hopefully, we are just getting our way onto these floors and into the catalogs, and have another chance to leverage an additional business if these initial placements perform well.

You mentioned the new warehouses and its distribution centers that you guys are looking at this year, the new one in China and then the other one adjacent to your Opus Design center. Any estimated costs on what that might, --what we could expect there?

I don't think we have that information to share with you today.

Okay.

The one at Opus Designs is still in the planning stage, so I can't say that we have finalized cost. The one that's attached to our second largest warehouse, there is -- it is a 50,000 square foot facility that was already part of their space, but there is cost to rent the space and have a third party operate the warehouse.

Okay. I'm sorry. Go ahead.

I think that, hopefully, the cost will be offset by the increased volume that mixed containers would offer coming out of those plants. We will ship some of our business from one at that time out of our warehouses and the East or West Coast here, but the profitability should be fairly comparable.

The '09 CapEx estimate, is it still about $4.3 million?

Yes, in that range. I think 4 to $6 million is what we have said.

Okay.

For the year, yes.

All right. Great. Thank you very much.

Thanks, Sean.

We will go next to Todd Schwartzman with Sidoti and Company.

Hi. Good morning, guys. Just so I understand your comments on the SG&A for the quarter -- for Q1, what were approximately -- what were the photography and advertising cost for Opus? And also the California warehouse related expense for the quarter? Did those dissipate to zero essentially in the current quarter?

I can comment on the Opus photography and printing and catalog costs, and they were significant, several hundred thousand dollars to bring them up to the standards that we try to present our line. And I think they are for the most part, one-time. For instance, Opus line is probably nine or ten groups presently, and we've rephotographed and recataloged most of those groups. Typically, we would bring out one or two groups per market. We really look at that as more of a one-time investment in the business, just like updating the showroom and presenting an area to display our products. That should not be recurring.

The warehousing cost in California -- I think the cost we have seen to operate the warehouse in this quarter is probably consistent with what we will see going forward. There was some probably one-time charges early on, just getting the warehouse ready and shipping some product in there. Some of it from our east coast warehouses to make sure that when we opened it, we would have a full compliment of our products. Hopefully going forward, we won't be incurring the freight from East to West, that we will be bringing everything from Asia into that warehouse.

On the audit charges that I alluded to, Todd, our proxy points out the cost that we incur from our auditors KP&G. And that in total last year was about $750,000, in that range. A good portion of that was incurred in the first quarter of this year.

That's a timing issue?

Yes, it is.

Larry, you had commented as to your reluctance to talk to one-time charges, and that there's always something. Is there anything of a nonrecurring nature that we should maybe expect for Q2 that you guys have not discussed as yet?

I am not aware of anything at this time, Todd, that is in place that should be a large nonrecurring item this second quarter, but that can change obviously.

We will have the cost for operating the warehouse we've talked about in Asia, although we have just closed a similar size facility here. Maybe a little bit of incremental cost, but nothing significant.

For Q1, what were bad debt expense and interest expense?

Give me just a second. About $100,000 in bad debt expense for the quarter.

How did that differ from last year?

260 last year. Actually our receivables look pretty good right now, pretty normal and considering the environment we are in, we are pleased with that. Obviously, the bad debt speaks for itself, but aging is very similar to what we have been experiencing in the past.

Okay. And gross interest expense? Ball park?

136 interest expense for the quarter, compared to a slight credit the previous year.

Just wanted to go back to the SG&A for a moment. Of the $1.3 million year-over-year increase, how much of that was was Sam Moore responsible for?

Selling and administrative in the quarter. Of course, there's volume that that is attached to also.

Sam Moore was about $1.8 million added in the first quarter, that wasn't there in the first quarter of last year and the total net increase for the quarter in SG&A was 1.3.

Sam Moore accounted for more than 100% of the year-over-year increase, yet there were other items that also were not present a year ago? I am just having some difficulty reconciling that.

First of all, you are correct. If you excluded Sam Moore from the selling and administrative, then dollars went down. But volume was down also, excluding Sam Moore. You have some things that directly relate to volume, like sales commissions. But we also we had some of the items Larry talked about that occurred at Hooker and Bradington-Young this year that didn't occur last year. And then, we had a few things that went the other way. For instance, we probably have three less warehouses in the first quarter this year -- the East Coast domestic warehouses than we had a year ago as we have reduced our inventory levels and our warehousing footprint.

Okay.

In dollars, selling expenses for Hooker came down, but as a percent of sales, they went up as volume came down at a higher percentage than selling costs came down.

Got it. As far as your upholstery plants, what kind of work schedules now are you running?

Both of them are operating at less than full capacity, and we have different work schedules at the two divisions. At Bradington-Young, we are working about three out of every four weeks. We are taking about a week a month down. At Sam Moore, we are working every week, but we are working still at about 75 -- 70 to 75% of capacity. We are just handling it with a reduced schedule every week, rather than taking a week down a month.

Okay. And what month did the reductions begin?

For Bradington-Young, actually for both of them, probably around April.

Okay. Now, I know that some others in the industry have taken domestic cuts, sell operations to Mexico or plan to do so in the not-so-distant future. Is this something that Hooker would look into?

At Bradington-Young, Todd, we have had cut-and-sew covers as part of our program. It went back to when we acquired them five years ago. I think those cut-and-sew covers are actually coming out of Asia versus Mexico. That percentage of our business really hasn't changed over the five years. We don't have any intention of going to Mexico with cut-and-sew that I am aware of in either Bradington-Young or Sam Moore. I don't think Sam Moore does any cut-and-sew covers. Theirs is much more custom, not the same as -- I think you may be referring to La-Z-Boy's announcement to move some of their cut-and-sew there there, but I think they're dealing in much higher volume of -- fewer covers where ours is much more special order and it is not practical.

Given the volume, given the nature of the product, you are not -- it doesn't seem like you are overly concerned about the prospects for inflation in Chinese and other Asian labor costs in the foreseeable future?

We are concerned about what's going on with the cost of product coming out of Asia, and also hides out of Europe, and anything that's steel-based even if we are buying from U.S. companies. Our recliner mechanism, say Bradington-Young, they're oftentimes importing there. And whether they're importing it or not, steel has gone up. We are very concerned about the cost increases coming on raw materials, as well as on finished product. But we think the price increases we have already implemented earlier this year, and increases that we will probably implement later in the year will offset the cost increases we've had.

And lastly, in the downturn -- I don't think anyone really in their right mind expects that anything can be done to stimulate demand meaningfully industry-wide. I was just wondering with respect to working with your retailers to do just that, selling furniture traditionally is a pretty passive business. I'm sure you will agree, most retailers essentially wait around for traffic to pick up. What could you guys do specifically, or maybe if you want to speak to the industry, what could you do? Other whole sellers do -- coming out of this downturn to get consumers excited about buying furniture, especially given the housing boom. The last one, it's been over for about two years now and I suspect that we won't see one of that magnitude for quite some time to come.

As we travel around and talk to investors, that's an argument that we hear a lot is, demand is terrible and there's nothing you can do about it, so why even try. We really don't buy into that argument. Demand is terrible, but I think to just say there's absolutely nothing we can do with our customers to impact business is like throwing in the towel. We are working with our retailers, and we have some national sale periods where we try to drive traffic into their stores through our website. I have bought key words in home office or home entertainment, or youth bedroom or whatever. But really more than that, we are trying through our sales reps to go to the customer and say, we want to work with you. You tell us what you think will drive some traffic into your stores. We are as customized as one customer at a time. We have done things from helping them run sales to helping them with their advertising. Or working on the price of key pieces of bed in a bedroom group. Or different type -- discounted the price of -- or maybe a free chair with a dining group. Or discounted bed, as I said, with a bedroom group. Or a desk chair with a home office group.

We have worked with people to do events, estate-sale type events where they will do live remotes from their locations. I think there's a lot of things that we are trying. Some of them work better than others, but I think the fact that we are there with our customers and I think they appreciate that we are concerned about the problems they're having. Even if it doesn't yield tremendous results, I think you can create some goodwill from at least attempting. As far as when business improves coming out of it, I think we would continue to do a lot of the same types of events or efforts in advertising and promoting as we have. I don't know if that answers your question, but that's what we are trying to do in the present environment.

I was trying to think more big picture, out of the box if you will. I think some of the promotions that you described, Paul, have been status quo, off and on in the industry for a century or longer. Is there any other industries' consumer goods or otherwise from which you would draw or could draw inspiration in basically, changing the way the industry courts the consumer or the way Hooker Furniture courts the consumer?

We look at what other industries do, but I think in our industry, you have a very fragmented industry. There's not players that is have the skill of automobile companies or consumer electronic companies to really drive things. In our distribution, it is not dedicated distribution. I think that some things you see from car companies or electronic companies may be not practical for a company of our size that doesn't have dedicated distribution.

Thanks, Paul. Thanks, Larry. That's it.

Thank you. Ladies and gentlemen, that will conclude our question-and-answer session. I would like turn the conference back over to Mr. Ryder for any additional closing remarks.

The only thing that I would point out, and I will let Paul add to this as well. The only thing I would point out is it is obvious that at $71 million a quarter, we are are not able to post the kind of profitability that we feel like we can and will again post when business improves. But as you all know, in an environment like this, while we are doing everything to spur demand that we can, it is also an opportunity to take a look at costcutting. And we are in the process right now of having all of our managers look for any nonessential spending that we have got. It crosses all lines of our business. We are looking at everything from manpower needs, advertising, professional services, marketing expenses, and all of our operations across, not only Hooker Furniture, but also our subsidiary upholstery companies.

We are careful however, to make sure that we don't do anything to disrupt or slow the delivery of products or services to our dealers. That's critically important in an environment like this, that we maintain high standards there. We are careful that we are not going to take cuts that affect our infrastructure and our ability to rebound when the economy does present a better outlook for us. We are in that process right now of cost cutting. We will do everything in our power to reduce expenses in this environment that we are in. It will not only serve us well in the current environment, but it will continue to serve us after the rebound does occur, when that occurs. I think that's all of our comments.

We really appreciate everybody on the call today, and listening in. I will say that our 10-Q for the quarter has been filed as of last night. It is available on the SEC websites. And as always, thank you very much for attending.

Thank you. Ladies and gentlemen, that will conclude today's conference. We do thank you for your participation. You may disconnect at this time.