Hooker Furnishings Corp (HOFT) 2010 Q3 法說會逐字稿

Welcome ladies and gentlemen to Hooker Furniture's third quarter earnings conference call reporting its operating results for August 3rd, 2009, through November 1st, 2009. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, today's 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, you may begin.

Thank you, Felicia. Good morning and welcome to our quarterly conference call to review our sales and earnings performance for the fiscal 2010 third quarter and the first nine months which both ended on November 1st. We appreciate your participation this morning. Joining me this morning is Paul Toms, our Chairman, President and CEO, and Alan Cole, President of Hooker Furniture's Upholstery Operations.

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 2010 third quarter results. Any forward-looking statement speaks only as of today and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after today's call.

With that out of the way, yesterday we reported net income for the third quarter of $957,000, or $0.09 a share, on net sales of $52.6 million. Sequentially, net sales for the third quarter increased 14% when compared to the second. Year-over-year net sales decreased $16.4 million or 23.8% compared to $69 million for the third quarter of fiscal 2009. Net income for the quarter decreased by approximately $2 million compared to net income of $3 million or $0.27 per share in the same period a year ago. Net sales for the first nine months declined $54 million or 26% to $15 million compared to $20 million in the first nine months of our last fiscal year. We reported net income for the 2010 first nine months of $38,000, or less than $0.01 per share, compared with net income of $7.6 million or $0.68 a share in the first nine months of last year.

Now Paul will comment further on our second quarter results.

Thanks, Larry. Good morning, everyone. It's particularly gratifying to see the Company begin to move in the right direction with improved performance on both the top and bottom lines this quarter. We returned to profitability after reporting small net losses in both the first and second quarters of this fiscal year. And now we'll report positive net income for the first nine months.

We believe the 14% sales increase this quarter compared to last quarter is the front wave of revenue momentum. The sales improvement is backed up by an upward trend in orders corporate-wide since late summer, and a growing backlog in our upholstery divisions. In fact, this October we experienced the highest per week incoming order rate since August 2008. Part of our sales recovery was built around the October Fall High Point Market, which was the best market we've had in a year and a half with increased traffic and orders at all of our companies. Our single greatest focus for the third quarter is to reverse the decline in sales. Although we weren't able to grow sales, we were able to slow the decrease, and as we look out over the horizon, we do see prospects for continued improvement.

I would like to take a few minutes now to point out how some of our long-range sales and marketing strategies are gaining traction and positioning to us to grow again. In both case goods and upholstery, we've expanded our product line into new styles and price points. During the course of the last two High Point Markets, we introduced a combined 1500 new items -- meaning that over 40% of our product line has been refreshed. We updated our line to reflect better value, more casual and lifestyle and transitional looks and add some smaller scaled and less expensive selections.

Let's talk just a little bit about the wooden side of our business. The successful launch of the Envision Lifestyle Collections by Hooker Furniture this past April in more moderate price points and casual styling to address the younger consumer has exceeded expectations, particularly given the depressed economic environment. Even though we have only been selling the Envision product for half of the year, we estimate that our shipments on that product in fiscal 2010, the current fiscal year, will be $8 million. We're bullish on the potential for Envision in fiscal 2011 when we'll have an entire year to ship the product line. We project Envision wood furniture shipments of $21 million for next year.

At the most recent October furniture market, we took a good, better, best merchandising approach, differentiating each level of merchandise with features, benefits, and styling to represent compelling value at each price range. Our best offering, a 65-piece upscale casual collection with multiple finish options called Sanctuary, was extremely well received and offers a fresh style direction that we believe we can build on for years to come. By taking the good, better, best approach, we now have more avenues to reach retailers ranging from the top 100 furniture stores and national accounts all the way to interior designers. At the same time, we've strengthened our relationship with our core dealer base as we have broadened our appeal and helped them find more ways to do business with our Company. We believe we have gained retail floor placements through our product and price point diversification, while maintaining our core competency in the niche of upper medium priced home entertainment, home office, and accent furniture and traditional styling.

Another area where we're gaining early traction is in our international sales efforts. As we discussed last quarter, we brought on a seasoned executive at the end of July in the new position of Vice President of International Sales. That executive, Brad Miller, had an outstanding October market. We saw more international customers and wrote more international business than we ever have, and we're especially pleased with the contributions Brad is already making. Adding to the progress on the wood side of our business is significant progress in our upholstery divisions as well, through the efforts of our upholstery President Alan Cole and his bright team.

I would now like to call on Alan to give us a few more details on the strides being made at both Bradington-Young and Sam Moore.

Thank you, Paul. We're excited in the upholstery divisions because momentum is definitely building at both Sam Moore and Bradington-Young on several fronts.

Orders have been trending up consistently now for about 90 days and our back log is building at both companies. At Bradington-Young, orders were up approximately 15% during the third quarter. At Sam Moore, orders were up around 8%. At both companies the backlog for domestic production is up about 25%.

The most recent October High Point Market could be characterized as a breakthrough market for both Sam Moore and Bradington-Young in that retail traffic was up over 40% for both Sam Moore and Bradington-Young compared to last October. This increase in traffic built up -- built on a 40% increase in traffic at the April market as well when we opened a new showroom for Sam Moore that was adjacent to a renovated Bradington-Young showroom on the 10th floor of the International Home Furnishing Center.

During the last two markets we have aggressively updated and expanded our product lines at both companies. At the October market, Bradington-Young successfully introduced its own Envision collection, an affordably priced line of leather sofas, sectionals and correlating recliners and chairs in vibrant fashion colors and casual styling to appeal to younger consumers. The Envision lifestyle collection by Bradington-Young is produced domestically allowing for a Made-in-America story, and for the marketplace advantage of faster delivery, multiple leather options, and all at moderate price points.

At Sam Moore, we have completely updated our fabric selection with upscale fresh looks in all cover grades. We've added more customization in our wood finishes, and an affordably priced Envision chair line and we have expanded into modular seating. Our new modular seating program, called Accommodations, exceeded our expectations this market at Sam Moore. The expansion into modular upholstery is a natural expansion since modular seating configurations are essentially a custom arrangement of single seat pieces to create an L-shaped or U-shaped sectional, and that fits right into our competency at Sam Moore for producing single pieces but allows us to expand beyond chairs to become a more complete living room resource while gaining retail floor placements. Through all of these efforts, we've added approximately 20% more dealers to our account base at Sam Moore since the April market.

In addition to our product line expansions and sales growth initiatives, we've intensified our focus on cost reductions, as we've been challenged by excess capacity and operating losses throughout this year at both companies. We've responded in various ways including reductions of personnel, consolidations of manufacturing facilities, implementation of lean manufacturing and technology changes to reduce labor costs. So with continued emphasis on cost control and product development, along with a continued improvement in business conditions, we believe that we will return the upholstery division to profitability in fiscal 2011.

Now I would like to call on Larry to discuss the factors driving our sales and earnings performance this quarter.

Thanks, Alan. The net sales decline of $16.4 million compared to the same period last year was primarily due to lower unit volume attributed to the industry-wide slowdown in business at retail. These shortfalls were partially offset by sales of our new Envision wood furniture product line. Unit volume decreased for Hooker wood and metal furniture and Sam Moore domestically produced upholstered furniture compared to the fiscal 2009 second quarter. We were encouraged to see more unit volume for Bradington-Young domestic and imported leather upholstery and for Sam Moore's imported upholstered furniture.

Sales of imported upholstery increased approximately 16% from the prior year quarter while domestic upholstery sales declined approximately 6.5% in the same period. Overall, average selling prices were virtually unchanged during the fiscal year 2010 third quarter compared to 2009's third quarter as discounting largely offset selling price increases implemented last year in response to cost increases for imported finished goods and raw materials. Wood and metal furniture average selling prices decreased slightly because of higher discounting and a higher proportion of lower priced youth and Envision furniture sold. Selling prices of imported upholstery declined more significantly due to heavier discounting and the mix of product shipped. The average selling prices for domestic leather upholstered furniture decreased slightly due primarily to agressive discounting.

We're pleased to have been able to improve gross margin this quarter in spite of the sales decrease and excess capacity in our upholstery divisions. Overall, gross profit margin increased to 24.1% of net sales in the current quarter, compared to 22.7% of net sales in the same period a year ago. The improvement was driven by lower freight costs on wood and metal imported furniture, partially offset by higher production costs as a percentage of net sales for domestically produced upholstered products. While gross margins for wood and metal furniture improved significantly in the third quarter compared to last year third quarter, margins for upholstered furniture declined due to higher fixed costs as percentage of lower sales volume.

For the first nine months of the year gross profit margin decreased slightly to 22% of sales compared to 23% in the first nine months of fiscal 2009 fiscal year, primarily as a result of higher production costs and discounting for upholstered furniture products as a percentage of net sales, partially offset by lower freight costs on wood and metal furniture. We reported operating income for the third quarter of $1.8 million or 3.4% of net sales compared to operating income of $4.7 million, or 6.8% of net sales in the third quarter last year. Our operating income was impacted by a decrease in selling and administrative expenses of $637,000 to $10.9 million, or 21% of net sales during the quarter. In comparison, selling and administrative expenses were $11.5 million, or 11% of net sales in the -- I'm sorry, 17% of net sales in the fiscal 2009 third quarter. The decrease in selling and administrative expenses in absolute dollars was due primarily to lower selling expenses on lower sales volume, lower compensation, benefits and other expenses as a result of workforce productions implemented last year and other actions to curtail spending. These decreases, however, were partially offset by increased marketing and sample expenses in the upholstery division to support extensive new product introductions for the October market.

Additional expenses recorded in the third quarter included accrued severance costs and charges to write down certain supplier pledged collateral to its net realizable value. Our balance sheet remains strong and continues to help cushion us from some of the impact of difficult sales environment in our lower profitability. At November 1st we had cash and cash equivalents of $35 million, up from $12 million at the end of fiscal 2009. With a repayment of our term loan in the third quarter we are now debt free. Additionally, we have $13 million available under our revolving credit facility, and this facility remains in place until March of 2011.

As we have managed our inventory down to more appropriate levels and decreased our accounts receivable due to lower sales volumes we've been able to generate almost $33 million in cash from operations. Account receivable levels have declined from $30 million at year end to $26 million at the end of the third quarter. Inventory levels are down from $60 million at year end to $34 million at November 1st, which is near our target for our expected sales volumes. We don't expect to reduce inventories much more and may see a slight increase during the fourth quarter as we continue to ramp up for slightly higher forecasted sales in the last quarter of the year. As part of our reaction to lower sales volumes and profitability, we continue to keep capital spending low, at $1.3 million year to date, generally limiting our spending to necessary replacements and upgrades or projects we believe will have have a high payback. Capital spending in the fourth quarter is expected to be between $100,000 to $300,000.

On the liability side of the balance sheet, there's one item I would like to draw your attention to -- in current liabilities. Consistent with the second quarter we are again reporting short-term borrowing, which is unusual. As you may recall we borrowed against factored invoices from our factor during the second quarter when we believe there was a significant risk that the factor would be forced to seek bankruptcy protection. We also modified our factoring agreement to give us additional protection from similar risks in the future.

During the third quarter we borrowed the remaining amount available under our factoring agreement and $111,000 remained unpaid at November 1st. That has been completed at this point in time. And there's nothing outstanding at this point. We fully expect to repay this balance during the fourth quarter and do not expect to continue borrowing against factored invoices. On November 1st, the parent company of the factor did declare bankruptcy. However, the filing did not include the factoring company.

Other items that impacted our reported cash flows compared to last year include lower income taxes paid due to lower profitability, which accounts for a $3.3 million favorable comparison to last year, and the absence of a stock repurchase program in the current year. Last year we used $14 million to repurchase stock. We believe it's wise to conserve cash in this environment and may consider additional stock repurchases at a later time.

While many companies have cut their dividends due to economic downturn we have been able to maintain our quarterly dividend at $0.10 a share thanks to our strong balance sheet and belief that our product line and business model uniquely position us to take advantage of an upturn in the economy. Our strong financial position gives us the ability to take advantage of opportunities that may present themselves in this still troubling financial environment.

Now I will turn the discussion back over to Paul for his outlook.

Thanks, Larry. As we stated in yesterday's press release, we do believe that the worst is behind us. But there are still significant headwinds to this recovery.

While business has improved somewhat since the end of the second quarter, we believe that the additional growth will be slow, irregular, and easily derailed. Our outlook for the fourth quarter is one of continued, cautious optimism. We believe that our product line, inventory availability, and business model uniquely position us to take advantage of any upturn in the economy. That optimism, however, is tempered by the uniqueness of the present economic situation, obviously continued attention to cost control and revenue generation is critical. We do see retail conditions improving somewhat and along with the typical improvement in business during the fourth quarter, and all the actions we are taking to grow sales and [trofits], we believe we can build on the progress we made this quarter.

That concludes our remarks, and at this point I will turn the call back over to our operator, Felicia, to take questions. Thank you.

Thank you. (Operator Instructions) We'll go to Todd Schwartzman of Sidoti & Company.

Good morning, people.

Hi, Todd.

First question, Paul, you had spoken in the press release, at least, of ramping inventory to support higher sales. Do you care to venture a guess as to in what quarter we start to see a year over year uptick?

Well, I would be happy to venture a guess, although my guess last quarter was that we would start to see a little bit of build and actually it went the other way. So as much as we can tell, and we're obviously having to forecast sales and expect that our suppliers will stay on schedule, we really don't expect to see significant build in the fourth quarter. I think you could probably expect that inventories would stay approximately where they are -- maybe up or down 5% -- and I would expect that we would start to see inventories build in the first and second quarters of fiscal 2011.

I will say, however, Todd, though, I think that we are adequately inventoried now. For the level of sales that we have and even forecasting some growth going forward, our inventory service position has held up pretty well. So inventory levels are not a problem.

What about resumption of top-line growth? When should we hope to see that sales growth?

Well, I think if we're looking at it sequentially, we obviously saw third quarter was better than second, second, understandably, is always our weakest quarter, so would you expect that normally, but we're encouraged by the level of growth we had over the second quarter, and we believe that we can continue to build on that, and expect growth going forward.

Okay.

As far as comps, the comps are easier starting this quarter, so if we're looking at comps, I don't know that we're going to see growth, but I think the gap is going to be much smaller going forward than it has been the first three-quarters. I think sequentially, we expect to continue to be able to build on the momentum from the third quarter.

Fair enough. Alan, could you maybe put some numbers to the upholstery plant work schedules during the quarter and capacity utilization as well at Q3 and subsequent to quarter's end?

Certainly. The upholstery work schedules during the summer months we not only experienced the summer seasonality drop, but also in the Bradington-Young case, the summer season for leather is one of our most difficult quarters.

We went to a four-day work schedule early in the summer, and occasionally also took a complete week down. And the reason that we did that was to try to keep a skilled workforce in place. We have two finished goods upholstery plants in Bradington-Young -- one is in Hickory, North Carolina, the other in Cherryville at the headquarters. And in both cases, we worked four-day work weeks and occasionally took a week off.

We've been ramping down our overall capacity in the upholstery division and yet trying to also allow for growth. So our upholstery capacity and our utilization of capacity was probably -- and I'm going to estimate this, because I -- it's a somewhat moving number -- but our utilization was probably in the 60% to 70% range throughout the summer.

And what about the past month or so? Any change there?

We've been working now -- actually at Sam Moore, we began in late September, and then the entire month of October, working full five-day work weeks, and now we're utilizing our capacity in a -- probably a 90% range currently at Sam Moore. And at Bradington-Young, we began just a little bit later than that going to full work schedules -- probably in the mid to late October schedule, and now we're working full schedules at Bradington-Young.

And, you may have noted that our backlog in both companies is up about 25%. So we feel now that keeping the workforce in place over the second and third quarters was a smart move because now we're beginning to need that workforce capacity.

Thank you for that. Next question on Envision. I got that you guided to $8 million roughly full year contribution. Was the contribution a couple of million in the third quarter?

Yes, it was $2.3 million.

Okay. Could you guys talk about trends in entertainment centers specifically and your product design? For example, are you developing anything specifically for the new LED TVs?

Todd, I'm going to have to plead a little bit of ignorance on that. The guy that is responsible for developing that does stay on top of consumer electronics industry trends. He typically would go to the CES show and subscribes to publications, so I'm trusting that he's aware of what's coming down the pike in home entertainment.

I think probably what we have seen is, in that category, people have obviously moved away from larger armoires and multi-piece systems a lot of times to smaller consoles, putting a flat screen or DLP over top of a console and sometimes that was surrounded by piers for a wall system. Generally the price of entertainment units per piece has come down.

The workforce cuts that you have implemented over time, over the past year in particular, the how much of that comes back in fiscal '11?

Let me talk to the case goods side, then I will let Alan speak to upholstery. But in the case goods side, the cuts that we made generally were August of 2008, and we've had some attrition since then. Not a lot.

I don't see us adding jobs as business improves. I think where we've seen a skill set that we needed -- in say IT -- we have not added people. We've maybe restructured a department and eliminated some to make room for a skill set that we felt like we really needed. But net-net, we have one less person in IT this year, one in accounting and finance, and one in merchandising, and these are -- in some case, officer jobs. And, in others, fairly high managers.

And I would add, on the upholstered side, a very similar scenario there. We may add specific skill sets that are needed on the upholstered side, but we don't see any meaningful additions on the administrative, if you will, side -- the management side.

However, in the plant situation, from time to time, we may need to add some skilled labor, because the marketplace is not very receptive to extended lead times. So we may flex our direct labor in our factory scenario to keep our lead times in order and to be able to accommodate the increase in business. But that would be pretty minor as well. Like Paul, we really don't anticipate adding a great deal, because we kept certain amount of our labor force intact, anticipating the upturn that we're seeing now.

Thanks. As for as the gross margin line, what's the best way to think about full-year margin, keeping today's environment constant, but with volume, let's say, in the 220 to 240 range?

We might all take a stab at that, too. I think our margins at a gross margin level are pretty good. The opportunity is going to be on the upholstery side as we increase utilization and capacity. I don't see the margins on the wood side getting much better than what they are. I don't think we're in an environment where we can pass price increases to our customers. And yet I think there is some possibility that our costs -- certainly freight costs, I don't see them going any lower than where they are now. I suspect they will go up as the economy improves.

And then the cost from Asia, a lot of it depends on what happens with the dollar. If the dollar declines significantly, I think we're going to probably see some price increases from our suppliers in Asia. If it stays where it is, or the Chinese currency stays fairly close to the dollar, maybe we can expect prices to stay about where they are. But I don't see an improvement on the wood side much, if any. And upholstery, it would be based on utilization and our ability to increase margins through that.

I would agree with Paul, Todd. On the wood side of the business. I think, as you well know, we've driven a lot of fixed costs out of the gross margin area, and it is a much more variable cost model that we've got there right now. We've been successful in being able to pass along price increases that we had last year to our customers in a difficult environment. There's no reason to believe we shouldn't be able to at least pass on cost increases in the future. So we'll just to have wait and see how they come, I would agree that what you see is fairly well sustainable. I wouldn't think there would be a great deal of movement one way or another.

Got it. Two more quick ones for you, Larry, then I'm done. Now that you're debt free what's the best way to project that other income and expense line going forward?

Pretty minimal, quite frankly. There's not a lot in that other income and expense that we're going to be seeing. I would say the dollars that you see in the third quarter are probably fairly indicative of the dollars you are going to see fourth quarter and going forward.

You don't foresee taking on any new debt for any reason?

No.

Finally, fourth quarter tax rate.

As you can see looking at our financial statements, the tax rate is a little bit bizarre right now. If you look at that time year to date rates, we're -- it's a pretty high tax rate.

There's a couple of reasons for that. One, we had a valuation allowance that we placed against our deferred benefits on some of the state NOLs and state credits because it's become apparent that we may not be able to recognize those carry-forward losses before they expire. So we did put an allowance in.

And since we reduced the projected income, which our effective tax rate is based, the ratio of the permanent differences to the pretax income increased, and that made a difference in the rate as well. And we had a few other things that affected us, but basically, I think it's fair so say that we don't anticipate any of these one-time charges going forward. As we see our income rise to more reasonable levels, we believe that 37% tax rate is going to be achieved once again. So I would expect it to be more normal in the fourth quarter and as income rises, normalized at the 37% rate.

Thank you, gentlemen.

Okay.

Thanks, Todd.

(Operator Instructions) We'll go to Matt McCall of BB&T Capital Markets.

Good morning, this is Sean Conner for Matt. In looking at the profitability trend this quarter versus last -- most of it clearly was driven by the -- I guess the absorption in upholstery going from 60% to 70% utilization rate to something more in the 80%, 90% range. We're seeing, I guess, an incremental margin, about 50% of flowing through. If we look out to next year -- and you're talking about profitability in upholstery, we're seeing seasonal trends hold, we're gaining share in new price points, and with your new products. How should we look at the incremental margin going forward?

Is that 50% type of sequential flow through sustainable going forward? I don't think we'll see the same type of capacity utilization improvement. But just trying to get an idea of what we can see from that type of scenario.

Well, I'm going to start out, then I'm going to let Larry follow, because I think he can answer your question in a lot of ways better than I can. I will say for this quarter I don't think improved utilization in the upholstery division had a lot to do with the improvement in earnings. Upholstery went through some one-time charges for severance, also for closing wood frame producing plant, and the increase in their utilization and capacity came late in the quarter. And I would say the earnings are driven totally by the wood side of the business at this point and actually offset some operating losses we're incurring on the upholstery side. We don't expect that to continue. We think the upholstery divisions will become profitable as they ramp up and start to produce and ship the backlogs they have. But I don't think that had much of an impact on third quarter earnings.

Yes, I would echo those sentiments, Sean. We -- certainly your 50% -- that's certainly not attainable.

We believe that as we've gone through this year, and we look back at where we've been, the wood side of our business has remained profitable. Certainly not where we want it to be, but has remained profitable throughout the year. It's been upholstery divisions because of the weak economy and the lower sales volumes that's dragged down the combined profitability. We haven't seen that much improvement in the third quarter. Hooker's wood business was improved, and there was some improvement in the upholstery side as well. We're anxious to see in the fourth quarter how the upholstery business improves, but it's got a ways to go yet. I expect we're going to see Sam Moore return to profitability a little bit earlier than Bradington-Young, but Bradington-Young basically has the bigger dollars to support.

So I think, although we're presenting what I think is a fairly positive outlook, based on what we know right now going forward in the next year, and the upholstery division seems to be improving somewhat, it's going to be I think a bouncy ride as we continue to ride out of this recession. And I think it's not going to be a rapid increase.

So I would expect slow improvement as we go through the fourth and early quarters of next year. With this economy, I'm not willing to make any statements much beyond that. It's pretty tough.

I understand. You highlighted order patterns and the improvement in the order patterns, some of which from new product placements. I was wondering if you could help explain the trend in maybe a restocking activity versus new floor placements, new product gains at your -- at the retail place, to get an idea of how much of that order improvement is sustainable versus more one-time stocking type activity.

Well, I don't know that I can give you an exact breakdown between the orders that we've seen in the most recent quarter, how much is on new product from October market introductions versus in-line product, but I do think you're making a point, which is valid, in that some of the improvement in orders in the third quarter was driven more by retailers having to restock inventories that had gotten very lean, and maybe to freshen their floors a bit also, versus a real significant improvement in their business at retail day to day. I think there's a little more optimism about the future by retailers, and they are starting to see some improved traffic and some improved sales versus prior year, but it's -- I wouldn't categorize anybody as being really bullish about the future.

Market -- I know the business we wrote at market -- I think probably 60% was on new product. That's fairly typical with past, and our performance since market, in placing new products that would ship in February, March, maybe some in late January -- has been fairly consistent with what we've seen in the past few market cycles.

Alan, how about on the upholstery side, do you have a feel for how much of our business is on new product versus just an increase in in-line sales?

Paul, the increase in new product at Bradington-Young was significant because of the introduction of Envision, which was an entire new leather category for Bradington-Young. And also, we've had an uptick both at Bradington-Young and at Sam Moore in our import lines at both companies. So a great deal of the order increase is going on in upholstery right now is from new placement and initial inventory placed against those new placements.

As far as ongoing repeat or reorder business, we still are not seeing a great deal of optimism at retail. We're seeing better conditions at retail, but we're not seeing a lot of forecasts for next year for significant improvements at retail. So we're thinking that we've gained floor space and market share that's fueling a lot of the improved upholstery business as opposed to better conditions in retail.

That's helpful, thank you. How much of the -- have you guys quantified how much of your revenue is in the international market? I know it was fairly small previously before the new effort.

Right. And I think the efforts are obviously take awhile to build.

Prior to Brad Miller joining our Company I think we did approximately 2.5% of our total volume outside of the US, and our goal long term is for that to be 10%. But we realize we're having to make investments now for something that may take 5 years to 10 years to reach our targets. But I think Brad came in at a pretty good time, too. You look at the value of US products overseas has improved as the dollar has weakened.

Traffic actually, that's one of the few growing parts of traffic at the international home furnishings market, is our international traffic. So I think there's plenty of opportunity. It's an area we probably underachieved at in the past, and we're making a very serious effort for that to be, like I say, potentially 10% of our volume.

Great. Larry, do you have a CapEx estimate for fiscal '11?

We haven't got one yet. We're working on our capital budgets right now. We haven't completed them. But I should have something in the next few weeks.

Okay.

I don't expect it to be dramatic -- a dramatic increase. We've got most of our production facilities are in pretty decent shape, so I wouldn't expect it to be a great deal different from where CapEx was for this year, but like I say, we'll have that wrapped up shortly.

Great. Thank you, guys.

Thanks, Sean.

At this time I will turn the conference back to Mr. Ryder for any additional remarks.

Well, I don't think we have any. I appreciate everybody joining in with us on the call, and we look forward to providing you with a good report for the fourth quarter.

Thank you.

Thank you.

That concludes today's conference. Thanks for your participation.