Haverty Furniture Companies Inc (HVT.A) 2004 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Haverty Furniture Companies First-Quarter Earnings conference call. At this time, all participants' lines have been placed in a listen-only mode. Following today's presentation instructions will be given for the question and answer session. If anyone requires assistance on today's conference please press the star, followed by the zero and an operator will assist you. As a reminder, this conference is being recorded Wednesday, April 28th of 2004.

I would now like to turn the conference over to Clarence Smith, Chief Executive Officer and President. Please go ahead, sir.

Good morning. Thank you for being on the call.

The first quarter had remarkably consistent total sales increases of about 8.5 percent for each of the three months. The comparative store sales weakened somewhat in March as we previously reported.

We expect April sales to increase approximately 11 percent with comp sales about six percent, as well as a continuation of the strong gross margins we've seen for the past two years. We will report actual April sales next Thursday.

Within our SG&A expenses advertising increased 30 basis points as more freestanding color inserts were distributed and we increased our presence in television, particularly in our larger markets. In addition to upgrading the quality of our television and print presentations we'll be offering more region specific color inserts in the coming months, such as a coastal version tabloid to reach those growing sections of the States we serve.

We expect to build our market share in the high growth Florida and Atlantic Coast markets with sharp values and positive products. In the first quarter we began a year long program of full color, full page monthly adds in 'Southern Living Magazine' to help build the recognition of Haverty's Collections brand throughout our regions.

Sales of leather upholstery, recliners, and bedding are strong, and the addition of our Haverty's Collections to these classes bolster these growing categories. We recently rolled out our new Haverty's bedding program featuring a line of premium foam mattresses, which has been very well received. Leather continues to lead our upholstery sales growth with better quality leathers and more elaborate designs helping separate our floors from the strictly promotional goods. Cinema seating is popular in leather and solid micro fibers, and has become a significant and growing category.

We're seeing more metropolitan looks in our upholstery sales with cleaner lines, smaller frames, and simpler looks. These new styles feature tight backs or seats and are more tailored. This complements the cleaner lines we began to sell in case goods from the last two seasons.

Color has become very important in upholstery. Brighter reds, blues, and greens are very popular. Upholstery has generally followed the apparel industry by 18 months to two years. However, we have begun to see that gap narrow, and the newest apparel colors are becoming some of our better sellers in the same year that those colors are popular in women's clothing. This quickness to market should bode well for upholstery sales in the coming months.

We're beginning to bring in imported fabrics from Asia. The look and feel of the fabrics is improving, and is being tested on several groups on our floors. Bedroom has been a good category this year with our emphasis on bringing new import values to our customers. We believe that our efforts to protect our sourcing of our best groups with alternate production outside Asia will allow us to maintain our strong position in our markets as a leader in the bedroom category.

Casual dining and formal dining are beginning to blur into one category. We're seeing smaller china cabinets and tables, and those are selling in casual and formal areas with cleaner lines, which fit several different decors. Barstools and gathering tables are hot sellers.

Home theater entertainment center walls are very popular, and present great values for our customers. The new plasma TVs and large screens are helping create a new demand for more functional entertainment centers and cases which will continue to help drive sales in these areas.

Inventories were 3.3m higher than at the end of 2003 as we improved our in-stock position with particular emphasis on imported case goods. However, inventories were $10.8m lower than year ago levels. This is due partly to the reduction of local market warehouses which took place mostly in the second quarter last year when we were in the last phases of consolidating service throughout our Eastern and mid-South stores into the Eastern distribution center in Braselton, Georgia.

Inventory levels, closeouts, and flow of import merchandise are also being managed more closely than last year, particularly through our centralized supply chain department. We are on track to open our new Florida DC in Lakeland in the fourth quarter, which will allow us to better serve our largest volume state, and should continue to help flow and manage our inventories better.

Cash provided by operating activities increased to 11.6m for the first quarter versus 8.7m for the first quarter of 2003, due primarily to improved earnings and tighter control over inventory levels.

Total debt was reduced by 1.9m during the first quarter, and the cash and equivalents balance increased by 7.9m. Total debt is 7.2m lower than year ago levels, and cash and equivalents are 36.4m higher. Total debt to capitalization was 22.9 percent as of the end of the quarter, down slightly in the first quarter and reduced four percent from the year ago figure of 26.9 percent.

At the end of 2003 and during Q1 2004 we accelerated our program of extensive investments in technology. We brought in large enterprise IBM iSeries computers, consolidating several AS400 and other servers to a multi-workload platform with extra capability available on demand and better backup capabilities.

We are upgrading to the latest AT&T and Cisco communications systems allowing for a faster, better-protected network with ample diversity and redundancy. This continues to give our associates the finest information systems to serve our customers of any retailer in the industry.

A key strategic initiative for Haverty's is to upgrade and improve our systems and continue to separate our service levels from any of our competition. We're combining our century plus strength and traditions with the most modern systems, technologies, and our buying strengths to assure that we provide the best values and service to the homeowners in our markets.

This quarter we will open a new store in Columbia, Maryland, adding to our presence in the metro D.C., Washington, D.C. market. In addition to the announced two stores we are planning to open later this year, we have extensive remodeling expansion projects for three of our best stores underway. We're also working on other opportunities which may come online by yearend.

We have begun plans to increase our store expansion in our regions to average six percent square footage growth for 2005 and 2006. We expect that this will net six to seven stores per year with emphasis on the Metro Washington, Baltimore markets, Southeast Florida, Ohio, and the best markets in our other regions. We believe that our current cash position, our strong cash from operations, and existing bank lines will support this growth.

Our emphasis and focus is to build Haverty's presence in the strongest demographic markets within the reach of our distribution, offering the best values and service of any retailer in the communities we serve.

I'd like to now turn this over to Dennis Fink, CFO.

Good morning, everybody.

We mentioned in the press release that our SG&A expenses were flat on a comparable basis as a percent of sales. Within that category there was a 40 basis point increase in discount expense on third-party financing. That was due to more usage of higher impact credit promotions than in the prior year's first quarter. We expect to continue offering some form of enticing credit promotions for people waiting or to keep from being at a competitive disadvantage, since we do intend to increase our market share.

Some of the systems and method changes that have recently been implemented should help us contain our future SG&A costs, especially in the distribution and customer service areas. We have now automated a large portion of our outbound calls that confirm delivery appointments with our customers. There's also computer programs which are now optimizing delivery routes and helping management dial up and down the frequency of delivery to different markets when sales volume fluctuates.

These improvements are in place for stores that represent a little less than half of our total sales volume, which are those stores served by our Eastern distribution center. We expect that we can add our Florida distribution center later in the year along with all of the new systems that go with it and not increase the headcount in our central customer service operation. There will be some reduction in headcount in the local market operations that are being replaced, so we would hope by the end of the year to be leaner and somewhat more effective, as well.

Operator, we will now open up the call for any questions. We also have our Chairman, Clancy Ridley, with us this morning. And he's going to help us with certain responses. So, go ahead, Andrew.

[Caller instructions.]

Our first question comes from [Charles Grom] [ph]. Please go ahead with your question.

Good morning. On an apples-to-apples basis it looks like your gross profit margins were up about 70 bips, but SG&A costs picked up about 10 basis points. And just a couple of questions here. Number one, at what sort of comp rate does it take for you guys to begin to leverage your SG&A costs going forward? Is it a five, six, seven handle, or you know, could you specify that for us?

I think in the past we've said that it's probably closer to five percent. I think we're starting to see some leverage, Charles, as we mentioned there. And I think we'll see more leverage particularly in the distribution warehouse delivery areas. I also expect to see advertising get a little bit more leverage, particularly as we're growing in our larger markets and those things cut back. And so it's top line oriented. Yes, it's probably higher than what we've been running, and I think the five percent range would show nice leverage.

Dennis, do you want to add?

Yeah, I agree with that. And the one wildcard or the one item that's been added in the last couple of years is the outsource credit promotions. And in the second quarter we're probably running a little more aggressive promotions again than last year's second quarter, but with that exception I think we ought to be able to leverage some expenses but without having strong comps.

Okay. Second question, could you breakdown the gross profit margin improvement into, you know, a couple of buckets? Is it, you know, strengthen private label, imports? I realize it's a little bit of a combination of both. And also, you know, how have you guys done in improving on your delivery efficiencies? I know that was an issue last call.

Well, I think the gross margin improvements, I mentioned Haverty's product growing. It doubled over last year and I think that's certainly helping us. And we're also getting better values as we're getting in, bringing in more imports, and those have been well received. So, and I think we're not selling the lower margin, higher profile brand names that we were last year and that helped us. And so, and I think as I mentioned in my comments we're managing our inventories better. We don't have as much in closeouts going on.

What was the other question, Charles? I'm sorry. The other part?

Yeah, well, I guess the other part of the question would be, you know, could you give us a sense of what you guys are kind of thinking internally going forward, and what we should be modeling? I realize with the EITF it's a little bit convoluted but could you just comment on that?

Well, the EITF impact probably will be about the same in the second and third quarter, and a little less in the fourth quarter because we had recorded about 40 basis points.

Last quarter, yes.

In the fourth quarter, 40 basis points was reclassified from SG&A expense into cost of goods sold. And so the, on a comparative basis we're looking, in the next two quarters, to be probably that 170, 180 basis points difference, and then it will drop down in the fourth quarter by maybe 30 or 40 basis points. But we're not giving specific guidance. We are not going to be happy unless we get our SG&A down as a percent of sales, when you take out that non-comparable item.

All right. And the last question, and then I'll pass it on. Just to clarify, you said right now you expect a comp in the April to be six percent, total sales, 11. There's been a lot of buzz on a weakness in demand over the past few weeks, and I was wondering if you could just kind of comment on what you're seeing in your stores in terms of traffic and buyer attitudes, et cetera? Thanks.

Well, I think we'll give a little more color when we realease sales next week because we'll know more about the last few days here. But I will have to say that incoming orders are probably a little softer than those numbers that I'm talking about. So we're hoping to see that return a little better, but it was soft in March as we announced. And it's not quite as strong as what we're reporting right there.

All right.

As far as the 11 and six.

Thanks.

Thank you.

Thank you. Our next question comes from Laura Champine. Please go ahead with your questions.

Good morning. I had a follow-up question on demand trends. One of your major suppliers has been recently commenting on a divergence between demand for low and high-end product. Are you seeing a difference in demand for your lower-priced product and your higher-priced product?

Laura, as you know, we're in the process of phasing in some of our higher end good. We call it the Haverty's Premium Collections, to replace the Thomasville, for instance, that is being moved off our floors. And that will be in through this quarter and possibly still into the third quarter. So we're doing well with the better goods, but we're really not a lower-end house,so we're middle, upper middle, and our core of our lines are doing pretty well. We're expecting to improve our position and presence with the better goods as we bring those in. For instance, from Bernhardt, from Schnadig, and some of it directly from other sources in China, and other parts.

So I would say we're seeing a pretty good balance across our lineup. I've heard the same thing that you have, is that higher end is returning, and low end is not doing well. We're not a low-end house so, and we're not a high-end house. So I don't know if I can give you the right color on that.

I may have missed it, but did you give the change in your average ticket in the quarter?

No, we did not. Our average ticket was up slightly as it has been for the last six to eight quarters, just nominally, the low single digits.

Great, thank you.

Okay.

Thank you. Our next question comes from Budd Bugatchi. Please go ahead with your question.

Good morning, Clarence. Good morning, Dennis.

Good morning, Bud.

Yeah, a couple of questions. One, can you give us what the allowance for doubtful accounts was at the end of the quarter?

Yes, it was $4m.

4.0, exactly?

4.0, exactly.

Okay. And when you look at, I would imagine customer deposits, I'm pretty sure they're right, for in the accounts payable side can you give us those numbers for maybe each period?

I really don't have them at this point.

Okay.

I can come up with them, but I don't have them handy.

Okay. Another question. You may have answered this. I was off for a second on the call. You said that advertising was up 30 basis points year-over-year. Do you expect that to continue into the next few quarters? Are you going to increase your advertising?

I think that will come back down in line. I would say level with last year. We had a big push in some of our major markets this first quarter, and I think that's starting to pay off. And I think that'll come back down in line.

Can you give us the actual number for, as a percentage of sales?

Yes. On a gross basis, since we're not netting any allowances, to about 7.8 percent.

Okay. And so you think that it will run about 7.5 percent going forward in Q's 2, 3, and 4?

I think that's a good number.

All right. Thank you, Clarence.

Lastly at the market that you just returned from last week, obviously a lot going on with what Clancy was involved with on Thursday on the wooden bedroom -- I don't want to ask you about that. But what did you see at the market that piqued your interest?

Bud, I would have to defer that, frankly, to our merchandising team. You know, we are bringing in a lot of new case goods. We are excited, I mentioned some of the looks that we're excited about. I don't think we want to mention any specific products right now, but I think we felt good about the things coming in, particularly in our case, in upholstery. I mentioned, you know, the color story, which is very important not only in upholstery but also in cases. But I don't think we want to mention any specific product right here.

Okay. And you said the Haverty Collections have doubled, do you have that number specifically, as to what the sales were in the quarter?

Thirty-one percent of total sales, and I think that was about 16 percent, 16.5 percent last year. And also, we have said and we are on target to be going at an annualized pace of about 50 percent by the end of the year. We have a lot of product coming in our stores in the next two quarters. So our target is a run rate of about 50 percent by the fourth quarter, end of the year.

Okay, so at the end of the second quarter what do you think you'll run to?

(Multiple speakers) it's moving up, so, you know, it could be 35.

Is it a -- should it be taken on a linear basis, or do you think it will -- will it be backend loaded?

I think it is probably backend loaded, but it's moving up pretty fast, and it has. I mean it won't continue to double, obviously. But I think we'll move towards that 50 percent and that'll be the rate come December.

And you will maintain that 300 basis improvement in margin from, on thatgoods?

Well we've said that it's 200 basis points better than average, is what we've said. And you know, the big difference here is that we're selling those goods at good margins compared to merchandise that we had to sell from name brand players at 37, 36 percent margin. So it's really helping balance out some of that. But as far as average, we said it's about two percent better than, at least two percent better than our overall average margin.

Okay. Thanks, Clarence. Thanks, Dennis.

Thanks, Bud.

Thank you. Our next question comes from Todd Schwartzman. Please go ahead with your question.

Good morning, gentlemen. For the rest of the year do you expect credit sales both in-house programs and as well as third-party programs to more or less revert to historical levels from the 42 percent where it's been the past quarter?

Todd, I'm not really sure. It was a change that we had seen a fairly level number of 46 percent for over four years. And then it came down for all three months. I'm not sure really why that happened. There were a lot of extended credit offers in the market, and perhaps more people that were interested in credit accepted some of those other offers. We're not really sure, so we're, fortunately, don't have to concern ourselves too much with it. Whatever the customer wants we'll support because we have, you know, an outsource program, and plenty of financing support inside, so if they choose our programs that's fine, too.

The third quarter will probably have a little more internal financing in the mix than third-party financing, and then it will probably go back to more third-party financing in the third and fourth quarter. That's just based on the programs that we have lined up to run.

And based on your internal expectations for interest rates is it, do you foresee maintaining some type of no, no program for the foreseeable future, at least?

Yes, I think that it's going to be that way in the market, and as we said, we really feel like we don't want to be losing business just by virtue of a finance offer. And to some people, to some percentage of our customers it's very important, and they look at that as kind of an equalizer that means you're postured competitively. And we think we have to continue offering something that is, you know, within the range of what is being offered out there. And I think that's going to continue until rates go up pretty significantly.

Okay. And also, with respect to some of your best selling bedroom collections, could you talk a little bit about shifting production from China, from Asia, both what you plan to do in the very near term, as well as what you might do down the road?

We have been working with our suppliers to move, particularly some of our better groups. They're going -- a number of them are going to Vietnam. We're moving to Indonesia. We've moved some production even to South America.

So we think we're pretty well positioned. We're clearly dealing with some of the larger players there, like Lacquer Craft, and that's, their position is pretty strongly entrenched in China. And there are a few others that we have a strong position with. But we're doing the best we can to protect with alternate sourcing, and they're helping us with some inventorying issues.

So I think we'll be in pretty good shape for the remainder of this year. It just depends on how strong the tariffs come out. And that's an unknown right now. So we've worked diligently; our team was in China, in Vietnam in the spring, plan to go back this summer. We're working very aggressively to protect ourselves. We've put an enormous amount of energy into this bedroom category, and I think we'll come out well.

Okay, thanks.

Okay, Todd. Thank you.

Thank you, sir. Our next question comes from Margaret Whelan. Please go ahead with your question.

Good morning. It's actually Susan, for Margaret.

Hello, Susan.

Can you talk a little bit about what you've been seeing in terms of pricing from the manufacturers?

We're hearing a little stirrings of manufacturers pushing for price increases due to raw material increases. We are resisting, and that's something that is still in the works. I think they're under some pressures. But frankly, with the import values we don't see that they're going to be any significant hits to our total costs, unless the tariffs come in pretty strong.

So we still have some great values. A lot of it is because of the imports, and the opportunity is there. But there's a lot of discussion from particularly domestic suppliers to try to get price increases. But some of the major players are not. So there's a lot of tension on that point right now.

Okay. And then just on the import side, are you seeing any shipment delays or anything like that, that are coming through as a result of the tariff or this kind of shift that's going on in terms of moving production to other locations?

We haven't seen that yet, Susan, but you know, we probably will as factories move their production from China to a country like Vietnam, which doesn't have the infrastructure. There are going to be some bumps. We're hoping that they won't be severe, and as I mentioned in my comments we have brought in a little more inventory this quarter, particularly in the cases to make sure that we're not having any major disruptions.

Okay, thank you.

Okay, thank you.

Thank you, ma'am. Our next question comes from Joel Havard. Please go ahead with your question.

Thanks, good morning, guys.

Good morning, Joel.

The, I guess first of all, a quick update on where we are with the shutdown and disposal of the redundant little distribution centers? In other words, how many more quarters can we expect to see what I presume is some real estate sales contribution on the other line?

Well, we're going to be moving into phasing out of our Florida warehouses. There's six of them we'll be closing when we open up this Florida distribution in Lakeland. And that will be late in the fourth quarter, we will start closing some of those facilities. It'll probably carry over into the first quarter of next year because we will phase in some of that, some of those conversions.

Inventories we will be continuing to bleed down so that they won't be a problem over the summer and into the fall. And frankly, we've started in some of the markets right now. So it's not going to be near as significant a factor as what we saw in the East because those, we were closing 20 warehouses when we did the Eastern distribution center.

So we've got a lot more experience in doing this now, a lot more experience in putting the systems in. We're putting a lot of energy into making sure it goes as smoothly as possible in Florida. And we will phase it. So, and I don't think we're going to have the real estate sales as significant as we had in the East, because we had some major facilities there.

The rollout of this to the mid-South, and to the West or the completion of it in the mid-South and the West, will be late first quarter '05 or possibly in the second quarter '05. So there's some spread time here to get us through that.

Okay, and was I right or being a little too aggressive here in assuming that the other income boost was real estate related? If it wasn't would you explain where that was coming from?

No, it was, you're correct.

Okay. I'm --

And some of that was not just warehouses, it was land that we had held, that were holding and then sold off.

That's correct.

Store types?

It was intended for store. We did not use it for that.

Okay, so for instance, you --

It was raw land.

A couple of bets in San Antonio, and went with one and sold the other, is that kind of how you do it, or --?

I couldn't hear that?

I said is that a situation where maybe you had two bets placed in San Antonio, went with the better of the two, and sold?

That wasn't what that was, but --

Actually there was -- this particular property was in Florida, and then there was an outparcel of a property that we sold. We often develop a bigger piece than we need for our store so we can control the development, the access points, and how the buildings are set up on the property. And then there's an out parcel that's sometimes spun-off to a restaurant or a small retailer. So we had one of each of those.

Right, and I guess we've been modeling an expense, and it's been nice to get the positive pop where you've had some, you know, some of these sort of asset sales. Looking, because of the timing you just explained, with Florida, should we be negative, flat, or positive on the other line for the rest of the year?

I think we ought to be positive, but it's probably going to be, you know, for the next quarter or two it could be flat in the fourth quarter, it could be positive. But positive for the rest of the year.

Okay.

We have some other properties for sale, and it's very difficult to say when they would come through.

Okay. Getting back to the D.C. structure here, can you all put some sort of parameters on the change in the overhead structure of what you see the revamped D.C.? I know you'll talked about this in other ways but if you could sort of characterize what the fully developed new D.C. structure will look like compared to the old widely distributed D.C. structure?

That's a good question, Joel. We would have to give you numbers later on that.

It was pretty theoretical, but I'm trying - you can see, Clarence, what I'm trying to get at.

We will have lower real estate costs. We will have higher fuel and freight costs because we've got trucks moving but we don't have as many warehouses. We'll have better, lower inventories, significantly, as we've already started to demonstrate and hopefully, better margins because we're handling the goods better. But, and also probably lower personnel costs because we are consolidating, as Dennis pointed out, with a lot of automation. So it's all still in process. We do believe that in the long run once we get this fully in place we'll be below the double digit total cost of distribution, and be about a point less than we would have been. And so it's just a long process. Primarily the reason we put it in is to be able to grow and service our customer better. And I think we're doing a better job of that. So yes, we'll get it down, and reduce our costs as we leverage it with top line, but we don't have a total read on that for you yet.

Right. Thank you. Bud didn't want to go there, but I'll be pushy and talk about the meeting, the retailer meeting down at Highpoint. Fairly heated, one might interpret that the retailers were getting a bit more agitated with what looks increasingly likely to be some sort of a tariff imposition. As it related to your being able to transition source countries are you saying that Lacquer Craft is opening a plant in Vietnam, or --?

No, Lacquer Craft is not opening a plant that I know of in Vietnam. We were just saying that Lacquer Craft's position is primarily China. And I think they, as one of the larger ones who's being audited, believe that the tariff will be lower on them but that's yet to be determined.

We have Clancy here, who helped conduct that meeting, and I'll let him comment on his thoughts on that.

Yeah, was the other part of your question, did it relate to the attitude or the increasing frustration and unhappiness of the other retailers who are involved in the Furniture Retailers of America? Was that part of your question?

Yes, sir.

As you know, I was the moderator at that meeting. Were you there?

We got the after-action report.

Okay, fine. Each of the members of the Steering Committee who spoke expressed his individual perspective and his company's individual perspective on the potential duties. I stated in the clearest terms that Haverty's joined with the other members of the Steering Committee in thinking that the duties were inappropriate from a number, and likely to be harmful from a number of perspectives.

I also tell you that many other retailers who were present got up and said that they expected adverse consequences for the customer, that is to say for the retail customer, if significant duties are imposed and that they would remember that a long time. And I'm not sure what they meant by that. Each retailer will have its own interpretation of those kinds of comments.

I also report that a number of transoceanic shippers and some manufacturers said they would like to join the Furniture Retailers of America in opposing the petition and the duties. And we've had a number of additional retailers sign up to join FRA.

And so there's a moving sentiment of increasing frustration and concern about the impact of duties on our customers and the prospect that may drive those customers to purchase other durable goods than furniture.

Uh-hum.

What else can I tell you?

Well, I guess what I was hoping to hear was that your view of the timing and impact more specifically, again, we got the sense from interviewing a number of the people that presented that it looks more like a Q4, Q1 '05 type issue. And that that might give retailers time to pre-position themselves. We also heard, though, that there was really a shortage of production currently in Vietnam particularly, but probably also in Indonesia, and that the transition to countries other than China might be much more challenging then.

Different retailers will have different experiences in trying to line up alternative sources. As Clarence Smith said, we think that we've done a pretty good job in that respect if there are high duties or unacceptably high duties, whatever that may mean to an individual retailer coming out of their sources in China.

I think that, as I say, each retailer will have it's own view of what the impact could be. Remember that on June 17th the DOC will make its preliminary determination of duties. That determination may or may not be revised on November 1st when the DOC's final determination is made. And all of that may be inconsequential if the ITC finds no injury.

Right.

Now, how is all of that going to work out? Everybody speculates differently. I've heard a number of semi and a number of retailers say they have been advised by their Chinese manufacturers that they're not going to have a very high duty. And I don't know how a Chinese manufacturer can say that, frankly.

Yeah, you guys have suggested in past calls, I believe, that, you know, there's something, there's some slack even up to a 20 percent across-the-board duty. Although we understand, of course, that it can be company specific and your vendors may be less affected than others.

Certainly.

Okay. We could go on and on about this. I don't want to hog the call. Thanks for addressing the issue in some more detail.

Sure.

Thanks, Joel.

Thank you, sir. Our next question comes from Tim Long. Please go ahead with your question.

Yes, thank you. I was hoping to get a little more color on the recent traffic that you talked about earlier on the call. I mean do you, is it correlated with reduced promotion in advertising, or weather, normal seasonality, or what's your sense?

I would say we're seeing normal seasonality, and again, Tim, I think we can give a little bit more color when we actually get the sales.

Okay.

-- release them next Thursday. We just were commenting that our incoming orders are not at the rate of what we just announced.

Of the six and the eleven, okay.

Exactly.

All righty.

Okay, thanks.

Thank you.

Thank you. Our next question comes from Kevin Sawyers. Please go ahead with your question.

Hey, good morning. I had a follow-up on a question that was asked earlier. It was in regards to, you know, some of the people, some of the U.S. manufacturers asking for some price increases, and you kind of mentioned that, you know, you were a little more hesitant on that.

And it seems like you kind of mentioned that the value that --those brung overseas. And, you know, the -- I guess the domestic guys have seen a lot of the raw material price increases. And, you know, if the importers are getting a lot of the same raw materials from here. And so I guess are you implying that the importers are willing right now to eat a lot of the increases of raw materials, or are they, you know, increasing their prices at a lesser degree than the domestic guys? I guess can you (multiple speakers) -- ?

We had a little bit of price increase also from the importers but not to the extent of what the domestic people are talking about. And so we haven't had any of them stick to any regard yet, and we're still in the process. Sometimes what they'll do is raise the pricing on an existing group, we'll just drop that group and look for a new one. And that has happened.

So there's so many styles and differences out there that we can move to a new collection if the price gets raised too high. So we've got enough flexibility, I think, so that it's not going to be a big issue, at least inflation. I think there are going to be some price increases clearly because the raw materials are up but I think that the pressure from the imports will help hold that down.

Right. So would you say right now the gap in terms of the price increases that the importer are asking for and the domestic guys, that price increase gap is fairly meaningful as far as from what you've seen thus far?

Well, I think the competition helps hold it down, let's put it that way. I don't know if it's a significant difference. I just know that that's more competition.

Right.

And I think that that will help hold the increases down except for, as we were talking about, the tariffs. That's something we don't --

Right, but it sounds like it potentially is large enough to where, you know, on an incremental basis that one item that's domestic, the price increase is large enough to where at some point you're kind of more willing to substitute that item with an imported item?

That is a good observation.

Right. Okay, thank you.

Thank you.

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