Haverty Furniture Companies Inc (HVT.A) 2006 Q2 法說會逐字稿

Welcome to Haverty Furniture Companies' second-quarter 2006 earnings release conference call. At this time all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question-and-answer session. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded today, Thursday, August 3, 2006. I would now like to turn the conference over to Mr. Clarence Smith, President and Chief Executive Officer. Please go ahead, sir.

Good morning, everyone, and thank you for joining us. We are encouraged by our second quarter's results, which were up over a weak Q2 last year. Our performance was driven by the strong sales increases in May and June, and we are pleased by July's double-digit sales increase beginning our third quarter.

Our investments over the past four years in improving our distribution and operating systems have begun to pay off for us. During the second quarter, we completed the expansion of our main distribution center in Brazelton, Georgia, to 800,000 square feet, which has allowed us to be better in stock throughout our line and to better serve our customers.

This combined with our stronger merchandise program, our more focused advertising and marketing, and our strengthened supply chain has allowed our stores to improve our closing percentage and increase our average sale.

We have been keenly focused on improving our service levels to our customers from the store presentation, to the sales process, through to the completed delivery. We believe our commitment to providing the best service and product value has helped us to begin to get credit for the value we provide and to gain market share throughout our regions.

We continue to say stay focused on building our proprietary Havertys Collections, and have recently introduced new groups working with top design firms, which have been very well received by our customers. By the end of the first half, we reached our year-end 2006 goal of achieving 80% of sales in Havertys Collections, excluding bedding and miscellaneous categories.

During the second quarter, we engaged Fitzgerald+CO, an Atlanta-based advertising agency, to assist in developing the Havertys brand. Fitzgerald+CO will manage creative strategy, media planning, and broadcast and online buying. We believe that Fitzgerald's expertise and creative talents will help to further energize our Havertys brand and continue to separate us from the competition.

Havertys Collections has allowed us to develop a clearer identity for our stores, build the strength of our brand, and to help us improve our gross margins by the elimination of some middleman cost. We're still using agents and domestic manufacturers throughout our product line, but we do believe that we are providing stronger values to our customer while improving margins.

Another merchandise success has been our updated special order upholstery program, which has strengthened our ability to better serve our customer base. We are expecting to expand the upholstery special order program to the upper price points early next year.

The strongest merchandise categories for July, consistent with year-to-date performance, are bedding, bedroom, and sleeper sofas, all up double digits. The weakest merchandise category has been formal dining, which has been deemphasized in our current lineup. We do expect to see stronger sales in dining in the second half, with several new collections in the heart of our best-selling styles.

While we are obtaining higher margins with our exclusive merchandise, we will continue to move out of slower moving product and work to keep our lineup current. This is a continuing process which we expect to result in second half's gross margins being consistent with the first half's performance.

Our new store plans for the third quarter this year include our first entry into the Fort Lauderdale market near Sawgrass Mall, and a new store in South Dallas, Texas, in the Cedar Hill area. We will close one store in Dallas and another in Texarkana, Texas. We will open a new store in Florence, Kentucky, a suburb of Cincinnati, Ohio, in the fourth quarter.

For 2006, we will have opened five stores and closed three, for a net of two, ending with a total of 120 stores. Growth in square footage nets to 1.5%.

For 2007, our current plans are to open eight new stores and close two, netting six stores with approximately 4% to 5% square footage growth.

We experienced somewhat softer written sales during the middle two weeks of July, but we're still optimistic that we can achieve positive-same store sales increases in the mid single digits for the third quarter. Even though our written business was up less than delivered sales in July, we did write an all-time record high month.

We are encouraged by our performance in a difficult sales environment for our industry, and we expect that we can keep up this positive momentum. I would like to now turn over the call to Dennis Fink, our CFO.

Thank you, Clarence. I first want to remind everyone this conference includes forward-looking statements which are subject to risks and uncertainties. Factors that might cause actual results to differ materially from future results expressed or implied in such forward-looking statements include, but are not limited to, general economic conditions, the consumer spending environment for large-ticket items, competition in the retail furniture industry, and other uncertainties detailed from time to time in the Company's reports filed with the SEC.

During the first half of 2006, we promoted a longer-term no interest financing program similar to those offered by other retailers. Although more costly, we believe it helped increase our business during a somewhat sluggish sales period. These stronger finance programs required a larger minimum purchase, and accordingly, helped increase our average sales transaction. We expect to continue to use a combination of financing promotions and special pricing on select merchandise to help stimulate sales.

Gross profit for the second-quarter 2006 increased 165 basis points compared with the prior year, due mostly to sales of new proprietary imported products introduced over the last year, which carry a higher margin than items replaced.

Gross profit for the first six months of 2006 increased approximately 211 basis points over the prior year first-half. A reduction in warehouse handling expense was offset by higher transportation costs, both of those being included in cost of sales.

Our SG&A costs in the second quarter, as we mentioned in the release, were up 8 basis points as a percent of sales compared to the second quarter last year, but declined 42 basis points on a sequential basis over the first quarter.

During 2006, as I mentioned, we offered through a third-party finance company more promotional credit program than in the prior year. This increased cost of the program, coupled with more usage, caused the charges that we incur to increase $2.6 million for the quarter, or 114 basis points of sales, and $4 million for the six months, 91 basis points of sales relative to the prior year.

The total amounts financed by our customers in the second quarter was 44% of sales; that is up from 38.7% in the second quarter last year. The third-party outsourcing made up almost 29% of total sales; that is up from 15% in the prior year's second quarter.

The effective tax rate for the quarter was 38.6%; and for the six months it was 38.1%. For the full year of 2006, we expect a lower tax rate than the first two quarters. The total for the year based on our estimates are expected to be approximately 37.6%.

Clarence mentioned our store growth. The square footage involved with the 2006 expansion is adding approximately 3.7% square footage and closing approximately 2.2% square footage for a net increase of 1.5%.

The capital expenditures to support this growth in addition to distribution and information technology is expected for 2006 to be approximately $30 million. Operator, we would like to open it up for questions at this time.

(OPERATOR INSTRUCTIONS) Susan Maklari with UBS.

You talked a little bit about how you seem to be gaining some share across your different regions. Can you give us some sense of the kind of customers that you feel like you're gaining share from and any sense of some regional trends maybe with that?

Part of the gains that we're getting, we believe, is the fact that we are now serving our customers better; frankly, the way we like to serve them. I think that the fact that we are able to complete deliveries, that we have our best sellers in stock, has allowed us to close sales where in the past we were not able to.

I think some of our competition is struggling with the same things we have struggled in the past year with. That is, flowing imports, having them in stock, being out of best sellers. I think we are executing better.

So I think it is across the strengths of our line. I also think that in the upper end people are looking for more value, because of what the Asian imports have done. I think we are providing that kind of value.

So I think it is across the board. We are seen gains in almost all of our regions. Florida has been tough as we have said in the past, but the other regions are doing well. We are seeing good share gains, we believe, because our sales are up; and from what we hear, others are having difficulties.

The fact that we're the only ones that release, frankly, makes that difficult to determine. But we believe these kind of growth numbers demonstrate that we are gaining share.

Sure. Do you have any sense of what your traffic was like during the month or during the quarter versus the sales growth that you saw?

We really believe that in our larger gain in average ticket we are closing more of our customers. I would say our traffic, overall, is pretty flat. Parts of our regions have been strong. For instance, the Midsouth is up significantly in parts of that region due to the Katrina storm last year. But I would say, overall, traffic is flat. Where we are seeing our growth is in bigger tickets and average sales going up.

Okay, thank you.

Rex Henderson with Raymond James.

Congratulations on a nice quarter. A couple of questions about SG&A. Excluding the promotional cost, it appears you got some efficiencies in SG&A. I am wondering if you can give us some color on where those were. Store, delivery, where were those efficiencies?

Yes, for the quarter, we had reduced our advertising expenditures as a percent of sales. Actually the dollars were up with the nice sales increase; the expense as a percent has gone down.

The selling expenses were primarily -- what we call selling -- was our credit costs that we already spoke about. Both occupancy and warehouse expense went down, combined, in the magnitude of 1% of sales compared to the prior year.

Delivery was up as we have run into higher fuel cost, primarily there. Our G&A costs were improved about 0.5% of sales compared to the prior year.

So you know, it was kind of mixed, the selling being up and the delivery being up, and the other big categories being down.

I guess a surprise to me there, I guess, is the savings in occupancy and warehousing. Is that sustainable?

Yes, I believe so.

Okay, any additional -- are you thinking about additional opportunities there? Or what is your thought about the trends in that area going forward?

I think that our warehouse is going to stay the same size for a while. We're going to put more volume through it, so you would have to believe we would get some cost leverage.

The same is true of occupancy. The third and fourth quarter are typically the strongest two of the year. So there ought to be some leverage in those categories.

Okay.

I will point out that we are likely to spend more on advertising in the second half, and the credit costs are going to continue as they have been in the third quarter, probably coming down some in the fourth.

I guess you have anticipated my next question, which is the promotional cost, the credit cost. Do you expect that to remain at this general level going forward?

For the third quarter yes, and I think we will see that come down some in the fourth quarter.

Okay, all right. Thank you very much.

Todd Schwartzman, Sidoti & Co.

July 4th was a four-day weekend for a lot of consumers. Can you talk about how -- to what extent this contributed to the monthly sales and order increases?

Well, it was a good calendar fall for us. I will let Dennis get into the numbers.

We were up double digits during the first week of July. That was by far the strongest in terms of total dollars, and that was really by far the strongest increase over the prior year. So it had a major impact.

As Clarence said, sales were soft, incoming orders the second and third week of July; and actually were down from the prior year; but we had a good final week. So clearly, the Fourth of July week and heavy promotion period that it always is for retailers was a very big influence, and the extra day did help.

What did you see in that fourth week versus the second and -- the middle part of the month?

We had an increase, a small increase in the fourth week.

Any sense of the reason for the pickup?

Getting down to that short of a time period, I am not sure that we really can tell you the --.

We did have some promotions in some major markets, which helped us, but that was something we had planned, so. Frankly, the last week of the month is always usually a little better than the middle two.

I think we had a stronger promotional calendar in the middle of the month, in the second half of the month last year.

What about lead-times for the quarter, sequentially versus Q1 and also June of '05?

You mean order fulfillment?

Yes, just on average, of in-stock merchandise.

I think it is the best it has been in several quarters right now.

Definitely.

We are more in stock on our bestsellers and focusing on that. I don't have any particular numbers on that at hand, but I know that we are better in stock than we were; and I think it is the best that we have been in the last several years right now.

Okay, final question. Net interest expense was $96,000. What was interest income?

The interest income and capitalized interest, I have got that combined here, was $152,000 for the quarter.

Let me give you the other components of interest expense. The interest on our debt was $1,104,000 for the quarter. Then we had a credit of $856,000, which is the amortization of the upfront discount on accounts receivable for in-house financings that were longer than a year.

As you guys know, we accrue a discount on that that goes against our gross profit, and then amortize that back to interest expense over the life of the free interest receivable when it is longer than 12 months. That is again for our in-house program.

So that $856,000 credit was there; then 152 of interest income and capitalized interest on construction projects. That comes down to $96,000 for the quarter.

We disclose that in the 10-Q, so you can look at that relative to the first quarter disclosures. It's not much different.

Thanks, Dennis.

Joel Havard with BB&T Capital Markets.

Congratulations. The previous question sort of got to mine; and your answer says that maybe you don't have a lot of numbers to support it. But I was wondering if you could somehow quantify the percent of products that's able to ship next day, or that week, or something like that, Clarence, versus a year ago.

Joel, I don't have those numbers at hand. I will have to get back to you on that.

Okay, I think we would all appreciate hearing what you have been doing there. Then maybe how you are getting there, is this a matter of some magical tweak to the forecast, and you figured out which items were in fact going to be the bestsellers? Or is there a tighter merchandise offering, something like that, Clarence?

I think it is a combination of several things. One is, we did open up this big facility, which we got a bigger box to serve the goods through.

We are spending enormous energy in developing systems to help us track our bestsellers; tools for our supply chain team. We have strengthened that organization significantly over the past year. We have talked about that. It is, right now, the full focus of our MIS team to give them the proper tools.

We have narrowed our lineup, and we are focusing with some of the biggest and strongest suppliers in Asia, who can give us predictable shipments. We have also, this year or late last year, put in a contract with Hellman to handle all of our flowing of goods from Asia. We have visibility all the way back to the plants in China when those orders are shipped, and we are selling into the containers as they are on the water, because we know when they are going to arrive.

So it is a long process that we have spent a lot of energy in developing and strengthening, and we think it is something that very few people in our industry are able to do right now.

So it is going to be a challenge, but we're just doing a better job throughout the whole process, starting with a tighter lineup.

Clarence, you know what we really care about, has the money been spent that has supported these already sort of run through the P&L and are you now starting to get the benefits? Or is there some percentage of this that is an ongoing cost? I am sure it is more the latter, but (multiple speakers)?

I do think we have talked for a long time about all of these investments we have put in the warehousing and distribution; and we are finally getting credit, and it didn't --.

(inaudible) physical plant we understand; it's more (multiple speakers) it sounds like --.

No, no, those are systems too.

Okay, right.

Heavy systems work, and it is going to be ongoing, certainly in the systems. Dennis answered Rex's question about distribution. We don't expect to do anything this year or probably next year on that. But we may have to start to expand our distribution to handle the volume.

But we're going to be continuing to heavily invest in our systems and our MIS. It is our future, that technology. Dennis, do you want to comment on that?

I'll actually come back to your other question about the in-stock percent. Actually probably the better way to look at it is there is roughly a three-week lag on average between order placement and delivery to a customer.

The factors are -- one of the factors is what percentage in-stock you are, which is certainly a moving number. But the other is how soon the customer wants the (multiple speakers). Then the third is the delivery truck availability, delivery trucks in that market.

You may also say it depends on when the customer wants it, as which day of the week they want it. Sometimes when they say, well, I'll take the next Tuesday you have; and our next Tuesday is filled up. So they may have to wait another week. But we work with them in every situation.

The overall average is about three weeks. We have improved the backlog, if you will, or the undelivered orders by about 10% year-over-year as of July. So that is a couple of days improvement. I think that is probably the best way to look at it.

Okay. Clarence, in your opening comments you talked about this marketing advertising firm that is going to help you with the programs. Were they involved with the creation of the catalog? Or is this something entirely new?

It is all new. We are working with them now very aggressively, our whole advertising and marketing team. We really will start to see some of their influence in this quarter. But most of it really doesn't show till the very end of this quarter or, frankly, the fourth quarter.

So the catalog was internally developed, and we are expanding that. But it is internally developed.

Is this sort of all media, or is there a focus? Something new?

It is all media. They certainly will help us in our creative production, our television etc. But it is all media, and they will have a creative influence over everything we do to make sure our brand is consistent.

Okay. Dennis, with regard to the debt payment, are you all at sort of a flat on the revolver now? Or is that just a seasonal effect and you will start to ramp back up for fall merchandise inventory?

We should be turning the inventory pretty well the last half of the year or so. I don't expect this to go a lot deeper into the revolver on a kind of a permanent basis. We may -- there's fluctuations all the time, but I don't look for a big increase in debt for the rest of the year, no.

Okay, good. All right, guys, thanks and congratulations again.

Laura Champine from Morgan Keegan.

We had talked on importing about some of the higher-cost middleman you all were using and the potential of switching to more direct sourcing. Is this contract with Hellman sort of a middle ground on that? Or what is your progress on sourcing more directly at a lower cost to Havertys?

Hellman is a freight forwarder. They are just handling our freight. So that should help us lower some cost there. But one of the primary things there, it just gives us better visibility.

But we are doing more direct projects. I mentioned in my comments, we are using some of the better design firms to help us to that. A lot of that has hit. We're bringing more groups in through the second half, into this quarter and into the fourth quarter. We will continue to expand our direct sourcing of product.

We, frankly, like domestic production where it is competitive, and certainly in upholstery and special order goods there that is very important to us. We are talking to some domestic case goods people who can supply us with value. But there are just fewer of them that are competitive.

So we will do more direct sourcing. We are not oppose to agents, certainly, if they are competitive and help us in handling the goods and developing the product. But we recognize that we have got to be over there and be involved with the Asian manufacturers directly, and we are.

So when you source through a middleman, do you still use Hellman to help you with that as well?

Yes, Hellman handles all of our freight coming from overseas.

What is the rough estimate of your potential cost savings on like-for-like products when you source it direct as opposed to use a middleman?

I would say probably 20%.

Great, thank you.

[Douglas Pratt] with Mesa Capital Management.

A couple of questions regarding the credit program. Can you real quickly outline the difference between your internal credit and the third party, which I think is for longer than a year?

Then also could you tell us what were the credit service charges for the quarter, if that is not -- oh, it is in the release. Scratch that last question.

Okay, on the other, we generally use the third party for the longer-term credit promotions; and from particularly the ones that require no payment for any period of time that's a year or greater.

So in this first half, the promotions we used were as far out as January 2009 and for a brief period January 2010. Those require equal monthly payments. So we just chose to use them for that to stimulate business back starting in mid-February, when things had been going a little slower and we were trying to jumpstart our sales.

The internal programs that we have, they go as far out as 24 months with equal payments. During the first half, I believe the furthest out we were was 18 months on those.

So the way we differentiate, is more, insofar as the customer goes, it is -- what is the average or, excuse me, the ticket required, the total purchase required or minimum, in order to get this type of financing.

The bigger the ticket, the longer-term financing is available for them. So it just depends on if they want to spread it over 18 months, or 32 months or whatever the various offers are at that moment; it takes a bigger ticket to spread it over a longer time. So we are letting the customer pick the program and are divvying up the programs inside and outside.

Sometimes customers already have an account with a third party or with us and they just want to add on to it. Other times, people don't like applying for another credit line anyway. So they use their MasterCard or write a check.

Okay, and what is the difference in profitability -- or maybe the other way, what is the difference in cost to you -- on the third party versus your internal? Obviously, you got another party involved there.

Yes, we save money when we run the identical program inside. The external cost has averaged about 7% of sales for the amounts that are financed. During this time period, we actually had a no downpayment for the most aggressive of the credit offers, so that raised the amount financed, obviously.

So if you have a $1,000 -- well, let's say if you have a $3,000 sale or $4,000 sale, let me use that example because it is over the minimum, that would be $280 that we would have as a discount upfront if that particular program were 7%.

We have -- from an accounting standpoint, the cost for the internal programs is pretty similar upfront. But we take more than 12 months interest, a discount that goes to gross profit that is similar to the third party.

But we, over the life that receivable, we probably beat it by 10% or 15% in terms of what the average cost is to us, net-net, compared to the third party.

I am not sure I understand that. Can you run that by me again? In other words, you get back interest because people -- there is an imputed interest into the contract?

There is an imputed interest that just turns around. Over the life of the receivable that we handle in-house, our administrative costs, our bad debts, our interest costs -- combined -- are less than it costs us to outsource.

We don't want to tie up all of the money that it would involve by having the -- we used to have the portfolio five years ago totally in-house. The longer these terms get, obviously the more money is tied up. We didn't want to tie up all that capital, and so that is why we started using the third party.

But when we do run inside promotions, in the long run they are cheaper. I was just actually trying to talk about, though, the accounting impact is that we take imputed interest, a discount charge upfront, and the upfront charge isn't much different than outside.

You are not referring to the 7%, though? The 7% is a discount that you get; that is the profit for the third party, right?

That is their revenue or their mark-up, yes, and they (multiple speakers).

You take the cost, the discount as it were, on the financing; you take it out of gross margin; then it comes back in through the interest income line over time. Is that correct?

That is absolutely correct. Then the real cost of maintaining the account is the people that are doing the collecting and ledgering of the receivables, the interest cost on the receivable itself, whatever that actually is, and the bad debt. So those take place over the life. Does that make sense?

Yes, that does. What is the current provision for bad debt on the in-house promotions?

For the quarter, we had a [low] total provision of like -- of $82,000.

I'm sorry, the allowance, the (multiple speakers).

The balance of the allowance? I'm sorry. Just a minute. It is just under $2 million. Let me get to that. It is $1,840,000, and the total accounts receivable is $75.6 million.

And how does that $1,840,000 compare to, say, year end?

Year end, it was $2 million.

How do you -- you set that as a percent of receivables, I assume?

Let me correct myself. Actually, at the end of the first quarter, it was $2 million; at the end of December, it was $2.4 million.

We go through a calculation based on historical average write-off rates; and then also the aging of the accounts; and the statuses of those accounts. Some of them may have been placed for collection. Some of them we may have a dispute or some kind of a legal issue.

We look at all the categories and the aging and come up with an amount, and then use an overall amount based on, as I said, historical bad debt write-offs as a percent of the receivables balance. But we look at it fresh every quarter.

In theory, though, shouldn't that mean unless there is a dramatic change in either improvement or deterioration in your borrowers, that that provision should be relatively constant as a percent of total receivables?

Yes, that does mean that. When receivables come down, the allowance will come down. When the performance is better, as it has been, the performance of our portfolio has been excellent.

One unusual event, just reminding everybody, the bankruptcy change last fall; and there was a lot of write-offs -- excuse me. A lot of bankruptcy filings, an enormous rush back in September. It took the courts two months to get all of the -- process all the paperwork. So most consumer portfolios showed pretty high write-offs for that brief period.

Since that time, the bad debt filings in our portfolio have been very low. Very low. So collections have been good, delinquencies low, and that is reflected in our provision. You are correct.

Had you increased your reserve in anticipation of that? In other words, through the first half of '05, did you increase the actual dollar amount of the reserve?

No, we didn't. We had already built in into the averages over the life of the receivables enough to cover. So we certainly were aware of it happening, but we didn't add any extra because of it.

I was a little surprised, both with how much came through in the last few months and how little has come through since then. Much bigger wave than I would have expected.

And then two last questions. What -- you increased the provision in this quarter sequentially, I believe.

Yes, it was very small in the first quarter, correct.

Okay, do you see -- is that a reflection of a change in charge-offs? What is your current level of charge-offs or delinquencies? How does that compare historically?

It is better than it has been historically. The write-off rate, it runs 2% of average AR, something like in that magnitude. It's been coming down for the last several years. I tell you what, if you have got some more questions on it, maybe we could talk about it off-line (multiple speakers).

Sorry, I apologize for taking so much time. Thanks very much. I will give you a call later.

John Baugh with Stifel Nicolaus.

A couple things. Could you talk about your APU sort of by category? I am just curious as to with the continued shift to Havertys private-label, are you seeing leather flatten out, still go down, case goods; bedding I assume is going up. Just some kind of flavor.

Well, our average price per unit, is that what you're referring to?

Yes, essentially are you inflating or deflating still?

It is going up slightly in the furniture categories, and it has been consistently. There are certain categories that are stronger. Bedding has been going up nicely consistently over the last several years. And upholstery is now moving up nicely which is good to see.

The bedroom has flattened out, and we have started to see a little bit of decline there. But it is a very high-growth category for us, as I mentioned in my comments.

Casual dining is moving up nicely, because we see, frankly, casual dining replacing formal dining in many homes, and they want better sets. So we are getting some higher price points and higher average prices per SKU in that area. So that -- overall it is slightly up and it has been consistent for quite a while.

Are you seeing for like-item out of China some inflation now? Is it flat versus what you are doing with your particular mix?

As we're starting to develop our own product, there is not really a direct comparison there, because we didn't have it before. But we are trying to develop better goods.

I see, frankly, that it is probably flat in what we're doing most of our work there, and that is case goods. I don't see much deflation, and we haven't seen much rise.

It is certainly -- we're hearing about labor rates going up and that will ultimately affect us. But it is still a value and that is where we are going.

Good. I didn't hear the big word demurrage in this quarter.

No, you didn't.

Has that pretty much gone away?

That is a non-factor currently, and certainly hope to keep it that way.

Okay. Then lastly, help me with the promotion calendar going forward. You mentioned you had jumped the no interest to '10 briefly. I think you've backed to '09; and then as each month clicks off the calendar there is less. I am trying to get a sense for the deceleration you saw in July in written orders.

Do you think that -- is that a function of your promotion being less aggressive, one month further ticking down? Or that it is just not a new program like it was the first few months you tried it?

Well, I think credit is going to be less important, credit promotions, because it is getting more expensive. I do want to say that we did have an all-time record high written month in July. So even though it was not up like the delivered, it was a terrific month; and we were pleased with the performance there.

I think credit is a competitive tool. We follow the most aggressive people. We're not trying to be the most aggressive. It is not that important, as it is to the promotional houses, to us. And we will see it slide down.

I don't want to come out and give you exactly what we're going to do as far as our credit promotions, for competitive reasons. But I think that we will be less aggressive, as the rest of the market will be, because it is too expensive.

Good point. Thanks, Clarence.

(OPERATOR INSTRUCTIONS) Gentlemen, I'm showing there are no further questions. I will turn it back to you for closing comments.

Okay.

I wanted to make one correction, operator, before we close. That is in the undelivered sales at the end of July. I quoted earlier 10% reduction; actually it is a 15% reduction year-over-year. Using the number of days as a gauge, that would be more like a three-day improvement instead of a two-day.

So I just wanted to make that correction and actually reemphasize how important that whole cycle in the product planning cycle, the merchandise lineup, and the supply chain, and the availability of merchandise to the customer -- is not just in terms of how many days it is, but how precise you can be about when the deliveries will be made, when the merchandise is available.

As Clarence has talked about we made a lot of progress there, and we are excited about being armed with that competitive tool going forward.

I would like to thank you all for listening to the call as well as the interesting questions. We greatly appreciate your interest in Havertys' performance and our plans. As you can hear, we are encouraged about our position and our markets and very excited about our future potential growth. Thank you very much.

Thank you. Ladies and gentlemen, that concludes today's teleconference. We thank you again for your participation, and at this time you may disconnect.