Hooker Furnishings Corporation (HOFT) Q4 2014 Earnings Report, Transcript and Summary

Greetings, ladies and gentlemen, and welcome to the Hooker Furniture Quarterly Investor Conference Call, reporting its operating results for fourth quarter 2014 period. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Paul Huckfeldt, Vice President of Finance and Chief Financial Officer for Hooker Furniture Corporation.

Thank you, Kate. Good afternoon, and welcome to our quarterly conference call to review our sales and earnings for the 2014 fiscal year and the fourth quarter, which both ended on February 2, 2014. We certainly appreciate your participation this afternoon. Joining me today are Paul Toms, our Chairman and CEO, and Michael Delgatti, our President. 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 filing and the press release announcing the 2014 annual and fourth 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. This morning, we reported consolidated net sales of $228.3 million and net income of $7.9 million, or $0.74 a share, for our 52-week fiscal year ending February 2, 2014. Net sales for the year increased about $10 million, or nearly 5%, compared to $218.4 million for the 2013 fiscal year, primarily due to higher average selling prices in both segments, partially offset by higher discounting and returns and allowances in the casegoods segment and 5 fewer shipping days in fiscal 2014. Net income for the year decreased 8% to $7.9 million, or $0.74 a share, compared to $8.6 million, or $0.80 a share, in the prior year. For the 2014 fourth quarter, sales decreased $2.1 million to nearly $58 million, a 3.5% decrease compared to net sales of $59.6 million in the fourth quarter last year. We reported consolidated net income of $2 million in the fourth quarter of 2014 compared to $3.7 million in the fourth quarter of 2013. Because we're on a fiscal year that ends on the Sunday closest to July -- January 31, the 2013 fiscal year and the 2013 fiscal fourth quarter were both 1 week longer than the comparable 2014 period. Based on actual shipping days, consolidated net sales per day increased 6.6% to $913,000 a day for the 2014 fiscal year compared to $856,000 per day in the 2013 year. Based on fiscal fourth quarter actual shipping days, consolidated net sales for the 2014 fiscal fourth quarter increased 4.6% to $960,000 a day compared to $918,000 a day in 2013 fiscal fourth quarter. Now Paul Toms will comment on the 2014 results.

Thanks, Paul, and good afternoon, everyone. We feel good about what we accomplished this year and believe we moved forward on multiple fronts with consolidated sales volume up nearly 5% and increases in each of our operating units. We grew our core business in upscale residential wood and upholstered furniture while launching 2 new startup operations, addressing new distribution channels and new target markets. We improved upholstery profitability, properly sized and aligned our finished goods inventories, import wood and upholstery segments, strengthened -- and strengthened our management team. As we mark our 90th year of operation, we're not only growing the business but seeking to reach a higher level of professionalism and discipline in everything we do. We were encouraged by upholstery sales growth with our Sam Moore division reporting 18% growth in fiscal 2014 on top of over 9% sales increase the prior year. Sales also increased at our Bradington-Young domestic leather division by 3%, suggesting both a recovery in the luxury leather business and a slight increase in market share. While casegoods sales also rose modestly by 2%, we believe the casegoods segment of our industry still lags upholstery sales last year. We're hopeful that trend is beginning to reverse itself as housing turnover improves. Although earnings were down slightly, we were comparing against a very strong prior year in which we had an extra week in the fourth quarter. If you exclude the startup costs for our new ventures, Homeware and H Contract, we would have been more profitable in fiscal '14 than the prior year. Regarding our new business initiatives, we are now a full year in with H Contract, which serves upscale senior living facilities. To address this growing market, we've developed market-specific upholstery products and also selected an assortment of accent and occasional wood furniture from our core casegoods line to include in the H Contract product lineup. During the year, we made significant progress establishing ourselves as a factor in this distribution channel, and our sales network now reaches 75% of the United States. While not profitable in the first year of operation, we expect H Contract to begin hitting its stride in the current calendar year. Our other startup operation, Homeware, is a direct-to-consumer e-commerce operation offering chairs, ottomans and living room tables featuring a patented connector system enabling the furniture to be assembled in minutes by the consumer with no tools required. We ship these products by parcel delivery service within 48 hours of receipt of the order direct to the consumer's residence. With about 10 months of experience in this business, we're enthusiastic about the brand and the future of online furniture retailing and have seen steady improvement in month-over-month website traffic and other key performance indicators, along with the double-digit, month-over-month sales gains in recent months, albeit off of a small base. In the coming year, we've planned at least 4 major rollouts of new product lines, including home entertainment furniture; major upholstery such as sofas, sectionals and the home decor categories of rugs, lighting and mirrors; and casual dining furniture. Expanding the product line will be an important catalyst for growth. We believe the Homeware initiative is critical to address a migration of retail furniture business to online outlets but realize it will take longer than H Contract to reach critical mass and profitability. However, we view this as an investment and a vital step towards the future of consumer-centric home furnishings retailing. In our core casegoods and upholstery business distributed through independent furniture retailers, we ended the year with a broad spectrum of collections and product lines performing well and entered this current year with good momentum. That momentum was boosted at the spring High Point Furniture Market, which just concluded last week. At this time, I'd like to call on our President, Mike Delgatti, for a recap of furniture market for Hooker, Sam Moore and Bradington-Young.

Thank you, Paul, and I'd be happy to give a furniture market overview. We feel very good about retailer response at market, both to our new product introductions and new marketing programs. Most retailers are optimistic about the year ahead. In fact, we heard no negatives about the current state of retail. We believe that our placements of new product and acceptance of new marketing programs have positioned us well for the important fall selling season later this year. We also accomplished a key objective we had for this market, and that was to strengthen our offerings and competitiveness in good and better price point casegoods. Seeking to expand upon our success in the last few years in the premium or best price points with collections such as Sanctuary, Mélange and Rhapsody, we entered the market with several introductions in the good, better price range. We also introduced a Vietnam warehouse program to enable retailers to order mixed containers of good- and better-priced products that will allow us to offer more competitive prices in this segment of the marketplace. The warehouse program was well received, and we have 2 major collections in the upper-medium price points that were very well placed: a 50-piece Tynecastle collection and the 35-piece Sunset Point collection. Even as we were strengthening this area of our business, we, again, hit a very strong market in the best price point category with the introduction of the 60-piece Chatelet collection. Now I'd like to discuss the performance of our upholstery companies. Collectively, our upholstery segment nearly doubled operating profitability in fiscal 2014 and posted 1.4% and 7.4% net sales increases for the fiscal fourth quarter and the fiscal year, respectively, compared to the prior year periods. To arrive at the overall positive results, Bradington-Young and Sam Moore are excelling on opposite ends of the spectrum. Sam Moore accounted for most of the sales increase, outpacing industry growth with 18% higher sales for this year on top of a solid 9% increase last year. However, Sam Moore was not profitable during the fiscal year. Bradington-Young's domestic and import divisions collectively were fairly flat in sales growth but reported operating income for 16 consecutive months, demonstrating sustainable profitability after several unprofitable years. We were pleased to grow upholstery and improve profitability in total for the year. At Sam Moore, we are making great strides in reducing our lead times for shipments to our retail customers and in bolstering our capacity through hiring and training of people, investments in technology and implementation of lean manufacturing. All these efforts are starting to come together, and we are finally at the point that our capacity is exceeding our order rate, which is what we have been aiming for. As a result, we were able to reduce our shipment lead times from 10 to 8 weeks in mid February, and should improve from 8 to 6 weeks by mid May. By early summer, we expect to reduce lead times further to 4 to 5 weeks, which has been our goal and is what our customers expect from us. As we have increased our capacity and trained our employees, they're becoming more productive, requiring less overtime. As capacity ramps up and we become more productive, our manufacturing costs are going down. It remains our goal to return Sam Moore to operating profitability fiscal year 2015 as we appear to be well on our way. At Bradington-Young's domestic operations, sales were up slightly more than 3% for the year. Because the overall leather furniture industry did not perform as well, we believe this indicates we're gaining market share. We continue successful expansion of Bradington-Young's comfort at home in-store retail display program and at furniture market last fall, successfully launched a new initiative called "so you," which is highly customizable special order program. The challenge of Bradington-Young remains leather raw material cost increases. Because these increases are purely a function of demand for leather outpacing supply worldwide, there's no end in sight. The rising costs present cost challenges for us, and we are forced to pass along the increases to our retailers. But the good news in all of this is that leather furniture is being positioned firmly as a luxury product and the promotional players are moving away to less-expensive alternate products and materials. Regarding our Seven Seas imported leather division, we announced to our sales representatives at market that we are rebranding that division as Hooker Upholstery. We believe this name has more relevance and want to leverage the respect the Hooker brand enjoys in the furniture industry. Hooker is an established brand with the consumer with 90 years of history. Over the next few months, we will move to change our overall marketing materials and websites to the Hooker Upholstery name. While the first half of the year, Hooker Upholstery was challenging with weaker orders, we came on strong in the second half to finish the year with orders up 6.8% for the year. With shipments lagging orders, we ended up flat in sales for the year. The positive momentum in orders has continued during the current year, and we also had a strong market for Hooker Upholstery. Our strategy continues to be to differentiate ourselves through design, quality, leather selection and seating comfort. On the operations side of our business, this was an important year of progress for the upholstery divisions in implementing Phase 2 of our company-wide Microsoft Dynamics AX Enterprise Resource Planning software. During this phase, we are adding manufacturing management and product configurations capabilities for our domestic upholstery operations. Associates at Bradington-Young and Sam Moore, in collaboration with casegoods employees, worked intently over the last 15 months so that we can implement the core systems in the upholstery divisions later this year. Now I'd like to call on Paul Huckfeldt to discuss factors that drove our sales and earnings performance for the year.

Thanks, Mike. For the year, though net sales were up in our casegoods segment, we had lower unit volume and higher discounting due to efforts to exit the Opus and Envision product lines. The lower volume and increased discounting were more than offset by higher average selling prices. Sales in the upholstery division increased due to -- increased unit volume in our fabric upholstery division and higher average selling prices in both leather and fabric upholstery. In particular, the average selling price of fabric upholstery increased 11.8% due to product mix, higher selling prices, and unit volume increased 5.3% compared to the prior year. Overall, average selling prices increased 2.3% during the fourth quarter and slightly over 6% for the fiscal year, primarily due to the mix of products shipped and price increases throughout the year. Gross profit for the fiscal 2014 fourth quarter decreased both in absolute terms and as a percentage of net sales to $14 million or 24.2% of net sales. This compares to $16.8 million, or 28.2% of net sales, in the same period a year ago. Higher discounting in casegoods and higher cost of goods sold at Sam Moore, which faced extremely high health insurance claims on top of the continued costs of increasing production capacity and reducing the backlog, contributed to the lower gross margin. Last year, we also recorded a favorable LIFO adjustment in the fourth quarter, which did not recur at the same level this year. For the full year, gross profit increased $2.2 million or almost 55 -- $2.2 million to almost $55 million, while gross profit margin maintained flat at about 24% of net sales primarily due to higher average selling prices, decreased distribution costs in our casegoods segment due to the closure of several Asian warehouses and lower payroll expenses in warehousing and distribution offset by higher costs at Sam Moore as they ramped up their production capacity and worked down their order backlog. Selling and administrative expenses increased in absolute terms and as a percentage of net sales during the 2014 fiscal year. Higher SG&A was primarily due to startup costs for our H Contract and Homeware initiatives, increased expenses for bad debts, benefits, professional services, and selling expenses due to increased marketing and promotional activities. Operating income for the fiscal 2014 fourth quarter was $3.5 million, or 6% of net sales, compared to $5.3 million, or 8.9% of net sales, in the fiscal 2013 fourth quarter. For the fiscal years, operating income was $12.5 million, or 5.5% of net income, in fiscal 2014 compared to $12.9 million, or 5.9% of net sales, in fiscal 2013. Our balance sheet remains strong with cash and cash equivalents of around $24 million, which allow us to continue to invest in inventory receivables and the costs of developing these new initiatives that Paul spoke about earlier. We remain debt-free and have nearly $13 million available under our revolving credit facility, which remains in place till July 31, 2018. And in March, we declared a quarterly dividend of $0.10 per share based on our continuing confidence in our business model and our ability to successfully adapt to changes in the furniture industry. Now I'd like to turn the discussion back to Paul Toms for his outlook.

Thanks, Paul. After a slow December and January and some weather-related impact in February, we're beginning to see retail conditions improve. This is confirmed in our order rates and was further confirmed at the furniture market last week when, as Mike said earlier, we found retailers optimistic about the year ahead. The overall economy seems to be more resilient and able to shake off bad news. There's a firmer foundation under key indicators for our industry like housing, employment, the stock market and consumer confidence. With both the near and longer term, we're fairly bullish. We're planning for growth by expanding our domestic upholstery capacity, warehousing and distribution in both the U.S. and Asia, and capital spending on information systems. With our strongest product line in years and the bright potential of our 2 new ventures targeting Millennials and aging Baby Boomers, respectively, we're planning for a larger business going forward. That ends the formal part of our discussion. At this time, I'll turn the call back over to Kate for questions. Thank you.

[Operator Instructions] And our first question comes from the line of Matt McCall with BB&T Capital Markets.

So I guess, starting with the impact of the investments in '14, I think you'd said in the past, I believe the number was something like $0.03 a year drag on -- I'm sorry, a quarter on earnings, what's the -- is that right? And what's the expectation as we move out to the '15 numbers relative to what we just experienced?

It was about $0.09 last year. I expect that to be cut in half. And of course, it's going to be weighted towards the first half of the 2015 year as volumes ramp up.

And that leads into the next question, Paul. What's the volume? What was the volume summary for '14? And what's your expectation for '15 for those 2 businesses?

Combined, it was about 700,000.

Volume?

Oh, in the quarter, it was 1.2 million for the '14 volume.

Okay, is that one of those -- is the growth rate we're at a stage where we're going to be doubling next year, and are we seeing that type of success initially?

It's -- I would expect the combined growth rate to be in the $5 million range next year. That 1.2 million is the ramp-up and, of course, that's all backed -- it's weighted to Q3 and Q4 this year. So I would expect it to be in the $5 million range next year.

Okay. And then, maybe, Mike, for you, the -- you said Sam Moore did lose money in '14. I think you talked about that in the past, and you just mentioned expectations of making money in '15. What was the loss? How much do you expect it to recover in '15? And then what kind of a revenue growth assumption do you have to make to get to the targeted profit?

The loss was around $1 million. And we expect to approach breakeven by the end of the first half of the year. And in terms of revenue expectation, we're on track to grow our business at a rate of around 10% to 15% in fiscal '15, which should head us in the right direction in terms of profitability. But what is most significant is that going forward, as we become more efficient, more productive, our volume or cost of sales will continually decline as we work less overtime and we work our way through the training curve that we're experiencing now as a result of hiring a lot of people, many of which did not have upholstery experience.

And if I could just chime in, also, Matt, and Mike, correct me if I'm wrong here, but it's really not an issue of more volume to reach profitability, it's more about getting beyond the training costs that Mike referenced, improve processes. And we think we can be profitable at the current volume.

Okay, that's helpful, Paul. And then just more broadly, I think, Paul Huckfeldt, you mentioned that -- you were going through your margin summary that you're basically flat gross profit this year. SG&A actually moved up as a percent of sales. When you take all these things into account and incorporate the bullishness, how should we look at incremental profitability next year? Maybe from a contribution margin perspective, do you expect gross margin expansion? Do you expect to leverage your SG&A? And if so, at what pace?

I think gross margin expansion of Sam Moore will be a drag. The new initiatives will be less of a drag. And we should leverage SG&A on sales growth. I would see -- I would expect margins to go up more than half a point.

We think our contribution margin is somewhere in the 25% range blended across all of the business -- well, the established businesses. I don't know that we have a contribution margin yet for H Contract or Homeware. Matt, just one other thing with gross margin. I think less discounting is -- have a fairly significant impact on our gross margins for import wood and upholstery -- import upholstery and import wood, which together account for maybe 75% to 78% of our total volume.

So -- I know discounting's kind of a -- always something you're going to have to deal with to a certain degree. Or was there a portion of the discounting this year that was maybe a little abnormal and could be considered more onetime in nature?

Yes, absolutely, and I think you're right. We're always going to have some discounting because we're obsoleting on average about 3 products a day. But at the beginning of fiscal '14, we made the decision to exit a category, youth bedroom. And at that point, we had about $7 million of inventory of Opus youth bedroom products, and we realized that, throughout the year, we're going to have to be fairly aggressive to get out of those, and as you work down your inventory, the more aggressive you're going to have to be to exit the remaining inventory. We don't have anything like that going into this year. It's more just normal turnover in the line. I guess 3 years ago, we had the same issue with Envision that we had a lot of excess Envision inventory, and we made the decision to, I guess, deemphasize that part of our line. So hopefully, we're beyond that as we enter fiscal '15. And I think this year, you'll see us return to more normal discounting, maybe along the lines of what we had in fiscal '13.

Okay, and just a follow-up to that and I'll hop off. So you said $7 million of product. But what was the impact from a discounting perspective of the onetimes?

Probably -- sometimes defining excess is hard to do, but I'd say it's $1.5 million to $2 million.

Our next question comes from the line of Todd Schwartzman with Sidoti & Company.

Now that your first quarter is nearly over, the new fiscal year, I'd like to focus on that as well as the Q4 that you just reported. Mike was good enough to give us a bunch of numbers, including the full year results by segment. I think, Mike, you mentioned the casegood sales delta for Q4. I wonder if you could just go over that again for the fourth quarter by segment and by -- or by upholstery brand or however you want to slice and dice it?

Todd, orders or shipments?

Both if you could. That would be great.

Okay, orders for the fourth quarter, casegoods was actually down 16%.

Is that unadjusted for the 1 fewer week?

Correct. Correct. And then Bradington-Young, their orders were down 7.9%. We had a lot of issues, as you know, relating to the weather that impacted our sales during the quarter. Hooker Upholstery orders were actually up about 12.5%, and Sam Moore for the fourth quarter, orders were up 3.4%.

So that upholstery, that Hooker Upholstery order growth of 12.5%, if you were to normalize that for -- put that on a daily or weekly basis, apples-to-apples, what would that become?

I would say our growth rate is somewhere between 7% to 10%.

7% to 10%?

The way I looked at the difference in quarters for the 1 week is that we have a 13-week quarter, and we're comparing to a 14-week quarter. To me that's about a 7% difference, meaning 1/13, 1/14 to 7% to 7.5%. So if we were up 12.5% unadjusted, then I think we would've been up about 20% on a per day basis, Hooker Upholstery and I forget what the other percentages were. But when we looked at it, we kind of just back of the envelope math, felt like it had about a 7% impact on the quarter comparison.

Okay. Since the quarter ended, has there been any with -- on the supply chain, has there been any increase in lead times from any product coming from China specifically in the past 3 months or so?

Well, yes, but less than normal. There's always an impact around Chinese New Year, where the factories are shut down for 10 days to 2 weeks typically. And then when they come back, there's a ramp-up period. So we always see deliveries get extended out a little bit in the first and second quarters, and it seems like by the third quarter, everybody's back to their normal stride. So it's built into our forecasting and ordering. And I would say, again, this year, we're actually seeing lead times deteriorate less after Chinese New Year than we have in prior years.

So excluding seasonal factors, nothing really to speak of?

No. It's interesting, not having issues from our vendor base in Asia, not having issues necessarily getting space on vessels. If we're having delays, it's vessels unloading at East Coast ports, either weather-related delays or just port congestion. But it seems like when things get delayed, it's more a function of congestion at East Coast ports than anything else.

Do you have a sense of how that congestion has played out by month of this quarter thus far?

No, I don't.

Okay. Wanted to just focus on the gross margin opportunities. Of course, Sam Moore, I think, is probably a big part of what you're trying to achieve, and I'm trying to get a handle on what really needs to happen to get back to the high 20s eventually. You spent a fair amount of time there and not that long ago. If you had them quantified, maybe by percentage, how much of the low-hanging fruit, for lack of a better word, really is represented by what -- how you intend to improve that Sam Moore brand?

Well, there's substantial opportunity in terms of gross margin improvement that we do think we're well on our way based on the performance of Sam Moore. The first 2 months into fiscal '15, we are seeing very positive trends in terms of productivity, improving productivity, reduction in cost of sales. We are achieving higher production rates and spending much less time in terms of overtime. So things are starting to line up and head in the right direction. And we expect those improvements to get us to a breakeven in the relatively near term, which obviously, full year, will have a significant impact on gross margin improvement overall.

Okay. And I know you'd mentioned that certainly a not small part of the gross margin story is the discounting. This quarter to date -- February, March, April to date, has discounting abated versus fourth quarter? Is it stable? How would you characterize that?

It's definitely less than the fourth quarter, and we made a real push in the 12 month to try to move as much of that excess, obsolete inventory as we could. We were more aggressive than normal in that, and I think we were successful, but it did impact the quarter somewhat. We're back to more normal rates of discounting, which, again, I would compare probably to fiscal '13. And I don't have that number right here. I'm not sure I can even quantify the impact on gross margins, but it's back to more normal levels.

Would you say that the benefit has improved sequentially each month, calendar year-to-date?

No. I would say it's probably been consistent February to March, and March to April. Probably -- we always at market are fairly -- we try to put incentives out for customers to invest in the new products. We've done that for years, but that really wouldn't show up until those orders shipped in the third quarter, and it's always there. So year-over-year, it wouldn't be noticeable.

It can be a little volatile, too. If you make a deal and you sell a lot, it could affect 1 more than the others do. Or sometimes an order will be accumulated and take a while to ship. So when you're dumping, especially a situation where you're dumping something like Opus, it can take a while to -- it could be a little sporadic when it shows up.

I think we're getting better from a sales-management standpoint, too, in managing the discounts, finding better ways to dispose of excess inventory than taking large chunks to the people that will have traditionally bought the most, but do it at a really steep discount. And we're trying to work broader with more customers and, if anything, try to identify earlier in a product's life cycle when it's peaked and when we are going to have excess inventory and start maybe discounting a little bit earlier but not anywhere near the levels that it would take later on in a life cycle with significant inventory.

Was the issue really exclusively Opus, and maybe to a lesser extent, some smaller other discontinued items? Or did weather or other factors play a role?

In the fourth...

In the fourth quarter, yes, I'm sorry.

I think it was a combination of things. Probably import leather and import casegoods, some aggressive discounting to move excess inventory. Weather had an impact. But actually, weather had an impact, as we said in February of this year. Think [ph] about some of the severe weather was in February. And then I think in upholstery, our inability to get Sam Moore to breakeven. We really had a lot of cost in the second half of last year and then specifically in the fourth quarter at Sam Moore that -- training cost, running 55 hours a week to try to catch up with the backlog, which was a tremendous amount of overtime. I think it -- there were different times where we had, maybe, 1/3 of our upholsters and 1/4 of our sewers involved in training. They were either new employees being trained or existing employees that were doing the training. Either way, they're way less efficient than normal. We had healthcare costs that were very high in one of the divisions and just a lot of things that we believe are not ongoing problems. We can get past the training we have gotten. I think our folks' back up to more efficient productivity wise and don't have the weather. Healthcare costs are very unpredictable. And then our work schedules, I think now we're 48 hours max probably.

Right.

And that's not in all departments. That's just selected departments. So we're -- we've significantly reduced our backlog at Sam Moore, and we're not -- we don't have as many new employees being trained up as we have had.

On Sam Moore, you'd mentioned the increased health insurance claims. Was that confined to a very small group of individuals?

I learned from somebody with another company, you don't want to be too specific about healthcare costs. But no, I think healthcare costs last year for us, as a company, were up by over 35% over the prior year. We're spending somewhere around $9,000 to $10,000 per employee per year to provide health benefits. And it's by far our most expensive benefit, and it's one that we -- in spite of our best efforts on wellness and managing people's health, it's a cost we don't have a lot of control over. And yet, it's a benefit we think we need to provide our employees.

Got it. Historically, looking at the delivered sales on the casegoods side, what type of sequential change do you normally see from March to April?

In shipments?

In shipments.

That's a good question. And I think as far as on the demand side, we usually see business slow around April 15, and it really gets a little slower in May and June and July, and then starts to pick back up in August. You go back 2 years ago, fiscal '13, we were struggling with deliveries as we entered the second quarter. That impacted shipments. Then last year, we probably comped pretty well second quarter to first, but I don't know that I can give you a hard number as far as the difference in orders or shipments.

Well, given that March weather this year, not the greatest. Do you have a -- maybe a growing sense that you maybe see a divergence from the historical delivery pattern?

I think what we said in our remarks was that business improved for us in March. I think we saw that across most all of our divisions. And that was compared to January and February, maybe even December. And so for us, I think -- and we didn't have any weather-related impacts in February -- I'm sorry, in March like we did in February, so I would think orders and shipments were probably improving a little bit month-over-month.

Right. And our orders early this year, second quarter versus the first were significantly stronger across most brands, with exception of Bradington-Young. They were flat. But quarter-over-quarter, first versus second, we did experience more robust orders for fiscal '14. Just leave it.

Yes, and I guess the market is going to follow in the first quarter. So it's going to have some impact, but then the post-market activity would be in the second quarter.

Second quarter.

Okay. And for fiscal '15, how should we model CapEx?

$4 million, $4.5 million. Similar to last year.

Would you say 1/2 of that, maybe 2/3, is IT? Or is it miscellaneous?

Yes.

Okay, I guess last question is regarding the new ventures, Homeware or H Contract. Can you give a little more maybe pinpoint -- I know you mentioned that H Contract is -- should get up to speed a little quicker than Homeware, so maybe looking at that first. Is it Q4 where you see a profit first on a quarterly basis? Or is it Q3? Or how should we think of the timeline for a bottom line contribution for each of these new ventures?

You take H Contract first. We actually were slightly profitable in the last 2 months of fiscal '14, but it was just a little bit better than breakeven, but in a new business, we were pretty happy with that in the eighth or ninth month of existence. I think there'll be months where we'll be slightly unprofitable or profitable. But we do believe this year that H Contract will be -- will contribute to our overall profitability. And I guess we're thinking that, that business is going to be a larger business, quicker -- or grow a little quicker than Homeware because we're leveraging some existing products from Hooker, and we're modifying products at Sam Moore. So we have a product line already, and we have a sales force of I think 25 or 30 men and women covering about 3/4 of the country. So I think that will be profitable this year, and I guess if I had to peg a number, probably around $3 million in volume. And then Homeware, it's a different deal. We're starting from scratch and trying to build a brand, build a product line. We're doing a lot more marketing. We don't have a sales force for Homeware. We're direct-to-consumer on our homeware.com website, and we're selling through other e-tailers, prominent online retailers across the country. There, I think, we're looking at probably $1.5 million volume for the year, and we don't expect to be profitable this year. But we think the drag from Homeware is probably, what, $0.05 or $0.06, Paul...

Right.

A year on earnings?

Yes, it's -- we're investing in brand building.

And that's definitely more -- we think it'll improve as the year goes along. We'll be more profitable in the third and fourth quarters or lose less than we will in the first half of the year.

Great. It sounds like you've got a lot of product launches there on your plates. You talked about sofas with sectionals and lighting and mirrors and casual dining. Are most of these or all of these going to be more of a fall to maybe early winter event? Or how do those -- how are those scheduled to roll out?

We're actually launching occasional tables right now. I think the multi-seat upholstery is in June.

June.

The rugs and other home decor will be sold on the homeware.com site. They won't be offered through our other e-tailers, but they're just to make our offering more complete on the Homeware site.

Upholstered beds over the summer months.

Right.

We launched that program.

Probably entertainment and dining would be more fall...

Right.

Winter.

Right.

And what percentage of these yet-to-rollout products are brand new for you?

Brand-new categories?

Brand-new products. Are they new to Homeware? Are they just -- obviously, most of what you've done thus far is specific to Homeware. But are these all essentially new designs?

What we just talked about was all Homeware products.

And then they're all new product categories to Homeware.

They both have unique features specific -- consistent with the Homeware product lines.

Right.

I'm not showing any further questions at this time. I'd like to turn the call back over to management for closing remarks.

All right. Well, we appreciate everybody joining us this afternoon. We look forward to delivering some good results when we release our first quarter fiscal '15 results in June. So we'll be back together in about 60 days or less. Thank you for joining us.

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