HNI Corporation
Q2 2017 Earnings Call Transcript

Published: 25 Jul 2017

[Operator:]

Good morning. My name is Christa. And I will be your conference operator today. I would like to welcome everyone to the HNI Corporation Second Quarter 2017 Fiscal Results Conference Call. All lines have been placed on mute to prevent the background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] And as a reminder, today’s conference call is being recorded. Thank you, Mr. Herring you may begin your conference.

[Jack Herring:]

Thank you. Good morning. I am Jack Herring, Treasurer and Director of Investor Relations for HNI Corporation. Thank you for joining us to discuss our second quarter fiscal 2017 results. Here with me are Stan Askren, Chairman, President and CEO; and Marshall Bridges, Vice President and Chief Financial Officer. Copies of our financial news release, earnings presentation and non-GAAP reconciliations are posted on our website. Statements made during this call that are not strictly historical facts are forward-looking statements which are subject to known and unknown risks. Actual results could differ materially. The earnings presentation posted on our website includes additional factors that could affect actual results. The Corporation assumes no obligation to update any forward-looking statements made during the call. I am pleased to turn the call over to Mr. Stan Askren.

[Stan Askren:]

Thank you, Jack. Good morning, everyone. We’ll share our assessment of the second quarter 2017 and then provide some thoughts on our outlook for the third quarter and full year and then as usual, will open the call up for questions. So, I’ll start up by saying, we continue to see dynamic market conditions with both the wide range of opportunities and challenges. On the positive side, we’re driving strong growth in our contract office furniture businesses. Our North American contract business grew 9% in the second quarter and we’re expecting stronger growth in the second half. Our hearth business continues to enhance its leading market position. We increased profit on flat sales in the second quarter and expect solid growth through the remainder of the year. We are pursuing new opportunities and confronting several challenges. As previously communicated, our supplies-driven office furniture business experienced a significant decline in the wholesale channel. Decline was a step down in a long-term trend we’ve been managing actively over the last several years. In response, we’re investing in capabilities and advancing initiatives around quick ship, direct fulfillment. Our response to these shifts will make a stronger in the long-term as we become closer to our customers, delivering unmatched value. Separate from the wholesale challenge, orders in our supplies-driven business came in later in the quarter than we expected, started slower, recovered later in the quarter. As a result, more of our second quarter orders will ship in the third quarter that we previously expected. Order rates have continued to recover and we’re projecting growth for the supplies-driven business in the second half. Our focus on cost remains. We’re experiencing delayed cost savings as we ship resources to handle the rapid escalation of order rates. As a result, we estimate $5 million to $6 million of net cost savings will be delayed from the second half in the next year. Despite the short-term challenges, our long-term view remains unchanged. We see opportunities for both topline growth and ongoing profit improvement. We’ll continue to drive our transformations, position our businesses for the future and continue to create long-term shareholder value. With those comments, I’ll now turn the call over to Marshall Bridges for some specifics on the second quarter. Marshall?

[Marshall Bridges:]

Thank you, Stan. For the second quarter, consolidated organic net sales were flat versus the prior year. Including the impacts of acquisitions and divestures, sales decreased 4.1%. In the office furniture segment, sales increased 0.2% organically and declined 5.1% in total. Within the office furniture segment, sales in our supplies-driven business decreased 7% organically or minus 11% when including the impact of divestures. Sales in our North American contract business increased 9% organically or up 2% in total. Sales in the international business increased 2%. In the hearth segment, sales decreased 0.4%. New construction sales increased 2%, growth was softer than anticipated due to variability in timing within the single family home construction cycle. Sales of retail wood and gas products decreased 4%. This decline was due to the impacts of dealer, distributors moving to our more efficient, just in time delivery model. Sales of pellet appliances increased $1 million or approximately 24%. Non-GAAP net income per diluted share was $0.42 compared to $0.68 in the second quarter of 2016. The change was driven by input cost inflation, deeper discounting, strategic growth investments, non-repeating corporate adjustments, and unfavorable product mix. Stan?

[Stan Askren:]

So, we expect stronger demand in the second half of the year. Our contract office furniture businesses continued to drive strong growth, demand in our supplies-driven business is stabilizing and we’re now seeing solid growth in our hearth business. We’re in the midst of multiple transformation, positioned our supplies-driven business for long-term success, driving further business simplification and improving our operational cost structure. I’m confident our growth together with our demonstrated record of cost efficiency will continue to drive long-term profit improvement for our shareholders. We’ll continue to invest for the long-term. One of our major investments is our business systems transformation initiative. I’ll remind you this initiative which we call BST is a broad-based transformation of how we work, a systematic RCI of our information to factories and it is a key enabler to our long-term success. We are progressing well towards our next significant milestone, which is bringing a large portion of our North American office furniture businesses up live on this new ERP platform at the beginning of the fourth quarter. In addition, we are investing in new products, selling new fulfillment capabilities. This will further grow and solidify our position as the best cost producer on markets delivering unmatched breadth, quality and services for our customers. So, Marshall, back to you.

[Marshall Bridges:]

For the third quarter, we expect consolidated organic sales to be up 7% to 10% or down 1% to up 2% when including the impacts of acquisitions and divestitures. Office furniture sales are expected to be up 8% to 11% organically or down 2% to up 1% in total. Organic sales in our supplies-driven business are projected to be up 1% to 4% or down 6% to 9% when including divestitures. Sales in our remaining office furniture businesses are forecasted to be up 15% to 18% organically or up 7% to 10% including the impacts of acquisitions and divestitures. We expect hearth sales to be up 3% to 6%. Within the hearth segment, new construction sales are forecasted to be up 7% to 10%. We are projecting retail wood and as sales to be up 2% to 5%, and retail pellet sales to be flat to up 3% versus the prior year. Non-GAAP gross profit margin as a percentage of net sales for the third quarter is expected to be approximately 39%, an improvement over prior year. Non-GAAP SG&A, which includes freight distribution expense is expected to be approximately 30% net sales. Our estimate of non-GAAP earnings per diluted share for the third quarter is in the range of $0.76 to $0.86. Looking at the full year 2017, we expect consolidated organic sales to be up 2% to 5%. The net impact of acquisitions and divestitures is expected to reduce sales by approximately $100 million. As a result, total net sales are forecasted to be in the range of minus 2% to plus 1%. Office furniture sales are expected to be up 2% to 5% organically for the year; sales in our hearth business are expected to be up 2% to 5%. We now expect full year free cash flow to be in the range of $40 million to $50 million; this is lower than our prior estimate, due to reduced income expectations and working capital timing driven by lower incentive compensation accruals and investments in inventory. Our current best estimate of non-GAAP earnings per diluted share for the full year 2017 is in the range of $2.35 to $2.55. Stan?

[Stan Askren:]

So, I will wrap this up then. Our businesses are strong and performing well in their markets. Our strategies are working and we remain committed to the investments we are making for long-term growth and profitable success. We are confident in our ability to deliver profitable growth, create long-term value for our shareholders. So, with those comments complete, we will now open it up for questions.

[Operator:]

And your first question comes from the line Matt McCall from Seaport Global Securities. Go ahead. Your line is open.

[Matt McCall:]

Thank you. Good morning, guys. So, maybe start with the contract outlook, up 15 to 18. I am looking at the comp; I believe it was down 10%, 11%, but it seems like that’s an acceleration. I was curious of what you’re seeing and maybe you talk about the geographical strength or weakness, vertical strength or weakness, what’s behind that strength other than -- I mean the comp is easy but there’s some good growth on top of that easy comp.

[Stan Askren:]

Yes, Matt. I mean, it’s coming across the board; it’s coming from many, many factors. And as you know, these things go this direction, kind of depending on where you’re positioned. And I think we’re in the right position, we’ve got the right value proposition. I think the teams are doing a nice job of executing. There’s no specific geography or vertical to call out here. And we’re pleased with the results and like what we’re seeing here.

[Matt McCall:]

And does the pipeline indicate that there is anything that’s not sustainable that there’s -- or there’re some big projects in there that would impact it that would skew it upward or is this an indication of the health of that part of the business?

[Stan Askren:]

Well, I guess the way to answer it is, Marshall gave you the outlook, which is continued, very strong contract sort of segment sales. And so, the pipeline is good. It’s a broad mix of large projects, small projects. And so, we see this continuing, as far as we can see, which is basically through 2017. Beyond that, I’m not going to hesitate to pretend to guess what’s out there, but we like a lot, the momentum, like a lot the prospects for the future.

[Matt McCall:]

Okay, perfect. That the cost savings delays, I think you referenced you’re pursuing stronger growth. Maybe that’s what delaying some of the savings. But, can you first quantify the savings impact or the delays in Q2? Can you maybe provide more details as to what exactly is going on there? And then, what is the delayed $5 million to $6 million due to your outlook for FY18 in terms of cost savings?

[Stan Askren:]

So, I’m going to let Marshall answer the number questions. But basically, I’ll explain what’s happening here is orders started off slow in the quarter. And so, we had a lot of operations folks that were deployed to initiating transformative moves, cost reductions, projects, consolidations, et cetera. And then, we saw a significant rapid acceleration of orders and demand, both in supplies and in contract. So, what happens there is you take people that are previously working on cost reductions and consolidations and you put them on simply getting production out. And so, when that happens, then you slow down moves, because you need to get out what you have, and you can’t afford disruption. And so, that’s really what’s transpired here, the simple sort of whipsaw of slow demand with very rapid demand, means we’re redeploying resources, people and resources. Marshall will comment on the numbers.

[Marshall Bridges:]

Yes. Matt, as Stan mentioned in the call earlier, we’re expecting to ship about $5 million to $6 million of cost savings from the second half of 2017 into 2018. And so, we’re still trying to develop our 2018 outlook. So, we’re not really prepared to talk about total cost savings, but we have talked about that $35 million to $40 million of structural cost reduction that we anticipate achieving and about $15 million of that will hit 18 now. We’d expected that to be more like 10 in 2017, so that’s pushed out a little bit.

[Matt McCall:]

So, Stan, back to what you were saying, are there -- are you running the service issues because this ramp, is it costing you money to service the customer, because you weren’t able to kind of meet the demand? I’m kind of trying to get a hand on the top line impact.

[Stan Askren:]

Yes. I think, Matt, the team is doing a nice job of managing through this. And so, I think we’re not seeing a degradation of service. We’re seeing some lead times extend a bit, but not in an unusual way, given kind of the seasonality of our business. And as it costs us money, as we said we’re deferring cost savings and it’s the right thing to do to protect our customers, our dealers, our resellers et cetera.

[Matt McCall:]

But beyond the deferred cost savings, there’s no incremental costs that you’ve experienced?

[Stan Askren:]

Not in a significant way, no. We’re not -- not a lot of business. I mean, certainly as I say, because we’re running flat out, we’re not getting the productivity that we’re used to. But that’s not unusual for this busy seasonal sort of aspect of our business to experience that.

[Matt McCall:]

I want to sneak one more in. The competitive pricing pressures, is that just typical pressures that you see from your traditional say contract competitors or is there something that’s new -- smaller players, newer players coming in, some of these new product categories, what’s the dynamic from a pricing perspective? Is this just kind of how you’ve always experienced it or is it -- is there anything that’s different about these current pressures?

[Stan Askren:]

No, I think it’s -- I think you characterized it correctly when you say it’s similar to what we’ve seen in the past. I mean, as you know, in this contract, we rolled it project-by-project sort of market-by-market local type of skirmish. And so there are different periods when you’ll see competition, pricing competition go up or discounting go up. It’s nothing extraordinary from where we sit. By the way, as the guys that are pretty good at best cost reducer status, we’re prepared to play whatever game needs to be played there. But it’s nothing -- it’s not new entrants that we see or it’s nothing new that’s changed in the competitive dynamic, just more of the same.

[Operator:]

Your next question comes from the line of Budd Bugatch from Raymond James. Please go ahead. Your line is open.

[Budd Bugatch:]

I guess to make sure I understand the deeper discounting commentary; that is related to contract or related to supplies?

[Stan Askren:]

Related to contract, primarily, Budd.

[Budd Bugatch:]

And that’s deeper than before, deeper than the first quarter or deeper than the last conference call Stan, it’s gotten more competitive?

[Stan Askren:]

Yes. It’s deeper than last year, okay, somewhat and it’s deeper a little bit than last time we talked, last conference call.

[Budd Bugatch:]

And you’ve said that you think contract will be up 15 to 18 organically in the third quarter, is that right?

[Stan Askren:]

That’s correct.

[Budd Bugatch:]

So, are you the price leader here, is that -- because that’s certainly faster than the market, right?

[Stan Askren:]

Well, I might appraise it. [ph] I don’t know, Budd. You know better than anybody there that nailing that all down is difficult. There’s lots of things going on. I mean, we all compete a little differently. Our value proposition seems to be resonating well. Our execution on the sales process seems to be going well. And I think everybody is working the discounting lever a little bit more aggressive than in the past.

[Budd Bugatch:]

And just to make sure I understand, is this is -- there are verticals that are stronger than others here that you care to disclose or is it geographical or how should we get the feeling of what’s going on in the overall market here?

[Stan Askren:]

For us, it’s broad-based, Budd.

[Budd Bugatch:]

Okay, all right. Broad-based geographically, broad-based vertically, that’s the way to understand that?

[Stan Askren:]

Yes.

[Budd Bugatch:]

Okay. You talk also about more investment. Make sure I understand where are those investments, we needed to do investments in distribution for supplies with the shift in the wholesaler environment. Is that correct?

[Stan Askren:]

Correct.

[Budd Bugatch:]

And how do we think about that? Can you, not only quantify it but give us some colors as to where those investments are? Are they distribution investments, new DCs for many and over what time period are those investments likely to be made?

[Marshall Bridges:]

He’s hit right. So, as it relates to the sort of our fulfillment investments, the fulfillment models, we have -- we are going to invest approximately $5 million to $10 million this year, Budd. And that’s primarily going to hit getting ahead F&D. And you’re right, it’s investment in freight fulfillment and DC capacity.

[Stan Askren:]

And mostly third quarter, fourth quarter, Marshall, or how do we think about that?

[Marshall Bridges:]

Yes, it will be mostly in the third and the fourth quarter. There is a little bit in the second quarter as well.

[Budd Bugatch:]

So, pro rata pretty evenly?

[Marshall Bridges:]

It will ramp, it will be a little bit more in the fourth and third, and the second is the lowest.

[Budd Bugatch:]

Okay. And investment, when you talk about investment, is that hit the SG&A line or is it hit assets?

[Marshall Bridges:]

It is primarily going to hit this particular investment, it’s primarily going to hit F&D, so SG&A in the broad sense.

[Stan Askren:]

So, freight and distribution within SG&A.

[Budd Bugatch:]

Freight and distribution, so these are period expenses?

[Stan Askren:]

Yes.

[Budd Bugatch:]

Got you, okay. That’s helpful. Help me if you would. Marshall, you went over the guidance and I thought you said net operating income up 39%. What was -- go through that again if you would a little more slowly. This old man can’t quite catch up.

[Stan Askren:]

Yes, yes, okay.

[Marshall Bridges:]

Yes. In the third quarter, I think you are talking about gross margin, we anticipated being 39%.

[Budd Bugatch:]

Gross margin, okay. I think you said -- I thought you said operating margin. That’s what got me.

[Stan Askren:]

Not, we said non-GAAP gross profit margin.

[Budd Bugatch:]

Okay.

[Marshall Bridges:]

Approximately 39%, which is an improvement over last year.

[Budd Bugatch:]

Okay. All right. Very good. And the other side of this equation is the guidance, the EPS went down by a nickel on the bottom end and then I think by $0.15 on the top end from your June pre-release. What’s changed?

[Marshall Bridges:]

The primary driver there, if you think about, that’s like a $0.10 drop on the midpoint. But so, the primary driver is those delayed cost savings we just talked about. So, that $5 million to $6 million that shifts into 2018, the big driver and there is a little bit of incremental competitive pricing pressure that rounds out the balance.

[Stan Askren:]

And I think, Budd, when we did our release, we had the full visibility and the amount of resources that we needed to redeploy and the focus to execute our current order demand and to take care of customers. And so that’s what changed.

[Budd Bugatch:]

And has there been any change in the revenue? The revenue guidance in that June was I think organic, what down 5 to plus -- down 2 to plus 5, is that right?

[Marshall Bridges:]

But there’s really no change to our outlook for revenue guidance for the year.

[Budd Bugatch:]

Okay. I thought that the -- when I had the divestiture of Artco-Bell and some of the dealers, I had an $80 million of an adjustment and you said a $100 million. So, maybe, a little bit offline Jack would go for us how those adjustments look, either backwards and forward, to make sure we got the right number, so we can do our model correct.

[Marshall Bridges:]

Yes. So, there is Artco-Bell, we also have some dealer kind of ins and outs, some acquisitions of dealers and some divestitures of dealers. And so, when we talk about the $100 million, we’re including all of that. So, it’s a $100 million impact for the full year reduces net sales.

[Budd Bugatch:]

Okay. And Stan, the last question for you is we’ve got a doubling of earnings in three to five years, it’s kind of a long-term outlook for HNI, which is certainly impressive. Is any change to that at all, any change to your thinking or maybe expects next four to five years or has that -- is that spread out at all?

[Stan Askren:]

Yes, I think it’s a great question. But, I mean, the answer is no. It hasn’t change. That’s why we see three to five, because these things, these challenges, these opportunities come and go. And so, I would say we’re as optimistic -- I am actually more optimistic about the outlook than I’ve been and we did these changes, I think we have response. I think we understand how to grow the topline; we know how to get after costs; we know how to manage our assets efficiently. And it’s a little bit of a call, a different play on the line, but we are in great shape for this. Does it go out for three years more like five years? Well, today, the answer I’d say it’s -- you said it like four to five, but stay tuned, if we keep rocking and rolling on the contract that double-digit top line growth, then maybe it’s more like three years. And so, no, I continually feel great about the prospect of doubling earnings every three to five years, timing comes and goes. And I am pretty careful by the way about not getting kneeled down, is it three years, is it four years, is it five years, because it is so dynamic out there. We’re in multiple businesses with lots of good competitors and we adjust. And I think we feel great about investments and about our capabilities as an organization to continue to drive long-term, profitable growth.

[Budd Bugatch:]

Okay. And I guess last for me is trying to understand what are the non-GAAP adjustments looking forward to in the third and the fourth quarter? And we’ve got restructuring and we’ve got transition cost. Do we know what they are or what you are planning?

[Marshall Bridges:]

It’s difficult to estimate those, Budd, given all the ins and outs. But based on what we know now, I would estimate that we expect $3 million to $4 million of sort of restructuring and transition for the third quarter and $4 million to $6 million in the fourth quarter.

[Budd Bugatch:]

Okay. So, 3 to 4 in the third, and 4 to 6 in the fourth. Okay. And that’s what your guidance is based on. Your non-GAAP has got to have I guess some midpoint of each of those, is that what you are looking at?

[Marshall Bridges:]

Well, the non-GAAP, we do not include those. So, there, you won’t have an impact.

[Budd Bugatch:]

Okay. All right. I got you. All right. Thank you very much.

[Stan Askren:]

Thank you, Budd.

[Operator:]

Your next question comes from the line of Kathryn Thompson from Thomson Research Group. Please go ahead. Your line is open.

[Kathryn Thompson:]

I wanted to circle back up on your North American contract sales, up 9% and as you said earlier, you’re looking up mid to -- mid teens or so for contract volumes in Q3. And again, it’s an environment where you’re seeing greater discounting. There have been some leadership changes from my understanding within your organization. So, how have leadership changes or changes in the sales, how your approach to sales impacted this? And also, given that you’re clearly outperforming the industry, what are the broad buckets where you’re seeing greater traction?

[Stan Askren:]

So, to the first question here, I mean these -- the results that we’re seeing in the contract business, due to the selling cycle are really the result prior to these leadership changes. The leadership changes are for lots of different reasons, sometimes it’s succession, sometimes it’s development. So, they weren’t made due to performance. And so, I would say, the growth that we’re seeing is not related. Now, I’d also say the leadership changes hopefully will continue to accelerate that growth in the future but not in the impact on current stage. [Ph] Again, where we’re seeing this growth is really broad-based. So, our contract business competes well, in the mid-sized sort of client. And we’ve talked to you about our value proposition well, or our value proposition position. I think we’re positioned well there. And so, it’s just a lot of different factors that are coming together that are leading us to win a lot of great business right now, big, small business, different geographies, different sectors, different verticals, whatever term you want to say.

[Kathryn Thompson:]

Once again on the office segment, if you could break out between supplies, contract, can you share at least directionally how margins trended between supplies and contracts? Particularly we understand that there’s a disruption going in the supplies, but when you look at the overall performance in the quarter, giving a better understanding of how the contract versus supplies operating margins are trending?

[Marshall Bridges:]

There’s not a major trend there between the two parts of office furniture.

[Kathryn Thompson:]

It’s more like, are supplies margins improving or did they take a step back contract margins improving or did they take a step back versus last year?

[Marshall Bridges:]

Our results versus last year are down, so it should be down consistently between the two sides.

[Kathryn Thompson:]

You may have answered this earlier in the call, apologies, I came in a little bit later. But, could you give an update on the pace of your direct orders as you ship that supplies business model to more direct orders?

[Stan Askren:]

Yes. We’re really just starting that Kathryn. So, it’s just ramping up. It’s not noteworthy at this stage. It’s coming on line as we expected, and we’d expect it as Marshall indicated to ramp up third quarter and fourth quarter. It’s just starting to get rolling now.

[Kathryn Thompson:]

And I know that you gave -- you outlined a few factors that impacted the full year guidance, cost savings shifting into 2018 and to discounting the market. But how much of a factor if at all the depletion play into lower 2017 guidance range?

[Marshall Bridges:]

Kathryn, we are expecting significant inflation around that 5% level for the full year, but as it relates to our prior expectations, we had most of that in there. There is a $1 million or $2 more inflation versus our prior expectations but the big drivers are the cost savings delay and the competitive pricing.

[Kathryn Thompson:]

Okay, perfect. And then, once again, not to beat a dead horse with discounting in the market. But it would be helpful if you could clarify, what areas, if it’s more small orders or just being more competitive but larger orders in terms of what is driving, where you see the greater pockets of discounting in the markets?

[Stan Askren:]

Yes. I mean the -- I guess what I could say is it’s in the contract segment and it would typically be the larger projects are seeing more competitive pricing. A lot of the smaller projects by nature are -- don’t get the same sort of shoot out ok corral as some of the large stuff does.

[Operator:]

And your final question comes from the line of Greg Burns from Sidoti & Company. Please go ahead. Your line is open.

[Greg Burns:]

Hi. Good morning. In terms of the supplies business, what percent of that business is wholesale now?

[Marshall Bridges:]

Greg, approximately 20% of supplies-driven business runs through wholesalers, as we said now.

[Greg Burns:]

Okay. And I just want to a better understand what’s driving this shift. Is this being driven by wholesalers moving to other suppliers or is it being more driven by -- proactively by you and your customers?

[Stan Askren:]

Well, first off, it’s the large customers are looking for more efficient ways to fulfill their furniture requirements and we’re responding to that. Second, the wholesale model is challenged, as you see secular decline in supplies and sort of the electronic office. You see them searching for a more productive future or more productive financial picture. And that’s leading them to take actions to change how they fulfill the furniture, who they fulfill furniture to et cetera. We simply are responding to both customers and to our channel. The wholesalers are important customers to us. They play a valuable role. We see them playing a valuable role. Our best guess is that shifting due to this sort of industry dynamics and more efficient and effective ways of fulfilling furniture requirements.

[Greg Burns:]

Okay. And then lastly, could you just maybe give a little bit more color on how you expect this shift to benefit HNI, once you have it fully implemented in terms of your direct fulfillment capabilities? I would assume there is a little bit of a margin hit upfront but maybe what are some of the broader benefits that you will see from this move?

[Stan Askren:]

I think we will be more connected, more closely connected to the -- actually the purchasing customer, the customer who is reselling, fulfilling the end-user requirements. I think it will allow us to more fully capitalize on our leaning capability of linking and leaning supply all the way through from sort of end last mile delivery to production scheduling et cetera. You’re correct, in the short-term, there is a financial hit. In the long-term, we’re always pretty optimistic about our ability to bring cost out and find efficiency in the supply chain to make the economics work.

[Greg Burns:]

Okay. So, do you see this connection with the customers like an opportunity for you to gain market share in the supplies market?

[Stan Askren:]

Yes. I think it will provide a better experience and a more efficient sort of fulfillment model. We’re going to get more business and we believe we can do that.

[Greg Burns:]

Okay. Thank you.

[Stan Askren:]

Thank you.

[Operator:]

We currently have no more questions in the queue at this time. Mr. Herring, I turn the call back over to you.

[Stan Askren:]

This is Mr. Askren. So, thank you very much for tuning in. We appreciate your interest in the HNI and we look forward to speaking to you in the future. Have a good day.

[Operator:]

And this concludes today’s conference call. You may now disconnect.