ALCO Stores Management Discusses Q4 2013 Results - Earnings Call Transcript

Apr.19.13 | About: ALCO Stores, (ALCS)


Q4 2013 Earnings Call

April 19, 2013 11:00 am ET


Royce L. Winsten - Chairman, Chairman of Strategy, Budget & Planning Committee, Member of Audit Committee, Member of Compensation Committee and Member of Nominating & Governance Committee

Richard E. Wilson - Chief Executive Officer, President, Director and Member of Strategy, Budget & Planning Committee

Wayne S. Peterson - Chief Financial Officer, Principal Accounting Officer and Senior Vice President


Benjamin I. Rosenzweig - Privet Fund Management LLC

Robert Schwerin


Good day, everyone, and welcome to the ALCO Stores Fourth Quarter and Fiscal Year End 2013 Earnings Call. At this time, I'd like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the company, we will open up the conference for a question-and-answers after the presentation. We would also like to remind you that this conference may contain forward-looking statements, as referenced in the Private Securities Litigation Reform Act of 1995. Any forward-looking statements are made by the company in good faith pursuant to the Safe Harbor provisions of the Act. These forward-looking statements reflect management's current views and projections regarding economic conditions, retail industry environments and the company performance.

Actual events or results may differ materially from those described in this conference call due to a number of risks and uncertainties. Factors that could significantly change results include, but are not limited to, sales performance; expense levels; competitive activity; interest rates; changes in the company's financial condition; the company's high operating leverage in an environment of flat or declining consumer spending; the economic viability of small rural towns the company serves; and, the macroeconomic factors affecting and potentially affecting the retail industry in general, such as a decline in the value of the U.S. dollar against currencies of countries from which U.S. retailers import product, the introduction of national sales tax or value-added tax, continued high levels of unemployment, rising fuel prices and the high level of consumer indebtedness.

Additional information regarding these and other factors that could cause actual results to differ materially from those contained in the forward-looking statements set forth in this conference call are included in the company's 10-K and 10-Q filings and other public documents, copies of which are available from the company on request.

Our speakers for today's call are Mr. Royce Winsten, Chairman of the Board; Mr. Richard Wilson, President and Chief Executive Officer; and Mr. Wayne Peterson, Senior Vice President and Chief Financial Officer.

At this time, I would like to turn the call over to Mr. Richard Winsten. Please go ahead, sir.

Royce L. Winsten

Thank you. But that's Royce Winsten, but thank you very much, operator. And good morning, everyone. Thanks for joining us on the call.

Although sales were soft in the final quarter of our fiscal year 2013, the board is pleased to report that the company is building on the work begun a year ago. Richard and his team have been improving the supply chain to reduce inventory and increase turns. They have been increasing margins by growing direct imports and skewing the sales mix towards higher-margin products. Consumer value proposition in general is being upgraded, with improved product offerings at better prices in more pleasant and shoppable stores. Results of their work are still working on their way through the system. Rich will describe these efforts at more length in his comments.

Apparel, which is a prime differentiator for ALCO, and a very high margin category relative to most of our offerings, performed poorly last year. Mike Cook, the new soft lines divisional manager came too late to have much impact on the Christmas season. His work will begin to be felt in the first quarter of this year and more fully in subsequent quarters.

In addition to the 2% payroll tax increase, weather has been an issue. Buying shorts and tank tops isn't top-of-mind for women in the Midwest of late, as they scrape snow and ice off their cars. But both management and the board are quite confident in predicting that spring will one day come and the summer will follow. Our customers will need and want the compellingly priced and lovely garments and accessories Mr. Cook and his team have put in the stores and they will buy them. Given the 40% -- plus -- the 40-plus-percent all-in margin apparel provides, that will be a good thing for both top and bottom lines.

Expense control continues to be a hallmark of Rich Wilson's management. Maintaining tight control of expenses while increasing margins is a recipe for making a lot of money when sales growth is added. Closing unproductive stores and replacing them with productive ones pushes the company forward in all dimensions of profitability. Management is in the process of doing that in a carefully thought out and controlled manner. Over the course of the next few years, through careful selection and natural lease terminations, the store portfolio can be improved a great deal without carrying more dark store expense than is necessary.

Better management of the supply chain also will help a lot, reducing inventory in less productive stores while keeping them well-stocked with those items that do sell is a challenge. Management is making changes in personnel, procedures and IT capabilities in the supply chain to accomplish that.

No doubt you're all aware that ALCO Stores will move its corporate headquarters to Coppell, Texas, a suburb of Dallas, in June. The company has been headquartered in Abilene since 1901 and its roots go very deep there. However, Abilene's relative inaccessibility, coupled with the difficulty it presents in recruiting top talent, made the decision to move essential. Management and the board did not take this decision lightly. Considerable time was taken in studying its every aspect. In the end, we are confident that Dallas is the ideal place to headquarter the company. ALCO Stores will be in very good company, with an extremely deep pool of retail and IT talent and well-positioned to grow into the vital and valuable company it deserves to be.

Rich and Wayne will describe the plans they have made to manage the move and to make it as imperceptible as possible to our stores and customers.

Now to the economy. The obvious markers of consumer weakness are everywhere. It should come as no surprise to anyone that the 2% increase in the payroll tax which hit in January has had an impact on retail sales. If you take out expenditures on home sales and cars, both beneficiaries of government largesse, the weakness in spending is all the more obvious. Macroeconomic data have been missing expectations for many months. If you look at the CapEx spending of a company like Intel, a reasonable bellwether for the U.S. economy

[Audio Gap]

there are an all-time record number of U.S. citizens receiving food assistance. The weakness in sales is being felt by all retailers. Target, for example, just reduced their forecast for Q1 sales and earnings.

A moment of accidental honesty by a Walmart executive in March, describing their February sales as a total disaster in an e-mail, is as clear a marker as any. This is in the face of a Fed that is effectively all-in on a strategy of punishing savings to push money into spending. Of course, corporate America won't invest until there's a good reason to believe demand will increase to absorb the product of the new investment, and consumers won't increase spending until they see their real income start to rise. But rising real incomes depend upon rising real investment, so we're in a sort of standoff. The Fed is doing everything it can, but it is at the limit of what it is equipped to do. Until real incomes rise in a meaningful and sustainable way, the economy will likely remain weak.

In this environment, being competitive and providing customers a compelling consumer proposition is essential for every retailer. Executing a carefully thought out plan with precision is a necessity. Management and the board believe that the operational and margin improvements Rich and his team have been able to achieve, and will be able to achieve, enable the company to continue improving financial performance, even in this economic environment.

First, Rich will speak, and then Wayne. So now, I'll pass the call to Rich. Go ahead, Rich.

Richard E. Wilson

Thank you, Royce, and good morning, everyone. This morning we will review operating results for fiscal year '13 and discuss key initiatives that will continue to improve sales and profitability.

First, a brief summary of our fourth quarter and fiscal '13 results. Starting with fourth quarter. On a 13-week basis, total sales for Q4 were $138.6 million, an increase of 3.8%. Same-store sales for the quarter were $132.5 million, a decrease of 0.5%.

Net earnings for Q4 were $2 million or $0.61 per diluted share, compared to $800,000 or $0.21 per diluted share last year, an increase of $1.2 million or $0.39 per diluted share. Fourth quarter gross margin dollars were $41.6 million, an increase of $2.8 million. Gross margin rate was 28.3%, a decrease of 0.3%. The decrease was a result of higher contribution of lower margin businesses during the quarter.

SG&A for Q4 was 25.7% of sales, compared to 27.3%.

On an annual basis, total sales were $479 million, an increase of 2.3%. Same-store sales were $463 million, a decrease of 0.9%. This compares to a same-store sales increase in the prior year of 3%. Sales through the year were depressed due to the impact of high unemployment, slow overall economic growth and, specific to the company's geography, severe drought condition that primarily impacted results during the second and third quarters. Same-store sales by quarter were: Q1, plus 1.7%; Q2, negative 1.8%; Q3, negative 3.3%; and Q4, negative 0.5%.

Businesses that performed better than the company total included commodities, which was led by the food and beverage business. Home businesses, primarily domestics, housewares and furniture categories; and in hard lines, outdoor furniture, horticulture, sporting goods and toys. Businesses that underperformed were all of apparel, electronics, including digital cameras, and the music and DVD categories.

Net earnings for the year, before discontinued operations, were $1.3 million or $0.49 per share, compared to $1.6 million or $0.48 per share last year. As a point of comparison, last year's earnings benefited from a one-time insurance settlement which increased earnings by $0.28 per share. Netting out the impact of this onetime event, ongoing operations, earnings per share, was $0.48 per share for fiscal year '13 compared to $0.21 per share for fiscal '12, an increase of $0.27 per share.

Wayne will cover financial results in real estate in greater detail in a few minutes.

Moving on, I'll now review our key initiatives for fiscal year '14 and '15.

Much is happening at ALCO. Every initiative is designed to grow sales and improve profitability. I'd like to start with the decision to move the company's central offices from Abilene to Dallas.

After much consideration in regards to expense and business disruption, we decided to move the company's corporate headquarters was crucial to retaining recently hired executive talent and recruiting future talent. Our decision to move to Texas, which is home to 35 of our stores, was also bolstered by the number of regional and national retailers already headquartered in the Texas market, including: JCPenney, Michaels Crafts, Gamestop, Pier One, AGB, Dillard's, The Container Store and others.

In addition, the proximity to DFW Airport will greatly improve the ability of our merchants to meet with ALCO's key vendor partners and enhance their ability to stay on top of competition.

The benefit of the headquarters move over time is immeasurable. I would add, while exciting, it is important to take time to recognize the current and past commitment of those who have worked for ALCO in the Abilene headquarters over so many years. Our decision to move is by no means a reflection on their talent, commitment or dedication.

Next, I'll discuss -- I'd like to discuss one of the company's most critical initiatives, gross margin expansion. Clearly, delivering improved profitability is anchored in our ability to increase gross margins. There are 2 initiatives that are designed to improve overall gross margin results. First is our implementation of price optimization. Our new partnership with Revionics, a price optimization software provider, will enable us to manage pricing based on competition and geography.

In the past, pricing across the chain has been the same. Therefore, we have been unable to mine additional margin opportunities in uncompetitive markets. Clearly, our pricing structure in the remote areas of Montana should be different from more competitive markets, such as Illinois and Indiana. When the installation and the training are completed in the second quarter, we will execute 4 to 5 price zones. Revionics is also designed to optimize markdown expense by recommending specific markdown timing based on desired liquidation timelines and measuring rate of sale and pricing elasticity dynamics.

Once again, as in pricing, currently all markdowns are taken simultaneously across the chain. Clearly not an efficient method, considering our widespread geographic footprint. It should also be noted, the growing profitability via a better price management actually increases top line sales, as price inflation increases overall sales. For those of you not familiar with Revionics, they are a top-tier pricing optimization software provider headquartered in California, with regional offices in Austin, Texas. Some of their current clients include: Dick's Sporting Goods, Cabela's and Family Dollar to the name a few.

The second strategy to expand margins is achieving growth in higher-margin businesses. To that end, turning around our apparel business is a top priority. We have totally reinvented apparel at ALCO. We recently launched new brands that include John Henry, Links Edition, English Laundry, Lee Jeans and Plug, in men's. In women's, we've doubled our investment in Gloria Vanderbilt and added One World, Sag Harbor, Built and Almost Famous, all brands that are currently found at major national retailers.

We are also pleased to be adding Reebok men's and women's active apparel during the second quarter.

In addition, we've also updated our private label strategy and have recently introduced 4 new lifestyle brands. In men's, David and James; in women's, Emma Brooke; Rebel in the junior's category and finally, Snicklefritz in the kids' business.

All goods are sourced direct from the factory and carry margins that are significantly higher than domestically-sourced product.

Next, I'd like to address our inventory shrink results, which have been a long-standing profit aversion for ALCO. Fiscal year '13 results were 2.4% or a decrease of 0.1%. Most retailers are delivering results of less than 2% or better. While ALCO's model is more remote and, therefore, potentially subject to a higher degree of internal and external theft, our results must improve.

The most effective tool that can be levered to reduce shrink is a stable, well-trained and professional store management and district management team. To that end, Ricardo Clemente, our new Director of Stores, has reengineered our store labor model to improve efficiency and customer service. While he's also raised standards and expectations on the field organization. And recently appointed 2 new regional positions to support the district manager team and ensure better execution and consistency across the enterprise.

In addition, we are in the final stages of interviewing a new Director of Loss Prevention in the Dallas market.

Moving on to operational improvements, which we will complete in the next 6 months to a year. First, we will be updating our supply chain software to improve inventory planning and allocation, increase inventory turnover, reduce store out of stocks, drive unnecessary freight and carrying costs out of the system. We are currently reviewing a number of service providers and expect to finalize the program shortly.

We have also recently selected Microsoft Dynamics to provide systems to support our purchase order management and warehouse management operations. Both existing systems are legacy and are inefficient and outdated. In particular, our current warehouse management system is designed to only support 1 distribution facility. As mentioned on previous calls, it is our intention to open a second distribution center in fiscal year '15 to reduce outbound miles and expense.

In merchandising, the integration of our new frozen food and refrigerated program is on track. Sales and margin results are meeting expectation. For fiscal year '13, food and beverage items penetrated 47% of our shoppers' baskets. Clearly, food and beverages is a category that is an important traffic driver.

In apparel, as discussed earlier, we've taken significant steps to turn around the business and expect sales results to improve throughout the year. Currently, in spite of the weather, the women's apparel business is running strong double-digit increases. However, other areas of apparel are slower due to the significantly cooler weather compared to last year. Anecdotally, some of our large volume stores were impacted by a major snowstorm in the Dakotas just this week.

In the home and hard lines businesses, current trends in domestics and housewares remain positive. That said, as in apparel, the outdoor furniture, lawn and garden and sporting goods businesses have also been impacted by this year's colder weather. We are confident sales will improve as spring finally arrives.

In summary, our results have improved. However, not as quickly as a we would like, or our shareholders deserved. We are, however, confident the operational initiatives outlined today are material and are the right priorities that will enable us to lever our strong balance sheet and deliver improved earnings and return on equity.

Following is a recap of our key initiatives for fiscal year '14 that will improve results.

First, moving the company's headquarters will provide the talent and location required to continue to improve execution and results. Leveraging price optimization using price elasticity analysis and regional pricing strategies will improve margins. Improving sales in higher-margin businesses will grow overall gross margins. Updating supply chain and warehouse management systems will improve efficiency, reduce turnover, lower debt and expense. Hiring new leadership and improving store level execution will reduce shrink. And finally, in real estate, an area Wayne will discuss, eliminating unproductive stores while adding more productive locations is critical.

I'll now pass the call to Wayne who will provide you with more granular financial results and an update on real estate. Wayne?

Wayne S. Peterson

Thank you, Rich. Good morning.

As you know, yesterday afternoon, we reported operational results for the fourth quarter for fiscal year 2013 which ended on February 3, 2013.

The company reported fourth quarter net income of $1,980,000 compared to net income of $832,000 in the prior year. On a per share basis, the fourth quarter net income was $0.61 compared to net income per share of $0.21 in the prior year. Results for discontinued operations during the quarter were minimal for both years. And as such, net income per share from continuing operations is essentially the same as total company net income per share. Net income for fiscal year 2013 was $1,307,000 compared to net income of $1,655,000 in the prior year.

Incorporated within the prior-year results are 2 onetime events, including $1.4 million or $0.37 per share gain from an insurance settlement and $325,000 or $0.09 per share expense due to the accelerated amortization of certain loan agreement transaction fees.

The net impact of these 2 onetime events in the prior year, is a net gain of $1,096,000 or $0.28 per share. Excluding these 2 onetime events from the prior year, the fiscal year 2013 net income of $1,307,000 compares to adjusted net income of $559,000 in fiscal year 2012, or an increase of $748,000.

On a per share basis, the fiscal year 2013 net income was $0.36 compared to an adjusted net income per share of $0.15 in the prior year. During the fiscal year, the company closed 4 stores, resulting in discontinued operation loss of $0.12 per share. Excluding the impact of these closed stores and the closed stores in the prior year, the net income on a continuing operations basis for fiscal year 2013 was $0.48 per share compared to an adjusted net income of $0.21 per share in the prior year.

As with any retailers this year, fiscal year 2013 was a 53-week year, with the fourth quarter having one extra week. Excluding the extra week, fourth quarter net sales from continuing operations increased 3.6% to $140.2 million. Net sales from same stores, excluding fuel center sales and excluding the extra week, fourth quarter net sales from same stores decreased 0.5% to $132.5 million. Again, excluding the extra week, fiscal year 2013 net sales from continuing operations increased 2.1% to $486.1 million. Net sales from same stores, excluding fuel center sales and excluding the extra week, fiscal year 2013 net sales from same stores decreased 1% to $463.2 million. Adjusted EBITDA for fiscal year 2013 was $14.5 million, representing a $1.1 million increase over the prior year. As a percentage of sales, fiscal year adjusted EBITDA was 2.95%, an improvement of approximately 22 basis points when compared to the prior year. The improvement in adjusted EBITDA is a function of an increase in total sales and a slight increase in gross profit margin.

Fiscal year 2013 gross profit margin of 30.32% improved approximately 6 basis points compared to the prior year. Fiscal year of 2013 adjusted SG&A, which is defined as SG&A, excluding share-based compensation expenses and loss on the sale of fixed assets, was 27.25%, representing a 15 basis point improvement when compared to prior year.

The balance under the working capital revolver at the end of year was $63 million, representing an increase of approximately $11 million compared to the prior year. The increase in the revolver balance is attributable to capital expenditures of $15.5 million, share repurchases of $4 million, net changes in working capital of $4.1 million and cash interest expense of $2 million, which is partially offset by $14.5 million of adjusted EBITDA.

Turning the discussion to share repurchases, under the current Board of Directors' authorization, ALCO has repurchased approximately 610,000 shares, leaving approximately 90,000 shares to be repurchased. Of the 610,000 shares repurchased, 585,000 were purchased during fiscal year 2013 at an average price of $6.77. The company will continue to evaluate the opportunistic repurchase of stock and the company has gained the support of its banking partner, Wells Fargo. The company recently disclosed an amendment to the existing credit facility, whereby the fixed charge coverage ratio is no longer applicable to the repurchase of stock and the company can repurchase up to $1 million in stock annually without bank consent.

Turning to fiscal year 2013, the company opened 5 new stores and closed 4 stores. Two of the locations were opened in the fourth quarter, including one store in Cut Bank, Montana and one store in Tioga, North Dakota.

Fiscal year 2014, the company is currently constructing one new store in Watford City, North Dakota, and has received board approval for an additional 6 stores which are in various stages of development. Additionally, the company continue to evaluate low-volume, low-productivity stores for potential closing. As such, the company plans to close 6 stores during the year upon the natural expiration of their respective leases.

Finally we have discussed the relocation of the corporate offices, which we expect to transition during the second and third quarter.

This time, our estimate for the expenses associated with the relocation of employees and the separation expenses for those employees not relocating ranges between $2 million and $2.5 million before tax.

Thank you, and at this time, I will turn the call back to Rich.

Richard E. Wilson

Thank you, Wayne. Operator, we'll now open the line for questioning.

Question-and-Answer Session


[Operator Instructions] And we do have Ben Rosenzweig.

Benjamin I. Rosenzweig - Privet Fund Management LLC

So just a few quick questions for you. Can you kind of talk about the inventory level and your debt level? It looks like for the fourth quarter, both of those are a little bit higher than normal. Is there a reason for that?

Richard E. Wilson

Yes, sure, Ben. We can give you some color and that. The debt level was increased primarily due to the stock buyback, as well as the expense for the freezers and refrigerators we bought towards the end of the third quarter and into the fourth quarter. Those 2 events alone added about $7 million, just in debt for the buyback as well as the freezers and coolers. In addition, clearly the debt was driven because we did end the year with a little higher inventory, also that was partially due to 2 things: a heavier direct import sourcing receipt flow this year, some of which is timing. We did flow more direct imports this year than last year in Q1; secondly, we were also preparing, frankly, for flowing some additional inventories. We were thinking about the relocation of our central offices to ensure we had enough inventory on hand or that we were mitigating any inventory potential problems that might exist during the course of the move. So we did pump the inventory levels up to a slight degree, just to accommodate for some of the disruption we'll have during the move.

Benjamin I. Rosenzweig - Privet Fund Management LLC

Okay. And then on the gross margin front, obviously that has come down as you moved into some of the frozen foods and perishables and things like that. Obviously, you have 28.3% or so I think it was in the fourth quarter, is pretty low. And correct me if I'm wrong, I mean, if I remember on past calls you had said there's going to be perhaps a gross margin hit as you try to move into areas that'll drive sales. But if I'm reading this correctly, you kind of get that reverse, almost deleveraging, if same-store sales go down, that you don't have that margin power anymore and you're not driving sales through the system. What are the kind of long-term ramifications? I mean what if sales don't rebound? And you're still kind of a purveyor of low-margin goods? I mean, how do you kind of right the ship? I know you kind of had mentioned some of these initiatives that you're undertaking. But I'm just trying -- I'm trying to figure out what the effect on the income statement and the balance sheet would be if you get negative same-store sales going forward?

Richard E. Wilson

Yes. The trajectory of the lower margin businesses, we don't anticipate that, that growth rate will be quicker or faster than the growth that we're going to experience in other higher margin categories. So partially, what hurt Q4 was we didn't have a good quarter in apparel, specifically, which carries such a significantly higher margin than some of the other categories. In addition, while we had a difficult quarter in Electronics, Electronics still holds -- and is still a high percentage of the year overall business. So it's not my expectation that we would continue to grow those low margin businesses at a significantly higher rate. In fact, I think the opposite will happen now, in light of the fact, that we have better strategies in apparel, specifically, as well as some other categories that are higher margin. I would anticipate that the mix will continue to improve. Yes, I'm very confident the plans we have in the system, specifically in the apparel zones, will be very accretive to the total margin than when you add to it the benefit of the price optimization initiative. We think both those things are very material in getting the margins back to a much better rate than what run rate was in Q4.

Benjamin I. Rosenzweig - Privet Fund Management LLC

Okay. So obviously, a lot is dependent on driving sales to the system, to make some sales, I guess. So why are you guys deciding not to continue to report sales monthly?

Richard E. Wilson

Good question. Basically, we're a handful -- we're one of a handful that were still reporting monthly. I'm sure you pay attention to it, and there's real -- none of the major nationals today report on a monthly basis. And in particular, this year, there's a lot of noise in the fact that we're up against significant calendar shifts as it relates to the 53rd week that we're anniversary-ing from last year. So it was just our feeling that there was so much noise in the month-to-month that -- and in addition to the fact that pretty much all the competition has moved to quarterly, that we just decided that, that was a better indication of where the business was going to be versus the noise and explanations might be required to explain some of the variations on a month-over-month basis. That's really all it is.

Benjamin I. Rosenzweig - Privet Fund Management LLC

Okay. And then I guess, lastly. Just -- so you've outlined kind of the strategies that you guys are kind of undertaking to kind of turn everything around. And it seems to me that most of those initiatives are going to be driven at kind of the store level. It just -- it feels like, it doesn't seem like maybe necessarily being headquartered in Abilene, Kansas is the problem. And so to spend $2 million to $2.5 million to relocate to a major metro, although I'm sure that makes life easier for a lot of people and build out finance department and things like that. Why now? To do something like that, I mean, what changed?

Richard E. Wilson

Fair question. Why now is -- the reality of the company is on sound foundation, relative to the fact that we've improved results over the past 3 years. One, stabilized top line even though last year we're down basically 1%. We had driven a 3% increase in the prior year. Last year, we had a lot of noise in the system especially around the drought, as I discussed earlier. So top line's pretty stable. The opportunity really is to grow margin, which we discussed. We feel very confident that the initiatives we have in place will deliver margin improvement that will be very accretive to overall earnings. We have exhibited, as we've discussed, a great ability to manage the expense side of the business. So the enterprise is stable. In order for the enterprise to grow and really be competitive into the future, it takes people. And at the end of the day, while the company's been headquartered in Abilene for 111 years, this is a town of 7,000 people. And hiring other talent from the market that are coming from places like Sam's Club or for -- from PacSun or Sports Authority or Myer up in Grand Rapids, Michigan or Dillard's, we had a really difficult time getting people to move to Abilene because it's such a small town. And most of the people who were trying to recruit at the management level, specifically in merchandising and marketing, they're coming from bigger cities and it's very hard, again, to recruit into this community.

So it really makes sense, from our perspective, that headquartering in the Texas market, with such deep retail talent available, that pipeline of talent is so significant to moving the company forward. It wasn't something that we could ignore. Again, great companies are built on great talent and we just weren't able to convince enough talent to join us and stay in Abilene.


[Operator Instructions] We'll now go to Bob Schwerin, Double Play Partners.

Robert Schwerin

Just one quick question. As part of the move to Dallas, are you personally going to move?

Richard E. Wilson

I will be buying property in Dallas and yes, I am. I will still maintain a property in Boston because my wife's family is -- she has a lot of family in that area. But we, my wife and I, will be buying property in Dallas and I will be spending the vast majority of the time in the Dallas market, yes.


[Operator Instructions] And we'll now go to William Redpath [ph].

Unknown Analyst

I was just wondering about the stock buybacks. How is it decided when and how many shares are going to be bought back?

Richard E. Wilson

Well, basically, William...

Royce L. Winsten

I'll take that, Rich. It's a board decision. We take advantage of opportunities that present, when the opportunity to buy stock at the prices that it was being offered at arise, it's a very compelling investment and a very good use of shareholder funds. So when opportunities present, we try to take advantage of them.

Unknown Analyst

Okay. Very good. If by any chance, is there a target? I know there's so many authorizations right now, but is there a target to say go below 3 million shares outstanding or anything like that?

Royce L. Winsten

We have no specific targets.


And we have no further questions in the queue at this time. I'll turn the conference back over to Mr. Royce Winsten, the Chairman, for closing remarks.

Royce L. Winsten

Thank you very much, operator, and thank you, everyone, for being with us on the call. Look forward to speaking with you again next quarter.


Thank you. If you wish to access the replay of this call, you may do so after approximately 1:30 p.m. today, Central Time, by dialing 1 (888) 203-1112 and using the replay passcode 868874. Or you can visit the company's website 4 hours after completion of this call. Go to and visit the Investors page.

This does conclude our conference for today conference. Thank you for participating and have a nice day. All parties may now disconnect.

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