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HNI Corporation (NYSE:HNI)

Q4 2010 Earnings Call Transcript

February 9, 2011 11:00 am ET

Executives

Kelly McGriff – Treasurer and VP

Kurt Tjaden – VP and CFO

Stan Askren – Chairman, President and CEO

Analysts

Peter Lisnic – Robert W. Baird

Chad Bolen – Raymond James

Mark Rupe – Longbow Research

Todd Schwartzman – Sidoti & Company

Matt McCall – BB&T Capital Markets

Stephen Chick – FBR

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the HNI Corporation fourth quarter results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator instructions) As a reminder, this conference is being recorded. I would now like to turn the conference to our host, Mr. Kelly McGriff. Please go ahead.

Kelly McGriff

Good morning and thank you for joining us today for the HNI Corporation conference call to discuss fourth quarter 2010 results which were announced yesterday after the market close. My name is Kelly McGriff, Treasurer and Vice President for HNI. If you have not received a copy of the financial new release, please call 563-272-7927 and we will send it to you. The release is also available on our website www.hnicorp.com. We posted a presentation intended to accompany this call to our website. The presentation contains details of our financial performance including the non-GAAP to GAAP reconciliation. It can be found by accessing the webcast link under the Investor Information section of our website. We encourage you to review this presentation.

Joining me on the line today from HNI Corporation are Kurt Tjaden, Vice President and Chief Financial Officer and Stan Askren, Chairman, President and CEO. Stan and Kurt will review the results and then open the call up for questions.

Before we begin, please be advised that statements made by the corporation during this call that are not strictly historical facts are forward-looking statements. Forward looking statements are subject to known and unknown risks. Actual results could differ materially from expected results. Additional information concerning the factors that could affect actual results can be found in the conference call presentation posted on the HNI Corporation website. The corporation assumes no obligation to update any forward-looking statements made during the call.

I now have the pleasure of turning the call over to Stan Askren. Stan?

Stan Askren

Thank you, Kelly. Good morning, everyone. We’ll share our assessment of the fourth quarter, as well as our thoughts for the first quarter of 2011 and then we’ll open the call up for questions. We had a great quarter as we experienced stronger than anticipated sales across all our businesses. The cost reset actions that we have taken in 2009 and 2010 combined with our strategic growth initiatives enabled us to deliver very strong results. Strength in our office furniture contract and international businesses driven by large projects continued at a substantial pace with a 25% topline growth.

Our supplies channel grew a healthy 10% over prior year. Our Hearth business exceeded our expectations with topline growth of 9% for the quarter, strong results in remodel-retrofit sales which were up 12% over prior year were positively impacted by the anticipated expiration of the Energy Efficiency tax credits. New construction channel was up 2%. Overall, we improved non-GAAP operating income by 42% as profit margins in both our office furniture and Hearth segments improved from the prior year. We executed well as the economy improved during 2010. For the year, with a modest increase in top line sales, non-GAAP operating income improved by 34% over the prior year. We effectively navigated those lowest small business confidence impact on our supply driven business and the contract business performed well despite a competitive market. The Hearth delivered significant profit improvement with only a slight increase in sales. These results reflect the hard work and commitment of our members, and we enter 2010 financially stronger, better positioned within our markets and focused on long-term growth. I’ll now turn the call over to Kurt to review the specific financial data for the fourth quarter. Kurt?

Kurt Tjaden

Thank you, Stan. For the fourth quarter 2010, consolidated net sales from continuing operations increased 14.9% to $466 million. Net sales for the office furniture segment increased 16.4% to $375 million. Net sales for the Hearth products segment increased 9.2% to $91 million. Consolidated gross margins, including the restructuring and transition charges, decreased to 35.2% compared to 36.5% in the prior-year quarter. Total selling and administrative expenses, including the restructuring and impairment charges decreased $15 million or 9.2%. Fourth quarter 2010 included $7.1 million of restructuring and impairment charges and transition costs, of which $500,000 was included in cost of sales. These charges included $1.9 million associated with the shutdown and consolidation of office furniture facilities and $5.2 million of impairment and restructuring charges related to Hearth distribution locations that were closed or classified as held for sale as of the end of 2010. We ended the year with $99 million of cash and we are well within our bank covenants with a leverage ratio of below 127. I’ll now turn the call back over to Stan.

Stan Askren

Thank you, Kurt. So, as we look forward, we anticipate double-digit growth to continue in our contract business in the near term. Discounting pressures remain. Our contract g grants represent outstanding value propositions for our customers and are performing well. We see significant growth opportunities in our international business, particularly in China where we continue to grow our presence across major markets and industries. We expect recovery to continue in the supply driven channel where we are the category leader. We continue to enhance our dealer experience, invest in selling capabilities and focus on our core markets. We anticipate the Hearth business to continue to be challenged by uncertainty in the new construction market. This business is well positioned to generate strong financial results as the market returns. I’m optimistic about the economy and the prospects for our growth initiatives. Our split and focus with leverage strategy drives the broadest and deepest coverage across the industry. We are uniquely positioned to benefit from our multiple growth platforms going forward. So, now I’ll let Kurt cover the financial outlook for the first quarter 2011. Kurt?

Kurt Tjaden

Thank you, Stan. So for the first quarter of 2011, we anticipate overall sales from continuing operations to be up 6% to 9%. Office furniture sales are expected to be up 9% to 11% with growth in both the supplies driven and contract channels. Sales in the supplies driven channel are expected to increase forward to 6% and we expect momentum to continue in the rest of our office furniture business with sales up 14% to 16%. Hearth sales are expected to decrease 4% to 8% driven by a decline in the new construction channel, due to the comparative impact of the home buyer tax credit we experienced in 2010. Excluding restructuring and transition charges, gross profit margin is expected to increase approximately 0.4 to 0.6 percentage points versus first quarter 2010 when it was 33.2%.

First quarter 2010 included $1.5 million of restructuring and transition costs. Excluding restructuring and transition charges, SG&A as a percent of sales is expected to increase approximately 0.2 to 0.7 percentage points, compared to 33.9% in the first quarter of 2010. We anticipated SG&A related restructuring and transition costs to be approximately $750,000 in the first quarter. Net interest expense is projected to be $3.2 million and the effective tax rate for the first quarter is projected to be approximately 36%. For the year, we are expecting capital expenditures to be $30 million to $35 million, again primarily focused on new products. And we project depreciation and amortization to be $46 million to $48 million for the year. So based on these projections, we are expecting a nominal loss in the first quarter. I would like to remind you that our first quarter is historically better lowest quarter for revenue and profit. With that, that summarizes our outlook for the first quarter of 2011. I’ll now the call back to Stan for closing comments.

Stan Askren

I remain optimistic about the markets and the improving economy. We’ll build on our momentum from 2010 to grow our business and increase profits in 2011. Our strategy to invest in growth initiatives across multiple platforms has not changed. We continue to remain focused on improving operations, reducing cost and generating cash. The corporation is financially strong and we are well positioned for long-term profitable growth. So with those comments complete, we’ll now open it up to questions.

Question-and-answer session

Operator

(Operator instructions) And our first question comes from the line of Peter Lisnic.

Peter Lisnic – Robert W. Baird

Good morning, gentlemen.

Stan Askren

Good morning, Pete.

Peter Lisnic – Robert W. Baird

I guess first question, if you could talk a little bit about the international growth that we saw, it sounds as though China continues to gain some good traction here, kind of what’s the opportunity for 2011 and beyond? How much is that contributing to growth? And then how should we think about that in terms of profitability mix for the business?

Stan Askren

So, Pete, first off, that business, although it’s grown rapidly, is still 5% of our combined business. It did in fact contribute to the growth. We are seeing high, high, double-digit growth in China, and including Hong Kong. And so, we anticipate 2011 to see similar sort of results there. A lot of that depends on what the overall Chinese economy does, but we are performing well, that economy is growing; we are doing a nice job on the topline and also, it’s a profitable business generating positive cash.

Peter Lisnic – Robert W. Baird

Okay. All right. And then, I think in the past couple of quarters you talked a bit about the investments that you’ve made and the costs that you are incurring, a few to several million dollars a quarter, can you give us a sense as to what sort of run rate we are at for maybe the first quarter and then the outlook for 2011 in terms of some of that spending? And then, maybe discuss what sort of paybacks you are seeing on some of those investments would be useful to us.

Stan Askren

Okay. I’ll take a shot at it, but I’ll let Kurt way and beyond. So what we said here is we are going to forgo some short-term profit and forgo some of our leverage to reinvest P&L dollars back into primarily front-end initiatives. And those initiatives are around accelerated new product development, around dealer development resources, channel development resources, marketing programs, promotions. We look at those item by item, company by company. And so, each company has a different set of initiatives. We track those carefully. We are currently at a first quarter of about $5 million that begins to anniversary itself once you hit the second half of the year. And payback, typically on that is 12 to 24 months, probably more, specifically 12 to 18 months, and we are encouraged. We think there’s good opportunities there and we are going to invest for the long term.

Peter Lisnic – Robert W. Baird

Thanks. So I assume sort of that $5 million run rate going forward. I mean, if you are looking at 12 to 18-month paybacks, are there opportunities to maybe accelerate that flaming a bit?

Stan Askren

Well, part of that has to do with just the capacity of the organization to, say, graze over what we have on the table.

Peter Lisnic – Robert W. Baird

Okay. That’s a good way of putting it. And then the, I guess last question I had is, you kind of look at a better demand environment relative to your capacity and organizational depth, any thoughts on adding capacity – not capacity, but labor or any incremental cost that you might incur in the second half of this year that sort of depress some of the strong incrementals that we’ve seen out of the business?

Stan Askren

I think we are managing pretty well in that regard. One of the things I’m pleased with is our organization – each of the companies has responded well to the growth. Certainly, labor adds is really the capacity that we are going to need to put on line. We are in good shape around sort of PP&E, property, plant, and equipment. And so, it’s going to be the labor add. We manage that closely, we do use overtime, we’ll use some temp labor to cover some of the cyclical or seasonal, for a better word, upturn, and I don’t anticipate at this point to be any sort of incremental cost penalty there.

Peter Lisnic – Robert W. Baird

Okay. That’s perfect. Thank you for your timing and all.

Stan Askren

Thanks, Pete.

Operator

Thank you. Our next question comes from Mark Rupe from Longbow Research. Please go ahead.

Mark Rupe – Longbow Research

Hi, guys. Great quarter. On the office furniture side, was there any surprises? I know that, I think your performance is a little bit better, maybe what you got into, but in general, any surprises on strength and maybe in particular, in which area is the strength?

Stan Askren

I don’t think there is any surprises; it was kind of across the board, Mark. We, in the supply side, put through our price increase and we always get to deal with the buy ahead of some of larger closing or stocking customers. And I think that was a little bit higher than we would have anticipated, but nothing that set us back on our heels.

Mark Rupe – Longbow Research

And then, on the supply side, obviously you are expecting growth of – well, I think you guided to 4% to 6% in the first quarter. So, I mean even if there was pull-forward, I mean the 4% to 6% still is a very positive number.

Stan Askren

That’s correct. We’re, I would say, beginning to see the early signs of recovery there. If you look at kind of the small business confidence, you are seeing a tick-up, still small business owners are, I think, in more of a maintenance mode, less of an expansion mode, but we anticipate, barring some extraneous events, that that should continue to improve.

Mark Rupe – Longbow Research

Okay. And then you said [ph] large productivity and still some discounting pressures on the contract side. I know that in the past you’ve kind of called out price/cost GAAP issues, was there a significant mismatch in price and cost in the fourth quarter and what are your thoughts kind of in the first quarter? I would have thought maybe we would see a little bit more leverage on the gross margin versus last year.

Kurt Tjaden

So, Mark, on the fourth quarter, we did see more discounting and particularly more on mix of business with our bid and large projects and we have called out, I think, a negative 6% to 7% in the outlook and there we are probably a couple of million dollars that slipped back in the fourth quarter because of that mix of business. So that was the fourth quarter. Going forward, recall, we put price increases in the third quarter, our HON Company put a price effect in January. So as we look out into the first quarter, it looks like we’ll close that gap for the quarter, but clearly, and I’ll let Stan comment on this, as we look out into the year, seeing commodity inflation pressuring coming at us.

Mark Rupe – Longbow Research

Okay. Perfect. Great, guys. Good luck. Thank you.

Kurt Tjaden

Thank you.

Operator

Thank you. Our next question comes from the line of Budd Bugatch from Raymond James.

Chad Bolen – Raymond James

Stan, Kurt, Kelly, this is actually Chad Bolen sitting for Budd.

Stan Askren

Hey, Chad.

Chad Bolen – Raymond James

A couple of questions, Kurt, if you wouldn’t mind, just to make sure we are on same page, in terms of guidance, are there any revenue adjustments to the prior year for de-consolidations or disc-ops or anything like that? I mean, what’s the revenue base?

Kurt Tjaden

No, we’ve anniversaried all of our disc-ops for 2011. So the 2010 number should be good.

Chad Bolen – Raymond James

Okay. Great. And the restructuring charges in the quarter came in significantly above what you had guided to, could you give us a little insight into that variance? Was it maybe an acceleration of decisions that had already been made, or were there new actions or decisions taken in the fourth quarter?

Stan Askren

Well, what we have done is we dispositioned a Hearth installing dealer, distributor in one of the markets over to local management, local leadership that we think can do a better job. So I think that surprise theme [ph], we actually did get it done in fourth quarter of 2010. It was – could have gone to 2011. And so, we tended to be conservative on that, and not factored in sort of – and count of happening in the first quarter of 2011 (inaudible) fourth quarter of 2010

Chad Bolen – Raymond James

Okay. That makes sense. And talking a little bit about Hearth, I mean, you guys beat your sales guidance pretty handily, beat our estimate, and I think even I had gotten the revenue number right, I don’t think I would have had you at 11.7% operating margin, can you talk a little bit more in detail about what drove that level of profitability and is that sustainable, obviously understanding that volume and variable expenses are going to fluctuate, but is that kind of the right run rate to work off of going forward.

Stan Askren

I’ll talk volume here and then I’ll let Kurt talk some of the cost structure. So what happened in the fourth quarter is several events were positive; A) positive for the remodel- retrofit, for the Hearth stove side primarily is, as fuel costs go up, the alternative biomass becomes more attractive, so that benefitted. Secondly, there is nothing like a good hard winner to get people thinking about heat and also, getting to think about emergency heat. So as the storm through and knocks power lines down and people without power, they think about the Hearth stove to provide alternative heat. Third, there was the expiration of this energy efficiency tax credit which basically offered up to $1500 tax incentive for energy efficiency appliances, that expired – actually stepped down to $300 from $1500 as of the end of the year. And so, we saw a pretty aggressive activity by the dealers and actually saw more activity around that than we anticipated. I’ll let Kurt talk about the cost structure here.

Kurt Tjaden

So, Chad, your comment, we still – the leverage you ought to be thinking about on that business is still always consistent with our past comments, at that 30% to 35% leverage going forward. There were some things that were unique in the fourth quarter. One, to link back to Stan’s comment on volume was, we had benefit from richness and mix, predominantly both on retail and on those stoves. So that was a better mix of profitability than we had anticipated. We did better on the cost side and that group has been at that for five years and continues to do an exceptional job on taking cost out of that business. And then, the other one, we talked about this in office, in the fourth quarter of 2010 we had a significant adjustment on LIFO [ph] is that group has brought their inventory down. So, kind of half a bit on inventory, a big part of it on mix and then on cost reset, but 30% to 35% is what you want to be using going forward still.

Chad Bolen – Raymond James

Okay. That’s very helpful detail. I appreciate that. And I guess, along those lines, could you share with us, maybe a range, your thoughts on what your guidance assumes in terms of operating margin for the segments?

Stan Askren

Sure. If you think of for office, we would be looking somewhere in the $9 million to $11 million range on profitability for first quarter for that. And on the Hearth business, that’s a business that we are projecting a loss, it’s somewhere in the $3 million to $4.5 million range.

Chad Bolen – Raymond James

All right, guys. Well, congratulations on the beat in the quarter and good luck to you 2011.

Stan Askren

Thanks, Chad.

Operator

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

Todd Schwartzman – Sidoti & Company

Hi, good morning, guys. Sticking with the weather, the winter theme, was there any impact on supplies driven sales orders in particular, or just furniture overall in either Q4 or Q1?

Stan Askren

It’s hard to tell, Todd, on the impact of first quarter. Certainly, I believe there was an impact just when there are businesses that are shutdown, etcetera. What that impact is is hard to tell. I think it’s an impact that’s made up as well. It’s not demand that goes away, it’s just demand that gets deferred. And think there’s plenty of time in the quarter to make up whatever impact that might have occurred there.

Todd Schwartzman – Sidoti & Company

Okay. And as we look at modeling 2011, how should we think about incentive compensation?

Kurt Tjaden

Yes, Todd, I would expect there would be some increase, it’s predominantly in profit sharing at our operating companies as we those businesses continue to improve. As we look in the first quarter, that’s about a million dollar number that’s included in our SG&A estimate. So that’s the big lever from an incremental year-on-year comparison.

Stan Askren

And what Kurt said is profit sharing, Todd. What that is, is we have since the beginning of this corporation share the profits with our member owners as we make it. It’s a significant part of the retirement contribution. And so it’s based on profitability, return on sales type of profitability predominantly. So as return on sales improve, we make bigger contributions to our member owners' retirement.

Todd Schwartzman – Sidoti & Company

Got it. What can you tell us about new product initiatives for the year?

Stan Askren

Well, we continue to be very aggressive in that regard across the board and across the companies. And so, last year we launched a record number of new products and we anticipate doing the same this year. And adversely, is in all categories and all price points top to bottom. And there is remarkable story there, one of our companies launched a new CD line [ph] which first year generated more than 100,000 units and over $20 million worth of sales. So when we are not probably as expansive on product developments, specific new products, maybe there are some of the other units require us put a vital vibrant part of our plan going forward.

Todd Schwartzman – Sidoti & Company

Great. And lastly, you don’t disclose backlog, is that correct?

Stan Askren

That’s correct. We are relatively short lead time, Todd, one of the things we are very proud of. And so, backlog is probably not a very good measurement of things going forward. Our objective is to ship as fast as possible.

Todd Schwartzman – Sidoti & Company

And on the contract side, you wouldn’t want to throw out any numbers?

Stan Askren

No, sir.

Todd Schwartzman – Sidoti & Company

Thank you very much.

Stan Askren

Thank you, Todd.

Operator

Thank you. And our next question comes from Matt McCall from BB&T Capital Markets.

Matt McCall – BB&T Capital Markets

Thank you. Good morning, everybody.

Stan Askren

Hey, Matt.

Matt McCall – BB&T Capital Markets

So, you don’t talk about backlog, I understand that, but when you talk about some of the leading indicators as we look at Q4, can you talk about things like customer visits, RFPs, mark-ups, any of those things would be leading indicators and maybe how those trend or how those items have trended in January and February?

Stan Askren

Yes, Todd, we don’t share – excuse me, Matt, pardon me, we don’t share that sort of data. We don’t even – each of the individual companies track of it, because we have just a different business, we go all the way from the supply driven transaction on line and all the way up to A&E specified, it’s such a broad mix. I’m not sure any of that would even be valuable. What we do believe is that as the economy improves, office furniture conditions [ph] improve, small business, and I think you do a pretty good job of tracking small business, we are waiting for that to continue to accelerate. I think small business owner is feeling better, if not yet transferring to employment growth and capital spending, I think it will. On the contract side, certainly we are seeing that pent-up demand around churn to pick up, I think that will start to work through. And then, I think what we are going to see is the sort of normal type of growth begin to driven by obviously the absorption of service sector employment growth. And the one question is government, government has been a significant growth engine for us in the past, was last year. We anticipate that to continue to go as well. So you look at activities, activity continues to be very healthy driven by different factors across our businesses.

Matt McCall – BB&T Capital Markets

You came to – ahead on me on government, I was going to ask that next, your comment there was you expect it to be healthy, that kind of a – is that a relative statement, is that more growth, is that remaining elevated levels, just how do we compare it to 2010?

Stan Askren

This is a guess too, Todd, because – or excuse me, I keep calling you Todd. Matt, because it’s hard to say how all this is going to work out with the states and what the federal government is going to do. We anticipate it’s going to continue to grow in 2011. How much? I don’t know. I think it’s likely to come back down a bit as to where it was in 2010, but it should still be healthy.

Matt McCall – BB&T Capital Markets

Okay. And then, Kurt, you – to an earlier question, you talked about some of the (inaudible) one-time benefits to Hearth, so I think you talked about inventories and inventory adjustments and what is the other one, and better mix, the way to look at that that it is kind of one-time in nature, I guess the inventory adjustment would be, and if so, what was the – can you quantify the benefits? So when we are looking out Q4 next year, we can keep that in mind.

Kurt Tjaden

Yes, the inventory benefit was a little north of a $1 million, Matt, that Hearth. So you wouldn’t expect to see that roll through. And mix will vary quarter to quarter based on the season. So I would not probably model that through as I looked at that either.

Matt McCall – BB&T Capital Markets

Got it. Okay. And then, finally, a little bit more restructuring cost, I guess, showing up next quarter, I think you said $750,000, maybe on top of a question earlier, what is the expected benefit that we can bake in? Is there any incremental benefit? And how many more quarters are we going to see these restructuring costs, I guess, associated with what has been announced thus far show up?

Kurt Tjaden

Yes. We’ve got a $700,000 – I think three quarters of a million I called out and it’s the tail end of things on – really on things we previously announced on manufacturing consolidations on office and a little bit on Hearth. So most of that, you should see rolling through that, Matt, as we talked about incremental savings; in ’10, we saw north of $10 million, I think, rolling through that should be anniversaried at this point.

Matt McCall – BB&T Capital Markets

Okay. So, no incremental. And any incremental restructuring post the $750,000?

Kurt Tjaden

Well, as you know, Matt, we always are looking at structural costs that will drive a longer term benefit. We don’t those prospectively. I think we are getting to the place where they would be less than this going forward.

Matt McCall – BB&T Capital Markets

Okay. Okay. And I’m going sneak out [ph] I’m last anyway, but we talked about incremental margin on the Hearth side, what about in furniture? I guess, it was a little low than we expected. What would the outlook be as we move through FY11 overall?

Kurt Tjaden

So, we still talk about this 30% core leverage. That said, what we’ve said is that we are going to invest incrementally in these strategic growth initiatives to fund future growth. That’s number one. Number two, there often is this movement around material cost spike that may impact that as well. Other than that, it’s – no, I think we would expect to see those investments start to pay back and you would see leverage start to accelerate as we get into the back half in ’11 and ’12, but you – we’ve talked this, Matt, it will be lumpy quarter to quarter, but that’s still right objective as we look at that segment of the business.

Matt McCall – BB&T Capital Markets

Okay. Okay. Got it. Thank you, guys.

Stan Askren

Thank you, Matt.

Operator

Thank you. Our next question comes from the line of Stephen Chick from FBR.

Stephen Chick – FBR

Hi, thanks. Congratulations. Just a follow-up question on, I guess, first quarter sales guidance as it relates to office furniture. The – there were some comments about weather and kind of sounds like there were some inventory purchase activity for the fourth quarter, and – but I don’t think – it didn’t sound like that was too significant, but the up 9% to 11% expectation, can you discuss a little bit of that – what the thoughts are behind that target? And is it – slightly compares, or what – or maybe even what you are seeing would help too.

Kurt Tjaden

Steve, you are going to have to narrow that question down a little bit for me, please.

Stephen Chick – FBR

Well, I guess you came off a very strong quarter in sales growth in office furniture and it sounds like for the first quarter, it’s still a healthy rate of growth, but it’s at a decelerated pace. I think you are targeting up 9% to 11% coming off of a 16% rate of growth, and just curious as to the thinking behind the trend?

Kurt Tjaden

Yes, a lot of it is driven by seasonality comparable over previous year. So it has to do with fourth quarter. We had, as we said, an inventory buy under the supply side of the business and so, it’s driven by many factors and many segments of the market and driven by different timings.

Stephen Chick – FBR

Okay. And the inventory buy portion, is that quantifiable, or is it kind of tough to narrow down what that might have helped the topline trend by in the quarter?

Kurt Tjaden

Yes, we’ve got a shot at that. I mean, we’ve estimated that the fourth quarter is somewhere between $5 million and $6 million that was a buy add [ph].

Stephen Chick – FBR

Okay. All right. That’s helpful. Thanks.

Kurt Tjaden

Okay. Thank you.

Operator

Thank you. And we have no further questions at this time.

Stan Askren

Okay. Well, thank you all very much for your interest here in HNI. We look forward to talking to you in the future. Have a good day.

Operator

Ladies and gentlemen, this conference will be available for replay after 12 PM today until February 16 at midnight. You may access the AT&T Executive Playback service at any time by dialing 1800-475-6701 and entering the access code, 189302. That does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference Service. You may now disconnect.

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