Delta Apparel Inc. (NYSEMKT:DLA) Q3 2019 Results Conference Call August 5, 2019 4:30 AM ET
Robert Humphreys - Chairman and Chief Executive Officer
Deborah Merrill - Chief Financial Officer
Conference Call Participants
Andrew Mali Vijayan - Roth Capital Partners
Jamie Wilen - Wilen Management
Chris Colvin - Breach Inlet Capital Management
Joe Furst - Furst Associates
Thank you and good afternoon to everyone participating in Delta Apparel’s Fiscal 2019 Third Quarter Earnings Conference call. Joining us from management are Bob Humphreys, Chairman and Chief Executive Officer; and Deb Merrill, Chief Financial Officer and President, Delta Group.
Before we begin, I would like to remind everyone that during the course of this conference call, projections or other Forward-Looking Statements may be made by Delta Apparel’s executives. Such projections and statements suggest prediction and involve risks and uncertainty, and actual results may differ materially.
Please refer to the periodic reports filed with the Securities and Exchange Commission, including the Company’s most recent Form 10-Q and Form 10-K. These documents identify important factors that could cause actual results to differ materially from those contained in the projections or forward-looking statements.
Please note that any forward-looking statements are made only as of today and except as required by law, the Company does not commit to update or revise any forward-looking statements, even if it becomes apparent that any projected results will not be realized.
I will now turn the call over to Delta’s Chairman and Chief Executive Officer, Bob Humphreys.
Good afternoon and thank you for joining us on our Fiscal 2019 Third Quarter Earnings Call. On today's call I will briefly discuss our business results along with key highlights that showcase why we continue to believe that Delta Apparel remains well positioned for profitable future growth. I will then turn the call over to our CFO Deb Merrill for more detailed discussion of our financial results.
We are extremely pleased with our accelerated top-line growth in the third quarter with overall sales of nearly $120 million representing year-over-year increase of roughly 5%. Our Delta Group segment continues to benefit from the strong sales growth in our digital print business DTG2Go. I’m also pleased to share that our Soffe brand achieved sales growth of nearly 3% for the quarter and help drive overall growth in that segment.
Our Salt Life group segment started the quarter strong with the arrival of more spring like weather and benefited from the later Easter holiday and spring break selling periods that impacted the prior quarter. That early sales momentum continues through the quarter resulting in robust year-over-year sales growth of over 18%.
Excellent quarters like this one only strengthens our lead in the Salt Life brands assigning long-term growth potential. Taking a look at our performance in greater detail, we delivered another quarter of solid top-line growth in our Delta Group segment, registered year-over-year sales increase of 5% that was anchored in our DTG2Go business, 53% sales growth for the quarter.
The foundation of our digital print business remains strong and we are excited about our expansion in DTG2Go and the synergies it is creating across our platform. We recently announced the planned opening of two new digital print facilities service in the Texas and North East markets.
These facilities, one located in Dallas and the second in Cranberry, New Jersey will further our strategy of establishing integrated locations that combine DTG2Go state-of-the-art on-demand platform with our activewear business, reliable supply of low cost fashion and core basic garments.
We initiated this vertical supply chain strategy with our facility in the Miami area and it has been a highly effective differentiator for us and something our competitors cannot easily replicate. Our two new facilities will give us a total of seven digital print locations and create a truly seamless nationwide print and fulfillment network able to reach over half of all U.S. consumers with one day shipping including the important New York City and Dallas metropolitan area markets.
As we have noted in the past, the speed with which we manufacture and deliver many finished garments to end consumer remains the key competency for us. Accommodation of our Western hemisphere manufacturing base multi-facility distribution strategy and leadership position in the on-demand digital printing is unparalleled in the market and we believe these two new facilities will only enhance our competitive advantage going forward.
We continue to view digital printing as a large and generally untapped market particularly when you consider the huge amount of screen print apparels sold in U.S. and globally that could be digitally printed on-demand. We see an exciting number of near-term growth opportunities in this space spanning across many channel.
In addition to the benefit DTG2Go’s on-demand solution to eliminate inventory risk for our customers, DTG2Go’s fulfillment model also provides growth opportunities for customers by allowing them to be more aggressive through their product offerings and better leverage their intellectual properties portfolios and creative design teams.
DTG2Go continues to develop and offer value added services, such as unique UPC codes and other packaging options which allows for a seamless retailer experience with on-demand and in-store purchases.
Over the past 18 months we have clearly shown our commitments to the digital print business through a combination of multiple acquisitions and significant investments in digital print capacity, proprietary fulfillment systems and new facilities. In addition as I mentioned on my second quarter call, we have a first-mover advantage with our recent adoption of its first in its kind polyester printing technology delivered by Kornit Digital.
I'm pleased to report that we have initiated production utilizing this new technology and believe it has tremendous market potential given this increased demand for decorated performance polyester garments. We have great momentum in our DTG2Go business as we enter our final quarter of our fiscal year.
With three quarters of the year now behind us, we have a fair line of site to achieve our full-year goal as more than doubling DTG2Go revenues to over $60 million and we remain very confident this business will quickly grow to $100 million in revenue with healthy double-digit operating margins.
Now turning to the other parts of our Delta Group’s segment. We executed our plans for the quarter and our core activewear business and market conditions appear to remain solid. Demand for our catalog fashion basic line, which includes by Delta Platinum brand continues to generate double-digit growth in that more profitable piece of our business. The vast majority of our new product development continues to be focused on our fashion basics line and is driving exciting new product innovation including fabric, color and silhouette expansions.
Our continuing emphasis on new sales channels such as direct-to-retail and e-commerce along with cross selling opportunities including our catalog line, the DTG2Go digital print and Soffe decoration platforms is driving new business along with value for customer diversification. We anticipate more growth in activewear as we capitalize on these new go-to-market strategies and further leverage our internal manufacturing capacities and decoration and fulfillment services.
Customers interest in our Western hemisphere manufacturing platform continues to be solid and the dynamics in the private label market remains favorable to the platform like our FunTees business and are sophisticated from our compliant standpoint, flexible in the products and retail services they can provide and importantly close to the United States market. I'm pleased to report that FunTees shipped a record number of units in our third fiscal quarter and remains on-pace for record unit sales for the full-year.
Finally within the Delta Group an update on our Soffe brand. In addition to the encouraging year-over-year growth at Soffe it also achieved solid profitability improvement. We had a strong quarter in the military channel and also saw wins with team dealers and specialty retailers.
Soffe's performance on the B2B side which allows customers to easily place the Soffe orders online continued with double-digit growth during the quarter bringing its year-to-date growth to nearly 40%. We believe that Soffe brand is gaining more traction with consumers and benefiting from the trends favoring authentic heritage brands.
Looking at our Salt Life Group, this was another quarter of broad-based success with our Salt Life business achieving sales growth in excess of 18% and solid performance across all major sales channels. As I mentioned, the later Easter holiday in spring breaks provides some nice early tailwinds and the Salt Life business was able to sustain that momentum throughout the quarter.
The nice growth trajectory Salt Life enjoys with national and regional retailers in the first half of the year continued during the third quarter. We expect this momentum to continue as Salt Life grows geographically with these larger accounts and to possibly accelerate several potential new national opportunities on the horizon.
In addition, product test with several new regional retailers in markets outside of Salt Life’s traditional strongholds have gone well and we hope to expand on that success going forward. From a product perspective, Salt Life higher price performance line continues to be well received across our wholesale partner base and branded retail stores and our sales mix continues to diversify with women's shoes and accessory categories gaining more traction.
In addition, our expanding product lines facilitate more opportunities to gain floor space, point-of-sale displays and shop-in-shops and retail.
On the direct-to-consumer side sales from the Salt Life brick and mortar retail footprint continues increase and a new store is expecting to open in Orlando, Florida market in our fourth fiscal quarter, and another in Key West Florida should open soon thereafter. These additional locations will bring Salt Life’s total store count to eight. And we have got several other locations under development is Florida and South Carolina with more in planning for the future.
During the quarter, we converted our Salt Life.com e-commerce site to a new technology platform that improves the user experience and speed on mobile devices. Although this transition impacted sales during the quarter, we are excited to be on the new platform and off to a good start in our fourth quarter with a nice rebound in site traffic and demand.
One of the many interesting things about our e-commerce business is the valuable insight it provides to where our consumer base and brand awareness is growing geographically. Recently, Illinois became one of the top 10 states for Salt Life direct to consumer sales and Pennsylvania is another. This inland growth in Midwest and Northeast markets is an exciting indicator for the potential for the brand in new regions and a validation of the efforts we have made to expand geographically.
Our entry into the beverage with Salt Life Lager had a nice quarter of market expansion, as we entered Alabama, Tennessee and South Carolina. We now have distribution of Salt Life Lager in five states, and we are planning entries into additional South Eastern markets from the fourth quarter and as we move into the new fiscal year.
The performance of Salt Life Lager and other brands extension like the Salt Life Food Shack restaurants continue to draw the brand's audience and lifestyle positions while also providing us with a nice supplemental revenue stream.
To summarize our view of the quarter and looking ahead we were pleased to deliver strong top-line growth and broad based strength across our business segments and continued outperformance in our fast growing digital print business. We are also extremely encouraged by the double-digit growth of our Salt Life business and positive trends with Soffe.
Our businesses are working together better to capitalize on opportunities to leverage the flexibility of our manufacturing decoration and distribution platform and we believe we are in a good position compete in our markets going forward.
I'll now turn the discussion over to Deb to review our financial results in more detail.
Thank you Bob. As Bob noted, we are pleased with our third quarter performance and the continued strength from our Delta Group and good momentum in our Salt Life Group. For the third quarter net sales were $119.3 million up 6.3% from the $112.34 in last year's third quarter.
Net sales in the Delta Group segment increased 5% over the prior year period driven by the strong growth from DTG2Go as well as improvement in our Soffe business. The growth at DTG2Go was driven not only by the recent acquisitions, but also by organic growth over the prior year keeping us on to pace generate about 20% organic growth in this business.
In the Salt Life Group segment net sales increased 18% with strength across all major sales channels. Gross profit for the third quarter was $24.8 million up 2.2% from the prior year quarter. As expected gross margins sequentially improved from the second quarter, increasing 240 basis points to 20.8% for the third quarter. We look for our gross margin to continue to increase in the fourth quarter and as we progress through the upcoming fiscal year.
SG&A expenses as a percentage of our overall sales was 15% an improvement 100 basis points versus last year driven by better leveraging of our cost structures with higher sales volumes in both our Salt Life Group and Delta Group segments.
Other income in the Salt Life Group segment benefited from a discrete gain of $1.3 million realized from the settlement of a commercial litigation matter during the quarter. Net of related expenses reported in SG&A the gain favorably impacted operating income by about $1 million or $0.10 earnings per diluted share.
Operating income for the quarter was $8.4 million compared to $6.7 million last year with improvements in profitability across both the Delta Group and Salt Life Group segments in addition to this discrete gain recorded in the quarter. Net income for the quarter was $4.9 million or $0.70 per diluted share compared to net income of $4.6 million or $0.62 per diluted share in the prior year period.
Now turning toward year-to-date performance. For the first nine-months of fiscal 2019, net sales were $323.8 million, up 7% from $302.5 million in the comparable period last year. Net sales in our Delta Group segment increased 7% over the prior year and net sales in our Salt Life Group segment increased almost 7% over the prior year as well.
Gross profit for the first nine-months was $62.3 million down slightly from $62.9 million in the comparable period last year with gross margins at 19.2% down 160 basis points from the prior year. Higher cost raw material, along with acquisition integration expenses and start up costs from new product launches in our private-label business impacted our first half of fiscal 2019 results. SG&A expenses as a percentage of sales improved 40 basis points to 16% compared to 16.4% in the prior year period.
Operating income was $11.3 million compared to $14 million in the comparable period last year with the majority of decrease attributable to the discrete expense of $2.5 million taken during the first quarter in connection with the resolution of a customer bankruptcy matter within the Delta Group segment that we previously disclosed. Net income for the period was $4.7 million or $0.67 per diluted share compared to the prior year period net loss of $1.8 million or $0.25 per diluted share.
Now turning to the balance sheet. With regard to CapEx the total spending for the first nine-month of fiscal 2019 was $10.3 million with $6.6 million coming in the third quarter. This spend was principally related to digital printing and other equipment as well as IT system enhancements. Depreciation and amortization including non-cash compensation for the first nine-months was approximately $10.3 million with approximately $3.4 million in the third quarter.
Regarding our share repurchase activity during the quarter we repurchased about 14,000 shares of our common stocks at an average price of $21.97 per share and a total cost of about $308,000. As of quarter end, we had approximately $9.5 million remaining approved for share repurchases under the program.
Total debt including capital lease financing as of the end of the quarter was a $149 million up approximately $33 million from last year. The majority of the increase was driven by our recent digital print acquisition as well as investments in the digital print business coupled with higher working capital to support our various growth initiative. We continue to expect our debt to decrease by about $15 million to $20 million as we progress through the fourth quarter.
Before turning the call back to Bob, I want to give some insight into our anticipated results for the remainder of the year. We expect to see more overall sales and earnings growth to finish the year driven by continued top-line strength from our DTG2Go business as well as solid performance from our Salt Lake business.
As mentioned before, we expect continued sequential improvement in our gross margins finishing the year with strong operating profitability driven by sales growth in our higher margin product and a better balance between selling prices and raw material cost in the activewear business.
Now, I will turn the call back to Bob for his final comments.
Thanks Deb. Our third quarter was well executed across all of our business segments and we enter our final quarter with exciting momentum in a variety of areas. Our focus on new product development, customer diversification, sales channel expansion is driving more and more new opportunities for optimal growth and we believe the investments we have made to create a more flexible manufacturing and distribution platform will allow us to effectively leverage these strategies.
We also believe we are uniquely positioned to adapt and capitalize on whatever new trends may arrive at retail through our ability to internally manufacture the majority of our products and deliver them quickly with the retail customization and sophistication customers now demand.
Before I close, I would like to thank all of our teams for their hard work and dedication to Delta Apparel. We now have approximately 8300 associates spread across four countries and they above all else derive our growth and success as a Company.
So operator, now we would be glad to open the call for any questions.
Thank you. [Operator Instructions] Will go first to Dave King from Roth Capital Partners. Your line is open.
Andrew Mali Vijayan
Hi there, this is Andrew stepping on for Dave. So Just to start off. It looks like organic growth for your Delta Group was up 2% or so. Is there anything you can share how catalogue and private label performed in the quarter? And then what was organic growth for DTG2Go?
Yes. So overall, from the catalogue in the private label business, catalogue continue to have some growth. That was offset though by some sales dollars decline in our FunTees business and as we have mentioned in prior quarters, our unit growth is up in our private label business, but being offset by some pricing differences based off of the products that we are delivering at the request of our customers. So overall that catalogue growth really offset the private label sales dollars decline.
And as far as DTG2Go is concerned, it obviously have this strong growth, some of that was additive from the acquisitions we have recently done. But we had a stronger organic growth than we did in the March quarter and are on-pace to meet our 20% overall organic growth that we have - you know, that was our goal for this year and going forward, and we are certainly on-pace to achieve or exceed that this fiscal year.
Andrew Mali Vijayan
Great, that is helpful. That is a good color, thank you. And then I guess to what extent the cotton prices still weigh on margins in the quarter. And then with cotton prices down a fair bit, should we begin to see a year-over-year increase in margins in Q4?
Alright, so to answer your question, a majority of those higher price from a cotton perspective really flush through in the March quarter, maybe a little bit still in this quarter. But for the most part, we got the highest cost cotton behind us. Certainly, there are other inflationary aspects that are still in the business.
But yes, we do expect the margins in that business to be sequentially better in the fourth quarter. And then I think where you really see the benefit is as we progress in the first half of next fiscal year as compared to the first half of our fiscal 2019 is where we would expect to see the big year-over-year improvement.
Andrew Mali Vijayan
Great. That is helpful, thank you. And then lastly for me, after the strong start to the quarter, it looks like the Salt Life growth might have moderated a bit. Do you have the growth month-by-month there and then anything you can share about trends into July and your outlook?
No, we are not going start by expecting this by month or by week, you got to look at the big picture trends I would say we are on pace to have a 10% growth rate for Salt Life, as we communicated is our expectation for what we are working for. And so far in our fourth quarter, we are seeing those trends continues.
Andrew Mali Vijayan
Great. That is helpful. Thank you.
Next we will go to Jamie Wilen from Wilen Management. Your line is open.
That was a nice quarter. I want to ask you about the capacity additions in DTG2Go. Are they now up in running in New Jersey and Dallas and are they running efficiently or are there more integration expenses to go. And how will this impact your ability as you go through the holiday season when you run 24/7, do you have more capacity this year than you did last year?
Yes. Those are good questions Jamie. The two locations will really be opening at the kind of end of this summer. So right towards the end of the fiscal year is when we expect to get those opened and then obviously into the first quarter to have them up running full speed for the holiday season.
There will be some tariff expenses in the first quarter of next year from that, but we don't expect that to be a significant impact to the overall results. We definitely will have more capacity for this upcoming holiday seasons than we did last year you know to support the expected strong again 20 plus % growth rate that we expect to see in this business, so that will certainly help that.
We also think we will get some benefits just from being able to ship you know one day into those key markets of New York City and in Dallas, and we think for our customers that should allow them to see some stronger growth than maybe they have seen in the past as well. So we think it will be good for our customers and good for us.
And the 20% organic growth, where is that coming from? Are you picking up additional brick and mortar retailers or what type of business is generating that type of consistent growth?
Yes. The exciting thing is that we are seeing new customer growth in a lot of areas. We are seeing growth within our existing customers so that is good in and of itself, but we continue to see more and more interest from what we would call traditional retailers and you know the interest there.
I think people are really realizing the benefits that we can provide with the no inventory commitment and growth opportunity for them, you know as well as the other sales channels that we have been talking about in the promotional product areas, and across those different sales channels. So that was exciting for us, as it's not coming from just one place, but really a broad spectrum of different customers that we are really reaching at this point in time.
Great. And you now have this digital printing capability on polyester, is that ready to go, will that have an impact on your business in the holiday season?
It will, we were excited we are now selling off of that new piece of equipment as speak, so it has been launched by new customer and more to be launched in that of getting those products up online with our other customers. So, yes we do, we think that we will continue to add value and certainly we will be using that during the holiday season as well this year for the first time.
Okay and then lastly on the vertical supply chain that you have, obviously if you have the inventory in hand there won't be out of stocks for your customers when an order is placed with them. The acquisitions you made obviously had a very small percentage of using your vertical supply capabilities and your existing business was more fully integrated. How do you expect to progress on that side and increasing the vertical supply penetration to the existing and new accounts.
And I would say we are very pleased with the progress that we are making - we had during the quarter, a couple of customers that did switch over to pick up the Delta products that were previously not using the Delta products, so it's a big initiative and we are having success already during the quarter and we expect more and more to actually convert over.
Even more exciting than that I think is that the new customers are coming online now, we are selling it to start on our products, rather than have other products come in and then convert them, we are really selling the platform as a vertical supply chain to them and they are seeing the benefits of having that right there under the same roof. So I think some really good trends happening there.
Jamie just to add a little bit to that. Its compelling economic model to use our product, it eliminates duplications of distribution cost that adds in the value, it eliminates another layer of residual profit in the process and in actually some of these key markets like the Northeast we are really just limiting the vast majority of this to our products, because we have limited amount of space for big pack and so obviously we want to control that marketed products that we manufacture and already have in stocks. So we have got a lot of leverage and it’s generally pretty easy sell overtime as we progress.
Excellent. Now lastly on Salt Life, the growth you are achieving is it from more doors, new specialty business, national accounts, online where would you say your greatest opportunities have been and were in the past, where your greatest opportunities in the future?
Yes. So it was really encouraging this past quarter we really had strong growth across all of our channels of distribution and what it has typically been a greater force of e-commerce. We turned off all of our marketing on the e-commerce for about five or six weeks before while we were going through this transition of our site we didn’t want to frustrate consumers so we turned our marketing lay down and so with that it was about flat for the quarter, we are seeing that growth rebounds.
So setting that aside, really our major customers we saw the growth, we saw the growth in the independence which was nice to see compared to the prior year. And then of course we had a couple of more retail stores opened on our own. So it is nice balance growth quarter for Salt Life.
Have the national accounts expanded their number of doors or the depth of merchandise that they are now carrying for you?
A little bit of both and you know some of them are expanding doors and some of them are contracting doors as they see where our product is selling for them at retail. I think there is a few things that are going on with competitors that is going to be helpful for Salt Life going forward.
We are booking spring of next year now and getting really strong response to what we presented and our pre-orders are up and our ability to pre-sell product before we source it is encouraging. And so lots of things going on in that marketplace, over the last few years there has been a lot of players, new players coming in, partially because of the success of Salt Life and I think we are seeing some of that laying a little bit.
So lot to do to be able to profitably services these, make retailers and we do an excellent job on customer service and I think that is landing us some more space and we expect a broader percentage of our product offerings to be displayed in these retails.
We are in a lot of doors, we are proud of the doors we are in and we have a great opportunity to get these retailers to carry a bigger percent of our offer and we can show them where they do in most of the markets their sales increased sales per square foot will increase.
Great. I have got some more, but I will hop back in the queue, let someone else go.
[Operator Instructions] Alright and we will take our next question from Chris Colvin from BICM. Your line is open.
Hey, thanks for taking my question. And I apologize if I missed this. I heard some great growth stats on Salt Life and DTG2Go, but can you provide any of the growth metrics on the other businesses such as Soffe, Delta activewear, Catalog which you may have mentioned private label?
Certainly. So again I think as Bob mentioned during the call Soffe, we are excited to see some growth. Soffe achieved about a 3% growth on during the quarter this quarter, certainly driven by some strong military, but also some wins that we have been seeing in team dealer and specialty retailers. So that was a nice quarter for Soffe, both on the top-line growth and some significantly improved profitability in that business for the quarter.
And then I mentioned earlier on the actors activewear business, our catalog business grew, but that really offset then the sales decline that we saw in our private label business to end up with activewear being about flat for the quarter. Just as a reminder, in that private label business, we have got record units flowing through there.
But due to a shift in the mix of products that we are selling through both in more children's wear flowing through that com at an lower average selling price just from the garment and some fabrication changes that our customers asked us to make. The average selling price in that FunTees business is lower, significantly lower than it was previously. So while we are achieving record unit, in that on the sales dollars are down.
Got it. Okay. Thank you.
And next, we will take a follow up from Jamie Wilen with Wilen Management. Your line is open.
Yes. Just a few more on Salt Life. So you took down your online presence for five to six weeks, I believe in the past many quarters it have been growing 25% to 30% per year and you mentioned it's relatively flat what is your outlook there now that you are back online?
So Jaime, we didn't take down our website for four to six weeks, we took down our marketing, you know, our online marketing keywords. So I think we actually took it down for four days along weekend. So you know we have put it - see I would say e-commerce sales growth across the whole platform are slowing in general.
And so as they slow people are spending more money to get the consumers there and their profitability is declining further or in many cases their losses are growing in the marketplace and so we remain committed to having our e-commerce distribution channel nicely profitable across all our sites.
So some of that stuff, we are not choosing to chase. And so we will have to see as things progress with how it gets, based on what I'm seeing today a 10% to 15% organic sales growth on e-commerce site is going to be pretty good, not just on the Salt Life site, but on most sites unless you are willing to continue to discount more, more free returns and those sorts of things that really hurt the profitability of online sales.
Okay. On the Salt Life business obviously the reorder sell-through is so important in this quarter and just how has sell-through been? How would you look at inventory levels in the field for Salt Life and your expectations for where it should be as we finish the season.
Well you know I think we are off to a good start in the quarter, we are in the reorder mode, you know obviously all the spring merchandize has been shipped. Next year, we will be going to three deliveries from two and that is really to help our business outside North Carolina where the season is all a bit different and people requested more products to be delivered later there, so we are addressing some of that.
So it’s really - at this stage, we are beginning what sells everyday at retail and we get the orders, the good news is we are extremely good about replenishment on that and we expect Salt Life towards the end of season in good shape as they traditionally do.
We do improve pre-sell our performance and fashion items and we don't speculate much than what we have hard orders for. So we generally sell-through that and then the stuff we are vertical owned, which is basically the cotton graphic tees and some poly-cotton graphic tees, you know we can make those and replenish them quickly.
So we have got a nice overall supply chain for Salt Life, we will bring you some fall goods in a little bit early. Considering what could happen on tariffs that got backed off. So we will be in a good inventory composition to start shipping fall you know on time and early this year as we traditionally did.
Okay. Great job fellows. Thanks.
[Operator Instructions] Next we will go to Joe Furst from Furst Associates.
Good afternoon gentlemen. Given the weakness in your stock price and the fact that you are doing so well, what are your current thoughts on the stock buyback?
Well we have been buying back stock for just about every year that we have been a public company. We have authorization left in our ability to buy back stock, we do it under a Safe Harbor provision and so I think I have said before you know any time our stock price is trading below our book value is a pretty easy decision for us to think that is a great investment. So that is all good stuff.
I'd say at this time maybe as a shareholder I'm getting more excited that we have a lot of good opportunities to use our money to grow our business. There has been times for us and all companies where you look around and you think I don’t really know what to do with my excess cash flow or buy back our stock and while we still in the market to buying back our stock, as a shareholder I'm particularly excited for the opportunity that we have at hand and in some years I haven’t seen to organically grow our business, grow it in higher margin items both from the gross margin and operating line.
So we will keep a focus and balance on those two strategies to grow our business organically, acquisitions when we think they are strategic and what we are trying to do and fairly priced and balance that with share repurchases.
Great. We appreciate the good work. Thanks a lot.
Okay. Thank you.
And we have no further questions in the queue at this time. I'll turn it back to management for any closing remarks.
Okay. Well thanks for your time and interest in our Company. We will look forward to updating you further on our full-year here in just a few months. So thanks again.
And that concludes our call for today. Thank you for your participation. You may now disconnect.