Stanley Furniture Co.

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Management Discusses Q1 2013 Results - Earnings
Call Transcript - Seeking Alpha
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earnings-call-transcript
Executives
Micah S. Goldstein - Chief Financial Of f icer, Chief Operating Of f icer, Principal Accounting Of f icer,
Secretary and Director
Glenn Charles Prillaman - Chief Executive Of f icer, President and Director
Analysts
Chad Bolen
John A. Baugh - Stif el, Nicolaus & Co., Inc., Research Division
Barry George Haimes - Sage Asset Management, LLC
Brad Hathaway
Stanley Furniture (STLY) Q1 2013 Earnings Call April 16, 2013 9:00 AM ET
Operator
Greetings, and welcome to the Stanley Furniture First Quarter Operating Results. [Operator
Instructions] As a reminder, this conf erence is being recorded.
It is now my pleasure to introduce your host, Micah Goldstein, Chief Operating and Financial Of f icer
f or Stanley Furniture. Thank you. Mr. Goldstein, you may now begin.
Micah S. Goldstein
Thanks, Jesse. Good morning, everyone. Glenn and I appreciate you taking the time this morning to
join us as we review the highlights of the f irst quarter.
During the call, we may make some f orward-looking statements that are subject to risks and
uncertainties. A discussion of f actors that could cause actual results to dif f er materially f rom our
expectations is contained in our SEC f ilings and the press release announcing these results. Any
f orward-looking statements we make speaks only as of today, and we undertake no obligation to
update or revise those f orward-looking statements to ref lect events or circumstances af ter this
morning's call.
Glenn?
Glenn Charles Prillaman
Good morning, and thank you f or joining us. I'm pleased to share with you this morning that the plan
to establish the Stanley and young brand -- the Young America brands as leaders in the premium
segment and position each f or growth is well underway. The major milestones of the plan have
included several large and troublesome issues that I'm sure you're aware of f rom our previous calls.
They have proven very disruptive to our sales over the past accounting periods. The good news is
that we f inally reached the time when completion of the plan is within our sights. And by the time we
have our next call, we think we will have jumped the last 3 hurdles, but we certainly have some work
still ahead of us to do.
I'd like to take you through what those last 3 hurdles are, we believe, and give you a little color on
that. And then I'll touch on each brand and then turn things back over to Micah.
First, we are excited to host our current and what we believe should be many new customers at this
week's High Point Spring Market. We're calling you f rom our new building here that has consolidated
our showrooms and our of f ice. Not totally opened yet, but Spring Market is upon us and we will open
this week. The showroom is in a new location, as well as being a totally new aesthetic f or our
customer. And both the location and the showroom, itself , are designed to better serve our target
customer who, like all customers today, are shopping f or great value but who are also just as
f ocused on how superior design drives consumers to purchase better goods. We think we entered
this market more prepared to give customers what they want than at any time in several years. And
the opening of our new showroom in the Las Vegas designs -- excuse me, Las Vegas Design Center
earlier this year was a success and we expect more of the same this week.
Our second hurdle, and it is really another major step towards our company's f uture growth, and that
is the opening of our new consolidated corporate of f ice. It's conveniently housed, as I said, adjacent
to the showroom here in downtown High Point. This move will be completed in this quarter, the
second quarter. And with it, we launched a new outlook on our business as it's been almost 10 years
since we've had everyone under one roof . We're extremely appreciative of the staf f 's ef f orts as we
make this move. And here, I'm speaking of both our newest associates as well as those tenured
associates moving with us. I'd also like to add that those associates that are not moving f orward
with us to High Point have helped us tremendously and continue to do so. This has truly been a team
ef f ort and the work getting done is monumental.
Thirdly, we look f orward to better serving our customer through new inf ormation systems. These
systems launch next month and are designed to provide more accurate and timely inf ormation
surrounding the sale of our products. Being an easier company to do business with is something
we've really f ocused on over the last couple of years, and we think inf ormation can truly become a
competitive advantage in the f ield. It's been part of our vision as we transf ormed our company into a
very customer-driven entity.
So we look f orward to getting all 3 of these milestones behind us and continuing gaining momentum
as an organization.
As f or the most recent quarter, we are pleased with the sales results even though they were down
slightly f rom the comparable quarter a year ago. I will remind you that a year ago, we did not yet have
our Young America business model in place. We have since put that model in place around the middle
of the f ourth quarter of last year. And in the f irst quarter, we grew Young America sales sequentially
with a meaningf ul increase, both orders and shipments I should add. This was the f irst quarter where
we grew orders and shipments sequentially since the f ourth quarter of 2010.
Despite the multiple f orces working against us in Young America, our sales f orce and our associates
in our f actory continue to do a great job backing up their belief in our dif f erentiated business model.
And over the previous 3 quarters, we've replaced over 10,000 items of f urniture on retail f loors
throughout the U.S. and worldwide. Young America now represents a better value at retail than ever.
And the question is only: can we get enough customers willing to pay a premium f or that value.
Outside of operating an increasingly ef f icient f actory, this is where our major area of f ocus lies and
we have several growth initiatives underway f or Young America. I look f orward to keeping you well
inf ormed.
Regarding the Stanley brand. Our major areas of f ocus to grow the Stanley brand, they include
continuing to improve the f low of product f rom Asia. This is something that really helps our
customers immensely as they deal with an ever increasingly demanding consumer. We are going to
f ocus on increasing the number of product placements at retail and we have several initiatives in
place there. We are attracting new customers that understand how to reach a more af f luent
consumer and the showroom certainly has a lot to do with that, the new showroom. And lastly, we
continue to develop increasingly desirable products at exceptional values. Those are really the 4
areas of f ocus with Stanley.
Now looking f orward, taking a broader outlook f or the sales at the total company level. As I've
mentioned, we have several initiatives f or growth in place. It is very dif f icult to predict the timing of
the related results. And based on the f act that incoming order rates are currently lower than the rate
at which we are shipping, it looks like it's going to be dif f icult to grow in the second quarter. However,
both brands are positioned f or growth and while it won't be easy without a change in that recent
order rate, we still expect to be able to grow f or the total year.
Those are my comments. Micah, let me have you take them through f inancial and operating results,
and then you open it up f or questions.
Micah S. Goldstein
Sounds good, thanks. All right, as Glenn just said and I think we also mentioned on our call in
February, it is important, we believe, to look at both sequential and year-over-year numbers, and in
particular, on Young America where the ef f orts we made to transf orm the brand last year were
disruptive, not only in the f actory but at retail as well.
So net sales f or the quarter increased 11.4% sequentially to $26.1 million. For the f irst time in many
quarters, both brands experienced double-digit sales growth. As Glenn mentioned in the press
release and in his comments a moment ago, we did see a reduction in backlog on Stanley and we
have multiple growth initiatives underway to boost momentum in its order rate. Comparing to the prior
year period, which was our highest revenue quarter of 2012 and that was f or both brands had the
best quarter in the f irst quarter of last year, we saw an overall net sales decline of 2.7%.
Gross margin improved sequentially as we guided on the last call, and while it's down slightly f rom the
previous year, this was driven solely by our decision to sell of f prior-generation Young America
inventory at a pretty steep discount. Without that discounting, gross margin would have improved
year-over-year.
SG&A remains well managed given the emphasis we're placing on marketing Young America and
rebranding Stanley. I continue to f orecast a $5 million spend each quarter, and our team continues to
manage their expenditures below that without sacrif icing any of our strategic initiatives. We did
record $260,000 of restructuring expenses in the f irst quarter and expect another $300,000 in Q2 f or
severance and relocation expenses surrounding the consolidation of our of f ice and High Point
showroom.
Our operating loss f or the quarter was $1.2 million, which is a signif icant improvement over the f ourth
quarter and $200,000 behind last year's f irst quarter. Without the discounting I mentioned a moment
ago, we would have seen an improvement over the prior year period. Accordingly, we should see
improved operating results continue in Young America, and operating results in the second quarter on
Stanley and f or the total company will largely depend on incoming order rates f or adult f urniture over
the next 2 months as our inventory position will allow us to benef it quickly f rom any increase.
As we guided on the year-end call, we expected to use cash in the f irst half of this year. The big
drivers of our cash usage in the f irst quarter were a $3.1 million reduction in accounts payable, $2
million increase in accounts receivable, $2 million capital spend and an operating loss of $1.2 million.
Capital spend was broken down between $400,000 in Robbinsville, which was really just a hangover
f rom our investments that we made in the f actory last year, f inal payments on equipment; $800,000
on leasehold improvements f or our corporate of f ice and showroom consolidation; and $800,000 on
our systems initiative. Additionally, we purchased $400,000 of stock during the quarter at an average
price of $4.47 a share.
In the second quarter, we expect to use about $1.3 million as we go live with our new systems in May,
around $700,000 to complete the leasehold improvements with our new of f ice and showroom and
around $200,000 in Robbinsville. We do expect to see our inventory f all in the second quarter, how
much will depend on what sales order rates do in the coming quarter. And this was really our f irst
quarter where our inventory did not grow -- did grow slightly but it was relatively f lat f or the quarter,
which is signaling the slowing down of product on its way f rom Asia and what we expect to be a
decline in Q2 in inventories.
On the operation side, both brands perf ormed as expected in the f irst quarter. Our Young America
f actory showed improved productivity while reducing labor and material costs compared to both the
sequential and prior year quarter. Our f actory initiatives have turned f rom reengineering product and
modernizing the f actory and putting in new equipment, the very tactical initiatives on quality and
schedule attainment.
On Stanley, our initiatives remain f ocused solely on quality and service. We opened a quality lab in
our Indonesian of f ice during the f irst quarter and are f ocused on delivering all of our 2013 product
introductions on time and complete to retail f loors, which we did not do as well as we would have
liked in the previous 2 years. Our sourcing team did a good job working with our vendors to manage
through the government mandated wage increases in Indonesia early this year. And we continue to
work hard on providing the right logistics solution to support each of our distribution channels.
Jesse, why don't we, at this point, go ahead and open the line f or questions?
Question-and-Answer Session
Operator
[Operator Instructions] Our f irst question comes f rom the line of Budd Bugatch with Raymond James.
Chad Bolen
This is actually Chad f illing in f or Budd. I guess, f irst, Micah, when you talked about gross margin, you
suggested that it would have been up year-over-year x the Young America discounting. I guess, 2
questions. One, has that completely run its course this point or do you expect that to persist a bit
into 2Q? And then can you quantif y f or us specif ically how much that bucket impacted gross margin?
Micah S. Goldstein
Yes, let me answer your second question f irst and that it's right around 1%. Our gross margins f or
the quarter would have been right at 14% had we not made that decision to move that product and it
has largely played its course. There is a small amount that will run through in the second quarter, but I
don't expect it to be signif icant. It may hurt us 0.25% or so in the second quarter, but it's largely
behind us.
Chad Bolen
I guess, kind of f ollowing up on Glenn's comment. If volume is sort of f lattish year-over-year in 2Q
given that Young America discounting is a little bit less of a drag and I assume you're probably
continuing to see productivity get better at Robbinsville, you did, I think, a 14.5% normalized gross
margin in 2Q of last year. If volume's f lat, what do you think is a reasonable expectation f or gross
margin in 2Q?
Micah S. Goldstein
Yes, it should be similar, Chad. I'd like to believe that it would go up. We are seeing some inf lation and
we're making some -- we are going to react to those inf lationary pressures with a price increase
that's going to take ef f ect in this quarter. But it should be similar.
Chad Bolen
Okay. And I guess f rom an operating income perspective, could you take a stab at what you think the
quarterly kind of revenue break-even level is now f or Stanley and maybe a sense of how long you
think it'll take you guys to get there?
Micah S. Goldstein
Yes, I still believe that we break even at -- assuming our mix of sales stays where it has been, that
we need a quarterly rate somewhere around $30 million in revenue to break even. So we're at $26
million now. Young America, as Glenn said, is positioned very well. We did a great job with placement,
the product's out there, the order rate and backlog remain healthy and the f actory is getting more
productive. So the real challenge is what's going to happen f or demand f or adult f urniture and all of
the initiatives that we've got underway to drive those orders and convert them into revenues. So I
think that we're close on a -- it seems like a long way on a percentage basis, but it's not a lot of
dollars and we're working hard to get there.
Chad Bolen
Okay. And in Glenn's comments, he talked about sort of sluggish order patterns really over the last
f ew quarters. Can you give us a sense at all of sort of how order rates progressed through the
quarter?
Glenn Charles Prillaman
Through the last quarter?
Chad Bolen
Yes, through Q1. Like sort of monthly trends or...
Glenn Charles Prillaman
Started out a little stronger than it ended-- in that-- I really don't have much color to add other than
that. It's just we are seeing some of the middle price points and lower end price points and the
industry start to gain some sales momentum -- or order rate momentum, I suppose, in speaking with
our customers. But it hasn't yet crept up into our price points, but we think that's coming. When it's
coming, I can't tell you. But I can tell you what we're working on and the initiatives we have in place. It's
just dif f icult to predict the timing.
Operator
The next question comes f rom the line of John Baugh with Stif el.
John A. Baugh - Stifel, Nicolaus & Co., Inc., Research Division
I wonder if we could talk a little bit about what you view as your competitive advantages on the adult
side in light of the f act that you're sourcing? And it sounds to me like you're moving up a little bit in
price point. We certainly saw it in terms of the product, it looks beautif ul. And how you are going to
address attracting both your retail customers and your consumers to adapt a little bit higher price
point, Stanley adult line?
Glenn Charles Prillaman
Thank you, John. This is Glenn. I know it may seem to you that we're moving up, but I can tell you f or
sure we are not moving up in price point. What's happened and what continues to remain in place is
just the trend towards trading down in our industry. And what we have is several customers that we
used to sell that have traded down and we have other customers that we still sell that are having a
tougher time getting the consumer to pay our price points f or f urniture. But we have not really moved
our prices at all. Now, as Micah said, we're having a price increase to cover the inf lation that we saw
overseas in the second quarter but that's our f irst increase since, what, Micah, 2009? Since bef ore
we closed the Stanleytown plant, which was ages ago. So what we have done to dif f erentiate is we
have, number one, continued to develop product that we think is f ar and away better than the
competition's knockof f s. And we've got to make sure that product is well displayed, well represented
through better marketing, better websites, better retail f loor displays. And so that's one thing we're
doing and certainly the idea is that our showrooms are giving our retailers, which, by the way, are
already beginning -- now, this is a slow process, but some of the ideas that we showed retailers in
Vegas are already beginning to be implemented at retail. That's one of the things we've got to do to
dif f erentiate. And there's -- we think there's plenty of business above us that the consumer will give
to us, that our retailer will give to us until we get more customers that are not trading down. Another
thing we're doing to dif f erentiate on the Stanley side, as you mentioned, now that we're sourcing,
you do have to have a dif f erent plan to dif f erentiate and that is f lowing goods f rom Asia. We have
one of the best programs to f low a mix of goods directly f rom Asia to our customer in the industry
and we just f inished our f irst year of that program and we learned a lot. And we're going to make
some adjustments here at market that we've been planning since the beginning of the year. We'll
announce those and that will bring quite a bit of conf idence in that program to the retailers that
maybe have traded down and need to buy our products at a lower price and can do so by taking
advantage of that logistics program on the Stanley side of the business. And look, logistics and
product development are really the 2 things that we've constantly been f ocused on, on the Stanley
side of the business and that's why I think we're beginning to gain some momentum. Now outside of
that, there's one main thing that we've got to do and that's just instill a little conf idence in the people
that sell our products and I think we've been working on it so long that we f orget nobody's really
seen the new Stanley yet. There's been a Vegas market. But as you know, it's nowhere near the size
of the High Point Market as f ar as attendance. And I think that when more customers see what we
have to of f er and the way we positioned our product in our showrooms, new websites, new
photography, cataloging, marketing materials, but there's just a -- there's a long way to go. On top of
that, when we launch these new systems and people can better see the stock availability in our
domestic warehouse versus our Asia warehouse versus f uture cuttings, all of these things are very
dif f icult to convey to our consumer right -- or to our customer, our retailer and designer right now
because of antiquated systems and hence the spend there. So lots of initiatives to work on to
dif f erentiate on the Stanley side. We do think we can dif f erentiate even though we do not own a
f actory.
John A. Baugh - Stifel, Nicolaus & Co., Inc., Research Division
And then if I could f ollow up on the cash f low. If we assume revenues were in the, say, high 20s and
the EBIT is still a loss but maybe $0.5 million or so per quarter, is that kind of a cash f low breakeven,
Micah, or is that still a use or slight source at that point?
Micah S. Goldstein
On an operating basis, our depreciation's around, call it, $2 million, $2.1 million a year. So yes. We --
at an operating basis, if we lost $0.5 million, we would be breakeven on a cash f low basis. You've got
a -- and the f ew things that are out there that we still have to work through is that we've got to make
all of the f inal payments f or our of f ice and showroom. We got to get our systems up and running,
which we've disclosed what those costs will be. And then our decision on whether or not to buy stock
could be a use of cash as well. A place where we'll generate cash is going to be f rom reduction in
inventory. Our inventories still are too high given our level of sales and we're working hard. The best
scenario would be f or sales to go up enough to keep our inventories at the level where they are. But
if that's not the case, we have got to drive those inventories down and turn them more f requently. So
I think you'll see that be a source of cash in the coming quarters.
John A. Baugh - Stifel, Nicolaus & Co., Inc., Research Division
And Micah, what -- I'm not going to pin you down to a '14 CapEx number, but assuming you get all the
showroom and headquarters and inf ormation systems expenditures largely behind you in '13, what is
there lef t sort of an ongoing CapEx basis to spend?
Micah S. Goldstein
I think that we will need to spend -- as long as we're running a f actory domestically with the money
that we have invested in getting it current and where it is, that we will have to spend somewhere
around $1 million a year to keep that f actory in its current condition. We don't need to buy a lot of
new equipment, but we've got to maintain the equipment that we have and keep the f acilities current.
So I think you're looking, I think, $1.5 million a year is probably a good number on an ongoing basis
f or the company once we get through these initiatives. It certainly should be equal to or less than
depreciation.
John A. Baugh - Stifel, Nicolaus & Co., Inc., Research Division
Okay. And Glenn, you ref erenced the best value comment around the youth line. Ref resh me what
you've done with pricing, if anything, on that line and then the other things that would -- because
there's more than just price that represent increased value.
Glenn Charles Prillaman
I'm glad you are willing to make that last comment, John. I need to get more retailers to make that
comment, but -- now everyone is struggling right now. Our retailers are really working hard to attract
and retain consumers and the consumers just -- they're challenged. They're challenged right now to
buy premium f urniture. What we've done in Young America to create the value to justif y price is we
have a dif f erentiated story that you cannot get f rom any other brand. It's the saf est f urniture you
can buy and we can prove it through the certif ications that we have that others do not. Color and
choice is something that we, f ar and away, exceed the customer's expectation on so we have that
customization or personalization f actor that the upper end consumer wants. We also make a product
that is not a disposable product. You buy it when the child is a certain age, even bef ore birth, as f ar
as a crib might be concerned and you keep it and add to it all the way through the child's lif e on into
college and that's something we call Built to Grow. And because of the quality of the product and the
amount of selection we of f er, you can add to one collection that you bought at a young age f or
many, many years. And then if there is any cache to the Made in USA side of our story, and some
customers are willing to pay a slight premium f or made in America, then that's something as well. But
we don't hang our hat on that. It's really more about saf ety, color and choice and the longevity of the
purchase. So that's why we think it's the best value available, but it is sold at a premium price. Now
regarding pricing, we've done nothing to increase pricing over the last, I don't know, probably 2, 3
years. So the only thing we've done with pricing is actually take it down with a certain number of items
we've decreased our prices to make them more attractive and that comes f rom ef f iciencies in the
plant, but also coming f rom f eedback f rom our retailers as to here's what the market will bring. So as
I said, we do have what we believe is a great value. But the question remains, can we get enough
consumers willing to pay that premium price f or that value. I will also add, and I'd be remiss if I didn't, I
said we replaced over 10,000 items of f urniture on retail f loors throughout the U.S. and worldwide
just in the last 8 months. We did that because we totally changed the engineering behind our product
and put in the most premium drawer guide system and drawer construction system that exist in the
marketplace today and that's -- if you look at the way consumers interact with case goods on the
retail f loor, they go up and pull that drawer out and when they get the silent self -closing guide that
we have now installed in our f urniture, when they get that experience it tells them that they're dealing
with a high-quality product. So as you see more and more retailers telling that story and that story
working to grow those sales in those retailers, we just got to get more retailers to tell that story.
How quickly we can do it is the question, John.
Operator
The next question comes f rom the line of Barry Haimes with Sage.
Barry George Haimes - Sage Asset Management, LLC
Had 3 questions. One is, you alluded a little bit to the Las Vegas show, but I wondered if you could
give us a little f eel anecdotally about how that went now that you're in the af termath of it? Any new
business relationships or expanded business relationships or people you're still talking to that could
pick you up that didn't carry you bef ore, that kind of thing? Second question, it sounds like f rom your
-- the Stanley comment on orders that you think it's more the consumer that's -- and theref ore it's
an industry f actor as opposed to Stanley-specif ic, just wanted to conf irm that, that's what you guys
think? And then third, could you talk a little bit about the systems cutover? When does that happen
and how complex might that be or what steps are you taking to ensure that it goes relatively
smoothly?
Glenn Charles Prillaman
This is Glenn, and thanks f or the 3 questions. I'll start -- I'll go backwards. The systems cutover, as
you can imagine, we're all very, very caref ul and concerned or acting with concern regarding the
cutover. It is rare that you have an ERP system launched on time, on budget without any problems.
We've only had one delay so f ar and we think we made the right decision in delaying the launch by
about a month. That system should cut over here in the f irst part of May. And we're pretty conf ident
that we've covered our bases there af ter going through numerous, numerous test pilots and
numerous trials f or backup plans. And just having more than the heads of the departments in our
company involved, we have a lot of people involved that know how to manage our business and
they've been involved f or well over 18 months in this process. So we are conf ident that the
switchover will go smoothly. And -- but I'll add, we haven't done this, we haven't had a systems
upgrade since the '90s. So f ortunately, we have some people here that were here during the '90s and
we're working with a top tier vendor that has done this with companies large and small all over the
world. Now regarding Stanley orders, I think that it's probably both a little bit self -inf licted and both a
little bit industry-wide. I do think -- it's very dif f icult to get your hands on numbers of our direct
competitors because they do not report. They also have upholstery, they're in other product
categories and so if you boil it down to just upper end case goods, I don't know that the market has
come back yet like it has at lower price points and that's kind of somewhat out of our control. Now
what is with our control is f or us to be able to justif y price through the types of initiatives that I
mentioned, which is improving the f low of product f rom Asia. As Micah said, we haven't done that as
well as in the past, say, 4 or 5 quarters as we have this previous quarter and as we expect to do
based on new initiatives in place in the coming quarters. We do have some product placement gains
at retail that we think we're going to be able to achieve in the coming quarters f or specif ic reasons,
not just hope there but a real plan to do that. And we think these new showrooms and the new way
that we are marketing our brand and what we believe is great design f or the money, we think that's
going to have a great ef f ect on the premium brick-and-mortar channel as well as the interior designer
and that's been our f ocus all along as we've repositioned the Stanley brand. Now Vegas Market, I'm
glad you said anecdotal because anytime you're only about 3 or 4 months out of a market, you can
point to certain specif ic examples of where you've gained the relationship you didn't have or where
you've improved a longtime relationship with a customer and we do have examples of that. And as I
said, we have the brand architecture that we introduced at Vegas in our showrooms already being
implemented on a couple of retail f loors and we're in the planning processes on that and the drawing
processes. But outside of that, it has to do with the way the interior designer perceives our brand.
And the interior designer does not work on a transactional basis. There may be a 12- to 18-month
lag bef ore an interior designer sees something she likes at Vegas or in High Point and then is
involved in the job where she specs our products. So we know there is a bit of a lag in the design
trade and in the brick-and-mortar channel. High Point's a heck of a lot bigger than Vegas. So a lot will
be learned over the next 4 to 6 weeks and we look f orward to keeping you inf ormed on how the
Stanley brand is transf orming. It's a 90-year-old brand that-- whose relevance is really being put out
of question or back on the map here as we go through Vegas and High Point. And Vegas was just a
great experience and we got great f eedback, so I think it's going to turn into orders. But the second
quarter has got -- hasn't started of f like we'd like, but we think we can turn it around and show
growth f or the year.
Operator
[Operator Instructions] Our next question comes f rom the line of Brad Hathaway with Far View
Capital.
Brad Hathaway
Quick question f or you on the accounts payable. Can you give a little more color on the decline into
this quarter? It's obviously been a -- it was a bit more sizable than in most prior quarters.
Micah S. Goldstein
Yes, Brad, that was really just timing on income and goods f rom Asia that showed up at the end of
the f ourth quarter. We had a lot of product that showed up, ordered with the long lead times and the
long -- the length of the supply chain. We had ordered pretty heavy in the second and the third
quarter of last year anticipating demand that didn't materialize as well as we would like and that
product showed up late part of the f ourth quarter. And we pay all those bills in the early part of the
f irst quarter, so it was just really just timing.
Brad Hathaway
Okay. So more kind of if you look back going f orward, back to more normalized levels at some point
in the next f ew quarters?
Micah S. Goldstein
Absolutely. Although it could go a little bit ditch-to-ditch because with orders light, we're ordering light
and trying to reduce our inventory position.
Brad Hathaway
Understood, understood. And maybe could you walk me through kind of the thought process on the
share buyback? I mean, how you think about how much to do or when to do it and kind of what's
some of the restrictions are around that?
Micah S. Goldstein
Our board authorized this time last year a $5 million share buyback, and we've agreed on a price with
the board at which we think is reasonable f or management to transact below. And when shares
become available and the price is reasonable, we've made some purchases. With the cash used that
we had in this last quarter, it's likely that we'll slow that down a little bit right now and make sure that
we get through these capital spends in this quarter and get our inventory rightsized. But we look at
each transaction separately and make good decisions. We're in constant communication with our
board on that and trying to add value long term f or the shareholder.
Brad Hathaway
Great, I appreciate that. Did that share price that you mentioned, did that -- was that kind of set
initially when you set the buyback or is that more of a dynamic each time you speak with the board,
you change that around?
Micah S. Goldstein
It constantly changes based on where the market is.
Operator
It appears there are no f urther questions at this time. I would like to turn the f loor back over to
management f or any closing comments.
Glenn Charles Prillaman
Thank you, Jesse, and thanks f or everyone f or joining us. As I've mentioned, we have several
initiatives in place f or growth and a f ew hurdles in f ront of us. A lot of work to do, but it's exciting to
see the completion of the plan to restructure the company to really be much more customer driven
and relevant in the marketplace. It's exciting to see the end of that in sight. So we look f orward to
keeping you posted on f uture calls. And I hope to see you at this week's High Point Market. Thank
you, Jesse.
Operator
Thank you. Ladies and gentlemen, this does conclude today's teleconf erence. You may disconnect
your lines at this time. Thank you f or your participation, and have a wonderf ul day.
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