Anthony Lebiedzinski: Understood. Well, thank you very much and best of luck.
Jeremy Hoff: Thank you, Anthony.
Operator: [Operator Instructions] Our next question comes from Dave Storms with Stonegate. Your line is open.
Dave Storms: Good morning.
Jeremy Hoff: Good morning.
Paul Huckfeldt: Good morning, Dave.
Dave Storms: Appreciate just taking my call. Just wanted to start towards the top of the balance sheet. It looks like gross profit margin is up about 350, 355 basis points or so. Can you just talk about what the drivers are of that on a year-over-year basis?
Paul Huckfeldt: Right now, we’re benefiting from lower costs. We — well, as mentioned on the call, our Upholstery margins are up because costs have stabilized, and we’ve been able to balance our labor better. On the imported product side, we’re benefiting from somewhat reduced factory cost, but mostly from the benefit of freight costs and increased the last of our higher prices, as we’ve had — we’ve reduced prices in corresponding with these freight decreases. But the last of the higher-priced inventories are — less the higher costs are now rolling out. So all those combined with exiting some difficult businesses. This time last year, we were burdened with the upside down cost structure of the ACH business, which is why we chose to exit it. So I think these margins are probably — the gross margins are probably a little bit high, compared to what we’ll see going forward, but more normal than they were this time last year.
Dave Storms: Would it be fair to say that it’s more a factor of pricing as opposed to volumes at this point?
Paul Huckfeldt: Yes.
Dave Storms: That’s very helpful. Thank you. And then just looking downstream, you’ve mentioned that orders are really starting to increase, but downstream suppliers are still working through some of their inventory. Are you seeing that come to some sort of turning point just with the orders increasing? Or do you expect destocking to continue going forward?
Jeremy Hoff: Yes. We’re actually seeing some of that loosening up, but it definitely has been a factor, and it’s continued to be a factor. And that situation seems to be a little different with each retailer. So it’s not really a — it’s hard to give a blanket answer, you know, one retailer is dealing with this and another retailer may have bought differently during that time. And — so — but overall, we definitely are feeling now a little bit looser environment with regards to inventory for sure. And I think the strong Labor Day sales are going to help us, although I can’t say that to this point because we’re — we’ll see that in the next few weeks.
Dave Storms: Very helpful. Thank you. And then just going back to — Paul, I think you mentioned about maintaining a strong balance sheet and how that’s very important for you guys. Can you just talk about your comfortability with your current debt position and the revolver availability that you have?
Paul Huckfeldt: Well, this company has always managed the balance sheet pretty conservatively. And I think it served us very well over the almost 100-year history in the company. And so that’s — it’s a core value to try to maintain a strong balance sheet. We have, at this point, $27 million of availability on our revolver, we’ve got $7 million tied up above that, we’ve got a $35 million revolver, $7 million is tied up in letters of credit. But we’ve got $27 million available there. We’ve got $22 million in debt. So it’s a pretty low level of debt. I know this industry is pretty debt of course, but I think still fairly comfortable with that level of debt. We’ve got $50 million in cash. So I think that’s a pretty comfortable level.
And — that’s a pretty comfortable level. So — but we’d like to — as we see the economy develop over this next year — the rest of this year, I think we’re going to try to manage things cautiously and then make our capital allocation decisions for next year as we — as we see what happens in the remainder of this year.
Jeremy Hoff: And we always mentioned we have an over 50-year history of paying our dividend as well.
Paul Huckfeldt: Right. Right, which dividend yield is just under 4%.
Jeremy Hoff: Right, right.
Paul Huckfeldt: We think that’s important for me…
Jeremy Hoff: That’s the priority.
Paul Huckfeldt: Yes.
Dave Storms: Understood. One more for me, if I could. Just from a modeling perspective, CapEx budgets running around $4 million to $5 million a quarter. Is that fair to extrapolate for the foreseeable — excuse me, for the remainder of 2023?
Paul Huckfeldt: CapEx for the remainder of this year is probably $1 million-ish. In a normal year, our CapEx is probably $5 million or $6 million. This one — this year has been a little bit bigger with new showrooms with our ERP project — so if you’re modeling going forward, I would probably put $6 million a year just for CapEx.
Dave Storms: That’s all, very helpful. Thank you for taking my questions.
Jeremy Hoff: Yes, you’re welcome. Thank you.
Operator: [Operator Instructions] We have a question from Budd Bugatch from Water Tower Research. Your line is open.
Budd Bugatch: Thank you very much and thank you for taking my questions as well. Congratulations. I want to echo the congratulations on the way you’ve maintained your balance sheet and your financial condition and what’s got to have been I think the most volatile time we’ve ever seen in the industry and maybe in society.
Jeremy Hoff: We appreciate that. Thank you.
Budd Bugatch: You’re welcome, and well deserve. When I think about Hooker, Hooker has the widest diversity of customers in terms of geography, number of customers and type of business model. And I was wondering, Jeremy, if you could give us maybe a read on what you’re hearing from various levels of customers and maybe delve down? I know the majors, who had a big — or seemed to have had a big problem with the order book in HMI. So what are you seeing as you look around the country and hearing from the retailers, what’s their — what are they talking about?
