Kathy Liebmann - Director of Investor Relations and Corporate Communications Louis Riccio - Chief Financial Officer and Senior Vice President Kurt Darrow - Chief Executive Officer, President and Executive Director

John Baugh Jack Salzman - King Point Chad Bolen - Raymond James Todd Schwartzman - Sidoti & Company, LLC Bradley Thomas - KeyBanc Capital Markets Inc. John Stimac - BB&T Capital Markets

Good morning, ladies and gentlemen. Welcome to the La-Z-Boy Fiscal 2011 Fourth Quarter and Year-End Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Ms. Kathy Liebmann, Director of Investor Relations of La-Z-Boy Incorporated. Ms. Liebmann, you may now begin.

Thank you, Rob. Good morning, everyone, and thank you for joining us to discuss our fiscal 2011 fourth quarter and year-end results. Present on the call this morning are Kurt Darrow, La-Z-Boy's President and Chief Executive Officer; and Mike Riccio, our Chief Financial Officer. Kurt will begin today's call, and then Mike will speak about the financials before turning the call back to Kurt for his concluding remarks. We will then open the call to questions. A telephone replay of the call will be available for one week beginning this afternoon. These regular, quarterly investor conference calls are one of La-Z-Boy's primary vehicles to communicate with investors about the company's current operations and future prospects. We will make forward-looking statements during this call, so I will repeat our usual Safe Harbor remark. While these statements reflect the best judgment of management at the present time, they are subject to numerous future risks and uncertainties, as detailed in our regular SEC filings. And they may differ material from our actual results due to a wide range of factors. We undertake no obligation to update any forward-looking statements made during this call. And with that, let me turn over the call to Kurt Darrow, La-Z-Boy's President and Chief Executive Officer. Kurt?

Thank you, Kathy. Good morning, everyone, and thanks for being on our call this morning. Yesterday afternoon, we reported our fourth quarter and year-end fiscal 2011 results. As we noted in our press release, fiscal 2011 included 53 weeks, which occurs in our reporting once every 5 or 6 years, depending on the calendar. And where able, we aim to quantify the additional week so you could make apples-to-apples comparison between this year's results and those of last year. Mike will speak in more detail about these numbers in just a few minutes. While the operating environment remains challenging for the quarter, all 3 of our operating segments experienced sales increases, led by our Retail Group, which posted a 16% increase in delivered sales on the core 68 stores that we had in the fourth quarter of fiscal 2010. Additionally, we are encouraged by the 12% comp in same-store written sales for the entire La-Z-Boy Furniture Galleries network. To put our performance in perspective, it's important to note that over the past few years, we repositioned and restructured our company to ensure we remain competitive within the changing operating environment. Although our business focus has never fundamentally changed, to be a best-in-class furniture manufacturer and retailer with products and services that enhance the quality of people's lives, it has been necessary to be nimble and dynamic. Every decision made was with the mindset for operational excellence and marketplace strength that will drive profitable growth and a return to our shareholders. The model we built is delivering results. And with much of the heavy lifting behind us, our focus has shifted to investment and expansion to capitalize on the growth opportunities that will inevitably surface as the economy strengthens. Today, our strategic positioning has never been stronger. We are operating with a lean and efficient North American manufacturing footprint, with an inherent speed-to-market advantage for custom orders, while pursuing an increasingly important integrated retail strategy. Our balance sheet is strong, and it is time to leverage the solid platform we created while investing in the future. Now let me spend a few minutes talking about each of our operating segments for the quarter. On the Upholstery side of the business, sales increased, and we posted an operating margin of 10.3% compared with 11.9% in last year's fourth quarter and, importantly, up sequentially from 8.2% in the third quarter of this fiscal year. We believe the sales increase was driven by a combination of factors, including new product introductions, improved merchandising and the successful launch of our new brand platform featuring Brooke Shields. From a margin perspective, although raw material costs continue to be higher over last-year levels, the increase in volume this quarter allowed us to leverage our lean operating structure and achieve a double-digit margin. For the full year, however, increased raw material costs impacted our margins compared with fiscal 2010. A recent price increase across all of our companies will offset higher raw material prices in fiscal 2012. And we will continue to monitor our raw material cost judiciously and react accordingly. Our cut-and-sew facility in Mexico continues to improve its efficiencies. We are obtaining the necessary production levels from the facility to supply our U.S.-based plants and expect to realize the full cost savings going forward. In our Casegoods segment, our operating margin improved significantly, reaching 5.2% versus a negative 0.6% in last year's fourth quarter. For the year, the margin of 4.4% versus negative 0.2% in fiscal 2010. This performance is primarily a reflection of the efficiencies we are achieving with the consolidation of our various operations implemented last year. Our one remaining Casegood manufacturing facility is operating at a higher-capacity utilization rate, and we are leveraging pooled marketing sales, merchandising and back-office functions through the combined American Drew/Lea and Hammary entity. On the sales side of the equation, we are beginning to see some light at the end of the tunnel, as our team is selling a larger concentration of higher-priced merchandise compared to the last 2 years and, importantly, is having success opening new accounts across all 4 brands. Now let me turn to the Retail segment. For the quarter, as noted earlier, sales for the core 68 stores that we had in last year's fourth quarter, which excludes Southern California and the additional week, increased 16% during the quarter. Indeed, this is encouraging sign reflecting -- reflective of target promotions and the belief that our new brand platform is resonating with the consumer. Both of these factors are driving not only more traffic to the stores, but a more qualified consumer. At the same time, we are converting better on the traffic and with a demonstrative increase in our close rate. The increased conversion rate coupled with our stringent cost structure across the business continues to fuel operating performance, and this quarter marked the ninth consecutive quarterly improvement. For the quarter, we posted a loss of $3 million, or an operating margin of negative 5.2%, compared with a loss of $4.7 million, or an operating margin of negative 12%, in last year's fourth quarter. For the full year, we reduced our operating loss by $4.7 million, or 24%, to $15 million from $20 million last year. Our Retail team has done an excellent job in improving the segment's performance. As we have noted in the past, our integrated retail strategy is a core part of our growth plan, as we believe branded or proprietary distribution offers strong growth opportunities going forward. Our #1 priority is to make our Retail segment profitable. And with an inherently lower cost structure today, we need an increase in volume to get there, with each store doing on an average between $2.8 million and $3 million in sales volume. To put the progress we've made on the cost and margin improvement in perspective, a little over 2 years ago, our breakeven point was about $4 million per store. As we noted during last quarter's conference call, we assumed ownership of 15 stores in Southern California as of February 1, 2011. This is an excellent market from a demographic standpoint, and our team is on the ground implementing sales, marketing, merchandising and operating processes throughout the 15-store system and has already improved its performance. I will now turn the call over to Mike so he can walk you through our numbers and also discuss the accounting changes that Southern California stores will have to our P&L.

Thank you, Kurt. I will start off by running through the numbers for both the quarter and the year. As Kurt mentioned in his opening remarks, fiscal 2011 was comprised of 53 weeks, which does occur every 5 or 6 years. The easiest way to do the math to determine the impact of this year's sales is to account for a 7% impact for the quarter and a 2% impact for the year. So 1 divided by 14 for the quarter, and 1 divided by 53 for the year. The percentage point amounts will differ when compared to the previous year's sales. Our sales for the year were also impacted by more than $20 million due to the de-consolidation of our Toronto VIE at the end of fiscal 2010. For the fiscal 2011 14-week fourth quarter, net sales were $339 million, up 9% compared with the prior year's fourth quarter, with approximately 7 percentage points of the increase attributable to the extra week. The de-consolidation of our Toronto VIE resulted in a decrease in sales for the quarter of $5.5 million net of eliminations. Excluding these 2 issues, the remaining sales increase for the quarter of approximately 3.4% was volume-related. Now breaking down the segments for the quarter, sales in our Upholstery Group increased 9.8% over last year's fourth quarter. Sales in the Casegoods segment were up 8.6% compared with the fourth quarter, and sales in our Retail segment increased 49%. There was an approximate 8-percentage-point impact to each of these numbers related to the extra week. Additionally, in our Retail segment, there was a positive quarter-over-quarter sales impact relating to the 15 stores in Southern California, which were previously reported as a VIE but, as of February 1, were added to this reporting segment. As Kurt mentioned, excluding both the extra week in the Southern California stores, our Retail segment experienced a 16% increase in delivered sales based on the 68 stores. For the quarter, net income attributable to La-Z-Boy Incorporated was $10 million, or $0.19 per share, compared with $14 million, or $0.26 per share, in the fiscal 2010 fourth quarter. This year's fourth quarter results included a $0.05-per-share impairment of long-lived assets, primarily related to certain stores in our Retail segment. The impairment also included a charge of $1.8 million related to our Southern California VIE, which is not included in the company's per-share amount due to the adjustment for non-controlling interests, which I will speak about in a moment. For the full year, net sales were $1.2 billion with the 53rd week having an approximate 2-percentage-point impact. The de-consolidation of our Toronto VIE resulted in a decrease in sales for the year of $20 million net of eliminations, as I noted earlier. For fiscal 2011, net income attributable to La-Z-Boy Incorporated was $24 million, or $0.45 per share, including a $0.01-per-share restructuring charge, a $0.05-per-share impairment of long-lived assets, as referenced a moment ago, and a $0.01 income per share in anti-dumping duties received on wood bedding and furniture imported from China. Also as I mentioned last quarter, the CDSOA website showed that about $152 million has been collected but not paid out. Based on the percentage of previous years' payouts of funds, La-Z-Boy could receive a substantial amount of the unpaid collected balance if and when it ever gets paid. Now I'd like to spend a few minutes talking about the Southern California stores, which were previously accounted for as a VIE and now are accounted for as part of our Retail segment. The results of a VIE impact our operating margin and go as far as the net income line. Then the results are reversed out to the non-controlling interest line net of tax and do not hit our earnings-per-share number. Today, we have one remaining VIE. So in the past, the Southern California store sales were included in the consolidated sales number, accounted for in the VIE line. Today, their sales remain in the consolidated sales number but are on the Retail segment sales line. Previously, the results, i.e., earnings or losses, are not included in our earnings per share attributable to La-Z-Boy Incorporated number, because they reversed out through the non-controlling interest line. As of the fourth quarter, the performance of these stores impact our earnings per share attributable to La-Z-Boy. So in short, there is no change to the consolidated sales number, but there is an impact, one way or another, to the earnings-per-share figure, depending on performance. Now the fourth quarter of fiscal 2011's effective tax rate was affected by the impairment charges this year. Regarding our tax rate for fiscal 2012, without the impact of any valuation allowances being adjusted, we expect our effective tax rate to be in the 38% to 40% range. As noted in our Form 10-K filed last night, valuation allowances of $55 million associated with certain U.S. federal, state and foreign deferred taxes could be reduced in fiscal 2012 based on the level of taxable income expected to be generated next year and beyond for this year. Now, let's shift to the balance sheet. For the quarter, cash provided by operating activities was $17 million, and for the year, it was $28 million. We ended the year with $150 million in cash and $108 million of availability under our revolving line of credit. Our total debt stands at $35 million, leaving us with a net cash position of $80 million. Capital expenditures for the quarter were $2.4 million and were $10.5 million for the full year. We expect CapEx for the fiscal 2012 to be in the range of $15 million to $20 million, reflecting upgrades to our IT systems, including our ERP implementation, investments in transportation equipment, the normal replacement of machinery and then new stores. Before turning the call back to Kurt, I'd like to remind everyone that our fiscal 2012 year will be a normal 52 weeks. That said, that means we'll go through all these explanations again next year. Kurt?

Thank you, Mike. Although the macroeconomic environment remains choppy, we are invigorated by the opportunities that lie before us and expect our business to have a corresponding acceleration when the overall consumer sentiment and discretionary spending improve. With a lean cost structure, our ability to convert on additional volume and drive strong results to the bottom line is excellent, and we demonstrated that in the fourth quarter. Moving forward, we remain focused on investment and expansion to fuel our growth, both at the top line as well as the bottom line. Our strong balance sheet will allow us to invest in the business. And with the best-known brand in the industry, we are well-positioned to build our market share across all segments and make our Retail business profitable. We continue to believe that proprietary branded distribution, distribution through La-Z-Boy Furniture Gallery stores and Comfort Studios, present the best opportunity to drive both revenue and earnings growth as the consumer will undoubtedly experience a more comfortable, professional and satisfactory shopping experience in these settings. This approach dovetails perfectly with the integrated Retail strategy we have been pursuing over the last several years, where we will achieve the greatest benefit from the combined wholesale, retail margin. With our vast network of 304 La-Z-Boy Furniture Gallery stores and the 526 Comfort Studios, there are more than 7 million square feet of retail space dedicated to the La-Z-Boy brand. That number will grow significantly as, together with our dealer base, we execute on our expansion plans with the objective of 1,000 branded outlets by 2014. I would also mention here that proprietary distribution plays an important role for several of our other companies, including England, Kincaid and Lea's La-Z-Boy Kidz. Between the 3, we have more than 700 such distribution arrangements in 2 million square feet. So in total, La-Z-Boy Incorporated has more than 1,500 branded outlets and 9 million square feet dedicated to branded distribution. And our commitment to the channel is clear, and with the ongoing change in the operating environment, we expect proprietary distribution arrangements with our retail partners to continue to grow in importance to our company. We are also pleased to introduce a new La-Z-Boy Furniture Galleries store format, which we will pilot in the next several months. After some fine-tuning, it will be formally introduced later in fiscal 2012 and will be rolled out across our dealer base over the next several years. Different on both the outside and inside, we believe the new format will do a better job of showcasing our furniture and highlighting the customization opportunities available while enabling us to better convert on the traffic and new customers that our brand platform is intended to drive to the stores. Over the next 24-month period, between our dealer base and the company, we have 25 to 30 La-Z-Boy Furniture Gallery store projects planned, which includes new stores, relocations and remodels. However, with some store closings, we anticipate a 3% to 4% net growth in stores over the next 24 months. Our investment to fuel growth and profitability extends beyond branded distribution, however. We are also investing in innovation and R&D as well as our Comfort Care organization, all of which will support our brand and the consumer experience with our company. From a seasonality perspective, we are moving into the summer period, which is typically the slowest for the furniture industry. Our first quarter, which ends in July, is the weakest in terms of sales and earnings, due to the fact that we shut down our plants for one week in July for maintenance and vacation during the slower time, and, therefore, we only ship products for 12 weeks instead of the normal 13. As we approach our 85th year in business, we would like to take this opportunity to sincerely thank our employees, our shareholders, Board of Directors, customers and suppliers for their dedication, interest and support throughout the year. We believe we are well-positioned to deliver meaningful results to our shareholders through investment, expansion and growth. We thank you for being on our call today, and I will turn things back to Kathy.

Thanks, Kurt. We will begin the question-and-answer period now. Rob, please review the instructions for getting into the queue to ask questions.

[Operator Instructions] Our first question this morning is from Chad Bolen of Raymond James. Chad Bolen - Raymond James: I guess my first question is, if you could, as I think about it -- I know you don't give specific forward guidance, but as you think about some of the moving pieces for fiscal 2012, could you give us an update on Mexico? And are there any additional savings that you would expect to realize this year over last year? And then kind of where do you stand from a commodity headwind perspective, and how much of that do you think you'd be able to offset with pricing?

That's just one question right, Chad? Chad Bolen - Raymond James: Yes, one question in several parts.

All right. Let me make sure I don't miss any of them. First, on the Mexico standpoint, we are continuing to make the progress that we anticipated. Our production levels in the fourth quarter were at an all-time high down there, and it's running smoothly. And we would anticipate achieving the savings that we have previously outlined. As far as other cost savings, we have a culture here of trying to take out waste, being a lean enterprise, making sure that we find ways to save significant dollars every year. And I think we will accomplish that this year. I think the difference this year compared to some others, we don't have one major project that we can say is going to deliver millions and millions of dollars. We've got a number of small projects combined that are significant, but that's just a part of our ongoing business. The headwinds with raw materials continue. As we told everyone previously, we experienced almost a $19 million increase in raw materials last year. We took some pricing adjustments at the beginning of this fiscal year that went into effect in May to offset part of those and part of what we're seeing in the future. We do not anticipate the raw materials to be quite at last year's level, but they still are -- they are going up. And we do not know what the back half of the year will look like, but we intend to monitor where they're heading and take whatever appropriate actions are necessary on the pricing side so our margins don't erode. I think that probably, hopefully, answers all 3 of the questions you had? Chad Bolen - Raymond James: Sure. I think that works for me. And if I could kind of change to the tone of business, I mean, obviously, the same-store written number, up 12%, was very impressive. Can you give us a sense of what you've seen in May and early June, and is it better or worse or in line with normal seasonality and what you might expect? What are you seeing at Retail?

Well, I think you answered almost your own question, Chad. It is, we are heading into the summer. And for whatever reason, the summer months for the furniture industry, we see a seasonal dip. And we're experiencing that. The consumer has changed a little bit of their buying habits since Easter, and there hasn't been quite the same robustness that we saw in the first 4 months of 2011. But if you're aggressive, and if you offer something that she's interested in, there's still business to be done, but certainly, business today is not at the pace as it was in our fourth quarter. Chad Bolen - Raymond James: Okay. And last question for me. If the balance sheet continues to strengthen, could you just give us an update on how you're thinking about priorities for cash? And might we see some cash returned to shareholders in the near future?

It's still in our process to bring this up to the board every quarter to review it. We came to our board meetings, and we're still evaluating what's the best use of our cash as we go through and we start looking at expanding our stores and doing certain things with our investing in stores. So as we get through the summer and make sure that there is a -- the economy rolls along and is progressing like it was and we can get through any downtime in this period, we'll need to start considering -- well not start, but considering in August of what other uses of cash we want. And we just haven't made that decision yet, but we have all the thoughts going through of return of capital to the shareholders or dividends or whatever we need to do, we need to start looking at that again and making some decisions after we get through this slow period in the summer.

Our next question is from the one of Matt McCall of BB&T Capital Markets. John Stimac - BB&T Capital Markets: This is actually Jack Stimac filling in for Matt. I guess, going back to the price increase you announced, have you -- how much do you think that will be? How much was inflation actually during this quarter? I think you said $19 million for the year. And is it -- how quickly do you think it will be realized? And do you think it will be completely realized or just 80%? And how should we look at that?

So, we would -- our raw materials were up $19 million for the year. It wasn't all inflationary-related, just to be clear. But we took a price increase. We said it was in the neighborhood of 2% to 3% across our varying companies, varying -- some them are across-the-board, some of them were specific styles. One never knows how much of it "sticks". Our prices are up. People sometimes merchandise different fabrics or different parts of the line. But it was our intention to take an increase that would neutralize the raw material effects so that our margins were not impacted. And only time will tell the effects of that as the year rolls on. John Stimac - BB&T Capital Markets: Okay. So you guys are actually trying to maintain margins, and not just gross profit dollars. Is that the way I should look at that?

Yes. John Stimac - BB&T Capital Markets: Okay. With the Mexico facility, I know before -- you said you're running at the production levels necessary to fulfill the U.S. factories. Are you still running extra labor in Mexico to do that? And is that going to push out the savings a little further? I think you had said it would be 25% to 30% in kind of second half of calendar year 2011. Is that -- are we still on track for that, or is that -- and kind of where is that labor situation?

We mentioned that we would start getting some savings in the second half of fiscal '11 and the balance in the full year of 2012. And we are on track for that. We still do probably have -- we do not have any more cut-and-sew activity going on in the U.S. And we probably have a few extra manpower in Mexico, but that's being monitored and worked on and improved every week. And we have the full confidence that we'll meet our target for this year with that facility. John Stimac - BB&T Capital Markets: Okay. And with the retail sales and kind of the outlook for business, I mean, do you think with the higher conversion rate, I mean, do you think that will help to offset things? And what are you doing to improve that? And how is it as high as it is, I guess? Because it seems like that's something you've called out the last few quarters. And I mean, is it something you think you kind of help offset the seasonal weakness, or is it just a seasonal weakness that's going to be a little -- it is what it is, essentially?

Well, the overall answer to that is, the seasonal weakness is going to be what it is. We don't seem to be able, and I don't -- I haven't seen anybody in our industry able to do as much business during the summer as they do in the first half or the holiday season. So we can't. But the issue with our conversion rate and close rate, it's an ongoing detailed, educational, coaching process to get our team to be sure that they approach the customer correctly, point out the features and benefits of our products, point out our customization options and just make a thorough presentation of what we're doing. And the longer we have seasoned people and the better our managers do at coaching and those kind of things continue to help us, and we continue to employ a lot of techniques to make that improving. And while we've had significant improvement, we still don't think we're at the point we need to be, long term. So we would expect some additional improvement in our conversion rate going forward. John Stimac - BB&T Capital Markets: Okay. And then lastly for me. Kind of on the same point, last year, it seemed like we were in a similar situation, where things kind of seemed to be going really well in the spring, an upbeat High Point furniture market. With gas prices about $1.00 higher this year than they were last year, I mean, is that -- has the seasonal decline come faster or more sharply than it did last year, or is it about the same? How should we think about that?

Well, we would separate that into 2 buckets. One is the seasonal decline, and one is just the concern that everybody has about the economy. And there's -- right now, unfortunately, there's probably more bad news than there is good news. And we are an industry and have a product that is discretionary. So people have to feel good about what's going on in the world and what's going on in the economy and their own prospects for jobs. And to the extent that they do, I think our performance will mirror that somewhat. To the fact that they don't, and the fact that they hold on to their discretionary dollars and have lower consumer confidence or higher unemployment, we are not immune from that. So I think there's the 2 factors you have to look at. There's the seasonality trend that has been inherent in our business for as long as I've been in the business, and then there is this feeling about the economy. And unfortunately, I think people felt better about the economy 6 months ago than they do now. So that may -- and that could change, and that will play into our results as we go forward.

Our next question is from Bradley Thomas, KeyBanc Capital markets. Bradley Thomas - KeyBanc Capital Markets Inc.: Just a couple of questions, if I may. First, starting off with just something maybe more on the housekeeping side. Your commentary around the contribution of that extra week from a sales standpoint was certainly helpful. When you think about it from an earnings standpoint, are you able to quantify what the benefit of the extra week was on the quarter?

It's all difficult, because not everything is so variable or fixed because of the extra week. So I would say that our margins are -- we talked about converting at anywhere from 20% to 30% or those type of things we talk about how we looked at our incremental business. But with the extra week, it's not really all incremental, because we have all costs associated with selling it. So it's a little harder to quantify, but I think you can look at the overall margins and quantify some of that. There's not much difference in that of the extra week. Because for the year, it's a whole different contribution than for just the quarter. And I know I didn't answer your question very well, but it's not as easy to quantify directly as the sales are. Bradley Thomas - KeyBanc Capital Markets Inc.: Okay. But some levels of similarity to what we saw in sales?

Yes. I mean, you can see in our sales how we're converting as you look at some of our segments, and so I think you can look at it similarly and then apply some earnings to that. Bradley Thomas - KeyBanc Capital Markets Inc.: Okay. And during the quarter, we had a pretty big liquidation of a competitor, Berkline. Did you see any impact from that during the quarter? And are you seeing some opportunity to pick up share going forward?

That's a good question, Brad. But our evaluation was we've done some extensive work on all the way back to last February, March. To our knowledge, and what I may say here may not be 100% factual, but it's what we've been recorded and some things we've seen. To our knowledge, Berkline was on a sales decline for about the last 3 or 4 years, and so -- and their peak was in 3 to 4x higher than where they were when they announced they were going out of business. And what that says to us is their customers were already making choices on doing something different with other competitors, with other lines and leaving them for their business to go down 60%, 70%. So it wasn't an overnight, all of a sudden, you wake up, and there's all this business there. This has been a gradual rundown for some time. And we have a number of dealers who also buy Berkline, and they -- we had conversations with them. We talked about the kind of product they were buying, and we're trying to accommodate some of that. But there were 2 other things going on, and I do think there is an opportunity for us to get a little business, but there were 2 other things going on with that business, is one, they sold into channels that the La-Z-Boy does not sell into and doesn't have any intention to sell into at the present time. And they also sold some things, from what we can determine based on what our customers told us, they also sold some things at prices that don't interest us. Partially, I think the reason they couldn't sustain their business model is they had some product at prices there was no margin in. So, going after no-margin business or going after channels that we don't feel are appropriate for us eliminates some of the volume replacement that we could consider. But we're trying to provide the product that they provided before to our dealers that carry both La-Z-Boy and Berkline to try to expand our assortment with them and see if we can pick up some additional business. Bradley Thomas - KeyBanc Capital Markets Inc.: Okay. And then there have been a couple of questions already about inflation and price increases. But, Kurt, as I think about the industry, it has historically been one that has been very deflationary. And over the last several quarters, we're seeing furniture companies raise prices. I recognize I don't have a whole lot of information to work with in terms of what that has -- what kind of reaction that has generated out of the consumer. But are we getting to a point where these price increases can be a little bit stickier? And what's the response tended to be from the customer and from some of the retailers that you sell to?

Well, I don't want overly editorialize on that, but I do think our industry, in general, has been too preoccupied with price. The consumer actually rates price, third, fourth or fifth on her consideration rate. It's the industry itself sometimes that puts a higher emphasis on it. But I would tell you that in my judgment, the industry has gone through a long period of deflation, thinking that as the prices go down, we could sell a lot more, and that hasn't happened. We've just given up margin and sales dollars. And I think the industry, for the most part, on the wholesale and Retail side, does not have any margin cushion that they just can accept more and more raw material increases and give up more and more margin and not try to find a way to recoup it, so I think that's on the top of mind of every retailer and manufacturer in the industry. And how to get more margin and how to pass on cost are something that I think the industry needs to deal with, because there's -- we took our rates to the bottom, and it wasn't very successful for the industry as a whole. Bradley Thomas - KeyBanc Capital Markets Inc.: That's helpful. And if I could just quickly add last one last question here on margin. When I take a step back and look at your full year, you all did a great job of improving profitability in Casegoods and Retail in a difficult selling environment. And obviously, into the quarter -- the year on [indiscernible] and the Upholstery Group. When you look at the different segments and think about what you all are doing from an expense standpoint, what level of sales do we need to see within each of these segments in order to drive further margin improvements into fiscal 2012?

I think we would answer that question as we try to give you some ideas about our conversion rates, and our conversions rates are higher in Upholstery than they are in Casegoods. We try to give you that our average store is performing at about $2.5 million, and we need to get it to the $2.8 million to $3 million level to break even. Other than that, I think you can calculate as you use this amount in volume, and if you get a 20%, 25%, 30% conversion on it, I think you can calculate that yourself. But there's no magic number that if you do this, there would be a continuum of the more volume we do, obviously, we'd expect our margins to improve. But I would use the conversion rate. I would use the store benchmarks that we've given you. And then that should be enough for you to work your models as far as what you expect going forward.

Our next question is from the line of John Baugh, Stifel Nicholas.

The overall material discussion, to beat it to a pulp here, I assume we had rampant inflation going on in all of your key input costs through April. And I don't know what the exact lag is in terms of when that flows through your P&L, so that would be sort of my first question on this issue. But I'm curious, with oil in particular having backed off, I believe, about 10% from the peak, if we just assume that stays at this current level for the rest of the year -- I know that's a big if, but would there be some possible relief in the second half of the year? If everything stayed where it was, will your into -- I assume your raws will increase in the first fiscal quarter sequentially from the fourth. I don't know what it will do in the second. Maybe you could help on the timing of all this and if everything's status quo for the remainder of the year, whether you'd see any relief?

Well, let me take a shot at that, John. As far as what flows through our P&L, it's a very fluid situation with some of our larger commodities, we have contracts and we can plan. Other things, the prices change periodically, and there's no set parameters. So the P&L is hit both positively and negatively, depending on the ebb and flow of all the various materials. When we were thinking about 2012, we were looking at increases near the levels of what we had this year, which I mentioned was about $19 million. And frankly, that was what we were seeing at the time. That was our best guess back in February. But you never know. I can't make a prediction on the second half of the year. Obviously, if prices go down, that would be to our benefit. But there is still a lot of concern out there about, particularly -- this is relatively new, it was always the commodities for lumber and steel and poly. But with what happened to cotton last year, and now with what happened to the leather supply, those are still not worked out yet and not totally stabilizing. So there's still quite a bit of volatility. And we have a commitment to our customers about some kind of pricing continuity. And we just can't raise and lower our prices on a monthly basis. So we try to do our best job of forecasting a 6-month period and doing what we think is a reasonable job of pegging where we need to be and act accordingly. So I think our team has done a good job of preparing us for that. And we'll just have to see as the year pans out.

So, Kurt, if I hear you right, you kind of have a visibility on the next 6 months of your raw material costs. And your comments that the pricing you think you'll get through, which is an uncertainty as well, will more or less offset what you see for the first 6 months. Is that a fair...

Not exactly. We don't have, necessarily, the visibility, but we have to make the judgment for a 6-month period in how we handle our pricing, for the most part. Now if there's something very unusual happen in leather and we had to take a price increase mid-season, we will obviously consider that. But we try to give some continuity. So we don't have 6, 9, 12 months' visibility on raw materials. We get some trends, we talk to our major suppliers, we have a sophisticated way of putting that all into a matrix and trying to determine where we're at. But we make the judgment. And we take the risk, either plus or minus, that we've analyzed things correctly and we're covering our pricing versus what we anticipate happening in raw materials.

And then on the Southern California stores, could you quantify what you lost in the fourth quarter? You mentioned you're already seeing progress there. I'm just curious how you look at that 15-store concentration in terms of fiscal '12 on an EBIT loss or possibly contribution basis?

John, I'm not going to go into details by each market that we have. But we have implemented, for the most part, now, by the end of the year, all the processes and things that we use in our whole Retail Group by the end of the year. So this next year, we have our admin matrix going through there. How we pay our salespeople, all those kind of things that we have that we've implemented throughout our Retail segment. So we're not expecting any of the significant losses that we were experiencing as a VIE as we've taken some cost out as well and been able to share more of our fixed costs over more stores, which would help our whole Retail segment in the end. So we're not -- at the present time, we're not forecasting any significant losses in that market.

Okay. I would say that another way to -- we don't expect Southern California to be a drag on our Retail segment.

Great. And then lastly, I noticed in the K, a backlog figure for Casegoods being down significantly year-over-year at the end of April. And you attributed that to timing in product introductions a year ago in the market. Just wanted to be clear that maybe by the end of May, that is sorted out and was a more equal comparison or there is not something else going on there?

Well, there is something else going on there. We had a very, very successful introduction in Nickelodeon 1.5 year ago -- 1 year ago. It was a year ago. And that's where all that big backlog was. And we had great receptivity from our dealers, and a lot of people wanted to buy it. And we -- it took us 6 months to get it out in placements and all. And so that's been the majority. The group is out there on the floors. It's got a normal backlog. But that was the buildup in backlog, higher than normal a year ago, and we're back to a much normal pace of backlog in Casegoods today. But it was all because of the introduction. And there were other good introductions that season, but the majority of that was the Nickelodeon program.

So there's no big readthrough there in terms of sales for fiscal '12 being down from fiscal '11 is the bottom line?

That's not our intent.

Our next question is from Todd Schwartzman of Sidoti & Company. Todd Schwartzman - Sidoti & Company, LLC: First, just to strip out the effect of the season on your order rates, looking at May and June of this year, of calendar '11 to date. Relative to those first 7 weeks of fiscal '11, is the written business up?

We're not going to comment on this first quarter. We got out of the habit of giving guidance right now. And I just think it would be inappropriate of us to make any comments. I just think you have to understand, and when you look at your models and all, we're just finishing our quarter that had 14 weeks of shipping. And we're going to a quarter that has 12, given the seasonality. So there will be a difference, a substantial difference. But you have to look back to the quarter a year ago when we're comparing the 12 weeks to the 12 weeks. Todd Schwartzman - Sidoti & Company, LLC: Okay. On the new store model, you mentioned it's going to be a 2-year or so endeavor, at least it sounds like. What is the planned square footage of the new stores?

So let me clarify something before that. It will take us much more than 2 years to roll out. If this change is successful, which we anticipate it will be, it will take a long time to change out 300-plus stores. And our history has been -- that's taken us 7, 8, 9 years to get the majority of the system. We would anticipate, after we fine-tune this, we would anticipate all the new stores being open would be in the new format. But the amount of time to move stores, remodel stores and everything, this would be a longer-term process over the decade of 2010 to get implemented in a significant manner across all of North America. Our square footage, we're designing this to be able to be in the 10,000- to 13,000-feet range. We have a problem going much smaller than 10,000 feet right now, given the real estate availability of getting the front footage that is needed. And we certainly don't need 17,000-, 19,000-, 20,000-foot stores. But I want to emphasize that these first couple of stores, like any new venture for a retailer, is our first attempt. And I'm sure we're going to learn some things. And I'm sure we're going to make some minor modifications. And I'm sure we're going to have a lot of input from our dealer partners on things. So this isn't something that we think we're going to roll out 50 of them in a year or anything. But it's the start in evolution. Our last new-design stores started to be open in 2001. And we've gotten a whole decade of progress out of that. And it's just time to use some fresh thinking and some new design and some new graphics and point-of-sale material in the stores. And we're very excited to see what this is like. But I'm sure what we introduce in August, by the time we open a number of them in 2012, '13, and '14, a part of that will probably be modified. Todd Schwartzman - Sidoti & Company, LLC: Got it. And, Kurt, this is, by my count at least, the second consecutive quarter that you pointed to improvement in the closing ratio. Can you maybe put some numbers to that to give a better sense of improvement?

Well I think you can tell by our results. And I don't want to give you great quantifiers here, but our average ticket has been relatively constant. Our traffic has been up, but not to the degree our sales are up. So the majority of the reason that our sales are better is the conversion. So given the quarter, either 3 quarters ago, 2 quarters ago or last quarter, our conversion rates are in the 8% to 10% to 12% improvement rage, which is -- which falls directly to the bottom line. So it's the biggest driver of our 3. Of our 3 metrics that we watch, traffic, ticket and conversion, the conversion has definitely been a survivor to date. Now there's room to work on the other things as well. But the conversion has been the most significant one that's impacted our business the last 9 months. Todd Schwartzman - Sidoti & Company, LLC: Has that dropped off meaningfully in the first 7 weeks of this quarter?

Percentage-wise improvement, it doesn't drop off, but you're close rates in this quarter are not what they are in the holiday quarters. So again, it's a relative thing based on seasonalities. Todd Schwartzman - Sidoti & Company, LLC: That makes sense. And my final question also I'd also like to ask if you could possibly quantify as well, how promotional were you in the fourth quarter versus a year ago?

I would answer that, Todd. We were not any more or less promotional. I think we have found some vehicles and we have found some methodologies and we have found some tactics to get to the right customers. We are doing a much better job of getting customer names from people who don't buy, reaching back to them, getting them back in the store, doing a lot of things of that nature. So, frankly, probably with the brand platform with all those TV we ran on Brooke, which you wouldn't say is necessarily promotional, we may even have been a little less promotional, but I just think we're spending our dollars more effective. We're in sync with how we want to handle the customers that are coming through the door. And the whole team is just finding ways that are working for us that are new than they were a year ago. So we didn't spend particularly more money in advertising to make this difference. We didn't offer a huge, a considerably different discount or anything of that nature. So it's just been an effort of a lot of research, a lot of studying, a lot of work by our marketing team to find out how best to spend our dollars on the customer that we want. And you can spend a lot of money advertising to a broad network of people, but a lot of those people are really not your targeted customer. And our team is doing a better job of reaching our target customer. Todd Schwartzman - Sidoti & Company, LLC: So the ASP's have held up fairly well across all brands. Is that fair to say?

Yes.

Our last question is from Jack Salzman from Kings Point Capital Management. Jack Salzman - King Point: I'd like to drill down a little bit more in the retail space, if I can. You folks are generating $176 million of revenue, and you're still at a fairly large loss. Your fourth quarter, you're running an annualized rate of, I guess, around $230 million. And you've indicated that breakeven is around $210 million. Can you explain why you're still generating losses at that fourth quarter annualized rate? And if I can ask a broader, more strategic question, how -- when can we expect a significant return on investment for all this time and effort you guys have put into retail? You've spent a lot of time. It's been, obviously, a detriment to the profitability of the firm. When is the payday? How big does this have to get to get a very sustainably respectable return on investment?

I would answer that in a number of ways. First of all, you have to go back to what we've been trying to get across is our integrated retail strategy, where we make money on both the wholesale side of the business as well as the Retail side, that is certainly our targets. We have made significant progress in reducing our losses from the peak of about $40 million a year to, if you take the fourth quarter now, a run rate of about $12 million a year. So there's been significant progress being made. With that said, today, the profit we're making on the wholesale side, selling to ourselves, equates to the losses that we're having on the Retail side. So the corporation is, essentially, from a cash flow standpoint, neutral in pursuing this. And we have a fundamental belief that branded distribution is important to us. We have taken on the responsibility for some of these large markets that we don't feel we would ever get the same kind of market penetration or sales volumes out of. And number 3, we cannot find independent dealers today who have the wherewithal to open 10, 12, 15 stores in these major markets. And therefore, we have assumed that responsibility. I think you're a little confused about our run rate and the addition of Southern California, and so let me try to explain that. We are -- the way you should think about this, we are averaging about $2.5 million a store right now in the company-owned segment. If you took the 68 stores and did the $2.5 million run rate, you would get one number. We had the extra 15 store for just one quarter. So that pushed up the breakeven volume, because we have all the expenses and all the leases and everything with the additional 15 stores. But we're no different than most retailers. We need to be approaching $190, $195, $200 a foot of sales to get there. And with our average store being about 13,000, 13,500 feet, our $2.8 million to $2.9 million of volume needs to -- that's what we need to do to a make a solid return. So we went into the Retail business with a long-term view. Again, we have the belief that our -- that we do have a solid program. We made the mistake of getting into some leases that were much higher than we could generate the volume to do that than we had the economy meltdown. But we have -- our dealers that own the other 220-plus stores have occupancy costs that are significantly different than ours are making money, are reinvesting in it. So our model, as long as you don't get the occupancy cost out of line, our model works. It's stood the test of time through the meltdown. And we just have a strong commitment to proprietary distribution. Jack Salzman - King Point: I appreciate the clarification of it. Can you give us a feel for these expensive leases? Over what time period can we expect you guys to be able to renegotiate these things to a more realistic level?

That is an ongoing process. Different leases are turning out at different times. We have been able to renegotiate a number of them in some of our worst-performing stores. We're looking at options and trying to think about other things. So there is not a deadline or a cliff that we can say, "At this point in time, this will all be better off, because we are moving some stores to get better locations at less expensive rates." And so I can't answer that. I'm not being evasive, I just can't answer that question, because there is no bright line test. Jack Salzman - King Point: Last question, if I may, on retail. Other than the high -- some of these leases that are too high in terms of cost, are you happy with the other variables, such as employee costs and locations, things of this nature, or do you think that there is some significant tweaking there?

No, I think we're -- I'm as pleased with our model as I've been in the past couple of years. Our cost structure is very tight. As I said, we've lowered our breakeven $1 million a store over the last couple of years. And just to be clear, we're in 7 or 8 markets. And in certain of the markets, we're making money. And in other markets, we're not. So it's not like this is epidemic across the entire chain. We have some specific issues in a couple of very expensive markets. But no, I think our model, it can always improve. There's things that, obviously, we know that we want to do a better job of, but we're running, from an expense standpoint, a pretty tight retail model today. Jack Salzman - King Point: Okay. One last question on probed [ph] on the new store format. Dollar for dollar, are they significantly more profitable than the existing format? Can you give us an indication of the profitability structure of the new formats versus the existing ones?

Given the fact that we haven't opened one yet and operated it for even a month, I can't answer that. We have tried to design it so it's a little less expensive to outfit. And the test will come in how the consumer reacts, and how -- if we can push up our conversion rate, and we can push up our average ticket, it will be a more profitable model. But if -- the jury's not even been assembled yet to say what we're going to do. I'll give you some answers on that in 6 months after we operate them for a while.

There are no further questions at this time. I'd like to turn the floor back to management for closing comments.

Thank you, everyone, for being on the call this morning. Should you have follow-up questions, give me a call. Have a great day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.