Hala Elsherbini – Halliburton Investor Relations Michael Benstock – Chief Executive Officer Andy Demott – Chief Financial Officer.

Jim Gentrup – Vista Capital Management Brandon Osten – Venator.

Good afternoon everyone. Welcome to the Superior Uniform Group’s 2014 Fourth Quarter and Fiscal Year Earnings Conference Call. With us today are Michael Benstock, the Company’s Chief Executive Officer and Andy Demott, Chief Financial Officer. After the speakers’ opening remarks, there will be a question-and-answer period.

Instructions on how to ask a question will be given at that time. This call is being recorded and your participation implies the consent to this. If you do not agree, then simply drop off the line.

Now, I would now like to turn the call over to Hala Elsherbini, Senior Vice President of Halliburton Investor Relations who will read the Safe Harbor statement. Please go ahead..

Thank you, Keith. This conference call will contain forward-looking statements about Superior Uniform Group’s business opportunities and its anticipated results of operations. Please bear in mind that forward-looking information is subject to risks and uncertainties and actual results may differ from what you hear today.

Many of these risks and uncertainties are described in Superior Uniform Group’s Annual Report on Form 10-K for the year just ended in the news release that was published this morning and the Company’s other filings with the SEC. Forward-looking statements in this conference call are based on our current expectations and beliefs.

Management does not undertake any duty to update the forward-looking statements made during this conference call or elsewhere. Please note that all growth comparisons that management makes today will relate to the corresponding period of last year unless otherwise noted. With that, I’ll turn the call over to Michael..

Thank you Hala and good afternoon everyone. Thank you for joining us to review our performance for the fourth quarter and our fiscal year 2014. We will follow our usual format. I’ll start with some financial highlights for the quarter.

Then I’ll give an update on the progress we made in executing our growth strategies in both of our operating segments, followed by some comments on general industry trends. Next Andy will give you some color on our financial results for the last quarter and full year. Finally, I’ll come back with the general outlook.

Then we’ll both be happy to answer your questions. Let’s begin with the quarterly highlights. The final three months of 2014 represented a solid finish to a year in which we posted two record quarters as measured by revenues and earnings.

This is noteworthy since the fourth quarter is seasonally low in our industry because a good percentage of our customers are more focused on generating holiday related sales than buying Uniforms. Generally, we will see lower sequential result in the fourth quarter than in our second and third quarters, which represent the peak in our annual cycle.

Both our Uniforms related products and our Remote Staffing Solution Segments posted strong performances. As a result, revenues rose by 9.2% to $49.7 million compared with $45.5 million for the 2013 fourth quarter. Here is a closer look at the two segments.

Our uniform related products business, which includes Fashion Seal Healthcare, HPI Direct, and Superior ID saw 8.3% higher revenues for the 2014 fourth quarter. We more than offset some challenges in the current market environment, including Port disruptions on the West Coast and work stoppages in Haiti.

This reflects the strength of our global sourcing team as well as our long-term redundant manufacturing strategies, meaning we are able to source products from a number of suppliers and move through ports less affected by the disruptions. Our Remote Staffing Solution Segment, The Office Gurus is still a small part of our overall sales.

However, we continue to post very strong growth in revenue to outside customers, up 34.5% compared to last year’s fourth quarter. This reflected the in roads we are making in penetrating new markets, as well as increasing sales to existing customers.

For the total company, the combination of leveraging our fixed cost across higher sales volumes and continued cost efficiencies enabled us to increase net earnings by 70.5%, more than 7.5 times faster than sales. Earnings per diluted share grew by 53.8%, despite a 7.5% increase in average shares outstanding.

Andy will give you more details on the numbers and other key performance measures in the few minutes. Let’s talk about growth strategies. We had a very strong finish to a very transformational year for our company. This is due to progress we’ve made on the long-term growth strategies in place of both of our operating segments.

I’d like to recap some of those growth strategies for you. In our uniform and related product segment we are increasing our market penetration in healthcare and non-health care industries.

During the quarter, we further penetrated the integrated delivery networks channel, this include a large healthcare systems, Group Purchasing Organizations or as they’re know GPOs, home healthcare, long term healthcare chains, medical colleges, and large single standing hospitals.

In November for example, we were awarded our first GPO contract which went into effect on February 1. This gives us the opportunity to pitch our value proposition to more than 3,000 healthcare facilities, which we may not have had been able to reach otherwise.

This group was attracted to our company because we offer one of the broadest product lines in the industry and an excellent responsible garment sourcing network. We are now in the process of registering these organizations so that they may buy from us.

It’s too soon to talk about actual results, however, we will be actively soliciting business from them, and expect this will have a very long-term positive impact on our results. On the non-healthcare side, we have a good pipeline of opportunities in all stages of development.

Here we focus on providing uniforms to a number of growing markets, food service, transportation, private security and chain store businesses. HPI is known for its leadership in these fields and we already have a stellar reputation recurring business upon which to build.

We are also strengthening our global sourcing, which will of course continue to payoff. As I mentioned earlier, our redundant manufacturing strategy gives us relationships with sources around the world that offer the best value price and delivery while meeting our high standards of quality.

Our team is doing great job by identifying suppliers, managing costs and mitigating risk. Additionally, our branded promotional merchandise business pipeline remains strong. As we have mentioned in the past, this is a natural extension of our branding activities with customers. We expect to see additional program rollouts in the coming year.

Most notably we are aggressively seeking acquisitions with high growth potential, while HPI of course is a high water mark, we are taking a broad brush in the uniform space for acquisitions that can help take us to our next level of growth. We also want to expand in the branded promotional products areas.

In both, we are engaged with potential future candidates that can give us critical mass in the existing all new market or create new relationships for us or of course add products that might be a logical extension of our business.

Our goal remains to be a one stop source for our customers’ uniform and branded materials, which makes us more relevant to them as a supplier. Next, let’s look at the growth that’s taking place for our Remote Staffing Solutions segment. As you know, this serves as our own back office operation in addition to working with outside customers.

As a result, everyone benefits from solid economies of scale. Our niche is serving customers that need support for fewer than 25 seats. In addition to customizing needs for larger opportunities. In 2014, we increased sales to outside customers like 42.5%, we’re very proud of that.

As we discussed, we have just completed the expansion of our Florida and Belize centers, and our investing in building a new call center in El Salvador. We purchased land and are in the midst of the permitting process. Around the end of 2015, we expect to complete a facility that will house almost 500 more employees in El Salvador.

Within four years, we plan to double the current number of people in each of our Remote Staffing locations. The demand for these services far out strips our current capacity. However, we’re taking a very measured approach to growth. We have the right management infrastructure in place and we’re strengthening our recruiting processes in all locations.

As a result, we will be able to quickly attract and hire the right people to support our expansion and keep it on track without suffering from growing things. Next, I’d like to speak to you about important trends in our markets. There are three worth noting. First, we are glad to finally see some good economic news.

Last quarter we told you that our customers were starting to experience higher turnover due to lower levels of unemployment and greater confidence in the job market. Now, we are seeing some validation of this. According to the U.S. Department of Labor in December, employers posted the most job openings, the country has seen in 14 years.

Total hires were up 1.9% for the month to a seasonally adjusted 5.1 million. This is highest level more than seven years. In addition, the number of people quitting their jobs increased. Employee turnover jumped by 2.1% to 2.7 million people.

This pace continued in January, employers had 257,000 jobs last month and wages rose up at the fastest one month pace in six years. All these are long waited and welcome signs for our industry. We believe in improving employment trends whilst per growth in demand from our market for the foreseeable future.

More people will need Uniforms in total and from turnover. In addition, employers that want to increase employee satisfaction will allocate more money in the Uniforms as one way to hold on to good people. Second, a stronger economy also is translating into a greater willingness among our customers to invest in their businesses.

Many of them are opening new stores, expanding their operations, and going through refreshes of their brands. These factors mean continued demand for our products. Third, we are seeing a trend that is kind of a double-edged sword. Commodity prices are coming down, which in turn are lowering the cost of materials including raw cotton and polyester.

The truth is that today’s reduced cotton prices will take about 6 months to 8 months to actually reach us in the pipeline. As the fabrics are created and then turned in uniforms. This is will likely have a softening effect on our margins for the early part of 2015, but the impact should be negligible by year end.

Additionally, our scale and cost effective operations allow us to remain very competitive and take on lower margin business that would have been very unprofitable for us in the past. Now Andy will take you through our financial review..

Thank you, Michael, and good afternoon everyone. I’ll provide some depth on the key numbers we believe are particularly significant, first for the fourth quarter and then for the year. Just a quick reminder, for more detail please see our press release on the Investor Relations section of our website or review our 10-K, which was filed this morning.

Let’s begin with the fourth quarter income statement. We had a strong end to the year. Net sales increased 9.3% from 2013 quarter to $49.7 million. As you know both quarters include results from HPI, so this top line improvement came completely from organic growth.

The uniforms and related products business contributed 8% of the overall sales increase with Remote Staffing Solutions adding the remaining 1.3%. Uniforms and related product sales were up 8.3% over last year’s fourth quarter. HPI delivered another outstanding quarter with 26.1% higher net sales.

This reflects a success of the market penetration strategies that Michael outlined for you earlier. Remote Staffing Solutions saw quarterly sales outside customers rise 34.5% from a year ago as it continue to sign significant new accounts.

Gross margin increase as a percentage of sales to 34.7% or $17.2 million, for 2013 quarter this was 33% or $15 million. Just a quick note on gross margins, this will fluctuate from quarter-to-quarter largely because some of our uniform contracts have higher service components than others.

For this region we believe looking at SG&A and operating margins will give you a better measure of our overall progress. Income from operations climbed 81.3% to $4.6 million. That lead to a significant increase in our operating margin to 9.3%, compared with 5.6% for last year’s fourth quarter. Net income for the quarter jumped 70.5% to $2.9 million.

On a diluted per share basis earnings rose 53.8% to $0.20. This included the impact of 7.5% increase in average shares outstanding. That higher number of shares outstanding came primarily from the impact of increased option exercise during the current year.

Because of our continuing confidence in our long-term growth, and our ways to provide more liquidity in the stocks, the board declared a two-for-one stock split in December. This was effective on February 4. That move was in addition to the action we took in our third quarter when we raised quarterly dividend by 11% to $0.75 per share.

Now I’ll move on to a recap of our income statement for 2014 in total. Net sales grew by 29.5% to $196.2 million. $17.1 million of this increase came from including HPI’s operating results for the full year in 2013 versus just six months in 2013.

The remaining increase comes from organic growth from HPI and the balance of our uniform-related product segment and our Remote Staffing Solutions Segment. During 2014, we completed the roll-out of a new uniform program for an existing customer, which added about $5 million.

And the roll-out of a special promotion by another existing customer, which contributed $2.5 million. As a result, we increased revenues in uniforms and related products by 29% in 2014. The Remote Staffing Solutions revenues to outside customers grew by 42.5%, primarily as we added new customers.

Cost of goods sold decreased as a percentage of sales to 65% or $127.5 million from 65.3% or nearly $99 million in 2013. The two major reasons for this were our ability to spread over head cost across the high volume of sales and lower direct purchasing cost due to better product sourcing efforts.

SG&A expenses continue to increase at a much lower rate than sales and increased 15.6% from a year ago to $50.7 million. As a percent of sales, SG&A dropped to 25.8% compared with 29% in 2013. This reflects the gains we are seeing from leveraging our fixed cost and benefiting from economies of scale.

Our interest expense increased 148.2% to $484,000 related primarily to larger average borrowings for the year. Remember the debt related to the HPI acquisition was only outstanding for the second half of 2013. Operating income more than doubled to $17.5 million. Our operating margin for 2014 was 8.9%, compared with 5.6% for the prior year.

Our effective tax rate rose to 35.3% from 31.1% in 2013. The two main reasons were an increase in the net accrual for uncertain tax positions and a decrease in the benefit for income from foreign operations. As you recall, our earnings in El Salvador and Belize are permanently reinvested there, and we pay minimal taxes in those countries.

This means there is no U.S. tax provision for their earnings. Because of the significant increase in our domestic income, foreign income is now much smaller percentage of the total. Net income for the year, nearly doubled to $11.3 million and diluted earnings per share rose 78% to $0.82, despite a 9.3% increase in diluted shares outstanding.

Now for some balance sheet highlights. Cash and cash equivalents remain strong at $4.6 million. This was down from 2013, as we invested our cash in funding inventory and the purchase of land for our new call center in El Salvador. Accounts receivable expanded to nearly $28 million, a 23% increase, as a result of increased sales.

Inventories also reflected the higher sales rising 17.8% to $58.3 million. We saw a 123.5% increase in our pension liabilities year end to $8.1 million. The primary cause was a reduction in the discount rates used to measure our liabilities at year end.

Long term debt decreased 7.5% to $22.7 million and shareholders’ equity expanded 11.8% to $80.4 million. As Michael mentioned, this truly was a phenomenal year. Now I’ll turn the call back to him. So he can share a general outlook for the company..

Thanks, Andy. We’re very proud of our fourth quarter and 2014 results. As we’ve said all long, the kind of increases we saw last year from our uniform’s and related products group are unlikely to be repeatable at those same epic levels.

While we don’t provide specific guidance, I want to give you a sense though of what we expect for organic growth from our businesses over the next three years to five years.

Our current outlook is that our uniform segment will continue to expand and should exceed our organic growth rate of approximately 6% per year, which was our historical growth rate for the last several years prior to the HPI acquisition.

Future acquisitions could improve this outlook and as we have repeatedly stated, we’re aggressively pursuing candidates to acquire as well as keeping the lines of communication open to potential candidates not yet ready to sell their businesses.

Our Remote Staffing Solutions vertical should continue to post accelerated growth at the same dollar levels you have seen in the past few years, which is roughly at an annual growth rate of $2.5 million to $3 million. On a consolidated basis over the next three years to five years, we expect average organic growth in excess of 8% per year.

Of course, certain situations could change this outlook such as unanticipated customer demands, new product lines, changes in the economy and global calamities events as well as other situations that might impact employment levels and turnover rates. With that let’s open the call for Q&A..

Yes. Thank you. [Operator Instructions] And the first question comes from Jim Gentrup with Vista Capital Management..

Good afternoon, gentlemen.

How are you?.

Great. Thanks.

How are you?.

I’m doing well. Just wanted to kind of start off with the - just taking look at your pipeline little bit more and as you grow this year and into next year, where you see the kind of short-term and long-term opportunities, is it more in the healthcare with the IDN idea or development or non-healthcare.

Can you just talk a little bit about that?.

I would say it’s fairly equal between the two, Jim. I mean there are so many segments other than healthcare that we are dealing, particularly on the non-healthcare side. Our pipeline has opportunities in all the segments. They are all kind of in a state of what we would consider to be positive flux.

Retails are doing a lot of rebranding, refreshing, opening of new stores, food service in particular is very, very active in trying to establish new uniform program. During the recession, a lot of things were put on hold and now just trying to retain employees. They realize it’s going to be more and more difficult.

From what we’re hearing, it’s already becoming difficult even at the levels of unemployment currently. So, we expect to see a pretty good push on either side. Healthcare is a little bit longer sale.

It involves a lot more thought around how to take a large healthcare system and all the different locations they have and how to tie them into a uniform programs both from a design and a conceptual standpoint and then bring in so many different partners within healthcare system to try to sell them often takes a longer time.

But I think we are going to see a nice upward lift from both. I can’t really predict what percentage will come what - we pretty well laid out where we think The Office Gurus, our Remote Staffing Segment will be, but in my earlier comments - but I don’t know, really I wish I could predict that. I’d be a much better executive of that..

And then along the same lines, would you categorize this incremental revenue that you are going after, would it be more coming from completely new customers or is it just the expansion of the adjusting programs..

We’re certainly seeing expansion of existing programs, but we’re actively engaged with bringing new people to the table. Our pipelines are robust, I’m quite satisfied with what’s in our pipeline and what the different stages there and where we can take them. Of course, with existing customers turnover of employees is a big factor. So the U.S.

Department of Labor figures that I quoted you know any kind of uptick and turn over generally means more uniforms being bought in particular in places where employers supply uniforms to their employees. So we are very excited about both of those. It’s going to come from both..

Is the promotional product category, is that large enough - I’m assuming that you can’t break it, you are not breaking it out here.

So it must not be 10% of revenue for the full year, is that a safe assumption?.

I will let Andy will respond..

Yeah, that is a safe assumption. Yeah..

Okay, so do you expect - with that category be growing more or less than the overall, those 8% - whatever 10% that your long-term rate, would that product be that category where we are going faster..

At this point Tim, we are not going to comment on what products growing faster than other products. We’ve never really given that information out within our uniform and related products. And right now we consider that to be a related product.

So, we really not going to give that out and when it becomes large enough and if we get to [indiscernible] where we do segmented out will certainly be we proud to do that. It is growing quite nicely there..

Okay, and one more question if I may.

You hit the 9.3% operating margins this quarter, right there knocking at 10%, this is - do you see continued leverage as you grow in the next year or is there - should we expect a big increase in sales people that will - can you just talk a little bit about your leverage and what’s your kind of internal goals already getting the operating margins even higher..

I think you are going to see, as we continue to grow we will get some leverage out of our operating expenses, but we are also making some significant investments in both in the healthcare side as far as trying to ramp up with the sales to GPOs in that area. So, I mean it’s going to kind of balance out on at this point.

I think probably looking through this next year I don’t think I’d expect to see a lot more leverage on it beyond offsetting the investments that we’ve got to make..

Okay. [indiscernible] Thanks..

Thank you..

Thank you..

And the next question comes from Brandon Osten from Venator..

Hey guys. Congratulations at the hell of a year you guys put out there.

Just wanted to talk a bit about HPI, are you guys going to continue to break out the HPI numbers going forward or are we just - is this business, I realize geographically a little different but are we integrating and just having uniforms in call center or is this is separately reportable business segment for the foreseeable future?.

No we’ve broke it out this year, simply because of the fact that it was not comparable in both years. It is the core part of our uniforms and related products segment. So after this quarter, I wouldn’t expect the see any separate mention of it as far as results..

Okay.

So, we’re going to go from 8% growth in core and 29% growth in HPI to whatever mid-teens growth in uniforms and then whatever growth in call centers is that the plan, is what I should expect going forward in terms of just reporting?.

In terms of reporting, you’re correct.

In terms of the numbers you just used, I think you have go back to my early statement where I, I said we expect to exceed our 8% organic historical growth rates and we expect to be somewhere on the call center side between additional revenue over the next three years to five years of $2.5 million to $3 million per year increase..

Okay, an HPI, I mean, since this is the last quarter. We are really going to see it on its own.

They’re still throwing out really good growth over there, is there any key success factor that you guys can point to that had allowed this situation to persist as the year went on?.

Yeah, I think, one of issues is, we were - and have explained this in a couple of the conferences we’ve done, which have been recorded, but [indiscernible] benefit on this call, you know HPI was one of our largest competitors in the non-healthcare marketplace.

We often found ourselves standing side by side with them in the RFP process as last two men standing and [indiscernible] purposes they’re driving the sales now and they’ve taken in the way - they’ve taken out their biggest competitor, was us.

So, they’ve got great salesmanship, they’ve got great designs and they’re an incredibly innovative organization. And customers like to work with them and customers are impressed by all that they can do for them.

So with our backing and sourcing that we provide in the scale that we’ve created by doing this acquisition has clearly given us a little bit of leverage on - more leverage on the sourcing side, has made them more able to compete.

And less concerned with who their competition is, because none of their competition measured up to us as competitors in our opinion out in the marketplace.

So they’ll continue to be innovative, they’ll continue to be who they are, we will continue to give them the economies of scale, but I know they are probably listening to this call or will be listening to this call, person per person they are a great organization..

Okay.

That’s kind of interesting, if I can just follow-up on that because I mean, did you like exceed what would have been previously competitive, you know situations to their division, I mean, had you guys, if you guys hadn’t merged effectively, would their growth rate potentially has been lowering and your growth rate would have potentially been higher because you would have split deals in some proportion..

That’s a good view of the world and I personally believe I have no way of knowing for certain, but I personally believe that that would have been true..

Okay.

Your SG&A expenses came down a lot sequentially, is there any – I wasn’t entirely clear on the reasons behind that?.

The primary reason for that was the significant growth and the leverage we got of our fixed cost..

Okay. And….

Let me point out one other item that was in SG&A last year. I mean, we did have just under $1 million worth of acquisition professional fees associated with the close when we acquired HPI, so that came out..

So I was referring in relation to the September quarter..

Okay..

You don’t normally see expenses come down that much quarter-to-quarter from that Q3 to Q4 typically..

Well, quarter three includes option grants..

And just have few more to kick off of my list here. Last year, you guys had a slight sequential Q3 to Q4 increase in revenues. And this year it was down a little bit.

I realized you guys had a monster Q2 and a monster Q3, but can you sort of dive into the normal expected seasonality a little bit with me here?.

Typically our second and third quarters are strongest quarters. Fourth and first are weakest and by now it’s weak but weaker and that’s historical. If you go back ten years and that has been true in most cases. Last year, we had strong backlogs going into fourth quarter as we did four or five years ago as well if I recall correctly.

It’s a little bit unusual, but it does happen. So but that is sequentially how things usually happen, first and fourth are weakest, things start to really ramp up in the middle of March or so, and carry us through to the fall..

Okay, and last thing I’d promise. The acquisitions, you guys have been talking for six months or obviously the last one was a home run. I’m not sure if you had the word aggressively pursuing in the last press release, I haven’t checked.

But can you comment as to whether or not targets have been identified and is it an issue I guess the question, is it an issue of fit or is it an issue of price that that you haven’t made an acquisition last ten months – last nine months when you made it fairly clear that you guys are looking?.

It’s a factor of all those things. It’s a factor of, I mean, yes, we have targets. We have our targeted lists and we view them regularly and we visit and communicate regularly with our targets. And we are no less aggressive now than we were a year ago or two years ago when we acquired HPI.

It is a question of fit, it is a question of exit could be many different – it’s got to be product culturally, do they management in place that can run their business and grow their business and perhaps behave as HPI has behaved or there more some company that we got to roll into our company and take over managing.

So there is a lot of thought that goes into that but there is no shortage of targets and that’s about all we can say about it at this point. When we say aggressively pursuing, we mean aggressively. We could not be any more aggressive than we are right now..

And that being, is there a wide variety of potential sizes that you are looking at – are we looking at anything from $5 million in annual revenues to $40 million in annual revenues or is there a specific size that internet you more than another one?.

You have to remember how many markets we serve. So there could be a smaller company, maybe a little larger than what you mentioned, but there could be smaller company in a particular market that would give us a total into a segment of the uniform market that we don’t currently serve well or don’t serve at all.

As opposed to a larger acquisition that we may see in the typical and in our organic space that we would want to go after, so that’s pretty good range, lot of expense on circumstances and what kind of leadership and what kind of infrastructure they have, and how easy or difficult it would be to integrate it.

We certainly have the firepower and the horsepower to do any of the sizes from the 5% to 40% that you mentioned or anything in between. But it’s got to be right fit; it’s got to be at the right price, and it’s got to be with the right group of people..

Thanks guys. Great year..

Thank you very much..

Thanks..

Thank you. And we have a follow-up question from [indiscernible]..

Hey, guys, I just wanted to quickly ask you about – have you guys seen much of a weather impact like you did last year at this time for Q1?.

We’re all seeing the weather impact. Yes, the impact fortunately, what happens in the middle of the quarter is less impact for us. It just means that things happened a little bit later. You hope to not have these strong weather conditions at the end of the quarter; the few days of the quarter to really impact you.

So the impact will be minimal but for sure. From all standpoints, transportation, two hours of inbound product, [indiscernible] products trying to get customers, our employees trying to get to warehouses to shift and there have been shut downs.

But we stay on top of what we do when we were really a quick service organization, so often times it’s a question of it’s a little bit over time when we get through these times and cranking of backup and things get back to normal very quickly..

And also I have a question about the commodity prices, the comments you made about commodity prices. And I guess I just wanted you to kind of reconfirm what you see. It’s something about six months to eight months for those favorable drops declines to reach you, but then you say something about softening impact.

Could you just elaborate on that a little bit more?.

Sure. We buy products all over the world. Some of our lead times are as long as eight months from the time we make a commitment to buy fabric and that fabric then begins at the spinning mill to make its way to a weaver, eventually gets died and so on.

The controlling of those prices is often done at different stages of that, and commitments are made between those people with respect to how much inventory they normally carry for them on any kind of basis. So, the impact is not immediate. If you see commodity prices go up, it doesn’t mean that, cotton and polyester go up.

Tomorrow my prices of fabric go up. Usually we’re bought out for at least in the next nine months and in some cases even longer. So my prices may not change for nine months to 12 months and further up or down. We hedge a little bit that helped us greatly during the cotton prices by going long-term as opposed to only looking at short term horizons.

We do expect, there’s a lot of pressure from a large standpoint from our customer base saying hey cotton and polyester have come down, what do you guys doing for us? And there’s almost an expectation in some cases that their prices have to come down.

Now, so we’re fighting that, that’s about as always been out there and we’ve always dealt with that and we’ve always dealt with that quite well. And so we’re doing so now. And but the reality is, there may be some give and take over the next few months.

But our pricing will all be in line as the year goes on, our inventory is replenished with lower price merchandise, our margins should come back and it’s essentially what we’re seeing..

So, I mean, if you have opportunity on the gross margin side to improve that, that would be probably more likely because of just better coverage of fixed costs?.

I’m sorry, could you restate that again?.

If you do have opportunity on the gross margin side which I’m not sure that you do, I’m not saying that you are sub stating that but if you did increase or had an opportunity there would be more likely in the short-term because of just better coverage of fixed cost?.

Yeah, there is also the issue that we’re not laying down still and we’re expanding in lower cost countries right now. We’re moving products around. We’ve got a strong sourcing effort and we continue to actually to grow the staff with talented people who know the world even better than we know at this point.

And as we continue to do that we will find lower cost sources, we will - it takes time grow those and build those and have make them impactful to your business. But we’re not taking this laying down, I mean this is something we’re constantly slugging out and we’ll continue to do so..

Okay, and then one last one.

Did you guys give a backlog number for 12/31 or could you?.

We didn’t give one for 12/31, there is one in the 10-K or the recent number which was basically I think it was up slightly from where the number was last year..

We’re kind of a quick ship organization. You have to be very careful. Some of the best times of this company has been when we got the lowest backlog. And a lot it depends on while customers are giving us some future orders and so on. That’s kind of a mix bag to look at. 20 years ago, backlog totally drove this company.

You looked at our backlog, you know what we are going to do three months, six months down the road. Today, you backlog tells us nothing about what we’re going to do..

Okay. That’s it. Go ahead..

I’m sorry, go-ahead, this is fine..

No, you said it was up slightly, I didn’t know [indiscernible]..

Yeah, was going to tell you. The $7.2 million compared to $6.9 million at the same date last year. That was as of February 23..

All right. Thank you very much, guys..

Thank you, Jim..

Thank you. And your next question comes from Bob [indiscernible] from Meridian. Please go ahead..

[indiscernible]..

Your line is live, if you are in mute..

Guys, I’m sorry about that [indiscernible].

Can you hear me?.

Okay..

I just – I wanted to ask a – kind of a rephrase able to what the previous two callers asked about, sequential revenues so and so forth. Michael, to what extent the business sort of lumpy and driven by large wins. Because I know you had a couple of marky wins in the previous two quarters.

And I just wonder if that sort of – made those two orders, those blockbuster orders look a little bit better, a short-term and they really were.

Not that I wanted you to quantify it or anything but is that an impact as well?.

Yeah. Just to clarify the two large orders that we actually discussed in the call today and early in the year, where both in second quarter. So they will have an impact in particular quarters, but it was O&E in that second quarter, the third quarter. And fourth quarter didn’t have any comparable types of numbers in that.

Absent those kind of roll-outs, our business really isn’t lumpy at all. It’s pretty straight forward. It’s pretty easy to predict. And I mean we do an awful lot of forecasting internally with respect to months and quarters, [indiscernible] become very, very close to our focus. Yes, we had wins.

Wins sometimes produce big roll-outs and we have recessions of brands that sometimes produce big results for in a small amount of time. But we expect to continue to have those from time to time. But from a standpoint of driving the business or driving our revenues, we did quite well without those, but we have to win business.

After we win the business and we do those roll-outs and refreshes, that becomes regular business for us becomes daily shipping of the customer’s orders to them to all of their maybe hundreds or thousands of locations.

But it can only get lumpy when we have those kind of rollouts and I would love to sit here and say, we wish we had more of a work and really hard to make sure we have more of those..

Great, okay good that’s good color, thanks. On the Remote Staffing side, you had a very interesting comment in your prepared remarks about your inability to meet the demand and there are obviously a lot of call center like businesses out there for enterprise customers to choose from.

What makes your offering so unique? Why is it growing as fast as it is growing?.

Well, we find the market for people who need less than 25 seats in a call center to be totally underserved market. The largest call center BPO businesses in the country aren’t going after the 25 seats, they’re going after the 100 seats.

So the 100 people doing the exact same thing that they can, and those are pretty tight RFPs and they come down to the end of the tenth of minute, where the tenth of the second how long a call lasts and so on.

Ours is a much different structure, it’s an hourly structure with people who are really looking to have in extension of their own office somewhere else. They don’t want to have to manage them, they want somebody else to manage them.

But they want to feel as if those people work for them and that’s the kind of service we provide to people, a very specialized service, where if they want to start with five people, we’ll start with five. If we believe there is potential to grow to 25, we will. That’s kind of our sweet spot. Now we’ve had customers grow well beyond the 25.

And they started with us on a very small basis. We did a great job to them they are like what they saw in some cases we help them grow their business. And so now, we are the lion’s share of their customer care.

So, I think we have a - first of all it does come down to the fact, I think we have a value proposition that even those who compete with us don’t have, we have a very Google like environment in our centers. Work fun environment, we get the cream in the crop. We are thought off in El Salvador and in Belize as one of the top call centers to work for.

We get the top employees and we’ll travel fast in that world, people who need BPO services whether it’s because the social media or whatever, but world travels fast and so we are just making sure we don’t trip over ourselves and we’re doing everything we can to do things right.

So that this is just a sustainable growing business for us and so far, so good..

Good, I just have a couple of more sort of technical questions, maybe more for Andy. I noticed a big increase in the pension liability to $8 million from $3.6 million a year before, and assuming HPI direct was included in the previous year’s balance sheet.

I just wondering what drove that?.

Yeah. HPI actually doesn’t affect the pension liability, we froze it. We had frozen the main picture plant prior to acquiring them. Very much the lion’s share of the increase was due to the fact that our discount rates for valuing the liability at year end went down from 4.6% last year to about 3.8%..

Due to the reduction in interest rates or?.

Yeah, this is due to the bond rates that one that we use to compare proceeding that discount rate..

Okay.

And then the CapEx looks like your additions to property, plant and equipment, which I guess I would call CapEx about $5 million last year, do you guys have a plan for 2015?.

We have a plan – I mean in a normal year we are certainly –..

You talked about it – I mean its –.

Yeah, I will give you some flavor on it. In most years we are standing between $2 million and $3 million in a normal basis for CapEx. Last year included $2 million for the purchase of the land in El Salvador for the new call center that Michael spoke about.

And for that call center specifically we’ve got budget around another $5 million or a little over that. And further we expect to spend in bringing that call center up. Other than that I mean we’ll be in normalized types of numbers..

And I think I’ve answered question before – when you, Andy gave you our normalize numbers, but if you look at our history almost every five years to six years or so, there is a larger expense. Five years to six years ago we spent money on upgrading our warehouse.

Five years to six years before that we spent money on implementing SAP and acquired a large expense for a company than our size. Five or six years before that we built a robotic warehouse at in Arkansas and that was a large expense. So, I don’t know what the next big expense will be beyond the call center expenses five years to six years from now.

But it will be related to distribution or to computer technology or some other way to create some other efficiency within our business..

Okay. Very good. Well phenomenal year and keep up the good work, thanks very much..

Thank you..

Thank you.

Thank you. [Operator Instructions] And as there is nothing else at the present time, we would like to turn the call back over to management for any closing comments..

Yes. I like to leave all of you with these final thoughts. We said all along that 2014 will be a transformational year. We’ve reported phenomenal results and strengthened our business model. Our diverse business segments offer services for which there is a growing demand.

We maintained a good competitive position from a cost efficient platform and generate solid margins with potential for upside leverage. We have evolved while maintaining the same entrepreneurial spirit, our 95-year old heritage was built upon.

Our management team and entire workforce are highly motivated to reach the next level of growth and drive optimum results, while strengthening the company's enterprise value, and creating long-term value for our shareholders. Andy and I certainly appreciate your time today and the great questions.

We look forward to sharing the results of our progress in the first quarter with you in April. Thank you..

Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect. Have a nice day..