Total selling, general and administrative expenses for the quarter increased year over year by $2.4 million, or 4.5%, but improved as a percentage of net sales from 10.6% for the second quarter of 2011 to 10.5% for the second quarter of 2012. The percentage decrease was primarily due to leveraging fixed costs over a larger sales base. In the latter half of 2012, the Company is scheduled to implement a Master Data Management system which concludes the first phase of a comprehensive initiative to improve our internal IT infrastructure. Depreciation expense for this asset is expected to add approximately $2.0 million in SG&A expenses in 2013 which may increase our SG&A rates.
The Company generated significant positive cash flow in the six months ended June 30, 2012. Total cash was $63.4 million compared to $4.6 million at December 31, 2011. In addition, there were no amounts outstanding on the Company’s line of credit at June 30, 2012, compared to $5.3 million outstanding at December 31, 2011. Days sales outstanding were 41 days at June 30, 2012, and inventory turns improved to 28 times as of June 30, 2012.
“I am pleased with our solid second quarter results and the continued improvement in gross margin and operating income,” said Timothy McGrath, President and Chief Executive Officer. “The macro-economic environment continues to be a challenge, which includes constrained government spending. However, we believe that our strong team and core business strategies position us well for future success.”
Non-GAAP Financial InformationAdjusted EBITDA, pro forma net income, and pro forma earnings per share are non-GAAP financial measures. This information is included to provide information with respect to the Company’s operating performance and earnings. Reconciliations of Adjusted EBITDA, pro forma net income, and pro forma earnings per share to GAAP net income are provided in tables immediately following the Condensed Consolidated Statements of Income.
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