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» Furniture Brands CEO Discusses Q2 2010 Results - Earnings Call Transcript
If you do not have a copy of yesterday’s press release, you may obtain one along with copies of prior press releases and past SEC filings by linking through to the Investor Relations page of our website, furniturebrands.com.Now, I’d like to move on to our financial results. As reported in the last evening’s financial results press release, total sales were $296.2 million in the second quarter, an increase of 2.3% over the same period last year. On a sequential basis, sales in the second quarter were almost flat versus the first quarter of 2011. Gross margin for the quarter was 24.8%, down compared to 25.7% last year. The decrease in gross margin on a year-over-year basis was driven largely by higher material costs relative to sales price and inventory write-downs. We continue to work on our ongoing productivity and price initiatives to help mitigate the impact of the cost pressures that we are facing. SG&A expenses totaled $79.3 million for the second quarter, compared to $75.2 million last year and down slightly from the $79.6 million level we reported in the first quarter of 2010. On a year-over-year basis the increase in SG&A was primarily due to higher advertising expense and favorable settlements in 2010 related to certain international tax and trade compliance matters. We expect SG&A for the third quarter of fiscal 2011 to be slightly above the just reported second quarter levels and we will update you about our expectation for fiscal fourth quarter SG&A levels on our third quarter earnings conference call. On the retail side of our business, the 45 Thomasville stores that we have operated for more than 15 months showed a same-store sales increase of 8% this quarter. Even at this quarter, we were up against a strong 21% same-store sales comp in the second quarter of 2010. We are pleased with Thomasville’s same-stores sales performance. This represents the sixth straight quarter of same-store sales growth.
Our 66 total company-owned retail stores at the end of second quarter was lower than our 71 stores at the end of the second quarter of 2010. Even with this reduction in stores, we reported flat retail sales on year-over-year basis and a slight reduction in retail operating losses.Inventory at quarter end was $246 million versus $251 million in the second quarter of 2010. We expect to end this year with inventory levels down approximately $10 million to $20 million from the 2010 year-end levels of $250 million. Cash at quarter end totaled $35 million and debt totaled $77 million. At the end of the quarter the excess availability to borrow under our revolver was approximately $54 million with total liquidity of $89 million. The decrease in our cash balance compared to the end of the first quarter largely reflects the investments being made in Indonesia, Mexico and SAP. In addition, we made a $2.4 million payment associated with the refinancing of our asset-based loan through 2016, which we mentioned in last quarters release. We said capital spending for the year would be more heavily weighted to the first half and you can see that was indeed the case with the year-to-date capital spending coming in at $17.4 million. We continue to expect our capital expenditure for the full year to be with in our previously issued $25 million to $29 million guidance range. We continue to expect depreciation expense to be approximately $24 million. Our required 2011 pension contribution is expected to be approximately $3 million. As we get near to the end of 2011, we will have greater visibility with respect to the required contribution in 2012. Read the rest of this transcript for free on seekingalpha.com