Question-and-Answer Session
Operator
Thank you. (Operator Instructions) And our first question will come from the line of Bruce Baughman from Franklin. Please proceed.
Bruce Baughman – Franklin Templeton Investments
Good morning.
Unidentified Company Representative
Good morning, Bruce
Unidentified Company Representative
Good morning, Bruce
Bruce Baughman – Franklin Templeton Investments
Congratulations on another nice quarter.
Unidentified Company Representative
Thank you.
Bruce Baughman – Franklin Templeton Investments
Obviously, the developments on the balance sheet are welcome and very nice to see. Would you anticipate a continued debt reduction during the coming year? And, do you have a particular leverage metric in mind that you consider an appropriate one?
Michael J. Valentine
Bruce, First of all, as you probably recall, we did generated lot of cash from reducing inventories. There is still a little bit more room there, but certainly not to the extent that we experienced in fiscal 2009, but we do expect to generate a significant amount of cash flow, a good portion of which will be used to invest in our Fisher brand and other parts of our consumer channel. But compared to say the previous three fiscal years we do expect to reduce debt further.
Bruce Baughman – Franklin Templeton Investments
Okay, is there a level of debt or some kind of benchmark metric that you can cite as a point place, where once want to arrive there you consider yourself appropriately capitalized?
Michael J. Valentine
Well I think, I think even the level that we have at the end of this fiscal year, I would characterize as appropriately capitalized. If we do reduce it further, that doesn’t necessarily mean that’s where we want it to stay. If there are good investment opportunities, both in say the Fisher brand or even other M&A activities, then we certainly would take advantage of that.
Bruce Baughman – Franklin Templeton Investments
Okay, and then just getting back to working capital for a moment. In your comments you suggested there is still some opportunity there. How much of that opportunity might come from continuing to improve efficiency at the plant versus other steps you might take?
Michael J. Valentine
I’ll let Jasper Sanfilippo, Jr., take this one.
Jasper B. Sanfilippo, Jr.
Well as Mike stated before, we still have improvements within the – managing of our inventories. As you know, we are vertically integrated in some of our major commodities and with respect to making improvements in our inventories there, and it is difficult although we will continue to look at that. Our main point priorities we are looking at all of raw materials purchased from outside vendors, as well as continuing to focus on our finished goods inventories. We have a substantial focus in terms of improving the efficiencies of the lines. We really can’t quantify how much improvement we expect in terms of cash flow or working capital, although we continue to increase the inventory turns of our finished goods, that is a direct result of having higher and more efficient lines because we can run finished goods orders much closer to ship to – you kind of have that double-whammy by increasing our efficiencies of our lines. We reduced our operating expense, but it also helps us turn our inventories quicker.
- To read the full transcript on Seeking Alpha, click here »
