Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Rex Henderson with Raymond James.
Rexford Henderson – Raymond James
I had a couple questions on the cost s and your efforts to reduce the cost structure. First of all, if you’d kind of quantify how much of those cost cutting efforts we’ve seen reflected in the results just announced, and how much more of them there are to go in the second half of the year. Secondly, it’s helpful I think to look at this, with a reduced cost structure, what the sales run rate would be required to reach break even and if you could address those I’d appreciate that.
Dennis L. Fink
It becomes difficult to call out the actual decreases because of cost cutting. The first half numbers and the second quarter numbers compared to last year speak to the reduction, the $3.5 million, and it’s net of several increases and several decreases. We noted that the two big increases were fuel costs and the cost of having outsourced credit promotions that were a little more aggressive, actually, quite a bit more aggressive than a year ago, so those are the two major items and we’ve made several other cuts. I think what we’re trying to do is to give you a second half guidance that tells you what’s still to come and so we’re trying to benchmark ourselves versus the first half and the comment was $2.3 million lower expenses in the second half than in the first, except that you have to take whatever sales you want to model and put some kind of variable costs in there for those. In terms of a break even, we’re running in the little over $61 million to $62 million a month so it’s probably in the range of $183 million to $185 million on a quarterly basis. That is going to be a little bit higher with the heavy LIFO expense we’re expected to incur in the second half and if inflation starts leveling out, or I should say prices start leveling out next year, the break even would be a lower figure. Does that help you?
Operator
Your next question comes from Laura Champine with Morgan Keegan.
Laura Champine – Morgan, Keegan & Company, Inc.
Your comments about the SG&A being lower than sales or even is a little frightening to me given that sales are historically much higher in the back half of the year. Did you mean to imply that sales might be flat in the back half compared to the first half of the year?
- To read the full transcript on Seeking Alpha, click here »
