Flexsteel Industries, Inc.

Good morning and welcome to the Flex Steel Industries second quarter of fiscal year 2020 earnings conference call. Our participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may use the star then the one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Donnie Case, Investor Relations for Flex Steel Industries. Please go ahead.

Thank you, and welcome to today's call to discuss Flex Steel Industries' second quarter of fiscal year 2020 financial results. Our earnings release, which we issued after market closed yesterday, Monday, January 27th, is available on the Investor Relations section of our website. at FlexSteel.com under News and Events. I'm here today with Jerry Dittmer, Chief Executive Officer, and Marcus Hamilton, Chief Financial Officer. On today's call, management will provide prepared remarks, and then we'll open the call to your questions. Before we begin, I would like to remind you that the comments on today's call will include forward-looking statements, which can be identified by the use of such words as estimate, anticipate, expect, and similar phrases. forward-looking statements by their nature involve estimates, projections, goals, forecasts, and assumptions and are subject to risk and uncertainties that could cause actual results or outcomes to differ materially from those expressed on the forward-looking statements. Such risks and uncertainties include but are not limited to those that are described in our most recent annual report on Form 10-K as updated by our subsequent quarterly reports on Form 10-Q and other SEC filings as applicable. These forward-looking statements speak only as of the date of this conference call and should not be relied upon as predictions of future events. Additionally, management may also refer to non-GAAP measures which are intended to supplement but not substitute for the most directly comparable GAAP measures. The press release available on the website contains the financial and other quantitative information. to be discussed today, as well as the reconciliation of the GAAP to non-GAAP measures. And with that, I'd like to turn the call over to Jerry.

Good morning, and thank you for joining us today. At the beginning of January, I celebrated my one-year anniversary as Flex Seal CEO. Within the first year being on board, we assessed the organizational and operational effectiveness of the company and laid out a comprehensive transformational plan to get the supply chain and operations working well. Additionally, we've completed a significant talent injection of leadership and subject matter experts into the organization from sales, engineering and product development to supply chain to IT. Since our first announcement last May, we've made solid progress on the restructuring plan and the six work streams. We identify and we are realizing benefits of these activities in our financials and our business. Getting supply chain and operations on the right track is important, but without growth, the company cannot win. With confidence our restructuring program execution is proceeding as planned, we are increasing our focus on growth. We continue to make progress redeveloping, our e-commerce channel as evidenced by our strong growth here topping 30% in the second quarter. This was the first positive year-over-year comparative in the e-commerce channel since I joined. Seeing a strong year-over-year comp after a couple quarters of strong sequential growth is a nice proof point that we're getting it right and our momentum is building in this channel. We've also been busy moving our largest buy and import product groups from China to other parts of Southeast Asia and have begun rolling back prices on these groups as we transition out of the China inventory. We saw a demand rebound almost instantly on these products when the pricing rollback hit the marketplace. We will continue to work our largest volume groups into Vietnam as soon as possible and ensure that sourced new product introductions are launched from this region going forward. Improving our service levels to the customers and reducing our lead times in key categories serves as another catalyst to restarting our growth engine. While our cost to serve has increased, reduced lead times remains one of our top initiatives, and we are seeing results. It takes consistent delivery at reduced lead times over an extended time period for performance to be recognized and positively impact point of purchase. The stationary category, our largest domestic category, still needs to prove out to customers. Right now, we are still seeing a drag on demand that resulted in stationary products being down 12.5% in the first half of the year. On the other hand, our domestic recliner and motion groups, where we have not had the same lead time performance challenges, continue to contribute very strong results up 24% and 33% respectively in the first half of the year. Additionally, we are overhauling our new product introduction process using customer insights and building a robust product pipeline for future introductions in all our core categories to further accelerate these growth opportunities. In short, our priorities are clear. grow the top line with focus in our core categories and channels by improving our customer experience, expanding distribution, execute our six work streams, and build a disciplined approach to product development and lifecycle management. We expect focus and execution on these priorities to turn our sales back to a growth trajectory and improve our profitability in the coming quarters. I'm going to turn the call over to Marcus to provide a more in-depth analysis of the quarter results. Marcus?