Financial Data and Key Metrics Changes - The gross profit margin for Q2 2025 was 29.2% of sales, an increase from 28.1% in Q2 2024 [2][3] - Operating income in Q2 2025 was $3.2 million, compared to $2.3 million in the same period of the prior year [2] - Net income for Q2 2025 was $1.2 million, up from $600,000 in Q2 2024 [3] - Selling and administrative expenses decreased by $600,000 or 3.4% year over year [5] Business Line Data and Key Metrics Changes - Soft surface sales remained relatively flat year over year, while the industry experienced a decline of approximately 7% [4] - The DuraSilk collection in soft surface products continued to gain market share, contributing to strong sales in decorative products [4][12] - The hard surface business, particularly the high-end Fabrica wood program, saw growth of nearly 10% in Q2 [11] Market Data and Key Metrics Changes - The flooring industry faced weak market conditions due to high interest rates and low consumer confidence, impacting sales negatively [4][10] - Existing home sales declined to approximately 4 million units, contributing to the challenging environment [10] Company Strategy and Development Direction - The company has implemented a cost reduction plan aimed at saving $12.6 million for the year, with approximately half achieved in the first six months [3][28] - Investments have been made in growth initiatives, particularly in hard surfaces and decorative offerings, to enhance market share [11][12] - The company is focused on maintaining selling and marketing expenses to support new product introductions [5] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing challenges in the flooring business but expressed optimism about future market improvements as consumer confidence and mortgage rates are expected to eventually rise [15] - The company believes it is well-positioned to take advantage of market dynamics when conditions improve, citing historical trends following economic downturns [15][16] Other Important Information - The net inventory balance at the end of Q2 2025 was $67.4 million, down from $76.1 million in the same period of the previous year [7] - The company plans to maintain capital expenditures at approximately $800,000 for 2025 [9] Q&A Session Summary Question: Impact of interest rate drops on sales - Management indicated that while a reduction in mortgage interest rates would positively impact sales, a definitive percentage increase could not be provided [18] Question: Lag time for sales increase after interest rate drops - Management acknowledged a lag time, noting that consumer confidence would also play a significant role in the speed of recovery [19] Question: Impact of tariffs on gross margin - Management confirmed that approximately 85% of sales are not impacted by tariffs, and price increases implemented have covered the costs associated with tariffs [22][23] Question: Cost of goods sold and raw material inputs - Management reported no inflation in raw materials yet, with some reductions helping to improve gross margins [25] Question: Incremental savings from cost savings program - Management anticipates achieving the planned $12.6 million in savings, with approximately half already realized [28][29] Question: Performance of hard flooring business - Management noted that the high-end wood segment performed well, while the luxury vinyl tile products faced more challenges due to competition [30][31]