Flexsteel Industries, Inc. (NASDAQ:FLXS) today reported results
of operations for its fourth quarter and fiscal year ended June 30,
2009.
The Company reported net sales for the quarter ended June 30,
2009 of $74.6 million compared to the prior year quarter of $100.6
million, a decrease of 25.9%. The Company reported net income for
the current quarter of $0.8 million or $0.12 per share compared to
net income of $0.3 million or $0.05 per share in the prior year
quarter.
Net sales for the fiscal year ended June 30, 2009 were $324.2
million compared to $405.7 million in the prior fiscal year, a
decrease of 20.1%. The Company reported a net loss for the current
fiscal year of $1.5 million or $0.23 per share compared to net
income of $4.2 million or $0.64 per share in the prior year. On a
pre-tax basis the reported loss of $2.6 million includes
approximately $2.6 million related to facility consolidation and
employee separation costs, reflecting near break-even results from
continuing operations.
The information regarding facility consolidation and employee
separation costs is non-GAAP disclosure. Investors should consider
these non-GAAP measures in addition to, and not as a substitute
for, financial performance measures prepared in accordance with
GAAP. We believe this information is relevant to our investors due
to the significance of these items on net income and earnings per
share and have included a table in the financial statements
demonstrating the impact on earnings.
For the quarter ended June 30, 2009, residential net sales were
$57.0 million, compared to $66.9 million, a decrease of 14.8% from
the prior year quarter. Commercial net sales were $14.8 million for
the quarter ended June 30, 2009, compared to $22.1 million in the
prior year quarter, a decrease of 33.0%. Recreational vehicle net
sales were $2.8 million for the quarter ended June 30, 2009,
compared to $11.6 million in the prior year quarter, a decrease of
75.9%.
For the fiscal year June 30, 2009, residential net sales were
$230.7 million, compared to $258.1 million, a decrease of 10.6%
from the year ended June 30, 2008. Commercial net sales were $77.2
million for the year ended June 30, 2009, a decrease of 15.6% from
net sales of $91.5 million for the year ended June 30, 2008.
Recreational vehicle net sales were $16.2 million for the year
ended June 30, 2009, a decrease of 71.1% from net sales of $56.1
million for the year ended June 30, 2008.
Gross margin for the quarter ended June 30, 2009 was 21.0%
compared to 18.5% in the prior year quarter. Gross margin
improvement in comparison to prior year quarter was primarily due
to cost reductions related to facility consolidation and a LIFO
benefit increase of approximately $0.4 million. Gross margin was
18.8% and 19.3% for the fiscal years ended June 30, 2009 and 2008,
respectively. The decrease in gross margin percentage for the year
is primarily due to an approximate $2.0 million adjustment to
realizable value on inventory and to a lesser extent to
under-utilization of capacity on significantly lower sales volume.
These factors were partially offset by a LIFO benefit increase of
approximately $0.6 million.
Selling, general and administrative expenses were 19.0% and
17.9% of net sales for the quarters ended June 30, 2009 and 2008,
respectively. For the fiscal years ended June 30, 2009 and 2008,
selling, general and administrative expenses were 18.8% and 17.5%,
respectively. The percentage increase in selling, general and
administrative costs for the quarter and the year is primarily due
to under-absorption of fixed costs on the lower sales volume and
the lag time in reducing advertising and other sales support costs
in response to the lower volume.
Although our effective full year tax expense rate is normally in
the 35% - 39% range, fiscal year ended June 30, 2009 reflects an
effective income tax benefit rate of 41.5% due to losses or low
level of earnings in various tax jurisdictions. The effective
income tax rate was 35.8% for the fiscal year ended June 30, 2008.
Effective tax expense rates for the quarters ended June 30, 2009
and 2008 were 23.8% and 27.9%, respectively, due to year to date
fluctuations
All earnings per share amounts are on a diluted basis.
Working capital (current assets less current liabilities) at
June 30, 2009 was $78.4 million as compared to $100.9 million at
June 30, 2008. Significant changes in working capital from June 30,
2008 to June 30, 2009 included decreased accounts receivable of
$12.5 million, decreased inventory of $11.9 million and decreased
accounts payable of $4.8 million. The decrease in receivables is
primarily related to lower shipment volume. Lower customer demand
for our products reduced production levels and finished product
purchases, which resulted in an inventory decrease. The decrease in
accounts payable relates to lower purchase volume based on current
demand.
Net cash provided by operating activities was $17.3 million for
the fiscal year ended June 30, 2009. Cash from operating activities
was used primarily to reduce borrowing by $15.9 million and pay
dividends of $2.9 million. Capital expenditures were $1.2 million
during fiscal year 2009. Depreciation and amortization expense was
$3.7 million and $4.4 million for the years ended June 30, 2009 and
2008, respectively. The Company expects that capital expenditures
will be approximately $2.0 million in fiscal year 2010.
Outlook
We believe that the consolidation of manufacturing operations
and workforce reductions that the Company completed during the
fiscal year has brought production capacity and fixed overhead in
line with current and expected demand for our products. Company
wide employment has been reduced approximately 30% over the past
year through plant closures and workforce reductions related to
business conditions.
The recreational vehicle industry continues to be the hardest
hit product category with the initial impact of high fuel costs
compounded by credit tightening and lack of consumer confidence in
the economy as a whole. Recreational vehicle industry published
data indicates that motor home unit sales, the sector that
encompasses the majority of our sales, are down nearly 80%. The
commercial seating product category held up well early in our
fiscal year, but fell considerably as the U.S. economy contracted
and credit tightened. We believe that our residential product
category has performed reasonably well in relation to our
competition. However, residential furniture remains a deferrable
purchase item and is adversely impacted by tighter consumer credit,
higher unemployment and low levels of consumer confidence.
As demonstrated above, demand for our products is dependent on
factors such as consumer confidence, affordable housing, reasonably
attainable financing and an economy with low levels of unemployment
and high levels of disposable income. These factors remain in
depressed positions, and indications are that they will remain that
way in the near-term. We are not anticipating significant
improvements in market conditions at this time, and are managing
our business on that basis.
While we expect that current business conditions will persist
for the remainder of calendar year 2009, we remain optimistic that
our strategy of a wide range of quality product offerings and price
points to the residential, recreational vehicle and commercial
markets combined with our conservative approach to business will be
rewarded when business conditions improve. We will maintain our
focus on a strong balance sheet during these challenging economic
times through emphasis on cash flow and improving
profitability.
Analysts Conference
Call
We will host a conference call for analysts on Thursday, August
20, 2009, at 10:30 a.m. Central Time. To access the call, please
dial 1-866-830-5279 and provide the operator with ID# 13761217. A
replay will be available for two weeks beginning approximately two
hours after the conclusion of the call by dialing 1-800-642-1687
and entering ID# 13761217.
Forward-Looking
Statements
Statements, including those in this release, which are not
historical or current facts, are “forward-looking statements” made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. There are certain important factors
that could cause our results to differ materially from those
anticipated by some of the statements made in this press release.
Investors are cautioned that all forward-looking statements involve
risk and uncertainty. Some of the factors that could affect results
are the cyclical nature of the furniture industry, the
effectiveness of new product introductions and distribution
channels, the product mix of sales, pricing pressures, the cost of
raw materials and fuel, foreign currency valuations, actions by
governments including taxes and tariffs, inflation, the amount of
sales generated and the profit margins thereon, competition (both
foreign and domestic), changes in interest rates, credit exposure
with customers and general economic conditions. Any forward-looking
statement speaks only as of the date of this press release. We
specifically decline to undertake any obligation to publicly revise
any forward-looking statements that have been made to reflect
events or circumstances after the date of such statements or to
reflect the occurrence of anticipated or unanticipated events.
About Flexsteel
Flexsteel Industries, Inc. is headquartered in Dubuque, Iowa,
and was incorporated in 1929. Flexsteel is a designer,
manufacturer, importer and marketer of quality upholstered and wood
furniture for residential, recreational vehicle, office,
hospitality and healthcare markets. All products are distributed
nationally.
For more information, visit our web site at
http://www.flexsteel.com.
TABLES FOLLOW
FLEXSTEEL INDUSTRIES, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS (UNAUDITED)
June 30, June 30, 2009 2008
ASSETS
CURRENT ASSETS: Cash and cash equivalents $ 1,713,717 $
2,841,323 Investments -- 1,160,066 Trade receivables, net
31,282,511 43,783,224 Inventories 73,844,345 85,791,400 Other
7,872,528 7,063,634 Total current assets 114,713,101 140,639,647
NONCURRENT ASSETS: Property, plant, and equipment, net
23,297,643 26,372,392 Other assets 12,960,239 12,894,179
TOTAL $ 150,970,983 $ 179,906,218
LIABILITIES AND SHAREHOLDERS’
EQUITY
CURRENT LIABILITIES: Accounts payable – trade $ 9,744,658 $
14,580,275 Notes payable and current maturities of long-term debt
10,000,000 5,142,945 Accrued liabilities 16,552,412 19,996,315
Total current liabilities 36,297,070 39,719,535 LONG-TERM
LIABILITIES: Long-term debt -- 20,810,597 Other long-term
liabilities 7,676,349 6,623,699 Total liabilities 43,973,419
67,153,831 SHAREHOLDERS’ EQUITY 106,997,564 112,752,387
TOTAL $ 150,970,983 $ 179,906,218
FLEXSTEEL INDUSTRIES, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
June 30,
Fiscal Year Ended
June 30,
2009 2008 2009 2008 NET SALES $ 74,564,239 $
100,630,109 $ 324,157,556 $ 405,654,829 COST OF GOODS SOLD
(58,925,321 ) (81,992,866 ) (263,083,274 ) (327,165,396 ) GROSS
MARGIN 15,638,918 18,637,243 61,074,282 78,489,433
SELLING, GENERAL AND
ADMINISTRATIVE
(14,168,859 )
(18,026,008
)
(60,791,151 )
(70,893,485
)
FACILITY CONSOLIDATION AND OTHER
CHARGES
(173,576 ) -- (2,554,771 ) -- OPERATING INCOME (LOSS)
1,296,483 611,235 (2,271,640 ) 7,595,948
OTHER INCOME (EXPENSE):
Interest and other (expense) income
(27,927
)
139,610
661,058
468,933
Interest expense (220,095 ) (284,798 ) (968,762 ) (1,468,476 )
Total (248,022 ) (145,188 ) (307,704 ) (999,543 ) INCOME (LOSS)
BEFORE INCOME TAXES 1,048,461 466,047 (2,579,344 ) 6,596,405 INCOME
TAX (PROVISION) BENEFIT (250,000 ) (130,000 ) 1,070,000
(2,360,000 ) NET INCOME (LOSS) $ 798,461 $ 336,047 $
(1,509,344 ) $ 4,236,405
AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
Basic 6,576,373 6,575,633
6,576,373
6,573,999
Diluted 6,617,714 6,608,512
6,576,373
6,611,136
EARNINGS (LOSS) PER SHARE
OF COMMON STOCK:
Basic $ 0.12 $ 0.05
$
(0.23
)
$
0.64
Diluted $ 0.12 $ 0.05
$
(0.23
)
$
0.64
SUPPLEMENTAL INFORMATION
NON-GAAP DISCLOSURE
(UNAUDITED)
Year EndedJune 30, 2009(in
thousands)
Pre-tax GAAP net loss $ (2,579 )
Adjustments to reconcile net
loss:
Facility consolidation and other charges 2,555 Pre-tax
NON-GAAP net loss $ (24 ) Income tax benefit 10 After tax
NON-GAAP net loss $ (14 )
FLEXSTEEL INDUSTRIES, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (UNAUDITED)
Fiscal Year Ended June 30, 2009 2008
OPERATING ACTIVITIES:
Net (loss) income $ (1,509,344 ) $ 4,236,405 Adjustments to
reconcile net income to net cash
provided by (used in) operating
activities:
Depreciation and amortization 3,733,353 4,437,903 Gain on
disposition of capital assets (251,909 ) (49,180 ) Gain on sale of
investments (462,473 ) -- Stock-based compensation expense 114,000
186,000 Impairment of long-lived assets 137,638 -- Deferred income
taxes 449,296 349,294 Other non-cash, net 14,048 (88,309 ) Changes
in operating assets and liabilities 15,081,496 (342,056 )
Net cash provided by operating activities 17,306,105
8,730,057
INVESTING ACTIVITIES:
Net sales of investments 940,087 131,079 Proceeds from sale of
capital assets 676,016 73,847 Capital expenditures (1,202,993 )
(1,227,863 ) Net cash provided by (used in) investing activities
413,110 (1,022,937 )
FINANCING ACTIVITIES:
Net payment of borrowings (15,953,542 ) (2,412,869 ) Dividends paid
(2,893,279 ) (3,414,960 ) Proceeds from issuance of common stock --
61,706 Net cash used in financing activities
(18,846,821 ) (5,766,123 ) (Decrease) Increase in cash and
cash equivalents (1,127,606 ) 1,940,997 Cash and cash equivalents
at beginning of period 2,841,323 900,326 Cash and
cash equivalents at end of period $ 1,713,717 $ 2,841,323
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