Flexsteel Industries, Inc. (NASDAQ:FLXS) today reported net
sales for the fiscal year ended June 30, 2011 of $339.4 million
compared to $326.5 million in the prior fiscal year, an increase of
4.0%. Net sales for the quarter ended June 30, 2011 were $84.2
million compared to the prior year quarter of $85.6 million, a
decrease of 1.6%.
For the fiscal year ended June 30, 2011, residential net sales
were $258.1 million compared to $246.0 million for the year ended
June 30, 2010, an increase of 4.9%. Commercial net sales were $81.3
million for the year ended June 30, 2011, an increase of 1.1% from
net sales of $80.5 million for the year ended June 30, 2010.
For the quarter ended June 30, 2011, residential net sales were
$64.4 million compared to the prior year quarter of $65.7 million,
a decrease of 2.0%. Commercial net sales were $19.8 million for the
quarter ended June 30, 2011 compared to $19.9 million in the prior
year quarter.
Net income for the fiscal year ended June 30, 2011 was $10.4
million or $1.50 per share compared to net income of $10.8 million
or $1.61 per share in the prior year. The current year includes
pre-tax charges of $1.6 million related to closing a manufacturing
facility. Employee separation and other closing costs of $1.0
million are reported as facility closing costs and an inventory
write-down of $0.6 million is charged to cost of goods sold. Net
income for the quarter ended June 30, 2011 was $3.5 million or
$0.50 per share compared to net income of $4.1 million or $0.61 per
share in the prior year quarter.
Gross margin for the years ended June 30, 2011 and 2010 was
22.8%. For the year ended June 30, 2011 the $0.6 million inventory
write-down related to facility closing is offset by operational
improvements. Gross margin for the quarter ended June 30, 2011 was
24.5% compared to 23.6% in the prior year quarter. The gross margin
improvement for the quarter is due to operational improvements and
changes in product mix.
For the fiscal years ended June 30, 2011 and 2010, selling,
general and administrative expenses were 17.8% and 17.5% of net
sales, respectively. The percentage increase for the year ended
June 30, 2011 reflects higher legal and professional fees. Selling,
general and administrative expenses were 18.4% and 16.0% of net
sales for the quarters ended June 30, 2011 and 2010, respectively,
with the increase due to higher legal and professional fees and
costs associated with the introduction of a new residential
furniture gallery format.
All earnings per share amounts are on a diluted basis.
Working capital (current assets less current liabilities) at
June 30, 2011 was $100.7 million as compared to $90.8 million at
June 30, 2010. Significant changes in working capital from June 30,
2010 to June 30, 2011 included increased cash of $9.6 million and
decreased accruals of $2.4 million partially offset by decreased
accounts receivable of $4.3 million. The decrease in receivables is
due to timing of collections and lower shipment volume in the
fourth fiscal quarter.
Cash increased by $9.6 million during fiscal year 2011 with net
cash provided by operating activities of $13.8 million offset by
capital expenditures of $2.6 million and payment of dividends of
$1.8 million. Depreciation expense was $2.7 million and $3.0
million for the years ended June 30, 2011 and 2010, respectively.
The Company expects that capital expenditures will be approximately
$15.0 million in fiscal year 2012. The Company plans to invest
approximately $12 million to construct, furnish and equip a
corporate office building in Dubuque, Iowa, and the balance of the
expenditures on delivery and manufacturing equipment.
OutlookWe had modest gains in sales
for the current year over the prior year partially due to a strong
backlog entering the year. We enter fiscal year 2012 with lower
backlogs and anticipate that first quarter fiscal year 2012 sales
will be lower than first quarter fiscal year 2011. Macroeconomic
conditions, such as, high unemployment, minimal job growth, a weak
housing market and low levels of consumer confidence continue to
adversely impact our business. The macroeconomic environment
tempers expectations of top line growth through the first part of
fiscal year 2012. The commercial office industry is reporting
improving order trends. While we have benefited minimally from
those improvements to date, we believe we will see increased sales
volume during fiscal year 2012. We anticipate increased orders for
hospitality products during fiscal year 2012 resulting from pent up
demand caused by delays in typical refurbishing cycles for hotel
properties.
We remain committed to our core strategies, which include a wide
range of quality product offerings and price points to the
residential and commercial markets, combined with a conservative
approach to business. We will maintain our focus on a strong
balance sheet through emphasis on cash flow and improving
profitability. We believe these core strategies are in the best
interest of our shareholders.
Analysts Conference CallWe will
host a conference call for analysts on Wednesday, August 17, 2011,
at 10:30 a.m. Central Time. To access the call, please dial
1-866-830-5279 and provide the operator with ID# 73569763. 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# 73569763.
Forward-Looking
StatementsStatements, 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 herein.
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, supply chain
disruptions, litigation, the effectiveness of new product
introductions and distribution channels, the product mix of sales,
pricing pressures, the cost of raw materials and fuel, retention
and recruitment of key employees, actions by governments including
laws, regulations, taxes and tariffs, inflation, the amount of
sales generated and the profit margins thereon, competition (both
U.S. and foreign), credit exposure with customers, participation in
multi-employer pension plans and general economic conditions. For
further information regarding these risks and uncertainties, see
the “Risk Factors” section in Item 1A of this Annual Report on Form
10-K.
About FlexsteelFlexsteel
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.
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands)
June 30, June 30, 2011 2010
ASSETS
CURRENT ASSETS: Cash $ 17,889 $ 8,278 Trade receivables, net
31,451 35,748 Inventories 73,680 72,637 Other 5,333 5,126
Total current assets 128,353 121,789 NONCURRENT
ASSETS: Property, plant, and equipment, net 21,387 21,614 Other
assets 14,937 14,267 TOTAL $ 164,677 $
157,670
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES: Accounts payable – trade $ 9,899 $
10,815 Accrued liabilities 17,771 20,174 Total
current liabilities 27,670 30,989 LONG-TERM LIABILITIES:
Other long-term liabilities 8,434 9,069 Total
liabilities 36,104 40,058 SHAREHOLDERS’ EQUITY 128,573
117,612 TOTAL $ 164,677 $ 157,670
FLEXSTEEL
INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED) (In thousands, except per share data) Three
Months Ended Fiscal Year Ended June 30, June 30, 2011 2010 2011
2010 NET SALES $ 84,200 $ 85,550 $ 339,426 $ 326,466
COST OF GOODS SOLD (63,536 ) (65,399 ) (262,124 ) (251,685 ) GROSS
MARGIN 20,664 20,151 77,302 74,781 SELLING, GENERAL AND
ADMINISTRATIVE (15,455 ) (13,727 ) (60,422 ) (57,252 )
FACILITY CLOSING COSTS
–
–
(1,016 )
–
OPERATING INCOME 5,209 6,424 15,864
17,529
OTHER INCOME (EXPENSE):
Interest and other income 99 123 343 361 Interest expense –
– – (439 ) Total 99 123 343 (78
) INCOME BEFORE INCOME TAXES 5,308 6,547 16,207 17,451 INCOME TAX
PROVISION (1,820 ) (2,410 ) (5,790 ) (6,650 ) NET INCOME $ 3,488
$ 4,137 $ 10,417 $ 10,801 AVERAGE
NUMBER OF COMMON SHARES OUTSTANDING: Basic 6,710 6,645
6,693
6,608
Diluted 6,984 6,792
6,929
6,697
EARNINGS PER SHARE OF COMMON STOCK: Basic $ 0.52 $
0.62
$
1.56
$
1.63
Diluted $ 0.50 $ 0.61
$
1.50
$
1.61
FLEXSTEEL INDUSTRIES, INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) (In thousands)
Fiscal Year Ended
June 30, 2011 2010
OPERATING ACTIVITIES:
Net income $ 10,417 $ 10,801 Adjustments to reconcile net income to
net cash provided by (used in) operating activities: Depreciation
2,690 2,986 Deferred income taxes 54 (963 ) Stock-based
compensation expense 1,014 781 Provision for losses on accounts
receivable 870 920 Other non-cash, net 224 218 Gain on disposition
of capital assets (185 ) (9 ) Changes in operating assets and
liabilities (1,284 ) 4,385 Net cash provided by operating
activities 13,800 19,119
INVESTING ACTIVITIES:
Net purchases of investments (288 ) (362 ) Proceeds from sale of
capital assets 187 34 Capital expenditures (2,573 ) (1,251 ) Net
cash used in investing activities (2,674 ) (1,579 )
FINANCING ACTIVITIES:
Net payment of borrowings
–
(10,000 ) Dividends paid (1,839 ) (1,320 ) Proceeds from issuance
of common stock 324 344 Net cash used in financing
activities (1,515 ) (10,976 ) Increase in cash and cash
equivalents 9,611 6,564 Cash and cash equivalents at beginning of
period 8,278 1,714 Cash and cash equivalents at end
of period $ 17,889 $ 8,278
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