Flexsteel Industries, Inc. (NASDAQ:FLXS) today reported net
income for its first fiscal quarter ended September 30, 2011 of
$2.4 million or $0.34 per share compared to a net income of $2.3
million or $0.34 per share in the prior year quarter. The prior
year quarter included a pre-tax charge of approximately $1.0
million for facility closing costs.
The Company reported net sales for the quarter ended September
30, 2011 of $81.5 million compared to the prior year quarter of
$87.2 million, a decrease of 6.5%. Net sales for the quarter ended
September 30, 2010 benefited from a longer than normal lag time on
orders received in the spring of 2010, but not shipped to dealers
until the quarter ended September 30, 2010. New orders received
during the quarter ended September 30, 2011 were approximately 8.4%
higher than the prior year period. Residential net sales were $62.5
million in the current quarter, a decrease of 4.1% from the prior
year quarter residential net sales of $65.2 million. Commercial net
sales were $19.0 million compared to $22.0 million in the prior
year quarter, a decrease of 13.7%.
Gross margin for the quarter ended September 30, 2011 was $19.0
million or 23.3% of net sales compared to $19.6 million or 22.5% of
net sales in the prior year quarter. The improvement in gross
margin percentage is primarily due to lower ocean freight costs and
lower fixed costs resulting from reductions in manufacturing
capacity.
Selling, general and administrative expenses were $15.3 million
or 18.8% of net sales and $14.9 million or 17.1% of net sales for
the quarters ended September 30, 2011 and 2010, respectively. The
increase in expenses is primarily due to support expenditures
related to residential dealers converting or installing the
Company’s revised gallery format and higher legal and professional
fees.
Working capital (current assets less current liabilities) at
September 30, 2011 was $102.7 million. Net cash used in operating
activities was $3.0 million during the first quarter ended
September 30, 2011. This use of cash was primarily related to
increases in inventories of $4.7 million and receivables of $0.7
million.
Capital expenditures were $0.6 million for the quarter ended
September 30, 2011. Depreciation expense was $0.7 million for the
fiscal quarters ended September 30, 2011 and 2010. The Company
expects that capital expenditures will be approximately $14.0
million for the remainder of the 2012 fiscal year including the
cost to construct, furnish and equip a corporate office
building.
All earnings per share amounts are on a diluted basis.
OutlookThe Company believes that
top line growth will be modest through fiscal year 2012.
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
commercial office industry is reporting improving order trends.
While sales have benefited minimally from those improvements to
date, we believe sales volume will increase during fiscal year
2012. We anticipate increased orders for hospitality products
during the remainder of fiscal year 2012 resulting from pent up
demand caused by delays in typical refurbishing cycles for hotel
properties.
The Company remains committed to its 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 CallThe Company
will host a conference call for analysts on October 19, 2011, at
10:30 a.m. Central Time. To access the call, please dial
1-866-830-5279 and provide the operator with ID# 95393480. A replay
will be available for two weeks beginning approximately two hours
after the conclusion of the call by dialing 1-800-585-8367 and
entering ID# 95393480.
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 our most recent 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 CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) (in
thousands) September 30,
June 30,
2011 2011
ASSETS
CURRENT ASSETS: Cash $ 14,086 $ 17,889 Trade receivables,
net 32,137 31,451 Inventories 78,377 73,680 Other 5,405 5,333 Total
current assets 130,005 128,353 NONCURRENT ASSETS: Property,
plant, and equipment, net 21,274 21,387 Other assets 14,240 14,937
TOTAL $ 165,519 $ 164,677
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES: Accounts payable – trade $ 9,841 $
9,899 Accrued liabilities 17,500 17,771 Total current liabilities
27,341 27,670 LONG-TERM LIABILITIES: Other long-term
liabilities 7,988 8,434 Total liabilities 35,329 36,104
SHAREHOLDERS’ EQUITY 130,190 128,573 TOTAL $ 165,519 $
164,677 FLEXSTEEL INDUSTRIES, INC. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in
thousands, except per share data) Three Months Ended
September 30, 2011 2010 NET SALES $ 81,520 $ 87,230
COST OF GOODS SOLD (62,556 ) (67,625 ) GROSS MARGIN 18,964 19,605
SELLING, GENERAL AND ADMINISTRATIVE (15,331 ) (14,898 ) FACILITY
CLOSING COSTS -- (1,016 ) OPERATING INCOME 3,633 3,691
OTHER INCOME:
Interest and other income 125 102 INCOME BEFORE
INCOME TAXES 3,758 3,793 INCOME TAX PROVISION (1,380 ) (1,450 ) NET
INCOME $ 2,378 $ 2,343 AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING: Basic 6,727 6,660 Diluted 6,969
6,839 EARNINGS PER SHARE OF COMMON STOCK: Basic $
0.35 $ 0.35 Diluted $ 0.34 $ 0.34
FLEXSTEEL INDUSTRIES, INC. AND
SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED) (in thousands) Three Months Ended September 30,
2011 2010
OPERATING ACTIVITIES:
Net income $ 2,378 $ 2,343 Adjustments to reconcile net income to
net cash
(used in) provided by operating
activities:
Depreciation 690 722 Deferred income taxes (33 ) (86 ) Stock-based
compensation expense 118 135 Change in provision for losses on
accounts
receivable
(70 ) 240 (Gain) loss on disposition of capital assets (3 ) 15
Changes in operating assets and liabilities (6,034 )
(6,974 ) Net cash used in operating activities (2,954 )
(3,605 )
INVESTING ACTIVITIES:
Net sales of investments 145 127 Proceeds from sale of capital
assets 3 18 Capital expenditures (580 ) (384 ) Net
cash used in investing activities (432 ) (239 )
FINANCING ACTIVITIES:
Dividends paid (503 ) (332 ) Proceeds from issuance of common stock
86 155 Net cash used in financing
activities (417 ) (177 ) Decrease in cash
(3,803 ) (4,021 ) Cash at beginning of period 17,889
8,278 Cash at end of period $ 14,086 $
4,257
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