Flexsteel Industries, Inc. (NASDAQ: FLXS) (“Flexsteel” or the
“Company”), one of the largest manufacturers, importers, and
marketers of residential furniture products in the United States,
today reported first quarter fiscal 2024 results.
Key Results for the First Quarter Ended September 30,
2023
- Net sales for the quarter of $94.6 million compared to $95.7
million in the prior year quarter, a decrease of (1.1%).
- Gross margin increased to 19.5% for the first quarter compared
to 16.0% in the prior year quarter.
- GAAP operating income of $1.9 million or 2.0% of net sales for
the first quarter compared to $0.4 million or 0.4% of net sales in
the prior year quarter.
- GAAP net income per diluted share of $0.14 for the current
quarter compared to net income of $0.05 in the prior year
quarter.
- Non-GAAP net income per diluted share of $0.14 for the quarter
compared to non-GAAP net income of $0.09 in the prior year
quarter.
GAAP to non-GAAP reconciliations follow
the financial statements in this press release
Management Commentary
“I am pleased with our first quarter results. We are competing
well and gaining share in a challenging business environment,” said
Jerry Dittmer, President and CEO of Flexsteel Industries, Inc.
“While net sales were down 1% compared to the prior year quarter,
sales in the quarter were adversely impacted by the elimination of
ocean freight surcharges in the prior year when ocean container
delivery costs were significantly inflated. Excluding the
approximately $7 million impact from the surcharge elimination,
growth from unit volume and sales mix was a robust 6.8% in the
quarter, reflecting our strong sales execution and the momentum of
our growth initiatives. In addition, we leveraged operational
efficiencies and cost savings to expand gross margin and improve
operating income from $0.4 million in the prior year quarter to
$1.9 million this quarter.”
Mr. Dittmer concludes, “A variety of macroeconomic headwinds
continue to weigh on industry demand and the outlook for consumer
spending on higher priced discretionary purchases such as
furniture. Despite these external challenges, our team isn’t
deterred and remains intensely focused on profitably growing our
business in fiscal year 2024. We enter the second quarter with
positive momentum and are confident in our ability to grow sales
both compared to last year and the first quarter, while also
improving gross and operating margins over the first quarter. Our
strategies are working. We’ll continue to innovate, drive expedient
and relevant new product development, and build strong brands.
Regardless of demand uncertainties, we remain aggressive in
identifying new growth opportunities while prudently managing costs
and investing for future growth and profit enhancement.”
Operating Results for the First Quarter Ended September 30,
2023
Net sales were $94.6 million for the first quarter compared to
net sales of $95.7 million in the prior year quarter, a decrease of
($1.1) million, or (1.1%). The decrease was driven by lower sales
in home furnishings products sold through retail stores of ($2.2)
million, or (2.6%), led by a reduction of ($7.1) million due to the
elimination of ocean freight surcharges which was partially offset
by unit volume and product mix. Sales of products sold through
e-commerce channels increased by $1.1 million, or 10.7%, compared
to the first quarter of the prior year.
Gross margin for the quarter ended September 30, 2023, was
19.5%, compared to 16.0% for the prior-year quarter, an increase of
350 basis points (“bps”). The 350-bps increase was primarily driven
by control of expenses related to material costs and the impact of
strategic cost savings initiatives.
Selling, general and administrative (SG&A) expenses
increased to 17.4% of net sales in the first quarter of fiscal 2024
compared with 15.2% of net sales in the prior-year quarter. The
increase was mainly due to investment in growth initiatives.
Operating income for the quarter ended September 30, 2023, was
$1.9 million compared to $0.4 million in the prior-year
quarter.
The Company reported income tax expense of $0.6 million, or an
effective rate of 44.2%, during the first quarter compared to a tax
benefit of ($0.2) million, or an effective rate of (175.5%), in the
prior-year quarter. The effective tax rate was primarily impacted
by non-deductible stock compensation, state taxes, and foreign
operations.
The Company reported net income of $0.8 million, or $0.14 per
diluted share, for the quarter ended September 30, 2023, compared
to net income of $0.3 million, or $0.05 per diluted share, in the
prior-year quarter.
Liquidity
The Company ended the quarter with a cash balance of $3.0
million and working capital (current assets less current
liabilities) of $118.3 million, and availability of approximately
$27.6 million under its secured line of credit.
Capital expenditures for the quarter ended September 30, 2023,
were $1.4 million.
Conference Call and Webcast
The Company will host a conference call and audio webcast with
analysts and investors on Wednesday, November 1, 2023, at 8:00 a.m.
Central Time to discuss the results and answer questions.
- Live conference call: 866-777-2509 (domestic) or 412-317-5413
(international)
- Conference call replay available through November 8, 2023:
877-344-7529 (domestic) or 412-317-0088 (international)
- Replay access code: 6306057
- Live and archived webcast: ir.flexsteel.com
To pre-register for the earnings conference call and avoid the
need to wait for a live operator, investors can visit
https://dpregister.com/sreg/10183478/faba967b02 and enter
their contact information. Investors will then be issued a
personalized phone number and pin to dial into the live conference
call.
About Flexsteel
Flexsteel Industries, Inc., and Subsidiaries (the “Company”) is
one of the largest manufacturers, importers, and marketers of
residential furniture products in the United States. Product
offerings include a wide variety of furniture such as sofas,
loveseats, chairs, reclining rocking chairs, swivel rockers, sofa
beds, convertible bedding units, occasional tables, desks, dining
tables and chairs, kitchen storage, bedroom furniture, and outdoor
furniture. A featured component in most of the upholstered
furniture is a unique steel drop-in seat spring from which the name
“Flexsteel” is derived. The Company distributes its products
throughout the United States through its e-commerce channel and
direct sales force.
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 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, changes in
foreign currency values, retention and recruitment of key
employees, actions by governments including laws, regulations,
taxes and tariffs, 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, disruptions or security breaches to business information
systems, the impact of any future pandemic, 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.
For more information, visit our website at
http://www.flexsteel.com.
FLEXSTEEL INDUSTRIES, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS (UNAUDITED)
(in thousands)
September 30,
June 30,
2023
2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
2,973
$
3,365
Trade receivables, net
31,551
38,168
Inventories
120,807
122,076
Other
9,208
6,417
Assets held for sale
616
616
Total current assets
165,155
170,642
NONCURRENT ASSETS:
Property, plant and equipment, net
39,010
38,652
Operating lease right-of-use assets
66,445
68,294
Other assets
14,260
12,962
TOTAL ASSETS
$
284,870
$
290,550
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable - trade
$
21,002
$
24,745
Accrued liabilities
25,832
30,360
Total current liabilities
46,834
55,105
LONG-TERM LIABILITIES
Line of credit
32,998
28,273
Other liabilities
63,671
65,551
Total liabilities
143,503
148,929
SHAREHOLDERS' EQUITY
141,367
141,621
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY
$
284,870
$
290,550
FLEXSTEEL INDUSTRIES, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME (UNAUDITED)
(in thousands, except per share
data)
Three Months Ended
September 30,
2023
2022
Net sales
$
94,603
$
95,684
Cost of goods sold
76,193
80,335
Gross profit
18,410
15,349
Selling, general and administrative
expenses
16,492
14,574
Other expense
—
347
Operating income
1,918
428
Interest expense
570
321
Other expense
—
2
Income before income taxes
1,348
105
Income tax provision (benefit)
596
(184
)
Net income and comprehensive income
$
752
$
289
Weighted average number of common shares
outstanding:
Basic
5,182
5,311
Diluted
5,375
5,467
Earnings per share of common stock:
Basic
$
0.15
$
0.05
Diluted
$
0.14
$
0.05
FLEXSTEEL INDUSTRIES, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (UNAUDITED)
(in thousands)
Three Months Ended
September 30,
2023
2022
OPERATING ACTIVITIES:
Net income
$
752
$
289
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation
940
1,128
Deferred income taxes
94
—
Stock-based compensation expense
911
825
Change in provision for losses on accounts
receivable
(70
)
(10
)
Loss on disposal of assets
34
—
Changes in operating assets and
liabilities
(4,442
)
10,762
Net cash (used in) provided by operating
activities
(1,781
)
12,994
INVESTING ACTIVITIES:
Capital expenditures
(1,355
)
(1,878
)
Net cash (used in) investing
activities
(1,355
)
(1,878
)
FINANCING ACTIVITIES:
Dividends paid
(879
)
(867
)
Treasury stock purchases
(455
)
(403
)
Proceeds from line of credit
101,365
88,058
Payments on line of credit
(96,640
)
(95,768
)
Shares withheld for tax payments on vested
restricted shares
(647
)
(349
)
Net cash provided by (used in) financing
activities
2,744
(9,329
)
(Decrease) increase in cash and cash
equivalents
(392
)
1,787
Cash and cash equivalents at beginning of
the period
3,365
2,184
Cash and cash equivalents at end of the
period
$
2,973
$
3,971
NON-GAAP DISCLOSURE (UNAUDITED)
The Company is providing information regarding adjusted net
sales, adjusted operating income, adjusted net income, and adjusted
diluted earnings per share of common stock, which are not
recognized terms under U.S. Generally Accepted Accounting
Principles (“GAAP”) and do not purport to be alternatives to net
sales, operating income, net income, or diluted earnings per share
of common stock as a measure of operating performance. A
reconciliation of adjusted net sales, adjusted operating income,
adjusted net income, and adjusted diluted earnings per share of
common stock is provided below. Management believes the use of
these non-GAAP financial measures provides investors useful
information to analyze and compare performance across periods
excluding the items which are considered by management to be
extraordinary or one-time in nature. Because not all companies use
identical calculations, these presentations may not be comparable
to other similarly titled measures of other companies.
Reconciliation of GAAP net sales to non-GAAP adjusted net
sales:
The following table sets forth the reconciliation of the
Company's reported GAAP net sales to the calculation of adjusted
net sales for the three months ended September 30, 2023 and
2022:
Three Months Ended
September 30,
September 30,
(in thousands)
2023
2022
% Change
Net Sales
$
94,603
$
95,684
(1.1
%)
Freight Surcharges
$
—
$
(7,099
)
Adjusted Net Sales
$
94,603
$
88,585
6.8
%
Reconciliation of GAAP operating income to non-GAAP adjusted
operating income:
The following table sets forth the reconciliation of the
Company’s reported GAAP operating income to the calculation of
non-GAAP adjusted operating income for the three months ended
September 30, 2023 and 2022:
Three Months Ended
September 30,
(in thousands)
2023
2022
Reported GAAP operating income
$
1,918
$
428
Other expense
—
347
Non-GAAP operating income
$
1,918
$
775
Reconciliation of GAAP net income to non-GAAP adjusted net
income:
The following table sets forth the reconciliation of the
Company’s reported GAAP net income to the calculation of non-GAAP
adjusted net income for the three months ended September 30, 2023
and 2022:
Three Months Ended
September 30,
(in thousands)
2023
2022
Reported GAAP net income
$
752
$
289
Other expense
—
347
Tax impact of the above adjustments(1)
—
(94
)
Non-GAAP net income
$
752
$
542
(1) Effective tax rate of 27.0% was used
to calculate the three months ended September 30, 2022.
Reconciliation of GAAP diluted earnings per share of common
stock to non-GAAP adjusted diluted earnings per share of common
stock:
The following table sets forth the reconciliation of the
Company’s reported GAAP diluted earnings per share to the
calculation of non-GAAP adjusted diluted earnings per share for the
three months ended September 30, 2023 and 2022:
Three Months Ended
September 30,
2023
2022
Reported GAAP diluted earnings per
share
$
0.14
$
0.05
Other expense
—
0.06
Tax impact of the above adjustments(1)
—
(0.02
)
Non-GAAP diluted earnings per share
$
0.14
$
0.09
Note: The table above may not foot due to
rounding.
(1) Effective tax rate of 27.0% was used
to calculate the three months ended September 30, 2022.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231031296965/en/
INVESTOR CONTACT: Derek Schmidt, Flexsteel Industries, Inc.
563-585-8122 investors@flexsteel.com
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