Flexsteel Industries, Inc. (NASDAQ:FLXS) today reported net
sales for the quarter ended December 31, 2011 of $85.0 million
compared to $82.8 million in the prior year quarter, an increase of
2.6%. The Company reported net income for the current quarter of
$2.9 million or $0.42 per share compared to net income of $2.1
million or $0.31 per share in the prior year quarter.
For the six months ended December 31, 2011, the Company reported
net sales of $166.5 million compared to the prior year sales of
$170.1 million, a decrease of 2.1%. The Company reported net income
for the current six-month period of $5.3 million or $0.76 per share
compared to a net income of $4.5 million or $0.65 per share in the
prior year period. The prior year six-month period includes a
pre-tax charge of approximately $1.0 million to facility closing
costs for employee separation and other closing costs.
For the quarter ended December 31, 2011, residential net sales
were $67.0 million, an increase of 5.4% from the prior year quarter
net sales of $63.5 million. Commercial net sales were $18.0 million
compared to $19.3 million in the prior year quarter, a decrease of
6.5%.
For the six months ended December 31, 2011, residential net
sales were $129.5 million compared to residential net sales of
$128.8 million in the six months ended December 31, 2010, an
increase of 0.6%. Commercial net sales were $37.0 million for the
six months ended December 31, 2011 compared to $41.3 million for
the six months ended December 31, 2010, a decrease of 10.3%.
Gross margin for the quarter ended December 31, 2011 was 24.1%
compared to 22.7% in the prior year quarter. For the six months
ended December 31, 2011, the gross margin was 23.7% compared to
22.6% for the prior year six-month period. Gross margin for the
prior year quarter and six-month period was adversely impacted by
inventory write-down of $0.6 million associated with the facility
closing.
Selling, general and administrative expenses for the quarter
ended December 31, 2011 were $15.8 million or 18.6% of net sales
compared to $15.5 million or 18.7% of net sales in the prior year
including an increase in legal and professional fees of $0.7
million, primarily related to an Indiana civil lawsuit, and a
decrease in bad debt expense of $0.7 million. Selling, general and
administrative expenses for the six months ended December 31, 2011
were $31.1 million or 18.7% of net sales, including a $1.2 million
increase in legal and professional fees, primarily related to the
aforementioned lawsuit, and a $1.0 million decrease in bad debt
expense, compared to $30.4 million or 17.9% of net sales in the
prior year six-month period.
Working capital (current assets less current liabilities) at
December 31, 2011 was $102.8 million. Net cash provided by
operating activities was $2.0 million during the six months ended
December 31, 2011. Net income of $5.3 million and increased
accounts payable of $1.6 million were offset by a $5.3 million
planned increase in inventory.
During the first six months of fiscal year 2012 capital
expenditures were $2.7 million, including $2.1 million related to
construction of a corporate office building. Depreciation expense
was $1.4 million in the six-month periods ended December 31, 2011
and 2010. The Company expects that capital expenditures will be
approximately $10 million for the remainder of the 2012 fiscal year
including costs related to construction, furnishing and equipping
the corporate office building which is expected to be completed in
August 2012.
All earnings per share amounts are on a diluted basis.
Outlook
The Company believes that top line growth will be modest through
the second half of fiscal year 2012. Our business continues to be
adversely impacted by macroeconomic conditions such as high
unemployment, limited job growth and a depressed housing market
resulting in low consumer confidence levels. We expect orders for
residential seating products to continue to perform slightly above
prior year levels. Our commercial office business has picked up
modestly as we enter the second half of the fiscal year. The
Company is expecting flat order trends for our vehicle and
hospitality seating products for the remainder of the fiscal
year.
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.
Conference Call
We will host a conference call on February 3, 2012, at 10:30
a.m. Central Time. To access the call, please dial 1-866-830-5279
and provide the operator with ID# 34186535. 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#
34186535.
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, 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 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.
FLEXSTEEL INDUSTRIES, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands)
December 31, June 30, 2011 2011
ASSETS
CURRENT ASSETS:
Cash
$ 15,871 $ 17,889 Trade receivables, net 32,055 31,451 Inventories
79,012 73,680 Other 5,715 5,333 Total current assets 132,653
128,353 NONCURRENT ASSETS: Property, plant, and equipment,
net 23,348 21,387 Other assets 14,920 14,937 TOTAL $ 170,921
$ 164,677
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES: Accounts payable – trade $ 12,180 $
9,899 Accrued liabilities 17,655 17,771 Total current liabilities
29,835 27,670 LONG-TERM LIABILITIES: Other long-term
liabilities 8,069 8,434 Total liabilities 37,904 36,104
SHAREHOLDERS’ EQUITY 133,017 128,573 TOTAL $ 170,921 $
164,677
FLEXSTEEL INDUSTRIES, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands, except per share data)
Three Months Ended Six Months Ended December 31,
December 31, 2011 2010 2011 2010 NET SALES $ 85,001 $
82,821
$ 166,522 $ 170,051 COST OF GOODS SOLD (64,543 ) (63,996 ) (127,100
) (131,620 ) GROSS MARGIN 20,458 18,825 39,422 38,431 SELLING,
GENERAL AND ADMINISTRATIVE (15,765 ) (15,508 ) (31,096 ) (30,406 )
FACILITY CLOSING COSTS -- -- -- (1,016 )
OPERATING INCOME 4,693 3,317 8,326 7,009
OTHER INCOME:
Interest and other income 45 14 170 115
INCOME BEFORE INCOME TAXES. 4,738 3,331 8,496 7,124 INCOME TAX
PROVISION (1,790 ) (1,200 ) (3,170 ) (2,650 ) NET INCOME $ 2,948
$ 2,131 $ 5,326 $ 4,474
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING:
Basic 6,763 6,691
6,745 6,676 Diluted 6,967 6,924 6,968
6,881
EARNINGS PER SHARE OF
COMMON STOCK:
Basic $ 0.44 $ 0.32 $ 0.79 $ 0.67
Diluted $ 0.42 $ 0.31 $ 0.76 $ 0.65
FLEXSTEEL INDUSTRIES, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (UNAUDITED)
(in thousands)
Six Months Ended December 31, 2011 2010
OPERATING ACTIVITIES:
Net income $ 5,326 $ 4,474 Adjustments to reconcile net income to
net cash provided by (used in) operating activities: Depreciation
1,404 1,408 Deferred income taxes (71 ) (498 ) Stock-based
compensation expense 493 699 Change in provision for losses on
accounts receivable (180 ) 800 Gain on disposition of capital
assets (16 ) (8 ) Changes in operating assets and liabilities
(4,950 ) (6,633 ) Net cash provided by operating activities 2,006
242
INVESTING ACTIVITIES:
Net purchases of investments (290 ) (189 ) Proceeds from sale of
capital assets 16 42 Capital expenditures (2,676 ) (585 ) Net cash
used in investing activities (2,950 ) (732 )
FINANCING ACTIVITIES:
Dividends paid (1,180 ) (834 ) Proceeds from issuance of common
stock 106 206 Net cash used in financing activities
(1,074 ) (628 ) Decrease in cash (2,018 ) (1,118 ) Cash at
beginning of period 17,889 8,278 Cash at end of
period $ 15,871 $ 7,160
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