Flexsteel Reports Strongest First Quarter in History

DUBUQUE, Iowa - Flexsteel Industries, Inc. (NASDAQ:FLXS) today reported net sales of $104.3 million for the quarter ended September 30, 2013, an increase of 14% from the prior year quarter. Residential net sales increased approximately 16% to $84.0 million in the current quarter, primarily due to increased sales of upholstered and ready to assemble products. Commercial net sales increased approximately $1.4 million or 8% to $20.3 million.

Net income for the first fiscal quarter ended September 30, 2013 was $3.8 million or $0.51 per share compared to $2.9 million or $0.40 per share for the prior year quarter.

Gross margin as a percent of net sales for the quarter ended September 30, 2013 was 22.7% compared to 23.1% for the prior year quarter. The decrease of 0.4% is primarily due to changes in product mix and price discounting on certain traditional case goods to improve operating efficiency. The discounting may continue for the remainder of the fiscal year as we realign inventory to focus on growth opportunities.

Selling, general and administrative (SG&A) expenses as a percent of net sales for the current quarter improved to 17.5% from 18.3% in the prior year quarter. The percentage decrease reflects fixed cost leverage on higher sales volume offset by increased legal costs of $0.4 million related to an Indiana civil lawsuit. In addition, the prior year quarter included approximately $0.5 million of executive transition costs.

Working capital (current assets less current liabilities) at September 30, 2013 was $117.2 million compared to $113.7 million at June 30, 2013. Changes in working capital from June 30, 2013 to September 30, 2013 include increases in inventory of $4.7 million, accounts receivable of $2.9 million and current liabilities of $3.9 million. The higher inventory levels support increased residential sales volume and expanded product offerings. The accounts receivable increase is primarily due to higher sales volume in the current quarter and the timing of collections.

Cash decreased by $0.3 million during the first fiscal quarter of 2014 with net cash provided by operating activities of $1.2 million, capital expenditures of $0.7 million and payment of dividends of $1.1 million. The Company expects that capital expenditures for the remainder of fiscal year 2014 will be approximately $3.5 million, primarily for delivery and manufacturing equipment and information technology infrastructure.

All earnings per share amounts are on a diluted basis.

Outlook

The Company believes that top line growth will continue through the end of fiscal year 2014. Residential growth is expected to continue with existing customers and products, and through expanding our product portfolio and customer base. The Company expects this growth to be led by increased demand for upholstered and ready to assemble products. The Company anticipates sales of commercial products to moderately increase for the remainder of the fiscal year. The Company is confident in its ability to take advantage of market opportunities.

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 increasing profitability. We believe these core strategies are in the best interest of our shareholders.

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
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(in thousands)

   

   





September 30,




June 30,





2013




2013

ASSETS

















 
CURRENT ASSETS:







Cash

$ 10,625

$ 10,934
Trade receivables, net


38,926


36,075
Inventories


97,131


92,417
Other


10,008


9,775
Total current assets


156,690


149,201








 
NONCURRENT ASSETS:







Property, plant, and equipment, net


31,696


32,145
Other assets


11,734


11,193








 
TOTAL

$ 200,120

$ 192,539








 

LIABILITIES AND SHAREHOLDERS' EQUITY

















 
CURRENT LIABILITIES:







Accounts payable - trade

$ 16,262

$ 13,927
Accrued liabilities


23,180


21,575
Total current liabilities


39,442


35,502








 
LONG-TERM LIABILITIES:







Other long-term liabilities


6,282


5,800
Total liabilities


45,724


41,302








 
SHAREHOLDERS' EQUITY


154,396


151,237








 
TOTAL

$ 200,120

$ 192,539








 
 
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share data)

   





Three Months Ended




September 30,




2013    
2012
NET SALES

$ 104,348


$ 91,237
COST OF GOODS SOLD


(80,703 )


(70,136 )
GROSS MARGIN


23,645



21,101
SELLING, GENERAL AND ADMINISTRATIVE


(18,209 )


(16,710 )
OPERATING INCOME


5,436



4,391
INTEREST AND OTHER INCOME


502  


161  
INCOME BEFORE INCOME TAXES


5,938



4,552
INCOME TAX PROVISION


(2,170 )


(1,680 )
NET INCOME

$ 3,768  

$ 2,872  








 
AVERAGE NUMBER OF COMMON







SHARES OUTSTANDING:







Basic


7,125  


6,938  
Diluted


7,432  


7,241  

EARNINGS PER SHARE OF COMMON STOCK:









Basic

$ 0.53  

$ 0.41  
Diluted

$ 0.51  

$ 0.40  








 
 
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)

   





Three Months Ended




September 30,




2013    
2012

OPERATING ACTIVITIES:









Net income

$ 3,768


$ 2,872
Adjustments to reconcile net income to net cash







(used in) provided by operating activities:









Depreciation


1,011



792
Deferred income taxes


(244 )


(19 )
Stock-based compensation expense


105



312
Provision for losses on accounts receivable


86



30
Gain on disposition of capital assets


(5 )


(1 )
Changes in operating assets and liabilities


(3,478 )


(7,503 )
Net cash provided by (used in) operating activities


1,243  


(3,517 )








 

INVESTING ACTIVITIES:









Net purchases of investments


(324 )


(159 )
Proceeds from sale of capital assets


11



1
Capital expenditures


(679 )


(3,005 )
Net cash used in investing activities


(992 )


(3,163 )








 

FINANCING ACTIVITIES:









Dividends paid


(1,066 )


(1,035 )
Proceeds from issuance of common stock


506  


273  
Net cash used in financing activities


(560 )


(762 )








 
Decrease in cash


(309 )


(7,442 )
Cash at beginning of period


10,934  


13,970  
Cash at end of period

$ 10,625  

$ 6,528  








 

 

Source: Flexsteel Industries, Inc.

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