Flexsteel reports financial results

DUBUQUE, IA-- Flexsteel Industries, Inc. 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.

Outlook

We 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.

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.

SOURCE: Flexsteel

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