Flexsteel Residential Sales For Quarter Decrease Slightly

Furniture World Magazine

Flexsteel Industries, Inc. reported sales and earnings for its first fiscal quarter ended September 30, 2008. The Company reported net sales for the quarter ended September 30, 2008 of $91.4 million compared to the prior year quarter of $100.9 million, a decrease of 9.4%. The Company reported a net loss for the current quarter of $0.7 million or $0.11 per share compared to net income of $1.2 million or $0.18 per share in the prior year quarter. During the current quarter the Company recorded pre-tax charges of approximately $1.4 million, or $0.13 per share after tax related to facility consolidation. Excluding these charges, net income1 for the current quarter was $0.1 million or $0.02 per share. For the quarter ended September 30, 2008, residential net sales were $62.0 million, slightly less than prior year quarter net sales of $62.7 million. Recreational vehicle net sales were $5.9 million, a decrease of 62.1% from the prior year quarter net sales of $15.7 million. Commercial net sales were $23.5 million compared to $22.5 million in the prior year quarter, an increase of 4.3%. Gross margin for the quarter ended September 30, 2008 was 18.7% compared to 19.6% in the prior year quarter. The decrease in gross margin percentage is primarily due to under-absorption of fixed manufacturing costs on significantly lower sales volume and higher material costs. Selling, general and administrative expenses for the quarter ended September 30, 2008 were 18.3% compared to 17.4% in the prior year quarter. This percentage increase is due to under-absorption of fixed costs on the lower sales volume and an increase in bad debt expense of approximately $0.2 million. Working capital (current assets less current liabilities) at September 30, 2008 was $94.5 million. Net cash provided by operating activities was $2.2 million during the first quarter ended September 30, 2008 due to lower accounts receivable and inventory. Net cash used in operating activities was $0.9 million at September 30, 2007. Capital expenditures were $0.2 million for the quarter ended September 30, 2008. Depreciation and amortization expense was $1.1 million and $ 1.2 million for the fiscal quarters ended September 30, 2008 and 2007, respectively. The Company expects that capital expenditures will be approximately $2.5 million for the remainder of the 2009 fiscal year. Outlook The impact of the slowdown of the U. S. economy, where most of our products are sold, has magnified as the news media reports job losses or layoffs related to cutbacks and closings over a broad spectrum of industries, including the furniture industry. With instability in the financial markets despite government relief efforts, rising prices throughout our supply chain and a changing political landscape, prospects for a recovery appear to be moving further into the future. In response to these conditions, we continue to adjust our operations and workforce to bring production capacity in line with current and expected demand for our products. Our workforce has been reduced approximately 15% over the past year through layoffs and attrition. As announced in September, we have proceeded with the closing of two long-established manufacturing operations. Our Lancaster, PA facility has produced and distributed high quality residential furniture for over fifty years. As demand tightens and foreign sourced products continue to gain acceptance as providing better value at the retail level, we no longer require this manufacturing capacity for residential products. Our New Paris, IN facility has been an integral part of our success in supplying quality recreational vehicle seating for over twenty-five years. With the recreational vehicle seating industry experiencing such a drastic decline in demand, as reflected by our 62% decrease in recreational vehicle seating net sales from the prior year period, we can no longer support our current capacity. While these are difficult decisions to make, we expect annual pre-tax cost savings of $3.5 million to $4.0 million going forward, and will continue to pursue cost savings in all aspects of our operations. While we expect that current business conditions will persist for most, if not all, of fiscal year 2009, we remain optimistic that our strategy of a wide range of quality product offerings and price points to the residential, recreational vehicle and commercial markets combined with our conservative approach to business will be rewarded over the longer-term. 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.