Flexsteel Reports First Quarter Results
Flexsteel Industries, Inc. (NASDAQ:FLXS) today reported first quarter financial results.
Financial Highlights:
- Net sales were $112 million;
- Net income was $4.8 million; and
- Ending cash balance increased $6 million to $43 million.
Net sales for the quarters ended September 30, (in millions):
|
|
|
2016 |
|
|
|
2015 |
|
|
|
$ Change
|
|
|
% Change |
Residential |
|
$ |
93.7 |
|
|
$ |
106.3 |
|
|
$ |
|
(12.6 |
) |
|
|
-11.9 |
% |
Commercial |
|
|
18.4 |
|
|
|
20.2 |
|
|
|
|
(1.8 |
) |
|
|
-8.9 |
% |
Total |
|
$ |
112.1 |
|
|
$ |
126.5 |
|
|
$ |
|
(14.4 |
) |
|
|
-11.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales were $112 million for the quarter ended September 30, 2016, the second highest first quarter, compared to $127 million
in the prior year quarter, a decrease of 11.4%. Residential net sales for the quarter ended September 30, 2015 included
approximately $3 million of product sales related to clearing the west coast port congestion. The current year quarter was
negatively impacted by approximately $6 million primarily due to discontinuing select leather imports that failed to meet
Flexsteel’s quality standards and delayed availability of technology components for new products. Casegoods net sales declined
approximately $4 million reflecting continued weak demand at retail.
Gross margin as a percent of net sales for the quarter ended September 30, 2016 was 23.8% compared to 22.0% for the prior year
quarter. Gross margin improvements were partially offset by lower absorption of fixed costs.
Selling, general and administrative (SG&A) expenses were 16.9% of net sales in the current year quarter, compared to 14.6%
of net sales in the prior year quarter. SG&A expenses increased $1.1 million or 1.0% of net sales to enhance the consumer brand
experience at retail. The Company expended $0.5 million or 0.4% of net sales upgrading its business information system. The
increase in SG&A as a percentage of net sales also reflects lower fixed cost leverage on decreased sales volume.
The effective income rate was 38.7% and 38.0% for the quarter ended September 30, 2016 and 2015, respectively.
The above factors resulted in net income of $4.8 million or $0.61 per share for the quarter ended September 30, 2016, compared
to $5.8 million or $0.74 per share in the prior year quarter.
Working capital (current assets less current liabilities) at September 30, 2016 was $146 million compared to $143 million at
June 30, 2016. Primary changes in working capital include increases in cash of $5.9 million and accounts payable of $2.3 million
and decreases in payroll and related items of $2.2 million, other current assets of $1.9 million and accounts receivable of $1.8
million.
For the quarter ended September 30, 2016, capital expenditures were $4.5 million including $3.9 million for the upgrade of the
Company’s business information system. Dividend payments were $1.4 million for the Company’s 298th consecutive
dividend.
All earnings per share amounts are on a diluted basis.
Outlook
The Company believes that demand for furniture products in the United States will continue to be weak due to economic
uncertainty for the remainder of the fiscal year. During the first half of fiscal year 2016, the Company reported a $6 million
increase in net sales related to clearing of west coast port congestion. Net sales for the Company are expected to remain soft for
the next fiscal quarter. The Company is focusing on streamlining product introductions to increase sales and controlling
discretionary spending.
For the remainder of fiscal year 2017, the Company expects to have the following expenditures:
- $10 million for capital expenditures and $3 million as SG&A expense for upgrading its business
information system to better meet market conditions, customer requirements and increase operating efficiency; and
- $3 million in operating capital expenditures.
The Company believes it has adequate working capital and borrowing capabilities to meet these requirements.
The Company remains committed to its core strategies, which include providing a wide range of quality product offerings and
price points to the residential and commercial markets, combined with a conservative approach to business. The Company will
maintain its focus on a strong balance sheet through emphasis on cash flow and increasing profitability. The Company believes these
core strategies are in the best interest of our shareholders.
About Flexsteel
Flexsteel Industries, Inc. and Subsidiaries (the “Company”) was incorporated in 1929 and is one of the oldest and largest
manufacturers, importers and marketers of residential and commercial upholstered and wooden furniture products in the United
States. Product offerings include a wide variety of upholstered and wood furniture such as sofas, loveseats, chairs, reclining and
rocker-reclining chairs, swivel rockers, sofa beds, convertible bedding units, occasional tables, desks, dining tables and chairs
and bedroom furniture. The Company’s products are intended for use in home, office, hotel, healthcare and other commercial
applications. A featured component in most of the upholstered furniture is a unique steel drop-in seat spring from which our name
“Flexsteel” is derived. The Company distributes its products throughout the United States through the Company’s sales force and
various independent representatives.
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.
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, |
|
|
|
2016 |
|
|
|
2016 |
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
Cash |
|
$ |
42,668 |
|
|
$ |
36,780 |
Trade receivables, net |
|
|
42,834 |
|
|
|
44,618 |
Inventories |
|
|
86,699 |
|
|
|
85,904 |
Other |
|
|
7,226 |
|
|
|
9,141 |
Total current assets |
|
|
179,427 |
|
|
|
176,443 |
|
|
|
|
|
|
|
|
NONCURRENT ASSETS: |
|
|
|
|
|
|
|
Property, plant, and equipment, net |
|
|
66,552 |
|
|
|
64,124 |
Other assets |
|
|
5,773 |
|
|
|
6,329 |
|
|
|
|
|
|
|
|
TOTAL |
|
$ |
251,752 |
|
|
$ |
246,896 |
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
Accounts payable – trade |
|
$ |
13,299 |
|
|
$ |
11,023 |
Accrued liabilities |
|
|
20,476 |
|
|
|
22,334 |
Total current liabilities |
|
|
33,775 |
|
|
|
33,357 |
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES: |
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
3,950 |
|
|
|
3,889 |
Total liabilities |
|
|
37,725 |
|
|
|
37,246 |
|
|
|
|
|
|
|
|
SHAREHOLDERS’ EQUITY |
|
|
214,027 |
|
|
|
209,650 |
|
|
|
|
|
|
|
|
TOTAL |
|
$ |
251,752 |
|
|
$ |
246,896 |
|
|
|
|
|
|
|
|
|
|
|
|
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) |
(in thousands, except per share data) |
|
|
|
|
|
|
|
Quarter Ended |
|
|
|
September 30, |
|
|
|
2016 |
|
|
|
2015 |
NET SALES |
|
$ |
112,050 |
|
|
|
$ |
126,531 |
|
COST OF GOODS SOLD |
|
|
(85,420 |
) |
|
|
|
(98,662 |
) |
GROSS MARGIN |
|
|
26,630 |
|
|
|
|
27,869 |
|
SELLING, GENERAL AND ADMINISTRATIVE
|
|
|
(18,926
|
)
|
|
|
|
(18,490
|
)
|
OPERATING INCOME |
|
|
7,704 |
|
|
|
|
9,379 |
|
OTHER INCOME (EXPENSE) |
|
|
48 |
|
|
|
|
(50 |
) |
INTEREST EXPENSE |
|
|
-- |
|
|
|
|
(37 |
) |
INCOME BEFORE INCOME TAXES |
|
|
7,752 |
|
|
|
|
9,292 |
|
INCOME TAX PROVISION |
|
|
(3,000 |
) |
|
|
|
(3,530 |
) |
NET INCOME |
|
$ |
4,752 |
|
|
|
$ |
5,762 |
|
|
|
|
|
|
|
|
|
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
|
|
|
|
|
|
|
|
Basic |
|
|
7,725 |
|
|
|
|
7,508 |
|
Diluted |
|
|
7,838 |
|
|
|
|
7,761 |
|
|
|
|
|
|
|
|
|
EARNINGS PER SHARE OF COMMON STOCK:
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.62 |
|
|
|
$ |
0.77 |
|
Diluted |
|
$ |
0.61 |
|
|
|
$ |
0.74 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) |
(in thousands) |
|
|
|
|
|
|
|
Quarter Ended |
|
|
|
September 30, |
|
|
|
2016 |
|
|
|
2015 |
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net income |
|
$ |
4,752 |
|
|
|
$ |
5,762 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
Depreciation |
|
|
2,032 |
|
|
|
|
1,742 |
|
Stock-based compensation expense |
|
|
639 |
|
|
|
|
171 |
|
Deferred income taxes |
|
|
699 |
|
|
|
|
(3 |
) |
Excess tax benefit from share-based payments |
|
|
(1,034 |
) |
|
|
|
(20 |
) |
Change in provision for losses on accounts receivable
|
|
|
(100
|
)
|
|
|
|
(50
|
)
|
Gain on disposition of capital assets |
|
|
(63 |
) |
|
|
|
-- |
|
Changes in operating assets and liabilities |
|
|
4,309 |
|
|
|
|
906 |
|
Net cash provided by operating activities |
|
|
11,234 |
|
|
|
|
8,508 |
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
Net purchases of investments |
|
|
(22 |
) |
|
|
|
(55
|
) |
Proceeds from sale of capital assets |
|
|
63 |
|
|
|
|
0
|
|
Capital expenditures |
|
|
(4,491 |
) |
|
|
|
(2,090 |
) |
Net cash used in investing activities |
|
|
(4,450 |
) |
|
|
|
(2,145 |
) |
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Dividends paid |
|
|
(1,386 |
) |
|
|
|
(1,347 |
) |
Proceeds from issuance of common stock |
|
|
588 |
|
|
|
|
644 |
|
Shares issued to employees, net of shares withheld |
|
|
(1,132 |
) |
|
|
|
-- |
|
Excess tax benefit from share-based payments |
|
|
1,034 |
|
|
|
|
20 |
|
Repayments of current notes payable |
|
|
-- |
|
|
|
|
(5,097 |
) |
Net cash provided by financing activities |
|
|
(896 |
) |
|
|
|
(5,780 |
) |
|
|
|
|
|
|
|
|
Increase in cash |
|
|
5,888 |
|
|
|
|
583 |
|
Cash at beginning of period |
|
|
36,780 |
|
|
|
|
1,282 |
|
Cash at end of period |
|
$ |
42,668 |
|
|
|
$
|
1,865 |
|
|
|
|
|
|
|
|
|
|
|
Flexsteel Industries, Inc., Dubuque, IA
Timothy E. Hall, 563-585-8392
Chief Financial Officer
View source version on businesswire.com: http://www.businesswire.com/news/home/20161019006572/en/