Flexsteel Reports 2% Residential Furniture Sales Increase For 4th Quarter
Furniture World Magazine
Flexsteel Industries, Inc. reported sales and earnings for its fourth quarter and fiscal year ended June 30, 2007.
Net sales for the fourth quarter ended June 30, 2007 were $114.3 million compared to the prior year quarter of $112.3 million, an increase of 2%. Residential net sales were $71.5 million, compared to $70.4 million, an increase of 2% from the prior year quarter. Commercial net sales were $25.1 million for the quarter ended June 30, 2007, compared to $23.3 million in the prior year quarter, an increase of 8%. Recreational vehicle net sales were $17.7 million for the quarter ended June 30, 2007, compared to $18.7 million, a decrease of 5% from the prior year quarter.
Net sales for the fiscal year ended June 30, 2007 were $425.4 million compared to $426.4 million in the prior fiscal year. Residential net sales were $259.7 million, a decrease of 3% from the fiscal year ended June 30, 2006. Commercial net sales were $99.5 million for the fiscal year ended June 30, 2007, an increase of 15% from the fiscal year ended June 30, 2006. Recreational vehicle net sales were $66.2 million for the fiscal year ended June 30, 2007, a decrease of 8% from the fiscal year ended June 30, 2006.
Net income for the quarter ended June 30, 2007 was $5.8 million or $0.89 per share. Financial results for the quarter were favorably impacted by two significant non-recurring events. The Company sold a commercial property, which resulted in a pre-tax gain of approximately $4.0 million, or $0.37 per share after tax. This gain is reported as “Gain on sale of capital assets.” The Company also realized a non-taxable gain on life insurance of $0.5 million, or $0.08 per share. This gain is included in “Interest and other income.” Excluding these items, net income for the quarter ended June 30, 2007 was $2.8 million, or $0.44 per share compared to $1.5 million, or $0.23 per share for the prior year quarter.
Net income for the fiscal year ended June 30, 2007 was $9.3 million or $1.42 per share. Results for the fiscal year include the two non-recurring items listed above and the gain on the sale of vacant land that was reported in a prior quarter, which resulted in a pre-tax gain of approximately $0.4 million, or $0.04 per share after tax. This gain is also reported as “Gain on sale of capital assets” on the attached income statement. Excluding these three items net income for the year ended June 30, 2007 was $6.1 million, or $0.93 per share, compared to $4.7 million, or $0.72 per share for the prior fiscal year, an increase of $1.4 million or 28%.
The information regarding non-recurring items is non-GAAP disclosure. Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial performance measures prepared in accordance with GAAP. We believe this information is relevant to our investors due to the significance of these items on net income and earnings per share and have included a table in the financial statements demonstrating the impact on earnings.
Gross margin for the quarter ended June 30, 2007 was 19.7% compared to 18.8% in the prior year quarter. This improvement is primarily due to the impact of changes in product mix and higher absorption of fixed manufacturing costs. Gross margin was 19.1% for the fiscal years ended June 30, 2007 and 2006.
Selling, general and administrative expenses were 15.8% and 16.4% of net sales for the quarters ended June 30, 2007 and 2006, respectively. For the fiscal years ended June 30, 2007 and 2006, selling, general and administrative expenses were 16.7% and 17.1%, respectively. This decrease in selling, general and administrative expenses for the current quarter and on a year-to-date basis in comparison to the prior year periods is due primarily to lower marketing and sales support expenses and lower bad debt expenses.
All earnings per share amounts are on a diluted basis.
Working capital (current assets less current liabilities) at June 30, 2007 was $99.3 million. Net cash provided by operating activities was $10.3 million for the fiscal year ended June 30, 2007 compared to net cash used in operating activities of $7.3 million in fiscal year 2006. The fluctuations in net cash provided by operating activities were primarily the result of changes in net income, changes in inventory and accounts payable related to sourcing of finished product and changes in accounts receivable due to sales volume and collection patterns.
Capital expenditures were $10.8 million during the fiscal year 2007, including approximately $6.0 million for the purchase of a west coast warehouse and approximately $1.5 million for a warehouse addition in Indiana to support the growth of foreign-sourced furniture products. The remainder of expenditures was primarily for delivery and manufacturing equipment. Depreciation and amortization expense was $5.3 million and $5.5 million for the fiscal years ended June 30, 2007 and 2006, respectively. The Company expects that capital expenditures will be approximately $3.0 million in fiscal year 2008.
Consistent with industry-wide trends, orders for residential and vehicle markets continued soft throughout the Company’s fourth fiscal quarter period. The Company expects this softness to continue through the first half of fiscal year 2008. Orders for products into commercial applications slowed in the fourth quarter of the 2007 fiscal year and we expect this moderation to continue into fiscal year 2008.
The Company continues to explore cost control opportunities in all facets of its business. The Company believes it has the necessary inventories and product offerings in place to take advantage of opportunities for expansion of market share in certain markets, such as commercial office and hospitality. The Company anticipates continuing its strategy of providing furniture from a wide selection of domestically manufactured and imported products.
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.