Flexsteel Announces Third Quarter and Year-to-Date Operating Results
DUBUQUE, Iowa--April 20, 2004--Flexsteel Industries, Inc. today reported sales and earnings for its third quarter ended March 31, 2004.Effective September 18, 2003, Flexsteel Industries, Inc. acquired DMI Furniture, Inc. (DMI) in a business combination accounted for as a purchase. The operating results of DMI for the period September 18 through March 31, 2004 are included in the reported amounts.
Net sales for the fiscal quarter ended March 31, 2004 were $107.0 million compared to the prior year quarter of $73.5 million, an increase of 46%. Net income for the current quarter was $2.5 million or $0.39 per share compared to the prior year quarter of $1.4 million or $0.22 per share, an increase of 79%.
Net sales for the nine months ended March 31, 2004 were $292.9 million compared to $217.1 million in the prior year nine months, an increase of 35%. Net income for the nine months ended March 31, 2004 of $7.4 million or $1.14 per share increased from net income for the nine months ended March 31, 2003 of $5.7 million or $0.89 per share, an increase of 31%.
During the current quarter, residential net sales were $68.2 million (includes $18.2 million of DMI), an increase of 39% from the prior year quarter. Recreational vehicle net sales were $22.0 million, an increase of 15%. Commercial net sales were $16.8 million (includes $9.7 million of DMI), an increase of 219%.
For the nine months ended March 31, 2004, residential net sales were $193.4 million (includes $44.7 million of DMI), an increase of 33% over the nine months ended March 31, 2003. Recreational vehicle net sales were $62.4 million, an increase of 10%. Commercial net sales were $37.1 million (includes $18.3 million of DMI), an increase of 151%. The increase in net sales reflects improved industry performance for vehicle and commercial products in addition to DMI net sales.
Gross margin for the quarter ended March 31, 2004 was 19.8% compared to 21.0% in the prior year quarter. For the nine months ended March 31, 2004 the gross margin was 20.9% compared to 22.2% for the prior year nine-month period. The decreased gross margin percentage reflects a lower gross margin on DMI products and increased costs for materials, especially steel and component parts that have steel content.
Selling, general and administrative expenses were 15.9% and 17.9% of net sales for the quarters ended March 31, 2004 and 2003, respectively. For the nine months ended March 31, 2004 and 2003, selling, general and administrative expenses were 16.8% and 18.4% of net sales, respectively. The decrease in the percentage of selling, general and administrative expenses is due primarily to the lower percentage cost related to DMI sales and the discontinuation of the Company's retail operations during the December 2003 quarter.
During the prior year nine months ended March 31, 2003, the Company recorded a net gain (after tax) of $0.2 million or $0.04 per share on the sale of land.
Working capital at March 31, 2004 was $82.8 million, which includes cash, cash equivalents and investments of $3.6 million. Cash and investments have decreased from June 30, 2003 due to the purchase of DMI that required $19.3 million combined with a reduction of long-term debt of $5.3 million. Working capital has increased by $15.1 million from June 30, 2003.
Capital expenditures, excluding the acquisition of DMI, were $5.4 million during the first nine months of fiscal 2004 and $4.0 million in the first nine months of fiscal 2003. The Company expects that capital expenditures will be approximately $1.1 million over the remainder of fiscal 2004. Depreciation and amortization expense was $4.2 million and $3.6 million for the nine months ended March 31, 2004 and 2003, respectively.
All earnings per share amounts are on a diluted basis.
The Company will host a conference call Wednesday, April 21, 2004, at 10:00 a.m. Central Time. The dial-in-number is 800-556-3831 with an access code of 00566. A replay will be available for two weeks beginning approximately four hours after the conclusion of the call. The dial-in-number for the replay is 888-813-1488 and no access code is required.
For more information, visit our web site at http://www.flexsteel.com.
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 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, the effectiveness of new product introductions, the product mix of our sales, the cost of raw materials, currency fluctuations, actions by governments including taxes and tariffs, the amount of sales generated and the profit margins thereon, competition, both foreign and domestic, credit exposure to our customers, the ability to successfully integrate DMI into the Company's operations, and general economic conditions.
Flexsteel Industries, Inc., headquartered in Dubuque, Iowa, is one of the oldest and largest manufacturers and marketers of residential, recreational vehicle, healthcare and hospitality upholstered seating in the country. In September 2003, Flexsteel purchased DMI Furniture, Inc., a design, manufacturing and marketing company of residential, commercial and home office furniture. A long-established company with quality lines, including bedroom and dining room furniture, DMI dovetails with Flexsteel in philosophy and markets. Both Flexsteel and DMI product lines are distributed nationally.
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, June 30,
2004 2003
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........... $ 2,372,648 $ 12,811,385
Investments......................... 1,268,685 9,531,913
Trade receivables, net.............. 44,157,032 29,612,278
Inventories......................... 60,733,530 32,473,287
Other............................... 7,299,105 5,393,426
------------ ------------
Total current assets...................... 115,831,000 89,822,289
PROPERTY, PLANT, AND EQUIPMENT, net....... 31,131,188 20,377,797
OTHER ASSETS.............................. 11,554,118 10,500,196
------------ ------------
TOTAL..................................... $158,516,306 $120,700,282
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade............... $ 8,577,311 $ 2,747,226
Current portion of long-term debt...... 1,000,008
Accrued liabilities.................... 23,477,363 19,409,504
------------ ------------
Total current liabilities................. 33,054,682 22,156,730
------------ ------------
LONG-TERM LIABILITIES:
Long-term debt, less current portion... 19,239,042
Other long-term liabilities............ 6,524,000 4,790,225
------------ ------------
Total long-term liabilities............... 25,763,042 4,790,225
------------ ------------
Total liabilities......................... 58,817,724 26,946,955
SHAREHOLDERS' EQUITY...................... 99,698,582 93,753,327
------------ ------------
TOTAL..................................... $158,516,306 $120,700,282
============ ============
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Nine Months Ended
March 31, March 31,
---------------------------- ----------------------------
2004 2003 2004 2003
------------- ------------- ------------- -------------
NET SALES. $ 106,964,330 $ 73,461,304 $ 292,923,464 $ 217,060,741
COST OF
GOODS
SOLD..... (85,769,751) (58,007,914) (231,672,594) (168,949,503)
------------- ------------- ------------- -------------
GROSS
MARGIN... 21,194,579 15,453,390 61,250,870 48,111,238
SELLING,
GENERAL
AND
ADMIN-
ISTRATIVE (16,990,730) (13,182,685) (49,319,065) (39,867,515)
GAIN ON
SALE OF
LAND..... 403,065
------------- ------------- ------------- -------------
OPERATING
INCOME... 4,203,849 2,270,705 11,931,805 8,646,788
------------- ------------- ------------- -------------
OTHER:
Interest
and
other
income. 199,697 265,467 723,202 872,535
Interest
expense (214,583) (95,187) (384,729) (101,235)
------------- ------------- ------------- -------------
Total. (14,886) 170,280 338,473 771,300
------------- ------------- ------------- -------------
INCOME
BEFORE
INCOME
TAXES.... 4,188,963 2,440,985 12,270,278 9,418,088
PROVISION
FOR
INCOME
TAXES.... (1,650,000) (1,020,000) (4,850,000) (3,750,000)
------------- ------------- ------------- -------------
NET INCOME $ 2,538,963 $ 1,420,985 $ 7,420,278 $ 5,668,088
============= ============= ============= =============
AVERAGE
NUMBER OF
COMMON
SHARES
OUTSTANDING:
BASIC.. 6,484,444 6,275,729 6,423,214 6,245,384
============= ============= ============= =============
DILUTED 6,565,220 6,394,339 6,505,645 6,358,686
============= ============= ============= =============
EARNINGS
PER SHARE
OF COMMON
STOCK:
BASIC.. $ 0.39 $ 0.23 $ 1.16 $ 0.91
============= ============= ============= =============
DILUTED $ 0.39 $ 0.22 $ 1.14 $ 0.89
============= ============= ============= =============