EXHIBIT 99.1
Flexsteel Announces First Quarter Operating Results
DUBUQUE, Iowa--(BUSINESS WIRE)--Oct. 20, 2004--Flexsteel
Industries, Inc. (Nasdaq:FLXS) today reported sales and earnings for
its first quarter ended September 30, 2004.
Net sales for the quarter ended September 30, 2004 were $97.9
million compared to the prior year quarter of $76.9 million, an
increase of 27.3%. Net income for the current quarter decreased to
$1.2 million or $0.18 per share from the prior year quarter of $1.9
million or $0.29 per share. Included in the quarter ended September
30, 2004, the Company recorded a net gain (after tax) of $0.4 million
or $0.06 per share on the sale of a building located in Elkhart,
Indiana.
Flexsteel acquired DMI Furniture, Inc. ("DMI") in a business
combination accounted for as a purchase as of September 17, 2003. The
net sales and operating results being reported for the prior year
quarter includes the net sales and operating results of DMI for the
period September 18, 2003 through September 30, 2003. The net sales
reported above include $25.1 million and $3.1 million of DMI for the
fiscal year quarters ended September 30, 2004 and 2003, respectively.
For the quarter ended September 30, 2004, residential net sales
were $59.0 million, which includes $15.5 million of DMI. Excluding
DMI, residential net sales decreased 8.7% from the prior year quarter.
Recreational vehicle net sales were $21.8 million, an increase of
6.8%. Commercial net sales were $17.1 million, which includes $9.6
million of DMI. Excluding DMI, commercial net sales increased 31.2%.
The overall increase in net sales reflects the inclusion of DMI net
sales and continued growth for vehicle and commercial products offset
by the decrease in net sales attributed to residential products.
Gross margin for the quarter ended September 30, 2004 was 18.2%
compared to 21.9% in the prior year quarter. The decreased gross
margin percentage reflects increased costs for materials, especially
steel and component parts that have steel content, and petroleum
related expenses, including poly foam and fuel related costs. The
adverse impact of cost increases on gross margin for the first quarter
was approximately $1.1 million or 1.2% of net sales. In addition, DMI
products have a lower gross margin due to a different customer base,
further decreasing the Company's overall gross margin percentage.
Selling, general and administrative expenses were 16.7% and 18.1%
of net sales for the quarters ended September 30, 2004 and 2003,
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 in November 2003.
Working capital at September 30, 2004 was $88.3 million including
cash, cash equivalents and investments of $4.9 million. Working
capital increased by $4.9 million from June 30, 2004 primarily due to
an increase in inventories of $8.4 million and a decrease in trade
receivables of $3.7 million. The increase in inventories reflects
higher levels of finished goods, primarily from imported products.
Capital expenditures were $1.0 million for the first quarter of
fiscal 2005 primarily for delivery and manufacturing equipment.
Depreciation and amortization expense was approximately $1.5 million
and $1.2 million for the fiscal year quarters ended September 30, 2004
and 2003, respectively. The Company expects that capital expenditures
will be approximately $4.0 million for the remainder of the fiscal
year.
All earnings per share amounts are on a diluted basis.
Outlook
The Company is finding that the pressures on margins experienced
in the second half of fiscal 2004 are continuing. Suppliers for steel
and petroleum-based products, including fuel and poly foam, continue
to pass on additional cost increases to the Company. At the same time,
many furniture manufacturers, including Flexsteel, are dealing with
competition and pricing pressures from imported products. The Company
believes that U.S. consumer confidence has been hampered by several
uncertainties in the marketplace, including the upcoming U.S.
presidential election, the war in Iraq, fluctuations in interest
rates, and record high and unstable oil prices. The Company believes
that this situation has caused consumers to postpone purchases of
furniture. The Company expects these uncertainties will continue to
have a negative impact on its results of operations through at least
the end of the second fiscal quarter ending December 31, 2004. The
Company has initiated several actions in response to these factors,
including review and potential adjustment to the Company's selling
prices, production capacity levels and cost control measures for
inventories, capital assets, and selling, general and administrative
expenses. The Company believes that its strategy of providing
furniture from a wide selection of domestically manufactured and
imported products is sound business practice and will continue.
Analysts Conference Call
The Company will host a conference call for analysts on Thursday,
October 21, 2004, at 10:30 a.m. Central Time. To access the call,
please dial 1-888-275-4480 and provide the operator with ID# 1228533.
A replay will be available for two weeks beginning approximately two
hours after the conclusion of the call by dialing 1-800-642-1687 and
entering ID# 1228533.
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 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 sales, the cost of raw materials, foreign currency
revaluations, actions by governments including taxes and tariffs, the
amount of sales generated and the profit margins thereon, competition
(both foreign and domestic), changes in interest rates, credit
exposure with customers, the ability to successfully integrate DMI
into the Company's operations and general economic conditions. Any
forward-looking statement speaks only as of the date of this press
release. The Company specifically declines to undertake any obligation
to publicly revise any forward-looking statements that have been made
to reflect events or circumstances after the date of such statements
or to reflect the occurrence of anticipated or unanticipated events.
About Flexsteel
Flexsteel Industries, Inc. is headquartered in Dubuque, Iowa, and
was incorporated in 1929. Flexsteel is a designer, manufacturer,
marketer and importer of quality upholstered and wood furniture.
Products are primarily for the residential, recreational vehicle,
hospitality and healthcare markets. All products are distributed
nationally.
For more information, visit our web site at
http://www.flexsteel.com.
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
September 30, June 30,
2004 2004
------------- -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............ $3,591,867 $2,476,521
Investments.......................... 1,263,112 1,271,417
Trade receivables, net............... 44,487,098 48,169,780
Inventories.......................... 77,326,255 68,880,118
Other................................ 6,043,731 6,690,979
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Total current assets....................... 132,712,063 127,488,815
NONCURRENT ASSETS:
Property, plant, and equipment, net.. 28,937,736 30,326,505
Other assets......................... 10,943,117 11,703,391
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TOTAL......................................$172,592,916 $169,518,711
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade................ $14,939,374 $12,272,405
Notes payable........................... 10,218,877 9,022,090
Accrued liabilities..................... 19,262,340 22,842,020
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Total current liabilities.................. 44,420,591 44,136,515
LONG-TERM LIABILITIES:
Long-term debt.......................... 19,333,337 17,583,336
Other long-term liabilities............. 6,260,257 6,187,118
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Total liabilities.......................... 70,014,185 67,906,969
SHAREHOLDERS' EQUITY....................... 102,578,731 101,611,742
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TOTAL......................................$172,592,916 $169,518,711
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FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended
September 30,
---------------------------
2004 2003
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NET SALES.................................. $97,855,557 $76,857,039
COST OF GOODS SOLD......................... (80,000,703) (60,006,842)
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GROSS MARGIN............................... 17,854,854 16,850,197
SELLING, GENERAL AND ADMINISTRATIVE........ (16,339,888) (13,958,079)
GAIN ON SALE OF BUILDING................... 608,613
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OPERATING INCOME........................... 2,123,579 2,892,118
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OTHER INCOME (EXPENSE):
Interest and other income............. 133,686 222,117
Interest expense...................... (277,123) (44,319)
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Total............................ (143,437) 177,798
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INCOME BEFORE INCOME TAXES................. 1,980,142 3,069,916
PROVISION FOR INCOME TAXES................. (780,000) (1,205,000)
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NET INCOME................................. $1,200,142 $1,864,916
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AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING:
Basic............................... 6,508,386 6,336,434
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Diluted............................. 6,583,846 6,431,189
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EARNINGS PER SHARE OF COMMON
STOCK:
Basic............................... $0.18 $0.29
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Diluted............................. $0.18 $0.29
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CONTACT: Flexsteel Industries, Inc., Dubuque
Timothy E. Hall, Treasurer 563-585-8392