Exhibit 99.1
Flexsteel Announces Third Quarter
and Year-To-Date Operating Results
DUBUQUE, Iowa--(BUSINESS WIRE)--April 19, 2006--Flexsteel
Industries, Inc. (NASDAQ:FLXS) today reported sales and earnings for
its third quarter and fiscal year-to-date ended March 31, 2006.
Net sales for the fiscal quarter ended March 31, 2006 were $110.3
million compared to the prior year quarter of $101.3 million, an
increase of 8.9%. Operating income for the current quarter was $3.1
million compared to $1.7 million in the prior year quarter. Net income
for the current quarter was $1.8 million or $0.27 per share compared
to $1.7 million or $0.26 per share in the prior year quarter. Prior
year quarter net income of $1.7 million includes a $0.1 million after
tax gain from sale of a former manufacturing facility and $0.7 million
of tax benefit related to reduced estimated tax liabilities.
Net sales for the nine months ended March 31, 2006 were $314.1
million compared to $304.3 million in the prior year nine months, an
increase of 3.2%. Net income for the nine months ended March 31, 2006
was $3.2 million or $0.49 per share, including stock-based
compensation expense of $0.4 million (after tax) or $0.06 per share,
compared to net income of $4.5 million or $0.68 per share for the nine
months ended March 31, 2005, which included a net gain (after tax) of
$0.4 million or $0.06 per share on the sale of facilities.
For the quarter ended March 31, 2006, residential net sales were
$69.6 million, an increase of 7.8% from the prior year quarter net
sales of $64.6 million. This increase in residential net sales in the
current quarter is primarily due to greater demand for products in
existing markets and introduction into newly developed markets. For
the nine months ended March 31, 2006, residential net sales of $197.4
million are up 1.6% from net sales of $194.2 million in the prior
year.
Recreational vehicle net sales for the quarter ended March 31,
2006 were $19.1 million, down 3.4% from the prior year quarter net
sales of $19.7 million. On a year-to-date basis, recreational vehicle
net sales decreased 11.9% to $53.3 million, compared to $60.5 million
in the nine-months ended March 31, 2005. The decline in recreational
vehicle net sales is due primarily to a continued weak wholesale
market environment.
Sales of commercial products increased from $17.0 million to $21.6
million and from $49.6 million to $63.4 million, for the quarter and
fiscal year-to-date, respectively. This approximate 28% increase in
commercial net sales for the quarter and year-to-date is primarily due
to expanded commercial office product offerings and improved industry
performance of hospitality products.
Gross margin for the quarter ended March 31, 2006 was 19.4%
compared to 17.9% in the prior year quarter. The gross margin
improvement for the quarter is a result of a greater percentage of
shipments of commercial office, hospitality and foreign sourced
products whose margins were not as significantly impacted by raw
material cost increases. In addition, selected selling price increases
have been implemented. However, the Company has been unable to fully
pass on these raw material cost increases on domestically manufactured
product. For the nine months ended March 31, 2006, the gross margin
was 19.2% compared to 18.5% for the prior year nine-month period,
reflecting the improved margin in the current quarter.
Selling, general and administrative expenses were 16.5% and 16.4%
of net sales for the quarters ended March 31, 2006 and 2005,
respectively. For the nine months ended March 31, 2006 and 2005,
selling, general and administrative expenses were 17.3% and 16.6%,
respectively. The increase in selling, general and administrative
costs on a year-to-date basis in comparison to prior year resulted
from increases in marketing and royalty expenses, general increases in
other fixed administrative expenses and the recording of stock-based
compensation expense related to stock option grants.
During the quarter ended March 31, 2005, the Company recorded a
pre-tax gain on the sale of a former manufacturing facility of $0.2
million. For the fiscal year-to-date in 2005 the Company recorded
pre-tax gains of $0.8 million on the sale of facilities.
The income tax rate was 39.3% and 39.2% for the quarter and fiscal
year-to-date periods ending March 31, 2006, respectively. The Company
expects that the income tax rate for its fourth fiscal quarter will be
approximately 39.2%. During the quarter ended March 31, 2005, an
examination by the Internal Revenue Service of the Company's federal
income tax returns for the fiscal years ended June 30, 2003 and 2004
was completed. Due to the favorable results, the Company reduced its
estimate of accrued tax liabilities by $0.7 million. The decrease
resulted in income tax rates of (3.7%) and 27.9% for the quarter and
fiscal year-to-date periods ending March 31, 2005, respectively.
Working capital (current assets less current liabilities) at March
31, 2006 was $96.0 million, compared to $85.4 million at June 30,
2005. Net cash used in operating activities was $6.5 million for the
nine-month period ended March 31, 2006. Net cash provided by operating
activities was $13.6 million for the nine-month period ended March 31,
2005. Fluctuations in net cash used in operating activities were
primarily the result of changes in accounts receivable, inventories
and accounts payable. The increase in inventories in fiscal 2006
relates primarily to the expansion of foreign sourced product
programs.
Capital expenditures were $3.2 million during the first nine
months of fiscal year 2006. Depreciation and amortization expense was
$4.1 million and $4.4 million for the nine-month periods ended March
31, 2006 and 2005, respectively. The Company expects that capital
expenditures will be less than $0.5 million for the remainder of the
fiscal year.
All earnings per share amounts are on a diluted basis.
Outlook
Flexsteel Industries, Inc., and the furniture industry in general,
continues to be impacted by increases in interest rates and
geopolitical issues leading to increased energy costs and marketplace
uncertainty. U. S. furniture manufacturers continue to be faced with
competition and pricing pressures from foreign sourced products. The
Company expects these challenging business conditions, which could
have an impact on its results of operations, to continue through the
remainder of the fiscal year.
In response to the aforementioned challenges, the Company
continues to monitor sell prices for its products and continues to
identify and implement cost control opportunities in all facets of its
business. The Company believes it has the necessary inventories,
product offerings and commitments in place to take advantage of
opportunities for expansion into new markets. The Company believes
that its strategy of providing furniture from a broad and varied
selection of domestically manufactured and foreign sourced products is
a sound business practice that it will continue to pursue.
Analysts Conference Call
The Company will host a conference call for analysts on Thursday,
April 20, 2006, at 10:30 a.m. Central Time. To access the call, please
dial 1-888-275-4480 and provide the operator with ID# 6095174. 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# 6095174.
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 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,
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.
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, June 30,
2006 2005
------------- -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........... $801,050 $1,706,584
Investments......................... 754,690 1,508,751
Trade receivables, net.............. 50,542,637 48,355,070
Inventories......................... 86,786,489 69,945,400
Other............................... 6,942,728 6,281,869
------------- -------------
Total current assets...................... 145,827,594 127,797,674
NONCURRENT ASSETS:
Property, plant, and equipment, net. 25,275,425 26,140,914
Other assets........................ 13,795,317 12,719,090
------------- -------------
TOTAL..................................... $184,898,336 $166,657,678
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade............... $20,481,928 $16,259,905
Notes payable and current maturities of
long-term debt........................ 6,356,164 5,000,000
Accrued liabilities.................... 22,974,834 21,149,428
------------- -------------
Total current liabilities................. 49,812,926 42,409,333
LONG-TERM LIABILITIES:
Long-term debt......................... 21,969,674 12,800,000
Other long-term liabilities............ 6,760,423 6,650,625
------------- -------------
Total liabilities......................... 78,543,023 61,859,958
SHAREHOLDERS' EQUITY...................... 106,355,313 104,797,720
------------- -------------
TOTAL..................................... $184,898,336 $166,657,678
============= =============
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Nine Months Ended
March 31, March 31,
--------------------------- ---------------------------
2006 2005 2006 2005
------------- ------------- ------------- -------------
NET SALES..... $110,345,280 $101,348,058 $314,081,702 $304,254,441
COST OF GOODS
SOLD......... (88,979,296) (83,175,515) (253,869,453) (247,826,424)
------------- ------------- ------------- -------------
GROSS MARGIN.. 21,365,984 18,172,543 60,212,249 56,428,017
SELLING,
GENERAL AND
ADMINI-
STRATIVE..... (18,223,706) (16,627,533) (54,320,932) (50,637,603)
GAIN ON SALE
OF FACILITIES 200,409 809,022
------------- ------------- ------------- -------------
OPERATING
INCOME....... 3,142,278 1,745,419 5,891,317 6,599,436
------------- ------------- ------------- -------------
OTHER INCOME
(EXPENSE):
Interest
and other
income... 247,120 141,687 554,055 436,373
Interest
expense.. (487,530) (247,448) (1,118,934) (791,441)
------------- ------------- ------------- -------------
Total... (240,410) (105,761) (564,879) (355,068)
------------- ------------- ------------- -------------
INCOME BEFORE
INCOME TAXES. 2,901,868 1,639,658 5,326,438 6,244,368
BENEFIT FROM
(PROVISION
FOR) INCOME
TAXES........ (1,140,000) 60,000 (2,090,000) (1,740,000)
------------- ------------- ------------- -------------
NET INCOME.... $1,761,868 $1,699,658 $3,236,438 $4,504,368
============= ============= ============= =============
AVERAGE NUMBER
OF COMMON
SHARES
OUTSTANDING:
Basic..... 6,562,456 6,539,079 6,556,669 6,528,179
============= ============= ============= =============
Diluted... 6,583,230 6,606,997 6,576,487 6,602,816
============= ============= ============= =============
EARNINGS PER
SHARE OF
COMMON STOCK:
Basic..... $0.27 $0.26 $0.49 $0.69
============= ============= ============= =============
Diluted... $0.27 $0.26 $0.49 $0.68
============= ============= ============= =============
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
March 31,
-------------------------
2006 2005
------------ ------------
OPERATING ACTIVITIES:
Net income.................................. $3,236,438 $4,504,368
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization........... 4,099,889 4,381,188
Gain on disposition of capital assets... (41,647) (852,838)
Stock based compensation expense........ 427,000
Changes in operating assets and
liabilities............................ (14,211,816) 5,577,125
------------ ------------
Net cash (used in) provided by operating
activities................................. (6,490,136) 13,609,843
------------ ------------
INVESTING ACTIVITIES:
Net purchases and sales of investments.. 631,110 (260,599)
Proceeds from sale of capital assets.... 75,286 2,087,208
Capital expenditures.................... (3,169,859) (2,714,835)
------------ ------------
Net cash used in investing activities....... (2,463,463) (888,226)
------------ ------------
FINANCING ACTIVITIES:
Net proceeds of borrowings.............. 10,525,838 (9,605,427)
Dividends paid.......................... (2,555,874) (2,543,762)
Proceeds from issuance of common stock.. 78,101 175,022
------------ ------------
Net cash provided by (used in) financing
activities................................. 8,048,065 (11,974,167)
------------ ------------
Increase (decrease) in cash and cash
equivalents................................ (905,534) 747,450
Cash and cash equivalents at beginning of
period..................................... 1,706,584 2,476,521
------------ ------------
Cash and cash equivalents at end of period.. $801,050 $3,223,971
============ ============
CONTACT: Flexsteel Industries, Inc., Dubuque
Timothy E. Hall, Chief Financial Officer, 563-585-8392