Flexsteel Industries Inc. Reports Operating Results (10-Q)

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May 06, 2009
Flexsteel Industries Inc. (FLXS, Financial) filed Quarterly Report for the period ended 2009-03-31.

Flexsteel Industries Inc. is engaged in the design manufacture and sale of a broad line of quality upholstered furniture for residential commercial and recreational vehicle seating use. Flexsteel primarily distributes its products throughout most of the United States through their sales force to furniture dealers department stores recreational vehicle manufacturers and van converters and hospitality and healthcarefacilities. The products are also sold to several national chains some of which sell on a private label basis. Flexsteel Industries Inc. has a market cap of $45.3 million; its shares were traded at around $6.88 with a P/E ratio of 76.5 and P/S ratio of 0.1. The dividend yield of Flexsteel Industries Inc. stocks is 2.9%.

Highlight of Business Operations:

The above factors resulted in current quarter net loss of $1.9 million or $0.28 per share, compared to the prior year quarter net income of $0.8 million or $0.13 per share.

Results for the nine-month period ended March 31, 2009 included a pre-tax gain on the sale of securities held for investment of $0.5 million or $0.04 per share after tax. During the current nine-month period the Company recorded pre-tax charges of approximately $2.4 million, or $0.23 per share after tax related to facility consolidation.

The above factors resulted in net loss of $2.3 million or $0.35 per share, compared to the prior year nine-month period net income of $3.9 million or $0.59 per share.

Working Capital (current assets less current liabilities) at March 31, 2009 was $87.8 million. Net cash provided by operating activities was $12.9 million for the nine months ended March 31, 2009 compared to $11.4 million at March 31, 2008. Cash from operating activities was used primarily to reduce borrowings by $12.0 million and pay dividends of $2.0 million. Significant changes in working capital from June 30, 2008 to March 31, 2009 included decreased accounts receivable of $11.6 million, decreased inventory of $9.1 million and decreased accounts payable of $3.8 million. The decrease in receivables is related to lower shipment volume, as well as the timing of shipments to customers and the related payment terms. Inventory decreased $7.4 million due to lower forecasted customer requirements and $1.7 million due to write-downs related to current business environment primarily in vehicle seating applications. The decrease in accounts payable relates to reduced purchase volume based on current demand. The Company expects that due to the nature of our operations that there will be continuing fluctuations in accounts receivable, inventory, accounts payable, and cash flows from operations due to the following: (i) we purchase inventory from overseas suppliers with long lead times and depending on the timing of the delivery of those orders inventory levels can be greatly impacted, and (ii) we have various customers that purchase large quantities of inventory periodically and the timing of those purchases can significantly impact inventory levels, accounts receivable, accounts payable and short-term borrowings. As discussed below, the Company believes it has adequate financing arrangements and access to capital to absorb these fluctuations in operating cash flow.

Net cash provided by investing activities was $0.6 million during the nine-month period ended March 31, 2009. Proceeds from the sale of investments were $0.7 million. Capital expenditures were $0.9 million for the nine months ended March 31, 2009. Depreciation and amortization expense was $2.8 million and $3.4 million for the nine-month periods ended March 31, 2009 and 2008, respectively. The Company expects that capital expenditures will be less than $0.5 million for the remainder of the 2009 fiscal year.

During the third quarter of fiscal year 2009, the Company negotiated a refinancing of its working capital line of credit that would have expired June 30, 2009. The Companys short-term credit facility was increased from $12 million to $15 million and expires June 30, 2010. The long-term credit facility was reduced from $20 million to $10 million and expires September 30, 2011.

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