Flexsteel Industries Inc. (FLXS)
F2Q08 (Qtr End 12/31/07) Earnings Call
February 8, 2008 11:30 am ET
Ron Klosterman - President and CEO
Tim Hall - CFO
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Thank you Erica. And good morning everyone and welcome to our fiscal year 2008 second quarter and fiscal year-to-date operating results conference call. We appreciate your participation this morning.
Joining me this morning from our corporate headquarters in Dubuque, Iowa, is Ron Klosterman, our President and Chief Executive Officer.
Today during our call, we may make forward-looking statements that are subject to risk and uncertainty. A discussion of the factors that could cause actual results to differ materially from management's expectations is contained in the company's SEC filings including the most recent 10-K and the press release dated February 7, 2008 announcing the earnings for the quarter and our fiscal year-to-date. Any forward looking statements are opinion as of now and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after today's call. I have a few comments about our press release and our quarter and year-to-date results before I turn the call over to Ron for his comments.
The company's reported net sales for the quarter of a $106 million, an increase of about 0.3% over the prior year quarter. Net income for the quarter was $1.9 million or $0.28 per share compared to $1.4 million or $0.21 a share in the prior year quarter. On a six-month basis, our sales were almost flat at about $207 million.
Net income for the six months ended December 31, 2007 was $3.1 million or $0.46 per share, an increase of approximately 55% from the $0.30 or $2 million that we reported in the six months ended December 31, 2006.
For the six months, our residential sales were up 1.1% to $130.2 million, our recreational vehicles decreased about 1% to $30.6 million, and our commercial sales decreased 2.8% to $46.1 million.
Some financial working capital; our receivables have decreased about $8.8 million from our June 30th numbers. And that decrease is really related to the timing of shipments to customers and the payment terms that we provide them.
Our inventories have increased about $9.3 million from the June 30th numbers and the net increase in the inventory is due primarily to timing of purchases of finished goods to meet our forecasted customer requirements and to accomplish new product introductions.
At this time, I will turn the call over to Ron Klosterman for any comments if he has. Ron?
Thank you, Tim and good morning. I would like to just provide a little bit more detail about primarily the six months year-to-date and then some general comments about what we see going forward. For the six months, as Tim indicated, our topline is about flat between $206 million and $207 million. And although we are never pleased when we don’t see topline growth considering the difficult environment that we have been working in our dirtiest furniture businesses, residential and RV in particular, we are not greatly disappointed with a flat topline at this point in time.
I think it stands up pretty well against most of what other publicly-owned furniture companies have been reporting during the last half of calendar year 2007. While our topline is flat, the company has been working very hard to control our costs and utilize our manufacturing capacity. We have made efforts to tighten physical space to eliminate non-value added handling of materials in our factories and in our warehouse operations and with that we have seen some nice improvement in our margins in spite of the flat sales.
Along with that, we've also had the benefit of some modest changes and product mix that have allowed us to enhance our margins slightly.
In the SG&A area, those costs have gone up from a year ago, although we are not greatly alarmed at the level that we are currently running. Part of that is in selling expenses and marketing expenses and they were planned expenditures that we hade, revising some of our catalogues, the introduction on the Flexsteel side of the Wrangler program, which had some initial costs associated with that.
And also in the administrative area, our bad debt expense is up from to where it was a year ago. And to further comment on that, it's really we have not had any extraordinary bad debt expenses or large expenses this year. We are really running at a fairly normal rate of loss on a historical basis. It's just that we are comparing it against the year, last year where we really had very minimal bad debt expenses in the first two quarters of our fiscal year.
With those changes in margin and SG&A, we feel reasonably good with having the net income increase from the current quarter and also the year-to-date that we have had with our year-to-date net income being -- our earnings per share being $0.46 versus $0.30 a year ago, we think a very respectable increase on flat sales.
So, I think it is once again a further reflection of the efforts that our management team and all of our associates here at Flexsteel are doing at controlling costs. I would like to comment a little bit really about not necessarily our fiscal results, but the calendar year 2007 -- the last four quarters for our company.