Flexsteel Industries, Inc. (FLXS)

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Flexsteel Industries Inc. (FLXS)

F1Q09 (Qtr End 09/30/08) Earnings Call Transcript

October 21, 2008 11:00 am ET


Tim Hall – CFO, VP of Finance and Secretary

Ron Klosterman – President and CEO


John Deisher [ph]



Good morning. My name is Clara and I will be your conference operator today. At this time, I would like to welcome everyone to the first quarter fiscal year 2009 operating results conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions)

And now I would like to turn the call over to Mr. Tim Hall, Vice President of Finance and Chief Financial Officer for Flexsteel Industries. Sir, you may begin your call.

Tim Hall

Thank you, Clara, and good morning everyone and welcome to our fiscal year 2009 first quarter operating results conference call. We appreciate you participating this morning.

Joining me this morning is Ron Klosterman, our Chief Executive Officer and President of Flexsteel. We are calling this morning from our showroom in High Point, North Carolina. During the call today, we may make forward-looking statements that are subject to risk and uncertainty. A discussion of those factors that could cause actual results to differ materially from management's expectation is contained in the company’s SEC filings including our most recent 10-K filed on September 15, 2008 and the press release dated October 20, 2008 announcing our first quarter 2009 operating results.

Any forward-looking statements or opinion as of now and we undertake no obligations, to update or revise any of the forward-looking information and statements to reflect events or circumstances after today’s call. I would like to make just a few comments before I turn the call over to Ron.

From the press release from yesterday, our sales for the quarter were approximately $91.4 million, a decrease of about 9.4%. We reported a net loss of approximately $700,000 or $0.11 per share compared to a $0.18 per share earnings in the prior year quarter. During the quarter, we recorded pre-tax charges of approximately $1.4 million related to facility consolidations that we announced during September. Excluding those charges, our net income for the current quarter was approximately $100,000 or $0.02 per share.

Our sales were both – breaking down our sales, our residential net sales were approximately $62 million, substantially flat with the prior year quarter. Our commercial seating sales were up slightly to $23.5 million, about 4% increase I guess. The recreational vehicle seating part of our business is where we have struggled most dramatically as that industry suffers as well. Our sales of $5.9 million had an increase of 62%.

Our gross margin for the quarter was impacted negatively by the under absorption of fixed costs as our sales fell, especially in the vehicle seating area, and we had some higher material costs as well. Our selling, general and administrative expenses were 18.3% versus 17.4% in the prior year quarter, again the absorption of our fixed selling costs on the lower volume and a slight increase in bad debt expense.

During the quarter, we’ve had cash provided by operations of approximately $2.2 million. Little information about what we’ve been trying to do with our working capital and our investment in primarily inventories and receivables. Compared to our June balances, our receivables are down about $2.7 million and our inventories are down about $1.8 million, $1.9 million. Looking at our – those numbers versus a year ago, our receivables are down about $6.5 million and our inventory is down about $3.1 million. We used those decrease to reduce our debts and from our September quarter balance sheet a year ago, our debt is down $8.1 million. And from our June quarter, June 30, 2008, we’re down about $3.5 million.

We continue to be stingy with our capital improvements, investing about $150,000 during the quarter or estimating that the fiscal year total will be about $2.5 million, as we have some delivery equipment during the second quarter of this fiscal year will be the predominant add there. Our depreciation projection for the year is about flat, slightly down to about $4.2 million for fiscal year 2009. At this time, I’ll turn the call over to Ron Klosterman for his comments. Ron?

Ron Klosterman

Thank you, Tim, and good morning everyone.

While this certainly has been a very challenging quarter, great volatility in the marketplace between the – all the issues going on in the financial end of things, the impact of the slower housing, etc., all of these seems to play a significant role in our businesses. Almost every product we make is an easily deferrable purchase. Although we’re never pleased with having top line revenue being flat, quite honestly, we’re not greatly disappointed in either our residential or our commercial business at this point in time, especially as we look at some of our competition in those areas. We feel reasonably good about having relatively flat top lines at this time compared to a year ago. And then, in fact, in the home furnishings industry, probably performing better than much of our competition.

The recreational vehicle business has been a real challenge for us. It has been throughout calendar year 2008, as we saw declines already beginning in the early part of the year as the retail volume of recreational vehicles started the year, the first couple of months being down in the 10% to teens areas, growing to the 20% and 30% range as we went through the late winter/early spring months and really being substantially impacted during these last three months or at least the last three months reported with I think the industry saying that retail sales for the month of August were off over 60%.

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