Flexsteel Reports Third Quarter Sales And Net Income Gains

The Company continues to experience increases in the cost of certain raw materials, such as steel, polyester fiber, fabric and leather, and finished products. We are implementing price increases to help mitigate the impact of the increased material and finished product costs, however, we will continue to experience downward pressure on gross margin until we realize the full benefits of these sell price increases and see an end to the cost increases.

We remain committed to our core strategies, which include a wide range of quality product offerings and price points to the residential and commercial markets, combined with a conservative approach to business. We will maintain our focus on a strong balance sheet through emphasis on cash flow and improving profitability. We believe these core strategies are in the best interest of our shareholders.

Conference CallWe will host a conference call on April 20, 2011, at 10:30 a.m. Central Time. To access the call, please dial 1-866-830-5279 and provide the operator with ID# 49982384. 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# 49982384.

Forward-Looking StatementsStatements, 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 our results to differ materially from those anticipated by some of the statements made in this press release. 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 and distribution channels, the product mix of sales, pricing pressures, the cost of raw materials and fuel, foreign currency valuations, actions by governments including taxes and tariffs, inflation, 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. We specifically decline 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 FlexsteelFlexsteel 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)
(in thousands)
			March 31,				June 30,
			2011				2010
ASSETS
CURRENT ASSETS:
Cash		$	12,201			$	8,278
Trade receivables, net			35,612				35,748
Inventories			74,737				72,637
Other			5,320				5,126
Total current assets			127,870				121,789
NONCURRENT ASSETS:
Property, plant, and equipment, net			20,453				21,614
Other assets			15,867				14,267
TOTAL		$	164,190			$	157,670
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable – trade		$	10,778			$	10,815
Accrued liabilities			19,375				20,174
Total current liabilities			30,153				30,989
LONG-TERM LIABILITIES:
Other long-term liabilities			9,485				9,069
Total liabilities			39,638				40,058
SHAREHOLDERS’ EQUITY			124,552				117,612
TOTAL		$	164,190			$	157,670

FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share data)
				Three Months Ended										Nine Months Ended
				March 31,										March 31,
				2011					2010					2011					2010
NET SALES			$	85,175				$	81,451				$	255,226				$	240,916
COST OF GOODS SOLD				(66,968	)				(63,418	)				(198,589	)				(186,286	)
GROSS MARGIN				18,207					18,033					56,637					54,630
SELLING, GENERAL AND
ADMINISTRATIVE				(14,561	)				(14,122	)				(44,966	)				(43,526	)
FACILITY CLOSING COSTS				–					–					(1,016	)				–
OPERATING INCOME				3,646					3,911					10,655					11,104
OTHER INCOME (EXPENSE):
Interest and other income				129					115					244					238
Interest expense				–					(206	)				–					(439	)
Total				129					(91	)				244					(201	)
INCOME BEFORE INCOME TAXES				3,775					3,820					10,899					10,903
INCOME TAX PROVISION				(1,320	)				(1,500	)				(3,970	)				(4,240	)
NET INCOME			$	2,455				$	2,320				$	6,929				$	6,663
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING:
Basic				6,710					6,622					6,687					6,596
Diluted				6,968					6,739					6,910					6,666
EARNINGS PER SHARE OF
COMMON STOCK:
Basic			$	0.37				$	0.35				$	1.04				$	1.01
Diluted			$	0.35				$	0.34				$	1.00				$	1.00

FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
			Nine Months Ended
			March 31,
			2011					2010
OPERATING ACTIVITIES:
Net income		$	6,929				$	6,663
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation			2,028					2,261
Deferred income taxes			(809	)				(1,009	)
Stock-based compensation expense			844					681
Provision for losses on accounts receivable			890					789
Gain on disposition of capital assets			(108	)				(15	)
Changes in operating assets and liabilities			(3,755	)				9,865
Net cash provided by operating activities			6,019					19,235
INVESTING ACTIVITIES:
Net purchases of investments			(230	)				(283	)
Proceeds from sale of capital assets			143					20
Capital expenditures			(991	)				(1,175	)
Net cash used in investing activities			(1,078	)				(1,438	)
FINANCING ACTIVITIES:
Net repayment of borrowings			–					(10,000	)
Dividends paid			(1,336	)				(988	)
Proceeds from issuance of common stock			318					292
Net cash used in financing activities			(1,018	)				(10,696	)
Increase in cash			3,923					7,101
Cash at beginning of period			8,278					1,714
Cash at end of period		$	12,201				$	8,815

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