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Flexsteel Announces Level Earnings On Lower Sales

Flexsteel Industries, Inc. (NASDAQ:FLXS) today reported net income for its first fiscal quarter ended September 30, 2011 of $2.4 million or $0.34 per share compared to a net income of $2.3 million or $0.34 per share in the prior year quarter. The prior year quarter included a pre-tax charge of approximately $1.0 million for facility closing costs.

The Company reported net sales for the quarter ended September 30, 2011 of $81.5 million compared to the prior year quarter of $87.2 million, a decrease of 6.5%. Net sales for the quarter ended September 30, 2010 benefited from a longer than normal lag time on orders received in the spring of 2010, but not shipped to dealers until the quarter ended September 30, 2010. New orders received during the quarter ended September 30, 2011 were approximately 8.4% higher than the prior year period. Residential net sales were $62.5 million in the current quarter, a decrease of 4.1% from the prior year quarter residential net sales of $65.2 million. Commercial net sales were $19.0 million compared to $22.0 million in the prior year quarter, a decrease of 13.7%.

Gross margin for the quarter ended September 30, 2011 was $19.0 million or 23.3% of net sales compared to $19.6 million or 22.5% of net sales in the prior year quarter. The improvement in gross margin percentage is primarily due to lower ocean freight costs and lower fixed costs resulting from reductions in manufacturing capacity.

Selling, general and administrative expenses were $15.3 million or 18.8% of net sales and $14.9 million or 17.1% of net sales for the quarters ended September 30, 2011 and 2010, respectively. The increase in expenses is primarily due to support expenditures related to residential dealers converting or installing the Company’s revised gallery format and higher legal and professional fees.

Working capital (current assets less current liabilities) at September 30, 2011 was $102.7 million. Net cash used in operating activities was $3.0 million during the first quarter ended September 30, 2011. This use of cash was primarily related to increases in inventories of $4.7 million and receivables of $0.7 million.

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