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Flexsteel Reports Earnings Improvement For Second Quarter And Year-To-Date Fiscal 2012

Stocks in this article: FLXS

Selling, general and administrative expenses for the quarter ended December 31, 2011 were $15.8 million or 18.6% of net sales compared to $15.5 million or 18.7% of net sales in the prior year including an increase in legal and professional fees of $0.7 million, primarily related to an Indiana civil lawsuit, and a decrease in bad debt expense of $0.7 million. Selling, general and administrative expenses for the six months ended December 31, 2011 were $31.1 million or 18.7% of net sales, including a $1.2 million increase in legal and professional fees, primarily related to the aforementioned lawsuit, and a $1.0 million decrease in bad debt expense, compared to $30.4 million or 17.9% of net sales in the prior year six-month period.

Working capital (current assets less current liabilities) at December 31, 2011 was $102.8 million. Net cash provided by operating activities was $2.0 million during the six months ended December 31, 2011. Net income of $5.3 million and increased accounts payable of $1.6 million were offset by a $5.3 million planned increase in inventory.

During the first six months of fiscal year 2012 capital expenditures were $2.7 million, including $2.1 million related to construction of a corporate office building. Depreciation expense was $1.4 million in the six-month periods ended December 31, 2011 and 2010. The Company expects that capital expenditures will be approximately $10 million for the remainder of the 2012 fiscal year including costs related to construction, furnishing and equipping the corporate office building which is expected to be completed in August 2012.

All earnings per share amounts are on a diluted basis.

Outlook

The Company believes that top line growth will be modest through the second half of fiscal year 2012. Our business continues to be adversely impacted by macroeconomic conditions such as high unemployment, limited job growth and a depressed housing market resulting in low consumer confidence levels. We expect orders for residential seating products to continue to perform slightly above prior year levels. Our commercial office business has picked up modestly as we enter the second half of the fiscal year. The Company is expecting flat order trends for our vehicle and hospitality seating products for the remainder of the fiscal year.

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