The following excerpt is from the company's SEC filing.
20201231 Press Release Exhibit 99.1
Flexsteel Industries, Inc. Reports Fiscal
Quarter 2021 Results
Dubuque, Iowa –
– Flexsteel Industries, Inc. (NASDAQ:FLXS)
(“Flexsteel” or the “Company”), one of the largest manufacturers, importers and online marketers of furniture products in the United States,
2021 financial results.
Highlights for the
Net sales increased
% to $1
millio n compared to $10
million in the prior year quarter
, excluding discontinued Vehicle Seating and Hospitality product lines,
retail home furnishings
backlog of $
December 31, 2020
, driven by strong year-over-year order growth of 49% in the second quarter
Gross margin increased to 2
% compared to
% in the prior year quarter
GAAP net income per diluted
share of $
net loss of
share of $0.
in the prior year quarter
Share repurchases of $
.0 million during the quarter
GAAP to non-GAAP reconciliations follow the financial statements in this press release.
“Despite ongoing challenges from COVID-19, we
well and delivered on strong demand for home furnishing products during our second quarter as we reported sales growth of 16% and organic sales growth of 26% compared to the prior year quarter, with growth in virtually all product categories,” said Jerry Dittmer, President and CEO of Flexsteel Industries.
“We enter the third quarter with strong sales momentum and a record high backlog. Global supply chain disruptions remain a significant near-term challenge due to constrained ocean container availability and material and labor shortages, but we are investing aggressively to expand our supply chain capabilities and inventories to best support our customers and the robust consumer demand for furniture. We recently signed a new building lease in Juarez, Mexico for an additional manufacturing plant which will add incremental manufacturing capacity in late third quarter. I remain confident in our ability to profitably grow the company in 2021 while accelerating strategic investments to drive long-term profitable growth and improve our customers’ experience.”
Operating Results for the
Net sales were $1
million for the first quarter compared to net sales of $10
million in the prior year quarter, an increase of
%. The increase was driven by home furnishing products sold through retail stores of $
.8%, versus the prior year quarter and an increase in homestyles
products sold through e-commerce channels of $
%, versus the prior year quarter. The increases in retail and e-commerce channels were partially offset by a decline of $
the prior year quarter, due to the Company’s exit of the Vehicle Seating and Hospitality product lines during the fourth quarter of fiscal 2020.
The Company reported net
income of $
million or $
share for the quarter ended
, 2020, compared to net
per diluted share in the prior year quarter. The reported net income
for the quarter ended December 31, 2020,
$1.3 million pre-tax bad debt expense due to the bankruptcy of a customer,
million pre-tax restructuring expense primarily for facility closures as part of the previously announced comprehensive transformation program,
a pre-tax gain of $
million due to the sale of the Company’s
Dubuque, Iowa and Lancaster, Pennsylvania
facilities. Excluding these
items (see attached non-GAAP disclosure), the Company reported adjusted net income of $
million, or $0.
per diluted share, as compared to adjusted net
quarter of fiscal year 2020.
Gross margin as a percent of net sales increased 4
0 basis points to 2
% compared to 1
% for the prior year
490 basis points
increase in gross margin was primarily due to structural cost reductions, operational efficiencies
fixed cost leverage due to higher sales volume as compared to the prior year quarter
, and a decline the Company’s inventory reserve due to strong demand, which resulted in sales of previously reserved products
Selling, general and administrative (SG&A) expenses
million as compared to $1
quarter of fiscal 2020.
As a percentage of net sales, SG&A was 1
quarter of fiscal 2021 compared to 17.
% of net sales in the prior year quarter.
SG&A expenses in the current year quarter included a $1.3 million bad debt expense due to
customer bankruptcy. The
cost leverage gained from higher sales, reductions in non-essential spending in response to COVID-19, and lower depreciation expense due to assets being held for sale, partially offset by a 110 bps increase related to a $1.3 million bad debt expense due to a customer bankruptcy during the quarter ended December 31, 2020.
The Company reported tax expense
million, or an effective rate of
quarter compared to a $
, or an effective rate of 2
Restructuring and COVID-19 Update
During the quarter, the Company incurred $
million of restructuring expense primarily due to
on-going facility and transition costs as part of the Company’s previously announced comprehensive transformation program. The Company expects to incur a total of approximately $2.5
million in restructuring expenses during fiscal 2021.
During the quarter, the Company completed the sale of
its facilities located in Dubuque, Iowa, and Lancaster, Pennsylvania, resulting in total net proceeds of $15.7 million and a total gain of $5.2 million.
continued to see
improvement in business conditions
during the second quarter
as retailers have reopened, however, there are
supply chain challenges faced by the furniture industry due to labor shortages in Asia, limited availability of ocean containers, and inflationary pressures in key materials. Due to the uncertainties around COVID-19, the Company continues to evaluate the impact of COVID-19 and will take necessary actions to reduce spend and preserve cash.
The Company ended the quarter with a cash
balance of $3
million and working capital (current assets less current liabilities) of $12
million, and no
outstanding balance on its $25.0 million secured line of credit.
Capital expenditures for the
, 2020 were $0.
million. For the full fiscal year 2021, capital expenditures are estimated to be in the range of $
.0 million to $
Conference Call and Webcast
The Company will host a conference call and webcast at 8:00 a.m. Central Time (9:00 a.m. Eastern Time) on Tuesday,
, to discuss its quarterly financial results. Analysts and investors may participate in the question-and-answer session. The call can be accessed via telephone at 866-777-2509 (domestic) or 412-317-5413 (international) and requesting to be connected with the Flexsteel conference call. Additionally, interested parties can listen to a live webcast of the call in the Investor Relations section of the Company’s website at
. An archived version of the webcast will be available in the same location shortly after the live call has ended. The
quarter fiscal 2021 press release will be available at
after the market close on
Flexsteel is enabling investors to pre-register for the earnings conference call so that they can expedite their entry into the call and avoid the need to wait for a live operator. In order to pre-register for the call,
investors can visit
and enter their contact information. Investors will then be issued a personalized phone number and
pin to dial into the live conference call. Individuals can pre-register any time prior to the start of the conference call.
A recorded replay can be accessed through
by dialing 877-344-7529 (domestic) or 412-317-0088 (international); Replay access code: 101
Flexsteel Industries, Inc. and Subsidiaries (the “Company”) is one of the largest manufacturers, importers and online marketers of furniture products in the United States. Product offerings include a wide variety of upholstered furniture such as sofas, loveseats, chairs, reclining and rocker-reclining chairs, swivel rockers, sofa beds, convertible bedding units, occasional tables, desks, dining tables and chairs and bedroom furniture. A featured component in most of the upholstered furniture is a unique steel drop-in seat spring from which the name “Flexsteel” is derived. The Company distributes its products throughout the United States through its ecommerce channel and direct sales force.
Statements, 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 herein. 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, supply chain disruptions, litigation, the effectiveness of new product introductions and distribution channels, the product mix of sales, pricing pressures, the cost of raw materials and fuel, retention and recruitment of key employees, actions by governments including laws, regulations, taxes and tariffs, the amount of sales generated and the profit margins thereon, competition (both U.S. and foreign), credit exposure with customers, participation in multi-employer pension plans, the impact of the COVID-19 pandemic and general economic conditions. For further information regarding these risks and uncertainties, see the “Risk Factors” section in Item 1A of our most recent Annual Report on Form 10-K.
For more information, visit our web site at
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
BALANCE SHEETS (UNAUDITED)
Cash and cash equivalents
Trade receivables, net
Assets held for sale
Total current assets
Property, plant and equipment, net
Operating lease right-of-use assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable - trade
Total current liabilities
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share data)
Three Months Ended
Six Months Ended
Cost of goods sold
Gain on disposal of assets due to restructuring
Operating income (loss)
Income (loss) before income taxes
Income tax provision (benefit)
Net income (loss)
Weighted average number of common shares outstanding:
Earnings (loss) per share of common stock:
DATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Deferred income taxes
Stock-based compensation expense
Change in provision for losses on accounts receivable
Change in reserve for VAT receivable
Gain on disposition of capital assets
Changes in operating assets and liabilities
Net cash (used in) provided by operating activities
Net proceeds from sales of investments
Proceeds from sale of capital assets
Net cash provided by investing activities
Treasury stock purchases
Proceeds from issuance of common stock
Shares withheld for tax payments on vested restricted shares
Net cash used in financing activities
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
NON-GAAP DISCLOSURE (Unaudited)
The Company is providing information regarding adjusted
net sales, adjusted
and adjusted diluted earnings
per share of common stock, which are not recognized terms under U.S. Generally Accepted Accounting Principles (“GAAP”) and do not purport to be alternatives to
or diluted earnings
per share of common stock as a measure of operating performance. A reconciliation of
adjusted net sales,
per share of common stock is provided below. Management believes the use of these non-GAAP financial measures provide investors useful information to analyze and compare performance across periods excluding the items which are considered by management to be extraordinary or one-time in nature. Because not all companies use identical calculations, these presentations may not be comparable to other similarly titled measures of other companies.
Reconciliation of GAAP net sales to non-GAAP adjusted net sales
The following table sets for
the reconciliation of the Company’s reported GAAP net sales to the calculation of non-GAAP adjusted net sales for the three
Reported GAAP Net sales
Less: discontinued product lines
Non-GAAP Net sales
Represents the exit of the Company’s Vehicle Seating and Hospitality product lines.
The following table sets forth the reconciliation of the Company’s reported GAAP net income
to the calculation of non-GAAP adjusted net income
Reported GAAP net income (loss)
Bad debt expense
Inventory impairment related to restructuring
Tax impact of above adjustments
Remeasurement of deferred tax assets and valuation allowance
Non-GAAP net income (loss)
used to calculate the three months ended
Effective tax of 31.3% and 28.1% used to calculate the six months ended December 31, 2020 and December 31, 2019, respectively.
per share of common stock to non-GAAP adjusted
Reported GAAP diluted earnings (loss) per share
Non-GAAP diluted earnings (loss) per share
% used to calculate the three months ended
Derek Schmidt, Flexsteel Industries, Inc.
The above information was disclosed in a filing to the SEC. To see the filing, click here.
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