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DUBUQUE, Iowa--(BUSINESS WIRE)--Aug. 19, 2024-- Flexsteel Industries, Inc. (NASDAQ: FLXS) (“Flexsteel” or the “Company”), one of the largest manufacturers, importers, and marketers of residential furniture products in the United States, today reported fourth quarter and full-year fiscal 2024 results.

Key Results for the Fourth Quarter and Fiscal Year Ended June 30, 2024

• Net sales for the quarter increased 4.7% to $110.8 million compared to $105.8 million in the prior year quarter. For the year, net sales increased 4.8% to $412.8 million compared to $393.7 million in the prior year.
• Robust sales orders of $108.5 million for the fourth quarter representing growth of $15.8 million, or 17.1%, compared to the prior year quarter.
• Gross margin increased to 21.3% for the fourth quarter and 21.1% for the year compared to 20.0% in the prior year quarter and 18.0% for the prior year.
• GAAP operating income of $7.6 million or 6.9% of net sales for the fourth quarter and $17.1 million or 4.1% of net sales for the year compared to $4.2 million or 4.0% of net sales in the prior year quarter and $10.5 million or 2.7% of net sales for the prior year.
  • Adjusted operating income of $6.2 million or 5.6% of net sales for the fourth quarter and $18.3 million or 4.4% of net sales for the year compared to $4.2 million or 4.0% of net sales in the prior year quarter and $8.1 million or 2.1% of net sales for the prior year.
• GAAP net income per diluted share of $0.89 for the current quarter and $1.91 for the year compared to net income per diluted share of $1.91 for the prior year quarter and net income per diluted share of $2.74 for the prior year.
  • Adjusted net income per diluted share of $0.75 for the quarter and $2.11 for the year compared to adjusted net income per diluted share of $0.36 for the prior year quarter and $0.87 for the prior year.
• Cash flow from operations in the fourth quarter of $7.5 million and $31.9 million for the year.
• Debt repayments of $23.5 million for the year, or an 83% reduction in borrowings under the line of credit.

GAAP to non-GAAP reconciliations follow the financial statements in this press release

Management Commentary

“I am extremely pleased with our fourth quarter results,” said Derek Schmidt, President & Chief Executive Officer of Flexsteel Industries, Inc. “Despite continued challenging conditions for our industry, we are executing well and delivered 4.7% sales growth in the quarter which represents our third consecutive quarter of mid- to high-single digit year-over-year growth. Our strategies to gain share in our core markets and pursue new growth in expanded markets are working due to our investments in innovation, new product development, customer experience and marketing.”

Mr. Schmidt continues, “At the same time, we continue to improve our profitability and achieved a third consecutive quarter of sequential quarter-over-quarter adjusted operating margin improvement. Adjusted operating margin was 5.6% in the quarter, up compared to 4.0% in the prior year quarter. The keys to our consistent profit improvement have been our sales growth, strong operational execution, cost savings and product portfolio management, all of which have strong momentum and will continue to be catalysts for continued margin expansion. The organization also continues to manage working capital and cash effectively, generating $7.5 million in operating cash flow and reducing debt by $9.4 million in the quarter.”

Mr. Schmidt concludes, “I’m very encouraged by these fourth quarter results and excited about the direction we are headed. In a period where many industry participants continue to realize meaningful year-over-year declines in both sales and profits, Flexsteel is financially strong, growing sales, improving profitability, generating cash, and aggressively investing for the future. While we expect industry headwinds will likely remain during our fiscal year 2025, our team is hyper-focused on continuing our sales growth and profit improvement momentum despite these challenges. I remain confident in our team and its ability to continue creating significant value for our customers and shareholders in both the near and long-term."

Operating Results for the Fourth Quarter Ended June 30, 2024

Net sales were $110.8 million for the fourth quarter compared to net sales of $105.8 million in the prior year quarter, an increase of $5.0 million, or 4.7%. The increase was driven by higher sales of home furnishings products sold through retail stores of $6.7 million, or 7.3%, led by unit volume and product mix. Sales of products sold through e-commerce channels decreased by ($1.7) million, or (11.7%), compared to the fourth quarter of the prior year. Lower sales in the e-commerce channel were driven by softer consumer demand.

Gross margin for the quarter ended June 30, 2024, was 21.3%, compared to 20.0% for the prior-year quarter, an increase of 130 basis points (“bps”). The 130-bps increase was primarily due to fixed cost leverage on higher sales, supply chain cost savings and efficiency improvements, and product portfolio management partially offset by higher ocean freight costs.

Selling, general and administrative (SG&A) expense was 17.0% of net sales for the quarter ended June 30, 2024, compared to 16.0% in the prior year quarter. The current quarter includes non-recurring stock-based compensation expense of $1.5 million or 1.4% of net sales, related to the re-valuation of previously awarded equity grants to Flexsteel's former CEO, Jerry Dittmer. The number of stock grants previously awarded to Mr. Dittmer under the Company's long-term incentive plans were reduced based on a time proration of his employment from grant date through his retirement date with the Company. In accordance with US generally accepted accounting principles, the modified awards were revalued at the stock price at the time of modification, resulting in the $1.5 million non-cash expense.

In the quarter, the Company completed the sale of its former Starkville, Mississippi manufacturing facility resulting in a gain of $3.3 million.

Operating income for the quarter ended June 30, 2024, was $7.6 million compared to $4.2 million in the prior-year quarter. On an adjusted basis, operating income for the quarter ended June 30, 2024, was $6.2 million compared to $4.2 million in the prior year quarter.

Income tax expense was $2.5 million, or an effective rate of 33.9%, during the fourth quarter compared to tax benefit of ($6.4) million, or an effective rate of (167.5%), in the prior year quarter. The prior year effective tax rate was impacted by the reversal of a full valuation allowance on deferred tax assets.

Net income was $4.9 million, or $0.89 per diluted share, for the quarter ended June 30, 2024, compared to net income of $10.2 million, or $1.91 per diluted share, in the prior year quarter. On an adjusted basis, net income for the quarter ended June 30, 2024, was $4.1 million or $0.75 per diluted share compared to adjusted net income of $1.9 million or $0.36 per diluted share in the prior year quarter.

Manufacturing Network Optimization Update

During the quarter, the Company incurred $0.4 million of restructuring expense primarily related to the transfer of inventory and equipment to other facilities and a loss on sale of equipment as part of the Company’s previously announced closure of our Dublin, GA manufacturing facility. Total expense incurred in fiscal year 2024 related to the restructuring was $3.0 million. The facility closure was completed during the fourth quarter and the Company does not expect to incur any further expense related to the restructuring plan.

Liquidity

The Company ended the quarter with a cash balance of $4.8 million, working capital (current assets less current liabilities) of $95.0 million, and availability of approximately $55.2 million under its secured line of credit.

Capital expenditures for the year ended June 30, 2024, were $4.8 million.

Financial Outlook

Conference Call and Webcast

The Company will host a conference call and audio webcast with analysts and investors on Tuesday, August 20, 2024, at 8:00 a.m. Central Time to discuss the results and answer questions.

• Live conference call: 833-816-1123 (domestic) or 412-317-0710 (international)
• Conference call replay available through August 27, 2024: 877-344-7529 (domestic) or 412-317-0088 (international)
• Replay access code: 5385251
• Live and archived webcast: ir.flexsteel.com

To pre-register for the earnings conference call and avoid the need to wait for a live operator, investors can visit https://dpregister.com/sreg/10191523/fd3a88a6b7 and enter their contact information. Investors will then be issued a personalized phone number and pin to dial into the live conference call.

About Flexsteel

Flexsteel Industries, Inc., and Subsidiaries (the “Company”) is one of the largest manufacturers, importers, and marketers of residential furniture products in the United States. Product offerings include a wide variety of furniture such as sofas, loveseats, chairs, reclining rocking chairs, swivel rockers, sofa beds, convertible bedding units, occasional tables, desks, dining tables and chairs, kitchen storage, bedroom furniture, and outdoor 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 e-commerce channel and direct sales force.

Forward-Looking Statements

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, restructurings, the effectiveness of new product introductions and distribution channels, the product mix of sales, pricing pressures, the cost of raw materials and fuel, changes in foreign currency values, 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, disruptions or security breaches to business information systems, the impact of any future 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 website at http://www.flexsteel.com.

NON-GAAP DISCLOSURE (UNAUDITED)

The Company is providing information regarding adjusted operating income, adjusted operating margin, adjusted net income, 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 operating income, net income, or diluted earnings per share of common stock as a measure of operating performance. A reconciliation of adjusted operating income, adjusted net income, and adjusted diluted earnings per share of common stock is provided below. Management believes the use of these non-GAAP financial measures provides 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 operating income to adjusted operating income and GAAP operating margin to adjusted operating margin:

The following table sets forth the reconciliation of the Company’s reported GAAP operating income to the calculation of adjusted operating income for the three and twelve months ended June 30, 2024 and 2023:

Reconciliation of GAAP net income to adjusted net income:

The following table sets forth the reconciliation of the Company’s reported GAAP net income to the calculation of adjusted net income for the three and twelve months ended June 30, 2024 and 2023:

Reconciliation of GAAP diluted earnings per share of common stock to adjusted diluted earnings per share of common stock:

The following table sets forth the reconciliation of the Company’s reported GAAP diluted earnings per share to the calculation of adjusted diluted earnings per share for the three and twelve months ended June 30, 2024 and 2023:

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INVESTOR CONTACT:
Michael Ressler, Flexsteel Industries, Inc.
563-585-8116
investors@flexsteel.com

Source: Flexsteel Industries, Inc.