Flexsteel: Record Fiscal Year Sales, Net Income
Flexsteel Industries Inc. reported record net sales and net income for the fiscal year ended June 30, 2014.
Net sales were $439 million for the fiscal year ended June 30, 2014, a 14% increase from the prior fiscal year. Net income was $15.0 million or $2.00 per share for the fiscal year compared to $13.2 million or $1.80 per share for the prior fiscal year. Adjusted net income for the current fiscal year increased 27% to $18.5 million or $2.46 per share compared to $14.6 million or $2.00 per share in the prior fiscal year, the company said in its written earnings announcement.
Net sales for the quarter were $111 million, a 9% increase over the $102 million reported in the prior year quarter. For the quarter, the company reported net income of $5.6 million or $0.74 per share compared to $4.2 million or $0.57 per share for the prior-year quarter. Adjusted net income for the quarter was $5.3 million or $0.70 per share compared to $4.6 million or $0.63 per share in the prior year quarter.
The increase in net sales for the quarter and fiscal year resulted from capturing demand for upholstered and ready-to-assemble products.
Gross margin for the fiscal year was 22.9% of net sales compared to 23.4% of net sales in the prior year. Gross margin for the quarters ended June 30, 2014 and 2013 was 23.0% and 23.3%, respectively. The current fiscal year and quarter were impacted by $4.1 million or 1.0% of net sales and $1.7 million or 1.5% of net sales, respectively, due to lower margins on case goods as it adjusts its product portfolio to respond to changing customer requirements.
Selling, general and administrative (SG&A) expense for the fiscal year 2014 and 2013 was 16.4% and 18.2% of net sales, respectively. The current fiscal year includes a $0.9 million (0.2%) increase in supplemental retirement plan expense and Indiana civil litigation defense costs of $2.1 million (0.5%) offset by $2.8 million (0.6%) in reimbursements from insurance carriers. SG&A expense for fiscal year 2013 includes Indiana civil litigation defense costs of $2.3 million (0.6%) and executive transition costs of $1.5 million (0.4%). Excluding these costs, SG&A expense decreased from 17.2% of net sales in the prior fiscal year to 16.3% of net sales in the current year, reflecting fixed cost leverage on higher sales volume.
Due to existing strong order backlog and positive order trends the company expects top line growth will continue into fiscal year 2015. Residential growth is expected from existing customers and products, and through expanding the product portfolio and customer base. The company believes this growth will be led by increased demand for upholstered and ready-to-assemble products. The company anticipates sales of commercial products to remain at current levels for fiscal year 2015.
The company has started two multi-year initiatives designed to enhance customer experience and increase shareholder value. In anticipation of future growth it is implementing a logistics strategy, and is assessing its business information system requirements. Consistent with the logistics strategy and subject to closing, the company will be investing $35-$40 million to purchase and equip a Midwest distribution center. Flexsteel is still in the preliminary stages of the business information system assessment. The timing and level of additional investment required for these initiatives will be evaluated as the projects progress.
Flexsteel 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.