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Flexsteel sales up 9.8%, net income slips 8.2%

By Furniture Today Staff -- Furniture Today, November 23, 2003

Dubuque, Iowa — Upholstery maker Flexsteel Inds. posted sales of $76.9 million in its first quarter ended Sept. 30, up 9.8% from the previous year, with net income slipping 8.2% to $1.9 million from last year's $2 million.

In the prior year's quarter, the company recorded a $200,000 after-tax gain on the sale of land. Excluding that sale, Flexsteel said net income in last year's quarter was $1.8 million.

Flexsteel completed its acquisition of DMI Furniture on Sept. 18, and DMI's operating results for Sept. 18 through Sept. 30 are reflected in the latest figures.

DMI's common shareholders were paid $16.7 million in cash for their shares, Flexsteel said. Acquisition costs were $2.8 million, and Flexsteel said it assumed liabilities of $35 million, including $25.5 million in long-term debt.

During the latest quarter, residential furniture sales were $49.4 million, including $1.7 million from DMI; recreational vehicle seating sales were $20.4 million; and commercial sales were $7.1 million, including $1.4 million from DMI. Those were increases of 7.4%, 3.4% and 65.7%, respectively, from the prior year.

Gross margin for the quarter was 21.9%, compared to 21.8% in the year-earlier period.

In a conference call, President Bruce Lauritsen said sales began picking up in mid-August but went flat in mid-September and stayed that way until the October High Point market. The company had a "very good market" with a 5% increase in attendance, and since then "order entry has been very robust," he said.

"Retail appears to be on an upward trend," Lauritsen said.

Flexsteel has subleased its last two Comfort Seating stores and is out of the retail business, he said, but is continuing its thrust into in-store galleries and now has 372 galleries, with 40 signed contracts on the way to a goal of 500. Christopher Lowell galleries, with upholstery by Flexsteel, now number 154, with 15 contracts in progress, nearing its goal of at least 180.

The DMI purchase will help by allowing Flexsteel to add wood furniture to its lineup, Lauritsen said. DMI "has a superior sourcing team" in the Asian market, he said, and gives the company opportunities in new areas.

Flexsteel Inds.(a)
Earnings per share are fully diluted, and all figures in parentheses are loses or declines.
Quarter ended 9/3020032002Change
(a) Includes the results of DMI Furniture from its Sept. 18, 2003 acquisition. (b) Includes a $403,065 pretax gain on the sale of land.
Sales	$76,857,039	$70,019,376	9.8%
Operating income	2,892,118	2,615,244	10.6%
Net income	1,864,916	(b)2,030,860	(8.2%)
Earnings per share	0.29	0.32	(9.4%)

Keller Mfg.
Earnings per share are fully diluted, and all figures in parentheses are loses or declines.
Quarter ended 9/3020032002Change
(a) Includes pretax charges for impairment of fixed assets of $2.9 million in both periods and pretax losses on the disposal of fixed assets of $391,684 in the 2003 quarter and $420,833 in the 2003 nine months. The 2003 nine months also includes a $155,880 income tax benefit. (b) Includes income tax benefits of $372,024 in the 2002 quarter and $1.2 million in the 2002 nine months.
Sales	$5,014,462	$8,302,862	(39.6%)
Operating income	(2,618,592)	(1,273,361)	—
Net income	(a)(5,928,632)	(b)(855,245)	—
Earnings per share	(1.15)	(0.16)	—
9 months ended 9/30	2003	2002	Change
Sales	$17,697,230	$27,845,113	(36.4%)
Operating income	(4,804,976)	(3,363,208)	—
Net income	(a)(8,126,953)	(b)(1,998,241)	—
Earnings per share	(1.55)	(0.37)	—

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