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Sales, earnings decline at Flexsteel

But residential furniture sales rise slightly

Gary Evans -- Furniture Today, April 22, 2008

DUBUQUE, Iowa — Upholstery manufacturer Flexsteel Inds. closed its fiscal third quarter with a slight gain in residential furniture sales, but reported that overall sales — which includes recreational vehicle and commercial furniture — were down 5.7%.

Residential furniture sales for the quarter ended March 31 were $60.9 million up 2.5% from the same period last year. For the nine months, residential furniture sales were up 1.6% from a year earlier to $191.1 million.

Total sales, however, declined 5.7% in the third quarter to $98.1 million because of weakness in the company’s recreational vehicle and commercial seating businesses.

Net income for the current quarter was $849,531 or 13 cents per share, down 44.2% from $1.5 million or 23 cents per share a year ago. The 2007 quarter included an after-tax gain of $300,000 or 4 cents per share from the sale of land.

Sales for the nine months were $305 million compared to $311 million in the prior nine month period, a 2% decrease. Net income for the year to date was $3.9 million or 59 cents per share compared to $3.5 million or 53 cents per share for the prior nine months, which included the land sale.

Flexsteel said its recreational vehicle sales for the quarter were down 20.6% to $14 million and commercial sales were down 14% to $23.2 million. For the nine months, RV sales were down 8% to $44.5 million and commercial sales decreased 6.9% to $69.3 million.

The company said the gross margin for the quarter was 18.4% compared to 19.7% a year ago, primarily due to $1.3 million related to increases in raw material costs, fuel related transportation costs and under absorption on the lower sales volume in the current quarter. For the nine months, the gross margin was 19.6% compared to 18.9% for the 2007 nine months period.

Flexsteel management said that because of the uncertain U.S. economy, troubled by higher prices for food and fuel and declining consumer confidence, the company expects to post lower shipments in its fourth fiscal quarter.

“We expect that this reduced demand for residential and recreational vehicle products will continue through the balance of calendar year 2008,” the company said. Officials said they will continue to explore allocation of capital resources and cost controls, and believe they have inventories and marketing strategies in place to take advantage of opportunities to gain market share.

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