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FLXS > SEC Filings for FLXS > Form 10-Q on 19-Oct-2012All Recent SEC Filings




Quarterly Report

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations


The following analysis of the results of operations and financial condition of the Company should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this quarterly report on Form 10-Q.


There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", included in our 2012 annual report on Form 10-K.


The following table has been prepared as an aid in understanding the Company's
results of operations on a comparative basis for the three months ended
September 30, 2012 and 2011. Amounts presented are percentages of the Company's
net sales.

                                                    Three Months Ended
                                                      September 30,
                                                     2012         2011
            Net sales                                  100.0 %     100.0 %
            Cost of goods sold                         (76.9 )     (76.7 )
            Gross margin                                23.1        23.3
            Selling, general and administrative        (18.3 )     (18.8 )
            Operating income                             4.8         4.5
            Other income                                 0.2         0.1
            Income before income taxes                   5.0         4.6
            Income tax expense                          (1.8 )      (1.7 )
            Net income                                   3.2 %       2.9 %

The following table compares net sales in total and by area of application for the quarter ended September 30, 2012 to the prior year quarter.

                            Net Sales (in thousands)
                          Quarter Ended September 30,          $ Change
  Area of Application        2012              2011         (in thousands)     % Change
  Residential           $       72,330    $       62,522   $          9,808         15.7 %
  Commercial                    18,907            18,998                (91 )       (0.5 )%
  Total                 $       91,237    $       81,520   $          9,717         11.9 %

Results of Operations for the Quarter Ended September 30, 2012 vs. 2011

Net sales for the quarter ended September 30, 2012 were $91.2 million, an 11.9% increase compared to $81.5 million in the prior year quarter. Residential net sales were $72.3 million in the current quarter, an increase of 15.7% from the prior year quarter of $62.5 million. Commercial net sales were approximately $19.0 million in the current and prior year quarters.

Gross margin for the three months ended September 30, 2012 was 23.1% compared to 23.3% in the prior year three-month period ended September 31, 2011.

Selling, general and administrative expenses were $16.7 million or 18.3% of net sales, compared to $15.3 million or 18.8% of net sales in the prior year quarter ended September 30, 2011.

Operating income for the first quarter ended September 30, 2012 was $4.4 million compared to operating income of $3.6 million.

The effective income tax expense rate for the current three-month period was 36.9% compared to an income tax expense rate of 36.7% in the prior year three-month period. The effective rates include the federal statutory rate as well as the effect of the various state taxing jurisdictions.

The above factors resulted in net income for the three months ended September 30, 2012 of $2.9 million or $0.40 per share compared to $2.4 million or $0.34 per share for the prior year quarter.

All earnings per share amounts are on a diluted basis.

Liquidity and Capital Resources

Working capital (current assets less current liabilities) at September 30, 2012 was $102.8 million compared to $103.7 million at June 30, 2012. Changes in working capital from June 30, 2012 to September 30, 2012 include a reduction in cash of $7.4 million offset by increases in inventory of $2.9 million and accounts receivable of $2.2 million, and a reduction in current liabilities of $0.9 million. The higher inventory levels are to support the increases in residential sales volume and expanded product offerings. The accounts receivable increase is primarily due to the timing of collections.

The Company's main source of liquidity is cash and cash flows from operations. As of September 30, 2012 and June 30, 2012, the Company had cash totaling $6.5 million and $14.0 million, respectively. The Company has borrowing availability under a credit agreement of up to $12.5 million.

Cash decreased by $7.4 million during the first fiscal quarter of 2013 with net cash used in operating activities of $3.5 million, capital expenditures of $3.0 million and payment of dividends of $1.0 million. Net cash used in operating activities of $3.0 million during the first quarter ended September 30, 2011 was primarily related to increases in inventories of $4.7 million partially offset by changes in other operating assets and liabilities. Depreciation expense was $0.8 million and $0.7 million for the first quarters ended September 30, 2012 and 2011, respectively.

Net cash used in investing activities was $3.2 million during the three-month period ended September 30, 2012 compared to cash used in investing activities of $0.4 million for the same prior year period. Capital expenditures were $3.0 million during the quarter-ended September 30, 2012.

Net cash used in financing activities was $0.8 million for the quarter-ended September 30, 2012, primarily due to the payment of dividends of $1.0 million, compared to $0.4 million in the quarter-ended September 30, 2011.

The Company expects that capital expenditures will be approximately $3.0 million for the remainder of fiscal year 2013. Management believes that the Company has adequate cash and credit arrangements to meet its operating and capital requirements for fiscal year 2013. In the opinion of management, the Company's liquidity and credit resources provide it with the ability to react to opportunities as they arise, to pay quarterly dividends to its shareholders, and to purchase productive capital assets that enhance safety and improve operations.


The Company believes that moderate top line growth will continue through the end of calendar year 2012. Residential growth will continue with existing customers and products, and through expanding our product portfolio and customer base. The Company expects current order trends for commercial products to continue for the remainder of the calendar year. The Company is confident in its ability to take advantage of market opportunities as they present themselves. However, our optimism is guarded due to the uncertainty that the upcoming elections and economic factors have on the consumers' confidence and willingness to buy.

The Company remains committed to its core strategies, which include offering a wide range of quality products and price points to the residential and commercial markets, combined with a conservative approach to business. We will maintain our focus on a strong balance sheet and profitable growth. We believe these core strategies are in the best interest of our shareholders.

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