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Flexsteel Industries Inc. Message Board

  • red_wombat80 red_wombat80 Feb 27, 2005 8:26 AM Flag

    so... back to FLXS

    While the Mikey soap opera is all very entertaining, I had actually visited here to see if anyone had thoughts on the stock price drop during the last 30 days and the outlook for margin recovery.

    I'm not an expert, but shile steel prices are not soaring as much as earlier in the year, they don't appear to be weakening either. Ditto for petroleum. Therefore if FLXS is going to regain breathing room in their margins they are going to have to increase prices or reduce costs through productivity gains or changes in the materials used. Does anyone have any insight as to whether FLXS's competitors have already increased prices to recover the increased raw materials costs? What about the likelihood of changing the materials used? Is that pretty unrealistic.

    Any advise on on cost drivers or other indicators of the Flexsteel's future health? Perhaps recent sales for certain retailers, or manufacturer's of recreational vehicles? To be honest, I'm not sure who their customer's are. Winnebago's profits were up on strong shipments. Thor posted stronger than expected sales recently, and sales in the 4th quarter were up 9% over at Coachmen. I would think that this bodes well for sales to the RV industry unless FLXS is losing significant market share.

    Other thoughts? ... on FLXS, not on "As the Mikey Turns"

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    • boxcarrs: From my point of view FLXS has a very good balance sheet. It is not as conservative as it was before they bought the other furniture company (more debt). They have no goodwill and no other intangibles and there have been very few, and no large extra-ordinary items. I think their accounting is very good and conservative.

      You are correct to be cynical about managements. I don't care too much for FLXS's employee stock options, but they are not as outlandish as most.

    • Not at all. I understand the basics of balance sheets, but I am a cynic and believe that management makes things look the way they want it to look. I should have said that I don't understand the games that can be played to hide good or bad performance. The thing I look at most is the ratio of assets to debt. From everything I can tell, FLXS is in good shape. Let me know if there are any timebombs in there.

    • Boxcarrs: I have an accounting background but do not consider myself the stereotypical beancounter. Your past posts sound like you are an adult, serious investor who is not a day trader. That makes you a rare commodity for these boards.

      After many years of ups and downs in the stock market, I decided to try to invest in successful companies run by people who wouldn't try to skin their stockholders.

      To me, the most important financial statement for determining those things is the balance sheet. If you click on the BALANCE SHEET caption at the lower left margin of the Yahoo quote page the screen will then show comparative balance sheets for that company.

      Next, look at the bottom of the statement at the stockholder equity section: (in millions)
      Common stock $6,494
      Retained earnings 92,552
      Capital surplus 2,111
      Other 454
      Total $101,602

      What this means is that of Flexsteel's total accounting stockholders equity of $101,602,000,
      about $9,000,000 was put into the company and the other $92,500,000 was the result of profits retained in the business. This does not include any of the millions of dollars in dividends paid out to sharehlders over the years. In my mind, this is the sign of a successful company. You start with nine million, pay many millions in dividends and still end up with stockholders equity of $101,000,000.

      There can be many major adjustments to stockholders equity that would distort the stockholders equity section of a balance sheet if you didn't do further research, such as stock buybacks, stock dividends etc.

      In addition, it doesn't say anything about the future and changes in the economy, management changes, imports from China etc.

      If you are interested, you could look at the balance sheets of some of the good companies I have had success with. They are FLXS, IAL, NPK, ITIC, SCX, RYAN, and BRKA.

      Then just for fun you could look at the stockholders equity section of the balance sheets of JDSU, TWX, CVC, CHTR, CKR, NTN, MYR etc. (Retained deficits-losses)

      I should point out that I am not recommending any of these stocks now, because I think prices are to high and in some cases the world may have changed. However I did use this method to find good stocks during the internet boom years. I owned most of the good stocks during the boom years and they didn't do anything. They did save me from losing any money on dot com stocks. When the internet insanity ended, these stocks all did very well and so did I.

      I hope this is of some interest to you even if it is long winded or if you don't understand it all. I feel like I need to vent a little. I have lost my great penpal (you know who).

    • Not really well, but yes.

    • red wombat80: I think FLXS, the company, is probably doing okay in a tough situation. You mentioned materials prices and competition. I don't have any special insight into those concerns.

      As compared to the company, the stock is not doing very well. It gets no coverage in the media or from analysts and pundits. It is not high profile and is not a growth company. There is very little trading.

      In the current market environment these things will probably not help the stock. I expect the credit market to tighten and interest rates to go up over the next eighteen months to two years. If that happens small cap value stocks will probably not do well.

      I currently do not own any FLXS, but I consider it to be a good company with reasonable management and honest accounting.
      If the stock should drop to $10-$12 in the next two years, I would consider being a big buyer depending on the company's position at the time.

      Best regards to all people interested in FLXS.

      • 3 Replies to pmlljl
      • I personally don't see any chance of this dropping to the 10-12 range. Insiders sold last summer in advance of the acquisition and I believe future reports will show they are accumulating now.

      • Flexsteel has some flexibility (pun intended) in the pricing, except when it comes to vehicles. Since the sticker price of a vehicle is usually fixed for a year, so is Flexsteel's price. But it's a competitive environment, so there is a limit to what they can do pricewise. The real question about Flexsteel is their 'blended' strategy. Can they make it work in the face of really cheap imports from China, Mexico and elsewhere? So far they are making a profit, and DMI's furniture is primarily from China. But it ain't cheap to make stuff in the USA, and until Flexsteel bites the bullet and really pushes outsourcing, it's a really open question.


      • Thanks for you input. I think I'll stick with a modest investment in FLXS... may invest more or bail once I have time to study the industry dynamics a little more.

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