Good morning, and welcome to the Flexsteel Industries Third Quarter Fiscal Year 2021 Earnings Results Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Derek Schmidt, Chief Financial Officer and Chief Operating Officer for Flexsteel Industries.
Please go ahead.
Thank you, and welcome to Today's call to discuss Flexsteel Industries' 3rd Quarter Fiscal Year 2021 Financial Results. Our earnings release, Which we issued after market closed yesterday, Monday, April 26, is available on the Investor Relations section of our website, www.flexsteel.com under News and Events. I'm here today with Jerry Dittmer, President and Chief Executive Officer. On today's call, we will provide prepared remarks and then we will open the call to your questions. Before we begin, I'd like to remind you that the comments on today's call will include forward looking statements, which can be identified by the use of words such as estimate, anticipate, expect and similar phrases.
Forward looking statements by their nature involve estimates, projections, goals, forecasts and assumptions and are subject to risks and uncertainties that could cause actual results or to differ materially from those expressed in forward looking statements. Such risks and uncertainties include, but are not limited to, Those that are described in our most recent annual report on Form 10 ks as updated by our subsequent quarterly reports on Form 10 Q and other SEC filings as applicable. These forward looking statements speak only as of the date of this conference call and should not be relied upon as predictions of future events. Additionally, we may refer to non GAAP measures, which are intended to supplement, but not substitute for the most directly comparable GAAP measures. The press release available on the website contains the financial and other quantitative information to be discussed today as well as the reconciliation of GAAP to non GAAP measures.
And with that, I will turn the call over to Jerry Dittmer. Jerry?
Good morning, and thank you for joining us today. Despite ongoing industry challenges related to supply chain, we executed well and delivered on continued strong demand for home furnishing products during our Q3. We reported net sales growth of 20 percent to 118 point $4,000,000 in the current quarter compared to $98,800,000 in the prior year quarter and organic sales growth of 33% compared to the prior year quarter with growth in virtually all product categories. Sales results in home furnishing products sold through retail stores were especially strong with year over year growth of 34% in the quarter. We're competing very well, gaining retail placements and taking market share.
Year over year order growth for retail sales Was a phenomenal 131% in the 3rd quarter. This builds on the strong year over year order growth momentum from the 2nd quarter 49% in the Q1 of 60%. Even more encouraging, 3rd quarter orders grew 22% sequentially From an already strong order performance in the 2nd quarter. This positive momentum gained traction throughout the 3rd quarter As total company orders in March set a monthly historical record high for our home furnishings business. As a result, our backlog for retail sales finished the 3rd quarter at a record level of $140,000,000 Up 3 14% from the prior year.
I'm proud of our team's performance and remain confident in our ability to sustain this growth momentum Going forward, despite the myriad of supply chain challenges facing the industry, which I'll elaborate on later. Sales in our Home Styles product, which are sold through e commerce channels, also had strong performance with growth of 23% versus prior year. E commerce continues to be a key strategic growth area for the company, and we are investing aggressively in New digital capabilities and product innovation to expand our business in this channel. Our near term outlook for the market remains bullish. The economy is building momentum, employment conditions are improving and the recent government stimulus has infused additional consumer spending.
Based on these macroeconomic conditions and what we are hearing from customers, we expect overall consumer demand for home furniture To likely remain strong through the bulk of the calendar year 2021. In the near term, our biggest obstacle to achieving our full sales growth potential Overcoming the global supply chain challenges, which our entire industry is currently battling. The biggest supply chain impediment, Which we face right now are material availability, namely foam and the ocean container availability and transit speed. Let me first start with a shortage of foam, which is having a crippling impact on the furniture industry as well as many other industries, including automotive. We've been fighting foam shortages since last fall due to the imbalance between strong consumer demand and available materials.
Until recently, we've been effectively managing the foam allocation situation by leveraging multiple strategic suppliers, improving forecasting to suppliers and utilizing alternative specifications where acceptable. However, the recent harsh weather that caused a deep freeze in Louisiana and Texas, Where most of the key chemical inputs for foam are produced has significantly aggravated the material shortage. Unlike some furniture manufacturers who were forced to temporarily shut down operations in recent weeks due to the form shortage, We have been able to keep our manufacturing plants running and stable, albeit at reduced levels due to proactive planning. However, The worsening situation with foam has constrained our production and unfortunately for furniture consumers has extended lead times for manufactured product. Despite our longer lead time, we are still advantaged versus our competitive alternatives in the market.
The second big Supply chain challenge is availability of ocean containers, which has been an issue for almost a year. The shipping industry is still trying to catch up with demand, But the mixture of low container inventories, congestion at U. S. Ports and increasing consumer demand due to the economic recoveries in the U. S.
And Europe Have extended the shortages, which are expected to continue. As a reminder, roughly 65% to 70% of our sales are derived from products That are sourced globally, so the container shortage has an outsized impact on our business. That said, we have taken aggressive steps to navigate the challenging environment to keep containers flowing as best as possible. We have doubled the number of carriers we utilize and expanded our network of freight forwarders. We are also leveraging our suppliers' networks, pursuing alternative container routes and ports and transloading shipments.
While the container situation remains highly fluid, it did improve in March and as a result, we had a Significant amount of inbound inventory in the ocean at the end of the Q3, which gives us optimism with our ability to support higher sales late in our Q4 And to start our fiscal year 2022. Given the shortages in ocean containers and key materials, it's not surprising that we are seeing cost inflation, But the magnitude and frequency of these cost increases is unprecedented and unlike anything I've experienced in recent history. Ocean container rates remain more than 3 times higher than rates prior to COVID-nineteen and have spiked recently close to historical highs. Costs on several key materials in our home furnishings product have risen by as much as 60% to 100% with substantial cost increases realized specifically in the Q3. While we attempt to pass cost increases to the markets Whenever reasonably possible, there is an inherent lag between when we realize cost inflation versus price increases.
This cost price lag is putting considerable pressure on our gross margins in the near term. It's not clear if and when these cost pressures may subside, But we remain agile in our pricing and vigilant with our cost controls. In response, we are prudently managing discretionary SG and A to partially offset the gross margin pressures until price realization catches up to cost increases. In summary, these supply chain challenges are frustrating as they are limiting our near sales potential and more importantly, our ability to provide Exceptional service to our customers, but our team is doing an exceptional job at problem solving the situation and seeking out alternatives to best support our customers wherever they can. Our sales team is hungry to grow the business and we are sprinting to ramp up capacity in all areas of our supply chain to support aggressive profitable growth.
I remain confident in our ability to deliver strong sales growth and financial results longer term. Now I'll turn the call over to Derek to discuss our financial and operational results, and I'll be back with some closing comments on what we see ahead.
Thank you, Jerry, and good morning, everyone. 3rd quarter net sales were $118,400,000 up $19,600,000 or 20 percent, compared to $98,800,000 in the prior year period. Our sales results were at the high end of our $105,000,000 to $120,000,000 guidance Despite the myriad of supply chain issues faced in the quarter, which Jerry highlighted earlier. We saw increases in both our home furnishing products Sold through retail stores of $26,500,000 or 34.4 percent and products sold through e commerce of $2,800,000 or or 23.4%. The sales increases were partially offset by a decline of $9,700,000 Due to the exit of our vehicle and hospitality product lines during the Q4 of fiscal 2020.
Excluding these exited product lines, our organic growth was 33 From a profit perspective, we reported a fiscal 3rd quarter net income of $4,900,000 or $0.67 per diluted share that compared to a net loss of $5,300,000 or minus $0.66 per diluted share in the prior year quarter. The reported net income included a $500,000 pretax restructuring expense. Excluding this item, the 3rd quarter non GAAP adjusted net income was $5,200,000 or $0.72 per diluted share as compared to a non GAAP adjusted net loss of $1,300,000 or minus $0.16 per diluted share in the Q3 last year. Please see the non GAAP Turning to gross margin. As a percent of net sales in the 3rd quarter, it was 19.5%, which was slightly below the low end of our guidance range of 20 to 21.5% due to the significant and unanticipated cost inflation realized in the quarter.
However, Gross margin was significantly higher versus a reported 14% in the prior year quarter. That 550 basis point year over year improvement in gross margin Primarily due to structural cost reductions, operational efficiencies, fixed cost leverage due to higher sales volume as compared to the prior year quarter and lower inventory reserves due to demand. The surge in ocean container rates, coupled with material wage and transportation inflation, Pressured margins in the 3rd quarter, which were similar themes during the Q2. We have taken pricing actions to mitigate the cost increases. Selling, general and administrative or SG and A expenses decreased $3,800,000 to $16,300,000 Which was below our guidance range of $17,000,000 to $18,000,000 as we prudently managed administrative costs to partially offset the impact of cost inflation on gross margins.
SG and A as a percent of net sales in the quarter was 13.8% compared to 20.4% in the prior year quarter. The The 660 basis point decline compared to the prior year quarter was driven by a 3 50 basis point decline, specifically due to higher bad debt expense in the prior year quarter, primarily related to a customer bankruptcy, with the remaining decline due to cost leverage gain from higher sales. Turning to income taxes, during the quarter, we reported a tax expense of $1,500,000 or an effective rate of 23.9 percent Compared to a tax benefit of $3,000,000 in the prior year quarter or an effective tax rate of 35.9%. The effective tax rate for Remaining of the year is expected between 25% 26%. Now moving on to the balance sheet.
We ended the quarter with a strong cash balance $17,000,000 and no outstanding balance on our $25,000,000 line of credit. Our working capital, Defined as current assets minus current liabilities at March 31, 2021, was $121,000,000 compared to $128,400,000 at June 30, 2020. The decline in working capital was due to a decrease in cash of $31,200,000 primarily due to $28,500,000 for share repurchases, a decline in other current assets of $8,300,000 primarily due to a tax refund, A decline of $11,700,000 in assets held for sale and a $4,100,000 increase in trade payables, partially offset by a $12,000,000 increase in trade receivables and a $38,900,000 increase in inventory. As it relates to inventory, the vast majority of this increase is related to goods that were in transit at the end of the quarter. Capital expenditures for the 9 months ended March 31, 2021 were approximately $2,000,000 During fiscal 2021, we anticipate spending between $2,500,000 $3,000,000 for capital expenditures and believe we have adequate working capital to meet these requirements.
Now on to our restructuring update. Company incurred $500,000 of restructuring expense, primarily for ongoing facility and transition costs. We anticipate total restructuring expense for the fiscal year 2021 of roughly $3,000,000 to $3,500,000 We currently have 2 facilities held for sale, 1 in Starkville, Mississippi and the other one in Harrison, Arkansas. We expect ongoing facility costs for these two locations be in the range of $50,000 to $60,000 per month. Now looking forward, guidance for the Q4 is a bit challenging Due to the uncertain conditions related to foam availability, ocean standard shortages and extender container transit times due to port and railway congestion, All of which Jerry noted earlier.
The unpredictability of continued cost inflation, including container rates in the 4th quarter further compounds the forecast All of these items remain fluid and could have a material impact on both sales and gross margin dollars. That said, our best estimate for the 4th quarter sales is between $120,000,000 $135,000,000 With the increased availability of foam and timely receipts of sourced product promotion containers being the largest determinants between the high and low end Gross margins are expected to remain under significant pressure from cost inflation and are forecasted in the range of 18.5% 20% with material cost increases, ocean freight rates and the quantity of containers shipped in the quarter being the primary determinants of that range. SG and A guidance for the Q4 is expected to be between $16,500,000 $17,500,000 as we continue to aggressively manage discretionary spending, while also funding strategic growth investments in new product development, digital capabilities And Supply Chain Resources. Adjusted operating income margins are expected in the range of 5% to 6% for the 4th quarter and will be modestly strained in the near term as we work through the lag between cost inflation and increased price realization, which Jerry previously discussed. We remain confident in our ability to improve adjusted operating income margins in fiscal year 2022 once inflationary pressures and supply chain conditions stabilize.
Now, I'll turn the call back over to Jerry to share his perspectives on our outlook.
Thanks. Despite the current supply chain challenges, we are very encouraged by our strong sales and order performance And are working feverishly to expand capacity in all areas of our supply chain operations. As noted last quarter, We signed a new building lease in Juarez, Mexico and for an additional manufacturing plant, which is ready to start production once foam availability improves. Production capacity at the new facility will quickly ramp up throughout the remainder of the calendar year as material availability stabilizes and new workers Most of our strategic global suppliers are also ramping up their capacity and are committed to supporting Flexsteel's growth ambition in fiscal year 2022 and beyond. Additionally, we are in the midst of a consultant engagement Intended to help us expand our global supply base, diversify our sourcing country exposure and build a more resilient supply chain.
From a logistics view, we are finalizing plans to expand our DC network to support growth in both our retail and e commerce sales. We've also recently partnered with a leading transportation management company to manage our dedicated transportation fleet, while expanding our capacity in improving our customers' experience. While increasing supply chain capacity is a paramount to our supporting growth, We also continue to invest strategically in our business to improve our customers' experience, expand our digital and e commerce capabilities, Build our brands and drive product innovation relevant to the market. Most recently, we recruited a new member to our leadership Team in the role of Vice President and General Manager, E Commerce. This position will be instrumental in accelerating growth in our e commerce channel And building the foundational capabilities necessary to compete and win in this space, including digital marketing, Merchandising and Sales Analytics.
The future of the company is promising, and I remain confident in our ability to create value for our customers, employees, Partners and shareholders. With that, we will open up the call to your questions. Operator?
We will now begin the question and answer session. At this time, we will pause momentarily to assemble our roster. Our first question comes from Sandy Matta from Evaluet Research.
Yes, good morning. Congratulations on a very strong quarterly result. There's a lot of news throughout the U. S. Of people leaving cities, big cities, fleeing the cities to move to the suburbs.
And I would imagine people moving from cities would have a lot of purchasing power if they're moving to homes in the suburbs. Could you comment on what is your sense of the longevity of this housing and furniture upcycle beyond this year? Do you think that this upcycle and bullish environment has legs for another 2, 3 years? Thank you.
Yes, Sandy, this is Jerry. We absolutely do. As you know, any time there is movement in households, whether it's new construction, Should people move to a new home, etcetera, it's a furniture event, which is great for us. And all you have to do is look and see what's happened with the major homebuilders out there And what's happening in pricing with homes, availability of homes, I think this thing has legs for quite some time. Is that 1 year is at 5 years.
We don't know that, but we do feel that this is much more than just a 6 month run and are very encouraged by what we're seeing.
Great. Thank you.
Our next question comes from Mike Hughes with SGF Capital. Please go ahead.
Good morning. Thanks for taking my questions. First on pricing, Assuming that there are no additional price increases, which I know is a big assumption, but just assume that for a second. How long will it be until you get back to your target margins? And As part of that question, can you kind of delineate between the freight surcharges where they are as far as catching up to where they need to be and then just kind of Pricing on the base business?
Yes. Hey, Mike, it's Derek. So in order to answer that question, you really have to bifurcate Domestic manufactured product from source product. So on the source side, we've got the good news is we've got about $35,000,000 roughly 900 containers right now either on the water in transit. As soon as that arrives, I mean, we turn it around fairly quickly.
And as soon as we can ship, then we realize those ocean freight surcharges. So, in terms of when assuming there's no more cost inflation, either on materials or ocean container rates going forward, We would expect that our surcharges and pricing on sourced goods would catch up to costs somewhere in the July timeframe. Now on the manufactured side, it's a little bit different because we've got a good chunk of that $140,000,000 backlog relates to manufactured goods, which have extended lead times. So on the manufactured side, we probably won't catch up to cost increases with our current pricing actions Likely until September, October. Now when you weight those things together, sourced goods right now make up Roughly 2 thirds of our business.
So we feel like we're going to be in much better shape from a margin perspective in Q1 of next year, Again, assuming there's no more cost inflation. Now that said, it's really it's unprecedented. Every week, Mike, we're getting hit either on the material side or even from source suppliers with cost increases. So it's difficult to say when we're going to get to a more stabilized period Of material costs and finished goods costs. So, but again, I think we are fairly confident that at some point Things do need to stabilize, and we can quickly get kind of back into that 21% to 22% gross margin Range fairly early in fiscal year 2022.
Okay. Which would would that translate into an operating margin of 7% to 8%, is that the target?
Exactly.
Okay. And where are your lead times now On the manufacturer side?
Yes. So depending on the product, I mean, we're we can be anywhere between 20 weeks to 24 weeks.
Okay. And then on the Mexican operations, last week, Congress passed a bill that would effectively outlaw the use of staffing firms outside of your core business. And I think the President has slated to sign it or has already signed it into law. Do you staffing what's the situation in your Mexican plants?
Yes, we do this is Jerry. We do currently use a staffing organization to help us. This is something that's been out there for quite some time. It's one we're working with them. There's a lot of nuances to the bill, and there's a lot of different ways that we're going to work with them going forward.
And if they need to become our employees, that's obviously an option that's out there also. But we are well aware of that and are working through that currently.
And the plan, Mike, is we feel good about the plan, so don't anticipate any disruption whatsoever in our production facilities down there.
If you bring the employees in house, do you have as much flexibility? And then also what does it do to your I assume in house the employees from an hourly rate you're not paying the markups so they might actually go down?
The way we think about it, Mike, is effectively, we're going to have to structure the arrangement differently To comply with the new government regulations, but the economics should not change materially. And we don't see necessarily our The ability with the workforce changing materially either.
Okay. One other detail question for you. It looks like the operating lease assets increased to $28,500,000 versus $9,500,000 last quarter sequentially. What was that increase?
Yes. There was 2 things, Mike. 1, so we've got 3 plants now down in Juarez. So our Main building, we renewed the lease for another 10 years on that. And then we just signed a lease for the new plant, the 3rd building down there for 10 years.
So that increase relates to the new lease and the renewed lease for those 2 buildings.
I see. Thank you very much.
Thank you.
Our next question comes from Jeff Jiggin from Global Value Investment Corp. Please go ahead.
Good morning, gentlemen. Thanks for taking my questions, sir.
Good morning.
You mentioned that your lead times Extended to 20 to 24 weeks, what would be more typical?
Much more typical would be in that 4 to 6 week range.
Your backlog is at a record $140,000,000 Presumably that's because of Some of your competitors going idle. Is the character of those orders firm or can they be canceled without penalty?
So So it's a
couple of things. Really nice to our competitors. A lot of that right now really has to do with foam. That's the biggest thing that's driving it right now is foam and other raw materials. And yes, they can be canceled.
It's something we track literally every day we see. Right now, we've seen very few cancellations. One of the reasons is that there is really not another place to go. In the industry, we are all kind of in the same boat right now. If you went and looked at our competitors' lead We're at or even much farther out.
So it's not it's unfortunate, but really a lot of that's dealing with us just being able to get the raw materials.
I see. Thanks. You mentioned you're improving your digital capabilities. Can you discuss that a little bit further and possibly tie in your new VP of E Commerce and what his or her objectives will be?
Yes. So Jeff, the way we think about digitization is probably threefold. 1, it starts with having really, really great content. So a big part of our Here in the near term, it's going to be enhancing our content, both for our Flexsteel brand as well as Home Styles. The second piece of the digitization transformation is around making sure that we've got the right platforms.
So right now, we're in the works of overhauling our Flexsteel website. We overhauled our homestylesfurniture.com website last fall. We also released a new Flexsteel app. We're in the process right now of taking that app, customizing it for our retail sales associates, So that literally as they are walking through the retail floor, they have got their iPad, they have got the Flexsteel app, They've got pricing integrated. They can show their consumers real time products draped in different fabrics with different pillows.
They can rotate it 3 d. We're starting to work in working on integrating virtual reality into that. And I think the 3rd part of the model is engagement. How do you take the content? How do you take the right platforms And engage consumers, and we are in really productive positive discussions with all the major Software players kind of within our industry of making sure that they can take our content and our tools And quickly distribute them and integrate them with our retailer system.
So that's our plan in terms of kind of Near term digitization efforts. In terms of our new Vice President and General Manager of E Commerce, he's got Several key objectives. One is start to build foundational e commerce capabilities to take Flexsteel And our business to next level. And so that's building digital marketing, building merchandising, building the analytics arm, Both to understand what consumers want out in the market, but then understand how we can use pay per Click and social media and other things effectively to go after driving increased demand. Wayfair and Amazon are 2 of our largest customers when it comes to e commerce, and we've got strategic initiatives to substantially grow with both of those customers that Are part of his key objectives as well.
And then at some point here, we are going to venture into direct to Near term goals though are to continue to expand our relationship with Wayfair, Amazon, homedepot.com, our existing kind of B2C players, and build the underlying capabilities, though, that we can successfully Launch into D to C in a meaningful way in the future.
Thank you for the detail. Have you disclosed the percentage of your sales coming from Wayfair?
We have not, but they are a very significant customer for us.
Appreciate it. In light of these investments in people and resources, what does your new product pipeline look like Today and will that be substantially different in the future?
Yes, it's Jerry. Yes, Jeff, it will be. And Really, we've got a great team. In fact, we just opened up an innovation center at our headquarters, Just a few miles from our headquarters that encompasses both our Flex Seal home furnishings and our e commerce product. And there's a lot of different areas, whether it's outdoor, whether it's taking a sofa that can be a flat pack or that's Sofa that could also go through the home furnishing channels, a lot of different things, but a lot of different product categories.
We are pretty excited about it. We have really enhanced that group. We have got 3, 4 more product managers than we have had in the past. We have got some several new designers And we are getting a lot of spirited innovation out of our new innovation center. So it's going to be pretty exciting as we go forward.
Yes, great. And last question, with regard to your Juarez investment in additional capacity, is that a reflection of needing more capacity? Or in fact, You're bringing some of your further afar production closer to home. I would think that might be Asian based.
No, I mean, in the near term, Jeff, this is all about supporting our growth ambitions, both next year as well as into the future. So It's an area it's part of our business that we want to substantially grow and so we need that capability and we need that incremental capacity.
Great. Appreciate it. Good luck, guys. Great.
Thanks,
Chad. Thanks, Chad.
Our next question comes from Budd Bugatch, a Private Investor. Please go ahead.
Yes. Good morning and thank you for taking my questions. Just I'd like to talk about Foam a little bit. The issue with Foam has been out there for a little bit of time Because of the freeze in the South, are we seeing any relief in that kind of on a daily or weekly basis?
Yes. So it's probably the foam situation, but it's been most severe over the last 2, 3, 4 weeks. So we are seeing a little bit of light at the end of the tunnel. Our suppliers, especially our major Supplier down in kind of Mexico has committed to increasing our allocation here in the coming weeks. And we're hopeful that even potentially maybe by July or mid summer, we can be up to 100%.
So we're getting a little bit of relief. That said, I think that the reality is the situation is Flu it day by day, week by week. So a lot of it has to do with where demand is. But I think we're hopeful that things will improve here in the near term.
And how much of your sourcing of Foam is concentrated with 1 supplier or how many do you have?
We have a multitude of suppliers.
But you said you had one that was concentrated, I thought?
That supports our Juarez facility, primarily our Juarez facility.
I see. And of the $140,000,000 backlog, which is truly just eye popping and worrisome, I would think, How much of it is upholstery? How much of it is that 20 to 24 weeks of supply?
Yes, I would I'd estimate, but roughly about half.
I see. And that so that's normally a 4 week commitment, right, to your dealers?
4 to 6.
I see. Okay.
Our intent though, Budd, is, I mean, once foam availability improves, that 3rd facility that we're bringing up in Juarez. The equipment is installed. Utilities are installed. We're training, hiring incremental workers. So We feel pretty confident that we can ramp that thing up fairly quickly assuming that foam is available.
That will be the critical enabler for us to Work down that manufactured backlog fairly quickly in the latter part of the year.
I got you. And Derek, if so, if Half of it is in upholstery, then the other half is in and you said I thought 45% was in overseas goods. Did I get that number right? And is it much of back home styles?
No. No, a lot of it is Flexsteel kind of branded product. It's motion product, recliners. There's just we're performing really, really well in those categories. We're actually Jerry and I this week have been at premarket, down in High Point.
And it's been the activity has been really amazing, really impressive. So, I truly believe we are gaining placements in retail floors. We are taking share. And so We're writing a lot of really big orders with important customers. And the good news though, like I said, is we've got a record number Containers on the water, and we've got a substantial amount of POs written for suppliers in the second half.
Hey, Budd. This is Jerry Tewitz. So you think about the inventory that Derek mentioned that's on the water, that's all sold inventory. That's inventory. As soon as we can get in here, we'll turn it around as best we can.
But of course, the supply chain from Asia to the ports to Trucking is across the country, etcetera, railing across, every piece of that has a cog in it right now. But the exciting part is We get that in and we think it's going to take a few more months for some of that to bust through because we have a tremendous amount more coming on the water too. Inventory is one of the Key places we are going to continue to use our capital and but we are pretty excited about what is all coming down.
And you were I understand that, Jerian. Thank you for that. Okay. Just last for me is cost increases is Are the cost increases can you identify which components or which and I know there are multiple, but which is the major cost? Are we seeing cost Increases, for example, in foam and steel, where are the cost increases?
Everywhere, Budd. I mean, plywood prices are up 120% from pre COVID levels. Foam is up well over 60%. Steel is up, I mean fabric. There aren't too many components that haven't seen significant inflation.
And it's not just again domestic materials, but we've gotten at least 3, in some cases, For price increases from our globally sourced suppliers as well.
And what cost actions or pricing actions have you taken so far? How could you quantify that?
Yes. We've taken, I want to say, altogether probably 8 or 9 different price increases Since COVID. So we're trying to be as agile and fluid. When we get the price increases, We pass those along wherever we reasonably can. We're just dealing with the lag between when we pay for the material and finished good costs and when we can actually realize those price increases to our customers.
And can you quantify the percentage of your price increase On a consolidated basis or?
On a consolidated basis, I mean, it's Between depending on the product category between probably 10% 20%.
Okay. Well, So that's eye popping, Derek. You might want to drop a note to Chairman Powell about the permanency of inflation.
Our next question is a follow-up from Queues with SGF Capital. Please go ahead.
Thanks for taking my follow ups. You just Alluded to lumber inflation, which is well chronicled. Can you just speak to just lumber availability? Is that an issue at all?
Right now, we're not having any availability issues with lumber. Plywood, we've got several sources for it and it's really at this point, if You're willing to pay, you can get it. But as you know, you're seeing lumber throughout the whole housing and every other parts of the economy too. But availability is there at this point.
And Mike, we've taken steps to look for alternative sources in South America, etcetera. So I think our team has done a really good job of Trying to diversify the sources wherever we can, where the specification meets our requirements.
Okay. And then just Turning to your Asian sources, what do their supply chains look like as far as availability of foam and other raw materials?
Yes. The material availability is less of an issue, especially as it relates to foam, Because the foam situation here domestically has a lot to do with the storms that hit Texas, Louisiana back in February. Now that said, I mean, material availability over in Asia is being simply constrained by the imbalance of strong demand and supply. Where our factories over there are challenged is really from a labor perspective. The cut and sew operation typically is the bottleneck.
It's a labor intensive Piece of their overall process. And so finding the labor, training the labor has been probably their bottleneck In terms of the ramp up.
Okay. And then you did a really good job of containing SG and A this quarter versus your internal plan. What are the areas that you were able to pull back so quickly intra quarter?
Yes, I think it's just There's not one thing, Mike. I give our team a lot of credit when they understand, hey, there's cost inflation, Costs and pressures and then we need to be more prudent around costs. It is it's things that, you know what, Are not going to hamper the business if we delay them for 3 months or 6 months. It's being prudent around travel and other things. We have kind of prioritized our recruiting efforts, so that we're absolutely going after And filling those roles that are most critical, but delaying some of those roles that are less critical.
So it's not one thing, Mike. It's just it's overall really, really good cost control on our part.
Okay. And then do you have a share count as of today Or very recently?
I do not. And actually, I know where you're going with the question, Mike, in terms of kind of share repurchase Activity, what I can tell you is kind of on a go forward basis, we're going to keep the share repurchase plan active. We'll be opportunistic in terms of purchases when the stock is at a Significant discount to our intrinsic value. That said, we are going to continue to think about Reprioritizing capital to support our growth ambitions. So even though inventory It's up pretty significantly.
We're going to continue to invest in inventory. I think we're going to continue to look at infrastructure expansion, Whether it's manufacturing or distribution, and there's going to be more prioritization of capital in those areas than, say, share repurchases going forward.
Okay. That makes sense. Actually, do you have the March 31 share count by any chance?
Yes, I do.
Give me a second, Mike. I'm just pulling it up here. Yes. Basic shares outstanding as of March 31 were 6,000,000 875,000.
Okay. Okay.
So as of today, I
guess you're right on the bubble as far as potentially being added back to the Russell 2000 this year. So
This concludes our question and answer session. I would like to turn the conference back over to Jerry Dittmer for any closing remarks.
In closing, I would like to thank all our Flexsteel employees for their outstanding performance and service during the Q3. I'd also like to thank you for participating in today's call. Thank you for your questions today and please reach out to any additional ones. We look forward to updating you on the next call.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.