Flexsteel Industries, Inc.(FLXS) today reported sales and earnings for its third quarter ended March 31, 2004.

Effective September 18, 2003, Flexsteel Industries, Inc. acquired DMI Furniture, Inc. (DMI) in a business combination accounted for as a purchase. The operating results of DMI for the period September 18 through March 31, 2004 are included in the reported amounts.

Net sales for the fiscal quarter ended March 31, 2004 were $107.0 million compared to the prior year quarter of $73.5 million, an increase of 46%. Net income for the current quarter was $2.5 million or $0.39 per share compared to the prior year quarter of $1.4 million or $0.22 per share, an increase of 79%.

Net sales for the nine months ended March 31, 2004 were $292.9 million compared to $217.1 million in the prior year nine months, an increase of 35%. Net income for the nine months ended March 31, 2004 of $7.4 million or $1.14 per share increased from net income for the nine months ended March 31, 2003 of $5.7 million or $0.89 per share, an increase of 31%.

During the current quarter, residential net sales were $68.2 million (includes $18.2 million of DMI), an increase of 39% from the prior year quarter. Recreational vehicle net sales were $22.0 million, an increase of 15%. Commercial net sales were $16.8 million (includes $9.7 million of DMI), an increase of 219%.

For the nine months ended March 31, 2004, residential net sales were $193.4 million (includes $44.7 million of DMI), an increase of 33% over the nine months ended March 31, 2003. Recreational vehicle net sales were $62.4 million, an increase of 10%. Commercial net sales were $37.1 million (includes $18.3 million of DMI), an increase of 151%. The increase in net sales reflects improved industry performance for vehicle and commercial products in addition to DMI net sales.

Gross margin for the quarter ended March 31, 2004 was 19.8% compared to 21.0% in the prior year quarter. For the nine months ended March 31, 2004 the gross margin was 20.9% compared to 22.2% for the prior year nine-month period. The decreased gross margin percentage reflects a lower gross margin on DMI products and increased costs for materials, especially steel and component parts that have steel content.

Selling, general and administrative expenses were 15.9% and 17.9% of net sales for the quarters ended March 31, 2004 and 2003, respectively. The decrease in the percentage of selling, general and administrative expenses is due primarily to the lower percentage cost related to DMI sales and the discontinuation of the Company's retail operations during the December 2003 quarter.