Q3 2021 Flexsteel Industries Inc Earnings Call
Good morning, and welcome to the Flex two industries third quarter fiscal year 2021 earnings results conference call all participants will be in a listen only mode.
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I would now like to turn the conference over to Derek Schmidt, Chief Financial Officer, and Chief operating Officer for Flex Steel industries. Please go ahead.
Thank you and welcome to today's call to discuss Black steel industries third quarter fiscal year 2021 financial results our earnings release, which we issued after market close yesterday Monday April 26 is available on the Investor Relations section of our website Www Dot flex deal Dot com.
Com under news and the about 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 <unk>.
<unk> 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 outcomes to differ materially from those expressed in forward looking statements such.
Such risks and uncertainties include but are not limited to those that are described in our most recent annual report on form 10-K.
Dated by our subsequent quarterly reports on form 10-Q, and other SEC filings out of the 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.
<unk> 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 third quarter.
We reported net sales growth of 20%.
Two $118 4 million of the current quarter compared to $98 8 million 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 of results and 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 gain retail placements and taking market share.
Year over year order growth for retail sales was a phenomenal 131% in the third quarter. This builds on the strong year over year order growth momentum from the second quarter of 49% in the first quarter of 60%.
Even more encouraging third quarter orders grew 22% sequentially from an already strong order performance in the second quarter.
This positive momentum gained traction throughout the third 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 third quarter at a record level of $140 million up 314% 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 of our of Homestyle 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 on 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're 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 is overcoming the global supply chain challenges, which our entire industry is currently battling the biggest supply chain impediments, which we face right now are material availability, namely foam and the ocean container availability in 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 the payable on materials.
Until recently, we've been effectively managing the foam allocation situation by leveraging multiple strategic suppliers, improving forecasting two suppliers and utilizing the alternative specifications were acceptable. However, the recent harsh weather that caused the deep freeze in Louisiana, and Texas, where most of the key chemical.
Inputs for foam or produce has significantly aggravated the material the shortage.
Unlike some furniture manufacturers, who were forced to temporarily shut down operations in recent weeks due to the forum 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 from 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 the 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.
Double the number of carriers, we utilize and expanded our network of freight forwarders. We're also leveraging our supplier's networks pursuing alternative container routes in ports and trans loading shipments.
While the container situation remains highly fluid it did improve in March and as a result, we added a significant amount of inbound inventory on the ocean at the end of the third quarter, which gives us optimism with our ability to support higher sales late in our fourth quarter 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.
<unk> container rates remain more than three times higher than rates prior to COVID-19, and have spiked recently close to historical highs.
Cost of on several key materials in our home furnishings products have risen by as much of 60% to 100% with substantial cost increases realized specifically in the third quarter.
We attempt to pass cost increases to the markets whenever a reasonably possible. There is an inherent lag between when we realized 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&A expenditures to partially offset the gross margin pressures until price realization catches up the cost increases.
In summary, the 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 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 price of 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 third quarter net sales were $118 $4 million up $19 $6 million of 20% compared to $98 $8 million in the prior year period. Our sales results were at the high end of our $105 million to $120 million guidance range.
Fight the myriad of supply chain issues based on the quarter, which Gerry highlighted earlier.
We saw increases in both our home furnishing products sold through retail stores of $26 5 million or 34, 4% and products sold through e-commerce of $2 $8 million or 23, 4%.
The sales increases were partially offset by the decline of $9 $7 million due to the exit of our vehicle in hospitality product lines. During the fourth quarter of fiscal 2020, excluding these exited product of our organic growth was 33%.
From a profit perspective, we reported fiscal third quarter net income of $4 $9 million or <unk> 67 per diluted share that compared to a net loss of $5 $3 million or minus <unk> 66 per diluted share in the prior year quarter. The reported net income included a 500 dollar.
Dollar pretax restructuring expense, excluding this item the third quarter non-GAAP adjusted net income was $5 $2 million or <unk> 72 per diluted share as compared to a non-GAAP adjusted net loss of $1 $3 million or minus <unk> 16 per diluted share in the third quarter last year. Please see the.
The non-GAAP disclosure included in the earnings release for a detailed reconciliation of GAAP to non-GAAP adjusted net income.
Turning to gross margin as a percentage of net sales in the third quarter. It was 19, 5%, which was slightly below the low end up 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 the reported.
The 14% in the prior year quarter.
That 550 basis point year over year improvement in gross margin was primarily due to restructure of 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 the demand.
The surge in ocean container rates, coupled with the material wage and transportation inflation pressured margins in the third quarter, which were similar themes. During the second quarter, we are taking pricing actions to mitigate the cost increases.
Selling general and administrative or SG&A expenses decreased $3 8 million to $16 $3 million, which was below our guidance range of $17 million to $18 million as we prudently manage administrative cost to partially offset the impact of cost inflation on gross margins or SG&A spending on the quarter was also significantly less compared to.
$21 million in the prior year quarter SG&A as a percent of net sales in the quarter was 13, 8% compared to 24% on the prior year quarter. The 660 basis point decline compared to the prior year quarter was driven by a 350 basis point decline specifically due to higher bad debt expense on the prior year quarter price.
Related to a customer bankruptcy with the remaining decline due to cost leverage gained from higher sales.
Turning to income taxes during the quarter, we reported a tax expense of $1 $5 million or an effective rate of 23, 9% compared to a tax benefit of $3 million on the prior year quarter or an effective tax rate of 35, 9%.
The effective tax rate for the remainder of the year is expected between 25 and 26%.
Now moving onto the balance sheet, we ended the quarter with a strong cash balance of $17 million and no outstanding balance on our $25 million of line of credit our working capital defined as current assets minus current liabilities at March 31, 2021 was $121 million compared to 128.
$4 million at June 32020, the decline in working capital was due to a decrease in cash of $31 $2 million, primarily due to $28 $5 million per share repurchases of declined in other current assets of $8 $3 million, primarily due to a tax refund of decline of $11 $7 million on <unk>.
Assets held for sale and of $4 $1 million increase in trade payables, partially offset by a $12 million increase in trade receivables and a $38 $9 million increase in inventory.
As it relates to inventory of the vast majority of this increase is related to goods that were in transit at the end of the quarter.
Capital expenditures for the nine months ended March 31, 2021 were approximately $2 million during fiscal 2021, we anticipate spending between two and a half and $3 million per capital expenditures and believe we have adequate working capital to meet these requirements.
Now onto a restructuring update company incurred $500000 of restructuring expense, primarily for ongoing facility and transition costs. We anticipate total restructuring expense for the fiscal year 2021 of roughly three to $3 $5 million. We currently of two facilities held per sale, one in Starkville, Mississippi and the other one in Harrison Arkansas.
We expect ongoing facility costs for these two locations to be in the range of $50 to $60000 per month.
Now looking forward guidance for the fourth quarter is a bit challenging due to the uncertain conditions related form of availability ocean container shortages and extended of container transit times due to Port railway congestion all of which Jerry noted earlier, the unpredictability of continued cost inflation, including container rates in the fourth quarter per.
Other compounds of the forecast variability.
All of these items remains fluid and could have a material impact on both sales and gross margin dollars.
That said, our best estimate for the fourth quarter sales is between 120 and $135 million with the increased availability of foam and timely receipt of sourced product promotion containers being the largest determinants between the high and low end of this range.
Margins are expected to remain under significant pressure from cost inflation and are forecasted in the range of 18, 5% to 20% with mirror to real cost increases ocean freight rates and the quantity of containers shipped in the quarter being the primary determinants of that range.
SG&A guidance for the fourth quarter is expected to be between 16, and a half and $17 $5 million as we continue to aggressively manage discretionary spending while also funding strategic growth investments in new product development digital capabilities and supply chain resources.
<unk> operating income margins are expected in the range of 5% to 6% for the fourth quarter and will be modestly strained on the near term as we work through the lag between cost inflation and increased price realization, which Gerry previously discussed we remain confident in our ability to improve adjusted operating income margins in fiscal year 'twenty 'twenty two.
Once inflationary pressures and supply chain conditions stabilize now I'll turn the call back over to Gerry 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.
Noted last quarter, we sign of new building lease in Juarez, Mexico and for an additional manufacturing plant, which is ready to start production once foam availability improve production.
Capacity at the new facility will quickly ramp up throughout the remainder of the calendar year as material availability stabilizes and new workers are trained.
Most of our strategic global suppliers are also ramping up their capacity and are committed to supporting flex deals growth ambitions 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.
The 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 and 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.
Spanned 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 and the role of Vice President and General manager of 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.
Of 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 to ask a question you May Press Star then one on your Touchtone phone.
Using a speakerphone please pick up your handset before pressing the keys.
If at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Our first question comes from Sandy Mehta from evaluate research.
Yes, good morning, congratulations on a very strong quarterly result.
There's a lot of news throughout the U S of people, leaving the city's big cities fleeing the city has to move to the suburbs and I would imagine people moving from the cities would have a lot of purchasing power if theyre moving to homes in the suburbs could you comment on what is your sense of the longevity of this housing and furniture.
Up cycle beyond this year do you think that this upcycle.
And bullish environment has legs for another two or three years. Thank you.
Yes, the Sandy this is Jerry we absolutely do.
You know anytime there is movement in households, whether it's new construction people have moved to a new home et cetera. So the furniture event, which is great for us.
And all of 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 and you always at one year is that five years, we don't know that but we do feel that this is much more than just up of <unk>.
The six month run and are very encouraged by what we're seeing.
Great. Thank you.
Yeah.
Our next question comes from Mike Hughes with SGS 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 the 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.
Yeah, Hey, Mike It's Derek.
In order to answer that question, you really have to bifurcate.
Domestic manufactured product from source product. So on the source side you know we've got the good news is we've got about $35 million roughly 900 containers right now either on the water in transit.
Sooner that arrives I mean, we turn it around fairly quickly.
And as soon as we can ship than we realize those ocean freight surcharges. So in terms of when assuming there's no more cost inflation either on materials or auction.
Container rates going forward, we will we would expect that our surcharges on pricing on source goods would catch up the cost somewhere in the July timeframe now on the manufacturer side, it's a little bit different because we've got you know good chunk of that of $140 million backlog relates to manufactured goods.
Which have extended lead times, so on the manufacturing side, we probably won't catch up the cost increases with with our current pricing actions likely until September October.
Now when you weight those things together of source source the goods right now make up roughly two 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 is there is no more cost inflation.
That said we.
It's really it's the 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 of.
Of the material costs and finished goods cost so but again.
I think we are fairly confident that at some point things do you need to stabilize.
And we can quickly get kind of back into that 21% to 22% gross margin.
Ill range fairly early in fiscal year 'twenty two.
Okay, which would would that translate into an operating margin of 7% to 8% is that the target is.
Xactly.
Okay, and where are your lead times now on the manufacturer side.
Yes, just so depending on the product I mean, where we can be anywhere between 20 weeks to 24 weeks.
Okay.
And then.
On the Mexican operations last week, the Mexican Congress.
Passed the bill that would effectively.
While the use of staffing firms outside of your core business.
And I think the president is slated to sign it or has already signed it into law did use staffing whats the situation of your Mexican plants.
Yes, we do this is Jerry we do currently use the staffing organization to help US. This is something thats been out there for quite some time. It's one we're working with them. There's a lot of nuances to the bill.
A lot of different ways that we're going to work with them going forward.
They need to become our employees. That's obviously an option that's out there also but we're well aware of that and are working through that currently.
And the and the plan Mike is we feel good about the plan. So don't anticipate any disruption whatsoever and are projecting the 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 cost of assume in house the employees from our hourly rate youre not paying the markups that they might actually go down.
The the way we think about it Mike is effectively we're going to have the structure of the arrangement differently.
To comply with the new government regulations, but the economics should not change materially.
And we don't see necessarily our flexibility with the workforce changing materially either.
Okay. One of our detailed question for you.
The it looks like the operating lease assets increased to $28 5 million versus $9 5 million last quarter sequentially, what was that increase.
Yes, there was two things Mike one so we've got we've.
Got three plants now down <unk>. 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 third building down there for 10 years, so that increase relates to the.
The new release of new lease and the renewed lease for those two buildings.
I see thank you very much.
Thank you.
As a reminder, if you of any questions. Please press Star then one of.
Our next question comes from Jeff Chicken from global value Investment Corp. Please.
Please go ahead, hey, good morning, gentlemen, thanks for taking my questions here.
Good morning.
You mentioned that your lead times extended to 'twenty to 'twenty four weeks, what would be more typical.
Much more typical would be in that four to six week range.
Let's see.
Your backlogs at a record of $140 million, presumably that's because of some of your competitors going idle.
Is the character of those orders firm or can they be accounts from without penalty.
So as the company as we are really not as our competitors a lot of that right now really has to do with phone that's the <unk>.
Thing Thats 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's really not another place to go in the industry. We're all kind of on the same boat right. Now if you went and looked at our competitors lead times, there were at or even much farther out.
So it's not it's unfortunate, but really a lot of it's dealing with us just being able to get the raw materials.
Let me see you.
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 you know the way, we think about Digitization is probably three fold one it starts with having.
Really really great content.
So a big part of our investment here in the near term, it's going to be enhancing our content both for our flex steel brand as well as home styles. The.
Second piece of the Digitization and transformation is around making sure that we've got the right platforms.
So right now we are in the works of overhauling.
Our flex steel website, we overhauled our home sales furniture Dot com website last fall.
We also released our new flex deal out of more in the process right now of taking that App customize net for our retail sales associates, so that literally as of the walking through the.
The retail floor, they've got their iPad, they've got the flex still app, they've got pricing the integrated they can show their consumers real time products draped in different fabrics with different pillows.
Located three D.
We're starting to work and working on integrating and virtual reality and of that.
And I think the third 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.
And really productive positive discussions with all of the major software.
Players kind of within our industry of making sure that they can take our content on our tools and quickly distribute them and integrate them with our retail retailer system. So that's our plan in terms of kind of near term debt digitization effort in terms of our new Vice President and general manager of E Commerce.
He has got several several key objectives. One is start to build foundational e-commerce capabilities to take flex deal in our business the next level.
And so thats the building digital marketing.
Building merchandising building the analytics are both the understand.
What consumers want out on the market, but then understand.
How we can use pay per click in social media and other things effectively to go after driving increased demand.
Wayfarer on Amazon are two of our largest customers when it comes of the 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 and that at some.
Point here.
We are going to venture into direct to consumer and more significantly.
The near term goals are to continue to expand our relationship with way fair Amazon home depot Dot com, our existing kind of BDC players.
And build the underlying capabilities, though that we can successfully launch into D to C and us in a meaningful way on the future.
Thank you for the detail have you disclosed the percentage of your sales come from welfare.
We have not but they are they are as they are a very significant customer for us.
I 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.
As the Jerry Yes, Jeff it will be in.
Really.
We've got a great team in fact, we just opened up in the innovation center at our headquarters of.
A few miles from our headquarters that encompasses both our flexi of home furnishings, and our ecommerce product and Theres a lot of different areas whether it is.
At the outdoor of whether its taking a sofa that can be of flat pack or the sofa that can also go through.
Through the home furnishing channels of lot of different things, but a lot of different product categories.
We're pretty excited about it we really enhance that group, we've got three or four more product managers that we've had in the past we've got some of several new designers and getting a lot of our spirited innovation out of our new innovation center. So it's going to be pretty exciting as we go forward.
Okay, Great and last question with regard to your whereas investment in additional capacity is that a reflection of.
Needing more capacity or in fact are you, bringing some of your.
Further afar production closer to home I would think that might be the Asian based.
No I mean near term Jeff. This is all about supporting our growth ambitions. Both next year as well as the end of the future. So.
It's an area as part of our business that we want to substantially grow and so we need that capability and we need that incremental capacity.
Great I appreciate it good luck guys great.
Alright, Thanks, Jeff.
Our next question comes from Budd <unk> of private Investor.
Please go ahead.
Yes.
Good morning, and thank you for taking my question.
Okay.
Okay.
Just I'd like to talk about phone a little bit.
The issue with film has been out there for a little bit of time.
Of the freeze on the South are we seeing any relief on that.
Kind of on a daily or weekly basis.
Yeah. So it's.
Probably the palm situation, but it's been most severe over the last two.
234 weeks. So we are seeing a little bit of light at the end of the tunnel.
Our suppliers, especially are our major supplier down and 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 or mid summer, we can be up to 100%.
So we're getting a little bit of relief.
That said I think the the reality of the situation is fluid day by day of week by week.
So a lot of has to do with you know.
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 one supplier or how many do you have.
We have a multitude.
Two of the suppliers.
But you said you had one that was concentrated on solar.
That supports our Juarez facility, primarily our Juarez facility.
And I hope the $140 million backlog, which is truly true.
Hi, popping and worrisome I would say.
How much of it is upholstery how much of it.
Is that 20% to 24 weeks of supply.
Yes, I would I would estimate but.
Roughly.
About half.
And so that's normally a four week.
The commitment right to your to your dealers for the.
The six.
I see okay.
Our intent the bot is I mean once volume of build building improves that third facility that we're bringing up in the war as 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 phone was available.
That will be the critical enabler for us to work down that manufactured backlog fairly quickly in the latter part of the year.
Gotcha and Derek if so it's half of it is in a post COVID-19 than the other half of it is in and he said I saw 40.
45% was in overseas goods did I get that number right.
Most of that home styles.
No no a lot of it is <unk> still kind of branded product at some.
Now it's motion product on Recliners.
Theres, just where we're performing really really well on those categories, where actually Jerry and I. This week of Ben at pre market down in high point.
And it's been the activity has been really amazing really impressive so.
I truly believe we are gaining placements and retail floors, we're taking share and so.
We're 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 of containers on the water.
And we've got a substantial amount of P. O is written for suppliers in the second half.
Budd This is Jerry to it so you think about the inventory the Derek mentioned Thats on the water. That's all sold inventory inventory soon as we can get it in here, we'll turn it around the best we can but of course the supply chain from Asia to the ports does trucking of the cross the country et cetera of railing of the cross every piece of that as the cargo.
On it right now but the.
The exciting part of it because we get that in and we think it's going to take a few more months for some of that the bus through because we have a tremendous amount of more coming on on the water to the inventories of one of the key places we're going to continue to use our capital and but we're pretty excited about whats all of them coming down.
Okay and you were on.
Understand that Shire and thank you for that.
Okay.
Cash from me as cost increases or the cost increases could you identify which components of which I know there are multiple book, which is the major cost share cost increases for example in foam and steel.
Where are the where the cost increases.
It everywhere, but.
I mean plywood prices are up 120%.
From pre COVID-19 levels foam is up well over 60% steel is up.
I mean fabric there arent too many components of that Havent seen significant inflation.
And it's not just again domestic materials, but we've gotten.
At least three in some cases for price increases from our globally sourced suppliers as well.
And what cost actions of our pricing actions of Vijay so far but how could you quantify that.
Yeah, we've taken I won't say altogether, probably eight or nine different.
Price increases since since COVID-19.
We're trying to be as agile and fluid you know when we get the price increases we pass those along wherever we reasonably can.
We're just dealing with the 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.
Can you quantify the percentage of <unk>.
The price increase.
On a consolidated basis.
On a consolidated basis you mean.
Yeah.
Between the depending on the product category between probably 10% to 20%.
Okay, well, that's that's eye-popping Derrick you might wanted to drop of note the chairman Powell.
The permanent CEO of inflation.
Alright, thanks, so much.
Thanks.
Our next question is a follow up from Mike Hughes with <unk> of capital. Thanks.
Thanks for taking thanks for taking my follow ups.
You just alluded to lumber inflation, which is well chronicled can you just speak to just the lumber availability is out of an issue at all.
Right now, we're not having any availability issues with lumber.
On plywood.
Got several sources for it and it's really at this point is if you are willing to pay you can get it.
And as you know youre seeing lumber throughout the whole of housing and every other parts of the economy too but availability is there at this point.
And Mike we've taken steps to 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 or the where the where the specification meets our requirements.
Okay, and then just turning to your Asian sources, what are their supply chain look like as far as availability of foam and all the raw materials.
Yes.
On the material availability is less of an issue, especially as it relates to foam because of the foam situation here domestically has a lot to do with the you.
You know the storms that hit Texas, Louisiana back in February now all that said I mean material availability over in Asia has been simply constrained by the imbalance of strong demand and supply.
Where where our factories over there are challenged is.
Really from a labor perspective, the cut and sew operation tip.
Typically is the bottleneck.
The labor intense of.
<unk>.
Piece of the overall process and so finding the labor training the labor has been probably their bottleneck in terms of the ramp up.
Okay and the.
Then you did a really good job of containing SG&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 is just.
There's not one thing Mike.
I give our team of lot of credit.
When they understand hey, there is cost inflation cost pressures and then we need to be more prudent around costs. It is things that you know what.
We're not going into hampered the business, if we delay them for three months or six months, it's being prudent around travel and other things.
We have kind of prioritize 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 the the that are less critical.
So it's not one thing Mike its overall really good really good cost control on our part.
Okay, and then do you have the share count as of today.
Very recently.
I do not.
And actually I.
I know, where you're going with the question Mike in terms of kind of share repurchase activity on.
What I can tell you is kind of on a go forward basis, we're going to keep the share repurchase plan active.
We will be opportunistic in terms of.
Purchases when the stock.
Is that a significant discount to our intrinsic value.
That said we are going to.
Continue to think about.
Re pricing re prioritizing capital to support our growth ambitions. So even though inventory is 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 then.
<unk> share repurchases going forward.
Okay that makes sense actually do you have the March 31 share count by any chance.
Yes, I do.
Right.
Give me a second Mike.
Pointed up share.
Yes.
Basic shares outstanding as of March 31, or $6 million 875000.
Okay. Okay. So as of today, I guess youre right on the bubble as far as potentially being added back to the Russell 2000 of this year. So.
We'll see what happens thanks for all your time I appreciate it you bet.
Thanks, Mike.
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 of our flex the only employees for their outstanding performance in service during the third quarter I'd.
I'd also like to thank you for participating in today's call. Thank you for your questions today and please reach out of any additional loans. We look forward to updating you on the next call. Thanks again, everybody really we really appreciate your time today.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.