The Company reported net sales for the quarter ended March 31, 2011 of $85.2 million compared to $81.5 million in the prior year quarter, an increase of 4.6%. The Company's net income improved by 5.8% in the current quarter to $2.5 million or $0.35 per share compared to net income of $2.3 million or $0.34 per share in the prior year quarter.
For the nine months ended March 31, 2011, the Company reported net sales of $255.2 million compared to the prior year sales of $240.9 million, an increase of 5.9%. The Company reported net income for the current nine-month period of $6.9 million or $1.00 per share compared to a net income of $6.7 million or $1.00 per share in the prior year period. The current year nine-month period includes pre-tax charges related to closing a manufacturing facility of approximately $1.0 million for employee separation and other closing costs, and an inventory write-down to cost of goods sold of $0.6 million.
For the quarter ended March 31, 2011, residential net sales were $65.0 million, an increase of 5.6% from the prior year quarter net sales of $61.6 million. Commercial net sales were $20.2 million compared to $19.9 million in the prior year quarter, an increase of 1.5%.
For the nine months ended March 31, 2011, residential net sales were $193.7 million compared to residential net sales of $180.3 million in the nine months ended March 31, 2010, an increase of 7.4%. Commercial net sales were $61.5 million for the nine months ended March 31, 2011 compared to $60.6 million for the nine months ended March 31, 2010, an increase of 1.5%.
Gross margin for the quarter ended March 31, 2011 was 21.4% compared to 22.1% in the prior year quarter reflecting the impact of increases in material costs. For the nine months ended March 31, 2011, the gross margin was 22.2% compared to 22.7% for the prior year nine-month period. Gross margin for the nine-month period was adversely impacted by inventory write-down associated with the facility closing and increases in material costs.
Selling, general and administrative expenses for the quarter ended March 31, 2011 were $14.6 million or 17.1% of net sales compared to $14.1 million or 17.3% of net sales in the prior year quarter. For the nine months ended March 31, 2011, selling, general and administrative expenses were $45.0 million or 17.6% of net sales compared to $43.5 million or 18.1% of net sales in the prior year nine-month period reflecting better absorption of fixed costs.
Working capital (current assets less current liabilities) at March 31, 2011 was $97.7 million. Net cash provided by operating activities was $6.0 million during the nine months ended March 31, 2011. Net income of $6.9 million and depreciation of $2.0 million were offset by a $2.1 million increase in inventory and a $0.8 million increase in accounts receivable.
Capital expenditures were $0.9 million during the nine months ended March 31, 2011. Depreciation expense was $2.0 million and $2.3 million in the nine-month periods ended March 31, 2011 and 2010, respectively. The Company expects that capital expenditures will be less than $2.0 million for the remainder of the fiscal year. On April 1, 2011, the Company announced plans to construct a $12 million, four-story, 40,000 square foot, corporate office building in Dubuque, Iowa, the majority of which will occur during fiscal year 2012. All earnings per share amounts are on a diluted basis.
Our balance sheet remains strong reflecting working capital in excess of $97 million and no bank borrowings. We were able to realize gains in residential sales for the current year over the prior year. There are indications that improving job prospects and improving consumer sentiment are having a positive impact on residential sales even though the housing market remains weak. We expect to continue top-line growth of our residential products through fiscal year 2012. Our commercial product sales are up slightly for the current year over the prior year. The commercial office industry continues to report increases in sales over last year. While we have benefited minimally from those increases to date, we believe we will see increased sales volume during fiscal year 2012. Based on low demand for an extended period, we anticipate increased orders for hospitality products during fiscal year 2012 as the economy improves.
The Company continues to experience increases in the cost of certain raw materials, such as steel, polyester fiber, fabric and leather, and finished products. We are implementing price increases to help mitigate the impact of the increased material and finished product costs, however, we will continue to experience downward pressure on gross margin until we realize the full benefits of these sell price increases and see an end to the cost increases.
We remain committed to our core strategies, which include a wide range of quality product offerings 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 through emphasis on cash flow and improving profitability. We believe these core strategies are in the best interest of our shareholders.
SOURCE: Flexsteel Industries Inc.
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