DUBUQUE, Iowa-- Flexsteel Industries, Inc. (NASDAQ:FLXS) today reported results of operations for its second quarter and fiscal year-to-date December 31, 2010.
The Company reported net sales for the quarter ended December 31, 2010 of $82.8 million compared to $83.5 million in the prior year quarter. The Company reported net income for the current quarter of $2.1 million or $0.31 per share compared to net income of $3.0 million or $0.45 per share in the prior year quarter. During the current year quarter the Company completed the closing of a manufacturing facility and recorded a pre-tax charge to cost of goods sold of $0.6 million to write-down related inventory.
For the six months ended December 31, 2010, the Company reported net sales of $170.1 million compared to the prior year sales of $159.5 million, an increase of 6.6%. The Company reported net income for the current six-month period of $4.5 million or $0.65 per share compared to a net income of $4.3 million or $0.66 per share in the prior year period. The current year six-month period includes a pre-tax charge of approximately $1.0 million to facility closing costs for employee separation and other closing costs, and an inventory write-down to cost of goods sold of $0.6 million related to closing the manufacturing facility described above.
For the quarter ended December 31, 2010, residential net sales were $63.5 million, an increase of 1.5% from the prior year quarter net sales of $62.6 million. Commercial net sales were $19.3 million compared to $20.9 million in the prior year quarter, a decrease of 7.8%.
For the six months ended December 31, 2010, residential net sales were $128.8 million compared to residential net sales of $118.8 million in the six months ended December 31, 2009, an increase of 8.4%. Commercial net sales were $41.3 million for the six months ended December 31, 2010 compared to $40.7 million for the six months ended December 31, 2009, an increase of 1.6%.
Gross margin for the quarter ended December 31, 2010 was 22.7% compared to 24.0% in the prior year quarter. For the six months ended December 31, 2010, the gross margin was 22.6% compared to 22.9% for the prior year six-month period. Gross margin for the quarter and six-month period was adversely impacted by inventory write-down associated with the facility closing.
Selling, general and administrative expenses for the quarter ended December 31, 2010 were $15.5 million or 18.7% of net sales compared to $15.3 million or 18.3% of net sales in the prior year quarter due to increases in bad debt and selling costs on slightly lower sales. For the six months ended December 31, 2010, selling, general and administrative expenses were $30.4 million or 17.9% of net sales compared to $29.4 million or 18.4% of net sales in the prior year six-month period reflecting better absorption of fixed costs.
Working capital (current assets less current liabilities) at December 31, 2010 was $95.4 million. Net cash provided by operating activities was $0.2 million during the six months ended December 31, 2010. Net income of $4.5 million and accounts receivables reduction of $2.5 million were offset by a $5.3 million increase in inventory and lower accrued liabilities.
Capital expenditures were $0.6 million during the first six months of fiscal year 2011. Depreciation expense was $1.4 million and $1.5 million in the six-month periods ended December 31, 2010 and 2009, respectively. The Company expects that capital expenditures will be less than $2.5 million for the remainder of the fiscal year.
All earnings per share amounts are on a diluted basis.
Outlook
Our balance sheet remains strong reflecting working capital in excess of $95 million and no bank borrowings. We had a sales increase for the current year over the prior year due in part to a strong backlog going into the year. Our residential furniture incoming order rate slowed during the first quarter, but improved slightly as we moved through the second quarter. Commercial product sales continue at low levels and we do not anticipate significant improvements in the second half of fiscal year 2011. The Company is beginning to see pricing pressures on certain raw materials and finished products. At this time we are unable to determine what the impact will be on our gross margin.
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.
About Flexsteel
Flexsteel Industries, Inc. is headquartered in Dubuque, Iowa, and was incorporated in 1929. Flexsteel is a designer, manufacturer, importer and marketer of quality upholstered and wood furniture for residential, recreational vehicle, office, hospitality and healthcare markets. All products are distributed nationally.
The Company reported net sales for the quarter ended December 31, 2010 of $82.8 million compared to $83.5 million in the prior year quarter. The Company reported net income for the current quarter of $2.1 million or $0.31 per share compared to net income of $3.0 million or $0.45 per share in the prior year quarter. During the current year quarter the Company completed the closing of a manufacturing facility and recorded a pre-tax charge to cost of goods sold of $0.6 million to write-down related inventory.
For the six months ended December 31, 2010, the Company reported net sales of $170.1 million compared to the prior year sales of $159.5 million, an increase of 6.6%. The Company reported net income for the current six-month period of $4.5 million or $0.65 per share compared to a net income of $4.3 million or $0.66 per share in the prior year period. The current year six-month period includes a pre-tax charge of approximately $1.0 million to facility closing costs for employee separation and other closing costs, and an inventory write-down to cost of goods sold of $0.6 million related to closing the manufacturing facility described above.
For the quarter ended December 31, 2010, residential net sales were $63.5 million, an increase of 1.5% from the prior year quarter net sales of $62.6 million. Commercial net sales were $19.3 million compared to $20.9 million in the prior year quarter, a decrease of 7.8%.
For the six months ended December 31, 2010, residential net sales were $128.8 million compared to residential net sales of $118.8 million in the six months ended December 31, 2009, an increase of 8.4%. Commercial net sales were $41.3 million for the six months ended December 31, 2010 compared to $40.7 million for the six months ended December 31, 2009, an increase of 1.6%.
Gross margin for the quarter ended December 31, 2010 was 22.7% compared to 24.0% in the prior year quarter. For the six months ended December 31, 2010, the gross margin was 22.6% compared to 22.9% for the prior year six-month period. Gross margin for the quarter and six-month period was adversely impacted by inventory write-down associated with the facility closing.
Selling, general and administrative expenses for the quarter ended December 31, 2010 were $15.5 million or 18.7% of net sales compared to $15.3 million or 18.3% of net sales in the prior year quarter due to increases in bad debt and selling costs on slightly lower sales. For the six months ended December 31, 2010, selling, general and administrative expenses were $30.4 million or 17.9% of net sales compared to $29.4 million or 18.4% of net sales in the prior year six-month period reflecting better absorption of fixed costs.
Working capital (current assets less current liabilities) at December 31, 2010 was $95.4 million. Net cash provided by operating activities was $0.2 million during the six months ended December 31, 2010. Net income of $4.5 million and accounts receivables reduction of $2.5 million were offset by a $5.3 million increase in inventory and lower accrued liabilities.
Capital expenditures were $0.6 million during the first six months of fiscal year 2011. Depreciation expense was $1.4 million and $1.5 million in the six-month periods ended December 31, 2010 and 2009, respectively. The Company expects that capital expenditures will be less than $2.5 million for the remainder of the fiscal year.
All earnings per share amounts are on a diluted basis.
Outlook
Our balance sheet remains strong reflecting working capital in excess of $95 million and no bank borrowings. We had a sales increase for the current year over the prior year due in part to a strong backlog going into the year. Our residential furniture incoming order rate slowed during the first quarter, but improved slightly as we moved through the second quarter. Commercial product sales continue at low levels and we do not anticipate significant improvements in the second half of fiscal year 2011. The Company is beginning to see pricing pressures on certain raw materials and finished products. At this time we are unable to determine what the impact will be on our gross margin.
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.
About Flexsteel
Flexsteel Industries, Inc. is headquartered in Dubuque, Iowa, and was incorporated in 1929. Flexsteel is a designer, manufacturer, importer and marketer of quality upholstered and wood furniture for residential, recreational vehicle, office, hospitality and healthcare markets. All products are distributed nationally.
Have something to say? Share your thoughts with us in the comments below.