Flexsteel Posts First Quarter Operating Profit

October 21, 2009 by · Leave a Comment 

 Flexsteel Industries Inc., Dubuque, Iowa, today (Oct. 22) reported results of operations for its  FY10 first fiscal quarter ended Sept. 30, according to a release.

The company reported net sales for the quarter of $75.9 million compared to the prior year quarter of $91.4 million, a decrease of 16.9%. The company reported net income for the current quarter of $1.4 million or $0.21 per share compared to a net loss of $0.7 million or $0.11 per share in the prior year quarter. The prior year quarter included approximately $1.3 million of facility consolidation costs.

For the quarter, net sales were $56.2 million, a decrease of 9.4% from the prior year quarter net residential sales of $62.0 million. Commercial net sales were $19.7 million compared to $29.4 million in the prior year quarter, a decrease of 32.9%. Commercial net sales for both periods now include vehicle seating product sales. Due to operational realignment related to shrinking markets and poor business conditions, and the changing nature of vehicle seating product applications, we will include these sales with commercial products on a go-forward basis.

Gross margin for the quarter was 21.8% compared to 18.7% in the prior year quarter. The improvement in gross margin percentage is primarily due to changes implemented during the prior fiscal year to better utilize capacity and control costs. In addition, we benefited from modest relief from some of the prior year cost increases for materials and freight.

Selling, general and administrative expenses were $14.1 million or 18.6% of sales and $16.8 million or 18.3% for the quarters ended September 30, 2009 and 2008, respectively, representing a reduction of approximately $2.7 million due to lower variable expenses on lower sales volume and control of fixed general and administrative expenses.

Working capital (current assets less current liabilities) was $79.4 million. Net cash provided by operating activities was $3.0 million during the first quarter due to net income of $1.4 million, depreciation of $0.8 million and changes in net current assets of $0.8 million. Net cash provided by operating activities was $2.2 million at September 30, 2008.

Capital expenditures were $0.6 million. Depreciation and amortization expense was $800,000 and $1.1 million for the fiscal quarters ended Sept. 30, 2009 and 2008, respectively. The company expects that capital expenditures will be approximately $1.5 million for the remainder of the 2010 fiscal year.

All earnings per share amounts are on a diluted basis.

Outlook based upon current business conditions: We believe sales have stabilized at current levels and do not anticipate significant further declines. However, at this time we are not seeing a significant improvement in near-term business conditions. The consolidation of manufacturing operations and workforce reductions that the company completed during the prior fiscal year has brought production capacity and fixed overhead in line with current and expected demand for our products. Companywide employment, which was reduced approximately 30% in the prior fiscal year through plant closures and workforce reductions, remains at these reduced levels.

We believe that our residential product category has performed reasonably well in relation to our competition. However, residential furniture continues to be a highly deferrable purchase item and is adversely impacted by low levels of consumer confidence, a depressed market for new housing, limited consumer credit and high unemployment. The commercial product category fell considerably as the U. S. economy contracted and credit tightened further during the fourth quarter of the prior fiscal year. We do not foresee any immediate improvement in these conditions and continue to operate on that basis.

While we expect that current business conditions will persist for the remainder of fiscal year 2010, we remain optimistic that our strategy, which includes a wide range of quality product offerings and price points to the residential and commercial markets, combined with our conservative approach to business, will be rewarded when business conditions improve. We will maintain our focus on a strong balance sheet during these challenging economic times through emphasis on cash flow and improving profitability.

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