Flexsteel Industries, Inc. reported results of operations for its second quarter and fiscal year-to-date December 31, 2009.
The Company reported net sales for the quarter ended December 31, 2009 of $83.5 million compared to $84.5 million in the prior year quarter. The Company reported net income for the current quarter of $3.0 million or $0.45 per share compared to net income of $0.3 million or $0.04 per share in the prior year quarter. The prior year quarter included approximately $0.5 million of pre-tax facility consolidation costs.
For the six months ended December 31, 2009, the Company reported net sales of $159.5 million compared to the prior year sales of $176.0 million, a decrease of 9%. The Company reported net income for the current six-month period of $4.3 million or $0.66 per share compared to a net loss of $0.5 million or $0.07 per share in the prior year period. The prior year six-month period included approximately $1.8 million of pre-tax facility consolidation costs.
For the quarter ended December 31, 2009, residential net sales were $62.6 million, an increase of 8% from the prior year quarter net sales of $58.1 million. Commercial net sales were $20.9 million compared to $26.4 million in the prior year quarter, a decrease of 21%.
For the six months ended December 31, 2009, residential net sales were $118.8 million, slightly less than residential net sales of $120.1 million in the six months ended December 31, 2008. Commercial net sales were $40.7 million for the six months ended December 31, 2009, a decrease of 27% from the six months ended December 31, 2008.
Gross margin for the quarter ended December 31, 2009 was 24.0% compared to 19.1% in the prior year quarter. For the six months ended December 31, 2009, the gross margin was 22.9% compared to 18.9% for the prior year six-month period. These gross margin improvements are primarily due to better capacity utilization and lower fixed manufacturing costs resulting from last year’s facility consolidations, changes in product mix and lower ocean freight costs.
Selling, general and administrative expenses for the quarter ended December 31, 2009 were 18.3% compared to 18.2% in the prior year quarter. For the six months ended December 31, 2009, selling, general and administrative expenses were 18.4% compared to 18.2% in the prior year six-month period.
Working capital (current assets less current liabilities) at December 31, 2009 was $83.1 million. Net cash provided by operating activities was $17.8 million during the six months ended December 31, 2009 due to improved profitability and lower inventory. Subsequent to the end of the quarter the Company paid off the remaining $5.0 million of bank borrowings with available cash.
Capital expenditures were $0.9 million during the first six months of fiscal year 2010. Depreciation expense was $1.5 million and $2.0 million in the six-month periods ended December 31, 2009 and 2008, respectively. The Company expects that capital expenditures will be less than $1.0 million for the remainder of the 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. 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. Company wide 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.
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.