Dubuque, Iowa -- US seating specialist Flexsteel Industries Inc. reported a drop in sales to $405.7 million from $425.4 million for fiscal 2008, ended 30 June 2008, and a drop in income to $4.2 million from $9.3 million in the previous fiscal year.
"We have been negatively impacted by price increases in raw materials and component parts, such as steel, poly foam and fabrics, as well as increases in the cost to transport those materials to our manufacturing facilities and products to our customers," said the company, in its 12 Sept results statement. "Our overseas manufacturers have also increased prices and the cost to transport those products to the US has increased with the price of fuel. We see no near term improvement in operating conditions," the company warned. In response to these factors, the group said, it will close two manufacturing operations, raise prices, and focus on raising profitability.
Flexsteel commented that fiscal 2008 began well with the first two quarters showing improved earnings over fiscal year 2007, on only slightly lower net sales. But in Q3, net sales dropped more rapidly, while Q4's 12 -percent decrease in net sales "hampered the ability to absorb fixed costs."
"Normally, at least one of the markets in which we sell products is doing well," said the group, adding that the current results show sales drops in all areas: 6 percent in residential, 12 percent in commercial, and 35 percent in recreational vehicle seating. "We do not believe that we are losing market share in these categories," the group stressed.
"The US economy, where most of our products are sold, has been greatly impacted by the credit crisis in the home mortgage sector, a fall in the value of the US dollar versus most other major currencies, volatile high-cost fuel, increasing food prices and a changing political landscape. These factors have contributed to the lowest consumer confidence levels since 1981," Flexsteel added.
Flexsteel said in response to these conditions, the group will:
* implement price increases where possible;
* close two manufacturing units in Lancaster, Pennsylvania and New Paris, Indiana;
* strengthen relationships with customers to help them operate effectively and profitability; and
* focus on profitability and cash flow over top line growth to maintain a strong balance sheet.
The plant closures will cut the company's manufacturing capacity to match expected demand in residential and recreational vehicle seating, and give annual pre-tax savings in the range of $3.5 million to $4.0 million.
The group said it expect current business conditions to persist for most of fiscal 2009, but it remains optimistic that its wide range of "quality product offerings and price points for residential, recreational vehicle and commercial markets combined with our conservative approach to business will be rewarded."
Flexsteel's sales for its fourth quarter, of $100.6 million compared to the same period in 2007 of $114.3 million, a decrease of 12.0%. Residential sales of $66.9 million were down 6.4 percent from Q4 2007, while commercial sales of $22.1 million were 11.7 percent down. Recreational vehicle net sales of $11.6 million decreased by 34.9 percent from Q4 2007. Net income for the seating manufacturer in Q4 2008 was $0.3 million compared with $5.8 million for Q4 2007. The $5.8 million included a $4.0 million gain sale of a commercial property, and a non-taxable gain on life insurance of $0.5 million.
Net income for the year was $4.2 million compared to $9.3 million in the prior fiscal year, with the results for fiscal 2007 including the two items listed above and a gain of $0.4 million on the sale of vacant land. Excluding these three items, net income for fiscal 2007 was $6.1 million.