SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 2O549
FORM 1O-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1995 Commission file number O-5151
FLEXSTEEL INDUSTRIES, INC.
Incorporated in State of Minnesota I.R.S. Identification No. 42-O442319
FLEXSTEEL INDUSTRIES, INC.
P. O. BOX 877
DUBUQUE, IOWA 52OO4-0877
Area code 319 Telephone 556-773O
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 9O days. Yes X . No.___.
Common Stock - $1.OO Par Value
Shares Outstanding as of December 31, 1995 7,215,180
FLEXSTEEL INDUSTRIES, INC.
CONDENSED BALANCE SHEETS (UNAUDITED)
DECEMBER 31, JUNE 3O,
1995 1995
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................... $ 5,986,589 $ 5,768,537
Temporary investments....................... 10,508,281 8,268,615
Trade receivables - Less allowance for
doubtful accounts: December 31, 1995,
$1,817,235; June 3O, 1995, $2,160,211..... 22,654,671 22,905,047
Inventories................................. 25,125,167 25,921,674
Deferred income taxes....................... 2,000,000 2,000,000
Other assets................................ 965,453 844,557
Total current assets........... 67,240,161 65,708,430
PROPERTY, PLANT, AND EQUIPMENT - At cost
less accumulated depreciation:
December 31, 1995, $43,604,085;
June 3O, 1995, $41,623,972.................. 23,250,680 24,376,052
OTHER ASSETS.................................. 6,351,169 6,186,144
TOTAL..................... $96,842,010 $96,270,626
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade.................... $ 5,282,271 $ 4,756,991
Dividends payable........................... 865,822 863,175
Accrued liabilities......................... 11,006,540 10,856,550
Current portion of long-term debt........... 2,960,000 2,960,000
Total current liabilities...... 20,114,633 19,436,716
LONG-TERM DEBT................................ 70,000 70,000
DEFERRED COMPENSATION......................... 2,927,829 2,940,329
SHAREHOLDERS' EQUITY:
Common Stock - $1 par value; authorized
15,000,000 shares; issued
December 31, 7,215,180 shares;
June 30, 7,193,124 shares................. 7,215,180 7,193,124
Additional paid-in capital.................. 1,614,971 1,386,754
Retained earnings........................... 64,612,647 65,199,703
Unrealized investment gain.................. 286,750 44,000
Total.......................... 73,729,548 73,823,581
TOTAL..................... $96,842,010 $96,270,626
See accompanying Notes.
<TABLE>
<CAPTION>
FLEXSTEEL INDUSTRIES, INC.
CONDENSED STATEMENTS OF EARNINGS (UNAUDITED)
Three Months Ended Six Months Ended
December 31, December 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Sales.............................. $48,177,183 $52,351,017 $97,403,911 $103,162,756
Operating Expenses:
Cost of goods sold..................... 38,490,613 40,886,356 77,860,040 80,223,019
Selling, general and
administrative expenses............ 8,749,440 9,251,692 18,091,706 18,403,852
Total............................ 47,240,053 50,138,048 95,951,746 98,626,871
Operating Income....................... 937,130 2,212,969 1,452,165 4,535,885
Interest and Other:
Income.............................. 272,116 222,863 515,735 469,589
Expense............................. 93,287 94,412 183,845 182,213
Net............................. 178,829 128,451 331,890 287,376
Earnings Before Income Taxes.......... 1,115,959 2,341,420 1,784,055 4,823,261
Provision for Income Taxes............ 400,000 845,000 640,000 1,730,000
Net Earnings....................... $ 715,959 $ 1,496,420 1,144,055 3,093,261
Average Number of Common
Shares Outstanding.................... 7,212,819 7,179,160 7,208,846 7,168,706
Per Share of Common Stock:
Net Earnings.......................... $ .10 $ .21 $ .16 $ .43
Dividends............................. $ .12 $ .12 $ .24 $ .24
</TABLE>
See accompanying Notes.
<TABLE>
<CAPTION>
FLEXSTEEL INDUSTRIES, INC.
CONDENSED STATEMENTS OF CASH FLOW (UNAUDITED)
Six Months Ended
December, 31,
1995 1994
OPERATING ACTIVITIES:
<S> <C> <C>
Net Income........................................ $1,144,055 $3,093,261
Adjustments to reconcile net income to net
cash provided by operating activities............. 4,010,969 1,143,251
Net cash provided by operating activities......... 5,155,024 4,236,512
INVESTING ACTIVITIES:
Purchases of temporary investments............. (4,464,215) (1,957,241)
Proceeds from sales of temporary investments... 2,224,549 3,136,086
Additions to property, plant and equipment..... (1,216,468) (5,375,771)
Construction funds held in escrow.............. 1,623,605
Net cash used in investing activities............. (3,456,134) (2,573,321)
FINANCING ACTIVITIES:
Payment of dividends........................... (1,731,111) (1,723,084)
Net proceeds from issuance of stock ........... 250,273 277,163
Net cash used in financing activities............. (1,480,838) (1,445,921)
Increase in cash and cash equivalents............. 218,052 217,270
Cash and cash equivalents at beginning of year.... 5,768,537 3,385,573
Cash and cash equivalents at end of period........ $5,986,589 $3,602,843
</TABLE>
See accompanying Notes.
NOTES (UNAUDITED)
1. The accompanying condensed financial statements, which are unaudited, have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis, which is consistent with that followed in
the financial statements for the year ended June 30, 1995. The statements
include all adjustments (comprising only normal recurring accruals) which
are, in the opinion of management, necessary to a fair statement of the
financial position and results of operations and cash flows, prepared on a
summary basis, as of such dates and for the stated dates then ended. The
results of operations for the six month period ended December 31, 1995 are
not necessarily indicative of the results which may be expected for the
year ending June 3O, 1996.
2. The earnings per share are based on the average number of common shares
outstanding during each period.
3. The inventories are categorized as follows:
December 31, June 3O,
1995 1995
Raw materials...................... $12,777,670 $14,186,359
Work in process and finished parts. 7,912,832 7,546,079
Finished goods..................... 4,434,665 4,189,236
Total............. $25,125,167 $25,921,674
4. Interest paid during the six month periods ended December 31, 1995 and 1994
was $54,000 and $63,000, respectively. Income taxes paid during the six
month periods ended December 31, 1995 and 1994 were $634,000 and
$2,170,000, respectively.
5. During the quarter ending September 30, 1995, the Company recorded charges
associated with the closing of its manufacturing facility in Sweetwater,
TN, and production consolidation of Charisma Chairs in Starkville, MS. The
charges recorded and estimated to be incurred are $470,000, and are
included in cost of goods sold for the six months ended December 31, 1995.
The net, after tax, charge to earnings is $300,000, or $.04 per share.
FLEXSTEEL INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONDENSED STATEMENT
OF EARNINGS
Financial Condition - The Company's cash, cash equivalents, and temporary
investments increased by $2,458,000. Accounts receivable decreased by $250,000
while inventories decreased by $797,000. Capital expenditures were $1,219,000
for plant improvements, manufacturing, and delivery equipment. Working capital
increased $854,000 for the six month period. In the next six months
approximately $1,800,000 will be spent for manufacturing facility improvements,
manufacturing, and delivery equipment.
Economic Conditions - Demand for the Company's seating products throughout the
remainder of the year should be significantly impacted by the level of consumer
confidence attained through anticipated moderation in interest rates. However,
concerns on a national level with the budget situation and the upcoming
elections may also have a strong impact on the level of consumer confidence
attained. The Company continues to concentrate on areas which can be controlled
internally such as identifying and implementing cost savings, modernizing
equipment, improving manufacturing processes, and completing previously
announced consolidation of Charisma Chair production to help offset cost
increases for materials and assist in maintaining margins in a price-competitive
marketplace. Profitability improvements should result from these strategies and
efforts to control, and reduce, costs while maintaining sales volume and
margins.
Results of Operations for the Quarter - Sales decreased by approximately
$4,174,000, compared to the prior year quarter. Sales volume decreased by
$2,220,000 in Recreational Vehicle products and $2,089,000 in Home Furnishings,
while Commercial Seating increased by $135,000. Cost of goods sold decreased by
$2,395,000 with volume related decreases being offset by approximately $860,000
of increases in material costs and under absorbed fixed manufacturing costs.
Selling, general, and administrative costs decreased by $502,000 due to
decreased volume. The aforementioned changes resulted in a decrease in net
income after taxes of $780,000, or $.11 per share, compared to the quarter ended
December 31, 1994.
Results of Operations for the Last Six Months - Sales decreased by approximately
$5,759,000, compared to the six month period ended December 31, 1994. Sales
decreased by $4,290,000 in Recreational Vehicle products and $1,585,000 in Home
Furnishings, while Commercial Seating increased by $116,000. Cost of goods sold
decreased by $2,363,000. Volume related decreases were offset by approximately
$470,000 or $.04 per share after tax, associated with closing the Sweetwater, TN
facility and approximately $1,500,000 related to lower margins caused by the
price-sensitive market and higher material costs, and under absorbed fixed
costs. Selling, general, and administrative expenses decreased by $312,000.
Additional costs of approximately $250,000 associated with enhancements to our
Flexsteel Gallery program and an increase in bad debt provision partially offset
volume related decreases in selling, general, and administrative costs. The
afore-mentioned changes resulted in a decrease in net income after taxes of
$1,949,000, or $.27 per share, compared to the six month period ended December
31, 1994.
PART II OTHER INFORMATION
The registrant did not file a report on Form 8-K during the quarter for which
this report is filed.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned officer thereunto duly authorized.
FLEXSTEEL INDUSTRIES, INC.
Date: February 9, 1996 By: /s/ R.J. KLOSTERMAN
R.J. Klosterman
Financial Vice President &
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 5,986,589
<SECURITIES> 10,508,281
<RECEIVABLES> 24,471,906
<ALLOWANCES> 1,817,235
<INVENTORY> 25,125,167
<CURRENT-ASSETS> 67,240,161
<PP&E> 66,854,765
<DEPRECIATION> 43,604,085
<TOTAL-ASSETS> 96,842,010
<CURRENT-LIABILITIES> 20,114,633
<BONDS> 70,000
0
0
<COMMON> 7,215,180
<OTHER-SE> 66,514,368
<TOTAL-LIABILITY-AND-EQUITY> 96,842,010
<SALES> 48,177,183
<TOTAL-REVENUES> 48,449,299
<CGS> 38,490,613
<TOTAL-COSTS> 47,240,053
<OTHER-EXPENSES> 8,749,440
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 93,287
<INCOME-PRETAX> 1,115,959
<INCOME-TAX> 400,000
<INCOME-CONTINUING> 715,959
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 715,959
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0
</TABLE>
