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, 1996 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, 1996 7,024,201
FLEXSTEEL INDUSTRIES, INC.
CONDENSED BALANCE SHEETS (UNAUDITED)
DECEMBER 31, JUNE 3O,
1996 1996
------------ -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............. $ 4,128,777 $ 3,867,742
Temporary investments at fair value
based on quoted market price ........ 9,068,155 8,940,603
Trade receivables - Less allowance for
doubtful accounts: December 31, 1996,
$2,235,324; June 3O, 1996, $2,152,810 22,569,371 24,464,171
Inventories ........................... 26,944,419 26,082,857
Deferred income taxes ................. 2,010,000 2,010,000
Other assets .......................... 601,312 732,054
----------- -----------
Total current assets ..... 65,322,034 66,097,427
PROPERTY, PLANT, AND EQUIPMENT - At cost
less accumulated depreciation:
December 31, 1996, $45,845,796;
June 3O, 1996, $44,211,432 ............ 23,736,320 23,046,224
OTHER ASSETS ............................ 6,860,109 6,730,513
----------- -----------
TOTAL ............... $95,918,463 $95,874,164
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade .............. $ 3,098,523 $ 3,574,232
Dividends payable ..................... 842,892 850,274
Accrued liabilities ................... 11,848,199 11,662,410
Industrial revenue bonds payable ...... 2,635,000 2,635,000
----------- -----------
Total current liabilities 18,424,614 18,721,916
----------- -----------
LONG-TERM DEBT .......................... 35,000 35,000
----------- -----------
DEFERRED COMPENSATION ................... 2,977,747 2,969,847
----------- -----------
SHAREHOLDERS' EQUITY:
Common Stock - $1 par value; authorized
15,OOO,OOO shares; issued December 31,
7,024,201 shares; June 30, 7,095,044
shares .............................. 7,024,201 7,095,044
Additional paid-in capital ............ 26,075 556,632
Retained earnings ..................... 67,034,376 66,266,325
Unrealized investment gain ............ 396,450 229,400
----------- -----------
Total .................... 74,481,102 74,147,401
----------- -----------
TOTAL ............... $95,918,463 $95,874,164
=========== ===========
See accompanying Notes.
<TABLE>
<CAPTION>
FLEXSTEEL INDUSTRIES, INC.
CONDENSED STATEMENTS OF EARNINGS (UNAUDITED)
Three Months Ended Six Months Ended
December 31, December 31,
1996 1995 1996 1995
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net Sales.............................. $50,551,568 $48,177,183 $102,570,627 $97,403,911
----------- ----------- ------------ -----------
Operating Expenses:
Cost of goods sold..................... 39,776,718 38,490,613 80,421,319 77,860,040
Selling, general and
administrative expenses............ 9,136,183 8,749,440 18,433,562 18,091,706
----------- ----------- ------------ -----------
Total............................ 48,912,901 47,240,053 98,854,881 95,951,746
----------- ----------- ------------ -----------
Operating Income....................... 1,638,667 937,130 3,715,746 1,452,165
----------- ----------- ------------ -----------
Interest and Other:
Income.............................. 334,621 272,116 635,991 515,735
Expense............................. 84,895 93,287 171,862 183,845
----------- ----------- ------------ -----------
Net............................. 249,726 178,829 464,129 331,890
----------- ----------- ------------ -----------
Earnings Before Income Taxes.......... 1,888,393 1,115,959 4,179,875 1,784,055
Provision for Income Taxes............ 685,000 400,000 1,515,000 640,000
----------- ----------- ------------ -----------
Net Earnings....................... $ 1,203,393 $ 715,959 2,664,875 1,144,055
=========== =========== ============ ===========
Average Number of Common
Shares Outstanding.................... 7,022,636 7,212,819 7,042,514 7,208,846
=========== =========== ============ ===========
Per Share of Common Stock:
Net Earnings.......................... $ .17 $ .10 $ .38 $ .16
Dividends............................. $ .12 $ .12 $ .24 $ .24
See accompanying Notes.
</TABLE>
FLEXSTEEL INDUSTRIES, INC.
CONDENSED STATEMENTS OF CASH FLOW (UNAUDITED)
Six Months Ended
December, 31,
1996 1995
---------- -----------
OPERATING ACTIVITIES:
Net Income........................................ $2,664,875 $1,144,055
Adjustments to reconcile net income to net
cash provided by operating activities............. 3,218,042 4,010,969
---------- -----------
Net cash provided by operating activities......... 5,882,917 5,155,024
---------- -----------
INVESTING ACTIVITIES:
Purchases of temporary investments............. (947,634) (4,464,215)
Proceeds from sales of temporary investments... 987,133 2,224,549
Additions to property, plant and equipment..... (3,163,157) (1,216,468)
---------- -----------
Net cash used in investing activities............. (3,123,658) (3,456,134)
---------- -----------
FINANCING ACTIVITIES:
Payment of dividends........................... (1,685,233) (1,731,111)
Proceeds from issuance of stock (9,157 shares). 77,009 250,273
Repurchase of common stock (80,000 shares)..... (890,000)
---------- -----------
Net cash used in financing activities............. (2,498,224) (1,480,838)
---------- -----------
Increase in cash and cash equivalents............. 261,035 218,052
Cash and cash equivalents at beginning of year.... 3,867,742 5,768,537
---------- -----------
Cash and cash equivalents at end of period........ $4,128,777 $5,986,589
========== ===========
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, 1996.
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, 1996 are not necessarily indicative of
the results which may be expected for the year ending June 3O, 1997.
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,
1996 1996
---- ----
Raw materials...................... $12,975,372 $12,936,114
Work in process and finished parts. 7,636,439 7,594,621
Finished goods..................... 6,332,608 5,552,122
----------- -----------
Total............. $26,944,419 $26,082,857
=========== ===========
4. Interest paid during the six month periods ended December 31, 1996 and
1995 was $52,000 and $54,000, respectively. Income taxes paid during
the six month periods ended December 31, 1996 and 1995 were $2,157,000
and $634,000, 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 at December 31, 1996 increased by $389,000 from the balances at June
30, 1996. During that same six months, net trade receivables decreased by
$1,895,000 while inventories increased by $862,000. Capital expenditures were
$3,159,000 for manufacturing and delivery equipment. Working capital decreased
by $478,000 for the six month period. In the next six months approximately
$2,000,000 will be spent for production related equipment.
Economic Conditions - The Company anticipates that demand for its seating
products will continue at current moderate levels over the remainder of the
fiscal year. Management continues to focus on internal improvements in the areas
of product line simplification, cost savings identification and implementation,
and manufacturing process efficiencies. Operating profits should improve as a
result of these strategies.
Results of Operations for the Quarter - Sales for the current quarter increased
by approximately $2,375,000 (4.9%), compared to the prior year quarter. Sales
volume increased by $1,704,000 (5.5%) in Home Furnishings and $982,000 (23.6%)
in Commercial Seating products, while Recreational Vehicle products sales
decreased by $311,000 (2.4%). Cost of goods sold for the quarter ended December
31, 1996 increased by $1,286,000 over the quarter ended December 31, 1995. Sales
volume related cost increases were partially offset by approximately $600,000 in
production related efficiency improvements and fixed cost absorption when
compared to the prior year quarter. Selling, general, and administrative costs
for the current quarter increased by $387,000 over the same quarter of the prior
year due primarily to the increased sales volume. These changes resulted in an
increase in net income after taxes of $487,000, or $.07 per share, compared to
the quarter ended December 31, 1995.
Results of Operations for the Last Six Months - Sales increased by approximately
$5,167,000 (5.3%), compared to the six month period ended December 31, 1995.
Sales increased $2,266,000 (3.6%)in Home Furnishings, Commercial Seating
increased $2,189,000 (27.1%), and Recreational Vehicle increased $712,000
(2.7%). Cost of goods sold increased by $2,561,000. Volume related cost
increases were offset by approximately $1,100,000 in production related
efficiency improvements and fixed cost absorption as compared to the prior year.
In addition, prior year results included pre-tax costs of $470,000, or $.04 per
share after tax, associated with closing the Sweetwater, TN production facility.
Selling, general, and administrative costs increased only $342,000. The Company
was able to absorb approximately $350,000 of volume related increases primarily
due to a lower bad debt provision. In addition, prior year results included
costs of approximately $250,000 associated with development of our Comfort
Seating Showroom Program. These changes resulted in an increase in net income
after taxes of $1,521,000, or $.22 per share, compared to the six month period
ended December 31, 1995.
PART II OTHER INFORMATION
Submission of Matters to a Vote of Security Holders.
(a) The Annual Meeting of the shareholders was held on December
10, 1996.
(b) Four directors were elected at the meeting to serve for three
years or until their successors are elected and qualified or
until their earlier resignation, removal or termination.
Shares were voted as follows:
FOR WITHHELD
K. Bruce Lauritsen 5,988,488 29,688
Thomas E. Holloran 5,988,338 29,838
L. Bruce Boylen 5,986,466 31,710
John R. Easter 5,985,966 32,210
(c) A proposal was made to ratify and approve the appointment of
Deloitte & Touche LLP as the Company's independent auditors
for 1997. Shares were voted as follows:
FOR AGAINST ABSTAIN
5,998,544 16,338 3,294
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 13, 1997 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-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 4,128,777
<SECURITIES> 9,068,155
<RECEIVABLES> 24,804,695
<ALLOWANCES> 2,235,324
<INVENTORY> 26,944,419
<CURRENT-ASSETS> 65,322,034
<PP&E> 69,582,116
<DEPRECIATION> 45,845,796
<TOTAL-ASSETS> 95,918,463
<CURRENT-LIABILITIES> 18,424,614
<BONDS> 35,000
0
0
<COMMON> 7,024,201
<OTHER-SE> 67,456,901
<TOTAL-LIABILITY-AND-EQUITY> 95,918,463
<SALES> 50,551,568
<TOTAL-REVENUES> 50,886,189
<CGS> 39,776,718
<TOTAL-COSTS> 48,912,901
<OTHER-EXPENSES> 9,136,183
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84,895
<INCOME-PRETAX> 1,888,393
<INCOME-TAX> 685,000
<INCOME-CONTINUING> 1,203,393
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,203,393
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0
</TABLE>
