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 March 31, 1997 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 52004-0877
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 - $1.00 Par Value
Shares Outstanding as of March 31, 1997 6,957,435
FLEXSTEEL INDUSTRIES, INC.
CONDENSED BALANCE SHEETS (UNAUDITED)
MARCH 31, JUNE 30,
1997 1996
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents.................... $ 2,990,130 $ 3,867,742
Temporary investments at fair value
based on quoted market price .............. 4,785,714 8,940,603
Trade receivables - Less allowance for
doubtful accounts: March 31, 1997,
$2,430,173; June 30, 1996, $2,152,810 ..... 29,207,478 24,464,171
Inventories ................................. 26,833,169 26,082,857
Deferred income tax ......................... 2,010,000 2,010,000
Other assets ................................ 97,837 732,054
----------- -----------
Total current assets ........... 65,924,328 66,097,427
PROPERTY, PLANT, AND EQUIPMENT - At cost
less accumulated depreciation:
March 31, 1997, $45,966,862;
June 30, 1996, $44,211,432 .................. 26,561,896 23,046,224
OTHER ASSETS .................................. 7,025,851 6,730,513
----------- -----------
TOTAL...................... $99,512,075 $95,874,164
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade..................... $ 5,072,733 $ 3,574,232
Dividends payable ........................... 834,892 850,274
Accrued liabilities ......................... 13,468,883 11,662,410
Current portion of long-term debt ........... 2,635,000 2,635,000
----------- -----------
Total current liabilities ...... 22,011,508 18,721,916
----------- -----------
LONG-TERM DEBT ................................ 35,000
-----------
DEFERRED COMPENSATION ......................... 3,015,247 2,969,847
----------- -----------
SHAREHOLDERS' EQUITY:
Common Stock - $1 par value; authorized
15,000,000 shares; issued March 31,
1997, 6,957,435 shares; June 30, 1996,
7,095,044 shares .......................... 6,957,435 7,095,044
Additional paid-in capital .................. 7,310 556,632
Retained earnings ........................... 67,170,787 66,266,325
Unrealized investment gain .................. 349,788 229,400
----------- -----------
Total .......................... 74,485,320 74,147,401
----------- -----------
TOTAL...................... $99,512,075 $95,874,164
=========== ===========
See accompanying Notes.
FLEXSTEEL INDUSTRIES, INC.
CONDENSED STATEMENTS OF EARNINGS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales ................... $ 56,803,035 $ 53,213,023 $159,373,662 $150,616,934
------------ ------------ ------------ ------------
Operating Expenses:
Cost of goods sold ........ 45,000,753 41,524,012 125,422,072 119,384,052
Selling, general and
administrative expenses.. 9,908,179 9,613,268 28,341,741 27,704,974
------------ ------------ ------------ ------------
Total ................. 54,908,932 51,137,280 153,763,813 147,089,026
------------ ------------ ------------ ------------
Operating Income ............ 1,894,103 2,075,743 5,609,849 3,527,908
------------ ------------ ------------ ------------
Interest and Other:
Income .................... 811,429 250,896 1,447,420 766,631
Expense ................... 84,349 88,622 256,211 272,467
------------ ------------ ------------ ------------
Net ................... 727,080 162,274 1,191,209 494,164
------------ ------------ ------------ ------------
Income Before Income Taxes... 2,621,183 2,238,017 6,801,058 4,022,072
Provision for Income Taxes... 935,000 805,000 2,450,000 1,445,000
------------ ------------ ------------ ------------
Net Income ............... $ 1,686,183 $ 1,433,017 $ 4,351,058 $ 2,577,072
============ ============ ============ ============
Average Number of Common
Shares Outstanding .......... 6,979,450 7,169,878 7,021,492 7,195,857
============ ============ ============ ============
Per Share of Common Stock:
Net Earnings ................ $ .24 $ .20 $ .62 $ .36
Dividends ................... $ .12 $ .12 $ .36 $ .36
See accompanying Notes.
</TABLE>
FLEXSTEEL INDUSTRIES, INC.
CONDENSED STATEMENTS OF CASH FLOW (UNAUDITED)
Nine Months Ended
March 31,
1997 1996
----------- -----------
OPERATING ACTIVITIES:
Net Income .................................... $ 4,351,058 $ 2,577,072
Adjustments to reconcile net income to net
cash provided by operating activities ......... 4,859,318 2,861,218
----------- -----------
Net cash provided by operating activities ..... 9,210,376 5,438,290
----------- -----------
INVESTING ACTIVITIES:
Payment for purchase of business assets ...... (6,973,951)
Purchases of temporary investments ........... (974,935) (4,367,910)
Proceeds from sales of temporary investments.. 5,250,212 2,711,124
Net additions to property, plant
and equipment .............................. (3,220,788) (1,559,047)
----------- -----------
Net cash used in investing activities ........... (5,919,461) (3,215,833)
----------- -----------
FINANCING ACTIVITIES:
Repayment of long-term debt .................. (35,000) (35,000)
Payment of dividends ......................... (2,520,126) (2,585,275)
Proceeds from issuance of common stock
March 31, 1997, 12,391 shares;
March 31, 1996, 24,948 shares .............. 119,099 279,562
Repurchase of common stock
March 31, 1997, 150,000 shares;
March 31, 1996, 100,045 shares ............. (1,732,500) (977,853)
----------- -----------
Net cash used in financing activities ........... (4,168,527) (3,318,566)
----------- -----------
Decrease in cash and cash equivalents ........... (877,612) (1,096,109)
Cash and cash equivalents at beginning of year... 3,867,742 5,768,537
----------- -----------
Cash and cash equivalents at end of period ...... $ 2,990,130 $ 4,672,428
=========== ===========
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 those principles
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 nine month period ended
March 31, 1997 are not necessarily indicative of the results which may be
expected for the year ending June 30, 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:
March 31, June 30,
1997 1996
---- ----
Raw materials........................ $13,208,106 $12,936,114
Work in process and finished parts... 7,659,707 7,594,621
Finished goods....................... 5,965,356 5,552,122
----------- -----------
Total............... $26,833,169 $26,082,857
=========== ===========
4. Interest paid during the nine month period ended March 31, 1997 and 1996
was $78,000 and $96,000, respectively. Income taxes paid during the nine
month period ended March 31, 1997 and 1996 were $2,500,000 and $1,061,000,
respectively.
5. During the quarter ended 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 nine months ended March 31, 1996.
The net, after tax, charge to earnings is $300,000, or $.04 per share.
6. During the quarter ended March 31, 1997, the Company completed the sale of
its former production facility located in Sweetwater, Tennessee. This sale
resulted in a gain of approximately $550,000, and is reported as other
income for the quarter and nine month period ended March 31, 1997. The net,
after tax, credit to earnings is approximately $350,000, or $.05 per share.
FLEXSTEEL INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONDENSED STATEMENT
OF EARNINGS
Financial Condition - On March 18, 1997 the Company announced the completion of
the acquisition of the assets of Dygert Seating, Inc. and the related production
facilities in Elkhart, Indiana for approximately $7,000,000. The purchase was
financed internally by liquidating temporary investments. The purchase included
accounts receivable $1,600,000, inventory $1,500,000, and fixed assets of
$3,900,000.
Additionally, during March the Company completed a sale of its idle production
facility in Sweetwater, Tennessee for $1,000,000. The sale resulted in a gain of
approximately $550,000 before income taxes and is reported as other income.
Excluding the transactions outlined above, the operations of the Company
produced a net cash and temporary investment increase of $968,000. Accounts
receivable increased $3,143,000 and inventories declined $750,000 compared to
June 30, 1996. Capital expenditures were $3,777,000 for manufacturing and
delivery equipment. In the next three months approximately $1,000,000 will be
spent for production related equipment.
The Company has repurchased 250,045 shares of its common stock for $2,710,353 as
authorized by the Board of Directors and announced through a release dated
February 1, 1996. Approximately 44% of the 500,000 shares of Company stock
authorized for purchase on the open market are still available for purchase by
the Company.
ECONOMIC CONDITIONS - The Company anticipates the demand for its seating
products will continue at current moderate levels over the remainder of the
fiscal year. In addition, sales attributable to the Dygert acquisition should
approximate $6,000,000, over the next three months. 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 $3,590,000 (6.7%), compared to the prior year quarter. Sales
increased $2,569,000 (7.7%) in Home Furnishings, Recreational Vehicle increased
$636,000 (4.2%), and Commercial Seating increased $385,000 (8.1%). Cost of goods
sold increased by $3,477,000 due to the increased volume, and approximately
$650,000 of additional costs associated with increased costs for labor and
materials, margin erosion, and start up of Dygert operations.
Selling, general, and administrative costs increased by $296,000 due to volume.
Other income increased by $550,000 due mainly to the gain on sale of the
Sweetwater, Tennessee production facility. The aforementioned changes resulted
in an increase in net income after taxes of $253,000, or $.04 per share,
compared to the quarter ended March 31, 1996.
RESULTS OF OPERATIONS FOR THE LAST NINE MONTHS - Sales increased by $8,757,000
(5.8%) compared to the nine month period ended March 31, 1996. Sales increased
$4,835,000 (5.0%) in Home Furnishings, $1,347,000 (3.2%) in Recreational Vehicle
Products and by $2,575,000 (20.1%) in Commercial Seating. Cost of goods sold
increased by $6,038,000 due primarily to the volume increase, however, prior
year results include $470,000 associated with closing the Sweetwater, Tennessee
production facility.
Selling, general and administrative expenses increased by $637,000. The Company
was able to absorb approximately $975,000 of volume related increases through
lower bad debt provision and fixed cost control. Interest and other income
increased by $681,000 primarily due to the gain on the sale of the Tennessee
facility. The aforementioned changes resulted in an increase in net income after
taxes of $1,774,000, or $.26 per share, compared to the nine month period ended
March 31, 1996.
The statements included in this report which are not historical or current facts
are "forward-looking statements" made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. There are certain
important factors that could cause results to differ materially from those
anticipated by some of the statements made herein. Investors are cautioned that
all forward-looking statements involve risks and uncertainty. Some of the
factors that could affect results are the effectiveness of new product
introductions, the product mix of our sales, the amount of sales generated and
the profit margins thereon or volatility in the major markets, competition and
general economic conditions.
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: May 1, 1997 By: /s/ R. J. Klosterman
------------------ ----------------------------------
R. J. Klosterman
Financial Vice President
and
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,990,130
<SECURITIES> 4,785,714
<RECEIVABLES> 31,637,651
<ALLOWANCES> 2,430,173
<INVENTORY> 26,833,169
<CURRENT-ASSETS> 65,924,328
<PP&E> 72,528,758
<DEPRECIATION> 45,966,862
<TOTAL-ASSETS> 99,512,075
<CURRENT-LIABILITIES> 22,011,508
<BONDS> 0
0
0
<COMMON> 6,957,435
<OTHER-SE> 67,527,885
<TOTAL-LIABILITY-AND-EQUITY> 99,512,075
<SALES> 56,803,035
<TOTAL-REVENUES> 57,614,464
<CGS> 45,000,753
<TOTAL-COSTS> 54,908,932
<OTHER-EXPENSES> 9,908,179
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84,349
<INCOME-PRETAX> 2,621,183
<INCOME-TAX> 935,000
<INCOME-CONTINUING> 1,686,183
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,686,183
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0
</TABLE>
