SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1998 Commission file number 0-5151
FLEXSTEEL INDUSTRIES, INC.
Incorporated in State of Minnesota I.R.S. Identification No. 42-0442319
FLEXSTEEL INDUSTRIES, INC.
P. O. BOX 877
DUBUQUE, IOWA 52004-0877
Area code 319 Telephone 556-7730
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 90 days. Yes _X_. No ___.
Common Stock - $1.00 Par Value
Shares Outstanding as of March 31, 1998 6,964,035
<PAGE>
FLEXSTEEL INDUSTRIES, INC.
BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................ $ 3,934,552 $ 4,445,327
Investments .............................................. 9,495,915 5,041,154
Trade receivables - less allowance for doubtful accounts:
March 31, 1998, $2,174,281;
June 30, 1997, $2,799,000 ............................ 31,081,379 25,348,941
Inventories .............................................. 26,664,677 26,985,554
Deferred income taxes .................................... 2,620,000 2,620,000
Other .................................................... 392,053 806,117
------------ ------------
Total current assets .............. 74,188,576 65,247,093
PROPERTY, PLANT, AND EQUIPMENT
at cost less accumulated depreciation:
March 31, 1998, $50,350,448;
June 30, 1997, $46,962,157 ............................... 24,153,614 26,214,405
OTHER ASSETS ................................................... 7,384,447 7,711,179
------------ ------------
TOTAL ............................. $105,726,637 $ 99,172,677
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade ................................. $ 5,586,858 $ 3,845,362
Accrued liabilities
Payroll and related items ........................... 5,522,086 4,440,219
Insurance ........................................... 5,228,664 6,057,093
Other accruals ...................................... 5,245,868 4,237,556
Industrial revenue bonds payable ......................... 2,275,000 2,310,000
------------ ------------
Total current liabilities .......... 23,858,476 20,890,230
------------ ------------
DEFERRED COMPENSATION .......................................... 3,044,918 3,044,418
------------ ------------
SHAREHOLDERS' EQUITY:
Common Stock - $1 par value; authorized 15,000,000 shares;
issued March 31,1998, 6,964,035 shares;
issued June 30, 1997, 6,927,310 shares ............. 6,964,035 6,927,310
Additional paid-in capital ............................... 395,602
Retained earnings ........................................ 70,481,385 67,750,719
Unrealized investment gain ............................... 982,221 560,000
------------ ------------
Total shareholders' equity ......... 78,823,243 75,238,029
------------ ------------
TOTAL ............................. $105,726,637 $ 99,172,677
============ ============
</TABLE>
See accompanying Notes.
- --------------------------------------------------------------------------------
<PAGE>
FLEXSTEEL INDUSTRIES, INC.
STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
--------------------------- ---------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales .................................. $ 62,089,586 $ 56,803,035 $173,508,959 $159,373,662
------------ ------------ ------------ ------------
Operating Expenses:
Cost of goods sold .................... 48,316,681 45,000,753 136,497,076 125,422,072
Selling, general and
administrative expenses ............. 10,676,560 9,919,637 30,577,483 28,420,721
------------ ------------ ------------ ------------
Total ......................... 58,993,241 54,920,390 167,074,559 153,842,793
------------ ------------ ------------ ------------
Operating Income ........................... 3,096,345 1,882,645 6,434,400 5,530,869
------------ ------------ ------------ ------------
Interest and Other:
Income ................................ 294,107 822,887 1,634,516 1,526,400
Expense ............................... 84,382 84,349 257,941 256,211
------------ ------------ ------------ ------------
Net ........................... 209,725 738,538 1,376,575 1,270,189
------------ ------------ ------------ ------------
Income Before Income Taxes ................. 3,306,070 2,621,183 7,810,975 6,801,058
Provision for Income Taxes ................. 1,200,000 935,000 2,575,000 2,450,000
------------ ------------ ------------ ------------
Net Income .......................... $ 2,106,070 $ 1,686,183 $ 5,235,975 $ 4,351,058
============ ============ ============ ============
Average Number of Common Shares Outstanding:
Basic ............................... 6,958,932 6,979,450 6,957,823 7,021,492
============ ============ ============ ============
Assuming Dilution ................... 7,035,406 7,033,382 7,024,040 7,068,371
============ ============ ============ ============
Per Share of Common Stock:
Net Earnings - Basic ..................... $ .30 $ .24 $ .75 $ .62
Net Earnings - Assuming Dilution ......... $ .30 $ .24 $ .75 $ .62
Dividends .................................. $ .12 $ .12 $ .36 $ .36
</TABLE>
See accompanying Notes.
- --------------------------------------------------------------------------------
<PAGE>
FLEXSTEEL INDUSTRIES, INC.
CONDENSED STATEMENTS OF CASH FLOW (UNAUDITED)
Nine Months Ended
March 31,
--------------------------
1998 1997
----------- -----------
OPERATING ACTIVITIES:
Net Income ..................................... $ 5,235,975 $ 4,351,058
Adjustments to reconcile net income to net
cash provided by operating activities .......... 2,398,176 4,780,338
----------- -----------
Net cash provided by operating activities ...... 7,634,151 9,131,396
----------- -----------
INVESTING ACTIVITIES:
Payment for purchase of business assets . (6,973,951)
Purchases of investments ............... (4,888,695) (974,935)
Proceeds from sales of investments ...... 856,155 5,250,212
Proceeds from sales of capital assets ... 178,137 81,250
Capital expenditures .................... (2,184,032) (3,223,057)
----------- -----------
Net cash used in investing activities .......... (6,038,435) (5,840,481)
----------- -----------
FINANCING ACTIVITIES:
Repayment of long-term debt ............. (35,000) (35,000)
Payment of dividends .................... (2,503,818) (2,520,126)
Proceeds from issuance of common stock .. 470,577 119,099
Repurchase of common stock .............. (38,250) (1,732,500)
----------- -----------
Net cash used in financing activities .......... (2,106,491) (4,168,527)
----------- -----------
Decrease in cash and cash equivalents .......... (510,775) (877,612)
Cash and cash equivalents at beginning of year . 4,445,327 3,867,742
----------- -----------
Cash and cash equivalents at end of period ..... $ 3,934,552 $ 2,990,130
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for
Interest ....................................... $ 70,000 $ 78,000
Income taxes ................................... $ 3,185,000 $ 2,500,000
Noncash financing activities
Common stock issued for management incentive
plan (40,208 and 12,391 shares respectively) ... $ 470,577 $ 119,099
See accompanying Notes.
- --------------------------------------------------------------------------------
<PAGE>
NOTES (UNAUDITED)
1. The accompanying 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, 1997. 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, 1998 are
not necessarily indicative of the results which may be expected for the
year ending June 30, 1998.
2. The inventories are categorized as follows:
March 31, June 30,
1998 1997
------------ ------------
Raw materials ........................... $ 13,099,674 $ 13,529,232
Work in process and finished parts ...... 7,084,770 7,689,051
Finished goods .......................... 6,480,233 5,767,271
------------ ------------
Total ............................ $ 26,664,677 $ 26,985,554
============ ============
3. Effective December 15, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, EARNINGS PER SHARE (SFAS No.128). Earnings
per share amounts presented for the period ended March 31, 1997 have been
restated for the adoption of SFAS No. 128. The following table reflects
the calculation of basic and diluted earnings per share for the period
ended March 31, 1998 and 1997.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
----------------------- -----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Income .................... $2,106,070 $1,686,183 $5,235,975 $4,351,058
========== ========== ========== ==========
Weighted average shares
outstanding ................ 6,958,932 6,979,450 6,957,823 7,021,492
Assumed conversion of options . 76,474 53,932 66,217 46,879
---------- ---------- ---------- ----------
Weighted average shares
outstanding and contingently
issuable ................... 7,035,406 7,033,382 7,024,040 7,068,371
========== ========== ========== ==========
Earnings per share - basic .... $ .30 $ .24 $ .75 $ .62
========== ========== ========== ==========
Earnings per share -
assuming dilution .......... $ .30 $ .24 $ .75 $ .62
========== ========== ========== ==========
</TABLE>
<PAGE>
FLEXSTEEL INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE STATEMENTS OF INCOME
FINANCIAL CONDITION - The Company's cash, cash equivalents, and temporary
investments increased by $3,944,000 since June 30, 1997. Accounts receivable
increased by $5,732,000 due to increased shipments in the current quarter.
Inventories decreased by $321,000. Capital expenditures were $2,184,000 for
building improvements, manufacturing and delivery equipment. Working capital
increased by $5,973,000 for the nine month period. In the next three months
approximately $400,000 will be spent for manufacturing related equipment.
ECONOMIC CONDITIONS - The Company anticipates that demand for its seating
products will continue at current levels for the remainder of the fiscal year.
Management continues to focus on product design for targeted markets to enhance
sales growth and internal improvements in productivity levels and efficiencies
to improve operating profit margins. Based on current backlogs and favorable
economic conditions, including low interest rates, the Company expects operating
profits to continue at or near current levels for the remainder of the fiscal
year.
RESULTS OF OPERATIONS FOR THE QUARTER - Sales increased by approximately
$5,287,000 (9.3%), compared to the prior year quarter. Vehicle Seating volume
increased $3,801,000 (24.2%), with approximately $1,996,000 related to Dygert
Seating, acquired during the third quarter of the prior year, and $1,805,000 in
other Vehicle Seating products. Residential Seating and Commercial Seating
volume increased $1,004,000 (2.8%) and $482,000 (9.4%), respectively, in
comparison to the prior year quarter. Cost of goods sold increased $3,316,000.
With record sales recorded for the quarter, volume related increases were offset
by approximately $850,000 in operating efficiencies and fixed cost absorption.
Selling, general, and administrative expenses increased $757,000 due to the
volume increase. Earnings for the prior year quarter ended March 31, 1997
included net income after tax of approximately $350,000 or $.05 per basic share
from the sale of the idle Sweetwater, Tennessee production facility. Net income
for the current quarter was $2,106,000 or $.30 per basic share compared to
$1,336,000 or $.19 per basic share, when adjusted for the after tax effect of
the aforementioned facility sale, for the quarter ended March 31, 1997.
RESULTS OF OPERATIONS FOR THE LAST NINE MONTHS - Sales increased by
approximately $14,135,000 (8.9%), compared to the nine month period ended March
31, 1997. Sales of Vehicle Seating products increased $11,830,000 (27.4%), with
approximately $8,686,000 attributable to the Dygert Seating acquisition during
the third quarter of the prior year, and the remaining $3,144,000 attributable
to increases in other Vehicle Seating markets. Residential Seating volume
increased $1,901,000 (1.9%) and Commercial Seating increased $404,000 (2.6%) in
comparison to the prior nine month period. Cost of goods sold increased
$11,075,000 and selling, general, and administrative expenses increased
$2,157,000, both due to the volume increase. Earnings for the current nine month
period include nontaxable other income of $720,000 or $.10 per basic share
resulting from life insurance proceeds following the death of board member and
former senior officer, Mr. Frank H. Bertsch. The nine month year-to-date net
income, when adjusted for life insurance proceeds, was $4,516,000 or $.65 per
basic share, significantly more than income, when adjusted for sale of idle
facility, of $4,001,000 or $.57 per basic share recorded for the nine month
period ended March 31, 1997.
<PAGE>
CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF
"SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
- - The Company and its representatives may from time to time make written or oral
forward-looking statements with respect to long-term goals of the Company,
including statements contained in the Company's filings with the Securities and
Exchange Commission and in its reports to stockholders.
Statements, including those 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 risk and uncertainty. Some of the
factors that could affect results are the effectiveness of new product
introductions, the product mix of our sales, the cost of raw materials, the
amount of sales generated and the profit margins thereon or volatility in the
major markets, competition and general economic conditions.
The Company specifically declines to undertake any obligation to publicly revise
any forward-looking statements that have been made to reflect events or
circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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: April 22, 1998 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-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,934,552
<SECURITIES> 9,495,915
<RECEIVABLES> 33,255,660
<ALLOWANCES> 2,174,281
<INVENTORY> 26,664,677
<CURRENT-ASSETS> 74,188,576
<PP&E> 74,504,062
<DEPRECIATION> 50,350,448
<TOTAL-ASSETS> 105,726,637
<CURRENT-LIABILITIES> 23,858,476
<BONDS> 0
0
0
<COMMON> 6,964,035
<OTHER-SE> 71,859,208
<TOTAL-LIABILITY-AND-EQUITY> 105,726,637
<SALES> 62,089,586
<TOTAL-REVENUES> 62,383,693
<CGS> 48,316,681
<TOTAL-COSTS> 58,993,241
<OTHER-EXPENSES> 10,676,560
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84,382
<INCOME-PRETAX> 3,306,070
<INCOME-TAX> 1,200,000
<INCOME-CONTINUING> 2,106,070
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,106,070
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
</TABLE>
