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, 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 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, 1997 6,955,174
<PAGE>
FLEXSTEEL INDUSTRIES, INC.
BALANCE SHEETS (UNAUDITED)
DECEMBER 31, JUNE 3O,
1997 1997
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................... $ 4,395,976 $ 4,445,327
Investments .................................. 7,900,556 5,041,154
Trade receivables - less allowance for
doubtful accounts: December 31, 1997,
$2,312,000; June 3O, 1997, $2,799,000 ...... 23,908,273 25,348,941
Inventories .................................. 27,430,899 26,985,554
Deferred income taxes ........................ 2,620,000 2,620,000
Other ........................................ 981,005 806,117
----------- -----------
Total current assets ............ 67,236,709 65,247,093
PROPERTY, PLANT, AND EQUIPMENT - at cost
less accumulated depreciation:
December 31, 1997, $49,218,373;
June 3O, 1997, $46,962,157 ................... 25,144,702 26,214,405
OTHER ASSETS ................................... 6,884,412 7,711,179
----------- -----------
TOTAL ...................... $99,265,823 $99,172,677
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade ..................... $ 3,345,303 $ 3,845,362
Accrued liabilities
Payroll and related items .................. 2,980,669 4,440,219
Insurance .................................. 5,730,263 6,057,093
Other accruals ............................. 4,602,462 4,237,556
Industrial revenue bonds payable ............. 2,310,000 2,310,000
----------- -----------
Total current liabilities ....... 18,968,697 20,890,230
----------- -----------
DEFERRED COMPENSATION .......................... 3,061,918 3,044,418
----------- -----------
SHAREHOLDERS' EQUITY:
Common Stock - $1 par value; authorized
15,OOO,OOO shares; issued December 31, 1997,
6,955,174 shares; June 30, 1997, 6,927,310
shares ..................................... 6,955,174 6,927,310
Additional paid-in capital ................... 298,759
Retained earnings ............................ 69,211,000 67,750,719
Unrealized investment gain ................... 770,275 560,000
----------- -----------
Total shareholders' equity ...... 77,235,208 75,238,029
----------- -----------
TOTAL ...................... $99,265,823 $99,172,677
=========== ===========
See accompanying Notes.
<PAGE>
FLEXSTEEL INDUSTRIES, INC.
STATEMENTS OF EARNINGS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales ....................... $ 56,260,249 $ 50,551,568 $111,419,373 $102,570,627
------------ ------------ ------------ ------------
Operating Expenses:
Cost of goods sold ............ 44,312,905 39,776,718 88,180,395 80,421,319
Selling, general and
administrative expenses ....... 10,064,132 9,155,605 19,900,923 18,501,084
------------ ------------ ------------ ------------
Total ..................... 54,377,037 48,932,323 108,081,318 98,922,403
------------ ------------ ------------ ------------
Operating Income ................ 1,883,212 1,619,245 3,338,055 3,648,224
------------ ------------ ------------ ------------
Interest and Other:
Income ....................... 1,094,140 354,043 1,340,409 703,513
Expense ...................... 87,297 84,895 173,559 171,862
------------ ------------ ------------ ------------
Net ...................... 1,006,843 269,148 1,166,850 531,651
------------ ------------ ------------ ------------
Earnings Before Income Taxes ... 2,890,055 1,888,393 4,504,905 4,179,875
Provision for Income Taxes ..... 790,000 685,000 1,375,000 1,515,000
------------ ------------ ------------ ------------
Net Earnings ................ $ 2,100,055 $ 1,203,393 $ 3,129,905 $ 2,664,875
============ ============ ============ ============
Average Number of Common
Shares Outstanding ............. 6,956,174 7,022,636 6,957,269 7,042,514
============ ============ ============ ============
Per Share of Common Stock:
Net Earnings - Basic ........... $ .30 $ .17 $ .45 $ .38
Net Earnings - Assuming Dilution $ .30 $ .17 $ .45 $ .38
Dividends ...................... $ .12 $ .12 $ .24 $ .24
</TABLE>
See accompanying Notes.
<PAGE>
FLEXSTEEL INDUSTRIES, INC.
CONDENSED STATEMENTS OF CASH FLOW (UNAUDITED)
Six Months Ended
December, 31,
1997 1996
----------- -----------
OPERATING ACTIVITIES:
Net Income ..................................... $ 3,129,905 $ 2,664,875
Adjustments to reconcile net income to net
cash provided by operating activities .......... 2,459,842 3,144,592
----------- -----------
Net cash provided by operating activities ...... 5,589,747 5,809,467
----------- -----------
INVESTING ACTIVITIES:
Purchases of investments .................... (3,495,933) (947,634)
Proceeds from sales of investments .......... 846,805 987,133
Proceeds from sales of capital assets ....... 162,056 69,600
Capital expenditures ........................ (1,810,420) (3,159,307)
----------- -----------
Net cash used in investing activities .......... (4,297,492) (3,050,208)
----------- -----------
FINANCING ACTIVITIES:
Payment of dividends ........................ (1,668,229) (1,685,233)
Proceeds from issuance of stock ............. 364,873 77,009
Repurchase of common stock .................. (38,250) (890,000)
----------- -----------
Net cash used in financing activities .......... (1,341,606) (2,498,224)
----------- -----------
Increase (decrease) in cash
and cash equivalents ......................... (49,351) 261,035
Cash and cash equivalents at beginning of year . 4,445,327 3,867,742
----------- -----------
Cash and cash equivalents at end of period ..... $ 4,395,976 $ 4,128,777
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for
Interest ..................................... $ 48,000 $ 52,000
Income taxes ................................. $ 2,564,000 $ 2,157,000
Noncash financing activities
Common stock issued for management incentive
plan (31,053 and 9,157 shares respectively) .. $ 364,873 $ 77,009
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 six month
period ended December 31, 1997 are not necessarily indicative of the
results which may be expected for the year ending June 3O, 1998.
2. The inventories are categorized as follows:
December 31, June 3O,
1997 1997
---- ----
Raw materials...................... $14,114,485 $13,529,232
Work in process and finished parts. 7,442,960 7,689,051
Finished goods..................... 5,873,454 5,767,271
--------- ---------
Total............. $27,430,899 $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
December 31, 1996 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 periods ended December 31, 1997 and 1996.
3 Months 6 Months
-------- --------
1997 1996 1997 1996
---- ---- ---- ----
Net Income $2,100,055 $1,203,393 $3,129,905 $2,664,875
========== ========== ========== ==========
Weighted average shares
outstanding 6,956,174 7,022,636 6,957,269 7,042,514
Assumed conversion of
options 17,022 13,366 15,272 10,838
------ ------ ------ ------
Weighted average shares
outstanding and
contingently issuable 6,973,196 7,036,002 6,972,541 7,053,352
========== ========== ========== ==========
Earnings per share - basic $0.30 $0.17 $0.45 $0.38
========== ========== ========== ==========
Earnings per share -
assuming dilution $0.30 $0.17 $0.45 $0.38
========== ========== ========== ==========
<PAGE>
FLEXSTEEL INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE STATEMENT
OF EARNINGS
Financial Condition - The Company's cash, cash equivalents, and temporary
investments increased by $2,810,000 since June 30, 1997. Accounts receivable
decreased by $1,441,000 and inventories increased by $445,000. Capital
expenditures were $1,810,000 for building improvements, manufacturing and
delivery equipment. Working capital increased by $3,911,000 for the six month
period. In the next six months approximately $750,000 will be spent for
manufacturing and related equipment.
Economic Conditions - The Company anticipates that demand for its seating
products will continue near current levels for the remainder of the fiscal year,
assuming there are no significant changes on the national level in regards to
interest rates or consumer spending. Management continues to focus on product
design for targeted markets and internal improvements in the areas of 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 increased by approximately
$5,709,000 (11.3%), compared to the prior year quarter. Recreational Vehicle
Seating volume increased $4,234,000 (33.4%), with approximately $2,875,000
related to the Dygert Seating acquisition during the third quarter of the prior
year, and $1,359,000 in other Recreational Vehicle products. Home Furnishings
and Commercial Seating volume increased $1,434,000 (4.4%) and $41,000 (.8%),
respectively, in comparison to the prior year. Cost of goods sold increased
$4,536,000 due to increased volume. Selling, general, and administrative costs
increased $909,000 due to the volume increase. Earnings for the current period
include nontaxable other income of $700,000 or $.10 per share resulting from
life insurance proceeds following the death of Mr. Frank H. Bertsch, a long time
board member and former senior officer of the Company. The net income for the
current quarter, when adjusted for the previously mentioned life insurance
proceeds, was $1,400,000 or $.20 per share compared to $1,203,000 or $.17 per
share for the quarter ended December 31, 1996.
Results of Operations for the last six months - Sales increased by approximately
$8,849,000 (8.6%), compared to the six month period ended December 31, 1996.
Sales of Recreational Vehicle products increased $8,029,000 (29.3%), with
approximately $6,784,000 attributable to the Dygert Seating acquisition during
the third quarter of the prior year, and the remaining $1,245,000 attributable
to increases in other Recreational Vehicle markets. Home Furnishings volume
increased $898,000 (1.4%), while Commercial Seating decreased by $78,000 (.8%),
in comparison to the prior year. Cost of goods sold increased $7,759,000 due to
increased volume and approximately $820,000 in increases related to lower
margins and under absorbed fixed costs. Selling, general, and administrative
costs increased $1,400,000 due to the volume increase. Interest and other income
increased $637,000 due to the aforementioned life insurance proceeds, offset
somewhat by lower average levels of cash available for investment. The six month
year-to-date net income, when adjusted for life insurance proceeds, was
$2,430,000 or $.35 per share, slightly less than income of $2,665,000 or $.38
per share reported for the six month period ended December 31, 1996.
<PAGE>
Cautionary Statement Relevant to Forward-Looking Information for the Purpose of
"Safe Harbor" Provisions 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 4 Submission of Matters to a Vote of Security Holders
At the annual meeting of stockholders on December 9, 1997, Proposals one and two
set forth in the Board of Directors' definitive Proxy Statement dated October
29, 1997, were approved and adopted by the stockholders. Proposals one and two,
respectively, received votes as follows:
Proposal 1 (Election of Directors): Art D. Richardson: For 6,111,081, Withheld
20,184, Abstentions and Broker Non-votes 834,977. James R. Richardson: For
6,112,926, Withheld 18,339, Abstentions and Broker Non-votes 834,977. The names
of each Director whose term of office as a Director continued after the meeting
are as follows: K. Bruce Lauritsen, Thomas E. Holloran, L. Bruce Boylen, John R.
Easter, J. B. Crahan and Edward J. Monaghan.
Proposal 2 (Appointment of Deloitte & Touche, LLP as Independent Auditors):
For: 6,117,333, Against: 5,585, and Abstain: 8,347.
Item 6. Exhibits and Reports on Form 8-K
The registrant filed on December 19, 1997, a report on Form 8-K which reported
the appointment to the registrant's Board of Directors of Mr. Jeffrey T. Bertsch
and Mr. Patrick M. Crahan.
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, 1998 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-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 4,395,976
<SECURITIES> 7,900,556
<RECEIVABLES> 26,220,644
<ALLOWANCES> 2,312,371
<INVENTORY> 27,430,899
<CURRENT-ASSETS> 67,236,709
<PP&E> 74,363,075
<DEPRECIATION> 49,218,373
<TOTAL-ASSETS> 99,265,823
<CURRENT-LIABILITIES> 18,968,697
<BONDS> 0
0
0
<COMMON> 6,955,174
<OTHER-SE> 70,280,034
<TOTAL-LIABILITY-AND-EQUITY> 99,265,823
<SALES> 56,260,249
<TOTAL-REVENUES> 57,354,389
<CGS> 44,312,905
<TOTAL-COSTS> 54,377,037
<OTHER-EXPENSES> 10,064,132
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 87,297
<INCOME-PRETAX> 2,890,055
<INCOME-TAX> 790,000
<INCOME-CONTINUING> 2,100,055
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,100,055
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0
</TABLE>
