SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the quarterly period ended March 31, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-5151
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, 2000 6,386,983
---------
<PAGE>
FLEXSTEEL INDUSTRIES, INC.
BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................................ $ 645,712 $ 4,886,038
Investments .......................................................... 6,973,770 8,967,197
Trade receivables - less allowance for doubtful accounts:
March 31, 2000, $ 2,675,000
June 30, 1999, $2,503,000 ........................................ 35,029,371 31,149,416
Inventories .......................................................... 34,006,251 29,503,209
Deferred income taxes ................................................ 3,700,000 3,700,000
Other ................................................................ 355,798 461,406
------------ ------------
Total current assets .......................... 80,710,902 78,667,266
PROPERTY, PLANT, AND EQUIPMENT
at cost less accumulated depreciation:
March 31, 2000, $ 55,734,476
June 30, 1999, $52,707,461 ........................................... 27,071,562 25,912,432
OTHER ASSETS ............................................................... 9,503,695 8,103,997
------------ ------------
TOTAL .................................. $117,286,159 $112,683,695
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade ............................................. $ 7,318,285 $ 7,076,729
Accrued liabilities:
Payroll and related items 6,105,482 6,735,108
Insurance 5,977,525 6,688,060
Other accruals 7,335,312 6,332,412
Industrial revenue bonds payable 1,625,000 1,625,000
------------ ------------
Total current liabilities 28,361,604 28,457,309
DEFERRED COMPENSATION 3,075,870 3,060,670
------------ ------------
Total liabilities 31,437,474 31,517,979
------------ ------------
SHAREHOLDERS' EQUITY:
Common Stock - $1 par value; authorized 15,000,000 shares; issued March
31, 2000, 6,386,983 shares; issued June 30, 1999, 6,491,840
shares 6,386,983 6,491,840
Retained earnings 78,649,659 73,718,238
Unrealized investment gain 812,043 955,638
------------ ------------
Total shareholders' equity 85,848,685 81,165,716
------------ ------------
TOTAL ................................ $117,286,159 $112,683,695
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
<PAGE>
FLEXSTEEL INDUSTRIES, INC.
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
-------------------------------- --------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES ......................... $ 74,972,094 $ 68,614,563 $213,076,665 $191,243,073
COST OF GOODS SOLD ................ 58,384,168 52,871,455 165,881,756 148,209,748
------------ ------------ ------------ ------------
GROSS MARGIN ...................... 16,587,926 15,743,108 47,194,909 43,033,325
SELLING, GENERAL AND
ADMINISTRATIVE 12,071,827 11,546,542 35,377,502 32,976,703
GAIN ON SALE OF LAND .............. 1,249,806
------------ ------------ ------------ ------------
OPERATING INCOME .................. 4,516,099 4,196,566 13,067,213 10,056,622
------------ ------------ ------------ ------------
OTHER:
Interest and other income .... 301,253 319,922 1,157,425 896,428
Interest and other expense ... 144,403 71,835 337,520 231,746
------------ ------------ ------------ ------------
Total ................... 156,850 248,087 819,905 664,682
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES ........ 4,672,949 4,444,653 13,887,118 10,721,304
PROVISION FOR INCOME TAXES ........ 1,730,000 1,615,000 4,990,000 3,900,000
------------ ------------ ------------ ------------
NET INCOME ........................ $ 2,942,949 $ 2,829,653 $ 8,897,118 $ 6,821,304
============ ============ ============ ============
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING:
BASIC ...................... 6,422,157 6,775,826 6,481,102 6,813,228
============ ============ ============ ============
DILUTED .................... 6,522,426 6,856,625 6,587,281 6,885,472
============ ============ ============ ============
EARNINGS PER SHARE OF COMMON
STOCK:
BASIC ..................... $ 0.46 $ 0.42 $ 1.37 $ 1.00
============ ============ ============ ============
DILUTED ................... $ 0.45 $ 0.41 $ 1.35 $ 0.99
============ ============ ============ ============
<CAPTION>
STATEMENTS OF COMPREHENSIVE INCOME
Three Months Ended Nine Months Ended
March 31, March 31,
-------------------------------- --------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET INCOME ........................ $ 2,942,949 $ 2,829,653 $ 8,897,118 $ 6,821,304
------------ ------------ ------------ ------------
OTHER COMPREHENSIVE INCOME
(LOSS) BEFORE TAX:
Unrealized gains (losses) on
securities arising during
period .................. 32,034 49,800 (267,116) 286,919
Less: reclassification adjustment for
gains included in net income 17,066 45,000 39,566 49,844
------------ ------------ ------------ ------------
Other comprehensive income (loss),
before tax .............. 49,100 94,800 (227,550) 336,763
------------ ------------ ------------ ------------
INCOME TAX BENEFIT (EXPENSE):
Income tax (expense) benefit related
to securities (losses) gains arising
during period ................. (11,856) (17,928) 98,594 (103,291)
Income tax (expense) benefit related to
securities reclassification
adjustment ................... (6,314) (16,200) (14,639) (17,944)
------------ ------------ ------------ ------------
Income tax (expense) benefit related to
other comprehensive income ... (18,170) (34,128) 83,955 (121,235)
------------ ------------ ------------ ------------
OTHER COMPREHENSIVE
INCOME (LOSS), NET OF TAX .... 30,930 60,672 (143,595) 215,528
------------ ------------ ------------ ------------
COMPREHENSIVE INCOME .............. $ 2,973,879 $ 2,890,325 $ 8,753,523 $ 7,036,832
============ ============ ============ ============
</TABLE>
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
<PAGE>
FLEXSTEEL INDUSTRIES, INC.
CONDENSED STATEMENTS OF CASH FLOW (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
-------------------------------
2000 1999
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income ..................................... $ 8,897,118 $ 6,821,304
Adjustments to reconcile net income to net cash
provided by operating activities ........... (4,593,725) 1,527,280
----------- -----------
Net cash provided by operating activities ...... 4,303,393 8,348,584
----------- -----------
INVESTING ACTIVITIES:
Purchases of investments ............... (761,840) (3,618,759)
Proceeds from sales of investments ...... 2,611,672 4,779,615
Loans to customers ...................... (2,272,375)
Proceeds from sales of capital assets ... 1,570,706 61,128
Capital expenditures .................... (5,621,328) (6,294,669)
----------- -----------
Net cash used in investing activities .......... (4,473,165) (5,072,685)
----------- -----------
FINANCING ACTIVITIES:
Repayment of long-term debt ............. (325,000)
Payment of dividends .................... (2,518,780) (2,459,832)
Proceeds from issuance of common stock .. 697,015 565,602
Repurchase of common stock .............. (2,248,789) (1,725,856)
----------- -----------
Net cash used in financing activities .......... (4,070,554) (3,945,086)
----------- -----------
Decrease in cash and cash equivalents .......... (4,240,326) (669,187)
Cash and cash equivalents at beginning of year . 4,886,038 5,464,261
----------- -----------
Cash and cash equivalents at end of period ..... $ 645,712 $ 4,795,074
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for
Interest .................................. $ 47,000 $ 59,000
Income taxes .............................. $ 1,035,000 $ 4,110,000
</TABLE>
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
<PAGE>
FLEXSTEEL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. These financial statements do not include certain information and
footnotes required by generally accepted accounting principles for
complete financial statements. However, in the opinion of management, all
adjustments considered necessary for a fair presentation have been
included and are of a normal recurring nature. Operating results for the
nine month period ended March 31, 2000 are not necessarily indicative of
the results that may be expected for the fiscal year ending June 30, 2000.
2. The inventories are categorized as follows:
March 31, June 30,
2000 1999
----------- -----------
Raw materials ................................ $16,143,985 $15,871,466
Work in process and finished parts ........... 8,632,265 7,416,826
Finished goods ............................... 9,230,001 6,214,917
----------- -----------
Total ................... $34,006,251 $29,503,209
=========== ===========
3. In 1997, the Financial Accounting Standards board issued Statement No. 128,
EARNINGS PER SHARE (SFAS 128). SFAS 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of stock options. All earnings per share amounts for all
periods have been presented and, where appropriate, restated to conform to the
SFAS 128 requirements.
<TABLE>
<CAPTION>
Three Months Ending Nine Months Ending
March 31, March 31,
------------------------------- -------------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Basic Earnings Per Share:
Income available to common
shareholders ............... $ 2,942,949 $ 2,829,653 $ 8,897,118 $ 6,821,304
Weighted average shares
outstanding ................ 6,422,157 6,775,826 6,481,102 6,813,228
----------- ----------- ----------- -----------
Earnings Per Share - Basic ...... $ 0.46 $ 0.42 $ 1.37 $ 1.00
=========== =========== =========== ===========
Diluted Earnings Per Share:
Income available to common
shareholders ............... $ 2,942,949 $ 2,829,653 $ 8,897,118 $ 6,821,304
----------- ----------- ----------- -----------
Weighted average shares
outstanding ................ 6,422,157 6,775,826 6,481,102 6,813,228
Dilutive shares issuable in
connection with stock option
plans ...................... 530,885 513,445 513,243 478,628
Less shares purchasable with
proceeds ................... (430,616) (432,646) (407,064) (406,384)
----------- ----------- ----------- -----------
Total Shares .................... 6,522,426 6,856,625 6,587,281 6,885,472
=========== =========== =========== ===========
Earnings Per Share - Diluted .... $ 0.45 $ 0.41 $ 1.35 $ 0.99
=========== =========== =========== ===========
</TABLE>
4. RECLASSIFICATIONS - certain prior year amounts have been reclassified to
conform to the 2000 presentation. These reclassifications had no impact on
net income or shareholders' equity as previously reported.
<PAGE>
FLEXSTEEL INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE STATEMENT OF INCOME
Results of Operations:
The following table has been prepared as an aid in understanding the Company's
results of operations on a comparative basis for the third quarter and nine
months ended March 31, 2000 and 1999. Amounts presented are percentages of the
Company's net sales.
<TABLE>
<CAPTION>
Third Quarter Ended Nine Month Ending
March 31, March 31,
------------------------- -------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales ....................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold .............. 77.9% 77.1% 77.9% 77.5%
---------- ---------- ---------- ----------
Gross margin .................... 22.1% 22.9% 22.1% 22.5%
Selling, general & administrative
expense .................... 16.1% 16.8% 16.6% 17.2%
Gain on sale of land ............ 0.6%
---------- ---------- ---------- ----------
Operating income ................ 6.0% 6.1% 6.1% 5.3%
Other income, net ............... 0.2% 0.4% 0.4% 0.3%
---------- ---------- ---------- ----------
Income before income taxes ...... 6.2% 6.5% 6.5% 5.6%
Income tax expense .............. 2.3% 2.4% 2.3% 2.0%
---------- ---------- ---------- ----------
Net income ...................... 3.9% 4.1% 4.2% 3.6%
========== ========== ========== ==========
</TABLE>
RESULTS OF OPERATIONS FOR THE QUARTER - Net sales for the quarter ended March
31, 2000 increased by $6,358,000 or 9.3% compared to the prior year quarter.
Residential seating sales volume increased $3,826,000 or 9.4%. Recreational
vehicle seating sales increased $2,765,000 or 12.0%. Commercial seating volume
decreased $233,000 or 4.7%.
Gross margin increased $844,818 to $16,587,926 or 22.1% of net sales in the
current year, from $15,743,108 or 22.9% of net sales in the prior year. The
gross margin percentage decrease was due primarily to increases in fixed cost
related to facility expansion, equipment for additional production capacity, and
start-up operations in Dunkirk, Indiana and Harrison, Arkansas.
Selling, general and administrative expenses as a percentage of sales were 16.1%
and 16.8% for the current year and prior year, respectively. The cost percentage
decrease was due to improved absorption of fixed costs.
The above factors resulted in current fiscal year earnings of $2,942,949 or
$0.45 per diluted share compared to $2,829,653 or $0.41 per diluted share in the
prior year, a net increase of $113,296 or $0.04 per share.
RESULTS OF OPERATIONS FOR THE LAST NINE MONTHS - Net sales for the nine-months
ended March 31, 2000 increased by $21,834,000 or 11.4% compared to the prior
year nine-month period. Residential seating sales volume increased $14,540,000
or 12.9%. Recreational vehicle seating sales increased $9,751,000 or 15.7%.
Commercial seating volume decreased $2,457,000 or 14.8%.
Gross margin increased $4,161,584 to $47,194,909 or 22.1% of sales, in the
current year, from $43,033,325 or 22.5% in the prior year. The gross margin
percentage decrease was due primarily to facility expansion to meet product
demand and opening new production facilities.
Selling, general and administrative expenses as a percentage of sales were 16.6%
and 17.2% for the current year and prior year, respectively. The cost percentage
decrease was due to improved absorption of fixed costs.
<PAGE>
Net income for the current year nine-months ended March 31, 2000 includes a net
gain (after tax) of $790,000, or $0.12 per share, on the sale of land and
$405,000, or $0.06 per share, from nontaxable proceeds of life insurance.
The above factors resulted in current fiscal year earnings of $8,897,118 or
$1.35 per diluted share compared to $6,821,304 or $0.99 per diluted share in the
prior year, a net increase of $2,075,814 or $0.36 per diluted share. Excluding
the sale of land and life insurance proceeds in the current year, net earnings
for the nine-months ended March 31, 2000, improved $0.18 per share over the
prior nine-month period.
Liquidity and Capital Resources:
Working capital at March 31, 2000 is $52,349,000 which includes cash, cash
equivalents and investments of $7,619,000. Working capital increased by
$2,139,000 from the June 30, 1999 amount. Net cash provided by operating
activities was $4,303,000 during the first nine months of fiscal year 2000
versus $8,349,000 in the first nine months of fiscal year 1999.
Capital expenditures were $5,621,000 and $6,295,000 during the first nine months
of fiscal 2000 and 1999, respectively. The current year expenditures were
incurred primarily for manufacturing and delivery equipment and the expansion of
our Riverside, California facility. During the next three months approximately
$1,500,000 will be spent on manufacturing equipment and facility improvements.
The funds for projected capital expenditures are expected to be provided by cash
generated from operations and available cash.
On November 4, 1998 the Company approved a plan to repurchase up to 700,000
shares, or slightly more than 10% of the Company's outstanding common stock. The
Company has repurchased 531,300 shares of its common stock under the plan. The
Company will make purchases, from time to time, in the open market as the
Company deems appropriate.
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 goals and expectations 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 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.
<PAGE>
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 20, 2000 By: /s/ R.J. Klosterman
-------------- ---------------------
R.J. Klosterman
Financial Vice President &
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 645,712
<SECURITIES> 6,973,770
<RECEIVABLES> 37,704,371
<ALLOWANCES> 2,675,000
<INVENTORY> 34,006,251
<CURRENT-ASSETS> 80,710,902
<PP&E> 82,806,038
<DEPRECIATION> 55,734,476
<TOTAL-ASSETS> 117,286,159
<CURRENT-LIABILITIES> 28,361,604
<BONDS> 0
0
0
<COMMON> 6,386,983
<OTHER-SE> 79,461,702
<TOTAL-LIABILITY-AND-EQUITY> 117,286,159
<SALES> 213,076,665
<TOTAL-REVENUES> 215,483,896
<CGS> 165,881,756
<TOTAL-COSTS> 201,596,778
<OTHER-EXPENSES> 35,377,502
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 337,520
<INCOME-PRETAX> 13,887,118
<INCOME-TAX> 4,990,000
<INCOME-CONTINUING> 8,897,118
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,897,118
<EPS-BASIC> 1.37
<EPS-DILUTED> 1.35
</TABLE>
