Flexsteel Investors | SEC Filing

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 ---------

FLEXSTEEL INDUSTRIES, INC. BALANCE SHEETS (UNAUDITED) March 31, June 30, 2000 1999 ------------ ------------ 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 ============ ============ See accompanying Notes to Financial Statements. - --------------------------------------------------------------------------------

FLEXSTEEL INDUSTRIES, INC. STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED) STATEMENTS OF INCOME Three Months Ended Nine Months Ended March 31, March 31, -------------------------------- -------------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ 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 ============ ============ ============ ============ STATEMENTS OF COMPREHENSIVE INCOME Three Months Ended Nine Months Ended March 31, March 31, -------------------------------- -------------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ 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 ============ ============ ============ ============ See accompanying Notes to Financial Statements. - --------------------------------------------------------------------------------

FLEXSTEEL INDUSTRIES, INC. CONDENSED STATEMENTS OF CASH FLOW (UNAUDITED) Nine Months Ended March 31, ------------------------------- 2000 1999 ----------- ----------- 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 See accompanying Notes to Financial Statements. - --------------------------------------------------------------------------------

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. Three Months Ending Nine Months Ending March 31, March 31, ------------------------------- ------------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ----------- 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 =========== =========== =========== =========== 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.

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. Third Quarter Ended Nine Month Ending March 31, March 31, ------------------------- ------------------------- 2000 1999 2000 1999 ---------- ---------- ---------- ---------- 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% ========== ========== ========== ========== 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.

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.

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

5 12-MOS JUN-30-2000 MAR-31-2000 645,712 6,973,770 37,704,371 2,675,000 34,006,251 80,710,902 82,806,038 55,734,476 117,286,159 28,361,604 0 0 0 6,386,983 79,461,702 117,286,159 213,076,665 215,483,896 165,881,756 201,596,778 35,377,502 0 337,520 13,887,118 4,990,000 8,897,118 0 0 0 8,897,118 1.37 1.35