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, 2001
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, 2001 6,035,937
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
FLEXSTEEL INDUSTRIES, INC.
BALANCE SHEETS
UNAUDITED
March 31, June 30,
2001 2000
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................ $ 5,697,630 $ 4,000,855
Investments .............................................. 2,945,073 5,730,888
Trade receivables - less allowance for doubtful accounts:
March 31, 2001, $2,260,000
June 30, 2000, $2,250,000 ............................ 32,868,880 32,053,104
Inventories .............................................. 31,446,325 32,456,058
Deferred income taxes .................................... 3,200,000 3,200,000
Other .................................................... 1,285,011 543,711
------------ ------------
Total current assets ............... 77,442,920 77,984,616
PROPERTY, PLANT, AND EQUIPMENT
At cost less accumulated depreciation:
March 31, 2001, $59,392,086
June 30, 2000, $56,914,987 ............................... 25,996,237 26,837,475
NOTES RECEIVABLE ............................................... 535,620 2,752,130
OTHER ASSETS ................................................... 8,217,266 7,302,095
------------ ------------
TOTAL ...................... $112,192,042 $114,876,316
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade ................................. $ 4,773,548 $ 6,921,533
Accrued liabilities:
Payroll and related items ........................... 4,858,992 6,344,417
Insurance ........................................... 5,863,451 5,977,525
Other accruals ...................................... 5,731,909 5,364,921
Industrial revenue bonds payable ......................... 1,300,000 1,300,000
------------ ------------
Total current liabilities .......... 22,527,900 25,908,396
DEFERRED COMPENSATION .......................................... 4,088,152 3,772,152
------------ ------------
Total liabilities ................................... 26,616,052 29,680,548
------------ ------------
SHAREHOLDERS' EQUITY:
Common Stock - $1 par value; authorized 15,000,000 shares;
issued March 31, 2001, 6,035,937 shares;
issued June 30, 2000, 6,170,789 shares ............. 6,035,937 6,170,789
Retained earnings ........................................ 78,905,608 78,268,436
Unrealized investment gain ............................... 634,445 756,543
------------ ------------
Total shareholders' equity ......... 85,575,990 85,195,768
------------ ------------
TOTAL ...................... $112,192,042 $114,876,316
============ ============
See accompanying Notes to Financial Statements.
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FLEXSTEEL INDUSTRIES, INC.
STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------------ ------------------------------
2001 2000 2001 2000
------------- ------------- ------------- -------------
NET SALES ......................... $ 68,441,058 $ 74,972,094 $ 205,286,457 $ 213,076,665
COST OF GOODS SOLD ................ (53,796,227) (58,384,168) (159,653,668) (165,881,756)
------------- ------------- ------------- -------------
GROSS MARGIN ...................... 14,644,831 16,587,926 45,632,789 47,194,909
SELLING, GENERAL AND ADMINISTRATIVE (13,545,901) (12,071,827) (39,251,899) 35,377,502
GAIN ON SALE OF LAND .............. (1,249,806)
------------- ------------- ------------- -------------
OPERATING INCOME .................. 1,098,930 4,516,099 6,380,890 13,067,213
------------- ------------- ------------- -------------
OTHER:
Interest and other income .... 264,261 301,253 874,236 1,157,425
Interest and other expense ... (74,068) (144,403) (260,363) (337,520)
------------- ------------- ------------- -------------
Total ................... 190,293 156,850 613,873 819,905
------------- ------------- ------------- -------------
INCOME BEFORE INCOME TAXES ........ 1,289,223 4,672,949 6,994,763 13,887,118
PROVISION FOR INCOME TAXES ........ (475,000) (1,730,000) (2,575,000) (4,990,000)
------------- ------------- ------------- -------------
NET INCOME ........................ $ 814,223 $ 2,942,949 $ 4,419,763 $ 8,897,118
============= ============= ============= =============
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING:
BASIC ...................... 6,070,892 6,422,157 6,131,994 6,481,102
============= ============= ============= =============
DILUTED .................... 6,140,248 6,522,426 6,199,023 6,587,281
============= ============= ============= =============
EARNINGS PER SHARE OF COMMON
STOCK:
BASIC ..................... $ 0.13 $ 0.46 $ 0.72 $ 1.37
============= ============= ============= =============
DILUTED ................... $ 0.13 $ 0.45 $ 0.71 $ 1.35
============= ============= ============= =============
STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended Nine Months Ended
March 31, March 31,
-------------------------- --------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
NET INCOME ................................. $ 814,223 $ 2,942,949 $ 4,419,763 $ 8,897,118
----------- ----------- ----------- -----------
OTHER COMPREHENSIVE INCOME
(LOSS) BEFORE TAX:
Unrealized gains (losses) on
securities arising during period .... (360,893) 32,034 (263,548) (267,116)
Less: reclassification adjustment for
gains included in net income ..... 28,500 17,066 69,750 39,566
----------- ----------- ----------- -----------
Other comprehensive income (loss),
before tax ....................... (332,393) 49,100 (193,798) (227,550)
----------- ----------- ----------- -----------
INCOME TAX BENEFIT (EXPENSE):
Income tax (expense) benefit related to
securities (losses) gains arising
during period .......................... 133,445 (11,856) 97,508 98,594
Income tax (expense) benefit related to
securities reclassification adjustment (10,545) (6,314) (25,808) (14,639)
----------- ----------- ----------- -----------
Income tax (expense) benefit related to
other comprehensive income ............ 122,900 (18,170) 71,700 83,955
----------- ----------- ----------- -----------
OTHER COMPREHENSIVE
INCOME (LOSS), NET OF TAX ............. (209,493) 30,930 (122,098) (143,595)
----------- ----------- ----------- -----------
COMPREHENSIVE INCOME ....................... $ 604,730 $ 2,973,879 $ 4,297,665 $ 8,753,523
=========== =========== =========== ===========
See accompanying Notes to Financial Statements.
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FLEXSTEEL INDUSTRIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
March 31,
--------------------------
2001 2000
----------- -----------
OPERATING ACTIVITIES:
Net Income ................................................ $ 4,419,763 $ 8,897,118
Adjustments to reconcile net income to net cash
provided by operating activities ...................... 2,803,916 (4,593,725)
----------- -----------
Net cash provided by operating activities ................. 7,223,679 4,303,393
----------- -----------
INVESTING ACTIVITIES:
Purchases of investments .......................... (1,850,565) (761,840)
Payments received from customers on notes receivable 163,072
Proceeds from sales of investments ................. 3,802,635 2,611,672
Loans to customers ................................. (325,000) (2,272,375)
Proceeds from sales of capital assets .............. 164,897 1,570,706
Capital expenditures ............................... (2,899,373) (5,621,328)
----------- -----------
Net cash used in investing activities ..................... (944,334) (4,473,165)
----------- -----------
FINANCING ACTIVITIES:
Payment of dividends ............................... (2,405,457) (2,518,780)
Proceeds from issuance of common stock ............. 52,761 697,015
Repurchase of common stock ......................... (2,229,874) (2,248,789)
----------- -----------
Net cash used in financing activities ..................... (4,582,570) (4,070,554)
----------- -----------
Increase (decrease) in cash and cash equivalents .......... 1,696,775 (4,240,326)
Cash and cash equivalents at beginning of period .......... 4,000,855 4,886,038
----------- -----------
Cash and cash equivalents at end of period ................ $ 5,697,630 $ 645,712
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for
Interest ............................................. $ 38,000 $ 47,000
Income taxes ......................................... $ 3,504,000 $ 5,265,000
See accompanying Notes to Financial Statements.
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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, 2001 are not necessarily indicative of
the results that may be expected for the fiscal year ending June 30, 2001.
2. The inventories are categorized as follows:
March 31, June 30,
2001 2000
----------- -----------
Raw materials ............................................................. $13,532,012 $16,711,084
Work in process and finished parts ........................................ 8,404,292 9,125,346
Finished goods ............................................................ 9,510,021 6,619,628
----------- -----------
Total ................................................ $31,446,325 $32,456,058
=========== ===========
3. Earnings per Share--Basic earnings per share of common stock is based on
the weighted average number of common shares outstanding during each year.
Diluted earnings per share of common stock takes into effect the dilutive
effect of potential common shares outstanding. The Company's only
potential common shares outstanding are stock options, which resulted in a
dilutive effect of 69,356 shares and 100,269 shares in the quarters ended
and 67,029 shares and 106,179 shares in the nine months ended March 31,
2001 and 2000, respectively. The Company calculates the dilutive effect of
outstanding options using the treasury stock method.
4. ACCOUNTING DEVELOPMENTS--The Company adopted Financial Accounting
Standards Board Statement No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES on July 1, 2000. There was no impact on the
Company's financial position and results of operations.
The Company adopted the Securities and Exchange Commission Staff
Accounting Bulletin No. 101, REVENUE RECOGNITION on January 1, 2001. There
was no impact on the Company's financial position and results of
operations.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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, 2001 and 2000. Amounts presented are percentages of the
Company's net sales.
Third Quarter Ended Nine Months Ended
March 31, March 31,
------------------------- -------------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Net Sales ....................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold .............. (78.6%) (77.9%) (77.8%) (77.9%)
---------- ---------- ---------- ----------
Gross margin .................... 21.4% 22.1% 22.2% 22.1%
Selling, general & administrative
expense .................... (19.8%) (16.1%) (19.1%) (16.6%)
Gain on sale of land ............ 0.6%
---------- ---------- ---------- ----------
Operating income ................ 1.6% 6.0% 3.1% 6.1%
Other income, net ............... 0.3% 0.2% 0.3% 0.4%
---------- ---------- ---------- ----------
Income before income taxes ...... 1.9% 6.2% 3.4% 6.5%
Income tax expense .............. (0.7%) (2.3%) (1.2%) (2.3%)
---------- ---------- ---------- ----------
Net income ...................... 1.2% 3.9% 2.2% 4.2%
========== ========== ========== ==========
RESULTS OF OPERATIONS FOR THE QUARTER - Net sales for the quarter ended March
31, 2001 decreased by $6.5 million or 8.7% compared to the prior year quarter.
Residential seating sales volume increased $4.0 million or 8.9%. Recreational
vehicle seating sales decreased $9.6 million or 37.5%. Commercial seating volume
decreased $1.0 million or 20.5%.
Gross margin decreased $1.9 million to $14.6 million or 21.4% of net sales in
the current year, from $16.6 million or 22.1% of net sales reflecting the lower
sales volume and changes in product mix.
Selling, general and administrative expenses as a percentage of sales were 19.8%
and 16.1% for the current year and prior year, respectively. Advertising, bad
debts and health insurance cost increases and the cost associated with the
development of retail operations negatively impacted selling, general and
administrative expenses in the current period.
The above factors resulted in current fiscal period earnings of $0.8 million or
$0.13 per diluted share compared to $2.9 million or $0.45 per diluted share in
the prior year, a net decrease of $2.1 million or $0.32 per share.
RESULTS OF OPERATIONS FOR THE LAST NINE MONTHS - Net sales for the nine-months
ended March 31, 2001 decreased by $7.8 million or 3.7% compared to the prior
year nine-month period. Residential seating sales volume increased $15.6 million
or 12.3%. Recreational vehicle seating sales decreased $22.6 million or 31.5%.
Commercial seating volume decreased $0.9 million or 6.1%.
Gross margin decreased $1.6 million to $45.6 million or 22.2% of net sales in
the current year, from $47.2 million or 22.1% of net sales reflecting the lower
sales volume and changes in product mix.
Selling, general and administrative expenses as a percentage of sales were 19.1%
and 16.6% for the current year and prior year, respectively. Advertising, bad
debts and health insurance cost increases and the cost associated with the
development of retail operations negatively impacted selling, general and
administrative expenses in the current period.
The Company has five retail stores in operation, two in the Chicago area and
three in the Indianapolis market. The Company does not anticipate opening
additional retail locations. The retail operations are experiencing operating
losses as staffing is completed, advertising is initiated and consumer traffic
is established. The Company believes that operating these retail stores will aid
in assuring product introductions meet consumer requirements, that advertising
and marketing materials are effective and to enhance sales by providing
additional floor space to display its wide product line.
Net income for the nine-months ended March 31, 2000 included 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 period earnings of $4.4 million or $0.71
per diluted share. Excluding the sale of land and life insurance proceeds in the
prior year, net earnings for the nine-months ended March 31, 2001 declined $0.46
per share from the prior year nine-month period.
Liquidity and Capital Resources:
Working capital at March 31, 2001 is $54.9 million, which includes cash, cash
equivalents and investments of $8.6 million. Working capital increased by $2.8
million from the June 30, 2000 amount. Net cash provided by operating activities
was $7.2 million during the first nine months of fiscal year 2001 versus $4.3
million in the first nine months of fiscal year 2000.
Capital expenditures were $3.6 million and $5.6 million during the first nine
months of fiscal 2001 and 2000, respectively. The current period capital
expenditures include $750,000 of equipment and leasehold improvements acquired
through settlement of a note receivable. The current period expenditures were
incurred primarily for manufacturing and delivery equipment. The Company
anticipates that minimal capital expenditures will be made during the next three
months. The funds for projected capital expenditures are expected to be provided
by cash generated from operations and available cash.
The Company has repurchased shares of its common stock under plans approved by
the Company's Board of Directors. During the nine month period ended March 31,
2001 the Company repurchased 194,425 shares of its common stock.
Item 3. Quantitative and Qualitative Information About Market Risk
Not applicable.
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, credit risk from
customers 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 17, 2001 By: ___________________________
-------------- R.J. Klosterman
Financial Vice President &
Principal Financial Officer