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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 21, 2005
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FLEXSTEEL INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Minnesota 0-5151 42-0442319
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3400 Jackson Street, Dubuque, Iowa 52001
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 563-556-7730
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On April 21, 2005, Flexsteel Industries, Inc. Announces Third Quarter and
Year-To-Date Operating Results. See the Press Release attached hereto as
Exhibit 99.1 and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
Exhibit 99.1 - Press Release by Flexsteel Industries, Inc. on April 21,
2005.
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 hereunto duly authorized.
FLEXSTEEL INDUSTRIES, INC.
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(Registrant)
Date: April 22, 2005 By: /s/ R. J. Klosterman
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R. J. Klosterman
Financial Vice President &
Principal Financial Officer
Exhibit 99.1
Flexsteel Announces Third Quarter and Year-To-Date Operating Results
DUBUQUE, Iowa--(BUSINESS WIRE)--April 21, 2005--Flexsteel Industries, Inc.
(NASDAQ:FLXS) today reported sales and earnings for its third quarter ended
March 31, 2005.
Net sales for the quarter ended March 31, 2005 were $101.3 million compared
to the prior year quarter of $107.0 million, a decrease of 5.3%. Net income for
the current quarter was $1.7 million or $0.26 per share compared to $2.5 million
or $0.39 per share in the prior year quarter, a decrease of 33.1%. In addition,
current quarter net income of $1.7 million includes a $0.2 million pre-tax gain
from the sale of a former manufacturing facility and $0.7 million of tax benefit
related to reduced estimated tax liabilities.
Net sales for the nine months ended March 31, 2005 were $304.3 million
compared to $292.9 million in the prior year nine months, an increase of 3.9%.
The net sales and operating results being reported for the prior year include
net sales and operating results for DMI Furniture, Inc. (DMI) for the period
September 18, 2003 (date of acquisition) through March 31, 2004. DMI net sales
included above were $87.4 million and $63.0 million for the nine months ended
March 31, 2005 and 2004, respectively. Net income for the nine months ended
March 31, 2005 was $4.5 million or $0.68 per share compared to $7.4 million or
$1.14 per share for the nine months ended March 31, 2004, a decrease of 39.3%.
For the quarter ended March 31, 2005, residential net sales were $64.6
million, compared to $68.2 million, a decrease of 5.2% from the prior year
quarter. Recreational vehicle net sales were $19.8 million, compared to $22.0
million, a decrease of 10.2% from the prior year quarter. Commercial net sales
were $17.0 million, compared to $16.8 million in the prior year quarter, an
increase of 0.9%.
For the nine months ended March 31, 2005, residential net sales were $194.2
million, an increase of 0.4% from the nine months ended March 31, 2004.
Recreational vehicle net sales were $60.5 million, a decrease of 3.1% from the
nine months ended March 31, 2004. Commercial net sales were $49.6 million, an
increase of 33.4% from the nine months ended March 31, 2004. The increase in net
sales reflects improved industry performance for commercial products in addition
to the inclusion of DMI net sales for the entire nine months in fiscal 2005.
Gross margin for the quarter ended March 31, 2005 was 17.9% compared to
19.8% in the prior year quarter. For the nine months ended March 31, 2005, the
gross margin was 18.5% compared to 20.9% for the prior year nine-month period.
Gross margin was adversely affected by cost increases for steel and petroleum
based products on a quarterly and year-to-date basis in comparison to the prior
fiscal year quarter and year-to-date.
Selling, general and administrative expenses were 16.4% and 15.9% of net
sales for the quarters ended March 31, 2005 and 2004, respectively. For the nine
months ended March 31, 2005 and 2004, selling, general and administrative
expenses were 16.6% and 16.8%, respectively.
During the quarter ended March 31, 2005, the Company recorded a pre-tax
gain on the sale of a former manufacturing facility of $0.2 million. For the
fiscal year-to-date the Company has recorded pre-tax gains of $0.8 million on
the sale of facilities.
During the quarter ended March 31, 2005, an examination by the Internal
Revenue Service of the Company's federal income tax returns for the fiscal years
ended June 30, 2003 and 2004 was completed. Due to the favorable results, the
Company has reviewed and reduced its estimate of accrued tax liabilities by $0.7
million. The decrease resulted in income tax rates of (3.7%) and 27.9% for the
quarter and fiscal year-to-date periods ending March 31, 2005, respectively. The
Company expects that the income tax rate for its fourth fiscal quarter will be
approximately 37%.
Working capital (current assets less current liabilities) at March 31, 2005
was $88.2 million, which includes cash, cash equivalents and investments of $4.6
million. Working capital increased by $4.8 million from June 30, 2004. Current
assets declined $7.6 million. Accounts receivable declined $6.2 million with the
decrease in net sales. Inventories declined $1.8 million as a result of lower
manufacturing levels. Current liabilities decreased $12.4 million. Accounts
payable declined $1.4 million while lower inventory purchases and the decrease
in accounts receivable and inventory allowed for a reduction in current notes
payable of $9.0 million.
Capital expenditures were $2.7 million for the fiscal year-to-date,
primarily for delivery and manufacturing equipment. Depreciation and
amortization expense was approximately $4.4 million and $4.2 million for the
nine-month periods ended March 31, 2005 and 2004, respectively. The Company
expects that capital expenditures will be less than $1.0 million for the
remainder of the fiscal year.
All earnings per share amounts are on a diluted basis.
Outlook
On a fiscal year-to-date basis, residential net sales have been weaker than
anticipated and we expect that this softness will continue for the remainder of
the fiscal year. Net sales of vehicle seating have fallen off as several
manufacturers of recreational vehicles adjust inventory levels of finished
units. We expect only a modest improvement in vehicle seating sales beginning in
late May or early June as manufacturers begin the new model year production. The
current volatility and high cost of fuel may dampen the favorable demographics
that currently exist within the vehicle seating industry. Commercial seating
provides an opportunity to expand distribution and increase net sales; however,
in this highly competitive market, the cost of product development and the
product margins will be monitored closely.
Margin pressures that started near the end of calendar year 2003 have
continued through our third fiscal quarter and we expect these pressures to
continue through the remainder of calendar year 2005. The cost of steel and
component parts that have steel content leveled somewhat during the fiscal
quarter ended March 31, 2005. However, the leveling of steel prices is at
relatively high historical cost per pound as it relates to product cost. The
cost of fuel and poly foam continued to increase during the quarter ended March
31, 2005. We anticipate that petroleum prices will remain volatile and at record
or near record levels for the remainder of calendar year 2005 resulting in
increasing costs in our fourth fiscal quarter and the first half of fiscal year
2006.
The Company continues to take actions to address the above concerns
including: new product introductions, refining existing product offerings,
adjusting selling and delivery prices, adjusting production levels and
implementing cost control measures for inventory and capital expenditures. These
actions occur regularly regardless of operating performance, but will continue
to receive additional attention under current business conditions. We continue
to believe that our strategy of providing furniture from a wide selection of
domestically manufactured and imported products is sound business practice and
will continue.
Analysts Conference Call
The Company will host a conference call for analysts on Friday, April 22,
2005, at 10:30 a.m. Central Time. To access the call, please dial 1-888-275-4480
and provide the operator with ID# 4619983. A replay will be available for two
weeks beginning approximately two hours after the conclusion of the call by
dialing 1-800-642-1687 and entering ID# 4619983.
Forward-Looking Statements
Statements, including those in this release, 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 cyclical nature of the furniture
industry, the effectiveness of new product introductions, the product mix of
sales, the cost of raw materials, foreign currency valuations, actions by
governments including taxes and tariffs, the amount of sales generated and the
profit margins thereon, competition (both foreign and domestic), changes in
interest rates, credit exposure with customers and general economic conditions.
Any forward-looking statement speaks only as of the date of this press release.
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.
About Flexsteel
Flexsteel Industries, Inc. is headquartered in Dubuque, Iowa, and was
incorporated in 1929. Flexsteel is a designer, manufacturer, importer and
marketer of quality upholstered and wood furniture for residential, recreational
vehicle, office, hospitality and healthcare markets. All products are
distributed nationally.
For more information, visit our web site at http://www.flexsteel.com.
TABLES FOLLOW
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, June 30,
2005 2004
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents............... $3,223,971 $2,476,521
Investments............................. 1,389,950 1,271,417
Trade receivables, net.................. 41,989,996 48,169,780
Inventories............................. 67,087,319 68,880,118
Other................................... 6,190,107 6,690,979
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Total current assets...................... 119,881,343 127,488,815
NONCURRENT ASSETS:
Property, plant, and equipment, net..... 26,878,481 30,326,505
Other assets............................ 12,729,288 11,703,391
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TOTAL..................................... $159,489,112 $169,518,711
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade................ $10,906,919 $12,272,405
Notes payable........................... 9,022,090
Accrued liabilities..................... 20,800,250 22,842,020
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Total current liabilities................. 31,707,169 44,136,515
LONG-TERM LIABILITIES:
Long-term debt.......................... 17,000,000 17,583,336
Other long-term liabilities............. 6,190,796 6,187,118
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Total liabilities......................... 54,897,965 67,906,969
SHAREHOLDERS' EQUITY...................... 104,591,147 101,611,742
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TOTAL..................................... $159,489,112 $169,518,711
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FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Nine Months Ended
March 31, March 31,
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2005 2004 2005 2004
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NET SALES..... $101,348,058 $106,964,330 $304,254,441 $292,923,464
COST OF GOODS
SOLD......... (83,175,515) (85,769,751) (247,826,424) (231,672,594)
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GROSS MARGIN.. 18,172,543 21,194,579 56,428,017 61,250,870
SELLING,
GENERAL AND
ADMINI-
STRATIVE.... (16,627,533) (16,990,730) (50,637,603) (49,319,065)
GAIN ON SALE
OF FACILITIES 200,409 809,022
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OPERATING
INCOME....... 1,745,419 4,203,849 6,599,436 11,931,805
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OTHER INCOME
(EXPENSE):
Interest and
other
income..... 141,687 199,697 436,373 723,202
Interest
expense.... (247,448) (214,583) (791,441) (384,729)
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Total..... (105,761) (14,886) (355,068) 338,473
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INCOME BEFORE
INCOME TAXES. 1,639,658 4,188,963 6,244,368 12,270,278
BENEFIT FROM
(PROVISION
FOR) INCOME
TAXES........ 60,000 (1,650,000) (1,740,000) (4,850,000)
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NET INCOME.... $1,699,658 $2,538,963 $4,504,368 $7,420,278
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AVERAGE NUMBER
OF COMMON
SHARES
OUTSTANDING:
Basic...... 6,539,079 6,484,444 6,528,179 6,423,214
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Diluted.... 6,606,997 6,565,220 6,602,816 6,505,645
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EARNINGS PER
SHARE OF
COMMON STOCK:
Basic...... $0.26 $0.39 $0.69 $1.16
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Diluted.... $0.26 $0.39 $0.68 $1.14
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FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
March 31,
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2005 2004
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OPERATING ACTIVITIES:
Net income................................ $4,504,368 $7,420,278
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization........... 4,381,188 4,157,328
Restructuring charge reversal........... 190,996
(Gain) loss on disposition of capital
assets.................................. (852,838) 167,769
Changes in operating assets and
liabilities, net of acquisitions....... 5,577,125 565,396
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Net cash provided by operating activities. 13,609,843 12,501,767
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INVESTING ACTIVITIES:
Net purchases and sales of investments.. (260,599) 7,712,047
Payments received from customers on
notes receivable....................... 350,371
Proceeds from sale of capital assets.... 2,087,208 120,539
Capital expenditures.................... (2,714,835) (5,369,956)
Acquisition of DMI Furniture, Inc., net
of cash acquired....................... (19,322,174)
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Net cash used in investing activities..... (888,226) (16,509,173)
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FINANCING ACTIVITIES:
Net repayment of borrowings............. (9,605,427) (5,307,561)
Dividends paid.......................... (2,543,762) (1,678,291)
Proceeds from issuance of common stock.. 175,022 554,521
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Net cash used in financing activities..... (11,974,167) (6,431,331)
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Increase (decrease) in cash and cash
equivalents.............................. 747,450 (10,438,737)
Cash and cash equivalents at beginning of
period................................... 2,476,521 12,811,385
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Cash and cash equivalents at end of period $3,223,971 $2,372,648
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CONTACT: Flexsteel Industries, Inc., Dubuque
Timothy E. Hall, Treasurer, 563-585-8392