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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) August 18, 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 August 18, 2005, Flexsteel Industries, Inc. Announces Fourth Quarter and
Fiscal 2005 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 August 18,
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: August 19, 2005 By: /s/ Timothy E. Hall
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Timothy E. Hall
Vice President, CFO, and Treasurer
Principal Financial Officer
Exhibit 99.1
Flexsteel Announces Fourth
Quarter and Fiscal 2005 Operating Results
DUBUQUE, Iowa--(BUSINESS WIRE)--August 18, 2005--Flexsteel
Industries, Inc. (NASDAQ:FLXS) today reported sales and earnings for
its fourth quarter and fiscal year ended June 30, 2005.
Net sales for the quarter ended June 30, 2005 were $105.8 million
compared to the prior year quarter of $108.3 million, a decrease of
2.3%. Net income for the current quarter was $1.5 million or $0.23 per
share compared to $2.7 million or $0.41 per share in the prior year
quarter, a decrease of 43.2%.
Net sales for the fiscal year ended June 30, 2005 were $410.0
million compared to $401.2 million in the prior fiscal year, an
increase of 2.2%. 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 June 30, 2004. DMI net sales included above were
$120.3 million and $92.5 million for the fiscal year ended June 30,
2005 and 2004, respectively. Net income for the fiscal year ended June
30, 2005 was $6.0 million or $0.92 per share compared to $10.1 million
or $1.55 per share for the fiscal year ended June 30, 2005, a decrease
of 40.3%.
For the quarter ended June 30, 2005, residential net sales were
$67.7 million, compared to $72.9 million, a decrease of 7.2% from the
prior year quarter. Recreational vehicle net sales were $18.4 million,
compared to $23.0 million, a decrease of 20.3% from the prior year
quarter. Commercial net sales were $19.7 million, compared to $12.4
million in the prior year quarter, an increase of 59.2%.
For the fiscal year ended June 30, 2005, residential net sales
were $261.9 million, a decrease of 1.6% over the prior fiscal year.
Recreational vehicle net sales were $78.8 million, a decrease of 7.7%
over the prior fiscal year. Commercial net sales were $69.3 million,
an increase of 39.8% over the prior fiscal year.
Gross margin for the quarter ended June 30, 2005 was 19.3%
compared to 20.2% in the prior year quarter. For the fiscal year ended
June 30, 2005, the gross margin was 18.7% compared to 20.7% for the
prior fiscal year. Gross margin was adversely affected by cost
increases for steel, petroleum based products and poly foam on a
quarterly and yearly basis when compared to the fiscal year ended June
30, 2004. During the quarter ended June 30, 2005, LIFO inventory
quantities (steel and lumber) were reduced, resulting in a favorable
impact on gross margin of 1.1% for the quarter and 0.3% for the fiscal
year.
Selling, general and administrative expenses were 17.0% and 15.9%
of net sales for the quarters ended June 30, 2005 and 2004,
respectively. The increase in SG&A expenses is due primarily to
increases in professional fees, advertising and selling supplies. For
the fiscal year ended June 30, 2005 and 2004, selling, general and
administrative expenses were 16.7% and 16.6% of net sales,
respectively.
During the current fiscal year the Company recorded pre-tax gains
of $0.8 million on the sale of former manufacturing facilities.
The effective tax rate in fiscal 2005 was 30.6% compared to 39.5%
in fiscal 2004. During fiscal year 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 resulting in a $0.7 million
reduction in the tax expenses. The Company expects that the effective
income tax rate for future periods will be approximately 37%.
All earnings per share amounts are on a diluted basis.
Working capital (current assets less current liabilities) at June
30, 2005 was $85.4 million, which includes cash, cash equivalents and
investments of $3.2 million. Net cash provided by operating activities
was $12.7 million and $7.5 million in fiscal 2005 and 2004,
respectively. Fluctuations in net cash provided by operating
activities were primarily the result of changes in net income,
inventories and accounts payable. The increase in inventories and
accounts payable in fiscal 2005 relates primarily to the expansion of
import programs.
Capital expenditures were $3.3 million and $6.0 million during
fiscal 2005 and 2004, respectively. Depreciation and amortization
expense was $5.8 million and $5.7 million during fiscal 2005 and 2004,
respectively.
Outlook
For the fiscal year ended June 30, 2005, residential net sales
have been weaker than anticipated and we expect that this softness
will continue through the first half of fiscal year 2006. Net sales of
vehicle seating have fallen off as several manufacturers of
recreational vehicles adjust inventory levels of finished units due to
weakness in demand for recreational vehicles. We expect that net sales
for recreational vehicle seating products will remain relatively
stable during the first quarter of fiscal 2006. We expect lower net
sales in our second fiscal quarter due to lower demand for
recreational vehicles. Additionally, the volatility and high cost of
fuel may temper the favorable longer-term demographics that exist
within the recreational vehicle industry. Our commercial marketing
channels provide an opportunity to expand distribution and increase
net sales in the first half of fiscal 2006. Commercial office
furniture net sales will benefit from a continued general increase in
demand for these products. Hospitality occupancy rates have improved
with an increase in business and recreational travel. This improvement
has led to increased construction and renovation activity that has led
to increased demand for the hospitality products we offer.
Margin pressures continued through all of fiscal 2005 and we
expect pressures on margins to continue through the first half of
fiscal 2006, with the cost of fuel being a key element. The rise in
fuel cost continues to negatively impact the cost of bringing raw
materials into our factories, as well as the cost of delivering
finished products to our customers. Petroleum prices are setting
record prices weekly, if not daily, and we anticipate that prices will
remain volatile and at record or near record levels for at least the
first half of fiscal 2006. The result will be continuing increasing
costs and we believe a continuing factor keeping consumer confidence
at relative low levels, negatively affecting demand for residential
and vehicle seating products. The cost of steel appears to have
steadied during the second half of the fiscal year just ended, albeit
at relatively high historical prices. The cost of chemicals required
in manufacturing poly foam used in our seating products increased
throughout fiscal 2005. At this time there are no announced price
increases for poly foam.
The furniture industry is in an unprecedented period of change.
There are increases in the cost of raw materials and fuel accompanied
by an increased flow of competing product from all over the world that
have added to pricing pressures. The distribution channels are
changing and increasingly include such non-traditional customers such
as mass merchandisers, wholesale clubs and specialty retail chains in
addition to e-commerce opportunities.
Flexsteel 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.
Flexsteel is also in a unique position to take advantage of the
rapid change that is affecting most of the markets we serve. We have
had tremendous success in the introduction of our complete new line of
Wrangler Home Collection. We continue to develop products for the
marine industry to augment our vehicle seating products. Our
commercial office product lineup is strong and expanded to continue to
take full advantage as demand for this product increases. Our
hospitality team is poised to deliver the needed products as this
market expansion continues.
We continue to believe that our strategy of providing furniture
from a wide selection of domestically manufactured and imported
products is sound business practice. This blended sourcing strategy
gives Flexsteel the opportunity to successfully participate in all the
important avenues of furniture distribution in the United States.
Analysts Conference Call
The Company will host a conference call for analysts on Friday,
August 19, 2005, at 10:30 a.m. Central Time. To access the call,
please dial 1-888-275-4480 and provide the operator with ID# 6560585.
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# 6560585.
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.
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, June 30,
2005 2004
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents............... $1,706,584 $2,476,521
Investments............................. 1,508,751 1,271,417
Trade receivables, net.................. 48,355,070 48,169,780
Inventories............................. 69,945,400 68,880,118
Other................................... 6,281,869 6,690,979
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Total current assets...................... 127,797,674 127,488,815
NONCURRENT ASSETS:
Property, plant, and equipment, net..... 26,140,914 30,326,505
Other assets............................ 12,719,090 11,703,391
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TOTAL..................................... $166,657,678 $169,518,711
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade................. $16,259,905 $12,272,405
Notes payable............................ 5,000,000 9,022,090
Accrued liabilities...................... 21,149,428 22,842,020
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Total current liabilities................. 42,409,333 44,136,515
LONG-TERM LIABILITIES:
Long-term debt........................... 12,800,000 17,583,336
Other long-term liabilities.............. 6,650,625 6,187,118
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Total liabilities......................... 61,859,958 67,906,969
SHAREHOLDERS' EQUITY...................... 104,797,720 101,611,742
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TOTAL..................................... $166,657,678 $169,518,711
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FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Fiscal Year Ended
June 30, June 30,
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2005 2004 2005 2004
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NET SALES..... $105,768,368 $108,298,046 $410,022,809 $401,221,510
COST OF GOODS
SOLD......... (85,343,905) (86,374,345) (333,170,329) (318,046,939)
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GROSS MARGIN.. 20,424,463 21,923,701 76,852,480 83,174,571
SELLING,
GENERAL AND
ADMINI-
STRATIVE..... (17,958,185) (17,253,297) (68,595,788) (66,572,362)
GAIN ON SALE
OF FACILITIES - 809,022
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OPERATING
INCOME....... 2,466,278 4,670,404 9,065,714 16,602,209
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OTHER INCOME
(EXPENSE):
Interest and
other
income..... 191,623 253,716 627,996 976,918
Interest
expense.... (198,313) (454,141) (989,754) (838,870)
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Total.. (6,690) (200,425) (361,758) 138,048
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INCOME BEFORE
INCOME TAXES. 2,459,588 4,469,979 8,703,956 16,740,257
PROVISION FOR
INCOME TAXES. (920,000) (1,760,000) (2,660,000) (6,610,000)
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NET INCOME.... $1,539,588 $2,709,979 $6,043,956 $10,130,257
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AVERAGE NUMBER
OF COMMON
SHARES
OUTSTANDING:
Basic...... 6,540,636 6,490,393 6,531,293 6,440,298
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Diluted.... 6,595,170 6,601,161 6,600,905 6,529,813
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EARNINGS PER
SHARE OF
COMMON
STOCK:
Basic...... $0.24 $0.42 $0.93 $1.57
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Diluted.... $0.23 $0.41 $0.92 $1.55
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FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Fiscal Year Ended
June 30,
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2005 2004
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OPERATING ACTIVITIES:
Net income................................ $6,043,956 $10,130,257
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization........... 5,785,354 5,680,391
Gain on disposition of capital assets... (879,462) (94,456)
Changes in operating assets and
liabilities, net of acquisitions....... 1,773,774 (8,221,681)
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Net cash provided by operating activities. 12,723,622 7,494,511
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INVESTING ACTIVITIES:
Net purchases and sales of investments.. (275,331) 7,923,262
Payments received from customers on
notes receivable....................... 320,371
Proceeds from sale of capital assets.... 2,121,083 115,859
Capital expenditures.................... (3,346,984) (6,029,968)
Acquisition of DMI Furniture, Inc., net
of cash acquired....................... - (19,322,174)
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Net cash used in investing activities..... (1,501,232) (16,992,650)
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FINANCING ACTIVITIES:
Net repayment of borrowings............. (8,805,426) 1,058,815
Dividends paid.......................... (3,393,842) (2,521,785)
Proceeds from issuance of common stock.. 206,941 626,245
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Net cash used in financing activities..... (11,992,327) (836,725)
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Decrease in cash and cash equivalents..... (769,937) (10,334,864)
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 $1,706,584 $2,476,521
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CONTACT: Flexsteel Industries, Inc., Dubuque
Timothy E. Hall, Chief Financial Officer, 563-585-8392