FORM 10-K
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended June 30, 2002
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
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FLEXSTEEL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 42-0442319
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. BOX 877, DUBUQUE, IOWA 52004-0877
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (563) 556-7730
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
NASDAQ
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $1.00 PAR VALUE
(Title of Class)
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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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
State the aggregate market value of the voting stock held by
non-affiliates of the registrant as of August 9, 2002 which is within 60 days
prior to the date of filing:
Common Stock, Par Value $1.00 Per Share: $44,838,000
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of August 9, 2002:
CLASS SHARES OUTSTANDING
-------------------------------- --------------------------------
Common Stock, $ 1.00 Par Value 6,238,006 Shares
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF REGISTRANT'S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR
ENDING JUNE 30, 2002 IN PARTS I, II, AND IV. IN PART III, PORTIONS OF THE
REGISTRANT'S 2002 PROXY STATEMENT, TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION WITHIN 120 DAYS OF THE REGISTRANT'S FISCAL YEAR END.
Exhibit Index -- page 6
PART I
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
The registrant was incorporated in 1929 and has been in the furniture
seating business ever since. For more detailed information see the registrant's
Annual Report for the Fiscal Year Ended June 30, 2002 which is incorporated
herein by reference.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The registrant's significant operating segment is the manufacture of
upholstered seating. The second segment is the operation of three retail
furniture stores. For more detailed financial information see the registrant's
Annual Report for the Fiscal Year Ended June 30, 2002 which is incorporated
herein by reference.
The registrant's upholstered seating business has three primary areas
of application -- residential seating, recreational vehicle seating and
commercial seating. Set forth below, in tabular form, is information for the
past three fiscal years showing the registrant's sales of upholstered seating
attributable to each of the areas of application described above:
SALES FOR UPHOLSTERED SEATING APPLICATIONS
2002 2001 2000
----------------- ----------------- -----------------
AMOUNT OF SALES AMOUNT OF SALES AMOUNT OF SALES
----------------- ----------------- -----------------
Residential Seating................ $193,200,000 $199,900,000 $185,100,000
Recreational Vehicle Seating ...... 67,900,000 66,400,000 94,500,000
Commercial Seating ................ 18,600,000 18,500,000 20,500,000
---------------- ----------------- -----------------
Upholstered Seating Total ......... $279,700,000 $284,800,000 $300,100,000
================ ================= =================
(c) NARRATIVE DESCRIPTION OF BUSINESS
(1) (i), (ii), (vii) The registrant's primary business is the design,
manufacture and sale of a broad line of quality upholstered furniture for
residential, commercial, and recreational vehicle seating use. The registrant's
classes of products include a variety of wood and upholstered furniture
including upholstered sofas, loveseats, chairs, reclining and rocker-reclining
chairs, swivel rockers, sofa beds and convertible bedding units, some of which
are for home, office, motorhome, travel trailer, vans, health care and hotels.
Featured as a basic component in most of the upholstered furniture is a unique
drop-in-seat spring. The registrant primarily distributes its products
throughout most of the United States through the registrant's sales force to
approximately 3,000 furniture dealers (including three Company owned stores),
department stores, recreational vehicle manufacturers and van converters, and
hospitality and healthcare facilities. The registrant's products are also sold
to several national chains, some of which sell on a private label basis.
(iii) Sources and availability of raw materials essential to
the business:
The registrant's furniture products utilize various species of
hardwood lumber obtained from Arkansas, Mississippi, Missouri and elsewhere. In
addition to hardwood lumber and engineered wood products, principal raw
materials utilized in the manufacturing process include bar and wire stock, high
carbon spring steel, fabrics, leather and polyurethane. While the registrant
purchases these materials from outside suppliers, it is not dependent upon any
single source of supply. The raw materials are all readily available.
2
(iv) Material patents and licenses:
The registrant owns the American and Canadian improvement
patents to its Flexsteel seat spring, as well as, patents on convertible beds
and various other recreational vehicle seating products. In addition, it holds
licenses to manufacture certain rocker-recliners. The registrant does not
consider its patents and licenses material to its business.
(v) The registrant's business is not considered seasonal.
(viii) The approximate dollar amounts of backlog of orders
believed to be firm as of the end of the current fiscal year and the prior two
fiscal years are as follows:
JUNE 30, 2002 JUNE 30, 2001 JUNE 30, 2000
------------- ------------- -------------
$30,000,000* $25,700,000 $30,600,000
* All of this amount is expected to be filled in the fiscal year ending June 30,
2003.
(ix) Competitive conditions:
The furniture industry is highly competitive. There are
numerous furniture manufactures in the United States. Although the registrant is
one of the largest manufacturers of upholstered furniture in the United States,
according to the registrant's best information it manufactures and sells less
than 4% of the upholstered furniture sold in the United States. The registrant's
principal method of meeting competition is by emphasizing its product
performance and to use its sales force.
(x) Expenditures on research activities:
Most items in the upholstered seating line are designed by the
registrant's own design staff. New models and designs of furniture, as well as
new fabrics, are introduced continuously. The registrant estimates that
approximately 40% of its upholstered seating line are redesigned in whole or in
part each year. In the last three fiscal years, these redesign activities
involved the following expenditures:
FISCAL YEAR ENDING EXPENDITURES
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June 30, 2002 $1,970,000
June 30, 2001 $2,090,000
June 30, 2000 $2,170,000
(xi) Approximately 2,300, 2,400, and 2,600 people were
employed by the registrant as of June 30, 2002, June 30, 2001, and June 30,
2000, respectively.
(d) FINANCIAL INFORMATION ABOUT DOMESTIC OPERATIONS
Financial information about operations is set forth in the registrant's
Annual Report for the Fiscal Year Ended June 30, 2002 which is incorporated
herein by reference. The registrant has no foreign operations and makes minimal
export sales.
3
ITEM 2. PROPERTIES
(a) THE REGISTRANT OWNS OR LEASES THE FOLLOWING MANUFACTURING PLANTS:
APPROXIMATE
LOCATION SIZE (SQUARE FEET) PRINCIPAL OPERATIONS
----------------------- -------------------- --------------------------------------------
Dubuque, Iowa 853,000 Upholstered Furniture- Recreational Vehicle
- Metal Working
Lancaster, Pennsylvania 216,000 Upholstered Furniture
Riverside, California 236,000 Upholstered Furniture - Recreational Vehicle
Harrison, Arkansas 123,000 Woodworking Plant
New Paris, Indiana 168,000 Recreational Vehicle - Metal Working
Dublin, Georgia 242,400 Upholstered Furniture
Starkville, Mississippi 349,000 Upholstered Furniture- Woodworking Plant
The registrant's operating plants are well suited for their
manufacturing purposes and have been updated and expanded from time to time as
conditions warrant. There is adequate production capacity to meet present market
demands.
The registrant leases one production facility in Harrison,
Arkansas of approximately 93,000 sq. feet for upholstered furniture.
The registrant leases showrooms for displaying its products in
the furniture marts in High Point, North Carolina and San Francisco, California.
The registrant leases one warehouse in Vancouver, Washington
of approximately 15,750 sq. feet for storing its products prior to distribution.
(b) OIL AND GAS OPERATIONS: NONE.
ITEM 3. LEGAL PROCEEDINGS
The Company has no material legal proceedings pending. All pending
litigation is considered to be routine litigation incidental to the business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter ended June 30, 2002 no matter was submitted
to a vote of security holders.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the registrant, their ages, positions (in
each case as of June 30, 2002), and the month and year they were first elected
or appointed an officer of the registrant, are as follows:
NAME (AGE) POSITION (DATE FIRST BECAME OFFICER)
- --------------------- ------------------------------------------------------------------------
K. B. Lauritsen (59) President / Chief Executive Officer (November 1979)
E. J. Monaghan (63) Executive Vice President / Chief Operating Officer (November 1979)
R. J. Klosterman (54) Vice President Finance / Chief Financial Officer & Secretary (June 1989)
J. R. Richardson (58) Senior Vice President of Marketing (November 1979)
T. D. Burkart (59) Senior Vice President of Vehicle Seating (February 1984)
P. M. Crahan (54) Vice President (June 1989)
J. T. Bertsch (47) Vice President (June 1989)
Each named executive officer has held the same office of an executive or
management position with the registrant for at least five years.
4
Cautionary Statement Relevant to Forward-Looking Information for the Purpose of
"Safe Harbor" Provisions and 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 long-term goals of the
Company, including statements contained in the Company's filings with the
Securities and Exchange Commission and in its reports to shareholders.
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 cyclical nature of the furniture
industry, 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, competition, both foreign and domestic, credit exposure to our
customers, and general economic 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
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The NASDAQ -- National Market System is the principal market on which
the registrant's Common Stock is traded. The market prices for the stock and the
dividends paid per common share for each quarterly period during the past two
years is shown in the registrant's Annual Report for the Fiscal Year Ended June
30, 2002, and is incorporated herein by reference.
The Company estimates there were approximately 1,800, 1,800, and 2,600
holders of Common Stock of the registrant as of June 30, 2002, June 30, 2001,
and June 30, 2000, respectively.
ITEM 6. SELECTED FINANCIAL DATA
This information is contained on page 6 in the registrant's Annual
Report for the Fiscal Year Ended June 30, 2002, under the caption "Five Year
Review" and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's discussion and analysis is contained on page 15 and page
16 in the registrant's Annual Report for the Fiscal Year Ended June 30, 2002 and
is incorporated herein by reference.
ITEM 7a. QUANTITATIVE INFORMATION ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements of the Company included in the
financial report section of the Annual Report for the Fiscal Year Ended June 30,
2002, are incorporated herein by reference:
PAGE(S)
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Consolidated Balance Sheets, June 30, 2002, 2001............................................................. 7
Consolidated Statements of Income and Comprehensive Income -Years Ended June 30, 2002, 2001, 2000............ 8
Consolidated Statements of Changes in Shareholders' Equity - Years Ended June 30, 2002, 2001, 2000........... 9
Consolidated Statements of Cash Flows - Years Ended June 30, 2002, 2001, 2000................................ 10
Quarterly Financial Data -- Years Ended June 30, 2002, 2001.................................................. 14
Notes to Consolidated Financial Statements................................................................... 11 - 14
Independent Auditors' Report................................................................................. 15
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
During fiscal 2002 there were no changes in or disagreements with
accountants on accounting procedures or accounting and financial disclosures.
5
PART III
ITEMS 10, 11, 12. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT, EXECUTIVE
COMPENSATION AND SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information identifying directors of the registrant, executive
compensation and beneficial ownership of registrant stock and supplementary data
is contained in the registrant's fiscal 2002 definitive Proxy Statement to be
filed with the Securities and Exchange Commission and are incorporated herein by
reference. Executive officers are identified in Part I, item 4 above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is contained under the heading "Certain Relationships
and Related Transactions" in the registrant's fiscal 2002 definitive Proxy
Statement to be filed with the Securities and Exchange Commission and is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
The financial statements of the registrant included in the Annual
Report for the Fiscal Year Ended June 30, 2002, are incorporated herein by
reference as set forth above in Item 8.
(2) Schedules
The following financial schedules for the years ended 2002, 2001 and
2000 are submitted herewith:
SCHEDULE VIII
RESERVES
FOR THE YEARS ENDED JUNE 30, 2002, 2001 AND 2000
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- --------------------------- ------------ ------------ ------------ ------------
DEDUCTIONS
BALANCE AT ADDITIONS FROM BALANCE
BEGINNING OF CHARGED TO RESERVES AT CLOSE
DESCRIPTION YEAR INCOME (NOTE) OF YEAR
- --------------------------- ------------ ------------ ------------ ------------
Allowance for
Doubtful Accounts:
2002 ...................... $ 1,950,000 $ 1,581,000 ($ 991,000) $ 2,540,000
============ ============ ============ ============
2001 ...................... $ 2,250,000 $ 4,178,000 ($ 4,478,000) $ 1,950,000
============ ============ ============ ============
2000 ...................... $ 2,503,000 $ 187,000 ($ 440,000) $ 2,250,000
============ ============ ============ ============
- --------------------
NOTE -- UNCOLLECTIBLE ACCOUNTS CHARGED AGAINST RESERVE, LESS RECOVERIES.
Other schedules are omitted because they are not required or are not
applicable or because the required information is included in the financial
statements incorporated by reference above.
(3) Exhibit No.
3.1 Restated Article of Incorporation by reference to Exhibits to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended June 30, 1988.
3.2 Bylaws of the Registrant incorporated by reference to Exhibits
to the Annual Report on Form 10-K for the fiscal year ended
June 30, 1994.
4.1 Instruments defining the rights of security holders, including
indentures. The issuer has not filed, but agrees to furnish
upon request to the Commission copies of the Mississippi
Industrial Development Revenue Bond Agreement issued regarding
the issuer's facilities in Starkville, MS.
10.1 1989 Stock Option Plan, as amended, incorporated by reference
from the 1992 Flexsteel definitive proxy statement.*
10.2 1995 Stock Option Plan incorporated by reference from the 1995
Flexsteel definitive proxy statement.*
10.3 Management Incentive Plan incorporated by reference from the
1980 Flexsteel definitive proxy statement - commission file
#0-5151.*
10.4 1999 Stock Option Plan incorporated by reference from the 1999
Flexsteel definitive proxy statement.*
10.5 Flexsteel Industries, Inc. Voluntary Deferred Compensation
Plan incorporated by reference to Exhibits to the Annual
Report on Form 10-K for the fiscal year ended June 30, 2001.
6
10.6 Flexsteel Industries, Inc. Restoration Retirement Plan
incorporated by reference to Exhibits to the Annual Report on
Form 10-K for the fiscal year ended June 30, 2001.
10.7 Flexsteel Industries, Inc. Senior Officer Supplemental
Retirement Plan incorporated by reference to Exhibits to the
Annual Report on Form 10-K for the fiscal year ended June 30,
2001.
13 Annual Report for the Fiscal Year Ended June 30, 2002.
22 2002 definitive Proxy Statement incorporated by reference is
to be filed with the Securities Exchange Commission on or
before December 1, 2002. However, the Nominating and
Compensation Committee Report and Audit Committee Report are
not incorporated herein as soliciting material or filed
material.
23.1 Independent Auditors' Report.
23.2 Independent Auditors' Consent.
99.1 Certification by Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350 as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification by Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350 as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
99.3 Form 11-K for the Fiscal Year Ended June 30, 2002.
*Management contracts and arrangements required to be
filed pursuant to Item 14 (c) of this report.
(b) REPORTS ON FORM 8-K
On June 18, 2002, the Company filed a report on Form 8-K announcing
the appointment of Eric S. Rangen to the Board of Directors.
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: September 25, 2002 FLEXSTEEL INDUSTRIES, INC.
----------------------
By: /S/ K. BRUCE LAURITSEN
----------------------------
K. BRUCE LAURITSEN
PRESIDENT, CHIEF EXECUTIVE OFFICER
and
PRINCIPAL EXECUTIVE OFFICER
By: /S/ R. J. KLOSTERMAN
----------------------------
RONALD J. KLOSTERMAN
VICE PRESIDENT OF FINANCE
and
PRINCIPAL FINANCIAL OFFICER
7
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: September 25, 2002 /S/ K. BRUCE LAURITSEN
--------------------------- ---------------------------
K. Bruce Lauritsen
DIRECTOR
Date: September 25, 2002 /S/ EDWARD J. MONAGHAN
--------------------------- ---------------------------
Edward J. Monaghan
DIRECTOR
Date: September 25, 2002 /S/ JAMES R. RICHARDSON
--------------------------- ---------------------------
James R. Richardson
DIRECTOR
Date: September 25, 2002 /S/ JEFFREY T. BERTSCH
--------------------------- ---------------------------
Jeffrey T. Bertsch
DIRECTOR
Date: September 25, 2002 /S/ L. BRUCE BOYLEN
--------------------------- ---------------------------
L. Bruce Boylen
DIRECTOR
Date: September 25, 2002 /S/ PATRICK M. CRAHAN
--------------------------- ---------------------------
Patrick M. Crahan
DIRECTOR
Date: September 25, 2002 /S/ LYNN J. DAVIS
--------------------------- ---------------------------
Lynn J. Davis
DIRECTOR
Date: September 25, 2002 /S/ THOMAS E. HOLLORAN
--------------------------- ---------------------------
Thomas E. Holloran
DIRECTOR
Date: September 25, 2002 /S/ MARVIN M. STERN
--------------------------- ---------------------------
Marvin M. Stern
DIRECTOR
Date: September 25, 2002 /S/ ROBERT E. DEIGNAN
--------------------------- ---------------------------
Robert E. Deignan
DIRECTOR
Date: September 25, 2002 /S/ ERIC S. RANGEN
--------------------------- ---------------------------
Eric S. Rangen
DIRECTOR
8