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FORM 10-K
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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, 1999
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: (319) 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 5, 1999 which is within 60 days
prior to the date of filing:
Common Stock, Par Value $1.00 Per Share: $54,062,071
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of August 5, 1999:
CLASS SHARES OUTSTANDING
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Common Stock, $ 1.00 Par Value Shares 6,538,241
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF REGISTRANT'S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR
ENDING JUNE 30, 1999 IN PARTS I, II, AND IV.
IN PART III, PORTIONS OF THE REGISTRANT'S 1999 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
1999 Annual Report to Shareholders which is incorporated herein by reference.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The registrant's operations consist of one industry segment --
upholstered seating. For more detailed financial information see the
registrant's 1999 Annual Report to Shareholders 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
1999 1998 1997
----------------- ---------------- ----------------
AMOUNT OF AMOUNT OF AMOUNT OF
SALES SALES SALES
----------------- ---------------- ----------------
Residential Seating............ $151,600,000 $139,200,000 $133,600,000
Recreational Vehicle Seating .. 86,700,000 73,900,000 64,600,000
Commercial Seating ............ 22,200,000 23,000,000 21,200,000
----------------- ---------------- ----------------
Upholstered Seating Total ..... $260,500,000 $236,100,000 $219,400,000
================= ================ ================
(c) NARRATIVE DESCRIPTION OF BUSINESS
(1) (i), (ii), (vii) The registrant is engaged in one segment of
business, namely, 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 the 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, 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 last fiscal year and the preceding 2
fiscal years are as follows:
JUNE 30, 1999 JUNE 30, 1998 JUNE 30, 1997
------------------------- ------------------------ -----------------------
$28,100,000 * $26,100,000 $22,700,000
*All of this amount is expected to be filled in fiscal year ending June 30,
2000.
(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
principle 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 is 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
------------------------------------- ---------------------------------------
June 30, 1999 $1,930,000
June 30, 1998 $1,640,000
June 30, 1997 $1,540,000
(xi) Approximately 2,400 people were employed by the registrant
as of June 30, 1999; additionally 2,300 people were employed as of June 30,1998
and 2,400 people as of June 30, 1997.
(d) FINANCIAL INFORMATION ABOUT DOMESTIC OPERATIONS
Financial information about domestic operations is set forth in the
registrant's 1999 Annual Report to Shareholders 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 THE FOLLOWING MANUFACTURING PLANTS:
APPROXIMATE
LOCATION SIZE (SQUARE FEET) PRINCIPAL OPERATIONS
--------------------------------------- ----------------------- ------------------------------------------------
Dubuque, Iowa 845,000 Upholstered Furniture- Recreational Vehicle
- Metal Working
Lancaster, Pennsylvania 216,000 Upholstered Furniture - Recreational Vehicle
Riverside, California 206,000 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 - Recreational Vehicle
Starkville, Mississippi 349,000 Upholstered Furniture- Woodworking Plant
Elkhart, Indiana 99,500 Recreational Vehicle - Metal Working
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 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 other than
ordinary routine litigation incidental to the business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter 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, 1999), 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 (56) President / Chief Executive Officer (November 1979)
E. J. Monaghan (60) Executive Vice President / Chief Operating Officer (November 1979)
R. J. Klosterman (51) Vice President Finance / Chief Financial Officer & Secretary (June 1989)
J. R. Richardson (55) Senior Vice President of Marketing (November 1979)
T. D. Burkart (56) Senior Vice President of Vehicle Seating (February 1984)
P. M. Crahan (51) Vice President (June 1989)
J. T. Bertsch (44) 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 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 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 being 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 to Shareholders for
the Year Ended June 30, 1999, and is incorporated herein by reference.
There were approximately 2,800 holders of Common Stock of the registrant
as of June 30, 1999; as well as 2,300 and 1,920 holders of Common Stock of the
registrant as of June 30, 1998, and June 30, 1997, respectively.
ITEM 6. SELECTED FINANCIAL DATA
This information is contained on page 6 in the registrant's Annual
Report to Shareholders for the Year Ended June 30, 1999, 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 to Shareholders for the Year Ended June 30,
1999 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 to Shareholders for the Year Ended
June 30, 1999, are incorporated herein by reference:
PAGE(S)
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Balance Sheets, June 30, 1999, 1998.............................................................. 8
Statements of Income and Comprehensive Income --Years Ended June 30, 1999, 1998, 1997............ 9
Statements of Changes in Shareholders' Equity -- Years ended June 30, 1999, 1998, 1997........... 10
Statements of Cash Flows -- Years Ended June 30, 1999, 1998, 1997................................ 11
Quarterly Financial Data -- Years Ended June 30, 1999, 1998...................................... 14
Notes to Financial Statements.................................................................... 12-14
Independent Auditors' Report..................................................................... 7
5
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
During fiscal 1999 there were no changes in or disagreements with accountants on
accounting procedures or accounting and financial disclosures.
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 1999 definitive Proxy Statement to be filed
with the Securities and Exchange Commission and is 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 1999 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 to Shareholders for the Year Ended June 30, 1999, are incorporated herein
by reference as set forth above in ITEM 8.
(2) Schedules
The following financial schedules for the years ended 1999, 1998 and
1997 are submitted herewith:
PAGE
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SCHEDULE VIII -- Reserves 9
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 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.*
13 Annual Report to Shareholders for the Year Ended
June 30, 1999.
22 1999 definitive Proxy Statement incorporated by
reference is to be filed with the Securities
Exchange Commission on or before December 1,
1999.
23.1 Independent Auditor's Report.
23.2 Consent of Independent Auditors.
27.1 Financial Data Schedule for the fiscal year ended
June 30, 1999.
99 1999 Form 11-K for Salaried Employee's Savings
Plan 401(k).
*Management contracts and arrangements required
to be filed pursuant to Item 14 ( c ) of this
report.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the last quarter of the
fiscal year ended June 30, 1999.
6
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 2, 1999 FLEXSTEEL INDUSTRIES, INC.
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By: /S/ K. B. LAURITSEN
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K. B. LAURITSEN
PRESIDENT, CHIEF EXECUTIVE OFFICER
and
PRINCIPAL EXECUTIVE OFFICER
By: /S/ R. J. KLOSTERMAN
-------------------------------------
R. 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 2, 1999 /S/ JOHN R. EASTER
---------------------------------------------------- ----------------------------------------------------------------------
John R. Easter
DIRECTOR
Date: September 2, 1999 /S/ K. BRUCE LAURITSEN
---------------------------------------------------- ----------------------------------------------------------------------
K. Bruce Lauritsen
DIRECTOR
Date: September 2, 1999 /S/ EDWARD J. MONAGHAN
---------------------------------------------------- ----------------------------------------------------------------------
Edward J. Monaghan
DIRECTOR
Date: September 2, 1999 /S/ JAMES R. RICHARDSON
---------------------------------------------------- ----------------------------------------------------------------------
James R. Richardson
DIRECTOR
Date: September 2, 1999 /S/ JEFFREY T. BERTSCH
---------------------------------------------------- ----------------------------------------------------------------------
Jeffrey T. Bertsch
DIRECTOR
Date: September 2, 1999 /S/ L. BRUCE BOYLEN
---------------------------------------------------- ----------------------------------------------------------------------
L. Bruce Boylen
DIRECTOR
Date: September 2, 1999 /S/ PATRICK M. CRAHAN
---------------------------------------------------- ----------------------------------------------------------------------
Patrick M. Crahan
DIRECTOR
Date: September 2, 1999 /S/ LYNN J. DAVIS
---------------------------------------------------- ----------------------------------------------------------------------
Lynn J. Davis
DIRECTOR
Date: September 2, 1999 /S/ THOMAS E. HOLLORAN
---------------------------------------------------- ----------------------------------------------------------------------
Thomas E. Holloran
DIRECTOR
Date: September 2, 1999 /S/ MARVIN M. STERN
---------------------------------------------------- ----------------------------------------------------------------------
Marvin M. Stern
DIRECTOR
8
SCHEDULE VIII
FLEXSTEEL INDUSTRIES, INC.
RESERVES
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
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DEDUCTIONS
BALANCE AT ADDITIONS FROM BALANCE AT
BEGINNING CHARGED TO RESERVES CLOSE OF YEAR
DESCRIPTION OF YEAR INCOME (NOTE)
- --------------------------------------- -------------------- ------------- ------------------- ----------------------
Allowance for Doubtful Accounts:
1999................................... $ 2,198,000 $ 544,000 $ 239,000 $ 2,503,000
==================== ============= =================== ======================
1998................................... $ 2,799,000 $ 943,000 $ 1,544,000 $ 2,198,000
==================== ============= =================== ======================
1997................................... $ 2,153,000 $ 831,000 $ 185,000 $ 2,799,000
==================== ============= =================== ======================
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NOTE -- UNCOLLECTIBLE ACCOUNTS CHARGED AGAINST RESERVE, LESS RECOVERIES.
9