Manufacturing and Offshore Sourcing
We
integrate our manufactured products with finished products acquired from
offshore suppliers who can meet our quality specification and scheduling
requirements. We will continue to pursue and refine this blended strategy,
offering customers manufactured goods, products manufactured utilizing imported
component parts, and ready-to-deliver imported products. The Company believes
that it best serves customers by offering products from each of these
categories to assist customers in reaching specific consumers with varied price
points, styles and product categories. This blended focus on products allows
the Company to provide a wide range of options to satisfy customer
requirements.
We
operate manufacturing facilities that are located in Arkansas, California,
Georgia, Indiana, Iowa, Mississippi and Juarez, Mexico. These manufacturing
operations are integral to our product offerings and distribution strategy by
offering smaller and more frequent product runs of a wider product selection.
We identify and eliminate manufacturing inefficiencies and adjust manufacturing
schedules on a daily basis to meet customer requirements. We have established
relationships with key suppliers to ensure prompt delivery of quality component
parts. Our production includes the use of selected offshore component parts to
enhance our product quality and value in the marketplace.
Competition
The
furniture industry is highly competitive and includes a large number of
domestic and foreign manufacturers and distributors, none of which dominates
the market. The competition has increased from foreign manufacturers, in
countries such as China, which have lower production costs, and through direct
importing by certain large retailers. The markets in which we compete include a
large number of relatively small manufacturers; however, certain competitors
have substantially greater sales volumes and financial resources than we have. Our
products compete based on style, quality, price, delivery, service and
durability. We believe that our manufacturing capabilities, facility locations,
commitment to customers, product quality and value and experienced production,
marketing and management teams, aided by offshore sourced components and
finished product, are our competitive advantages.
Seasonality
The
Companys business is not considered seasonal.
Foreign Operations
The
Company makes minimal export sales. At June 30, 2009, the Company had 76
employees located in Asia to inspect and coordinate the delivery of purchased
products.
Customer Backlog
The
approximate backlog of customer orders believed to be firm as of the end of the
current fiscal year and the prior two fiscal years were as follows (in
thousands):
|
|
|
|
|
June 30, 2009
|
|
June 30, 2008
|
|
June 30, 2007
|
$35,200
|
|
$45,700
|
|
$50,900
|
Raw Materials
The
Company utilizes various types of wood, fabrics, leathers, upholstered filling
material, high carbon spring steel, bar and wire stock, polyurethane and other
raw materials in manufacturing furniture. While the Company purchases these
materials from numerous outside suppliers, both domestic and offshore, it is
not dependent upon any single source of supply. The costs of certain raw
materials fluctuate, but all continue to be readily available.
Working Capital Practices
For
a discussion of the Companys working capital practices, see Liquidity and
Capital Resources in Item 7 of this Annual Report on Form 10-K.
Industry Factors
The
Company has exposure to actions by governments, including tariffs. Tariffs are
a possibility on any imported or exported products.
Government Regulations
The
Company is subject to various local, state, and federal laws, regulations and
agencies that affect businesses generally. These include regulations
promulgated by federal and state environmental and health agencies, the federal
Occupational Safety and Health Administration, and laws pertaining to the
hiring, treatment, safety, and discharge of employees.
3
Environmental Matters
The
Company is subject to environmental laws and regulations with respect to
product content and industrial waste. Compliance with these laws and
regulations has not had a material impact on our capital expenditures,
earnings, or competitive position.
Trademarks, Patents and Licenses
The
Company 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. The Company owns certain trademarks in
connection with its furniture products, which trademarks are due to expire on
dates ranging from 2011 to 2020. The Company does not consider its trademarks,
patents and licenses material to its business.
It
is not common in the furniture industry to obtain a patent for a furniture
design. If a particular design of a furniture manufacturer is well accepted in
the marketplace, it is common for other manufacturers to imitate the same
design without recourse by the furniture manufacturer who initially introduced
the design. Furniture products are designed by the Companys own design staff
and through the services of independent designers. New models and designs of
furniture, as well as new fabrics, are introduced continuously. In the last
three fiscal years, these design activities involved the following expenditures
(in thousands):
|
|
|
Fiscal Year Ended June 30,
|
|
Expenditures
|
2009
|
|
$2,680
|
2008
|
|
$3,130
|
2007
|
|
$3,270
|
Employees
The
Company had approximately 1,400 employees as of June 30, 2009 including
approximately 300 employees that are covered by collective bargaining
agreements. Management believes it has good relations with employees.
Website and Available Information
Our
website is located at
www.flexsteel.com
. Information on the website does not
constitute part of this Annual Report on Form 10-K.
A
copy of the Companys Annual Report on Form 10-K, as filed with the Securities
and Exchange Commission (SEC), other SEC reports filed or furnished and our
Guidelines for Business Conduct
are
available, without charge, on the Companys website at
www.flexsteel.com
or by
writing to the Office of the Secretary, Flexsteel Industries, Inc., P. O. Box
877, Dubuque, IA 52004-0877.
Item 1A Risk Factors
Our
business is subject to a variety of risks. You should carefully consider the
risk factors detailed below in conjunction with the other information contained
in this Annual Report on Form 10-K. Should any of these risks actually
materialize, our business, financial condition, and future prospects could be
negatively impacted. These risks are not the only ones we face. There may be additional
factors that are presently unknown to us or that we currently believe to be
immaterial that could affect our business.
The
current economic downturn could continue to result in a decrease in our sales
and earnings.
The
current economic downturn has caused a decrease in our sales and earnings,
particularly in recreational vehicle product applications. This economic
downturn has and will likely continue to affect near-term consumer-spending
habits by decreasing the overall demand for home furnishings, recreational
vehicles and commercial products. Interest rates, consumer confidence, fuel
costs, credit availability, unemployment levels, housing starts, and
geopolitical factors that affect many other businesses are particularly significant
to our business because many of our products are discretionary consumer goods.
We
may lose market share due to competition, which would decrease our future sales
and earnings.
The
furniture industry is very competitive and fragmented. We compete with many
domestic and foreign manufacturers and distributors. Some competitors have
greater financial resources than we have and some often offer extensively
advertised, well-recognized, branded products. Additionally, competition from
foreign producers has increased dramatically in the past few years. These
foreign producers typically have lower selling prices due to their lower
operating costs. As a result, we may not be able to maintain or to raise the
prices of our products in response to such competitive pressures or increasing
costs. Also, due to the large number of competitors and their wide range of
product offerings, we may not be able to differentiate our products (through
styling, finish and other construction techniques) from those of our
competitors. Large retail furniture dealers have the ability to obtain offshore
sourcing on their own. As a result, we are continually subject to the risk of
losing market share, which may lower our sales and earnings.
4
Our
offshore capabilities provide flexibility in product offerings and pricing to
meet competitive pressures, but this approach may adversely affect our ability
to service customers, which could lower future sales and earnings.
We
acquire a portion of our finished goods and components used in our
manufacturing operations from foreign vendors. These vendors are located
primarily in Southeast Asia. The delivery of goods from these vendors may be
delayed for reasons not typically encountered with U.S. suppliers including
shipment delays caused by customs, dockworker labor issues, changes in
political, economic and social conditions, laws and regulations. This could
make it more difficult to service our customers resulting in lower sales and
earnings.
Efforts
to realign manufacturing could decrease our near-term earnings.
We
continually review our manufacturing operations and offshore sourcing
capabilities. As a result, we sometimes realign those operations and
capabilities and institute cost savings programs. These programs can include
the consolidation and integration of facilities, functions, systems and
procedures. We also may shift certain products to or from domestic
manufacturing to offshore sourcing. These realignments and cost savings
programs generally involve some initial cost and can result in decreases in our
near-term earnings until we achieve the expected cost reductions. We may not
always accomplish these actions as quickly as anticipated, and we may not fully
achieve the expected cost reductions.
If
we experience fluctuations in the price, availability and quality of raw
materials, this could cause manufacturing delays, adversely affect our ability
to provide goods to our customers and increase our costs, any of which could
decrease our sales and earnings.
We
use various types of wood, fabrics, leathers, upholstered filling material,
high carbon spring steel, bar and wire stock and other raw materials in
manufacturing furniture. Because we are dependent on outside suppliers for all
of our raw material needs, we must obtain sufficient quantities of quality raw
materials from our suppliers at acceptable prices and in a timely manner. We do
not utilize long-term supply contracts with our suppliers. Unfavorable
fluctuations in the price, quality and availability of these raw materials
could negatively affect our ability to meet demands of our customers and have a
negative impact on product margin. The inability to meet our customers demands
could result in the loss of future sales, and we may not always be able to pass
along price increases to our customers due to competitive and marketing
pressures.
If
we experience the loss of large customers through business failures (or for
other reasons) or any extended business interruptions at our manufacturing
facilities, this could decrease our future sales and earnings. Our failure to
anticipate or respond to changes in consumer tastes and fashions in a timely
manner could adversely affect our business and decrease our sales and earnings.
Although
we have no customers that individually represent 10% or more of our net sales,
the possibility of business failures by, or the loss of, large customers could
decrease our future sales and earnings. Lost sales may be difficult to replace
and any amounts owed to us may become uncollectible. Our inability to fill
customer orders during an extended business interruption could negatively
impact existing customer relationships resulting in market share decreases.
Furniture
is a styled product and is subject to rapidly changing consumer trends and
tastes and upholstered furniture is highly fashion oriented, and if we are not
able to acquire sufficient fabric variety, or if we are unable to predict or
respond to changes in fashion trends, we may lose sales and have to sell excess
inventory at reduced prices.
At
times it is necessary we discontinue certain relationships with customers
(retailers, O.E.M. manufacturers and others) who do not meet our growth, credit
or profitability standards. Until realignment is established, there can be a
decrease in near-term sales and earnings. We continually review relationships
with our customers and future realignments are possible based upon such ongoing
reviews.
5
We
are, and may in the future be, a party to legal proceedings and claims,
including those involving product liability or environmental matters, some of
which claim significant damages and could adversely affect our business, operating
results and financial condition.
We
face the business risk of exposure to product liability claims in the event
that the use of any of our products results in personal injury or property
damage. In the event any of our products prove to be defective, we may be
required to recall or redesign such products. We maintain insurance against
product liability claims, but there can be no assurance such coverage will
continue to be available on terms acceptable to us or that such coverage will
be adequate for liabilities actually incurred.
Given
the inherent uncertainty of litigation, we can offer no assurance future
litigation will not have a material adverse impact on our business, operating
results or financial condition. We are also subject to various laws and
regulations relating to environmental protection and the discharge of materials
into the environment and we could incur substantial costs as a result of the
noncompliance with, or liability for cleanup or other costs or damages under,
environmental laws.
We
may engage in acquisitions and investments in businesses, which could dilute
our earnings per share and decrease the value of our common stock.
As
part of our business strategy, we may make acquisitions and investments in
businesses that offer complementary products. Risks commonly encountered in
acquisitions include the possibility that we pay more than the acquired company
or assets are worth, the difficulty of assimilating the operations and
personnel of the acquired business, the potential disruption of our ongoing
business and the distraction of our management from ongoing business.
Consideration paid for future acquisitions could be in the form of cash or
stock or a combination thereof. Dilution to existing stockholders and to
earnings per share may result in connection with any such future acquisition.
Restrictive covenants in our
existing credit facilities may restrict our ability to pursue our business
strategies.
Our
existing credit facilities limit our ability, among other things, to: incur
additional indebtedness; merge, sell or otherwise dispose of all or
substantially all of our assets; and create liens.
The
restrictions contained in our credit facilities could: limit our ability to
plan for or react to market conditions or meet capital needs or otherwise
restrict our activities or business plans; and adversely affect our ability to
finance our operations, strategic acquisitions, investments or alliances or
other capital needs or to engage in other business activities that would be in
our best interest.
A
breach of any of these restrictive covenants or our inability to comply with
the required financial ratios could result in a default under our credit facilities.
If a default occurs, the lender under our credit agreement may elect to declare
all borrowings outstanding, together with accrued interest and other fees, to
be immediately due and payable which would result in an event of default under
our outstanding notes. The lender will also have the right in these
circumstances to terminate any commitments they have to provide further
borrowings. If we are unable to repay outstanding borrowings when due, the
lender will also have the right to initiate collection proceedings against us.
Terms
of collective bargaining agreements and labor disruptions could adversely
impact our results of operations.
We
employ approximately 1,400 people, 20% of whom are covered by union contracts.
Where a significant portion of our workers are unionized, our ability to
implement productivity improvements and effect savings with respect to health
care, pension and other retirement costs is more restricted than in many
nonunion operations as a result of various restrictions specified in our
collective bargaining agreements. Terms of collective bargaining agreements
that prevent us from competing effectively could adversely affect our financial
condition, results of operations and cash flows. We are committed to working
with those groups to resolve conflicts as they arise. However, there can be no
assurance that these efforts will be successful.
|
|
Item 1B.
|
Unresolved
Staff Comments
|
None.
6
The
Company owns the following facilities as of June 30, 2009:
|
|
|
|
|
|
|
|
|
Location
|
|
Approximate
Size (square feet)
|
|
Principal Operations
|
|
|
Dubuque, Iowa
|
|
853,000
|
|
|
Manufacturing, Warehouse
and Corporate Offices
|
|
Lancaster, Pennsylvania
|
|
216,000
|
|
|
Warehouse
|
|
|
Riverside, California
|
|
236,000
|
|
|
Manufacturing
|
|
|
|
|
69,000
|
|
|
Warehouse
|
|
|
Dublin, Georgia
|
|
300,000
|
|
|
Manufacturing
|
|
|
Harrison, Arkansas
|
|
221,000
|
|
|
Manufacturing
|
|
|
Starkville, Mississippi
|
|
349,000
|
|
|
Manufacturing
|
|
|
New Paris, Indiana
|
|
168,000
|
|
|
Held for sale
|
|
|
Huntingburg, Indiana
|
|
612,000
|
|
|
Warehouse
|
|
|
|
|
79,000
|
|
|
Manufacturing
|
|
The
Company leases the following facilities as of June 30, 2009:
|
|
|
|
|
|
|
|
|
Location
|
|
Approximate
Size (square feet)
|
|
Principal Operations
|
|
|
Vancouver, Washington
|
|
16,000
|
|
|
Warehouse
|
|
|
Louisville, Kentucky
|
|
15,000
|
|
|
Administrative Offices
|
|
|
Ferdinand, Indiana
|
|
158,000
|
|
|
Warehouse
|
|
|
Juarez, Mexico
|
|
48,000
|
|
|
Manufacturing
|
|
The
Companys operating plants are well suited for their manufacturing purposes and
have been updated and expanded from time to time as conditions warrant.
Management believes there is adequate production capacity at the Companys
facilities to meet present market demands.
The
Company leases showrooms for displaying its products in the furniture markets
in High Point, North Carolina and Las Vegas, Nevada.
|
|
Item 3.
|
Legal Proceedings
|
From
time to time, the Company is subject to various legal proceedings, including lawsuits,
which arise out of, and are incidental to, the conduct of the Companys
business. The Company does not consider any of such proceedings that are
currently pending, individually or in the aggregate, to be material to its
business or likely to result in a material adverse effect on its consolidated
operating results, financial condition, or cash flows.
|
|
Item 4.
|
Submission of Matters to a Vote of Security Holders
|
During
the quarter ended June 30, 2009 no matter was submitted to a vote of security
holders.
7
PART II
|
|
Item 5.
|
Market for the Registrants Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity Securities
|
|
|
|
Share
Investment Performance
|
|
|
|
The
following graph is based upon the SIC Code #251 Household Furniture Index as
a peer group. It shows changes over the past five-year period in the value of
$100 invested in: (1) Flexsteels common stock; (2) The NASDAQ Global Market;
and (3) an industry peer group of the following: Bassett Furniture Ind., Chromcraft
Revington Inc., Ethan Allen Interiors, Furniture Brands Intl., Hooker
Furniture Corp., Interface Inc., Kimball International, La-Z-Boy Inc.,
Natuzzi S.P.A., and Stanley Furniture Inc.
|
Five-Year
Cumulative Total Returns
Value of $100 Invested on June 30, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
|
2008
|
|
2009
|
|
|
Flexsteel
|
|
100.00
|
|
62.81
|
|
59.26
|
|
68.64
|
|
55.49
|
|
43.36
|
|
|
Peer Group
|
|
100.00
|
|
90.14
|
|
98.61
|
|
94.53
|
|
66.96
|
|
33.43
|
|
|
NASDAQ
|
|
100.00
|
|
101.09
|
|
107.64
|
|
129.93
|
|
115.40
|
|
93.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
NASDAQ Global Market is the principal market on which the Companys common
stock is traded.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale Price of Common Stock *
|
|
Cash Dividends
Per Share
|
|
|
|
|
Fiscal 2009
|
|
Fiscal 2008
|
|
|
|
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
Fiscal 2009
|
|
Fiscal 2008
|
|
|
First Quarter
|
|
$
|
12.18
|
|
$
|
9.50
|
|
$
|
14.75
|
|
$
|
12.92
|
|
$
|
0.13
|
|
$
|
0.13
|
|
|
Second Quarter
|
|
|
10.99
|
|
|
6.68
|
|
|
14.86
|
|
|
11.60
|
|
|
0.13
|
|
|
0.13
|
|
|
Third Quarter
|
|
|
7.96
|
|
|
5.11
|
|
|
14.50
|
|
|
11.00
|
|
|
0.05
|
|
|
0.13
|
|
|
Fourth Quarter
|
|
|
9.00
|
|
|
4.98
|
|
|
13.98
|
|
|
11.01
|
|
|
0.05
|
|
|
0.13
|
|
|
|
|
* Reflects the market price
as reported on The NASDAQ Global Market.
|
|
|
|
The Company estimates
there were approximately 1,600 holders of common stock of the Company as of
June 30, 2009.
|
|
|
|
There were no repurchases
of the Companys common stock during the quarter ended June 30, 2009.
|
8
|
|
Item
6.
|
Selected
Financial Data
|
The
selected financial data presented below should be read in conjunction with the
Companys consolidated financial statements and notes thereto included in Item
8 of this Annual Report on Form 10-K and with Managements Discussion and
Analysis of Financial Condition and Results of Operations included in Item 7
of this Annual Report on Form 10-K. The selected consolidated statement of
operations data of the Company is derived from the Companys consolidated
financial statements.
Five-Year Review
(Amounts in
thousands, except certain
ratios and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
SUMMARY OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
324,158
|
|
$
|
405,655
|
|
$
|
425,400
|
|
$
|
426,408
|
|
$
|
410,023
|
|
Cost of goods sold
|
|
|
263,083
|
|
|
327,165
|
|
|
344,177
|
|
|
345,068
|
|
|
334,978
|
|
Operating (loss) income
|
|
|
(2,272
|
)
|
|
7,596
|
|
|
14,699
|
|
|
8,561
|
|
|
7,258
|
|
Interest and other income
|
|
|
661
|
|
|
469
|
|
|
1,277
|
|
|
775
|
|
|
628
|
|
Interest expense
|
|
|
969
|
|
|
1,468
|
|
|
1,491
|
|
|
1,557
|
|
|
990
|
|
(Loss) income before income taxes
|
|
|
(2,579
|
)
|
|
6,596
|
|
|
14,484
|
|
|
7,778
|
|
|
6,896
|
|
Income tax (benefit) provision (5)
|
|
|
(1,070
|
)
|
|
2,360
|
|
|
5,150
|
|
|
3,060
|
|
|
1,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income (1) (2) (3) (4) (5)
|
|
|
(1,509
|
)
|
|
4,236
|
|
|
9,334
|
|
|
4,718
|
|
|
4,906
|
|
(Loss) earnings per common share: (1) (2) (3) (4) (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
(0.23
|
)
|
|
0.64
|
|
|
1.42
|
|
|
0.72
|
|
|
0.75
|
|
Diluted
|
|
|
(0.23
|
)
|
|
0.64
|
|
|
1.42
|
|
|
0.72
|
|
|
0.74
|
|
Cash dividends declared per common share
|
|
$
|
0.36
|
|
$
|
0.52
|
|
$
|
0.52
|
|
$
|
0.52
|
|
$
|
0.52
|
|
SELECTED DATA AS OF JUNE 30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
6,576
|
|
|
6,574
|
|
|
6,568
|
|
|
6,558
|
|
|
6,531
|
|
Diluted
|
|
|
6,576
|
|
|
6,611
|
|
|
6,583
|
|
|
6,577
|
|
|
6,601
|
|
Total assets
|
|
$
|
150,971
|
|
$
|
179,906
|
|
$
|
185,014
|
|
$
|
184,176
|
|
$
|
165,221
|
|
Property, plant and equipment, net
|
|
|
23,298
|
|
|
26,372
|
|
|
28,168
|
|
|
24,158
|
|
|
26,141
|
|
Capital expenditures
|
|
|
1,203
|
|
|
1,228
|
|
|
10,839
|
|
|
3,411
|
|
|
3,347
|
|
Long-term debt
|
|
|
|
|
|
20,811
|
|
|
21,336
|
|
|
21,846
|
|
|
12,800
|
|
Working capital (current assets less current
liabilities)
|
|
|
78,416
|
|
|
100,920
|
|
|
97,902
|
|
|
95,551
|
|
|
83,952
|
|
Shareholders equity
|
|
$
|
106,998
|
|
$
|
112,752
|
|
$
|
112,679
|
|
$
|
106,066
|
|
$
|
103,361
|
|
SELECTED RATIOS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income, as a percent of sales
|
|
|
(0.5
|
)
|
|
1.0
|
|
|
2.2
|
|
|
1.1
|
|
|
1.2
|
|
Current ratio
|
|
|
3.2
to 1
|
|
|
3.5
to 1
|
|
|
3.2
to 1
|
|
|
2.9
to 1
|
|
|
3.0
to 1
|
|
Return on ending shareholders equity, as a
percent of sales
|
|
|
(1.4
|
)
|
|
3.8
|
|
|
8.3
|
|
|
4.5
|
|
|
4.8
|
|
Average number of employees
|
|
|
1,600
|
|
|
2,140
|
|
|
2,290
|
|
|
2,400
|
|
|
2,460
|
|
|
|
|
|
(1)
|
Fiscal
2009 net loss and per share amounts reflect facility consolidation and other
costs (after tax) of $1.5 million or $(0.23) per share.
|
|
|
|
|
(2)
|
Fiscal
2007 net income and per share amounts reflect the net gain (after tax) on
sale of building of approximately $2.5 million or $0.37 per share, the gain
on life insurance of $0.6 million or $0.08 per share and the net gain (after
tax) on the sale of vacant land of approximately $0.2 million or $0.04 per
share.
|
|
|
|
|
(3)
|
Fiscal
2009, 2008, 2007 and 2006 net (loss) income and per share amounts reflect the
recording of stock-based compensation expense, as required by Statement of
Financial Accounting Standard No. 123 (Revised), of $0.1 million, $0.1
million, $0.2 million and $0.4 million (after tax), respectively, or $0.02
per share, $0.02 per share, $0.04 per share and $0.06 per share,
respectively.
|
|
|
|
|
(4)
|
Fiscal
2005 net income and per share amounts reflect a net gain (after tax) on the
sale of facilities of approximately $0.5 million or $0.08 per share.
|
|
|
|
|
(5)
|
During
Fiscal 2005, an examination by the Internal Revenue Service of the Companys
federal income tax returns for the fiscal years ended June 30, 2004 and 2005
was completed. Due to the favorable settlement results, the Company reduced
its estimate of accrued tax liabilities by $0.7 million. The decrease
resulted in an income tax rate of 30.6% for the fiscal year ended June 30,
2005.
|
9
|
|
Item
7.
|
Managements
Discussion and Analysis of Financial Condition and Results of Operations
|
General
The
following analysis of the results of operations and financial condition of the
Company should be read in conjunction with the consolidated financial
statements and related notes included elsewhere in this Annual Report on Form
10-K.
Critical
Accounting Policies
The
discussion and analysis of the Companys consolidated financial statements and
results of operations are based on consolidated financial statements prepared
in accordance with accounting principles generally accepted in the United
States of America. Preparation of these consolidated financial statements
requires the use of estimates and judgments that affect the reported results.
The Company uses estimates based on the best information available in recording
transactions and balances resulting from business operations. Estimates are
used for such items as collectibility of trade accounts receivable, inventory
valuation, depreciable lives, self-insurance programs, warranty costs and
income taxes. Ultimate results may differ from these estimates under different
assumptions or conditions.
Allowance for doubtful accounts
the Company establishes an
allowance for doubtful accounts through review of open accounts, and historical
collection and allowances amounts. The allowance for doubtful accounts is
intended to reduce trade accounts receivable to the amount that reasonably
approximates their net realizable fair value due to their short-term nature.
The amount ultimately realized from trade accounts receivable may differ from
the amount estimated in the consolidated financial statements based on
collection experience and actual returns and allowances.
Inventories
the Company values inventory at the lower
of cost or market. A large portion of our finished goods inventory is made to
order and many of our raw material parts are interchangeable between products.
Management assesses the inventory on hand and if necessary writes down the
obsolete or excess inventory to market.
Revenue recognition
is upon delivery of product to our
customer and when collectibility is reasonably assured. Delivery of product to
our customer is evidenced through the shipping terms indicating when title and
risk of loss is transferred. Our ordering process creates persuasive evidence
of the sale arrangement and the sales amount is determined. The delivery of the
goods to our customer completes the earnings process. Net sales consist of
product sales and related delivery charge revenue, net of adjustments for
returns and allowances. Shipping and handling costs are included in cost of
goods sold.
Recently Issued
Accounting Pronouncements
See
Item 8. Note 1 to the Companys Consolidated Financial Statements.
Results of
Operations
The following table has been
prepared as an aid in understanding the Companys results of operations on a
comparative basis for the fiscal years ended June 30, 2009, 2008 and 2007.
Amounts presented are percentages of the Companys net sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR THE YEARS ENDED JUNE 30,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Net sales
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Cost of goods sold
|
|
|
(81.2
|
)
|
|
(80.7
|
)
|
|
(80.9
|
)
|
Gross margin
|
|
|
18.8
|
|
|
19.3
|
|
|
19.1
|
|
Selling, general and administrative
|
|
|
(18.8
|
)
|
|
(17.5
|
)
|
|
(16.7
|
)
|
Facility consolidation and
other charges
|
|
|
(0.8
|
)
|
|
|
|
|
|
|
Gain on sale of land and
building
|
|
|
|
|
|
|
|
|
1.0
|
|
Operating (loss) income
|
|
|
(0.8
|
)
|
|
1.8
|
|
|
3.4
|
|
Other expense, net
|
|
|
0.0
|
|
|
(0.2
|
)
|
|
0.0
|
|
(Loss) income before
income taxes
|
|
|
(0.8
|
)
|
|
1.6
|
|
|
3.4
|
|
Income tax benefit
(provision)
|
|
|
0.3
|
|
|
(0.6
|
)
|
|
(1.2
|
)
|
Net (loss) income
|
|
|
(0.5
|
)%
|
|
1.0
|
%
|
|
2.2
|
%
|
10
Fiscal 2009
Compared to Fiscal 2008
Net
sales for the fiscal year ended June 30, 2009 were $324.2 million compared to
$405.7 million in the prior fiscal year, a decrease of 20.1%. Residential net
sales were $230.7 million compared to $258.1 million in the fiscal year ended
June 30, 2008, a decrease of 10.6%. Commercial net sales were $77.2 million for
the fiscal year ended June 30, 2009, a decrease of 15.6% from net sales of
$91.5 million for the fiscal year ended June 30, 2008. Recreational vehicle net
sales were $16.2 million for the fiscal year ended June 30, 2009, a decrease of
71.1% from $56.1 million for the fiscal year ended June 30, 2008.
The
recreational vehicle industry continues to be the hardest hit product category
with the initial impact of high fuel costs compounded by credit tightening and
lack of consumer confidence in the economy as a whole. Recreational vehicle
industry published data indicates that motor home unit sales, the sector that
encompasses the majority of our sales, are down nearly 80%. The commercial
seating product category held up well early in our fiscal year, but fell
considerably as the U. S. economy contracted and credit tightened. We believe
that our residential product category has performed reasonably well in relation
to our competition. However, residential furniture remains a deferrable
purchase item and is adversely impacted by tighter consumer credit, higher
unemployment and low levels of consumer confidence.
Gross
margin for the fiscal years ended June 30, 2009 and 2008 was 18.8% and 19.3%,
respectively. The decrease in gross margin percentage for the year is primarily
due to an approximate $2.0 million adjustment to realizable value on inventory
and to a lesser extent to under-utilization of capacity on significantly lower
sales volume. These factors were partially offset by a LIFO benefit increase of
approximately $0.6 million.
Selling,
general and administrative expenses were 18.8% and 17.5% of net sales for the
fiscal years ended June 30, 2009 and 2008, respectively. The percentage
increase in selling, general and administrative costs is primarily due to
under-absorption of fixed costs on the lower sales volume and the lag time in
reducing advertising and other sales support costs to the lower volume.
The
Company recorded $2.6 million in facility consolidation and employee separation
costs during fiscal year 2009. These costs related to consolidating
manufacturing operations and workforce reductions to bring production capacity
in line with current and expected demand for the Companys products.
Interest
expense decreased $0.5 million to $1.0 million for the fiscal year ended June
30, 2009 due to lower borrowings and interest rates.
Although
the Companys full year tax rate is typically in the 35% - 39% range, fiscal
year ended June 30, 2009 reflects an effective income tax benefit rate of 41.5%
due to losses or low level of earnings in various tax jurisdictions. The
effective income tax expense rate was 35.8% for the fiscal year ended June 30,
2008.
The
above factors resulted in net loss for the fiscal year ended June 30, 2009 of
$1.5 million or $0.23 per share compared to net income of $4.2 million or $0.64
per share for the fiscal year ended June 30, 2008.
All
earnings per share amounts are on a diluted basis.
Fiscal 2008
Compared to Fiscal 2007
Net
sales for the fiscal year ended June 30, 2008 were $405.7 million compared to
$425.4 million in the prior fiscal year, a decrease of 4.6%. Residential net
sales were $258.1 million compared to $259.7 million in the fiscal year ended
June 30, 2007, a decrease of 0.6%. Commercial net sales were $91.5 million for
the fiscal year ended June 30, 2008, a decrease of 8.1% from the fiscal year
ended June 30, 2007. Recreational vehicle net sales were $56.1 million for the
fiscal year ended June 30, 2008, a decrease of 15.2% from the fiscal year ended
June 30, 2007. The fiscal year decline in all net sales categories is due to a
generally soft market environment.
Net income for the fiscal year ended June 30,
2008 was $4.2 million or $0.64 per share compared to $9.3 million or $1.42 per
share in the fiscal year ended June 30, 2007. Results for the fiscal year ended
June 30, 2007 were favorably impacted by three significant non-recurring
events. The Company sold a commercial property, which resulted in a pre-tax gain
of approximately $4.0 million, or $0.37 per share after tax. The Company
recognized a pre-tax gain on the sale of vacant land of approximately $0.4
million or $0.04 per share after tax. These gains are reported as Gain on sale
of capital assets in the Consolidated Statements of Operations. The Company
also realized a non-taxable gain on life
insurance of $0.6
million, or $0.08 per share. This gain is included in Interest and other
income in the Consolidated Statements of Operations.
11
Gross
margin for the fiscal years ended June 30, 2008 and 2007 was 19.3% and 19.1%,
respectively.
Selling,
general and administrative expenses were 17.5 % and 16.7% of net sales for the
fiscal years ended June 30, 2008 and 2007, respectively. The percentage
increase in selling, general and administrative costs compared to the prior
fiscal year is due primarily to higher marketing and sales support expenses and
higher bad debt expense of $1.1 million on reduced revenues on a year over year
basis.
The
effective income tax rate for the fiscal year ended June 30, 2008 was 35.8%,
reflecting lower net income compared to the prior year. The effective income
tax rate was 35.6% for the fiscal year ended June 30, 2007. The 2007 rate was
reduced by approximately 1.4% due to the non-taxable life insurance gain.
The
above factors resulted in net income for the fiscal year ended June 30, 2008 of
$4.2 million or $0.64 per share compared to $9.3 million or $1.42 per share for
the fiscal year ended June 30, 2007.
All
earnings per share amounts are on a diluted basis.
Liquidity and
Capital Resources
Net
cash provided by operating activities was $17.3 million for fiscal year 2009
compared to $8.7 million in fiscal year 2008. Cash from operating activities
was used primarily to reduce borrowings by $16.0 million and pay dividends of
$2.9 million. Significant changes in working capital from June 30, 2008 to June
30, 2009 included decreased accounts receivable of $12.5 million, decreased
inventory of $11.9 million and decreased accounts payable of $4.8 million. The
decrease in receivables is related to lower shipment volume. Lower customer
demand for our products reduced production levels and finished product
purchases which resulted in an inventory decrease. The decrease in accounts
payable related to lower purchase volume based on current demand. The Company
expects that due to the nature of our operations that there will be continuing
fluctuations in accounts receivable, inventory, accounts payable, and cash
flows from operations due to the following: (i) we purchase selected inventory
items from offshore suppliers with long lead times and depending on the timing
of the delivery of those orders inventory levels can be greatly impacted, and
(ii) we have various customers that purchase large quantities of inventory
periodically and the timing of those purchases can significantly impact inventory
levels, accounts receivable, accounts payable and short-term borrowings. As
discussed below the Company believes it has adequate financing arrangements and
access to capital to absorb these fluctuations in operating cash flow.
Net
cash provided by investing activities was $0.4 million in fiscal year 2009
compared to cash used in investing activities of $1.0 million in fiscal year
2008. Proceeds from the sale of investments were $1.5 million. Proceeds from
the sale of capital assets were $0.7 million. Capital expenditures were $1.2
million for the fiscal year ended 2009. Depreciation and amortization expense
was $3.7 million and $4.4 million for the fiscal years ended June 30, 2009 and
2008, respectively. The Company expects that capital expenditures will be
approximately $2.0 million in fiscal year 2010.
Net
cash used in financing activities was $18.8 million in fiscal year 2009
compared to $5.8 million in fiscal year 2008. Cash from operating activities
was used to reduce borrowings by $16.0 million and pay dividends of $2.9
million. Borrowings were reduced by $2.4 million and dividends paid were $3.4
million in fiscal year 2008.
Management
believes that the Company has adequate cash and credit arrangements to meet its
operating and capital requirements for fiscal year 2010. In the opinion of
management, the Companys liquidity and credit resources provide it with the
ability to react to opportunities as they arise, to pay quarterly dividends to
its shareholders, and to purchase productive capital assets that enhance safety
and improve operations. However, should the current economic conditions
continue for an extended period of time or deteriorate significantly, we would
further evaluate all uses of cash and credit facilities, including the payment
of dividends and purchase of capital assets.
12
At June 30, 2009, the Company has no long-term debt obligations and
therefore, no interest related to long-term debt. The following table
summarizes the Companys contractual obligations at June 30, 2009 and the
effect these obligations are expected to have on the Companys liquidity and
cash flow in the future (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Less than
1 Year
|
|
1 - 3
Years
|
|
3 - 5
Years
|
|
More than
5 Years
|
|
Notes payable
|
|
$
|
10,000
|
|
$
|
10,000
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Operating lease obligations
|
|
|
5,775
|
|
|
2,022
|
|
|
3,110
|
|
|
643
|
|
|
|
|
Total contractual
obligations
|
|
$
|
15,775
|
|
$
|
12,022
|
|
$
|
3,110
|
|
$
|
643
|
|
$
|
|
|
Contractual obligations associated with the Companys deferred
compensation plans were excluded from the table above as the Company cannot
predict when the events that trigger payment will occur. Total accumulated
deferred compensation liabilities were $5.0 million at June 30, 2009. At June
30, 2009 the Company had no capital lease obligations, and no purchase
obligations for raw materials or finished goods. The purchase price on all open
purchase orders was fixed and denominated in U.S. dollars. Additionally, the
Company has excluded the FIN 48 reserve from the above table, as the timing of
payments, if any, cannot be reasonably estimated.
Financing Arrangements
See Note 7 to the Consolidated Financial Statements on page 23 of this
Annual Report on Form 10-K.
Outlook
We believe that the consolidation of manufacturing operations and workforce
reductions that the Company completed during the fiscal year has brought
production capacity and fixed overhead more in line with current and expected
demand for our products. Company wide employment has been reduced approximately
30% over the past year through plant closures and workforce reductions related
to business conditions.
Demand for our products is dependent on factors such as consumer
confidence, affordable housing, reasonably attainable financing and an economy
with low levels of unemployment and high levels of disposable income. These
factors remain in depressed positions, and indications are that they will
remain that way in the near-term. We are not anticipating significant
improvements in market conditions at this time, and are managing our business
on that basis.
While we expect that current business conditions will persist for the
remainder of calendar year 2009, we remain optimistic that our strategy of a
wide range of quality product offerings and price points to the residential,
recreational vehicle and commercial markets combined with our conservative
approach to business will be rewarded when business conditions improve. We will
maintain our focus on a strong balance sheet during these challenging economic
times through emphasis on cash flow and improving profitability.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
General
Market risk represents the risk of changes in the
value of a financial instrument, derivative or non-derivative, caused by
fluctuations in interest rates, foreign exchange rates and equity prices. As
discussed below, management of the Company does not believe that changes in
these factors could cause material fluctuations in the Companys results of
operations or cash flows. The ability to import furniture products can be
adversely affected by political issues in the countries where suppliers are
located, disruptions associated with shipping distances and negotiations with
port employees. Other risks related to furniture product importation include
government imposition of regulations and/or quotas; duties and taxes on
imports; and significant fluctuation in the value of the U.S. dollar against
foreign currencies. Any of these factors could interrupt supply, increase costs
and decrease earnings.
Foreign
Currency Risk
During fiscal years 2009, 2008 and
2007, the Company did not have sales, purchases, or other expenses denominated
in foreign currencies. As such, the Company is not exposed to market risk
associated with currency exchange rates and prices.
Interest
Rate Risk
The Companys primary market risk exposure
with regard to financial instruments is changes in interest rates. At June 30,
2009, a hypothetical 100 basis point increase in short-term interest rates
would decrease annual pre-tax earnings by approximately $50,000, assuming no
change in the volume or composition of debt. As of June 30, 2009, the Company
has effectively fixed the interest rates at 5.0% on approximately $10.0 million
of its debt through the use of interest rate swaps, and the above estimated
earnings reduction takes these swaps into account. On July 31, 2009, a $5.0
million swap matured. As of the date of this Annual Report on Form 10-K, the
Company has effectively fixed its interest rate at 4.9% on approximately $5.0
million of its debt through the use of interest rate swaps. As of June 30, 2009
and 2008, the fair value of these swaps is a liability of approximately $0.3
million and is included in other long-term liabilities.
13
Tariffs
The Company has exposure to actions by governments, including tariffs.
Tariffs are a possibility on any imported or exported products.
Inflation
Increased operating costs are reflected in product or services pricing with
any limitations on price increases determined by the marketplace. The impact of
inflation on the Company has not been significant during the past three years
because of the relatively low rates of inflation experienced in the United
States. Raw material costs, labor costs and interest rates are important
components of costs for the Company. Inflation or other pricing pressures could
impact any or all of these components, with a possible adverse effect on our
profitability, especially where increases in these costs exceed price increases
on finished products. In recent years, the Company has faced strong
inflationary and other pricing pressures with respect to steel, fuel and health
care costs, which have been partially mitigated by pricing adjustments.
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
|
|
|
|
|
|
Page(s)
|
|
Report of
Independent Registered Public Accounting Firm
|
|
15
|
|
Consolidated
Balance Sheets at June 30, 2009 and 2008
|
|
16
|
|
Consolidated
Statements of Operations for the Years Ended June 30, 2009, 2008, and 2007
|
|
17
|
|
Consolidated
Statements of Changes in Shareholders Equity for the Years Ended June 30,
2009, 2008, and 2007
|
|
18
|
|
Consolidated
Statements of Cash Flows for the Years Ended June 30, 2009, 2008, and 2007
|
|
19
|
|
Notes to
Consolidated Financial Statements
|
|
20
|
|
14
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Shareholders of Flexsteel Industries, Inc.
We have
audited the accompanying consolidated balance sheets of Flexsteel Industries,
Inc. and subsidiaries (the Company) as of June 30, 2009 and 2008, and the
related consolidated statements of income, stockholders equity, and cash flows
for each of the three years in the period ended June 30, 2009. Our audits also
included the financial statement schedule listed in the Index at Item 15. These
financial statements and financial statement schedule are the responsibility of
the Companys management. Our responsibility is to express an opinion on the
financial statements and financial statement schedule based on our audits.
We conducted
our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Companys internal control over financial
reporting. Accordingly, we express no such opinion.
An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion. In our opinion, such consolidated financial
statements present fairly, in all material respects, the financial position of
Flexsteel Industries, Inc. and subsidiaries
at June 30, 2009 and 2008, and the results of their operations and their cash
flows for each of the three years in the period ended June 30, 2009, in
conformity with accounting principles generally accepted in the United States
of America. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, present fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Minneapolis,
Minnesota
August 26, 2009
15
|
|
|
|
|
|
|
|
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JUNE 30,
|
|
|
|
2009
|
|
2008
|
|
|
ASSETS
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,713,717
|
|
$
|
2,841,323
|
|
Investments
|
|
|
|
|
|
1,160,066
|
|
Trade receivables less allowance for
doubtful accounts: 2009, $1,760,000; 2008, $2,110,000
|
|
|
31,282,511
|
|
|
43,783,224
|
|
Inventories
|
|
|
73,844,345
|
|
|
85,791,400
|
|
Deferred income taxes
|
|
|
3,960,000
|
|
|
4,210,000
|
|
Other
|
|
|
3,912,528
|
|
|
2,853,634
|
|
Total current assets
|
|
|
114,713,101
|
|
|
140,639,647
|
|
NONCURRENT ASSETS:
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
23,297,643
|
|
|
26,372,392
|
|
Deferred income taxes
|
|
|
2,145,187
|
|
|
1,392,187
|
|
Other assets
|
|
|
10,815,052
|
|
|
11,501,992
|
|
TOTAL
|
|
$
|
150,970,983
|
|
$
|
179,906,218
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
Accounts payable trade
|
|
$
|
9,744,658
|
|
$
|
14,580,275
|
|
Notes payable and current maturities on
long-term debt
|
|
|
10,000,000
|
|
|
5,142,945
|
|
Accrued liabilities:
|
|
|
|
|
|
|
|
Payroll and related items
|
|
|
4,937,712
|
|
|
6,759,941
|
|
Insurance
|
|
|
6,519,538
|
|
|
7,176,799
|
|
Other
|
|
|
5,095,162
|
|
|
6,059,575
|
|
Total current liabilities
|
|
|
36,297,070
|
|
|
39,719,535
|
|
LONG-TERM LIABILITIES:
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
|
20,810,597
|
|
Deferred compensation
|
|
|
4,991,435
|
|
|
5,343,545
|
|
Other liabilities
|
|
|
2,684,914
|
|
|
1,280,154
|
|
Total liabilities
|
|
|
43,973,419
|
|
|
67,153,831
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES (Note 13)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY:
|
|
|
|
|
|
|
|
Cumulative preferred stock $50 par value;
authorized 60,000 shares; outstanding none
|
|
|
|
|
|
|
|
Undesignated (subordinated) stock $1 par
value; authorized 700,000 shares; outstanding none
|
|
|
|
|
|
|
|
Common stock $1 par value; authorized
15,000,000 shares; outstanding 2009, 6,576,373 shares; 2008, 6,575,633 shares
|
|
|
6,576,373
|
|
|
6,575,633
|
|
Additional paid-in capital
|
|
|
4,369,263
|
|
|
4,255,996
|
|
Retained earnings
|
|
|
97,815,822
|
|
|
101,692,431
|
|
Accumulated other comprehensive (loss)
income
|
|
|
(1,763,894
|
)
|
|
228,327
|
|
Total shareholders equity
|
|
|
106,997,564
|
|
|
112,752,387
|
|
TOTAL
|
|
$
|
150,970,983
|
|
$
|
179,906,218
|
|
See accompanying Notes to Consolidated
Financial Statements.
16
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR THE YEARS ENDED JUNE 30,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
NET SALES
|
|
$
|
324,157,556
|
|
$
|
405,654,829
|
|
$
|
425,399,951
|
|
COST OF GOODS SOLD
|
|
|
(263,083,274
|
)
|
|
(327,165,396
|
)
|
|
(344,176,763
|
)
|
GROSS MARGIN
|
|
|
61,074,282
|
|
|
78,489,433
|
|
|
81,223,188
|
|
SELLING, GENERAL AND ADMINISTRATIVE
|
|
|
(60,791,151
|
)
|
|
(70,893,485
|
)
|
|
(70,895,260
|
)
|
FACILITY CONSOLIDATION AND OTHER CHARGES
|
|
|
(2,554,771
|
)
|
|
|
|
|
|
|
GAIN ON SALE OF CAPITAL ASSETS
|
|
|
|
|
|
|
|
|
4,370,712
|
|
OPERATING (LOSS) INCOME
|
|
|
(2,271,640
|
)
|
|
7,595,948
|
|
|
14,698,640
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
Interest and other income
|
|
|
661,058
|
|
|
468,933
|
|
|
1,276,857
|
|
Interest expense
|
|
|
(968,762
|
)
|
|
(1,468,476
|
)
|
|
(1,491,510
|
)
|
Total
|
|
|
(307,704
|
)
|
|
(999,543
|
)
|
|
(214,653
|
)
|
(LOSS) INCOME BEFORE INCOME TAXES
|
|
|
(2,579,344
|
)
|
|
6,596,405
|
|
|
14,483,987
|
|
INCOME TAX BENEFIT (PROVISION)
|
|
|
1,070,000
|
|
|
(2,360,000
|
)
|
|
(5,150,000
|
)
|
NET (LOSS) INCOME
|
|
$
|
(1,509,344
|
)
|
$
|
4,236,405
|
|
$
|
9,333,987
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
6,576,373
|
|
|
6,573,999
|
|
|
6,567,522
|
|
Diluted
|
|
|
6,576,373
|
|
|
6,611,136
|
|
|
6,582,558
|
|
|
|
|
|
|
|
|
|
|
|
|
(LOSS) EARNINGS PER SHARE OF COMMON STOCK:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.23
|
)
|
$
|
0.64
|
|
$
|
1.42
|
|
Diluted
|
|
$
|
(0.23
|
)
|
$
|
0.64
|
|
$
|
1.42
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH DIVIDENDS DECLARED PER COMMON SHARE
|
|
$
|
0.36
|
|
$
|
0.52
|
|
$
|
0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Consolidated
Financial Statements.
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Par
Value of
Common
Shares ($1 Par)
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
(Loss) Income
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at July 1, 2006
|
|
$
|
6,563,750
|
|
$
|
3,670,152
|
|
$
|
95,065,832
|
|
$
|
766,112
|
|
$
|
106,065,846
|
|
Issuance of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options exercised, net
|
|
|
1,566
|
|
|
10,891
|
|
|
|
|
|
|
|
|
12,457
|
|
401(k) plan shares
|
|
|
5,151
|
|
|
58,413
|
|
|
|
|
|
|
|
|
63,564
|
|
Unrealized gain on available for sale investments, net of
tax
|
|
|
|
|
|
|
|
|
|
|
|
301,611
|
|
|
301,611
|
|
Stock-based compensation
|
|
|
|
|
|
274,000
|
|
|
|
|
|
|
|
|
274,000
|
|
Interest rate swaps valuation adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
(168,137
|
)
|
|
(168,137
|
)
|
SFAS No. 87 minimum pension liability
|
|
|
|
|
|
|
|
|
|
|
|
254,638
|
|
|
254,638
|
|
SFAS No. 158 transition adjustment
|
|
|
|
|
|
|
|
|
|
|
|
(44,093
|
)
|
|
(44,093
|
)
|
Cash dividends declared
|
|
|
|
|
|
|
|
|
(3,415,242
|
)
|
|
|
|
|
(3,415,242
|
)
|
Net income
|
|
|
|
|
|
|
|
|
9,333,987
|
|
|
|
|
|
9,333,987
|
|
Balance at June 30, 2007
|
|
|
6,570,467
|
|
|
4,013,456
|
|
|
100,984,577
|
|
|
1,110,131
|
|
|
112,678,631
|
|
Adoption of FIN 48
|
|
|
|
|
|
|
|
|
(110,000
|
)
|
|
|
|
|
(110,000
|
)
|
Issuance of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options exercised, net
|
|
|
1,642
|
|
|
13,314
|
|
|
|
|
|
|
|
|
14,956
|
|
401(k) plan shares
|
|
|
3,524
|
|
|
43,226
|
|
|
|
|
|
|
|
|
46,750
|
|
Unrealized loss on available for sale investments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
(84,342
|
)
|
|
(84,342
|
)
|
Stock-based compensation
|
|
|
|
|
|
186,000
|
|
|
|
|
|
|
|
|
186,000
|
|
Interest rate swaps valuation adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
(273,062
|
)
|
|
(273,062
|
)
|
Minimum pension liability adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
(524,400
|
)
|
|
(524,400
|
)
|
Cash dividends declared
|
|
|
|
|
|
|
|
|
(3,418,551
|
)
|
|
|
|
|
(3,418,551
|
)
|
Net income
|
|
|
|
|
|
|
|
|
4,236,405
|
|
|
|
|
|
4,236,405
|
|
Balance at June 30, 2008
|
|
|
6,575,633
|
|
|
4,255,996
|
|
|
101,692,431
|
|
|
228,327
|
|
|
112,752,387
|
|
Issuance of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options exercised, net
|
|
|
740
|
|
|
(733
|
)
|
|
|
|
|
|
|
|
7
|
|
Unrealized loss on available for sale investments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
(1,022,289
|
)
|
|
(1,022,289
|
)
|
Stock-based compensation
|
|
|
|
|
|
114,000
|
|
|
|
|
|
|
|
|
114,000
|
|
Interest rate swaps valuation adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
(1,414
|
)
|
|
(1,414
|
)
|
Minimum pension liability adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
(968,518
|
)
|
|
(968,518
|
)
|
Cash dividends declared
|
|
|
|
|
|
|
|
|
(2,367,265
|
)
|
|
|
|
|
(2,367,265
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
(1,509,344
|
)
|
|
|
|
|
(1,509,344
|
)
|
Balance at June 30, 2009
|
|
$
|
6,576,373
|
|
$
|
4,369,263
|
|
$
|
97,815,822
|
|
$
|
(1,763,894
|
)
|
$
|
106,997,564
|
|
See accompanying Notes to Consolidated
Financial Statements.
18
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR THE YEARS ENDED JUNE 30,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(1,509,344
|
)
|
$
|
4,236,405
|
|
$
|
9,333,987
|
|
Adjustments to reconcile net (loss) income
to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
3,733,353
|
|
|
4,437,903
|
|
|
5,270,651
|
|
Deferred income taxes
|
|
|
449,296
|
|
|
349,294
|
|
|
1,464,664
|
|
Stock-based compensation expense
|
|
|
114,000
|
|
|
186,000
|
|
|
274,000
|
|
Other non-cash, net
|
|
|
14,048
|
|
|
(88,309
|
)
|
|
|
|
Gain on disposition of capital assets
|
|
|
(251,909
|
)
|
|
(49,180
|
)
|
|
(4,407,682
|
)
|
Gain on sale of investments
|
|
|
(462,473
|
)
|
|
|
|
|
|
|
Impairment of long-lived assets
|
|
|
137,638
|
|
|
|
|
|
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
|
Trade receivables
|
|
|
12,500,712
|
|
|
12,490,650
|
|
|
(5,094,083
|
)
|
Inventories
|
|
|
11,947,055
|
|
|
(7,034,415
|
)
|
|
6,012,987
|
|
Other current assets
|
|
|
(781,872
|
)
|
|
(655,486
|
)
|
|
255,076
|
|
Other assets
|
|
|
(287,869
|
)
|
|
(292,485
|
)
|
|
57,919
|
|
Accounts payable trade
|
|
|
(4,848,593
|
)
|
|
(2,188,444
|
)
|
|
(2,160,950
|
)
|
Accrued liabilities
|
|
|
(2,917,889
|
)
|
|
(2,272,811
|
)
|
|
(631,804
|
)
|
Other long-term liabilities
|
|
|
(177,938
|
)
|
|
(197,497
|
)
|
|
(411,588
|
)
|
Deferred compensation
|
|
|
(352,110
|
)
|
|
(191,568
|
)
|
|
327,938
|
|
Net cash provided by operating activities
|
|
|
17,306,105
|
|
|
8,730,057
|
|
|
10,291,115
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Purchases of investments
|
|
|
(520,233
|
)
|
|
(631,704
|
)
|
|
(774,964
|
)
|
Proceeds from sales of investments
|
|
|
1,460,320
|
|
|
762,783
|
|
|
476,840
|
|
Proceeds from sale of capital assets
|
|
|
676,016
|
|
|
73,847
|
|
|
6,039,946
|
|
Capital expenditures
|
|
|
(1,202,993
|
)
|
|
(1,227,863
|
)
|
|
(10,839,479
|
)
|
Net cash provided by (used in) investing
activities
|
|
|
413,110
|
|
|
(1,022,937
|
)
|
|
(5,097,657
|
)
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Proceeds from (repayments of) short-term
borrowings, net
|
|
|
4,857,055
|
|
|
(1,912,683
|
)
|
|
(2,470,729
|
)
|
Repayment of long-term borrowings
|
|
|
(20,810,597
|
)
|
|
(500,186
|
)
|
|
(475,889
|
)
|
Dividends paid
|
|
|
(2,893,279
|
)
|
|
(3,414,960
|
)
|
|
(3,414,369
|
)
|
Proceeds from issuance of common stock
|
|
|
|
|
|
61,706
|
|
|
82,087
|
|
Net cash used in financing activities
|
|
|
(18,846,821
|
)
|
|
(5,766,123
|
)
|
|
(6,278,900
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash
equivalents
|
|
|
(1,127,606
|
)
|
|
1,940,997
|
|
|
(1,085,442
|
)
|
Cash and cash equivalents at beginning of
year
|
|
|
2,841,323
|
|
|
900,326
|
|
|
1,985,768
|
|
Cash and cash equivalents at end of year
|
|
$
|
1,713,717
|
|
$
|
2,841,323
|
|
$
|
900,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR THE YEARS ENDED JUNE 30,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL INFORMATION
CASH PAID DURING
THE PERIOD FOR:
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
979,000
|
|
$
|
1,473,000
|
|
$
|
1,517,000
|
|
Income taxes (refunded) paid
|
|
$
|
(62,000
|
)
|
$
|
3,205,000
|
|
$
|
3,551,000
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Consolidated
Financial Statements.
19
FLEXSTEEL
INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
|
|
1.
|
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
|
|
|
|
DESCRIPTION OF BUSINESS Flexsteel Industries, Inc.
and subsidiaries (the Company) is one of the oldest and largest
manufacturers, importers and marketers of residential, recreational vehicle
and commercial upholstered and wooden furniture products in the country. The
Companys furniture products include a broad line of quality upholstered and
wooden furniture for residential, recreational vehicle and commercial use.
Product offerings include a wide variety of upholstered and wood furniture
such as sofas, loveseats, chairs, reclining and rocker-reclining chairs,
swivel rockers, sofa beds, convertible bedding units, occasional tables,
desks, dining tables and chairs, bedroom furniture and home and commercial
office furniture. The Company has one active wholly-owned subsidiary: DMI
Furniture, Inc. (DMI), which is a Louisville, Kentucky-based, manufacturer,
importer and marketer of residential and commercial office furniture with
manufacturing and warehouses in Indiana and manufacturing sources in Asia;
DMIs divisions are WYNWOOD, Homestyles and DMI Commercial Office Furniture.
|
|
|
|
PRINCIPLES OF CONSOLIDATION the consolidated
financial statements include the accounts of Flexsteel Industries, Inc. and
its wholly owned subsidiaries. All intercompany transactions and accounts
have been eliminated in consolidation.
|
|
|
|
USE OF ESTIMATES the preparation of consolidated
financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Ultimate results
could differ from those estimates.
|
|
|
|
FAIR VALUE The Companys cash, investments,
accounts receivable, other assets, accounts payable, accrued liabilities,
notes payable, interest rate swaps and other liabilities are carried at
amounts, which reasonably approximate their fair value due to their
short-term nature. The Companys notes payable are at variable interest rates
that approximate market. The Company adopted Statement of Financial
Accounting Standards (SFAS) No. 157,
Fair Value Measurements
, subject to the deferral provisions of
FASB Staff Position 157-2,
Effect Date of
FASB Statement No. 157
, as of July 1, 2008. SFAS 157 established a
framework for measuring fair value and expanded disclosures about fair value
measurements. SFAS 157 applies to all assets and liabilities that are
measured and reported on a fair value basis. This enables the reader of the
financial statements to assess the inputs used to develop those measurements
by establishing a hierarchy for ranking the quality and reliability of the
information used to determine fair values. The statement requires that each
asset and liability carried at fair value be classified into one of the
following categories: Level 1: Quoted market prices in active markets for
identical assets and liabilities; Level 2: Observable market based inputs or
unobservable inputs that are corroborated by market data; or Level 3:
Unobservable inputs that are not corroborated by market data.
|
|
|
|
CASH EQUIVALENTS the Company considers highly
liquid investments with original maturities of three months or less as the
equivalent of cash.
|
|
|
|
ALLOWANCE FOR DOUBTFUL ACCOUNTS the Company
establishes an allowance for doubtful accounts through review of open
accounts, and historical collection and allowances amounts. The allowance for
doubtful accounts is intended to reduce trade accounts receivable to the
amount that reasonably approximates their net realizable fair value due to
their short-term nature. The amount ultimately realized from trade accounts
receivable may differ from the amount estimated in the consolidated financial
statements based on collection experience and actual returns and allowances.
|
|
|
|
INVENTORIES are stated at the lower of cost or
market. Raw steel is valued on the last-in, first-out (LIFO) method. Other
inventories are valued on the first-in, first-out (FIFO) method.
|
|
|
|
PROPERTY, PLANT AND EQUIPMENT is stated at cost
and depreciated using the straight-line method over the estimated useful
lives of the assets. For internal use software, the Companys policy is to
capitalize external direct costs of materials and services, directly related
internal payroll and payroll-related costs, and interest costs. These costs
are amortized using the straight-line method over the useful lives.
|
20
|
|
|
VALUATION OF LONGLIVED ASSETS the Company
periodically reviews the carrying value of long-lived assets and estimated
depreciable or amortizable lives for continued appropriateness. This review
is based upon projections of anticipated future cash flows and is performed
whenever events or changes in circumstances indicate that asset carrying
values may not be recoverable or that the estimated depreciable or
amortizable lives may have changed. These evaluations could result in a
change in estimated useful lives in future periods. During the first six
months of fiscal year 2009, the Company reviewed its long-lived assets in
connection with the commencement of facility consolidation activities and
identified $0.1 million of impaired machinery and equipment assets. The asset
impairment was recorded in the Facility Consolidation and Other Charges
line in the Consolidated Statements of Operations. At June 30, 2009, no
additional impairment of long-lived assets was identified.
|
|
|
|
WARRANTY the Company estimates the amount of
warranty claims on sold product that may be incurred based on current and
historical data. The actual warranty expense could differ from the estimates
made by the Company based on product performance.
|
|
|
|
REVENUE RECOGNITION is upon delivery of product to
the Companys customer and collectibility is reasonably assured. The
Companys ordering process creates persuasive evidence of the sale
arrangement and the sales amount is determined. The delivery of the goods to
the customer completes the earnings process. Net sales consist of product
sales and related delivery charge revenue, net of adjustments for returns and
allowances. Shipping and handling costs are included in cost of goods sold.
|
|
|
|
ADVERTISING COSTS are charged to selling, general
and administrative expense in the periods incurred. The Company conducts no
direct-response advertising programs and there are no assets related to
advertising recorded on the consolidated balance sheet. Advertising expenditures,
primarily shared customer advertising in which an identifiable benefit is
received and national trade-advertising programs, were approximately $4.5
million, $4.6 million and $4.6 million in fiscal 2009, 2008 and 2007,
respectively.
|
|
|
|
DESIGN, RESEARCH AND DEVELOPMENT COSTS are charged
to selling, general and administrative expense in the periods incurred.
Expenditures for design, research and development costs were approximately
$2.7 million, $3.1 million and $3.3 million in fiscal 2009, 2008 and 2007,
respectively.
|
|
|
|
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES the
Company utilizes interest rate swaps to hedge against adverse changes in
interest rates relative to its variable rate debt. The notional principal
amounts of the outstanding interest rate swaps totaled $10.0 million with a
weighted average fixed rate of 5.0% at June 30, 2009. On July 31, 2009, a
$5.0 million swap matured. Excluding the subsequently matured swap, the
Company has effectively fixed its interest rate at 4.9% on approximately $5.0
million of its variable rate debt. The interest rate swaps are not utilized
to take speculative positions. The Board of Directors established the
Companys policies with regards to activities involving derivative
instruments. Management, along with the Board of Directors, periodically
reviews those policies, along with the actual derivative related results. The
Company recorded the fair market value of its interest rate swaps as cash
flow hedges on its balance sheet and has marked them to fair value through
other comprehensive (loss) income. The cumulative fair value of the swaps was
a liability of approximately $0.3 million as of June 30, 2009 and 2008 and is
reflected as other liabilities on the accompanying consolidated balance sheets.
At each reporting period, the Company performs an assessment of hedge
effectiveness by verifying and documenting whether the critical terms of the
derivative instruments and the hedged items have changed during the period in
review. All of the derivatives used by the Company in its risk management are
highly effective hedges because all of the critical terms of the derivative
instruments match those of the hedged item. The Company does not hold these
derivative instruments for trade and does not plan to sell the instruments.
The Company recognizes the fair value of the swap liability as a Level 2
valuation.
|
|
|
|
INSURANCE the Company is self-insured for health
care and most workers compensation up to predetermined amounts above which
third party insurance applies. The Company purchases specific stop-loss
insurance for individual health care claims in excess of $150,000 per plan
year, with a $1.0 million individual lifetime maximum. For workers
compensation the Company retains the first $350,000 per claim and purchases
excess coverage up to the statutory limits for amounts in excess of the
retention limit. Losses are accrued based upon the Companys estimates of the
aggregate liability for claims incurred using certain actuarial assumptions
followed in the insurance industry and based on Company experience. The
Company records these insurance accruals within the accrued liabilities
insurance account on the consolidated balance sheets.
|
|
|
|
INCOME TAXES the Company accounts for income taxes
in accordance with the provisions SFAS No. 109,
Accounting for Income Taxes
and evaluates uncertainties in
income taxes in accordance with FIN 48,
Accounting
for Uncertainty in Income Taxes
. In the preparation of the
Companys consolidated financial statements, management calculates income
taxes. This includes estimating the Companys current tax liability as well
as assessing temporary differences resulting from different treatment of
items for tax and book accounting purposes. These differences result in
deferred tax assets and liabilities, which are recorded on the balance sheet.
These assets and liabilities are analyzed regularly and management assesses
the likelihood that deferred tax assets will be realized from future taxable
income.
|
21
|
|
|
(LOSS) EARNINGS PER SHARE basic (loss) earnings
per share of common stock is based on the weighted-average number of common
shares outstanding during each fiscal year. Diluted earnings per share of
common stock includes the dilutive effect of potential common shares outstanding.
The Companys only potential common shares outstanding are stock options,
which resulted in a dilutive effect of 37,137 shares and 15,036 shares in
fiscal 2008 and 2007, respectively. The Company calculates the dilutive
effect of outstanding options using the treasury stock method. The dilutive
effect of 42,539 shares of stock options is excluded in fiscal 2009 because
the net loss caused the effect of the options to be anti-dilutive. Options to
purchase 759,689 shares, 567,411 shares and 572,200 shares of common stock
were outstanding in fiscal 2009, 2008 and 2007, respectively, but were not
included in the computation of diluted earnings per share as their exercise
prices were greater than the average market price of the common shares.
|
|
|
|
STOCKBASED COMPENSATION The Company utilizes the
fair value recognition provisions of SFAS No. 123 Accounting for Stock-Based
Compensation (revised 2004), Share-Based Payment (123(R)), requiring the
Company to recognize expense related to the fair value of stock-based
compensation. The modified prospective transition method was used as allowed
under SFAS No. 123(R). Under this method, the stock-based compensation
expense includes: (a) compensation expense for all stock-based compensation
awards granted prior to, but not yet vested as of July 1, 2005, based on the
grant date fair value estimated in accordance with the original provisions of
SFAS No. 123, Accounting for Stock-Based Compensation; and (b) compensation
expense for all stock-based compensation awards granted subsequent to July 1,
2005, based on the grant date fair value estimated in accordance with the
provisions of SFAS No. 123(R). See Note 9 Stock-Based Compensation.
|
|
|
|
ACCOUNTING DEVELOPMENTS In September 2006, the
FASB issued Statement of Financial Accounting Standards (SFAS) No. 157,
Fair Value Measurements,
which defines
fair value, establishes a framework for measuring fair value, and expands
disclosures about fair value measurements. The Company adopted SFAS No. 157
on July 1, 2008 for all assets and liabilities measured at fair value except
for nonfinancial assets and nonfinancial liabilities measured at fair value
on a nonrecurring basis, as permitted by FASB Staff Position No. 157-2,
Effective Date of FASB Statement No. 157
.
The adoption did not have a material impact on the Companys financial
statements.
|
|
|
|
In February 2007, the FASB issued SFAS No. 159,
The Fair
Value Option for Financial Assets and Financial Liabilities (SFAS No. 159).
SFAS No. 159 permits entities to choose to measure many financial
assets and financial liabilities at fair value. Unrealized gains and losses
on items for which the fair value option has been elected will be reported in
earnings. The provisions of SFAS No. 159 are effective as of the beginning of
the Companys 2009 fiscal year. The Company chose not to adopt SFAS No. 159.
|
|
|
|
In March 2008, the
Financial Accounting Standards Board (FASB) issued statement of Financial
Accounting Standards No.161,
Disclosures about Derivative Instruments and Hedging
Activities (SFAS No. 161),
which require additional disclosure
related to derivative instruments and hedging activities. The provisions of
SFAS No. 161 are effective as of the beginning of the Companys 2010 fiscal
year. Adoption of SFAS No. 161 will result in enhanced disclosure regarding
the Companys derivatives.
|
|
|
|
In May 2009, the FASB
issued SFAS No. 165,
Subsequent Events
(SFAS No. 165),
which provides guidance on managements
assessment of subsequent events. SFAS No. 165 clarifies that management must
evaluate, as of each reporting period, events or transactions that occur
after the balance sheet date through the date that the financial statements
are issued or are available to be issued. In addition to current disclosure
requirements, SFAS No. 165 also requires disclosure of the date through which
subsequent events have been evaluated. For the fiscal year ended June 30,
2009, the Company evaluated subsequent events through August 26, 2009.
|
|
|
2.
|
INVESTMENTS
|
|
|
|
At June 30, 2008, the Company had available-for-sale
securities consisting of equity securities that were sold during fiscal year
2009. These securities were valued at current market value, with the
resulting unrealized holding gains and losses excluded from earnings and
reported, net of tax, as a separate component of shareholders equity until
realized.
|
22
|
|
3.
|
INVENTORIES
|
|
|
|
Inventories valued on a LIFO basis would have been
approximately $2.2 million and $3.3 million higher at June 30, 2009 and 2008,
respectively, if they had been valued on a FIFO basis. At June 30, 2009 and
2008 the total value of LIFO inventory was $1.8 million and $2.7 million,
respectively. During the fiscal year 2009, inventory quantities for steel
were reduced. This reduction resulted in a liquidation of LIFO inventory
quantities carried at lower costs prevailing in prior years as compared with
the cost of 2009 purchases, the effect of which decreased cost of goods sold
by approximately $0.8 million. There was no material liquidation of LIFO
inventory in 2008 or 2007. A comparison of inventories is as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
2009
|
|
2008
|
|
Raw materials
|
|
$
|
9,832
|
|
$
|
15,272
|
|
Work in process and finished parts
|
|
|
5,124
|
|
|
8,082
|
|
Finished goods
|
|
|
58,888
|
|
|
62,437
|
|
Total
|
|
$
|
73,844
|
|
$
|
85,791
|
|
|
|
4.
|
PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
Life (Years)
|
|
June 30,
|
|
(in thousands)
|
|
|
2009
|
|
2008
|
|
Land
|
|
|
|
|
$
|
3,984
|
|
$
|
4,049
|
|
Buildings and improvements
|
|
|
5-39
|
|
|
40,857
|
|
|
41,138
|
|
Machinery and equipment
|
|
|
3-7
|
|
|
28,894
|
|
|
31,322
|
|
Delivery equipment
|
|
|
3-5
|
|
|
18,872
|
|
|
19,103
|
|
Furniture and fixtures
|
|
|
3-7
|
|
|
4,095
|
|
|
4,251
|
|
Total
|
|
|
|
|
|
96,702
|
|
|
99,863
|
|
Less accumulated depreciation
|
|
|
|
|
|
(73,404
|
)
|
|
(73,491
|
)
|
Net
|
|
|
|
|
$
|
23,298
|
|
$
|
26,372
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
June
30,
|
|
|
|
2009
|
|
2008
|
|
Cash value of life insurance
|
|
$
|
6,520
|
|
$
|
6,232
|
|
Rabbi Trust assets (see Note 10)
|
|
|
4,259
|
|
|
5,229
|
|
Other
|
|
|
36
|
|
|
41
|
|
Total
|
|
$
|
10,815
|
|
$
|
11,502
|
|
|
|
6.
|
ACCRUED LIABILITIES OTHER
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
June 30,
|
|
|
|
2009
|
|
2008
|
|
Dividends
|
|
$
|
329
|
|
$
|
855
|
|
Advertising and rebates
|
|
|
1,951
|
|
|
1,982
|
|
Warranty
|
|
|
850
|
|
|
1,090
|
|
Other
|
|
|
1,965
|
|
|
2,133
|
|
Total
|
|
$
|
5,095
|
|
$
|
6,060
|
|
|
|
7.
|
BORROWINGS AND CREDIT ARRANGEMENTS
|
|
|
|
The Company has lines of credit of $29.0 million
with banks, with borrowings at differing rates based on the date and type of
financing utilized.
|
|
|
|
In March 2009, the Company amended its credit
facility agreements with its primary bank reducing its long-term availability
from $20.0 million to $10.0 million, shortening the maturity date to
September 30, 2011, increasing its short-term facility from $12.0 million to
$15.0 million, and extending its short-term facility to June 30, 2010. The
Company pledged accounts receivable and inventory as security under the
amended credit facility agreements. The amount of credit available to the
Company will be based on eligible accounts receivable and inventory as
defined in the amended agreements. At June 30, 2009, the Company had
available collateral, as defined by the bank, of $52.5 million with borrowing
availability of $25 million of which $10 million was outstanding.
|
23
|
|
|
The amended agreements provide short-term working
capital financing up to $15.0 million with interest selected at the option of
the Company at a Commercial Bank Floating Rate (CBFR) which is the prime
rate subject to a floor calculation of adjusted one month LIBOR rate (3.25%
at June 30, 2009) or LIBOR (0.31% at June 30, 2009) plus 2.25%. At June 30,
2009, $10 million was outstanding. The short-term portion also provides
overnight credit when required for operations at prime. No amounts were outstanding
at June 30, 2009 related to overnight credit. As prescribed by SFAS 157,
which is previously discussed in Note 1, the Company recognizes the fair
value of the borrowings as a Level 2 valuation.
|
|
|
|
The long-term portion of the credit facility provides
up to $10.0 million and expires September 30, 2011. No amount was outstanding
at June 30, 2009. Variable interest is set monthly at the option of the
Company at a CBFR or LIBOR plus 3.0%. All interest rates are adjusted
monthly, except for the overnight portion of the short-term line of credit,
which varies daily at the prime rate.
|
|
|
|
As of June 30, 2009, the Company has effectively
fixed the interest rates at 5.0% on approximately $10.0 million of its
long-term debt through the use of interest rate swaps.
|
|
|
|
The credit agreement contains financial covenants.
The primary covenant is an interest coverage ratio. The ratio is computed as
net (loss) income plus amortization, depreciation, interest expense, income
taxes and the aggregate of all expenses related to stock options (EBITDA)
divided by interest expense, which will vary by quarter over the term of the
agreement. At June 30, 2009, the Company was in compliance with all of the
financial covenants contained in the credit agreement.
|
|
|
|
An officer of the Company is a director at a bank
where the Company maintains an unsecured $4.0 million line of credit,
cumulative letter of credit facilities and where its routine daily banking
transactions are processed. In addition, the Rabbi Trust assets (Note 10) are
administered by this banks trust department. The Company is contingently
liable to insurance carriers under its comprehensive general, product, and
vehicle liability policies, as well as some workers compensation, and has
provided letters of credit in the amount of $4.9 million. The Company
receives no special services or pricing on the services performed by the bank
due to the directorship of this officer. No amount was outstanding on the
line of credit at prime minus 1.0% at June 30, 2009.
|
|
|
8.
|
INCOME TAXES
|
|
|
|
In determining the
provision for income taxes, the Company uses an estimated annual effective
tax rate that is based on the annual (loss) income, statutory tax rates and
tax planning opportunities available in the various jurisdictions in which
the Company operates. This includes recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
included in the financial statements or tax returns to the extent pervasive
evidence exists that they will be realized in future periods. The deferred
tax balances are adjusted to reflect tax rates by tax jurisdiction, based on
currently enacted tax laws, which are expected to be in effect in the years
in which the temporary differences are expected to reverse. In accordance
with the Companys income tax policy, significant or unusual items are
separately recognized when they occur.
|
|
|
|
The Company adopted the provisions of FIN 48 on July
1, 2007. As a result of the implementation of FIN 48, the Company recognized
an adjustment in the liability for unrecognized income tax benefits of $0.1
million, which is reported as a cumulative effect of a change in accounting
principle and is reported as an adjustment to the beginning balance of
retained earnings as of July 1, 2007. At the adoption date of July 1, 2007,
the Company had approximately $0.8 million of gross liabilities related to
unrecognized tax benefits (composed of $0.6 million of gross unrecognized tax
benefits and accrued interest and penalties of $0.2 million) and related
deferred tax assets of approximately $0.2 million. At June 30, 2009, the
Company included in other long-term liabilities approximately $0.6 million of
gross liabilities related to unrecognized tax benefits (composed of $0.4
million of gross unrecognized tax benefits and accrued interest and penalties
of $0.2 million) and related deferred tax assets of approximately $0.2
million, all of which would affect our effective tax rate if recognized. The
Company does not expect that there will be any positions for which it is
reasonably possible that the total amounts of unrecognized tax benefits will
significantly increase or decrease within the next twelve months.
|
24
|
|
|
A reconciliation of the beginning and ending amount
of unrecognized tax benefits is as follows (in thousands):
|
|
|
|
|
|
Balance at July 1, 2007
|
|
$
|
617
|
|
Additions (reductions) based on tax positions
related to fiscal year 2008
|
|
|
(68
|
)
|
Balance at June 30, 2008
|
|
|
549
|
|
Additions (reductions) based on tax positions
related to the current year
|
|
|
(145
|
)
|
Balance at June 30, 2009
|
|
$
|
404
|
|
|
|
|
Consistent with prior periods and upon adoption of
FIN 48 the Company records interest and penalties related to income taxes as
income tax expense in the Consolidated Statements of Operations. As of June
30, 2009 and 2008, the Company had approximately $0.2 million of accrued
interest and penalties related to uncertain tax positions. The total income
tax provision in fiscal years 2009, 2008 and 2007 was 41.5%, 35.8% and 35.6%,
respectively, of (loss) income before income taxes.
|
|
|
|
The income tax (benefit)
provision is as follows for the years ended June 30 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Federal current
|
|
$
|
(1,410
|
)
|
$
|
1,510
|
|
$
|
6,045
|
|
State current
|
|
|
(110
|
)
|
|
270
|
|
|
570
|
|
Deferred
|
|
|
450
|
|
|
580
|
|
|
(1,465
|
)
|
Total
|
|
$
|
(1,070
|
)
|
$
|
2,360
|
|
$
|
5,150
|
|
|
|
|
A reconciliation between
the U.S. federal statutory tax rate and the effective tax rate is as follows
for the years ended June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Federal
statutory tax rate
|
|
|
34.0
|
%
|
|
34.0
|
%
|
|
35.0
|
%
|
State taxes, net of federal effect
|
|
|
2.7
|
|
|
2.7
|
|
|
2.6
|
|
Other
|
|
|
4.8
|
|
|
(0.9
|
)
|
|
(2.0
|
)
|
Effective tax
rate
|
|
|
41.5
|
%
|
|
35.8
|
%
|
|
35.6
|
%
|
|
|
|
Although the Companys
effective full year tax expense rate has historically ranged from 35% to 39%,
fiscal year ended June 30, 2009 reflects an effective income tax benefit rate
of 41.5% due to losses or low level of earnings in various tax jurisdictions.
The effective income tax expense rate was 35.8% for the fiscal year ended
June 30, 2008.
|
|
|
|
The primary components of deferred tax assets and
(liabilities) are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
June 30, 2008
|
|
|
|
Current
|
|
Long-term
|
|
Current
|
|
Long-term
|
|
Investments
|
|
$
|
30
|
|
$
|
|
|
$
|
(580
|
)
|
$
|
|
|
Accounts receivable
|
|
|
650
|
|
|
|
|
|
780
|
|
|
|
|
Inventory
|
|
|
1,180
|
|
|
|
|
|
1,730
|
|
|
|
|
Self insurance
|
|
|
780
|
|
|
|
|
|
1,040
|
|
|
|
|
Employee benefits
|
|
|
670
|
|
|
|
|
|
540
|
|
|
|
|
Accrued expenses
|
|
|
650
|
|
|
|
|
|
700
|
|
|
|
|
Property, plant and equipment
|
|
|
|
|
|
(570
|
)
|
|
|
|
|
(940
|
)
|
Deferred compensation
|
|
|
|
|
|
1,900
|
|
|
|
|
|
2,030
|
|
Other
|
|
|
|
|
|
815
|
|
|
|
|
|
302
|
|
Total
|
|
$
|
3,960
|
|
$
|
2,145
|
|
$
|
4,210
|
|
$
|
1,392
|
|
|
|
|
The Company is subject to U.S. federal income tax as
well as income tax of multiple state and foreign jurisdictions. Generally,
tax years 20052009 remain open to examination by the Internal Revenue
Service or other taxing jurisdictions to which we are subject.
|
25
|
|
|
9.
|
STOCK-BASED COMPENSATION
|
|
|
|
The Company has two stock-based compensation methods
available when determining employee compensation.
|
|
|
|
|
(1)
|
2007 Long-Term Management Incentive Compensation Plan
The plan provides for shares of common stock and cash to be awarded to
officers and key employees based on performance targets set by the Nominating
and Compensation Committee of the Board of Directors (the Committee). The
Committee selected consolidated operating results for organic net sales
growth and fully-diluted earnings per share for the two-year transition
period which began on July 1, 2007 and ended on June 30, 2009 and the
three-year performance periods beginning July 1, 2007 and ending on June 30,
2010, beginning July 1, 2008 and ending on June 30, 2011, and beginning July
1, 2009 and ending on June 30, 2012. The Committee has also specified that
payouts, if any, for awards earned under the fiscal years 2008-2009,
2008-2010, 2009-2011 and 2010-2012 performance periods will be 60% stock and
40% cash. Awards will be paid to participants as soon as practicable
following the end of the performance periods, verification of results, and
subject to the negative discretion of the Committee. As the payouts of these
awards are subject to the negative discretion of the Committee the grant date
is not established until the awards are paid. Accordingly, compensation cost
is re-measured based on the awards estimated fair value at the end of each
reporting period prior to the grant date to the extent service has been
rendered in comparison to the total requisite service period. Further, the
accrual of compensation cost is based on the probable outcomes of the
performance conditions. The portion of the accrued award payable in
stock is classified within equity and the portion of the accrued award
payable in cash is classified within liabilities.
|
|
|
|
|
|
The fair value of the equity portion of the award is
estimated each period based on the market value of the Companys common
shares reduced by the present value of expected dividends to be paid prior to
the service period, discounted using a risk-free interest rate. In the period
the grant date occurs, cumulative compensation cost will be adjusted to
reflect the cumulative effect of measuring compensation cost based on the
fair value at the grant date. Under the plan the aggregate number of shares
and cash that could be awarded to key executives if the target and maximum
performance goals are met are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At Target
|
|
At Maximum
|
|
Performance Period
|
|
Stock
|
|
Cash
|
|
Stock
|
|
Cash
|
|
Fiscal Year 2008 2010
|
|
|
33,330
|
|
$
|
186,204
|
|
|
53,329
|
|
$
|
297,931
|
|
Fiscal Year 2009 2011
|
|
|
44,621
|
|
$
|
249,283
|
|
|
71,398
|
|
$
|
398,877
|
|
Fiscal Year 2010 2012
|
|
|
58,155
|
|
$
|
324,893
|
|
|
93,058
|
|
$
|
519,884
|
|
|
|
|
|
|
No amounts were earned for the two-year transition
period ended June 30, 2009. No compensation costs were accrued at June 30,
2009 or 2008. If the target performance goals would be achieved the total amount
of stock compensation cost recognized over the requisite service periods
would be $0.5 million (2008-2010), $0.6 million (2009-2011) and $0.8 million
(2010-2012) based on the estimated fair values at June 30, 2009. At June 30,
2009, 500,000 shares were available for awards.
|
|
|
|
|
(2)
|
Stock Option Plans
The stock
option plans for key employees and directors provide for the granting of
incentive and nonqualified stock options. Under the plans, options are
granted at an exercise price equal to the fair market value of the underlying
common stock at the date of grant, and may be exercisable for up to 10 years.
All options are exercisable when granted.
|
|
|
|
|
|
In December 2008, 2007 and 2006, the Company issued
options for 265,000, 120,000 and 135,000 common shares at weighted average
exercise prices of $6.82, $12.40 and $12.63 (the fair market value on the
date of grant), respectively. The options were immediately available for
exercise and may be exercised for a period of 10 years. In accordance with the
provisions of SFAS No. 123(R) the Company recorded compensation expense of
$0.1 million, $0.2 million and $0.3 million during the quarters ended
December 31, 2008, 2007 and 2006, respectively. The assumptions used in
determining the compensation expense are discussed below.
|
|
|
|
|
|
The fair value of each option grant is estimated on
the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants in fiscal 2009, 2008
and 2007, respectively; dividend yield of 7.6%, 4.2% and 4.1%, expected
volatility of 21.8%, 19.5% and 21.6%; risk-free interest rate of 1.6%, 3.3%
and 4.5%; and an expected life of 6, 5 and 6 years, respectively. The
expected volatility and expected life are determined based on historical
data.
|
|
|
|
|
|
The weighted-average grant date fair value of stock
options granted during the three months ended December 31, 2008, 2007 and
2006 was $0.45, $1.55 and $2.03, respectively. The cash proceeds, income tax
benefit and aggregate intrinsic value of options (the amount by which the
market price of the stock on the date of exercise exceeded the market price
of stock on the date of grant) exercised during the fiscal years ended June
30, 2009, 2008 and 2007, respectively, were not material.
|
26
|
|
|
|
|
At June 30, 2009, 230,100 shares were available for
future grants. It is the Companys policy to issue new shares upon exercise
of stock options. The Company accepts shares of the Companys common stock as
payment for the exercise price of options. These shares received as payment
are retired upon receipt.
|
|
|
|
|
|
A summary of the status of the Companys stock
option plans as of June 30, 2009, 2008 and 2007 and the changes during the
years then ended is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted Average
Exercise Price
|
|
Aggregate
Intrinsic Value
(in millions)
|
|
Outstanding and exercisable at June 30, 2007
|
|
|
782,174
|
|
|
$15.45
|
|
|
$0.4
|
|
Granted
|
|
|
120,000
|
|
|
12.40
|
|
|
|
|
Exercised
|
|
|
(3,400
|
)
|
|
11.80
|
|
|
|
|
Canceled
|
|
|
(5,790
|
)
|
|
16.07
|
|
|
|
|
Outstanding and exercisable at June 30, 2008
|
|
|
892,984
|
|
|
15.05
|
|
|
0.0
|
|
Granted
|
|
|
265,000
|
|
|
6.82
|
|
|
|
|
Exercised
|
|
|
(4,235
|
)
|
|
6.81
|
|
|
|
|
Canceled
|
|
|
(133,295
|
)
|
|
14.93
|
|
|
|
|
Outstanding and
exercisable at June 30, 2009
|
|
|
1,020,454
|
|
|
$12.94
|
|
|
$0.4
|
|
|
|
|
The following table summarizes information for
options outstanding and exercisable at June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
Range of
Prices
|
|
|
Options
Outstanding
|
|
|
Remaining
Life (Years)
|
|
|
Exercise
Price
|
|
|
$ 6.81 10.75
|
|
|
271,815
|
|
|
9.1
|
|
|
$ 6.97
|
|
|
12.35 13.59
|
|
|
268,773
|
|
|
7.0
|
|
|
12.60
|
|
|
14.40 16.52
|
|
|
356,266
|
|
|
5.4
|
|
|
15.54
|
|
|
19.21 20.27
|
|
|
123,600
|
|
|
4.4
|
|
|
19.34
|
|
|
$ 6.81 20.27
|
|
|
1,020,454
|
|
|
6.7
|
|
|
$ 12.94
|
|
|
|
10.
|
BENEFIT AND RETIREMENT PLANS
|
|
|
|
The Company sponsors various defined contribution
pension and retirement plans, which cover substantially all employees, other
than employees covered by multi-employer pension plans under collective
bargaining agreements. Total pension and retirement plan expense was $1.8
million in fiscal year 2009 and $2.0 million in each of the fiscal years 2008
and 2007. The amounts include $0.5 million in each of the fiscal years 2009,
2008 and 2007, for the Companys matching contribution to retirement savings
plans. The Companys cost for pension plans is generally determined as 2% -
6% of each covered employees wages. The Companys matching contribution for
the retirement savings plans is generally 25% - 50% of employee contributions
(up to 4% of employee earnings). In addition to the above, amounts charged to
pension expense and contributed to multi-employer defined benefit pension
plans administered by others under collective bargaining agreements were $0.5
million, $0.8 million and $0.9 million in fiscal 2009, 2008 and 2007,
respectively. The cumulative cost to exit the Companys multi-employer plans
was approximately $3.9 million on June 30, 2009.
|
|
|
|
The Company has unfunded deferred compensation plans
with executive officers. The plans require various annual contributions for
the participants based upon compensation levels and age. All participants are
fully vested. For fiscal 2009, 2008 and 2007, the benefit obligation was
increased by interest expense of $0.1 million, $0.3 million and $0.2 million,
service costs of $0.2 million, $0.3 million and $0.5 million, and decreased
by payments of $0.6 million, $0.8 million and $0.5 million, respectively. At
June 30, 2009 and 2008, the deferred compensation liability was $5.0 million
and $5.3 million, respectively. Funds of the deferred compensation plans are
held in a Rabbi Trust. The assets held in the Rabbi Trust are not available
for general corporate purposes. The Rabbi Trust is subject to creditor claims
in the event of insolvency, but otherwise must be used only for purposes of
providing benefits under the plans. As of June 30, 2009, the Companys
deferred compensation plan assets, held in the Rabbi Trust, were invested in
stock and bond funds. As of June 30, 2009 and 2008, the fair market value of
the assets held in the Rabbi Trust were $4.3 million and $5.2 million,
respectively, and are classified as Other Assets in the Consolidated
Balance Sheets. These assets are classified as Level 2 in accordance with
SFAS 157 as discussed in Note 1.
|
|
|
27
|
|
|
Under provisions of the Companys Voluntary Deferred Compensation
Plan, executive officers may defer common stock awards received as
participants of the 2007 Long-Term Incentive Plan until retirement. Under the
plan, no shares were deferred during the fiscal years ended June 30, 2009 and
2008. At June 30, 2009 and 2008, 47,322 shares and 53,575 shares with an
award date value of $0.7 million and $0.8 million, respectively, had been
deferred and are being held on behalf of the employees. Under the plan, 6,253
shares and 7,278 shares were distributed in fiscal years 2009 and 2008,
respectively.
|
|
|
|
The Companys defined benefit pension plan covers 59 active hourly
production employees of DMI. There are a total of 463 participants in the
plan. Retirement benefits are based on years of credited service multiplied
by a dollar amount negotiated under collective bargaining agreements. The
Companys policy is to fund normal costs and amortization of prior service
costs at a level that is equal to or greater than the minimum required under
the Employee Retirement Income Security Act of 1974 (ERISA). According to an
agreement reached with the collective bargaining unit, all benefits and
participants are fixed. Future benefits will accrue to current participants;
however, new participants cannot be added to the plan. As of June 30, 2009
and 2008, the Company recorded an accrued benefit liability related to the
funded status of the defined benefit pension plan recognized on the Companys
consolidated balance sheets in other long-term liabilities of $1.8 million
and $0.3 million, respectively. The accumulated benefit obligation was $5.7
million and $5.2 million at fiscal years ended June 30, 2009 and 2008,
respectively.
|
|
|
11.
|
COMPREHENSIVE (LOSS) INCOME
|
|
|
|
The components of comprehensive (loss) income, net of income taxes,
for the years ended June 30, were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
Net (loss) income
|
|
$
|
(1,509
|
)
|
$
|
4,236
|
|
$
|
9,334
|
|
|
Other comprehensive (loss)
income (OCI):
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of derivatives, net of income taxes of $5, $176
and $70, respectively
|
|
|
(1
|
)
|
|
(273
|
)
|
|
(168
|
)
|
|
Change in fair value of available-for-sale, Securities, net of income
taxes of $631, $54, $(205), respectively
|
|
|
(1,022
|
)
|
|
(84
|
)
|
|
301
|
|
|
Change in minimum pension liability, net of income taxes of $595, $321
and $(140), respectively
|
|
|
(969
|
)
|
|
(524
|
)
|
|
255
|
|
|
Total other comprehensive (loss) income
|
|
|
(1,992
|
)
|
|
(881
|
)
|
|
388
|
|
|
Total comprehensive (loss) income
|
|
$
|
(3,501
|
)
|
$
|
3,355
|
|
$
|
9,722
|
|
|
|
|
The
components of accumulated other comprehensive (loss) income, net of income
taxes, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
|
2009
|
|
2008
|
|
|
Available-for-sale
securities
|
|
$
|
(47
|
)
|
$
|
975
|
|
|
Interest rate swaps
|
|
|
(180
|
)
|
|
(178
|
)
|
|
Pension and other
post-retirement benefit adjustments
|
|
|
(1,537
|
)
|
|
(569
|
)
|
|
Total accumulated other
comprehensive (loss) income
|
|
$
|
(1,764
|
)
|
$
|
228
|
|
|
|
12.
|
LITIGATION
|
|
|
|
From time to time, the Company is subject to various legal
proceedings, including lawsuits, which arise out of, and are incidental to,
the conduct of the Companys business. The Company does not consider any of
such proceedings that are currently pending, individually or in the
aggregate, to be material to its business or likely to result in a material
adverse effect on its consolidated operating results, financial condition, or
cash flows.
|
|
|
13.
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
FACILITY
LEASES the
Company leases certain facilities and equipment under various operating
leases. These leases require the Company to pay the lease cost, operating
costs, including property taxes, insurance, and maintenance. Total lease
expense related to the various operating leases was approximately $4.3
million, $4.0 million and $3.6 million in fiscal 2009, 2008 and 2007,
respectively.
|
28
|
|
|
Expected
future minimum commitments under operating leases as of June 30, 2009 were as
follows (in thousands):
|
|
|
|
|
|
|
|
Fiscal Year Ended June 30
|
|
|
2010
|
|
|
2,022
|
|
|
2011
|
|
|
1,229
|
|
|
2012
|
|
|
1,112
|
|
|
2013
|
|
|
768
|
|
|
2014
|
|
|
482
|
|
|
Thereafter
|
|
|
162
|
|
|
|
|
$
|
5,775
|
|
|
|
14.
|
FACILITY CONSOLIDATION COSTS
|
|
|
|
During
fiscal year ended June 30, 2009, the Company recorded charges for facility
consolidation and related costs of $2.6 million. The charges represent
employee separation costs of $2.0 million and facility closing costs of $0.6
million with no future benefit to the Company. In the process of recording
facility consolidation charges, the company reviewed the usefulness and/or
ability to sell idle assets at these facilities in order to determine their
fair value. Based on this review, the Company recorded an asset impairment of
$0.1 million related to machinery and equipment and included it in the
Facility Consolidation and Other Charges line in the Consolidated
Statements of Operations.
|
|
|
15.
|
SEGMENTS
|
|
|
|
The Company operates in one reportable operating segment, furniture
products. Our operations involve the distribution of manufactured and
imported products consisting of a broad line of upholstered and wood
furniture such as sofas, loveseats, chairs, reclining and rocker-reclining
chairs, swivel rockers, sofa beds, convertible bedding units, occasional tables,
desks, dining tables and chairs and bedroom furniture for residential,
recreational vehicle, and commercial markets. The Companys furniture
products are sold primarily throughout the United States by the Companys
internal sales force and various independent representatives. The Company
makes minimal export sales. No single customer accounted for more than 10% of
net sales.
|
|
|
|
Set forth below is information for the past three fiscal years
showing the Companys net sales attributable to each of the areas of
application (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR THE YEARS ENDED JUNE 30,
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
Residential
|
|
$
|
230,727
|
|
$
|
258,084
|
|
$
|
259,710
|
|
|
Recreational
Vehicle
|
|
|
16,197
|
|
|
56,090
|
|
|
66,165
|
|
|
Commercial
|
|
|
77,234
|
|
|
91,481
|
|
|
99,525
|
|
|
|
|
$
|
324,158
|
|
$
|
405,655
|
|
$
|
425,400
|
|
16. SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION
UNAUDITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts)
|
|
FOR THE QUARTER ENDED
|
|
|
|
|
September 30
|
|
December 31
|
|
March 31
|
|
June 30
|
|
|
Fiscal 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
91,417
|
|
$
|
84,550
|
|
$
|
73,627
|
|
$
|
74,564
|
|
|
Gross margin
|
|
|
17,136
|
|
|
16,131
|
|
|
12,168
|
|
|
15,639
|
|
|
Net (loss) income (1)
|
|
|
(749
|
)
|
|
296
|
|
|
(1,854
|
)
|
|
798
|
|
|
(Loss) earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.11
|
)
|
$
|
0.04
|
|
$
|
(0.28
|
)
|
$
|
0.12
|
|
|
Diluted
|
|
$
|
(0.11
|
)
|
$
|
0.04
|
|
$
|
(0.28
|
)
|
$
|
0.12
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts)
|
|
FOR THE QUARTER ENDED
|
|
|
|
|
September 30
|
|
December 31
|
|
March 31
|
|
June 30
|
|
|
Fiscal 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
100,900
|
|
$
|
105,986
|
|
$
|
98,138
|
|
$
|
100,630
|
|
|
Gross margin
|
|
|
19,763
|
|
|
22,070
|
|
|
18,019
|
|
|
18,637
|
|
|
Net income
|
|
|
1,183
|
|
|
1,868
|
|
|
849
|
|
|
336
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.18
|
|
$
|
0.28
|
|
$
|
0.13
|
|
$
|
0.05
|
|
|
Diluted
|
|
$
|
0.18
|
|
$
|
0.28
|
|
$
|
0.13
|
|
$
|
0.05
|
|
|
|
|
The sum of the per share amounts for the quarters may not equal the
total for the year due to the treasury stock method.
|
|
|
|
|
(1)
|
The quarters ended September 30, 2008, December 31, 2008, March 31,
2009 and June 30, 2009 include facility consolidation and other charges
after-tax of $0.8 million or $0.13 per share, $0.3 million or $0.05 per
share, $0.3 million or $0.05 per share and $0.1 million or $0.02 per share,
respectively.
|
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial Disclosure
|
None.
|
|
Item 9A.
|
Controls
and Procedures
|
Evaluation
of disclosure controls and procedures
Based on their evaluation as of the
end of the period covered by this Annual Report on Form 10-K, the Companys
Chief Executive Officer (CEO) and Chief Financial Officer (CFO) have
concluded that the Companys disclosure controls and procedures (as defined in
Rules 13a-15(e) or 15d-15(e)) under the Securities Act of 1934, as amended) were
effective as of June 30, 2009.
Changes
in internal control over financial reporting
During fiscal year 2009, the
Company completed remediation of the material weakness in internal control over
financial reporting identified during fiscal year 2008, specifically related to
the reconciliation of accounts payable at its material consolidated subsidiary.
Remedial measures undertaken during fiscal 2009 included simplifying the
account structure surrounding the accounts payable transactions by reducing the
number of general ledger accounts used to record accounts payable, improving
the accounts payable reconciliation process by revising the automatic postings
to accounts payable, and enhancing the review and approval of the accounts
payable reconciliation process with our subsidiary associates. The Company
believes that these remediation actions have improved the Companys internal
controls over financial reporting (as defined in Rule 13a-15(f) under the
Securities Exchange Act of 1934) and are sufficient to remediate the material
weakness described above.
Managements
Annual Report on Internal Control Over Financial Reporting
Management is
responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Rules 13a-15(f) or 15d-15(f) of
the Securities Exchange Act of 1934, as amended. We performed an evaluation
under the supervision and with the participation of our management, including
the CEO and CFO, to assess the effectiveness of the design and operation of our
disclosure controls and procedures under the Exchange Act as of June 30, 2009.
In making this assessment, we used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission in
Internal Control Integrated Framework.
Based on that criteria, management concluded that the internal control over
financial reporting is effective as of June 30, 2009.
This annual
report does not include an attestation report of the Companys registered
public accounting firm regarding internal control over financial reporting.
Managements report was not subject to attestation by the Companys registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission for smaller reporting companies that permit the Company to
provide only managements report in this annual report.
|
|
Item 9B.
|
Other
Information
|
None.
30
PART III
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
The
information identifying directors of the Company, the Audit and Ethics
Committee, the Audit and Ethics Committee Expert and Section 16(a) beneficial
ownership reporting compliance, will be contained in the Companys fiscal 2008
definitive proxy statement to be filed with the Securities and Exchange
Commission under the sections captioned Proposal 1 Election of Directors,
Corporate Governance Audit and Ethics Committee of the Board of Directors
and Compliance with Section 16(a) of the Securities Exchange Act of 1934 and
are incorporated herein by reference.
The Company
has adopted a code of ethics called the
Guidelines
for Business Conduct
that applies to the Companys employees,
including the principal executive officer, principal financial officer,
principal accounting officer or controller, and persons performing similar
functions. A copy of the code of ethics is posted on our website at
www.flexsteel.com.
The
executive officers of the Company, their ages, positions (in each case as of
June 30, 2009), and the year they were first elected or appointed an officer of
the registrant, are as follows:
|
|
|
Name (age)
|
|
Position (date first became officer)
|
Ronald J.
Klosterman (61)
|
|
President
& Chief Executive Officer (1989)
|
James R.
Richardson (65)
|
|
Senior Vice
President of Residential Sales and Marketing (1979)
|
Thomas D.
Burkart (66)
|
|
Senior Vice
President of Vehicle Seating (1984)
|
Patrick M.
Crahan (61)
|
|
Senior Vice
President of Commercial Seating (1989)
|
Jeffrey T.
Bertsch (54)
|
|
Senior Vice
President of Corporate Services (1989)
|
Donald D.
Dreher (60)
|
|
Senior Vice
President (2004), President & CEO of DMI Furniture, Inc. (1986)
|
James E.
Gilbertson (59)
|
|
Vice
President of Vehicle Seating (1989)
|
Timothy E.
Hall (51)
|
|
Vice President-Finance,
Chief Financial Officer & Secretary (2000)
|
|
|
Item 11.
|
Executive
Compensation
|
The
information identifying executive compensation will be contained in the
Companys fiscal year 2009 definitive proxy statement to be filed with the
Securities and Exchange Commission under the sections captioned Executive
Compensation, Director Compensation, and Corporate Governance -
Compensation Committee Interlocks and Insider Participation and are
incorporated herein by reference.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
|
The
information identifying beneficial ownership of stock and supplementary data
will be contained in the Companys fiscal year 2009 definitive proxy statement
to be filed with the Securities and Exchange Commission under the sections
captioned Ownership of Stock By Directors and Executive Officers, Ownership
of Stock by Certain Beneficial Owners, and Equity Compensation Plan
Information and are incorporated herein by reference.
|
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director Independence
|
This
information will be contained under the heading Interest of Management and
Others in Certain Transactions and Corporate Governance Board of Directors
in the Companys fiscal year 2009 definitive proxy statement to be filed with
the Securities and Exchange Commission and is incorporated herein by reference.
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
Deloitte
& Touche LLP was the Companys independent registered public accounting
firm in fiscal 2009. In addition to performing the audit of the Companys
consolidated financial statements, Deloitte & Touche LLP provided various
audit-related services during fiscal 2009.
The Audit
and Ethics Committee pre-approves both the type of services to be provided by
Deloitte & Touche LLP and the estimated fees related to these services. The
Audit and Ethics Committee reviewed professional services and the possible
effect on Deloitte & Touche LLPs independence was considered. The Audit
and Ethics Committee has considered and found the provision of services for
non-audit services compatible with maintaining Deloitte & Touche LLPs
independence. All services provided by Deloitte & Touche LLP during fiscal
2009 were pre-approved by the Audit and Ethics Committee.
31
The
aggregate fees billed for each of the past two fiscal years ended June 30 for
each of the following categories of services are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
|
Audit Fees
(1)
|
|
$
|
365,000
|
|
$
|
578,000
|
|
|
Audit
Related Fees
(2)
|
|
|
38,000
|
|
|
38,000
|
|
|
Tax Fees
(3)
|
|
|
|
|
|
22,000
|
|
|
Total
|
|
$
|
403,000
|
|
$
|
638,000
|
|
|
|
(1)
|
Professional fees and expenses for audit of financial statements and
internal control over financial reporting services for fiscal 2009 and 2008,
as applicable, and consisted of (i) audit of the Companys annual
consolidated financial statements; (ii) reviews of the Companys quarterly
consolidated financial statements; (iii) consents and other services related
to Securities and Exchange Commission matters; and (iv) consultations on
financial accounting and reporting matters arising during the course of the
audit and reviews.
|
|
|
(2)
|
Professional fees and expenses for audit-related services billed in
fiscal 2009 and 2008 consisted of employee benefit plan audits.
|
|
|
(3)
|
Professional fees and expenses for tax services billed in fiscal 2008
consisted of tax planning and advice services totaling $22,000 and consisted
of (i) tax advice related to structuring certain proposed transactions; and
(ii) general tax planning matters.
|
PART IV
|
|
Item 15.
|
Exhibits,
Financial Statement Schedules, and Reports on Form 8-K
|
|
|
|
(a)
|
(1)
|
Financial Statements
|
|
|
|
|
The financial statements of the Company are set forth above in Item
8.
|
|
|
|
|
(2)
|
Schedules
|
|
|
|
|
The following financial statement schedules for the years ended June
30, 2009, 2008 and 2007 are submitted herewith:
|
SCHEDULE II
RESERVES
For the Years Ended
June 30, 2009, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Balance at
Beginning
of Year
|
|
Additions
Charged to
Income
|
|
Deductions
from
Reserves
|
|
Balance at
End of Year
|
|
|
Allowance
for Doubtful Accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
$
|
2,110,000
|
|
$
|
1,240,000
|
|
$
|
(1,590,000
|
)
|
$
|
1,760,000
|
|
|
2008
|
|
$
|
2,090,000
|
|
$
|
1,050,000
|
|
$
|
(1,030,000
|
)
|
$
|
2,110,000
|
|
|
2007
|
|
$
|
2,820,000
|
|
$
|
|
|
$
|
(730,000
|
)
|
$
|
2,090,000
|
|
|
|
|
Other
schedules are omitted because they are not required or are not applicable or
because the required information is included in the financial statements.
|
|
|
|
|
(3)
|
Exhibit No.
|
|
|
|
|
3.1
|
The 1983
Restated Articles of Incorporation of the Company, as amended through
February 14, 2007 (incorporated by reference to the Companys Annual Report
on Form 10-K for the fiscal year ended June 30, 2007).
|
32
|
|
|
|
3.2
|
By-Laws of
the Company (incorporated by reference to the Companys Annual Report on Form
10-K for the fiscal year ended June 30, 1993).
|
|
|
|
|
3.3
|
Amendments
to Restated By-Laws of the Company (incorporated by reference to Exhibit 3.1
to the Companys Form 8-K filed on June 8, 2007).
|
|
|
|
|
10.1
|
1999 Stock
Option Plan incorporated by reference from the 1999 Flexsteel definitive
proxy statement. *
|
|
|
|
|
10.2
|
Flexsteel
Industries, Inc. Voluntary Deferred Compensation Plan incorporated by
reference to Exhibit No. 10.5 to the Annual Report on Form 10-K for the
fiscal year ended June 30, 2001. *
|
|
|
|
|
10.3
|
Flexsteel
Industries, Inc. Restoration Retirement Plan incorporated by reference to
Exhibit No. 10.6 to the Annual Report on Form 10-K for the fiscal year ended
June 30, 2001. *
|
|
|
|
|
10.4
|
Flexsteel
Industries, Inc. Senior Officer Supplemental Retirement Plan incorporated by
reference to Exhibit No. 10.7 to the Annual Report on Form 10-K for the
fiscal year ended June 30, 2001. *
|
|
|
|
|
10.5
|
2002 Stock
Option Plan incorporated by reference to Appendix A from the 2002 Flexsteel
definitive proxy statement. *
|
|
|
|
|
10.6
|
Agreement
and Plan of Merger, dated as of August 12, 2003, by and among Flexsteel,
Churchill Acquisition Corp. and DMI (incorporated by reference to Exhibit
99(d)(1) of Flexsteel Industries, Inc.s Tender Offer Statement on Schedule
TO filed with the Securities and Exchange Commission on August 20, 2003)
incorporated by reference to Form 8-K and Amendments No. 1 to Form 8-K, as
filed with Securities and Exchange Commission on October 2, 2003.
|
|
|
|
|
10.7
|
Credit
Facility Agreement dated June 30, 2004 as amended or modified on June 10,
2005, August 19, 2005, December 23, 2005, January 3, 2006, and May 19, 2006
incorporated by reference to Exhibit 10.9 to Flexsteel Industries, Inc.
Annual Report on Form 10-K for the fiscal year ended June 30, 2006.
|
|
|
|
|
10.8
|
Flexsteel
Industries, Inc. 2006 Stock Option Plan incorporated by reference to Appendix
C from the 2006 Flexsteel Proxy Statement filed with the Securities, and
Exchange Commission on October 31, 2006.
|
|
|
|
|
10.9
|
Note Modification
Agreement date June 25, 2007 (long-term facility) between Flexsteel
Industries, Inc. and JPMorgan Chase Bank, N.A. incorporated by reference to
Exhibit 10.1 to Flexsteels Form 8-K filed with the Securities and Exchange
Commission on June 26, 2007.
|
|
|
|
|
10.10
|
Note
Modification Agreement date June 25, 2007 (short-term facility) between
Flexsteel Industries, Inc. and JPMorgan Chase Bank, N.A. incorporated by
reference to Exhibit 10.1 to Flexsteels Form 8-K filed with the Securities
and Exchange Commission on June 26, 2007.
|
|
|
|
|
10.11
|
Credit
Agreement date June 25, 2007 between Flexsteel Industries, Inc. and JPMorgan
Chase Bank, N.A. incorporated by reference to Exhibit 10.3 to Flexsteels
Form 8-K filed with the Securities and Exchange Commission on June 26, 2007.
|
|
|
|
|
10.12
|
Employment
Agreement dated October 1, 2006 between Flexsteel Industries, Inc. and Donald
D. Dreher incorporated by reference to Exhibit 10.1 to Flexsteels Form 8-K
filed with the Securities and Exchange Commission on October 5, 2006. *
|
|
|
|
|
10.13
|
Note
Modification Agreement dated June 26, 2008 (short-term facility) between
Flexsteel Industries, Inc. and JPMorgan Chase Bank, N.A. incorporated by
reference to Exhibit 10.1 to Flexsteels Form 8-K filed with the Securities
and Exchange Commission on June 27, 2008.
|
|
|
|
|
10.14
|
Credit
Agreement dated June 26, 2008 between Flexsteel Industries, Inc. and JPMorgan
Chase Bank, N.A. incorporated by reference to Exhibit 10.2 to Flexsteels
Form 8-K filed with the Securities and Exchange Commission on June 27, 2008.
|
|
|
|
|
10.15
|
Amendment to
Employment Agreement dated June 27, 2008 between Flexsteel Industries, Inc.
and Donald D. Dreher incorporated by reference to Exhibit 10.3 to Flexsteels
Form 8-K filed with the Securities and Exchange Commission on June 27, 2008.*
|
33
|
|
|
|
10.16
|
Flexsteel
Industries, Inc. 2007 Long-Term Management Compensation Plan (incorporated by
reference to Appendix C to the Definitive Proxy Statement on Schedule 14A
filed with the Commission on November 1, 2007). *
|
|
|
|
|
10.17
|
Credit
Agreement dated March 27, 2009 between Flexsteel Industries, Inc. and
JPMorgan Chase Bank, N.A. incorporated by reference to Exhibit 10.1 to
Flexsteels Form 8-K filed with the Securities and Exchange Commission on
March 31, 2009.
|
|
|
|
|
10.18
|
Continuing
Security Agreement dated March 27, 2009 between Flexsteel Industries, Inc.
and JPMorgan Chase Bank, N.A. incorporated by reference to Exhibit 10.2 to
Flexsteels Form 8-K filed with the Securities and Exchange Commission on
March 31, 2009.
|
|
|
|
|
10.19
|
Line of
Credit Note (Facility A) dated March 27, 2009 between Flexsteel Industries,
Inc. and JPMorgan Chase Bank, N.A. incorporated by reference to Exhibit 10.3
to Flexsteels Form 8-K filed with the Securities and Exchange Commission on
March 31, 2009.
|
|
|
|
|
10.20
|
Line of
Credit Note (Facility B) dated March 27, 2009 between Flexsteel Industries,
Inc. and JPMorgan Chase Bank, N.A. incorporated by reference to Exhibit 10.4
to Flexsteels Form 8-K filed with the Securities and Exchange Commission on
March 31, 2009.
|
|
|
|
|
21.1
|
Subsidiaries
of the Company. Filed herewith.
|
|
|
|
|
23
|
Consent of
Independent Registered Public Accounting Firm. Filed herewith.
|
|
|
|
|
31.1
|
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. Filed herewith.
|
|
|
|
|
31.2
|
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. Filed herewith.
|
|
|
|
|
32
|
Certification
by Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. Filed herewith.
|
|
|
|
|
|
*Management
contracts, compensatory plans and arrangements required to be filed as an
exhibit to this report.
|
SIGNATURES
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:
|
August 26, 2009
|
|
|
FLEXSTEEL
INDUSTRIES, INC.
|
|
|
|
|
|
|
|
|
By:
|
/S/ Ronald J. Klosterman
|
|
|
|
|
Ronald J. Klosterman
|
|
|
|
|
Chief Executive Officer
|
|
|
|
|
and
|
|
|
|
|
Principal Executive Officer
|
|
|
|
|
|
|
|
|
By:
|
/S/ Timothy E. Hall
|
|
|
|
|
Timothy E. Hall
|
|
|
|
|
Chief Financial Officer
|
|
|
|
|
and
|
|
|
|
|
Principal Financial and Accounting Officer
|
34
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:
|
August 26, 2009
|
|
/S/ L. Bruce Boylen
|
|
|
|
L.
Bruce Boylen
|
|
|
|
Chairman of the Board of Directors
|
|
|
|
|
Date:
|
August 26, 2009
|
|
/S/ Ronald J. Klosterman
|
|
|
|
Ronald
J. Klosterman
|
|
|
|
Director
|
|
|
|
|
Date:
|
August 26, 2009
|
|
/S/ Jeffrey T. Bertsch
|
|
|
|
Jeffrey
T. Bertsch
|
|
|
|
Director
|
|
|
|
|
Date:
|
August 26, 2009
|
|
/S/ Mary C. Bottie
|
|
|
|
Mary
C. Bottie
|
|
|
|
Director
|
|
|
|
|
Date:
|
August 26, 2009
|
|
/S/ Patrick M. Crahan
|
|
|
|
Patrick
M. Crahan
|
|
|
|
Director
|
|
|
|
|
Date:
|
August 26, 2009
|
|
/S/ Lynn J. Davis
|
|
|
|
Lynn
J. Davis
|
|
|
|
Director
|
|
|
|
|
Date:
|
August 26, 2009
|
|
/S/ Robert E. Deignan
|
|
|
|
Robert
E. Deignan
|
|
|
|
Director
|
|
|
|
|
Date:
|
August 26, 2009
|
|
/S/ Thomas E. Holloran
|
|
|
|
Thomas
E. Holloran
|
|
|
|
Director
|
|
|
|
|
Date:
|
August 26, 2009
|
|
/S/ Eric S. Rangen
|
|
|
|
Eric
S. Rangen
|
|
|
|
Director
|
|
|
|
|
Date:
|
August 26, 2009
|
|
/S/ James R. Richardson
|
|
|
|
James
R. Richardson
|
|
|
|
Director
|
35
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