Item 3.
Quantitative and Qualitative Disclosures About Market Risk
General
Market
risk represents the risk of changes in 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 the three and six months ended December 31, 2009 and 2008, the Company
did not have sales, purchases, or other expenses denominated in foreign
currencies. As such, the Company is not exposed to material 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 December 31, 2009, the Company had effectively
fixed the interest rates at 4.9% on approximately $5.0 million of its
short-term debt through the use of interest rate swaps. As of December 31,
2009, the cumulative fair value of the swaps is a liability of approximately
$0.2 million and is included in other liabilities. On January 28, 2010, the
Company paid off its $5 million in short-term debt and terminated the related
interest rate swap of $5 million. The cost to terminate the swap was $0.2
million.
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 4.
Controls and Procedures
(a)
Evaluation of disclosure controls and procedures.
Based on their evaluation as of the end of the period covered by this Quarterly
Report on Form 10-Q, our chief executive officer and chief financial officer
have concluded that our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934,
as amended) were effective as of December 31, 2009.
(b)
Changes in internal control over financial reporting.
During the quarter ended December 31, 2009, there were no significant
changes in our internal control over financial reporting (as defined in Rule
13a-15(f) under the Securities Exchange Act of 1934, as amended) that has
materially affected, or is reasonable likely to materially affect the Companys
internal control over financial reporting.
Cautionary Statement Relevant to
Forward-Looking Information for the Purpose of Safe Harbor Provisions of the
Private Securities Litigation Reform Act of 1995
The Company
and its representatives may from time to time make written or oral
forward-looking statements with respect to long-term goals or anticipated
results of the Company, including statements contained in the Companys filings
with the Securities and Exchange Commission and in its reports to stockholders.
Statements, including
those in this Quarterly Report on Form 10-Q, which are not historical or
current facts, are forward-looking statements made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
There are certain important factors that could cause our results to differ
materially from those anticipated by some of the statements made herein.
Investors are cautioned that all forward-looking statements involve risk and
uncertainty. Some of the factors that could affect results are the cyclical
nature of the furniture industry, the effectiveness of new product
introductions and distribution channels, the product mix of sales, pricing
pressures, the cost of raw materials and fuel, foreign currency valuations,
actions by governments including taxes and tariffs, inflation, the amount of
sales generated and the profit margins thereon, competition (both foreign and
domestic), changes in interest rates, credit exposure with customers and
general economic conditions. For further information regarding these risks and
uncertainties, see the Risk Factors section in Item 1A of the Companys
Annual Report on Form 10-K for the fiscal year ended June 30, 2009.
12
The Company
specifically declines to undertake any obligation to publicly revise any
forward-looking statements that have been made to reflect events or
circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
PART II OTHER
INFORMATION
Item 1A. Risk
Factors
There
has been no material change in the risk factors set forth under Part 1, Item 1A
Risk Factors in the Companys Annual Report on Form 10-K for the fiscal year
ended June 30, 2009.
Item 4.
Submission of Matters to a Vote of Security Holders
At
the annual meeting of stockholders on December 7, 2009, Proposals I and II set
forth in the Board of Directors definitive proxy statement dated October 21,
2009 were approved and adopted by the stockholders with the following votes:
Proposal
I (elect four (4) Class II Directors): James R. Richardson: For 5,863,605,
Withheld 18,433, Abstentions and Broker Non-votes 196,228; Patrick M. Crahan:
For 5,622,197, Withheld 260,541, Abstentions and Broker Non-votes 195,528;
Robert E. Deignan: For 5,833,770, Withheld 48,968, Abstentions and Broker
Non-votes 195,528; Mary C. Bottie: For 5,653,963, Withheld 228,775, Abstentions
and Broker Non-votes 195,528.
The
names of each Director whose term of office as a Director continued after the
meeting are as follows: Ronald J. Klosterman, Jeffrey T. Bertsch, Mary C.
Bottie, L. Bruce Boylen, Patrick M. Crahan, Lynn J. Davis, Robert E. Deignan,
Thomas E. Holloran, James R. Richardson and Eric S. Rangen.
Proposal
II (Approval of 2009 Stock Option Plan): For 5,081,412, Against 373,662 and
Abstentions 242,329.
Item 6.
Exhibits
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31.1
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Certification
by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
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31.2
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Certification
by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
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32
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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.
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SIGNATURES
Pursuant to
the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
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FLEXSTEEL
INDUSTRIES, INC.
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Date:
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February 9,
2010
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By:
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S/ Timothy
E. Hall
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Timothy E.
Hall
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Chief
Financial Officer
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(Principal
Financial & Accounting Officer)
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13
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