- Annual Report (10-K)
August 19 2011 - 3:45PM
Edgar (US Regulatory)
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UNITED STATES
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SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
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Form 10-K
x
Annual Report Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended
June 30, 2011
or
o
Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period
from to
Commission file number
0-5151
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FLEXSTEEL INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
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Minnesota
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42-0442319
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification No.)
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3400 Jackson Street, Dubuque, Iowa
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52004-0877
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(Address of principal executive offices)
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(Zip Code)
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Registrants telephone number, including area code:
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(563) 556-7730
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered
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Common Stock, $1.00 Par Value
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The NASDAQ Stock Market LLC
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Securities registered pursuant to Section 12(g) of the Act:
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None
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(Title of Class)
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Indicate by check mark whether the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act.
Yes
o
No
x
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
o
No
x
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes
x
No
o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes
o
No
o
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
x
Indicate by check mark whether the Registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of large accelerated filer, accelerated filer and
smaller reporting company in Rule 12b-2 of the Exchange Act (check one).
Large accelerated filer
o
Accelerated
filer
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Non-accelerated
filer
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Smaller
reporting company
x
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Act). Yes
o
No
x
The aggregate market value of the voting stock held by non-affiliates,
computed by reference to the last sales price on December 31, 2010 (which was
the last business day of the registrants most recently completed second
quarter) was $74,061,443.
Indicate the number of shares outstanding of each of the registrants
classes of Common Stock, as of the latest practicable date. 6,715,612 Common
Shares ($1 par value) as of August 15, 2011.
DOCUMENTS INCORPORATED BY REFERENCE
In Part III, portions of the registrants 2011 Proxy Statement to be filed with
the Securities and Exchange Commission within 120 days of the Registrants
fiscal year end.
1
PART I
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 Annual Report on Form 10-K, 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, supply chain disruptions, litigation, the
effectiveness of new product introductions and distribution channels, the
product mix of sales, pricing pressures, the cost of raw materials and fuel,
retention and recruitment of key employees, actions by governments including
laws, regulations, taxes and tariffs, inflation, the amount of sales generated
and the profit margins thereon, competition (both U.S. and foreign), credit
exposure with customers, participation in multi-employer pension plans and
general economic conditions. For further information regarding these risks and
uncertainties, see the Risk Factors section in Item 1A of this Annual Report
on Form 10-K.
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.
General
Flexsteel
Industries, Inc. and Subsidiaries (the Company) was incorporated in 1929 and
is one of the oldest and largest manufacturers, importers and marketers of residential
and commercial upholstered and wooden furniture products in the United States.
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 and bedroom furniture. The Companys products are intended
for use in home, office, hotel and other commercial applications. Featured as a
basic component in most of the upholstered furniture is a unique steel drop-in
seat spring from which our name Flexsteel is derived. The Company distributes
its products throughout the United States through the Companys sales force and
various independent representatives. The Companys products are also sold to
several national and regional chains, some of which sell on a private label
basis. No single customer accounted for more than 10% of net sales.
The
Company has one active wholly-owned subsidiary: DMI Furniture, Inc. (DMI),
which is a Louisville, Kentucky-based, importer and marketer of residential and
commercial office furniture with warehouses in Indiana and manufacturing
sources in Asia; DMIs divisions are WYNWOOD, Homestyles and DMI Commercial
Office Furniture.
The
Company operates in one reportable operating segment, furniture products. Our
furniture products business involves the distribution of manufactured and
imported products consisting of a broad line of upholstered and wooden
furniture for residential and commercial markets. 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):
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FOR THE YEARS ENDED JUNE 30,
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2011
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2010
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2009
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Residential
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$
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258,095
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$
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246,041
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$
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230,727
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Commercial
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81,331
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80,425
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93,431
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$
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339,426
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$
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326,466
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$
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324,158
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2
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,
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 U.S.
and foreign manufacturers and distributors, none of which dominates the market.
Our competition includes foreign manufacturers, in countries such as China, and
customers who obtain products directly from foreign manufacturers. The markets
in which we compete include a large number of relatively small manufacturers;
however, certain competitors have substantially greater sales volumes 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, 2011, the Company had
approximately 90 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):
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June 30, 2011
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June 30, 2010
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June 30, 2009
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$35,700
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$49,000
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$35,200
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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 U.S. and foreign, 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, see Risk
Factors in Item 1A of this Annual Report on Form 10-K.
Government Regulations
The
Company is subject to various local, state, and federal laws, regulations and
agencies that affect businesses generally, see Risk Factors in Item 1A of
this Annual Report on Form 10-K.
3
Environmental Matters
The
Company is subject to environmental laws and regulations with respect to
product content and industrial waste, see Risk Factors in Item 1A and Legal
Proceedings in Item 3 of this Annual Report on Form 10-K.
Trademarks and Patents
The
Company owns the American and Canadian improvement patents to its Flexsteel
seat spring, as well as patents on convertible beds. The Company has patents
and owns certain trademarks in connection with its furniture products, which
are due to expire on dates ranging from 2011 to 2025. The Company does not
consider its trademarks and patents 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):
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Fiscal Year Ended June 30,
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Expenditures
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2011
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$2,190
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2010
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$2,040
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2009
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$2,680
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Employees
The Company
had 1,300 employees as of June 30, 2011 including 250 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.
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.
Our
products are considered highly deferrable purchases for consumers during
economic downturns. Prolonged negative economic conditions could impact our
business.
Home
furnishings and commercial products are generally considered a deferrable
purchase by most consumers and end-users. Economic downturns and prolonged
negative economic conditions could affect consumer spending habits by
decreasing the overall demand for home furnishings and commercial products.
These events could impact retailers, hospitality, vehicle seating and
healthcare businesses resulting in an impact on our business. A recovery in our
sales could lag significantly behind a general economic recovery due to the
deferrable nature and relatively significant cost of home furnishings and
commercial products purchases.
Our
future success depends on our ability to manage our global supply chain.
We
acquire raw materials, component parts and certain finished products from
external suppliers, both U.S. and foreign. Many of these suppliers are
dependent upon other suppliers in countries other than where they are located.
This global interdependence within our supply chain is subject to delays in
delivery, availability, quality and pricing (including tariffs) of products.
The delivery of goods from these suppliers may be delayed by customs, labor
issues, changes in political, economic and social conditions, laws and
regulations. Unfavorable fluctuations in price, quality, delivery and
availability of these products could negatively affect our ability to meet
demands of our customers and have a negative impact on product margin.
4
Competition
from U.S. and foreign finished product manufacturers may adversely affect our
business, operating results or financial condition.
The
furniture industry is very competitive and fragmented. We compete with U.S. and
foreign manufacturers and distributors. As a result, we may not be able to
maintain or raise the prices of our products in response to 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 significantly
differentiate our products (through styling, finish and other construction
techniques) from those of our competitors. Our current and potential customers
have the ability to obtain products direct from the manufacturers. As a result,
we are continually subject to the risk of losing market share, which may lower
our sales and earnings.
Business
failures of large dealers or a group of customers could impact our future sales
and earnings.
Our
business practice has been to extend payment terms to our customers. As a
result, we have a large amount of trade receivables. Although we have no
customers that individually represent 10% or more of our annual net sales,
business failures of a large customer or a group of customers could require us
to record additional receivable reserves, which would decrease earnings.
Receivables collection can be significantly impacted by economic conditions.
Deterioration of the economy or a lack of economic recovery could cause further
business failures of our customers, which could in turn require additional
receivable reserves and lower our 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.
Furniture
is a styled product and is subject to rapidly changing consumer and end-user
trends and tastes and 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.
Our
success depends on our ability to recruit and retain key employees.
Our success
depends on our ability to recruit and retain key employees. If we are not
successful in recruiting and retaining key employees or experience the
unexpected loss of key employees, our operations may be negatively impacted.
Future
costs of complying with various laws and regulations may adversely impact
future operating results.
Our
business is subject to various laws and regulations, such as the California
Transparency in Supply Chains Act of 2010, Patient Protection and Affordable
Care Act of 2010, the Pension Protection Act of 2006, the Lacey Act, as amended
in 2008 to cover plants and trees, the Consumer Product Safety Improvement Act
of 2008, the Security and Accountability for Every (SAFE) Port Act of 2006 and
the Maritime Transportation Security Act of 2002 as well as many others.
Partially in response to the financial markets crises and the global economic
recession, regulatory initiatives have accelerated. These initiatives could
have a significant impact on our operations and the cost to comply with such
laws and regulations could adversely impact our financial position, results of
operations and cash flows. In addition, failure to comply with such laws and
regulations, even inadvertently, could produce negative consequences which could
adversely impact our operations.
Terms
of collective bargaining agreements and labor disruptions could adversely
impact our results of operations.
We employ
approximately 1,300 people, 250 of whom are covered by 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.
Due
to our participation in multi-employer pension plans, we may have exposures
under those plans that could extend beyond what our obligations would be with
respect to our employees.
We
participate in, and make periodic contributions to, three multi-employer
pension plans that cover 200 of our union employees. Multi-employer pension
plans are managed by trustee boards comprised of participating employer and
labor union representatives, and the employers participating in a
multi-employer pension plan are jointly responsible for maintaining the plans
funding requirements. Based on the most recent information available to us, we
believe that the present value of actuarially accrued liabilities in the
multi-employer pension plans substantially exceeds the value of the assets held
in trust to pay benefits. As a result of our participation, we could experience
greater volatility in our overall pension funding obligations. Our obligations
may be impacted by the funded status of the plans, the plans investment
performance, changes in the participant demographics, financial stability of
contributing employers and changes in actuarial assumptions.
5
Our
future results may be affected by various legal proceedings and compliance
risk, including those involving product liability, environmental, or other
matters.
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 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. See Note 11, Litigation within the Notes to Consolidated
Financial Statements for a description of an existing environmental claim
against the Company. Additionally, the Company is involved in various other
kinds of commercial disputes. Given the inherent uncertainty of litigation, these
various legal proceedings and compliance matters could have a material impact
on our business, operating results or financial condition.
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Item
1B.
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Unresolved
Staff Comments
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None.
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Item 2.
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Properties
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The
Company owns the following facilities as of June 30, 2011:
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Approximate
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Location
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Size (square feet)
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Principal Operations
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Dubuque,
Iowa
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719,000
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Manufacturing,
Distribution and Corporate Offices
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Lancaster,
Pennsylvania
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216,000
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Distribution
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Riverside,
California
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236,000
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Manufacturing
and Distribution
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69,000
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Distribution
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Dublin,
Georgia
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300,000
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Manufacturing
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Harrison,
Arkansas
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221,000
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Manufacturing
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Starkville,
Mississippi
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349,000
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Manufacturing
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New Paris,
Indiana
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168,000
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Held for sale
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Huntingburg,
Indiana
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691,000
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Distribution
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The Company
leases the following facilities as of June 30, 2011:
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Approximate
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Location
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Size (square feet)
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Principal Operations
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Louisville,
Kentucky
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15,000
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Administrative
Offices
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Ferdinand,
Indiana
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101,000
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Distribution
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Juarez,
Mexico
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48,000
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Manufacturing
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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 and distribution 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.
6
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Item
3.
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Legal
Proceedings
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The Company
has been named as one of several defendants in an Indiana civil lawsuit related
to groundwater contamination. The lawsuit alleges that the contamination source
is a property once owned by the Company. The Company does not believe that it
caused or contributed to the contamination. This lawsuit is in its preliminary
stages. Plaintiffs have not identified a dollar amount of their alleged damages
and the status of insurance coverage has not been determined. We are unable to
estimate a range of reasonably possible outcomes or losses at this time.
Accordingly, no accrual related to this matter has been recorded in the June
30, 2011 financial statements. Legal and other related expenses of $0.5 million
have been incurred responding to this lawsuit and are included in Selling,
General and Administrative expense in the fiscal year 2011 Consolidated
Statement of Operations.
Other
Proceedings.
From time to time, the Company is subject
to various other 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 other proceedings that are currently pending, individually
or in the aggregate, to be material to its business or likely to result in a
material effect on its consolidated operating results, financial condition, or
cash flows.
7
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PART II
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Item
5.
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Market
for the Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
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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., Kimball International, La-Z-Boy Inc., Natuzzi S.P.A.,
and Stanley Furniture Inc.
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2006
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2007
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2008
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2009
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2010
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2011
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Flexsteel
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100.00
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115.82
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93.64
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73.16
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97.88
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132.62
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Peer Group
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100.00
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87.04
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62.64
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31.24
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39.52
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48.76
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NASDAQ
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100.00
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122.72
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93.36
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71.02
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79.93
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105.32
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The NASDAQ
Global Market is the principal market on which the Companys common stock is
traded.
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Sale Price of Common Stock *
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Cash Dividends
Per Share
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Fiscal 2011
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Fiscal 2010
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High
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Low
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High
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Low
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Fiscal 2011
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Fiscal 2010
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First
Quarter
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$
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15.84
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$
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10.08
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$
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8.84
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$
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6.64
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$
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0.075
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$
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0.05
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Second
Quarter
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18.75
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14.22
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10.34
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7.77
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0.075
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0.05
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Third
Quarter
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19.69
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14.11
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16.50
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9.33
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0.075
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0.05
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Fourth
Quarter
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16.60
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13.80
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15.74
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10.75
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0.075
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0.05
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*
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, 2011.
There were
no repurchases of the Companys common stock during the quarter ended June 30,
2011.
The payment
of future cash dividends is within the discretion of our Board of Directors and
will depend, among other factors, on our earnings, capital requirements and
operating and financial condition.
8
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Item
6.
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Selected
Financial Data
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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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
|
SUMMARY OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
339,426
|
|
$
|
326,466
|
|
$
|
324,158
|
|
$
|
405,655
|
|
$
|
425,400
|
|
Cost of goods sold
|
|
|
262,124
|
|
|
251,685
|
|
|
263,083
|
|
|
327,165
|
|
|
344,177
|
|
Operating income (loss)
|
|
|
15,864
|
|
|
17,529
|
|
|
(2,272
|
)
|
|
7,596
|
|
|
14,699
|
|
Interest and other income
|
|
|
343
|
|
|
361
|
|
|
661
|
|
|
469
|
|
|
1,277
|
|
Interest expense
|
|
|
|
|
|
439
|
|
|
968
|
|
|
1,469
|
|
|
1,491
|
|
Income (loss) before income taxes
|
|
|
16,207
|
|
|
17,451
|
|
|
(2,579
|
)
|
|
6,596
|
|
|
14,484
|
|
Income tax provision (benefit)
|
|
|
5,790
|
|
|
6,650
|
|
|
(1,070
|
)
|
|
2,360
|
|
|
5,150
|
|
Net income (loss) (1) (2) (3)
|
|
|
10,417
|
|
|
10,801
|
|
|
(1,509
|
)
|
|
4,236
|
|
|
9,334
|
|
Earnings (loss) per common share: (1) (2)
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
1.56
|
|
|
1.63
|
|
|
(0.23
|
)
|
|
0.64
|
|
|
1.42
|
|
Diluted
|
|
|
1.50
|
|
|
1.61
|
|
|
(0.23
|
)
|
|
0.64
|
|
|
1.42
|
|
Cash dividends declared per common share
|
|
$
|
0.30
|
|
$
|
0.20
|
|
$
|
0.36
|
|
$
|
0.52
|
|
$
|
0.52
|
|
SELECTED DATA AS OF JUNE 30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
6,693
|
|
|
6,608
|
|
|
6,576
|
|
|
6,574
|
|
|
6,568
|
|
Diluted
|
|
|
6,929
|
|
|
6,697
|
|
|
6,576
|
|
|
6,611
|
|
|
6,583
|
|
Total assets
|
|
$
|
164,677
|
|
$
|
157,670
|
|
$
|
150,971
|
|
$
|
179,906
|
|
$
|
185,014
|
|
Property, plant and equipment, net
|
|
|
21,387
|
|
|
21,614
|
|
|
23,298
|
|
|
26,372
|
|
|
28,168
|
|
Capital expenditures
|
|
|
2,573
|
|
|
1,251
|
|
|
1,203
|
|
|
1,228
|
|
|
10,839
|
|
Long-term debt
|
|
|
|
|
|
|
|
|
|
|
|
20,811
|
|
|
21,336
|
|
Working capital (current assets less
current liabilities)
|
|
|
100,683
|
|
|
90,800
|
|
|
78,416
|
|
|
100,920
|
|
|
97,902
|
|
Shareholders equity
|
|
$
|
128,573
|
|
$
|
117,612
|
|
$
|
106,998
|
|
$
|
112,752
|
|
$
|
112,679
|
|
SELECTED RATIOS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss), as a percent of sales
|
|
|
3.1
|
|
|
3.3
|
|
|
(0.5
|
)
|
|
1.0
|
|
|
2.2
|
|
Current ratio
|
|
|
4.6 to 1
|
|
|
3.9 to 1
|
|
|
3.2 to 1
|
|
|
3.5 to 1
|
|
|
3.2 to 1
|
|
Return on ending shareholders equity
|
|
|
8.1
|
|
|
9.2
|
|
|
(1.4
|
)
|
|
3.8
|
|
|
8.3
|
|
Average number of employees
|
|
|
1,320
|
|
|
1,400
|
|
|
1,600
|
|
|
2,140
|
|
|
2,290
|
|
|
|
(1)
|
Fiscal 2011 net income and per
share amounts include charges consisting of employee separation costs and
inventory write down related to closing a manufacturing facility of $1.0
million (after tax) or $0.15 per share.
|
(2)
|
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.
|
(3)
|
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.
|
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 and
inventory valuation. 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 value. The amount ultimately realized from trade accounts receivable
may differ from the amount estimated in the consolidated financial statements
based on collection experience.
Inventories
the Company values inventory at the lower of cost or market. A 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, 2011, 2010 and 2009. Amounts presented are percentages of the Companys net
sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR THE YEARS ENDED JUNE 30,
|
|
|
|
2011
|
|
2010
|
|
2009
|
|
Net sales
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Cost of goods sold
|
|
|
(77.2
|
)
|
|
(77.2
|
)
|
|
(81.2
|
)
|
Gross margin
|
|
|
22.8
|
|
|
22.8
|
|
|
18.8
|
|
Selling, general and administrative
|
|
|
(17.8
|
)
|
|
(17.5
|
)
|
|
(18.8
|
)
|
Facility consolidation and other charges
|
|
|
(0.3
|
)
|
|
|
|
|
(0.8
|
)
|
Operating income (loss)
|
|
|
4.7
|
|
|
5.3
|
|
|
(0.8
|
)
|
Other income, net
|
|
|
0.1
|
|
|
0.0
|
|
|
0.0
|
|
Income (loss) before income taxes
|
|
|
4.8
|
|
|
5.3
|
|
|
(0.8
|
)
|
Income tax (provision) benefit
|
|
|
(1.7
|
)
|
|
(2.0
|
)
|
|
0.3
|
|
Net income (loss)
|
|
|
3.1
|
%
|
|
3.3
|
%
|
|
(0.5
|
)%
|
10
Fiscal
2011 Compared to Fiscal 2010
Net sales
for fiscal 2011 were $339.4 million compared to $326.5 million in the prior fiscal
year, an increase of 4%. For the fiscal year June 30, 2011, residential net
sales were $258.1 million compared to $246.0 million for the year ended June
30, 2010, an increase of 4.9%. Commercial net sales were $81.3 million for the
year ended June 30, 2011, an increase of 1.1% from net sales of $80.5 million
for the year ended June 30, 2010.
Gross
margin for the years ended June 30, 2011 and 2010 was 22.8%. The gross margin
for the year ended June 30, 2011, includes the $0.6 million inventory
write-down related to facility closing offset by operational improvements.
For the
fiscal years ended June 30, 2011 and 2010, selling, general and administrative
expenses were 17.8% and 17.5% of net sales, respectively. The percentage
increase for the year ended June 30, 2011 reflects higher legal and
professional fees.
Operating
income decreased by $1.7 million in fiscal year 2011 in comparison to the prior
year. During fiscal year 2011, the Company recorded pre-tax charges of $1.6 million
related to closing a manufacturing facility. Of these pre-tax charges, employee
separation and other closing costs of $1.0 million are reported as facility
closing costs and an inventory write-down of $0.6 million is reported as cost
of goods sold.
The
effective tax rate for the fiscal year ended June 30, 2011 was 35.7% compared
to 38.1% for fiscal year 2010. The change in effective tax rate is primarily
due to the change in provision for uncertain tax positions related to various
state taxing jurisdictions, stock-based compensation and the benefit of the
Domestic Manufacturing Deduction under Internal Revenue Code Section 199 (DMD),
which provides a tax benefit on U.S. based manufacturing. The DMD tax benefit
available in previous years was being phased in by statute and was therefore
lower than the full DMD tax benefit for 2011.
The above
factors resulted in net income for the fiscal year ended June 30, 2011 of $10.4
million or $1.50 per share compared to $10.8 million or $1.61 per share in
fiscal 2010.
All
earnings per share amounts are on a diluted basis.
Fiscal
2010 Compared to Fiscal 2009
Net sales
for fiscal 2010 were $326.5 million compared to $324.2 million in the prior
fiscal year, an increase of 1%. Residential net sales were $246.0 million
compared to $230.7 million in fiscal 2009, an increase of 7%. Commercial net
sales were $80.5 million for fiscal 2010, a decrease of 14% from net sales of
$93.5 million for fiscal 2009.
The
Companys operating income improved by $19.8 million in fiscal year 2010 in
comparison to the prior year. The Company benefited from strategies implemented
and actions taken during fiscal year 2009 including consolidation of
manufacturing operations and workforce reductions that brought production
capacity and fixed overhead more in line with current product demand. During
the prior fiscal year, the Company recorded pre-tax charges of approximately
$2.6 million related to facility consolidation and employee separation costs.
Company-wide employment was reduced approximately 30% through plant closures
and workforce reductions and remains at these reduced levels. These factors
contributed significantly to gross margin improvements and selling, general and
administrative expense reductions.
Gross
margin for fiscal year 2010 was 22.8% compared to 18.8% for the prior year
period. The gross margin improvements for the year were greatly impacted by the
operational changes discussed above. In addition, gross margin improved due to
stability in material and product costs and lower ocean freight costs.
For the
fiscal years ended 2010 and 2009, selling, general and administrative expenses
were 17.5% and 18.8% of net sales, respectively. These percentage improvements
are due to the operational changes discussed above, as well as, lower bad debt
and advertising costs.
Interest
expense decreased $0.6 million to $0.4 million for fiscal year 2010 due to
lower borrowings.
The
effective tax rate for the fiscal year ended June 30, 2010 was 38.1%. The
effective income tax benefit rate was 41.5% for fiscal year 2009 due to losses
or low level of earnings in various tax jurisdictions.
The above
factors resulted in net income for the fiscal year ended June 30, 2010 of $10.8
million or $1.61 per share compared to a net loss of $1.5 million or $0.23 per
share in fiscal 2009.
11
All
earnings per share amounts are on a diluted basis.
Liquidity
and Capital Resources
Working
capital (current assets less current liabilities) at June 30, 2011 was $100.7
million as compared to $90.8 million at June 30, 2010. Significant changes in
working capital from June 30, 2010 to June 30, 2011 included increased cash of
$9.6 million and decreased accruals of $2.4 million offset by decreased
accounts receivable of $4.3 million. The decrease in receivables is due to
timing of collections and lower shipment volume in the fourth fiscal quarter.
Net cash
provided by operating activities was $13.8 million for the fiscal year ended
June 30, 2011 reflecting net income of $10.4 million, changes in operating
assets and liabilities of $1.3 million and non-cash charges of $4.7 million.
The change in net cash provided by operating activities of $19.1 million in
fiscal year 2010 was comprised primarily of net income of $10.8 million,
changes in operating assets and liabilities of $4.4 million and non-cash
charges of $3.9 million. Depreciation expense was $2.7 million and $3.0 million
for the years ended June 30, 2011 and 2010, respectively.
Net cash
used in investing activities was $2.7 million in fiscal year 2011 compared to
cash used by investing activities of $1.6 million in fiscal year 2010. Net
purchases of investments were $0.3 million. Capital expenditures were $2.6
million during fiscal year 2011.
Net cash
used in financing activities was $1.5 million in fiscal year 2011, primarily
for the payment of dividends of $1.8 million, compared to $11.0 million in
fiscal year 2010. For fiscal year 2010, the cash was used primarily to reduce
borrowings by $10.0 million and pay dividends of $1.3 million.
The Company
expects that capital expenditures will be approximately $15.0 million in fiscal
year 2012. The Company
plans to invest approximately $12 million to construct, furnish and equip a
corporate office building in Dubuque, Iowa, and the balance of the expenditures
on delivery and manufacturing equipment. Management believes that the
Company has adequate cash and credit arrangements to meet its operating and
capital requirements for fiscal year 2012, including the construction of a
corporate office. 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.
At June 30,
2011, the Company has no long-term debt obligations and therefore, no
contractual interest payments are included in the table below. The following
table summarizes the Companys contractual obligations at June 30, 2011 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
|
|
Operating
lease obligations
|
|
$
|
4,082
|
|
$
|
1,851
|
|
$
|
2,231
|
|
$
|
|
|
$
|
|
|
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 $5.3 million at June 30, 2011. At June 30, 2011 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 tax contingency
reserve from the above table, as the timing of payments, if any, cannot be
reasonably estimated.
Financing
Arrangements
See Note 6
to the Consolidated Financial Statements of this Annual Report on Form 10-K.
12
Outlook
We had
modest gains in sales for the current year over the prior year partially due to
a strong backlog entering the year. We enter fiscal year 2012 with lower
backlogs and anticipate that first quarter fiscal year 2012 sales will be lower
than first quarter fiscal year 2011. Macroeconomic conditions, such as, high
unemployment, minimal job growth, a weak housing market and low levels of
consumer confidence continue to adversely impact our business. The
macroeconomic environment tempers expectations of top line growth through the
first part of fiscal year 2012. The commercial office industry is reporting
improving order trends. While we have benefited minimally from those
improvements to date, we believe we will see increased sales volume during
fiscal year 2012. We anticipate increased orders for hospitality products
during fiscal year 2012 resulting from pent up demand caused by delays in
typical refurbishing cycles for hotel properties.
We remain
committed to our core strategies, which include a wide range of quality product
offerings and price points to the residential and commercial markets, combined
with a conservative approach to business. We will maintain our focus on a
strong balance sheet through emphasis on cash flow and improving profitability.
We believe these core strategies are in the best interest of our shareholders.
|
|
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.
Inflation
Increased operating costs are reflected in product or services pricing with
any limitations on price increases determined by the marketplace. Inflation or
other pricing pressures could impact raw material costs, labor costs and
interest rates which are important components of costs for the Company and
could have an adverse effect on our profitability, especially where increases
in these costs exceed price increases on finished products.
Foreign
Currency Risk
During fiscal years 2011, 2010 and
2009, the Company did not have sales, purchases, or other expenses denominated
in foreign currencies. As such, the Company is not directly 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,
2011, the Company does not have any debt outstanding.
|
|
Item
8.
|
Financial
Statements and Supplementary Data
|
13
R
EPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors and Stockholders of Flexsteel Industries,
Inc.
We have audited the accompanying consolidated balance sheets of
Flexsteel Industries, Inc. and subsidiaries (the Company) as of June 30, 2011
and 2010, and the related consolidated statements of operations, changes in
shareholders equity, and cash flows for each of the three years in the period
ended June 30, 2011. 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 as of June 30, 2011 and 2010, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 2011, 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, presents fairly, in all material respects, the
information set forth therein.
|
|
DELOITTE & TOUCHE LLP
|
|
Minneapolis,
Minnesota
|
|
August 19,
2011
|
|
14
|
FLEXSTEEL INDUSTRIES, INC. AND
SUBSIDIARIES
|
Consolidated Balan
ce Sheets
|
(Amounts in thousands, except share
and per share data)
|
|
|
|
|
|
|
|
|
|
|
JUNE
30,
|
|
|
|
2011
|
|
2010
|
|
|
ASSETS
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
Cash
|
|
$
|
17,889
|
|
$
|
8,278
|
|
Trade
receivables less allowance for doubtful accounts: 2011, $2,000; 2010,
$2,020
|
|
|
31,451
|
|
|
35,748
|
|
Inventories
|
|
|
73,680
|
|
|
72,637
|
|
Deferred income
taxes
|
|
|
3,700
|
|
|
4,050
|
|
Other
|
|
|
1,633
|
|
|
1,076
|
|
Total current
assets
|
|
|
128,353
|
|
|
121,789
|
|
NONCURRENT
ASSETS:
|
|
|
|
|
|
|
|
Property, plant
and equipment, net
|
|
|
21,387
|
|
|
21,614
|
|
Deferred income
taxes
|
|
|
2,560
|
|
|
3,010
|
|
Other assets
|
|
|
12,377
|
|
|
11,257
|
|
TOTAL
|
|
$
|
164,677
|
|
$
|
157,670
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
Accounts payable
trade
|
|
$
|
9,899
|
|
$
|
10,815
|
|
Accrued
liabilities:
|
|
|
|
|
|
|
|
Payroll and
related items
|
|
|
6,922
|
|
|
7,023
|
|
Insurance
|
|
|
5,645
|
|
|
6,192
|
|
Other
|
|
|
5,204
|
|
|
6,959
|
|
Total current
liabilities
|
|
|
27,670
|
|
|
30,989
|
|
LONG-TERM
LIABILITIES:
|
|
|
|
|
|
|
|
Deferred
compensation
|
|
|
5,270
|
|
|
5,096
|
|
Other
liabilities
|
|
|
3,164
|
|
|
3,973
|
|
Total
liabilities
|
|
|
36,104
|
|
|
40,058
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND
CONTINGENCIES (Note 12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 2011, 6,710,612
shares; 2010, 6,645,532 shares
|
|
|
6,711
|
|
|
6,646
|
|
Additional
paid-in capital
|
|
|
6,698
|
|
|
5,425
|
|
Retained
earnings
|
|
|
115,699
|
|
|
107,293
|
|
Accumulated
other comprehensive loss
|
|
|
(535
|
)
|
|
(1,752
|
)
|
Total
shareholders equity
|
|
|
128,573
|
|
|
117,612
|
|
TOTAL
|
|
$
|
164,677
|
|
$
|
157,670
|
|
See accompanying Notes to
Consolidated Financial Statements.
15
|
FLEXSTEEL INDUSTRIES, INC. AND
SUBSIDIARIES
|
C
onsolidated
Statements of Operations
|
(Amounts in thousands, except per
share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR
THE YEARS ENDED JUNE 30,
|
|
|
|
2011
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
NET SALES
|
|
$
|
339,426
|
|
$
|
326,466
|
|
$
|
324,158
|
|
COST OF GOODS
SOLD
|
|
|
(262,124
|
)
|
|
(251,685
|
)
|
|
(263,083
|
)
|
GROSS MARGIN
|
|
|
77,302
|
|
|
74,781
|
|
|
61,075
|
|
SELLING, GENERAL
AND ADMINISTRATIVE
|
|
|
(60,422
|
)
|
|
(57,252
|
)
|
|
(60,792
|
)
|
FACILITY CLOSING
COSTS
|
|
|
(1,016
|
)
|
|
|
|
|
(2,555
|
)
|
OPERATING INCOME
(LOSS)
|
|
|
15,864
|
|
|
17,529
|
|
|
(2,272
|
)
|
OTHER INCOME
(EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
Interest and
other income
|
|
|
343
|
|
|
361
|
|
|
661
|
|
Interest expense
|
|
|
|
|
|
(439
|
)
|
|
(968
|
)
|
Total
|
|
|
343
|
|
|
(78
|
)
|
|
(307
|
)
|
INCOME (LOSS)
BEFORE INCOME TAXES
|
|
|
16,207
|
|
|
17,451
|
|
|
(2,579
|
)
|
INCOME TAX
(PROVISION) BENEFIT
|
|
|
(5,790
|
)
|
|
(6,650
|
)
|
|
1,070
|
|
NET INCOME
(LOSS)
|
|
$
|
10,417
|
|
$
|
10,801
|
|
$
|
(1,509
|
)
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE
NUMBER OF COMMON SHARES OUTSTANDING:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
6,693
|
|
|
6,608
|
|
|
6,576
|
|
Diluted
|
|
|
6,929
|
|
|
6,697
|
|
|
6,576
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS (LOSS)
PER SHARE OF COMMON STOCK:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.56
|
|
$
|
1.63
|
|
$
|
(0.23
|
)
|
Diluted
|
|
$
|
1.50
|
|
$
|
1.61
|
|
$
|
(0.23
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH DIVIDENDS
DECLARED PER COMMON SHARE
|
|
$
|
0.30
|
|
$
|
0.20
|
|
$
|
0.36
|
|
See accompanying Notes to
Consolidated Financial Statements.
16
|
FLEXSTEEL INDUSTRIES, INC. AND
SUBSIDIARIES
|
Consolidated S
tatements of Changes in Shareholders Equity
|
(Amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Par
Value of
Common
Shares ($1 Par)
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
(Loss) Income
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at July
1, 2008
|
|
$
|
6,576
|
|
$
|
4,256
|
|
$
|
101,692
|
|
$
|
228
|
|
$
|
112,752
|
|
Unrealized loss
on available for sale investments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
(1,022
|
)
|
|
(1,022
|
)
|
Stock-based
compensation
|
|
|
|
|
|
114
|
|
|
|
|
|
|
|
|
114
|
|
Interest rate
swaps valuation adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
(1
|
)
|
Minimum pension
liability adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
(969
|
)
|
|
(969
|
)
|
Cash dividends
declared
|
|
|
|
|
|
|
|
|
(2,367
|
)
|
|
|
|
|
(2,367
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
(1,509
|
)
|
|
|
|
|
(1,509
|
)
|
Balance at June 30,
2009
|
|
|
6,576
|
|
|
4,370
|
|
|
97,816
|
|
|
(1,764
|
)
|
|
106,998
|
|
Issuance of
common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
exercised, net
|
|
|
70
|
|
|
274
|
|
|
|
|
|
|
|
|
344
|
|
Unrealized gain
on available for sale investments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
39
|
|
|
39
|
|
Long-term
incentive compensation
|
|
|
|
|
|
510
|
|
|
|
|
|
|
|
|
510
|
|
Stock-based
compensation
|
|
|
|
|
|
271
|
|
|
|
|
|
|
|
|
271
|
|
Interest rate
swaps valuation adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
177
|
|
|
177
|
|
Minimum pension
liability adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
(204
|
)
|
|
(204
|
)
|
Cash dividends
declared
|
|
|
|
|
|
|
|
|
(1,324
|
)
|
|
|
|
|
(1,324
|
)
|
Net income
|
|
|
|
|
|
|
|
|
10,801
|
|
|
|
|
|
10,801
|
|
Balance at June 30,
2010
|
|
|
6,646
|
|
|
5,425
|
|
|
107,293
|
|
|
(1,752
|
)
|
|
117,612
|
|
Issuance of
common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
exercised, net
|
|
|
65
|
|
|
259
|
|
|
|
|
|
|
|
|
324
|
|
Unrealized gain
on available for sale investments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
348
|
|
|
348
|
|
Long-term
incentive compensation
|
|
|
|
|
|
590
|
|
|
|
|
|
|
|
|
590
|
|
Stock-based
compensation
|
|
|
|
|
|
424
|
|
|
|
|
|
|
|
|
424
|
|
Minimum pension
liability adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
869
|
|
|
869
|
|
Cash dividends
declared
|
|
|
|
|
|
|
|
|
(2,011
|
)
|
|
|
|
|
(2,011
|
)
|
Net income
|
|
|
|
|
|
|
|
|
10,417
|
|
|
|
|
|
10,417
|
|
Balance at June 30,
2011
|
|
$
|
6,711
|
|
$
|
6,698
|
|
$
|
115,699
|
|
$
|
(535
|
)
|
$
|
128,573
|
|
See accompanying Notes to
Consolidated Financial Statements.
17
|
FLEXSTEEL INDUSTRIES, INC. AND
SUBSIDIARIES
|
Consolidated Statements of Cash F
lows
|
(Amounts
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR
THE YEARS ENDED JUNE 30,
|
|
|
|
2011
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
10,417
|
|
$
|
10,801
|
|
$
|
(1,509
|
)
|
Adjustments to
reconcile net income (loss) to net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
2,690
|
|
|
2,986
|
|
|
3,733
|
|
Deferred income
taxes
|
|
|
54
|
|
|
(963
|
)
|
|
449
|
|
Stock-based
compensation expense
|
|
|
1,014
|
|
|
781
|
|
|
114
|
|
Provision for
losses on accounts receivable
|
|
|
870
|
|
|
920
|
|
|
1,240
|
|
Other non-cash,
net
|
|
|
224
|
|
|
218
|
|
|
14
|
|
Gain on
disposition of capital assets
|
|
|
(185
|
)
|
|
(9
|
)
|
|
(252
|
)
|
Gain on sale of
investments
|
|
|
|
|
|
|
|
|
(462
|
)
|
Impairment of
long-lived assets
|
|
|
|
|
|
|
|
|
138
|
|
Changes in
operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Trade
receivables
|
|
|
3,427
|
|
|
(5,386
|
)
|
|
11,261
|
|
Inventories
|
|
|
(1,043
|
)
|
|
1,207
|
|
|
11,947
|
|
Other current
assets
|
|
|
(557
|
)
|
|
2,837
|
|
|
(781
|
)
|
Other assets
|
|
|
(270
|
)
|
|
(18
|
)
|
|
(288
|
)
|
Accounts payable
trade
|
|
|
(841
|
)
|
|
994
|
|
|
(4,849
|
)
|
Accrued
liabilities
|
|
|
(2,541
|
)
|
|
3,618
|
|
|
(2,918
|
)
|
Other long-term
liabilities
|
|
|
367
|
|
|
1,028
|
|
|
(178
|
)
|
Deferred
compensation
|
|
|
174
|
|
|
105
|
|
|
(352
|
)
|
Net cash
provided by operating activities
|
|
|
13,800
|
|
|
19,119
|
|
|
17,307
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Purchases of
investments
|
|
|
(698
|
)
|
|
(721
|
)
|
|
(520
|
)
|
Proceeds from
sales of investments
|
|
|
410
|
|
|
359
|
|
|
1,460
|
|
Proceeds from
sale of capital assets
|
|
|
187
|
|
|
34
|
|
|
676
|
|
Capital
expenditures
|
|
|
(2,573
|
)
|
|
(1,251
|
)
|
|
(1,203
|
)
|
Net cash (used
in) provided by investing activities
|
|
|
(2,674
|
)
|
|
(1,579
|
)
|
|
413
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
(Repayments of) proceeds from short-term borrowings, net
|
|
|
|
|
|
(10,000
|
)
|
|
4,857
|
|
Repayment of
long-term borrowings
|
|
|
|
|
|
|
|
|
(20,811
|
)
|
Dividends paid
|
|
|
(1,839
|
)
|
|
(1,320
|
)
|
|
(2,893
|
)
|
Proceeds from
issuance of common stock
|
|
|
324
|
|
|
344
|
|
|
|
|
Net cash used in
financing activities
|
|
|
(1,515
|
)
|
|
(10,976
|
)
|
|
(18,847
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash and cash equivalents
|
|
|
9,611
|
|
|
6,564
|
|
|
(1,127
|
)
|
Cash and cash
equivalents at beginning of year
|
|
|
8,278
|
|
|
1,714
|
|
|
2,841
|
|
Cash and cash
equivalents at end of year
|
|
$
|
17,889
|
|
$
|
8,278
|
|
$
|
1,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR
THE YEARS ENDED JUNE 30,
|
|
|
|
2011
|
|
2010
|
|
2009
|
|
SUPPLEMENTAL INFORMATION
CASH PAID DURING THE PERIOD FOR:
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
|
|
$
|
439
|
|
$
|
979
|
|
Income taxes
paid (refunded)
|
|
$
|
7,647
|
|
$
|
3,587
|
|
$
|
(62
|
)
|
See accompanying Notes to
Consolidated Financial Statements.
18
|
FLEXSTEEL INDUSTRIES, INC. AND
SUBSIDIARIES
|
N
otes 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 and
commercial upholstered and wooden furniture products in the United States.
The Companys furniture products include a broad line of quality upholstered
and wooden furniture for residential 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, importer and marketer of residential
and commercial office furniture with 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, accounts receivable, other current assets, accounts payable
and certain accrued liabilities are carried at amounts which reasonably
approximate their fair value due to their short-term nature. Generally
accepted accounting principles on fair value measurement for certain
financial assets and liabilities 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. The Company has not changed its
valuation techniques in measuring the fair value of any financial assets and
liabilities during the period.
|
|
|
|
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
value. The amount ultimately realized from trade accounts receivable may
differ from the amount estimated in the consolidated financial statements
based on collection experience.
|
|
|
|
INVENTORIES are
stated at the lower of cost or market. Steel products are 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.
|
|
|
|
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.
|
19
|
|
|
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, $4.1 million and $4.5 million in
fiscal 2011, 2010 and 2009, 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 $2.2 million, $2.0 million and $2.7
million in fiscal 2011, 2010 and 2009, respectively.
|
|
|
|
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. 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 uses the liability method of accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on
differences between the financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse. The Company
recognizes in its financial statements the tax benefit from an uncertain tax
position only if it is more likely than not that the tax position will be
sustained on examination by the taxing authorities, based on the technical
merits of the position.
|
|
|
|
EARNINGS (LOSS) PER
SHARE basic earnings (loss) 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 potential common
shares outstanding are stock options and shares associated with the long-term
management incentive compensation plan, which resulted in a dilutive effect
of 236,082 shares and 89,403 shares in fiscal 2011 and 2010, respectively.
The Company calculates the dilutive effect of outstanding options using the
treasury stock method. The Company calculates the dilutive effect of shares related
to the long-term management incentive compensation plan based on the number of shares, if any,
that would be issuable if the end of the fiscal year were the end of the contingency period. 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 424,150 shares, 716,939
shares and 759,689 shares of common stock were outstanding in fiscal 2011,
2010 and 2009, 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 recognizes compensation expense related to the
cost of employee services received in exchange for Company equity interests
based on the awards fair value at the date of grant. See Note 8 Stock-Based
Compensation.
|
|
|
|
ACCOUNTING DEVELOPMENTS
In June 2011, the FASB issued guidance on presentation of comprehensive
income. The new guidance eliminates the current option to report other
comprehensive income and its components in the statement of changes in
equity. Instead, an entity will be required to present either a continuous
statement of net income and other comprehensive income or in two separate but
consecutive statements. This guidance is effective for fiscal years, and
interim periods within those years, beginning after December 15, 2011.
Early adoption of the new guidance is permitted and full retrospective
application is required. We will be required to adopt this guidance beginning
with our first quarter of fiscal 2013.
|
20
|
|
2.
|
INVENTORIES
|
|
|
|
Inventories valued on a
LIFO basis (steel) would have been approximately $1.9 million and $1.7
million higher at June 30, 2011 and 2010, respectively, if they had been
valued on a FIFO basis. At June 30, 2011 and 2010 the total value of LIFO
inventory was $1.5 million and $2.3 million, respectively. There was no
material liquidation of LIFO inventory in 2011 and 2010. A comparison of
inventories is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
2011
|
|
2010
|
|
Raw materials
|
|
$
|
9,235
|
|
$
|
9,696
|
|
Work in process and finished parts
|
|
|
3,951
|
|
|
4,943
|
|
Finished goods
|
|
|
60,494
|
|
|
57,998
|
|
Total
|
|
$
|
73,680
|
|
$
|
72,637
|
|
|
|
3.
|
PROPERTY,
PLANT AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Estimated
|
|
June 30,
|
|
|
|
Life (Years)
|
|
2011
|
|
2010
|
|
Land
|
|
|
|
|
$
|
3,984
|
|
$
|
3,984
|
|
Buildings and improvements
|
|
5-39
|
|
|
39,851
|
|
|
40,248
|
|
Machinery and equipment
|
|
3-7
|
|
|
26,513
|
|
|
28,251
|
|
Delivery equipment
|
|
3-5
|
|
|
18,180
|
|
|
18,269
|
|
Furniture and fixtures
|
|
3-7
|
|
|
4,000
|
|
|
4,291
|
|
Construction in progress
|
|
|
|
|
|
366
|
|
|
|
|
Total
|
|
|
|
|
|
92,894
|
|
|
95,043
|
|
Less accumulated depreciation
|
|
|
|
|
|
(71,507
|
)
|
|
(73,429
|
)
|
Net
|
|
|
|
|
$
|
21,387
|
|
$
|
21,614
|
|
|
|
4.
|
OTHER
NONCURRENT ASSETS
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
June 30,
|
|
|
|
2011
|
|
2010
|
|
Cash value of life insurance
|
|
$
|
6,815
|
|
$
|
6,560
|
|
Rabbi Trust assets (see Note 9)
|
|
|
5,533
|
|
|
4,683
|
|
Other
|
|
|
29
|
|
|
14
|
|
Total
|
|
$
|
12,377
|
|
$
|
11,257
|
|
|
|
5.
|
ACCRUED
LIABILITIES OTHER
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
June 30,
|
|
|
|
2011
|
|
2010
|
|
Dividends
|
|
$
|
504
|
|
$
|
332
|
|
Income taxes
|
|
|
|
|
|
1,445
|
|
Advertising
|
|
|
1,873
|
|
|
2,200
|
|
Warranty
|
|
|
970
|
|
|
980
|
|
Other
|
|
|
1,857
|
|
|
2,002
|
|
Total
|
|
$
|
5,204
|
|
$
|
6,959
|
|
21
|
|
6.
|
CREDIT ARRANGEMENTS
|
|
|
|
The Company maintains a
credit agreement which provides short-term working capital financing up to
$15.0 million with interest of LIBOR plus 1% including $5.0 million of
letters of credit availability. No amounts were outstanding at June 30, 2011
and 2010 under the working capital facility. The credit agreement contains
financial covenants. The primary covenant is an interest coverage ratio of
3.0 to 1.0. The ratio is computed as net (loss) income plus interest expense and
stock-based compensation expense less dividends divided by interest expense.
In addition, the Company must maintain working capital of $60 million. At
June 30, 2011, the Company was in compliance with all of the covenants contained in the credit agreement. 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 $3.0 million at June 30, 2011.
|
|
|
|
An officer of the
Company is a director at a bank where the Company maintains an additional
unsecured $5.0 million line of credit at prime minus 1%, but not less than
2.5% and where its routine daily banking transactions are processed. No amount
was outstanding on the line of credit at June 30, 2011 and 2010. In addition,
the Rabbi Trust assets (Note 9) are administered by this banks trust
department. The Company receives no special services or pricing on the
services performed by the bank due to the directorship of this officer.
|
|
|
7.
|
INCOME
TAXES
|
|
|
|
In determining the
provision for income taxes, the Company uses an estimated annual effective
tax rate that is based on the annual income (loss), statutory tax rates and
permanent differences between book and tax. 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 components of the
gross liabilities related to unrecognized tax benefits and the related
deferred tax assets are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
2011
|
|
2010
|
|
Gross unrecognized tax benefits
|
|
$
|
970
|
|
$
|
995
|
|
Accrued Interest and penalties
|
|
|
340
|
|
|
215
|
|
Gross liabilities related to unrecognized tax
benefits
|
|
$
|
1,310
|
|
$
|
1,210
|
|
|
|
|
|
|
|
|
|
Deferred tax assets
|
|
$
|
330
|
|
$
|
230
|
|
|
|
|
A reconciliation of the beginning and ending amount
of unrecognized tax benefits is as follows (in thousands):
|
|
|
|
|
|
|
|
|
Balance at June 30, 2009
|
|
|
|
|
$
|
404
|
|
Additions for tax positions of prior years
|
|
|
|
|
|
591
|
|
Balance at June 30, 2010
|
|
|
|
|
|
995
|
|
Reduction for tax positions of prior years
|
|
|
|
|
|
(25
|
)
|
Balance at June 30, 2011
|
|
|
|
|
$
|
970
|
|
|
|
|
The Company records
interest and penalties related to income taxes as income tax expense in the
Consolidated Statements of Operations. The total income tax provision in
fiscal years 2011, 2010 and 2009 was 35.7%, 38.1% and 41.5%, respectively, of
income (loss) before income taxes. 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.
|
22
|
|
|
The income tax provision (benefit) is as follows for
the years ended June 30 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
2009
|
|
Federal current
|
|
$
|
5,313
|
|
$
|
6,630
|
|
$
|
(1,410
|
)
|
State current
|
|
|
423
|
|
|
975
|
|
|
(110
|
)
|
Deferred
|
|
|
54
|
|
|
(955
|
)
|
|
450
|
|
Total
|
|
$
|
5,790
|
|
$
|
6,650
|
|
$
|
(1,070
|
)
|
|
|
|
A reconciliation
between the U.S. federal statutory tax rate and the effective tax rate is as
follows for the years ended June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
2009
|
|
Federal statutory tax rate
|
|
|
35.0
|
%
|
|
35.0
|
%
|
|
34.0
|
%
|
State taxes, net of federal effect
|
|
|
2.6
|
|
|
3.7
|
|
|
2.7
|
|
Other
|
|
|
(1.9
|
)
|
|
(0.6
|
)
|
|
4.8
|
|
Effective tax rate
|
|
|
35.7
|
%
|
|
38.1
|
%
|
|
41.5
|
%
|
|
|
|
The effective tax rate for the fiscal year ended June 30, 2011 was
35.7% compared to 38.1% for fiscal year 2010. The change in effective tax
rate is primarily due to the change in provision for uncertain tax positions
related to various state taxing jurisdictions, stock-based compensation and
the benefit of the Domestic Manufacturing Deduction under Section 199 (DMD),
which provides a tax benefit on U.S. based manufacturing. The DMD tax benefit
available in previous years was being phased in by statute and was therefore
lower than the full DMD tax benefit for 2011.
|
|
|
|
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 primary components
of deferred tax assets and (liabilities) are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2011
|
|
June 30, 2010
|
|
|
|
Current
|
|
Long-term
|
|
Current
|
|
Long-term
|
|
Accounts receivable
|
|
$
|
740
|
|
$
|
|
|
$
|
750
|
|
$
|
|
|
Inventory
|
|
|
1,360
|
|
|
|
|
|
1,100
|
|
|
|
|
Self insurance
|
|
|
620
|
|
|
|
|
|
690
|
|
|
|
|
Employee benefits
|
|
|
360
|
|
|
|
|
|
680
|
|
|
|
|
Accrued expenses
|
|
|
620
|
|
|
|
|
|
830
|
|
|
|
|
Property, plant and equipment
|
|
|
|
|
|
(760
|
)
|
|
|
|
|
(340
|
)
|
Deferred compensation
|
|
|
|
|
|
2,520
|
|
|
|
|
|
2,280
|
|
Other
|
|
|
|
|
|
800
|
|
|
|
|
|
1,070
|
|
Total
|
|
$
|
3,700
|
|
$
|
2,560
|
|
$
|
4,050
|
|
$
|
3,010
|
|
|
|
|
The Company is subject
to U.S. federal income tax as well as income tax of multiple state and
foreign jurisdictions. Generally, tax years 20082011 remain open to
examination by the Internal Revenue Service or other taxing jurisdictions to
which we are subject.
|
|
|
8.
|
STOCK-BASED
COMPENSATION
|
|
|
|
The Company has two
stock-based compensation methods available when determining employee
compensation.
|
|
|
|
|
(1)
|
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 Companys shareholders
approved 500,000 shares to be issued under the plan. The Committee selected consolidated operating
results for organic net sales growth and fully-diluted earnings per share for
the three-year performance periods beginning July 1, 2008 and ending on June
30, 2011, beginning July 1, 2009 and ending on June 30, 2012, and beginning
July 1, 2010 and ending on June 30, 2013. The Committee has also specified
that payouts, if any, for awards earned under the fiscal years 2009-2011,
2010-2012 and 2011-2013 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 subject to Committee approval and verification of
results. The compensation cost related to the number of shares to be granted
under each performance period is fixed on the grant date, which is the date
the performance period begins. The compensation cost related to the cash
portion of the award is re-measured based on the equity awards estimated
fair value at the end of each reporting period. The accrual is based on the
probable outcomes of the performance conditions. The short-term portion of the recorded cash
award payable is classified within current liabilities (payroll and related items) and the long-term
portion of the recorded cash award payable is classified within other long-term liabilities in the Consolidated
Balance Sheets. As of June 30, 2011, the Company has recorded cash awards payable of $0.4 million
within current liabilities and $0.7 million within long-term liabilities. As of June 30, 2010, the
Company recorded cash awards payable of $0.4 million within long-term liabilities. There have been
no awards related to any of the performance periods as of June 30, 2011.
|
23
|
|
|
|
|
The aggregate number of
shares and cash that could be awarded to key executives if the minimum,
target and maximum performance goals are met, based upon the fair market
value at June 30, 2011, is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum
|
|
Target
|
|
Maximum
|
|
Performance
Period
|
|
Shares
|
|
Cash
|
|
Shares
|
|
Cash
|
|
Shares
|
|
Cash
|
|
Fiscal Year 2009 2011
|
|
16
|
|
$
|
152
|
|
45
|
|
$
|
435
|
|
71
|
|
$
|
696
|
|
Fiscal Year 2010 2012
|
|
20
|
|
$
|
198
|
|
58
|
|
$
|
567
|
|
93
|
|
$
|
907
|
|
Fiscal Year 2011 2013
|
|
17
|
|
$
|
162
|
|
48
|
|
$
|
463
|
|
76
|
|
$
|
741
|
|
|
|
|
|
|
If the target
performance goals would be achieved, the total amount of compensation cost
recognized over the requisite service periods would be $0.9 million
(2009-2011), $1.1 million (2010-2012) and $1.0 million (2011-2013) based on
the estimated fair values at June 30, 2011. The Company recorded compensation expense
of $1.3 million, $0.9 million, and $0 during fiscal years 2011, 2010 and 2009, respectively.
|
|
|
|
|
(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 fiscal years 2011,
2010 and 2009, the Company issued options for 87,500, 165,000 and 265,000
common shares at weighted average exercise prices of $17.23, $8.43 and $6.82
(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. The Company recorded compensation expense of $0.4 million, $0.3
million and $0.1 million during fiscal years 2011, 2010 and 2009,
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 2011, 2010 and 2009, respectively; dividend yield of 1.2%,
2.4% and 7.6%, expected volatility of 33.4%, 25.3% and 21.8%; risk-free
interest rate of 1.5%, 2.2% and 1.6%; and an expected life of 5, 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 fiscal years 2011, 2010
and 2009 was $4.84, $1.64 and $0.45, 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,
2011, 2010 and 2009, respectively, were not material.
|
|
|
|
|
|
At June 30, 2011,
423,950 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.
|
24
|
|
|
|
|
A summary of the status
of the Companys stock option plans as of June 30, 2011, 2010 and 2009 and
the changes during the years then ended is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
(in thousands)
|
|
Weighted Average
Exercise Price
|
|
Aggregate
Intrinsic Value
(in thousands)
|
|
Outstanding and exercisable at June 30, 2009
|
|
|
1,020
|
|
$
|
12.94
|
|
$
|
407
|
|
Granted
|
|
|
165
|
|
|
8.43
|
|
|
|
|
Exercised
|
|
|
(99
|
)
|
|
7.52
|
|
|
|
|
Canceled
|
|
|
(34
|
)
|
|
13.40
|
|
|
|
|
Outstanding and exercisable at June 30, 2010
|
|
|
1,052
|
|
|
12.70
|
|
|
1,168
|
|
Granted
|
|
|
88
|
|
|
17.23
|
|
|
|
|
Exercised
|
|
|
(91
|
)
|
|
7.41
|
|
|
|
|
Canceled
|
|
|
(3
|
)
|
|
17.30
|
|
|
|
|
Outstanding and exercisable at June 30, 2011
|
|
|
1,046
|
|
$
|
13.56
|
|
$
|
2,271
|
|
|
|
|
The following table summarizes information for
options outstanding and exercisable at June 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
Range of
Prices
|
|
Options Outstanding
(in thousands)
|
|
Remaining
Life (Years)
|
|
Exercise
Price
|
|
|
$
|
6.81 10.75
|
|
|
254
|
|
|
8.0
|
|
|
|
$
|
7.71
|
|
|
|
|
12.35 12.74
|
|
|
230
|
|
|
6.0
|
|
|
|
|
12.51
|
|
|
|
|
14.40 16.52
|
|
|
352
|
|
|
3.4
|
|
|
|
|
15.54
|
|
|
|
|
17.23 20.27
|
|
|
210
|
|
|
5.3
|
|
|
|
|
18.46
|
|
|
|
$
|
6.81 20.27
|
|
|
1,046
|
|
|
5.4
|
|
|
|
$
|
13.56
|
|
|
|
|
9.
|
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 $1.7 million, $1.5 million and $1.8 million in
fiscal years 2011, 2010 and 2009. The amounts include $0.5 million in fiscal
year 2011, $0.4 million in fiscal 2010 and $0.5 million in fiscal years 2009,
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 in fiscal years 2011, 2010 and 2009,
respectively. The cumulative cost to exit the Companys multi-employer plans
was approximately $7.2 million on June 30, 2011.
|
|
|
|
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 2011,
2010 and 2009, the benefit obligation was increased by interest expense of
$0.2 million, $0.2 million and $0.1 million, service costs of $0.4 million,
$0.3 million and $0.2 million, and decreased by payments of $0.4 million,
$0.4 million and $0.6 million, respectively. At June 30, 2011 and 2010, the
deferred compensation liability was $5.3 and $5.1 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, 2011, the Companys deferred
compensation plan assets, held in the Rabbi Trust, were invested in stock and
bond funds. As of June 30, 2011 and 2010, the fair market value of the assets
held in the Rabbi Trust were $5.5 million and $4.7 million, respectively, and
are classified as Other Assets in the Consolidated Balance Sheets. These
assets are classified as Level 2 in accordance with fair value accounting as
discussed in Note 1.
|
25
|
|
|
Under provisions of the
Companys Voluntary Deferred Compensation Plan, executive officers may defer
common stock awards received as part of incentive compensation plans until retirement. Under the plan, no shares were deferred during the
fiscal years ended June 30, 2011 and 2010. At June 30, 2011 and 2010, 36,867
shares and 42,094 shares with an award date value of $0.5 million and $0.6
million, respectively, had been deferred and are being held on behalf of the
employees. Under the plan, 5,227 shares and 5,228 shares were distributed in
fiscal years 2011 and 2010, respectively.
|
|
|
|
As of June 30, 2011, the Companys defined
benefit pension plan has no active employees of DMI and is frozen.
There are a total of 444 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). As of June 30, 2011 and 2010, 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 $1.1 million and $2.4 million,
respectively. The accumulated benefit obligation was $6.2 million and $6.6
million at fiscal years ended June 30, 2011 and 2010, respectively. The
Company recorded expense of $0.2 million, $0.2 million and $0 during fiscal
years 2011, 2010 and 2009, respectively, related to the plan.
|
|
|
10.
|
COMPREHENSIVE INCOME (LOSS)
|
|
|
|
The components of
comprehensive income (loss), net of income taxes, for the years ended June
30, were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
2009
|
|
Net income (loss)
|
|
$
|
10,417
|
|
$
|
10,801
|
|
$
|
(1,509
|
)
|
Other comprehensive income (loss) (OCI):
|
|
|
|
|
|
|
|
|
|
|
Change in fair
value of derivatives, net of income
taxes of $0, $(109) and $5, respectively
|
|
|
|
|
|
177
|
|
|
(1
|
)
|
Change in fair
value of available-for-sale,
Securities, net of income taxes of $(214), $(24), $631, respectively
|
|
|
348
|
|
|
39
|
|
|
(1,022
|
)
|
Change in
minimum pension liability, net of
income taxes of $(532), $124 and $595,
respectively
|
|
|
869
|
|
|
(204
|
)
|
|
(969
|
)
|
Total other comprehensive income (loss)
|
|
|
1,217
|
|
|
12
|
|
|
(1,992
|
)
|
Total comprehensive income (loss)
|
|
$
|
11,634
|
|
$
|
10,813
|
|
$
|
(3,501
|
)
|
|
|
|
The components of
accumulated other comprehensive loss, net of income taxes, are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
2011
|
|
2010
|
|
Available-for-sale securities
|
|
$
|
337
|
|
$
|
(11
|
)
|
Pension and other post-retirement benefit
adjustments
|
|
|
(872
|
)
|
|
(1,741
|
)
|
Total accumulated other comprehensive loss
|
|
$
|
(535
|
)
|
$
|
(1,752
|
)
|
|
|
11.
|
LITIGATION
|
|
|
|
The Company has been
named as one of several defendants in an Indiana civil lawsuit related to
groundwater contamination. The lawsuit alleges that the contamination source
is a property once owned by the Company. The Company does not believe that it
caused or contributed to the contamination. This lawsuit is in its
preliminary stages. Plaintiffs have not identified a dollar amount of their
alleged damages and the status of insurance coverage has not been determined.
We are unable to estimate a range of reasonably possible outcomes or losses
at this time. Accordingly, no accrual related to this matter has been
recorded in the June 30, 2011 financial statements. Legal and other related
expenses of $0.5 million have been incurred responding to this lawsuit and
are included in Selling, General and Administrative expense in the fiscal
year 2011 Consolidated Statement of Operations.
|
26
|
|
|
Other
Proceedings
From time to time, the Company is
subject to various other 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 other proceedings that are currently
pending, individually or in the aggregate, to be material to its business or
likely to result in a material effect on its consolidated operating results,
financial condition, or cash flows.
|
|
|
12.
|
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 $2.7
million, $3.4 million and $4.3 million in fiscal 2011, 2010 and 2009,
respectively.
|
|
|
|
Expected
future minimum commitments under operating leases as of June 30, 2011 were as
follows (in thousands):
|
|
|
|
|
|
Fiscal Year Ended June 30,
|
|
2012
|
|
$
|
1,851
|
|
2013
|
|
|
1,315
|
|
2014
|
|
|
751
|
|
2015
|
|
|
165
|
|
2016
|
|
|
|
|
Thereafter
|
|
|
|
|
|
|
$
|
4,082
|
|
|
|
13.
|
FACILITY CLOSING COSTS
|
|
|
|
During the
fiscal year 2011, the Company closed a manufacturing facility and recorded
pre-tax charges for facility closing costs of $1.0 million. The charges
represent employee separation costs of $0.6 million and other closing costs
of $0.4 million and were classified as Facility Closing Costs in the
Consolidated Statements of Operations and June 30, 2011. At June 30, 2011,
the closure is completed and there were no facility consolidation liabilities
remaining.
|
|
|
14.
|
SEGMENT REPORTING
|
|
|
|
The Company operates in one reportable operating segment, furniture
products. Our operations involve the distribution of manufactured and
imported furniture for residential 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,
|
|
|
|
2011
|
|
2010
|
|
2009
|
|
Residential
|
|
$
|
258,095
|
|
$
|
246,041
|
|
$
|
230,727
|
|
Commercial
|
|
|
81,331
|
|
|
80,425
|
|
|
93,431
|
|
|
|
$
|
339,426
|
|
$
|
326,466
|
|
$
|
324,158
|
|
27
|
|
15.
|
SUPPLEMENTARY QUARTERLY FINANCIAL
INFORMATION
UNAUDITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per
share amounts)
|
|
FOR THE QUARTER ENDED
|
|
|
|
September 30
|
|
December 31
|
|
March 31
|
|
June 30
|
|
Fiscal 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
87,230
|
|
$
|
82,821
|
|
$
|
85,175
|
|
$
|
84,200
|
|
Gross margin
|
|
|
19,606
|
|
|
18,825
|
|
|
18,207
|
|
|
20,664
|
|
Net income (1)
|
|
|
2,343
|
|
|
2,131
|
|
|
2,455
|
|
|
3,488
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.35
|
|
$
|
0.32
|
|
$
|
0.37
|
|
$
|
0.52
|
|
Diluted
|
|
$
|
0.34
|
|
$
|
0.31
|
|
$
|
0.35
|
|
$
|
0.50
|
|
|
|
(1)
|
The quarter ended September 30, 2010 includes facility closing costs
after-tax of $1.0 million or $0.15 per share, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per
share amounts)
|
|
FOR THE QUARTER ENDED
|
|
|
|
September 30
|
|
December 31
|
|
March 31
|
|
June 30
|
|
Fiscal 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
75,941
|
|
$
|
83,524
|
|
$
|
81,451
|
|
$
|
85,550
|
|
Gross margin
|
|
|
16,556
|
|
|
20,041
|
|
|
18,033
|
|
|
20,151
|
|
Net income
|
|
|
1,380
|
|
|
2,964
|
|
|
2,320
|
|
|
4,137
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.21
|
|
$
|
0.45
|
|
$
|
0.35
|
|
$
|
0.62
|
|
Diluted
|
|
$
|
0.21
|
|
$
|
0.45
|
|
$
|
0.34
|
|
$
|
0.61
|
|
|
|
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, 2011.
Changes
in internal control over financial reporting
During the year-ended June
30, 2011, there was no change in the Companys internal control over financial
reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of
1934) that has materially affected, or is reasonably likely to materially
affect the Companys internal control over financial reporting.
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, 2011. 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 those
criteria, management concluded that the internal control over financial
reporting is effective as of June 30, 2011.
|
|
Item
9B.
|
Other
Information
|
None.
28
PART
III
|
|
Item 10.
|
Directors, Executive Officers and
Corporate Governance
|
The
information contained in the Companys 2011 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, Corporate Governance Nomination Matters and Section 16(a) Beneficial Ownership Reporting Compliance is
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, 2011), 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 (63)
|
|
President & Chief
Executive Officer (1989)
|
James R. Richardson (67)
|
|
Senior Vice President of
Residential Sales and Marketing (1979)
|
Thomas D. Burkart (68)
|
|
Senior Vice President of
Vehicle Seating (1984)
|
Patrick M. Crahan (63)
|
|
Senior Vice President of
Commercial Seating (1989)
|
Jeffrey T. Bertsch (56)
|
|
Senior Vice President of
Corporate Services (1989)
|
Donald D. Dreher (61)
|
|
Senior Vice President
(2004), President & CEO of DMI Furniture, Inc. (1986)
|
James E. Gilbertson (61)
|
|
Senior Vice President of
Vehicle Seating (1989)
|
Timothy E. Hall (53)
|
|
Senior Vice
President-Finance, Chief Financial Officer, Secretary & Treasurer (2000)
|
|
|
Item 11.
|
Executive Compensation
|
The
information contained in the Companys 2011 definitive proxy statement to be
filed with the Securities and Exchange Commission under the sections captioned
Executive Compensation, and Director Compensation, is incorporated herein
by reference.
|
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
|
The
information contained in the Companys 2011 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 is
incorporated herein by reference.
|
|
Item
13.
|
Certain
Relationships and Related Transactions, and Director Independence
|
This
information contained under the sections Interest of Management and Others in
Certain Transactions and Corporate Governance Board of Directors in the
Companys 2011 definitive proxy statement to be filed with the Securities and
Exchange Commission 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 2011. In addition to performing the audit of the Companys
consolidated financial statements, Deloitte & Touche LLP provided various
audit-related services during fiscal 2011.
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
2011 were pre-approved by the Audit and Ethics Committee.
29
|
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
Audit Fees
(1)
|
|
$
|
357,500
|
|
$
|
376,000
|
|
Tax Fees (2)
|
|
|
15,000
|
|
|
|
|
|
|
$
|
372,500
|
|
$
|
376,000
|
|
|
|
(1)
|
Professional
fees and expenses for the audit of financial statements for fiscal 2011 and
fiscal 2010 consisted of (i) audit of the Companys annual consolidated
financial statements; (ii) reviews of the Companys quarterly
consolidated financial statements; (iii) employee benefit plan audits;
(iv) consents and other services related to Securities and Exchange
Commission matters; and (v) consultations on financial accounting and
reporting matters arising during the course of the audit and reviews. Fiscal
2010 also included internal control over financial reporting services.
|
|
|
(2)
|
Professional
fees and expenses for tax services billed in fiscal 2011 consisted of tax
planning and advice services totaling $15,000 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, 2011, 2010
and 2009 are submitted herewith:
SCHEDULE
II
RESERVES
For the Years Ended
June 30, 2011, 2010 and 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Balance at
Beginning of
Year
|
|
Additions
Charged to
Income
|
|
Deductions
from
Reserves
|
|
Balance at
End of Year
|
|
Allowance
for Doubtful Accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
$
|
2,020,000
|
|
$
|
870,000
|
|
$
|
(890,000
|
)
|
$
|
2,000,000
|
|
2010
|
|
$
|
1,760,000
|
|
$
|
920,000
|
|
$
|
(660,000
|
)
|
$
|
2,020,000
|
|
2009
|
|
$
|
2,110,000
|
|
$
|
1,240,000
|
|
$
|
(1,590,000
|
)
|
$
|
1,760,000
|
|
|
|
|
|
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
|
Amended and
Restated Articles of Incorporation of the Company incorporated by reference
to Form 8-K, as filed with the Securities and Exchange Commission on December
8, 2010.
|
|
|
|
|
3.2
|
Amended and
Restated Bylaws of the Company incorporated by reference to Form 8-K, as
filed with the Securities and Exchange Commission on December 8, 2010.
|
|
|
|
|
10.1
|
1995 Stock
Option Plan incorporated by reference from the 1995 Flexsteel definitive
proxy statement. *
|
30
|
|
|
|
10.2
|
1999 Stock
Option Plan incorporated by reference from the 1999 Flexsteel definitive
proxy statement. *
|
|
|
|
|
10.3
|
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). *
|
|
|
|
|
10.4
|
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). *
|
|
|
|
|
10.5
|
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). *
|
|
|
|
|
10.6
|
2002 Stock
Option Plan (incorporated by reference to Appendix A from the 2002 Flexsteel
definitive proxy statement). *
|
|
|
|
|
10.7
|
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).
|
|
|
|
|
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
|
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). *
|
|
|
|
|
10.10
|
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).*
|
|
|
|
|
10.11
|
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). *
|
|
|
|
|
10.12
|
2009 Stock
Option Plan (incorporated by reference to Appendix A from the 2009 Flexsteel
definitive proxy statement). *
|
|
|
|
|
10.13
|
Credit
Agreement dated June 7, 2011 between Flexsteel Industries, Inc. and Wells
Fargo Bank, N. A. (incorporated by reference to Form 8-K filed with the Securities and
Exchange Commission on June 9, 2011).
|
|
|
|
|
10.14
|
Revolving
Line of Credit Note dated June 7, 2011 between Flexsteel Industries, Inc. and
Wells Fargo Bank, N. A. (incorporated by reference to Form 8-K filed with the Securities and
Exchange Commission on June 9, 2011).
|
|
|
|
|
21.1
|
Subsidiaries
of the Company. Filed herewith.
|
|
|
|
|
23
|
Consent of
Independent Registered Public Accounting Firm. Filed herewith.
|
|
|
|
|
31.1
|
Certification.
Filed herewith.
|
|
|
|
|
31.2
|
Certification.
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.
|
31
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 19, 2011
|
|
|
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
|
|
32
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 19, 2011
|
|
/S/ L. Bruce Boylen
|
|
|
|
|
L. Bruce Boylen
|
|
|
|
|
Chairman of the Board of Directors
|
|
|
|
|
|
|
Date:
|
August 19, 2011
|
|
/S/ Ronald J. Klosterman
|
|
|
|
|
Ronald J. Klosterman
|
|
|
|
|
Director
|
|
|
|
|
|
|
Date:
|
August 19, 2011
|
|
/S/ Jeffrey T. Bertsch
|
|
|
|
|
Jeffrey T. Bertsch
|
|
|
|
|
Director
|
|
|
|
|
|
|
Date:
|
August 19, 2011
|
|
/S/ Mary C. Bottie
|
|
|
|
|
Mary C. Bottie
|
|
|
|
|
Director
|
|
|
|
|
|
|
Date:
|
August 19, 2011
|
|
/S/ Patrick M. Crahan
|
|
|
|
|
Patrick M. Crahan
|
|
|
|
|
Director
|
|
|
|
|
|
|
Date:
|
August 19, 2011
|
|
/S/ Lynn J. Davis
|
|
|
|
|
Lynn J. Davis
|
|
|
|
|
Director
|
|
|
|
|
|
|
Date:
|
August 19, 2011
|
|
/S/ Robert E. Deignan
|
|
|
|
|
Robert E. Deignan
|
|
|
|
|
Director
|
|
|
|
|
|
|
Date:
|
August 19, 2011
|
|
/S/ Thomas E. Holloran
|
|
|
|
|
Thomas E. Holloran
|
|
|
|
|
Director
|
|
|
|
|
|
|
Date:
|
August 19, 2011
|
|
/S/ Thomas M. Levine
|
|
|
|
|
Thomas M. Levine
|
|
|
|
|
Director
|
|
|
|
|
|
|
Date:
|
August 19, 2011
|
|
/S/ Robert J. Maricich
|
|
|
|
|
Robert J. Maricich
|
|
|
|
|
Director
|
|
|
|
|
|
|
Date:
|
August 19, 2011
|
|
/S/ Eric S. Rangen
|
|
|
|
|
Eric S. Rangen
|
|
|
|
|
Director
|
|
|
|
|
|
|
Date:
|
August 19, 2011
|
|
/S/ James R. Richardson
|
|
|
|
|
James R. Richardson
|
|
|
|
|
Director
|
|
|
|
|
|
|
Date:
|
August 19, 2011
|
|
/S/ Nancy E. Uridil
|
|
|
|
|
Nancy E. Uridil
|
|
|
|
|
Director
|
|
33
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