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UNITED STATES |
SECURITIES AND EXCHANGE COMMISSION |
Washington, D.C. 20549 |
Form 10-K
xAnnual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year endedJune 30, 20122013
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 number0-5151
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FLEXSTEEL INDUSTRIES, INC. |
(Exact name of registrant as specified in its charter) |
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Minnesota |
| 42-0442319 |
(State or other jurisdiction of incorporation or |
| (I.R.S. Employer Identification No.) |
385 Bell Street, Dubuque, Iowa |
| 52001 |
(Address of principal executive offices) |
| (Zip Code) |
Registrant’s telephone number, including area code: |
| (563) 556-7730 |
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Securities registered pursuant to Section 12(b) of the Act: |
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Title of each class |
| Name of each exchange on which registered |
Common Stock, $1.00 Par Value |
| The NASDAQ Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yeso Nox
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. Yesx Noo
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). Yesx Noo
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.x
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Large accelerated filero | Accelerated filer | Non-accelerated filero | Smaller reporting companyx |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yeso Nox
The aggregate market value of the voting stock held by non-affiliates, computed by reference to the last sales price on December 31, 20112012 (which was the last business day of the registrant’s most recently completed second quarter) was $58,373,120.$96,762,452.
Indicate the number of shares outstanding of each of the registrant’s classes of Common Stock, as of the latest practicable date. 6,921,2847,107,723 Common Shares ($1 par value) as of August 17, 2012.9, 2013.
DOCUMENTS INCORPORATED BY REFERENCE
In Part III, portions of the registrant’s 20122013 Proxy Statement to be filed with the Securities and Exchange Commission within 120 days of the Registrant’s 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 Company’s 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, including expenses relating to the Indiana civil 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.
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Item 1. | Business |
General
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;furniture. DMI’s divisionsbrands are WYNWOOD, HomestylesHome Styles and DMI Commercial Office Furniture.
The Company operates in one reportable 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 Company’s net sales attributable to each of the areas of application:
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(in thousands) |
| FOR THE YEARS ENDED JUNE 30, |
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| FOR THE YEARS ENDED JUNE 30, |
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| 2012 |
| 2011 |
| 2010 |
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| 2013 |
| 2012 |
| 2011 |
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Residential |
| $ | 275,442 |
| $ | 258,095 |
| $ | 246,041 |
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| $ | 311,214 |
| $ | 275,442 |
| $ | 258,095 |
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Commercial |
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| 76,647 |
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| 81,331 |
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| 80,425 |
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| 74,975 |
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| 76,647 |
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| 81,331 |
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| $ | 352,089 |
| $ | 339,426 |
| $ | 326,466 |
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| $ | 386,189 |
| $ | 352,089 |
| $ | 339,426 |
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Manufacturing and Offshore Sourcing
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 value in the marketplace.
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. 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 and sourcing capabilities, facility locations, commitment to customers, product quality, delivery, service and value and experienced production, sales, marketing and management teams, aided by offshore sourced components and finished product, are our competitive advantages.
Seasonality
The Company’s business is not considered seasonal.
Foreign Operations
The Company makes minimal export sales. At June 30, 2012,2013, 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, 2012 |
| June 30, 2011 |
| June 30, 2010 |
$38,700 |
| $35,700 |
| $49,000 |
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June 30, 2013 |
| June 30, 2012 |
| June 30, 2011 |
$43,300 |
| $38,700 |
| $35,700 |
Raw Materials
The Company utilizes various types of wood, fabrics, leathers, upholsteredfabric, leather, 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 Company’s 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.
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 2013 to 2025.2026. 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 Company’s own design staff and through the services of independentthird-party 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, |
| Expenditures |
| Expenditures |
2013 |
| $2,520 | ||
2012 |
| $2,310 |
| $2,310 |
2011 |
| $2,190 |
| $2,190 |
2010 |
| $2,040 |
Employees
The Company had 1,3001,360 employees as of June 30, 2012,2013, including 250285 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 Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (“SEC”), other SEC reports filed or furnished and ourGuidelines for Business Conduct are available, without charge, on the Company’s 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.
Effective June 30, 2012, Ronald J. Klosterman retired as President and CEO of Flexsteel. Mr. Klosterman, had been with Flexsteel for nearly 40 years, and had been President and CEO since 2006. Effective July 1, 2012, Karel K. Czanderna became the Company’s President and Chief Executive Officer.
The executive officers of the Company, their ages, positions (in each case as of August 14, 2012)16, 2013), and the year they were first elected or appointed an officer of the registrant, are as follows:
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Name (age) |
| Position (date first became officer) |
Karel K. Czanderna |
| President & Chief Executive Officer (2012) |
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| Senior Vice |
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Jeffrey T. Bertsch |
| Senior Vice President of Corporate Services (1989) |
Julia K. Bizzis (56) | Senior Vice President Strategic Growth (2013) | |
Donald D. Dreher |
| Senior Vice President (2004), President & CEO of DMI Furniture, Inc. |
James |
| Senior Vice President of |
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Item 1A. | Risk Factors |
Our business is subject to a variety of risks. You should carefully consider the risk factors detailed below in conjunction with the other information contained in this Annual Report on Form 10-K. Should any of these risks actually materialize, our business, financial condition, and future prospects could be negatively impacted. These risks are not the only ones we face. There may be additional factors that are presently unknown to us or that we currently believe to be immaterial that could affect our business.
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, recreational 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.
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 or accounts receivable, net, balance as of June 30, 2013, 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 or designer 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 which 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 1,3001,360 people, 250285 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 avert or 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 200215 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 plan’s 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.
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. We could incur substantial costs, including legal expenses, 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. | Unresolved Staff Comments |
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Item 2. | Properties |
The Company owns the following facilities as of June 30, 2012:2013:
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Location |
| Approximate |
| Principal Operations | |
| 221,000 | Manufacturing | |||
Riverside, California |
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Dublin, Georgia | 300,000 |
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New Paris, Indiana |
| 168,000 |
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Huntingburg, Indiana | 691,000 | Distribution | |||
Dubuque, Iowa |
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| Manufacturing and Distribution |
Dubuque, Iowa | 40,000 | Corporate Office | |||
Starkville, Mississippi | 349,000 | Manufacturing | |||
Lancaster, Pennsylvania | 216,000 | Distribution |
The Company leases the following facilities as of June 30, 2012:2013:
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Location |
| Approximate |
| Principal Operations | |||
| 32,000 |
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Ferdinand, Indiana |
| 101,000 |
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Louisville, Kentucky | 15,000 | Administrative Offices | |||||
Juarez, Mexico |
| 225,000 |
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The Company’s 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 Company’s 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.
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Item 3. | Legal Proceedings |
Indiana Civil Litigation.Litigation – A Complaint for Damages and Injunctive Relief and Request for Jury Trial was filed on March 3, 2011 in Elkhart, Indiana Superior Court by Leo VanNorman, et al, plaintiffs vs. Flexsteel Industries, Inc., et al, defendants. The Company has been named as one of several defendants in a lawsuit related to groundwater contamination. The lawsuitcomplaint alleges that the source of groundwater contamination sourceunderneath plaintiffs’ current or former residences is a propertytwo adjacent properties, in Elkhart, Indiana, once owned by the Company. The VanNorman case is set for a Phase 1 trial in May 2014 on the issue of cause or contribution to the Elkhart contamination. A subsequent Complaint for Damages under RICO and RPTL, and Injunctive Relief under RCRA, titled Dennis and Darlene Knoll, et al, vs. Flexsteel Industries, Inc., et al, was filed on May 5, 2012 in United States District Court Northern District of Indiana South Bend Division by a subgroup of the state court plaintiffs, as well as the current owner of one of the properties once owned by the Company. The District Court dismissed one of the two RCRA claims in March 2013, and dismissed both RICO claims in June 2013. One RCRA claim and a RPTL claim remain pending in the Knoll case. Relief sought in these complaints includes payment to Plaintiffs for their damages and attorneys’ fees and costs, payment to remove the contamination, payment for medical monitoring, and punitive damages. Based on policy language and jurisdiction, insurance coverage is in question. Flexsteel has filed an appeal to the Iowa Supreme Court regarding two adverse opinions of an Iowa District Court regarding coverage issues. The Company does not believe that it caused or contributed to the contamination.
Plaintiffs have not identified a dollar amount of their alleged damages and the status of insurance coverage has not been determined. Wedamages. Therefore, 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, 20122013 financial statements. LegalDuring the fiscal years ended June 30, 2013, 2012 and 2011, legal and other related expenses of $2.3 million, $2.4 million and $0.5 million, respectively, have been incurred responding to this lawsuit for the fiscal years 2012state and 2011, respectively, andfederal lawsuits, as well as in pursuing insurance coverage. These costs are included in Selling, General and Administrative expense in the Consolidated Statements of Income.
Other Proceedings.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 Company’s 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.
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Item 4. | Mine Safety Disclosures |
PART II
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Item 5. | Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Share Investment Performance
The following graph is based upon the SIC Code #251 Household Furniture Index as a peer group. It shows changes over the past five-year period in the value of $100 invested in: (1) Flexsteel’s common stock; (2) The NASDAQ Global Market; and (3) an industry peer group of the following: American Woodmark Corp, Bassett Furniture Ind., Dixie Group Inc., Ethan Allen Interiors Inc., Hooker Furniture Corp., iRobot Corp., Johnson Outdoors Inc., Kid Brands Inc., Kimball International, Knoll Inc., La-Z-Boy Inc., Lifetime Brands Inc., Patrick Industries Inc., and Select Comfort Corp. During the fiscal year ended June 30, 2013, the Company completed a compensation study utilizing the peer group above. The Company chose to utilize the new peer group for the share investment performance graph. The former peer group was comprised 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.
Five-Year Cumulative Total ReturnsValue of $100 Invested on June 30, 2007
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| 2008 |
| 2009 |
| 2010 |
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| 2009 |
| 2010 |
| 2011 |
| 2012 |
| 2013 |
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Flexsteel |
| 100.00 |
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| 63.17 |
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| 84.51 |
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| 114.51 |
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| 159.16 |
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| 100.00 | 78.13 | 104.53 | 141.64 | 196.86 | 249.18 |
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Peer Group |
| 100.00 |
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| 71.96 |
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New Peer Group |
| 100.00 |
| 63.84 |
| 97.91 |
| 144.69 |
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NASDAQ |
| 100.00 |
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| 100.00 | 76.07 | 85.62 | 112.80 | 109.34 | 142.31 |
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Former Peer Group |
| 100.00 |
| 49.87 |
| 63.09 |
| 77.84 |
| 77.96 |
| 111.35 |
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The NASDAQ Global Select Market is the principal market on which the Company’s common stock is traded.
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| Sale Price of Common Stock * |
| Cash Dividends |
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| Sale Price of Common Stock * |
| Cash Dividends |
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| Fiscal 2012 |
| Fiscal 2011 |
| Per Share |
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| Fiscal 2013 |
| Fiscal 2012 |
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| High |
| Low |
| High |
| Low |
| Fiscal 2012 |
| Fiscal 2011 |
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| High |
| Low |
| High |
| Low |
| Fiscal 2013 |
| Fiscal 2012 |
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First Quarter |
| $ | 15.91 |
| $ | 13.04 |
| $ | 15.84 |
| $ | 10.08 |
| $ | 0.10 |
| $ | 0.075 |
| $ | 23.28 | $ | 18.68 | $ | 15.91 | $ | 13.04 | $ | 0.15 | $ | 0.10 | |||||||
Second Quarter |
| 15.00 |
| 13.26 |
| 18.75 |
| 14.22 |
| 0.10 |
| 0.075 |
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| 23.44 |
| 19.01 |
| 15.00 |
| 13.26 |
| 0.15 |
| 0.10 |
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Third Quarter |
| 18.39 |
| 13.82 |
| 19.69 |
| 14.11 |
| 0.10 |
| 0.075 |
| 26.29 | 21.15 | 18.39 | 13.82 | 0.15 | 0.10 | |||||||||||||||||||
Fourth Quarter |
| 22.00 |
| 18.28 |
| 16.60 |
| 13.80 |
| 0.15 |
| 0.075 |
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| 25.43 |
| 18.56 |
| 22.00 |
| 18.28 |
| 0.15 |
| 0.15 |
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* Reflects the market price as reported on The NASDAQ Global Market.Market through January 2, 2013 and on The NASDAQ Global Select Market thereafter.
The Company estimates there were approximately 1,6003,000 holders of common stock of the Company as of June 30, 2012.
2013. There were no repurchases of the Company’s common stock during the quarter ended June 30, 2012.
2013. 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.
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Item 6. | Selected Financial Data |
The selected financial data presented below should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in Item 8 of this Annual Report on Form 10-K and with “Management’s 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 statements of income data of the Company is derived from the Company’s consolidated financial statements.
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| 2012 |
| 2011 |
| 2010 |
| 2009 |
| 2008 |
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SUMMARY OF OPERATIONS |
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|
|
|
|
|
|
|
Net sales |
| $ | 352,089 |
| $ | 339,426 |
| $ | 326,466 |
| $ | 324,158 |
| $ | 405,655 |
|
Cost of goods sold |
|
| 266,810 |
|
| 262,124 |
|
| 251,685 |
|
| 263,083 |
|
| 327,165 |
|
Operating income (loss) |
|
| 20,246 |
|
| 15,864 |
|
| 17,529 |
|
| (2,272 | ) |
| 7,596 |
|
Interest and other income |
|
| 422 |
|
| 343 |
|
| 361 |
|
| 661 |
|
| 469 |
|
Interest expense |
|
| — |
|
| — |
|
| 439 |
|
| 968 |
|
| 1,469 |
|
Income (loss) before income taxes |
|
| 20,668 |
|
| 16,207 |
|
| 17,451 |
|
| (2,579 | ) |
| 6,596 |
|
Income tax provision (benefit) |
|
| 7,600 |
|
| 5,790 |
|
| 6,650 |
|
| (1,070 | ) |
| 2,360 |
|
Net income (loss) (1) (2) |
|
| 13,068 |
|
| 10,417 |
|
| 10,801 |
|
| (1,509 | ) |
| 4,236 |
|
Earnings (loss) per common share: (1) (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 1.93 |
|
| 1.56 |
|
| 1.63 |
|
| (0.23 | ) |
| 0.64 |
|
Diluted |
|
| 1.86 |
|
| 1.50 |
|
| 1.61 |
|
| (0.23 | ) |
| 0.64 |
|
Cash dividends declared per common share |
| $ | 0.45 |
| $ | 0.30 |
| $ | 0.20 |
| $ | 0.36 |
| $ | 0.52 |
|
SELECTED DATA AS OF JUNE 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 6,781 |
|
| 6,693 |
|
| 6,608 |
|
| 6,576 |
|
| 6,574 |
|
Diluted |
|
| 7,008 |
|
| 6,929 |
|
| 6,697 |
|
| 6,576 |
|
| 6,611 |
|
Total assets |
| $ | 181,672 |
| $ | 164,677 |
| $ | 157,670 |
| $ | 150,971 |
| $ | 179,906 |
|
Property, plant and equipment, net |
|
| 29,867 |
|
| 21,387 |
|
| 21,614 |
|
| 23,298 |
|
| 26,372 |
|
Capital expenditures |
|
| 10,939 |
|
| 2,573 |
|
| 1,251 |
|
| 1,203 |
|
| 1,228 |
|
Long-term debt |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 20,811 |
|
Working capital (current assets less current liabilities) |
|
| 103,744 |
|
| 100,683 |
|
| 90,800 |
|
| 78,416 |
|
| 100,920 |
|
Shareholders’ equity |
| $ | 139,442 |
| $ | 128,573 |
| $ | 117,612 |
| $ | 106,998 |
| $ | 112,752 |
|
SELECTED RATIOS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss), as a percent of sales |
|
| 3.7 |
|
| 3.1 |
|
| 3.3 |
|
| (0.5 | ) |
| 1.0 |
|
Current ratio |
|
| 4.3 to 1 |
|
| 4.6 to 1 |
|
| 3.9 to 1 |
|
| 3.2 to 1 |
|
| 3.5 to 1 |
|
Return on ending shareholders’ equity |
|
| 9.4 |
|
| 8.1 |
|
| 9.2 |
|
| (1.4 | ) |
| 3.8 |
|
Average number of employees |
|
| 1,300 |
|
| 1,320 |
|
| 1,400 |
|
| 1,600 |
|
| 2,140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2013 |
| 2012 |
| 2011 |
| 2010 |
| 2009 |
| |||||
SUMMARY OF OPERATIONS |
|
|
|
|
| |||||||||||
Net sales |
| $ | 386,189 |
| $ | 352,089 |
| $ | 339,426 |
| $ | 326,466 |
| $ | 324,158 |
|
Cost of goods sold | 295,720 | 266,810 | 262,124 | 251,685 | 263,083 | |||||||||||
Operating income (loss) |
|
| 20,271 |
|
| 20,246 |
|
| 15,864 |
|
| 17,529 |
|
| (2,272 | ) |
Interest and other income | 610 | 422 | 343 | 361 | 661 | |||||||||||
Interest expense |
|
| — |
|
| — |
|
| — |
|
| 439 |
|
| 968 |
|
Income (loss) before income taxes | 20,881 | 20,668 | 16,207 | 17,451 | (2,579 | ) | ||||||||||
Income tax provision (benefit) |
|
| 7,730 |
|
| 7,600 |
|
| 5,790 |
|
| 6,650 |
|
| (1,070 | ) |
Net income (loss) (1) (2) (3) | 13,151 | 13,068 | 10,417 | 10,801 | (1,509 | ) | ||||||||||
Earnings (loss) per common share: (1) (2) (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic | 1.87 | 1.93 | 1.56 | 1.63 | (0.23 | ) | ||||||||||
Diluted |
|
| 1.80 |
|
| 1.86 |
|
| 1.50 |
|
| 1.61 |
|
| (0.23 | ) |
Cash dividends declared per common share | $ | 0.60 | $ | 0.45 | $ | 0.30 | $ | 0.20 | $ | 0.36 | ||||||
SELECTED DATA AS OF JUNE 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding: |
|
|
|
|
| |||||||||||
Basic |
|
| 7,041 |
|
| 6,781 |
|
| 6,693 |
|
| 6,608 |
|
| 6,576 |
|
Diluted | 7,326 | 7,008 | 6,929 | 6,697 | 6,576 | |||||||||||
Total assets |
| $ | 192,539 |
| $ | 181,672 |
| $ | 164,677 |
| $ | 157,670 |
| $ | 150,971 |
|
Property, plant and equipment, net | 32,145 | 29,867 | 21,387 | 21,614 | 23,298 | |||||||||||
Capital expenditures |
|
| 6,225 |
|
| 10,939 |
|
| 2,573 |
|
| 1,251 |
|
| 1,203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital (current assets less current liabilities) | 113,699 | 103,744 | 100,683 | 90,800 | 78,416 | |||||||||||
Shareholders’ equity |
| $ | 151,237 |
| $ | 139,442 |
| $ | 128,573 |
| $ | 117,612 |
| $ | 106,998 |
|
SELECTED RATIOS |
|
|
|
|
| |||||||||||
Net income (loss), as a percent of sales |
|
| 3.4 |
|
| 3.7 |
|
| 3.1 |
|
| 3.3 |
|
| (0.5 | ) |
Current ratio | 4.2 to 1 | 4.3 to 1 | 4.6 to 1 | 3.9 to 1 | 3.2 to 1 | |||||||||||
Return on ending shareholders’ equity |
|
| 8.7 |
|
| 9.4 |
|
| 8.1 |
|
| 9.2 |
|
| (1.4 | ) |
Average number of employees | 1,320 | 1,300 | 1,320 | 1,400 | 1,600 |
|
|
(1) | Fiscal 2013 net income and per share amounts include executive transition costs of $0.8 million (after tax) or $0.11 per share. |
(2) | 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. |
| 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. |
|
|
Item 7. | Management’s 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 Company’s 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 collectability 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, historical collections and historical collection and allowanceswrite-off 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 net realizable value. Management assessesThe Company’s inventory valuation reflects markdowns for the inventory on handexcess of the cost over the amount expected to be realized and if necessary writes downconsiders obsolete and excess inventory. Markdowns establish a new cost basis for the obsoleteCompany’s inventory. Subsequent changes in facts or excess inventory to net realizable value.circumstances do not result in the reversal of previously recorded markdowns or an increase in that newly established cost basis.
Revenue recognition – is upon delivery ofwhen both product to our customerownership 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 have transferred to the customer, collectability is transferred. Ourreasonably assured, and the Company has no remaining obligations. The Company’s ordering process creates persuasive evidence of the sale arrangement and the sales amountprice is determined. The delivery of the goods to ourthe 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 Company’s Consolidated Financial Statements.
Results of Operations
The following table has been prepared as an aid in understanding the Company’s results of operations on a comparative basis for the fiscal years ended June 30, 2013, 2012 2011 and 2010.2011. Amounts presented are percentages of the Company’s net sales.
|
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|
|
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|
|
| FOR THE YEARS ENDED JUNE 30, |
|
| FOR THE YEARS ENDED JUNE 30, |
| ||||||||||||||
|
| 2012 |
| 2011 |
| 2010 |
|
| 2013 |
| 2012 |
| 2011 |
| ||||||
Net sales |
| 100.0 | % |
| 100.0 | % |
| 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||
Cost of goods sold |
|
| (75.8 | ) |
| (77.2 | ) |
| (77.2 | ) |
|
| (76.6 | ) |
| (75.8 | ) |
| (77.2 | ) |
Gross margin |
| 24.2 |
| 22.8 |
| 22.8 |
| 23.4 | 24.2 | 22.8 | ||||||||||
Selling, general and administrative |
| (18.4 | ) |
| (17.8 | ) |
| (17.5 | ) |
| (18.2 | ) |
| (18.4 | ) |
| (17.8 | ) | ||
Facility consolidation and other charges |
|
| — |
|
| (0.3 | ) |
| — |
|
|
| — |
|
| — |
|
| (0.3 | ) |
Operating income |
| 5.8 |
| 4.7 |
| 5.3 |
|
| 5.2 |
| 5.8 |
| 4.7 |
| ||||||
Other income, net |
|
| 0.1 |
|
| 0.1 |
|
| 0.0 |
|
|
| 0.2 |
|
| 0.1 |
|
| 0.1 |
|
Income before income taxes |
| 5.9 |
| 4.8 |
| 5.3 |
|
| 5.4 |
| 5.9 |
| 4.8 |
| ||||||
Income tax provision |
|
| (2.2 | ) |
| (1.7 | ) |
| (2.0 | ) |
|
| (2.0 | ) |
| (2.2 | ) |
| (1.7 | ) |
Net income |
|
| 3.7 | % |
| 3.1 | % |
| 3.3 | % |
|
| 3.4 | % |
| 3.7 | % |
| 3.1 | % |
Fiscal 2013 Compared to Fiscal 2012
Net sales for fiscal 2013 were $386.2 million compared to $352.1 million in the prior fiscal year, an increase of 10%. For the fiscal year ended June 30, 2013, residential net sales were $311.2 million compared to $275.4 million for the year ended June 30, 2012, an increase of 13.0%. The residential net sales increase of $35.8 million was primarily due to growth from existing customers and products, and expansion of product portfolio and customer base. Commercial net sales were $75.0 million for the year ended June 30, 2013, a decrease of 2.2% from net sales of $76.7 million for the year ended June 30, 2012.
Gross margin for the fiscal year ended June 30, 2013 was 23.4% compared to 24.2% for the prior fiscal year. During fiscal year 2013 the Company’s expenses related to workers compensation and health insurance programs were approximately $1.5 million higher than in fiscal 2012, impacting gross margin by 0.4%.
Selling, general and administrative expenses for the fiscal year ended June 30, 2013 were 18.2% of net sales compared to 18.4% in the prior fiscal year. The current year includes executive transition costs of $1.3 million or 0.4% of net sales.
The effective tax rate for the fiscal year ended June 30, 2013 was 37.0% compared to 36.8% for fiscal year 2012. The change in effective tax rate is primarily due to the lower benefit of the Domestic Manufacturing Deduction under Internal Revenue Code Section 199 (DMD), which provides a tax benefit on U.S. based manufacturing, and the limitation on executive compensation deduction.
The fiscal year 2013 net income increased $0.1 million to $13.2 million, the highest ever reported for the Company. The number of diluted shares increased during fiscal 2013 due to additional shares outstanding and the impact of the Company’s higher stock trading price on outstanding options, resulting in the Company reporting diluted earnings per share of $1.80 for fiscal year 2013 versus $1.86 for fiscal year 2012. All earnings per share amounts are on a diluted basis.
Fiscal 2012 Compared to Fiscal 2011
Net sales for fiscal 2012 were $352.1 million compared to $339.4 million in the prior fiscal year, an increase of 3.7%. For the fiscal year ended June 30, 2012, residential net sales were $275.4 million compared to $258.1 million for the year ended June 30, 2011, an increase of 6.7%. Commercial net sales were $76.7 million for the year ended June 30, 2012, a decrease of 5.8% from net sales of $81.3 million for the year ended June 30, 2011.
Gross margin for the year ended June 30, 2012 was 24.2% compared to 22.8% for the prior year primarily due to better absorption of fixed costs on the higher sales volume and lower freight costs. The prior year included a $0.6 million inventory write-down related to a facility closing.
Selling, general and administrative expenses for the fiscal year ended June 30, 2012 were $65.0 million or 18.4% of net sales compared to $60.4 million or 17.8% of net sales in the year ended June 30, 2011. The current year includes an increase in legal and professional fees of $2.1 million, or 0.6% of sales, primarily related to an Indiana civil lawsuit and a $1.0 million decrease in bad debt expense, compared to the prior year.
Operating income increased by $4.4 million in fiscal year 2012 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, 2012 was 36.8% compared to 35.7% for fiscal year 2011. The change in effective tax rate is primarily due to the benefit of the Domestic Manufacturing Deduction under Internal Revenue Code Section 199 (DMD),DMD, which provides a tax benefit on U.S. based manufacturing, the change in provision for uncertain tax positions related to various state taxing jurisdictions and stock-based compensation.
The above factors resulted in net income for the fiscal year ended June 30, 2012 of $13.1 million or $1.86 per share compared to $10.4 million or $1.50 per share in fiscal 2011.
All earnings per share amounts are on a diluted basis.
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 4.5%. Residential net sales were $258.1 million compared to $246.0 million in fiscal 2010, an increase of 4.9%. Commercial net sales were $81.3 million for fiscal 2011, a increase of 1.1% from net sales of $80.5 million for fiscal 2010.
The Company’s 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.
Gross margin for fiscal year 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 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.
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 the 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 DMD. 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.
Liquidity and Capital Resources
Working capital (current assets less current liabilities) at June 30, 20122013 was $103.7$113.7 million as compared to $100.7$103.7 million at June 30, 2011.2012. Significant changes in working capital from June 30, 20112012 to June 30, 20122013 included increasedincreases in inventories of $9.0$9.7 million, other current assets of $4.4 million and increased accounts receivable of $2.2 million,$2.5 million. The increases were offset by a decrease in cash of $3.9$3.0 million, increased other current liabilities of $2.7 million and increased current liabilitiesaccounts payable of $4.4$1.0 million. The higher inventory levels are to support the increases inincreased residential sales volume and expanded product offerings and also reflect the timing of inventory receipts, especially imported finished products and components which require longer lead times. The increase in accounts receivable resulted from the higher shipments in the fourth fiscal quarter.offerings.
The Company’s main source of liquidity is cash and cash flows from operations. As of June 30, 20122013 and 2011,2012, the Company had cash totaling $14.0$10.9 million and $17.9$14.0 million, respectively. The Company hasmaintains a credit agreement which provides short-term working capital financing up to $10.0 million with interest of LIBOR plus 1%, including up to $4.0 million of letters of credit. Letters of credit outstanding at June 30, 2013 totaled $2.3 million, leaving borrowing availability of $7.7 million. The Company did not utilize any borrowing availability under athe credit facility during the period other than the aforementioned letters of credit. The credit agreement expires June 30, 2014. At June 30, 2013, the Company was in compliance with all of upthe financial covenants contained in the credit agreement.
An officer of the Company is a director at a bank where the Company maintains an unsecured $8.0 million line of credit, with interest at prime minus 1%, and where its routine banking transactions are processed. The Company did not utilize any borrowing availability during the period and no amount was outstanding on the line of credit at June 30, 2013. In addition, the supplemental retirement plans assets, held in a Rabbi Trust, of $5.8 million are administered by this bank’s trust department. The Company receives no special services or pricing on the services performed by the bank due to $12.5 million.the directorship of this officer.
Cash decreased by $3.9$3.0 million during fiscal year 20122013 with net cash provided by operating activities of $9.0$5.9 million offset by capital expenditures of $10.9$6.2 million including $8.8 million related to construction of our corporate office building, and payment of dividends of $2.5$4.2 million. The Company completed construction and moved into its Corporate Headquarters in Dubuque, Iowa during fiscal year 2013. The total cost of construction and equipping the Corporate Headquarters building was approximately $11.8 million, with $2.7 million paid during fiscal year 2013. Dividends to the Company’s shareholders during fiscal year 2013 increased 33% to $0.60 per share ($4.2 million) from $0.45 per share ($2.5 million) for fiscal year 2012.
Net cash provided by operating activities of $13.8$9.0 million in fiscal year 20112012 was comprised primarily of net income of $10.4$13.1 million, changes in operating assets and liabilities of $1.3$7.8 million and non-cash charges of $4.7$3.7 million. Depreciation expense was $2.8 million and $2.7 million for the years ended June 30, 2012 and 2011, respectively.
Net cash used in investing activities was $6.0 million and $11.3 million in fiscal years 2013 and 2012, respectively. Net sales of investments were $0.2 million for fiscal year 2012 compared to cash used in investing activities2013 versus net purchases of $2.7investments of $0.4 million in fiscal year 2011. Net purchases of investments were $0.4 million.2012. Capital expenditures were $6.2 million and $10.9 million during fiscal years 2013 and 2012, respectively.
During fiscal year 2012.2013, four executive officers retired from the Company. Two were directors and will continue to serve in that capacity. As a result of the retirements, during fiscal year 2014 the Company will make distributions of approximately $3.0 million from its supplemental retirement plans. The distributions will be made out of the Rabbi Trust assets, not out of the Company’s operating cash. The Company has increased its current assets and liabilities and decreased its long-term assets and liabilities to reflect these anticipated distributions.
Net cash used in financing activities was $2.9 million and $1.6 million in fiscal yearyears 2013 and 2012, respectively, primarily for the payment of dividends of $2.5$4.2 million, compared to $1.5$2.5 million in fiscal year 2011. For fiscal year 2011, the cash was used primarily for the payment of dividends of $1.8 million.2012.
The Company expects that capital expenditures will decrease to approximately $6.0 million infor fiscal year 2013, including $2.62014 will be approximately $4.5 million primarily for delivery and manufacturing equipment and information technology infrastructure. The Company estimates that depreciation expense will be approximately $4.5 million for the completion of the corporate office building.fiscal year 2014. Management believes that the Company has adequate cash, cash flows from operations and credit arrangements to meet its operating and capital requirements for fiscal year 2013, including the completion of the corporate office building.2014. In the opinion of management, the Company’s 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, 2012,2013, 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 Company’s contractual obligations at June 30, 20122013 and the effect these obligations are expected to have on the Company’s liquidity and cash flow in the future (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
| Less than |
| 1 - 3 |
| 3 - 5 |
| More than |
| |||||
Operating lease obligations |
| $ | 10,337 |
| $ | 1,842 |
| $ | 4,146 |
| $ | 931 |
| $ | 3,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
| 1 Year |
| 2 - 3 |
| 4 - 5 |
| More than |
| |||||
Operating lease obligations |
| $ | 10,087 |
| $ | 2,617 |
| $ | 3,897 |
| $ | 1,588 |
| $ | 1,985 |
|
Supplemental retirement plans |
|
| 5,403 |
|
| 2,989 |
|
| — |
|
| — |
|
| 2,414 |
|
Total contractual obligations |
|
| 15,490 |
|
| 5,606 |
|
| 3,897 |
|
| 1,588 |
|
| 4,399 |
|
ContractualThe long-term portion of the contractual obligations associated with the Company’s deferred compensationsupplemental retirement plans were excluded fromare included in the table above under more than five years as the Company cannot predict when the events that trigger payment will occur. Total accumulated deferred compensation liabilities were $5.6 million at June 30, 2012. At June 30, 2012,2013, 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 uncertain tax positions 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.
Outlook
The Company believes that moderate overall top line growth will continue through the end of calendar year 20122013. Residential growth is expected to continue with existing customers and products, and through additions to product offerings and expanding our residentialproduct portfolio and customer base. The Company is expecting current order trendsexpects this growth to be led by increased demand for upholstered products. The Company expects demand for its commercial products to continue forremain at current levels into the remaindersecond half of the calendar year. The Company is confident in its ability to take advantage of market opportunities as they present themselves. However, our optimism is guarded due to the uncertainty that the upcoming elections and economic factors have on consumers’ confidence and willingness to buy.opportunities.
The Company remains committed to its core strategies, which include offering a wide range of quality productsproduct 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 improvingincreasing 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 Company’s 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 2013, 2012 2011 and 2010,2011, 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 Company’s primary market risk exposure with regard to financial instruments is changes in interest rates. At June 30, 2012,2013, the Company does not have any debt outstanding.
|
|
Item 8. | Financial Statements and Supplementary Data |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and StockholdersShareholders of Flexsteel Industries, Inc.
We have audited the accompanying consolidated balance sheets of Flexsteel Industries, Inc. and subsidiaries (the “Company”) as of June 30, 20122013 and 2011,2012, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended June 30, 2012.2013. 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 Company’s 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 Company’s 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,statements. An audit also includes 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, 20122013 and 2011,2012, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2012,2013, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of June 30, 2013, based on the criteria established inInternal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 23, 2013 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
August 22, 201223, 2013
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIESConsolidated Balance Sheets(AmountsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Flexsteel Industries, Inc.
We have audited the internal control over financial reporting of Flexsteel Industries, Inc. and subsidiaries (the “Company”) as of June 30, 2013, based on criteria established inInternal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in thousands, except sharethe accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and per share data)perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2013, based on the criteria established inInternal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
|
|
|
|
|
|
|
|
|
| June 30, |
| ||||
|
| 2012 |
| 2011 |
| ||
| |||||||
ASSETS |
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
Cash |
| $ | 13,970 |
| $ | 17,889 |
|
Trade Receivables - less allowance for doubtful accounts: 2012, $1,910; 2011, $2,000 |
|
| 33,601 |
|
| 31,451 |
|
Inventories |
|
| 82,689 |
|
| 73,680 |
|
Deferred income taxes |
|
| 3,750 |
|
| 3,700 |
|
Other |
|
| 1,583 |
|
| 1,633 |
|
Total current assets |
|
| 135,593 |
|
| 128,353 |
|
NONCURRENT ASSETS: |
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
| 29,867 |
|
| 21,387 |
|
Deferred income taxes |
|
| 3,160 |
|
| 2,560 |
|
Other assets |
|
| 13,052 |
|
| 12,377 |
|
TOTAL |
| $ | 181,672 |
| $ | 164,677 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
Accounts payable - trade |
| $ | 12,973 |
| $ | 9,899 |
|
Accrued liabilities: |
|
|
|
|
|
|
|
Payroll and related items |
|
| 8,037 |
|
| 6,922 |
|
Insurance |
|
| 4,440 |
|
| 5,645 |
|
Other |
|
| 6,399 |
|
| 5,204 |
|
Total current liabilities |
|
| 31,849 |
|
| 27,670 |
|
LONG-TERM LIABILITIES: |
|
|
|
|
|
|
|
Deferred compensation |
|
| 5,613 |
|
| 5,270 |
|
Other liabilities |
|
| 4,768 |
|
| 3,164 |
|
Total liabilities |
|
| 42,230 |
|
| 36,104 |
|
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 2012, 6,905,534 shares; 2011, 6,710,612 shares |
|
| 6,906 |
|
| 6,711 |
|
Additional paid-in capital |
|
| 8,476 |
|
| 6,698 |
|
Retained earnings |
|
| 125,699 |
|
| 115,699 |
|
Accumulated other comprehensive loss |
|
| (1,639 | ) |
| (535 | ) |
Total shareholders’ equity |
|
| 139,442 |
|
| 128,573 |
|
TOTAL |
| $ | 181,672 |
| $ | 164,677 |
|
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended June 30, 2013 of the Company and our report dated August 23, 2013 expressed an unqualified opinion on those consolidated financial statements and financial statement schedule.
/s/ DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
August 23, 2013
Consolidated Balance Sheets |
(Amounts in thousands, except share and per share data) |
|
|
|
|
|
|
|
|
|
| June 30, |
| ||||
|
| 2013 |
| 2012 |
| ||
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
Cash |
| $ | 10,934 |
| $ | 13,970 |
|
Trade Receivables - less allowances: 2013, $1,560; 2012, $1,910 |
|
| 36,075 |
|
| 33,601 |
|
Inventories |
|
| 92,417 |
|
| 82,689 |
|
Deferred income taxes |
|
| 4,970 |
|
| 3,750 |
|
Other current assets |
|
| 4,805 |
|
| 1,583 |
|
Total current assets |
|
| 149,201 |
|
| 135,593 |
|
NONCURRENT ASSETS: |
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
| 32,145 |
|
| 29,867 |
|
Deferred income taxes |
|
| 1,190 |
|
| 3,160 |
|
Other assets |
|
| 10,003 |
|
| 13,052 |
|
TOTAL |
| $ | 192,539 |
| $ | 181,672 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
Accounts payable - trade |
| $ | 13,927 |
| $ | 12,973 |
|
Accrued liabilities: |
|
|
|
|
|
|
|
Payroll and related items |
|
| 7,836 |
|
| 8,037 |
|
Insurance |
|
| 4,667 |
|
| 4,440 |
|
Other current liabilities |
|
| 9,072 |
|
| 6,399 |
|
Total current liabilities |
|
| 35,502 |
|
| 31,849 |
|
LONG-TERM LIABILITIES: |
|
|
|
|
|
|
|
Supplemental retirement plans |
|
| 2,414 |
|
| 5,613 |
|
Other liabilities |
|
| 3,386 |
|
| 4,768 |
|
Total liabilities |
|
| 41,302 |
|
| 42,230 |
|
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 2013, 7,106,723 shares; 2012, 6,905,534 shares |
|
| 7,107 |
|
| 6,906 |
|
Additional paid-in capital |
|
| 10,615 |
|
| 8,476 |
|
Retained earnings |
|
| 134,606 |
|
| 125,699 |
|
Accumulated other comprehensive loss |
|
| (1,091 | ) |
| (1,639 | ) |
Total shareholders’ equity |
|
| 151,237 |
|
| 139,442 |
|
TOTAL |
| $ | 192,539 |
| $ | 181,672 |
|
See accompanying Notes to Consolidated Financial Statements.
FLEXSTEEL INDUSTRIES,INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
| FOR THE YEARS ENDED JUNE 30, |
| |||||||
|
| 2012 |
| 2011 |
| 2010 |
| |||
| ||||||||||
NET SALES |
| $ | 352,089 |
| $ | 339,426 |
| $ | 326,466 |
|
COST OF GOODS SOLD |
|
| (266,810 | ) |
| (262,124 | ) |
| (251,685 | ) |
GROSS MARGIN |
|
| 85,279 |
|
| 77,302 |
|
| 74,781 |
|
SELLING, GENERAL AND ADMINISTRATIVE |
|
| (65,033 | ) |
| (60,422 | ) |
| (57,252 | ) |
FACILITY CLOSING COSTS |
|
| — |
|
| (1,016 | ) |
| — |
|
OPERATING INCOME |
|
| 20,246 |
|
| 15,864 |
|
| 17,529 |
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
|
|
Interest and other income |
|
| 422 |
|
| 343 |
|
| 361 |
|
Interest expense |
|
| — |
|
| — |
|
| (439 | ) |
Total |
|
| 422 |
|
| 343 |
|
| (78 | ) |
INCOME BEFORE INCOME TAXES |
|
| 20,668 |
|
| 16,207 |
|
| 17,451 |
|
INCOME TAX PROVISION |
|
| (7,600 | ) |
| (5,790 | ) |
| (6,650 | ) |
NET INCOME |
| $ | 13,068 |
| $ | 10,417 |
| $ | 10,801 |
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: |
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 6,781 |
|
| 6,693 |
|
| 6,608 |
|
Diluted |
|
| 7,008 |
|
| 6,929 |
|
| 6,697 |
|
EARNINGS PER SHARE OF COMMON STOCK: |
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 1.93 |
| $ | 1.56 |
| $ | 1.63 |
|
Diluted |
| $ | 1.86 |
| $ | 1.50 |
| $ | 1.61 |
|
CASH DIVIDENDS DECLARED PER COMMON SHARE |
| $ | 0.45 |
| $ | 0.30 |
| $ | 0.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the years ended June 30, |
| |||||||
|
| 2013 |
| 2012 |
| 2011 |
| |||
Net sales |
| $ | 386,189 |
| $ | 352,089 |
| $ | 339,426 |
|
Cost of goods sold |
|
| (295,720 | ) |
| (266,810 | ) |
| (262,124 | ) |
Gross margin |
|
| 90,469 |
|
| 85,279 |
|
| 77,302 |
|
Selling, general and administrative |
|
| (70,198 | ) |
| (65,033 | ) |
| (60,422 | ) |
Facility closing costs |
|
| — |
|
| — |
|
| (1,016 | ) |
Operating income |
|
| 20,271 |
|
| 20,246 |
|
| 15,864 |
|
Interest and other income |
|
| 610 |
|
| 422 |
|
| 343 |
|
Income before income taxes |
|
| 20,881 |
|
| 20,668 |
|
| 16,207 |
|
Income tax provision |
|
| (7,730 | ) |
| (7,600 | ) |
| (5,790 | ) |
Net income |
| $ | 13,151 |
| $ | 13,068 |
| $ | 10,417 |
|
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 7,041 |
|
| 6,781 |
|
| 6,693 |
|
Diluted |
|
| 7,326 |
|
| 7,008 |
|
| 6,929 |
|
Earnings per share of common stock: |
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 1.87 |
| $ | 1.93 |
| $ | 1.56 |
|
Diluted |
| $ | 1.80 |
| $ | 1.86 |
| $ | 1.50 |
|
Cash dividends declared per common share |
| $ | 0.60 |
| $ | 0.45 |
| $ | 0.30 |
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
| 2012 |
| 2011 |
| 2010 |
| |||
| ||||||||||
NET INCOME |
| $ | 13,068 |
| $ | 10,417 |
| $ | 10,801 |
|
UNREALIZED (LOSSES) GAINS ON SECURITITES |
|
| (5 | ) |
| 562 |
|
| 63 |
|
INCOME TAX BENEFIT (EXPENSE) RELATED TO SECURITIES GAINS |
|
| 2 |
|
| (214 | ) |
| (24 | ) |
NET UNREALIZED (LOSSES) GAINS ON SECURITIES |
|
| (3 | ) |
| 348 |
|
| 39 |
|
INTEREST RATE DERIVATIVE |
|
| — |
|
| — |
|
| 285 |
|
INCOME TAX EXPENSE RELATED TO INTEREST RATE DERIVATIVE |
|
| — |
|
| — |
|
| (108 | ) |
NET INTEREST RATE DERIVATIVE |
|
| — |
|
| — |
|
| 177 |
|
MINIMUM PENSION LIABILITY |
|
| (1,771 | ) |
| 1,401 |
|
| (328 | ) |
INCOME TAX BENEFIT (EXPENSE) RELATED TO MINIMUM PENSION LIABILITY |
|
| 670 |
|
| (532 | ) |
| 124 |
|
NET MINIMUM PENSION LIABILITY |
|
| (1,101 | ) |
| 869 |
|
| (204 | ) |
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX |
|
| (1,104 | ) |
| 1,217 |
|
| 12 |
|
COMPREHENSIVE INCOME |
| $ | 11,964 |
| $ | 11,634 |
| $ | 10,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the years ended June 30, |
| |||||||
|
| 2013 |
| 2012 |
| 2011 |
| |||
Net income |
| $ | 13,151 |
| $ | 13,068 |
| $ | 10,417 |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on securities in supplemental retirement plans |
|
| 96 |
|
| (5 | ) |
| 562 |
|
Income tax (expense) benefit related to securities in supplemental retirement plans gains (losses) |
|
| (36 | ) |
| 2 |
|
| (214 | ) |
Net unrealized gains (losses) on securities in supplemental retirement plans (1) |
|
| 60 |
|
| (3 | ) |
| 348 |
|
|
|
|
|
|
|
|
|
|
|
|
Minimum pension liability |
|
| 787 |
|
| (1,771 | ) |
| 1,401 |
|
Income tax (expense) benefit related to minimum pension liability |
|
| (299 | ) |
| 670 |
|
| (532 | ) |
Net minimum pension liability |
|
| 488 |
|
| (1,101 | ) |
| 869 |
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax |
|
| 548 |
|
| (1,104 | ) |
| 1,217 |
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
| $ | 13,699 |
| $ | 11,964 |
| $ | 11,634 |
|
(1) | See Note 9 to the Consolidated Financial Statements |
See accompanying Notes to Consolidated Financial Statements.
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders’ Equity
(Amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Par |
| Additional |
| Retained |
| Accumulated |
| Total |
|
| Total Par |
| Additional |
| Retained |
| Accumulated |
| Total |
| ||||||||||
| ||||||||||||||||||||||||||||||||
Balance at July 1, 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 |
|
| $ | 6,646 |
| $ | 5,425 |
| $ | 107,293 |
| $ | (1,752 | ) | $ | 117,612 |
| ||||
Issuance of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Stock options exercised, net |
| 65 |
| 259 |
| — |
| — |
| 324 |
|
| 65 |
| 259 |
| — |
| — |
| 324 |
| ||||||||||
Unrealized gain on available for sale investments, net of tax |
| — |
| — |
| — |
| 348 |
| 348 |
|
| — |
| — |
| — |
| 348 |
| 348 |
| ||||||||||
Long-term incentive compensation |
| — |
| 590 |
| — |
| — |
| 590 |
|
| — |
| 590 |
| — |
| — |
| 590 |
| ||||||||||
Stock-based compensation |
| — |
| 424 |
| — |
| — |
| 424 |
|
| — |
| 424 |
| — |
| — |
| 424 |
| ||||||||||
Minimum pension liability adjustment, net of tax |
| — |
| — |
| — |
| 869 |
| 869 |
|
| — |
| — |
| — |
| 869 |
| 869 |
| ||||||||||
Cash dividends declared |
| — |
| — |
| (2,011 | ) |
| — |
| (2,011 | ) |
| — |
| — |
| (2,011 | ) |
| — |
| (2,011 | ) | ||||||||
Net income |
|
| — |
|
| — |
|
| 10,417 |
|
| — |
|
| 10,417 |
|
|
| — |
|
| — |
|
| 10,417 |
|
| — |
|
| 10,417 |
|
Balance at June 30, 2011 |
| 6,711 |
| 6,698 |
| 115,699 |
| (535 | ) |
| 128,573 |
|
| $ | 6,711 |
| $ | 6,698 |
| $ | 115,699 |
| $ | (535 | ) | $ | 128,573 |
| ||||
Issuance of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Stock options exercised, net |
| 156 |
| 761 |
| — |
| — |
| 917 |
|
| 156 |
| 761 |
| — |
| — |
| 917 |
| ||||||||||
Unrealized gain on available for sale investments, net of tax |
| — |
| — |
| — |
| (3 | ) |
| (3 | ) |
| — |
| — |
| — |
| (3 | ) |
| (3 | ) | ||||||||
Long-term incentive compensation |
| 39 |
| 761 |
| — |
| — |
| 800 |
|
| 39 |
| 761 |
| — |
| — |
| 800 |
| ||||||||||
Stock-based compensation |
| — |
| 256 |
| — |
| — |
| 256 |
|
| — |
| 256 |
| — |
| — |
| 256 |
| ||||||||||
Minimum pension liability adjustment, net of tax |
| — |
| — |
| — |
| (1,101 | ) |
| (1,101 | ) |
| — |
| — |
| — |
| (1,101 | ) |
| (1,101 | ) | ||||||||
Cash dividends declared |
| — |
| — |
| (3,068 | ) |
| — |
| (3,068 | ) |
| — |
| — |
| (3,068 | ) |
| — |
| (3,068 | ) | ||||||||
Net income |
|
| — |
|
| — |
|
| 13,068 |
|
| — |
|
| 13,068 |
|
|
| — |
|
| — |
|
| 13,068 |
|
| — |
|
| 13,068 |
|
Balance at June 30, 2012 |
| $ | 6,906 |
| $ | 8,476 |
| $ | 125,699 |
| $ | (1,639 | ) | $ | 139,442 |
|
| $ | 6,906 |
| $ | 8,476 |
| $ | 125,699 |
| $ | (1,639 | ) | $ | 139,442 |
|
Issuance of common stock: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Stock options exercised, net |
| 92 |
| 1,197 |
| — |
| — |
| 1,289 |
| |||||||||||||||||||||
Unrealized gain on available for sale investments, net of tax |
| — |
| — |
| — |
| 60 |
| 60 |
| |||||||||||||||||||||
Long-term incentive compensation |
| 109 |
| 442 |
| — |
| — |
| 551 |
| |||||||||||||||||||||
Stock-based compensation |
| — |
| 500 |
| — |
| — |
| 500 |
| |||||||||||||||||||||
Minimum pension liability adjustment, net of tax |
| — |
| — |
| — |
| 488 |
| 488 |
| |||||||||||||||||||||
Cash dividends declared |
| — |
| — |
| (4,244 | ) |
| — |
| (4,244 | ) | ||||||||||||||||||||
Net income |
|
| — |
|
| — |
|
| 13,151 |
|
| — |
|
| 13,151 |
| ||||||||||||||||
Balance at June 30, 2013 |
| $ | 7,107 |
| $ | 10,615 |
| $ | 134,606 |
| $ | (1,091 | ) | $ | 151,237 |
|
See accompanying Notes to Consolidated Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
| FOR THE YEARS ENDED JUNE 30, |
| |||||||
|
| 2013 |
| 2012 |
| 2011 |
| |||
OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 13,151 |
| $ | 13,068 |
| $ | 10,417 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
| 3,803 |
|
| 2,835 |
|
| 2,690 |
|
Deferred income taxes |
|
| 414 |
|
| 23 |
|
| 54 |
|
Stock-based compensation expense |
|
| 1,051 |
|
| 1,056 |
|
| 1,014 |
|
Excess tax benefit from stock-based payment arrangements |
|
| (182 | ) |
| — |
|
| — |
|
Provision for losses on accounts receivable |
|
| (215 | ) |
| (150 | ) |
| 870 |
|
Other non-cash, net |
|
| 69 |
|
| 7 |
|
| 224 |
|
Gain on disposition of capital assets |
|
| (18 | ) |
| (34 | ) |
| (185 | ) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
Trade receivables |
|
| (2,260 | ) |
| (2,000 | ) |
| 3,427 |
|
Inventories |
|
| (9,728 | ) |
| (9,009 | ) |
| (1,043 | ) |
Other current assets |
|
| 58 |
|
| 50 |
|
| (557 | ) |
Other assets |
|
| (307 | ) |
| (308 | ) |
| (270 | ) |
Accounts payable - trade |
|
| 1,082 |
|
| 2,699 |
|
| (841 | ) |
Accrued liabilities |
|
| (138 | ) |
| 572 |
|
| (2,541 | ) |
Other long-term liabilities |
|
| (665 | ) |
| (174 | ) |
| 367 |
|
Supplemental retirement plans |
|
| (210 | ) |
| 342 |
|
| 174 |
|
Net cash provided by operating activities |
|
| 5,905 |
|
| 8,977 |
|
| 13,800 |
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
Purchases of investments |
|
| (1,086 | ) |
| (777 | ) |
| (698 | ) |
Proceeds from sales of investments |
|
| 1,273 |
|
| 405 |
|
| 410 |
|
Proceeds from sale of capital assets |
|
| 21 |
|
| 34 |
|
| 187 |
|
Capital expenditures |
|
| (6,225 | ) |
| (10,939 | ) |
| (2,573 | ) |
Net cash used in investing activities |
|
| (6,017 | ) |
| (11,277 | ) |
| (2,674 | ) |
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
Dividends paid |
|
| (4,213 | ) |
| (2,535 | ) |
| (1,839 | ) |
Proceeds from issuance of common stock |
|
| 1,107 |
|
| 916 |
|
| 324 |
|
Excess tax benefit from stock-based payment arrangements |
|
| 182 |
|
| — |
|
| — |
|
Net cash used in financing activities |
|
| (2,924 | ) |
| (1,619 | ) |
| (1,515 | ) |
(Decrease) increase in cash and cash equivalents |
|
| (3,036 | ) |
| (3,919 | ) |
| 9,611 |
|
Cash at beginning of year |
|
| 13,970 |
|
| 17,889 |
|
| 8,278 |
|
Cash at end of year |
| $ | 10,934 |
| $ | 13,970 |
| $ | 17,889 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| FOR THE YEARS ENDED JUNE 30, |
| |||||||
|
| 2013 |
| 2012 |
| 2011 |
| |||
SUPPLEMENTAL INFORMATION CASH PAID DURING THE PERIOD FOR: |
|
|
|
|
|
|
|
|
|
|
Income taxes paid |
| $ | 7,250 |
| $ | 6,237 |
| $ | 7,647 |
|
Capital expenditures in accounts payable |
| $ | 261 |
| $ | 389 |
| $ | 14 |
|
See accompanying Notes to Consolidated Financial Statements.
FLEXSTEEL INDUSTRIES, INC. AND SUBSIDIARIESConsolidated Statements of Cash Flows(Amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
| FOR THE YEARS ENDED JUNE 30, |
| |||||||
|
| 2012 |
| 2011 |
| 2010 |
| |||
| ||||||||||
OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 13,068 |
| $ | 10,417 |
| $ | 10,801 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
| 2,835 |
|
| 2,690 |
|
| 2,986 |
|
Deferred income taxes |
|
| 23 |
|
| 54 |
|
| (963 | ) |
Stock-based compensation expense |
|
| 1,056 |
|
| 1,014 |
|
| 781 |
|
Provision for losses on accounts receivable |
|
| (150 | ) |
| 870 |
|
| 920 |
|
Other non-cash, net |
|
| 7 |
|
| 224 |
|
| 218 |
|
Gain on disposition of capital assets |
|
| (34 | ) |
| (185 | ) |
| (9 | ) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
Trade receivables |
|
| (2,000 | ) |
| 3,427 |
|
| (5,386 | ) |
Inventories |
|
| (9,009 | ) |
| (1,043 | ) |
| 1,207 |
|
Other current assets |
|
| 50 |
|
| (557 | ) |
| 2,837 |
|
Other assets |
|
| (308 | ) |
| (270 | ) |
| (18 | ) |
Accounts payable - trade |
|
| 2,699 |
|
| (841 | ) |
| 994 |
|
Accrued liabilities |
|
| 572 |
|
| (2,541 | ) |
| 3,618 |
|
Other long-term liabilities |
|
| (174 | ) |
| 367 |
|
| 1,028 |
|
Deferred compensation |
|
| 342 |
|
| 174 |
|
| 105 |
|
Net cash provided by operating activities |
|
| 8,977 |
|
| 13,800 |
|
| 19,119 |
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
Purchases of investments |
|
| (777 | ) |
| (698 | ) |
| (721 | ) |
Proceeds from sales of investments |
|
| 405 |
|
| 410 |
|
| 359 |
|
Proceeds from sale of capital assets |
|
| 34 |
|
| 187 |
|
| 34 |
|
Capital expenditures |
|
| (10,939 | ) |
| (2,573 | ) |
| (1,251 | ) |
Net cash used in investing activities |
|
| (11,277 | ) |
| (2,674 | ) |
| (1,579 | ) |
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
Repayments of short-term borrowings, net |
|
| — |
|
| — |
|
| (10,000 | ) |
Dividends paid |
|
| (2,535 | ) |
| (1,839 | ) |
| (1,320 | ) |
Proceeds from issuance of common stock |
|
| 916 |
|
| 324 |
|
| 344 |
|
Net cash used in financing activities |
|
| (1,619 | ) |
| (1,515 | ) |
| (10,976 | ) |
(Decrease) increase in cash and cash equivalents |
|
| (3,919 | ) |
| 9,611 |
|
| 6,564 |
|
Cash at beginning of year |
|
| 17,889 |
|
| 8,278 |
|
| 1,714 |
|
Cash at end of year |
| $ | 13,970 |
| $ | 17,889 |
| $ | 8,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| FOR THE YEARS ENDED JUNE 30, |
| |||||||
|
| 2012 |
| 2011 |
| 2010 |
| |||
SUPPLEMENTAL INFORMATION CASH PAID DURING THE PERIOD FOR: |
|
|
|
|
|
|
|
|
|
|
Interest |
| $ | — |
| $ | — |
| $ | 439 |
|
Income taxes paid |
| $ | 6,237 |
| $ | 7,647 |
| $ | 3,587 |
|
See accompanying Notes to Consolidated Financial Statements.
|
|
|
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|
|
| DESCRIPTION OF BUSINESS – Flexsteel Industries, Inc. and subsidiaries (the “Company”) is one of the oldest and largest |
|
|
| 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 Company’s 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 require 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. |
|
|
|
|
|
|
| INVENTORIES – are stated at the lower of cost or net realizable value. Steel products |
|
|
| 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 Company’s 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 LONG–LIVED 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. No impairments of long-lived assets or changes in depreciable or amortizable lives were incurred during fiscal year 2013. |
|
|
| 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 |
|
|
| 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 $5.6 million, $4.9 million |
|
|
| 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 $2.5 million, $2.3 million |
|
|
| 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 |
|
|
| 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 PER SHARE (EPS) – basic earnings per share of common stock is based on the weighted-average number of common shares outstanding during each fiscal year. Diluted earnings per share of common stock includes the dilutive effect of potential common shares outstanding. The Company’s potential common shares outstanding are stock options and shares associated with the long-term management incentive compensation plan. The Company calculates the dilutive effect of outstanding options using the treasury stock method. Anti-dilutive shares are not included in the computation of diluted EPS when their exercise price was greater than the average closing market price of the common shares. 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. |
|
|
| In computing EPS for the fiscal years ended 2013, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, |
|
| June 30, |
| ||||||||||||||
(in thousands) |
| 2012 |
| 2011 |
| 2010 |
|
| 2013 |
| 2012 |
| 2011 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Basic shares |
| 6,781 |
| 6,693 |
| 6,608 |
|
| 7,041 |
| 6,781 |
| 6,693 |
| ||||||
|
|
|
|
|
|
|
| |||||||||||||
Potential common shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Stock options |
| 142 |
| 147 |
| 62 |
|
| 253 |
| 142 |
| 147 |
| ||||||
Long-term incentive plan |
|
| 85 |
|
| 89 |
|
| 27 |
|
|
| 32 |
|
| 85 |
|
| 89 |
|
|
|
| 227 |
|
| 236 |
|
| 89 |
|
|
| 285 |
|
| 227 |
|
| 236 |
|
|
|
|
|
|
|
|
| |||||||||||||
Diluted shares |
|
| 7,008 |
|
| 6,929 |
|
| 6,697 |
|
|
| 7,326 |
|
| 7,008 |
|
| 6,929 |
|
|
|
|
|
|
|
|
| |||||||||||||
Anti-dilutive shares |
|
| 300 |
|
| 424 |
|
| 717 |
|
|
| 10 |
|
| 300 |
|
| 424 |
|
|
|
| STOCK–BASED COMPENSATION – the Company recognizes compensation expense related to the cost of employee services received in exchange for Company equity interests based on the award’s fair value at the date of grant. See Note 8 Stock-Based Compensation. |
|
|
| ACCOUNTING DEVELOPMENTS – In |
|
|
|
2. | INVENTORIES |
| |
| Inventories valued on a LIFO basis (steel) would have been approximately $1.7 million |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
| June 30, |
|
| June 30, |
| ||||||||
|
| 2012 |
| 2011 |
|
| 2013 |
| 2012 |
| ||||
Raw materials |
| $ | 10,410 |
| $ | 9,235 |
|
| $ | 10,684 |
| $ | 10,410 |
|
Work in process and finished parts |
| 5,288 |
| 3,951 |
|
| 5,410 |
| 5,288 |
| ||||
Finished goods |
|
| 66,991 |
|
| 60,494 |
|
|
| 76,323 |
|
| 66,991 |
|
Total |
| $ | 82,689 |
| $ | 73,680 |
|
| $ | 92,417 |
| $ | 82,689 |
|
|
|
3. | PROPERTY, PLANT AND EQUIPMENT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
| Estimated |
| June 30, |
|
| Estimated |
| June 30, |
| |||||||||
|
|
| 2012 |
| 2011 |
|
| 2013 |
| 2012 |
| ||||||||
Land |
|
| $ | 4,150 |
| $ | 3,984 |
|
|
|
| $ | 4,233 |
| $ | 4,150 |
| ||
Buildings and improvements |
| 5-39 |
| 39,978 |
| 39,851 |
|
| 5-39 |
| 49,147 |
| 39,978 |
| |||||
Machinery and equipment |
| 3-7 |
| 26,449 |
| 26,513 |
|
| 3-7 |
| 27,048 |
| 26,449 |
| |||||
Delivery equipment |
| 3-5 |
| 18,113 |
| 18,180 |
|
| 3-5 |
| 18,689 |
| 18,113 |
| |||||
Furniture and fixtures |
| 3-7 |
| 3,843 |
| 4,000 |
|
| 3-7 |
| 6,265 |
| 3,843 |
| |||||
Construction in progress |
|
|
|
| 9,333 |
|
| 366 |
|
|
|
|
| — |
|
| 9,333 |
| |
Total |
|
|
| 101,866 |
| 92,894 |
|
|
|
| 105,382 |
| 101,866 |
| |||||
Less accumulated depreciation |
|
|
|
| (71,999 | ) |
| (71,507 | ) |
|
|
|
| (73,237 | ) |
| (71,999 | ) | |
Net |
|
|
|
| 29,867 |
|
| 21,387 |
|
|
|
|
| 32,145 |
|
| 29,867 |
|
|
|
4. | OTHER NONCURRENT ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
| June 30, |
|
| June 30, |
| ||||||||
|
| 2012 |
| 2011 |
|
| 2013 |
| 2012 |
| ||||
Cash value of life insurance |
| $ | 7,072 |
| $ | 6,815 |
|
| $ | 7,337 |
| $ | 7,072 |
|
Rabbi Trust assets (see Note 9) |
| 5,900 |
| 5,533 |
|
| 2,529 |
| 5,900 |
| ||||
Other |
|
| 80 |
|
| 29 |
|
|
| 137 |
|
| 80 |
|
Total |
| $ | 13,052 |
| $ | 12,377 |
|
| $ | 10,003 |
| $ | 13,052 |
|
|
|
5. | ACCRUED LIABILITIES – OTHER |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
| June 30, |
|
| June 30, |
| ||||||||
|
| 2012 |
| 2011 |
|
| 2013 |
| 2012 |
| ||||
Dividends |
| $ | 1,036 |
| $ | 504 |
|
| $ | 1,067 |
| $ | 1,036 |
|
Income taxes |
| 562 |
| — |
|
| 299 |
| 562 |
| ||||
Advertising |
| 1,899 |
| 1,873 |
|
| 2,220 |
| 1,899 |
| ||||
Warranty |
| 1,010 |
| 970 |
|
| 1,000 |
| 1,010 |
| ||||
Supplemental retirement plans - current |
| 2,989 |
| — |
| |||||||||
Other |
|
| 1,892 |
|
| 1,857 |
|
|
| 1,497 |
|
| 1,892 |
|
Total |
| $ | 6,399 |
| $ | 5,204 |
|
| $ | 9,072 |
| $ | 6,399 |
|
|
|
6. | CREDIT ARRANGEMENTS |
|
|
| The Company maintains a credit agreement which provides short-term working capital financing up to |
An officer of the Company is a director at a bank where the Company maintains an unsecured $8.0 million line of credit, with interest at prime minus 1%, and where its routine banking transactions are processed. The Company | |
|
|
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, 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 Company’s 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, |
|
| June 30, |
| ||||||||
|
| 2012 |
| 2011 |
|
| 2013 |
| 2012 |
| ||||
Gross unrecognized tax benefits |
| $ | 1,000 |
| $ | 970 |
|
| $ | 1,085 |
| $ | 1,000 |
|
Accrued interest and penalties |
|
| 365 |
|
| 340 |
|
|
| 425 |
|
| 365 |
|
Gross liabilities related to unrecognized tax benefits |
| $ | 1,365 |
| $ | 1,310 |
|
| $ | 1,510 |
| $ | 1,365 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Deferred tax assets |
| $ | 350 |
| $ | 330 |
|
| $ | 440 |
| $ | 350 |
|
|
|
| A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
| 2012 |
| 2011 |
| 2010 |
|
| 2013 |
| 2012 |
| 2011 |
| ||||||
Balance at July 1 |
| $ | 970 |
| $ | 995 |
| $ | 404 |
|
| $ | 1,000 |
| $ | 970 |
| $ | 995 |
|
Additions based on tax positions related to the current year |
| 207 |
| 193 |
| 250 |
|
| 265 |
| 207 |
| 193 |
| ||||||
Additions for tax positions of prior years |
| — |
| 41 |
| 420 |
|
| 100 |
| — |
| 41 |
| ||||||
Reductions for tax positions of prior years |
|
| (177 | ) |
| (259 | ) |
| (79 | ) |
|
| (280 | ) |
| (177 | ) |
| (259 | ) |
Balance at June 30 |
| $ | 1,000 |
| $ | 970 |
| $ | 995 |
|
| $ | 1,085 |
| $ | 1,000 |
| $ | 970 |
|
|
|
| The Company records interest and penalties related to income taxes as income tax expense in the |
|
|
| The income tax provision (benefit) is as follows for the years ended June 30: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
| 2012 |
| 2011 |
| 2010 |
|
| 2013 |
| 2012 |
| 2011 |
| ||||||
Federal- current |
| $ | 6,969 |
| $ | 5,313 |
| $ | 6,630 |
|
| $ | 6,750 |
| $ | 6,969 |
| $ | 5,313 |
|
State - current |
| 608 |
| 423 |
| 975 |
|
| 566 |
| 608 |
| 423 |
| ||||||
Deferred |
|
| 23 |
|
| 54 |
|
| (955 | ) |
|
| 414 |
|
| 23 |
|
| 54 |
|
Total |
| $ | 7,600 |
| $ | 5,790 |
| $ | 6,650 |
|
| $ | 7,730 |
| $ | 7,600 |
| $ | 5,790 |
|
|
|
| A reconciliation between the U.S. federal statutory tax rate and the effective tax rate is as follows for the years ended June 30: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2012 |
| 2011 |
| 2010 |
|
| 2013 |
| 2012 |
| 2011 |
| ||||||
Federal statutory tax rate |
| 35.0 | % |
| 35.0 | % |
| 35.0 | % |
| 35.0 | % |
| 35.0 | % |
| 35.0 | % | ||
State taxes, net of federal effect |
| 2.9 |
| 2.6 |
| 3.7 |
|
| 2.6 |
| 2.9 |
| 2.6 |
| ||||||
Other |
|
| (1.1 | ) |
| (1.9 | ) |
| (0.6 | ) |
|
| (0.6 | ) |
| (1.1 | ) |
| (1.9 | ) |
Effective tax rate |
|
| 36.8 | % |
| 35.7 | % |
| 38.1 | % |
|
| 37.0 | % |
| 36.8 | % |
| 35.7 | % |
|
| ||||||||||||
| The effective tax rate for the fiscal years ended June 30, 2013, 2012, 2011 | ||||||||||||
|
| ||||||||||||
| The primary components of deferred tax assets and (liabilities) are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
| June 30, 2012 |
| June 30, 2011 |
|
| June 30, 2013 |
| June 30, 2012 |
| ||||||||||||||||
|
| Current |
| Long-term |
| Current |
| Long-term |
|
| Current |
| Long-term |
| Current |
| Long-term |
| ||||||||
Accounts receivable |
| $ | 710 |
| $ | — |
| $ | 740 |
| $ | — |
|
| $ | 590 |
| $ | — |
| $ | 710 |
| $ | — |
|
Inventory |
| 1,390 |
| — |
| 1,360 |
| — |
|
| 1,530 |
| — |
| 1,390 |
| — |
| ||||||||
Self insurance |
| 480 |
| — |
| 620 |
| — |
| |||||||||||||||||
Self-insurance |
| 500 |
| — |
| 480 |
| — |
| |||||||||||||||||
Employee benefits |
| 480 |
| — |
| 360 |
| — |
|
| 800 |
| — |
| 480 |
| — |
| ||||||||
Accrued expenses |
| 690 |
| — |
| 620 |
| — |
|
| 550 |
| — |
| 690 |
| — |
| ||||||||
Property, plant and equipment |
| — |
| (860 | ) |
| — |
| (760 | ) |
| — |
| (1,150 | ) |
| — |
| (860 | ) | ||||||
Deferred compensation |
| — |
| 2,430 |
| — |
| 2,520 |
| |||||||||||||||||
Supplemental retirement plans |
| 1,000 |
| 810 |
| — |
| 2,430 |
| |||||||||||||||||
Other |
|
| — |
|
| 1,590 |
|
| — |
|
| 800 |
|
|
| — |
|
| 1,530 |
|
| — |
|
| 1,590 |
|
Total |
| $ | 3,750 |
| $ | 3,160 |
| $ | 3,700 |
| $ | 2,560 |
|
| $ | 4,970 |
| $ | 1,190 |
| $ | 3,750 |
| $ | 3,160 |
|
|
|
|
| The Company is subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. Generally, tax years | |
|
|
|
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 Company’s shareholders approved 500,000 shares to be issued under the plan. As of June 30, |
|
|
| 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, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
| Minimum |
| Target |
| Maximum |
|
| Minimum |
| Target |
| Maximum |
| |||||||||||||||||||||
Performance Period |
| Shares |
| Cash |
| Shares |
| Cash |
| Shares |
| Cash |
|
| Shares |
| Cash |
| Shares |
| Cash |
| Shares |
| Cash |
| |||||||||
Fiscal Year 2010 - 2012 |
| 20 |
| $ | 268 |
| 58 |
| $ | 767 |
| 93 |
| $ | 1,227 |
| |||||||||||||||||||
Fiscal Year 2011 - 2013 |
| 17 |
| $ | 219 |
| 48 |
| $ | 627 |
| 76 |
| $ | 1,003 |
|
| 12 |
| $ | 198 |
| 35 |
| $ | 566 |
| 56 |
| $ | 905 |
| |||
Fiscal Year 2012 - 2014 |
| 13 |
| $ | 171 |
| 37 |
| $ | 490 |
| 59 |
| $ | 784 |
|
| 11 |
| $ | 179 |
| 32 |
| $ | 512 |
| 50 |
| $ | 819 |
| |||
Fiscal Year 2013 - 2015 |
| 10 |
| $ | 168 |
| 30 |
| $ | 481 |
| 47 |
| $ | 769 |
|
|
|
|
| If the target performance goals would be achieved, the total amount of compensation cost recognized over the requisite service periods would be | |
|
| |
| 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 2013, 2012 | |
|
| |
| 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 2013, 2012 | |
|
| |
| The weighted-average grant date fair value of stock options granted during fiscal years 2013, 2012 and 2011 was $5.06, $3.11 and | |
|
| |
| At June 30, |
|
| |
| A summary of the status of the Company’s stock option plans as of June 30, 2013, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares |
| Weighted Average |
| Aggregate |
|
| Shares |
| Weighted Average |
| Aggregate |
| ||||||
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 |
|
| 1,046 |
| 13.56 |
| 2,271 |
| ||||||
Granted |
| 83 |
| 13.87 |
|
|
|
| 83 |
| 13.87 |
|
|
| ||||||
Exercised |
| (306 | ) |
| 12.57 |
|
|
|
| (306 | ) |
| 12.57 |
|
|
| ||||
Canceled |
|
| (5 | ) |
| 17.12 |
|
|
|
|
| (5 | ) |
| 17.12 |
| ||||
Outstanding and exercisable at June 30, 2012 |
|
| 818 |
| $ | 13.94 |
| $ | 4,783 |
|
| 818 |
| $ | 13.94 |
| $ | 4,783 |
| |
Granted |
| 89 |
| 20.31 |
|
|
| |||||||||||||
Exercised |
| (109 | ) |
| 13.38 |
|
|
| ||||||||||||
Canceled |
|
| (11 | ) |
| 16.09 |
|
| ||||||||||||
Outstanding and exercisable at June 30, 2013 |
|
| 787 |
| $ | 14.71 | $ | 7,609 |
|
|
| The following table summarizes information for options outstanding and exercisable at June 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Options |
| Weighted Average |
| ||||||||
Range of |
|
| Remaining |
| Exercise |
| |||||||
$ | 6.81 - 8.55 |
|
| 153 |
|
| 7.0 |
|
| $ | 7.67 |
|
|
| 12.35 - 13.90 |
|
| 254 |
|
| 6.1 |
|
|
| 12.86 |
|
|
| 14.40 - 16.52 |
|
| 214 |
|
| 2.8 |
|
|
| 15.49 |
|
|
| 17.23 - 20.27 |
|
| 197 |
|
| 4.1 |
|
|
| 18.52 |
|
|
$ | 6.81 - 20.27 |
|
| 818 |
| 4.9 |
|
|
| 13.94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of |
| Options |
| Weighted Average |
| ||||||||||
|
| Remaining |
| Exercise |
| ||||||||||
| $ | 6.81 - 8.55 |
|
| 129 |
|
| 5.9 |
|
|
| $ | 7.62 |
|
|
|
| 12.35 - 13.90 |
|
| 216 |
|
| 5.1 |
|
|
|
| 12.86 |
|
|
|
| 14.40 – 17.23 |
|
| 245 |
|
| 3.5 |
|
|
|
| 16.02 |
|
|
|
| 19.21 – 22.82 |
|
| 197 |
|
| 4.3 |
|
|
|
| 19.77 |
|
|
| $ | 6.81 – 22.82 |
|
| 787 |
|
| 4.6 |
|
|
|
| 14.71 |
|
|
|
| |
9. | BENEFIT AND RETIREMENT PLANS | |
|
| |
| Defined Contribution and Retirement Plans | |
| The Company sponsors various defined contribution pension and retirement plans, which cover substantially all employees, other than employees covered by multi-employer pension plans under collective bargaining agreements. Total pension and retirement plan expense was $1.8 million, $1.6 million | |
|
| |
| Multi-employer Pension Plans | |
|
| |
| The Company contributes to three multi-employer defined benefit pension plans under the terms of collective-bargaining agreements that cover its union-represented employees. The risks of participating in these multi-employer plans are different from single-employer plans in the following aspects: |
| • | Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers. | |
| • | If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be shared by the remaining participating employers. | |
| • | If a participating employer chooses to stop participating in some of its multi-employer plans, the employer may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability. |
|
| |
| The Company’s participation in these plans for the annual period ended June 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
|
|
|
| Pension |
|
|
|
|
|
|
|
|
|
|
| Expiration Date |
| Number of |
| ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
| Company Contributions |
|
|
|
|
| Pension Protection |
| Company Contributions |
| Expiration Date |
| Number of |
| ||||||||||||||||||||||||||||||||||||
|
| EIN/Pension |
| June 30, |
| Rehabilitation |
| Surcharge |
| Expiration Date | Number of |
| EIN/Pension |
| June 30, |
| Rehabilitation |
| Surcharge |
| |||||||||||||||||||||||||||||||||||
Pension Fund |
|
| 2012 |
| 2011 |
| 2012 |
| 2011 |
| 2010 |
|
| 2013 |
| 2012 |
| 2013 |
| 2012 |
| 2011 |
| Number of | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
Central States Southeast and Southwest Areas Pension Fund |
| 36-6044243 |
| Red |
| Red |
| Implemented |
| $ | 254 |
| $ | 249 |
| $ | 228 |
| Yes |
| 03/28/2015 | 18 | |||||||||||||||||||||||||||||||||
Central States SE and SW Areas Pension Fund |
| 36-6044243 |
| Red |
| Red |
| Implemented |
| $ | 243 |
| $ | 254 |
| $ | 249 |
| Yes |
| 03/28/2015 |
| 18 |
| |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Steelworkers Pension Trust |
| 23-6648508 |
| Green |
| Green |
| No |
| 285 |
| 283 |
| 278 |
| No |
| 11/03/2012 |
| 175 |
|
| 23-6648508 |
| Green |
| Green |
| No |
| 347 |
| 285 |
| 283 |
| No |
| 10/31/2015 |
| 194 |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Central Pension Fund |
| 36-6052390 |
| Green |
| Green |
| No |
|
| 7 |
|
| 7 |
|
| 8 |
| No |
| 06/01/2013 |
| 3 |
|
| 36-6052390 |
| Green |
| Green |
| No |
|
| 7 |
|
| 7 |
|
| 7 |
| No |
| 05/31/2017 |
| 3 |
| |||||||
|
|
|
|
|
|
|
|
|
| $ | 546 |
| $ | 539 |
| $ | 514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 597 |
| $ | 546 |
| $ | 539 |
|
|
|
|
|
|
|
|
|
| The cumulative cost to exit the Company’s multi-employer plans was approximately $8.6 million, $7.8 million |
|
|
|
|
|
|
| The Company has unfunded |
The Company maintains supplemental retirement plans, collectively referred to as the Supplemental Plan, which provides for additional annual defined contributions toward retirement benefits to certain of the Company’s executive officers. For fiscal 2013, 2012 | |
| |
|
|
| Defined Benefit Plan |
|
|
| The Company’s defined benefit pension plan is frozen. There are a total of |
|
|
10. | ACCUMULATED OTHER COMPREHENSIVE |
|
|
| The components of accumulated other comprehensive loss, net of income taxes, are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, |
|
| June 30, |
| |||||||||||
(in thousands) |
| 2012 |
| 2011 |
|
| 2013 |
| 2012 |
| 2011 |
| |||||
Available-for-sale securities |
| $ | 334 |
| $ | 337 |
|
| $ | 394 |
| $ | 334 |
| $ | 337 |
|
Pension and other post-retirement benefit adjustments |
|
| (1,973 | ) |
| (872 | ) |
|
| (1,485 | ) |
| (1,973 | ) |
| (872 | ) |
Total accumulated other comprehensive loss |
| $ | (1,639 | ) | $ | (535 | ) |
| $ | (1,091 | ) | $ | (1,639 | ) | $ | (535 | ) |
|
|
11. | LITIGATION |
|
|
Indiana Civil Litigation – A Complaint for Damages and Injunctive Relief and Request for Jury Trial was filed on March 3, 2011 in Elkhart, Indiana Superior Court by Leo VanNorman, et al, plaintiffs vs. Flexsteel Industries, Inc., et al, defendants. The | |
Plaintiffs have not identified a dollar amount of their alleged | |
|
|
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 Company’s 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 $2.5 million, $2.2 million |
|
|
| Expected future minimum commitments under operating leases as of June 30, |
|
|
|
|
| ||||
(in thousands) |
|
|
| |||||
|
|
|
|
|
|
|
| |
Fiscal Year Ended June 30, | Fiscal Year Ended June 30, | Fiscal Year Ended June 30, | ||||||
2013 |
| $ | 1,842 |
| ||||
2014 |
| 1,705 |
|
| $ | 2,617 |
| |
2015 |
| 1,372 |
|
| 2,218 |
| ||
2016 |
| 1,069 |
|
| 1,679 |
| ||
2017 |
| 931 |
|
| 794 |
| ||
2018 |
| 794 |
| |||||
Thereafter |
|
| 3,418 |
|
|
| 1,985 |
|
|
| $ | 10,337 |
|
| $ | 10,087 |
|
|
|
13. |
|
| |
| SEGMENT REPORTING |
|
|
| The Company operates in one reportable segment, furniture products. Our operations involve the distribution of manufactured and imported furniture for residential and commercial markets. The Company’s furniture products are sold primarily throughout the United States by the Company’s 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 Company’s net sales attributable to each of the areas of application: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
| FOR THE YEARS ENDED JUNE 30, |
|
| FOR THE YEARS ENDED JUNE 30, |
| ||||||||||||||
|
| 2012 |
| 2011 |
| 2010 |
|
| 2013 |
| 2012 |
| 2011 |
| ||||||
Residential |
| $ | 275,442 |
| $ | 258,095 |
| $ | 246,041 |
|
| $ | 311,214 |
| $ | 275,442 |
| $ | 258,095 |
|
Commercial |
|
| 76,647 |
|
| 81,331 |
|
| 80,425 |
|
|
| 74,975 |
|
| 76,647 |
|
| 81,331 |
|
|
| $ | 352,089 |
| $ | 339,426 |
| $ | 326,466 |
|
| $ | 386,189 |
| $ | 352,089 |
| $ | 339,426 |
|
|
|
| SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION– UNAUDITED |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts) |
| FOR THE QUARTER ENDED |
|
| FOR THE QUARTER ENDED |
| ||||||||||||||||||||
|
| September 30 |
| December 31 |
| March 31 |
| June 30 |
|
| September 30 |
| December 31 |
| March 31 |
| June 30 |
| ||||||||
Fiscal 2012: |
|
|
|
|
|
|
|
|
| |||||||||||||||||
Fiscal 2013: |
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net sales |
| $ | 81,520 |
| $ | 85,001 |
| $ | 91,631 |
| $ | 93,936 |
|
| $ | 91,237 |
| $ | 94,590 |
| $ | 98,351 |
| $ | 102,010 |
|
Gross margin |
| 18,964 |
| 20,458 |
| 22,098 |
| 23,759 |
|
| 21,101 |
| 22,747 |
| 22,839 |
| 23,781 |
| ||||||||
Net income |
| 2,378 |
| 2,948 |
| 3,343 |
| 4,399 |
|
| 2,872 |
| 2,922 |
| 3,118 |
| 4,240 |
| ||||||||
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Basic |
| $ | 0.35 |
| $ | 0.44 |
| $ | 0.49 |
| $ | 0.64 |
|
| $ | 0.41 |
| $ | 0.42 |
| $ | 0.44 |
| $ | 0.60 |
|
Diluted |
| $ | 0.34 |
| $ | 0.42 |
| $ | 0.48 |
| $ | 0.61 |
|
| $ | 0.40 |
| $ | 0.40 |
| $ | 0.42 |
| $ | 0.57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| FOR THE QUARTER ENDED |
| ||||||||||
|
| September 30 |
| December 31 |
| March 31 |
| June 30 |
| ||||
Fiscal 2012: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
| $ | 81,520 |
| $ | 85,001 |
| $ | 91,631 |
| $ | 93,936 |
|
Gross margin |
|
| 18,964 |
|
| 20,458 |
|
| 22,098 |
|
| 23,759 |
|
Net income |
|
| 2,378 |
|
| 2,948 |
|
| 3,343 |
|
| 4,399 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 0.35 |
| $ | 0.44 |
| $ | 0.49 |
| $ | 0.64 |
|
Diluted |
| $ | 0.34 |
| $ | 0.42 |
| $ | 0.48 |
| $ | 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 Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) have concluded that the Company’s 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, 2012.2013.
Changes in internal control over financial reporting – During the year-endedfiscal quarter ended June 30, 2012,2013, there was no change in the Company’s 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 Company’s internal control over financial reporting.
Management’s 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, 2012.2013. 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.Framework (1992). Based on those criteria, management concluded that the internal control over financial reporting is effective as of June 30, 2012.2013. The effectiveness of the Company’s internal control over financial reporting as of June 30, 2013, has been audited by Deloitte & Touche LLP, our independent registered public accounting firm, as stated in their report in Part II, Item 8 of this Form 10-K.
|
| |
Item 9B. | Other Information | |
|
| |
None. | ||
| ||
PART III | ||
|
| |
Item 10. | Directors, Executive Officers and Corporate Governance |
The information contained in the Company’s 20122013 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 theGuidelines for Business Conduct that applies to the Company’s 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.
|
|
Item 11. | Executive Compensation |
The information contained in the Company’s 20122013 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 Company’s 20122013 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 |
ThisThe information contained under the sections “Interest of Management and Others in Certain Transactions” and “Corporate Governance – Board of Directors” in the Company’s 20122013 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 wasThe information contained in the Company’s independent registered public accounting firm in fiscal 2012. In addition to performing the audit of the Company’s consolidated financial statements, Deloitte & Touche LLP provided various audit-related services during fiscal 2012.
The Audit and Ethics Committee pre-approves both the type of services2013 definitive proxy statement to be providedfiled with the Securities and Exchange Commission under the sections captioned “Independent Registered Public Accounting Firm” is incorporated herein 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 LLP’s 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 LLP’s independence. All services provided by Deloitte & Touche LLP during fiscal 2012 were pre-approved by the Audit and Ethics Committee.reference.
|
|
|
|
|
|
|
|
(in thousands) |
| 2012 |
| 2011 |
| ||
Audit Fees (1) |
| $ | 363 |
| $ | 358 |
|
Tax Fees (2) |
|
| — |
|
| 15 |
|
|
| $ | 363 |
| $ | 373 |
|
|
| |
|
|
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. |
|
|
|
|
| Schedules |
|
|
|
| The following financial statement schedules for the years ended June 30, 2013, 2012 |
SCHEDULE II
RESERVESVALUATION AND QUALIFYING ACCOUNTS
For the Years Ended June 30, 2013, 2012 2011 and 20102011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
| Balance at |
| (Additions) |
| Additions to |
| Balance at |
|
| Balance at |
| (Additions) Reductions to Income |
| Additions to (Deductions from) |
| Balance at |
| ||||||||
Allowance for Doubtful Accounts: |
|
|
|
|
|
|
|
|
| |||||||||||||||||
Accounts Receivable Allowances: |
|
|
|
|
|
|
|
|
| |||||||||||||||||
2013 |
| $ | 1,910 |
| $ | (215 | ) | $ | (135 | ) | $ | 1,560 |
| |||||||||||||
2012 |
| $ | 2,000 | $ | (150 | ) | $ | 60 | $ | 1,910 |
| $ | 2,000 |
| $ | (150 | ) | $ | 60 |
| $ | 1,910 |
| |||
2011 |
| $ | 2,020 | $ | 870 | $ | (890 | ) | $ | 2,000 |
| $ | 2,020 |
| $ | 870 |
| $ | (890 | ) | $ | 2,000 |
| |||
2010 |
| $ | 1,760 | $ | 920 | $ | (660 | ) | $ | 2,020 |
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). * |
|
|
|
| 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 Flexsteel’s 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 Flexsteel’s 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 April 14, 2010 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 April 19, 2010). |
10.14 | Revolving Line of Credit Note dated April 14, 2010 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 April 19, 2010). | |
10.15 | First Amendment dated June 7, 2011 to Credit Agreement dated April 14, 2010 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). | |
10.16 | 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). | |
10.17 | Second Amendment dated May 11, 2012 to Credit Agreement dated April 14, 2010 between Flexsteel Industries, Inc. and Wells Fargo Bank, N.A. (incorporated by reference to Form 10-Q for the period ended March 31, 2013 filed with the Securities and Exchange Commission on April 18, 2013). | |
10.18 | Revolving Line of Credit Note dated May 11, 2012 between Flexsteel Industries, Inc. and Wells Fargo Bank, N.A. (incorporated by reference to Form 10-Q for the period ended March 31, 2013 filed with the Securities and Exchange Commission on April 18, 2013). | |
10.19 | Third Amendment dated June 28, 2013 to Credit Agreement dated April 14, 2010 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 July 5, 2013). | |
10.20 | Revolving Line of Credit Note dated June 28, 2013 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 July 5, 2013). | |
10.21 | One-Year Incentive Compensation Award for Karel K. Czanderna, dated | |
|
|
|
|
| Restricted Stock Unit Award Agreement for Karel K. Czanderna, dated July 1, 2012 (incorporated by reference to Exhibit 4.1 of Flexsteel’s Form S-8 filed with the Securities and Exchange Commission on August 20, 2012.)* |
|
|
|
| 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. |
|
|
|
| 101.INS | XBRL Instance Document. |
|
|
|
| 101.SCH | XBRL Taxonomy Extension Schema Document. |
|
|
|
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. |
|
|
|
| 101.LAB | XBRL Taxonomy Extension Labels Linkbase Document. |
|
|
|
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. |
|
|
|
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
|
|
|
|
| *Management contracts, compensatory plans and arrangements required to be filed as an exhibit to this report. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
|
Date: | August |
|
| FLEXSTEEL INDUSTRIES, INC. |
|
| |||||
|
|
| By: | /S/ Karel K. Czanderna |
|
|
|
|
| Karel K. Czanderna |
|
|
|
|
| Chief Executive Officer |
|
|
|
|
| and |
|
|
|
|
| Principal Executive Officer |
|
|
|
|
|
|
|
|
|
| By: | /S/ Timothy E. Hall |
|
|
|
|
| Timothy E. Hall |
|
|
|
|
| Chief Financial Officer |
|
|
|
|
| and |
|
|
|
|
| Principal Financial and Accounting Officer |
|
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 |
| /S/ Lynn J. Davis |
|
|
|
| Lynn J. Davis |
|
|
|
| Chairman of the Board of Directors |
|
|
|
|
|
|
Date: | August | /S/ Karel K. Czanderna | ||
�� | Karel K. Czanderna | |||
Director | ||||
Date: | August 23, 2013 |
| /S/ Jeffrey T. Bertsch |
|
|
|
| Jeffrey T. Bertsch |
|
|
|
| Director |
|
|
|
|
|
|
Date: | August |
| /S/ Mary C. Bottie |
|
|
|
| Mary C. Bottie |
|
|
|
| Director |
|
|
|
|
|
|
Date: | August |
| /S/ Patrick M. Crahan |
|
|
|
| Patrick M. Crahan |
|
|
|
| Director |
|
| ||||
Date: | August |
| /S/ Robert E. Deignan |
|
|
|
| Robert E. Deignan |
|
|
|
| Director |
|
| ||||
Date: | August |
| /S/ Thomas M. Levine |
|
|
|
| Thomas M. Levine |
|
|
|
| Director |
|
| ||||
Date: | August |
| /S/ Ronald J. Klosterman |
|
|
|
| Ronald J. Klosterman |
|
|
|
| Director |
|
| ||||
Date: | August |
| /S/ Robert J. Maricich |
|
|
|
| Robert J. Maricich |
|
|
|
| Director |
|
| ||||
Date: | August |
| /S/ Eric S. Rangen |
|
|
|
| Eric S. Rangen |
|
|
|
| Director |
|
| ||||
Date: | August |
| /S/ James R. Richardson |
|
|
|
| James R. Richardson |
|
|
|
| Director |
|
| ||||
Date: | August |
| /S/ Nancy E. Uridil |
|
|
|
| Nancy E. Uridil |
|
|
|
| Director |
|
3233