FORM 10-K
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______ to ______
Commission file number 0-5151
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FLEXSTEEL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 42-0442319
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. BOX 877, DUBUQUE, IOWA 52004-0877
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (319) 556-7730
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
NASDAQ
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $1.00 PAR VALUE
(Title of Class)
-----------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
State the aggregate market value of the voting stock held by
non-affiliates of the registrant as of August 9, 1996 which is within 60 days
prior to the date of filing:
Common Stock, Par Value $1.00 Per Share: $58,684,494
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of August 9, 1996:
CLASS SHARES OUTSTANDING
------------------------------------ ---------------------------
Common Stock, $1.00 Par Value 7,098,565 Shares
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF REGISTRANT'S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR
ENDING JUNE 30, 1996 IN PARTS I, II AND IV.
IN PART III, PORTIONS OF THE REGISTRANT'S 1996 PROXY STATEMENT, TO BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WITHIN 120 DAYS OF THE
REGISTRANT'S FISCAL YEAR END.
Exhibit Index -- page 5
PART I
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
The registrant was incorporated in 1929 and has been in the furniture
seating business ever since. For more detailed information see the registrant's
1996 Annual Report to Shareholders which is incorporated herein by reference.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The registrant's operations consist of one industry segment: upholstered
seating. For more detailed financial information see the registrant's 1996
Annual Report to Shareholders which is incorporated herein by reference.
The registrant's upholstered seating business has three primary areas of
application: home seating, vehicle seating and commercial seating. Set forth
below, in tabular form, is information for the past three fiscal years showing
the registrant's sales of upholstered seating attributable to each of the areas
of application described above:
SALES FOR UPHOLSTERED SEATING APPLICATIONS
1996 1995 1994
------------------ ----------------- -----------------
AMOUNT OF SALES AMOUNT OF SALES AMOUNT OF SALES
------------------ ----------------- -----------------
Home Seating........................... $128,600,000 $131,500,000 $123,100,000
Vehicle Seating........................ 58,200,000 60,700,000 58,500,000
Commercial Seating..................... 18,200,000 16,200,000 13,800,000
------------------ ----------------- -----------------
Upholstered Seating Total........... $205,000,000 $208,400,000 $195,400,000
================== ================= =================
(c) NARRATIVE DESCRIPTION OF BUSINESS
(1) (i), (ii), (vii) The registrant is engaged in one segment of business,
namely, the manufacture and sale of a broad line of quality upholstered
furniture for the retail furniture market, contract furniture market and
recreational vehicle furniture market. The registrant's classes of products
include a variety of wood and upholstered furniture including upholstered
reclining and rocker-reclining chairs, swivel rockers, chairs, sofas, sofa beds,
loveseats and convertible bedding units, some or all of which are for the home,
office, recreational vehicles, vans and mobile homes. Featured as a basic
component in most of the upholstered furniture is a unique drop-in-seat spring.
The registrant primarily distributes its products throughout most of the United
States through the registrant's sales force to approximately 3,000 furniture
dealers, department stores and R.V. manufacturers. The registrant's products are
also sold to several national chains, some of which sell on a private label
basis.
(iii) Sources and availability of raw materials essential to the
business:
The registrant's furniture products utilize oak, gum and other
species of hardwood lumber obtained from Arkansas, Mississippi, Missouri
and elsewhere. In addition to lumber and plywood, principal raw materials
utilized in the manufacturing process include bar and wire stock, high
carbon spring steel, fabrics and polyurethane. While the registrant
purchases these materials from outside suppliers, it is not dependent upon
any single source of supply. The raw materials are all readily available.
(iv) Material patents and licenses:
The registrant owns the American and Canadian improvement patents to
its Flexsteel seat spring, as well as, patents on convertible beds and
various other recreational vehicle seating products. In addition, it holds
licenses to manufacture certain rocker-recliners. The registrant does not
consider its patents and licenses material to its business.
(v) The registrant's business is not considered seasonal.
(viii) The approximate dollar amounts of backlog of orders believed
to be firm as of the end of the last fiscal year and the preceding fiscal
year are as follows:
JUNE 30, 1996 JUNE 30, 1995
--------------------------- --------------------------
$22,600,000* $20,400,000
*All of this amount is expected to be filled and billed in fiscal year
ending June 30, 1997.
(x) Competitive conditions:
The furniture industry is highly competitive. There are numerous
furniture manufacturers in the United States. Although the registrant is
one of the largest manufacturers of upholstered furniture in the United
States, according to the registrant's best information it manufactures and
sells less than 4% of the upholstered furniture sold in the United States.
The registrant's principal method of meeting competition is to emphasize
its product performance and to use its sales force.
(xi) Expenditures on Research Activities:
Most items in the upholstered seating line are designed by the
registrant's own design staff. New models and designs of furniture, as
well as new fabrics, are introduced continuously. The registrant estimates
that approximately 40% of its upholstered seating line is redesigned in
whole or in part each year. In the last three fiscal years, these redesign
activities involved the following expenditures:
FISCAL YEAR ENDING EXPENDITURES
------------------------- -------------------------
June 30, 1994 $1,340,000
June 30, 1995 $1,490,000
June 30, 1996 $1,485,000
(xiii) Approximately 2,200 people are employed by the registrant.
(d) FINANCIAL INFORMATION ABOUT DOMESTIC OPERATIONS
The registrant has no foreign operations and makes minimal export sales.
Financial information about domestic operations is set forth in the registrant's
1996 Annual Report to Shareholders which is incorporated herein by reference.
ITEM 2. PROPERTIES
(a) THE REGISTRANT OWNS THE FOLLOWING MANUFACTURING PLANTS:
APPROXIMATE SIZE
LOCATION (SQUARE FEET) PRINCIPAL OPERATIONS
- --------------------------------- -------------------- ---------------------------------------------
Dubuque, Iowa 845,000 Upholstered Furniture -- Recreational Vehicle
-- Metal Working
Lancaster, Pennsylvania 216,000 Upholstered Furniture -- Recreational Vehicle
Riverside, California 206,000 Upholstered Furniture -- Recreational Vehicle
Harrison, Arkansas 123,000 Woodworking Plant
New Paris, Indiana 168,000 Upholstered Furniture -- Recreational Vehicle
Dublin, Georgia 153,000 Upholstered Motion Furniture
Starkville, Mississippi 349,000 Upholstered Furniture -- Woodworking Plant
Sweetwater, Tennessee* 106,000
- ----------------------
* Production at this plant has ceased and the plant is for sale.
The registrant's operating plants are well suited for their
manufacturing purposes and have been updated and expanded from time to
time as conditions warrant. There is adequate production capacity to meet
present market demands.
The registrant leases showrooms for displaying its products in the
furniture marts in High Point, North Carolina and San Francisco, California.
The registrant leases one warehouse in Vancouver, Washington of
approximately 15,750 sq. feet for storing its products prior to distribution.
(b) OIL AND GAS OPERATIONS: NONE.
ITEM 3. LEGAL PROCEEDINGS
The Company has no material legal proceedings pending other than ordinary
routine litigation incidental to the business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter no matter was submitted to a vote of security
holders.
The 1995 Stock Option Plan was approved and all nominee directors
re-elected at the December 5, 1995 annual shareholders' meeting.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the registrant, their ages, positions (in each
case as of June 30, 1996), and the month and year they were first elected or
appointed an officer of the registrant, are as follows:
NAME (AGE) POSITION (DATE FIRST BECAME OFFICER)
- ------------------------------------ ----------------------------------------------------------------------
K. B. Lauritsen (53) President/Chief Executive Officer (November 1979)
E. J. Monaghan (57) Executive Vice President/Chief Operating Officer (November 1979)
R. J. Klosterman (48) Vice President Finance/Chief Financial Officer & Secretary (June 1989)
J. R. Richardson (52) SeniorVice President of Marketing (November 1979)
P. M. Crahan (48) Vice President (June 1989)
J. T. Bertsch (41) Vice President (June 1989)
Each named executive officer has held the same office or an executive or
management position with the registrant for at least five years.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
The NASDAQ -- National Market System, is the principal market on which the
registrant's Common Stock is being traded. The market prices for the stock and
the dividends paid per common share, for each quarterly period during the past
two years is shown in the registrant's Annual Report to Shareholders for the
Year Ended June 30, 1996, and is incorporated herein by reference.
There were approximately 1,646 holders of Common Stock of the registrant
as of June 30, 1996.
ITEM 6. SELECTED FINANCIAL DATA
This information is contained on page 6 in the registrant's Annual Report
to Shareholders for the Year Ended June 30, 1996, under the caption "Five Year
Review" and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis is contained on page 7 in the
registrant's Annual Report to Shareholders for the Year Ended June 30, 1996 and
is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements of the Company included in the
financial report section of the Annual Report to Shareholders for the Year Ended
June 30, 1996, are incorporated herein by reference:
PAGE
------
Balance Sheets, June 30, 1996, 1995......................... 8
Statements of Income and Retained Earnings --
Years Ended June 30, 1996, 1995, 1994................ 9
Statements of Cash Flows --
Years Ended June 30, 1996, 1995, 1994................ 10
Quarterly Financial Data 1996, 1995......................... 12
Notes to Financial Statements............................... 11-12
Independent Auditors' Report................................ 9
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
During fiscal 1996 there were no changes in or disagreements with
accountants on accounting procedures or accounting and financial disclosures.
PART III
ITEMS 10, 11, 12. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT,
EXECUTIVE COMPENSATION AND SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information identifying directors of the registrant, executive
compensation and beneficial ownership of registrant stock and supplementary data
is contained in the registrant's 1996 definitive Proxy Statement to be filed
with the Securities and Exchange Commission and is incorporated herein by
reference. Executive officers are identified in Part I, Item 4 above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is contained under the heading "Certain Relationships and
Related Transactions" in the registrant's 1996 definitive Proxy Statement to be
filed with the Securities and Exchange Commission and is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
The financial statements of the registrant included in the Annual
Report to Shareholders for the Year Ended June 30, 1996, are incorporated
herein by reference as set forth above in ITEM 8.
(2) Schedules
The following financial schedule for the years ended 1996, 1995 and
1994 is submitted herewith:
PAGE
----
SCHEDULE VIII -- Reserves............................................ 8
Other schedules are omitted because they are not required or are not
applicable or because the required information is included in the
financial statements incorporated by reference above.
(3) Exhibits
3.1 Restated Articles of Incorporation incorporated by reference to
Exhibits to the Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1988.
3.2 Bylaws of the Registrant incorporated by reference to Exhibits to
the Annual Report on Form 10-K for the fiscal year ended June 30,
1994.
11 Computation of Earnings Per Share attached as EXHIBIT 1 hereto
13 Annual Report to Shareholders for the Year Ended June 30, 1996,
attached as EXHIBIT 2 hereto
99 1996 Form 11-K for Salaried Employees' Savings Plan 401(k) attached
as EXHIBIT 3 hereto
23 Independent Auditors' Report attached as EXHIBIT 4 hereto
22 1996 definitive Proxy Statement incorporated by reference is to
be filed with the Securities and Exchange Commission on or before
December 1, 1996.
23 Consent of Independent Auditors attached as EXHIBIT 6 hereto
4 Instruments defining the rights of security holders, including
indentures.
The issuer has not filed, but agrees to furnish upon request to the
Commission copies of the Mississippi Industrial Development Revenue
Bond Agreement issued regarding the issuer's facilities in
Starkville, MS.
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the last quarter of the fiscal
year ended June 30, 1996.
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: September 10, 1996 FLEXSTEEL INDUSTRIES, INC.
By: /S/ K. B. LAURITSEN
-----------------------------------
K. B. LAURITSEN
PRESIDENT, CHIEF EXECUTIVE OFFICER
and
PRINCIPAL EXECUTIVE OFFICER
By: /S/ R. J. KLOSTERMAN
-----------------------------------
R. J. KLOSTERMAN
VICE PRESIDENT OF FINANCE
and
PRINCIPAL FINANCIAL OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: September 10, 1996 /S/ FRANK H. BERTSCH
------------------------------- -------------------------------------
Frank H. Bertsch
DIRECTOR
Date: September 10, 1996 /S/ J. B. CRAHAN
------------------------------ -------------------------------------
J. B. Crahan
DIRECTOR
Date: September 10, 1996 /S/ ART D. RICHARDSON
------------------------------- -------------------------------------
Art D. Richardson
DIRECTOR
Date: September 10, 1996 /S/ K. BRUCE LAURITSEN
------------------------------- ------------------------------------
K. Bruce Lauritsen
DIRECTOR
Date: September 10, 1996 /S/ EDWARD J. MONAGHAN
------------------------------- -------------------------------------
Edward J. Monaghan
DIRECTOR
Date: September 10, 1996 /S/ JAMES G. PETERSON
------------------------------- -------------------------------------
James G. Peterson
DIRECTOR
Date: September 10, 1996 /S/ THOMAS E. HOLLORAN
------------------------------- -------------------------------------
Thomas E. Holloran
DIRECTOR
Date: September 10, 1996 /S/ JAMES R. RICHARDSON
------------------------------- -------------------------------------
James R. Richardson
DIRECTOR
Date: September 10, 1996 /S/ L. BRUCE BOYLEN
------------------------------- -------------------------------------
L. Bruce Boylen
DIRECTOR
Date: September 10, 1996 /S/ JOHN R. EASTER
------------------------------- -------------------------------------
John R. Easter
DIRECTOR
SCHEDULE VIII
FLEXSTEEL INDUSTRIES, INC.
RESERVES
FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------------------------------------------- ----------------- ----------------- ------------------ ------------------
BALANCE AT ADDITIONS
BEGINNING OF CHARGED TO DEDUCTIONS FROM BALANCE AT CLOSE
DESCRIPTION YEAR INCOME RESERVES (NOTE) OF YEAR
- -------------------------------------------- ----------------- ----------------- ------------------ ------------------
Allowance for Doubtful Accounts:
1996 ................................ $ 2,160,000 $ 1,246,000 $ 1,253,000 $ 2,153,000
================= ================= ================== ==================
1995 ................................ $ 1,960,000 $ 574,000 $ 374,000 $ 2,160,000
================= ================= ================== ==================
1994 ................................ $ 2,163,000 $ 600,000 $ 803,000 $ 1,960,000
================= ================= ================== ==================
- ---------------
NOTE -- UNCOLLECTIBLE ACCOUNTS CHARGED AGAINST RESERVE, LESS RECOVERIES.
EXHIBIT 1
FLEXSTEEL INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER SHARE
YEAR ENDED JUNE 30
----------------------------------------------------------------------------------
1996 1995 1994 1993 1992
-------------- -------------- -------------- -------------- --------------
Primary (Note 1):
Net earnings applicable to
common stock ..................... $4,502,170 $5,210,903 $6,787,163 $6,184,914 $1,689,679
=============== =============== =============== =============== ===============
Weighted Average Number of shares
outstanding during the year....... 7,172,299 7,178,285 7,140,144 7,090,041 7,048,494
=============== =============== =============== =============== ===============
Earnings Per Share.................... $.63 $.73 $.95 $.87 $.24
=============== =============== =============== =============== ===============
NOTE 1 -- The calculation of earnings per share for the five years ended
June 30, 1996 excludes the effect of common equivalent shares
resulting from outstanding stock options as the effect would not be
material. The effect on 1996, 1995, 1994, 1993, and 1992 earnings per
share, assuming exercise of dilutive stock options by the treasury
stock method, would reduce earnings per share by less than 3% (1996,
$4,502,170 / 7,188,908 shares = $.626 or .0%; 1995, $5,210,903 /
7,178,285 shares = $.726 or .0%; 1994, $6,787,163 / 7,170,070 shares
= $.947 or .4%; 1993, $6,184,914 / 7,137,694 shares = $.867 or .6%;
1992, $1,689,679 / 7,076,053 shares = $.239 or .1%).
EXHIBIT 2
F L E X S T E E L I N D U S T R I E S I N C O R P O R A T E D
ANNUAL REPORT
Fiscal Year Ended June 30, 1996
MOMENTUM
for the 21st Century
-COVER-
FINANCIAL HIGHLIGHTS
Year Ended June 30 1996 1995 1994
Net Sales....................................... $205,008,000 $208,432,000 $195,388,000
Income Before Taxes............................. 7,052,000 8,111,000 10,092,000
Net Income (1).................................. 4,502,000 5,211,000 6,787,000
Per Share of Common Stock
Earnings (1).................................... .63 .73 .95
Cash Dividends.................................. .48 .48 .48
Average Shares Outstanding...................... 7,172,000 7,178,000 7,140,000
At June 30
Working Capital................................. 47,376,000 46,272,000 47,787,000
Net Plant and Equipment......................... 23,046,000 24,376,000 18,829,000
Total Assets.................................... 95,874,000 96,271,000 95,088,000
Shareholders' Equity............................ 74,147,000 73,824,000 71,289,000
Long-Term Debt.................................. 35,000 70,000 105,000
(1) 1994 income and per share amounts reflect cumulative effect of
accounting change as of June 30, 1994 of $320,000 (net of income taxes)
or $.04 per share income.
FLEXSTEEL(R)
INDUSTRIES INCORPORATED
[PHOTO]
Front Cover: Exemplifying the best of home fashion is this blending of Old World
elegance into today's life styles. Classic details include the turned Victorian
legs and a sculpted, attached pillow-back, while the collage of mixed fabrics
and nailhead trim are very today. Pairing this Centennial Royale sofa with the
leather, tufted-back lounge chair and its matching ottoman creates a room
setting which dramatizes comfort.
-INSIDE FRONT COVER-
To Our Shareholders
The home furnishings industry remains challenging. The sluggish retail
environment that decelerated sales in the final quarters of our previous fiscal
year carried over into our fiscal year just completed; coupled with the negative
activity that permeated this past winter's retail sales and recreational vehicle
sales, it adversely affected our revenues for the year.
For the full year ending June 30, 1996, revenues were $205,008,000 versus
$208,432,000 generated the previous year. Earnings were $4,502,000 or $.63 per
share, compared to earnings of $5,211,000 or $.73 per share a year earlier.
While this is clearly disappointing, we are extremely encouraged with the
dramatic earnings recovery in our final quarter: earnings were $1,925,000 or
$.27 per share, versus earnings of $350,000 or $.05 per share in the comparable
quarter in 1995, or an earnings increase of 450%.
RESIDENTIAL SEATING
The current housing recovery is helping our industry. Retail business, after
showing impressive gains in the spring, leveled off at a higher plateau. This
sales increase has given us the opportunity to take advantage of improved
productivity resulting from capital expenditures initiated in the previous
fiscal year.
We continue to gain momentum with the fresh concepts in marketing being
introduced in our recently-unveiled Comfort Seating Program. This program
provides the dealer a state-of-the-art product display, focussing on the
breadth of our entire home furnishings line, in a dedicated space of 6,500
square feet. The Comfort Seating Showroom is a complete concept which can be
introduced into an existing store or introduced separately in a free-standing
store.
Comfort Seating has created a lot of enthusiasm among our dealers, and we
expect significant sales increases as the program expands.
We enjoy excellent acceptance with major retailers; in fact, our position has
never been stronger. We will continue our aggressive pursuit of a greater share
of this major market.
Our Gallery Program continues to be a vital part of our business; we work
closely with our 170-plus independent retail dealers who have dedicated display
areas in their stores exclusively to Flexsteel. We will also open Gallery
Boutiques this fall in 30 Sears Homelife stores.
Finally, we continue to push our presence in the international marketplace.
Unfortunately, the strength of the dollar in certain Pacific Rim countries has
increased the cost of American-made furniture some 30% in the past year.
Nevertheless, we continue to show moderate sales increases, and we feel that
international opportunities are worth the expense of continuing to pursue them.
[PHOTO]
Jack B. Crahan, Chairman of the Board (1) and K. Bruce Lauritsen, President and
CEO. Mixed fabrics on this classic Flexsteel sofa are typical of popular
eclecticism.
WE
CONTINUE
TO BUILD
FLEXSTEEL
MOMENTUM
FOR AN
EXCITING
NEW
CENTURY.
[PHOTOS]
Top: The new Comfort Seating Showroom greets shoppers with a welcoming ambience.
The design makes use of insights from focus groups and proven retailing
techniques to put the customer at ease. It invites return visits.
Bottom: This Van Pak, a handsome group of recreational vehicle seating, features
exclusive adjustable arms.
PAGE 1
RECREATIONAL VEHICLE SEATING
A soft market in van conversions and recreational vehicle sales during the
first half of this fiscal year contributed to a reduction in sales and profits
in those industries. However, with a resurgence in sales this spring, our
production of seating for RVs is now running at a much higher level.
We continue to bolster our leadership in this field with innovative product
design and engineering, critical elements in our success. We are introducing
more exciting, new products; at the same time we are reducing the lead time and
costs in their development.
Among manufacturing improvements is the consolidation of our metal working
and our fabric cutting and sewing operations in our Dubuque, Iowa, plant for a
more efficient, cell-type manufacturing operation. All of these will combine to
help us continue to increase our market share, and will enhance next year's
earnings.
COMMERCIAL SEATING
Production formerly at our Sweetwater, Tennessee, facility has now been
consolidated at our Starkville, Mississippi, plant. Production of commercial
seating at this expanded and modernized plant is now fully operational, with the
problems of re-arrangement and integration of the Charisma(R) product line
behind us. This consolidation will allow us to enjoy the benefits of economies
of scale and improved service. It should also allow us to improve the product
lines, customer satisfaction and, ultimately, earnings.
You will recall that we took a one-time charge of $300,000 or $.04 per share
in our first quarter to close out the manufacturing facility in Tennessee. The
building is now vacated, though not yet sold.
During the past fiscal year we announced a plan to repurchase a half-million
shares of Flexsteel stock. We believe the tender is an appropriate use of excess
cash while enhancing the value of our stock by improving earnings per share.
OUTLOOK
We expect another year of intense competition, with customers continuing to
focus on value, quality, service and price. We believe that our newest changes
this past year will help us meet these customer needs better than ever.
We remain buoyed by our unusually strong balance sheet, a national network of
excellent dealers, and modern facilities strategically located for optimum
customer service. If the economic environment remains relatively stable, we
believe the positive steps we have taken will continue to improve our market
share, customer satisfaction, and shareholder value.
We are grateful for the continued support of all of our retailers, suppliers,
associates and stockholders.
/s/ Jack B. Crahan
JACK B. CRAHAN
Chairman of the Board of Directors
/s/ K. Bruce Lauritsen
K. BRUCE LAURITSEN
President & Chief Executive Officer
[PHOTOS]
TOP: Charmingly-shaped "swan's-neck" arms add a graceful note to this
Charisma(R) rocker. The shaped wood is beautifully finished, arms and back
upholstered.
CENTER: Fresh styling, in fabric and proportion, and a new emphasis on comfort,
characterize furniture for today's life styles. In addition to the recliner and
reclining sofa shown, this group includes a love seat and a sectional.
BOTTOM: Extended-stay hotels and rental condos are a rapidly-growing market for
dual-purpose seating. Handsomely-styled pieces such as this sofa sleeper are
contributing to Flexsteel's growing share of the commercial seating market.
PAGE 2
Fresh momentum is animating Flexsteel's marketing.
In home furnishings, we have continued to study the evolving life styles of
today's more sophisticated consumer. Our strongest market niche today is in a
younger, more metropolitan audience; their taste is eclectic, their lifestyle is
more casual, their styling preferences typically transitional.
Focus groups have helped us evaluate not only that market's needs but also
the impact of the retail environment. From these studies has emerged one of the
most exciting developments in Flexsteel's history.
COMFORT SEATING SHOWROOMS are a new generation of consumer-friendly stores.
Whether free-standing or in existing stores, independently-owned Comfort Seating
Showrooms use fresh display concepts to create a memorable shopping environment,
conducive to the revisits that are part of the furniture purchase decision.
Inviting, bright and open, Comfort Seating Showrooms are also laid out for
selling effectiveness. The distinctive interiors were created with the help of
Grid II International, a specialist in the creation of effective retail
environments. These showrooms are expected to increase sales per-square-foot
even above that of the excellent performance of Flexsteel Galleries.
Comprehensive advertising and other dealer merchandising aids are available
to all dealers. Upscale retail advertising, targeted to emotive issues of core
audiences, is available to Comfort Seating Showrooms and Flexsteel Gallery
dealers, who also have access to an exclusive selection of high-fashion designer
fabrics. Our new line of accent tables also helps the dealer increase the
dollar amount of his sales.
ANOTHER MARKETING INNOVATION is the ready-to-assemble recliner, ideal for
specialty direct-mail marketing. Shipped by UPS in two cartons, assembled in
seconds, these recliners can be customized with school or corporate logos.
THE COMMERCIAL SEATING MARKET continues to evolve. In the hospitality
industries, a significant development is the rapid emergence of the
extended-stay hotel, now being introduced by the major hotel chains. Their
seating needs vary from those of traditional hotels, using, for example, more
sofa sleepers and recliners and even office-type chairs for executives who work
with computers in their rooms. Flexsteel's growing share of the market includes
significant placements in Summerfield Suites and the Wyndham Garden Hotels.
Other growing markets are found in campus-type senior living facilities and
the health-care markets, including both long-term and acute-care markets. All
these markets require specialized seating such as that developed by Flexsteel.
THE RECREATIONAL VEHICLE SEATING market continues to expand even though
there has been considerable consolidation of the customer base. Flexsteel has
long had momentum in this market, and continues to stay ahead of the curve in
testing, and in meeting or exceeding increasingly stringent safety standards.
FUTURE SALES GROWTH will come through all these markets both at home and
abroad, where customers in Europe, Canada, Japan, and the Pacific Rim are now
discovering Flexsteel. We, in turn, are discovering the preferences of these
international buyers, and now ship to countries in five continents.
[PHOTO]
Special signage and subtle decor greet visitors to the Comfort Seating Showroom
and direct them toward the entire collection of vignettes.
MOMENTUM IN MARKETING
COMFORT
SEATING
DISPLAYS
FLEXSTEEL AT ITS
RELEVANT BEST,
OUR RESPONSE
TO TODAY'S
ECLECTIC
CONSUMER.
[PHOTOS]
TOP: Ready-to-assemble recliners with college emblems, sold directly by Groves
Marketing.
BOTTOM: Our new accent tables blend beautiful fossil stone with graceful
wrought iron.
PAGE 3
Market research has confirmed that today's consumer is sophisticated and expects
quality. She knows that Flexsteel meets her quality standards. Many who choose
Flexsteel motion pieces, for example, do so for upgraded styles and fabrics, and
are willing to pay a bit more for our quality and comfort.
Keeping our vital momentum goes beyond research. Change accelerates; recent
years have seen more change in markets and technologies than did our founders in
their lifetimes.
NEW VERTICAL STRUCTURES at Flexsteel are replacing some traditional
management concepts. Each of our three core seating markets - residential,
commercial, automotive - has its own division and leadership, with
responsibilities embracing every aspect from design to production to sales.
IN RESIDENTIAL FURNISHINGS, we define the most profitable price point and
design to meet the consumer's key requirements - comfort and fashion.
Home fashion leaders today are leather and motion furniture. Leather has long
been one of our strengths, and we offer a range of today's most popular styles,
among them soft Euro looks. The expansion of our Dubuque facility added two
dedicated cutting and sewing rooms; all leather cutting is now done in one
facility, reducing our materials handling costs.
In motion furniture, our "studio" styling, sculptured and roomy, is very
successful. For greater cost effectiveness, we've concentrated production of
motion furniture for markets east of the Rockies in our Dublin, Georgia,
facility, now operating two shifts.
MARKET NICHES are similarly defined in commercial and recreational vehicle
seating, and our product development follows Flexsteel's proven strengths. We
continue to increase our shares of both these markets.
But in all these markets, fast response is a key to success. Close looks at
our methods, use of technology, and scheduling techniques have resulted in
numerous improvements.
BUYERS OF RECREATIONAL VEHICLES today expect upscale automotive design. We've
been a leader for many years in the design and manufacture of seating for vans,
motor homes and travel trailers. Customers here, too, demand more comfort
features, such as adjustable arms, lumbar supports, and power adjustments.
The most luxurious motor homes today even feature Flexsteel recliners.
Vacation motor homes with "push-out" sides provide more sleeping space, and thus
use more of our sofa sleepers.
EXTENDED-STAY HOTELS have their own seating requirements: especially popular
are Flexsteel's high-leg recliners which dress up a suite while still providing
recliner comfort. The popularity of these suites has also increased the demand
for sofa sleepers.
RAPIDLY-GROWING HEALTH-CARE industries continue to demand furnishings that
are utilitarian in function and wear, but with the fashion and comfort of fine
residential furniture.
TECHNOLOGY HELPS US make vertical structures more efficient than was possible
in the past, by defining shared horizontal layers within our three core
businesses. Virtually instant communications from factory to factory, and
between factory and customers, helps standardize certain parts and/or processes,
maximize plant efficiency, and make purchasing more cost-effective.
[PHOTO]
Leather's popularity continues: consumers choose it for comfort and durability.
Flexsteel's leather furniture is known for its skillful tailoring and beautiful
palette of fashion colors.
FOCUSSING ON MOMENTUM
WE DEFINE
MARKETS
AND APPLY
TECHNOLOGY
TO FOCUS
EFFECTIVELY
ON THEIR
KEY NEEDS.
[PHOTOS]
TOP: The popular recreation
room for Madison House residents features club and wing chairs from our
commercial seating division. Interior design by Annemarie Kretschmann.
BOTTOM: Innovative Flexsteel designers created this sleeper chair, a space saver
for recreational vehicles, and popular in international markets.
PAGE 4
Our associates play key roles in Flexsteel's enviable reputation for quality
and performance. They design, market, sew, upholster, inspect and deliver to
meet the consumer's high expectations.
Nowhere has this been better demonstrated than by awards recently given to
Flexsteel, awards which were accepted on behalf of all Flexsteel associates.
THE SEARS' CHAIRMAN'S AWARD was awarded to Flexsteel as Quality Source of the
Year. More than 10,000 vendors serve Sears, and quality is constantly monitored.
This Sears' award was given for their "Partners in Progress" program in which
Flexsteel scored a perfect five for quality. This "perfect five" was achieved by
Flexsteel people who measured up to, or exceeded, the program's demanding
criteria in every aspect of business, from product quality to shipping to
marketing support to leadership to innovation to ethics in business.
The Top Supplier of the Year award was given by Starcraft Automotive to
Flexsteel for "continuous support, consistent good quality, and delivery along
with a total commitment to research and development". It is an excellent tribute
to the accomplishments of our recreational vehicle seating teams.
TECHNOLOGY IS A BOON to our craftsman's skills and frees us to concentrate on
quality. Computerized fabric cutting makes the best use of fabric and
standardizes pattern matching for maximum beauty of our upholstery.
Computer-controlled routers help in frame construction. Computerized ordering
and shipping reduces paperwork and errors. A new corporate E-mail system has
speeded up exchange of vital information between factories.
New wood technology allows us to make stronger frames, such as one-piece arms
that completely eliminate failure-prone joints. Not only are the frames better,
but we are making better use of our precious forest resources.
We continue to find new ways to standardize certain production operations,
while still offering the range of custom options that makes Flexsteel so
attractive to our key customers. This allows us to make better use of factory
space as well as to reduce inventory expenses.
It is these people of Flexsteel who will continue the momentum that has
sustained us through one hundred and three years. There are over 2200 associates
leading Flexsteel through its 103rd year, with the combined experience of
centuries. Many of them are following in the footsteps of other family members,
so that now many of our people represent a third-generation helping to continue
Flexsteel's leadership into the 21st century.
[PHOTO]
More than 10,000 vendors were evaluated for Sears "Partners in Progress" Chair
man's Award, received by Flexsteel this year.
SUSTAINING MOMENTUM
FLEXSTEEL'S
SECRET IS ITS
PEOPLE, USING
THE BEST SKILLS,
ARTS AND
TECHNOLOGIES
TO CREATE
THE FINEST IN
FURNITURE.
[PHOTOS]
TOP: Applying an informal fabric gives a new dimension to this ever-popular
classic silhouette
BOTTOM: From Flexsteel's premium Centennial Royale line, this group features the
overscale, extra-soft cushions and eclectic fabric selections popular in today's
informal lifestyles.
PAGE 5
FLEXSTEEL INDUSTRIES, INC.
FIVE YEAR REVIEW
(All amounts in thousands except for Per Share data)
1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------
SUMMARY OF OPERATIONS
Net Sales..................................... $205,008 $208,432 $195,388 $177,271 $157,916
Cost of Sales................................. 161,451 164,231 151,066 136,110 122,294
Interest and Other Expense.................... 358 372 270 252 277
Interest and Other Income..................... 1,048 973 990 1,460 2,076
Income Before Taxes........................... 7,052 8,111 10,092 9,710 2,640
Income Taxes.................................. 2,550 2,900 3,625 3,525 950
Net Income (1)................................ 4,502 5,211 6,787 6,185 1,690
Earnings per Common Share (1)................. .63 .73 .95 .87 .24
Cash Dividends per Common Share............... .48 .48 .48 .48 .48
STATISTICAL SUMMARY
Average Common Shares Outstanding............. 7,172 7,178 7,140 7,090 7,048
Book Value per Common Share................... 10.45 10.28 9.98 9.57 9.17
Total Assets.................................. 95,874 96,271 95,088 87,861 81,843
Net Plant and Equipment....................... 23,046 24,376 18,829 17,208 17,228
Capital Additions............................. 3,290 9,682 5,074 3,273 1,966
Working Capital............................... 47,376 46,272 47,787 49,707 46,863
Long-Term Debt................................ 35 70 105 140 345
Shareholders' Equity.......................... 74,147 73,824 71,289 67,855 64,640
SELECTED RATIOS
Earnings as Percent of Sales.................. 2.2% 2.5% 3.5% 3.5% 1.1%
Current Ratio................................. 3.5 3.4 3.3 3.9 4.3
Return on Total Capital....................... 6.1% 7.1% 9.5% 9.1% 2.6%
Return on Beginning Common Equity............. 6.1% 7.3% 10.0% 9.6% 2.6%
Average Number of Employees................... 2,230 2,375 2,240 2,120 2,040
(1) 1994 income and per share amounts reflect cumulative effect of
accounting change as of June 30, 1994, of $320,000 (net of income
taxes) or $.04 per share income.
FLEXSTEEL INDUSTRIES, INC. QUARTERLY COMMON STOCK DATA
FISCAL YEAR 1995-96
PER SHARE MARKET PRICE*
EARNINGS DIVIDEND HIGH LOW
First Quarter .06 .12 12 5/8 10 1/4
Second Quarter .10 .12 12 10 1/4
Third Quarter .20 .12 10 3/4 8 5/8
Fourth Quarter .27 .12 11 3/4 9 1/2
FISCAL YEAR 1994-95
PER SHARE MARKET PRICE*
EARNINGS DIVIDEND HIGH LOW
First Quarter .22 .12 13 1/4 9 1/2
Second Quarter .21 .12 13 3/4 10
Third Quarter .25 .12 13 1/4 10 1/2
Fourth Quarter .05 .12 12 10 1/4
Flexsteel has paid cash dividends on its common stock for 218 consecutive
quarters. The Company expects to continue regular dividend payments. As of June
18, 1996, there were 1,646 holders of Flexsteel's outstanding common stock.
* Reflects the Market prices as quoted by the National Association of Securities
Dealers, Inc.
PAGE 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITIONS
Working Capital - Flexsteel's working capital at June 30, 1996 is $47,376,000
which includes cash, cash equivalents, and temporary investments of $12,808,000.
Working capital increased by $1,104,000 from June 30, 1995. The Company has
lines of credit of $5,700,000 with banks for short-term borrowings, which have
not been utilized since 1979. The Company has outstanding borrowings of
$2,600,000 in the form of variable rate demand industrial development revenue
bonds.
Capital Expenditures - Capital expenditures were $3,290,000 in fiscal 1996.
These expenditures were for manufacturing facility improvements, manufacturing,
and delivery equipment. Projected capital spending in fiscal 1997 is
approximately $4,500,000 for manufacturing and delivery equipment. The funds
required for these expenditures will be provided from available cash.
Dividends - Dividends were $.48 per share both years. The Board of Directors
determine dividend levels based on the Company's ability to pay its obligations,
capital expenditure requirements, and other related factors.
Economic Conditions - The Company anticipates that demand for its seating
products will remain steady throughout fiscal 1997, assuming no significant
changes in interest rates or consumer spending. Management will concentrate on
simplification of the product lines to improve quality, service, and delivery
times. Operating profit improvements should result from product line refinements
and improved productivity resulting from capital improvements undertaken in the
prior fiscal year.
RESULTS OF OPERATIONS
FISCAL 1996 COMPARED TO FISCAL 1995
Sales for 1996 decreased by $3,424,000 or 1.6% compared to 1995. Home
Furnishings sales volume decreased $2,848,000 or 2.2%, Recreational Vehicle
products decreased $2,519,000 or 4.2%, while Commercial Seating increased
$1,943,000 or 12.0%. Cost of goods sold decreased by $2,780,000 for the year as
compared to 1995 due to the volume decrease. Selling, general and administrative
expenses were 18.1% in fiscal 1996 compared to 17.6% in fiscal 1995. This
increase reflects approximately $400,000 of additional costs associated with
enhancements to our Comfort Seating Gallery Program and an increase of
approximately $675,000 in bad debt provision. The above factors resulted in
fiscal year 1996 net earnings of $4,502,000 or $.63 per share compared to
$5,211,000 or $.73 per share in fiscal 1995, a net decrease of $709,000 or $.10
per share.
FISCAL 1995 COMPARED TO FISCAL 1994
Sales for 1995 increased by $13,044,000 or 6.7% compared to 1994. Home
Furnishings sales volume increased $8,359,000 or 6.8%, Contract Furniture
increased $2,507,000 or 18.2%, and Recreational Vehicle products increased
$2,178,000 or 3.7%. Cost of goods increased $13,164,000 for the year as compared
to 1994. Approximately $3,000,000 of this increase relates to lower margins,
increased material costs, and inefficiencies due to decreased volume in the
fourth quarter of the year, with the remainder due to overall increased volume
for the year. Selling, general and administrative expenses were 17.6% in fiscal
1995 compared to 17.9% in 1994. The Company continues to control fixed costs
while increasing volume. Interest expense increased by $102,000 due to financing
the Starkville, Mississippi, expansion. In fiscal 1994 the Company made an
accounting principle change in adopting Statement of Financial Accounting
Standards (SFAS) No. 115 which resulted in net cumulative income of $320,000 or
$.04 per share. The above factors resulted in fiscal year 1995 net earnings of
$5,211,000 or $ .73 per share compared to $6,787,000 or $ .95 per share in
fiscal 1994, a net decrease of $1,576,000 or $.22 per share.
FISCAL 1994 COMPARED TO FISCAL 1993
Sales for 1994 increased by $18,117,000 or 10.2% compared to 1993.
Recreational Vehicle product sales volume increased $9,008,000 or 18.2%, Home
Furnishings increased $8,739,000 or 7.6%, and Contract Furniture increased
$370,000 or 2.8%. Due to the higher volume, cost of sales increased by
$13,957,000 compared to the prior year. In addition, cost of sales increased
approximately $1,000,000 due to the erosion of margins in the price-competitive
marketplace and lower production efficiencies associated with training new
associates necessary to meet sales volume requirements. Selling, general and
administrative expenses were 17.9% of sales in fiscal 1994 compared to 18.4% in
1993. The improvement reflects the Company's successful efforts to control fixed
costs while increasing volume. Interest income decreased by $471,000 due to
lower levels of investment and decreased rate of return. The Company elected to
adopt the provisions of Statement of Financial Accounting Standards (SFAS) No.
115 during fiscal 1994, with respect to the Company's accounting for certain
investments in debt and equity securities. This change in accounting principle
resulted in net cumulative income of $320,000, or $.04 per share. Also in fiscal
1994, the Company adopted SFAS No. 112, "Employers Accounting for Postemployment
Benefits." The adoption of this standard did not have a material effect on the
Company's financial position or results of operations.
PAGE 7
FLEXSTEEL INDUSTRIES, INC.
BALANCE SHEETS
JUNE 30,
1996 1995
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,867,742 $ 5,768,537
Temporary investments - at fair value based
on quoted market price 8,940,603 8,268,615
Trade receivables - less allowance for doubtful
accounts: 1996, $2,153,000; 1995, $2,160,000 24,464,171 22,905,047
Inventories 26,082,857 25,921,674
Deferred income taxes 2,010,000 2,000,000
Other 732,054 844,557
Total current assets 66,097,427 65,708,430
PROPERTY, PLANT AND EQUIPMENT, net 23,046,224 24,376,052
OTHER ASSETS 6,730,513 6,186,144
TOTAL $95,874,164 $96,270,626
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 3,574,232 $ 4,756,991
Accrued liabilities:
Payroll and related items 3,433,562 3,656,678
Insurance 5,347,758 5,368,145
Other accruals 3,731,364 2,694,902
Industrial revenue bonds payable 2,635,000 2,960,000
Total current liabilities 18,721,916 19,436,716
LONG-TERM DEBT 35,000 70,000
DEFERRED COMPENSATION 2,969,847 2,940,329
Total liabilities 21,726,763 22,447,045
SHAREHOLDERS' EQUITY:
Common stock - $1 par value; authorized 15,000,000 shares;
issued 1996, 7,095,044 shares; 1995, 7,193,124 shares 7,095,044 7,193,124
Additional paid-in capital 556,632 1,386,754
Retained earnings 66,266,325 65,199,703
Unrealized investment gain 229,400 44,000
Total shareholders' equity 74,147,401 73,823,581
TOTAL $95,874,164 $96,270,626
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
PAGE 8
FLEXSTEEL INDUSTRIES, INC.
STATEMENTS OF INCOME & RETAINED EARNINGS
FOR THE YEARS ENDED JUNE 30,
1996 1995 1994
NET SALES $ 205,008,245 $ 208,432,198 $ 195,388,106
OPERATING EXPENSES:
Cost of goods sold 161,450,649 164,230,883 151,066,404
Selling, general and administrative 37,195,178 36,692,054 34,949,047
Total 198,645,827 200,922,937 186,015,451
OPERATING INCOME 6,362,418 7,509,261 9,372,655
OTHER:
Interest and other income 1,048,074 973,371 989,554
Interest expense (358,322) (371,729) (270,046)
Total 689,752 601,642 719,508
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 7,052,170 8,110,903 10,092,163
PROVISION FOR INCOME TAXES 2,550,000 2,900,000 3,625,000
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 4,502,170 5,210,903 6,467,163
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 320,000
NET INCOME 4,502,170 5,210,903 6,787,163
RETAINED EARNINGS - BEGINNING OF YEAR 65,199,703 63,437,854 60,080,908
TOTAL 69,701,873 68,648,757 66,868,071
CASH DIVIDENDS ON COMMON STOCK
($.48 per share) (3,435,548) (3,449,054) (3,430,217)
RETAINED EARNINGS - END OF YEAR $ 66,266,325 $ 65,199,703 $ 63,437,854
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 7,172,299 7,178,285 7,140,144
EARNINGS PER SHARE BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $ .63 $ .73 $ .91
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE $ .04
EARNINGS PER SHARE OF COMMON STOCK $ .63 $ .73 $ .95
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS OF FLEXSTEEL INDUSTRIES, INC.:
We have audited the accompanying balance sheets of Flexsteel Industries,
Inc. as of June 30, 1996 and 1995, and the related statements of income and
retained earnings and cash flows for each of the three years in the period ended
June 30, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial 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, the financial statements referred to above present fairly,
in all material respects, the financial position of Flexsteel Industries, Inc.
as of June 30, 1996 and 1995, and the results of its operations and cash flows
for each of the three years in the period ended June 30, 1996 in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the financial statements, the Company changed its
method of accounting for certain investments in debt and equity securities
during the year ended June 30, 1994.
DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
August 9, 1996
PAGE 9
FLEXSTEEL INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30,
1996 1995 1994
OPERATING ACTIVITIES:
Net income $ 4,502,170 $ 5,210,903 $ 6,787,163
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Cumulative effect of accounting change (320,000)
Depreciation 4,619,511 4,135,053 3,452,962
Trade receivables (1,559,124) 2,710,379 (3,422,717)
Inventories (161,183) 663,723 (4,873,616)
Other current assets 112,503 68,744 59,779
Other assets (544,369) (519,313) (1,721,325)
Accounts payable - trade (1,182,759) (114,639) 658,967
Accrued liabilities 792,959 (894,289) (138,855)
Deferred compensation 29,518 16,600 58,732
Deferred income taxes (10,000) 340,000 (250,000)
Net cash provided by
operating activities 6,599,226 11,617,161 291,090
INVESTING ACTIVITIES:
Construction funds held in escrow 2,034,248 (2,034,248)
Purchases of temporary investments (4,178,560) (2,751,519) (2,878,805)
Proceeds from sales of temporary investments 3,691,972 4,565,254 8,508,968
Additions to property, plant and equipment (3,289,683) (9,682,052) (5,074,138)
Net cash used in investing activities (3,776,271) (5,834,069) (1,478,223)
FINANCING ACTIVITIES:
Proceeds from (payment of) borrowings (360,000) (360,000) 3,215,000
Payment of dividends (3,435,548) (3,449,054) (3,430,217)
Proceeds from issuance of common stock 383,237 408,926 396,523
Repurchase of common stock (132,453 shares) (1,311,439)
Net cash provided by
(used in) financing activities (4,723,750) (3,400,128) 181,306
Increase (decrease) in cash and cash equivalents (1,900,795) 2,382,964 (1,005,827)
Cash and cash equivalents at beginning of year 5,768,537 3,385,573 4,391,400
Cash and cash equivalents at end of year $ 3,867,742 $ 5,768,537 $ 3,385,573
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for
Interest $ 123,000 $ 135,000 $ 38,000
Income taxes $ 1,927,000 $ 3,555,000 $ 5,081,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
REPORT OF MANAGEMENT
To the Shareholders of Flexsteel Industries, Inc.:
Management is responsible for the financial and operating information
contained in this Annual Report, including the financial statements covered by
the report of Deloitte & Touche LLP, our independent auditors. The statements
were prepared in conformity with generally accepted accounting principles and
include amounts based on estimates and judgments of management.
The Company maintains a system of internal accounting controls to provide
reasonable assurance that the books and records reflect the authorized
transactions of the Company. There are limits inherent in all systems of
internal control because their cost should not exceed the benefits derived. The
Company believes its system of internal accounting controls and internal audit
functions balance the cost/ benefit relationship.
The Audit & Ethics Committee of the Board of Directors, composed solely of
outside directors, annually recommends to the Board of Directors the appointment
of the independent auditors. The independent auditors are engaged to audit the
financial statements of the Company and to express an opinion thereon. The
independent auditors' report is expressed on page 9. The Audit & Ethics
Committee meets periodically with the independent auditors to review financial
reports, accounting and auditing practices and controls.
K. BRUCE LAURITSEN RONALD J. KLOSTERMAN
President Vice President, Finance
Chief Executive Officer Chief Financial Officer
Secretary
PAGE 10
FLEXSTEEL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS - Flexsteel Industries, Inc. (the Company),
manufactures and sells upholstered furniture and other seating products.
USE OF ESTIMATES - the preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
FAIR VALUE - the Company's cash, accounts receivable, accounts payable,
accrued liabilities and other liabilities are carried at amounts which
reasonably approximate their fair value due to their short-term nature. Fair
values of investments in debt and equity securities are disclosed in Note 2.
STATEMENT OF CASH FLOWS - the Company considers highly liquid investments
with original maturities of less than three months as the equivalent of cash.
INVENTORIES - are stated at the lower of cost or market. Raw steel, lumber
and wood frame parts are valued on the last-in, first-out (LIFO) method.
Other inventories are valued on the first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT - is stated at cost and depreciated using the
straight-line method.
INCOME TAXES - deferred income taxes result from temporary differences
between the tax basis of an asset or liability and its reported amount in the
financial statements.
EARNINGS PER SHARE - are based on the weighted average number of common
shares outstanding during each year. The exercise of employee stock options
would have no material effect on earnings per share.
ACCOUNTING CHANGES - effective June 30, 1994, the Company adopted the
provisions of Statement of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." This
standard which requires certain investments to be recorded at their market
value resulted in a decrease of $320,000 in shareholders' equity. This change
in accounting principle resulted in a cumulative effect adjustment as of June
30, 1994 of $320,000 (tax affected amount) or $ .04 per share.
Effective July 1, 1995 the Company adopted SFAS No. 107, "Disclosure about
Fair Value of Financial Instruments" and SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
The adoption of these statements did not have a material effect on results of
operation or financial position.
Stock compensation plans provide for the granting of incentive and
nonqualified stock options to key employees. Under the plans, options are
granted at fair market value, and may be exercisable for up to 10 years. The
Financial Accounting Standards Board has issued SFAS No. 123, "Accounting for
Stock-Based Compensation," which is required for fiscal years beginning after
December 15, 1995. The Company has not yet determined if it will elect to
change to the fair value method, nor has it determined the effect the new
standard will have on net income and earnings per share should it elect to
make such a change. Adoption of the new standard will have no effect on the
Company's cash flows.
RECLASSIFICATIONS - certain prior years' amounts have been reclassified to
conform to the 1996 presentation.
2. INVESTMENTS
Debt and equity securities are included in Temporary Investments and in Other
Assets and are considered as available for sale. The amortized cost and
estimated market values of investments in debt and equity securities are as
follows:
June 30, 1996 June 30, 1995
Debt Equity Debt Equity
Securities Securities Securities Securities
Amortized Cost $8,987,896 $2,296,905 $8,324,825 $2,168,475
Unrealized gains
(losses) (144,740) 499,199 (94,086) 157,453
Est. Market Value $8,843,156 $2,796,104 $8,230,739 $2,325,928
As of June 30, 1996, the maturities of debt securities are $2,012,816 within
one year, $6,570,455 one to five years, and $259,885 six to ten years.
3. INVENTORIES
Inventories valued on the LIFO method would have been approximately
$2,024,000 and $2,671,000 higher at June 30, 1996 and 1995, respectively, if
they had been valued on the FIFO method. A comparison of inventories is as
follows:
June 30,
1996 1995
Raw materials $12,936,114 $14,186,359
Work in process and finished parts 7,594,621 7,546,079
Finished goods 5,552,122 4,189,236
Total $26,082,857 $25,921,674
4. PROPERTY, PLANT AND EQUIPMENT
Estimated June 30,
Life (Years) 1996 1995
Land $ 1,609,572 $ 1,609,572
Buildings and
improvements 3 - 50 23,710,516 23,099,131
Machinery and
equipment 3 - 15 24,455,532 24,434,273
Delivery equipment 2 - 9 13,041,661 12,430,880
Furniture and fixtures 3 - 15 4,440,375 4,426,168
Total $ 67,257,656 $66,000,024
Less accumulated
depreciation 44,211,432 41,623,972
Net $ 23,046,224 $24,376,052
5. BORROWINGS
The Company is obligated for $2,600,000 for Industrial Revenue Bonds at June
30, 1996 which were issued for the financing of property, plant and
equipment. The obligations are variable rate demand bonds with a weighted
average rate for years ended June 30, 1996, 1995, and 1994 of 4.13%, 4.05%,
and 3.00% respectively, and are due in annual installments of $325,000
through 2004, if not paid earlier upon demand of the holder. The Company has
a letter of credit to guarantee the payment of these bonds in the event of
default.
PAGE 11
No amounts were outstanding on this letter at June 30, 1996. In addition, the
Company is obligated for General Obligation Development Bonds bearing
interest at 5.0% and due in annual installments of $35,000 through 1998.
6. INCOME TAXES
The total income tax provision for the years ended June 30, 1996, 1995, and
1994 was 36.2%, 35.8%, and 35.9%, respectively, of income before income taxes
and cumulative effect of change in accounting principle.
PROVISION - COMPRISED OF THE FOLLOWING:
1996 1995 1994
Federal - current $2,240,000 $2,230,000 $3,395,000
State - current 320,000 330,000 480,000
Deferred (10,000) 340,000 (250,000)
Total $2,550,000 $2,900,000 $3,625,000
DEFERRED INCOME TAXES - COMPRISED OF THE FOLLOWING:
June 30, 1996 June 30, 1995
Asset (Liability) Asset (Liability)
Asset allowances $ 793,000 $ 808,000
Deferred compensation 1,099,000 1,088,000
Other accruals and allowances 1,542,000 1,542,000
Excess of tax over book depreciation (1,424,000) (1,438,000)
Total $2,010,000 $ 2,000,000
7. CREDIT ARRANGEMENTS
The Company has lines of credit of $5,700,000 with banks for short-term
borrowings at the prime rate in effect at the date of the loan. On $1,000,000
of such line, the Company is required to maintain compensating bank balances
equal to 5% of the line of credit plus 5% of any amounts borrowed. There were
no short-term bank borrowings during 1996 or 1995. Additionally, the Company
has issued a $1,300,000 letter of credit related to worker's compensation and
casualty insurance. No amounts were outstanding on this letter as of June 30,
1996 or 1995.
8. SHAREHOLDERS' EQUITY
The Company has authorized 60,000 shares of cumulative, $50 par value
preferred stock and 700,000 shares of undesignated, $1 par value
(subordinated) stock, none of which is outstanding. The Company issued
34,373, 38,112, and 31,981 net shares under stock option and other employee
plans during the years ended June 30, 1996,1995, and 1994, respectively. The
difference between the purchase or issue prices and the par value of the
shares is credited or charged to paid-in capital.
9. STOCK OPTIONS
At June 30, 1996, 416,140 shares of common stock were available for future
grants. Changes in options outstanding are as follows:
June 30, 1993 Shares Price/Range
Outstanding 158,690 $10.50 - $12.375
Granted 100,930 14.875 - 15.75
Exercised (19,100) 10.50 - 11.00
June 30, 1994
Outstanding 240,520 10.50 - 15.75
Granted 94,360 10.50 - 11.125
Exercised (17,000) 11.00
Cancelled . (41,210) 10.50 - 14.875
June 30, 1995 Shares Price/Range
Outstanding 276,670 $10.50 - 15.75
Granted 91,950 11.25
Cancelled (26,140) 10.50 - 14.875
June 30, 1996
Outstanding 342,480 $10.50 - $15.75
10. PENSION AND RETIREMENT PLANS
The Company sponsors various defined contribution pension and retirement
plans which cover substantially all employees, other than employees covered
by multiemployer pension plans under collective bargaining agreements. It is
the Company's policy to fund all pension costs accrued. Total pension and
retirement plan expense was $1,326,000 in 1996, $1,295,000 in 1995, and
$1,226,000 in 1994 including $287,000 in 1996, $274,000 in 1995, and $251,000
in 1994 for the Company's matching contribution to retirement savings plans.
The Company's cost for pension plans is determined as 2% - 4% of each covered
employee's wages. The Company's matching contribution for the retirement
savings plans is 25% - 50% of employee contributions (up to 4% of their
earnings). In addition to the above, amounts charged to pension expense and
contributed to multiemployer defined benefit pension plans administered by
others under collective bargaining agreements were $1,135,000 in 1996,
$1,203,000 in 1995, and $1,150,000 in 1994.
11. MANAGEMENT INCENTIVE PLANS
The Company has an incentive plan that provides for shares of common stock to
be awarded to key employees based on a targeted rate of earnings to common
equity as established by the Board of Directors. Shares awarded to employees
are subject to the restriction of continued employment with 33 1/3% of the
stock received by the employee on the award date and the remaining shares
issued after one and two years. Under the plan 13,687, and 16,189 shares were
awarded, and the amounts charged to income were $150,000 and $170,000 in 1995
and 1994 respectively. No shares were awarded in 1996. At June 30, 1996,
379,310 shares were available for future grants.
12. SUPPLEMENTARY QUARTERLY
FINANCIAL INFORMATION
(UNAUDITED - in thousands of dollars, except per share amounts)
Quarters
1st 2nd 3rd 4th
1996:
Net Sales $49,227 $48,177 $53,213 $54,391
Gross Profit 9,857 9,687 11,689 12,325
Net Income 428 716 1,433 1,925
Earnings Per Share .06 .10 .20 .27
Quarters
1st 2nd 3rd 4th
1995:
Net Sales $50,812 $52,351 $56,783 $48,486
Gross Profit 11,475 11,465 12,078 9,183
Net Income 1,597 1,496 1,768 350
Earnings Per Share .22 .21 .25 .05
PAGE 12
PLANT LOCATIONS
*Flexsteel Industries, Inc.
DUBUQUE, IOWA 52001
(319) 556-7730
P. M. Crahan, General Manager
Flexsteel Industries, Inc.
DUBLIN, GEORGIA 31040
(912) 272-6911
R. C. Adams, General Manager
Flexsteel Industries, Inc.
LANCASTER, PENNSYLVANIA 17604
(717) 392-4161
T. P. Fecteau, General Manager
Flexsteel Industries, Inc.
RIVERSIDE, CALIFORNIA 92504
(909) 354-2440
T. D. Burkart, General Manager
Flexsteel Industries, Inc.
NEW PARIS, INDIANA 46553
(219) 831-4050
G. H. Siemer, General Manager
Wood Products Division
HARRISON, ARKANSAS 72601
(501) 743-1101
M. J. Feldman, General Manager
Metal Division
DUBUQUE, IOWA 52001
(319) 556-7730
J. E. Gilbertson, General Manager
Commercial Seating Division
STARKVILLE, MISSISSIPPI 39760
(601) 323-5481
S. P. Salmon, General Manager
Vancouver Distribution Center
VANCOUVER, WASHINGTON 98668
(206) 696-9955
R. Heying, Supervisor
* Executive Offices
PERMANENT SHOWROOMS
Dubuque, Iowa
High Point, North Carolina
San Francisco, California
DIRECTORS AND OFFICERS
Frank H. Bertsch
Chairman of Executive Committee
Director
Jack B. Crahan
Chairman of the Board of Directors
K. Bruce Lauritsen
President
Chief Executive Officer
Director
Edward J. Monaghan
Executive Vice President
Chief Operating Officer
Director
James R. Richardson
Senior Vice President, Marketing
Director
L. Bruce Boylen
Retired Vice President
Fleetwood Enterprises, Inc.
Director
John R. Easter
Retired Vice President
Sears, Roebuck & Company
Director
Thomas E. Holloran
Professor, Graduate School of
Business, University of St. Thomas
St. Paul, Minnesota
Director
James G. Peterson
Consultant
James G. Peterson Associates
Business Consultant
and Investment Advisor
Director
Art D. Richardson
Retired Senior Vice President
Flexsteel Industries, Inc.
Director
Jeffrey T. Bertsch
Vice President
Carolyn T. B. Bleile
Vice President
Thomas D. Burkart
Senior Vice President, Vehicle Seating
Kevin F. Crahan
Vice President
Patrick M. Crahan
Vice President
Keith R. Feuerhaken
Vice President
James E. Gilbertson
Vice President
James M. Higgins
Vice President, Commercial Seating
Ronald J. Klosterman
Vice President, Finance
Chief Financial Officer
Secretary
Michael A. Santillo
Vice President
EXECUTIVE COMMITTEE
Frank H. Bertsch, Chairman
Jack B. Crahan
K. Bruce Lauritsen
Edward J. Monaghan
James R. Richardson
AUDIT & ETHICS
COMMITTEE
Thomas E. Holloran, Chairman
John R. Easter
James G. Peterson
Art D. Richardson
NOMINATING &
COMPENSATION
COMMITTEE
L. Bruce Boylen, Chairman
John R. Easter
Thomas E. Holloran
James G. Peterson
MARKETING COMMITTEE
John R. Easter, Chairman
Frank H. Bertsch
L. Bruce Boylen
James G. Peterson
Art D. Richardson
TRANSFER AGENT AND
REGISTRAR
Norwest Capital Resources
P. 0. Box 738
South St. Paul,
Minnesota 55075-0738
GENERAL COUNSEL
Irving C. MacDonald
Minneapolis, Minnesota
O'Connor and Thomas, P.C.
Dubuque, Iowa
NATIONAL OVER
THE COUNTER
NASDAQ Symbol - FLXS
ANNUAL MEETING
Tuesday,
December 10, 1996, 3:30 p.m.
Minneapolis Hilton & Towers
1001 Marquette Avenue, 3rd floor
Minneapolis, Minnesota 55403
AFFIRMATIVE ACTION POLICY
It is the policy of Flexsteel Industries, Inc. that all employees and potential
employees shall be judged on the basis of qualifications and ability, without
regard to age, sex, race, creed, color or national origin in all personnel
actions. No employee or applicant for employment shall receive discriminatory
treatment because of physical or mental handicap in regard to any position for
which the employee or applicant for employment is qualified. Employment
opportunities and job advancement opportunities will be provided for qualified
disabled veterans and veterans of the Vietnam era. This policy is consistent
with the Company's plan for 'Affirmative Action' in implementing the intent and
provisions of the various laws relating to employment and non-discrimination.
ANNUAL REPORT ON
FORM 10-K AVAILABLE
A copy of the Company's annual report on Form 10-K, as filed with the Securities
and Exchange Commission, can be obtained without charge by writing to: Office of
the Secretary, Flexsteel Industries, Inc., P. O. Box 877, Dubuque, Iowa
52004-0877.
Visit us on the Internet
http://www.flexsteel.com
FLEXSTEEL(R)
INDUSTRIES INCORPORATED
(C) 1996 FLEXSTEEL INDUSTRIES, INC.
-INSIDE BACK COVER-
[PHOTO]
Comfort and good looks are as important to recreational vehicle sales as they
are to home furnishings. For years, Fleetwood has found Flexsteel seating to be
a positive sales feature for their motor homes. For luxurious comfort on the
road, the interior of this Pace Arrow motor home by Fleetwood features a
Flexsteel Magic Bed(R) and a Flexsteel recliner. Flexsteel bucket seats complete
the seating package.
FLEXSTEEL(R) INDUSTRIES INCORPORATED
P.O. BOX 877 * DUBUQUE, IA 52001-0877
-BACK COVER-
EXHIBIT 4
INDEPENDENT AUDITORS' REPORT
Flexsteel Industries, Inc.:
We have audited the financial statements of Flexsteel Industries, Inc.
(the Company) as of June 30, 1996 and 1995 and for each of the three years in
the period ended June 30, 1996, and have issued our report thereon dated August
9, 1996, which report includes an explanatory paragraph relating to a change in
the Company's method of accounting for certain investments in debt and equity
securities; such financial statements and report are included in your 1996
Annual Report to Stockholders and are incorporated herein by reference. Our
audits also included the financial statement schedule of Flexsteel Industries,
Inc., listed in Item 14. This financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion on the
financial statement schedule based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
August 9, 1996
EXHIBIT 6
CONSENT OF INDEPENDENT AUDITORS
Flexsteel Industries, Inc.:
We hereby consent to the incorporation by reference in Registration
Statement No. 33-1836 on Form S-8 as amended by Post-Effective Amendment No. 1
for the Flexsteel Salaried Employees' Savings Plan 401(k) and in Registration
Statement No. 2-86782 on Form S-8 as amended by Post-Effective Amendment No. 3
for the Flexsteel 1983 Stock Option Plan and in Registration Statement No.
33-26267 on Form S-8 for the Flexsteel 1989 Stock Option Plan of our reports
dated August 9, 1996 (which expresses an unqualified opinion and includes an
explanatory paragraph relating to a change in the Company's method of accounting
for certain investments in debt and equity securities) appearing in and
incorporated by reference in the Annual Report on Form 10-K of Flexsteel
Industries, Inc. for the year ended June 30, 1996.
DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
September 25, 1996
EXHIBIT 3
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 11-K
[x] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended JUNE 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______ to ______
Commission file number 0-5151
A) Full title of the plan:
SALARIED EMPLOYEES' SAVINGS PLAN 401(k)
B) Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
FLEXSTEEL INDUSTRIES, INC., P.O. BOX 877, DUBUQUE, IA 52004-0877
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of
1934, the trustees (or other persons who administer the employee benefit plan)
have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
Salaried Employees' Savings Plan 401(k)
(Name of Plan)
Date: September 10, 1996 /S/ R. J. KLOSTERMAN
-----------------------------------------
R.J. Klosterman
VICE PRESIDENT OF FINANCE AND
PRINCIPAL FINANCIAL OFFICER
INDEPENDENT AUDITORS' REPORT
Flexsteel Industries, Inc. Salaried Employees' Savings Plan 401(k):
We have audited the combining statements of financial position of the
Flexsteel Industries, Inc. Salaried Employees' Savings Plan 401(k) (the "Plan")
as of June 30, 1996 and 1995 and the related combining statements of income and
changes in plan equity for each of the three years in the period ended June 30,
1996. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial 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 financial statements present fairly, in all material
respects, the financial position of the Plan as of June 30, 1996 and 1995, and
the results of its operations for each of the three years in the period ended
June 30, 1996 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
August 9, 1996
FLEXSTEEL INDUSTRIES, INC.
SALARIED EMPLOYEES' SAVINGS PLAN 401(k)
COMBINING STATEMENTS OF FINANCIAL POSITION
JUNE 30, 1996
FLEXSTEEL PRIVATE
INDUSTRIES, MARKET
INC. GUARANTEED BOND AND
COMMON COMMON INTEREST MORTGAGE STOCK
STOCK FUND STOCK FUND ACCOUNT ACCOUNT INDEX FUND
----------- ---------- ---------- ---------- ----------
1996:
ASSETS
Cash ................................. $ 16,724
Employee Contributions
Receivable ....................... 3,497 $ 17,421 $ 21,497 $ 4,790 $ 315
Company Contributions Receivable ..... 764 2,355 3,347 707 24
Investment in Flexsteel Industries,
Inc. Common Stock - Par Value $1
Per Share; at market 122,709 shares
at $11.75 each ................. 1,441,832
Investment in Common Stock Fund ...... 3,766,934
Investment in Private Market Bond &
Mortgage Account ............ 828,863
Investment in Guaranteed
Interest Accounts ........... 4,302,584
Investment in Stock
Index Fund .................. 96,452
Investment in Money
Market Account ...............
Investment in International
Stock Account ...............
Investment in Small Company
Stock Fund ...................
---------- ---------- ---------- --------- ---------
Total assets .................. $1,462,817 $3,786,710 $4,327,428 $ 834,360 $ 96,791
========== ========== ========== ========= =========
PLAN EQUITY
Total plan equity .................... $1,462,817 $3,786,710 $4,327,428 $ 834,360 $ 96,791
========== ========== ========== ========= =========
[WIDE TABLE CONTINUED FROM ABOVE]
MONEY INTERNATIONAL SMALL
MARKET STOCK COMPANY
ACCOUNT ACCOUNT STOCK FUND TOTAL
--------- ------------- ---------- ----------
1996:
ASSETS
Cash ................................. $ 16,724
Employee Contributions
Receivable ....................... $ 704 $ 3,360 $ 6,580 58,164
Company Contributions Receivable ..... 115 645 987 8,944
Investment in Flexsteel Industries,
Inc. Common Stock - Par Value $1 Per
Share; at market 122,709 shares
at $11.75 each ................. 1,441,832
Investment in Common Stock Fund ...... 3,766,934
Investment in Private Market Bond &
Mortgage Account ............... 828,863
Investment in Guaranteed
Interest Accounts ........... 4,302,584
Investment in Stock
Index Fund .................. 96,452
Investment in Money
Market Account ............... 70,165 70,165
Investment in International
Stock Account ............... 309,267 309,267
Investment in Small Company
Stock Fund ................... 615,575 615,575
-------- --------- --------- -----------
Total assets .................. $ 70,984 $ 313,272 $ 623,142 $11,515,504
======== ========= ========= ===========
PLAN EQUITY
Total plan equity .................... $ 70,984 $ 313,272 $ 623,142 $11,515,504
======== ========= ========= ===========
See accompanying Notes to Financial Statements
FLEXSTEEL INDUSTRIES, INC.
SALARIED EMPLOYEES' SAVINGS PLAN 401(k)
COMBINING STATEMENTS OF FINANCIAL POSITION
JUNE 30, 1995
FLEXSTEEL PRIVATE
INDUSTRIES, MARKET
INC. GUARANTEED BOND AND
COMMON COMMON INTEREST MORTGAGE STOCK
STOCK FUND STOCK FUND ACCOUNT ACCOUNT INDEX FUND
----------- ---------- ---------- --------- ----------
1995:
ASSETS
Cash ................................. $ 11,645
Employee Contributions
Receivable ....................... 8,314 $ 20,038 $ 30,253 $ 8,125 $ 947
Company Contributions Receivable ..... 869 872 11,241 483
Investment in Flexsteel Industries,
Inc. Common Stock - Par Value $1 Per
Share; at market 109,719.5 shares
at $10.25 each ................. 1,124,625
Investment in Common Stock Fund ...... 2,721,227
Investment in Private Market Bond &
Mortgage Account ............ 777,219
Investment in Guaranteed
Interest Accounts ........... 4,385,870
Investment in Stock
Index Fund .................. 69,401
Investment in Money
Market Account ...............
Investment in International
Stock Account ...............
Investment in Small Company
Stock Fund ...................
---------- ---------- ---------- --------- --------
Total assets .................. $1,145,453 $2,742,137 $4,427,364 $ 785,827 $ 70,348
========== ========== ========== ========= ========
PLAN EQUITY
Total plan equity .................... $1,145,453 $2,742,137 $4,427,364 $ 785,827 $ 70,348
========== ========== ========== ========= ========
[WIDE TABLE CONTINUED FROM ABOVE]
MONEY INTERNATIONAL SMALL
MARKET STOCK COMPANY
ACCOUNT ACCOUNT STOCK FUND TOTAL
--------- ------------- ---------- ----------
1995:
ASSETS
Cash ................................. $ 11,645
Employee Contributions
Receivable ....................... $ 739 $ 3,874 $ 4,900 77,190
Company Contributions Receivable ..... 31 32 161 13,689
Investment in Flexsteel Industries,
Inc. Common Stock - Par Value $1 Per
Share; at market 109,719.5 shares
at $10.25 each ................. 1,124,625
Investment in Common Stock Fund ...... 2,721,227
Investment in Private Market Bond &
Mortgage Account ............ 777,219
Investment in Guaranteed
Interest Accounts ........... 4,385,870
Investment in Stock
Index Fund .................. 69,401
Investment in Money
Market Account ............... 58,412 58,412
Investment in International
Stock Account ............... 106,627 106,627
Investment in Small Company
Stock Fund ................... 261,580 261,580
-------- --------- --------- ----------
Total assets .................. $ 59,182 $ 110,533 $ 266,641 $9,607,485
======== ========= ========= ==========
PLAN EQUITY
Total plan equity .................... $ 59,182 $ 110,533 $ 266,641 $9,607,485
======== ========= ========= ==========
See accompanying Notes to Financial Statements
FLEXSTEEL INDUSTRIES, INC.
SALARIED EMPLOYEES' SAVINGS PLAN 401(k)
COMBINING STATEMENTS OF INCOME AND CHANGES IN PLAN EQUITY
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
PRIVATE
FLEXSTEEL MARKET
INDUSTRIES, BOND
INC. GUARANTEED AND STOCK
COMMON COMMON INTEREST MORTGAGE INDEX
STOCK FUND STOCK FUND ACCOUNT ACCOUNT FUND
---------- ---------- ----------- ---------- ---------
1996:
Net Investment Income
Cash Dividends on Flexsteel Common Stock $ 55,375
Interest and Other Income (Loss) ..... 334 $ 273,600 $ 42,443
---------- ---------- ----------
Total ............................ 55,709 273,600 42,443
Employee Contributions .................. 86,646 $ 256,401 321,675 89,823 $ 7,306
Company Contributions ................... 18,303 40,007 54,506 15,211 1,697
Net Appreciation (Depreciation) in Fair
Value of Investments.................. 176,968 819,100 19,021
Withdrawals ............................. (103,805) (73,081) (486,413) (41,370) (3,426)
Transfers (To) From Other Investment
Programs ............................. 83,543 2,146 (263,304) (57,574) 1,845
---------- ---------- ---------- ----------- --------
Increase in Plan Equity ................. 317,364 1,044,573 (99,936) 48,533 26,443
Plan Equity - Beginning of Year ......... 1,145,453 2,742,137 4,427,364 785,827 70,348
---------- ---------- ---------- ---------- --------
Plan Equity - End of Year ............... $1,462,817 $3,786,710 $4,327,428 $ 834,360 $ 96,791
========== ========== ========== ========== ========
1995:
Net Investment Income
Cash Dividends on Flexsteel Common Stock $ 46,567
Interest and Other Income (Loss) ..... 298 $ 283,899 $ 88,895
---------- ---------- ----------
Total ............................ 46,865 283,899 88,895
Employee Contributions .................. 119,961 $ 258,121 369,532 107,638 $ 20,512
Company Contributions ................... 23,735 31,891 87,045 15,075 3,464
Net Appreciation (Depreciation) in Fair
Value of Investments.................. (330,185) 428,530 20,245
Withdrawals ............................. (27,454) (57,752) (160,378) (43,716) (1,472)
Transfers (To) From Other Investment
Programs ............................. 49,665 (32,875) (76,843) (46,560) (172,578)
---------- ---------- ---------- ---------- --------
Increase in Plan Equity ................. (117,413) 627,915 503,255 121,332 (129,829)
Plan Equity - Beginning of Year ......... 1,262,866 2,114,222 3,924,109 664,495 200,177
---------- ---------- ---------- ---------- --------
Plan Equity - End of Year ............... $1,145,453 $2,742,137 $4,427,364 $ 785,827 $ 70,348
========== ========== ========== ========== ========
1994:
Net Investment Income
Cash Dividends on Flexsteel Common Stock $ 39,333
Interest ............................. 179 $ 260,834 $ (5,145)
---------- ---------- ----------
Total ............................ 39,512 260,834 (5,145)
Employee Contributions .................. 110,523 $ 235,433 365,573 103,369 $ 32,142
Company Contributions ................... 26,130 38,564 65,537 19,374 5,497
Net Appreciation in Fair Value of
Investments........................... (147,018) 29,692 (5,098)
Withdrawals ............................. (10,127) (34,307) (196,372) (2,777) (154)
Transfers (To) From Other Investment
Programs ............................. 31,201 38,229 (316,774) 121,000 117,050
---------- ---------- ---------- ---------- --------
Increase (Decrease) in Plan Equity ...... 50,221 307,611 178,798 235,821 149,437
Plan Equity - Beginning of Year ......... 1,212,645 1,806,611 3,745,311 428,674 50,740
---------- ---------- ---------- ---------- --------
Plan Equity - End of Year ............... $1,262,866 $2,114,222 $3,924,109 $ 664,495 $200,177
========== ========== ========== ========== ========
[WIDE TABLE CONTINUED FROM ABOVE]
MONEY INTERNATIONAL SMALL
MARKET STOCK COMPANY
ACCOUNT ACCOUNT STOCK FUND TOTAL
-------- ------------- ---------- -----------
1996:
Net Investment Income
Cash Dividends on Flexsteel Common Stock $ 55,375
Interest and Other Income (Loss) ..... $ 3,317 319,694
-------- -----------
Total ............................ 3,317 375,069
Employee Contributions .................. 11,386 $ 65,272 $ 96,323 934,832
Company Contributions ................... 1,947 12,687 17,299 161,657
Net Appreciation (Depreciation) in Fair
Value of Investments.................. 38,056 106,732 1,159,877
Withdrawals ............................. (4,090) (2,236) (8,995) (723,416)
Transfers (To) From Other Investment
Programs ............................. (758) 88,960 145,142
-------- -------- -------- -----------
Increase in Plan Equity ................. 11,802 202,739 356,501 1,908,019
Plan Equity - Beginning of Year ......... 59,182 110,533 266,641 9,607,485
-------- -------- -------- -----------
Plan Equity - End of Year ............... $ 70,984 $313,272 $623,142 $11,515,504
======== ======== ======== ===========
1995:
Net Investment Income
Cash Dividends on Flexsteel Common Stock $ 46,567
Interest and Other Income (Loss) ..... $ 2,364 375,456
-------- -----------
Total ............................ 2,364 422,023
Employee Contributions .................. 10,617 $ 29,247 $ 39,743 955,371
Company Contributions ................... 1,345 3,575 4,167 170,297
Net Appreciation (Depreciation) in Fair
Value of Investments.................. 4,164 36,161 158,915
Withdrawals ............................ . (1,356) (59) (546) (292,733)
Transfers (To) From Other Investment
Programs ............................. 18,469 73,606 187,116
-------- -------- -------- ------------
Increase in Plan Equity ................. 31,439 110,533 266,641 1,413,873
Plan Equity - Beginning of Year ......... 27,743 8,193,612
-------- -------- -------- -----------
Plan Equity - End of Year ............... $ 59,182 $110,533 $266,641 $ 9,607,485
======== ======== ======== ===========
1994:
Net Investment Income
Cash Dividends on Flexsteel Common Stock $ 39,333
Interest ............................. $ 655 256,523
-------- ------------
Total ............................ 655 295,856
Employee Contributions .................. 5,029 852,069
Company Contributions ................... 962 156,064
Net Appreciation in Fair Value of
Investments........................... (122,424)
Withdrawals ............................. (238) (243,975)
Transfers (To) From Other Investment
Programs ............................. 9,294
-------- -----------
Increase (Decrease) in Plan Equity ...... 15,702 937,590
Plan Equity - Beginning of Year ......... 12,041 7,256,022
-------- ------------
Plan Equity - End of Year ............... $ 27,743 $ 8,193,612
======== ===========
See accompanying Notes to Financial Statements
FLEXSTEEL INDUSTRIES, INC.
SALARIED EMPLOYEES' SAVINGS PLAN 401(k)
NOTES TO FINANCIAL STATEMENTS
1) PLAN DESCRIPTION
The Flexsteel Industries, Inc. Salaried Employees' Savings Plan 401(k)
(the "Plan") was established effective July 1, 1985 by Flexsteel Industries,
Inc. (the "Company"). The Plan is available to certain salaried, salesmen and
office employees that have one year of eligible service and have reached the age
of twenty-one. Participation is voluntary.
The Plan allows eligible employees to elect to have from 1% to 10%
(salesmen are subject to a 4% maximum) of their basic pre-tax pay contributed to
the Plan. Employee contributions are subject to a maximum of $9,500 in calendar
year 1996 by law. The Company contributes an amount equal to 25% of the first 4%
of pay the employee contributes. Participant and Company basic contributions are
100% vested. The Company, at its option, may also contribute additional amounts
to be allocated amongst all participants based on the participants' pay; such
additional company contributions vest over 6 years (40% after 3 years, 60% after
4 years, 80% after 5 years, and 100% after 6 years).
Plan participants direct their contributions to any of the eight
investment accounts available:
1) The FLEXSTEEL INDUSTRIES, INC. COMMON STOCK FUND, which consists of
the Company's common stock.
2) A COMMON STOCK FUND, which consists of common stock and other equity
securities, and also may include short-term money market
instruments, cash, or cash equivalents.
3) A GUARANTEED INTEREST ACCOUNT, which is an insurance company account
that provides a guaranteed interest rate for a five-year period.
4) A PRIVATE MARKET BOND AND MORTGAGE ACCOUNT, which is an insurance
company account that provides for competitive yield debt securities.
5) A STOCK INDEX FUND, which is a pooled investment account invested in
the common stock of those firms included in the Standard & Poor's
500 Stock Index.
6) A MONEY MARKET ACCOUNT, which is an insurance company account
primarily invested in commercial paper with maturities of one year
or less.
7) An INTERNATIONAL STOCK ACCOUNT, which invests in stocks of companies
in Western Europe and Asia.
8) A SMALL COMPANY STOCK FUND, which invests in stocks of relatively
smaller companies.
Assets of the Plan are held by a "Custodian," the Principal Mutual Life
Insurance Company, except for the Flexsteel Industries, Inc. Common Stock Fund
that is held by the American Trust & Savings Bank of Dubuque, Iowa (the
"Trustee"). The Plan is administered by a committee appointed by the Board of
Directors of the Company. Distributions are paid upon retirement, termination of
employment, death, disability, or in hardship cases. Non-vested contributions
revert to the Company upon termination of employment. Upon termination of the
Plan, participant accounts become fully vested and non-forfeitable.
At June 30, 1996, the Plan had 472 participants, of which there were 184
participants in the Flexsteel Industries, Inc. Common Stock Fund, 332
participants in the Common Stock Fund, 391 participants in the Guaranteed
Interest Account, 198 participants in the Private Market Bond and Mortgage
Account, 40 participants in the Stock Index Fund, and 56 participants in the
Money Market Account, 162 participants in the International Stock Fund, and 190
participants in the Small Company Stock Fund.
2) SIGNIFICANT ACCOUNTING POLICIES
The Plan uses the accrual basis of accounting. Investments in common stock
are recorded at market value based on market quotations. Other investments are
stated at market value as determined by the Trustee and Custodian based on the
market value of the funds and the participation in each fund. The cost of
investments sold is determined by the average cost method.
3) INCOME TAXES
The Plan has received a determination from the Internal Revenue Service
that the Plan is exempt from Federal income taxes. Participants are not taxed
currently on their contributions or on Company contributions to the Plan.
Distributions to participants generally are subject to Federal and State income
tax at the time of distribution; certain distributions may receive more
favorable tax treatment.
4) NET APPRECIATION (DEPRECIATION) IN FAIR VALUE OF INVESTMENTS
The unrealized appreciation (depreciation) in the investment accounts is
as follows:
NET
MARKET APPRECIATION
COST VALUE (DEPRECIATION)
------------ ------------ --------------
Flexsteel Industries, Inc. Common Stock
Fund
Balance, June 30, 1993 ............... $ 893,251 $ 1,182,745 $ 289,494
Net change during year ............... $ 181,664 $ 34,646 $ (147,018)
------------ ------------ ------------
Balance, June 30, 1994 ............... $ 1,074,915 $ 1,217,391 $ 142,476
Net change during year ............... $ 237,419 $ (92,766) $ (330,185)
------------ ------------ ------------
Balance, June 30, 1995 ............... $ 1,312,334 $ 1,124,625 $ (187,709)
Net change during year ............... $ 140,239 $ 317,207 $ 176,968
------------ ------------ ------------
Balance, June 30, 1996 ............... $ 1,452,573 $ 1,441,832 $ (10,741)
============ ============ ============
Common Stock Fund
Balance, June 30, 1993 ............... $ 1,142,374 $ 1,792,093 $ 649,719
Net change during year ............... $ 275,963 $ 305,655 $ 29,692
------------ ------------ ------------
Balance, June 30, 1994 ............... $ 1,418,337 $ 2,097,748 $ 679,411
Net change during year ............... $ 194,949 $ 623,479 $ 428,530
------------ ------------ ------------
Balance, June 30, 1995 ............... $ 1,613,286 $ 2,721,227 $ 1,107,941
Net change during year ............... $ 226,607 $ 1,045,707 $ 819,100
------------ ------------ ------------
Balance, June 30, 1996 ............... $ 1,839,893 $ 3,766,934 $ 1,927,041
============ ============ ============
Stock Index Fund
Balance, June 30, 1993 ............... $ 46,286 $ 49,228 $ 2,942
Net change during year ............... $ 153,641 $ 148,543 $ (5,098)
------------ ------------ -------------
Balance, June 30, 1994 ............... $ 199,927 $ 197,771 $ (2,156)
Net change during year ............... $ (148,615) $ (128,370) $ 20,245
------------ ------------ ------------
Balance, June 30, 1995 ............... $ 51,312 $ 69,401 $ 18,089
Net change during year ............... $ 8,030 $ 27,051 $ 19,021
------------ ------------ ------------
Balance, June 30, 1996 ............... $ 59,342 $ 96,452 $ 37,110
============ ============ ============
International Stock Fund
Balance, June 30, 1994 ...............
Net change during year ............... $ 102,463 $ 106,627 $ 4,164
------------ ------------ ------------
Balance, June 30, 1995 ............... $ 102,463 $ 106,627 $ 4,164
Net change during year ............... $ 164,584 $ 202,640 $ 38,056
------------ ------------ ------------
Balance, June 30, 1996 ............... $ 267,047 $ 309,267 $ 42,220
============ ============ ============
Small Company Stock Fund
Balance, June 30, 1994 ...............
Net change during year ............... $ 225,419 $ 261,580 $ 36,161
------------ ------------ ------------
Balance, June 30, 1995 ............... $ 225,419 $ 261,580 $ 36,161
Net change during year ............... $ 247,263 $ 353,995 $ 106,732
------------ ------------ ------------
Balance, June 30, 1996 ............... $ 472,682 $ 615,575 $ 142,893
============ ============ ============
The cost of investments in the Guaranteed Interest Account, Private Market
Bond and Mortgage Account, and Money Market Account approximate market.
5) RELATED PARTY TRANSACTIONS
All administrative costs of the Plan are paid by the Company. Brokers'
commissions and fees, if any, incurred in connection with the segregated funds
are paid by the Plan.
The Plan had the following transactions in the Flexsteel Industries, Inc.
Common Stock Fund or in the Custodian's funds for the years ended June 30, 1996,
1995 and 1994 (shares in parentheses):
1996: COST OF
FUND PURCHASES SALES (1) SALES (1)
---- -------------------- -------------------- ------------------
Flexsteel Industries, Inc. Common
Stock Fund .......................... $ 229,258(20,686) $ 89,019(7,696) $ 89,019
Common Stock Fund ................... $ 297,543 $ 70,935 $ 70,935
Guaranteed Interest Account ......... $ 392,830 $ 749,717 $ 749,717
Private Market Bond and
Mortgage Account ................ $ 108,147 $ 98,946 $ 98,946
Stock Index Fund .................... $ 9,611 $ 1,581 $ 1,581
Money Market Account ................ $ 13,284 $ 4,848 $ 4,848
International Stock Account ......... $ 77,860 $ (86,724) $ (86,724)
Small Company Stock Fund ........... $ 111,116 $(136,147) $(136,147)
1995: COST OF
FUND PURCHASES SALES (1) SALES (1)
---- -------------------- -------------------- ------------------
Flexsteel Industries, Inc. Common
Stock Fund .......................... $ 238,920(21,182)
Common Stock Fund ................... $ 285,576 $ 90,627 $ 90,627
Guaranteed Interest Account ......... $ 443,902 $ 237,223 $ 237,223
Private Market Bond and
Mortgage Account ................ $ 121,977 $ 90,276 $ 90,276
Stock Index Fund .................... $ 25,435 $ 174,050 $ 174,050
Money Market Account ................ $ 11,785 $ (17,113) $ (17,113)
International Stock Account ......... $ 28,916 $ (73,546) $ (73,546)
Small Company Stock Fund ........... $ 38,848 $(186,571) $(186,571)
1994: COST OF
FUND PURCHASES SALES (1) SALES (1)
---- -------------------- -------------------- ------------------
Flexsteel Industries, Inc. Common
Stock Fund .......................... $ 182,789(11,611)
Common Stock Fund ................... $ 272,041 $ (3,922) $ (3,922)
Guaranteed Interest Account ......... $ 434,413 $ 513,146 $ 513,146
Private Market Bond and
Mortgage Account ................ $ 121,686 $(118,223) $(118,223)
Stock Index Fund.................... $ 36,746 $(116,896) $(116,896)
Money Market Account................. $ 5,764 $ (9,056) $ (9,056)
- -----------------
(1) Amount is net of transfers
EXHIBIT 6
CONSENT OF INDEPENDENT AUDITORS
Flexsteel Industries, Inc.:
We hereby consent to the incorporation by reference in Registration
Statement No. 33-1836 on Form S-8 as amended by Post-Effective Amendment No. 1
for the Flexsteel Salaried Employees' Savings Plan 401(k) and in Registration
Statement No. 2-86782 on Form S-8 as amended by Post-Effective Amendment No. 3
for the Flexsteel 1983 Stock Option Plan and in Registration Statement No.
33-26267 on Form S-8 for the Flexsteel 1989 Stock Option Plan and in
Registration Statement No. 333-1413 on Form S-8 for the Flexsteel 1995 Stock
Option Plan of our reports dated August 9, 1996 (which expresses an unqualified
opinion and includes an explanatory paragraph relating to a change in the
Company's method of accounting for certain investments in debt and equity
securities) appearing in and incorporated by reference in the Annual Report on
Form 10-K of Flexsteel Industries, Inc. for the year ended June 30, 1996.
DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
September 25, 1996
5
12-MOS
JUN-30-1996
JUN-30-1996
3,867,742
8,940,603
26,616,981
2,152,810
26,082,857
66,097,427
67,257,656
44,211,432
95,874,164
18,721,916
35,000
0
0
7,095,044
67,052,357
95,874,164
205,008,245
206,056,319
161,450,649
198,645,827
37,195,178
0
358,322
7,052,170
2,550,000
4,502,170
0
0
0
4,502,170
0.63
0
