SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
FLEXSTEEL INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
FLEXSTEEL INDUSTRIES, INC.
P.O. BOX 877
DUBUQUE, IOWA 52004-0877
Date: October 27, 1999
Office of the Chairman of the Board
Dear Stockholder:
You are cordially invited to attend the Annual Stockholders' Meeting on
Thursday, December 9, 1999, at 3:30 p.m. We sincerely want you to come, and we
welcome this opportunity to meet with those of you who find it convenient to
attend.
Time will be provided for stockholder questions regarding the affairs of
the Company and for discussion of the business to be considered at the meeting
as explained in the notice and proxy statement which follow. Directors and other
Company executives expect to be available to talk individually with stockholders
after the meeting. No admission tickets or other credentials are currently
required for attendance at the meeting.
The formal notice of the meeting and proxy statement follow. I hope that
after reading them you will sign and mail the proxy card, whether you plan to
attend in person or not, to assure that your shares will be represented.
Sincerely,
/s/ John R. Easter
John R. Easter
Chairman of the Board
- --------------------------------------------------------------------------------
RECORD DATE: October 13, 1999
DATE OF MEETING: December 9, 1999
TIME: 3:30 P.M.
PLACE: The Marquette
710 Marquette Avenue, Third Floor
Minneapolis, Minnesota 55402
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IMPORTANT
WHETHER YOU OWN ONE SHARE OR MANY, EACH STOCKHOLDER IS URGED TO VOTE, DATE, SIGN
AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED WHICH REQUIRES NO POSTAGE
IF MAILED IN THE UNITED STATES.
FLEXSTEEL INDUSTRIES, INC.
P.O. BOX 877
DUBUQUE, IOWA 52004-0877
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 9, 1999
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Flexsteel Industries, Inc. will be
held at The Marquette, 710 Marquette Avenue, Third Floor, Minneapolis, MN
55402, on Thursday, December 9, 1999, at 3:30 p.m. for the following purposes:
1. To elect four (4) Class I Directors to serve until the year 2002
Annual Meeting and until their successors have been elected and
qualified or until their earlier resignation, removal or termination
(Proposal I).
2. To consider and act upon a proposal to approve the 1999 Stock Option
Plan (Proposal II).
3. To ratify or reject the appointment by the Board of Directors of
Deloitte & Touche LLP as independent auditors for the fiscal year
ending June 30, 2000 (Proposal III).
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
October 13, 1999 has been fixed as the record date for the determination of
Common stockholders entitled to notice of and to vote at the meeting, and only
holders of record at the close of business on that date will be entitled to vote
at the meeting or any adjournment thereof.
Whether or not you plan to attend the meeting, please mark, date and sign
the accompanying proxy and return it promptly in the enclosed envelope which
requires no additional postage if mailed in the United States. If you attend the
meeting, you may vote your shares in person even though you have previously
signed and returned your proxy. Voting by ballot at the meeting cancels any
proxy previously returned.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ R.J. Klosterman
R.J. KLOSTERMAN
SECRETARY
October 27, 1999
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PLEASE SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY
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PROXY STATEMENT
The accompanying proxy is solicited on behalf of the Board of Directors of
Flexsteel Industries, Inc. (the "Company") to be used at the Annual Meeting of
Stockholders to be held on Thursday, December 9, 1999, and any adjournments
thereof, and may be revoked by the stockholder at any time before it is
exercised by a written notice or a later dated proxy delivered to the Secretary
of the Company. Execution of the proxy will in no way affect a stockholder's
right to attend the meeting and vote in person. The proxy will be revoked if the
stockholder is present at the meeting and votes by ballot in person. Properly
executed proxies received prior to the voting at the meeting will be voted at
the meeting or any adjournments thereof. If a stockholder specifies how the
proxy is to be voted on any business to come before the meeting, it will be
voted in accordance with such specification. If no specification is made, it
will be voted FOR the election of K. Bruce Lauritsen, Thomas E. Holloran, L.
Bruce Boylen and John R. Easter as Class I Directors (Proposal I), FOR the
approval of the 1999 Stock Option Plan (Proposal II) and FOR ratification of the
appointment of Deloitte & Touche LLP (Proposal III). Each of the above named
nominees has been previously elected by the stockholders.
The mailing address of the corporate office and principal executive office
of the Company is P.O. Box 877, Dubuque, Iowa 52004-0877. The approximate date
on which this proxy statement and accompanying proxy card are first being mailed
to stockholders is October 27, 1999.
As of the close of business on October 13, 1999, the record date for
determining stockholders entitled to notice and to vote at the meeting, the
Company had 6,510,707 outstanding shares of Common Stock, par value $1.00 per
share. Each share is entitled to one vote and cumulative voting is not
permitted. No Preferred Stock is outstanding.
Stockholder votes will be counted by Inspectors of Election who will be
present at the stockholder meeting. The affirmative vote of a majority of the
shares of stock represented at the meeting shall be the act of the stockholders
for the election of directors. Abstentions and broker non-votes shall not be
counted as votes for or against the proposal being voted on.
EXPENSE OF SOLICITATION
The cost of the solicitation of proxies on behalf of the Board of Directors
will be paid by the Company. Solicitation of proxies will be principally by
mail. In addition, the officers or employees of the Company and others may
solicit proxies, either personally, by telephone, by special letter, or by other
forms of communication. The Company will also make arrangements
1
with banks, brokerage houses and other custodians, nominees and fiduciaries to
send proxies and proxy material to their principals and will reimburse them for
reasonable expenses in so doing. Officers and employees of the Company will not
receive additional compensation in connection with the solicitation of proxies.
PROPOSAL I -- ELECTION OF DIRECTORS
The Board currently consists of ten persons divided into three classes. At
each Annual Meeting the terms of one class of Directors expire and persons are
elected to that class for terms of three years or until their respective
successors are duly qualified and elected or until their earlier resignation,
removal or termination.
The term of the Class I Directors expires at the time of the 1999 Annual
Meeting. The Board of Directors of the Company has nominated K. Bruce Lauritsen,
Thomas E. Holloran, L. Bruce Boylen and John R. Easter for election as Class I
Directors of the Company. The Class I Directors' term expires at the time of the
year 2002 Annual Meeting and until their respective successors have been elected
and qualified or until their earlier resignation, removal or termination. It is
the intention of the proxies named herein to vote FOR these nominees unless
otherwise directed in the proxy.
All nominees named above have consented to serve as Directors if elected.
In the event that any of the nominees should fail to stand for election, the
persons named as proxy in the enclosed form of proxy intend to vote for
substitute nominees. The proxies cannot be voted for a greater number of persons
than the number of nominees named herein.
2
DIRECTOR PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS OR
NAME AGE SINCE EMPLOYMENT DURING THE LAST FIVE YEARS
- ------------------------- --- -------- -----------------------------------------------------------------
NOMINEES FOR ELECTION FOR A TERM OF THREE YEARS EXPIRING AT THE 2002
ANNUAL MEETING, CLASS I
K. Bruce Lauritsen 57 1987 Chief Executive Officer and President, 1993 to present, Flexsteel
Industries, Inc.; Director, Mercantile Bank of Dubuque; Regent,
Loras College.
Thomas E. Holloran (1)(2) 70 1971 Professor, Graduate School of Business, University of St. Thomas,
St. Paul; Director, ADC Telecommunications, Inc.; Director, MTS
Systems Corporation; Director, Medtronic, Inc; Director, National
City Bankcorporation; Director, Bush Foundation.
L. Bruce Boylen (1)(2) 67 1993 Retired Vice President, Fleetwood Enterprises, Inc. (retired
1991) (mfr. of recreational vehicles and manufactured homes).
John R. Easter 70 1993 Retired Vice President, Sears-Roebuck Company (retired 1989);
Director, Mutual Trust Life Insurance Co.
DIRECTORS CONTINUING TO SERVE WHOSE TERMS EXPIRE AT THE 2000
ANNUAL MEETING, CLASS II
James R. Richardson (3) 55 1990 Senior Vice President Marketing, 1994 to present, Flexsteel
Industries, Inc.
Patrick M. Crahan (3) 51 1997 Vice President, Dubuque Upholstering Division, 1989 to present,
Flexsteel Industries, Inc; Director, American Trust and Savings
Bank, Dubuque, Iowa; Trustee, Steelworkers Pension Fund Trust;
Trustee, University of Dubuque.
Marvin M. Stern (2)(3) 63 1998 Retired Vice President, Sears-Roebuck Company (retired 1996)
DIRECTORS CONTINUING TO SERVE WHOSE TERMS EXPIRE AT THE 2001
ANNUAL MEETING, CLASS III
Edward J. Monaghan (3) 60 1987 Chief Operating Officer and Executive Vice President, 1993 to
present, Flexsteel Industries, Inc.; Trustee, Clarke College.
Jeffrey T. Bertsch (3) 44 1997 Vice President Corporate Services, 1989 to present, Flexsteel
Industries, Inc.; Director, American Trust and Savings Bank,
Dubuque, Iowa; Director, Retirement Investment Corp.; Trustee
University of Dubuque.
Lynn J. Davis (1) (3) 52 1999 Senior Vice President, 1991 to present, ADC Telecommunications,
Inc.; Director, Automated Quality Technologies, Inc. (mfr. of
non-contact measurement equipment).
- ---------------------
(1) Member of Audit Committee
(2) Member of Compensation and Nominating Committee
(3) Member of Marketing and Planning Committee
3
CERTAIN INFORMATION CONCERNING BOARD
AND OUTSIDE DIRECTOR'S COMPENSATION
During the fiscal year ended June 30, 1999, four meetings of the Board of
Directors were held. No Director attended less than 75% of the meetings.
Each Director who is not an employee of the Company is paid a retainer at
the rate of $9,600 per year. In addition, each is paid a fee of $2,400 for each
Board meeting each attends. The Chairman of the Board is paid a retainer of
$16,800 per year and a fee of $4,200 for each Board meeting attended. For
attending a committee meeting each is paid a fee of $1,000. The Chairman of each
Committee is paid $1,100 for each meeting attended. The Company pays no
additional remuneration to employees of the Company who are Directors.
Each Director who is not an employee of the Company receives on the first
business day after each annual meeting a non-discretionary, non-qualified stock
option grant for 1,000 shares valued at fair market value on date of grant,
exercisable for 10 years. Each person who becomes for the first time a
non-employee member of the Board, including by reason of election, appointment
or lapse of three (3) years since employment by the Company, will receive an
immediate one-time option grant for 2,000 shares.
The Company previously entered into an unfunded deferred compensation
agreement with John R. Easter, whereby director fees were invested by the
Company. Payments to Mr. Easter were deferred until his 70th birthday.
The Company has entered into an agreement with Thomas E. Holloran pursuant
to which the Company will pay to him, or his beneficiaries, $20,000 after he
ceases to be a Director as additional compensation in recognition of Director
services rendered.
4
COMMITTEES OF THE BOARD
The Board of Directors has established three standing committees; the names
of the committees and the principal duties are as follows:
AUDIT COMMITTEE:
Confers with the independent auditors on various matters, including the
scope and results of the audit; authorizes special reviews or audits; reviews
internal auditing procedures and the adequacy of internal controls; and reviews
policies and practices respecting compliance with laws, conflicts of interest
and ethical standards of the Company. The Committee held two meetings during the
fiscal year ended June 30, 1999. The Committee members are Thomas E.
Holloran, L. Bruce Boylen and Lynn J. Davis.
COMPENSATION AND NOMINATING COMMITTEE:
Makes recommendations regarding Board compensation, reviews performance and
compensation of various executive officers, determines stock option grants, and
advises regarding employee benefit plans. Makes recommendations regarding Board
of Director nominees and reviews timely proposed nominees received from any
source including nominees by stockholders. Nominations by stockholders must be
received by the Secretary at least 18 days before the annual meeting and set
forth nominee information as required by the Restated Articles which are
available upon request to the Secretary of the Company. The Committee held two
meetings during the fiscal year ended June 30, 1999. The Committee members are
L. Bruce Boylen, Thomas E. Holloran and Marvin M. Stern.
MARKETING AND PLANNING COMMITTEE:
Reviews marketing plans with respect to the Company's position in the
various market places. Makes recommendations regarding marketing direction to
enhance revenues and profit margins. The Committee did not meet during the
fiscal year ended June 30, 1999. The Committee members are Marvin M. Stern,
Patrick M. Crahan, Jeffrey T. Bertsch, Lynn J. Davis, Edward J. Monaghan and
James R. Richardson.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITS NOMINEES. PROXIES
SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS
SPECIFY OTHERWISE IN THEIR PROXIES.
5
OWNERSHIP OF STOCK BY
DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth the shares of Flexsteel's Common Stock
beneficially owned by the Directors, the Chief Executive Officer, the other four
most highly compensated executive officers and by all directors and executive
officers as a group as of August 5, 1999. Unless otherwise indicated, to the
best knowledge of the Company all persons named in the table have sole voting
and investment power with respect to the shares shown.
SHARES BENEFICIALLY PERCENT OF TOTAL SHARES
NAME TITLE OWNED (1)(2) OUTSTANDING
- --------------- ----------------------------------------------- ------------------- -----------------------
J.T. Bertsch Vice President Corporate Services, Director 299,645(3)(4) 4.6%
L.B. Boylen Director 8,000 0.1%
P.M. Crahan Vice President Dubuque Upholstering 117,752(4) 1.8%
Division, Director
L.J. Davis Director 2,000 0.0%
J.R. Easter Chairman of the Board of Directors 8,000 0.1%
T.E. Holloran Director 13,680 0.2%
K.B. Lauritsen President, Chief Executive Officer, Director 111,148(4) 1.7%
E.J. Monaghan Executive Vice President, Chief Operating 144,508(4) 2.2%
Officer, Director
J.R. Richardson Senior Vice President Marketing, Director 206,293(4) 3.2%
M.M. Stern Director 3,000 0.0%
T.D. Burkart Senior Vice President Vehicle Seating 63,810(4) 1.0%
R.J. Klosterman Vice President Finance, Chief Financial Officer 64,649(4) 1.0%
and Secretary
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (12) 1,042,485 15.9%
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(1) Includes the following number of shares which may be acquired by exercise
of stock options: J.T. Bertsch -- 35,850; L.B. Boylen -- 8,000; P.M. Crahan
-- 37,050; L.J. Davis -- 2,000; J.R. Easter -- 8,000; T.E. Holloran --
9,000; K.B. Lauritsen -- 55,865; E.J. Monaghan -- 63,960; J.R. Richardson
-- 52,490; M.M. Stern -- 3,000; T.D. Burkart -- 35,000; R.J. Klosterman --
37,900.
(2) Includes shares, if any, owned beneficially by their respective spouses.
(3) Does not include 199,040 shares held in irrevocable trusts for which trusts
American Trust & Savings Bank serves as sole trustee. Under the Terms of
Trust, Jeffrey T. Bertsch has a possible contingent interest. Jeffrey T.
Bertsch disclaims beneficial ownership in the shares held by each such
trust.
(4) Includes shares awarded pursuant to the Company's Long-Term Incentive Plan
over which shares the Grantee has voting rights. Investment rights are
restricted subject to continued service with the Company.
6
OWNERSHIP OF STOCK BY
CERTAIN BENEFICIAL OWNERS
AS OF AUGUST 5, 1999
To the best knowledge of the Company, no person owns beneficially 5% or
more of the outstanding common stock of the Company except as is set forth
below.
AMOUNT PERCENT
BENEFICIALLY OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OWNED (1) CLASS
- -------------- ----------------------------------------- ------------ -------
Common J.B. Crahan, P.O. 877, Dubuque, IA 52004 380,988 5.8%
Common Dimensional Fund Advisors, Inc.
1299 Ocean Avenue, Santa Monica, CA 90401 450,700 6.9%
Common First Pacific Advisors Incorporated
11400 West Olympic Boulevard
Los Angeles, CA 90064 402,000 6.2%
Common Heartland Advisors, Inc.
790 North Milwaukee Street
Milwaukee, WI 53202 334,000 5.1%
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(1) To the best knowledge of the Company, no beneficial owner named above has
the right to acquire beneficial ownership in additional shares.
7
The following table discloses compensation received by the Company's Chief
Executive Officer and the four remaining most highly paid executive officers for
the three (3) fiscal years ending June 30, 1999.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
-------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
- --------------------------------------------------------------- ----------------------- -----------------
OTHER RESTRICTED SECURITIES ALL
ANNUAL STOCK UNDERLYING LTIP OTHER
SALARY BONUS COMP AWARDS OPTIONS PAYOUTS COMP
NAME & PRINCIPAL POSITION YEAR $ $ $ $ # $ $(1)
- --------------------------- ---- ------- ------- ------ ---------- ---------- ------- -------
K. Bruce Lauritsen 1999 302,850 178,239 9,500 70,587 26,616
President & Chief 1998 290,400 143,848 8,725 54,202 27,459
Executive Officer 1997 261,600 105,586 9,750 45,841 26,553
Edward J. Monaghan 1999 229,950 121,809 9,000 46,596 9,832
Executive Vice President 1998 225,000 100,784 8,300 35,010 10,870
& Chief Operating Officer 1997 220,500 58,786 9,250 31,576 36,205
James R. Richardson 1999 201,750 105,896 8,500 40,748 23,152
Senior Vice President of 1998 195,300 77,983 7,600 29,371 23,664
Marketing 1997 189,600 56,173 8,500 27,785 22,880
Ronald J. Klosterman 1999 171,750 90,312 8,500 34,706 33,066
Vice President of 1998 160,200 70,425 7,200 24,853 33,573
Finance & Secretary 1997 141,000 51,042 8,000 21,714 33,352
Thomas D. Burkart 1999 174,300 103,734 7,500 36,826 26,596
Senior Vice President 1998 164,700 69,417 6,500 21,263 26,656
Vehicle Seating 1997 161,100 52,594 6,000 20,853 25,376
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(1) All Other Compensation -- Includes for the fiscal years and the named
executive officers indicated below: (i) retirement plan contributions, (ii)
Company matching contributions to the Section 401k plan and (iii) accruals
made in accordance with the Company's Senior Officer Deferred Compensation
Plan entitling each participant upon retirement or other limited
circumstances to $5,000 per month during their lives.
8
RETIREMENT DEFERRED
NAME YEAR PLAN 401K COMP
- --------------------- ---- ---------- ----- --------
K. Bruce Lauritsen 1999 8,232 1,600 16,784
1998 9,256 1,419 16,784
1997 8,269 1,500 16,784
Edward J. Monaghan 1999 8,232 1,600 0
1998 9,270 1,600 0
1997 8,269 1,500 26,436
James R. Richardson 1999 8,232 1,600 13,320
1998 8,744 1,600 13,320
1997 8,060 1,500 13,320
Ronald J. Klosterman 1999 8,232 1,600 23,234
1998 8,739 1,600 23,234
1997 8,663 1,455 23,234
Thomas D. Burkart 1999 8,232 1,600 16,764
1998 8,292 1,600 16,764
1997 7,112 1,500 16,764
STOCK OPTIONS/SAR*
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR
OPTION TERM (1)
------------------
EXERCISE
NAME SHARES PRICE ($/Sh) EXPIRE DATE 5% 10%
- -------------------- -------- ------------ ----------- ------ -------
K. Bruce Lauritsen 9,500 10.50 11/02/2008 62,732 158,976
Edward J. Monaghan 9,000 10.50 11/02/2008 59,431 150,609
James R. Richardson 8,500 10.50 11/02/2008 56,129 142,242
Ronald J. Klosterman 8,500 10.50 11/02/2008 56,129 142,242
Thomas D. Burkart 7,500 10.50 11/02/2008 49,525 125,507
- ---------------------
* The Company does not have a stock appreciation rights plan (SAR).
(1) The amounts set forth in these columns are the result of calculations at
the 5% and 10% rates set by the Securities and Exchange Commission. Actual
gains, if any, on stock option exercise are dependent on the future
performance of the Company's common stock.
9
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options during the last fiscal
year and unexercised options held as of the end of the fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
FY-END 1999 AT FY-END 1999 (1)
# OF SHARES ---------------------- --------------------
ACQUIRED ON $ VALUE # $
NAME EXERCISE REALIZED EXERCISABLE EXERCISABLE
- -------------------- ----------- -------- ---------------------- --------------------
K. Bruce Lauritsen 9,520 33,320 55,865 117,966
Edward J. Monaghan 63,960 141,006
James R. Richardson 9,520 28,560 52,490 109,216
Ronald J. Klosterman 3,650 12,775 37,900 86,281
Thomas D. Burkart 4,200 14,700 35,000 76,031
- ---------------------
(1) Based on the closing price as published in The Wall Street Journal for the
last business day of the fiscal year ($13.31). All options are exercisable
at time of grant.
10
LONG-TERM INCENTIVE PLAN AWARDS TABLE
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
PERFORMANCE OR
OTHER PERIOD ESTIMATED FUTURE
NUMBER OF UNTIL PAYOUTS UNDER
SHARES, UNITS MATURATION OR NON-STOCK PRICE BASED
NAME OR OTHER RIGHTS PAYOUT (1) PLANS (2)
- -------------------- --------------- -------------- ---------------------
K. Bruce Lauritsen 7,991
Edward J. Monaghan 5,275
James R. Richardson 4,613
Ronald J. Klosterman 3,929
Thomas D. Burkart 4,169
- ---------------------
Shares of the Company's common stock are available for award annually to key
employees based on the average of the returns on beginning equity for the last
three years.
(1) Shares awarded are subject to restriction, with 33.3% of the stock received
by the employee on the award date and 33.3% each year for the next two
years. Restricted Stock Awards -- The aggregate stock holdings (number of
shares and value) as of July 8, 1999 are as follows: K. Bruce Lauritsen --
5,327 shares, $70,587; Edward J. Monaghan -- 3,517 shares, $46,596; James
R. Richardson -- 3,075 shares, $40,748; Ronald J. Klosterman -- 2,619
shares, $34,706; Thomas D. Burkart -- 2,779 shares, $36,826. Dividends are
paid to the employee on restricted shares.
(2) Not applicable to Plan.
NOMINATING AND COMPENSATION COMMITTEE REPORT CONCERNING
FLEXSTEEL'S EXECUTIVE COMPENSATION POLICY
The Nominating and Compensation Committee of the Board of Directors is
responsible for the establishing of the Company's policy for compensating
executives. The Committee is comprised of non-employee directors.
COMPENSATION PHILOSOPHY -- The fundamental objective of Flexsteel's
executive compensation program is to support the achievement of the Company's
business objectives and, thereby, the creation of stockholder value. As such,
the Company's philosophy is that executive compensation policy and practice
should be designed to achieve the following objectives:
* Align the interests of executives with those of the Company and its
stockholders by providing a significant portion of compensation in
Company stock.
* Provide an incentive to executives by tying a meaningful portion of
compensation to the achievement of Company financial objectives.
11
* Enable the Company to attract and retain key executives whose skills
and capabilities are needed for the continued growth and success of
Flexsteel by offering competitive total compensation opportunities and
providing attractive career opportunities.
In compensating senior management for its performance, two key measures are
considered: return on equity and stock price. At the executive level, overall
Company performance is emphasized in an effort to encourage teamwork and
cooperation.
While a significant portion of compensation fluctuates with annual results,
the total program is structured to emphasize longer-term performance and
sustained growth in stockholder value.
COMPETITIVE POSITIONING -- The Committee regularly reviews executive
compensation levels to ensure that the Company will be able to attract and
retain the caliber of executives needed to run the Company and that pay for
executives is reasonable and appropriate relative to market practice. In making
these evaluations, the Committee annually reviews the result of surveys of
executive salary and annual bonus levels among durable goods manufacturers of
comparable size. The Committee periodically completes an in-depth analysis of
salary, annual bonus, and long-term incentive opportunities among specific
competitors assisted by an independent compensation consulting firm. All of the
surveyed companies are included in the Household Furniture Index used as the
peer group for purposes of the performance graph. While the pay of an individual
executive may vary, the Company's Policy is to target aggregate compensation for
executives at average competitive levels, provided commensurate performance.
COMPONENTS OF EXECUTIVE COMPENSATION -- The principal components of
Flexsteel's executive compensation program include base salaries, annual cash
bonuses, and longer-term incentives using Company stock.
BASE SALARY -- An individual executive's base salary is based upon the
executive's level of responsibility and performance within the Company, as well
as competitive rates of pay. The Committee reviews each executive officer's
salary annually and makes adjustments, as appropriate, in light of any change in
the executive's responsibility, changes in competitive salary levels, and the
Company's performance.
ANNUAL INCENTIVE -- The purpose of the Company's annual incentive program
is to provide a direct monetary incentive to executives in the form of annual
cash bonus tied to the achievement of performance objectives. For executive
officers, the Committee annually sets a targeted return on equity for the coming
year, from which minimum and maximum levels are determined. Corresponding
incentive award levels, expressed as a percentage of salary, also
12
are set based primarily on an individual's responsibility level. If minimum
performance levels are not met, no bonus award is made. After the completion of
the year, the Committee ratifies cash bonuses as awarded based principally on
the extent to which targeted return on equity has been achieved.
LONG-TERM INCENTIVES -- Longer-term incentive compensation involves the use
of stock under two types of awards: Long-term incentive awards and stock
options. Both types of awards are intended to focus executives' attention on the
achievement of the Company's longer term performance objectives, to align the
executive officers' interests with those of stockholders and to facilitate
executives' accumulations of sustained holding of Company stock. The level of
award opportunities, as combined under both plans, are intended to be consistent
with typical levels of comparable companies and reflect an individual's level of
responsibility and performance.
Long-term incentive awards are paid under the stockholder approved
Management Incentive Plan. Awards give executives the opportunity to earn shares
of Company stock to the extent that the three-year average return on equity
objectives are achieved. As with annual incentives, various levels of
performance goals and corresponding compensation amounts are established, with
no awards earned if a minimum level is not achieved. Two-thirds of any earned
shares are subject to forfeiture provisions tied to the executive's continued
service with the Company. This provision is intended to enhance the Company's
ability to retain key executives and provide a longer-term performance focus.
Stock options, as awarded under stockholder approved plans, give executives
the opportunity to purchase Flexsteel common stock for a term not to exceed ten
years and at a price of no less than the fair market value of Company stock on
the date of grant. Executives benefit from stock options only to the extent
stock price appreciates after the grant of the option.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER -- The total compensation for
Flexsteel's CEO in fiscal year 1999 was established in accordance with the
policies discussed above. Mr. Lauritsen's base salary increase reflects market
movements in executive salaries. His annual incentive bonus and long-term
incentive award were based on the Company's achievement of established target
levels for return on equity. Mr. Lauritsen's stock option award was consistent
with prior awards and those to other senior executives.
The Company's current levels of compensation are less than the $l,000,000
level of non-deductibility with respect to Section 162(m) of the Internal
Revenue Code.
13
This report has been prepared by members of the Compensation and Nominating
Committee of the Board of Directors. Members of this Committee are:
L. Bruce Boylen Thomas E. Holloran Marvin M. Stern
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The current members of Flexsteel's Compensation and Nominating Committee
are L. Bruce Boylen, Chairman, Thomas E. Holloran and Marvin M. Stern. No
executive officer of Flexsteel served as a director of another entity that had
an executive officer serving on Flexsteel's compensation committee. No executive
officer of Flexsteel served as a member of the compensation committee of another
entity which had an executive officer who served as a director of Flexsteel.
SHARE INVESTMENT PERFORMANCE
The following graph is based upon the SIC Code #251 Household Furniture
Index as a peer group. It shows changes over the past five-year period in the
value of $100 invested in: (1) Flexsteel's Common Stock; (2) the NASDAQ Market
Index; and (3) an industry group of the following: Bassett Furniture Ind., Bush
Industries Inc. CL A, Chromcraft Revington Inc., DMI Furniture, Inc., Ethan
Allen Interiors, Flexsteel Industries, Inc., Furniture Brands Intl., Industrie
Natuzzi S.P.A., Krause's Furniture, Inc., La-Z-Boy Inc., Ladd Furniture Inc.,
Leggett & Platt Inc., Meadowcraft Inc., O'Sullivan Ind. Hldgs Inc., Pulaski
Furniture Corp, Rowe Companies, and Stanley Furniture Inc. This data was
furnished by Media General Financial Services. The graph assumes reinvestment of
dividends.
14
FIVE-YEAR CUMULATIVE TOTAL RETURNS
VALUE OF $100 INVESTED ON JUNE 30, 1994
[PLOT POINTS CHART]
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
Flexsteel 100 77.75 93.17 97.02 120.00 118.65
Furniture Household 100 102.44 125.92 182.16 231.04 241.05
NASDAQ 100 117.28 147.64 177.85 235.75 330.37
15
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
Information with respect to directorships held by certain directors of the
Company in local financial institutions is set forth in the table under
"Proposal I -- Election of Directors," in the column captioned "Principal
Occupation and Other Directorships or Employment during the Last Five Years."
The Company maintains normal banking relations with the banks named in the
table. It is expected that the Company's relationship with these banks will
continue in the future.
PROPOSAL II
PROPOSAL FOR APPROVAL OF THE 1999 STOCK OPTION PLAN
The Compensation and Nominating Committee, recognizing that insufficient
shares are available to provide further grants of stock options under the
existing Company plan, advised the Board of Directors that it is in the interest
of the Company to continue its longstanding practice of making stock options
available to those employees responsible for significant contributions to the
Company's business. The Compensation and Nominating Committee believes that the
equity stake in the growth and success of the Company afforded by stock options
provides such key employees with an incentive to continue to energetically apply
their talents within the Company. Accordingly, on September 2, 1999, the Board
of Directors, acting on the recommendation of the Compensation and Nominating
Committee, unanimously approved the 1999 Stock Option Plan (the "Plan") and
directed that it be submitted for consideration and action at the meeting of
stockholders.
The following is a brief but not comprehensive summary of the Plan which
continues a practice that began at the Company in 1969. The complete text is
attached as Appendix A and reference is made to such Appendix for a complete
statement of the provisions of the Plan. The Plan provides for the granting of
options to purchase up to 500,000 shares of the Company's Common Stock, to be
drawn from authorized but unissued shares and/or from shares acquired by the
Company, including on the open market. The number and kind of shares subject to
the Plan would be appropriately adjusted in the event of any change in the
capital structure of the Company. Stockholders would have no preemptive rights
with regard to shares allotted to the Plan. The Plan would be administered by
the Company's Compensation and Nominating Committee which is composed of two or
more directors who are not employees of the Company. Each member of the
Compensation and Nominating Committee must be a "disinterested person" within
the meaning of Rule 16b-3 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended from time to time. No
16
member of the Compensation and Nominating Committee is eligible to receive
options under the Plan except automatic formula grants as a director.
Participants would be selected by the Compensation and Nominating Committee from
among key employees of the Company. Optionees would be selected on the basis of
demonstrated ability to contribute substantially to the effective management of
the Company. The Compensation and Nominating Committee would determine both the
number of optionees and the number of shares to be optioned to any individual
under the Plan. The Board of Directors would be able to amend the Plan without
further approval by the Stockholders, except insofar as such approval is
required by law.
Under the Plan, nonstatutory stock options are automatically granted to
non-employee directors of the Company. Each person who is a non-employee
director is granted a nonstatutory 1,000 share option the day after the annual
meeting of stockholders of the Company, at an exercise price equal to the fair
market value (as defined in the Plan) of the Common Stock on the date of the
grant. The option is immediately vested.
The Plan would enable the Company to grant either "non-qualified options"
or "incentive stock options". No options could be granted under the Plan later
than December 1, 2009. Options could have an exercise period of up to ten years
as determined by the Committee.
In the event of termination of employment due to death, disability or
retirement, the period of time for exercise varies from two (2) to five (5)
years. The options would not be transferable, except in the event of death.
The exercise price per share for each option would be not less than the
fair market value on the date of grant. It is provided that payment for the
exercise may be made in stock or cash.
The aggregate fair market value (determined as of the time such option is
granted) of the Common Stock for which any employee may have incentive stock
options vest in any calendar year may not exceed $100,000.
Proceeds received from optioned shares will be used for general corporate
purposes.
Under currently applicable provisions of the Internal Revenue Code an
optionee will not be deemed to receive any income for Federal tax purposes upon
the grant of an option under the Plan, nor will the Company be entitled to a tax
deduction at that time. However, upon the exercise of an option the tax
consequences are as follows:
1. Upon the exercise of a non-qualified option, the optionee will be
deemed to have received ordinary income in an amount equal to the
difference between the option
17
price and the market price of the shares on the exercise date. The Company
will be allowed an income tax deduction equal to the excess of market value
of the shares on the date of exercise over the cost of such shares to
optionee.
2. Upon the exercise of an incentive stock option, there is no income
recognized by the optionee at the time of exercise. If the stock is held at
least one year following the exercise date and at least two years from the
date of grant of the option, the optionee will realize a long-term capital
gain or loss upon sale, measured as the difference between the option
exercise price and the sale price. If either of these holding period
requirements are not satisfied, ordinary income tax treatment will apply to
the amount of gain at sale or exercise, whichever is less. No income tax
deduction will be allowed the Company with respect to shares purchased by
an optionee upon the exercise of an incentive stock option, provided such
shares are held for the required periods as described above.
There is no current charge against the Company in connection with the grant
of an option or the exercise of an option for cash. The exercise of an option
for stock may result in a charge against income.
Under the Internal Revenue Code, an option will generally be disqualified
from receiving incentive stock option treatment if it is exercised more than
three months following termination of employment. However, if the optionee is
disabled, such statutory treatment is available for one year following
termination. If the optionee dies while employed by the Company or within three
months thereafter, the statutory time limit is waived altogether. In no event do
these statutory provisions extend the rights to exercise an option beyond those
provided by its terms.
The closing price of the Common Stock of the Company on October 13, 1999,
based on composite trading data published in the Wall Street Journal, was
$13.375 per share.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock present and entitled to vote at the Meeting will be required for
approval of the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE
1999 STOCK OPTION PLAN. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO
VOTED UNLESS SHAREHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES.
18
PROPOSAL III
APPOINTMENT OF INDEPENDENT AUDITORS
Subject to ratification by the stockholders, the Board of Directors has
appointed Deloitte & Touche LLP as independent certified public accountants to
examine the financial statements of the Company for the fiscal year ending June
30, 2000.
The Company has been informed by Deloitte & Touche LLP that neither it nor
its members nor its associates has any direct, nor any material indirect
financial interest in the Company. Management is not aware of any material
connection by such firm in the recent past with the Company in any capacity
other than as independent auditors. Representatives of Deloitte & Touche LLP are
expected to be present during the annual meeting. They are expected to be
available to respond to appropriate questions and will have the opportunity to
make a statement if they wish.
Audit services performed by Deloitte & Touche LLP during the fiscal year
include examinations of the financial statements of the Company, services
related to filings with the Securities and Exchange Commission and consultation
on matters related to accounting, taxation and financial reporting. Professional
services were reviewed by the Audit Committee and the possible effect on the
auditor's independence was considered.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
APPOINTMENT OF DELOITTE & TOUCHE LLP. PROXIES SOLICITED BY THE BOARD OF
DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE IN THEIR
PROXIES.
PROPOSALS BY STOCKHOLDERS
Stockholders wishing to have a proposal considered for inclusion in the
Company's proxy statement for the 2000 annual meeting must submit the proposal
in writing and direct it to the Secretary of the Company at the address shown
herein. It must be received by the Company no later than June 30, 2000.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934 Section
16(a) requires the Company's directors and executive officers to
file with the Securities and Exchange Commission reports of ownership and
changes in ownership of the Company's Common Stock, and the Company is required
to identify any of those persons who fail to file such reports on a timely
basis. To the best of the Company's knowledge, there were no late filings by
directors and executive officers during fiscal year 1999.
19
OTHER MATTERS
The percentage total number of the outstanding shares represented at each
of the last three years stockholders' meetings was as follows: 1996 - 85.7%;
1997 - 88.0%; 1998 - 80.1%.
The financial statements of the Company contained in the Annual Report to
Shareholders for the year ended June 30, 1999, are incorporated herein by
reference. Specifically incorporated herein by reference from the 1999 Annual
Report to Shareholders, is the Independent Auditors' Report, Management's
Discussion and Analysis of Financial Condition and Results of Operations and
Selected Quarterly Financial Data.
UPON WRITTEN REQUEST THE COMPANY WILL PROVIDE, WITHOUT CHARGE, A COPY OF
ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30, 1999. REQUESTS SHOULD
BE DIRECTED TO THE SECRETARY OF THE COMPANY AT P.O. BOX 877, DUBUQUE, IA
52004-0877.
The Board of Directors does not know of any other matter which may come
before the meeting. However, should any other matter properly come before the
meeting, the persons named in the Proxy will vote in accordance with their
judgment upon such matters unless a contrary direction is indicated by the
Stockholder by his lining or crossing out the authority on the Proxy.
Stockholders are urged to vote, date, sign and return the Proxy form in the
enclosed envelope to which no postage need be affixed if mailed in the United
States. Prompt response is helpful and your cooperation will be appreciated.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ R.J. KLOSTERMAN
R.J. KLOSTERMAN
Secretary
Dated: October 27, 1999
Dubuque, Iowa
20
APPENDIX A
FLEXSTEEL INDUSTRIES, INC.
1999 STOCK OPTION PLAN
SECTION 1
DEFINITIONS: As used herein, the following terms have the meaning indicated:
"AGREEMENT" means the Option Agreement entered into between the Company and an
Optionee.
"BOARD OF DIRECTORS" means the Board of Directors of the Company.
"COMMITTEE" means the members of the Board of Directors appointed to administer
the Plan.
"COMPANY" means Flexsteel Industries, Inc.
"DATE OF ADOPTION" means December 9, 1999.
"DATE PLAN APPROVED BY SHAREHOLDERS" means December 9, 1999.
"OPTION" means an Optionee's right to purchase shares of Common Stock of the
Company, subject to the terms and conditions of the Plan and Agreement. Options
are either Incentive Stock Options or Nonqualified Stock Options.
"OPTIONEE" means an eligible employee who has been designated for participation
under the Plan as defined in Section 5(a) or a Non-employee director granted
options pursuant to Section 5(e).
"OPTION PERIOD" means the ten-year or lesser period of time during which the
Stock Option Agreement allows the Option to be exercised commencing with the
date the Option is granted. No Option shall be granted after December 1, 2009.
"NON-EMPLOYEE DIRECTOR" means a director of the Company who has not been an
employee of the Company for three years.
"PLAN" means the Flexsteel Industries, Inc. 1999 Stock Option Plan.
SECTION 2
AGGREGATE SHARES UNDER THE PLAN AND PURPOSE:
(a) The aggregate number of shares which may be issued pursuant to this
Plan under Options is 500,000 Common Shares of the Company, subject to
adjustments provided for hereafter in Section 4(b).
A-1
(b) The purpose of this Plan is to encourage the growth and success of the
Company by providing incentives to motivate, attract and retain employees of
competent training, experience and ability to encourage such people to invest in
the Common Stock of the Company, thereby increasing their proprietary interest
in the business and their personal interest in the Company's continued success
and progress. The purpose also is to attract and retain outstanding Non-employee
directors by enabling them to participate in Company growth through automatic
non-discretionary grants of Options.
(c) The Plan shall be deemed to have been adopted December 9, 1999, subject
to the ratification and approval by shareholders of the Company at the December
9, 1999 Annual Meeting. Options may be granted after the Plan is adopted and
before the Plan is approved by shareholders but the Company shall have no
obligations of any nature whatsoever to any employee or other person arising out
of either this Plan or any Options granted hereunder unless shareholder approval
is obtained.
(d) The Plan will not confer upon any Optionee any right with respect to
continuance of employment by the Company, nor a continuing directorship, nor
will it interfere in any way with the Company's right to terminate the
Optionee's employment at any time with or without cause.
(e) No Option shall be granted pursuant to the Plan after December 1, 2009.
(f) The Committee, in its discretion, shall set the length of the time
during which each Option may be exercised, except for Non-employee director
grants, but in no event shall it be longer than ten years after the date of
grant.
SECTION 3
ADMINISTRATION:
(a) Subject to such orders and resolutions not inconsistent with the
provisions of the Plan as may from time to time be issued or adopted by the
Board of Directors, the Plan shall be administered by, or only in accordance
with the recommendation of, a Committee of two or more persons having full
authority to act in the matter, all of the members of which Committee are
disinterested persons within the meaning of Rule 16b-3 of the Securities
Exchange Act of 1934, as amended.
(1) The Committee shall administer the Plan and accordingly, it shall
have full power to grant Options, construe and interpret the Plan, amend
and adjust terms of then
A-2
existing options subject to restrictions of this Plan, establish rules and
regulations and perform all other acts, including the delegation of
administrative responsibilities, it believes reasonable and proper.
(2) The determination of those eligible to receive Options, and the
amount, type and timing of each Option and the terms and conditions of the
respective Option Agreements shall rest in the sole discretion of the
Committee, subject to the provisions of the Plan.
(3) The Committee may cancel any Options awarded under the Plan if an
Optionee conducts himself in a manner which the Committee determines to be
inimical to the best interests of the Company and/or accepts employment
with a competitor. This provision does not apply to Non-employee director
Options.
(4) The Board, or the Committee, may correct any defect, supply any
omission or reconcile any inconsistency in the Plan, or in any granted
Option, in the manner and to the extent it shall deem necessary to carry it
into effect.
None of the Committee members are eligible to receive Options under the
Plan while a member of the Committee, except pursuant to Section 5(e).
(b) All determinations by the Committee shall be made by the affirmative
vote of a majority of its members by written consent or by a majority vote, in
person or otherwise, of its members at a meeting called for that purpose.
(c) Each Option shall be evidenced by an Agreement which shall contain the
terms and conditions and shall be signed by an Officer of the Company and the
Optionee. As a minimum, the Agreement shall state the number of shares of stock
under Option, the Option price and the duration of the Option.
(d) All decisions made by the Committee pursuant to provisions of the Plan
or related orders or resolutions of the Board of Directors shall be final,
conclusive and binding on all parties, including the Company, shareholders,
employees and Optionees.
SECTION 4
SHARES SUBJECT TO THE PLAN:
(a) Shares to be delivered upon exercise of an Option under the Plan shall
be made available at the discretion of the Board of Directors either from
authorized but unissued
A-3
shares of the Company's Common Stock or shares acquired by the Company,
including shares purchased in the open market.
(b) In the event of merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, or other change in corporation
structure affecting the Company's Common Stock the number of shares of Common
Stock available for Options and subject to outstanding Options shall be adjusted
proportionately. Similarly, the Option price per share of outstanding Options
shall be appropriately adjusted. However, fractional shares may be rounded to
the nearest whole share.
SECTION 5
ELIGIBILITY AND PARTICIPATION:
(a) The persons eligible for participation in the Plan shall be full-time
managerial, administrative or professional employees of the Company,
Non-employee directors and those other employees who are key to the Company's
success. This includes officers, whether or not Directors of the Company.
Participation in the Plan shall not be automatic except for Non-employee
directors who shall be granted Options in amounts and pursuant to the terms only
as provided by Section 5(e) herein and not otherwise.
(b) Subject to the limitations of the Plan, the Committee shall select the
persons to participate in the Plan, determine the number and Option price of
shares subject to each Option, and determine the date when each Option shall be
granted and the date when each Option shall expire. The date the employee
becomes an Optionee is the date of his Agreement with the Company. More than one
Option may be granted to the same Optionee and an Optionee may enter into more
than one Agreement with the Company.
(c) No Incentive Stock Option shall be granted to anyone who, immediately
after such Option would otherwise be granted, would own stock representing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company.
(d) An Option granted to an Optionee under this Plan shall in all events
lapse upon expiration of the Option period, if not exercised, lapsed, canceled
or otherwise terminated prior thereto. If an Option granted hereunder is not
exercised but is canceled, terminated or lapsed, the shares covered by such
Option shall become again available for grant by the Committee under this Plan.
(e) Each person who becomes for the first time a Non-employee director,
including by reason of election, appointment or lapse of three (3) years since
employment by the
A-4
Company (whether or not that person is standing for re-election that year), will
receive an immediate one-time Option grant for 2,000 shares. Each Non-employee
director will receive a Option grant for 1,000 shares on the first business day
following each annual meeting. The following terms and conditions are applicable
to each Option. The Option price per share will be equal to one hundred percent
(100%) of the fair market value on the date of the Option grant. The Options
will have terms of ten years measured from the date of the Option grant. In the
event the Optionee ceases to serve as a director the Option may be exercised for
a period of five (5) years after the date of cessation unless cessation is
caused by reason of disability or death in which case the option may be
exercised for a period of two (2) years. In the case of death the Option may be
exercised within such period by the estate or heirs of the Optionee. The above
exercise periods do not extend the option period as established at time of
grant.
SECTION 6
TERM OF THE PLAN AND OPTION PERIOD:
(a) The Plan shall automatically terminate on December 1, 2009, which is
within ten years from the Date of Adoption. No Options shall be granted after
the date of such termination. However, the Plan shall remain in effect as to all
outstanding Options until the outstanding Options are exercised, canceled,
terminated or lapsed.
(b) Such termination shall not adversely affect Options previously granted.
(c) Subject to the provisions of the Plan with respect to death,
disability, retirement, termination of employment, or otherwise, the maximum
period during which each Option shall be exercised shall be fixed by the
Committee, except for Non-employee directors, at the time each such Option is
granted, but in no event shall it exceed ten years from the date of such grant.
SECTION 7
OTHER PROVISIONS:
The Committee may grant either Incentive Stock Options or Nonqualified
Stock Options to employees. Where an Incentive Stock Option and a Nonqualified
Stock Option are awarded by the Committee, such Options shall constitute
separate grants and shall clearly be identified as such. In no event will the
exercise of one such Option affect the right to exercise
A-5
the other such Option. If an Incentive Stock Option is awarded, absolutely all
terms and conditions making it so must be complied with by the Company and the
Optionee.
(a) OPTION PRICE: The Option price for shares of Common Stock of the
Company shall be one hundred percent (100%) of the fair market value of
such Common Stock on the date the Option is granted. For the purposes of
this Plan, such fair market value shall be determined (i) in case the
Common Stock shall not then be listed and traded upon a recognized
securities exchange, upon the basis of the mean between the bid and asked
quotations for such stock on the date of grant (as reported by a recognized
stock quotation service) or, in the event that there shall be no bid or
asked quotations on the date of grant, then upon the basis of preceding the
date of grant, or (ii) in the case the Common Stock shall then be listed
and traded upon a recognized securities exchange, upon the basis of the
mean between the highest and lowest selling prices at which shares of the
Common Stock were traded on such recognized securities exchange on the date
of grant or, if the Common Stock was not traded on said date, upon the
basis of the mean of such prices on the date nearest preceding the date of
grant, and upon any other factors which the Committee shall deem
appropriate.
(b) MAXIMUM OPTION GRANTS: The aggregate fair market value (determined
at the time the Option is granted) of the stock with respect to which
Incentive Stock Options are exercisable for the first time by such
individual during any calendar year (under all such plans of the Company
and its parent and subsidiary corporations, if any) shall not exceed
$100,000. Options granted in excess of the applicable statutory limit shall
be treated as Nonqualified Stock Options.
(c) EXERCISE OF OPTIONS: Each Option granted under the Plan shall be
exercisable at the Option price set forth in the Agreement, on such date or
dates during such Option Period (not exceeding ten years from the date of
such grant) and for such number of shares as determined by the Committee
and as is set forth in the Agreement with respect to such Option. However,
no Option granted hereunder to any employee may be exercised except in the
case of death, disability or retirement pursuant to any pension or
retirement plan of the Company, until two years of continued employment
with the Company has elapsed. Any Optionee desiring to exercise any Option
hereunder shall give written notice to the designated financial officer of
the Company and include therein full payment for the shares supporting such
Option. Full payment of the exercise price including any tax due is to be
made in cash or with the consent of the Committee with the stock of the
Company or with a combination of both. Notice is only valid when full
payment is included therewith.
A-6
(d) TRANSFERABILITY OF OPTIONS: An Option granted under the Plan may
not be transferred except by will or the laws of descent and distribution,
and during the lifetime of the Optionee shall only be exercisable by the
Optionee. The Optionee shall have no interest in the stock subject to
Options and shall have no rights until the shares are fully paid for and
certificates for such stock are issued to the Optionee.
(e) PAYMENT FOR SHARES: No shares shall be issued to any Optionee
until notice, as defined in Section 7(c) has been given to the Company.
Within 45 days after the receipt of said notice to exercise the Option, the
Company shall deliver to the Optionee certificates representing all stock
purchased thereunder.
(f) RESTRICTION ON SALE OF SHARES: Any stock received pursuant to the
exercise of an Incentive Stock Option which is sold within either: 1) two
years from the effective date of the Option grant, or 2) within one year of
the effective date of exercise, shall not be afforded the tax treatment of
Incentive Stock Options. However, if any Optionee disposes of shares of
Common Stock of the Company acquired on the exercise of an Incentive Stock
Option by sale or exchange, either: 1) within two years after the date of
the Option grant of the Incentive Stock Option under which the stock was
acquired, or 2) within one year after the acquisition of such shares, he
shall notify the Company of such disposition and of the amount realized
upon such disposition.
(g) If any Option is not granted, exercised or held pursuant to the
provisions of this Section, it will be considered to be a Nonqualified
Stock Option to the extent that any or all of the Option grant or exercise
is in conflict with the above restrictions.
SECTION 8
DEATH, RETIREMENT AND TERMINATION OF EMPLOYMENT:
Any Option granted to an employee, the period of which has not lapsed or
expired, shall terminate at the time of the death of the Optionee to whom the
Option was granted or on the retirement or termination for any reason of such
Optionee's employment with the Company, and no shares may thereafter be
delivered pursuant to such Option, except that:
(a) within two years after the date of the Optionee's death, during
which two year period the Option may be exercised by the Optionee's estate,
legal representative, or legatee or such other person designated by an
appropriate court as the person entitled to exercise such Option but only
to the extent the Optionee was entitled to exercise it at the time of his
or her death. The Option must be exercised in the manner provided for in
Section 7(c).
A-7
(b) within five years after termination of employment by reason of
retirement pursuant to any pension or retirement plan of the Company and to
the extent the Optionee would have been able to exercise it at the time of
such termination. The Option must be exercised in the manner provided for
in Section 7(c).
(c) within two years after termination of employment by reason of
disability to the extent the Optionee would have been able to exercise it
at the time of such termination. The Option must be exercised in the manner
provided for in Section 7(c).
Nothing in this Section 8 shall extend the option period as established at
time of grant.
SECTION 9
AMENDMENT OF THE PLAN:
The Board of Directors may amend, suspend or discontinue the Plan, but may
not, without the approval of the Company's shareholders, make any amendment
which would:
(a) abolish the Committee, change the qualifications of its members,
or withdraw the administration of the Plan from its supervision, or permit
any person while a member of the Committee to become eligible to
participate in the Plan subject to Section 5(e);
(b) make any material change in the class of eligible employees as
defined in the Plan;
(c) increase the aggregate number of shares for which Options may be
granted under the Plan;
(d) extend the term of the Plan or the maximum Option Period; or
(e) change the right of any Non-employee director to receive automatic
non-discretionary grants of Options under this Plan. The Plan provisions
relating to grants to Non-employee directors shall not be amended more than
once every six months, other than to comport with changes in the Internal
Revenue Code, the Employee Retirement Income Security Act, or the rules
thereunder.
REQUIREMENTS OF LAW:
(a) WITHHOLDING TAXES: The Company shall have the right to deduct from all
payments under this Plan, in cash, or deduct from payroll wages, an amount
necessary to satisfy any federal, state or local withholding tax requirements or
otherwise.
(b) GOVERNING LAW: The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Minnesota.
A-8
(c) AGREEMENT TO COMPLY WITH SECURITIES LAWS AND THE INTERNAL REVENUE CODE:
Before the Company delivers any stock purchased, the following written statement
may be required from the Optionee:
"I agree not to dispose of the shares purchased by me pursuant to the
Flexsteel Industries, Inc. 1999 Stock Option Plan, otherwise than in
compliance with the Securities Act of 1933, as amended, and rules and
regulations promulgated thereunder and all other laws, rules and
regulations applicable."
(d) If any term in this Plan pertaining to Incentive Stock Options does not
conform to Section 422 of the Internal Revenue Code of 1986, as amended, those
terms will be invalid and taken out of the Plan. However, removal of any invalid
terms will not affect the remaining terms of the Plan.
A-9
[LOGO] FLEXSTEEL(R)
AMERICA'S SEATING SPECIALIST
NOTICE OF 1999
ANNUAL MEETING
AND
PROXY STATEMENT
THE FLEXSTEEL INDUSTRIES, INC. THIS PROXY IS SOLICITED ON BEHALF OF
P.O. BOX 877 BOARD OF DIRECTORS FOR THE ANNUAL MEETING
DUBUQUE, IOWA 52004-0877 OF STOCKHOLDERS TO BE HELD DECEMBER 9, 1999
The undersigned, a stockholder of Flexsteel Industries, Inc., hereby
appoints E. J. Monaghan and R. J. Klosterman and each of them, as proxies, with
full power of substitution, to vote on behalf of the undersigned the same number
of shares which the undersigned is then entitled to vote at the Annual Meeting
of the Stockholders of Flexsteel Industries, Inc., to be held on Thursday,
December 9, 1999 at 3:30 P.M. at The Marquette, 710 Marquette Avenue,
Minneapolis, MN 55402, and at any adjournments thereof as follows:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR:
- --------------------------------------------------------------------------------
Proposal No. 1 -- Election of four (4) Class I Directors (Term Expires at the
2002 Annual Meeting):
K. BRUCE LAURITSEN THOMAS E. HOLLORAN L. BRUCE BOYLEN JOHN R. EASTER
(Class I) (Class I) (Class I) (Class I)
[ ] FOR all Nominees [ ] WITHHELD from all [ ] WITHHELD from the following
(Except as marked to Nominees only: (Write name(s) below)
the contrary)
---------------------------
---------------------------
- --------------------------------------------------------------------------------
Proposal No. 2 -- Approval of the 1999 Stock Option Plan:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
- --------------------------------------------------------------------------------
Proposal No. 3 -- Appointment of Deloitte & Touche LLP as Independent Auditors
for the ensuing fiscal year:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
- --------------------------------------------------------------------------------
In their discretion to vote upon such other business as may properly come
before the meeting, or any adjournments thereof, UNLESS THE STOCKHOLDER LINES
OR CROSSES OUT THIS AUTHORITY.
- --------------------------------------------------------------------------------
(IMPORTANT: continued, and to be signed and dated, on the reverse side)
(CONTINUED FROM OTHER SIDE)
The Undersigned hereby revokes any proxy or proxies to vote such shares
heretofore given.
PLEASE VOTE, DATE, SIGN, AND RETURN IN THE ENCLOSED ENVELOPE.
Dated ________________________________, 1999.
---------------------------------------------
(Signature)
---------------------------------------------
Signature of stockholder shall correspond
exactly with the name appearing hereon.
If a joint account, each owner must sign.
When signing as attorney, executor,
administrator, trustee, guardian or corporate
official, give your full title as such.
This proxy when properly executed will be voted in the manner directed hereon by
the above signed stockholder. If no direction is given, this proxy will be voted
FOR Proposals 1, 2 and 3, and the grant of authority to vote upon such other
business as may properly come before the meeting or any adjournments thereof
will not be crossed out.
FLEXSTEEL INDUSTRIES INCORPORATED
ANNUAL REPORT
FISCAL YEAR ENDED JUNE 30, 1999
IMPACT FOR THE MILLENNIUM
[PHOTO OF FURNITURE]
[COMPANY LOGO]
FINANCIAL HIGHLIGHTS
[AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA]
Year Ended June 30, 1999 1998 1997
-------- -------- --------
Net Sales ................. $260,519 $236,125 $219,427
Operating Income .......... 15,398 9,868 7,888
Income Before Income Taxes 16,217 11,527 9,473
Net Income ................ 10,317 7,602 6,048
Per Share of Common Stock:
Average Shares Outstanding:
Basic ................... 6,775 6,959 7,024
Diluted ................. 6,850 7,035 7,072
Earnings: (1)
Basic ................... 1.52 1.09 0.86
Diluted ................. 1.51 1.08 0.86
Cash Dividends ............ 0.48 0.48 0.48
At June 30,
Working Capital ........... 50,210 50,549 44,357
Net Plant and Equipment ... 25,912 23,096 26,214
Total Assets .............. 112,684 104,673 99,173
Shareholders' Equity ...... 81,166 78,080 75,238
(1) The earnings per share amounts for 1997 have been restated to comply with
Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE.
FLEXSTEEL PROFILE
Begun over a century ago as a midwestern maker of upholstered furniture,
Flexsteel is a national presence in the seating industry, utilizing the
unitized seat spring which gave the company its name.
As Flexsteel furniture began to develop a national reputation for quality,
the company linked its network of factories with its own fleet of trucks, and
direct-to-dealer delivery was soon a Flexsteel hallmark. At the same time, they
combined their metal and tailoring expertise to develop fine seating for
recreational vehicles. Soon interior designers turned to Flexsteel for large
installations, and the company's contract division was born. Today Flexsteel is
found in homes, hotels, hospitals, on the road and on the water.
[BAR CHART]
NET EARNINGS BOOK VALUE RETURN ON
SALES PER SHARE PER SHARE COMMON EQUITY
----- --------- ---------- -------------
1999 $260,519,000 $1.52 $12.50 13.2%
1998 236,125,000 1.09 11.49 10.1
1997 219,427,000 .86 10.86 8.2
1996 205,008,000 .63 10.45 6.1
1995 208,432,000 .73 10.26 7.3
1994 195,388,000 .95 9.96 10.0
1993 177,271,000 .87 9.57 9.6
1992 157,916,000 .24 9.17 2.6
1991 145,566,000 .27 9.34 2.8
1990 173,547,000 .90 9.66 9.7
[PHOTO]
[CAPTION: FRONT COVER AND LEFT: A HIT AT RECENT SHOWS AND WITH FLEXSTEEL DEALERS
IS THE CONVERSATION SOFA, SUCCESSOR TO THE CRESCENT SOFA. TYPICAL OF TODAY'S
ECLECTIC LIFE STYLES IS THE HARMONIZING OF SUCH ELEMENTS AS THE LUSH CHENILLE ON
THIS SOFA WITH A LOUNGE CHAIR IN EVER-POPULAR LEATHER. THE GLASS-AND-METAL
TABLES COMPLETE THE FRESH UPSCALE SETTING.]
[COMPANY LOGO]
IMPACT FOR THE MILLENNIUM
[PHOTO]
[CAPTION: K. BRUCE LAURITSEN, (L) PRESIDENT & CHIEF EXECUTIVE OFFICER, AND JOHN
R. EASTER, CHAIRMAN OF THE BOARD OF FLEXSTEEL INDUSTRIES]
TO OUR SHAREHOLDERS
Sales for the fiscal year ended June 30, 1999, were $260,519,000, an
increase of 10% over revenues of $236,125,000 in the previous fiscal year. Net
earnings were $10,317,000 or $1.51 per share (diluted), an increase of 39% over
earnings of $7,602,000 or $1.08 per share (diluted) in the last fiscal year. We
are very proud of the contributions of management and associates which have made
these records possible.
HIGHLIGHTS IN RESIDENTIAL FURNITURE
Our furniture has never looked better. Sales increased 9%, with growth in
all areas including independent dealers, national and regional chains and, most
importantly, Flexsteel Galleries and Comfort Seating Showrooms.
Imaginative, attractive innovations in style, comfort, and the use of
fabrics draw more customers to Flexsteel every year. We continually study market
needs and trends, matching new ideas to the desires of our customers. Leather is
still enormously popular, and our new Leather Express program (CENTER PHOTO)
assures delivery in two to three weeks.
We recently added 100,000 square feet of production capacity to our plant
in Dublin, Georgia, which will help sustain our focused growth in reclining
furniture and recliners.
During the past year we added 10 new Comfort Seating Showrooms and 21 new
Flexsteel Galleries. In addition to being admirable showcases for Flexsteel,
these specialized stores provide a pleasant shopping experience and custom-order
choice for the consumer, with an emphasis on quality that cannot be achieved in
more price-competitive standardized units.
HIGHLIGHTS IN RECREATIONAL VEHICLE SEATING
It was another record year with excellent performance in this important
market. As in the residential market, style and comfort contribute to our growth
in the market share for motor home and towable trailer seating. Working closely
with customers, we've produced such innovations as a new fold-over van bed, and,
for motor homes, power footrests and ultra-luxurious sofas.
Though the market for van conversions seems to have stabilized, our
business still increased over the prior year. The benefits from the 1997
acquisition of Dygert Seating are being realized in broader product coverage.
Sales in all three of these markets -- vans, towables and motor homes -- remain
strong, and the demographics for future growth are encouraging. In addition, our
expertise and reputation have opened new doors for us in the market for seating
in yachts and high-end boats. Here again, our ability to listen and identify
customer needs has helped propel our continuing innovation and diversification.
[PHOTO]
[CAPTION: THIS HANDSOME GROUPING IS ONE OF SIX AVAILABLE FROM OUR
HIGHLY-SUCCESSFUL LEATHER EXPRESS PROGRAM. THE CUSTOMER CAN CHOOSE FROM A
SELECTION OF LEATHERS, PREVIOUSLY CUT-AND-SEWN, AND RECEIVE SHIPMENT IN 2 TO 3
WEEKS. IN THIS GROUP, THE COMBINATION OF LEATHER AND FABRIC IS ESPECIALLY
EFFECTIVE IN A LODGE-LIKE SETTING.]
1
HIGHLIGHTS IN COMMERCIAL SEATING
A five-year growth in the hospitality and health care markets has
contributed to strong sales through the first three quarters of our fiscal year.
While these industries may be taking a momentary breather, we are preparing for
future growth by moving contract design and development to Dubuque under
seasoned Flexsteel management, increasing our capacity, and speeding
responsiveness to the hospitality design community.
We are also developing exciting new products especially for these markets,
such as chairs for Alzheimer's patients and day beds which can be free-standing
or integrated into case goods for hotel properties. We are working to increase
our market share and are optimistic about our opportunities for growth in both
the health care and the hospitality industries.
TELLING THE FLEXSTEEL STORY
Some of the newest Flexsteel designs will be featured not only in national
advertising but also in feature stories in consumer magazines. Our Web site
continues to draw interest: hits have increased over 100% in the past year. Our
dealers are pleased with our new fleet identification program, highlighting the
Flexsteel image, for their delivery trucks. See page 4.
PASSING THE BATON
This year saw the retirement from your board of two men who spent decades
directing Flexsteel toward its present success. We are indebted to Jack Crahan
for his many insights, including Flexsteel's introduction to the important
vehicle seating market; and to Art Richardson for the marketing vision which has
helped Flexsteel grow from a regional maker of furniture to a
nationally-distributed, multi-million dollar company.
As Jack Crahan retired, long-time board member John Easter was elected
Chairman of the Board. The Board also welcomed two new members: Lynn J. Davis, a
long-time executive in the communications industry with experience in marketing,
manufacturing, and operations; and Marvin M. Stern, a 35-year veteran of
retailing.
OUTLOOK FOR THE NEW MILLENNIUM
Positive growth signs still mark the economy: low inflation, high
employment, and reasonable interest rates. With sales of both new and existing
homes remaining strong, the outlook for home furnishings sales remains
excellent. We expect to add 7 new Comfort Seating Showrooms and 30 new Flexsteel
Galleries in the coming year.
We expect our exceptional sales growth to continue in residential
furniture, especially leather, in seating for recreational vehicles, and in our
commercial contracts, all supported not only by high consumer confidence but
also by the Flexsteel name for excellence. Add the continuing enthusiasm of
Flexsteel management, sales personnel and associates, and the outlook for
increasing the value of your company is excellent.
/s/K. Bruce Lauritsen
K. BRUCE LAURITSEN
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
/s/John Easter
JOHN EASTER
CHAIRMAN OF THE BOARD
[PHOTO]
[CAPTION: COMFORT SEATING SHOWROOMS ARE IDEALLY SUITED FOR HIGH-DENSITY
METROPOLITAN AREAS. ATTRACTIVE INTERIORS INCLUDE LIGHTING AND CARPETS SPECIALLY
DESIGNED TO DISPLAY THE FULL FLEXSTEEL LINE, CREATE A PLEASING SHOPPING
EXPERIENCE, AND INCREASE DEALERS' SALES.]
2
IMPACT FOR THE MILLENNIUM
COMFORT
WITH STYLE
Styling at Flexsteel is more exciting than ever, with our 1999 styles
drawing highly favorable comment and exceptional sales response. With new
collections such as the West Indies group, new styling such as our "conversation
sofas" and new offerings in fabrics and accessories, dealers are drawing more
Flexsteel customers into their showrooms.
The conversation sofa is this year's conversation piece, and we have added
this shape to five of our most popular styles, including two leather designs.
Leather is still high in consumer popularity and our new Leather Express program
speeds the customer's selection to her in two to three weeks. By marrying
certain frames to previously cut-and-sewn leather, we give custom styling but
with extra-fast delivery.
Our Starkville, MS, plant, is making complete exposed-wood groups with
matching tables in many popular styles, including Mission. A highlight this year
is our West Indies group (CENTER PHOTO) which has struck a chord for its
casualness touched with a suggestion of the exotic. This group has great
potential with its matching game table and entertainment center.
We also import handsome accent tables to enhance many groups. These tables
are popular with dealers and home owners alike; they help the consumer complete
a room, and help the dealer complete a sale.
Flexsteel designers continually evolve styles as consumer preferences
change. Because today's customer is more likely to prefer a living-room look in
a recliner, we offer more upscale, wing-chair recliner styles. Our "Season's
Best" sofa promotion offers fabrics especially selected for regional suitability
and tastes.
COMFORT AND QUALITY: NOT NEGOTIABLE
Today's furniture shopper is well educated about quality, and Flexsteel
has built-in appeal for her with our century-old reputation for quality and our
famous lifetime-warranted seat spring.
Flexsteel's quality means that comfort is a given. We chose the name
Comfort Seating Showroom for this proven way for dealers to showcase the
complete Flexsteel line because beauty in home fashions is meaningless without
Flexsteel comfort and quality. There are now 17 such Showrooms across the
nation, some free-standing and others integrated into the dealer's existing
installation. Many more are planned, for they have proven to be highly effective
in increasing dealer's sales per square foot.
[PHOTO]
[PHOTO]
[PHOTO]
[PHOTO]
[CAPTION: UNIQUE PLANTATION STYLING IN OUR "WEST INDIES" GROUP (CENTER) INCLUDES
COORDINATED TABLES. COTTAGE STYLING (TOP) CONTINUES IN POPULARITY. A CHARISMA(R)
CHAIR (FAR LEFT) IS PETITELY SCALED, WHILE THE DROP-LEAF COFFEE TABLE (LEFT)
INCLUDES STORAGE DRAWERS.]
3
IMPACT FOR THE MILLENNIUM
VALUE OF
AN IMAGE
Our customers are not limited to buyers of home furnishings. Flexsteel's
reputation for seating with quality, style and comfort has made Flexsteel a
natural choice for commercial installations such as the health care and
hospitality industries. Added to this is Flexsteel's expertise in metal gained
by years of making the famous Flexsteel seat spring, highly important to our
leadership as a natural source for seating for recreational vehicles.
We use every modern technique to publicize information about Flexsteel.
Visits to our Web site have more than doubled this year. Here customers can
learn not only of the various Flexsteel lines, but also of current promotions
at Comfort Seating Showrooms or Flexsteel Galleries. Nearly half of Web site
audiences are our target audience -- women over 18 years of age.
THE LADIES HOME JOURNAL chose Flexsteel for its upholstered furniture in
its 1999 Model Home for the National Builders' Show, and featured us in two
issues. We expect eight to ten other feature stories during the year, and plan
full-page ads in four major consumer magazines.
Changing demographics affect both our presentations and our sales. Our
population is older and more aware of quality standards, while the younger
professional couple is also quality-savvy and an ideal customer for Flexsteel.
Our new Fleet Identification Program has been a hit with dealers. This
program provides the dealer with everything necessary to add a four-color
graphic, highlighting Flexsteel, on the dealer's delivery vehicles. Images are
similar to those used on our delivery trailers (CENTER PHOTO). Typically, an
in-town vehicle garners sixteen million impressions annually -- at a cost far
less than any other advertising medium.
CUSTOMER RELATIONS
With the Flexsteel reputation for quality goes a reputation for service.
Our dealer program goes far beyond furnishing materials for creating ads,
including vast catalogs of CD images. Retailing experts work with Gallery and
Comfort Seating dealers, and our sales personnel are intimately familiar with
dealer's needs and preferences.
In recreational vehicle seating, and in contract furnishings, close
customer relations are essential; in the former we work not only with design and
comfort elements, but also government-mandated safety standards. In the latter,
we must integrate designers' specifications of fabrics and finishes into both
factory and customer's schedules. All help buttress our reputation for
thoughtful customer service.
[PHOTO]
[PHOTO]
[PHOTO]
[PHOTO]
[CAPTION: SOME TRAVELERS WILL VACATION IN THIS LUXURIOUS FLEETWOOD MOTOR HOME
WITH COMFORTABLE SEATING BY FLEXSTEEL (TOP). MOTORISTS ACROSS THE NATION WILL
SEE STRIKING NEW FOUR-COLOR GRAPHICS ON FLEXSTEEL TRUCKS (CENTER). HANDSOME NEW
FLEXSTEEL RECLINERS WITH UPSCALE DESIGNS ARE POPULAR (RIGHT); FULL-PAGE ADS IN
POPULAR MAGAZINES FEATURE BEAUTIFUL FLEXSTEEL (FAR RIGHT).]
4
IMPACT FOR THE MILLENNIUM
CHALLENGES OF
A DIGITAL AGE
Creating a crafted product such as upholstered furniture in an age of
computerized automation presents unique challenges. Though one of the first to
embrace computerized solutions, we have maintained our dedication to the
personalized craftsmanship which is integral to Flexsteel quality.
Modern communications assist with scheduling, customer relations, order
taking, and shipping. CAD systems include three-dimensional design capabilities.
Our Gerber cutting machines are now supplemented with single-ply cutters. These
cutters can quickly lay out and cut fabric for a single chair or sofa, with
perfect matching and minimum waste. Better frames are made using CNC routers,
while increasing yields of precious raw materials.
Vertical integration at Flexsteel gives the company a vital synergy
between our various seating businesses, as our metal-working expertise meshes
with a century of experience in residential seating. In recreational vehicle
seating, for example, we not only create beautiful interiors but also meet or
exceed all requirements of the Federal Motor Vehicle Safety Standards. Our
nationwide network of factories is so planned that production can be shifted
from one plant to another as conditions warrant.
GOALS FOR THE NEW MILLENNIUM
The new millennium will see Flexsteel teams intensify their focus on
understanding and meeting the needs of home owners and all our customers.
We continue to develop new ways to reduce lead times in all markets.
Designs for recreational vehicles must mesh with automotive model years, while
contract interiors must take into consideration individualized finish and fabric
specifications. Our creativity, our vertical integration, and our long-term
financial stability are assets in our relations with these industries.
The Flexsteel name is an important asset, and we plan to emphasize brand-
name marketing through 23 Comfort Seating Showrooms and 235 Flexsteel Galleries.
Knowing the needs of our customers is vital to our success in the coming years.
We will continue to listen, to study their needs, to refine our displays and
maximize sales per square foot, and to expand the number of exquisite fabrics
which we market exclusively to Gallery and Showroom dealers.
We expect our new millennium to be an exciting one, as we give our
customers more beautiful Flexsteel furniture than ever, at the same time
enjoying the satisfaction of continued solid growth in all our markets.
[PHOTO]
[PHOTO]
[PHOTO]
[CAPTION: A REASSURING VISTA OF COMFORT GREETS PATIENTS AT THE MEDICAL
ASSOCIATES' CLINIC IN DUBUQUE, IOWA, (CENTER). SEATING BY FLEXSTEEL'S COMMERCIAL
SEATING DIVISION, WHOSE CONVERTIBLE DAYBED (TOP AND LEFT) HAS BEEN INSTALLED IN
A NUMBER OF HOTELS.]
5
[LOGO]
FLEXSTEEL INDUSTRIES, INC.
FIVE YEAR REVIEW
[ALL AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA]
Year Ended June 30,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(1)
SUMMARY OF OPERATIONS
Net Sales ............................ $260,519 $236,125 $219,427 $205,008 $208,432
Cost of Sales ........................ 200,965 185,345 173,088 161,451 164,231
Operating Income ..................... 15,398 9,868 7,888 6,362 7,509
Interest and Other Income ............ 1,134 2,015 1,931 1,132 924
Interest and Other Expense ........... 315 356 345 358 372
Income Before Income Taxes ........... 16,217 11,527 9,473 7,052 8,111
Income Taxes ......................... 5,900 3,925 3,425 2,550 2,900
Net Income (2) (3) (4) ............... 10,317 7,602 6,048 4,502 5,211
Earnings per Common Share: (2) (3) (4)
Basic ............................. 1.52 1.09 0.86 0.63 0.73
Diluted ........................... 1.51 1.08 0.86 0.63 0.72
Cash Dividends per Common Share ...... 0.48 0.48 0.48 0.48 0.48
STATISTICAL SUMMARY
Average Common Shares Outstanding:
Basic ............................. 6,775 6,959 7,024 7,172 7,178
Diluted ........................... 6,850 7,035 7,072 7,188 7,205
Book Value per Common Share .......... 12.50 11.49 10.86 10.45 10.26
Total Assets ......................... 112,684 104,673 99,173 95,874 96,271
Property, Plant and Equipment, net ... 25,912 23,096 26,214 23,046 24,376
Capital Expenditures ................. 8,398 2,392 5,273 3,298 9,948
Working Capital ...................... 50,210 50,549 44,357 47,376 46,272
Long-Term Debt ....................... 0 0 0 35 70
Shareholders' Equity ................. 81,166 78,080 75,238 74,147 73,824
SELECTED RATIOS
Net Income as Percent of Sales ....... 4.0% 3.2% 2.8% 2.2% 2.5%
Current Ratio ........................ 2.8 TO 1 3.1 to 1 3.1 to 1 3.5 to 1 3.4 to 1
Return on Ending Common Equity ....... 12.7% 9.7% 8.0% 6.1% 7.1%
Return on Beginning Common Equity .... 13.2% 10.1% 8.2% 6.1% 7.3%
Average Number of Employees .......... 2,400 2,330 2,320 2,230 2,375
(1) On March 18, 1997, the Company acquired certain assets of Dygert Seating,
Inc., and the related production facilities in Elkhart, Indiana, for $6,934,000.
(2) 1997 income and per share amounts reflect a gain on the sale of the
Sweetwater, Tennessee facility of approximately $350,000 (net of income taxes)
or $0.05 per share.
(3) 1998 income and per share amounts reflect a non-taxable gain from life
insurance proceeds of approximately $720,000 or $0.10 per share.
(4) The earnings per share amounts for 1997, 1996, and 1995 have been restated
to comply with Statement of Financial Accounting Standards No. 128, EARNINGS PER
SHARE.
6
[LOGO]
FLEXSTEEL INDUSTRIES, INC.
REPORTS OF AUDITOR'S AND MANAGEMENT
INDEPENDENT AUDITOR'S REPORT
TO THE SHAREHOLDERS OF FLEXSTEEL INDUSTRIES, INC.:
We have audited the accompanying balance sheets of Flexsteel Industries,
Inc. (the Company) as of June 30, 1999 and 1998, and the related statements of
income, comprehensive income, changes in shareholders' equity and cash flows for
each of the three years in the period ended June 30, 1999. 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, 1999 and 1998, and the results of its operations and cash flows
for each of the three years in the period ended June 30, 1999 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
MINNEAPOLIS, MINNESOTA
AUGUST 5, 1999
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 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 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 that are engaged to audit the financial statements
of the Company and to express an opinion thereon. The Audit & Ethics Committee
meets periodically with the independent auditors to review financial reports,
accounting and auditing practices and controls.
K. BRUCE LAURITSEN
PRESIDENT
CHIEF EXECUTIVE OFFICER
RONALD J. KLOSTERMAN
VICE PRESIDENT, FINANCE
CHIEF FINANCIAL OFFICER
SECRETARY
7
[LOGO]
FLEXSTEEL INDUSTRIES, INC.
BALANCE SHEETS
JUNE 30,
----------------------------
1999 1998
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................ $ 4,886,038 $ 5,464,261
Investments .............................................. 8,967,197 9,877,784
Trade receivables - less allowance for doubtful
accounts: 1999, $2,503,000; 1998, $2,198,000 ........... 31,149,416 28,722,752
Inventories .............................................. 29,503,209 26,607,296
Deferred income taxes .................................... 3,700,000 2,785,000
Other .................................................... 461,406 632,730
------------ ------------
Total current assets ................................. 78,667,266 74,089,823
PROPERTY, PLANT AND EQUIPMENT, net ......................... 25,912,432 23,095,589
OTHER ASSETS ............................................... 8,103,997 7,487,729
------------ ------------
TOTAL ........................... $112,683,695 $104,673,141
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade ................................. $ 7,076,729 $ 5,792,708
Accrued liabilities:
Payroll and related items .............................. 6,735,108 5,448,032
Insurance .............................................. 6,688,060 5,834,895
Other accruals ......................................... 6,332,412 4,515,177
Industrial revenue bonds payable ......................... 1,625,000 1,950,000
------------ ------------
Total current liabilities .......................... 28,457,309 23,540,812
DEFERRED COMPENSATION ...................................... 3,060,670 3,052,525
------------ ------------
Total liabilities .................................. 31,517,979 26,593,337
------------ ------------
SHAREHOLDERS' EQUITY:
Common stock - $1 par value; authorized 15,000,000 shares;
issued 1999, 6,491,840 shares; 1998, 6,794,730 shares .. 6,491,840 6,794,730
Retained earnings ........................................ 73,718,238 70,450,282
Unrealized investment gain ............................... 955,638 834,792
------------ ------------
Total shareholders' equity ................... 81,165,716 78,079,804
------------ ------------
TOTAL ........................... $112,683,695 $104,673,141
============ ============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8
[LOGO]
FLEXSTEEL INDUSTRIES, INC.
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30,
-------------------------------------------------
1999 1998 1997
------------- ------------- -------------
NET SALES ............................................ $ 260,519,459 $ 236,125,280 $ 219,426,736
COST OF GOODS SOLD ................................... 200,965,199 185,345,398 173,088,406
------------- ------------- -------------
GROSS MARGIN ......................................... 59,554,260 50,779,882 46,338,330
SELLING, GENERAL AND ADMINISTRATIVE .................. 44,156,199 40,911,581 38,450,275
------------- ------------- -------------
OPERATING INCOME ..................................... 15,398,061 9,868,301 7,888,055
------------- ------------- -------------
OTHER:
Interest and other income .......................... 1,133,814 2,014,982 1,930,527
Interest and other expense ......................... (315,289) (356,066) (345,148)
------------- ------------- -------------
Total ............................................ 818,525 1,658,916 1,585,379
------------- ------------- -------------
INCOME BEFORE INCOME TAXES ........................... 16,216,586 11,527,217 9,473,434
PROVISION FOR INCOME TAXES ........................... 5,900,000 3,925,000 3,425,000
------------- ------------- -------------
NET INCOME ........................................... $ 10,316,586 $ 7,602,217 $ 6,048,434
============= ============= =============
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING:
BASIC ............................................ 6,774,996 6,959,310 7,024,021
============= ============= =============
DILUTED .......................................... 6,850,115 7,035,158 7,071,895
============= ============= =============
EARNINGS PER SHARE OF COMMON STOCK:
BASIC ............................................ $ 1.52 $ 1.09 $ 0.86
============= ============= =============
DILUTED .......................................... $ 1.51 $ 1.08 $ 0.86
============= ============= =============
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED JUNE 30,
-------------------------------------------------
1999 1998 1997
------------- ------------- -------------
NET INCOME ........................................... $ 10,316,586 $ 7,602,217 $ 6,048,434
------------- ------------- -------------
OTHER COMPREHENSIVE INCOME, BEFORE TAX:
Unrealized gains (losses) on securities arising
during period .................................... (1,575) 736,051 643,123
Less: reclassification adjustment for (gains) losses
included in net income ........................... 192,338 (313,294) (121,123)
------------- ------------- -------------
Other comprehensive income, before tax ............... 190,763 422,757 522,000
------------- ------------- -------------
INCOME TAX BENEFIT (EXPENSE):
Income tax benefit (expense) related to securities
(gains) losses arising during period ............... 577 (257,618) (235,811)
Income tax benefit (expense) related to securities
reclassification adjustment ........................ (70,494) 109,653 44,411
------------- ------------- -------------
Income tax expense related to other
comprehensive income ............................... (69,917) (147,965) (191,400)
------------- ------------- -------------
OTHER COMPREHENSIVE INCOME, NET OF TAX ............... 120,846 274,792 330,600
------------- ------------- -------------
COMPREHENSIVE INCOME ................................. $ 10,437,432 $ 7,877,009 $ 6,379,034
============= ============= =============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9
[LOGO]
FLEXSTEEL INDUSTRIES, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
COMMON STOCK ADDITIONAL UNREALIZED
------------ PAID-IN RETAINED INVESTMENT
SHARES PAR VALUE CAPITAL EARNINGS GAIN (LOSS) TOTAL
------------ ------------ ------------ ------------ ------------ ------------
Balance at June 30, 1996 7,095,044 $ 7,095,044 $ 556,632 $ 66,266,325 $ 229,400 $ 74,147,401
Purchase of
Company Stock ....... (186,345) (186,345) (722,573) (1,212,626) (2,121,544)
Issuance of
Company Stock ....... 18,611 18,611 165,941 184,552
Investment Valuation
Adjustment .......... 330,600 330,600
Cash Dividends ......... (3,351,414) (3,351,414)
Net Income ............. 6,048,434 6,048,434
------------ ------------ ------------ ------------ ------------ ------------
Balance at June 30, 1997 6,927,310 6,927,310 0 67,750,719 560,000 75,238,029
Purchase of
Company Stock ....... (176,489) (176,489) (470,508) (1,581,978) (2,228,975)
Issuance of
Company Stock ....... 43,909 43,909 470,508 514,417
Investment Valuation
Adjustment .......... 274,792 274,792
Cash Dividends ......... (3,320,676) (3,320,676)
Net Income ............. 7,602,217 7,602,217
------------ ------------ ------------ ------------ ------------ ------------
Balance at June 30, 1998 6,794,730 6,794,730 0 70,450,282 834,792 78,079,804
Purchase of
Company Stock ........ (364,092) (364,092) (550,258) (3,810,916) (4,725,266)
Issuance of
Company Stock ........ 61,202 61,202 550,258 611,460
Investment Valuation
Adjustments .......... 120,846 120,846
Cash Dividends ......... (3,237,714) (3,237,714)
Net Income ............. 10,316,586 10,316,586
------------ ------------ ------------ ------------ ------------ ------------
Balance at June 30, 1999 6,491,840 $ 6,491,840 $ 0 $ 73,718,238 $ 955,638 $ 81,165,716
============ ============ ============ ============ ============ ============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10
[LOGO]
FLEXSTEEL INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30,
----------------------------------------------
1999 1998 1997
------------ ------------ ------------
OPERATING ACTIVITIES:
Net income ................................................... $ 10,316,586 $ 7,602,217 $ 6,048,434
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation .............................................. 5,358,482 5,400,025 5,129,246
(Gain) Loss on disposition of capital assets .............. 134,235 7,106 (646,050)
Trade receivables ......................................... (2,426,664) (3,373,811) 688,561
Inventories ............................................... (2,895,913) 378,258 637,112
Other current assets ...................................... 171,324 173,387 256,487
Other assets .............................................. (616,268) 223,450 (980,666)
Accounts payable - trade .................................. 1,284,021 1,947,346 271,130
Accrued liabilities ....................................... 3,957,476 1,063,236 2,222,184
Deferred compensation ..................................... 8,145 8,107 74,571
Deferred income taxes ..................................... (915,000) (165,000) (610,000)
------------ ------------ ------------
Net cash provided by
operating activities ...................................... 14,376,424 13,264,321 13,091,009
------------ ------------ ------------
INVESTING ACTIVITIES:
Payment for purchase of business assets ................... (6,933,951)
Purchases of investments .................................. (3,750,686) (7,231,401) (1,517,439)
Proceeds from sales of investments ........................ 4,782,119 2,669,563 5,747,488
Proceeds from sales of capital assets ..................... 88,927 104,050 1,112,201
Capital expenditures ...................................... (8,398,487) (2,392,365) (5,273,317)
------------ ------------ ------------
Net cash used in investing activities ........................ (7,278,127) (6,850,153) (6,865,018)
------------ ------------ ------------
FINANCING ACTIVITIES:
Repayment of borrowings ................................... (325,000) (360,000) (360,000)
Payment of dividends ($0.48 per share) .................... (3,237,714) (3,320,676) (3,351,414)
Proceeds from issuance of common stock .................... 611,460 514,417 184,552
Repurchase of common stock ................................ (4,725,266) (2,228,975) (2,121,544)
------------ ------------ ------------
Net cash used in financing activities ........................ (7,676,520) (5,395,234) (5,648,406)
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents ............. (578,223) 1,018,934 577,585
Cash and cash equivalents at beginning of year ............... 5,464,261 4,445,327 3,867,742
------------ ------------ ------------
Cash and cash equivalents at end of year ..................... $ 4,886,038 $ 5,464,261 $ 4,445,327
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest ................................................ $ 70,000 $ 90,000 $ 103,000
Income taxes ............................................ $ 5,644,000 $ 4,405,000 $ 3,640,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
[LOGO]
FLEXSTEEL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS - Flexsteel Industries, Inc. (the Company)
manufactures a broad line of quality upholstered furniture for residential,
recreational vehicle and commercial seating use. Products include sofas, love
seats, chairs, reclining and rocker-reclining chairs, swivel rockers, sofa
beds, and convertible bedding units. The Company's products are sold
primarily throughout the United States and Canada, by the Company's internal
sales force and various independent representatives.
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.
CASH EQUIVALENTS - 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. In fiscal year 1999, the Company adopted Statement of
Position (SOP) 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED
OR OBTAINED FOR INTERNAL USE. The Company's policy is to capitalize external
direct costs of materials and services, directly related internal payroll and
payroll-related costs, and interest costs while developing or obtaining
internal use software. The amount of software capitalized in 1999 was
$216,187.
REVENUE RECOGNITION - is upon delivery of product.
INSURANCE - the Company is self-insured for health care and most worker's
compensation up to predetermined amounts above which third party insurance
applies. The Company is contingently liable to insurance carriers under its
comprehensive general, product, and vehicle liability policies, as well as
some worker's compensation, and has provided a letter of credit in the amount
of $1,159,000. Losses are accrued based upon the Company's estimates of the
aggregate liability for claims incurred using certain actuarial assumptions
followed in the insurance industry and based on Company experience.
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.
SEGMENT AND RELATED INFORMATION - in June 1997, the Financial Accounting
Standards Board (FASB) issued Statement No. 131, DISCLOSURES ABOUT SEGMENTS
OF AN ENTERPRISE AND RELATED INFORMATION (SFAS 131). SFAS 131 redefines how
operating segments are determined and requires disclosures of certain
financial and descriptive information about a company's operating segments.
During 1998, the Company adopted this standard. Under the "management
approach" methodology prescribed by SFAS 131, the Company operates in one
segment, seating products.
DERIVATIVES - in 1998, the FASB issued Statement No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (SFAS 133), which is effective
for the Company's fiscal 2001 financial statements. SFAS 133 requires
derivatives to be recognized in the financial statements and measured at fair
value. The Company does not expect the impact of the pronouncement to be
material.
ACQUISITION - on March 18, 1997 the Company announced the acquisition of
certain assets of Dygert Seating, Inc. and the related production facilities
in Elkhart, Indiana for $6,933,951. The purchase included accounts receivable
of approximately $1,573,000, inventory of approximately $1,540,000, and fixed
and other current assets of approximately $3,821,000.
RECLASSIFICATIONS - certain prior years' amounts have been reclassified to
conform to the 1999 presentation. These reclassifications had no impact on
net income or shareholders' equity as previously reported.
2. INVESTMENTS
Debt and equity securities are included in Investments and in Other Assets,
at fair value based on quoted market prices, and are classified as available
for sale. The amortized cost and estimated market values of investments are
as follows:
June 30, 1999 June 30, 1998
-------------------------- -------------------------
Debt Equity Debt Equity
Securities Securities Securities Securities
-------------------------- -------------------------
Amortized Cost $ 9,043,136 $ 2,351,845 $10,780,529 $ 2,202,952
Unrealized gains
(losses) (91,762) 1,571,674 44,668 1,277,629
----------- ----------- ----------- -----------
Est. Market Value $ 8,951,374 $ 3,923,519 $10,825,197 $ 3,480,581
=========== =========== =========== ===========
As of June 30, 1999, the maturities of debt securities are $4,010,642 within
one year, $4,013,672 in one to five years, and $927,060 over five years.
3. INVENTORIES
Inventories valued on the LIFO method would have been approximately
$2,016,000 and $2,331,000 higher at June 30, 1999 and 1998, respectively, if
they had been valued on the FIFO method. A comparison of inventories is as
follows:
June 30,
----------------------------
1999 1998
----------- -----------
Raw materials............................. $15,871,466 $13,538,911
Work in process and finished parts........ 7,416,826 7,227,558
Finished goods............................ 6,214,917 5,840,827
----------- -----------
Total.................................. $29,503,209 $26,607,296
=========== ===========
12
4. PROPERTY, PLANT AND EQUIPMENT
June 30,
Estimated --------------------------
Life (Years) 1999 1998
----------- ----------- -----------
Land ....................... $ 2,512,715 $ 1,642,422
Buildings and
improvements ............ 3 - 39 27,294,496 24,929,545
Machinery and
equipment ............... 3 - 10 29,306,600 28,655,104
Delivery equipment ......... 3 - 7 14,193,014 13,894,648
Furniture and fixtures ..... 3 - 5 5,313,068 5,307,217
----------- -----------
Total ................... 78,619,893 74,428,936
Less accumulated
depreciation ............ 52,707,461 51,333,347
----------- -----------
Net ..................... $25,912,432 $23,095,589
=========== ===========
5. BORROWINGS
The Company is obligated for $1,625,000 for Industrial Revenue Bonds at June
30, 1999 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, 1999, 1998 and 1997 of 3.70%, 4.06% and
3.94% respectively, and are due in annual installments of $325,000 through
2004, if not paid earlier upon demand of the holder. The Company has issued a
letter of credit to guarantee the payment of these bonds in the event of the
default. No amounts were outstanding on this letter at June 30, 1999.
6. INCOME TAXES
The total income tax provision for the years ended June 30, 1999, 1998 and
1997 was 36.4%, 34.0%, and 36.2%, respectively, of income before income
taxes. In 1998 the effective rate was reduced by 2.2% for nontaxable life
insurance proceeds of $720,000.
PROVISION - COMPRISED OF THE FOLLOWING:
1999 1998 1997
----------- ----------- -----------
Federal - current $ 4,285,000 $ 3,580,000 $ 3,528,000
State - current . 700,000 510,000 507,000
Deferred ........ 915,000 (165,000) (610,000)
----------- ----------- -----------
Total ........ $ 5,900,000 $ 3,925,000 $ 3,425,000
=========== =========== ===========
DEFERRED INCOME TAXES - COMPRISED OF THE FOLLOWING:
Asset (Liability)
June 30, 1999 June 30, 1998
------------- -------------
Asset allowances ............ $ 910,000 $ 805,000
Deferred compensation ....... 1,130,000 1,130,000
Other accruals and allowances 2,355,000 1,940,000
Property, plant and
equipment ................. (695,000) (1,090,000)
----------- -----------
Total .................... $ 3,700,000 $ 2,785,000
=========== ===========
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 1999 or 1998.
8. STOCK OPTIONS
The Company has stock option plans for key employees and directors that
provide for the granting of incentive and nonqualified stock options. Under
the plans, options are granted at an exercise price equal to the fair market
value of the underlying common stock at the date of grant, and may be
exercisable for up to 10 years. All options are exercisable when granted. At
June 30, 1999, 140,100 shares were available for future grants. The Company
applies APB Opinion 25 and related interpretations in accounting for its
stock option plans, as permitted under FASB Statement No. 123 ACCOUNTING FOR
STOCK-BASED COMPENSATION (SFAS 123). Accordingly, no compensation cost has
been recognized for its stock option plans. Had the compensation cost for the
Company's incentive stock option plans been determined based on the fair
value at the grant dates for awards under those plans consistent with the
methodology of SFAS 123, the Company's net income and earnings per share
would have been reduced to the pro forma amounts indicated below:
1999 1998 1997
----------- ---------- ----------
Net Income As reported $10,316,586 $7,602,217 $6,048,434
Pro forma 10,171,214 7,462,506 5,907,480
Earnings per share:
- Basic As reported $1.52 $1.09 $0.86
Pro forma $1.50 $1.07 $0.84
- Diluted As reported $1.51 $1.08 $0.86
Pro forma $1.48 $1.06 $0.84
The fair value of each option grant is estimated on the date of grant using
the Black-Sholes option-pricing model with the following weighted-average
assumptions used for grants in 1999, 1998 and 1997, respectively: dividend
yield of 4.5%, 4.2% and 4.6%; expected volatility of 27.1%, 26.3% and 27.3%;
interest rates of 6.8%, 6.8% and 6.9%; and an expected life of 8 to 10 years
on all options.
A summary of the status of the Company's stock option plans as of June 30,
1999, 1998 and 1997 and the changes during the years ending on those dates is
presented below:
Shares Price Range
------- ---------------
June 30, 1996 Outstanding 342,480 $10.50 - 15.75
Granted ................. 103,400 10.25 - 12.75
Exercised ............... (6,800) 10.25 - 10.50
Cancelled ............... (6,400) 10.50 - 14.875
-------
June 30, 1997 Outstanding 432,680 10.25 - 15.75
Granted ................. 88,775 11.44 - 12.66
Exercised ............... (10,250) 10.25 - 12.75
Cancelled ............... (10,700) 10.25 - 15.75
-------
June 30, 1998 Outstanding 500,505 10.25 - 15.75
Granted ................. 106,450 10.50 - 12.75
Exercised ............... (34,088) 10.25 - 11.44
Cancelled ............... (13,600) 11.13 - 15.75
-------
June 30, 1999 Outstanding 559,267 $10.25 - 15.75
=======
Significant option groups outstanding at June 30, 1999 and related
weighted-average exercise price and remaining life information follows:
Weighted-Average
----------------
Grant Options Exercise Remaining
Date Outstanding Price Life (Years)
----------------- ----------- ------ ------------
December 12, 1991 32,670 10.500 0.3
July 6, 1993 74,360 14.875 1.9
July 28, 1994 72,712 10.500 5.0
August 16, 1995 81,950 11.250 6.1
July 30, 1996 88,400 10.250 7.0
November 7, 1997 82,225 11.438 8.3
November 2, 1998 96,950 10.500 9.3
All other 30,000 13.091 6.6
-------
Total 559,267
=======
13
9. 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 $1,427,000 in 1999, $1,373,000 in 1998 and
$1,352,000 in 1997 including $330,000 in 1999, $311,000 in 1998 and $300,000
in 1997 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 multi-employer defined benefit pension plans
administered by others under collective bargaining agreements were
$1,355,000 in 1999, $1,184,000 in 1998 and $1,102,000 in 1997.
The Company has an unfunded deferred compensation plan with certain officers
providing for fixed benefits upon retirement over fifteen years or until
death, whichever is longer. Participants become fully vested at age 59. The
Company records a liability for this obligation based on the present value
of accumulated plan benefits discounted at 8%. The beginning of the year
benefit obligation of $3,052,525 was increased by interest expense of
$247,228, service costs of $146,917 and decreased by payments of $386,000,
resulting in the end of the year benefit obligation of $3,060,670.
10. MANAGEMENT INCENTIVE PLAN
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 331
1/43% of the stock received by the employee on the award date and the
remaining shares issued after one and two years. Under the plan 45,158,
35,459 and 31,053 shares were awarded, and the amounts charged to income
were $598,000, $406,000 and $365,000 in 1999, 1998 and 1997, respectively.
At June 30, 1999, 267,640 shares were available for future grants.
11. 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.
12. EARNINGS PER SHARE
In 1997, FASB issued Statement No. 128, EARNINGS PER SHARE (SFAS 128). SFAS
128 replaced the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of stock
options. All earnings per share amounts for all periods have been presented
and, where appropriate, restated to conform to the SFAS 128 requirements.
1999 1998 1997
------------ ------------ ------------
Basic Earnings Per Share:
Income available to common
shareowners $ 10,316,586 $ 7,602,217 $ 6,048,434
Weighted average shares
outstanding 6,774,996 6,959,310 7,024,021
------------ ------------ ------------
Earnings Per Share - Basic $ 1.52 $ 1.09 $ 0.86
============ ============ ============
Diluted Earnings Per Share:
Income available to common
shareowners $ 10,316,586 $ 7,602,217 $ 6,048,434
------------ ------------ ------------
Weighted average shares
outstanding 6,774,996 6,959,310 7,024,021
Dilutive shares issuable in
connection with stock
option plans 477,907 418,145 339,820
Less shares purchasable
with proceeds (402,788) (342,297) (291,946)
------------ ------------ ------------
Total Shares 6,850,115 7,035,158 7,071,895
------------ ------------ ------------
Earnings Per Share - Diluted $ 1.51 $ 1.08 $ 0.86
============ ============ ============
Options to purchase 81,360 shares of common stock at a range of $14.875 to
$15.75 were outstanding during 1999 but were not included in the computation
of the diluted earnings per share because the options' exercise price was
greater than the average market price of the common shares.
13. SUPPLEMENTARY QUARTERLY
FINANCIAL INFORMATION
(UNAUDITED - in thousands of dollars, except per share amounts)
Quarters
-------------------------------------------------
1st 2nd 3rd 4th
---------- ---------- ---------- ----------
1999:
-----
Net Sales ......... $ 60,053 $ 62,575 $68,615 $69,276
Gross Margin ...... 13,150 14,140 15,743 16,521
Net Income ........ 1,795 2,197 2,829 3,496
Earnings Per Share:
Basic ........... 0.26 0.32 0.42 0.52
Diluted ......... 0.26 0.32 0.41 0.52
Dividends Per Share 0.12 0.12 0.12 0.12
* Market Price
High ............ 14 1/8 13 1/2 14 14 1/8
Low ............. 10 3/8 8 3/4 11 3/8 11 3/4
Quarters
-------------------------------------------------
1st 2nd 3rd 4th
---------- ---------- ---------- ----------
1998:
-----
Net Sales ......... $ 55,159 $ 56,260 $62,090 $62,616
Gross Margin ...... 11,292 11,947 13,773 13,768
Net Income ........ 1,030 2,100(1) 2,106 2,366
Earnings Per Share:
Basic ........... 0.15 0.30 0.30 0.34
Diluted ......... 0.15 0.30 0.30 0.33
Dividends Per Share 0.12 0.12 0.12 0.12
* Market Price
High ............ 12 7/8 14 1/8 14 5/8 15
Low ............. 11 5/8 11 1/4 12 12
(1) Includes a non-taxable gain from life insurance proceeds of approximately
$720,000.
* Reflects the market price as quoted by the National Association of
Securities Dealers, Inc.
14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The following analysis of the results of operations and financial
condition of Flexsteel Industries, Inc. (the Company) should be read in
conjunction with the financial statements and related notes included
elsewhere in this document.
RESULTS OF OPERATIONS
The following table has been prepared as an aid in understanding the
Company's results of operations on a comparative basis for the years ended
June 30, 1999, 1998 and 1997. Amounts presented are percentages of the
Company's net sales.
For the Years Ended June 30,
---------------------------
1999 1998 1997
------ ------ ------
Net Sales 100.0% 100.0% 100.0%
Cost of goods sold 77.1 78.5 78.9
----- ----- -----
Gross margin 22.9 21.5 21.1
Selling, general &
administrative expenses 16.9 17.3 17.5
----- ----- -----
Operating income 6.0 4.2 3.6
Other income, net 0.3 0.7 0.7
----- ----- -----
Income before income taxes 6.3 4.9 4.3
Income tax expense 2.3 1.7 1.5
----- ----- -----
Net income 4.0% 3.2% 2.8%
===== ===== =====
FISCAL 1999 COMPARED TO FISCAL 1998
Net sales for 1999 increased by $24,394,000 or 10% compared to 1998.
Residential sales volume increased $12,388,000 or 9%. Vehicle seating sales
increased $12,715,000 or 17%. Commercial sales volume decreased $709,000 or
3%.
Gross margin increased $8,774,000 to $59,554,000, or 22.9% of sales, in
1999, from $50,780,000, or 21.5% in 1998. The gross margin increase was due
to improved utilization of available production capacity and changes in
product mix.
Selling, general and administrative expenses as a percentage of sales were
16.9% and 17.3% for 1999 and 1998 respectively. The cost percentage decrease
was due to management's continued efforts to control fixed costs as volume
increased.
Net other income was $819,000 in 1999 and $1,659,000 for 1998. During the
second quarter of 1998 the Company realized a non-taxable gain on the
proceeds of life insurance of $720,000.
The effective tax rate in 1999 was 36.4% compared to 34.0% in 1998. The
lower effective income tax rate in 1998 is attributable to the non-taxable
gain on the proceeds of life insurance.
The above factors resulted in 1999 fiscal year net income of $10,317,000
or $1.51 per share (diluted) compared to $7,602,000 or $1.08 per share
(diluted) in fiscal 1998, a net increase of $2,715,000 or $0.43 per share.
FISCAL 1998 COMPARED TO FISCAL 1997
Sales for 1998 increased by $16,699,000 or 8% compared to 1997.
Residential sales volume increased $5,647,000 or 4%. Vehicle seating sales
increased $9,293,000 or 14%. Approximately $7,026,000 of this increase
relates to the acquisition of certain assets of Dygert Seating, Inc. in March
1997. Commercial sales volume increased $1,759,000 or 8%.
Gross margin increased $4,442,000 to $50,780,000, or 21.5% of sales, in
1998, from $46,338,000, or 21.1% in 1997. The gross margin increase was due
to improved utilization of available production capacity and changes in
product mix.
Selling, general and administrative expenses as a percentage of sales were
17.3% and 17.5% for 1998 and 1997 respectively. The cost percentage decrease
was due to management's control of fixed costs.
Net other income was $1,659,000 in 1998 and $1,585,000 for 1997. Each year
contains amounts which are non-recurring in nature. During the second quarter
of 1998 the Company realized a non-taxable gain on the proceeds of life
insurance of $720,000. In fiscal year 1997, the Company sold its production
facility in Sweetwater, Tennessee which resulted in a gain of $550,000 before
income taxes.
The effective tax rate in 1998 was 34.0% compared to 36.2% in 1997. The
lower effective income tax rate is attributable to the non-taxable gain on
the proceeds of life insurance.
The above factors resulted in 1998 fiscal year net income of $7,602,000 or
$1.08 per share (diluted) compared to $6,048,000 or $0.86 per share (diluted)
in fiscal 1997, a net increase of $1,554,000 or $0.22 per share.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at June 30, 1999, is $50,210,000 which includes cash, cash
equivalents and investments of $13,853,000. Working capital decreased by
$339,000 from the June 30, 1998 amount.
Net cash provided by operating activities was $14,376,000, $13,284,000 and
$13,114,000 in 1999, 1998 and 1997, respectively. Fluctuations in net cash
provided by operating activities are primarily the result of changes in net
income and changes in working capital accounts.
Capital expenditures were $8,398,000, $2,392,000 and $5,273,000 for 1999,
1998 and 1997, respectively. The current year expenditures were incurred
primarily for land, manufacturing and delivery equipment and the expansion of
our Dublin, Georgia facility. Projected capital spending for fiscal 2000 is
$6,000,000, with approximately $1,000,000 for expansion of our Riverside,
California facility. The remainder of the projected capital expenditures will
be for manufacturing and delivery equipment. The funds for projected capital
expenditures are expected to be provided from cash generated from operations
and available cash.
Financing activities utilized net cash of $7,709,000, $5,415,000 and
$5,671,000 in 1999, 1998 and 1997, respectively. During the current year the
Company's Board of Directors approved the repurchase of up to 700,000 shares
of the Company's common stock. Under that authority, the Company repurchased
363,600
15
shares of its outstanding common stock in 1999. Under prior authority the
Company repurchased 176,489 and 186,345 shares of its outstanding common
stock during 1998 and 1997, respectively.
FINANCING ARRANGEMENTS
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 $1,625,000 in the form of variable rate demand
industrial development revenue bonds. During fiscal 1999, the
weighted-average interest rate on the industrial development revenue bonds
was 3.70%.
OTHER
Year 2000 Issue - The Company developed a plan to identify and modify its
computer information systems to ensure that transactions will be properly
processed on and after January 1, 2000. The Company also reviewed its
computer dependent manufacturing activities to identify areas of concern
related to the year 2000 issues. The plan has been completed and tested. The
Company believes that it is prepared internally for January 1, 2000. The
internal conversion costs were not material to the Company's financial
position. None of the Company's other information technology projects have
been delayed due to the implementation of the year 2000 plan. As a part of
developing a contingency plan for year 2000 issues, the Company will continue
testing each of the major systems.
The Company continues to communicate with major suppliers to emphasize
that operations must continue without interruption through January 1, 2000,
and beyond. However, there can be no assurances that systems of other
companies, on which the Company's systems rely, will be converted in a timely
manner or that any failure to convert by another company would not have an
adverse effect on the Company's ability to conduct operations.
FORWARD-LOOKING STATEMENTS
Cautionary Statement Relevant to Forward-Looking Information for the
Purpose of "Safe Harbor" Provisions of the Private Securities Litigation
Reform Act of 1995 - The Company and its representatives may from time to
time make written or oral forward-looking statements with respect to
long-term goals of the Company, including statements contained in the
Company's filings with the Securities and Exchange Commission and in its
reports to stockholders.
Statements, including those in this report, which are not historical or
current facts are "forward-looking statements" made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
There are certain important factors that could cause results to differ
materially from those anticipated by some of the statements made here-in.
Investors are cautioned that all forward-looking statements involve risk and
uncertainty. Some of the factors that could affect results are the
effectiveness of new product introductions, the product mix of our sales, the
cost of raw materials, the amount of sales generated and the profit margins
there-on or volatility in the major markets, competition and general economic
conditions.
The Company specifically declines to undertake any obligation to publicly
revise any forward-looking statements that have been made to reflect events
or circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events.
[PHOTO]
[CAPTION: ANOTHER EXAMPLE OF HOW OUR TABLES HARMONIZE WITH OUR UPHOLSTERED
FURNITURE: NOTE THE TURNED WOOD LEGS ON BOTH TABLE AND LAWSON-ARM TRANSITIONAL
SOFA. AN INTERESTING ACCENT IS THE CHARISMA(R) CHAIR WITH NAILHEAD TRIM AND
GRACEFULLY-SHAPED CARVED ARMS.]
16
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
M. C. Dixon, 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
(870) 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
(662) 323-5481
S. P. Salmon, General Manager
Dygert Seating Division
ELKHART, INDIANA 46515
(219) 262-4675
D. L. Dygert, 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
John R. Easter
CHAIRMAN OF THE BOARD OF DIRECTORS
RETIRED VICE PRESIDENT
SEARS, ROEBUCK & COMPANY
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
Jeffrey T. Bertsch
VICE PRESIDENT
DIRECTOR
L. Bruce Boylen
DIRECTOR
RETIRED VICE PRESIDENT
FLEETWOOD ENTERPRISES, INC.
Patrick M. Crahan
VICE PRESIDENT
DIRECTOR
Lynn J. Davis
DIRECTOR
SENIOR VICE PRESIDENT
ADC TELECOMMUNICATIONS, INC.
Thomas E. Holloran
DIRECTOR
PROFESSOR, GRADUATE SCHOOL OF BUSINESS,
UNIVERSITY OF ST. THOMAS
ST. PAUL, MINNESOTA
Marvin M. Stern
DIRECTOR
RETIRED VICE PRESIDENT
SEARS, ROEBUCK & COMPANY
Carolyn T. B. Bleile
VICE PRESIDENT
Thomas D. Burkart
SENIOR VICE PRESIDENT, VEHICLE SEATING
Kevin F. 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
AUDIT & ETHICS
COMMITTEE
Thomas E. Holloran, Chairman
L. Bruce Boylen
Lynn J. Davis
COMPENSATION &
NOMINATING COMMITTEE
L. Bruce Boylen, Chairman
Thomas E. Holloran
Marvin M. Stern
MARKETING &
PLANNING COMMITTEE
Marvin M. Stern, Chairman
Jeffrey T. Bertsch
Patrick M. Crahan
Lynn J. Davis
Edward J. Monaghan
James R. 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
December 9, 1999, 3:30 p.m.
The Marquette
710 Marquette Avenue, 3rd floor
Minneapolis, Minnesota 55402
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 disability 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://flexsteel.com
[LOGO] FLEXSTEEL
AMERICA'S SEATING SPECIALIST
(C) 1999 FLEXSTEEL INDUSTRIES, INC.
[PHOTO]
[CAPTION: PHOTO COURTESY OF NEWMAR CORP.]
For a motor home with every luxury imaginable, the discriminating traveler
finds the 2000 Londonaire by Newmar(R) is the choice for elegance, performance
and comfort. Its top-of-the-line furnishings include a Flexsteel Easy Bed Sofa
and a Flexsteel leather-and-vinyl sofa with incliner or optional recliner.
The front passenger and driver's seats include power, lumbar support, and an
integrated seat belt developed by Flexsteel engineers. Other new Flexsteel
developments include power foot rests for motor homes; for vans, a new Flex-Over
bed and restraint packages for seats, all tested for FMVSS codes. Recreational
vehicle buyers have learned to look for and trust the Flexsteel name for smart,
dependable, and comfortable seating.
- --------------------------------------------------------------------------------
[LOGO] FLEXSTEEL
AMERICA'S SEATING SPECIALIST
- -------------------------------------
P.O. BOX 877 * DUBUQUE IA 52004-0877