UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
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 [_] Soliciting Material Pursuant to
[_] Confidential, For Use of the SS.240.14a-11(c) or SS.240.14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
FLEXSTEEL INDUSTRIES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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statement number, or the form or schedule and the date of its filing.
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FLEXSTEEL INDUSTRIES, INC.
P.O. BOX 877
DUBUQUE, IOWA 52004-0877
Date: October 27, 2000
Office of the Chairman of the Board
Dear Stockholder:
You are cordially invited to attend the Annual Stockholders' Meeting on
Monday, December 11, 2000, at 2:00 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
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RECORD DATE: October 13, 2000
DATE OF MEETING: December 11, 2000
TIME: 2:00 p.m.
PLACE: Hyatt Regency O'Hare
9300 West Bryn Mawr Avenue
Pine Valley Conference Room
Rosemont, Illinois 60018
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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 11, 2000
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Flexsteel Industries, Inc. will be
held at the Hyatt Regency O'Hare, 9300 West Bryn Mawr Avenue, Rosemont, Illinois
60018 in the Pine Valley Conference Room, on Monday, December 11, 2000, at 2:00
p.m. for the following purposes:
1. To elect three (3) Class II Directors to serve until the year 2003
Annual Meeting and until their successors have been elected and
qualified or until their earlier resignation, removal or termination
(Proposal I).
2. 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, 2001 (Proposal II).
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
October 13, 2000 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, 2000
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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 Monday, December 11, 2000, 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 James R. Richardson, Patrick M. Crahan and
Marvin M. Stern as Class II Directors (Proposal I), and FOR ratification of the
appointment of Deloitte & Touche LLP (Proposal II). Each of the above named
nominees has been previously elected by the stockholders, except Marvin M.
Stern.
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, 2000.
As of the close of business on October 13, 2000, the record date for
determining stockholders entitled to notice and to vote at the meeting, the
Company had 6,175,212 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 with banks,
brokerage houses and other custodians, nominees and fiduciaries to send proxies
1
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 Board of Directors of the Company has nominated James R. Richardson,
Patrick M. Crahan and Marvin M. Stern for election as Class II Directors of the
Company. The Class II Directors' term expires at the time of the year 2003
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 2003
ANNUAL MEETING, CLASS II
James R. Richardson (3) 56 1990 Senior Vice President Marketing, 1994 to present, Flexsteel
Industries, Inc.
Patrick M. Crahan (3) 52 1997 Vice President, Dubuque Upholstering Division, 1989 to present,
Flexsteel Industries, Inc; Director, American Trust and Savings
Bank, Dubuque, Iowa.
Marvin M. Stern (2)(3) 64 1998 Retired Vice President, Sears-Roebuck Company (retired 1996).
DIRECTORS CONTINUING TO SERVE WHOSE TERMS EXPIRE AT THE 2002
ANNUAL MEETING, CLASS I
K. Bruce Lauritsen 58 1987 Chief Executive Officer and President, 1993 to present, Flexsteel
Industries, Inc.; Regent, Loras College.
Thomas E. Holloran (1)(2) 71 1971 Professor, Graduate School of Business, University of St. Thomas,
St. Paul; former Director, Medtronic, Inc, (1960 - 2000).
L. Bruce Boylen (1)(2) 68 1993 Retired Vice President, Fleetwood Enterprises, Inc. (retired
1991) (mfr. of recreational vehicles and manufactured homes).
John R. Easter 71 1993 Retired Vice President, Sears-Roebuck Company (retired 1989).
DIRECTORS CONTINUING TO SERVE WHOSE TERMS EXPIRE AT THE 2001
ANNUAL MEETING, CLASS III
Edward J. Monaghan (3) 61 1987 Chief Operating Officer and Executive Vice President, 1993 to
present, Flexsteel Industries, Inc.; Trustee, Clarke College.
Jeffrey T. Bertsch (3) 45 1997 Vice President Corporate Services, 1989 to present, Flexsteel
Industries, Inc.; Director, American Trust and Savings Bank,
Dubuque, Iowa.
Lynn J. Davis (1)(3) 53 1999 Senior Vice President, 1991 to present, ADC Telecommunications,
Inc.; Director, Automated Quality Technologies, Inc. (mfr. of
non-contact measurement equipment).
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(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, 2000, 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, 2000. The Committee members are Thomas E. Holloran,
L. Bruce Boylen and Lynn J. Davis. The Board of Directors has adopted a written
charter for the Audit Committee which is attached hereto as Appendix A. The
Company believes all audit committee members are independent as defined in Rule
4200(a)(14) of NASD listing standards.
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 three
meetings during the fiscal year ended June 30, 2000. 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 held one meeting during the
fiscal year ended June 30, 2000. 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 10, 2000. 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 329,967(3)(4) 5.3%
L.B. Boylen Director 9,000 0.1%
P.M. Crahan Vice President Dubuque Upholstering 127,360(4) 2.0%
Division, Director
L.J. Davis Director 3,000 0.0%
J.R. Easter Chairman of the Board of Directors 9,000 0.1%
T.E. Holloran Director 14,680 0.2%
K.B. Lauritsen President, Chief Executive Officer, Director 132,572(4) 2.1%
E.J. Monaghan Executive Vice President, Chief Operating 152,791(4) 2.5%
Officer, Director
J.R. Richardson Senior Vice President Marketing, Director 476,178(4)(5) 7.6%
M.M. Stern Director 4,000 0.1%
T.D. Burkart Senior Vice President Vehicle Seating 77,761(4) 1.2%
R.J. Klosterman Vice President Finance, Chief Financial Officer 78,316(4) 1.3%
and Secretary
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (12) 1,414,625 22.7%
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(1) Includes the following number of shares which may be acquired by exercise
of stock options: J.T. Bertsch -- 41,200; L.B. Boylen -- 9,000; P.M. Crahan
-- 42,400; L.J. Davis -- 3,000; J.R. Easter -- 9,000; T.E. Holloran --
10,000; K.B. Lauritsen -- 67,865; E.J. Monaghan -- 63,440; J.R. Richardson
-- 61,490; M.M. Stern -- 4,000; T.D. Burkart -- 44,000; R.J. Klosterman --
46,900.
(2) Includes shares, if any, owned beneficially by their respective spouses.
(3) Does not include 178,192 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.
(5) Includes 244,449 shares held in the Irrevocable Arthur D. Richardson trust
for which American Trust & Savings Bank serves as sole trustee but over
which shares J.R. Richardson has the rights of voting and disposition.
6
OWNERSHIP OF STOCK BY
CERTAIN BENEFICIAL OWNERS
AS OF AUGUST 10, 2000
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.T. Bertsch, P.O. Box 877, Dubuque, IA 52004 329,967 5.3%
Common J.B. Crahan, P.O. Box 877, Dubuque, IA 52004 373,613 6.0%
Common J.R. Richardson, P.O. Box 877, Dubuque, IA 52004 476,178(2) 7.6%
Common Dimensional Fund Advisors, Inc.
1299 Ocean Avenue, Santa Monica, CA 90401 485,200 7.8%
Common First Pacific Advisors Incorporated
11400 West Olympic Boulevard
Los Angeles, CA 90064 402,200 6.5%
Common Heartland Advisors, Inc.
790 North Milwaukee Street
Milwaukee, WI 53202 363,300 5.8%
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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.
(2) Includes 244,449 shares held in the Irrevocable Arthur D. Richardson trust
for which American Trust & Savings Bank serves as sole trustee but over
which shares J.R. Richardson has the rights of voting and disposition.
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, 2000.
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)(2)
- ---------------------------- ------ --------- --------- -------- ------------ ------------ --------- ----------
K. Bruce Lauritsen 2000 316,500 181,068 12,000 76,020 169,744
President & Chief 1999 302,850 178,239 9,500 70,587 26,616
Executive Officer 1998 290,400 143,848 8,725 54,202 27,459
Edward J. Monaghan 2000 239,700 137,559 9,000 52,054 119,708
Executive Vice President 1999 229,950 121,809 9,000 46,596 9,832
& Chief Operating Officer 1998 225,000 100,784 8,300 35,010 10,870
James R. Richardson 2000 210,300 121,046 9,000 45,714 117,627
Senior Vice President of 1999 201,750 105,896 8,500 40,748 23,152
Marketing 1998 195,300 77,983 7,600 29,371 23,664
Ronald J. Klosterman 2000 180,600 92,292 9,000 37,647 171,770
Vice President of 1999 171,750 90,312 8,500 34,706 33,066
Finance & Secretary 1998 160,200 70,425 7,200 24,853 33,573
Thomas D. Burkart 2000 183,600 105,889 9,000 39,938 93,212
Senior Vice President 1999 174,300 103,734 7,500 36,826 26,596
Vehicle Seating 1998 164,700 69,417 6,500 21,263 26,656
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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
Plans.
(2) Fiscal year 2000 includes a one-time additional accrual related to changes
in the Company's Senior Officer Deferred Compensation Plan. The one-time
additional accurals are as follows: K. Bruce Lauritsen -- $122,212; Edward
J. Monaghan -- $97,710; James R. Richardson -- $85,109; Ronald J.
Klosterman -- $132,488; Thomas D. Burkart -- $59,350.
8
RETIREMENT DEFERRED
NAME YEAR PLAN 401k COMP
- ---------------------- ------ ----------- ------ ----------
K. Bruce Lauritsen 2000 8,148 1,600 159,996
1999 8,232 1,600 16,784
1998 9,256 1,419 16,784
Edward J. Monaghan 2000 8,148 1,600 109,960
1999 8,232 1,600 0
1998 9,270 1,600 0
James R. Richardson 2000 8,148 1,600 107,879
1999 8,232 1,600 13,320
1998 8,744 1,600 13,320
Ronald J. Klosterman 2000 8,148 1,600 162,022
1999 8,232 1,600 23,234
1998 8,739 1,600 23,234
Thomas D. Burkart 2000 8,148 1,600 83,464
1999 8,232 1,600 16,764
1998 8,292 1,600 16,764
STOCK OPTIONS/SAR*
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR
OPTION TERM (1)
-----------------------
EXERCISE
NAME SHARES PRICE ($/Sh) EXPIRE DATE 5% 10%
- ---------------------- --------- -------------- ------------- --------- ----------
K. Bruce Lauritsen 12,000 13.25 11/02/09 99,994 253,405
Edward J. Monaghan 9,000 13.25 11/02/09 74,996 190,054
James R. Richardson 9,000 13.25 11/02/09 74,996 190,054
Ronald J. Klosterman 9,000 13.25 11/02/09 74,996 190,054
Thomas D. Burkart 9,000 13.25 11/02/09 74,996 190,054
- ---------------------
* 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 2000 AT FY-END 2000 (1)
# OF SHARES ------------------------ ---------------------
ACQUIRED ON $ VALUE # $
NAME EXERCISE REALIZED EXERCISABLE EXERCISABLE
---------------------- ------------- ---------- ------------------------ ---------------------
K. Bruce Lauritsen -0- -0- 67,865 68,724
Edward J. Monaghan 9,520 32,748 63,440 66,504
James R. Richardson -0- -0- 61,490 63,560
Ronald J. Klosterman -0- -0- 46,900 50,475
Thomas D. Burkart -0- -0- 44,000 44,156
- ---------------------
(1) Based on the closing price as published in The Wall Street Journal for the
last business day of the fiscal year ($12.25). 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 9,424
Edward J. Monaghan 6,453
James R. Richardson 5,667
Ronald J. Klosterman 4,667
Thomas D. Burkart 4,951
- ---------------------
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 August 1, 2000 are as follows: K. Bruce Lauritsen
-- 6,283 shares, $76,020; Edward J. Monaghan -- 4,302 shares, $52,054;
James R. Richardson -- 3,778 shares, $45,714; Ronald J. Klosterman -- 3,111
shares, $37,647; Thomas D. Burkart -- 3,301 shares, $39,938. 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. 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 2000 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
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed the audited financial
statements with management. The Audit Committee has discussed with the
independent auditors the matters required to be discussed by Statements on
Auditing Standards (SAS) No. 61 "Communication with Audit Committees", as may be
modified or supplemented. The Audit Committee has received the written
disclosures and the letter from the independent accountants required by
Independence Standards Board Standard No. 1, as may be modified or supplemented,
and has discussed with the independent accountant, the independent accountant's
independence. Based on the review and discussions referred to above in this
report, the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in the Company's Annual Report on Form
10-K for the last fiscal year for filing with the Commission.
This report has been prepared by members of the Audit Committee. Members of
this Committee are:
Thomas E. Holloran L. Bruce Boylen Lynn J. Davis
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.
14
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., Leggett & Platt Inc.,
Rowe Companies, and Stanley Furniture Inc. This data was furnished by Media
General Financial Services. The graph assumes reinvestment of dividends.
15
FIVE-YEAR CUMULATIVE TOTAL RETURNS
VALUE OF $100 INVESTED ON JUNE 30, 1995
[PLOT POINTS CHART]
1995 1996 1997 1998 1999 2000
------ ---------- ---------- ---------- ---------- ----------
Flexsteel 100 119.84 124.78 151.34 152.60 146.19
Furniture Household 100 122.93 177.83 225.55 235.32 145.57
NASDAQ 100 125.88 151.64 201.01 281.68 423.84
16
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
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, 2001.
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 2001 annual meeting must submit the proposal
in writing and direct
17
it to the Secretary of the Company at the address shown herein. It must be
received by the Company no later than June 30, 2001.
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 2000.
OTHER MATTERS
The percentage total number of the outstanding shares represented at each
of the last three years stockholders' meetings was as follows: 1997 - 88.0%;
1998 - 80.1%; 1999 - 92.0%.
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, 2000. 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, 2000
Dubuque, Iowa
18
APPENDIX A TO 2000 PROXY
FLEXSTEEL INDUSTRIES, INC.
AUDIT COMMITTEE CHARTER
ORGANIZATION
This charter governs the operations of the audit committee of Flexsteel
Industries, Inc. The committee shall review and reassess the charter and obtain
the approval of the board of directors. The committee shall be appointed by the
board of directors and shall comprise at least three directors, each of whom are
independent of management and the Company. Members of the committee shall be
considered independent if they have no relationship that may interfere with the
exercise of their independence from management and the Company. All committee
members shall be financially literate, [or shall become financially literate
within a reasonable period of time after appointment to the committee,] and at
least one member shall have accounting or related financial management
expertise.
STATEMENT OF POLICY
The audit committee shall provide assistance to the board of directors in
fulfilling their oversight responsibility to the shareholders, potential
shareholders, the investment community, and others relating to the Company's
financial statements and the financial reporting process, the systems of
internal accounting and financial controls, the internal audit function, the
annual independent audit of the Company's financial statements, and the legal
compliance and ethics programs as established by management and the board. In so
doing, it is the responsibility of the committee to maintain free and open
communication between the committee, independent auditors, the internal auditors
and management of the Company. In discharging its oversight role, the committee
is empowered to investigate any matter brought to its attention with full access
to all books, records, facilities, and personnel of the Company and the power to
retain outside counsel, or other experts for this purpose.
RESPONSIBILITIES AND PROCESSES
The primary responsibility of the audit committee is to oversee the
Company's financial reporting process on behalf of the board and report the
results of their activities to the board. Management is responsible for
preparing the Company's financial statements and the independent auditors are
responsible for auditing those financial statements. The committee in carrying
out its responsibilities believes its policies and procedures should remain
flexible, in order to best react to changing conditions and circumstances. The
committee should take
A-1
the appropriate actions to set the overall corporate "tone" for quality
financial reporting, sound business risk practices, and ethical behavior.
The following shall be the principal recurring processes of the audit
committee in carrying out its oversight responsibilities. The processes are set
forth as a guide with the understanding that the committee may supplement them
as appropriate.
* The committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the board and the audit committee, as representatives
of the Company's shareholders. The committee shall have the ultimate
authority and responsibility to evaluate and, where appropriate,
replace the independent auditors. The committee shall discuss with the
auditors their independence from management and the Company and the
matters included in the written disclosures required by the
Independence Standards Board. Annually, the committee shall review and
recommend to the board the selection of the Company's independent
auditors, subject to shareholders' approval.
* The committee shall discuss with the independent auditors the overall
scope and plans for their respective audits including the adequacy of
staffing and compensation. Also, the committee shall discuss with
management, and the independent auditors the adequacy and
effectiveness of the accounting and financial controls, including the
Company's system to monitor and manage business risk, and legal and
ethical compliance programs. Further, the committee shall meet with
the independent auditors, with and without management present, to
discuss the results of their examinations.
* The committee shall review the interim financial statements with
management and the independent auditors prior to the filing of the
Company's Quarterly Report on Form 10-Q. Also, the committee shall
discuss the results of the quarterly review and any other matters
required to be communicated to the committee by the independent
auditors under generally accepted auditing standards. The chair of the
committee may represent the entire committee for the purposes of this
review.
* The committee shall review with management and independent auditors
the financial statements to be included in the Company's Annual Report
on Form 10-K (or the annual report to shareholders if distributed
prior the filing of Form 10-K) including their judgment about the
quality of accounting principles, the reasonableness of significant
judgments, and the clarity of the disclosures in the financial
statements. Also, the committee shall discuss the results of the
annual audit and any other matters required to be communicated to the
committee by the independent auditors under generally accepted
auditing standards.
A-2
[LOGO]
FLEXSTEEL(R)
AMERICA'S SEATING SPECIALIST
NOTICE OF 2000
ANNUAL MEETING
AND
PROXY STATEMENT
FLEXSTEEL INDUSTRIES, INC. THIS PROXY IS SOLICITED ON BEHALF OF THE
P.O. BOX 877 BOARD OF DIRECTORS FOR THE ANNUAL MEETING
DUBUQUE, IOWA 52004-0877 OF STOCKHOLDERS TO BE HELD DECEMBER 11, 2000
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 Monday,
December 11, 2000 at 2:00 P.M. at the Hyatt Regency O-Hare, 9300 West Bryn Mawr
Avenue, Rosemont, Illinois 60018, in the Pine Valley Conference Room, and at any
adjournments thereof as follows:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR:
- --------------------------------------------------------------------------------
Proposal No. 1 -- Election of three (3) Class II Directors (Term Expires at
the 2003 Annual Meeting):
JAMES R. RICHARDSON PATRICK M. CRAHAN MARVIN M. STERN
(Class II) (Class II) (Class II)
[ ] 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 -- 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 ________________________________, 2000.
_____________________________________________
(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 and 2, 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.
NEW VISIONS OF COMFORT
[LOGO]
FLEXSTEEL(R)
AMERICA'S SEATING SPECIALIST
[COVER PHOTO]
F L E X S T E E L 2 0 0 0
FLEXSTEEL INDUSTRIES INCORPORATED / ANNUAL REPORT
FISCAL YEAR ENDED JUNE 30, 2000
FINANCIAL HIGHLIGHTS
[AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA]
Year Ended June 30, 2000 1999 1998
-------- -------- --------
Net Sales...................... $286,860 $260,519 $236,125
Operating Income............... 17,679 15,398 9,868
Income Before Income Taxes..... 18,658 16,217 11,527
Net Income..................... 11,928 10,317 7,602
Per Share of Common Stock:
Average Shares Outstanding:
Basic........................ 6,458 6,775 6,959
Diluted...................... 6,562 6,850 7,035
Earnings:
Basic........................ 1.85 1.52 1.09
Diluted...................... 1.82 1.51 1.08
Cash Dividends................. 0.52 0.48 0.48
At June 30,
Working Capital................ 52,076 50,210 50,549
Net Plant and Equipment........ 26,837 25,912 23,096
Total Assets................... 114,876 112,684 104,673
Shareholders' Equity........... 85,196 81,166 78,080
FLEXSTEEL'S MISSION
Flexsteel Industries, Inc., is committed to building its brand as a
successful seating specialist. The Company is committed to exceeding customer
expectations. With emphasis on high quality Home Seating, Recreational Vehicle
Seating, and Commercial Seating, Flexsteel will remain focused upon
strengthening its product integrity and customer service programs, expanding its
customer base, and profitably growing our business in order to increase
shareholder value.
Flexsteel will continue to hire dedicated, productive, achievement-oriented
associates who will be instrumental in leading the Company into its second
successful century.
[BAR GRAPHS OMITTED]
NET SALES IN MILLION DOLLARS
Years: 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
$140 $159 $180 $190 $210 $205 $219 $230 $260 $285
EARNINGS PER SHARE IN DOLLARS
Years: 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
$.18 $.15 $.22 $.89 $.70 $.64 $.82 $1.08 $1.52 $1.82
BOOK VALUE PER SHARE IN DOLLARS
Years: 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
$9.00 $8.50 $9.00 $10.00 $10.10 $11.00 $11.70 $11.50 $12.50 $13.60
RETURN ON COMMON EQUITY IN PERCENT
Years: 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
2.9% 1.8% 9.5% 10% 7.5% 6.5% 8.2% 10.1% 13.1% 14%
[PHOTO] Front cover and left: Rich with warm woods and the flavors of North
Africa, our new Sahara Retreat collection is one of several new
integrated groupings. Shown in highly popular leather, it includes
sofa, love seat, chair, ottoman, and a wide selection of tables, all
embellished with the carved and scalloped trim seen on the sofa base.
[LOGO]
FLEXSTEEL (R)
AMERICA'S SEATING SPECIALIST
NEW VISIONS OF COMFORT
FLEXSTEEL: 2000
TO OUR SHAREHOLDERS
Your company's fiscal year ended June 30, 2000, was outstanding. Our
Management Team began the year by creating and putting in place a Strategic Plan
for the next three years. We are beginning our second year of the plan,
enormously encouraged by this year's outstanding results.
Sales reached a new peak of $286,860,000 which was an increase of 10% over
the sales of the previous fiscal year of $260,519,000. Our net income totalled
$11,928,000 or $1.82 per diluted share, was an increase of 16% over earnings of
$10,317,000, or $1.51 per share in the same period last year.
HIGHLIGHTS IN RESIDENTIAL FURNITURE
Strong emphasis on retail development has resulted in record sales, an
increase of 15% over last year. We have increased our independent dealer base,
with more dealers than ever devoting gallery space or entire stores to selling
Flexsteel. Today there are 231 operating Flexsteel Galleries with 59 new ones in
progress. Comfort Seating Showrooms, whose larger format allows a more complete
presentation of our line, now total 21. Six more Showrooms are on the drawing
boards or under construction.
Following our Strategic Plan, we are also increasing our business with
national retailers Homelife and the JC Penney Home Stores, as well as other
large key accounts across the country.
Soft comfort and relaxed styling, combined with pleasing silhouettes and
fabrics, make Flexsteel furniture beautifully suited to today's life styles.
With a superb team of associates assuring that Flexsteel quality and timely
delivery are added to the equation, sales, customer satisfaction, and profits
have all responded.
A BANNER
YEAR FOR
FLEXSTEEL
Flexsteel popularity has never been higher in leather -- sales this year
increased over 30%. We are responding to this demand with a new
100,000-square-foot production facility for making leather furniture in
Harrison, Arkansas. Leased in January 2000, this plant adds to our presence in
Harrison, where we have had a large wood frame facility since 1958. Community
leaders and the state helped make this a positive decision for us.
HIGHLIGHTS IN RECREATIONAL VEHICLE SEATING
Here, too, we achieved another year of record growth. Sales grew 7% with our
market share increasing in all segments. To meet our customer's needs, we added
a new facility in the Portland/Dunkirk area of Indiana. It is already up and
running, producing quality recreational vehicle seating. We have the in-house
capabilities to engineer and test all vehicle seating to the stringent Federal
Motor Vehicle Standards. Our customers know they can depend on us to meet or
exceed the proper standards, and we continue to be the leader in this industry.
Our ability to design seating for individual customers has always been one of
our strengths, now showing its importance in new areas such as the growing
marine market. Flexsteel-quality seating now goes to sea as well as overland.
[PHOTO]
K. Bruce Lauritsen (l), President
& Chief Executive Officer, and
John R. Easter, Chairman of the
Board, of Flexsteel Industries, Inc.
[PHOTO]
The handsome interiors of today's fine motor homes deserve a bucket seat for
driver and passenger that looks as good as it rides. This Flexsteel seat
captures the essence of sleek automotive styling.
[PHOTO]
The "conversation sofa" is more than a conversation piece. Introduced last year
to immediate success, it is a worthy successor to the crescent sofa. Here, piled
high with plump pillows, it represents a whole life style of relaxed welcome.
1
Radisson Hotels Worldwide advertises "elegant accommodations," and this suite in
the Radisson in Beverly Hills, designed by Concepts 4 and furnished with
Flexsteel sofa and chairs, makes their point beautifully. The growing
hospitality market is a natural fit for Flexsteel.
Photo: Martin Fine Photography
[PHOTO]
[PHOTO]
Beauty of fabric and silhouette mark Flexsteel upholstered
furniture. Consider our century-old reputation for quality, and it's apparent
why we are the choice of more discriminating buyers. With our famous
lifetime-warranted seat spring, we still offer the best warranties in the
industry.
Our sales to the van conversion business continues strong, despite the slowed
growth in this market. Our leadership depends on our innovative designs,
offering converters handsome Flexsteel styling, value, comfort, quality, and
safety.
HIGHLIGHTS IN COMMERCIAL SEATING
We continue to make excellent progress, placing new emphasis on developing
our portion of this promising market. The hospitality market is a natural for
Flexsteel, where we are developing complete upholstered seating packages for
accounts such as the Marriott Corporation, as well as for Choice, Best Western,
and Cendent Hotels.
Another growing market is that of assisted-living and acute-care facilities.
We are developing new products such as chair-sleepers for the acute-care market,
sold through Stryker Medical.
As in recreational vehicle seating, Flexsteel's ability to develop unique
products for specific customer needs will serve us well in the commercial
seating market. Our Strategic Plan, recognizing the strength of these growing
national markets, calls for us to intensify our efforts to develop their
potential.
A GROWING NATIONAL PRESENCE
Flexsteel continues to expand its outreach to potential customers. Our name
goes before more potential buyers with our largest national ad program ever,
reaching an audience of over 220 million readers. Visits to our freshly-designed
Web site are increasing exponentially, visitors are staying longer, and a
growing number are downloading Flexsteel literature.
A SAD NOTE
This year saw the passing of one of our more dynamic second-generation
Flexsteel leaders, Art Richardson. He joined Flexsteel in 1948 and became one of
the industry's visionaries, breaking new ground in furniture fabrics, styling,
and marketing. He retired from the Board only last year, after inspiring us for
a half century with his enthusiastic vision. We will miss him.
AN EXCELLENT OUTLOOK
At the close of the fiscal year, the effects of the Federal Reserve's
increases in interest are appearing, resulting in a slight slowdown of orders
during the fourth quarter.
Still the overall prognosis is excellent. Our Strategic Plan is being
executed by a seasoned and committed team, and it is working. In the following
pages, you will see some of this team's accomplishments.
Our earnings have grown for four years. We remain focused on the positive
aspects of the economy: strong consumer confidence, affordable mortgage rates,
high employment, low inflation, and a good housing market. Our confidence in the
future is reflected in our decision to buy back over one million shares of
stock.
We thank our associates who have given us a banner year.
/s/ K. Bruce Lauritsen
K. BRUCE LAURITSEN
President and Chief Executive Officer
/s/ John Easter
JOHN EASTER
Chairman of the Board
2
NEW VISIONS OF COMFORT
FLEXSTEEL: 2000
Whether at home in the living room or traveling, whether by boat or motor home
or visiting a hotel or conference center, more people relax in Flexsteel luxury.
They are choosing Flexsteel for its comfort, its smart styling, and its proven
quality.
Today's computer-savvy furniture customers visit our Web site to the tune of
212,000 hits a month. Here they can see our latest silhouettes and timely
fabrics; they can download data on our environmental-friendly construction and
famous warranties -- and find the nearest Flexsteel dealer.
Flexsteel is keeping pace with this customer's growing insistence on style.
During the past year, we introduced several new thematic collections. Sahara
Retreat, shown on the cover, La Costa, Tuscany, Sonoma Valley, and West Indies,
are spiced with touches of romance and adventure; Wentworth and Stone Harbor
reflect the trend to the cottage look; the Metropolitan group is both retro and
urban. All have been well received because they also offer sleek functionality,
a variety of seating, coordinated tables and, in some cases, entertainment
units.
The very picture of today's casual comfort is leather, and sales of Flexsteel
leather continue to soar, helped by handsome new styling that takes advantage of
leather's natural beauty and comfort. We've also stimulated sales of our
Charisma(R) exposed-wood chairs with smart new looks.
FLEXSTEEL
MAKES COMFORT
VISIBLE
The same concentration on customer-pleasing design is notable in our seating
for recreation vehicles. Here Flexsteel has long been a leader in comfort and
safety for motor homes and towable trailers. Recently we've added noteworthy
marine designs for large boats and yachts.
Style appeal is an absolute must also for the growing commercial markets,
especially the hospitality industry and new assisted-living centers. Even the
very functional furniture we provide for acute-care health centers derives part
of its success from the assurance it gives of comfort as well as safety and
reliability.
Now a new dimension of comfort will put Flexsteel in the bedroom. Restonic,
long a supplier of mattresses for Flexsteel sofa sleepers, is introducing a new
line of premium bedding using the famous Flexsteel spring design for a superior,
long-lasting box spring. Test marketed in the Midwest, it is expected to roll
out nationally by year end, giving our dealers an exciting new product for their
quality-conscious buyers.
Flexsteel joins a century of leadership in quality and comfort with handsome
styles and fabrics to offer the finest in beautiful furniture.
[PHOTO]
Leather and recliners go together for long-lasting comfort and good looks, and
never more so than in our ever-popular Flexsteel recliners with their many
lifetime warranties, including the famous Flexsteel spring.
[PHOTO]
New comfort for sleeping, in a new product for Flexsteel dealers. A line of
premium Restonic mattress sets, with their Marvelous Middle(R) construction for
lumbar support, will also feature Flexsteel's spring, the only box spring with a
lifetime guarantee.
[PHOTO]
"Retro" returns to acclaim in Flexsteel's Metropolitan group. Enhanced with wood
trim and matching tables and an entertainment center, the group shows that the
sleek urban look is remarkably Twenty-First Century.
3
NEW VISIONS OF COMFORT
[PHOTO]
Flexsteel is helping our dealers put new emphasis on consumer education,
providing learning centers with answers to customer's most frequently-asked
questions. The Leather Center explains the nature of leather and the vast range
of choices available.
[PHOTO]
A new power chair from Invacare Corporation provides an exceptional range of
mobility for the disabled. The top quality of this product is well matched to
the expertly tailored seat, designed and manufactured by the Elkhart Division of
Flexsteel.
Sensational sectionals are possible in Flexsteel leather. Classic features in
this group include large rolled arms and nailhead trim. Fabric on the matching
chair is repeated on the accent pillows. The tables are also from Flexsteel.
[PHOTO]
FLEXSTEEL: 2000
Our Strategic Plan recognizes that our marketing efforts must be multi-pronged.
We must reach the dealer, the hospitality designer, the recreational vehicle
engineer, the director of health care and ultimately the consumer.
All of these markets are evolving. For example, many of our customers for
residential furniture and motor homes represent a large and older segment of the
market who instinctively appreciate Flexsteel for its traditional style and
quality. On the other hand, a younger audience goes all out for casual styles
emphasizing comfort and function. All can find their styles of choice in
Flexsteel.
In the retail market, we are concentrating on strengthening our independent
dealer base across the country. Our three sizes of Galleries and our "total
store" Comfort Seating approach are integral parts of our plan. In addition, we
have designed new sales centers for leather and for recliners and reclining
sofas, complete with signage, drop tags, and display layouts. These centers can
educate both dealer and customer on Flexsteel features and help close the sale.
Our national advertising program also helps our dealers, as do our CD-ROM
libraries of print and TV ad material. We also encourage dealers to take
advantage of our Internet presence with links to our Web site.
BRINGING
NEW VISION
TO THE
MARKET
Our High Point showroom, recently redesigned and enlarged, displays our
beautiful designs in a handsome setting that promotes enthusiasm and sales.
Of interest in the RV seating market is the growth of "full-time RV'ers" who
live year-round in their motor homes. They may migrate seasonally, often
returning to areas where they develop communities and friends. There are now a
million such RV'ers with a 20% growth expected in the next decade. We are
beautifully positioned to serve this market.
Though our portion of the van conversion market is still strong, sales of
vans themselves have plateaued. However, our innovative team is already
offsetting this decline by creating interesting new opportunities for their
combined expertise in metal and seating. They have already opened new marine
markets and are busily exploring significant new possibilities in metal-framed
products for health care.
Our Strategic Plan also calls for us to take advantage of new opportunities
in commercial seating, where an energized sales force will seek to introduce
Flexsteel into more national hospitality chains, and increase sales to health
care and assisted living centers.
With strong teams in place to cover all our markets, we expect sales and our
roster of satisfied customers to keep growing.
4
NEW VISIONS OF COMFORT
FLEXSTEEL: 2000
We are well aware that our century-old reputation for quality sells Flexsteel.
We take advantage of new technology wherever it helps us improve technology and
maintain or improve quality. Constant vigilance over the quality control process
includes in-process quality audits to be sure that every piece of Flexsteel
leaves us in mint condition.
Pattern-making and specification packages are completely comput- erized.
Substantial sums have been saved by "lay- ing up" patterns electronically; and
now that the printing of bulky specification books is no longer necessary, we
will realize even more savings. New single-ply cutters for matched fabrics are
racking up substantial savings at our Riverside plant; they will gradually be
implemented in our other plants. A new Gerber automated cutter for solid fabrics
is already operating in our Portland/Dunkirk RV plant and two more are planned.
More efficient and smaller than older cutters, they use the latest in computer
technology.
Our technology is well integrated and turned the calendar to January 1st,
2000 without a major Y2K glitch.
CONVERTING
VISION TO
REALITY
Global sourcing is becoming more important. Imported leather selections,
already cut and sewn, allow us to offer a greater choice in our highly popular
leather and deliver it faster. Imports of frames for our exposed-wood chairs
give us great versatility, while imported wood trim and tables let us create
totally integrated groups such as our popular Sonoma Valley and Sahara Retreat
collections.
We've expanded production at the Riverside plant, stepped up leather
production in our new plant in Harrison, shifted all Charisma(R) chair
production to Starkville, added 90,000 sq. ft. to our Dublin facility, and
expanded RV and other metal seating products with a new facility in Indiana.
Bringing all design effort to our home office in Dubuque has helped unify the
design process and increased sales in all the Company's divisions.
New product development continues in RV seating. Driver and passenger seats
with integrated safety belts are more effective and better looking. Upgraded
foam for padding seats has improved comfort.
The Internet is becoming one of our most effective communications tools, more
useful in our industry for telling than selling. Business-to-business
communications with our sales associates keeps everyone up-to-date; we are
working toward introducing similar communications with our dealers next year.
We never forget that Flexsteel means quality. Our goal is to exceed customer
expectations in quality and fast, world-class service.
[PHOTO]
Upholstered exposed-wood chairs are now produced exclusively at our Starkville
plant. The warm wood trim of this Charisma(R) chair is available in a variety of
finishes.
[PHOTO]
Many furniture customers now go into stores knowing exactly what they want. At
Flexsteel's redesigned Web site, they can get all the information that's in our
catalog. In addition, a B-to-B site provides sales personnel with instant
updated information.
[PHOTO]
Sonoma Valley is one of our newest lifestyle groups. The thematic designs of
these popular collections are echoed in every piece, including tables and
hardware. These vignettes delight the customer and make larger sales easier for
the dealer.
5
2000 FLEXSTEEL INDUSTRIES, INC. 2000
FIVE YEAR REVIEW
[ALL AMOUNTS IN THOUSANDS EXCEPT
PER SHARE DATA]
Year Ended June 30, 2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(1)
SUMMARY OF OPERATIONS
Net Sales.................................... $286,860 $260,519 $236,125 $219,427 $205,008
Cost of Sales................................ 222,619 200,965 185,345 173,088 161,451
Operating Income............................. 17,679 15,398 9,868 7,888 6,362
Interest and Other Income.................... 1,439 1,134 2,015 1,931 1,132
Interest and Other Expense................... 461 315 356 345 358
Income Before Income Taxes................... 18,658 16,217 11,527 9,473 7,052
Income Taxes................................. 6,730 5,900 3,925 3,425 2,550
Net Income(2)(3)(4)(5)....................... 11,928 10,317 7,602 6,048 4,502
Earnings per Common Share:(2)(3)(4)(5)
Basic..................................... 1.85 1.52 1.09 0.86 0.63
Diluted................................... 1.82 1.51 1.08 0.86 0.63
Cash Dividends per Common Share.............. 0.52 0.48 0.48 0.48 0.48
STATISTICAL SUMMARY
Average Common Shares Outstanding:
Basic..................................... 6,458 6,775 6,959 7,024 7,172
Diluted................................... 6,562 6,850 7,035 7,072 7,188
Book Value per Common Share.................. 13.81 12.50 11.49 10.86 10.45
Total Assets................................. 114,876 112,684 104,673 99,173 95,874
Property, Plant and Equipment, net........... 26,837 25,912 23,096 26,214 23,046
Capital Expenditures......................... 6,718 8,398 2,392 5,273 3,298
Working Capital.............................. 52,076 50,210 50,549 44,357 47,376
Long-Term Debt............................... 0 0 0 0 35
Shareholders' Equity......................... 85,196 81,166 78,080 75,238 74,147
SELECTED RATIOS
Net Income as Percent of Sales............... 4.2% 4.0% 3.2% 2.8% 2.2%
Current Ratio................................ 3.0 to 1 2.8 to 1 3.1 to 1 3.1 to 1 3.5 to 1
Return on Ending Common Equity............... 14.0% 12.7% 9.7% 8.0% 6.1%
Return on Beginning Common Equity............ 14.7% 13.2% 10.1% 8.2% 6.1%
Average Number of Employees.................. 2,570 2,400 2,330 2,320 2,230
(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) 2000 income and per share amounts reflect a gain on the sale of land in
Lancaster, Pennsylvania of approximately $1,250,000 ($790,000 net of income tax)
or $0.12 per share and a non-taxable gain from life insurance proceeds of
approximately $405,000 or $0.06 per share.
(5) The earnings per share amounts for 1997 and 1996 have been restated to
comply with Statement of Financial Accounting Standards No. 128, Earnings per
Share.
6
2000 FLEXSTEEL INDUSTRIES, INC. 2000
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, 2000 and 1999, 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, 2000. 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 auditing standards generally
accepted in the United States of America. 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 the Company as of June 30, 2000
and 1999, and the results of its operations and cash flows for each of the three
years in the period ended June 30, 2000 in conformity with accounting principles
generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
August 10, 2000
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
2000 FLEXSTEEL INDUSTRIES, INC. 2000
BALANCE SHEETS
JUNE 30,
-----------------------------
2000 1999
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................................... $ 4,000,855 $ 4,886,038
Investments....................................................... 5,730,888 8,967,197
Trade receivables - less allowance for doubtful
accounts: 2000, $2,250,000; 1999, $2,503,000.................... 32,053,104 31,149,416
Inventories....................................................... 32,456,058 29,503,209
Deferred income taxes............................................. 3,200,000 3,700,000
Other............................................................. 543,711 461,406
------------ ------------
Total current assets 77,984,616 78,667,266
PROPERTY, PLANT AND EQUIPMENT, net.................................. 26,837,475 25,912,432
NOTES RECEIVABLE.................................................... 2,752,130
OTHER ASSETS........................................................ 7,302,095 8,103,997
------------ ------------
TOTAL.................................... $114,876,316 $112,683,695
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade.......................................... $ 6,921,533 $ 7,076,729
Accrued liabilities:
Payroll and related items....................................... 6,344,417 6,735,108
Insurance....................................................... 5,977,525 6,688,060
Other accruals.................................................. 5,364,921 6,332,412
Industrial revenue bonds payable................................ 1,300,000 1,625,000
------------ ------------
Total current liabilities................................... 25,908,396 28,457,309
DEFERRED COMPENSATION............................................... 3,772,152 3,060,670
------------ ------------
Total liabilities............................................. 29,680,548 31,517,979
------------ ------------
SHAREHOLDERS' EQUITY:
Common stock - $1 par value; authorized 15,000,000 shares;
issued 2000, 6,170,789 shares; 1999, 6,491,840 shares........... 6,170,789 6,491,840
Retained earnings................................................. 78,268,436 73,718,238
Unrealized investment gain........................................ 756,543 955,638
------------ ------------
Total shareholders' equity............................ 85,195,768 81,165,716
------------ ------------
TOTAL.................................... $114,876,316 $112,683,695
============ ============
See accompanying Notes to Financial Statements.
8
2000 FLEXSTEEL INDUSTRIES, INC. 2000
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30,
---------------------------------------------------
2000 1999 1998
------------- ------------- -------------
NET SALES............................................. $ 286,860,422 $ 260,519,459 $ 236,125,280
COST OF GOODS SOLD.................................... (222,618,664) (200,965,199) (185,345,398)
------------- ------------- -------------
GROSS MARGIN.......................................... 64,241,758 59,554,260 50,779,882
SELLING, GENERAL AND ADMINISTRATIVE................... (47,812,467) (44,156,199) (40,911,581)
GAIN ON SALE OF LAND.................................. 1,249,806
------------- ------------- -------------
OPERATING INCOME...................................... 17,679,097 15,398,061 9,868,301
------------- ------------- -------------
OTHER:
Interest and other income........................... 1,439,293 1,133,814 2,014,982
Interest and other expense.......................... (460,796) (315,289) (356,066)
------------- ------------- -------------
Total............................................. 978,497 818,525 1,658,916
------------- ------------- -------------
INCOME BEFORE INCOME TAXES............................ 18,657,594 16,216,586 11,527,217
PROVISION FOR INCOME TAXES............................ (6,730,000) (5,900,000) (3,925,000)
------------- ------------- -------------
NET INCOME............................................ $ 11,927,594 $ 10,316,586 $ 7,602,217
============= ============= =============
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING:
BASIC............................................. 6,457,960 6,774,996 6,959,310
============= ============= =============
DILUTED........................................... 6,561,968 6,850,115 7,035,158
============= ============= =============
EARNINGS PER SHARE OF COMMON STOCK:
BASIC............................................. $ 1.85 $ 1.52 $ 1.09
============= ============= =============
DILUTED........................................... $ 1.82 $ 1.51 $ 1.08
============= ============= =============
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED JUNE 30,
---------------------------------------------------
2000 1999 1998
------------- ------------- -------------
NET INCOME............................................ $ 11,927,594 $ 10,316,586 $ 7,602,217
------------- ------------- -------------
OTHER COMPREHENSIVE INCOME, BEFORE TAX:
Unrealized gains (losses) on securities arising
during period..................................... (389,788) (1,575) 736,051
Less: reclassification adjustment for (gains) losses
included in net income............................ 74,138 192,338 (313,294)
------------- ------------- -------------
Other comprehensive income, before tax................ (315,650) 190,763 422,757
------------- ------------- -------------
INCOME TAX BENEFIT (EXPENSE):
Income tax benefit (expense) related to securities
(gains) losses arising during period................ 143,986 577 (257,618)
Income tax benefit (expense) related to securities
reclassification adjustment......................... (27,431) (70,494) 109,653
------------- ------------- -------------
Income tax expense related to other
comprehensive income................................ 116,555 (69,917) (147,965)
------------- ------------- -------------
OTHER COMPREHENSIVE INCOME, NET OF TAX................ (199,095) 120,846 274,792
------------- ------------- -------------
COMPREHENSIVE INCOME.................................. $ 11,728,499 $ 10,437,432 $ 7,877,009
============= ============= =============
See accompanying Notes to Financial Statements.
9
2000 FLEXSTEEL INDUSTRIES, INC. 2000
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, 1997..... 6,927,310 $6,927,310 $ $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 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 $73,718,238 955,638 81,165,716
Purchase of
Company Stock............. (385,445) (385,445) (651,621) (4,055,342) (5,092,408)
Issuance of
Company Stock............. 64,394 64,394 651,621 716,015
Investment Valuation
Adjustment................ (199,095) (199,095)
Cash Dividends............... (3,322,054) (3,322,054)
Net Income................... 11,927,594 11,927,594
--------- ---------- ----------- ----------- ----------- -----------
Balance at June 30, 2000..... 6,170,789 $6,170,789 $ $78,268,436 $756,543 $85,195,768
========= ========== =========== =========== =========== ===========
See accompanying Notes to Financial Statements.
10
2000 FLEXSTEEL INDUSTRIES, INC. 2000
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30,
---------------------------------------------------
2000 1999 1998
------------- ------------- -------------
OPERATING ACTIVITIES:
Net income............................................ $ 11,927,594 $ 10,316,586 $ 7,602,217
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation....................................... 5,492,556 5,358,482 5,400,025
(Gain) Loss on disposition of capital assets....... (1,278,671) 134,235 7,106
Trade receivables.................................. (830,818) (2,426,664) (3,373,811)
Inventories........................................ (2,952,849) (2,895,913) 378,258
Other current assets............................... (82,305) 171,324 173,387
Other assets....................................... 630,602 (616,268) 223,450
Accounts payable - trade........................... (155,196) 1,284,021 1,947,346
Accrued liabilities................................ (2,068,717) 3,957,476 1,063,236
Deferred compensation.............................. 711,482 8,145 8,107
Deferred income taxes.............................. 500,000 (915,000) (165,000)
------------- ------------- -------------
Net cash provided by
operating activities............................... 11,893,678 14,376,424 13,264,321
------------- ------------- -------------
INVESTING ACTIVITIES:
Purchases of investments........................... (1,635,138) (3,750,686) (7,231,401)
Proceeds from sales of investments................. 4,843,652 4,782,119 2,669,563
Payments received from customers on notes receivable 50,000
Loans to customers on notes receivable............. (2,875,000)
Proceeds from sales of capital assets.............. 1,579,166 88,927 104,050
Capital expenditures............................... (6,718,094) (8,398,487) (2,392,365)
------------- ------------- -------------
Net cash used in investing activities................. (4,755,414) (7,278,127) (6,850,153)
------------- ------------- -------------
FINANCING ACTIVITIES:
Repayment of borrowings............................ (325,000) (325,000) (360,000)
Dividends ($0.52, 0.48, 0.48 per share, respectively) (3,322,054) (3,237,714) (3,320,676)
Proceeds from issuance of common stock............. 716,015 611,460 514,417
Repurchase of common stock......................... (5,092,408) (4,725,266) (2,228,975)
------------- ------------- -------------
Net cash used in financing activities................. (8,023,447) (7,676,520) (5,395,234)
------------- ------------- -------------
Increase (decrease) in cash and cash equivalents...... (885,183) (578,223) 1,018,934
Cash and cash equivalents at beginning of year........ 4,886,038 5,464,261 4,445,327
------------- ------------- -------------
Cash and cash equivalents at end of year.............. $ 4,000,855 $ 4,886,038 $ 5,464,261
============= ============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest......................................... $ 64,000 $ 70,000 $ 90,000
Income taxes..................................... $ 7,050,000 $ 5,644,000 $ 4,405,000
See accompanying Notes to Financial Statements.
11
2000 FLEXSTEEL INDUSTRIES, INC. 2000
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
accounting principles generally accepted in the United States of America
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. Notes
receivable and the industrial revenue bonds payable are carried at amounts
which reasonably approximate their fair value due to their variable interest
rates. 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. For internal use software, the Company's policy is to
capitalize external direct costs of materials and services, directly related
internal payroll and payroll-related costs, and interest costs.
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 $982,000. 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.
EARNINGS PER SHARE - Basic earnings per share of common stock is based on the
weighted average number of common shares outstanding during each year.
Diluted earnings per share of common stock takes into effect the dilutive
effect of potential common shares outstanding. The Company's only potential
common shares outstanding are stock options, which resulted in a dilutive
effect of 104,008 shares, 75,119 shares, and 75,848 shares in 2000, 1999 and
1998 respectively. The Company calculates the dilutive effect of outstanding
options using the treasury stock method.
SEGMENT AND RELATED INFORMATION - Under the "management approach" methodology
prescribed by Statement No. 131, the Company operates in one segment, seating
products.
ACCOUNTING DEVELOPMENTS - In June 1998, the Financial Accounting Standards
Board (FASB) issued Statement No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES. The FASB subsequently issued FAS No. 137 delaying the
effective date for one year, to fiscal years beginning after June 15, 2000.
The Company will adopt this standard on July 1, 2000. The Company expects
that this standard will not materially affect its financial position and
results of operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, Revenue Recognition. An amendment in June 2000
delayed the effective date until the fourth quarter of calendar 2000. The
Company is reviewing the requirements of this standard and has not yet
determined the impact of this standard on its financial statements.
RECLASSIFICATIONS - certain prior years' amounts have been reclassified to
conform to the 2000 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, 2000 June 30, 1999
---------- ---------- ---------- ----------
Debt Equity Debt Equity
Securities Securities Securities Securities
---------- ---------- ---------- ----------
Amortized Cost...... $6,080,606 2,244,735 $9,043,136 $2,351,845
Unrealized gains
(losses).......... (144,432) 1,284,794 (91,762) 1,571,674
---------- ---------- ---------- ----------
Est. Market Value... $5,936,174 $3,529,529 $8,951,374 $3,923,519
========== ========== ========== ==========
As of June 30, 2000, the maturities of debt securities are $1,511,703 within one
year, $3,30l,385 in one to five years, and $1,123,086 over five years.
12
3. INVENTORIES
Inventories valued on the LIFO method would have been approximately
$2,062,000 and $2,016,000 higher at June 30, 2000 and 1999, respectively, if
they had been valued on the FIFO method. A comparison of inventories is as
follows:
June 30,
--------------------------
2000 1999
----------- -----------
Raw materials............................... $16,711,084 $15,871,466
Work in process and finished parts.......... 9,125,346 7,416,826
Finished goods.............................. 6,619,628 6,214,917
----------- -----------
Total.................................... $32,456,058 $29,503,209
=========== ===========
4. PROPERTY, PLANT AND EQUIPMENT
June 30,
Estimated ---------------------------
Life (Years) 2000 1999
------------ ------------ ------------
Land...................... $ 2,212,790 $ 2,512,715
Buildings and
improvements............ 3 - 39 29,503,530 27,294,496
Machinery and
equipment............... 3 - 10 31,074,388 29,306,600
Delivery equipment........ 3 - 7 14,945,474 14,193,014
Furniture and fixtures.... 3 - 5 6,016,280 5,313,068
------------ ------------
Total.................. 83,752,462 78,619,893
Less accumulated
depreciation........... (56,914,987) (52,707,461)
------------ ------------
Net.................... $ 26,837,475 $ 25,912,432
============ ============
5. BORROWINGS
The Company is obligated for $1,300,000 for Industrial Revenue Bonds at June
30, 2000 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, 2000, 1999 and 1998 of 4.14%, 3.70% and
4.06% 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, 2000.
6. INCOME TAXES
The total income tax provision for the years ended June 30, 2000, 1999 and
1998 was 36.1%, 36.4%, and 34.0%, respectively, of income before income
taxes. In 2000 and 1998 the effective rate was reduced by 0.7% and 2.2%,
respectively, for nontaxable life insurance proceeds of $405,000 and
$720,000.
Provision - comprised of the following:
2000 1999 1998
---------- ---------- ----------
Federal - current.......... $5,520,000 $6,115,000 $3,580,000
State - current............ 710,000 700,000 510,000
Deferred................... 500,000 (915,000) (165,000)
---------- ---------- ----------
Total................... $6,730,000 $5,900,000 $3,925,000
========== ========== ==========
Deferred income taxes - comprised of the following:
Asset (Liability)
------------------------------
June 30, 2000 June 30, 1999
------------- -------------
Asset allowances...................... $ 810,000 $ 910,000
Deferred compensation................. 1,400,000 1,130,000
Other accruals and allowances......... 2,330,000 2,355,000
Property, plant and
equipment........................... (1,340,000) (695,000)
------------- -------------
Total.............................. $ 3,200,000 $ 3,700,000
============= =============
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 2000 or 1999.
8. SHAREHOLDERS' EQUITY
The Company has authorized 60,000 shares of cumulative, $50 par value
preferred stock and 700,000 shares of undesignated, $1 par value
(subordinated) stock, none of which is outstanding.
9. 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, 2000, 543,300 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:
2000 1999 1998
----------- ----------- ----------
Net Income As reported $11,927,594 $10,316,586 $7,602,217
Pro forma 11,736,594 10,171,214 7,462,506
Earnings per share:
- Basic As reported $1.85 $1.52 $1.09
Pro forma $1.82 $1.50 $1.07
- Diluted As reported $1.82 $1.51 $1.08
Pro forma $1.79 $1.48 $1.06
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 2000, 1999 and 1998, respectively: dividend
yield of 3.9%, 4.5%, and 4.2%; expected volatility of 26.3%, 27.1%, and
26.3%; interest rates of 7.05%, 6.8%, and 6.8%; 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,
2000, 1999 and 1998 and the changes during the years ending on those dates is
shown on the next page.
13
Shares Price Range
------------ --------------
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
Granted............................... 98,500 13.25 - 13.59
Exercised............................. (42,872) 10.25 - 11.44
Cancelled............................. (2,650) 10.25 - 11.44
--------
June 30, 2000 Outstanding............. 612,245 $10.25 - 15.75
========
Significant option groups outstanding at June 30, 2000 and related
weighted-average exercise price and remaining life information follows:
Weighted-Average
--------------------------
Grant Options Exercise Remaining
Date Outstanding Price Life (Years)
---------------- ----------- ----------- -----------
July 6, 1993............... 74,360 14.875 0.9
July 28, 1994.............. 66,060 10.500 4.0
August 16, 1995............ 81,200 11.250 5.1
July 30, 1996.............. 85,350 10.250 6.0
November 7, 1997........... 80,825 11.438 7.3
November 2, 1998........... 95,950 10.500 8.3
November 2, 1999........... 93,500 13.250 9.3
All other.................. 35,000 13.163 6.2
-------
Total...................... 612,245
=======
10. PENSION AND RETIREMENT PLANS
The Company sponsors various defined contribution pension and retirement
plans which cover substantially all employees, other than employees covered
by multi-employer 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 $1,572,000 in 2000, $1,427,000 in 1999, and
$1,373,000 in 1998 including $363,000 in 2000, $330,000 in 1999, and $311,000
in 1998 for the Company's matching contribution to retirement savings plans.
The Company's cost for pension plans is determined as 2% - 6% 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 $1,449,000 in 2000,
$1,355,000 in 1999, and $1,184,000 in 1998.
The Company has an unfunded post retirement benefit plan with certain
officers. During the year the Company recorded a one time cost adjustment of
$474,161 due to a change from a fixed benefit obligation to a defined
contribution obligation. The plans require various annual contributions for
the participants based upon compensation levels and age. All participants are
fully vested. For the years ended 2000, 1999 and 1998, excluding the
aforementioned one-time cost, the benefit obligation was increased by
interest expense of $343,536, $247,228, and $244,690, service costs of
$256,785, $146,917 and $131,917, and decreased by payments of $363,000,
$386,000 and $380,000, respectively. At June 30, 2000 the benefit obligation
was $3,772,152.
11. 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 33 1/3% of the
stock received by the employee on the award date and the remaining shares
issued after one and two years. Under the plan 53,427, 45,158, and 35,459
shares were awarded, and the amounts charged to income were $646,000,
$598,000, and $406,000 in 2000, 1999, and 1998, respectively. At June 30,
2000, 214,213 shares were available for future grants.
12. COMMITMENTS AND CONTINGENCIES
Facility Leases - The Company leases certain facilities under various
operating leases. These leases require the company to pay operating costs,
including property taxes, insurance, and maintenance. Total lease expense
related to the various operating leases was approximately $630,000, $518,000
and $485,000 in years 2000, 1999, and 1998, respectively.
Expected future minimum commitments under operating leases as of June 30,
2000, were as follows:
Year Ended June 30:
2001 $ 669,000
2002 702,500
2003 649,600
2004 418,500
2005 309,000
Thereafter 1,834,500
----------
$4,583,100
==========
13. SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION
(UNAUDITED - in thousands of dollars, except per share amounts)
Quarters
-------------------------------------------------
1st 2nd 3rd 4th
---------- ---------- ---------- ----------
2000:
----
Net Sales............ $67,701 $70,404 $74,972 $73,783
Gross Margin......... 15,030 15,577 16,588 17,047
Net Income........... 2,365 3,589(1) 2,943 3,031
Earnings Per Share:
Basic.............. 0.36 0.55 0.46 0.48
Diluted............ 0.36 0.54 0.45 0.47
Dividends Per Share.. 0.13 0.13 0.13 0.13
* Market Price
High............... 14-5/8 14 14 14-1/8
Low................ 12-9/16 12-1/2 11-3/4 11-3/8
(1) Includes net gains of $790,000 on the sale of land and $405,000 from the
non-taxable proceeds of life insurance.
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
* Reflects the market price as quoted by the National Association of
Securities Dealers, Inc.
14
2000 FLEXSTEEL INDUSTRIES, INC. 2000
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, 2000, 1999 and 1998. Amounts presented are percentages of the
Company's net sales.
For the Years Ended June 30,
-----------------------------------------
2000 1999 1998
----------- ----------- ----------
Net Sale..................... 100.0% 100.0% 100.0%
Cost of goods sold........... (77.6) (77.1) (78.5)
----------- ----------- ----------
Gross margin................. 22.4 22.9 21.5
Selling, general &
administrative expenses... (16.7) (16.9) (17.3)
Gain on sale of land......... 0.5 0.0 0.0
----------- ----------- ----------
Operating income............. 6.2 6.0 4.2
Other income, net............ 0.3 0.3 0.7
----------- ----------- ----------
Income before income taxes... 6.5 6.3 4.9
Income tax expense........... (2.3) (2.3) (1.7)
----------- ----------- ----------
Net income................... 4.2% 4.0% 3.2%
=========== =========== ==========
FISCAL 2000 COMPARED TO FISCAL 1999
Net sales for 2000 increased by $26,341,000 or 10% compared to 1999.
Residential sales volume increased $22,591,000 or 15%. Vehicle seating sales
increased $6,420,000 or 7%. Commercial sales volume decreased $2,670,000 or 12%.
Gross margin increased $4,687,000 to $64,242,000, or 22.4% of sales, in 2000,
from $59,554,000, or 22.9% in 1999. Gross margin increased due to the increase
in net sales. Gross margin was adversely affected due primarily to start up
costs at new facilities and changes in product mix.
Selling, general and administrative expenses as a percentage of sales were
16.7% and 16.9% for 2000 and 1999 respectively. The amount of selling, general,
and administrative costs increased due to volume related expenses and additional
advertising costs.
During the second quarter of 2000 the Company sold land adjacent to its
Lancaster, Pennsylvania production facility at a gain of approximately
$1,250,000.
Net other income was $978,000 in 2000 and $819,000 for 1999. During the
second quarter of 2000 the Company realized a non-taxable gain on the proceeds
of life insurance of $405,000.
The effective tax rate in 2000 was 36.1% compared to 36.4% in 1999. The lower
effective income tax rate in 2000 is attributable to the non-taxable gain on the
proceeds of life insurance.
The above factors resulted in 2000 fiscal year net income of $11,928,000 or
$1.82 per diluted share compared to $10,317,000 or $1.51 per diluted share in
fiscal 1999, a net increase of $1,611,000 or $0.31 per share.
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.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at June 30, 2000, is $52,076,000 which includes cash, cash
equivalents and investments of $9,732,000. Working capital increased by
$1,866,000 from the June 30, 1999 amount.
Net cash provided by operating activities was $11,894,000, $14,376,000 and
$13,264,000 in 2000, 1999, and 1998, respectively. Fluctuations in net cash
provided by operating activities are primarily the result of changes in net
income and changes in accrued liabilities.
Capital expenditures were $6,718,000, $8,398,000 and $2,392,000 for 2000,
1999, and 1998, respectively. The current year expenditures were incurred
primarily for manufacturing and delivery equipment and the expansion of our
Riverside, California facility. Projected capital spending for fiscal 2001 is
$5,500,000. 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 $8,023,000, $7,677,000, and
$5,395,000 in 2,000, 1999, and 1998, respectively. During the current year the
Company's Board of Directors approved the repurchase of up to an additional
250,000 shares of the Company's common stock. The Company repurchased 385,445
shares of its outstanding common stock in 2000.
15
Under prior authority the Company repurchased 364,092 and 176,489 shares of its
outstanding common stock during 1999 and 1998, respectively. At June 30, 2000,
under existing authorizations, the Company may repurchase 205,378 shares.
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 $1,300,000 in the form of variable rate demand industrial
development revenue bonds. During fiscal 2000, the weighted-average interest
rate on the industrial development revenue bonds was 4.14%.
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]
Such traditional details as box pleats, welted cushions and rolled arms remain
popular. But this hospitable sectional still definitely mirrors today's tastes.
Other selections shown by Flexsteel include the matching upholstered chair, the
table, and the Charisma(R) chair.
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
J.E. Gilbertson, General Manager
Flexsteel Industries, Inc.
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
Elkhart Division
ELKHART, INDIANA 46515
(219) 262-4675
D. L. Dygert, General Manager
Portland Division
DUNKIRK,INDIANA 47336
(765) 768-1384
D. L. Dygert, General Manager
Vancouver Distribution Center
VANCOUVER, WASHINGTON 98668
(206) 696-9955
T. D. Burkart, General Manager
* Executive Offices
PERMANENT SHOWROOMS
Dubuque, Iowa
High Point, North Carolina
San Francisco, California
- -------------------------------
VISIT US ON THE INTERNET
http://flexsteel.com
- -------------------------------
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
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.
[LOGO] FLEXSTEEL (R)
AMERICA'S SEATING SPECIALIST
(C)2000 FLEXSTEELINDUSTRIES, INC.
[PHOTO]
For luxury and comfort to go, the Fleetwood motor home is the choice of many
travelers, from the vacationer to the "permanent RV'er." These beautiful
coaches, like the Fleetwood Discovery shown above, provide a home-like
atmosphere. Sofas and recliners by Flexsteel provide the definitive touch of
at-home comfort.
Flexsteel's long leadership in the recreational vehicle field results from a
combination of expertise. Not only do we have a long history in metal
fabrication and upholstery, but we daily demonstrate our ability to design and
deliver handsome custom products. The name Flexsteel helps sell recreational
vehicles.
________________________________________________________________________________
[LOGO]
FLEXSTEEL (R) BULKRATE
AMERICA'S SEATING SPECIALIST U.S. Postage
- ------------------------------------ PAID
P.O. BOX 877 * DUBUQUE IA 52004-0877 Permit # 10
Dubuque, IA