SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FLEXSTEEL INDUSTRIES, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to exchange Act Rule 0-11:1
(4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
- --------------------------------------------------------------------------------
FLEXSTEEL INDUSTRIES, INC.
P.O. BOX 877
DUBUQUE, IOWA 52004-0877
Date: October 25, 1995
Office of the Chairman of the Board
Dear Stockholder:
You are cordially invited to attend the Annual Stockholders' Meeting on
Tuesday, December 5, 1995, at 3:30 p.m. We sincerely want you to come, and we
welcome this opportunity to meet with those of you who find it convenient to
attend.
Time will be provided for stockholder questions regarding the affairs of the
Company and for discussion of the business to be considered at the meeting as
explained in the notice and proxy statement which follow. Directors and other
Company executives expect to be available to talk individually with
stockholders after the meeting. No admission tickets or other credentials are
currently required for attendance at the meeting.
The formal notice of the meeting and proxy statement follow. I hope that
after reading them you will sign and mail the proxy card, whether you plan to
attend in person or not, to assure that your shares will be represented.
Sincerely,
/s/ J.B. Crahan
J.B. Crahan
Chairman of the Board
RECORD DATE: October 16, 1995
DATE OF MEETING: December 5, 1995
TIME: 3:30 p.m.
PLACE: The Minneapolis Hilton and Towers
1001 Marquette Avenue, Third Floor
Minneapolis, Minnesota 55403
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 5, 1995
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Flexsteel Industries, Inc. will be held
at The Minneapolis Hilton and Towers, 1001 Marquette Avenue, Third Floor,
Minneapolis, MN 55403, on Tuesday, December 5, 1995, at 3:30 p.m. for the
following purposes:
1. To elect three (3) Class III Directors to serve until the 1998 Annual
Meeting and until their successors have been elected and qualified or until
their earlier resignation, removal or termination (Proposal I).
2. To consider and act upon a proposal to approve the 1995 Stock Option Plan
(Proposal II).
3. To ratify or reject the appointment by the Board of Directors of Deloitte
& Touche LLP as independent auditors for the fiscal year ending June 30, 1996
(Proposal III).
4. To transact such other business as may properly come before the meeting or
any adjournment thereof.
October 16, 1995 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 25, 1995
PLEASE SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY
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 December 5, 1995, 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 Frank H. Bertsch, J.B. Crahan, and Edward
J. Monaghan as Class III Directors (Proposal I), FOR approval of the 1995
Stock Option Plan (Proposal II) and FOR ratification of the appointment of
Deloitte & Touche LLP (Proposal III). Each of the above named nominees has
previously been elected by the shareholders.
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 25, 1995.
As of the close of business on October 16, 1995, the record date for
determining stockholders entitled to notice and to vote at the meeting, the
Company had outstanding 7,210,748 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.
Shareholder votes will be counted by Inspectors of Election who will be
present at the shareholder meeting. The affirmative vote of a majority of the
shares of stock represented at the meeting shall be the act of the
shareholders 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 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 terms of the Class III Directors expire at the time of the 1995 Annual
Meeting. The Board of Directors of the Company has nominated Frank H.
Bertsch, J.B. Crahan, and Edward J. Monaghan for re-election as Class III
Directors of the Company. Each Director, if elected, will serve a three (3)
year term expiring at the time of the 1998 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.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND OTHER
DIRECTOR DIRECTORSHIPS OR EMPLOYMENT
NOMINEE'S NAME AGE SINCE DURING THE LAST FIVE YEARS
<S> <C> <C> <C>
NOMINEES FOR ELECTION FOR A TERM OF THREE YEARS EXPIRING 1998
ANNUAL MEETING, CLASS III
Frank H. Bertsch(1)(4) 69 1948 Chairman of the Executive Committee, Flexsteel Industries, Inc., 1990
to present; Director Northwestern Mutual Life Insurance Co.; Director
American Trust & Savings Bank, Dubuque, Iowa; Trustee University of
Dubuque; Director Cycare Systems (medical systems).
J.B. Crahan(1) 71 1949 Chairman of the Board, Flexsteel Industries, Inc., 1990 to present;
Chief Executive Officer, 1990 to 1993; Director Dubuque Bank & Trust
Co.; Trustee U.I.U. Pension Trust Fund.
Edward J. Monaghan(1) 56 1987 Chief Operating Officer and Executive Vice President, 1993 to
present; Executive Vice President, Flexsteel Industries, Inc., 1988
to 1993.
DIRECTORS WHOSE TERMS EXPIRE 1997 ANNUAL MEETING, CLASS II
Art D. Richardson(2)(4) 78 1951 Retired Senior Vice President, Flexsteel Industries, Inc. (retired
1982).
James G. Peterson(2)(3)(4) 75 1970 Retired self-employed Financial and Business Consultant and
Investment Advisor, James G. Peterson Associates.
James R. Richardson(1) 51 1990 Senior Vice President Marketing, 1994 to Present. Vice President
Marketing, Flexsteel Industries, Inc., 1979 to 1994.
DIRECTORS WHOSE TERMS EXPIRE 1996 ANNUAL MEETING, CLASS I
K. Bruce Lauritsen(1) 52 1987 Chief Executive Officer and President, Flexsteel Industries, Inc.,
1993 to present; President and Chief Operating Officer, Flexsteel
Industries, Inc., 1990 to 1993; Director, Hawkeye Bank of Dubuque;
Regent, Loras College.
Thomas E. Holloran(2)(3) 66 1971 Professor Graduate School of Business, University of St. Thomas, St.
Paul; Director ADC Telecommunications, Inc., Director MTS Systems
Corporation (mfr. testing systems); Director Medtronic, Inc.;
Chairman, Bush Foundation; Director National City Bancorporation.
L. Bruce Boylen(3)(4) 63 1993 Retired Vice President, Fleetwood Enterprises, Inc. (retired 1991)
(mfr. of recreational vehicles and manufactured homes).
John R. Easter(2)(3)(4) 66 1993 Retired Vice President, Sears-Roebuck Company (retired 1989);
Director, Mutual Trust Life Insurance Co.
</TABLE>
(1) Member of Executive Committee
(2) Member of Audit and Ethics Committee
(3) Member of Nominating and Compensation Committee
(4) Member of Marketing Committee
CERTAIN INFORMATION CONCERNING BOARD
AND OUTSIDE DIRECTOR'S COMPENSATION
During the fiscal year ended June 30, 1995, five 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 $8,000 per year. In addition, each is paid a fee of $2,000 for each
Board meeting each attends. The Chairman of the Board is paid a retainer of
$12,380 per year and a fee of $3,095 for each Board meeting attended. For
attending a committee meeting each is paid a fee of $900. The Chairman of
each Committee is paid $1,000 for each meeting attended. The Company pays no
additional remuneration to employees of the Company who are Directors.
Each duly elected 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 grant for 2,000 shares.
The Company has entered into an unfunded deferred compensation agreement with
John R. Easter, whereby, director fees are invested by the Company in mutual
funds. Payments to Mr. Easter are deferred until his 70th birthday, except
for special circumstances.
The Company has entered into an agreement with James G. Peterson and Thomas
E. Holloran pursuant to which the Company will pay to each, or his
beneficiaries, $20,000 after the person ceases to be a Director as additional
compensation in recognition of Director services rendered.
During the fiscal year ending June 30, 1995, L. Bruce Boylen performed
consulting services for the Company. Mr. Boylen was paid $6,400 for his
services.
COMMITTEES OF THE BOARD
The Board of Directors has established four standing committees; the names of
the committees and the principal duties are as follows:
Audit and Ethics 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, 1995. The Committee members
are Thomas E. Holloran, John R. Easter, James G. Peterson, and Art D.
Richardson.
Executive Committee:
Exercises all powers and authority of the Board between Board meetings,
except those powers specifically reserved to the Board by law, the Charter or
by the Bylaws of the Company. The committee held one meeting during the
fiscal year ended June 30, 1995. The Committee members are Frank H. Bertsch,
J. B. Crahan, K. Bruce Lauritsen, Edward J. Monaghan, and James R.
Richardson.
Nominating and Compensation Committee:
Makes recommendations regarding Board compensation, reviews performance and
compensation of various senior 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 shareholders. Nominations by shareholders
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. The
Committee held four meetings during the fiscal year ended June 30, 1995. The
Committee members are L. Bruce Boylen, John R. Easter, Thomas E. Holloran,
and James G. Peterson.
Marketing 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, 1995. The Committee members are John R. Easter, Frank H.
Bertsch, L. Bruce Boylen, James G. Peterson and Art D. Richardson.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITS NOMINEES. PROXIES SOLICITED
BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY
OTHERWISE IN THEIR PROXIES
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 and the
other four most highly compensated executive officers and by all directors
and executive officers as a group. 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.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED AS OF PERCENT OF TOTAL SHARES
AUGUST 7, 1995 OUTSTANDING AS OF
NAME TITLE (1) (2) AUGUST 7, 1995
<S> <C> <C> <C>
F.H. Bertsch Chairman of the Executive 89,714 (3) 1.2%
Committee, Director
L.B. Boylen Director 4,000 0.1%
J.B. Crahan Chairman of the Board of Directors 425,610 5.9%
J.R. Easter Director 4,000 0.1%
T.E. Holloran Director 9,680 0.1%
K.B. Lauritsen President, Chief Executive Officer, Director 91,299 1.3%
E.J. Monaghan Executive Vice President, 97,177 1.3%
Chief Operating Officer, Director
J.G. Peterson Director 10,000 0.1%
A.D. Richardson Director 291,906 4.0%
J.R. Richardson Senior Vice President -- Marketing, Director 168,235 2.3%
R.J. Klosterman Vice President -- Finance, 28,725 0.4%
Chief Financial Officer and Secretary
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (11) 1,220,346 16.9%
</TABLE>
(1) Includes 121,530 shares, which directors and executive officers as a
group have the right to acquire pursuant to stock options within 60 days. Mr.
Bertsch and Mr. Crahan have no stock options.
(2) Includes shares owned beneficially by their respective spouses.
(3) Does not include 295,458 shares held in irrevocable trusts for the
benefit of Frank H. Bertsch's children and grandchildren for which trusts
American Trust & Savings Bank serves as trustee. Also, does not include
140,511 shares held in the trust established by the Will of Eleanor E.
Bertsch for the children of Frank H. Bertsch and his sister. Under the Terms
of Trust, Frank H. Bertsch has a possible contingent interest. The American
Trust & Savings Bank is the sole trustee. Frank H. Bertsch disclaims
beneficial ownership in the shares held by each such trust.
F.H. Bertsch and J.B. Crahan are first cousins. J.R. Richardson is the son of
A.D. Richardson.
OWNERSHIP OF STOCK BY
CERTAIN BENEFICIAL OWNERS
AS OF AUGUST 7, 1995
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.
<TABLE>
<CAPTION>
AMOUNT PERCENT
BENEFICIALLY OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) CLASS
<S> <C> <C> <C>
Common J.B. Crahan, P.O. 877, Dubuque, Iowa 52004 425,610 5.9%
Common Quest Advisory Corp., 1414 Avenue of the
Americas, New York, New York 10019 578,000 8.0%
Common First Pacific Advisors Incorporated, 11400 West
Olympic Boulevard, Los Angeles, CA 90064 387,500 5.4%
Common Mitchell, Hutchins Int. Inv., 1285 Avenue of the
Americas, New York, New York 10019 691,035 9.6%
</TABLE>
(1) No Beneficial owner named above has the right to acquire beneficial
ownership in additional shares to the best knowledge of the Company.
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, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
K. Bruce Lauritsen 1995 216,600 42,143 9,520 19,305 26,406
President & 1994 186,600 46,168 9,520 21,427 31,295
Chief Executive Officer 1993 164,100 29,026 15,066 28,385
Edward J. Monaghan 1995 201,000 35,978 9,520 17,685 36,229
Executive Vice President & 1994 180,000 40,503 9,520 18,725 40,715
Chief Operating Officer 1993 161,100 28,493 14,787 35,893
James R. Richardson 1995 173,700 31,089 9,520 15,278 22,974
Senior Vice President of 1994 155,400 34,966 9,520 16,163 25,646
Marketing 1993 138,000 24,401 12,679 23,029
Frank H. Bertsch 1995 140,034 20,000 18,540 9,557
Chairman of the Executive 1994 131,610 25,000 18,590 13,319
Committee 1993 126,600 60,000 18,415 9,906
Ronald J. Klosterman* 1995 103,500 18,526 5,000 9,105 7,919
Vice President of 1994 92,700 17,501 4,200 4,410 6,878
Finance & Secretary 1993 85,800 11,569 3,146 5,680
M. O. Becker* 1995 126,728 9,520 9,698
Senior Vice President of 1994 153,900 34,630 9,520 16,009 12,054
Finance & Secretary 1993 138,000 18,061 12,679 10,155
</TABLE>
* Mr. M.O. Becker retired from the office of Senior Vice President of Finance
and Secretary March 31, 1995 and Mr. Ronald. J. Klosterman was appointed to
the office of Vice President of Finance and Secretary effective April 1,
1995.
(1) Other Annual Comp -- During 1995, Frank H. Bertsch received $17,640 as an
automobile allowance.
(2) 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, (iii) premiums paid
on term life insurance with a face value greater than $50,000 and (iv)
accruals made in accordance with the Company's Senior Officer Deferred
Compensation Plan. All of the named executive officers, except for Mr.
Klosterman, are participants of the Senior Officer Deferred Compensation
Plan, entitling each thereunder upon retirement or other limited
circumstances to $5,000 per month during their lives.
<TABLE>
<CAPTION>
RETIREMENT 401K INSURANCE DEFERRED
NAME YEAR PLAN MATCH PREMIUM COMP
<S> <C> <C> <C> <C> <C>
K. Bruce Lauritsen 1995 8,293 1,329 0 16,784
1994 12,430 2,081 253 16,784
1993 9,960 1,641 253 16,784
Edward J. Monaghan 1995 8,293 1,500 0 26,436
1994 12,268 2,011 132 26,436
1993 10,546 1,611 132 26,436
James R. Richardson 1995 8,091 1,500 63 13,320
1994 10,591 1,735 84 13,320
1993 8,339 1,380 174 13,320
Frank H. Bertsch 1995 7,990 1,567 0 0
1994 11,403 1,916 0 0
1993 7,830 1,266 0 0
Ronald J. Klosterman 1995 6,607 1,189 123 0
1994 5,711 1,027 140 0
1993 4,658 858 164 0
M. O. Becker 1995 8,165 1,533 0 0
1994 10,334 1,720 0 0
1993 8,775 1,380 0 0
</TABLE>
STOCK OPTIONS/SAR*
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR
OPTION TERM (1)
EXERCISE
NAME SHARES PRICE ($/SH) EXPIRE DATE 5% 10%
<S> <C> <C> <C> <C> <C>
K. Bruce Lauritsen 9,520 $10.50 7/28/04 $62,864 $159,310
Edward J. Monaghan 9,520 $10.50 7/28/04 $62,864 $159,310
James R. Richardson 9,520 $10.50 7/28/04 $62,864 $159,310
Frank H. Bertsch 0 0
Ronald J. Klosterman 5,000 $10.50 7/28/04 $33,017 $ 88,672
M. O. Becker 8,000 $10.50 7/28/04 $52,827 $133,874
</TABLE>
(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.
* The Company does not have a stock appreciation rights plan (SAR).
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
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
YEAR END FY-END 1995 (1)
# OF SHARES
ACQUIRED ON $ VALUE # $
NAME EXERCISE REALIZED EXERCISABLE EXERCISABLE
<S> <C> <C> <C> <C>
K. Bruce Lauritsen 7,000 $3,500 28,560 $0
Edward J. Monaghan 0 28,560 $0
James R. Richardson 9,000 $4,500 28,560 $0
Frank H. Bertsch 0 0 $0
Ronald J. Klosterman 0 12,850 $0
M.O. Becker 0 24,540 $0
</TABLE>
(1) Based on the closing price as published in The Wall Street Journal for
the last business day of the fiscal year ($10.25). All options are
exercisable at time of grant.
LONG TERM INCENTIVE PLAN AWARDS TABLE
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE OR
NUMBER OTHER PERIOD
OF UNTIL ESTIMATED FUTURE
SHARES, UNITS MATURATION OR PAYOUTS UNDER
OR OTHER PAYOUT NON-STOCK PRICE BASED
NAME RIGHTS (1) PLANS (2)
<S> <C> <C> <C>
K. Bruce Lauritsen 2,574
Edward J. Monaghan 2,259
James R. Richardson 1,953
Frank H. Bertsch 0
Ronald J. Klosterman 1,163
M. O. Becker 0
</TABLE>
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. Frank H. Bertsch is not a participant of the plan.
(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 7, 1995 (award date) are as follows: K. Bruce
Lauritsen -- 2,736 shares, $30,780; Edward J. Monaghan -- 2,402 shares,
$27,023; James R. Richardson -- 2,071 shares, $23,299; Ronald J. Klosterman
- -- 986 shares, $11,093. 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 shareholder 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
shareholders 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.
* 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 shareholder 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. In 1994, the Committee also completed an
in-depth analysis of salary, annual bonus, and long-term incentive
opportunities among specific competitors, as assisted by an independent
compensation consulting firm. All of the surveyed companies are included in
the Household Furniture Index used as the peer group for purposes of the
performance graph. While the pay of an individual executive may vary, the
Company's Policy is to target aggregate compensation for executives at
average competitive levels, provided commensurate performance.
COMPONENTS OF EXECUTIVE COMPENSATION -- The principal components of
Flexsteel's executive compensation program include base salaries, annual cash
bonuses, and longer-term incentives using Company stock.
BASE SALARY -- An individual executive's base salary is based upon the
executive's level of responsibility 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 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 shareholders 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 shareholder 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 executives
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 shareholder 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 1995 was established in accordance with the
policies discussed above. As reported in the Summary Compensation Table, Mr.
Lauritsen's base salary increased by 16% which in large part reflects his
responsibility as CEO for the entire year. Mr. Lauritsen's increase also
reflected market movements in executive salaries. His annual bonus and
long-term incentive award were based on the Company's return on equity, which
was based on established target levels. 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.
This report has been prepared by members of the Nominating and Compensation
Committee of the Board of Directors. Members of this Committee are:
L. Bruce Boylen John R. Easter
Thomas E. Holloran James G. Peterson
*NOTE: This report is not incorporated by reference in any prior or future
Securities Exchange Act filings, directly or by reference to the
incorporation of proxy statements of the Company, unless such filing
specifically incorporates this report.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The current members of Flexsteel's Nominating and Compensation Committee are
L. Bruce Boylen, John R. Easter, Thomas E. Holloran and James G. Peterson. No
executive officer of Flexsteel served as a director of another entity that
had an executive officer serving on Flexsteel's compensation committee. No
executive officer of Flexsteel served as a member of the compensation
committee of another entity which had an executive officer who served as a
director of Flexsteel.
SHARE INVESTMENT PERFORMANCE
The following graph is based upon the SIC Code #251 Household Furniture Index
as a peer group. It shows changes over the past five-year period in the value
of $100 invested in: (1) Flexsteel's Common Stock; (2) the NASDAQ Market
Index; and (3) an industry group of the following: Ameriwood Industries Int.
CP., Bassett Furniture Ind., Bush Ind. Inc. CL A, Chromcraft Revington Inc.,
DMI Furniture, Inc., Ethan Allen Interiors, Flexsteel Ind. Inc., Industrie
Natuzzi S.P.A., Interco, Krause's Furniture, Inc., La-Z-Boy Chair Co., Ladd
Furniture Inc., Leggett & Platt Inc., Masco CP, O'Sullivan Ind. Hldgs Inc.,
Pulaski Furniture CP, River Oaks Furniture Inc., Rowe Furniture CP, Stanley
Furniture Inc., Wellington Hall Ltd. This data was furnished by Media General
Financial Services. The graph assumes reinvestment of dividends.
[GRAPH]
FIVE-YEAR CUMULATIVE TOTAL RETURNS
VALUE OF $100 INVESTED ON JUNE 30, 1990
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
Flexsteel 100 83.66 106.63 138.72 127.89 99.43
Furniture Household 100 99.06 117.50 151.38 152.57 156.28
NASDAQ 100 94.22 101.52 124.62 136.66 160.27
</TABLE>
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.
Northwestern Mutual Life Insurance Company is the insurer of the majority of
the life insurance carried by the Company on its officers. This insurance was
competitively purchased over the past several years. Frank H. Bertsch is
presently a Director of Northwestern Mutual Life Insurance Company.
PROPOSAL II
PROPOSAL FOR 1995 STOCK OPTION PLAN
The Compensation Committee, recognizing that insufficient shares are
available to provide further grants of stock options under the existing
Company plan, advised the Board of Directors that it is in the interest of
the Company to continue its longstanding practice of making stock options
available to those employees responsible for significant contributions to the
Company's business. The Compensation Committee believes that the equity stake
in the growth and success of the Company afforded by stock options provides
such key employees with an incentive to continue to energetically apply their
talents within the Company. Accordingly, on June 1, 1995, the Board of
Directors, acting on the recommendation of the Compensation Committee,
unanimously approved the 1995 Stock Option Plan (the "Plan") and directed
that it be submitted for consideration and action at the meeting of
shareholders.
The following is a brief but not comprehensive summary of the proposed 1995
Stock Option Plan which continues a practice that began at the Company in
1969. The complete text is attached as Appendix A and reference is made to
such Appendix for a complete statement of the provisions of the Plan. The
Plan provides for the granting of options to purchase up to 400,000 shares of
the Company's Common Stock, to be drawn from authorized but unissued shares
and/or from shares acquired by the Company, including on the open market. The
number and kind of shares subject to the Plan would be appropriately adjusted
in the event of any change in the capital structure of the Company.
Stockholders would have no preemptive rights with regard to shares allotted
to the Plan. The Plan would be administered by the Company's Compensation
Committee which is composed of two or more directors who are not employees of
the Company. Each member of the Compensation Committee must be a
"disinterested person" within the meaning of Rule 16b-3 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended from
time to time. No member of the Compensation Committee is eligible to receive
options under the Plan except automatic formula grants as a director.
Participants would be selected by the Compensation Committee from among key
employees of the Company. Optionees would be selected on the basis of
demonstrated ability to contribute substantially to the effective management
of the Company. The Compensation Committee would determine both the number of
optionees and the number of shares to be optioned to any individual under the
Plan. The Board of Directors would be able to amend the Plan without further
approval by the Stockholders, except insofar as such approval is required by
law.
Under the 1995 Plan, nonstatutory stock options are automatically granted to
non-employee directors of the Company. Each person who is a non-employee
director is granted a nonstatutory 1,000 share option the day after the
annual meeting of shareholders of the Company, at an exercise price equal to
the fair market value (as defined in the 1995 Plan) of the Common Stock on
the date of the grant. The option is immediately vested.
The Plan would enable the Company to grant either "non-qualified options" or
"incentive stock options." No options could be granted under the Plan later
than December 1, 2005. Options could have an exercise period of up to ten
years as determined by the Committee.
In the event of termination of employment due to death, disability or
retirement, the period of time for exercise is one year. The options would
not be transferable, except in the event of death.
The exercise price per share for each option would be not less than the fair
market value on the date of grant. It is provided that payment for the
exercise may be made in stock or cash.
The aggregate fair market value (determined as of the time such option is
granted) of the Common Stock for which any employee may have incentive stock
options vest in any calendar year may not exceed $100,000.
Proceeds received from optioned shares will be used for general corporate
purposes.
Under currently applicable provisions of the Internal Revenue Code of 1986,
an optionee will not be deemed to receive any income for Federal tax purposes
upon the grant of an option under the Plan, nor will the Company be entitled
to a tax deduction at that time. However, upon the exercise of an option the
tax consequences are as follows:
1. Upon the exercise of a non-qualified option, the optionee will be
deemed to have received ordinary income in an amount equal to the
difference between the option price and the market price of the shares on
the exercise date. The Company will be allowed an income tax deduction
equal to the excess of market value of the shares on the date of exercise
over the cost of such shares to the optionee.
2. Upon the exercise of an incentive stock option, there is no income
recognized by the optionee at the time of exercise. If the stock is held
at least one year following the exercise date and at least two years from
the date of grant of the option, the optionee will realize a long-term
capital gain or loss upon sale, measured as the difference between the
option exercise price and the sale price. If either of these holding
period requirements are not satisfied, ordinary income tax treatment will
apply to the amount of gain at sale or exercise, whichever is less. No
income tax deduction will be allowed the Company with respect to shares
purchased by an optionee upon the exercise of an incentive stock option,
provided such shares are held for the required periods as described above.
There is no current charge against the Company in connection with the grant
of an option or the exercise of an option for cash. The exercise of an option
for stock may result in a charge against income.
Under the Internal Revenue Code, an option will generally be disqualified
from receiving incentive stock option treatment if it is exercised more than
three months following termination of employment. However, if the optionee is
disabled, such statutory treatment is available for one year following
termination. If the optionee dies while employed by the Company or within
three months thereafter, the statutory time limit is waived altogether. In no
event do these statutory provisions extend the rights to exercise an option
beyond those provided by its terms.
The closing price of the Common Stock of the Company on October 16, 1995,
based on composite trading data published in the Wall Street Journal, was
$11.25 per share.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock present and entitled to vote at the Meeting will be required
for approval of the 1995 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE 1995
STOCK OPTION PLAN. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO
VOTED UNLESS SHAREHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES.
PROPOSAL III
APPOINTMENT OF INDEPENDENT AUDITORS
Subject to ratification by the stockholders, the Board of Directors has
appointed Deloitte & Touche LLP as independent certified public accountants
to examine the financial statements of the Company for the fiscal year ending
June 30, 1996. Deloitte & Touche LLP has performed this function for the
Company since 1965.
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 past with the Company in any capacity other
than as independent auditors. It is not expected that a representative of
Deloitte & Touche LLP will be present at the meeting.
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 and Ethics
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 SHAREHOLDERS 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 1996 annual meeting must submit the
proposal in writing and direct it to the Secretary of the Company at the
address shown herein. It must be received by the Company no later than June
28, 1996.
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 filing by
directors and executive officers during 1995.
OTHER MATTERS
The percentage total number of the outstanding shares represented at each of
the last three years shareholders' meetings was as follows: 1992 -- 85.4%;
1993 -- 91.0%; 1994 -- 89.0%.
The financial statements of the Company contained in the Annual Report to
Shareholders for the year ended June 30, 1995, are incorporated herein by
reference. Specifically incorporated herein by reference from the 1995 Annual
Report to Shareholders, is the Independent Auditors' Report, Management's
Discussion and Analysis of Financial Condition and Results of Operations and
Selected Quarterly Financial Data.
UPON WRITTEN REQUEST THE COMPANY WILL PROVIDE, WITHOUT CHARGE, A COPY OF ITS
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30, 1995. REQUESTS SHOULD
BE DIRECTED TO THE SECRETARY OF THE COMPANY AT P.O. BOX 877, DUBUQUE, IOWA
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 25, 1995
Dubuque, Iowa
APPENDIX A
FLEXSTEEL INDUSTRIES, INC.
1995 STOCK OPTION PLAN
SECTION 1
Definitions: As used herein, the following terms have the meaning indicated:
"Agreement" means the Stock Option Agreement entered into between the Company
and an Optionee.
"Board of Directors" means the Board of Directors of the Company.
"Committee" means the members of the Board of Directors appointed to
administer the Plan.
"Company" means Flexsteel Industries, Inc.
"Date of Adoption" means December 5, 1995.
"Date Plan Approved by Shareholders" means December 5, 1995.
"Option" means an Optionee's right to purchase shares of Common Stock of the
Company, subject to the terms and conditions of the Plan and Agreement.
Options are either Incentive Stock Options or Nonqualified Stock Options.
"Optionee" means an eligible employee who has been designated for
participation under the Plan as defined in Section 5(a) or a non-employee
director granted options pursuant to Section 5(e).
"Option Period" means the ten-year or lesser period of time during which the
Stock Option Agreement allows the Option to be exercised commencing with the
Date the Option is Granted. No Option shall be granted after December 1,
2005.
"Non-employee director" means a director of the Company who has not been an
employee of the Company for three years.
"Plan" means the Company's 1995 Stock Option Plan. Its name is Flexsteel
Industries, Inc. 1995 Stock Option Plan.
SECTION 2
AGGREGATE SHARES UNDER THE PLAN AND PURPOSE:
(a) The aggregate number of shares which may be issued pursuant to this Plan
under Options is 400,000 Common Shares of the Company, subject to adjustments
provided for hereafter in Section 4(b).
(b) The purpose of this Plan is to encourage the growth and success of the
Company by providing incentives to motivate, attract and retain employees of
competent training, experience and ability to encourage such people to invest
in the Common Stock of the Company, thereby increasing their proprietary
interest in the business and their personal interest in the Company's
continued success and progress. The purpose also is to attract and retain
outstanding non-employee directors by enabling them to participate in company
growth through automatic non-discretionary grants of options.
(c) The Plan shall be deemed to have been adopted December 5, 1995, subject
to the ratification and approval by shareholders of the Company at the
December 5, 1995 Annual Meeting. Options may be granted after the Plan is
adopted and before the Plan is approved by shareholders but the Company shall
have no obligations of any nature whatsoever to any employee or other person
arising out of either this Plan or any Options granted hereunder unless
shareholder approval is obtained.
(d) The Plan will not confer upon any Optionee any right with respect to
continuance of employment by the Company, nor a continuing directorship, nor
will it interfere in any way with the Company's right to terminate the
Optionee's employment at any time with or without cause.
(e) No Option shall be granted pursuant the Plan after December 1, 2005.
(f) The Committee, in its discretion, shall set the length of the time during
which each Option may be exercised, except for non-employee director grants,
but in no event shall it be longer than ten years after the Date of Grant.
SECTION 3
ADMINISTRATION:
(a) Subject to such orders and resolutions not inconsistent with the
provisions of the Plan as may from time to time be issued or adopted by the
Board, the Plan shall be administered by, or only in accordance with the
recommendation of, a Committee of two or more persons having full authority
to act in the matter, all of the members of which Committee are disinterested
persons within the meaning of Rule 16b-3 of the Securities Exchange Act of
1934, as amended.
1. The Committee shall administer the Plan and accordingly, it shall
have full power to grant stock options, construe and interpret the Plan,
amend and adjust terms of then existing options subject to restrictions of
this Plan, establish rules and regulations and perform all other acts,
including the delegation of administrative responsibilities, it believes
reasonable and proper.
2. The determination of those eligible to receive stock options, and
the amount, type and timing of each stock option and the terms and
conditions of the respective stock option agreements shall rest in the
sole discretion of the Committee, subject to the provisions of the Plan.
3. The Committee may cancel any stock options awarded under the Plan
if an Optionee conducts himself in a manner which the Committee determines
to be inimical to the best interests of the Company and/or accepts
employment with a competitor. This provision does not apply to
non-employee director options.
4. The Board, or the Committee, may correct any defect, supply any
omission or reconcile any inconsistency in the Plan, or in any granted
stock option, in the manner and to the extent it shall deem necessary to
carry it into effect.
None of the Committee members are eligible to receive Options under the Plan
while a member of the Committee except pursuant to Section 5(e).
(b) All determinations by the Committee shall be made by the affirmative vote
of a majority of its members by written consent or by a majority vote, in
person or otherwise, of its members at a meeting called for that purpose.
(c) Each Option shall be evidenced by an Agreement which shall contain the
terms and conditions and shall be signed by an Officer of the Company and the
Optionee. As a minimum, the Agreement shall state the number of shares of
stock under Option, the Option Price and the Duration of the Option.
(d) All decisions made by the Committee pursuant to provisions of the Plan or
related orders or resolutions of the Board shall be final, conclusive and
binding on all parties, including the Company, shareholders, employees and
Optionees.
SECTION 4
SHARES SUBJECT TO THE PLAN:
(a) Shares to be delivered upon exercise of an Option under the Plan shall be
made available at the discretion of the Board of Directors either from
authorized but unissued shares of the Company's Common Stock or shares
acquired by the Company, including shares purchased in the open market.
(b) In the event of merger, reorganization, consolidation, recapitalization,
stock dividend, stock split, or other change in corporation structure
affecting the Company's Common Stock the number of shares of Common Stock
available for Options and subject to outstanding stock options shall be
adjusted proportionately. Similarly, the Option Price per share of
outstanding stock options shall be appropriately adjusted. However,
fractional shares may be rounded to the nearest whole share.
SECTION 5
ELIGIBILITY AND PARTICIPATION:
(a) The persons eligible for participation in the Plan shall be full-time
managerial, administrative or professional employees of the Company,
non-employee directors and those other employees who are key to the
corporation's success. This includes officers, whether or not Directors of
the Company. Participation in the Plan shall not be automatic except for
non-employee directors who shall be granted options in amounts and pursuant
to the terms only as provided by Section 5(e) herein and not otherwise.
(b) Subject to the limitations of the Plan, the Committee shall select the
persons to participate in the Plan, determine the number and option price of
shares subject to each Option, and determine the date when each Option shall
be granted and the date when each Option shall expire. The Date the employee
becomes an Optionee is the date of his Agreement with the Company. More than
one Option may be granted to the same Optionee and an Optionee may enter into
more than one Agreement with the Company.
(c) No Incentive Stock Option shall be granted to anyone who, immediately
after such Option would otherwise be granted, would own stock representing
more than ten percent (10%) of the total combined voting power of all classes
of stock of the Company.
(d) An Option granted to an Optionee under this Plan shall in all events
lapse upon expiration of the Option Period, if not exercised, lapsed,
canceled or otherwise terminated prior thereto. If an Option granted
hereunder is not exercised but is canceled, terminated or lapsed, the shares
covered by such Option shall become again available for grant by the
Committee under this Plan.
(e) Each person who becomes for the first time a non-employee member of the
Board, including by reason of election, appointment or lapse of three (3)
years since employment by the Company (whether or not that person is standing
for re-election that year), will receive an immediate one-time grant for
2,000 shares. Each duly elected non-employee director will receive a grant
for 1,000 shares on the first business day following each annual meeting. The
following terms and conditions are applicable to each option. The option
price per share will be equal to one hundred percent (100%) of the fair
market value on the date of grant. The options will have terms of ten years
measured from the date of grant. In the event the optionee ceases to serve as
a director the option may be exercised for a period of ninety days after the
date of cessation or if by reason of disability or death twelve months. In
the case of death the option may be exercised within such period by the
estate or heirs of the optionee.
SECTION 6
TERM OF THE PLAN AND OPTION PERIOD:
(a) The Plan shall automatically terminate on December 1, 2005, which is
within ten years from the Date of the Adoption. No Options shall be granted
after the date of such termination. However, the Plan shall remain in effect
as to all outstanding Options until the outstanding Options are exercised,
canceled, terminated or lapsed.
(b) Such termination shall not adversely affect Options previously granted.
(c) Subject to the provisions of the Plan with respect to death, disability,
retirement, termination of employment, or otherwise, the maximum period
during which each Option shall be exercised shall be fixed by the Committee,
except for non-employee directors, at the time each such Option is granted,
but in no event shall it exceed ten years from the date of such grant.
SECTION 7
The Committee may grant either Incentive Stock Options or Nonqualified Stock
Options to employees. Where an Incentive Stock Option and a Nonqualified
Stock Option are awarded by the Committee, such Options shall constitute
separate grants and shall clearly be identified as such. In no event will the
exercise of one such Option affect the right to exercise the other such
Option. If an Incentive Stock Option is awarded, absolutely all terms and
conditions making it so must be complied with by the Company and the
Optionee.
(a) Option Price: The option price for shares of Common Stock of the
Company shall be one hundred percent (100%) of the Fair Market Value of
such Common Stock on the date the Option is granted. For the purposes of
this Plan, such Fair Market Value shall be determined (i) in case the
Common Stock shall not then be listed and traded upon a recognized
securities exchange, upon the basis of the mean between the bid and asked
quotations for such stock on the Date of Grant (as reported by a
recognized stock quotation service) or, in the event that there shall be
no bid or asked quotations on the Date of Grant, then upon the basis of
the mean between the bid and asked quotations on the date nearest
preceding the Date of Grant, or (ii) in the case the Common Stock shall
then be listed and traded upon a recognized securities exchange, upon the
basis of the mean between the highest and lowest selling prices at which
shares of the Common Stock were traded on such recognized securities
exchange on the Date of Grant or, if the Common Stock was not traded on
said Date, upon the basis of the mean of such prices on the date nearest
preceding the Date of Grant, and upon any other factors which the
Committee shall deem appropriate.
(b) Maximum Option Grants: The aggregate Fair Market Value (determined
at the time the option is granted) of the stock with respect to which
Incentive Stock Options are exercisable for the first time by such
individual during any calendar year (under all such plans of the Company
and its parent and subsidiary corporations, if any) shall not exceed
$100,000. Options granted in excess of the applicable statutory limit
shall be treated as Nonqualified Stock Options.
(c) Exercise of Options: Each Option granted under the Plan shall be
exercisable at the Option Price set forth in the Agreement, on such date
or dates during such Option Period (not exceeding ten years from the date
of such grant) and for such number of shares as determined by the
Committee and as is set forth in the Agreement with respect to such
Option. However, no Option granted hereunder to any employee may be
exercised except in the case of death, disability or retirement pursuant
to any pension plan of the Company, until two years of continued
employment with the Company has elapsed. Any Optionee desiring to exercise
any Option hereunder shall give written Notice to the designated financial
officer of the Company and include therein full payment for the shares
supporting such Option. Full payment of the exercise price including any
tax due is to be made in cash or with the consent of the Committee with
the stock of the Company or with a combination of both. Notice is only
valid when full payment is included therewith.
(d) Transferability of Options: An Option granted under the Plan may
not be transferred except by will or the laws of descent and distribution,
and during the lifetime of the Optionee shall only be exercisable by the
Optionee. The Optionee shall have no interest in the stock subject to
Options and shall have no rights until the shares are fully paid for and
certificates for such stock are issued to the Optionee.
(e) Payment for Shares: No shares shall be issued to any Optionee
until Notice, as defined in Section 7(c) has been given to the Company.
Within 45 days after the receipt of said Notice to exercise the Option,
the Company shall deliver to the Optionee certificates representing all
stock purchased thereunder.
(f) Restriction on Sale of Shares: Any stock received pursuant to the
exercise of an Incentive Stock Option which is sold within either: 1) two
years from the effective date of the grant, or 2) within one year of the
effective date of exercise, shall not be afforded the tax treatment of
Incentive Stock Options. However, if any Optionee disposes of shares of
Common Stock of the Company acquired on the exercise of an Incentive Stock
Option by sale or exchange, either: 1) within two years after the date of
grant of the Incentive Stock Option under which the stock was acquired, or
2) within one year after the acquisition of such shares, he shall notify
the Company of such disposition and of the amount realized upon such
disposition.
(g) If any Option is not granted, exercised or held pursuant to the
provisions of this Section, it will be considered to be a Nonqualified
Stock Option to the extent that any or all of the grant or exercise is in
conflict with the above restrictions.
SECTION 8
DEATH, RETIREMENT AND TERMINATION OF EMPLOYMENT:
Any Option granted to an employee, the period of which has not lapsed or
expired, shall terminate at the time of the death of the Optionee to whom the
Option was granted or on the retirement or termination for any reason of such
Optionee's employment with the Company, and no shares may thereafter be
delivered pursuant to such Option, except that:
(a) within one year after the date of the Optionee's death, during
which one year period the Option may be exercised by the Optionee's
estate, legal representative, or legatee or such other person designated
by an appropriate court as the person entitled to exercise such Option but
only to the extent the Optionee was entitled to exercise it at the time of
his or her death. The Option must be exercised in the manner provided for
in Section 7(c). This Section is subject to Section 2(f).
(b) within one year after termination of employment by reason of
retirement pursuant to any pension plan of the Company and to the extent
the Optionee would have been able to exercise it at the time of such
termination. The Option must be exercised in the manner provided for in
Section 7(c). This Section is subject to Section 2(f).
(c) within one year after termination of employment by reason of
disability to the extent the Optionee would have been able to exercise it
at the time of such termination. The Option must be exercised in the
manner provided for in Section 7(c). This Section is subject to Section
2(f).
SECTION 9
AMENDMENT OF THE PLAN:
The Board of Directors may amend, suspend or discontinue the Plan, but may
not, without the approval of the Company's shareholders, make any amendment
which would:
(a) abolish the Committee, change the qualifications of its members,
or withdraw the administration of the Plan from its supervision, or permit
any person while a member of the Committee to become eligible to
participate in the Plan subject to Section 5(e);
(b) make any material change in the class of eligible employees as
defined in the Plan;
(c) increase the aggregate number of shares for which Options may be
granted under the Plan;
(d) extend the term of the Plan or the maximum Option Period; or
(e) change the right of any non-employee director to receive automatic
non-discretionary grants of options under this plan. The Plan provisions
relating to grants to non-employee directors shall not be amended more
than once every six months, other than to comport with changes in the
Internal Revenue Code, the Employee Retirement Income Security Act, or the
rules thereunder.
REQUIREMENTS OF LAW:
(a) Withholding Taxes: The Company shall have the right to deduct from all
payments under this Plan, in cash, or deduct from payroll wages, an amount
necessary to satisfy any federal, state or local withholding tax requirements
or otherwise.
(b) Governing Law: The Plan, and all agreements hereunder, shall be construed
in accordance with and governed by the laws of the State of Minnesota.
(c) Agreement to Comply with Securities Laws and the Internal Revenue
Code: Before the Company delivers any stock purchased, the following written
statement may be required from the Optionee:
"I agree not to dispose of the shares purchased by me pursuant to the
Flexsteel Industries, Inc. 1995 Stock Option Plan, otherwise than in
compliance with the Securities Act of 1933, as amended, and rules and
regulations promulgated thereunder and all other laws, rules and
regulations applicable."
(d) If any term in this Plan pertaining to Incentive Stock Options does not
conform to Section 422A of the Internal Revenue Code of 1986, as amended,
those terms will be invalid and taken out of the Plan. However, removal of
any invalid terms will not affect the remaining terms of the Plan.
FLEXSTEEL (logo)
INDUSTRIES, INC.
NOTICE OF 1995
ANNUAL MEETING
AND
PROXY STATEMENT
FLEXSTEEL INDUSTRIES, INC.
P.O. BOX 877
DUBUQUE, IOWA 52004-0877
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD DECEMBER 5, 1995
The undersigned, a stockholder of Flexsteel Industries, Inc., hereby appoints
K. B. Lauritsen 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
Tuesday at 3:30 P.M. on December 5, 1995 at The Minneapolis Hilton and
Towers, Minneapolis, MN 55403, and at any adjournments thereof as follows:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR:
Proposal No. 1 -- Election of 3 Class III Directors (Term Expires 1998 Annual
Meeting):
FRANK H. BERTSCH J.B. CRAHAN EDWARD J. MONAGHAN
(Class III) (Class III) (Class III)
[ ] FOR all Nominees
(Except as marked to the contrary)
[ ] WITHHELD from all Nominees
[ ] WITHHELD from the following only: (Write name(s) below)
Proposal No. 2 -- Approval of the 1995 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal No. 3 -- Appointment of Deloitte & Touche LLP as Independent
Auditors for the ensuing fiscal year
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion to vote upon such other business as may properly come
before the meeting, or any adjournments thereof
UNLESS THE STOCKHOLDER LINES OR CROSSES OUT THIS AUTHORITY.
(IMPORTANT: continued, and to be signed and dated, on the reverse side)
(CONTINUED FROM OTHER SIDE)
The Undersigned hereby revokes any proxy or proxies to vote such shares
heretofore given.
PLEASE VOTE, DATE, SIGN, AND RETURN IN THE ENCLOSED ENVELOPE.
Dated __________________, 1995.
_______________________________
(Signature)
_______________________________
Signature of stockholder shall
correspond exactly with the
name appearing hereon.
If a joint account, each owner
must sign. When signing as
attorney, executor,
administrator, trustee,
guardian or corporate official,
give your full title as such.
This proxy when properly executed will be voted in the manner directed hereon by
the above signed stockholder. If no direction is given, this proxy will be voted
FOR Proposals 1, 2 and 3, and the grant of authority to vote upon such other
business as may properly come before the meeting or any adjournments thereof
will not be crossed out.
- --------------------------------------------------------------------------------
FLEXSTEEL INDUSTRIES INCORPORATED
ANNUAL REPORT
FISCAL YEAR ENDED JUNE 30, 1995
[PHOTO] (See description at bottom of following page.)
FOCUS ON INNOVATION
[LOGO]
Page - Cover
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Year Ended June 30 1995 1994 1993
<S> <C> <C> <C>
Net Sales....................................... $208,432,000 $195,388,000 $177,271,000
Income Before Taxes............................. 8,111,000 10,092,000 9,710,000
Net Income (1).................................. 5,211,000 6,787,000 6,185,000
Per Share of Common Stock
Earnings (1).................................... .73 .95 .87
Cash Dividends.................................. .48 .48 .48
Average Shares Outstanding...................... 7,178,000 7,140,000 7,090,000
At June 30
Working Capital................................. 46,272,000 47,787,000 49,707,000
Net Plant and Equipment......................... 24,376,000 18,829,000 17,208,000
Total Assets.................................... 96,271,000 95,088,000 87,861,000
Shareholders' Equity............................ 73,824,000 71,289,000 67,855,000
Long-Term Debt.................................. 70,000 105,000 140,000
</TABLE>
(1) 1994 income and per share amounts reflect cumulative effect of accounting
change as of June 30, 1994 of $320,000 (net of income taxes) or $.04 per share
income.
FRONT COVER: Computers have become a valuable creative tool for designers. On
our cover we show an up-to-date room setting as a computer might render it in a
simulated wash drawing.
[photo] Left, a photograph of the same room setting. Featured are some of
Flexsteel's most beautiful current and popular styles: today's fashionable soft
look is created with high, waterfall pleats and gentle lines on arms and cushion
welting. The wing chair and the Charisma(R) accent chair, both perennial
classics, are upholstered in the new softer tones.
Page - Inside Front Cover
<PAGE>
[top photo] See description below.
TO OUR SHAREHOLDERS
"An intense
focus on creativity is
essential. . ."
This year was a challenging and frustrating one for Flexsteel
Industries, Inc. Revenues had increased nicely until our fourth quarter, when a
sluggish retail environment and a noticeable decrease in consumer confidence
decelerated new orders.
For the full year ended June 30, 1995, revenues increased a moderate 6%
to $208,432,000 versus $195,388,000 generated in the previous year. While this
was a record sales year for your Company, it came at the expense of
profitability. Earnings were $5,211,000 or $.73 per share, clearly a major
disappointment when compared to earnings of $6,787,000 or $.95 per share the
previous year.
The Federal Reserves' harsh economic policy to quell inflation has
worked very well. Record-setting interest rate hikes over the past eighteen
months have impacted our cyclical industry much more so than it did other
industries. With the recent moderation of interest rates, it appears that our
economy is now in the early stages of what could be a prolonged period of
sluggish growth. Under that scenario, the market place will continue to be under
severe pricing pressure.
In the early summer, we were able to raise prices 2% to 3% and we
should start to feel the effect of these increases in our first half of fiscal
1996. However, the increases will help offset our increased raw materials cost;
in this sluggish retail climate, we cannot recover all cost increases.
When the sales deceleration began, we were well underway with heavy
investments in the development of new products and in needed modernization of
certain manufacturing facilities. Both of these efforts are aimed at making us
more competitive in the market place.
With much of this profit drain now behind us, we are fully convinced
that this sacrifice of short-term profitability will be the key to maintaining
profit margins while more effectively manufacturing and distributing the right
product to the market place.
RESIDENTIAL FURNITURE
The fiscal year began with residential furniture revenues up
approximately 24% in the first six months. Ultimately, rising interest rates
eroded consumer confidence; as housing starts and resales declined, so did
retail furniture sales. We doubled the size of our High Point Show room for the
April 1995 Market. While this unusual expense hampered profitability in the
final quarter, we felt it necessary to properly display our entire line of home
furnishings to the increasing numbers of both domestic and international
retailers who attend this market.
[bottom photo]
Top photo: Available only through a Flexsteel Gallery, exclusive fabrics create
beautiful traditional elegance in a sofa, love seat and chair from Flexsteel's
8512 Group.
Bottom photo: Jack B. Crahan, Chairman of the Board of Directors
(l.), and Bruce Lauritsen, President and Chief Executive Officer, with
recreational vehicle seating displaying Flexsteel's distinctive automotive
styling.
Page 1
<PAGE>
We continue to expand our international presence. Sales representatives
have been added in Europe and the Pacific Rim countries. Exchange-rate
fluctuation impeded progress in Canada and Mexico, but the weaker dollar helped
in other countries. It is our belief that the international opportunities are
worth the expense and effort at this time.
RECREATIONAL VEHICLE SEATING
The sales pattern in recreational vehicle seating sales was not much
different from that of home furnishings. As interest rates cut heavily into
sales of motor homes and other recreational vehicles, competition only became
keener in this cyclical industry. The 25,000-square-foot addition to our Dubuque
product development and engineering center is completed; we have increased our
engineering staff as well as adding other technical personnel to shorten
development time and continue our growth in this field.
Like other markets, the world of recreational vehicles is changing
rapidly; we must change with it to develop new products and lower our costs if
we are to maintain our leadership position.
COMMERCIAL SEATING
The $3,500,000 addition to our Starkville, Mississippi, manufacturing
facilities is finally completed. A new state-of-the-art wood finishing system,
coupled with modernization of woodworking and upholstering facilities, will
provide us with the capabilities of better service to our customers and more
efficient production. We remain confident of our prospects in the hospitality
and health care field in the years ahead.
OUTLOOK
While we made sweeping changes for the future during this past year, we
didn't forget to run the business. Your Company had its best year ever in total
sales volume. Under prevailing highly competitive market conditions, this was
outstanding. However, the reason for change is that we are not satisfied with
our profitability and know we can do better. The lowering of interest rates by
the Federal Reserve Bank, for the first time in 17 months, and the 15-month low
in fixed rates for mortgages, will act to improve business conditions in our
industry. With our improved efficiencies, we can expect enhanced profitability.
We remain committed to maximizing shareholder value, and we will do
everything we can to make fiscal 1996 a successful year in every respect.
/s/ Jack B. Crahan
JACK B. CRAHAN
Chairman of the Board of Directors
/s/ K. Bruce Lauritsen
K. BRUCE LAURITSEN
President &
Chief Executive Officer
[photo]
Recliners are lovelier than ever with traditional
styling and true reclining comfort.
[photo]
Designs for health care must meet the
special requirements of that industry. This love seat
combines practicality with residential graciousness.
[photo]
Light scaling and firmer seating are characteristic of
the"Pacifica Collection."
Page 2
<PAGE>
FOCUS ON CREATIVITY
[top photo] See description below.
"DESIGN IS
A CREATIVE
RESPONSE TO
CHANGING LIFESTYLES"
From the 1890's Victorian parlor to the 1990's family room, Flexsteel
designs have responded to the changing tastes and needs of the American
consumer. Our lives are far more complex than a century ago, as high-tech
surrounds us at work and at home. As a counterpoint, we make our homes more
welcoming and more relaxed.
Softness has become the most defining feature of home furnishings.
Flexsteel designers create visual comfort: generous scaling with bigger arms and
deeper backs conveys comfort at a glance. Fabrics are more important than ever
- -- a "soft hand" complements relaxed lines. Colors are soft and tranquil, with a
mellowed vividness and brightness. Paled tones, approaching white, are preferred
in many areas.
Our designers have created even softer seating with new, thicker,
softer luxury cushioning.
Flexsteel innovations have made us a significant player in today's
fastest-growing upholstery market -- motion furniture. Whether it's called the
great room or the gathering room, the room where the family relaxes now takes
more of the family budget, and motion is the furniture of choice.
Here Flexsteel competes beautifully, offering updated styles and
unmatched quality. The Flexsteel patented seat spring is key to both comfort and
quality. Many modular styles feature unusual built-in convenience features. Most
of our recliners are shipped with our exclusive lumbar support, and all feature
one-piece arm frame construction, with our famous seat spring framed in metal.
The other big story in home furnishings is the still-growing demand for
leather. A responsive design team, implementing the newer relaxed designs, and
integral Flexsteel quality have been responsible for steady and pronounced
growth in leather sales.
In recreational vehicle seating, Flexsteel designers are already
planning for the year 2000, anticipating the needs of a rapid evolution of
automotive technology. In seating for the hospitality industry, demand is for
the residential look of softened comfort. Seating for the health care industry
must do the same, with the added requirements of safety, provisions for moisture
resistance, and ease of use.
In a century-plus of specializing in seating, Flexsteel designs have
evolved from a stately formality to today's dynamic choices of softened
traditional and casual elegance -- always underwritten by famous Flexsteel
quality.
[bottom photo]
Top photo: Appropriate for today's busy lifestyles is this dual-purpose queen
sofa sleeper. Camelback styling, distinctive bun feet and a companion chair
complete the upscale look.
Bottom Photo: Leather's distinction is enhanced with appealing designer colors,
generous proportions, waterfall pleats, and unusual leather pillows.
Page 3
<PAGE>
FOCUS ON CREATIVITY
[top photo] See description below.
"MARKETING
MUST COPE
WITH
CHANGING
REALITIES"
Changing lifestyles, corporate and personal, are changing our markets.
There are fewer furniture stores and, with less retail space, retailers must
make more effective use of their floor space.
The Flexsteel Gallery lets the retailer offer virtually limitless
choices in style, trim, and fabric in minimum floor space.
Flexsteel's 161 galleries give us excellent retail exposure in our
major markets. This year, our ongoing gallery support included the introduction
of a collection of 300 exciting fabrics which are exclusive to our Galleries.
Support of our dealers continues to be an important part of our market
plan. National advertising in magazines and television produces inquiries for
our dealers. Our sponsorship of a car in today's biggest spectator sport,
stock-car racing, has created name recognition, plus excitement for dealers who
have displayed the car.
Flexsteel marketing has continued to emphasize both the national chains
and major regional multi-store retailers, and we are increasingly represented in
these important markets.
Our presence in the international market is growing. We expect the
implementation of NAFTA to energize sales to Mexican and Canadian markets. We
have developed a handsome Pacifica Collection specifically for the Far East
market. While the "American look" is much in demand there, buyers prefer firmer
seating and smaller proportions than their American counterparts.
Rapid technological change is affecting marketing at every level. Our
automated SIS (Sales Inquiry System) gives dealers instant information on fabric
promotions and availability, style options, price, and order status. Video
cataloging is becoming more powerful; at least 150 of our dealers are using
Flexsteel's "Sneak Preview" to show customers their sofas or chairs, made up in
the fabrics of their choice. Both dealers and customers enjoy this new way of
shopping.
To sell recreational vehicle seating, we must stay abreast of an
explosive growth in automotive manufacturing technology. In this, as in the
hospitality and health care contract markets, both the total market and
Flexsteel's share continue to grow. Our contract backlog continues high, but our
recent $3.5 million expansion at Stark ville, Mississ ippi, is helping us to be
more competitive. With more pro cess control, we can ship a better product more
rapidly.
Foremost priority is given at Flexsteel to the needs of present and
potential customers; they are our life blood and our future.
[bottom photo]
Top photo: Perfect for today's casual life styles, this Shaker-influenced room
group features oak accents and matching occasional tables.
Bottom photo: Residents at Seven Oaks health-care facility enjoy this striking
dining room with handsome chairs by Flexsteel. Photo Courtesy Bob Harr, Hedrick
Blessing Studios.
Page 4
<PAGE>
FOCUS ON CREATIVITY
[top photo] See description below.
"OUR PEOPLE
INNOVATE THROUGH
UNDERSTANDING
OF CUSTOMER'S
NEEDS"
Our people, alert to changing markets, watch and listen. We see people
seeking more relaxed surroundings for their homes. We hear their requests for
greater comfort and sustained quality combined with environmentally-sound
practices.
To answer these, the people of Flexsteel bring their innovative skills.
Our engineers and designers, for example, have combined talents to produce a
superior sofa sleeper. With our suppliers, we have developed a new premium
mattress and an improved mechanism for more sleeping comfort. Having developed a
better bed, we turned our attention to making it sit as comfortably as a
conventional sofa. The result is an exquisite new group of Masquerader(R) sofa
sleepers with matching love seats and companion chairs.
Another innovation resulting from the creative use of our people's
knowledge and talents is a revolutionary recliner that can be assembled by the
purchaser without tools. The recliner is shipped in two smaller cartons, greatly
reducing shipping and handling costs.
Production methods and materials are also scrutinized. Innovative
associates contributed to a major rearrangement of our Dubuque facility which,
when completed, will substantially reduce material handling there. The ongoing
quest for quality now involves all our in-plant sales associates with production
staff to check such matters as the comfort of foam cushioning and tailoring.
Ecological concerns are addressed. Use of laminates as well as
kiln-dried hardwood has not only improved our product but made our use of wood
more efficient. We have a better product and use fewer trees.
In recreational vehicle seating, we are working to improve the response
time, critical in products subject to the automotive scheduling cycle. Many
manufacturers now expect a 28-day schedule from approved design to production.
In an increasingly technological society and an intensely competitive
retail environment, it is still Flexsteel's people who sense and meet the needs
of the people who are our customers.
At Flexsteel, the personal touch has survived.
[bottom photo]
Top photo: This Charisma accent chair reflects current home fashion trends with
the freshness of a washed white finish on the carved frame, embellished with a
charming floral print.
Bottom photo: Stunning seating groups with an accent on comfort are created by
combining the versatile units of this modular group.
Page 5
<PAGE>
<TABLE>
<CAPTION>
FLEXSTEEL INDUSTRIES, INC.
FIVE YEAR REVIEW
(All amounts in thousands except for Per Share data)
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net Sales..................................... $208,432 $195,388 $177,271 $157,916 $145,566
Cost of Sales................................. 164,231 151,066 136,110 122,294 112,784
Interest Expense.............................. 372 270 252 277 282
Interest and Other Income..................... 973 990 1,460 2,076 1,982
Income Before Taxes........................... 8,111 10,092 9,710 2,640 2,364
Income Taxes.................................. 2,900 3,625 3,525 950 1,150
Net Income (1)................................ 5,211 6,787 6,185 1,690 1,214
Earnings per Common Share (1)................. .73 .95 .87 .24 .17
Cash Dividends per Common Share............... .48 .48 .48 .48 .48
STATISTICAL SUMMARY
Average Common Shares Outstanding............. 7,178 7,140 7,090 7,048 7,067
Book Value per Common Share................... 10.28 9.98 9.57 9.17 9.34
Total Assets.................................. 96,271 95,088 87,861 81,843 81,484
Net Plant and Equipment....................... 24,376 18,829 17,208 17,228 18,795
Capital Additions............................. 9,682 5,074 3,273 1,966 1,804
Working Capital............................... 46,272 47,787 49,707 46,863 47,114
Long-Term Debt................................ 70 105 140 345 652
Shareholders' Equity.......................... 73,824 71,289 67,855 64,640 66,036
SELECTED RATIOS
Earnings as Percent of Sales.................. 2.5% 3.5% 3.5% 1.1% 1.3%
Current Ratio................................. 3.4 3.3 3.9 4.3 4.9
Return on Total Capital....................... 7.1% 9.5% 9.1% 2.6% 2.9%
Return on Beginning Common Equity............. 7.3% 10.0% 9.6% 2.6% 2.8%
Average Number of Employees................... 2,375 2,240 2,120 2,040 2,005
</TABLE>
(1) 1994 and 1991 income and per share amounts reflect cumulative effect of
accounting changes as of June 30, 1994, of $320,000 (net of income taxes) or
$.04 per share income and July 1, 1990, of $715,000 (net of income taxes) or
$.10 per share charge, respectively.
FLEXSTEEL INDUSTRIES, INC. QUARTERLY COMMON STOCK DATA
FISCAL YEAR 1994-95
PER SHARE
MARKET PRICE*
EARNINGS DIVIDEND HIGH LOW
First Quarter .22 .12 13 1/4 9 1/2
Second Quarter .21 .12 13 3/4 10
Third Quarter .25 .12 13 1/4 10 1/2
Fourth Quarter .05 .12 12 10 1/4
FISCAL YEAR 1993-94
PER SHARE
MARKET PRICE*
EARNINGS DIVIDEND HIGH LOW
First Quarter .22 .12 16 3/4 14 1/2
Second Quarter .20 .12 17 1/2 15
Third Quarter .25 .12 18 1/2 15 3/4
Fourth Quarter .28 .12 16 1/4 13
Flexsteel has paid cash dividends on its common stock for 214 consecutive
quarters. The Company expects to continue regular dividend payments. As of June
24, 1995, there were 1,716 holders of Flexsteel's outstanding common stock.
* Reflects the Market prices as quoted by the National Association of Securities
Dealers, Inc.
Page 6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITIONS
Working Capital - Flexsteel's working capital at June 30, 1995 is $46,272,000
which includes cash, cash equivalents, and temporary investments of $14,037,000.
Working capital decreased by $1,515,000 from June 30, 1994. The Company has
lines of credit of $5,700,000 with banks for short-term borrowings, which have
not been utilized since 1979. The Company has outstanding borrowings of
$2,925,000 in the form of variable rate demand industrial development revenue
bonds.
Capital Expenditures - Capital expenditures were $9,682,000 in fiscal 1995.
These expenditures were for plant expansions, manufacturing, and delivery
equipment. Projected capital spending in fiscal 1996 is approximately $2,500,000
for manufacturing and delivery equipment. The funds required for these
expenditures will be provided from available cash.
Dividends - Dividends were $.48 per share both years. The Board of Directors
determine dividend levels based on the Company's ability to pay its obligations,
capital expenditure requirements, and other related factors.
Economic Conditions - The Company anticipates that demand for its seating
products will improve gradually, from current levels, throughout the remainder
of the year as consumer confidence rebounds, aided by moderation in interest
rates. The Company's previously implemented price increases, in conjunction with
investments in computerized manufacturing equipment, plant layout improvements
and associate training, will help offset cost increases for materials and assist
in maintaining margins in the highly price-competitive marketplace.
Profitability improvements should result from improved manufacturing
efficiencies and continued efforts to control fixed costs while maintaining
sales volume and margins.
RESULTS OF OPERATIONS
FISCAL 1995 COMPARED TO FISCAL 1994
Sales for 1995 increased by $13,044,000 or 6.7% compared to 1994. Home
Furnishings sales volume increased $8,359,000 or 6.8%, Contract Furniture
increased $2,507,000 or 18.2%, and Recreational Vehicle products increased
$2,178,000 or 3.7%. Cost of goods increased $13,164,000 for the year as compared
to 1994. Approximately $3,000,000 of this increase relates to lower margins,
increased material costs, and inefficiencies due to decreased volume in the
fourth quarter of the year, with the remainder due to overall increased volume
for the year. Selling, general and administrative expenses were 17.6% in fiscal
1995 compared to 17.9% in 1994. The Company continues to control fixed costs
while increasing volume. Interest expense increased by $102,000 due to financing
the Starkville, Mississippi, expansion. In fiscal 1994 the Company made an
accounting principle change in adopting Statement of Financial Accounting
Standards (SFAS) No. 115 which resulted in net cumulative income of $320,000 or
$.04 per share. The above factors resulted in fiscal year 1995 net earnings of
$5,211,000 or $ .73 per share compared to $6,787,000 or $ .95 per share in
fiscal 1994, a net decrease of $1,576,000 or $.22 per share.
RESULTS OF OPERATIONS
FISCAL 1994 COMPARED TO FISCAL 1993
Sales for 1994 increased by $18,117,000 or 10.2% compared to 1993.
Recreational Vehicle product sales volume increased $9,008,000 or 18.2%, Home
Furnishings increased $8,739,000 or 7.6%, and Contract Furniture increased
$370,000 or 2.8%. Due to the higher volume, cost of sales increased by
$13,957,000 compared to the prior year. In addition, cost of sales increased
approximately $1,000,000 due to the erosion of margins in the price-competitive
marketplace and lower production efficiencies associated with training new
associates necessary to meet sales volume requirements. Selling, general and
administrative expenses were 17.9% of sales in fiscal 1994 compared to 18.4% in
1993. The improvement reflects the Company's successful efforts to control fixed
costs while increasing volume. Interest income decreased by $471,000 due to
lower levels of investment and decreased rate of return. The Company elected to
adopt the provisions of Statement of Financial Accounting Standards (SFAS) No.
115 during fiscal 1994, with respect to the Company's accounting for certain
investments in debt and equity securities. This change in accounting principle
resulted in net cumulative income of $320,000, or $.04 per share. Also in fiscal
1994, the Company adopted SFAS No. 112, "Employers Accounting for Postemployment
Benefits." The adoption of this standard did not have a material effect on the
Company's financial position or results of operations.
FISCAL 1993 COMPARED TO FISCAL 1992
Sales for 1993 increased by $19,355,000 or 12.3% compared to 1992.
Double-digit sales growth was realized in all product categories: Home
Furnishings sales volume increased $13,264,000 or 13.1%, Recreational Vehicle
products increased $4,660,000 or 10.4%, and Contract Furniture increased
$1,431,000 or 12.0%. Cost of sales increased by $13,816,000 compared to the
prior year reflecting the higher sales volume. Volume related increases were
offset by reduced fixed costs resulting from prior year's production
consolidation. Selling, general and administrative expenses were 18.4% of sales
in fiscal 1993 compared to 20.3% in 1992. The improvement reflects the Company's
efforts to control fixed costs and the administrative cost reductions associated
with the prior year's consolidation. Operating income increased to $8,501,000
from $841,000 reflecting the aforementioned volume increases and cost control
efforts. Fiscal 1992 operating income was also reduced by the restructuring
charge of $2,675,000. Interest income decreased by $615,000 due to lower
interest rates during 1993. The result of the above factors is increased net
income of $4,495,000 or $.63 per share.
Page 7
<PAGE>
<TABLE>
<CAPTION>
FLEXSTEEL INDSUTRIES, INC.
BALANCE SHEETS
JUNE 30,
1995 1994
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ................................ $ 5,768,537 $ 3,385,573
Temporary investments - at fair value based
on quoted market price ................................. 8,268,615 9,718,350
Trade receivables - less allowance for doubtful
accounts: 1995, $2,160,211; 1994, $1,960,231 ........... 22,905,047 25,615,426
Inventories .............................................. 25,921,674 26,585,397
Deferred income taxes .................................... 2,000,000 2,340,000
Other .................................................... 844,557 913,301
Total current assets ................................. 65,708,430 68,558,047
PROPERTY, PLANT AND EQUIPMENT, net ......................... 24,376,052 18,829,053
OTHER ASSETS ............................................... 6,186,144 7,701,079
TOTAL .......................................... $96,270,626 $ 95,088,179
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade ................................. $ 4,756,991 $ 4,871,630
Accrued liabilities:
Payroll and related items ............................. 3,656,678 4,322,063
Insurance .............................................. 5,368,145 4,683,962
Other accruals ......................................... 2,694,902 3,607,989
Industrial revenue bonds payable ......................... 2,960,000 3,285,000
Total current liabilities .......................... 19,436,716 20,770,644
LONG-TERM DEBT ............................................. 70,000 105,000
DEFERRED COMPENSATION ...................................... 2,940,329 2,923,729
Total liabilities .................................... 22,447,045 23,799,373
SHAREHOLDERS' EQUITY:
Common stock - $1 par value; authorized 15,000,000 shares;
issued 1995, 7,193,124 shares; 1994, 7,155,012 shares . 7,193,124 7,155,012
Additional paid-in capital ............................... 1,386,754 1,015,940
Retained earnings ........................................ 65,199,703 63,437,854
Unrealized investment gain (loss) ........................ 44,000 (320,000)
Total shareholders' equity ................... 73,823,581 71,288,806
TOTAL ........................... $96,270,626 $ 95,088,179
</TABLE>
See accompanying Notes to Financial Statements.
Page 8
<PAGE>
<TABLE>
<CAPTION>
FLEXSTEEL INDSUTRIES, INC.
STATEMENTS OF INCOME & RETAINED EARNINGS
FOR THE YEARS ENDED JUNE 30,
1995 1994 1993
<S> <C> <C> <C>
NET SALES ................................ $ 208,432,198 $ 195,388,106 $ 177,270,751
OPERATING EXPENSES:
Cost of goods sold ..................... 164,230,883 151,066,404 136,109,870
Selling, general and administrative .... 36,692,054 34,949,047 32,659,675
Total .......................... 200,922,937 186,015,451 168,769,545
OPERATING INCOME ......................... 7,509,261 9,372,655 8,501,206
OTHER:
Interest and other income .............. 973,371 989,554 1,460,371
Interest expense ....................... (371,729) (270,046) (251,663)
Total .......................... 601,642 719,508 1,208,708
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 8,110,903 10,092,163 9,709,914
PROVISION FOR INCOME TAXES ............... 2,900,000 3,625,000 3,525,000
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE ................ 5,210,903 6,467,163 6,184,914
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE ................... 320,000
NET INCOME ............................... 5,210,903 6,787,163 6,184,914
RETAINED EARNINGS - BEGINNING OF YEAR .... 63,437,854 60,080,908 57,303,266
TOTAL .................................... 68,648,757 66,868,071 63,488,180
CASH DIVIDENDS ON COMMON STOCK
(per share: $.48) ..................... (3,449,054) (3,430,217) (3,407,272)
RETAINED EARNINGS - END OF YEAR .......... $ 65,199,703 $ 63,437,854 $ 60,080,908
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING ............................ 7,178,285 7,140,144 7,090,041
EARNINGS PER SHARE BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $ .73 $ .91 $ .87
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE ................... .04
EARNINGS PER SHARE OF COMMON STOCK ....... $ .73 $ .95 $ .87
</TABLE>
See accompanying Notes to Financial Statements.
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS OF FLEXSTEEL INDUSTRIES, INC.:
We have audited the accompanying balance sheets of Flexsteel Industries,
Inc. as of June 30, 1995 and 1994, and the related statements of income and
retained earnings and cash flows for each of the three years in the period ended
June 30, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Flexsteel Industries, Inc.
as of June 30, 1995 and 1994, and the results of its operations and cash flows
for each of the three years in the period ended June 30, 1995 in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the financial statements, the Company changed its
method of accounting for certain investments in debt and equity securities
during the year ended June 30, 1994.
DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
August 11, 1995
Page 9
<PAGE>
<TABLE>
<CAPTION>
FLEXSTEEL INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30,
1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income ................................................................ $ 5,210,903 $ 6,787,163 $ 6,184,914
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Cumulative effect of accounting change ................................. (320,000)
Depreciation ........................................................... 4,135,053 3,452,962 3,292,710
Trade receivables ...................................................... 2,710,379 (3,422,717) (2,620,742)
Inventories ............................................................ 663,723 (4,873,616) 620,054
Other current assets ................................................... 68,744 59,779 (74,050)
Other assets ........................................................... (519,313) (1,721,325) (246,816)
Accounts payable - trade ............................................... (114,639) 658,967 167,679
Accrued liabilities .................................................... (894,289) (138,855) 3,049,931
Deferred compensation .................................................. 16,600 58,732 60,493
Deferred income taxes .................................................. 340,000 (250,000) (415,000)
Net cash provided by
operating activities ................................................... 11,617,161 291,090 10,019,173
INVESTING ACTIVITIES:
Construction funds held in escrow ...................................... 2,034,248 (2,034,248)
Purchases of temporary investments ..................................... (2,751,519) (2,878,805) (7,447,705)
Proceeds from sales of temporary investments ........................... 4,565,254 8,508,968 5,136,530
Additions to property, plant and equipment ............................. (9,682,052) (5,074,138) (3,272,816)
Net cash (used in)
investing activities ................................................... (5,834,069) (1,478,223) (5,583,991)
FINANCING ACTIVITIES:
Proceeds from (repayment of)
revenue bonds issued ................................................. (325,000) 3,250,000
Repayment of long-term debt ............................................ (35,000) (35,000) (475,417)
Payment of dividends ................................................... (3,449,054) (3,430,217) (3,407,272)
Proceeds from issuance of stock ........................................ 408,926 396,523 437,801
Net cash provided by
(used in) financing activities ......................................... (3,400,128) 181,306 (3,444,888)
Increase (decrease) in cash and cash equivalents .......................... 2,382,964 (1,005,827) 990,294
Cash and cash equivalents at beginning of year ............................ 3,385,573 4,391,400 3,401,106
Cash and cash equivalents at end of year .................................. $ 5,768,537 $ 3,385,573 $ 4,391,400
</TABLE>
See accompanying Notes to Financial Statements.
REPORT OF MANAGEMENT
To the Shareholders of Flexsteel Industries, Inc.:
Management is responsible for the financial and operating information
contained in this Annual Report, including the financial statements covered by
the report of Deloitte & Touche LLP, our independent auditors. The statements
were prepared in conformity with generally accepted accounting principles and
include amounts based on estimates and judgments of management.
The Company maintains a system of internal accounting controls to provide
reasonable assurance that the books and records reflect the authorized
transactions of the Company. There are limits inherent in all systems of
internal control because their cost should not exceed the benefits derived. The
Company believes its system of internal accounting controls and internal audit
functions balance the cost/benefit relationship.
The Audit & Ethics Committee of the Board of Directors, composed solely of
outside directors, annually recommends to the Board of Directors the appointment
of the independent auditors. The independent auditors are engaged to audit the
financial statements of the Company and to express an opinion thereon. The
independent auditors' report is expressed on page 9. The Audit & Ethics
Committee meets periodically with the independent auditors to review financial
reports, accounting and auditing practices and controls.
/s/ K. Bruce Lauritsen
K. Bruce Lauritsen
President Chief Executive Officer
/s/ Ronald J. Klosterman
Ronald J. Klosterman
Vice President, Finance
Chief Financial Officer
Secretary
Page 10
<PAGE>
FLEXSTEEL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
INDUSTRY INFORMATION - the Company manufactures and sells upholstered furniture
and other seating products.
STATEMENT OF CASH FLOWS - the Company considers highly liquid investments with
original maturities of less than three months as the equivalent of cash.
INVENTORIES - are stated at the lower of cost or market. Raw steel, lumber and
wood frame parts are valued on the last-in, first-out (LIFO) method. Other
inventories are valued on the first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT - is stated at cost and depreciated using the
straight-line method.
INCOME TAXES - deferred income taxes result from temporary differences between
the tax basis of an asset or liability and its reported amount in the financial
statements.
EARNINGS PER SHARE - are based on the weighted average number of common shares
outstanding during each year. The exercise of employee stock options would have
no material effect on earnings per share.
ACCOUNTING CHANGE - effective June 30, 1994, the Company adopted the provisions
of Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." This new standard which
requires certain investments to be recorded at their market value resulted in a
decrease of $320,000 in shareholders' equity. This decrease represents the gross
unrealized loss on investments which has been recorded net of tax as a separate
component of shareholders' equity. This change in accounting principle resulted
in a cumulative effect adjustment as of June 30, 1994 of $320,000 (tax effected
amount) or $ .04 per share.
RECLASSIFICATIONS - certain prior years' amounts have been reclassified to
conform to the 1995 presentation.
2. INVESTMENTS
The amortized cost and estimated market values of investments in debt and equity
securities are as follows:
June 30, 1995 June 30, 1994
Debt Equity Debt Equity
Securities Securities Securities Securities
Amortized Cost $ 8,324,825 $ 2,168,475 $ 10,270,409 $ 2,044,502
Unrealized gains
(losses) (94,086) 157,453 (404,235) (90,522)
Est. Market Value $ 8,230,739 $ 2,325,928 $ 9,866,174 $ 1,953,980
Debt and equity securities are included in Temporary Investments and Other
Assets and are considered as available for sale. As of June 30, 1995, the
maturities of debt securities are $1,069,667 within one year, $6,913,537 one to
five years, and $247,535 six to ten years.
3. INVENTORIES
Inventories valued on the LIFO method would have been approximately $2,671,000
and $2,387,000 higher at June 30, 1995 and 1994, respectively, if they had been
valued on the FIFO method. A comparison of inventories is as follows:
June 30,
1995 1994
Raw materials .................... $14,186,359 $16,369,701
Work in process and finished parts 7,546,079 6,621,585
Finished goods ................... 4,189,236 3,594,111
Total ......................... $25,921,674 $26,585,397
4. PROPERTY, PLANT AND EQUIPMENT
Estimated June 30,
Life (Years) 1995 1994
Land................ $ 1,609,572 $ 1,609,572
Buildings and
improvements..... 3 - 50 23,099,131 20,052,762
Machinery and
equipment........ 3 - 15 24,434,273 22,229,898
Delivery equipment.. 2 - 9 12,430,880 11,239,624
Furniture and fixtures 3 - 15 4,426,168 3,902,180
Total............ $66,000,024 $59,034,036
Less accumulated
depreciation..... 41,623,972 40,204,983
Net.............. $24,376,052 $18,829,053
5. BORROWINGS
The Company is obligated for $2,925,000 for Industrial Revenue Bonds at June 30,
1995 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, 1995 and 1994 of 3.00% and 4.05%, respectively, and are due
in annual installments of $325,000 through 2004, if not paid earlier upon demand
of the holder. The Company has a letter of credit to guarantee the payment of
these bonds in the event of default. No amounts were outstanding on this letter
at June 30, 1995. In addition, the Company is obligated for General Obligation
Development Bonds bearing interest at 5.0% and due in annual installments of
$35,000 through 1998. Interest paid during 1995, 1994, and 1993 was $135,000,
$38,000, and $40,000, respectively.
6. INCOME TAXES
The total income tax provision for 1995, 1994, and 1993 was 35.8%, 35.9%, and
36.3%, respectively, of income before income taxes and cumulative effect of
change in accounting principle.
Page 11
<PAGE>
Provision - comprised of the following:
1995 1994 1993
Federal - current.. $2,230,000 $3,395,000 $3,497,000
State - current.... 330,000 480,000 443,000
Deferred........... 340,000 (250,000) (415,000)
Total........... $2,900,000 $3,625,000 $3,525,000
Net deferred taxes included in the balance sheet - comprised of the following
temporary differences:
For the Years ended June 30,
1995 Total 1994 Total
Asset (Liability) Asset (Liability)
Asset allowances............... $ 808,317 $ 921,521
Deferred compensation.......... 1,087,921 1,081,779
Other accruals and allowances.. 1,542,073 1,641,303
Excess of tax over book depreciation (1,438,311) (1,304,603)
Total....................... $2,000,000 $2,340,000
Income taxes paid during 1995, 1994, and 1993 were $3,555,000, $5,081,000, and
$2,618,000, respectively.
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 1995 or 1994. Additionally, the Company has a
$1,280,000 letter of credit related to worker's compensation and casualty
insurance. No amounts were outstanding on this letter as of June 30, 1995.
8. SHAREHOLDERS' EQUITY
The Company has authorized 60,000 shares of cumulative, $50 par value preferred
stock and 700,000 shares of undesignated, $1 par value (subordinated) stock,
none of which is outstanding. The Company issued 38,112, 31,981, and 55,305 net
shares under stock option and other employee plans during the years ended June
30, 1995,1994, and 1993, respectively. The difference between the purchase or
issue prices and the par value of the shares is credited or charged to paid-in
capital.
9. STOCK OPTIONS
The Company has stock option plans for key employees that provide for the grant
ing of incentive and nonqualified stock options. Under the plans, options are
granted at fair market value and may be exercisable for up to 10 years. At June
30, 1995, 88,970 shares of common stock were available for future grants.
Changes in options outstanding are as follows:
June 30, 1992 Shares Price/Range
Outstanding............ 250,980 $ 9.50 -$11.50
Granted................ 11,000 12.375
Exercised ......... (98,890) 9.50 - 11.50
Cancelled.............. (4,400) 9.50 - 12.375
June 30, 1993
Outstanding............ 158,690 10.50 - 12.375
Granted................ 100,930 14.875 - 15.75
Exercised.............. (19,100) 10.50 - 11.00
June 30, 1994
Outstanding............ 240,520 10.50 - 15.75
Granted................ 94,360 10.50 - 11.125
Exercised.............. (17,000) 11.00
Cancelled.............. (41,210) 10.50 - 14.875
June 30, 1995
Outstanding............ 276,670 $10.50 -$14.875
10. PENSION AND RETIREMENT PLANS
The Company sponsors various defined contribution pension and retirement plans
which cover substantially all employees, other than employees covered by
multiemployer pension plans under collective bargaining agreements. It is the
Company's policy to fund all pension costs accrued. Total pension and
retirement plan expense was $1,295,000 in 1995, $1,226,000 in 1994, and
$1,044,000 in 1993 including $274,000 in 1995, $251,000 in 1994, and $220,000 in
1993 for the Company's matching contribution to retirement savings plans. The
Company's cost for pension plans is determined as 2% - 4% of each covered
employees wages. The Company's matching contribution for the retirement savings
plans is 25% - 50% of employee contributions (up to 4% of their earnings). In
addition to the above, amounts charged to pension expense and contributed to
multiemployer defined benefit pension plans administered by others under
collective bargaining agreements were $1,203,000 in 1995, $1,150,000 in 1994,
and $1,030,000 in 1993.
11. MANAGEMENT INCENTIVE PLANS
The Company has an incentive plan that provides for shares of common stock to be
awarded to key employees based on a targeted rate of earnings to common equity
as established by the Board of Directors. Shares awarded to employees are
subject to the restriction of continued employment with 33 1/3% of the stock
received by the employee on the award date and the remaining shares issued after
one and two years. Under the plan 13,300, 16,189, and 8,090 shares were awarded,
and the amounts charged to income in 1995, 1994, and 1993 were $149,625,
$169,985, and, $125,395, respectively. At June 30, 1995, 379,697 shares were
available for future grants.
12. SUPPLEMENTARY QUARTERLY
FINANCIAL INFORMATION
(UNAUDITED - in thousands of dollars, except per share amounts)
Quarters
1st 2nd 3rd 4th
1995:
Net Sales...... $50,812 $52,351 $56,783 $48,486
Gross Profit... 11,475 11,465 12,078 9,183
Net Income .... 1,597 1,496 1,768 350
Earnings Per Share .22 .21 .25 .05
Quarters
1st 2nd 3rd 4th(a)
1994:
Net Sales...... $44,360 $46,583 $52,638 $51,807
Gross Profit... 10,529 10,074 11,970 11,749
Net Income..... 1,561 1,409 1,787 2,030
Earnings Per Share .22 .20 .25 .28
(a) Reflects cumulative effect of accounting change as of June 30, 1994 of
$320,000 (net of income taxes) or $.04 per share income.
Page 12
<PAGE>
PLANT LOCATIONS
*Flexsteel Industries, Inc.
DUBUQUE, IOWA 52001
(319) 556-7730
P. M. Crahan, General Manager
Flexsteel Industries, Inc.
DUBLIN, GEORGIA 31040
(912) 272-6911
R. C. Adams, General Manager
Flexsteel Industries, Inc.
LANCASTER, PENNSYLVANIA 17604
(717) 392-4161
T. P. Fecteau, General Manager
Flexsteel Industries, Inc.
RIVERSIDE, CALIFORNIA 92504
(909) 354-2440
T. D. Burkart, General Manager
Flexsteel Industries, Inc.
NEW PARIS, INDIANA 46553
(219) 831-4050
G. H. Siemer, General Manager
Wood Products Division
HARRISON, ARKANSAS 72601
(501) 743-1101
M. J. Feldman, General Manager
Metal Division
DUBUQUE, IOWA 52001
(319) 556-7730
J. E. Gilbertson, General Manager
Charisma Chairs
SWEETWATER, TENNESSEE 37874
(423) 337-6694
A. F. McCosh, Plant Manager
Commercial Seating Division
STARKVILLE, MISSISSIPPI 39760
(601) 323-5481
S. P. Salmon, General Manager
Vancouver Distribution Center
VANCOUVER, WASHINGTON 98668
(206) 696-9955
R. Heying, Supervisor
* Executive Offices
PERMANENT SHOWROOMS
Dubuque, Iowa
High Point, North Carolina
Lancaster, Pennsylvania
San Francisco, California
DIRECTORS AND OFFICERS
Frank H. Bertsch
Chairman of Executive Committee
Director
Jack B. Crahan
Chairman of the Board of Directors
K. Bruce Lauritsen
President
Chief Executive Officer
Director
Edward J. Monaghan
Executive Vice President
Chief Operating Officer
Director
James R. Richardson
Senior Vice President, Marketing
Director
L. Bruce Boylen
Retired Vice President
Fleetwood Enterprises, Inc.
Director
John R. Easter
Retired Vice President
Sears, Roebuck & Company
Director
Thomas E. Holloran
Professor, Graduate School of
Business, University of St. Thomas
St. Paul, Minnesota
Director
James G. Peterson
Consultant
James G. Peterson Associates
Business Consultant
and Investment Advisor
Director
Art D. Richardson
Retired Senior Vice President
Flexsteel Industries, Inc.
Director
Jeffrey T. Bertsch
Vice President
Carolyn T. B. Bleile
Vice President
Thomas D. Burkart
Senior Vice President, Vehicle Seating
Kevin F. Crahan
Vice President
Patrick M. Crahan
Vice President
Keith R. Feuerhaken
Vice President
James E. Gilbertson
Vice President
James M. Higgins
Vice President
Ronald J. Klosterman
Vice President, Finance
Chief Financial Officer
Secretary
Michael A. Santillo
Vice President
EXECUTIVE COMMITTEE
Frank H. Bertsch, Chairman
Jack B. Crahan
K. Bruce Lauritsen
Edward J. Monaghan
James R. Richardson
AUDIT & ETHICS
COMMITTEE
Thomas E. Holloran, Chairman
John R. Easter
James G. Peterson
Art D. Richardson
NOMINATING &
COMPENSATION
COMMITTEE
L. Bruce Boylen, Chairman
John R. Easter
Thomas E. Holloran
James G. Peterson
MARKETING COMMITTEE
John R. Easter, Chairman
Frank H. Bertsch
L. Bruce Boylen
James G. Peterson
Art D. Richardson
TRANSFER AGENT AND
REGISTRAR
Norwest Capital Resources
P. 0. Box 738
South St. Paul,
Minnesota 55075-0738
GENERAL COUNSEL
Peter F. Walstad
Minneapolis, Minnesota
O'Connor and Thomas, P.C.
Dubuque, Iowa
NATIONAL OVER
THE COUNTER
NASDAQ SYMBOL - FLXS
ANNUAL MEETING
Tuesday,
December 5, 1995, 3:30 p.m.
Minneapolis Hilton & Towers
1001 Marquette Avenue,
3rd floor
Minneapolis, Minnesota 55403
AFFIRMATIVE ACTION POLICY
It is the policy of Flexsteel Industries, Inc. that all employees and potential
employees shall be judged on the basis of qualifications and ability, without
regard to age, sex, race, creed, color or national origin in all personnel
actions. No employee or applicant for employment shall receive discriminatory
treatment because of physical or mental handicap in regard to any position for
which the employee or applicant for employment is qualified. Employment
opportunities and job advancement opportunities will be provided for qualified
disabled veterans and veterans of the Vietnam era. This policy is consistent
with the Company's plan for `Affirmative Action' in implementing the intent and
provisions of the various laws relating to employment and non-discrimination.
ANNUAL REPORT ON FORM 10-K AVAILABLE
A copy of the Company's annual report on Form 10-K, as filed with the Securities
and Exchange Commission, can be obtained without charge by writing to: Office of
the Secretary, Flexsteel Industries, Inc., P. O. Box 877, Dubuque, Iowa
52004-0877.
[LOGO]
(C) 1995 FLEXSTEEL INDUSTRIES, INC.
Page - Inside Back Cover
<PAGE>
[photo]
With recreational vehicle seating designed to meet or surpass the exacting
standards mandated by safety and comfort considerations, Flexsteel is now
recognized as a major supplier of seating for all types of recreational vehicles
and motor homes. A key selling point of Fleetwood's most popular motor home, The
Bounder, is a beautiful interior made inviting and comfortable with the finest
appointments. Among these is top-quality Flexsteel seating in living, dining,
and sleeping areas.
BULK RATE
U.S. Postage
PAID
Permit #10
Dubuque,IA
FLEXSTEEL(R) INDUSTRIES INCORPORATED
P.O. BOX 877 o DUBUQUE, IA 52004-0877
Page - Back Cover
