FORM 10-K
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended June 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-5151
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FLEXSTEEL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 42-0442319
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. BOX 877, DUBUQUE, IOWA 52004-0877
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (319) 556-7730
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
NASDAQ
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $1.00 PAR VALUE
(Title of Class)
-----------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
State the aggregate market value of the voting stock held by
non-affiliates of the registrant as of August 8, 1997 which is within 60 days
prior to the date of filing:
Common Stock, Par Value $1.00 Per Share: $58,779,042
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of August 8, 1997:
CLASS SHARES OUTSTANDING
- ------------------------------------ ---------------------------
Common Stock, $1.00 Par Value 6,958,363 Shares
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF REGISTRANT'S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR
ENDING JUNE 30, 1997 IN PARTS I, II AND IV.
IN PART III, PORTIONS OF THE REGISTRANT'S 1997 PROXY STATEMENT, TO BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WITHIN 120 DAYS OF THE
REGISTRANT'S FISCAL YEAR END.
Exhibit Index -- page 5
<PAGE>
PART I
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
The registrant was incorporated in 1929 and has been in the furniture
seating business ever since. For more detailed information see the registrant's
1997 Annual Report to Shareholders which is incorporated herein by reference.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The registrant's operations consist of one industry segment--
upholstered seating. For more detailed financial information see the
registrant's 1997 Annual Report to Shareholders which is incorporated herein by
reference.
The registrant's upholstered seating business has three primary areas
of application -- home seating, vehicle seating and commercial seating. Set
forth below, in tabular form, is information for the past three fiscal years
showing the registrant's sales of upholstered seating attributable to each of
the areas of application described above:
SALES FOR UPHOLSTERED SEATING APPLICATIONS
1997 1996 1995
--------------- --------------- ---------------
AMOUNT OF SALES AMOUNT OF SALES AMOUNT OF SALES
--------------- --------------- ---------------
Home Seating............... $133,600,000 $128,600,000 $131,500,000
Vehicle Seating............ 64,600,000 58,200,000 60,700,000
Commercial Seating......... 21,200,000 18,200,000 16,200,000
--------------- --------------- ---------------
Upholstered Seating Total. $219,400,000 $205,000,000 $208,400,000
=============== =============== ===============
(c) NARRATIVE DESCRIPTION OF BUSINESS
(1) (i), (ii), (vii) The registrant is engaged in one segment of
business, namely, the manufacture and sale of a broad line of quality
upholstered furniture for the retail furniture market, contract furniture market
and recreational vehicle furniture market. The registrant's classes of products
include a variety of wood and upholstered furniture including upholstered
reclining and rocker- reclining chairs, swivel rockers, chairs, sofas, sofa
beds, loveseats and convertible bedding units, some or all of which are for the
home, office, recreational vehicles, vans and mobile homes. Featured as a basic
component in most of the upholstered furniture is a unique drop-in-seat spring.
The registrant primarily distributes its products throughout most of the United
States through the registrant's sales force to approximately 3,000 furniture
dealers, department stores and R.V. manufacturers. The registrant's products are
also sold to several national chains, some of which sell on a private label
basis.
(iii) Sources and availability of raw materials essential to the
business:
The registrant's furniture products utilize oak, gum and other
species of hardwood lumber obtained from Arkansas, Mississippi,
Missouri and elsewhere. In addition to lumber and plywood, principal
raw materials utilized in the manufacturing process include bar and
wire stock, high carbon spring steel, fabrics, leather and
polyurethane. While the registrant purchases these materials from
outside suppliers, it is not dependent upon any single source of
supply. The raw materials are all readily available.
<PAGE>
(iv) Material patents and licenses:
The registrant owns the American and Canadian improvement
patents to its Flexsteel seat spring, as well as, patents on
convertible beds and various other recreational vehicle seating
products. In addition, it holds licenses to manufacture certain
rocker-recliners. The registrant does not consider its patents and
licenses material to its business.
(v) The registrant's business is not considered seasonal.
(viii) The approximate dollar amounts of backlog of orders believed to
be firm as of the end of the last fiscal year and the preceding fiscal year are
as follows:
JUNE 30, 1997 JUNE 30, 1996
--------------- ---------------
$22,700,000* $22,600,000
* All of this amount is expected to be filled and billed in fiscal year ending
June 30, 1998.
(x) Competitive conditions:
The furniture industry is highly competitive. There are
numerous furniture manufacturers in the United States. Although the
registrant is one of the largest manufacturers of upholstered furniture
in the United States, according to the registrant's best information it
manufactures and sells less than 4% of the upholstered furniture sold
in the United States. The registrant's principal method of meeting
competition is by emphasizing its product performance and to use its
sales force.
(xi) Expenditures on Research Activities:
Most items in the upholstered seating line are designed by the
registrant's own design staff. New models and designs of furniture, as
well as new fabrics, are introduced continuously. The registrant
estimates that approximately 40% of its upholstered seating line is
redesigned in whole or in part each year. In the last three fiscal
years, these redesign activities involved the following expenditures:
FISCAL YEAR ENDING EXPENDITURES
-------------------- --------------
June 30, 1995 $1,490,000
June 30, 1996 $1,485,000
June 30, 1997 $1,540,000
(xiii) Approximately 2,400 people are employed by the registrant.
(d) FINANCIAL INFORMATION ABOUT DOMESTIC OPERATIONS
The registrant has no foreign operations and makes minimal export
sales. Financial information about domestic operations is set forth in the
registrant's 1997 Annual Report to Shareholders which is incorporated herein by
reference.
<PAGE>
ITEM 2. PROPERTIES
(a) THE REGISTRANT OWNS THE FOLLOWING MANUFACTURING PLANTS:
<TABLE>
<CAPTION>
APPROXIMATE SIZE
LOCATION (SQUARE FEET) PRINCIPAL OPERATIONS
- ------------------------- ----------------- --------------------------------------------
<S> <C> <C>
Dubuque, Iowa 845,000 Upholstered Furniture-- Recreational Vehicle
-- Metal Working
Lancaster, Pennsylvania 216,000 Upholstered Furniture-- Recreational Vehicle
Riverside, California 206,000 Upholstered Furniture-- Recreational Vehicle
Harrison, Arkansas 123,000 Woodworking Plant
New Paris, Indiana 168,000 Upholstered Furniture-- Recreational Vehicle
Dublin, Georgia 153,000 Upholstered Motion Furniture
Starkville, Mississippi 349,000 Upholstered Furniture-- Woodworking Plant
Elkhart, Indiana 99,500 Upholstered Furniture-- Vehicle
</TABLE>
The registrant's operating plants are well suited for their
manufacturing purposes and have been updated and expanded from time to
time as conditions warrant. There is adequate production capacity to
meet present market demands.
The registrant leases showrooms for displaying its products in
the furniture marts in High Point, North Carolina and San Francisco,
California.
The registrant leases one production facility for recreational
vehicle products in Watkinsville, Georgia of approximately 60,000 sq.
feet and one warehouse in Vancouver, Washington of approximately 15,750
sq. feet for storing its products prior to distribution.
(b) OIL AND GAS OPERATIONS: NONE.
ITEM 3. LEGAL PROCEEDINGS
The Company has no material legal proceedings pending other than
ordinary routine litigation incidental to the business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter no matter was submitted to a vote of security
holders.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the registrant, their ages, positions (in
each case as of June 30, 1997), and the month and year they were first elected
or appointed an officer of the registrant, are as follows:
NAME (AGE) POSITION (DATE FIRST BECAME OFFICER)
- ------------------------ --------------------------------------------------
K. B. Lauritsen (54) President /Chief Executive Officer (November 1979)
E. J. Monaghan (58) Executive Vice President/Chief Operating Officer
(November 1979)
R. J. Klosterman (49) Vice President Finance/Chief Financial Officer &
Secretary (June 1989)
J. R. Richardson (53) Senior Vice President of Marketing (November 1979)
T. D. Burkart (55) Senior Vice President of Vehicle Seating
(February 1984)
P. M. Crahan (49) Vice President (June 1989)
J . T. Bertsch (42) Vice President (June 1989)
Each named executive officer has held the same office or an executive or
management position with the registrant for at least five years.
<PAGE>
CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF
"SAFE HARBOR" PROVISIONS THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Company and its representatives may from time to time make written
or oral forward-looking statements with respect to long-term goals of the
Company, including statements contained in the Company's filings with the
Securities and Exchange Commission and in its reports to stockholders.
Statements, including those in this report, which are not historical or
current facts are "forward-looking statements" made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. There are
certain important factors that could cause results to differ materially from
those anticipated by some of the statements made herein. Investors are cautioned
that all forward-looking statements involve risk and uncertainty. Some of the
factors that could affect results are the effectiveness of new product
introductions, the product mix of our sales, the cost of raw materials, the
amount of sales generated and the profit margins thereon or volatility in the
major markets, competition and general economic conditions.
The Company specifically declines to undertake any obligation to
publicly revise any forward-looking statements that have been made to reflect
events or circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The NASDAQ -- National Market System, is the principal market on which
the registrant's Common Stock is being traded. The market prices for the stock
and the dividends paid per common share, for each quarterly period during the
past two years is shown in the registrant's Annual Report to Shareholders for
the Year Ended June 30, 1997, and is incorporated herein by reference.
There were approximately 1,920 holders of Common Stock of the
registrant as of June 30, 1997.
ITEM 6. SELECTED FINANCIAL DATA
This information is contained on page 6 in the registrant's Annual
Report to Shareholders for the Year Ended June 30, 1997, under the caption "Five
Year Review" and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's discussion and analysis is contained on page 7 in the
registrant's Annual Report to Shareholders for the Year Ended June 30, 1997 and
is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements of the Company included in the
financial report section of the Annual Report to Shareholders for the Year Ended
June 30, 1997, are incorporated herein by reference:
PAGE(S)
-------
Balance Sheets, June 30, 1997, 1996................................... 7
Statements of Income and Changes in Shareholders' Equity --
Years Ended June 30, 1997, 1996, 1995 ........................... 8
Statements of Cash Flows -- Years Ended June 30, 1997, 1996, 1995..... 9
Quarterly Financial Data 1997, 1996................................... 11
Notes to Financial Statements......................................... 10-11
Independent Auditors' Report.......................................... 6
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
During fiscal 1997 there were no changes in or disagreements with
accountants on accounting procedures or accounting and financial disclosures.
<PAGE>
PART III
ITEMS 10, 11, 12. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT, EXECUTIVE
COMPENSATION AND SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The information identifying directors of the registrant, executive
compensation and beneficial ownership of registrant stock and supplementary data
is contained in the registrant's 1997 definitive Proxy Statement to be filed
with the Securities and Exchange Commission and is incorporated herein by
reference. Executive officers are identified in Part I, Item 4 above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is contained under the heading "Certain Relationships
and Related Transactions" in the registrant's 1997 definitive Proxy Statement to
be filed with the Securities and Exchange Commission and is incorporated herein
by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
The financial statements of the registrant included in the Annual
Report to Shareholders for the Year Ended June 30, 1997, are incorporated herein
by reference as set forth above in ITEM 8.
(2) Schedules
The following financial schedules for the years ended 1997, 1996 and
1995 are submitted herewith:
PAGE
----
SCHEDULE VIII -- Reserves 8
Other schedules are omitted because they are not required or are not
applicable or because the required information is included in the financial
statements incorporated by reference above.
(3) Exhibit No.
3.1 Restated Articles of Incorporation incorporated by
reference to Exhibits to the Registrant's Annual
Report on Form 10-K for the fiscal year ended June
30, 1988.
3.2 Bylaws of the Registrant incorporated by reference to
Exhibits to the Annual Report on Form 10-K for the
fiscal year ended June 30, 1994.
11 Computation of Earnings Per Share.
13 Annual Report to Shareholders for the Year Ended June
30, 1997.
99 1997 Form 11-K for Salaried Employee's Savings Plan
401(k).
23.1 Independent Auditor's Report.
22 1997 definitive Proxy Statement incorporated by
reference is to be filed with the Securities Exchange
Commission on or before December 1, 1997.
23.2 Consent of Independent Auditors.
4 Instruments defining the rights of security holders,
including indentures. The issuer has not filed, but
agrees to furnish upon request to the Commission
copies of the Mississippi Industrial Development
Revenue Bond Agreement issued regarding the issuer's
facilities in Starkville, MS.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the last quarter of the fiscal
year ended June 30, 1997.
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: September 9, 1997 FLEXSTEEL INDUSTRIES, INC.
By: /S/ K.B LAURITSEN
K. B. LAURITSEN
PRESIDENT, CHIEF EXECUTIVE OFFICER
and
PRINCIPAL EXECUTIVE OFFICER
By: /S/ R.J. KLOSTERMAN
R. J. KLOSTERMAN
VICE PRESIDENT OF FINANCE
and
PRINCIPAL FINANCIAL OFFICER
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: September 9, 1997 /S/ FRANK H. BERTSCH
Frank H. Bertsch
DIRECTOR
Date: September 9, 1997 /S/ J. B. CRAHAN
J. B. Crahan
DIRECTOR
Date: September 9, 1997 /S/ ART D. RICHARDSON
Art D. Richardson
DIRECTOR
Date: September 9, 1997 /S/ K. BRUCE LAURITSEN
K. Bruce Lauritsen
DIRECTOR
Date: September 9, 1997 /S/ EDWARD J. MONAGHAN
Edward J. Monaghan
DIRECTOR
Date: September 9, 1997 /S/ JAMES G. PETERSON
James G. Peterson
DIRECTOR
Date: September 9, 1997 /S/ THOMAS E. HOLLORAN
Thomas E. Holloran
DIRECTOR
Date: September 9, 1997 /S/ JAMES R. RICHARDSON
James R. Richardson
DIRECTOR
Date: September 9, 1997 /S/ L. BRUCE BOYLEN
L. Bruce Boylen
DIRECTOR
Date: September 9, 1997 /S/ JOHN R. EASTER
John R. Easter
DIRECTOR
<PAGE>
SCHEDULE VIII
FLEXSTEEL INDUSTRIES, INC.
RESERVES
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------------- ------------ ----------- ----------- -------------
DEDUCTIONS
BALANCE AT ADDITIONS FROM BALANCE AT
BEGINNING OF CHARGED TO RESERVES CLOSE OF YEAR
DESCRIPTION YEAR INCOME (NOTE)
- ----------------------------------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
1997 ......................... $ 2,153,000 $ 831,000 $ 186,000 $ 2,798,000
============ =========== =========== =============
1996 ......................... $ 2,160,000 $ 1,246,000 $ 1,253,000 $ 2,153,000
============ =========== =========== =============
1995 ......................... $ 1,960,000 $ 574,000 $ 374,000 $ 2,160,000
============ =========== =========== =============
</TABLE>
- ---------------
NOTE -- UNCOLLECTIBLE ACCOUNTS CHARGED AGAINST RESERVE, LESS RECOVERIES.
EXHIBIT 11
FLEXSTEEL INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
--------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Primary (Note 1):
Net earnings applicable to
common stock ................ $6,048,434 $4,502,170 $5,210,903 $6,787,163 $6,184,914
========== ========== ========== ========== ==========
Weighted Average Number of
shares outstanding during the
year ........................ 7,024,021 7,172,299 7,178,285 7,140,144 7,090,041
========== ========== ========== ========== ==========
Earnings Per Share ............ $ .86 $ .63 $ .73 $ .95 $ .87
========== ========== ========== ========== ==========
</TABLE>
NOTE 1-- The calculation of earnings per share for the five years ended June 30,
1997 excludes the effect of common equivalent shares resulting from
outstanding stock options as the effect would not be material. The
effect on 1997, 1996, 1995, 1994, and 1993 earnings per share, assuming
exercise of dilutive stock options by the treasury stock method, would
reduce earnings per share by less than 3% (1997, $6,048,434 / 7,057,216
shares = $.857 or .5%; 1996, $4,502,170 / 7,188,908 shares = $.626 or
.0%; 1995, $5,210,903 / 7,178,285 shares = $.726 or .0%; 1994,
$6,787,163 / 7,170,070 share = $.947 or .4%; 1993, $6,184,914 /
7,137,694 shares = $.867 or .6%).
ANNUAL REPORT
FISCAL YEAR ENDED JUNE 30, 1997
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FLEXSTEEL INDUSTRIES INCORPORATED
ENHANCING EXCELLENCE
[PHOTO]
[LOGO]
FLEXSTEEL(R)
AMERICA'S SEATING SPECIALIST
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended June 30 1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net Sales....................................... $219,427,000 $205,008,000 $208,432,000
Income Before Taxes............................. 9,473,000 7,052,000 8,111,000
Net Income...................................... 6,048,000 4,502,000 5,211,000
Per Share of Common Stock
Earnings ....................................... .86 .63 .73
Cash Dividends.................................. .48 .48 .48
Average Shares Outstanding...................... 7,024,000 7,172,000 7,178,000
At June 30
Working Capital................................. 44,357,000 47,376,000 46,272,000
Net Plant and Equipment......................... 26,214,000 23,046,000 24,376,000
Total Assets.................................... 99,173,000 95,874,000 96,271,000
Shareholders' Equity............................ 75,238,000 74,147,000 73,824,000
Long-Term Debt.................................. 0 35,000 70,000
</TABLE>
- --------------------------------------------------------------------------------
[BAR CHARTS]
NET SALES
(MILLIONS OF DOLLARS)
EARNINGS PER SHARE
(DOLLARS)
CASH DIVIDENDS PER SHARE
(DOLLARS)
BOOK VALUE PER SHARE
(DOLLARS)
RETURN ON COMMON EQUITY
(PERCENT)
[LOGO]
FLEXSTEEL(R)
AMERICA'S SEATING SPECIALIST
- --------------------------------------------------------------------------------
[PHOTO]
FRONT COVER: "Lifestyle" collections such as this grouping, presenting pieces
that are beautifully compatible, capture the consumer's imagination. Louis XVI
influences and handsome carving distinguish the Charisma(R) chair and ottoman.
The sofa is from our "Casual Collections" group, with relaxed styling in the
popular "slip-cover" look and waterfall pleats.
<PAGE>
ENHANCING EXCELLENCE: FLEXSTEEL'S UNIQUE CHALLENGE
TO OUR SHAREHOLDERS
[LOGO]
We are pleased to announce that fiscal 1997 showed marked improvements for
Flexsteel Industries, Inc. We achieved record revenues and improved our earnings
despite a persistently competitive marketplace.
Consolidated sales for the fiscal year ending June 30, 1997, totaled
$219,427,000, an all-time high and an increase of 7% over revenues of
$205,008,000 the previous fiscal year. Our net earnings for the year were
$6,048,000, or $.86 per share, compared to earnings of $4,502,000 or $.63 per
share a year earlier.
This is progress in a retail environment which, for our industry, remains
challenging; we remain, however, committed to goals which will further improve
our results. We continue developing and implementing changes which will improve
shareholder value.
RESIDENTIAL SEATING
Residential furniture sales began the fiscal year with modest gains in the
extremely competitive domestic market. International sales, although a small
percentage of our sales, were up significantly, even though the strength of the
dollar, plus prevailing economic conditions in Canada and Mexico, were not
especially favorable for sales of exported furniture.
The major furniture market, both domestically and internationally, is held in
High Point, North Carolina, and this spring your company introduced some of its
most exciting new styles. These introductions were very well received in spite
of reduced attendance resulting from slower retail furniture sales. Our enlarged
showroom allowed us to display our new Collections more completely, in
coordinated displays that emphasized today's less structured, softer, and more
comfortable home fashions.
Flexsteel's emphasis on growth continues with the new Comfort Seating Stores
which will give us a dynamic presence in major metropolitan markets where we
have been less visible in the past. At the same time, we are updating our
dealers' in-store Flexsteel Galleries; both are, like our collections, cohesive
and dynamic. Special packages of signage, photography and other dealer aids are
put together by Flexsteel designers for maximum effectiveness and consumer
appeal.
[PHOTO]
JACK B. CRAHAN, CHAIRMAN OF THE BOARD (L) AND K. BRUCE LAURITSEN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER. THE SOFA IS TYPICAL OF THOSE IN OUR "LIFESTYLES"
COLLECTIONS.
We expect furniture supply to exceed demand over the next few months, with
resultant continuing pressure on prices and profit margins. The economy is
booming, yet the furniture market is more complex, competitive, and intense than
ever.
[PHOTO]
INTERESTING FABRICS COMBINE IN THIS "COLLAGE" SOFA, A POPULAR CHOICE. SHOWN WITH
A POET'S CHAIR AND OTTOMAN SCALED FOR MAXIMUM COMFORT.
1
<PAGE>
RECREATIONAL VEHICLE SEATING
The year began with a decline in sales of converted vans as more consumers
turned to sports utility vehicles. As consumer confidence grew, our sales
improved nicely in the second half of our fiscal year. Revenues in this division
are at record levels as we continue to increase our market share.
In March we announced the acquisition of the assets of Dygert Seating, Inc.
including their RV seating production facility in Elkhart, Indiana. Dygert
Seating, who had previously purchased another RV seating maker, Goshen Cushion,
reported sales of over $30 million in 1996. We have long been a leading supplier
to high-end motor homes and van conversions, and the addition of Dygert's lines
gives us broader market coverage as well as greater production capacity in the
van, sport vehicle, and light truck markets.
COMMERCIAL SEATING
We previously reported to you that we were consolidating production of our
exposed wood chairs and contract seating line at our recently expanded and
updated plant in Starkville, Mississippi. This transition has been completed,
and in the third quarter we sold the facility in Sweetwater, Tennessee. With
sales up 15% over the past year, even that facility has been hard-pressed to
keep up with demand, and we have had to temporarily produce some orders in our
other plants, resulting in a decrease in profit margins because of higher labor
and overhead costs.
We are confident of excellent future prospects in both the health care and
hospitality fields, and we are totally committed to increasing capacity at
Starkville. We have an excellent relationship with Stryker Medical who
represents us in the health care field, and sales remain buoyant.
VISIT OUR WEB SITE
We encourage you to visit our web site (http://flexsteel.com) installed last
October and featuring products from all divisions of Flexsteel. There is a news
section including the latest financial releases plus cross links to both NASDAQ
Online and QUOTE.COM which allows you to access the latest Flexsteel stock
prices. We continue to improve this major online site; our latest addition is
implementing the Flexsteel "Smart Shopper" e-mail data base marketing program to
potential Flexsteel customers.
JAMES G. PETERSON TO RETIRE
Mr. James G. Peterson, who has been a valuable member of Flexsteel's Board of
Directors since we went public in 1969, has announced that he will retire from
our Board effective at the December 1997 Annual Stockholders' meeting. He earned
our respect and admiration for his strong and creative contributions, and we
will miss his wisdom and counsel.
OUTLOOK
Looking to the future, it appears we can expect a reasonable period of growth.
Interest rates and inflation are low, and consumer confidence is high. In this
market, one thing becomes abundantly clear - it is no longer "business as
usual." Consumers insist on choice, and the manufacturer who has not cut costs
and made significant operational changes, including applications of advanced
information and material technologies, will simply not survive.
As challenging as that may sound, your company will continue to take advantage
of the many opportunities for future growth. Every aspect of our business is
under scrutiny to help us increase earnings and improve shareholder's value. We
are continuing our stock repurchase program and are committed to future dividend
reviews. Our current dividend is one of the highest among our peer companies and
we have paid uninterrupted dividends since 1938.
We look forward to reporting our progress to you next year.
/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]
[PHOTO]
COMFORT ON THE ROAD: FLEXSTEEL SEATING GRACES THE INTERIOR OF A FLEETWOOD
PROWLER, TOP. LUXURIOUS RELAXING IN THE SHERATON BOSTON'S CIGAR LOUNGE, DESIGNED
BY JOANNE SPENCER, RIGHT.
2
<PAGE>
ENHANCING EXCELLENCE: ELEGANCE AND PRACTICALITY
[LOGO]
FURNITURE REFLECTS FASHION. BUYERS ARE CHOOSING A LESS-STRUCTURED LIFESTYLE
IN EVERYTHING FROM ENTERTAINING TO CLOTHING, CHOICES RICHLY REFLECTED IN THE
HOME ENVIRONMENTS THEY CREATE FOR THEMSELVES.
Flexsteel designers of home fashions have responded with furniture that
reflects these lifestyle choices.
These were beautifully portrayed in our Lifestyle Collections which were
introduced at our April High Point Market and very well received.
A softer look permeated these collections with such details as relaxed pleats,
soft, plush and downy cushions, and gentler tailoring. The result, in many
styles, is closer to a slip-cover look but is more disciplined for more enduring
good looks. It also allows us to retain the sense of elegance that reflects
quality, even in casual styles, and appeals to today's consumer.
The collections concept also fits neatly into our upscaled Flexsteel Gallery
presentations and the new, highly-integrated Comfort Seating showrooms. It
contributes to more sales, for the customer with a vision of a personal look may
find it not in a single piece but in several that combine to create that look.
Leather is still popular for its prestige, natural good looks, strength, and
practicality. Flexsteel designers, adept at the selection and application of
leather, have developed today's softer look, using hides chosen for their
excellent hand.
High-leg recliners and Press back chair-and-ottoman combinations answer a
growing demand for comfort with a sense of elegance. Our new Press back chairs,
which allow the user to recline by leaning against the chair back, have been
well received.
In our commercial seating markets of extended-stay hotels and retirement
living, we see similar trends. In those new or remodeled hotels and motels
offering suites, Flexsteel seating - especially recliners - are appearing more
often. Fine, durable, specially designed Flexsteel seating is also at home in
senior living facilities where the thrust has been to make surroundings less
institutional and as residential and pleasant as possible. Even our health-care
furniture, created to meet special problems such as incontinence, reflects our
designers dedication to handsome furniture.
Our RV seating designers meet today's relaxed attitude with sleek automotive
styling, while in motor homes and travel trailers they continue to create
seating for distinctive interiors that must also emphasize comfort and safety.
From their homes to their vacations, our customers find their lifestyles
reflected in Flexsteel's fine furniture and seating, all designed to be a joy to
live with.
[PHOTO]
[PHOTO]
RELAXED AND CASUAL ELEGANCE, TYPICAL OF TODAY'S FASHIONS, IS CAPTURED IN A
STUNNING CONVERSATIONAL GROUP IN LEATHER, TOP. THE MIXED-MEDIA TABLE, RECENTLY
ADDED TO THE FLEXSTEEL LINE, COORDINATES BEAUTIFULLY. HIGH-LEG RECLINERS, LIKE
THE SPOON-LEG RECLINER AT RIGHT, ARE POPULAR.
3
<PAGE>
ENHANCING EXCELLENCE: ENLISTING TECHNOLOGY
[LOGO]
FINE FURNITURE BY INSPIRED DESIGNERS STILL NEEDS THE HANDS-ON EXPERTISE OF
FLEXSTEEL'S SKILLED ARTISANS TO COME TO BEAUTIFUL LIFE. TODAY'S TECHNOLOGY
EXTENDS THE REACH OF THE DESIGNER AND ASSISTS THE HANDS OF THE CRAFTSMAN.
The rapid development of information technology means we can reach more
potential customers and give them more up-to-date information. We continue to
develop our own applications for faster, more accurate communication with our
dealers. We use it to schedule delivery of components to our associates creating
finished pieces of beautiful furniture. Communication is also faster and more
convenient for our associates and our suppliers. We can schedule shipping and
production for efficient, just-in-time deliveries. All these techniques shorten
turn-around time from order to delivery.
Flexsteel's home page on the Internet received over 50,000 hits last month.
With our Flexsteel "Smart Shopper" data base program, our potential customers
can learn, via e-mail, of special promotions at the nearest Flexsteel dealer.
The home page emphasizes our quality story through handsome photography and
cut-aways of construction details. The customer may even, through Broder
bound's 3D Home Interiors software, see how selected items of Flexsteel
furniture will appear in a room she is designing.
Our totally integrated Comfort Seating Showrooms provide us, the dealer, and
the shopper the maximum advantages of the latest technology. Customers view
Flexsteel styles on our Sneak Preview video catalog and can even see the effect
of fabric choice on frame choice. With the instantaneous communication provided
by EDI (Electronic Data Interchange), the dealer can check availability of that
fabric, place an order, and obtain a delivery date while the customer is in the
store.
Advancements in materials technology allow us to offer softer cushions in home
seating and molded foam in recreational vehicle seats. In both cases,
consistency and user comfort are increased and production is simplified. We've
also applied technology to frames: by using laminated hardwoods, we've made our
frames stronger and more durable while using natural resources more efficiently.
Exciting technology applications are all through Flexsteel: gallery designers
use CAD (Computer-Aided Design), while our plants are equipped with CNC routers
and computer controlled cutters; our RV seating designers are developing
intelligent seat systems with power throughout. They have already developed an
integral seat belt for bucket seats in motor homes, and a patent is pending on
an adjustable arm rest that remains parallel with the floor when the seat
reclines.
High tech helps us maintain quality and simplify tasks, but in the end it is
still the human touch that ensures that Flexsteel furniture is always a
beautiful pleasure to own.
[PHOTO]
[PHOTO]
FROM THE CASUAL CLASSIC COLLECTION: A PILLOW BACK SOFA WITH APPLE-SHAPED FEET;
THE EVER-POPULAR WING CHAIR UPDATED; AND FLEXSTEEL OCCASIONAL TABLES, ABOVE.
OUR NEWLY-DEVELOPED, INTEGRATED SEAT BELT ADDS COMFORT AND SAFETY TO A HANDSOME
MOTOR HOME BUCKET SEAT, RIGHT.
4
<PAGE>
ENHANCING EXCELLENCE: EXPANDING MARKETS
OUR INDEPENDENT DEALERS HAVE HISTORICALLY BEEN THE SOURCE OF FLEXSTEEL'S
STRENGTH. IN CITIES ACROSS THE NATION, THEY ARE OUR LINK TO THE HOME FURNISHINGS
MARKET WHERE CONSUMER LOYALTY IS BUILT.
Though many of the smaller retailers that dominated the market a few decades
ago have disappeared, the surviving dealers are larger and stronger than ever.
To continue in their strong market positions, it is essential to such dealers to
have a dependable relationship with an equally strong manufacturer. Flexsteel,
with its extensive dealer programs, offers its dealers a breadth of line and
many support functions that are not available from the smaller manufacturers.
In dealers' in-store Flexsteel Galleries and in the new free-standing Comfort
Seating Showrooms, our designers help with the showroom design from vignettes to
color choices to patterns of traffic flow. Dealer support includes national
advertising, numerous print and electronic advertising aids, plus tie-ins to our
Web site on the Internet. Our dealers opened nine new Flexsteel in-store
galleries during fiscal 1997, and eight more are scheduled to open by year-end.
Three Comfort Seating Showrooms are already open and five more are in various
stages of planning. These Comfort Seating Showrooms are giving us a strong new
presence in such major metropolitan markets as Chicago and Milwaukee.
We recently expanded our regional sales manager staff. We now have four
managers instead of three, allowing each manager to better focus on our sales
associates and their customers.
Major multiple stores, such as J. C. Penney and Sears, provide another
important outlet for our upholstered furniture. We are quite proud that we
received, for the second consecutive year, the Sears Quality Award, resulting
from a rigorous evaluation of market performance and quality of our product and
service.
The necessity of quick responsiveness to a sometimes unpredictable market is
nowhere more visible than in the market for recreational seating. After a love
affair lasting almost twenty years with converted vans, many consumers have
switched their loyalties to sports utility vehicles and light trucks.
Flexsteel's seating sales in this market, however, remain strong with our
addition of expanded lines for pickups and other utility vehicles. Recently,
through our purchase of Dygert Seating, we've expanded our presence into more
price brackets of the market. With our already-strong presence in motor homes
and other high-end vehicles, we are now the largest supplier of seating for
recreational vehicles.
We have also found a promising market in the marine industry. Flexsteel
designs are now in all 17 models produced by Carver Boats. (See photo on back
cover.)
Throughout our more than a century of history, Flexsteel's maintenance of
excellent relations with our customers has been an essential component to our
continuing success in the marketplace.
[PHOTO]
[PHOTO]
UPHOLSTERED CHAIRS WITH CARVED-WOOD ARMS AND LEGS, LIKE THIS CHARISMA(R) CHAIR,
RIGHT ABOVE, CONTINUE IN DEMAND. A TOP SELLER IN THE VAN CONVERSION MARKET IS
THE DYGERT-DESIGNED GROUP, RIGHT, WITH SMART AUTOMOTIVE DETAILING ON SEATS AND
BACK.
5
<PAGE>
FLEXSTEEL INDUSTRIES, INC.
FIVE YEAR REVIEW
<TABLE>
<CAPTION>
(All amounts in thousands except for Per Share data)
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net Sales..................................... $219,427 $205,008 $208,432 $195,388 $177,271
Cost of Sales................................. 173,088 161,451 164,231 151,066 136,110
Interest and Other Expense.................... 345 358 372 270 252
Interest and Other Income..................... 1,833 1,048 973 990 1,460
Income Before Taxes........................... 9,473 7,052 8,111 10,092 9,710
Income Taxes.................................. 3,425 2,550 2,900 3,625 3,525
Net Income (1)................................ 6,048 4,502 5,211 6,787 6,185
Earnings per Common Share (1)................. .86 .63 .73 .95 .87
Cash Dividends per Common Share............... .48 .48 .48 .48 .48
STATISTICAL SUMMARY
Average Common Shares Outstanding............. 7,024 7,172 7,178 7,140 7,090
Book Value per Common Share................... 10.86 10.45 10.28 9.98 9.57
Total Assets.................................. 99,173 95,874 96,271 95,088 87,861
Net Plant and Equipment....................... 26,214 23,046 24,376 18,829 17,208
Capital Additions............................. 5,273 3,298 9,948 5,074 3,273
Working Capital............................... 44,357 47,376 46,272 47,787 49,707
Long-Term Debt................................ 0 35 70 105 140
Shareholders' Equity.......................... 75,238 74,147 73,824 71,289 67,855
SELECTED RATIOS
Earnings as Percent of Sales.................. 2.8% 2.2% 2.5% 3.5% 3.5%
Current Ratio................................. 3.1 3.5 3.4 3.3 3.9%
Return on Total Capital....................... 8.0% 6.1% 7.1% 9.5% 9.1%
Return on Beginning Common Equity............. 8.2% 6.1% 7.3% 10.0% 9.6%
Average Number of Employees................... 2,320 2,230 2,375 2,240 2,120
</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.
- --------------------------------------------------------------------------------
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, 1997 and 1996, and the related statements of income and
changes in shareholders' equity and cash flows for each of the three years in
the period ended June 30, 1997. 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, 1997 and 1996, and the results of its operations and cash flows
for each of the three years in the period ended June 30, 1997 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
MINNEAPOLIS, MINNESOTA
AUGUST 8, 1997
6
<PAGE>
FLEXSTEEL INDUSTRIES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
---------------------------
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................ $ 4,445,327 $ 3,867,742
Investments ........................................................ 5,041,154 8,940,603
Trade receivables - less allowance for doubtful
accounts: 1997, $2,799,000; 1996, $2,153,000....................... 25,348,941 24,464,171
Inventories.......................................................... 26,985,554 26,082,857
Deferred income taxes................................................ 2,620,000 2,010,000
Other................................................................ 806,117 732,054
----------- -----------
Total current assets............................................. 65,247,093 66,097,427
PROPERTY, PLANT AND EQUIPMENT, net..................................... 26,214,405 23,046,224
OTHER ASSETS........................................................... 7,711,179 6,730,513
----------- -----------
TOTAL...................................................... $99,172,677 $95,874,164
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade............................................. $ 3,845,362 $ 3,574,232
Accrued liabilities:
Payroll and related items.......................................... 4,440,219 3,433,562
Insurance.......................................................... 6,057,093 5,347,758
Other accruals..................................................... 4,237,556 3,731,364
Industrial revenue bonds payable..................................... 2,310,000 2,635,000
----------- -----------
Total current liabilities...................................... 20,890,230 18,721,916
LONG-TERM DEBT......................................................... 35,000
DEFERRED COMPENSATION ................................................. 3,044,418 2,969,847
----------- -----------
Total liabilities................................................ 23,934,648 21,726,763
----------- -----------
SHAREHOLDERS' EQUITY:
Common stock - $1 par value; authorized 15,000,000 shares;
issued 1997, 6,927,310 shares; 1996, 7,095,044 shares ............. 6,927,310 7,095,044
Additional paid-in capital........................................... 556,632
Retained earnings.................................................... 67,750,719 66,266,325
Unrealized investment gain........................................... 560,000 229,400
----------- -----------
Total shareholders' equity............................... 75,238,029 74,147,401
----------- -----------
TOTAL....................................... $99,172,677 $95,874,164
=========== ===========
</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 controls to provide reasonable
assurance that the books and records reflect the authorized transactions of the
Company. There are limits inherent in all systems of internal control because
their cost should not exceed the benefits derived. The Company believes its
system of internal controls and internal audit functions balance the cost/
benefit relationship.
The Audit & Ethics Committee of the Board of Directors, composed solely of
outside directors, annually recommends to the Board of Directors the appointment
of the independent auditors that are engaged to audit the financial statements
of the Company and to express an opinion thereon. The independent auditors'
opinion is expressed on page 6. The Audit & Ethics Committee meets periodically
with the independent auditors to review financial reports, accounting and
auditing practices and controls.
K. BRUCE LAURITSEN RONALD J. KLOSTERMAN
PRESIDENT VICE PRESIDENT, FINANCE
CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER
SECRETARY
7
<PAGE>
FLEXSTEEL INDUSTRIES, INC.
STATEMENTS OF INCOME AND
CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30,
-------------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES............................................ $219,426,736 $205,008,245 $208,432,198
------------ ------------ ------------
OPERATING EXPENSES:
Cost of goods sold................................. 173,088,406 161,450,649 164,230,883
Selling, general and administrative................ 38,352,665 37,195,178 36,692,054
------------ ------------ ------------
Total...................................... 211,441,071 198,645,827 200,922,937
------------ ------------ ------------
OPERATING INCOME..................................... 7,985,665 6,362,418 7,509,261
------------ ------------ ------------
OTHER:
Interest and other income.......................... 1,832,917 1,048,074 973,371
Interest and other expense......................... (345,148) (358,322) (371,729)
------------ ------------ ------------
Total...................................... 1,487,769 689,752 601,642
------------ ------------ ------------
INCOME BEFORE INCOME TAXES........................... 9,473,434 7,052,170 8,110,903
PROVISION FOR INCOME TAXES........................... 3,425,000 2,550,000 2,900,000
------------ ------------ ------------
NET INCOME........................................... $ 6,048,434 $ 4,502,170 $ 5,210,903
============ ============ ============
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING ....................................... 7,024,021 7,172,299 7,178,285
============ ============ ============
EARNINGS PER SHARE OF COMMON STOCK................... $ .86 $ .63 $ .73
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
COMMON STOCK ADDITIONAL UNREALIZED
------------ PAID-IN RETAINED INVESTMENT
SHARES PAR VALUE CAPITAL EARNINGS GAIN (LOSS) TOTAL
--------- ---------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1994 7,155,012 $7,155,012 $1,015,940 $63,437,854 $(320,000) $71,288,806
Issuance of Company Stock 38,112 38,112 370,814 408,926
Investment Valuation
Adjustment 364,000 364,000
Cash Dividends (3,449,054) (3,449,054)
Net Income 5,210,903 5,210,903
--------- ---------- ---------- ----------- --------- -----------
Balance at June 30, 1995 7,193,124 7,193,124 1,386,754 65,199,703 44,000 73,823,581
Purchase of Company Stock (132,453) (132,453) (1,178,986) (1,311,439)
Issuance of Company Stock 34,373 34,373 348,864 383,237
Investment Valuation
Adjustment 185,400 185,400
Cash Dividends (3,435,548) (3,435,548)
Net Income 4,502,170 4,502,170
--------- ---------- ---------- ----------- --------- -----------
Balance at June 30, 1996 7,095,044 7,095,044 556,632 66,266,325 229,400 74,147,401
Purchase of Company Stock (186,345) (186,345) (722,573) (1,212,626) (2,121,544)
Issuance of Company Stock 18,611 18,611 165,941 184,552
Investment Valuation
Adjustment 330,600 330,600
Cash Dividends (3,351,414) (3,351,414)
Net Income 6,048,434 6,048,434
--------- ---------- ---------- ----------- --------- -----------
Balance at June 30, 1997 6,927,310 $6,927,310 $ 0 $67,750,719 $ 560,000 $75,238,029
========= ========== ========== =========== ========= ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
FLEXSTEEL INDUSTRIES, INC.
STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
-------------------------------------------
1997 1996 1995
------------ ----------- ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income ..................................... $ 6,048,434 $ 4,502,170 $ 5,210,903
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation ................................ 5,129,246 4,619,511 4,135,053
(Gain) loss on disposition of capital assets (646,050) (83,878) 49,004
Trade receivables ........................... 688,561 (1,559,124) 2,710,379
Inventories ................................. 637,112 (161,183) 663,723
Other current assets ........................ 256,487 112,503 68,744
Other assets ................................ (980,666) (544,369) (519,313)
Accounts payable - trade .................... 271,130 (1,182,759) (114,639)
Accrued liabilities ......................... 2,244,775 809,535 (895,856)
Deferred compensation ....................... 74,571 29,518 16,600
Deferred income taxes ....................... (610,000) (10,000) 340,000
------------ ----------- ------------
Net cash provided by
operating activities ........................ 13,113,600 6,531,924 11,664,598
------------ ----------- ------------
INVESTING ACTIVITIES:
Construction funds held in escrow ........... 2,034,248
Payment for purchase of business assets ..... (6,933,951)
Purchases of investments .................... (1,517,439) (4,178,560) (2,751,519)
Proceeds from sales of investments .......... 5,747,488 3,691,972 4,565,254
Proceeds from sales of capital assets ....... 1,112,201 91,818 216,451
Capital Expenditures ........................ (5,273,317) (3,297,623) (9,947,507)
------------ ----------- ------------
Net cash used in investing activities .......... (6,865,018) (3,692,393) (5,883,073)
------------ ----------- ------------
FINANCING ACTIVITIES:
Repayment of borrowings ..................... (360,000) (360,000) (360,000)
Payment of dividends ........................ (3,374,005) (3,452,124) (3,447,487)
Proceeds from issuance of common stock ...... 184,552 383,237 408,926
Repurchase of common stock .................. (2,121,544) (1,311,439)
------------ ----------- ------------
Net cash used in financing activities .......... (5,670,997) (4,740,326) (3,398,561)
------------ ----------- ------------
Increase (decrease) in cash and cash equivalents 577,585 (1,900,795) 2,382,964
Cash and cash equivalents at beginning of year . 3,867,742 5,768,537 3,385,573
------------ ----------- ------------
Cash and cash equivalents at end of year ....... $ 4,445,327 $ 3,867,742 $ 5,768,537
============ =========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for
Interest .................................. $ 103,000 $ 123,000 $ 135,000
Income taxes .............................. $ 3,640,000 $ 1,927,000 $ 3,555,000
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
FLEXSTEEL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS - Flexsteel Industries, Inc. (the Company)
manufactures and sells upholstered furniture and other seating products.
USE OF ESTIMATES - the preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
FAIR VALUE - the Company's cash, accounts receivable, accounts payable,
accrued liabilities and other liabilities are carried at amounts which
reasonably approximate their fair value due to their short-term nature. Fair
values of investments in debt and equity securities are disclosed in Note 2.
CASH EQUIVALENTS - the Company considers highly liquid investments with
original maturities of less than three months as the equivalent of cash.
REVENUE RECOGNITION - is upon delivery of product.
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.
INSURANCE - The Company is self-insured for health care and most worker's
compensation up to predetermined amounts above which third party insurance
applies. The Company is contingently liable to insurance carriers under the
comprehensive general, product, and vehicle liability policies, as well as,
some worker's compensation, and has provided a letter of credit in the amount
of $1,623,000. Losses are accrued based upon the Company's estimates of the
aggregate liability for claims incurred using certain actuarial assumptions
followed in the insurance industry and based on Company experience.
INCOME TAXES - deferred income taxes result from temporary differences
between the tax basis of an asset or liability and its reported amount in the
financial statements.
EARNINGS PER SHARE - 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.
ACQUISITION - on March 18, 1997 the Company announced the acquisition of
certain assets of Dygert Seating, Inc. and the related production facilities
in Elkhart, Indiana for $6,933,951. The purchase included accounts receivable
of approximately $1,573,000, inventory of approximately $1,540,000, and fixed
and other current assets of approximately $3,821,000.
RECLASSIFICATIONS - certain prior years' amounts have been reclassified to
conform to the 1997 presentation.
2. INVESTMENTS
Debt and equity securities are included in Investments and in Other Assets,
at fair value based on quoted market prices, and are considered as available
for sale. The amortized cost and estimated market values of investments are
as follows:
June 30, 1997 June 30, 1996
------------- -------------
Debt Equity Debt Equity
Securities Securities Securities Securities
---------- ---------- ---------- ----------
Amortized Cost $ 5,505,167 $ 2,315,994 $ 8,987,896 $ 2,296,905
Unrealized gains
(losses) (27,689) 904,344 (144,740) 499,199
----------- ----------- ----------- -----------
Est. Market Value $ 5,477,478 $ 3,220,338 $ 8,843,156 $ 2,796,104
=========== =========== =========== ===========
As of June 30, 1997, the maturities of debt securities are $1,984,560 within
one year, $3,174,743 in one to five years, and $318,175 over six years.
3. INVENTORIES
Inventories valued on the LIFO method would have been approximately
$2,001,000 and $2,024,000 higher at June 30, 1997 and 1996, respectively, if
they had been valued on the FIFO method. A comparison of inventories is as
follows:
June 30,
--------
1997 1996
------------ ------------
Raw materials.............. $ 13,529,232 $ 12,936,114
Work in process and finished parts 7,689,051 7,594,621
Finished goods............. 5,767,271 5,552,122
------------ ------------
Total................... $ 26,985,554 $ 26,082,857
============ ============
4. PROPERTY, PLANT AND EQUIPMENT
June 30,
Estimated --------
Life (Years) 1997 1996
------------ ----------- -----------
Land................ $ 1,642,422 $ 1,609,572
Buildings and
improvements..... 3 - 50 24,485,437 23,710,516
Machinery and
equipment........ 3 - 15 28,024,677 24,455,532
Delivery equipment.. 2 - 9 13,818,489 13,041,661
Furniture and fixtures 3 - 15 5,205,537 4,440,375
----------- -----------
Total............ 73,176,562 67,257,656
Less accumulated
depreciation..... 46,962,157 44,211,432
----------- -----------
Net.............. $26,214,405 $23,046,224
=========== ===========
5. BORROWINGS
The Company is obligated for $2,275,000 for Industrial Revenue Bonds at June
30, 1997 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, 1997, 1996, and 1995 of 3.94%, 4.13%,
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
issued 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,
1997. In addition, the Company is obligated for General Obligation
Development Bonds of $35,000 bearing interest at 5.0% payable in 1998.
10
<PAGE>
6. INCOME TAXES
The total income tax provision for the years ended June 30, 1997, 1996, and
1995 was 36.2%, 36.2% and 35.8%, respectively, of income before income taxes.
PROVISION - COMPRISED OF THE FOLLOWING:
1997 1996 1995
---------- ---------- ----------
Federal - current.. $3,528,000 $2,240,000 $2,230,000
State - current.... 507,000 320,000 330,000
Deferred........... (610,000) (10,000) 340,000
---------- ---------- ----------
Total........... $3,425,000 $2,550,000 $2,900,000
========== ========== ==========
DEFERRED INCOME TAXES - COMPRISED OF THE FOLLOWING:
June 30, 1997 June 30, 1996
Asset (Liability) Asset (Liability)
----------------- -----------------
Asset allowances............... $ 1,025,000 $ 793,000
Deferred compensation.......... 1,126,000 1,099,000
Other accruals and allowances.. 1,756,000 1,542,000
Excess of tax over book depreciation (1,287,000) (1,424,000)
----------- -----------
Total....................... $ 2,620,000 $ 2,010,000
=========== ===========
7. CREDIT ARRANGEMENTS
The Company has lines of credit of $5,700,000 with banks for short-term
borrowings at the prime rate in effect at the date of the loan. On $1,000,000
of such line, the Company is required to maintain compensating bank balances
equal to 5% of the line of credit plus 5% of any amounts borrowed. There were
no short-term bank borrowings during 1997 or 1996.
8. SHAREHOLDERS' EQUITY
The Company has authorized 60,000 shares of cumulative, $50 par value
preferred stock and 700,000 shares of undesignated, $1 par value
(subordinated) stock, none of which is outstanding.
9. STOCK OPTIONS
At June 30, 1997, 319,140 shares were available for future grants. The
options granted under the stock option plans expire 10 years from the date of
grant. Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock-Based Compensation," encourages, but does not require,
companies to record compensation for stock-based employee compensation plans
at fair value. The Company has chosen to continue to account for stock-based
employee compensation plans using the intrinsic value method prescribed by
the Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employee," and related interpretations. The effect of applying the
fair value method of SFAS No. 123 to the Company's option plans would result
in net income and net income per share that are not materially different from
the amounts reported in the Company's financial statements.
Changes in options outstanding are as follows:
Shares Price Range
------ -----------
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 - 15.75
Granted................ 91,950 11.25
Cancelled.............. (26,140) 10.50 - 14.875
-------
June 30, 1996 Outstanding 342,480 10.50 - 15.75
Granted................ 103,400 10.25 - 12.75
Exercised.............. (6,800) 10.25 - 10.50
Cancelled.............. (6,900) 10.50 - 14.875
June 30, 1997 Outstanding 432,180 $10.25 - 15.75
=======
10. PENSION AND RETIREMENT PLANS
The Company sponsors various defined contribution pension and retirement
plans which cover substantially all employees, other than employees covered
by multiemployer pension plans under collective bargaining agreements. It is
the Company's policy to fund all pension costs accrued. Total pension and
retirement plan expense was $1,352,000 in 1997, $1,326,000 in 1996, and
$1,295,000 in 1995, including $300,000 in 1997, $287,000 in 1996, and
$274,000 in 1995, for the Company's matching contribution to retirement
savings plans. The Company's cost for pension plans is determined as 2% - 4%
of each covered employee's wages. The Company's matching contribution for the
retirement savings plans is 25% - 50% of employee contributions (up to 4% of
their earnings). In addition to the above, amounts charged to pension expense
and contributed to multiemployer defined benefit pension plans administered
by others under collective bargaining agreements were $1,102,000 in 1997,
$1,135,000 in 1996, and $1,203,000 in 1995.
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 31,053 and 13,687 shares were
awarded, and the amounts charged to income were $365,000, and $150,000 in
1997 and 1995 respectively. No shares were awarded in 1996. At June 30, 1997,
348,257 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
--- --- --- ---
1997:
Net Sales............. $52,019 $50,552 $56,803 $60,053
Gross Profit.......... 11,374 10,775 11,802 12,387
Net Income............ 1,462 1,203 1,686(1) 1,697
Earnings Per Share.... .21 .17 .24(1) .24
Dividends Per Share... .12 .12 .12 .12
* Market Price
High................ 12 13 3/4 13 5/8 12 1/2
Low................. 10 1/4 11 1/2 10 3/4 10 1/2
(1) Includes a gain on the sale of the Sweetwater, Tennessee facility of
approximately $350,000.
Quarters
--------------------------------------------
1st 2nd 3rd 4th
--- --- --- ---
1996:
Net Sales............. $49,227 $48,177 $53,213 $54,391
Gross Profit.......... 9,857 9,687 11,689 12,325
Net Income ........... 428 716 1,433 1,925
Earnings Per Share.... .06 .10 .20 .27
Dividends Per Share... .12 .12 .12 .12
* Market Price
High................ 12 5/8 12 10 3/4 11 3/4
Low................. 10 1/4 10 1/4 8 1/4 9 1/2
* Reflects the market prices as quoted by the National Association of
Securities Dealers, Inc.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITIONS
Working Capital - Flexsteel's working capital at June 30, 1997 is $44,357,000
which includes cash, cash equivalents, and investments of $9,486,000. Working
capital decreased by $3,019,000 from June 30, 1996. The decrease in working
capital was primarily due to the purchase of certain assets of Dygert Seating,
Inc., and the repurchase of Company common stock. 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 $2,275,000 in the
form of variable rate demand industrial development revenue bonds.
Capital Expenditures - Capital expenditures were $8,703,000 in fiscal 1997
including approximately $3,430,000 pertaining to the Dygert asset acquisition.
Expenditures for manufacturing and delivery equipment were approximately
$5,273,000. Projected capital spending in fiscal 1998 is approximately
$3,000,000 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
determines dividend levels based on the Company's ability to pay its
obligations, capital expenditure requirements, and other related factors. The
Company has paid dividends on its common stock for 222 consecutive quarters. The
company expects to continue regular dividend payments. As of June 30, 1997 there
were approximately 1,920 shareholders of Flexsteel's outstanding common stock.
Pending Accounting Changes - The Financial Accounting Standards Board (FASB)
has issued SFAS No. 128 "Earnings Per Share" and SFAS No. 129 "Disclosure of
Information about Capital Structure" which are effective for fiscal years ending
after December 15, 1997. The FASB has also issued SFAS No. 130 "Reporting Com
pre hensive Income" and SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information" which are effective for fiscal years
beginning after December 15, 1997. The Company expects that adoption of these
statements will not have a material effect on the Company's results of
operations or financial position when they are adopted.
Economic Conditions - With interest rates and inflation at relatively low
levels and consumer confidence remaining high, demand for the Company's seating
products should remain steady throughout fiscal 1998. The Company is positioned
to capitalize on the consumer confidence which currently exists through product
design efforts to better target specific residential furniture consumers,
increased capacity and market penetration in the recreational vehicle market
place, and maximization of growth opportunities in the hospitality and health
care fields. These factors, in conjunction with continued efforts to identify
and implement cost savings, improve manufacturing process efficiencies, and
increase utilization of production facilities, should result in operating profit
improvements.
RESULTS OF OPERATIONS
FISCAL 1997 COMPARED TO FISCAL 1996
Sales for 1997 increased by $14,418,000 or 7.0% compared to 1996. Home
Furnishings sales volume increased $4,960,000 or 3.9%. Recreational Vehicle
products increased $6,481,000 or 11.2%. Approximately $6,200,000 of this
increase relates to the acquisition of Dygert Seating Inc. Commercial Seating
volume increased $2,977,000 or 16.4%. Cost of goods sold increased by
$11,638,000 for the year as compared to 1996 due to the volume increase.
Selling, general and administrative expenses increased by $1,157,000 due
primarily to the Dygert acquisition and volume related increases in variable
expenses. Selling, general, and administrative expenses, as a percentage of
sales, decreased from 18.1% in fiscal 1996 to 17.5% in fiscal 1997. This
percentage decrease reflects the Company's ability to control fixed costs in
relation to the volume increase. Interest and other income increased by
$785,000, primarily due to a gain of approximately $550,000 on the sale of the
Sweetwater, Tennessee facility. The above factors resulted in fiscal year 1997
earnings of $6,048,000 or $.86 per share compared to $4,502,000 or $.63 per
share in fiscal 1996, a net increase of $1,546,000 or $.23 per share.
FISCAL 1996 COMPARED TO FISCAL 1995
Sales for 1996 decreased by $3,424,000 or 1.6% compared to 1995. Home
Furnishings sales volume decreased $2,848,000 or 2.2%, Recreational Vehicle
products decreased $2,519,000 or 4.2%, while Commercial Seating increased
$1,943,000 or 12.0%. Cost of goods sold decreased by $2,780,000 for the year as
compared to 1995 due to the volume decrease. Selling, general and administrative
expenses were 18.1% in fiscal 1996 compared to 17.6% in fiscal 1995. This
increase reflects approximately $400,000 of additional costs associated with
enhancements to our Comfort Seating Gallery Program and an increase of
approximately $675,000 in bad debt provision. The above factors resulted in
fiscal year 1996 net earnings of $4,502,000 or $.63 per share compared to
$5,211,000 or $.73 per share in fiscal 1995, a net decrease of $709,000 or $.10
per share.
FISCAL 1995 COMPARED TO FISCAL 1994
Sales for 1995 increased by $13,044,000 or 6.7% compared to 1994. Home
Furnishings sales volume increased $8,359,000 or 6.8%, Contract Furniture
increased $2,507,000 or 18.2%, and Recreational Vehicle products increased
$2,178,000 or 3.7%. Cost of goods increased $13,164,000 for the year as compared
to 1994. Approximately $3,000,000 of this increase relates to lower margins,
increased material costs, and inefficiencies due to decreased volume in the
fourth quarter of the year, with the remainder due to overall increased volume
for the year. Selling, general and administrative expenses were 17.6% in fiscal
1995 compared to 17.9% in 1994. The Company continues to control fixed costs
while increasing volume. Interest expense increased by $102,000 due to financing
the Starkville, Mississippi, expansion. In fiscal 1994 the Company made an
accounting principle change in adopting Statement of Financial Accounting
Standards (SFAS) No. 115 which resulted in net cumulative income of $320,000 or
$.04 per share. The above factors resulted in fiscal year 1995 net earnings of
$5,211,000 or $ .73 per share compared to $6,787,000 or $ .95 per share in
fiscal 1994, a net decrease of $1,576,000 or $.22 per share.
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
M. C. Dixon, General Manager
Flexsteel Industries, Inc.
LANCASTER, PENNSYLVANIA 17604
(717) 392-4161
T.P. Fecteau, General Manager
Flexsteel Industries, Inc.
RIVERSIDE, CALIFORNIA 92504
(909) 354-2440
T.D. Burkart, General Manager
Flexsteel Industries, Inc.
NEW PARIS, INDIANA 46553
(219) 831-4050
G.H. Siemer, General Manager
Wood Products Division
HARRISON, ARKANSAS 72601
(501) 743-1101
M.J. Feldman, General Manager
Metal Division
DUBUQUE, IOWA 52001
(319) 556-7730
J.E. Gilbertson, General Manager
Commercial Seating Division
STARKVILLE, MISSISSIPPI 39760
(601) 323-5481
S.P. Salmon, General Manager
DYGERT SEATING DIVISION
Elkhart, Indiana 46515
(219) 262-4675
D.L. Dygert, General Manager
DYGERT SEATING DIVISION
Watkinsville, Georgia 30677
(706) 769-8731
J.B. Wilkes, Plant Manager
Vancouver Distribution Center
VANCOUVER, WASHINGTON 98668
(206) 696-9955
R. Heying, Supervisor
* EXECUTIVE OFFICES
PERMANENT SHOWROOMS
Dubuque, Iowa
High Point, North Carolina
San Francisco, California
DIRECTORS AND OFFICERS
Frank H. Bertsch
CHAIRMAN OF EXECUTIVE COMMITTEE
DIRECTOR
Jack B. Crahan
CHAIRMAN OF THE BOARD OF DIRECTORS
K. Bruce Lauritsen
PRESIDENT
CHIEF EXECUTIVE OFFICER
DIRECTOR
Edward J. Monaghan
EXECUTIVE VICE PRESIDENT
CHIEF OPERATING OFFICER
DIRECTOR
James R. Richardson
SENIOR VICE PRESIDENT, MARKETING
DIRECTOR
L. Bruce Boylen
RETIRED VICE PRESIDENT
FLEETWOOD ENTERPRISES, INC.
DIRECTOR
John R. Easter
RETIRED VICE PRESIDENT
SEARS, ROEBUCK & COMPANY
DIRECTOR
Thomas E. Holloran
PROFESSOR, GRADUATE SCHOOL OF
BUSINESS, UNIVERSITY OF ST. THOMAS
ST. PAUL, MINNESOTA
DIRECTOR
James G. Peterson
CONSULTANT
JAMES G. PETERSON ASSOCIATES
BUSINESS CONSULTANT
AND INVESTMENT ADVISOR
DIRECTOR
Art D. Richardson
RETIRED SENIOR VICE PRESIDENT
FLEXSTEEL INDUSTRIES, INC.
DIRECTOR
Jeffrey T. Bertsch
VICE PRESIDENT
Carolyn T. B. Bleile
VICE PRESIDENT
Thomas D. Burkart
SENIOR VICE PRESIDENT, VEHICLE SEATING
Kevin F. Crahan
VICE PRESIDENT
Patrick M. Crahan
VICE PRESIDENT
Keith R. Feuerhaken
VICE PRESIDENT
James E. Gilbertson
VICE PRESIDENT
James M. Higgins
VICE PRESIDENT, COMMERCIAL SEATING
Ronald J. Klosterman
VICE PRESIDENT, FINANCE
CHIEF FINANCIAL OFFICER
SECRETARY
Michael A. Santillo
VICE PRESIDENT
EXECUTIVE COMMITTEE
Frank H. Bertsch, Chairman
Jack B. Crahan
K. Bruce Lauritsen
Edward J. Monaghan
James R. Richardson
AUDIT & ETHICS
COMMITTEE
Thomas E. Holloran, Chairman
John R. Easter
James G. Peterson
Art D. Richardson
NOMINATING &
COMPENSATION
COMMITTEE
L. Bruce Boylen, Chairman
John R. Easter
Thomas E. Holloran
James G. Peterson
MARKETING COMMITTEE
John R. Easter, Chairman
Frank H. Bertsch
L. Bruce Boylen
James G. Peterson
Art D. Richardson
TRANSFER AGENT AND
REGISTRAR
Norwest Capital Resources
P.0. Box 738
South St. Paul,
Minnesota 55075-0738
GENERAL COUNSEL
Irving C. MacDonald
Minneapolis, Minnesota
O'Connor and Thomas, P.C.
Dubuque, Iowa
NATIONAL OVER
THE COUNTER
NASDAQ Symbol - FLXS
ANNUAL MEETING
Tuesday,
December 9, 1997, 3:30 p.m.
The Marquette
710 Marquette Avenue, 3rd floor
Minneapolis, Minnesota 55402
AFFIRMATIVE ACTION POLICY
It is the policy of Flexsteel Industries, Inc. that all employees and potential
employees shall be judged on the basis of qualifications and ability, without
regard to age, sex, race, creed, color or national origin in all personnel
actions. No employee or applicant for employment shall receive discriminatory
treatment because of physical or mental handicap in regard to any position for
which the employee or applicant for employment is qualified. Employment
opportunities and job advancement opportunities will be provided for qualified
disabled veterans and veterans of the Vietnam era. This policy is consistent
with the Company's plan for 'Affirmative Action' in implementing the intent and
provisions of the various laws relating to employment and non-discrimination.
ANNUAL REPORT ON FORM 10-K AVAILABLE
A copy of the Company's annual report on Form 10-K, as filed with the Securities
and Exchange Commission, can be obtained without charge by writing to: Office of
the Secretary, Flexsteel Industries, Inc., P. O. Box 877, Dubuque, Iowa
52004-0877.
- --------------------------
VISIT US ON THE INTERNET
http://flexsteel.com
- --------------------------
[LOGO] FLEXSTEEL(R)
AMERICA'S SEATING SPECIALIST
(C) 1997 FLEXSTEEL INDUSTRIES, INC.
<PAGE>
[PHOTO]
Luxury afloat: a handsome leather reclining sofa, as well as the dining table
and chairs, in the spacious salon of this Carver Yacht are by Flexsteel. The
free-standing furniture in all seventeen Carver models is by Flexsteel.
[PHOTO]
"There's a world of difference," says Carver Boats of their luxurious and
spacious motor yachts and cruisers. Carver has a long history of dedication to
quality, and Flexsteel furniture is ideal for their interiors.
- --------------------------------------------------------------------------------
[LOGO] FLEXSTEEL(R)
AMERICA'S SEATING SPECIALIST
P.O. BOX 877 * DUBUQUE IA 52004-0877
EXHIBIT 23.1
INDEPENDENT AUDITORS' REPORT
Flexsteel Industries, Inc.:
We have audited the financial statements of Flexsteel Industries, Inc.
(the Company) as of June 30, 1997 and 1996 and for each of the three years in
the period ended June 30, 1997, and have issued our report thereon dated August
8, 1997, such financial statements and report are included in your 1997 Annual
Report to Stockholders and are incorporated herein by reference. Our audits also
included the financial statement schedule of Flexsteel Industries, Inc., listed
in Item 14. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statement schedule based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
August 8, 1997
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
Flexsteel Industries, Inc.:
We consent to the incorporation by reference in Registration Statement No.
33-1836 on Form S-8 as amended by Post-Effective Amendment No. 1 for the
Flexsteel Salaried Employees' Savings Plan 401(k) and in Registration Statement
No. 2-86782 on Form S-8 as amended by Post-Effective Amendment No. 3 for the
Flexsteel 1983 Stock Option Plan and in Registration Statement No. 33-26267 on
Form S-8 for the Flexsteel 1989 Stock Option Plan and in Registration Statement
No. 333-1413 on Form S-8 for the Flexsteel 1995 Stock Option Plan of our reports
dated August 8, 1997 appearing in and incorporated by reference in the Annual
Report on Form 10-K of Flexsteel Industries, Inc. for the year ended June 30,
1997.
DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
September 24, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,445,327
<SECURITIES> 5,041,154
<RECEIVABLES> 28,147,941
<ALLOWANCES> 2,799,000
<INVENTORY> 26,985,554
<CURRENT-ASSETS> 65,247,093
<PP&E> 73,176,562
<DEPRECIATION> 46,962,157
<TOTAL-ASSETS> 99,172,677
<CURRENT-LIABILITIES> 20,890,230
<BONDS> 0
0
0
<COMMON> 6,927,310
<OTHER-SE> 68,310,719
<TOTAL-LIABILITY-AND-EQUITY> 99,172,677
<SALES> 219,426,736
<TOTAL-REVENUES> 221,259,653
<CGS> 173,088,406
<TOTAL-COSTS> 211,441,071
<OTHER-EXPENSES> 38,352,665
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 345,148
<INCOME-PRETAX> 9,473,434
<INCOME-TAX> 3,425,000
<INCOME-CONTINUING> 6,048,434
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,048,434
<EPS-PRIMARY> 0.86
<EPS-DILUTED> 0
</TABLE>
