Flexsteel Industries, Inc.
ANNUAL REPORT
Fiscal Year ending June 30, 2011
2011
Financial Highlights
For the Years Ended June 30,
(Amounts in thousands, except per share data)
2011
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 339,426
Operating income (1) (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,864
Income before income taxes (1) (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,207
Net income (1) (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,417
Weighted Average Common Shares Outstanding - Diluted . . . . . . . . . . . . . . . . 6,929
Earnings per share of Common Stock - Diluted (1) (2). . . . . . . . . . . . . . . . . . . . . $ 1.50
Cash dividends declared per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.30
Book value per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.16
At June 30,
Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 100,683
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164,677
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,104
Shareholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128,573
2010
$ 326,466
17,529
17,451
10,801
6,697
$ 1.61
$ 0.20
17.70
$ 90,800
157,670
40,058
117,612
2009
$ 324,158
(2,272)
(2,579)
(1,509)
6,576
$ (0.23)
$ 0.36
16.27
$ 78,416
150,971
43,973
106,998
(1) Fiscal 2011 income and per share amounts include charges
consisting of employee separation costs and inventory
write down related to closing a manufacturing facility of
$1.0 million (after tax) or $0.15 per share.
(2) Fiscal 2009 loss and per share amounts reflect facility
consolidation and other costs (after tax) of $1.5 million or
$0.23 per share.
New Corporate Headquarters announced
After 75 years in our current location, Flexsteel will break ground
in September 2011 for a new corporate headquarters in
Dubuque, Iowa, near the Mississippi River. The four-story
building will feature 40,000 square feet of office space. The
building is designed with large windows to make use of natural
light creating an open, airy ambiance. Flexsteel and DMI
furniture will be utilized throughout the building.
The new facility is designed to be energy-efficient and
environmentally friendly. Approximately 100 employees will
relocate to the new office and there is room for expansion to take
advantage of future growth opportunities. These employees
provide administrative
and
management
services to the global
operations of Flexsteel
and its wholly-owned
subsidiary DMI. Additionally, these employees manage
residential and commercial products in areas including design,
manufacturing, marketing,
supply-chain management,
purchasing, engineering, advertising, customer service, credit
management, information systems and accounting.
DMI celebrates 100 years in furniture
Founded in 1911 in Huntingburg, Indiana near abundant
supplies of native timber, the company was first known as
Huntingburg Furniture Company. After decades of success,
growth and expansion, including the establishment of additional
manufacturing facilities and trucking distribution centers across
the U.S., the company was sold in 1964 to Dolly Madison Foods
and became Dolly Madison Industries, Inc. More success
followed and by the late 1970s, DMI Furniture owned and
operated eight manufacturing facilities and five supplier plants.
In the early-1980s, the headquarters was moved to Louisville,
Kentucky where it remains today. After sourcing in China proved
successful, the company
established a presence in
southern China during
the early 1990s. Later in that decade, DMI launched Wynwood,
an elegant line of upscale furniture, and HomeStyles, an online
source for casual furnishings, as well as DMI Office, which
supplies stylish commercial furniture. During that time, DMI
expanded its Asia infrastructure to include Vietnam and
Thailand. Acquired by Flexsteel Industries, Inc., in 2003, DMI
remains a respected and thriving marketer of quality product.
To Our Shareholders:
Fiscal year 2011 was a very challenging year. Continuing high
unemployment, declining consumer confidence, lack of recovery
in the housing sector and diminishing consumer discretionary
spending all negatively impacted our opportunities for growth.
In spite of these challenges, we stayed focused on the strategies
that we established and executed since the onset of the “Great
Recession” of 2008. This fiscal year we built upon our success in
fiscal year 2010 and recorded modest growth in sales for both
Residential and Commercial products.
Founded in 1893, our Company has survived and thrived during
the Great Depression, many recessions and other periods of
economic uncertainty. Our corporate culture, long and short-
term business strategies, and core values enable our company to
continue to succeed in this economic environment.
Our core principles remain the same: the integrity of our
associates allows us to maintain and grow customer and
loyalty, our product quality strengthens these
supplier
relationships and our product design and innovation provide
opportunities for growth.
Our financial results for fiscal year 2011 built upon the strong
turnaround experienced in fiscal year 2010. Net sales were
$339.4 million in fiscal year 2011 compared to $326.5 million in
the prior year, an increase of 4.0%. Residential net sales were
$258.1 million compared to $246.0 million in fiscal year 2010,
an increase of 4.9%. Commercial net sales were $81.3 million
for fiscal year 2011, an increase of 1.1% from last year’s net sales
of $80.5 million.
We maintained our gross margin in spite of significant cost
increases for raw materials and finished products. We closed our
last domestic commercial office manufacturing facility and
downsized our Riverside, CA, residential manufacturing facility
to match current demand levels. Both of these adjustments
reduced fixed overhead and will help us maintain margins in
fiscal year 2012 and beyond.
Adjusted operating income in fiscal year 2011 was $17.8 million
excluding the costs associated with the commercial office facility
closing and the related inventory write down. This compares to
fiscal year 2010 operating income of $17.5 million.
Net income for fiscal year 2011 was $10.4 million compared to
record net income of $10.8 million in fiscal year 2010.
We have continued to strengthen our balance sheet over the last
two fiscal years. We ended fiscal year 2011 with working capital
of $100 million. This includes cash on hand of $18 million. We
have no bank borrowings and shareholder equity is $129 million
or $19.16 per share. During the year, the Board of Directors
approved dividend payments of $0.30 per share, an increase of
50% from prior year dividend payments of $0.20 per share.
We would like to thank our shareholders, Board of Directors, our
associates and our customers and suppliers for their support.
Best regards,
Ronald J. Klosterman
President and
Chief Executive Officer
L. Bruce Boylen
Chairman of the Board
Board members Boylen and Holloran retire
Longtime Flexsteel Industries, Inc., board members Bruce Boylen
and Tom Holloran, announced their retirement, effective
December 2011.
Bruce Boylen joined the board in 1994, bringing with him an
extensive background in the recreational vehicle industry and
manufacturing operations. His career with Fleetwood
Enterprises, a recreational vehicle industry leader, involved every
facet of development, manufacturing and management. Bruce
served and led committees on the Flexsteel board and was named
Chairman of the Board in 2000.
Tom Holloran has provided extraordinary leadership since 1971.
His qualities of integrity, honesty, enthusiasm and leadership have
been the basis for his significant contributions. Flexsteel has been
fortunate
to have
someone with his
skills, including his
abilities in effective
corporate governance,
on our Board
for
nearly 40 years.
“We will miss the guidance and counsel of Bruce and Tom.
Flexsteel
insights,
contributions, and the consistent support that they have provided
during their long tenures as Directors,” said Ronald J.
Klosterman, Flexsteel’s President and CEO.
is much stronger because of
Thomas E. Holloran
L. Bruce Boylen
their
Three new board members appointed
During fiscal 2011, three new board members were selected. We
look forward to their guidance and contributions.
Thomas M. Levine is an independent management advisor
based in Pittsburgh, Pennsylvania. Mr. Levine has more than
thirty-five years of business management and legal experience.
He has served on both public and private company boards and
is currently serving on the boards of various private companies.
Mr. Levine counsels businesses in a number of areas, including
strategic planning, acquisitions, and other initiatives to improve
shareholder value.
Robert J. Maricich is the President and CEO of World Market
Center Ventures LLC, Las Vegas, Nevada. Throughout the past
thirty years, Mr. Maricich has developed a comprehensive
understanding of the furniture industry. He has furniture
expertise in engineering, manufacturing, product development
and sourcing, sales and marketing. Mr. Maricich is a passionate
leader for the furniture industry and has served and is currently
serving on industry association boards.
Nancy E. Uridil
is the Senior Vice President of Moen
Incorporated, North Olmsted, Ohio, responsible for global
sourcing, manufacturing, worldwide distribution and logistics,
engineering, and quality. Educated as an engineer, she expanded
her business knowledge and expertise serving Procter & Gamble,
Mary Kay, Inc., and Estee Lauder Companies in various
leadership roles. Ms. Uridil offers a unique blend of business
talents and has successfully demonstrated her ability to deliver
top and bottom line results.
Directors
L. Bruce Boylen
Chair of the Board of Directors
Retired Vice President
Fleetwood Enterprises, Inc.
Ronald J. Klosterman
President and Chief Executive Officer
Director
Jeffrey T. Bertsch
Senior Vice President ~ Corporate Services
Director
Mary C. Bottie
Director
Retired Vice President
Marketing and Operations
Motorola, Inc.
Patrick M. Crahan
Senior Vice President ~ Commercial Seating
Director
Lynn J. Davis
Director
Retired President and Chief Operating Officer
August Technology
Robert E. Deignan
Director
Attorney at Law ~ Baker & McKenzie LLP
Committees
Audit and Ethics Committee
Eric S. Rangen, Chair
Lynn J. Davis
Thomas E. Holloran
Thomas M. Levine
Thomas E. Holloran
Director
Professor Emeritus, College of Business
Senior Distinguished Fellow ~ School of Law
University of St. Thomas ~ St. Paul, Minnesota
Thomas M. Levine
Director
Independent Management Advisor
Robert J. Maricich
Director
Chief Executive Officer
International Market Centers
Eric S. Rangen
Director
Senior Vice President and
Chief Accounting Officer
United Health Group
James R. Richardson
Senior Vice President ~ Sales and Marketing
Director
Nancy E. Uridil
Director
Senior Vice President ~ Moen Incorporated
Nominating and Compensation Committee
Mary C. Bottie, Chair
Robert E. Deignan
Robert J. Maricich
Nancy E. Uridil
Officers
Carrie T. Bertsch Bleile
Vice President ~ Merchandising
Thomas D. Burkart
Senior Vice President
Vehicle Seating
Kevin F. Crahan
Vice President
Commercial Seating Sales
Donald D. Dreher
Senior Vice President
President and
Chief Executive Officer
DMI Furniture
Lee D. Fautsch
Vice President ~ Residential Sales
James E. Gilbertson
Senior Vice President
Vehicle Seating
Timothy E. Hall
Senior Vice President ~ Finance
Chief Financial Officer
Secretary
Michael A. Santillo
Vice President
Vehicle Seating Marketing
Trans fer Agent and Registrar
Wells Fargo Shareowner Services
P.O. Box 64854 • South St. Paul, Minnesota 55164-0854
General Counsels
Gray, Plant, Mooty, Mooty & Bennett, P.A. • Minneapolis, Minnesota
O’Connor and Thomas, P.C. • Dubuque, Iowa
NASDAQ Global Market
NASDAQ Symbol • FLXS
Annual Meeting
December 12, 2011, 2:00 p.m. • Hilton Minneapolis
1001 Marquette Avenue • Minneapolis, Minnesota 55403
Locations
Flexsteel Industries, Inc.
Dubuque, Iowa 52001 . . . . . . . . . J. E. Gilbertson, General Manager
(executive offices)
Dublin, Georgia 31040 . . . . . . . . M.C. Dixon, General Manager
Lancaster, Pennsylvania 17604. . D. Kobie, Manager
Riverside, California 92504. . . . . D.J. Bashor, General Manager
Harrison, Arkansas 72601. . . . . . M.J. Feldman, General Manager
Starkville, Mississippi 39760. . . . R. C. Adams, General Manager
DMI Furniture, Inc
Louisville, Kentucky 40223 . . . . . D.D. Dreher, President & CEO
Huntingburg, Indiana 47542 . . . R. Rosbottom, VP Distribution
Permanent Showrooms
High Point, North Carolina • Las Vegas, Nevada
Internet
www.flexsteel.com • www.flexsteel.com/home-furniture
www.flexsteelhospitality.com • www.flexsteel.com/vehicle-seating
www.dmifurniture.com • www.dmiofficefurniture.com
www.wynwoodfurniture.com • www.homestyles-furniture.com
AFFIRMATIVE ACTION POLICY
It is the policy of Flexsteel Industries, Inc. that all employees and
potential employees shall be judged on the basis of qualifications and
ability, without regard to age, sex, race, creed, color or national origin
in all personnel actions. No employee or applicant for employment
shall receive discriminatory treatment because of physical or mental
disability in regard to any position for which the employee or
applicant for employment is qualified. Employment opportunities,
and job advancement opportunities will be provided for qualified
disabled veterans and veterans of the Vietnam era. This policy is
consistent with the Company’s plan for “Affirmative Action” in
implementing the intent and provisions of the various laws relating to
employment and non-discrimination.
ANNUAL REPORT ON FORM 10-K AVAILABLE
A copy of the Company’s annual report on Form 10-K, as filed with the
Securities and Exchange Commission, can be obtained without charge
by writing to: Office of the Secretary • Flexsteel Industries, Inc.
P. O. Box 877 • Dubuque, Iowa 52004-0877
© 2011 Flexsteel Industries, Inc.
PO Box 877 • Dubuque, IA 52004-0877
PRST STD
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Dubuque, IA
Fine Furniture Since 1893