SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 11-K
(Mark One)
[ ] ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended _________________
or
[|X|] TRANSITION REPORT PURSUANT TO SECTION 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from July 1, 2002 to December 31, 2002
Commission file number 0-5151
A) Full title of the plan and the address of the plan, if different from that
of issuer named below:
FLEXSTEEL INDUSTRIES, INC. SALARIED EMPLOYEES RETIREMENT AND 401(K) PLAN
B) Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office:
FLEXSTEEL INDUSTRIES, INC., P.O. BOX 877, DUBUQUE, IA 52004-0877
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of
1934, the trustees (or other persons who administer the employee benefit plan)
have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
Flexsteel Industries, Inc. Salaried Employees Retirement and 401(k) Plan
------------------------------------------------------------------------
(Name of Plan)
Date: June 25, 2003 /s/ R. J. KLOSTERMAN
---------------------------------------------------
R.J. Klosterman
VICE PRESIDENT OF FINANCE AND
PRINCIPAL FINANCIAL OFFICER
INDEPENDENT AUDITORS' REPORT
Flexsteel Industries, Inc.
Salaried Employees Retirement and 401(k) Plan
Dubuque, Iowa
We have audited the accompanying statements of net assets available for benefits
of the Flexsteel Industries, Inc. Salaried Employees Retirement and 401(k) Plan
(the Plan) as of December 31, 2002 and June 30, 2002 and the related statements
of changes in net assets available for benefits for the six-month period ended
December 31, 2002 and the years ended June 30, 2002 and 2001. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
2002 and June 30, 2002 and the changes in net assets available for benefits for
the six-month period ended December 31, 2002 and the years ended June 30, 2002
and 2001 in conformity with accounting principles generally accepted in the
United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes as of December 31, 2002 is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule is the responsibility of the
Plan's management. Such supplemental schedule has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects when considered in relation
to the basic financial statements taken as a whole.
DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
June 6, 2003
2
Flexsteel Industries, Inc.
Salaried Employees Retirement and 401(k) Plan
Statements of Net Assets Available for Benefits
December 31, 2002 and June 30, 2002
June 30,
December 31, 2002 2002
----------------- -----------
Assets:
Cash $ 24,633 $ 18,876
Investments:
Flexsteel Industries, Inc. common stock 2,547,693 2,173,520
Other investments 37,502,946 17,703,716
----------- -----------
40,050,639 19,877,236
Employer contributions receivable 85,757 16,090
Employee contributions receivable 114,794 109,301
----------- -----------
Net assets available for benefits $40,275,823 $20,021,503
=========== ===========
See Notes to Financial Statements.
Flexsteel Industries, Inc.
Salaried Employees Retirement and 401(k) Plan
Statements of Changes in Net Assets Available For Benefits
Six Months Ended December 31, 2002 and Years Ended June 30, 2002 and 2001
June 30, June 30,
December 31, 2002 2002 2001
----------------- ------------ ------------
Additions:
Employee contributions $ 835,178 $ 1,438,730 $ 1,501,871
Employer contributions 649,727 218,546 223,361
Investment income 365,958 334,701 331,962
Net depreciation in fair value of
assets (2,322,421) (1,419,645) (2,065,535)
Transfer from merged plan (Note 1) 21,699,452
Transfers from other plans (Note 1) 252,451
Receipt from demutualization (Note 4) 709,100
------------ ------------ ------------
Total net additions 21,480,345 1,281,432 (8,341)
Distributions and expenses (1,226,025) (582,031) (464,911)
------------ ------------ ------------
Net increase (decrease) 20,254,320 699,401 (473,252)
Net assets available for benefits
at beginning of period 20,021,503 19,322,102 19,795,354
------------ ------------ ------------
Net assets available for benefits
at end of period $ 40,275,823 $ 20,021,503 $ 19,322,102
============ ============ ============
See Notes to Financial Statements.
3
FLEXSTEEL INDUSTRIES, INC.
SALARIED EMPLOYEES' RETIREMENT AND 401(K) PLAN
NOTES TO FINANCIAL STATEMENTS
1) DESCRIPTION OF THE PLAN
The following description of the Flexsteel Industries, Inc. Salaried Employees
Retirement and 401(k) Plan (the Plan) is provided for general information
purposes only. Participants should refer to the plan document for more complete
information.
GENERAL - The Plan is a defined contribution plan covering substantially all
salaried employees of Flexsteel Industries, Inc. (the Company) who have reached
the age of 21 and have completed one year of service. Participation is
voluntary. The plan administrator controls and manages the operation and
administration of the Plan. Assets of the Plan are held by the Principal Life
Insurance Company (the Custodian), except for the Flexsteel Industries, Inc.
common stock fund that is held by the American Trust & Savings Bank of Dubuque,
Iowa (the Trustee). A committee appointed by the Board of Directors of the
Company administers the Plan. The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA).
FISCAL YEAR END - Effective July 1, 2002, the Plan's fiscal year end was changed
from June 30 to December 31.
TRANSFERS - Effective July 1, 2002, the Plan combined with the Flexsteel
Industries, Inc. Salaried Employees Retirement Plan (Plan #006). To reflect this
combination, all of the net assets of Plan #006 as of July 1, 2002 have been
recorded as a transfer of $21,699,452 to the Plan in the statement of changes in
net assets available for benefits.
During the six months ended December 31, 2002, the Plan received transfers from
other company benefit plans totaling $252,451 related to certain employee job
classification changes.
CONTRIBUTIONS AND VESTING - The Plan allows eligible employees to elect to have
from 1% to 50% (sales personnel are subject to a 4% maximum) of their basic
pre-tax pay contributed to the Plan. Employee contributions are subject to a
maximum of $11,000 in calendar year 2002 by law. The Company contributes an
amount equal to 25% of the first 4% of pay the employee contributes. Participant
and company basic contributions are 100% vested. The Company, at its option, may
also contribute additional amounts to be allocated amongst all participants
based on the participants' pay; such additional discretionary contributions vest
over 7 years (20% after 3 years, 40% after 4 years, 60% after 5 years, 80% after
6 years, and 100% after 7 years). Discretionary company contributions may be
made in either cash or company stock, at the Company's discretion. In addition,
the Company contributes 4% of pay up to the social security limit and 6% of pay
in excess of this limit on a monthly basis. Forfeited balances of terminated
participants may first be applied to pay expenses which would otherwise be paid
by the Company. Forfeitures not used to pay expenses shall be applied to reduce
future company contributions.
PARTICIPANT ACCOUNTS - Individual accounts are maintained for each plan
participant. Each participant's account is credited with the Company's
contribution and allocations of plan earnings, and charged with an allocation of
plan losses and administrative expenses. Allocations are based on compensation,
participant investment elections, and account balances, as defined. The benefit
to which a participant is entitled is the benefit that can be provided from the
participant's vested account.
INVESTMENTS - Plan participants direct their contributions to any of the 12
investment accounts available:
1) FLEXSTEEL INDUSTRIES, INC. COMMON STOCK, which consists of the Company's
common stock.
2) GUARANTEED INTEREST ACCOUNT, which is an insurance company account that
provides a guaranteed interest rate for a five-year period.
3) MONEY MARKET ACCOUNT, which is an investment account primarily invested in
commercial paper with maturities of one year or less.
4) PRIVATE MARKET BOND AND MORTGAGE ACCOUNT, which is an investment account
that provides for competitive yield debt securities.
5) BOND EMPHASIS BALANCED ACCOUNT, which invests primarily in other separate
accounts made up of stocks, bonds, convertibles, and cash. It usually
maintains at least 50% of assets in fixed-income securities.
6) LARGE CAP STOCK INDEX FUND, which is a pooled investment account invested
in the common stock of those firms included in the Standard & Poor's 500
Stock Index.
7) LARGE COMPANY GROWTH ACCOUNT, which primarily invests in larger companies
that management believes have an above-average potential for growth of
capital, earnings, and dividends.
4
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8) LARGE COMPANY BLEND ACCOUNT, which consists of common stock and other
equity securities, and also may include short-term money market
instruments, cash, or cash equivalents.
9) MID CAP STOCK INDEX FUND, which is a pooled investment account invested in
the common stock of those firms included in the Standard & Poor's 400 Mid
Cap Stock Index.
10) SMALL COMPANY BLEND STOCK FUND, which invests in stocks of smaller seasoned
companies.
11) SMALL COMPANY GROWTH STOCK FUND, which invests in stocks of smaller
developing companies.
12) INTERNATIONAL STOCK ACCOUNT, which invests in stocks of companies in
Western Europe and Asia.
PAYMENT OF BENEFITS - Distributions of benefits are paid upon retirement, death,
disability, and in certain hardship cases. Distributions, in certain cases, may
also occur on termination of the Plan or disposition of substantially all of the
Company's assets to another entity. Otherwise, benefits will be distributed on
the later of the date the participant attains age 65, the tenth anniversary of
the participant's entry date, or the date the participant ceases to be an
employee. If a participant's vested account balance has never exceeded $5,000,
the entire vested account balance shall be payable as a single lump sum upon
retirement, death, or termination. For participants whose vested account balance
exceeds $5,000, benefits are paid in an automatic form unless an optional form
has been selected by the participant or their beneficiary:
o Automatic Forms - The automatic form of retirement benefits shall be
in the form of an immediate survivorship life annuity with installment
refund for participants with a spouse or a single life annuity with
installment refund for participants without a spouse.
The automatic form of death benefits shall be: (1) a qualified
preretirement survivor annuity for participants who have a spouse to
whom they have been continuously married throughout the one-year
period ending on the date of their death, or (2) a single-sum payment
to the participant's beneficiary for participants who do not have a
spouse who is entitled to the qualified preretirement survivor
annuity.
o Optional Forms - The optional forms of retirement benefits shall be:
(1) straight life annuity, (2) single life annuities with certain
periods of 5, 10, or 15 years, (3) single life annuity with
installment refund, (4) survivorship life annuities with installment
refund and survivorship percentages of 50%, 66-2/3%, or 100%, (5)
fixed period annuities, (6) a series of installments chosen by the
participant with a minimum payment each year beginning with age 70-1/2
(full flexibility option), or (7) single-sum payment.
The optional forms of death benefits are a single-sum payment and any
annuity that is an optional form of retirement benefit. However, the full
flexibility option shall not be available if the beneficiary is not the
spouse of the deceased participant.
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING - The financial statements have been prepared on the accrual
basis in accordance with accounting principles generally accepted in the United
States of America.
USE OF ESTIMATES - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.
INVESTMENTS - The Plan invests in various investment securities. Investment
securities, in general, are exposed to various risks, such as interest rate,
credit, and overall market volatility. Due to the level of risk associated with
certain investment securities, it is reasonably possible that changes in the
values of investment securities will occur in the near term and that such
changes could materially affect the amounts reported in the statements of net
assets available for benefits.
INVESTMENT VALUATION AND INCOME RECOGNITION - Investments in common stock are
recorded at market value based on market quotations. Other investments are
stated at market value as determined by the Trustee and Custodian based on the
market value of the funds and the participation in each fund, except for the
investment contract. The investment contract is not fully benefit responsive and
is stated at fair value as determined by the Custodian. Net realized and
unrealized appreciation (depreciation) of investments represents the increase
(decrease) in the market value of investments from the beginning of the period
or from the date of purchase (if
5
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
purchased during the year) to the end of the period, as well as the difference
between the sales proceeds and the sum of the market values of the investments
held at the beginning of the period and sold during the period and the cost of
any investments purchased and sold during the period.
EXPENSES - Certain administrative expenses of the Plan, such as contract
administration, record-keeping, and transaction fees, are paid by the Plan.
Certain other administrative fees, such as audit fees of the Plan, are paid by
the Company. Administrative expenses charged to the Plan were not significant.
Expenses paid by the Company were $25,033, $33,094, and $35,050 for the six
months ended December 31, 2002, and the years ended June 30, 2002 and 2001,
respectively.
PAYMENT OF BENEFITS - Benefit payments to participants are recorded upon
distribution.
3) INVESTMENTS
Investments that represent 5% or more of the Plan's net assets were as
follows:
December 31, June 30,
2002 2002
--------------- -----------------
Flexsteel Industries, Inc. common stock
(152,693 and 144,998 shares, respectively) $ 2,547,693 $ 2,173,520
Principal Guaranteed Interest Account 12,147,702 4,773,514
Principal Private Market Bond and Mortgage Account 5,598,744 1,886,284
Principal Large Cap Stock Index Fund 2,611,970 1,508,459
Principal Large Company Blend Account 7,072,082 3,841,326
Principal Small Company Blend Stock Fund 2,783,214 1,823,904
Principal Money Market Account 2,113,075
Principal International Stock Account 1,097,168
The net appreciation (depreciation) in the fair value of investments was as
follows:
Six Months Ended Year Ended Year Ended
December 31, June 30, June 30,
2002 2002 2001
------------------ ---------------- -----------------
Flexsteel Industries, Inc. common stock $ 107,979 $ 559,971 $ (31,754)
Other investments (2,430,400) (1,979,616) (2,033,781)
------------------ ---------------- -----------------
$ (2,322,421) $ (1,419,645) $ (2,065,535)
================== ================ =================
4) DEMUTUALIZATION
Principal Life Insurance Company, the Plan's Custodian, elected to demutualize
and become a public company. As a result, the Plan received cash in the amount
of $709,100 in December 2001. The cash received was allocated to each
participant account based on their respective balance and their investment
fund(s) election.
5) RELATED-PARTY TRANSACTIONS
The Plan invests in Pooled Separate Accounts and the Guaranteed Interest Account
that are managed by the Custodian. The Plan also invests in the Company's common
stock. These transactions qualify as exempt party-in-interest transactions.
6) PLAN TERMINATION
Although it has not expressed any intention to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions set forth in ERISA. In the event that the Plan is
terminated, participants would become 100% vested in their account.
6
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7) FEDERAL INCOME TAX STATUS
The Internal Revenue Service has determined and informed the Company by letter
dated September 27, 2002 that the Plan qualifies under the applicable sections
of the Internal Revenue Code and, therefore, the related trust is not subject to
tax under current tax law. As a result, no provision for income taxes is
believed necessary.
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SUPPLEMENTAL SCHEDULE
FLEXSTEEL INDUSTRIES, INC. SALARIED EMPLOYEES RETIREMENT AND 401(K) PLAN
SCHEDULE H, PART IV, LINE 4I - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 2002
Current
Value
---------------------
Flexsteel Industries, Inc. common stock (1) $ 2,547,693
Principal Life Insurance Company (2):
Guaranteed Interest Account 12,147,702
Pooled Separate Accounts:
Money Market Account 2,113,075
Private Market Bond and Mortgage Account 5,598,744
Bond Emphasis Balanced Account 226,423
Large Cap Stock Index Fund 2,611,970
Large Company Growth Account 1,312,630
Large Company Blend Account 7,072,082
Mid Cap Stock Index Fund 954,014
Small Company Blend Stock Fund 2,783,214
Small Company Growth Stock Fund 675,987
International Stock Account 2,007,105
---------------------
$ 40,050,639
=====================
(1) Flexsteel Industries, Inc., the Plan Sponsor, is known to be a
party-in-interest.
(2) Principal Life Insurance Company, the Plan Custodian, is known to be a
party-in-interest.
8