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Flexsteel Announces Second Quarterly Earnings

    DUBUQUE, Iowa.--Feb. 6, 2001--Flexsteel Industries Inc.




FLEXSTEEL INDUSTRIES, INC.
FINANCIAL INFORMATION
SECOND QUARTER ENDED DECEMBER 31, 2000


                      THREE MONTHS ENDED         SIX MONTHS ENDED
                         DECEMBER 31,               DECEMBER 31,
                   -----------------------  --------------------------
                       2000        1999          2000          1999
                   ----------- -----------  ------------  ------------

Sales              $70,202,314 $70,403,821  $136,845,399  $138,104,571

Operating Income    $2,566,003  $4,804,074    $5,281,960    $8,359,920

Pretax Earnings      2,723,164   5,459,479     5,705,540     9,214,169

Income Taxes         1,000,000   1,870,000     2,100,000     3,260,000

Net Earnings        $1,723,165  $3,589,479    $3,605,540    $5,954,169

Per Share Common 
 Stock:
 Net Earnings - Basic    $0.28       $0.55         $0.59         $0.91
 Net Earnings - Assuming 
  Dilution               $0.28       $0.54         $0.58         $0.90

 Dividends               $0.13       $0.13         $0.26         $0.26

Average Common 
 Shares 
 Outstanding:
 Basic               6,119,763   6,480,183     6,162,545     6,510,574
 Assuming Dilution   6,186,848   6,586,083     6,228,410     6,619,708


    Sales for the second quarter ended December 31, 2000, were $70,200,000 or $200,000 lower than the $70,400,000 record sales reported for the year earlier quarter. Fiscal year-to-date sales decreased 1% or $1,300,000 to $136,845,000 for the six months. For the current quarter, shipments of vehicle seating products decreased by $6,300,000 or 29% while residential shipments increased $6,000,000 or 14%. The decline in year-to-date sales reflects decreased demand for vehicle seating products of $13,000,000 or 28%, offset by increased shipments of residential products of $11,100,000 or 13%.
    Income from operations, excluding the gain on the sale of land of $1,250,000 reported for the quarter and six months ended December 31, 1999, declined 28% to $2,600,000 for the quarter ended December 31, 2000 compared to $3,600,000 reported in the year earlier quarter. For the six months, again excluding the sale of land, operating income declined 26% to $5,300,000 from $7,100,000 for the six months ended December 31, 1999 reflecting lower RV production and initial costs associated with opening retail operations.
    Net earning for the quarter ended December 31, 2000 were $1,700,000 or $0.28 per diluted share. Net earnings for the quarter ended December 31, 1999 includes a net gain of $790,000 or $0.12 per share on the sale of land and $0.06 per share or $405,000 from the proceeds of life insurance. Net earnings, excluding the aforementioned items were $2,400,000 or $0.36 per diluted share. Net earnings on a year-to-date basis were $3,600,000 or $0.58 per diluted share compared to $4,800,000 or $0.72 per diluted share excluding the land sale and life insurance proceeds.
    In October 2000 the Company opened its second Comfort Seating retail store in the Chicago area and in December opened two of three Comfort Seating stores planned for the Indianapolis market. Initial operating expenses associated with opening the stores resulted in a loss of $400,000 during the December 2000 quarter. The Company does not anticipate opening additional retail locations. The retail operations are experiencing operating losses as staffing is completed, advertising is initiated and consumer traffic is established.
    The Company believes that operating these retail stores will aid in assuring product introductions meet consumer requirements, that advertising and marketing materials are effective and to enhance sales by providing additional floor space to display its wide product line to consumers.
    Flexsteel continues to be impacted by the erosion of consumer confidence and the slowdown in the economy. The Company anticipates sales comparisons to be below the March and June 2000 quarterly levels primarily due to the softness in the recreational vehicle business and a flattening of residential seating sales. As a result of the lower revenue levels and the adverse effect on production capacities and efficiencies, earnings will be negatively impacted during the balance of the Company's fiscal year ending June 30, 2001. The Company anticipates an improvement in economic conditions and consumer spending during the last half of calendar 2001. The Company will continue to adjust production levels to meet order demand, reduce fixed costs and maximize efficiencies at these lower levels in its efforts to minimize the negative impact on earnings during the balance of the fiscal year.

    Forward-Looking Information

Any forward-looking statements contained in this report represent management's current expectations based on present information and current assumptions. Actual results could differ materially from those which are not anticipated or projected due to a number of factors. These factors include, but are not limited to, anticipated growth in sales; success of product introductions; fluctuations of interest rates; changes in consumer confidence/demand and other risks and factors identified from time to time in the Company's reports filed with the Securities and Exchange Commission.