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<SEC-DOCUMENT>/in/edgar/work/0000897101-00-000945/0000897101-00-000945.txt : 20000930
<SEC-HEADER>0000897101-00-000945.hdr.sgml : 20000930
ACCESSION NUMBER:		0000897101-00-000945
CONFORMED SUBMISSION TYPE:	10-K405
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20000630
FILED AS OF DATE:		20000928

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			FLEXSTEEL INDUSTRIES INC
		CENTRAL INDEX KEY:			0000037472
		STANDARD INDUSTRIAL CLASSIFICATION:	 [2510
]		IRS NUMBER:				420442319
		STATE OF INCORPORATION:			MN
		FISCAL YEAR END:			0630
</COMPANY-DATA>

		FILING VALUES:
			FORM TYPE:		10-K405
			SEC ACT:		
			SEC FILE NUMBER:	000-05151
			FILM NUMBER:		731244
</FILING-VALUES>

			BUSINESS ADDRESS:	
				STREET 1:		PO BOX 877
				STREET 2:		3400 JACKSON
				CITY:			DUBUQUE
				STATE:			IA
				ZIP:			52004-0877
				BUSINESS PHONE:		3195567730
</BUSINESS-ADDRESS>

				MAIL ADDRESS:	
					STREET 1:		3400 JACKSON
					STREET 2:		P.O. BOX 877
					CITY:			DUBUQUE
					STATE:			IA
					ZIP:			52004-0877
</MAIL-ADDRESS>
</FILER>
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>0001.txt
<TEXT>



                                    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, 2000

                                       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

                 -----------------------------------------------

                           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

                 -----------------------------------------------

           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 10, 2000 which is within 60 days
prior to the date of filing:


              Common Stock, Par Value $1.00 Per Share: $44,620,588

         Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of August 10, 2000:

                   CLASS                          SHARES OUTSTANDING
    -------------------------------------    -----------------------------
       Common Stock, $ 1.00 Par Value               Shares 6,225,637

                       DOCUMENTS INCORPORATED BY REFERENCE

         PORTIONS OF REGISTRANT'S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR
ENDING JUNE 30, 2000 IN PARTS I, II, AND IV.

         IN PART III, PORTIONS OF THE REGISTRANT'S 2000 PROXY STATEMENT, TO BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WITHIN 120 DAYS OF THE
REGISTRANT'S FISCAL YEAR END.

Exhibit Index -- page 6

<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
2000 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 2000 Annual Report to Shareholders which is incorporated herein by
reference.

       The registrant's upholstered seating business has three primary areas of
application -- residential seating, recreational 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
<TABLE>
<CAPTION>
                                                              2000                  1999                 1998
                                                        ------------------    -----------------    -----------------
                                                         AMOUNT OF SALES      AMOUNT OF SALES      AMOUNT OF SALES
                                                        ------------------    -----------------    -----------------
               <S>                                             <C>                   <C>                 <C>
               Residential Seating................           $174,200,000         $151,600,000         $139,200,000

               Recreational Vehicle Seating ......             93,100,000           86,700,000           73,900,000

               Commercial Seating ................             19,600,000           22,200,000           23,000,000
                                                        ------------------    -----------------    -----------------

               Upholstered Seating Total .........           $286,900,000         $260,500,000         $236,100,000
                                                        ==================    =================    =================
</TABLE>

(c)    NARRATIVE DESCRIPTION OF BUSINESS
         (1) (i), (ii), (vii) The registrant is engaged in one segment of
business, namely, the design, manufacture and sale of a broad line of quality
upholstered furniture for residential, commercial, and recreational vehicle
seating use. The registrant's classes of products include a variety of wood and
upholstered furniture including upholstered sofas, loveseats, chairs, reclining
and rocker-reclining chairs, swivel rockers, sofa beds and convertible bedding
units, some of which are for the home, office, motorhome, travel trailer, vans,
health care and hotels. 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, recreational
vehicle manufacturers and van converters, and hospitality and healthcare
facilities. 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 various species of
         hardwood lumber obtained from Arkansas, Mississippi, Missouri and
         elsewhere. In addition to hardwood lumber and engineered wood products,
         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.


                                       2
<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 two fiscal years are as follows:

            JUNE 30, 2000            JUNE 30, 1999            JUNE 30, 1998
         -------------------      -------------------      ------------------
            $30,600,000 *             $28,100,000              $26,100,000

*All of this amount is expected to be filled in fiscal year ending June 30,
2001.

             (ix)  Competitive conditions:

             The furniture industry is highly competitive. There are
         numerous furniture manufactures 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.

             (x)   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, 2000              $2,170,000
                       June 30, 1999              $1,930,000
                       June 30, 1998              $1,640,000

             (xi)  Approximately 2,600 people were employed by the
         registrant as of June 30, 2000; additionally 2,400 people were employed
         as of June 30,1999 and 2,300 people as of June 30, 1998.

(d)    FINANCIAL INFORMATION ABOUT DOMESTIC OPERATIONS

         Financial information about domestic operations is set forth in the
registrant's 2000 Annual Report to Shareholders which is incorporated herein by
reference. The registrant has no foreign operations and makes minimal export
sales.


                                       3
<PAGE>



ITEM 2.       PROPERTIES

(a)    THE REGISTRANT OWNS THE FOLLOWING MANUFACTURING PLANTS:

<TABLE>
<CAPTION>
                                           APPROXIMATE
                  LOCATION              SIZE (SQUARE FEET)                    PRINCIPAL OPERATIONS
         -------------------------    --------------------    -------------------------------------------------
         <S>                                <C>               <C>
         Dubuque, Iowa                      853,000           Upholstered Furniture- Recreational Vehicle
                                                              - Metal Working
         Lancaster, Pennsylvania            216,000           Upholstered Furniture - Recreational Vehicle
         Riverside, California              236,000           Upholstered Furniture - Recreational Vehicle
         Harrison, Arkansas                 123,000           Woodworking Plant
         New Paris, Indiana                 168,000           Recreational Vehicle - Metal Working
         Dublin, Georgia                    242,400           Upholstered Furniture - Recreational Vehicle
         Starkville, Mississippi            349,000           Upholstered Furniture- Woodworking Plant
         Elkhart, Indiana                    99,500           Recreational Vehicle - Metal Working
</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 two production facilities: Harrison,
         Arkansas, 93,000 sq. feet for upholstered furniture and Dunkirk,
         Indiana, 30,000 sq. feet for recreational vehicle furniture.

                  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 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. All pending
litigation is 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, 2000), and the month and year they were first elected
or appointed an officer of the registrant, are as follows:
<TABLE>
<CAPTION>
             NAME (AGE)                                       POSITION (DATE FIRST BECAME OFFICER)
- -------------------------------------     -----------------------------------------------------------------------------
<S>                                       <C>
K. B. Lauritsen (57)                      President / Chief Executive Officer (November 1979)
E. J. Monaghan (61)                       Executive Vice President / Chief Operating Officer (November 1979)
R. J. Klosterman (52)                     Vice President Finance / Chief Financial Officer & Secretary (June 1989)
J. R. Richardson (56)                     Senior Vice President of Marketing (November 1979)
T. D. Burkart (57)                        Senior Vice President of Vehicle Seating (February 1984)
P. M. Crahan (52)                         Vice President (June 1989)
J. T. Bertsch (45)                        Vice President (June 1989)
</TABLE>

Each named executive officer has held the same office of an executive or
management position with the registrant for at least five years.


                                       4
<PAGE>


Cautionary Statement Relevant to Forward-Looking Information for the Purpose of
"Safe Harbor" Provisions and 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, 2000, and is incorporated herein by reference.

         There were approximately 2600 holders of Common Stock of the registrant
as of June 30, 2000; as well as 2,700 and 2,300 holders of Common Stock of the
registrant as of June 30, 1999, and June 30, 1998, respectively.

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, 2000, 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 15 and page
16 in the registrant's Annual Report to Shareholders for the Year Ended June 30,
2000 and is incorporated herein by reference.

ITEM 7a.      QUANTITATIVE INFORMATION ABOUT MARKET RISK

         Not applicable.

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, 2000, are incorporated herein by reference:
<TABLE>
<CAPTION>
                                                                                                                PAGE(S)
                                                                                                               ---------
<S>                                                                                                               <C>
Balance Sheets, June 30, 2000, 1999 ...........................................................................    8
Statements of Income and Comprehensive Income -- Years Ended June 30, 2000, 1999, 1998.........................    9
Statements of Changes in Shareholders' Equity -- Years ended June 30, 2000, 1999, 1998.........................   10
Statements of Cash Flows -- Years Ended June 30, 2000, 1999, 1998..............................................   11
Quarterly Financial Data -- Years Ended June 30, 2000, 1999....................................................   14
Notes to Financial Statements..................................................................................  12-14
Independent Auditors' Report...................................................................................    7
</TABLE>

ITEM 9.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                FINANCIAL DISCLOSURE

         During fiscal 2000 there were no changes in or disagreements with
accountants on accounting procedures or accounting and financial disclosures.


                                       5
<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 2000 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 2000 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, 2000, are incorporated herein
by reference as set forth above in Item 8.

         (2)      Schedules

         The following financial schedules for the years ended 2000, 1999 and
1998 are submitted herewith:
                                                             PAGE
                                                        ----------------
         Schedule VIII             -- Reserves                 9

         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 Article of Incorporation 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.

                  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.

                  10.1     1989 Stock Option Plan, as amended, incorporated by
                           reference from the 1992 Flexsteel definitive proxy
                           statement.*

                  10.2     1995 Stock Option Plan incorporated by reference from
                           the 1995 Flexsteel definitive proxy statement.*

                  10.3     Management Incentive Plan incorporated by reference
                           from the 1980 Flexsteel definitive proxy statement -
                           commission file #0-5151.*

                  10.4     1999 Stock Option Plan incorporated by reference from
                           the 1999 Flexsteel definitive proxy statement.*

                  13       Annual Report to Shareholders for the Year Ended
                           June 30, 2000.

                  22       2000 definitive Proxy Statement incorporated by
                           reference is to be filed with the Securities Exchange
                           Commission on or before December 1, 2000.

                  23.1     Independent Auditor's Report.

                  23.2     Consent of Independent Auditors.

                  27.1     Financial Data Schedule for the fiscal year ended
                           June 30, 2000.

                  99       2000 Form 11-K for Salaried Employee's Savings Plan
                           401(k).

                           *Management contracts and arrangements required to be
                             filed pursuant to Item 14 ( c ) of this report.

(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, 2000.


                                       6
<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 12, 2000            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


                                       7
<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 12, 2000                         /S/ JOHN R. EASTER
     -------------------------------      --------------------------------------
                                                      John R. Easter
                                                         DIRECTOR



Date:    September 12, 2000                      /S/ K. BRUCE LAURITSEN
     --------------------------           --------------------------------------
                                                   K. Bruce Lauritsen
                                                         DIRECTOR



Date:    September 12, 2000                      /S/ EDWARD J. MONAGHAN
     --------------------------           --------------------------------------
                                                   Edward J. Monaghan
                                                        DIRECTOR



Date:    September 12, 2000                     /S/ JAMES R. RICHARDSON
     --------------------------           --------------------------------------
                                                  James R. Richardson
                                                        DIRECTOR



Date:    September 12, 2000                     /S/ JEFFREY T. BERTSCH
     --------------------------           --------------------------------------
                                                   Jeffrey T. Bertsch
                                                        DIRECTOR



Date:    September 12, 2000                     /S/ L. BRUCE BOYLEN
     --------------------------           --------------------------------------
                                                   L. Bruce Boylen
                                                        DIRECTOR



Date:    September 12, 2000                     /S/ PATRICK M. CRAHAN
     --------------------------           --------------------------------------
                                                  Patrick M. Crahan
                                                        DIRECTOR



Date:    September 12, 2000                       /S/ LYNN J. DAVIS
     --------------------------           --------------------------------------
                                                    Lynn J. Davis
                                                        DIRECTOR



Date:    September 12, 2000                    /S/ THOMAS E. HOLLORAN
     --------------------------           --------------------------------------
                                                  Thomas E. Holloran
                                                        DIRECTOR



Date:    September 12, 2000                      /S/ MARVIN M. STERN
     --------------------------           --------------------------------------
                                                    Marvin M. Stern
                                                        DIRECTOR


                                       8
<PAGE>





                                                                  SCHEDULE  VIII

                           FLEXSTEEL INDUSTRIES, INC.

                                    RESERVES
                FOR THE YEARS ENDED JUNE 30, 2000, 1999 AND 1998
<TABLE>
<CAPTION>
                     COLUMN A                          COLUMN B            COLUMN C           COLUMN D              COLUMN E
- -----------------------------------------------    -----------------    ---------------    ----------------    -------------------
                                                      BALANCE AT          ADDITIONS          DEDUCTIONS
                                                     BEGINNING OF         CHARGED TO        FROM RESERVES       BALANCE AT CLOSE
DESCRIPTION                                              YEAR               INCOME             (NOTE)               OF YEAR
- -----------------------------------------------    -----------------    ---------------    ----------------    -------------------
<S>                                                <C>                  <C>                <C>                 <C>
Allowance for Doubtful Accounts:

2000...........................................        $2,503,000           $187,000        ($  440,000)            $2,250,000
                                                   =================    ===============    ================    ===================

1999...........................................        $2,198,000           $544,000        ($  239,000)            $2,503,000
                                                   =================    ===============    ================    ===================

1998...........................................        $2,799,000           $943,000        ($1,544,000)            $2,198,000
                                                   =================    ===============    ================    ===================
</TABLE>


- --------------------
NOTE -- UNCOLLECTIBLE ACCOUNTS CHARGED AGAINST RESERVE, LESS RECOVERIES.


                                       9


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>2000 ANNUAL REPORT
<TEXT>



                             NEW VISIONS OF COMFORT


                                     [LOGO]
                                  FLEXSTEEL(R)
                          AMERICA'S SEATING SPECIALIST

                                 [COVER PHOTO]

                         F L E X S T E E L    2 0 0 0



                FLEXSTEEL INDUSTRIES INCORPORATED / ANNUAL REPORT

                         FISCAL YEAR ENDED JUNE 30, 2000
<PAGE>

                              FINANCIAL HIGHLIGHTS

[AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA]

Year Ended June 30,                   2000           1999            1998
                                    --------        --------       --------
  Net Sales......................   $286,860        $260,519       $236,125
  Operating Income...............     17,679          15,398          9,868
  Income Before Income Taxes.....     18,658          16,217         11,527
  Net Income.....................     11,928          10,317          7,602

Per Share of Common Stock:
  Average Shares Outstanding:
    Basic........................      6,458           6,775          6,959
    Diluted......................      6,562           6,850          7,035

  Earnings:
    Basic........................       1.85            1.52           1.09
    Diluted......................       1.82            1.51           1.08

  Cash Dividends.................       0.52            0.48           0.48

At June 30,
  Working Capital................     52,076          50,210         50,549
  Net Plant and Equipment........     26,837          25,912         23,096
  Total Assets...................    114,876         112,684        104,673
  Shareholders' Equity...........     85,196          81,166         78,080


                               FLEXSTEEL'S MISSION

   Flexsteel Industries, Inc., is committed to building its brand as a
successful seating specialist. The Company is committed to exceeding customer
expectations. With emphasis on high quality Home Seating, Recreational Vehicle
Seating, and Commercial Seating, Flexsteel will remain focused upon
strengthening its product integrity and customer service programs, expanding its
customer base, and profitably growing our business in order to increase
shareholder value.

   Flexsteel will continue to hire dedicated, productive, achievement-oriented
associates who will be instrumental in leading the Company into its second
successful century.

[BAR GRAPHS OMITTED]
<TABLE>
<CAPTION>

                          NET SALES IN MILLION DOLLARS
<S>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>
Years:  1991    1992    1993    1994    1995    1996    1997    1998    1999    2000
        ----    ----    ----    ----    ----    ----    ----    ----    ----    ----
        $140    $159    $180    $190    $210    $205    $219    $230    $260    $285


                         EARNINGS PER SHARE IN DOLLARS

Years:  1991    1992    1993    1994    1995    1996    1997    1998    1999    2000
        ----    ----    ----    ----    ----    ----    ----    ----    ----    ----
        $.18    $.15    $.22    $.89    $.70    $.64    $.82    $1.08   $1.52   $1.82

                        BOOK VALUE PER SHARE IN DOLLARS

Years:  1991    1992    1993    1994    1995    1996    1997    1998    1999    2000
        ----    ----    ----    ----    ----    ----    ----    ----    ----    ----
        $9.00  $8.50   $9.00  $10.00  $10.10  $11.00  $11.70  $11.50  $12.50  $13.60

                       RETURN ON COMMON EQUITY IN PERCENT

Years:  1991    1992    1993    1994    1995    1996    1997    1998    1999    2000
        ----    ----    ----    ----    ----    ----    ----    ----    ----    ----
        2.9%    1.8%    9.5%    10%     7.5%    6.5%    8.2%    10.1%   13.1%   14%
</TABLE>


[PHOTO]  Front cover and left: Rich with warm woods and the flavors of North
         Africa, our new Sahara Retreat collection is one of several new
         integrated groupings. Shown in highly popular leather, it includes
         sofa, love seat, chair, ottoman, and a wide selection of tables, all
         embellished with the carved and scalloped trim seen on the sofa base.

                                     [LOGO]
                                  FLEXSTEEL (R)
                          AMERICA'S SEATING SPECIALIST


<PAGE>


                             NEW VISIONS OF COMFORT


                                 FLEXSTEEL: 2000


TO OUR SHAREHOLDERS

   Your company's fiscal year ended June 30, 2000, was outstanding. Our
Management Team began the year by creating and putting in place a Strategic Plan
for the next three years. We are beginning our second year of the plan,
enormously encouraged by this year's outstanding results.

   Sales reached a new peak of $286,860,000 which was an increase of 10% over
the sales of the previous fiscal year of $260,519,000. Our net income totalled
$11,928,000 or $1.82 per diluted share, was an increase of 16% over earnings of
$10,317,000, or $1.51 per share in the same period last year.

HIGHLIGHTS IN RESIDENTIAL FURNITURE

   Strong emphasis on retail development has resulted in record sales, an
increase of 15% over last year. We have increased our independent dealer base,
with more dealers than ever devoting gallery space or entire stores to selling
Flexsteel. Today there are 231 operating Flexsteel Galleries with 59 new ones in
progress. Comfort Seating Showrooms, whose larger format allows a more complete
presentation of our line, now total 21. Six more Showrooms are on the drawing
boards or under construction.

   Following our Strategic Plan, we are also increasing our business with
national retailers Homelife and the JC Penney Home Stores, as well as other
large key accounts across the country.

   Soft comfort and relaxed styling, combined with pleasing silhouettes and
fabrics, make Flexsteel furniture beautifully suited to today's life styles.
With a superb team of associates assuring that Flexsteel quality and timely
delivery are added to the equation, sales, customer satisfaction, and profits
have all responded.

                                    A BANNER
                                    YEAR FOR
                                    FLEXSTEEL

   Flexsteel popularity has never been higher in leather -- sales this year
increased over 30%. We are responding to this demand with a new
100,000-square-foot production facility for making leather furniture in
Harrison, Arkansas. Leased in January 2000, this plant adds to our presence in
Harrison, where we have had a large wood frame facility since 1958. Community
leaders and the state helped make this a positive decision for us.

HIGHLIGHTS IN RECREATIONAL VEHICLE SEATING

   Here, too, we achieved another year of record growth. Sales grew 7% with our
market share increasing in all segments. To meet our customer's needs, we added
a new facility in the Portland/Dunkirk area of Indiana. It is already up and
running, producing quality recreational vehicle seating. We have the in-house
capabilities to engineer and test all vehicle seating to the stringent Federal
Motor Vehicle Standards. Our customers know they can depend on us to meet or
exceed the proper standards, and we continue to be the leader in this industry.

   Our ability to design seating for individual customers has always been one of
our strengths, now showing its importance in new areas such as the growing
marine market. Flexsteel-quality seating now goes to sea as well as overland.

          [PHOTO]

K. Bruce Lauritsen (l), President
& Chief Executive Officer, and
John R. Easter, Chairman of the
Board, of Flexsteel Industries, Inc.

          [PHOTO]

The handsome interiors of today's fine motor homes deserve a bucket seat for
driver and passenger that looks as good as it rides. This Flexsteel seat
captures the essence of sleek automotive styling.

          [PHOTO]

The "conversation sofa" is more than a conversation piece. Introduced last year
to immediate success, it is a worthy successor to the crescent sofa. Here, piled
high with plump pillows, it represents a whole life style of relaxed welcome.


                                                                               1
<PAGE>


Radisson Hotels Worldwide advertises "elegant accommodations," and this suite in
the Radisson in Beverly Hills, designed by Concepts 4 and furnished with
Flexsteel sofa and chairs, makes their point beautifully. The growing
hospitality market is a natural fit for Flexsteel.

Photo: Martin Fine Photography

[PHOTO]

[PHOTO]

Beauty of fabric and silhouette mark Flexsteel upholstered
furniture. Consider our century-old reputation for quality, and it's apparent
why we are the choice of more discriminating buyers. With our famous
lifetime-warranted seat spring, we still offer the best warranties in the
industry.

   Our sales to the van conversion business continues strong, despite the slowed
growth in this market. Our leadership depends on our innovative designs,
offering converters handsome Flexsteel styling, value, comfort, quality, and
safety.

HIGHLIGHTS IN COMMERCIAL SEATING

   We continue to make excellent progress, placing new emphasis on developing
our portion of this promising market. The hospitality market is a natural for
Flexsteel, where we are developing complete upholstered seating packages for
accounts such as the Marriott Corporation, as well as for Choice, Best Western,
and Cendent Hotels.

   Another growing market is that of assisted-living and acute-care facilities.
We are developing new products such as chair-sleepers for the acute-care market,
sold through Stryker Medical.

   As in recreational vehicle seating, Flexsteel's ability to develop unique
products for specific customer needs will serve us well in the commercial
seating market. Our Strategic Plan, recognizing the strength of these growing
national markets, calls for us to intensify our efforts to develop their
potential.

A GROWING NATIONAL PRESENCE

   Flexsteel continues to expand its outreach to potential customers. Our name
goes before more potential buyers with our largest national ad program ever,
reaching an audience of over 220 million readers. Visits to our freshly-designed
Web site are increasing exponentially, visitors are staying longer, and a
growing number are downloading Flexsteel literature.

A SAD NOTE

   This year saw the passing of one of our more dynamic second-generation
Flexsteel leaders, Art Richardson. He joined Flexsteel in 1948 and became one of
the industry's visionaries, breaking new ground in furniture fabrics, styling,
and marketing. He retired from the Board only last year, after inspiring us for
a half century with his enthusiastic vision. We will miss him.

AN EXCELLENT OUTLOOK

   At the close of the fiscal year, the effects of the Federal Reserve's
increases in interest are appearing, resulting in a slight slowdown of orders
during the fourth quarter.

   Still the overall prognosis is excellent. Our Strategic Plan is being
executed by a seasoned and committed team, and it is working. In the following
pages, you will see some of this team's accomplishments.

   Our earnings have grown for four years. We remain focused on the positive
aspects of the economy: strong consumer confidence, affordable mortgage rates,
high employment, low inflation, and a good housing market. Our confidence in the
future is reflected in our decision to buy back over one million shares of
stock.

   We thank our associates who have given us a banner year.

   /s/ K. Bruce Lauritsen
   K. BRUCE LAURITSEN
   President and Chief Executive Officer

   /s/ John Easter
   JOHN EASTER
   Chairman of the Board

2
<PAGE>

                             NEW VISIONS OF COMFORT


                                 FLEXSTEEL: 2000


Whether at home in the living room or traveling, whether by boat or motor home
or visiting a hotel or conference center, more people relax in Flexsteel luxury.
They are choosing Flexsteel for its comfort, its smart styling, and its proven
quality.

   Today's computer-savvy furniture customers visit our Web site to the tune of
212,000 hits a month. Here they can see our latest silhouettes and timely
fabrics; they can download data on our environmental-friendly construction and
famous warranties -- and find the nearest Flexsteel dealer.

   Flexsteel is keeping pace with this customer's growing insistence on style.
During the past year, we introduced several new thematic collections. Sahara
Retreat, shown on the cover, La Costa, Tuscany, Sonoma Valley, and West Indies,
are spiced with touches of romance and adventure; Wentworth and Stone Harbor
reflect the trend to the cottage look; the Metropolitan group is both retro and
urban. All have been well received because they also offer sleek functionality,
a variety of seating, coordinated tables and, in some cases, entertainment
units.

   The very picture of today's casual comfort is leather, and sales of Flexsteel
leather continue to soar, helped by handsome new styling that takes advantage of
leather's natural beauty and comfort. We've also stimulated sales of our
Charisma(R) exposed-wood chairs with smart new looks.

                                    FLEXSTEEL
                                  MAKES COMFORT
                                     VISIBLE

   The same concentration on customer-pleasing design is notable in our seating
for recreation vehicles. Here Flexsteel has long been a leader in comfort and
safety for motor homes and towable trailers. Recently we've added noteworthy
marine designs for large boats and yachts.

   Style appeal is an absolute must also for the growing commercial markets,
especially the hospitality industry and new assisted-living centers. Even the
very functional furniture we provide for acute-care health centers derives part
of its success from the assurance it gives of comfort as well as safety and
reliability.

   Now a new dimension of comfort will put Flexsteel in the bedroom. Restonic,
long a supplier of mattresses for Flexsteel sofa sleepers, is introducing a new
line of premium bedding using the famous Flexsteel spring design for a superior,
long-lasting box spring. Test marketed in the Midwest, it is expected to roll
out nationally by year end, giving our dealers an exciting new product for their
quality-conscious buyers.

   Flexsteel joins a century of leadership in quality and comfort with handsome
styles and fabrics to offer the finest in beautiful furniture.

[PHOTO]

Leather and recliners go together for long-lasting comfort and good looks, and
never more so than in our ever-popular Flexsteel recliners with their many
lifetime warranties, including the famous Flexsteel spring.

[PHOTO]

New comfort for sleeping, in a new product for Flexsteel dealers. A line of
premium Restonic mattress sets, with their Marvelous Middle(R) construction for
lumbar support, will also feature Flexsteel's spring, the only box spring with a
lifetime guarantee.

[PHOTO]

"Retro" returns to acclaim in Flexsteel's Metropolitan group. Enhanced with wood
trim and matching tables and an entertainment center, the group shows that the
sleek urban look is remarkably Twenty-First Century.

                                                                               3


<PAGE>

                             NEW VISIONS OF COMFORT

[PHOTO]

Flexsteel is helping our dealers put new emphasis on consumer education,
providing learning centers with answers to customer's most frequently-asked
questions. The Leather Center explains the nature of leather and the vast range
of choices available.

[PHOTO]

A new power chair from Invacare Corporation provides an exceptional range of
mobility for the disabled. The top quality of this product is well matched to
the expertly tailored seat, designed and manufactured by the Elkhart Division of
Flexsteel.


Sensational sectionals are possible in Flexsteel leather. Classic features in
this group include large rolled arms and nailhead trim. Fabric on the matching
chair is repeated on the accent pillows. The tables are also from Flexsteel.

[PHOTO]

                                FLEXSTEEL: 2000

Our Strategic Plan recognizes that our marketing efforts must be multi-pronged.
We must reach the dealer, the hospitality designer, the recreational vehicle
engineer, the director of health care and ultimately the consumer.

   All of these markets are evolving. For example, many of our customers for
residential furniture and motor homes represent a large and older segment of the
market who instinctively appreciate Flexsteel for its traditional style and
quality. On the other hand, a younger audience goes all out for casual styles
emphasizing comfort and function. All can find their styles of choice in
Flexsteel.

   In the retail market, we are concentrating on strengthening our independent
dealer base across the country. Our three sizes of Galleries and our "total
store" Comfort Seating approach are integral parts of our plan. In addition, we
have designed new sales centers for leather and for recliners and reclining
sofas, complete with signage, drop tags, and display layouts. These centers can
educate both dealer and customer on Flexsteel features and help close the sale.

   Our national advertising program also helps our dealers, as do our CD-ROM
libraries of print and TV ad material. We also encourage dealers to take
advantage of our Internet presence with links to our Web site.

                                    BRINGING
                                   NEW VISION
                                     TO THE
                                     MARKET

   Our High Point showroom, recently redesigned and enlarged, displays our
beautiful designs in a handsome setting that promotes enthusiasm and sales.

   Of interest in the RV seating market is the growth of "full-time RV'ers" who
live year-round in their motor homes. They may migrate seasonally, often
returning to areas where they develop communities and friends. There are now a
million such RV'ers with a 20% growth expected in the next decade. We are
beautifully positioned to serve this market.

   Though our portion of the van conversion market is still strong, sales of
vans themselves have plateaued. However, our innovative team is already
offsetting this decline by creating interesting new opportunities for their
combined expertise in metal and seating. They have already opened new marine
markets and are busily exploring significant new possibilities in metal-framed
products for health care.

   Our Strategic Plan also calls for us to take advantage of new opportunities
in commercial seating, where an energized sales force will seek to introduce
Flexsteel into more national hospitality chains, and increase sales to health
care and assisted living centers.

   With strong teams in place to cover all our markets, we expect sales and our
roster of satisfied customers to keep growing.


4
<PAGE>

                             NEW VISIONS OF COMFORT


                                 FLEXSTEEL: 2000


We are well aware that our century-old reputation for quality sells Flexsteel.
We take advantage of new technology wherever it helps us improve technology and
maintain or improve quality. Constant vigilance over the quality control process
includes in-process quality audits to be sure that every piece of Flexsteel
leaves us in mint condition.

   Pattern-making and specification packages are completely comput- erized.
Substantial sums have been saved by "lay- ing up" patterns electronically; and
now that the printing of bulky specification books is no longer necessary, we
will realize even more savings. New single-ply cutters for matched fabrics are
racking up substantial savings at our Riverside plant; they will gradually be
implemented in our other plants. A new Gerber automated cutter for solid fabrics
is already operating in our Portland/Dunkirk RV plant and two more are planned.
More efficient and smaller than older cutters, they use the latest in computer
technology.

   Our technology is well integrated and turned the calendar to January 1st,
2000 without a major Y2K glitch.

                                   CONVERTING
                                    VISION TO
                                     REALITY

   Global sourcing is becoming more important. Imported leather selections,
already cut and sewn, allow us to offer a greater choice in our highly popular
leather and deliver it faster. Imports of frames for our exposed-wood chairs
give us great versatility, while imported wood trim and tables let us create
totally integrated groups such as our popular Sonoma Valley and Sahara Retreat
collections.

   We've expanded production at the Riverside plant, stepped up leather
production in our new plant in Harrison, shifted all Charisma(R) chair
production to Starkville, added 90,000 sq. ft. to our Dublin facility, and
expanded RV and other metal seating products with a new facility in Indiana.
Bringing all design effort to our home office in Dubuque has helped unify the
design process and increased sales in all the Company's divisions.

   New product development continues in RV seating. Driver and passenger seats
with integrated safety belts are more effective and better looking. Upgraded
foam for padding seats has improved comfort.

   The Internet is becoming one of our most effective communications tools, more
useful in our industry for telling than selling. Business-to-business
communications with our sales associates keeps everyone up-to-date; we are
working toward introducing similar communications with our dealers next year.

   We never forget that Flexsteel means quality. Our goal is to exceed customer
expectations in quality and fast, world-class service.

[PHOTO]

Upholstered exposed-wood chairs are now produced exclusively at our Starkville
plant. The warm wood trim of this Charisma(R) chair is available in a variety of
finishes.

[PHOTO]

Many furniture customers now go into stores knowing exactly what they want. At
Flexsteel's redesigned Web site, they can get all the information that's in our
catalog. In addition, a B-to-B site provides sales personnel with instant
updated information.

[PHOTO]

Sonoma Valley is one of our newest lifestyle groups. The thematic designs of
these popular collections are echoed in every piece, including tables and
hardware. These vignettes delight the customer and make larger sales easier for
the dealer.

                                                                               5

<PAGE>


2000                         FLEXSTEEL INDUSTRIES, INC.                     2000

                                FIVE YEAR REVIEW

[ALL AMOUNTS IN THOUSANDS EXCEPT
PER SHARE DATA]

<TABLE>
<CAPTION>

Year Ended June 30,                                    2000          1999          1998          1997          1996
                                                     --------      --------      --------      --------      --------
                                                                                                  (1)
<S>                                                  <C>           <C>           <C>           <C>           <C>
SUMMARY OF OPERATIONS
  Net Sales....................................      $286,860      $260,519      $236,125      $219,427      $205,008
  Cost of Sales................................       222,619       200,965       185,345       173,088       161,451
  Operating Income.............................        17,679        15,398         9,868         7,888         6,362
  Interest and Other Income....................         1,439         1,134         2,015         1,931         1,132
  Interest and Other Expense...................           461           315           356           345           358
  Income Before Income Taxes...................        18,658        16,217        11,527         9,473         7,052
  Income Taxes.................................         6,730         5,900         3,925         3,425         2,550
  Net Income(2)(3)(4)(5).......................        11,928        10,317         7,602         6,048         4,502
  Earnings per Common Share:(2)(3)(4)(5)
     Basic.....................................          1.85          1.52          1.09          0.86          0.63
     Diluted...................................          1.82          1.51          1.08          0.86          0.63
  Cash Dividends per Common Share..............          0.52          0.48          0.48          0.48          0.48
STATISTICAL SUMMARY
  Average Common Shares Outstanding:
     Basic.....................................         6,458         6,775         6,959         7,024         7,172
     Diluted...................................         6,562         6,850         7,035         7,072         7,188
  Book Value per Common Share..................         13.81         12.50         11.49         10.86         10.45
  Total Assets.................................       114,876       112,684       104,673        99,173        95,874
  Property, Plant and Equipment, net...........        26,837        25,912        23,096        26,214        23,046
  Capital Expenditures.........................         6,718         8,398         2,392         5,273         3,298
  Working Capital..............................        52,076        50,210        50,549        44,357        47,376
  Long-Term Debt...............................             0             0             0             0            35
  Shareholders' Equity.........................        85,196        81,166        78,080        75,238        74,147
SELECTED RATIOS
  Net Income as Percent of Sales...............           4.2%          4.0%          3.2%          2.8%          2.2%
  Current Ratio................................        3.0 to 1      2.8 to 1      3.1 to 1      3.1 to 1      3.5 to 1
  Return on Ending Common Equity...............          14.0%         12.7%          9.7%          8.0%          6.1%
  Return on Beginning Common Equity............          14.7%         13.2%         10.1%          8.2%          6.1%
  Average Number of Employees..................         2,570         2,400         2,330         2,320         2,230
</TABLE>



(1) On March 18, 1997, the Company acquired certain assets of Dygert Seating,
Inc., and the related production facilities in Elkhart, Indiana, for $6,934,000.

(2) 1997 income and per share amounts reflect a gain on the sale of the
Sweetwater, Tennessee facility of approximately $350,000 (net of income taxes)
or $0.05 per share.

(3) 1998 income and per share amounts reflect a non-taxable
gain from life insurance proceeds of approximately $720,000 or $0.10 per share.

(4) 2000 income and per share amounts reflect a gain on the sale of land in
Lancaster, Pennsylvania of approximately $1,250,000 ($790,000 net of income tax)
or $0.12 per share and a non-taxable gain from life insurance proceeds of
approximately $405,000 or $0.06 per share.

(5) The earnings per share amounts for 1997 and 1996 have been restated to
comply with Statement of Financial Accounting Standards No. 128, Earnings per
Share.

6

<PAGE>


2000                         FLEXSTEEL INDUSTRIES, INC.                     2000

                       REPORTS OF AUDITOR'S AND MANAGEMENT


INDEPENDENT AUDITOR'S REPORT

TO THE SHAREHOLDERS OF FLEXSTEEL INDUSTRIES, INC.:

   We have audited the accompanying balance sheets of Flexsteel Industries, Inc.
(the Company) as of June 30, 2000 and 1999, and the related statements of
income, comprehensive income, changes in shareholders' equity and cash flows for
each of the three years in the period ended June 30, 2000. 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 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, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of June 30, 2000
and 1999, and the results of its operations and cash flows for each of the three
years in the period ended June 30, 2000 in conformity with accounting principles
generally accepted in the United States of America.

                                              DELOITTE & TOUCHE LLP
                                              Minneapolis, Minnesota
                                              August 10, 2000



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 Audit & Ethics Committee
meets periodically with the independent auditors to review financial reports,
accounting and auditing practices and controls.

                                                              K. BRUCE LAURITSEN
                                                                       President
                                                         Chief Executive Officer

                                                            RONALD J. KLOSTERMAN
                                                         Vice President, Finance
                                                         Chief Financial Officer
                                                                       Secretary

                                                                               7

<PAGE>


2000                         FLEXSTEEL INDUSTRIES, INC.                     2000


                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                   JUNE 30,
                                                                        -----------------------------
                                                                            2000             1999
                                                                        ------------     ------------
<S>                                                                     <C>              <C>
ASSETS
 CURRENT ASSETS:
  Cash and cash equivalents.........................................    $  4,000,855     $  4,886,038
  Investments.......................................................       5,730,888        8,967,197
  Trade receivables - less allowance for doubtful
    accounts: 2000, $2,250,000; 1999, $2,503,000....................      32,053,104       31,149,416
  Inventories.......................................................      32,456,058       29,503,209
  Deferred income taxes.............................................       3,200,000        3,700,000
  Other.............................................................         543,711          461,406
                                                                        ------------     ------------
      Total current assets                                                77,984,616       78,667,266
PROPERTY, PLANT AND EQUIPMENT, net..................................      26,837,475       25,912,432
NOTES RECEIVABLE....................................................       2,752,130
OTHER ASSETS........................................................       7,302,095        8,103,997
                                                                        ------------     ------------
                           TOTAL....................................    $114,876,316     $112,683,695
                                                                        ============     ============


LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable - trade..........................................    $  6,921,533     $  7,076,729
  Accrued liabilities:
    Payroll and related items.......................................       6,344,417        6,735,108
    Insurance.......................................................       5,977,525        6,688,060
    Other accruals..................................................       5,364,921        6,332,412
    Industrial revenue bonds payable................................       1,300,000        1,625,000
                                                                        ------------     ------------
        Total current liabilities...................................      25,908,396       28,457,309
DEFERRED COMPENSATION...............................................       3,772,152        3,060,670
                                                                        ------------     ------------
      Total liabilities.............................................      29,680,548       31,517,979
                                                                        ------------     ------------
SHAREHOLDERS' EQUITY:
  Common stock - $1 par value; authorized 15,000,000 shares;
    issued 2000, 6,170,789 shares; 1999, 6,491,840 shares...........       6,170,789        6,491,840
  Retained earnings.................................................      78,268,436       73,718,238
  Unrealized investment gain........................................         756,543          955,638
                                                                        ------------     ------------
              Total shareholders' equity............................      85,195,768       81,165,716
                                                                        ------------     ------------
                           TOTAL....................................    $114,876,316     $112,683,695
                                                                        ============     ============
</TABLE>

               See accompanying Notes to Financial Statements.


8

<PAGE>

2000                         FLEXSTEEL INDUSTRIES, INC.                     2000


                  STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                      FOR THE YEARS ENDED JUNE 30,
                                                          ---------------------------------------------------
                                                               2000               1999               1998
                                                          -------------      -------------      -------------
<S>                                                       <C>                <C>                <C>
NET SALES.............................................    $ 286,860,422      $ 260,519,459      $ 236,125,280
COST OF GOODS SOLD....................................     (222,618,664)      (200,965,199)      (185,345,398)
                                                          -------------      -------------      -------------
GROSS MARGIN..........................................       64,241,758         59,554,260         50,779,882
SELLING, GENERAL AND ADMINISTRATIVE...................      (47,812,467)       (44,156,199)       (40,911,581)
GAIN ON SALE OF LAND..................................        1,249,806
                                                          -------------      -------------      -------------
OPERATING INCOME......................................       17,679,097         15,398,061          9,868,301
                                                          -------------      -------------      -------------
OTHER:
  Interest and other income...........................        1,439,293          1,133,814          2,014,982
  Interest and other expense..........................         (460,796)          (315,289)          (356,066)
                                                          -------------      -------------      -------------
    Total.............................................          978,497            818,525          1,658,916
                                                          -------------      -------------      -------------
INCOME BEFORE INCOME TAXES............................       18,657,594         16,216,586         11,527,217
PROVISION FOR INCOME TAXES............................       (6,730,000)        (5,900,000)        (3,925,000)
                                                          -------------      -------------      -------------
NET INCOME............................................    $  11,927,594      $  10,316,586      $   7,602,217
                                                          =============      =============      =============

AVERAGE NUMBER OF COMMON SHARES
  OUTSTANDING:
    BASIC.............................................        6,457,960          6,774,996          6,959,310
                                                          =============      =============      =============
    DILUTED...........................................        6,561,968          6,850,115          7,035,158
                                                          =============      =============      =============
EARNINGS PER SHARE OF COMMON STOCK:
    BASIC.............................................    $        1.85      $        1.52      $        1.09
                                                          =============      =============      =============
    DILUTED...........................................    $        1.82      $        1.51      $        1.08
                                                          =============      =============      =============
</TABLE>

STATEMENTS OF COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                                      FOR THE YEARS ENDED JUNE 30,
                                                          ---------------------------------------------------
                                                               2000               1999               1998
                                                          -------------      -------------      -------------
<S>                                                       <C>                <C>                <C>
NET INCOME............................................    $  11,927,594      $  10,316,586      $   7,602,217
                                                          -------------      -------------      -------------
OTHER COMPREHENSIVE INCOME, BEFORE TAX:
  Unrealized gains (losses) on securities arising
    during period.....................................         (389,788)            (1,575)           736,051
  Less: reclassification adjustment for (gains) losses
    included in net income............................           74,138            192,338           (313,294)
                                                          -------------      -------------      -------------
Other comprehensive income, before tax................         (315,650)           190,763            422,757
                                                          -------------      -------------      -------------
INCOME TAX BENEFIT (EXPENSE):
Income tax benefit (expense) related to securities
  (gains) losses arising during period................          143,986                577           (257,618)
Income tax benefit (expense) related to securities
  reclassification adjustment.........................          (27,431)           (70,494)           109,653
                                                          -------------      -------------      -------------
Income tax expense related to other
  comprehensive income................................          116,555            (69,917)          (147,965)
                                                          -------------      -------------      -------------
OTHER COMPREHENSIVE INCOME, NET OF TAX................         (199,095)           120,846            274,792
                                                          -------------      -------------      -------------
COMPREHENSIVE INCOME..................................    $  11,728,499      $  10,437,432      $   7,877,009
                                                          =============      =============      =============
</TABLE>

                 See accompanying Notes to Financial Statements.


                                                                               9

<PAGE>

2000                         FLEXSTEEL INDUSTRIES, INC.                     2000


                 STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                      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, 1997.....   6,927,310    $6,927,310    $             $67,750,719      $560,000     $75,238,029
Purchase of
   Company Stock.............    (176,489)     (176,489)    (470,508)     (1,581,978)                   (2,228,975)
Issuance of
   Company Stock.............      43,909        43,909      470,508                                       514,417
Investment Valuation
   Adjustment................                                                              274,792         274,792
Cash Dividends...............                                             (3,320,676)                   (3,320,676)
Net Income...................                                              7,602,217                     7,602,217
                                ---------    ----------   -----------    -----------    -----------    -----------
Balance at June 30, 1998.....   6,794,730     6,794,730                   70,450,282       834,792      78,079,804
Purchase of
  Company Stock..............    (364,092)     (364,092)    (550,258)     (3,810,916)                   (4,725,266)
Issuance of
  Company Stock..............      61,202        61,202      550,258                                       611,460
Investment Valuation
  Adjustments................                                                              120,846         120,846
Cash Dividends...............                                             (3,237,714)                   (3,237,714)
Net Income...................                                             10,316,586                    10,316,586
                                ---------    ----------   -----------    -----------    -----------    -----------
Balance at June 30, 1999.....   6,491,840     6,491,840                  $73,718,238       955,638      81,165,716
Purchase of
   Company Stock.............    (385,445)     (385,445)    (651,621)     (4,055,342)                   (5,092,408)
Issuance of
   Company Stock.............      64,394        64,394      651,621                                       716,015
Investment Valuation
   Adjustment................                                                             (199,095)       (199,095)
Cash Dividends...............                                             (3,322,054)                   (3,322,054)
Net Income...................                                             11,927,594                    11,927,594
                                ---------    ----------   -----------    -----------    -----------    -----------
Balance at June 30, 2000.....   6,170,789    $6,170,789    $             $78,268,436      $756,543     $85,195,768
                                =========    ==========   ===========    ===========    ===========    ===========
</TABLE>

                 See accompanying Notes to Financial Statements.


10

<PAGE>
2000                         FLEXSTEEL INDUSTRIES, INC.                     2000


                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                      FOR THE YEARS ENDED JUNE 30,
                                                          ---------------------------------------------------
                                                               2000               1999               1998
                                                          -------------      -------------      -------------
<S>                                                       <C>                <C>                <C>
OPERATING ACTIVITIES:
Net income............................................    $  11,927,594      $  10,316,586      $   7,602,217
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
   Depreciation.......................................        5,492,556          5,358,482          5,400,025
   (Gain) Loss on disposition of capital assets.......       (1,278,671)           134,235              7,106
   Trade receivables..................................         (830,818)        (2,426,664)        (3,373,811)
   Inventories........................................       (2,952,849)        (2,895,913)           378,258
   Other current assets...............................          (82,305)           171,324            173,387
   Other assets.......................................          630,602           (616,268)           223,450
   Accounts payable - trade...........................         (155,196)         1,284,021          1,947,346
   Accrued liabilities................................       (2,068,717)         3,957,476          1,063,236
   Deferred compensation..............................          711,482              8,145              8,107
   Deferred income taxes..............................          500,000           (915,000)          (165,000)
                                                          -------------      -------------      -------------
Net cash provided by
   operating activities...............................       11,893,678         14,376,424         13,264,321
                                                          -------------      -------------      -------------

INVESTING ACTIVITIES:
   Purchases of investments...........................       (1,635,138)        (3,750,686)        (7,231,401)
   Proceeds from sales of investments.................        4,843,652          4,782,119          2,669,563
   Payments received from customers on notes receivable          50,000
   Loans to customers on notes receivable.............       (2,875,000)
   Proceeds from sales of capital assets..............        1,579,166             88,927            104,050
   Capital expenditures...............................       (6,718,094)        (8,398,487)        (2,392,365)
                                                          -------------      -------------      -------------
Net cash used in investing activities.................       (4,755,414)        (7,278,127)        (6,850,153)
                                                          -------------      -------------      -------------

FINANCING ACTIVITIES:
   Repayment of borrowings............................         (325,000)          (325,000)          (360,000)
   Dividends ($0.52, 0.48, 0.48 per share, respectively)     (3,322,054)        (3,237,714)        (3,320,676)
   Proceeds from issuance of common stock.............          716,015            611,460            514,417
   Repurchase of common stock.........................       (5,092,408)        (4,725,266)        (2,228,975)
                                                          -------------      -------------      -------------
Net cash used in financing activities.................       (8,023,447)        (7,676,520)        (5,395,234)
                                                          -------------      -------------      -------------

Increase (decrease) in cash and cash equivalents......         (885,183)          (578,223)         1,018,934
Cash and cash equivalents at beginning of year........        4,886,038          5,464,261          4,445,327
                                                          -------------      -------------      -------------
Cash and cash equivalents at end of year..............    $   4,000,855      $   4,886,038      $   5,464,261
                                                          =============      =============      =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
     Interest.........................................    $      64,000      $      70,000      $      90,000
     Income taxes.....................................    $   7,050,000      $   5,644,000      $   4,405,000

</TABLE>

               See accompanying Notes to Financial Statements.


                                                                              11

<PAGE>
2000                         FLEXSTEEL INDUSTRIES, INC.                     2000


                         NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT
   ACCOUNTING POLICIES

   DESCRIPTION OF BUSINESS - Flexsteel Industries, Inc. (the Company)
   manufactures a broad line of quality upholstered furniture for residential,
   recreational vehicle and commercial seating use. Products include sofas, love
   seats, chairs, reclining and rocker-reclining chairs, swivel rockers, sofa
   beds, and convertible bedding units. The Company's products are sold
   primarily throughout the United States and Canada, by the Company's internal
   sales force and various independent representatives.

   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.

   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. Notes
   receivable and the industrial revenue bonds payable are carried at amounts
   which reasonably approximate their fair value due to their variable interest
   rates. 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.

   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. For internal use software, the Company's policy is to
   capitalize external direct costs of materials and services, directly related
   internal payroll and payroll-related costs, and interest costs.

   REVENUE RECOGNITION - is upon delivery of product.

   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 its
   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 $982,000. 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 - Basic earnings per share of common stock is based on the
   weighted average number of common shares outstanding during each year.
   Diluted earnings per share of common stock takes into effect the dilutive
   effect of potential common shares outstanding. The Company's only potential
   common shares outstanding are stock options, which resulted in a dilutive
   effect of 104,008 shares, 75,119 shares, and 75,848 shares in 2000, 1999 and
   1998 respectively. The Company calculates the dilutive effect of outstanding
   options using the treasury stock method.

   SEGMENT AND RELATED INFORMATION - Under the "management approach" methodology
   prescribed by Statement No. 131, the Company operates in one segment, seating
   products.

   ACCOUNTING DEVELOPMENTS - In June 1998, the Financial Accounting Standards
   Board (FASB) issued Statement No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS
   AND HEDGING ACTIVITIES. The FASB subsequently issued FAS No. 137 delaying the
   effective date for one year, to fiscal years beginning after June 15, 2000.
   The Company will adopt this standard on July 1, 2000. The Company expects
   that this standard will not materially affect its financial position and
   results of operations.

   In December 1999, the Securities and Exchange Commission issued Staff
   Accounting Bulletin No. 101, Revenue Recognition. An amendment in June 2000
   delayed the effective date until the fourth quarter of calendar 2000. The
   Company is reviewing the requirements of this standard and has not yet
   determined the impact of this standard on its financial statements.

   RECLASSIFICATIONS - certain prior years' amounts have been reclassified to
   conform to the 2000 presentation. These reclassifications had no impact on
   net income or shareholders' equity as previously reported.

2. INVESTMENTS

   Debt and equity securities are included in Investments and in Other Assets,
   at fair value based on quoted market prices, and are classified as available
   for sale. The amortized cost and estimated market values of investments are
   as follows:

                            June 30, 2000              June 30, 1999
                      ----------    ----------    ----------    ----------
                         Debt         Equity         Debt         Equity
                      Securities    Securities    Securities    Securities
                      ----------    ----------    ----------    ----------
Amortized Cost......  $6,080,606     2,244,735    $9,043,136    $2,351,845
Unrealized gains
  (losses)..........    (144,432)    1,284,794       (91,762)    1,571,674
                      ----------    ----------    ----------    ----------
Est. Market Value...  $5,936,174    $3,529,529    $8,951,374    $3,923,519
                      ==========    ==========    ==========    ==========

As of June 30, 2000, the maturities of debt securities are $1,511,703 within one
year, $3,30l,385 in one to five years, and $1,123,086 over five years.

12

<PAGE>


3. INVENTORIES

   Inventories valued on the LIFO method would have been approximately
   $2,062,000 and $2,016,000 higher at June 30, 2000 and 1999, respectively, if
   they had been valued on the FIFO method. A comparison of inventories is as
   follows:

                                                           June 30,
                                                  --------------------------
                                                     2000           1999
                                                  -----------    -----------
   Raw materials...............................   $16,711,084    $15,871,466
   Work in process and finished parts..........     9,125,346      7,416,826
   Finished goods..............................     6,619,628      6,214,917
                                                  -----------    -----------
      Total....................................   $32,456,058    $29,503,209
                                                  ===========    ===========

4. PROPERTY, PLANT AND EQUIPMENT
                                                           June 30,
                                    Estimated    ---------------------------
                                  Life (Years)       2000           1999
                                  ------------   ------------   ------------
   Land......................                    $  2,212,790   $  2,512,715
   Buildings and
     improvements............      3 - 39          29,503,530     27,294,496
   Machinery and
     equipment...............      3 - 10          31,074,388     29,306,600
   Delivery equipment........      3 - 7           14,945,474     14,193,014
   Furniture and fixtures....      3 - 5            6,016,280      5,313,068
                                                 ------------   ------------
      Total..................                      83,752,462     78,619,893
    Less accumulated
      depreciation...........                     (56,914,987)   (52,707,461)
                                                 ------------   ------------
      Net....................                    $ 26,837,475   $ 25,912,432
                                                 ============   ============

5. BORROWINGS

   The Company is obligated for $1,300,000 for Industrial Revenue Bonds at June
   30, 2000 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, 2000, 1999 and 1998 of 4.14%, 3.70% and
   4.06% 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 the
   default. No amounts were outstanding on this letter at June 30, 2000.

6. INCOME TAXES

   The total income tax provision for the years ended June 30, 2000, 1999 and
   1998 was 36.1%, 36.4%, and 34.0%, respectively, of income before income
   taxes. In 2000 and 1998 the effective rate was reduced by 0.7% and 2.2%,
   respectively, for nontaxable life insurance proceeds of $405,000 and
   $720,000.

   Provision - comprised of the following:

                                      2000           1999           1998
                                   ----------     ----------     ----------
   Federal - current..........     $5,520,000     $6,115,000     $3,580,000
   State - current............        710,000        700,000        510,000
   Deferred...................        500,000       (915,000)      (165,000)
                                   ----------     ----------     ----------
      Total...................     $6,730,000     $5,900,000     $3,925,000
                                   ==========     ==========     ==========

   Deferred income taxes - comprised of the following:

                                                     Asset (Liability)
                                             ------------------------------
                                             June 30, 2000    June 30, 1999
                                             -------------    -------------
   Asset allowances......................     $   810,000      $   910,000
   Deferred compensation.................       1,400,000        1,130,000
   Other accruals and allowances.........       2,330,000        2,355,000
   Property, plant and
     equipment...........................      (1,340,000)        (695,000)
                                             -------------    -------------
      Total..............................     $ 3,200,000      $ 3,700,000
                                             =============    =============
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 2000 or 1999.

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

   The Company has stock option plans for key employees and directors that
   provide for the granting of incentive and nonqualified stock options. Under
   the plans, options are granted at an exercise price equal to the fair market
   value of the underlying common stock at the date of grant, and may be
   exercisable for up to 10 years. All options are exercisable when granted. At
   June 30, 2000, 543,300 shares were available for future grants. The Company
   applies APB Opinion 25 and related interpretations in accounting for its
   stock option plans, as permitted under FASB Statement No. 123 Accounting for
   Stock-Based Compensation (SFAS 123). Accordingly, no compensation cost has
   been recognized for its stock option plans. Had the compensation cost for the
   Company's incentive stock option plans been determined based on the fair
   value at the grant dates for awards under those plans consistent with the
   methodology of SFAS 123, the Company's net income and earnings per share
   would have been reduced to the pro forma amounts indicated below:

                                      2000           1999           1998
                                  -----------    -----------     ----------
   Net Income     As reported     $11,927,594    $10,316,586     $7,602,217
                  Pro forma        11,736,594     10,171,214      7,462,506
   Earnings per share:
   - Basic        As reported           $1.85          $1.52          $1.09
                  Pro forma             $1.82          $1.50          $1.07
   - Diluted      As reported           $1.82          $1.51          $1.08
                  Pro forma             $1.79          $1.48          $1.06

   The fair value of each option grant is estimated on the date of grant using
   the Black-Sholes option-pricing model with the following weighted-average
   assumptions used for grants in 2000, 1999 and 1998, respectively: dividend
   yield of 3.9%, 4.5%, and 4.2%; expected volatility of 26.3%, 27.1%, and
   26.3%; interest rates of 7.05%, 6.8%, and 6.8%; and an expected life of 8 to
   10 years on all options.

   A summary of the status of the Company's stock option plans as of June 30,
   2000, 1999 and 1998 and the changes during the years ending on those dates is
   shown on the next page.

                                                                              13

<PAGE>


                                                Shares         Price Range
                                             ------------    --------------
   June 30, 1997 Outstanding.............      432,680       $10.25 - 15.75
   Granted...............................       88,775        11.44 - 12.66
   Exercised.............................      (10,250)       10.25 - 12.75
   Cancelled.............................      (10,700)       10.25 - 15.75
                                              --------
   June 30, 1998 Outstanding.............      500,505        10.25 - 15.75
   Granted...............................      106,450        10.50 - 12.75
   Exercised.............................      (34,088)       10.25 - 11.44
   Cancelled.............................      (13,600)       11.13 - 15.75
                                              --------
   June 30, 1999 Outstanding.............      559,267        10.25 - 15.75
   Granted...............................       98,500        13.25 - 13.59
   Exercised.............................      (42,872)       10.25 - 11.44
   Cancelled.............................       (2,650)       10.25 - 11.44
                                              --------
   June 30, 2000 Outstanding.............      612,245       $10.25 - 15.75
                                              ========

   Significant option groups outstanding at June 30, 2000 and related
   weighted-average exercise price and remaining life information follows:

                                                      Weighted-Average
                                                 --------------------------
        Grant                       Options        Exercise      Remaining
         Date                     Outstanding       Price       Life (Years)
   ----------------               -----------    -----------    -----------
   July 6, 1993...............      74,360         14.875           0.9
   July 28, 1994..............      66,060         10.500           4.0
   August 16, 1995............      81,200         11.250           5.1
   July 30, 1996..............      85,350         10.250           6.0
   November 7, 1997...........      80,825         11.438           7.3
   November 2, 1998...........      95,950         10.500           8.3
   November 2, 1999...........      93,500         13.250           9.3
   All other..................      35,000         13.163           6.2
                                   -------
   Total......................     612,245
                                   =======

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 multi-employer 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 $1,572,000 in 2000, $1,427,000 in 1999, and
   $1,373,000 in 1998 including $363,000 in 2000, $330,000 in 1999, and $311,000
   in 1998 for the Company's matching contribution to retirement savings plans.
   The Company's cost for pension plans is determined as 2% - 6% 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 multi-employer defined benefit pension plans administered by
   others under collective bargaining agreements were $1,449,000 in 2000,
   $1,355,000 in 1999, and $1,184,000 in 1998.

   The Company has an unfunded post retirement benefit plan with certain
   officers. During the year the Company recorded a one time cost adjustment of
   $474,161 due to a change from a fixed benefit obligation to a defined
   contribution obligation. The plans require various annual contributions for
   the participants based upon compensation levels and age. All participants are
   fully vested. For the years ended 2000, 1999 and 1998, excluding the
   aforementioned one-time cost, the benefit obligation was increased by
   interest expense of $343,536, $247,228, and $244,690, service costs of
   $256,785, $146,917 and $131,917, and decreased by payments of $363,000,
   $386,000 and $380,000, respectively. At June 30, 2000 the benefit obligation
   was $3,772,152.

11. MANAGEMENT INCENTIVE PLAN

   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 53,427, 45,158, and 35,459
   shares were awarded, and the amounts charged to income were $646,000,
   $598,000, and $406,000 in 2000, 1999, and 1998, respectively. At June 30,
   2000, 214,213 shares were available for future grants.

12. COMMITMENTS AND CONTINGENCIES

   Facility Leases - The Company leases certain facilities under various
   operating leases. These leases require the company to pay operating costs,
   including property taxes, insurance, and maintenance. Total lease expense
   related to the various operating leases was approximately $630,000, $518,000
   and $485,000 in years 2000, 1999, and 1998, respectively.

   Expected future minimum commitments under operating leases as of June 30,
   2000, were as follows:

                         Year Ended June 30:
                     2001            $  669,000
                     2002               702,500
                     2003               649,600
                     2004               418,500
                     2005               309,000
                     Thereafter       1,834,500
                                     ----------
                                     $4,583,100
                                     ==========

13. SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION

   (UNAUDITED - in thousands of dollars, except per share amounts)

                                                Quarters
                          -------------------------------------------------
                              1st          2nd         3rd          4th
                          ----------   ----------   ----------   ----------
   2000:
   ----
    Net Sales............  $67,701      $70,404      $74,972      $73,783
    Gross Margin.........   15,030       15,577       16,588       17,047
    Net Income...........    2,365        3,589(1)     2,943        3,031
    Earnings Per Share:
      Basic..............     0.36         0.55         0.46         0.48
      Diluted............     0.36         0.54         0.45         0.47
    Dividends Per Share..     0.13         0.13         0.13         0.13

 *  Market Price

      High...............       14-5/8       14           14           14-1/8
      Low................       12-9/16      12-1/2       11-3/4       11-3/8

   (1) Includes net gains of $790,000 on the sale of land and $405,000 from the
   non-taxable proceeds of life insurance.

                                                Quarters
                          -------------------------------------------------
                              1st          2nd         3rd          4th
                          ----------   ----------   ----------   ----------
   1999:
   ----
    Net Sales............  $60,053      $62,575      $68,615      $69,276
    Gross Margin.........   13,150       14,140       15,743       16,521
    Net Income...........    1,795        2,197        2,829        3,496
    Earnings Per Share:
      Basic..............     0.26         0.32         0.42         0.52
      Diluted............     0.26         0.32         0.41         0.52
    Dividends Per Share..     0.12         0.12         0.12         0.12

 *  Market Price

      High...............       14-1/8       13-1/2       14           14-1/8
      Low................       10-3/8        8-3/4       11-3/8       11-3/4

 *  Reflects the market price as quoted by the National Association of
    Securities Dealers, Inc.

14

<PAGE>


2000                         FLEXSTEEL INDUSTRIES, INC.                     2000

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                                     GENERAL

   The following analysis of the results of operations and financial condition
of Flexsteel Industries, Inc. (the Company) should be read in conjunction with
the financial statements and related notes included elsewhere in this document.

   RESULTS OF OPERATIONS

   The following table has been prepared as an aid in understanding the
Company's results of operations on a comparative basis for the years ended
June 30, 2000, 1999 and 1998. Amounts presented are percentages of the
Company's net sales.

                                          For the Years Ended June 30,
                                  -----------------------------------------
                                     2000            1999           1998
                                  -----------    -----------     ----------
Net Sale.....................       100.0%          100.0%         100.0%
Cost of goods sold...........       (77.6)          (77.1)         (78.5)
                                  -----------    -----------     ----------
Gross margin.................        22.4            22.9           21.5
Selling, general &
   administrative expenses...       (16.7)          (16.9)         (17.3)
Gain on sale of land.........         0.5             0.0            0.0
                                  -----------    -----------     ----------
Operating income.............         6.2             6.0            4.2
Other income, net............         0.3             0.3            0.7
                                  -----------    -----------     ----------
Income before income taxes...         6.5             6.3            4.9
Income tax expense...........        (2.3)           (2.3)          (1.7)
                                  -----------    -----------     ----------
Net income...................         4.2%            4.0%           3.2%
                                  ===========    ===========     ==========

                       FISCAL 2000 COMPARED TO FISCAL 1999

   Net sales for 2000 increased by $26,341,000 or 10% compared to 1999.
Residential sales volume increased $22,591,000 or 15%. Vehicle seating sales
increased $6,420,000 or 7%. Commercial sales volume decreased $2,670,000 or 12%.

   Gross margin increased $4,687,000 to $64,242,000, or 22.4% of sales, in 2000,
from $59,554,000, or 22.9% in 1999. Gross margin increased due to the increase
in net sales. Gross margin was adversely affected due primarily to start up
costs at new facilities and changes in product mix.

   Selling, general and administrative expenses as a percentage of sales were
16.7% and 16.9% for 2000 and 1999 respectively. The amount of selling, general,
and administrative costs increased due to volume related expenses and additional
advertising costs.

   During the second quarter of 2000 the Company sold land adjacent to its
Lancaster, Pennsylvania production facility at a gain of approximately
$1,250,000.

   Net other income was $978,000 in 2000 and $819,000 for 1999. During the
second quarter of 2000 the Company realized a non-taxable gain on the proceeds
of life insurance of $405,000.

   The effective tax rate in 2000 was 36.1% compared to 36.4% in 1999. The lower
effective income tax rate in 2000 is attributable to the non-taxable gain on the
proceeds of life insurance.

   The above factors resulted in 2000 fiscal year net income of $11,928,000 or
$1.82 per diluted share compared to $10,317,000 or $1.51 per diluted share in
fiscal 1999, a net increase of $1,611,000 or $0.31 per share.

                       FISCAL 1999 COMPARED TO FISCAL 1998

   Net sales for 1999 increased by $24,394,000 or 10% compared to 1998.
Residential sales volume increased $12,388,000 or 9%. Vehicle seating sales
increased $12,715,000 or 17%. Commercial sales volume decreased $709,000 or 3%.

   Gross margin increased $8,774,000 to $59,554,000, or 22.9% of sales, in 1999,
from $50,780,000, or 21.5% in 1998. The gross margin increase was due to
improved utilization of available production capacity and changes in product
mix.

   Selling, general and administrative expenses as a percentage of sales were
16.9% and 17.3% for 1999 and 1998 respectively. The cost percentage decrease was
due to management's continued efforts to control fixed costs as volume
increased.

     Net other income was $819,000 in 1999 and $1,659,000 for 1998. During the
second quarter of 1998 the Company realized a non-taxable gain on the proceeds
of life insurance of $720,000.

     The effective tax rate in 1999 was 36.4% compared to 34.0% in 1998. The
lower effective income tax rate in 1998 is attributable to the non-taxable gain
on the proceeds of life insurance.

     The above factors resulted in 1999 fiscal year net income of $10,317,000 or
$1.51 per share (diluted) compared to $7,602,000 or $1.08 per share (diluted) in
fiscal 1998, a net increase of $2,715,000 or $0.43 per share.

                         LIQUIDITY AND CAPITAL RESOURCES

   Working capital at June 30, 2000, is $52,076,000 which includes cash, cash
equivalents and investments of $9,732,000. Working capital increased by
$1,866,000 from the June 30, 1999 amount.

   Net cash provided by operating activities was $11,894,000, $14,376,000 and
$13,264,000 in 2000, 1999, and 1998, respectively. Fluctuations in net cash
provided by operating activities are primarily the result of changes in net
income and changes in accrued liabilities.

   Capital expenditures were $6,718,000, $8,398,000 and $2,392,000 for 2000,
1999, and 1998, respectively. The current year expenditures were incurred
primarily for manufacturing and delivery equipment and the expansion of our
Riverside, California facility. Projected capital spending for fiscal 2001 is
$5,500,000. The projected capital expenditures will be for manufacturing and
delivery equipment. The funds for projected capital expenditures are expected to
be provided from cash generated from operations and available cash.

   Financing activities utilized net cash of $8,023,000, $7,677,000, and
$5,395,000 in 2,000, 1999, and 1998, respectively. During the current year the
Company's Board of Directors approved the repurchase of up to an additional
250,000 shares of the Company's common stock. The Company repurchased 385,445
shares of its outstanding common stock in 2000.


                                                                              15
<PAGE>

Under prior authority the Company repurchased 364,092 and 176,489 shares of its
outstanding common stock during 1999 and 1998, respectively. At June 30, 2000,
under existing authorizations, the Company may repurchase 205,378 shares.

                             FINANCING ARRANGEMENTS

   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 $1,300,000 in the form of variable rate demand industrial
development revenue bonds. During fiscal 2000, the weighted-average interest
rate on the industrial development revenue bonds was 4.14%.

                           FORWARD-LOOKING STATEMENTS

Cautionary Statement Relevant to Forward-Looking Information for the Purpose of
"Safe Harbor" Provisions of 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 here-in. 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 there-on 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.

                                    [PHOTO]

Such traditional details as box pleats, welted cushions and rolled arms remain
popular. But this hospitable sectional still definitely mirrors today's tastes.
Other selections shown by Flexsteel include the matching upholstered chair, the
table, and the Charisma(R) chair.

16
<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
 J.E. Gilbertson, General Manager

 Flexsteel Industries, Inc.
 HARRISON, ARKANSAS 72601
 (870) 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
 (662) 323-5481
 S. P. Salmon, General Manager

 Elkhart Division
 ELKHART, INDIANA 46515
 (219) 262-4675
 D. L. Dygert, General Manager

 Portland Division
 DUNKIRK,INDIANA 47336
 (765) 768-1384
 D. L. Dygert, General Manager

 Vancouver Distribution Center
 VANCOUVER, WASHINGTON 98668
 (206) 696-9955
 T. D. Burkart, General Manager

* Executive Offices

PERMANENT SHOWROOMS
Dubuque, Iowa
High Point, North Carolina
San Francisco, California

- -------------------------------
VISIT US ON THE INTERNET
http://flexsteel.com
- -------------------------------

DIRECTORS AND OFFICERS
John R. Easter
  Chairman of the Board of Directors
    Retired Vice President
    Sears, Roebuck & Company
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
Jeffrey T. Bertsch
  Vice President
  Director
L. Bruce Boylen
  Director
     Retired Vice President
     Fleetwood Enterprises, Inc.
Patrick M. Crahan
  Vice President
  Director
Lynn J. Davis
  Director
     Senior Vice President
     ADC Telecommunications, Inc.
Thomas E. Holloran
  Director
     Professor, Graduate School of Business,
     University of St. Thomas
     St.  Paul, Minnesota
Marvin M. Stern
  Director
     Retired Vice President
     Sears, Roebuck & Company
Carolyn T. B. Bleile
  Vice President
Thomas D. Burkart
  Senior Vice President, Vehicle Seating
Kevin F. 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

AUDIT & ETHICS
COMMITTEE
Thomas E. Holloran, Chairman
L. Bruce Boylen
Lynn J. Davis

COMPENSATION &
NOMINATING COMMITTEE
L. Bruce Boylen, Chairman
Thomas E. Holloran
Marvin M. Stern

MARKETING &
PLANNING COMMITTEE
Marvin M. Stern, Chairman
Jeffrey T. Bertsch
Patrick M. Crahan
Lynn J. Davis
Edward J. Monaghan
James R. 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

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.

[LOGO]  FLEXSTEEL (R)
        AMERICA'S SEATING SPECIALIST

(C)2000 FLEXSTEELINDUSTRIES, INC.
<PAGE>

                                    [PHOTO]

For luxury and comfort to go, the Fleetwood motor home is the choice of many
travelers, from the vacationer to the "permanent RV'er." These beautiful
coaches, like the Fleetwood Discovery shown above, provide a home-like
atmosphere. Sofas and recliners by Flexsteel provide the definitive touch of
at-home comfort.

Flexsteel's long leadership in the recreational vehicle field results from a
combination of expertise. Not only do we have a long history in metal
fabrication and upholstery, but we daily demonstrate our ability to design and
deliver handsome custom products. The name Flexsteel helps sell recreational
vehicles.
________________________________________________________________________________

                                     [LOGO]

FLEXSTEEL (R)                                                    BULKRATE
AMERICA'S SEATING SPECIALIST                                   U.S. Postage
- ------------------------------------                               PAID
P.O. BOX 877 * DUBUQUE IA 52004-0877                            Permit # 10
                                                                Dubuque, IA


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>INDEPENDENT AUDITOR'S REPORT
<TEXT>



                                                                    EXHIBIT 23.1

                          INDEPENDENT AUDITOR'S REPORT

Flexsteel Industries, Inc.:

         We have audited the financial statements of Flexsteel Industries, Inc.
(the Company) as of June 30, 2000 and 1999 and for each of the three years in
the period ended June 30, 2000, and have issued our report thereon dated August
10, 2000. Such financial statements and report are included in your 2000 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 10, 2000


                                       10


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>4
<FILENAME>0004.txt
<DESCRIPTION>CONSENT OF INDEPENDENT AUDITORS
<TEXT>


                                                                    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 and in
Registration Statement No. 333-45768 on Form S-8 for the Flexsteel 1999 Stock
Option Plan of our reports dated August 10, 2000 appearing in and incorporated
by reference in the Annual Report on Form 10-K of Flexsteel Industries, Inc. for
the year ended June 30, 2000.





                              DELOITTE & TOUCHE LLP

Minneapolis, Minnesota
September 27, 2000


                                       11
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27.1
<SEQUENCE>5
<FILENAME>0005.txt
<DESCRIPTION>FINANCIAL DATA SCHEDULE
<TEXT>

<TABLE> <S> <C>

<ARTICLE>                   5



<S>                         <C>
<PERIOD-TYPE>               12-MOS
<FISCAL-YEAR-END>                        JUN-30-2000
<PERIOD-START>                           JUL-01-1999
<PERIOD-END>                             JUN-30-2000
<CASH>                                     4,000,855
<SECURITIES>                               5,730,888
<RECEIVABLES>                             34,304,084
<ALLOWANCES>                               2,250,980
<INVENTORY>                               32,456,058
<CURRENT-ASSETS>                          77,984,616
<PP&E>                                    83,752,462
<DEPRECIATION>                            56,914,987
<TOTAL-ASSETS>                           114,876,316
<CURRENT-LIABILITIES>                     25,908,396
<BONDS>                                            0
<COMMON>                                   6,170,789
<PREFERRED-MANDATORY>                              0
<PREFERRED>                                        0
<OTHER-SE>                                79,024,979
<TOTAL-LIABILITY-AND-EQUITY>             114,876,316
<SALES>                                  286,860,422
<TOTAL-REVENUES>                         289,549,521
<CGS>                                    222,618,664
<TOTAL-COSTS>                            270,891,927
<OTHER-EXPENSES>                          47,812,467
<LOSS-PROVISION>                                   0
<INTEREST-EXPENSE>                           460,796
<INCOME-PRETAX>                           18,657,594
<INCOME-TAX>                               6,730,000
<INCOME-CONTINUING>                       11,927,594
<DISCONTINUED>                                     0
<EXTRAORDINARY>                                    0
<CHANGES>                                          0
<NET-INCOME>                              11,927,594
<EPS-BASIC>                                     1.85
<EPS-DILUTED>                                   1.82




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