Flexsteel Industries, Inc. and DMI Furniture, Inc. jointly announced today that they have signed a definitive purchase agreement for Flexsteel Industries, Inc. to acquire DMI Furniture, Inc. at a price of $3.30 per share, payable in cash. The total value of the transaction is approximately $44 million, including the assumption of the outstanding debt of DMI Furniture, Inc., which is approximately $27 million.

The boards of directors of both companies have unanimously approved the transaction. Under the definitive purchase agreement, a wholly-owned subsidiary of Flexsteel Industries, Inc. will make a cash tender offer for all DMI Furniture, Inc. shares for $3.30 per share. The acquisition is subject to at least a majority of the shares of DMI Furniture, Inc. on a fully diluted basis being tendered, as well as other customary closing conditions. Certain stockholders of DMI Furniture, Inc. representing approximately 8% of the company's common stock have agreed to tender their shares. Following the purchase of shares in the tender offer, DMI Furniture, Inc. and a subsidiary of Flexsteel Industries, Inc. will merge. DMI Furniture, Inc. shares not purchased in the tender offer will be entitled to receive $ 3.30 per share. The transaction is expected to be completed in September 2003.

"We are very pleased that the experienced team of DMI Furniture will be joining with the Flexsteel team", stated Bruce Lauritsen, President and Chief Executive Officer of Flexsteel. "The combination of our two companies will allow us to capitalize on the strengths of both organizations. DMI Furniture distribution, product lines and global sourcing infrastructure will enhance Flexsteel's focus on expanding its product offering, while the financial strength of Flexsteel provides the resources for continued growth of DMI Furniture."

Don Dreher, Chairman and Chief Executive Officer of DMI Furniture, noted that DMI Furniture will be operated as an independent business unit of the combined company with the headquarters remaining in Louisville. "Not only is this a great business fit, but the two companies have similar cultures and share the same values," stated Dreher. "We look forward to joining the Flexsteel organization."

The combination is expected to result in immediate accretion to the earnings of Flexsteel. Additionally, management believes the combined company will have the financial capacity to continue to invest in the business allowing for continued growth in sales and profits. Based upon the recent financial reports of the companies, the combined company will have assets of approximately $175 million and annual net sales of approximately $400 million.

DMI Furniture, Inc. is a Louisville, Kentucky based vertically integrated manufacturer, importer, and marketer of residential and commercial office furniture with four manufacturing plants and warehouses in Indiana and manufacturing sources in Asia and South America. DMI Furniture's divisions are WYNWOOD, Homestyles and DMI Commercial Office Furniture.

Mann, Armistead & Epperson, Ltd, Richmond, Virginia serves as financial advisor to DMI Furniture in connection with the transaction.

A manufacturer of upholstered furniture, Flexsteel Industries, Inc. is headquartered in Dubuque, Iowa with additional factories in Lancaster, Pennsylvania; Riverside, California; Dublin, Georgia; Harrison, Arkansas; Starkville, Mississippi; and New Paris, Indiana.