"It appears that consumers are facing uncertainties causing them to postpone purchases of durable goods, including furniture"
From Flexsteel's fiscal year end report

Flexsteel Industries, Inc. (FLXS) today reported sales and earnings for its fourth quarter and fiscal year ended June 30, 2004.

The net sales and operating results being reported include the net sales and operating results of DMI Furniture, Inc. ("DMI") for the period September 18, 2003 through June 30, 2004. Flexsteel acquired DMI in a business combination accounted for as a purchase as of September 18, 2003.

Net sales for the quarter ended June 30, 2004 were $108.3 million compared to the prior year quarter of $74.9 million, an increase of 44.6%. Net income for the current quarter was $2.7 million or $0.41 per share compared to the prior year quarter of $2.6 million or $0.41 per share, an increase of 3.3%.

Net sales for the fiscal year ended June 30, 2004 were $401.2 million compared to $292.0 million in the prior fiscal year, an increase of 37.4%. Net income for the fiscal year ended June 30, 2004 of $10.1 million or $1.55 per share increased from net income for the prior fiscal year of $8.3 million or $1.30 per share, an increase of 22.2%.

For the quarter ended June 30, 2004, residential net sales were $72.9 million (includes $23.2 million of DMI), an increase of 50.3% from the prior year quarter. Recreational vehicle net sales were $23.0 million, an increase of 22.0%. Commercial net sales were $12.4 million (includes $6.3 million of DMI), an increase of 64.2%.

For the fiscal year ended June 30, 2004, residential net sales were $266.3 million (includes $67.9 million of DMI), an increase of 37.3% over the prior fiscal year. Recreational vehicle net sales were $85.4 million, an increase of 13.0%. Commercial net sales were $49.5 million (includes $24.6 million of DMI), an increase of 121.4%. The increase in net sales reflects improved industry performance for vehicle and commercial products in addition to the inclusion of DMI net sales.

Gross margin for the quarter ended June 30, 2004 was 20.2% compared to 23.3% in the prior year quarter. For the fiscal year ended June 30, 2004, gross margin was 20.7% compared to 22.4% for the prior fiscal year. The decreased gross margin percentage reflects increased costs for materials, especially steel and component parts that have steel content. The adverse impact on gross margin for the fourth quarter was approximately $1.2 million or 1.1% of net sales. In addition, DMI products have a lower gross margin due to a different customer base, further decreasing the Company's overall gross margin percentage.

Outlook
With the first quarter of fiscal 2005 now half over, the Company is finding that the pressures on margins experienced in the second half of fiscal 2004 are continuing. Suppliers for steel and petroleum-based products, including fuel and poly foam, continue to pass on additional cost increases to the Company. In addition, the recently imposed tariffs on bedroom furniture imported from China may negatively impact margins.

It appears that consumers are facing uncertainties causing them to postpone purchases of durable goods, including furniture. In the meantime, the Company has initiated several actions in response to present market conditions, including review and potential adjustment to the Company's selling prices and cost control measures for inventories, capital assets, and selling, general, and administrative expenses. The Company believes that its strategy of providing furniture from a wide selection of domestically manufactured and imported products is sound and will continue.

The Company will host a conference call for analysts on Friday, August 20, 2004, at 10:00 a.m. Central Time. To access the call, please dial 1-888-275-4480 and provide the operator with ID# 7810259. A replay will be available for two weeks beginning approximately two hours after the conclusion of the call by dialing 1-800-642-1687 and entering ID# 7810259.