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FLEXSTEEL INDUSTRIES INC

FLEXSTEEL INDUSTRIES INCFLXSEarnings & Financial Report

Nasdaq · Consumer Discretionary · Household Furniture

Flexsteel Industries Inc is a leading U.S.-headquartered furniture manufacturer that designs, produces and distributes a wide portfolio of upholstered residential, commercial, and hospitality furniture. It primarily operates across North American markets, serving end consumers, retail partners and corporate clients through its extensive distribution network.

What changed in FLEXSTEEL INDUSTRIES INC's 10-K — 2024 vs 2025

Top changes in FLEXSTEEL INDUSTRIES INC's 2025 10-K

121 paragraphs added · 100 removed · 88 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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It is not common in the furniture industry to obtain a patent for a furniture design. If a particular design of a furniture manufacturer is well accepted in the marketplace, it is common for other manufacturers to imitate the same design without recourse by the furniture manufacturer who initially introduced the design.
It is not common in the furniture industry to obtain a patent for furniture design. If a particular design of a furniture manufacturer is well accepted in the marketplace, it is common for other manufacturers to imitate the same design without recourse by the furniture manufacturer who initially introduced the design.
Our compliance with federal, state and local laws and regulations did not have a material effect upon our capital expenditures, earnings or competitive position during the fiscal year ended June 30, 2024. Environmental Matters All of Flexsteel’s stakeholders have a responsibility to protect our employees and our environment.
Our compliance with federal, state and local laws and regulations did not have a material effect upon our capital expenditures, earnings or competitive position during the fiscal year ended June 30, 2025. Environmental Matters All of Flexsteel’s stakeholders have a responsibility to protect our employees and our environment.
Furniture products are designed by the Company’s own design staff and through the services of third-party designers. New models and designs of furniture, as well as new fabrics, are introduced continuously. 5 Table of Contents Employees The Company had approximately 1,500 employees on June 30, 2024, including 7 employees who are covered by collective bargaining agreements.
Furniture products are designed by the Company’s own design staff and through the services of third-party designers. New models and designs of furniture, as well as new fabrics, are introduced continuously. 5 Table of Contents Employees The Company had approximately 1,400 employees on June 30, 2025, including 7 employees who are covered by collective bargaining agreements.
Customer Backlog The approximate backlog of customer orders believed to be firm as of the end of the current fiscal year and the prior two fiscal years were as follows (in thousands): June 30, 2024 June 30, 2023 June 30, 2022 $ 59,543 $ 49,729 $ 62,800 Raw Materials The Company utilizes various types of wood, fabric, leather, filling material, high carbon spring steel, bar and wire stock, polyurethane foam and other raw materials in manufacturing furniture.
Customer Backlog The approximate backlog of customer orders believed to be firm as of the end of the current fiscal year and the prior two fiscal years were as follows (in thousands): June 30, 2025 June 30, 2024 June 30, 2023 $ 66,465 $ 59,543 $ 49,729 Raw Materials The Company utilizes various types of wood, fabric, leather, filling material, high carbon spring steel, bar and wire stock, polyurethane foam and other raw materials in manufacturing furniture.
On June 30, 2024, the Company had approximately 30 employees located in Asia to ensure Flexsteel’s quality standards are met and to coordinate the delivery of products acquired from overseas suppliers.
On June 30, 2025, the Company had approximately 30 employees located in Asia to ensure Flexsteel’s quality standards are met and to coordinate the delivery of products acquired from overseas suppliers. The Company leases and operates three manufacturing facilities in Juarez, Mexico and leases one manufacturing facility in Mexicali, Mexico.
As of June 30, 2024, the Company has not begun operations in the Mexicali facility and has subleased approximately 339,000 of the 508,000 square feet. The Company expects to sublease the facility until such time that demand necessitates the additional capacity.
The Company had approximately 1,000 employees located in Mexico on June 30, 2025. The four Mexico facilities total 1,061,000 square feet. As of June 30, 2025, the Company has not begun operations in the Mexicali facility and expects to sublease the facility until such time that demand necessitates the additional capacity.
The Company has established relationships with key suppliers to ensure prompt delivery of quality component parts. The Company’s production includes the use of selected component parts sourced offshore to enhance value in the marketplace. The Company integrates manufactured products with finished products acquired from offshore suppliers who can meet quality specifications and scheduling requirements.
The Company identifies and eliminates manufacturing inefficiencies and adjusts manufacturing schedules on a daily basis to meet customer requirements. The Company has established relationships with key suppliers to ensure prompt delivery of quality component parts. The Company’s production includes the use of selected component parts sourced offshore to enhance value in the marketplace.
Competition The furniture industry is highly competitive and includes a large number of U.S. and foreign manufacturers and distributors, none of which dominate the market. The Company competes in markets with a large number of relatively small manufacturers; however, certain competitors have substantially greater sales volumes than the Company.
The Company competes in markets with a large number of relatively small manufacturers; however, certain competitors have substantially greater sales volumes than the Company. The Company’s products compete based on style, quality, comfort, price, delivery, service and durability.
The Company will continue to pursue and refine this blended strategy, offering customers manufactured goods, products manufactured utilizing imported component parts, and ready-to-deliver imported products. This blended focus on products allows the Company to provide a wide range of price points, styles and product categories to satisfy customer requirements.
The Company integrates manufactured products with finished products acquired from offshore suppliers who can meet quality specifications and scheduling requirements. The Company will continue to pursue and refine this blended strategy, offering customers manufactured goods, products manufactured utilizing imported component parts, and ready-to-deliver imported products.
These ongoing manufacturing operations are integral to the Company’s product offerings and distribution strategy by offering smaller and more frequent product runs of a wider product selection. The Company identifies and eliminates manufacturing inefficiencies and adjusts manufacturing schedules on a daily basis to meet customer requirements.
Manufacturing and Offshore Sourcing During the fiscal year ended June 30, 2025, the Company operated manufacturing facilities located in Juarez, Mexico. This ongoing manufacturing operation is integral to the Company’s product offerings and distribution strategy by offering smaller and more frequent product runs of a wider product selection.
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Manufacturing and Offshore Sourcing During the fiscal year ended June 30, 2024, the Company operated manufacturing facilities located in Dublin, Georgia, and Juarez, Mexico (the Dublin, Georgia location ceased operations effective June 30, 2024).
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This blended focus on products allows the Company to provide a wide range of price points, styles and product categories to satisfy customer requirements. Competition The furniture industry is highly competitive and includes a large number of U.S. and foreign manufacturers and distributors, none of which dominate the market.
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The Company’s products compete based on style, quality, price, delivery, service and durability.
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The Company leases and operates three manufacturing facilities in Juarez, Mexico and leases one manufacturing facility in Mexicali, Mexico and had approximately 1,200 employees located in Mexico on June 30, 2024. The four Mexico facilities total 1,061,000 square feet.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Economic downturns and prolonged negative economic conditions could affect consumer spending habits by decreasing the overall demand for home furnishing products. These events could impact retailers resulting in an impact on the Company’s business.
Prolonged negative economic conditions could impact the business. Economic downturns and prolonged negative economic conditions could affect consumer spending habits by decreasing the overall demand for home furnishing products. These events could impact retailers resulting in an impact on the Company’s business.
Inflation and changes in foreign currency may impact our profitability. Cost inflation including significant increases in ocean container rates, raw materials prices, labor rates, and domestic transportation costs have and could continue to impact profitability. Imbalances between supply and demand for these resources may continue to exert upward pressure on costs.
Inflation and changes in foreign currency may impact our profitability. Cost inflation including significant increases in ocean container rates, tariffs, raw materials prices, labor rates, and domestic transportation costs have and could continue to impact profitability. Imbalances between supply and demand for these resources may continue to exert upward pressure on costs.
In addition, the majority of our manufactured products are produced in Mexico. The wages of our employees and certain other employee benefit and indirect costs are made in Pesos. A negative shift in the value of the U.S. dollar against the Peso could increase the cost of manufacturing.
In addition, our manufactured products are produced in Mexico. The wages of our employees and certain other employee benefit and indirect costs are made in Pesos. A negative shift in the value of the U.S. dollar against the Peso could increase the cost of manufacturing.
Security breaches and other disruptions to the Company’s information technology infrastructure could interfere with operations, compromise information belonging to the Company and its customers and suppliers and expose the Company to liability which could adversely impact the Company’s business and reputation.
Security breaches and other disruptions to the Company’s information technology infrastructure could interfere with operations, compromise information belonging to the Company and its customers or suppliers and expose the Company to liability which could adversely impact the Company’s business and reputation.
A write-down of all or a portion of the value of the Mexicali right of use asset could have a material impact on our earnings in the period of impairment.
A write-down of all or a portion of the remaining value of the Mexicali right of use asset could have a material impact on our earnings in the period of impairment.
The Company’s obligations may be impacted by the funded status of the plans, the plans’ investment performance, changes in the participant demographics, financial stability of contributing employers and changes in actuarial assumptions. See Note 12 Benefit and Retirement Plans of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for more information.
The Company’s obligations may be impacted by the funded status of the plans, the plans’ investment performance, changes in the participant demographics, financial stability of contributing employers and changes in actuarial assumptions. See Note 13 Benefit and Retirement Plans of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for more information.
The Company takes great care in the planning and execution of these migrations, however, implementation issues related to the transition could arise and may result in the following: • Disruption of the Company’s domestic and international supply chain; • Inability to fill customer orders accurately and on a timely basis; • Negative impact on financial results; • Inability to fulfill federal, state and local tax filing requirements in a timely and accurate matter; and • Increased demands of management and associates to the detriment of other corporate initiatives.
The Company takes great care in the planning and execution of these migrations, however, implementation issues related to the transition could arise and may result in the following: • Disruption of the Company’s domestic and international supply chain; • Inability to fill customer orders accurately and on a timely basis; • Negative impact on financial results; • Inability to fulfill federal, state and local tax filing requirements in a timely and accurate matter; and 8 Table of Contents • Increased demands of management and associates to the detriment of other corporate initiatives.
See Note 13 Commitments and Contingencies of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for more information. We may experience impairment of our long-lived assets, which would decrease our earnings and net worth.
See Note 14 Commitments and Contingencies of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for more information. We may experience impairment of our long-lived assets, which would decrease our earnings and net worth.
Enacted tariffs and potential future increases in tariffs on manufactured goods imported from China or other countries could adversely affect our business. Inability to reduce acquisition costs or pass-through price increases may have an adverse impact on sales volume, earnings, and liquidity.
Enacted tariffs and potential future increases in tariffs on manufactured goods imported from various other countries could adversely affect our business. Inability to reduce acquisition costs or pass-through price increases may have an adverse impact on sales volume, earnings, and liquidity.
There has been a substantial increase in the use of social media platforms, including blogs, social media websites, and other forms of internet-based communications, which allow individuals to access a broad audience of consumers and other interested persons.
There has been a substantial increase in the use of social media platforms, including blogs, social media websites, and other forms of internet-based communications, which allow individuals to access a broad audience of consumers and other interested people.
Based 6 Table of Contents on the most recent information available to the Company, the present value of actuarially accrued liabilities of the multi-employer pension plan substantially exceeds the value of the assets held in trust to pay benefits. As a result of the Company’s participation, it could experience greater volatility in the overall pension funding obligations.
Based on the most recent information available to the Company, the present value of actuarially accrued liabilities of the multi-employer pension plan substantially exceeds the value of the assets held in trust to pay benefits. As a result of the Company’s participation, it could experience greater volatility in the overall pension funding obligations.
In particular, if capacity requirements do not necessitate the utilization of our leased Mexicali, Mexico facility and we are unsuccessful at subleasing the facility in the future the carrying amount of the right of use asset associated with that lease may not be recoverable.
If capacity requirements do not necessitate the utilization of our leased Mexicali facility and we are unsuccessful at subleasing the facility in the future, the remaining carrying amount of the right of use asset associated with that lease may not be recoverable.
In addition, inadvertently failing to comply with such laws and regulations could produce negative consequences which could adversely impact the Company’s operations. Failure to anticipate or respond to changes in consumer or designer tastes and fashions in a timely manner could adversely affect the Company’s business and decrease sales and earnings.
In addition, inadvertently failing to comply with such laws and regulations could produce negative consequences which could adversely impact the Company’s operations. 7 Table of Contents Failure to anticipate or respond to changes in consumer or designer tastes and fashions in a timely manner could adversely affect the Company’s business and decrease sales and earnings.
The Company’s participation in a multi-employer pension plan may have exposures under those plans that could extend beyond what its obligations would be with respect to its employees. The Company participates in, and makes periodic contributions to, one multi-employer pension plan that covers union employees.
The Company’s participation in a multi-employer pension plan may have exposure under the plan that could extend beyond what its obligations would be with respect to its employees. The Company participates in, and makes periodic contributions to, one multi-employer pension plan that covers union employees.
Consumers value readily available information and often act on such information without further investigation and without regard to its accuracy or context. The harm may be immediate without affording the Company an opportunity for redress or correction. Item 1B. Unresolved Staff Comments None.
Consumers value readily available information and often act on such information without further investigation and without regard to its accuracy or context. The harm may be immediate without affording the Company an opportunity for redress or correction.
At June 30, 2024, we had $36.7 million in property, plant and equipment and $61.4 million in right of use assets associated with leased facilities. These long-lived assets are tested for impairment whenever events or circumstances indicate that the carrying amount of the asset may not be recoverable.
At June 30, 2025, we had $36.2 million in property, plant and equipment and $41.5 million in right of use assets associated with leased facilities. These long-lived assets are tested for impairment whenever events or circumstances indicate that the carrying amount of the asset may not be recoverable.
In the event of negative economic events such as supply chain disruptions, weather events or natural disasters, public health events or other unforeseen issues with negative economic impact to our customers, which have occurred in the past, we may not be able to collect amounts owed to us.
In the event of negative economic events such as economic recession or significant decline in consumer demand, supply chain disruptions, weather events or natural disasters, public 9 Table of Contents health events or other unforeseen issues with negative economic impact to our customers, which have occurred in the past, we may not be able to collect amounts owed to us.
Our ability to recover these cost increases through price increases may continue to lag the cost increases, resulting in downward pressure on margins. In addition, price increases to offset rising costs could negatively impact demand for our products. The Company’s products are considered deferrable purchases for consumers during economic downturns. Prolonged negative economic conditions could impact the business.
Our ability to recover these cost increases through price increases may continue to lag the cost increases, resulting in downward pressure on margins. In addition, price increases to offset rising costs could negatively impact demand for our products. 6 Table of Contents The Company’s products are considered deferrable purchases for consumers during economic downturns.
The main foreign countries we source from are Vietnam, China, Thailand, and Mexico. If we were unsuccessful in obtaining those products from other sources or at comparable cost, a disruption in our supply chain could adversely affect our sales, earnings, financial condition, and liquidity. Finally, the Company relies on third parties to deliver customer orders.
If we were unsuccessful in obtaining those products from other sources or at comparable cost, a disruption in our supply chain could adversely affect our sales, earnings, financial condition, and liquidity. Finally, the Company relies on third parties to deliver customer orders.
At June 30, 2024 the Company does not believe any impairment indicators exist due to current and expected sublease tenants and plans for future operations but impairment assessment involves the use of considerable judgment and any change in future market or economic conditions could cause actual results to differ.
At June 30, 2025 the Company does not believe any further impairment indicators exist, but impairment assessment involves the use of considerable judgement and any change in future market or economic conditions could cause actual results to differ from estimates.
There may be additional factors that are presently unknown to the Company or that the Company currently believes to be immaterial that could affect its business. Risks related to our operations: Business information systems could be impacted by disruptions and security breaches. The Company employs information technology systems to support its global business.
Risks related to our operations: Business information systems could be impacted by disruptions and security breaches. The Company employs information technology systems to support its global business.
Similarly, increases in pricing may have an adverse impact on the competitiveness of the Company’s products relative to other furniture manufacturers with less exposure to the tariff and could also lead to adverse impacts on volume, earnings, and liquidity. 8 Table of Contents Additionally, a disruption in supply from foreign countries could adversely affect our ability to timely fill customer orders for those products and decrease our sales, earnings, and liquidity.
Similarly, increases in pricing may have an adverse impact on the competitiveness of the Company’s products relative to other furniture manufacturers with less exposure to the tariff and could also lead to adverse impacts on volume, earnings, and liquidity.
During the initial height of the COVID-19 pandemic, purchases of home furnishings were heavily impacted as they are largely deferable and heavily influenced by consumer sentiment. Public health organizations recommended, and many governments implemented, measures from time-to-time to slow and limit the transmission of the virus, including certain business shutdowns and shelter in place and social distancing requirements.
Public health organizations recommended, and many governments implemented, measures from time-to-time to slow and limit the transmission of the virus, including certain business shutdowns and shelter in place and social distancing requirements.
Any actions taken by those agencies to delay, limit or deny the amounts submitted or retroactive changes in legislation surrounding these regimes may impact our ability to recover these amounts. 7 Table of Contents Risks related to our industry: Public health events could have a materially adverse effect on our ability to operate, our ability to keep employees safe from the pandemic, our results of operations, and financial condition.
Any actions taken by those agencies to delay, limit or deny the amounts submitted or retroactive changes in legislation surrounding these regimes may impact our ability to recover these amounts. Item 1B. Unresolved Staff Comments None.
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There may be additional factors that are presently unknown to the Company or that the Company currently believes to be immaterial that could affect its business. Risks related to our industry: Changes in global trade policy and the impact on tariffs may have a material adverse effect on our business and results of operations.
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We source certain finished products from external suppliers in foreign countries, primarily Vietnam, and have significant manufacturing operations in Mexico. On April 2, 2025, the President of the United States issued an executive order to regulate imports by imposing reciprocal country specific tariffs on multiple nations around the world, including Vietnam.
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A further executive order issued April 9, 2025, paused the implementation of the country specific tariffs on Vietnam and many other countries for 90 days, maintaining a 10% global baseline tariff, while the United States works with its trade partners to negotiate new trade agreements.
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On July 31, 2025, a further executive order was issued clarifying certain matters related to tariffs, including a country specific tariff of 20% on goods from Vietnam. Although the country specific tariffs and the global 10% baseline tariffs do not apply to our products imported from Mexico, that status could change at any time.
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The current situation is dynamic, and it is unknown if the United States and its trade partners will reach an agreement to further pause or adjust the current tariffs.
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Tariffs or other trade restrictions may lead to continuing uncertainty and volatility in U.S. economic conditions and commodity markets, declining consumer confidence, significant inflation or diminished expectations for the economy, and ultimately reduced demand for our products.
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In addition, tariffs on our imported goods could have a material adverse impact on our future net sales, cost of goods sold, profit and cash flow. The ultimate effect will be dependent on the magnitude and duration of the tariffs and the countries implicated as well as our ability to offset or recoup the increased costs.
Added
Additionally, a disruption in supply from foreign countries could adversely affect our ability to timely fill customer orders for those products and decrease our sales, earnings, and liquidity. The main foreign countries we source from are Vietnam, China, Thailand, and Mexico.
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Public health events could have a materially adverse effect on our ability to operate, our ability to keep employees safe from the pandemic, our results of operations, and financial condition. During the initial height of the COVID-19 pandemic, purchases of home furnishings were heavily impacted as they are largely deferable and heavily influenced by consumer sentiment.
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During the quarter ended March 31, 2025 the Company determined that the right of use asset related to our leased Mexicali, Mexico facility was not fully recoverable and recorded a pre-tax non-cash asset impairment charge of $14.1 million due to substantial changes in U.S. trade policy in early 2025 that created significant uncertainty in US-Mexico trade relations, slowed foreign direct investment in Mexico, and greatly diminished tenant interest in subleasing the Mexicali facility.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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In addition, the Company has implemented a cross-functional cybersecurity steering team to facilitate 9 Table of Contents coordination across key departments and assists in defining policies, procedures, and mitigation strategies, and will be called on to assist in risk assessment of any threat or incident.
In addition, the Company has implemented a cross-functional cybersecurity steering team to facilitate coordination across key departments and assists in defining policies, procedures, and mitigation strategies, and will be called on to assist in risk assessment of any threat or incident.
As the severity of events meet certain levels as specified by the Incident Response Plan, those events are escalated to senior levels of management and reported to the Board of Directors. Our Board of Directors is responsible for the oversight of controls and procedures related to the public disclosure of material cybersecurity incidents.
As the severity of events meet certain levels as specified by the Incident Response Plan, those events are escalated to senior levels of management and reported to the Board of Directors. Our Board of Directors is responsible for the oversight of controls and procedures related to the public disclosure of material cybersecurity incidents. 10 Table of Contents
On a quarterly basis, our Chief Information Officer (CIO) provides a cybersecurity status report and update to the Board of Directors, which includes a scorecard of cybersecurity threats, updates on key initiatives, and any changes in trends that may impact the Company.
On a quarterly basis, our C hief Information Officer (CIO) provides a cybersecurity status report and update to the Board of Directors, which includes a scorecard of cybersecurity threats, updates on key initiatives, and any changes in trends that may impact the Company.

Item 2. Properties

Properties — owned and leased real estate

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Item 3. Legal Proceedings See Note 13 Commitments and Contingencies of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for discussion of legal proceedings. Item 4. Mine Safety Disclosures None. PART II
Item 3. Legal Proceedings See Note 14 Commitments and Contingencies of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for discussion of legal proceedings. Item 4. Mine Safety Disclosures None. PART II
See Note 6 Assets Held for Sale of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for disclosure of the assets held for sale. 10 Table of Contents The Company leases the following facilities as of June 30, 2024: Approximate Location Size (square feet) Principal Operations Mexicali, Mexico 508,000 Manufacturing Greencastle, Pennsylvania 242,000 Distribution Juarez, Mexico 225,000 Manufacturing Juarez, Mexico 197,000 Manufacturing Juarez, Mexico 131,000 Manufacturing High Point, North Carolina 54,000 Showroom El Paso, Texas 38,000 Warehouse High Point, North Carolina 11,000 Design & Engineering Center Las Vegas, NV 10,000 Showroom Shenzhen, China 2,000 Office Bangkok, Thailand 1,500 Office Binh Duong, Vietnam 1,000 Office See Note 2 Leases of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion of the leased assets.
Properties The Company owns the following facilities as of June 30, 2025: Approximate Location Size (square feet) Principal Operations Edgerton, Kansas 500,000 Distribution Huntingburg, Indiana 337,000 Distribution Dubuque, Iowa 40,000 Corporate Office The Company leases the following facilities as of June 30, 2025: Approximate Location Size (square feet) Principal Operations Mexicali, Mexico 508,000 Manufacturing Greencastle, Pennsylvania 206,000 Distribution Juarez, Mexico 225,000 Manufacturing Juarez, Mexico 197,000 Manufacturing Juarez, Mexico 131,000 Manufacturing High Point, North Carolina 54,000 Showroom El Paso, Texas 38,000 Warehouse High Point, North Carolina 11,000 Design & Engineering Center Las Vegas, NV 10,000 Showroom Shenzhen, China 2,000 Office Bangkok, Thailand 1,500 Office Binh Duong, Vietnam 1,000 Office See Note 2 Leases of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion of the leased assets.
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Item 2. Properties The Company owns the following facilities as of June 30, 2024: Approximate Location Size (square feet) Principal Operations Huntingburg, Indiana 611,000 Distribution Edgerton, Kansas 500,000 Distribution Dublin, Georgia (1) 315,000 Manufacturing (Held for Sale) Dubuque, Iowa 40,000 Corporate Office (1) Facility is classified as held for sale as of June 30, 2024.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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ITEM 4. MINE SAFETY DISCLOSURES 11 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 11 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 12 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 16 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 17
ITEM 4. MINE SAFETY DISCLOSURES 11 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 11 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 13 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 18 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 19

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Purchases of Equity Securities On January 20, 2022, the Board of Directors approved a repurchase program authorizing the Company to purchase up to an additional $30 million of the Company’s common stock through January 19, 2025. The following table details shares repurchased by the Company during the three months ended June 30, 2024.
Purchases of Equity Securities On December 11, 2024, the Board of Directors approved a share repurchase program authorizing the Company to purchase up to $30 million of the Company’s common stock. 11 Table of Contents The following table details shares repurchased by the Company during the three months ended June 30, 2025.
Total Number Average Total Number Approximate Dollar Value of Shares Price Paid of Shares Purchased of Shares that May Yet Period Purchased per Share as Part of Plan Be Purchased April 1, 2024, to April 30, 2024 — $ — 1,485,274 $ 2,115,634 May 1, 2024, to May 31, 2024 — — 1,485,274 2,115,634 June 1, 2024, to June 30, 2024 — — 1,485,274 2,115,634 As of June 30, 2024 — $ — 1,485,274 $ 2,115,634 11 Table of Contents
Total Number Average Total Number Approximate Dollar Value of Shares Price Paid of Shares Purchased of Shares that May Yet Period Purchased per Share as Part of Plan Be Purchased April 1, 2025, to April 30, 2025 — $ — — $ 30,000,000 May 1, 2025, to May 31, 2025 — — — 30,000,000 June 1, 2025, to June 30, 2025 — — — 30,000,000 As of June 30, 2025 — $ — — $ 30,000,000 12 Table of Contents
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The Company’s common stock is traded on the NASDAQ Global Select Market under the trading symbol FLXS. Holders of Record The Company estimates there were approximately 3,000 beneficial holders of common stock of the Company as of June 30, 2024.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The Company’s common stock is traded on the NASDAQ Global Select Market under the trading symbol FLXS.
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Holders of Record The Company had 187 registered holders of common stock and estimates there were approximately 3,000 beneficial holders of common stock of the Company as of June 30, 2025.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Net cash (used in) financing activities For the year ended June 30, 2024, net cash used in financing activities was $29.9 million, primarily due to proceeds from lines of credit of $367.8 million, offset by payments on lines of credit of $391.3 million, dividends paid of $3.2 million, $1.7 million for treasury stock purchases, and $1.5 million for tax payments on employee vested restricted shares netted with proceeds from the issuance of common stock.
For the year ended June 30, 2024, net cash used in financing activities was $29.9 million, primarily due to proceeds from lines of credit of $367.8 million, offset by payments on lines of credit of $391.3 million, dividends paid of $3.2 million, $1.7 million for treasury stock purchases, and $1.5 million for tax payments on employee vested restricted shares netted with proceeds from the issuance of common stock.
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 fiscal years ended June 30, 2024, 2023, and 2022. Amounts presented are percentages of the Company’s net sales.
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 fiscal years ended June 30, 2025, 2024, and 2023. Amounts presented are percentages of the Company’s net sales.
At June 30, 2024 the Company determined that based on the weight of available evidence, we will be able to recover our deferred tax assets. The realization of our deferred tax assets is primarily dependent on future taxable income in the appropriate jurisdiction.
At June 30, 2025, the Company determined that based on the weight of available evidence, we will be able to recover our deferred tax assets. The realization of our deferred tax assets is primarily dependent on future taxable income in the appropriate jurisdiction.
On September 8, 2021, the Company, as the borrower, entered into a credit agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association (the “Lender”), and the other lenders party thereto. The Credit Agreement has a five-year term and provides for up to an $85 million revolving line of credit.
Financing Arrangements Line of Credit On September 8, 2021, the Company, as the borrower, entered into a credit agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association (the “Lender”), and the other lenders thereto. The Credit Agreement has a five-year term and provides for up to an $85 million revolving line of credit.
Letters of credit outstanding at the Lender as of June 30, 2024, totaled $1.0 million. See Note 9 Credit Arrangements of Notes to Consolidated Financial Statements of this Annual Report on Form 10-K.
Letters of credit outstanding at the Lender as of June 30, 2025, totaled $0.9 million. See Note 9 Credit Arrangements of Notes to Consolidated Financial Statements of this Annual Report on Form 10-K.
Refer to Note 10 Income Taxes of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for more information.
Refer to Note 10 Income Taxes of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for more information. 17 Table of Contents
Subject to certain conditions, the Credit Agreement also provides for the issuance of letters of credit in an aggregate amount up to $5 million which, upon issuance, would be deemed advances under the revolving line of credit. Proceeds of borrowings were used to refinance all indebtedness owed to Dubuque Bank and Trust and for working capital purposes.
Subject to certain conditions, the Credit Agreement also provides for the issuance of letters of credit in an aggregate amount up to $5 million which, upon issuance, would be deemed advances under the revolving line of credit. Proceeds of borrowings were used to refinance all indebtedness owed to a prior lender and for working capital purposes.
There were no restructuring expenses incurred in the prior fiscal year. See Note 5, Restructuring , of the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for more information. During the year ended June 30, 2024, the Company completed the sale of the Starkville, Mississippi location which had been previously recorded as held for sale.
See Note 5, Restructuring , of the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for more information. 14 Table of Contents During the year ended June 30, 2024, the Company completed the sale of the Starkville, Mississippi location which had been previously recorded as held for sale.
For the year ended June 30, 2023, cash provided by operating activities was $23.0 million, which primarily consisted of net income of $14.8 million, adjusted for non-cash items including depreciation of $4.6 million and stock-based compensation of $3.2 million, offset by $7.2 million in deferred income taxes, accounts receivable allowance recoveries of $0.4 million, and gain from the sale of capital assets of $0.3 million.
For the year ended June 30, 2024, cash provided by operating activities was $31.9 million, which primarily consisted of net income of $10.5 million, adjusted for non-cash items including depreciation of $4.0 million and stock-based compensation of $4.6 million, offset by $1.5 million in deferred income taxes, accounts receivable allowance recoveries of $0.2 million, and gain from the sale of capital assets of $2.8 million.
Liquidity and Capital Resources Working capital (current assets less current liabilities) on June 30, 2024, was $95.0 million compared to $115.5 million on June 30, 2023.
Liquidity and Capital Resources Working capital (current assets less current liabilities) on June 30, 2025, was $110.4 million compared to $95.0 million on June 30, 2024.
For assets held for sale, if the net book value of the asset is greater than its estimated fair value less cost to sell, an impairment is recorded for the excess of net book value over the estimated fair value less cost to sell.
For long-lived assets, including right-of-use lease assets, if the net book value of the asset is greater than its estimated fair value less cost to sell, an impairment is recorded for the excess of net book value over estimated fair value less cost to sell.
See Note 10, Income Taxes , of the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for more information. Net income was $14.8 million, or $2.74 per diluted share for the year ended June 30, 2023, compared to net income of $1.9 million, or $0.28 per diluted share in the prior year.
See Note 10, Income Taxes , of the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for more information. Net income was $20.2 million, or $3.55 per diluted share for the year ended June 30, 2025, compared to net income of $5.5 million, or $1.91 per diluted share in the prior year.
For the years ended June 30, 2024 2023 2022 Net sales 100.0 % 100.0 % 100.0 % Cost of goods sold 78.9 82.0 86.6 Gross margin 21.1 18.0 13.4 Selling, general and administrative 17.1 16.0 12.3 Restructuring expense 0.7 — 0.1 Environmental remediation — (0.7 ) — (Gain) on disposal of assets (0.8 ) — (0.3 ) Other expense — 0.1 — Operating income 4.1 2.7 1.2 Other income — — — Interest (expense) (0.4 ) (0.3 ) (0.2 ) Income before income taxes 3.8 2.3 1.1 Income tax expense (benefit) 1.2 (1.4 ) 0.7 Net income 2.6 % 3.8 % 0.3 % Fiscal 2024 Compared to Fiscal 2023 Net sales were $412.8 million for the year ended June 30, 2024, compared to net sales of $393.7 million in the prior year, an increase of $19.1 million or 4.8%.
For the years ended June 30, 2025 2024 2023 Net sales 100.0 % 100.0 % 100.0 % Cost of goods sold 77.8 78.9 82.0 Gross margin 22.2 21.1 18.0 Selling, general and administrative expenses 15.1 17.1 16.0 Restructuring expense — 0.7 — Right-of-use asset impairment 3.2 — — (Gain) on sale of real estate (0.2 ) — — (Gain) on disposal of assets held for sale (2.0 ) (0.8 ) — Environmental remediation — — (0.7 ) Other expense — — 0.1 Operating income 6.0 4.1 2.7 Interest income 0.1 0.0 0.0 Interest (expense) (0.0 ) (0.4 ) (0.3 ) Income before income taxes 6.1 3.8 2.3 Income tax provision (benefit) 1.5 1.2 (1.4 ) Net income and comprehensive income 4.6 % 2.6 % 3.8 % Fiscal 2025 Compared to Fiscal 2024 Net sales were $441.1 million for the year ended June 30, 2025, compared to net sales of $412.8 million in the prior year, an increase of $28.3 million or 6.9%.
The 310-bps increase was primarily driven by an increase of 240-bps primarily related to cost savings initiatives for materials, labor, and logistics, product portfolio management and disciplined promotional pricing and a 70-bps improvement on volume leverage of fixed cost structure.
The 310-bps increase was primarily driven by an increase of 240-bps primarily related to cost savings initiatives for materials, labor, and logistics, product portfolio management and disciplined promotional pricing and a 70-bps improvement on volume leverage of fixed cost structure. SG&A expenses increased by $7.6 million in the year ended June 30, 2024, compared to the prior fiscal year.
Contractual Obligations The following table summarizes our contractual obligations on June 30, 2024, and the effect these obligations are expected to have on our liquidity and cash flow in the future (in thousands): 2-3 4-5 More than Total 1 Year Years Years 5 Years Operating lease obligations $ 74,188 $ 9,418 $ 18,586 $ 17,208 $ 28,976 Warehouse management obligation 3,403 1,512 1,891 — — Outlook Our focus for fiscal 2025 will be to remain financially agile with strong liquidity, continue building our foundation for profitable long-term growth in both retail and e-commerce sales channels, build global supply chain resiliency, expand sourcing, manufacturing, and distribution capacity to support future growth, strengthen digital capabilities, re-imagine the customer experience, and build strong culture and talent.
Contractual Obligations The following table summarizes our contractual obligations on June 30, 2025, and the effect these obligations are expected to have on our liquidity and cash flow in the future (in thousands): 2-3 4-5 More than Total 1 Year Years Years 5 Years Operating lease obligations $ 67,976 $ 10,003 $ 20,062 $ 17,511 $ 20,400 Warehouse management obligation 1,735 1,388 347 — — 16 Table of Contents Outlook Our focus for fiscal 2026 will be to remain financially agile with strong liquidity, continue building our foundation for profitable long-term growth in both retail and e-commerce sales channels, build global supply chain resiliency, continue focusing on operational excellence, strengthen digital capabilities, re-imagine the customer experience, and build strong culture and talent.
Capital expenditures were $4.8 million for the fiscal year ended June 30, 2024.
Capital expenditures were $3.3 million for the fiscal year ended June 30, 2025.
Involuntary employee termination benefits must be a one-time benefit, and this element of restructuring cost is recognized as incurred upon communication of the plan to the identified employees. Costs to terminate contracts are recognized upon the effectiveness of the termination agreement with the provider. Other associated restructuring costs are expensed as incurred.
Restructuring Costs – The Company groups exit or disposal cost obligations into three categories: Involuntary employee termination benefits, costs to terminate contracts, and other associated costs. Involuntary employee termination benefits must be a one-time benefit, and this element of restructuring cost is recognized as incurred upon communication of the plan to the identified employees.
Any inventory impairment costs as a result of restructuring activities are accounted for as costs of goods sold. Income Taxes - In determining taxable income for financial statement purposes, we must make certain estimates and judgments.
Costs to terminate contracts are recognized upon the effectiveness of the termination agreement with the provider. Other associated restructuring costs are expensed as incurred. Any inventory impairment costs as a result of restructuring activities are accounted for as costs of goods sold. Income Taxes - In determining taxable income for financial statement purposes, we must make certain estimates and judgments.
For the year ended June 30, 2023, net cash used in financing activities was $17.4 million, primarily due to proceeds from lines of credit of $363.8 million, offset by payments on lines of credit of $373.3 million, $3.7 million for treasury stock purchases, dividends paid of $3.2 million, and $1.0 million for tax payments on employee vested restricted shares netted with proceeds from the issuance of common stock.
For the year ended June 30, 2024, net cash used in investing activities was $0.6 million, primarily due to capital expenditures of $4.8 million partially offset by proceeds of $4.2 million from the sale of capital assets 15 Table of Contents Net cash (used in) financing activities For the year ended June 30, 2025, net cash used in financing activities was $11.2 million, primarily due to proceeds from lines of credit of $202.3 million, offset by payments on lines of credit of $207.3 million, dividends paid of $3.6 million, and $2.8 million for tax payments on employee vested restricted shares netted with proceeds from the issuance of common stock.
On May 24, 2023, the Company entered into a second amendment to the Credit Agreement (“Second Amendment to the Credit Agreement”) with the lender to transition the applicable interest rate from LIBOR to Secured Overnight Financing Rate (“SOFR”).
Subject to certain conditions, borrowings under the Credit Agreement initially bore interest at LIBOR plus 1.25% or 1.50% per annum. On May 24, 2023, the Company entered into a second amendment to the Credit Agreement (“Second Amendment to the Credit Agreement”) with the Lender to transition the applicable interest rate from LIBOR to Secured Overnight Financing Rate (“SOFR”).
Effective as of the date of the Second Amendment to the Credit Agreement, borrowings under the amended Credit Agreement bear interest at SOFR plus 1.36% to 1.61% or an effective interest rate of 6.70% on June 30, 2024. As of June 30, 2024, there was $4.8 million outstanding under the Credit Agreement, exclusive of fees and letters of credit.
Effective as of the date of the Second Amendment to the Credit Agreement, borrowings under the amended Credit Agreement bear interest at SOFR plus 1.36% to 1.61% or an effective interest rate of 5.76% on June 30, 2025.
Income tax benefit was ($5.6) million, or an effective rate of (60.3%), for the year ended June 30, 2023, compared to income tax expense of $4.1 million in the prior year, or an effective tax rate of 68.6%. The effective tax rate was primarily impacted by the release of our valuation allowance on deferred tax assets.
Income tax expense was $5.0 million, or an effective rate of 32.3%, for the year ended June 30, 2024, compared to income tax benefit of ($5.6) million in the prior year, or an effective tax rate of (60.3%).
Selling, general, and administrative (“SG&A”) expenses increased by $7.6 million in the year ended June 30, 2024, compared to the prior fiscal year. As a percentage of net sales, SG&A expense was 17.1% in fiscal year 2024 compared to 16.0% of net sales in the prior fiscal year.
As a percentage of net sales, SG&A expense was 17.1% in fiscal year 2024 compared to 16.0% of net sales in the prior fiscal year.
Net cash provided by operating assets and liabilities was $8.3 million and was primarily due to a decrease in inventory of $19.1 million due to inventory optimization initiatives, a decrease in accounts receivable of $3.3 million due to lower net sales, offset by a decrease in accounts payable of $7.3 million due to lower inventory purchases, an increase in other assets of $5.3 million, and a decrease in other liabilities of $1.5 million.
Net cash provided by operating assets and liabilities was $8.7 million and was primarily due to a decrease in trade receivables of $9.3 million and a decrease in inventory of $7.4 million due to inventory optimization initiatives, offset by an increase in other assets of $7.6 million primarily related to our receivable for recoverable VAT paid in Mexico.
Net cash (used in) investing activities For the year ended June 30, 2024, net cash used in investing activities was $0.6 million, primarily due to capital expenditures of $4.8 million partially offset by proceeds of $4.2 million from the sale of capital assets.
Net cash provided by (used in) investing activities For the year ended June 30, 2025, net cash provided by investing activities was $9.4 million, primarily due to proceeds of $11.6 million from the sales of property, plant and equipment, and corporate owned life insurance proceeds of $1.2 million, offset by capital expenditures of $3.3 million partially.
A summary of operating, investing, and financing cash flow is shown in the following table: For the years ended June 30, (in thousands) 2024 2023 Net cash provided by operating activities $ 31,883 $ 22,989 Net cash (used in) investing activities (593 ) (4,450 ) Net cash (used in) financing activities (29,894 ) (17,358 ) Increase in cash and cash equivalents $ 1,396 $ 1,181 13 Table of Contents Net cash provided by operating activities For the year ended June 30, 2024, cash provided by operating activities was $31.9 million, which primarily consisted of net income of $10.5 million, adjusted for non-cash items including depreciation of $4.0 million and stock-based compensation of $4.6 million, offset by $1.5 million in deferred income taxes, accounts receivable allowance recoveries of $0.2 million, and gain from the sale of capital assets of $2.8 million.
A summary of operating, investing, and financing cash flow is shown in the following table: For the years ended June 30, (in thousands) 2025 2024 Net cash provided by operating activities $ 36,979 $ 31,883 Net cash provided by (used in) investing activities 9,432 (593 ) Net cash (used in) financing activities (11,166 ) (29,894 ) Increase in cash and cash equivalents $ 35,245 $ 1,396 Net cash provided by operating activities For the year ended June 30, 2025, cash provided by operating activities was $37.0 million, which primarily consisted of net income of $20.2 million, adjusted for non-cash items including an impairment of our Mexicali facility right-of-use asset of $14.1 million, stock-based compensation expense of $3.9 million, and depreciation expense of $3.7 million, offset by gain on disposition of property, plant and equipment of $9.5 million, $3.8 million in deferred income tax benefit, and accounts receivable allowance benefit of $0.2 million.
In addition, the Loan Agreement places restrictions on the Company’s ability to incur additional indebtedness, to create liens or other encumbrances, to sell or otherwise dispose of assets, and to merge or consolidate with other entities. 14 Table of Contents On April 18, 2022, the Company, as the borrower, entered a first amendment to the September 8, 2021, Credit Agreement (“First Amendment to the Credit Agreement”), with the Lender, and the lenders party thereto.
In addition, the Loan Agreement places restrictions on the Company’s ability to incur additional indebtedness, to create liens or other encumbrances, to sell or otherwise dispose of assets, and to merge or consolidate with other entities.
Markdowns establish a new cost basis for the Company’s inventory. Subsequent changes in facts or circumstances do not result in the reversal of previously recorded markdowns or an increase in that newly established cost basis. Valuation of Long-Lived Assets – We periodically review the carrying value of long-lived assets and estimated depreciable or amortizable lives for continued appropriateness.
Our inventory valuation reflects markdowns for the excess of the cost over the amount expected to be realized and considers obsolete and excess inventory. Markdowns establish a new cost basis for the Company’s inventory. Subsequent changes in facts or circumstances do not result in the reversal of previously recorded markdowns or an increase in that newly established cost basis.
Gross margin as a percent of net sales for the year ended June 30, 2024, was 21.1%, compared to 18.0% for the prior fiscal year, an increase of 310 basis points (“bps”).
Sales of products sold through e-commerce channels decreased by ($3.8) million, or (7.5%) due to a decrease in consumer demand. Gross margin as a percent of net sales for the year ended June 30, 2024, was 21.1%, compared to 18.0% for the prior fiscal year, an increase of 310-bps.
See Note 6, Assets Held For Sale , of the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for more information. 12 Table of Contents Income tax expense was $5.0 million, or an effective rate of 32.3%, for the year ended June 30, 2024, compared to income tax benefit of ($5.6) million in the prior year, or an effective tax rate of (60.3%).
The Company recorded a pre-tax gain of $5.0 million related to the sale. See Note 6, Assets Held For Sale , of the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for more information.
The amount ultimately realized from trade accounts receivable may differ from the amount estimated in the consolidated financial statements. Inventories – We value inventory at the lower of cost or net realizable value. Our inventory valuation reflects markdowns for the excess of the cost over the amount expected to be realized and considers obsolete and excess inventory.
The amount ultimately realized from trade accounts receivable may differ from the amount estimated in the consolidated financial statements. Inventories – We value inventory at the lower of cost or net realizable value. Cost of manufactured inventory includes materials, labor and overhead. In addition, finished goods inventory includes capitalized freight, import duties, and warehousing costs.
During the year ended June 30, 2023, the Company recorded income of $2.8 million as a result of insurance proceeds received related to the settlement of the environmental remediation liability. See Note 13 Commitments and Contingencies , of the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for more information.
See Note 2, Leases, of the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for more information. 13 Table of Contents During the year ended June 30, 2025, the Company completed the sale of its Dublin, Georgia facility which had been previously recorded as held for sale.
The $20.5 million decrease in working capital was due to a decrease in inventory of $25.5 million, an increase in other liabilities of $4.2 million, an increase in accounts payable of $1.1 million partially offset by an increase of $6.1 million in trade receivables, an increase of other current assets of $2.8 million, and an increase in cash of $1.4 million.
The $15.4 million increase in working capital is primarily due to an increase in cash of $35.2 million offset by a decrease of $9.0 million of trade receivables, a decrease of $7.4 million in inventory, an increase in sales & advertising related accruals of $2.0 million and a decrease of $1.7 million in assets held for sale.
Sales of products sold through retailers increased by $22.9 million or 6.7% primarily driven by growth with strategic customers and new product introductions. Sales of products sold through e-commerce channels decreased by ($3.8) million, or (7.5%) due to a decrease in consumer demand.
Fiscal 2024 Compared to Fiscal 2023 Net sales were $412.8 million for the year ended June 30, 2024, compared to net sales of $393.7 million in the prior year, an increase of $19.1 million or 4.8%. Sales of products sold through retailers increased by $22.9 million or 6.7% primarily driven by growth with strategic customers and new product introductions.
The prior fiscal year expenses were primarily for ongoing costs associated with our facilities listed as held for sale, professional fees, and former employee expenses as part of our previously announced comprehensive restructuring plan. See Note 5, Restructuring , of the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for more information.
See Note 6, Assets Held For Sale , of the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for more information.
Selling, general, and administrative (“SG&A”) expenses decreased by $3.9 million in the year ended June 30, 2023, compared to the prior fiscal year. As a percentage of net sales, SG&A expense was 16.0% in the fiscal year 2023 compared to 12.3% of net sales in the prior fiscal year.
The 110-bps increase was primarily driven by fixed cost leverage on higher sales, supply chain cost savings, and product portfolio management. Selling, general, and administrative (“SG&A”) expenses decreased by $3.7 million in the year ended June 30, 2025, compared to the prior fiscal year.
The first amendment to the Credit Agreement changed the definition of the term "Payment Conditions" and further defines default or event of default and the calculation of the Fixed Charge Coverage Ratio. Subject to certain conditions, borrowings under the Credit Agreement initially bore interest at LIBOR plus 1.25% or 1.50% per annum.
On April 18, 2022, the Company entered into a first amendment to the Credit Agreement (“First Amendment to the Credit Agreement”), with the Lender, and the lenders thereto. The amendment to the Credit Agreement changed the definition of the term "Payment Conditions" and further defined default or event of default and the calculation of the Fixed Charge Coverage Ratio.
The Company recorded a gain of $3.3 million related to the sale in the fiscal year.
The Company recorded a gain of $3.3 million related to the sale in the fiscal year. See Note 6, Assets Held For Sale , of the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for more information.
Gross margin as a percent of net sales for the year ended June 30, 2023, was 18.0%, compared to 13.4% for the prior year period, an increase of 460 basis points (“bps”).
The increase in sales was primarily driven by unit volume in our soft seating products, offset by a decline in our homestyles ready-to-assemble product line. Gross margin for the year ended June 30, 2025, was 22.2%, compared to 21.1% for the prior fiscal year, an increase of 110 basis points (“bps”).
Fiscal 2023 Compared to Fiscal 2022 Net sales were $393.7 million for the year ended June 30, 2023, compared to net sales of $544.3 million in the prior year, a decrease of ($150.6) million or (27.7%).
Income tax expense was $6.8 million, or an effective rate of 25.3%, for the year ended June 30, 2025, compared to income tax expense of $5.0 million in the prior year, or an effective tax rate of 32.3%.
Removed
Sales of products sold through retailers declined by ($142.5) million or (29.3%) primarily driven by consumer demand returning to pre-pandemic levels and competitive pressure to lower prices. Sales of products sold through e-commerce channels decreased by ($8.1) million, or (13.8%) due to a decrease in consumer demand.
Added
As a percentage of net sales, SG&A expense was 15.1% in fiscal year 2025 compared to 17.1% of net sales in the prior fiscal year. The decrease of 200-bps is primarily due to fixed cost leverage on higher sales volume and structural cost savings partially offset by investments in growth initiatives.
Removed
The 460-bps increase was primarily driven by a 680-bps increase related to lower ancillary charges caused by domestic supply chain disruptions and higher per diem charges in the prior year, an increase of 40-bps primarily related to cost savings initiatives for materials, labor, and transportation, a decrease of 150-bps due to pricing promotions and inventory write-downs, and a decrease of 110-bps related to capacity growth investments in manufacturing and distribution.
Added
The prior year SG&A expense also included a $1.5 million expense due to CEO transition costs associated with the revaluation of previously awarded equity awards which did not recur in the current year.
Removed
The increase of 370-bps is primarily due to an increase of 350-bps due to deleverage on year-over-year sales decline and an increase of 20-bps due to higher incentive compensation and investment in growth initiatives. There were no restructuring expenses in the year ended June 30, 2023, as all restructuring activities were completed in the prior fiscal year.
Added
In July 2022, Flexsteel commenced a 12-year lease for a manufacturing facility in Mexicali, Mexico to support strong demand growth which was elevated due to pandemic-driven buying at that time.
Removed
The $7.2 million change in deferred income taxes primarily relates to the release of our valuation allowance on deferred tax assets.
Added
Subsequently, U.S. furniture demand reverted to pre-pandemic norms, and the Company’s plan for the facility pivoted to subleasing the space short-term while maintaining the option to utilize it longer term to support growth.
Removed
For the year ended June 30, 2023, net cash used in investing activities was $4.5 million, primarily due to capital expenditures of $4.8 million partially offset by proceeds of $0.3 million from the sale of capital assets.
Added
While the Company secured multiple short-term sublease tenants at the beginning of the lease term, substantial changes in U.S. trade policy in early 2025 created significant uncertainty in US-Mexico trade relations, slowed foreign direct investment in Mexico, and greatly diminished tenant interest in subleasing the Mexicali facility.
Removed
Financing Arrangements Line of Credit On August 28, 2020, the Company entered a two-year secured $25.0 million revolving line of credit with Dubuque Bank and Trust Company, with an interest rate of 1.50% plus LIBOR, subject to a floor of 3.00%.
Added
As a result, management concluded that the right of use asset related to this lease was not fully recoverable and recorded a pre-tax non-cash asset impairment charge of $14.1 million during the quarter ended March 31, 2025.
Removed
The revolving line of credit was secured by essentially all the Company’s assets, excluding real property, and required the Company to maintain compliance with certain financial and non-financial covenants. This line of credit was subsequently canceled in the first quarter of the fiscal year 2022.
Added
During the year ended June 30, 2025, the Company completed the sale of 2 separate ancillary buildings, formerly part of its Huntingburg, Indiana distribution center complex. The Company received proceeds of $0.8 million and recorded a pre-tax gain of $0.7 million related to the first sale.
Removed
We recorded no impairments in the fiscal years 2024 and 2023. 15 Table of Contents Restructuring Costs – The Company groups exit or disposal cost obligations into three categories: Involuntary employee termination benefits, costs to terminate contracts, and other associated costs.
Added
The Company received proceeds of $4.0 million and recorded a pre-tax gain of $3.7 million related to the second sale. The Company has adequate distribution capacity to support our growth as we continue to optimize our distribution and logistics network.
Added
The current year effective tax rate was primarily impacted by the effect of state and foreign taxes, offset by a research & development credit benefit. The prior year tax rate was impacted by the effect of state taxes, nondeductible stock compensation, and foreign taxes, offset by a research & development credit benefit.
Added
On July 31, 2025, the President of the United States issued an executive order intended to clarify certain matters related to previously issued executive orders on tariffs. This executive order included, among other things, a country specific tariff of 20% on goods imported from Vietnam.
Added
The current situation is dynamic, and it is unknown if the United States and its trade partners will reach an agreement to further pause or adjust the current tariffs. Depending on our ability to mitigate these tariffs, they could have a material impact on our future net sales, cost of goods sold, profit and cash flow.
Added
The ultimate effect will be dependent on the magnitude and duration of the tariffs and the countries implicated as well as our ability to successfully mitigate the potential impact. The Company is assessing options to mitigate any potential impact, which includes supply chain adjustments, negotiating concessions with current suppliers, and pricing actions.
Added
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The OBBBA includes a number of provisions which impact the United States tax code. These regulations impacting the tax code have multiple effective dates ranging from fiscal years beginning January 1, 2025, to fiscal years beginning January 1, 2027.
Added
The Company has not adjusted its provision for income tax or measurement of deferred tax assets as of June 30, 2025, based on the changes that may be triggered by the OBBBA due to the law being signed on July 4, 2025.
Added
The Company is currently assessing the impact of the OBBBA but does not expect it to have a material impact on our future financial position and results of operations.
Added
There were no restructuring expenses incurred in the prior fiscal year.
Added
On June 3, 2025, the Company entered into a third amendment to its Credit Agreement ("Third Amendment to the Credit Agreement") with Wells Fargo Bank, NA. The amendment reduced the maximum revolving line of credit amount to $55 million and modified certain definitions in the Credit Agreement which include dollar figures derived from the maximum revolver amount.
Added
The reduction in the maximum revolving line of credit amount was initiated by the Company to better align with current and projected borrowing availability under the terms of the Credit Agreement. As of June 30, 2025, there were no outstanding borrowings under the Credit Agreement, exclusive of fees and letters of credit.
Added
Valuation of Long-Lived Assets – We periodically review the carrying value of long-lived assets and estimated depreciable or amortizable lives for continued appropriateness.
Added
We recorded $14.1 million of impairments in the fiscal year 2025 related to our Mexicali facility lease right-of-use asset. See Note 2, Leases, for the Company’s lease disclosures. No impairments were recorded in fiscal years 2024 and 2023.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+1 added−0 removed4 unchanged
Other risks related to furniture product importation include government imposition of regulations and/or quotas; duties, taxes or tariffs on imports; and significant fluctuation in the value of the U.S. dollar against foreign currencies. Any of these factors could interrupt supply, increase costs, and decrease earnings.
Other risks related to furniture product importation include government imposition of regulations and/or quotas; duties, taxes or tariffs on imports; and significant fluctuation in the value of the U.S. dollar against foreign currencies. Any of these factors could interrupt supply, increase costs, decrease demand, and decrease earnings.
Foreign Currency Risk – During fiscal years 2024, 2023, and 2022, the Company did not have sales but had purchases and other expenses denominated in foreign currencies, primarily the Mexican Peso.
Foreign Currency Risk – During fiscal years 2025, 2024, and 2023, the Company did not have sales but had purchases and other expenses denominated in foreign currencies, primarily the Mexican Peso.
The wages of our employees and certain other employee benefit and indirect costs related to our operations in Mexico are made in Pesos and subject to foreign currency fluctuation with the U.S. dollar. The Company does not employ any foreign currency hedges against this exposure.
The wages of our employees and certain other employee benefits and indirect costs related to our operations in Mexico are made in Pesos and subject to foreign currency fluctuation with the U.S. dollar. The Company does not employ any foreign currency hedges against this operating expense exposure.
A negative shift in the value of the Peso against the U.S. dollar could result in the value of our receivable decreasing which may impact our earnings. See “Risk Factors” in Item 1A in this Annual Report on Form 10-K for further discussion.
A negative shift in the value of the Peso against the U.S. dollar could result in the value of our receivable decreasing which may impact our earnings. During the third quarter of fiscal year 2025, we utilized a derivative instrument to reduce our exposure to foreign currency risk from changes in the peso’s exchange rate for this exposure.
Interest Rate Risk – The Company’s primary market risk exposure regarding financial instruments is changes in interest rates. On June 30, 2024, the Company had $4.8 million outstanding on its line of credit. 16 Table of Contents
On June 30, 2025, the Company had no outstanding balance on its line of credit. 18 Table of Contents
Added
This instrument expired on March 31, 2025, without being utilized and the Company does not currently hedge foreign currency risk. See “Risk Factors” in Item 1A in this Annual Report on Form 10-K for further discussion. Interest Rate Risk – The Company’s primary market risk exposure regarding financial instruments is changes in interest rates.

Other FLXS 10-K year-over-year comparisons