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What changed in FLEXSTEEL INDUSTRIES INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of FLEXSTEEL INDUSTRIES INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+86 added−82 removedSource: 10-K (2024-08-30) vs 10-K (2023-08-25)

Top changes in FLEXSTEEL INDUSTRIES INC's 2024 10-K

86 paragraphs added · 82 removed · 71 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThe Company’s products compete based on style, quality, price, delivery, service and durability. The Company believes its patented, guaranteed-for-life Blue Steel Spring, manufacturing and sourcing capabilities, facility locations, commitment to customers, product quality, delivery, service, value and experienced production, sales, marketing and management teams, are some of its competitive advantages. Seasonality The Company’s business is not considered seasonal.
Biggest changeThe Company believes its patented, guaranteed-for-life Blue Steel Spring, manufacturing and sourcing capabilities, facility locations, commitment to customers, product quality, delivery, service, value and experienced production, sales, marketing and management teams, are some of its competitive advantages. 4 Table of Contents Seasonality The Company’s business is not considered seasonal. Foreign Operations The Company has minimal export sales.
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, 2023. 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, 2024. Environmental Matters All of Flexsteel’s stakeholders have a responsibility to protect our employees and our environment.
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, 2023. The four Mexico facilities total 1,061,000 square feet.
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.
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. 3 Table of Contents The Company integrates manufactured products with finished products acquired from offshore suppliers who can meet quality specifications and scheduling 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. The Company integrates manufactured products with finished products acquired from offshore suppliers who can meet quality specifications and scheduling requirements.
The officers of Flexsteel and its subsidiaries will use our role as business and community leaders to set the tone at the top to guide our management teams in their efforts 4 Table of Contents to improve the workplace and the environment we directly impact.
The officers of Flexsteel and its subsidiaries will use our role as business and community leaders to set the tone at the top to guide our management teams in their efforts to improve the workplace and the environment we directly impact.
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, 2023 June 30, 2022 June 30, 2021 $ 49,729 $ 62,800 $ 155,325 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, 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.
Further discussion is included in “Risk Factors” in Item 1A and “Legal Proceedings” in Item 3 of this Annual Report on Form 10-K.
Further discussion is included in “Risk Factors” in Item 1A of this Annual Report on Form 10-K.
Foreign Operations The Company has minimal export sales. On June 30, 2023, the Company had approximately 34 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, 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.
As of June 30, 2023, the Company has not begun operations in the Mexicali facility and had subleased approximately 105,000 square feet. The Company is in negotiations to sublease the remainder of the facility until such time that demand necessitates the additional capacity.
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.
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. Employees The Company had approximately 1,700 employees on June 30, 2023, including 6 employees who are covered by collective bargaining agreements. Management believes it has good relations with employees.
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.
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In fiscal 2020, the Company substantially completed its exit from the Commercial Office and custom design Hospitality product lines which served contract markets. During fiscal 2021, the Company substantially completed its restructuring activities related to the exit of its Vehicle Seating and the remainder of its Hospitality product lines, which also served contract markets.
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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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Set forth below is information for the past three fiscal years showing the Company’s net sales attributable to each of the areas of application: For the years ended June 30, (in thousands) 2023 2022 2021 Residential $ 393,692 $ 543,447 $ 476,519 Contract — 835 2,406 $ 393,692 $ 544,282 $ 478,925 Manufacturing and Offshore Sourcing During the fiscal year ended June 30, 2023, the Company operated manufacturing facilities located in Dublin, Georgia, and Juarez, Mexico.
Added
The Company’s products compete based on style, quality, price, delivery, service and durability.
Added
Approximately all of the Company's employees are full-time. Management believes it has good relations with employees.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks related to our industry: The impact of COVID-19 or similar pandemics 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.
Biggest changeAny 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.
This could negatively impact the efficiency and effectiveness of processes and internal controls throughout the Company and our ability to service customers. We may not be able to collect amounts owed to us. We grant payment terms between 10 and 60 days to customers, often without requiring collateral.
This could negatively impact the efficiency and effectiveness of processes and internal controls throughout the Company and our ability to service customers. We may not be able to collect amounts owed to us. We generally grant payment terms between 10 and 60 days to customers, often without requiring collateral.
If the Company is not able to acquire sufficient fabric variety or if the Company is unable to predict or respond to changes in fashion trends, it may lose sales and have to sell excess inventory at reduced prices. Use of social media to disseminate negative commentary may adversely impact the Company’s reputation and business.
If the Company is not able to acquire sufficient cover variety or if the Company is unable to predict or respond to changes in fashion trends, it may lose sales and have to sell excess inventory at reduced prices. Use of social media to disseminate negative commentary may adversely impact the Company’s reputation and business.
The delivery of goods from these suppliers has been and may continue to be delayed by customs, labor issues, availability of third-party transportation and equipment, geo-political pressures, changes in political, economic, and social conditions, weather, laws, and regulations.
The delivery of goods from these suppliers has been and may continue to be delayed by customs, labor issues, availability of third-party transportation and equipment, geopolitical pressures, changes in political, economic, and social conditions, weather, laws, and regulations.
Negative commentary regarding the Company or its products may be posted on social media platforms at any time and may have an adverse impact on its reputation, business, or relationships with third parties, including suppliers, customers, investors, and lendors.
Negative commentary regarding the Company or its products may be posted on social media platforms at any time and may have an adverse impact on its reputation, business, or relationships with third parties, including suppliers, customers, investors, and lenders.
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 persions.
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.
Our suppliers and customers also face these and other challenges, which have and could continue to lead to a disruption in our supply chain, raw material inflation or the inability to get the raw materials necessary to produce our products, increased shipping, and transportation costs, as well as decreased consumer spending and decreased demand for our products.
Our suppliers and customers may also face these and other challenges, which have and could to lead to a future disruption in our supply chain, raw material inflation or the inability to get the raw materials necessary to produce our products, increased shipping and transportation costs, as well as decreased consumer spending and decreased demand for our products.
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.
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.
Ongoing or future communicable diseases increase the risk that certain senior executive officers or a member of the board of directors could become ill, 6 Table of Contents causing them to be incapacitated or otherwise unable to perform their duties for an extended absence.
Ongoing or future communicable diseases increase the risk that certain senior executive officers or a member of the board of directors could become ill, causing them to be incapacitated or otherwise unable to perform their duties for an extended absence.
Should more customers experience liquidity issues than we anticipate, if payment is not received on a timely basis, or if a customer declares bankruptcy or closes stores, we may have difficulty collecting amounts owed to us by these customers, which could adversely affect our sales, earnings, financial condition, and liquidity.
Should customers experience liquidity issues beyond what we anticipate, if payment is not received on a timely basis, or if a customer declares bankruptcy or closes stores, we may have difficulty collecting amounts owed to us by these customers, which could adversely affect our sales, earnings, financial condition, and liquidity.
At June 30, 2023 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 judgement and any change in future market or economic conditions could cause actual results to differ.
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.
Consumers 8 Table of Contents 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. Item 1B. Unresolved Staff Comments None.
Additionally, most of our sales are to distribution channels that rely on physical stores to merchandise and sell our products and an involuntary shut down of those stores due to COVID-19 or similar pandemic or a significant shift in consumer preference toward purchasing products online could have a materially adverse impact on our sales and operating margin.
Additionally, most of our sales are to distribution channels that rely on physical stores to merchandise and sell our products and an involuntary shut down of those or a significant shift in consumer preference toward purchasing products online could have a materially adverse impact on our sales and operating margin.
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.
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.
At June 30, 2023, we had $38.7 million in property, plant and equipment and $68.3 million in right of use assets associated with leased facilities. These definite-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, 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.
Although we continue to implement strong physical and cybersecurity measures to ensure that our business operations remain functional and to ensure uninterrupted service to our customers, our systems and our operations remain vulnerable to cyberattacks and other disruptions because a material portion of our employees work remotely either full or part-time, and we cannot be certain that our mitigation efforts will be effective. 5 Table of Contents The implementation of a new business information system could disrupt the business.
Although we continue to implement strong physical and cyber security measures to ensure that our business operations remain functional and to ensure uninterrupted service to our customers, our systems and our operations remain vulnerable to cyber attacks and other disruptions because a material portion of our employees work remotely either full or part-time, and we cannot be certain that our mitigation efforts will be effective.
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. Continued imbalances between supply and demand for these resources may continue to exert upward pressure on costs. The Company purchases raw materials, component parts, and certain finished goods from foreign external suppliers.
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.
Prices for these purchases are primarily negotiated in U.S. dollars on a purchase order basis. A negative shift in the U.S. dollar relative to the local currency of our supplier could result in price increases and negatively impact our cost structure. In addition, the majority of our manufactured products are produced in Mexico.
The Company purchases raw materials, component parts, and certain finished goods from foreign external suppliers. Prices for these purchases are primarily negotiated in U.S. dollars on a purchase order basis. A negative shift in the U.S. dollar relative to the local currency of our supplier could result in price increases and negatively impact our cost structure.
The wages of our employees and certain other employee benefit and indirect costs are made in Pesos. The Company does not employ any foreign currency hedges against this exposure. A negative shift in the value of the U.S. dollar against the Peso could increase the cost of manufacturing.
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.
The Company continues to migrate business and financial processes from legacy ERP systems to SAP.
The implementation of a new business information system could disrupt the business. The Company continues to migrate business and financial processes from legacy ERP systems to SAP.
Many of these suppliers are dependent upon other suppliers in countries other than where they are located. This global interdependence 7 Table of Contents within the Company’s supply chain is subject to delays in delivery, availability, quality, and pricing.
Many of these suppliers are dependent upon other suppliers in countries other than where they are located. This global interdependence within the Company’s supply chain is subject to delays in delivery, availability, quality, and pricing. Changes in international trade policies including tariffs, access to ports and border crossings, or railways could disrupt the supply chain, increase cost and reduce competitiveness.
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.
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.
Due to ongoing global supply chain issues and inflationary cost pressures, some customers have requested extended payment terms or informed us they will not pay amounts within agreed upon terms. Some of our customers have experienced, and may in the future experience, cash flow and credit-related issues.
Some of our customers have experienced, and may in the future experience, cash flow and credit-related issues.
Removed
A resurgence of the COVID-19 pandemic or other public health emergency in the future could have a material adverse effect on our ability to operate, our ability to keep employees safe from the pandemic, our results of operations, and financial condition. Continuing inflation and changes in foreign currency may impact our profitability.
Added
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.
Removed
Changes in international trade policies including tariffs, access to ports and border crossings, or railways could disrupt the supply chain, increase cost and reduce competitiveness.
Added
In addition, we have receivables for recoverable value added tax paid under such regimes in foreign jurisdictions, primarily Mexico. The collection of these amounts are subject to approval by foreign governmental agencies who evaluate the claims.
Removed
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.
Added
In addition, the Company has certain asset and liabilities related to our manufacturing operations which are denominated in pesos, primarily our VAT receivable for recoverable VAT paid in Mexico. 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.
Removed
It is unclear how our supply chain could be further impacted by COVID-19, including the spread of new variants, and there are many unknowns including how long we could be impacted, the severity of the impacts, and the probability of a recurrence of COVID-19 or similar regional or global pandemics.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe Company leases the following facilities as of June 30, 2023: 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 58,000 Showroom El Paso, Texas 38,000 Warehouse Las Vegas, NV 6,000 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.
Biggest changeSee 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.
Item 2. Properties The Company owns the following facilities as of June 30, 2023: Approximate Location Size (square feet) Principal Operations Huntingburg, Indiana 611,000 Distribution Edgerton, Kansas 500,000 Distribution Starkville, Mississippi (1) 349,000 Manufacturing (Held for Sale) Dublin, Georgia 315,000 Manufacturing Dubuque, Iowa 40,000 Corporate Office (1) Facility is classified as held for sale as of June 30, 2023.
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.
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.
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 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeTotal 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, 2023, to April 30, 2023 17,894 $ 18.71 1,374,056 $ 4,162,934 May 1, 2023, to May 31, 2023 13,237 17.46 1,387,293 3,944,992 June 1, 2023, to June 30, 2023 8,753 18.86 1,396,046 3,779,477 As of June 30, 2023 39,884 $ 18.33 1,396,046 $ 3,779,477
Biggest changeTotal 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
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, 2023.
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.
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. All purchases were made in the open market.
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.
Removed
The following table summarizes the activity of the common stock repurchases made during the three months ended June 30, 2023.

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe effective tax rate is primarily impacted by changes in our deferred tax assets for which we do not receive the income tax benefit due to our full valuation allowance. See Note 10, Income Taxes , of the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for more information.
Biggest changeSee 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%).
Net cash (used in) investing activities 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.
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.
Any reduction in future taxable income including but not limited to any future restructuring activities may require that we re-establish a valuation allowance against our deferred tax assets. Establishing a valuation allowance or an increase in the valuation allowance could result in additional income tax expense in such a period and could have a significant impact on our future earnings.
Any reduction in future taxable income including but not limited to any future restructuring activities may require that we establish a valuation allowance against our deferred tax assets. Establishing a valuation allowance or an increase in the valuation allowance could result in additional income tax expense in such a period and could have a significant impact on our future earnings.
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, 2023, 2022 and 2021. 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, 2024, 2023, and 2022. Amounts presented are percentages of the Company’s net sales.
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.
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.
Letters of credit outstanding at the Lender as of June 30, 2023, totaled $1.1 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, 2024, totaled $1.0 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 . 14 Table of Contents
Refer to Note 10 Income Taxes of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for more information.
Capital expenditures were $4.8 million for the fiscal year ended June 30, 2023.
Capital expenditures were $4.8 million for the fiscal year ended June 30, 2024.
At June 30, 2023 the Company determined that based on the weight of available evidence, we will be able to recover our deferred tax assets and reversed our deferred tax valuation allowance. The realization of our remaining deferred tax assets is primarily dependent on future taxable income in the appropriate jurisdiction.
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.
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 fewer purchases intended to reduce inventory, 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, a decrease 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 $8.3 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.
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 6.42% on June 30, 2023 . As of June 30, 2023, there was $28.3 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 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.
For the year ended June 30, 2022, net cash used in financing activities was $5.2 million, primarily due to proceeds from lines of credit of $265.1 million, offset by payments on lines of credit of $230.9 million, $35.0 million for treasury stock purchases, dividends paid of $3.9 million, and $0.5 million for tax payments on employee vested restricted shares netted with proceeds from the issuance of common stock.
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.
The $9.9 million decrease in working capital was due to a decrease in inventory of $19.1 million and a decrease of $2.9 million in trade receivables offset by a decrease in accounts payable of $7.4 million, a decrease in other liabilities of $2.1 million, an increase of other current assets of $1.5 million, and an increase in cash of $1.2 million.
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.
A summary of operating, investing, and financing cash flow is shown in the following table: For the years ended June 30, (in thousands) 2023 2022 Net cash provided by operating activities $ 22,989 $ 7,993 Net cash (used in) investing activities (4,450) (1,916) Net cash (used in) financing activities (17,358) (5,235) Increase in cash and cash equivalents $ 1,181 $ 842 Net cash provided by operating activities 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.
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.
Contractual Obligations The following table summarizes our contractual obligations on June 30, 2023, 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 $ 82,746 $ 9,391 $ 18,233 $ 18,082 $ 37,040 Warehouse management obligation 4,915 1,512 3,025 378 — 13 Table of Contents Outlook Our focus for fiscal 2024 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, reimagine the customer experience, and build strong culture and talent.
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.
For the year ended June 30, 2022, net cash used in investing activities was $1.9 million, primarily due to capital expenditures of $3.8 million partially offset by proceeds of $1.9 million from the sale of our Harrison, Arkansas, facility, and the finalization of the sale of our transportation fleet equipment. 12 Table of Contents Net cash (used in) financing activities 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, 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 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. We recorded no impairments in the fiscal years 2023 and 2022.
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 the years ended June 30, 2023 2022 2021 Net sales 100.0 % 100.0 % 100.0 % Cost of goods sold 82.0 86.6 79.8 Gross margin 18.0 13.4 20.2 Selling, general and administrative 16.0 12.3 14.2 Restructuring expense — 0.1 0.7 Environmental remediation (0.7) — — (Gain) on disposal of assets — (0.3) (1.2) Other expense 0.1 — — Litigation settlement costs — — 0.0 Operating income 2.7 1.2 6.5 Other income 0.0 0.0 0.1 Interest (expense) (0.3) (0.2) (0.0) Income before income taxes 2.3 1.1 6.6 Income tax (benefit) expense (1.4) 0.7 1.8 Net income 3.8 % 0.3 % 4.8 % 10 Table of Contents 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%).
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 year ended June 30, 2022, cash provided by operating activities was $8.0 million, which primarily consisted of net income of $1.9 million, adjusted for non-cash items including depreciation of $5.2 million, gain from the sale of capital assets of $1.8 million, stock-based compensation of $1.0 million and allowance reserve recoveries of $0.3 million.
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.
Costs to terminate contracts are recognized upon 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.
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.
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.
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.
Net cash provided by operating assets and liabilities was $2.0 million and was primarily due to a decrease in accounts payable of $35.8 million due to a decrease in inventory of $19.9 million due to fewer purchases intended to reduce inventory, a decrease in accounts receivable of $15.1 million primarily due to the timing of sales and collections, a decrease in other current assets of $4.0 million and a decrease in other liabilities of $1.2 million.
Net cash provided by operating assets and liabilities was $17.2 million and was primarily due to a decrease in inventory of $25.5 million due to inventory optimization initiatives, an increase in accounts payable of $1.4 million due to timing of inventory purchases, and an increase in other liabilities of $4.4 million offset by an increase in other assets of $8.2 million and an increase in accounts receivable of $5.9 million due to higher net sales.
Fiscal 2022 Compared to Fiscal 2021 Net sales were $544.3 million for the year ended June 30, 2022, compared to net sales of $478.9 million in the prior year, an increase of $65.4 million or 13.6%.
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%).
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.
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.
SG&A expenses decreased by $1.2 million in the year ended June 30, 2022, compared to the prior fiscal year. As a percentage of net sales, SG&A was 12.3% in the fiscal year 2022 compared to 14.2% of net sales in the prior fiscal year.
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.
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, 2022, we completed the sale of our remaining Harrison, Arkansas facility, resulting in total net proceeds of $1.4 million, and a total gain of $1.4 million.
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 $10.5 million, or $1.91 per diluted share for the year ended June 30, 2024, compared to net income of $14.8 million, or $2.74 per diluted share in the prior year.
Sales of products sold through retailers grew by $73.4 million or 17.8% primarily driven by pricing and a strong order backlog at the start of the year. Sales of products sold through e-commerce channels decreased by ($8.0) million, or (12%) due to a decrease in consumer demand.
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.
Gross margin as a percent of net sales for the year ended June 30, 2022, was 13.4%, compared to 20.2% for the prior year period, a decrease of 680-bps.
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”).
Net income was $1.9 million, or $0.28 per diluted share for the year ended June 30, 2022, compared to net income of $23.0 million, or $3.09 per diluted share in the prior year. Liquidity and Capital Resources Working capital (current assets less current liabilities) on June 30, 2023, was $115.5 million compared to $125.4 million on June 30, 2022.
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.
Removed
The 680-bps decrease was primarily driven by a 450-bps decrease related to ancillary charges caused by domestic supply chain disruptions and higher per diem charges, a decrease of 200-bps due to pricing promotions and inventory write-downs, a decrease of 110-bps related to capacity growth investments in a third additional manufacturing plant in Mexico, and a new distribution facility in Greencastle, Pennsylvania, and a decrease of 70-bps primarily related to cost inflation for materials, labor, and transportation, partially offset by an increase of 150-bps related to price realization.
Added
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.
Removed
The decrease of 190-bps is primarily due to a decrease of 170-bps due to leverage on year-over-year sales growth and a decrease of 100-bps due to lower incentive compensation and offset by an increase of 80-bps due to growth investments. 11 Table of Contents Restructuring expenses were $0.7 million during the year ended June 30, 2022, 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.
Added
The increase of 110-bps is primarily due to an increase of 40-bps due to CEO transition costs associated with the revaluation of previously awarded equity awards, an increase of 40-bps due to higher incentive compensation, and an increase of 30-bps driven by investments in growth initiatives partially offset by cost leverage on higher sales volume.
Removed
Income tax expense was $4.1 million, or an effective rate of 68.6%, during the year ended June 30, 2022, compared to income tax expense of $8.4 million in the prior year, or an effective tax rate of 26.8%.
Added
There was $3.0 million in restructuring expenses recorded in the year ended June 30, 2024 associated with the previously announced closure of the Dublin, Georgia manufacturing facility. The $3.0 million primarily consists of $2.6 million in one-time employee termination benefits and other associated costs. All charges related to the restructuring activities were completed in fiscal year 2024.
Removed
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.
Added
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.
Added
The Company recorded a gain of $3.3 million related to the sale in the fiscal year.
Added
The effective tax rate was impacted by the effect of state taxes, nondeductible stock compensation and foreign taxes, offset by a research & development credit benefit. The prior year tax rate was negative due to the reversal of a full valuation allowance on deferred tax assets.
Added
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.
Added
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.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+1 added−0 removed5 unchanged
Biggest changeA negative shift in the value of the U.S. dollar against the Peso could increase the cost of our manufactured product. 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.
Biggest changeA 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.
Foreign Currency Risk – During fiscal years 2023, 2022, and 2021, 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 2024, 2023, and 2022, the Company did not have sales but had purchases and other expenses denominated in foreign currencies, primarily the Mexican Peso.
On June 30, 2023, the Company had $28.3 million outstanding on its line of credit. ‎ 15 Table of Contents
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
Added
A negative shift in the value of the U.S. dollar against the Peso could increase the cost of our manufactured product. In addition, the Company has certain asset and liabilities related to our manufacturing operations which are denominated in pesos, primarily our VAT receivable for recoverable VAT paid in Mexico.

Other FLXS 10-K year-over-year comparisons