FLEXSTEEL INDUSTRIES INC
For the period ended Sep 30, 2025. Filed Oct 22, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2025 · Filed Oct 22, 2025
FLXS$71.47-2.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-03-31; filed 2025-04-23.
0000950170-25-057522
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-09-30; filed 2025-10-22.
0001193125-25-246951
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 47 previous paragraphs and 35 current paragraphs.
16 unchanged; 14 reworded; 2 added; 16 removed; 1 previous and 3 current paragraphs rearranged.
Tables are not compared: 2 previous and 2 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (2)
Current report
Net sales were $110.4 million for the quarter ended September 30, 2025, compared to net sales of $104.0 million in the prior year quarter, an increase of 6.2%. The increase was driven by our sourced soft seating products, partially offset by lower unit volume in our made-to-order soft seating products and homestyles branded ready-to-assemble category.
Current report
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. 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.
Removed paragraphs (16)
Previous report
Net sales were $114.0 million for the quarter ended March 31, 2025, compared to net sales of $107.2 million in the prior year quarter, an increase of 6.3%. The increase was driven by higher sales in home furnishings products sold through retail stores of $10.6 million, or 10.9%, over the prior year quarter led by unit volume increases, freight surcharges, and product mix. Sales of products sold through e-commerce channels decreased by ($3.8) million, or (36.7%), compared to the third quarter of the prior year. Lower sales in the e-commerce channel were driven by softer consumer demand.
Previous report
During the quarter, the Company completed the sale of an ancillary building, formerly part of its Huntingburg, IN distribution center complex. The Company received proceeds of $0.8 million and recorded a pre-tax gain of $0.7 million related to the sale. The company also committed to a plan to sell a second ancillary building which is part of the Huntingburg, IN distribution center complex. The
Previous report
Company has classified $0.4 million of assets associated with the second building as held-for-sale in its balance sheet at March 31, 2025. The Company has adequate distribution capacity to support our growth as we continue to optimize our distribution and logistics network. See Note 3, Assets Held For Sale, of the Notes to Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q for more information.
Previous report
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. 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. 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 have created significant uncertainty in US-Mexico trade relations, slowed foreign direct investment in Mexico, and greatly diminished tenant interest in subleasing the Mexicali facility. As a result, management concluded that the right of use asset related to this lease is not fully recoverable and recorded a pre-tax non-cash asset impairment charge of $14.1 million during the quarter ended March 31, 2025. See Note 4, Leases, of the Notes to Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q for more information.
Previous report
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 46% on goods imported from Vietnam where the Company sources a significant amount of finished product. 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% tariff while the United States works with its trade partners to negotiate new trade agreements. 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 eliminate the pending tariffs. Should these tariffs be enacted they could have a material 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. The Company is assessing options to mitigate any potential impact.
Previous report
Results of Operations for the nine months ended March 31, 2025 and 2024
Previous report
Net sales were $326.5 million for the nine months ended March 31, 2025, compared to net sales of $301.9 million in the prior-year nine-month period, an increase of 8.1%. The increase in sales of $24.6 million was driven by a $30.8 million increase related to home furnishing products sold through retailers offset by a decrease of ($6.2) million for home furnishing products sold through e-commerce channels.
Previous report
Gross margin as a percent of net sales for the nine months ended March 31, 2025, was 21.6%, compared to 21.1% for the prior-year nine-month period, an increase of 50 bps. The 50-bps increase was primarily driven by sales volume leverage and structural cost reduction savings versus the nine months ended March 31, 2024.
Previous report
Selling, general and administrative expenses decreased ($2.1) million in the nine months ended March 31, 2025, compared to the prior-year nine-month period. SG&A as a percentage of sales was 15.2% in the nine months ended March 31, 2025, compared to the prior-year nine-month period of 17.1%. The 190-bps decrease was primarily due to sales volume leverage and structural cost savings partially offset by investments in growth initiatives for the nine months ended March 31, 2025.
Previous report
During the nine-month period ended March 31, 2025, the Company completed the sale of its Dublin, Georgia facility which had been previously recorded as held for sale. The Company recorded a pre-tax gain of $5.0 million related to the sale. See Note 3, Assets Held For Sale, of the Notes to Consolidated Financial Statements, included in the December 31, 2024 Quarterly Report on Form 10-Q for more information.
Previous report
During the nine-month period ended March 31, 2025, the Company completed the sale of an ancillary building, formerly part of its Huntingburg, IN distribution center complex. The Company received proceeds of $0.8 million and recorded a pre-tax gain of $0.7 million related to the sale. The company also committed to a plan to sell a second ancillary building which is part of the Huntingburg, IN distribution center complex. The Company has classified $0.4 million of assets associated with the second building as held-for-sale in its balance sheet at March 31, 2025. The Company has adequate distribution capacity to support our growth as we continue to optimize our distribution and logistics network. See Note 3, Assets Held For Sale, of the Notes to Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q for more information
Previous report
As described above, the Company determined that the carrying amount of the right of use asset associated with the 12-year lease for a manufacturing facility in Mexicali, Mexico is no longer fully recoverable and recorded a pre-tax non-cash asset impairment charge of $14.1 million during the nine months ended March 31, 2025. See Note 4, Leases, of the Notes to Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q for more information.
Previous report
Income tax expense was $3.3 million, or an effective rate of 25.6%, during the nine months ended March 31, 2025, compared to income tax expense of $2.5 million in the prior-year nine-month period, or an effective tax rate of 30.8%. The effective tax rate for the nine months ended March 31, 2025, was primarily impacted by state taxes and the impact of foreign operations.
Previous report
Net income was $9.5 million, or $1.70 per diluted share for the nine months ended March 31, 2025, compared to net income of $5.6 million, or $1.04 per diluted share in the prior-year nine-month period.
Previous report
For the nine months ended March 31, 2024, net cash provided by operating activities was $24.4 million, primarily due to a decrease in inventory of $25.5 million, net income of $5.6 million, an increase in accrued liabilities of $1.6 million, an increase in other long-term liabilities of $0.1 million, and adjustments for non-cash items including depreciation of $2.9 million, stock-based compensation of $2.7 million, and deferred income taxes of $0.1 million partially offset by an increase in other assets of $7.6 million, a decrease in accounts payable of $3.0 million, an increase in other current assets of $2.8 million, an increase in trade receivables of $0.6 million and an increase in trade receivables provision of $0.1 million.
Previous report
For the nine months ended March 31, 2024, net cash used in financing activities was $18.8 million, due to payments on the line of credit of $284.5 million partially offset by proceeds from the line of credit of $270.4 million, dividends paid of $2.4 million, $1.7 million paid for purchases of company stock, and $0.7 million paid for tax payments on employee vested restricted shares netted with proceeds from the issuance of common stock partially offset by proceeds from issuance of common stock of $0.1 million.
Reworded paragraphs (14)
Previous wording
The following table has been prepared as an aid in understanding the Company’s results of operations on a comparative basis for the three and nine months ended March 31, 2025 and 2024. The amounts presented are percentages of the Company’s net sales.
Current wording
The following table has been prepared as an aid in understanding the Company’s results of operations on a comparative basis for the three months ended September 30, 2025 and 2024. The amounts presented are percentages of the Company’s net sales.
Previous wording
Home furnishings backlog was $78.3 million as of the quarter ended March 31, 2025, an increase of 25.8% compared to $61.5 million in the prior year quarter.
Current wording
Home furnishings backlog was $67 million as of the quarter ended September 30, 2025, an increase of 9.8% compared to $61 million in the prior year quarter.
Previous wording
Gross margin as a percent of net sales for the quarter ended March 31, 2025, was 22.2%, compared to 21.7% for the prior year quarter, an increase of 50 basis points (“bps”). The 50-bps increase was primarily due to leverage of fixed costs on higher sales and favorable mix, partially offset by no sub-lease income from our Mexicali facility compared to the prior year period.
Current wording
Gross margin as a percent of net sales for the quarter ended September 30, 2025, was 23.5%, compared to 21.5% for the prior year quarter, an increase of 200 basis points (“bps”). The 200-bps increase was primarily driven by sales leverage, and favorable foreign currency translation of our peso denominated assets in Mexico in the current quarter versus unfavorable foreign currency translation in the prior year quarter.
Previous wording
Selling, general and administrative (“SG&A”) expenses decreased ($0.6) million to $17.1 million in the third quarter ended March 31, 2025, as compared to $17.7 million in the prior year quarter. As a percentage of net sales, SG&A was 15.0% in the quarter ended March 31, 2025 compared to 16.5% of net sales in the prior year quarter. The 150-bps was due to leverage on higher sales and cost savings, partially offset by investments in growth initiatives for the quarter ended March 31, 2025.
Current wording
Selling, general and administrative (“SG&A”) expenses increased $0.7 million to $17.0 million in the quarter ended September 30, 2025, as compared to $16.3 million in the prior year quarter. As a percentage of net sales, SG&A was 15.4% in the quarter ended September 30, 2025 compared to 15.7% of net sales in the prior year quarter. The 30-bps decrease was mainly due to leverage on higher sales, partially offset by investments in growth initiatives.
Previous wording
Income tax expense was ($1.2) million, or an effective rate of 24.5% for the quarter ended March 31, 2025, compared to an income tax expense of $0.9 million, or an effective rate of 32.2% during the quarter ended March 31, 2024. For the quarter ended March 31, 2025, the effective tax rate differs from the statutory tax rate of 21% primarily due to state taxes and the impact of foreign operations.
Current wording
Income tax expense was $2.1 million, or an effective rate of 21.9% for the quarter ended September 30, 2025, compared to an income tax expense of $1.9 million, or an effective rate of 31.0% during the quarter ended September 30, 2024. For the quarter ended September 30, 2025, the effective tax rate differs from the statutory tax rate of 21% primarily due to state taxes and the impact of foreign operations, offset by credits for research and development and the impact associated with uncertain tax positions. The decrease in tax rate from the prior year quarter is primarily the result of lesser impact of taxes on foreign operations due to higher profits, a benefit in the current period for the adjustment of uncertain tax positions and a larger credit for research and development compared to the prior year.
Previous wording
Net loss was ($3.7) million, or $(0.71) per diluted share for the quarter ended March 31, 2025, compared to net income of $1.8 million, or $0.33 per diluted share in the prior year quarter.
Current wording
Net income was $7.3 million, or $1.31 per diluted share for the quarter ended September 30, 2025, compared to net income of $4.1 million, or $0.74 per diluted share in the prior year quarter.
Previous wording
Working capital (current assets less current liabilities) on March 31, 2025, was $103.4 million compared to $95.0 million on June 30, 2024. The $8.4 million increase in working capital was primarily due to an increase in cash of $17.9 million, a decrease in accounts payable of $3.7 million, a decrease in payroll and related liabilities of $2.7 million, and an decrease in other current liabilities of $0.7 million offset by an decrease in inventories of $9.4 million, a decrease in net trade receivables of $5.8 million, and a decrease in assets held for sale of $1.3 million. Refer to discussion of working capital changes below, under Net cash provided by operating activities. Capital expenditures were $2.7 million during the nine months ended March 31, 2025.
Current wording
Working capital (current assets less current liabilities) on September 30, 2025, was $116.9 million compared to $110.4 million on June 30, 2025. The $6.5 million increase in working capital was primarily due to an increase in other current assets of $6.6 million, a decrease in payroll and related liabilities of $5.4 million, and a decrease in other current liabilities of $1 million, offset by an increase in accounts payable of $3.1 million, a decrease in inventory of $2.2 million and a decrease in cash of $1.4 million. Refer to discussion of working capital changes below, under Net cash provided by operating activities. Capital expenditures were $1.4 million during the three months ended September 30, 2025.
Previous wording
For the nine months ended March 31, 2025, net cash provided by operating activities was $21.4 million, primarily due to net income of $9.5 million, adjustments for non-cash items including a right-of-use asset impairment of $14.1 million, a pre-tax gain on sale of assets of $5.8 million, deferred income tax of $3.5 million, stock-based compensation of $3.0 million, and depreciation of $2.8 million, as well as changes in operating assets and liabilities including, a decrease in inventory of $9.4 million, and a decrease in trade receivables of $5.8 million, offset by an increase in other assets of $5.6 million, a decrease in accounts payable of $3.7 million, a decrease in accrued liabilities of $3.5 million, an increase in other current assets of $1.3 and a decrease in other long-term liabilities of $0.2 million.
Current wording
For the three months ended September 30, 2024, net cash provided by operating activities was $2.4 million, primarily due to a decrease in trade receivables of $4.8 million, net income of $4.1 million, adjustments for non-cash items including stock-based compensation of $1.1 million and depreciation of $0.9 million, and a decrease in inventory of $0.7 million offset by a decrease in accrued liabilities of $6.0 million, an increase in other current assets of $1.8 million, a decrease in accounts payable of $1.0 million and a decrease of other assets and liabilities of $0.4 million.
Previous wording
For the nine months ended March 31, 2024, net cash used in investing activities was $4.4 million due to capital expenditures.
Current wording
For the three months ended September 30, 2025, net cash used in investing activities was $1.4 million due to capital expenditures.
Previous wording
For the nine months ended March 31, 2025, net cash provided by investing activities was $6.0 million due to proceeds from the sales of property, plant and equipment of $7.5 million, and corporate owned life insurance proceeds of $1.2 million, offset by capital expenditures of $2.7 million.
Current wording
For the three months ended September 30, 2024, net cash provided by investing activities was $0.7 million due to proceeds from corporate owned life insurance proceeds of $1.1 million, offset by capital expenditures of $0.4.
Previous wording
For the nine months ended March 31, 2025, net cash used in financing activities was $9.5 million, due to payments on the line of credit of $207.3 million, dividends paid of $2.7 million, and shares withheld for tax payments on vested shares and options exercised of $2.1 million, partially offset by proceeds from the line of credit of $202.3 million and proceeds from issuance of common stock of $0.1 million.
Current wording
For the three months ended September 30, 2024, net cash used in financing activities was $2.1 million, due to payments on the line of credit of $104.1 million partially offset by proceeds from the line of credit of $102.9 million and dividends paid of $0.9 million.
Previous wording
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. 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. The Company’s obligations under the Credit Agreement are secured by substantially all its assets, excluding real property. The Credit Agreement contains customary representations, warranties, and covenants, including a financial covenant to maintain a fixed coverage ratio of not less than 1.00 to 1.00. 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. As of March 31, 2025, management believes the Company was in compliance with all covenants.
Current wording
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 provided for up to an $85 million revolving line of credit. 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. The Company’s obligations under the Credit Agreement are secured by substantially all its assets, excluding real property. The Credit Agreement contains customary representations, warranties, and covenants, including a financial covenant to maintain a fixed coverage ratio of not less than 1.00 to 1.00. 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. As of September 30, 2025, management believes the Company was in compliance with all covenants.
Previous wording
On April 18, 2022, the Company, as the borrower, 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.
Current wording
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.
Previous wording
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 5.72%, on March 31, 2025.
Current wording
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 5.52%, on September 30, 2025.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
For the three months ended September 30, 2025, net cash provided by operating activities was $4.1 million, primarily due to net income of $7.3 million, adjustments for non-cash items including deferred income tax expense of $3.4 million, stock-based compensation of $1.1 million and depreciation of $0.8 million, as well as changes in operating assets and liabilities including an increase in accounts payable of $3.3 million, and a decrease in inventory of $2.2 million, offset by a decrease in accrued liabilities of $7.1 million, and a decrease in other current assets of $6.6 million.
Current report — wording carried from elsewhere
Net cash (used in) provided by investing activities
Current report — wording carried from elsewhere
For the three months ended September 30, 2025, net cash used in financing activities was $4.2 million, primarily due to shares withheld for tax payments on vested shares and options exercised of $1.9 million, dividends paid of $1.1 million and treasury stock purchases of $1.1 million.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Net cash provided by (used in) investing activities