FLEXSTEEL INDUSTRIES INC

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 six months ended December 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 and nine months ended March 31, 2026 and 2025. The amounts presented are percentages of the Company’s net sales.

Previous wording

Net sales were $118.2 million for the quarter ended December 31, 2025, compared to net sales of $108.5 million in the prior year quarter, an increase of 9.0%. The increase was driven by higher unit volume of sourced soft seating products and pricing from tariff surcharges, partially offset by lower unit volume in our made-to-order soft seating products and homestyles branded ready-to-assemble products.

Current wording

Net sales were $115.1 million for the quarter ended March 31, 2026, compared to net sales of $114.0 million in the prior year quarter, an increase of 1.0%. The increase was driven by higher pricing from tariff surcharges, offset by lower unit volume, particularly in our made-to-order, ready-to-assemble and case goods categories.

Previous wording

Sales order backlog, inclusive of estimated tariff surcharges, was $82.4 million as of the quarter ended December 31, 2025, an increase of 6.5% compared to $77.3 million in the prior year quarter.

Current wording

Sales order backlog, inclusive of estimated tariff surcharges, was $79.5 million as of the quarter ended March 31, 2026, an increase of 1.5% compared to $78.3 million in the prior year quarter.

Previous wording

Gross margin as a percent of net sales for the quarter ended December 31, 2025, was 22.7%, compared to 21.0% for the prior year quarter, an increase of 170 basis points (“bps”). The 170-bps increase was primarily driven by favorable sales composition of higher margin products, partially offset by the dilutive impact of tariffs.

Current wording

Gross margin as a percent of net sales for the quarter ended March 31, 2026, was 22.6%, compared to 22.2% for the prior year quarter, an increase of 40 basis points (“bps”). The 40-bps increase was primarily driven by favorable sales composition of higher margin products.

Previous wording

Selling, general and administrative (“SG&A”) expenses increased $1.7 million to $17.8 million in the quarter ended December 31, 2025, as compared to $16.1 million in the prior year quarter. As a percentage of net sales, SG&A was 15.1% in the quarter ended December 31, 2025 compared to 14.9% of net sales in the prior year quarter. The 20-bps increase was mainly due to investments in growth initiatives.

Current wording

Selling, general and administrative (“SG&A”) expenses increased $0.7 million to $17.8 million in the quarter ended March 31, 2026, as compared to $17.1 million in the prior year quarter. As a percentage of net sales, SG&A was 15.5% in the quarter ended March 31, 2026 compared to 15.0% of net sales in the prior year quarter. The 50-bps increase was mainly due to investments in consumer insights, innovation, demand generation, and customer experience.

Previous wording

Income tax expense was $2.7 million, or an effective rate of 28.9% for the quarter ended December 31, 2025, compared to income tax expense of $2.6 million, or an effective rate of 22.4% for the quarter ended December 31, 2024. For the quarter ended December 31, 2025, the effective tax rate differs from the statutory tax rate of 21% primarily due to the impact of foreign operations, state taxes and non-deductible compensation offset by credits for research and development and the impact associated with uncertain tax positions.

Current wording

Income tax expense was $2.1 million, or an effective rate of 24.9% for the quarter ended March 31, 2026, compared to income tax benefit of ($1.2) million, or an effective rate of 24.5% for the quarter ended March 31, 2025. For the quarter ended March 31, 2026, the effective tax rate differs from the statutory tax rate of 21% primarily due to state taxes, the impact of foreign operations, and non-deductible compensation offset by credits for research and development.

Previous wording

Net income was $6.6 million, or $1.18 per diluted share for the quarter ended December 31, 2025, compared to net income of $9.1 million, or $1.62 per diluted share in the prior year quarter. During the three-month period ended December 31, 2024, the Company recorded a gain on the sale of its Dublin, Georgia facility.

Current wording

Net income was $6.4 million, or $1.14 per diluted share for the quarter ended March 31, 2026, compared to net loss of ($3.7) million, or $(0.71) per diluted share in the prior year quarter. During the quarter ended March 31, 2025, the Company recorded a right-of-use asset impairment on the manufacturing facility in Mexicali, Mexico.

Previous wording

Results of Operations for the six months ended December 31, 2025 and 2024

Current wording

Results of Operations for the nine months ended March 31, 2026 and 2025

Previous wording

Net sales were $228.7 million for the six months ended December 31, 2025, compared to net sales of $212.5 million in the prior-year six-month period, an increase of 7.6%. The increase in sales of $16.2 million was driven by higher unit volume of sourced soft seating products and pricing from tariff surcharges, partially offset by lower unit volume in our made-to-order soft seating products and homestyles branded ready-to-assemble products.

Current wording

Net sales were $343.8 million for the nine months ended March 31, 2026, compared to net sales of $326.5 million in the prior-year nine-month period, an increase of 5.3%. The increase in sales of $17.3 million was driven by higher unit volume of sourced soft seating products and pricing from tariff surcharges, partially offset by lower unit volume in our made-to-order soft seating products and homestyles branded ready-to-assemble products.

Previous wording

Gross margin as a percent of net sales for the six months ended December 31, 2025, was 23.1%, compared to 21.3% for the prior-year six-month period, an increase of 180 bps. The 180-bps increase was primarily driven by favorable sales composition of higher margin products, partially offset by the dilutive impact of tariffs.

Current wording

Gross margin as a percent of net sales for the nine months ended March 31, 2026, was 22.9%, compared to 21.6% for the prior-year nine-month period, an increase of 130 bps. The 130-bps increase was primarily driven by favorable sales composition of higher margin products, partially offset by the dilutive impact of tariffs.

Previous wording

Selling, general and administrative expenses increased $2.3 million in the six months ended December 31, 2025, compared to the prior-year six-month period. SG&A as a percentage of sales was 15.2% in the six months ended December 31, 2025, compared to the prior-year six-month period of 15.3%. The 10-bps decrease was primarily due to fixed cost leverage on higher sales, offset by investments in growth initiatives for the six months ended December 31, 2025.

Current wording

Selling, general and administrative expenses increased $3.1 million in the nine months ended March 31, 2026, compared to the prior-year nine-month period. SG&A as a percentage of sales was 15.3% in the nine months ended March 31, 2026, compared to the prior-year nine-month period of 15.2%. The 10-bps increase was mainly due to investments in growth initiatives.

Previous wording

Income tax expense was $4.8 million, or an effective rate of 25.4%, during the six months ended December 31, 2025, compared to income tax expense of $4.5 million in the prior-year six-month period, or an effective tax rate of 25.3%. The effective tax rate for the six months ended December 31, 2025, was primarily impacted by state taxes, the impact of foreign operations and nondeductible compensation, offset by credits for research and development.

Current wording

Income tax expense was $6.9 million, or an effective rate of 25.2%, during the nine months ended March 31, 2026, compared to income tax expense of $3.3 million in the prior-year nine-month period, or an effective tax rate of 25.6%. The effective tax rate for the nine months ended March 31, 2026, was primarily impacted by state taxes, the impact of foreign operations and nondeductible compensation, offset by credits for research and development.

Previous wording

Working capital (current assets less current liabilities) on December 31, 2025, was $126.0 million compared to $110.4 million on June 30, 2025. The $15.6 million increase in working capital was primarily due to an increase in other current assets of $6.9 million, an increase in trade receivables of $6.6 million, an increase in inventories of $6.0 million, and a decrease in other current liabilities of $2.9 million partially offset by a decrease in cash of $3.2 million, an increase in accounts payable of $3.3 million, and an increase in operating lease of $0.3 million. Refer to discussion of working capital changes below, under Net cash provided by operating activities. Capital expenditures were $3.1 million during the six months ended December 31, 2025.

Current wording

Working capital (current assets less current liabilities) on March 31, 2026, was $142.2 million compared to $110.4 million on June 30, 2025. The $31.8 million increase in working capital was primarily due to an increase in cash of $17.3 million, other current assets of $13.2 million, an increase in trade receivables of $6.2 million, and a decrease in accounts payable of $1.7 million, a decrease in other current liabilities of $1.6 million, a decrease in other current liabilities of $0.8 million partially offset by a decrease in inventories of $8.6 million and an increase in operating lease of $0.4. Refer to discussion of working capital changes below, under Net cash provided by operating activities. Capital expenditures were $3.5 million during the nine months ended March 31, 2026.

Previous wording

For the six months ended December 31, 2025, net cash provided by operating activities was $5.1 million, primarily due to net income of $14 million, an increase in accounts payable of $3.6 million, a decrease in other assets of $3.4 million, and adjustments for non-cash items including deferred income taxes $3.4 million, stock-based compensation of $2.3 million, depreciation of $1.7 million, provision for credit losses of $0.1 million partially offset by an increase in other current assets of $6.9 million, an increase in trade receivables of $6.7 million, an increase in inventories of $6.0 million, a decrease in accrued liabilities of $3.7 million and a decrease in other long-term liabilities of $0.1 million.

Current wording

For the nine months ended March 31, 2026, net cash provided by operating activities was $27.2 million, primarily due to net income of $20.4 million, a decrease in inventories of $8.6 million and adjustments for non-cash items including stock-based compensation of $3.4 million, deferred income taxes $3.3 million, depreciation of $2.8 million, provision for credit losses of $0.3 million, partially offset by an increase in trade receivables of $6.5 million, a decrease in accrued liabilities of $3.7 million, a decrease in accounts payable of $1.3 million and an increase in other current assets of $0.1 million.

Previous wording

For the six months ended December 31, 2024, net cash provided by operating activities was $9.1 million, primarily due to an increase in net income of $13.2 million, adjustments for non-cash items including a pre-tax gain on sale of assets of $5 million, stock-based compensation of $2.1 million, depreciation of $1.9 million, and a decrease in inventory of $5.5 million offset by an increase in trade receivables of $7.9 million, an increase in accrued liabilities of $4.9 million, a decrease in other current assets of $3.6 million, an increase in accounts payable of $5.4 million and a decrease of other assets and liabilities of $0.2 million.

Current 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.

Previous wording

For the six months ended December 31, 2025, net cash used in investing activities was $3.1 million due to capital expenditures.

Current wording

For the nine months ended March 31, 2026, net cash used in investing activities was $3.5 million due to capital expenditures.

Previous wording

For the six months ended December 31, 2024, net cash provided by investing activities was $6.5 million due to proceeds from the sale of the Dublin, Georgia facility of $6.7 million, and corporate owned life insurance proceeds of $1.1 million, offset by capital expenditures of $1.3 million.

Current 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.

Previous wording

For the six months ended December 31, 2025, net cash used in financing activities was $5.3 million, primarily due to dividends paid of $2.2 million, shares withheld for tax payments on vested shares and options exercised of $1.9 million and treasury stock purchases of $1.1 million.

Current wording

For the nine months ended March 31, 2026, net cash used in financing activities was $6.4 million, primarily due to dividends paid of $3.3 million, shares withheld for tax payments on vested shares and options exercised of $2.0 million and treasury stock purchases of $1.1 million.

Previous wording

For the six months ended December 31, 2024, net cash used in financing activities was $8.6 million, due to payments on the line of credit of $207.1 million partially offset by proceeds from the line of credit of $202 million, shares withheld for tax payments on vested shares and options exercised of $2.1 million, dividends paid of $1.8 million, and proceeds from issuance of common stock of $0.1 million.

Current 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.

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 5.13%, on December 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 4.99%, on March 31, 2026.