FLEXSTEEL INDUSTRIES INC (FLXS)

CIK: 0000037472. SIC: 2510 Household Furniture. Latest 10-K as of: 2025-08-22.

SIC breadcrumb: Manufacturing > SIC Major Group 25 > SIC 2510 Household Furniture

SEC company page: https://www.sec.gov/edgar/browse/?CIK=37472. Latest filing source: 0000950170-25-110965.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2025-08-22. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000037472.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-04-22. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000037472.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001193125-26-170444.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Confidence: high. Filing date: 2026-04-22. Report date: 2026-03-31.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

GENERAL

The following analysis of the results of operations and financial condition of the Company should be read in conjunction with the Consolidated Financial Statements and related notes included elsewhere in this quarterly report on Form 10-Q.

CRITICAL ACCOUNTING POLICIES:

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", included in our 2025 annual report on Form 10-K.

Overview

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.

Three Months Ended

Nine Months Ended

March 31,

March 31,

2026

2025

2026

2025

Net sales

100.0

%

100.0

%

100.0

%

100.0

%

Cost of goods sold

77.4

77.8

77.1

78.4

Gross margin

22.6

22.2

22.9

21.6

Selling, general and administrative expenses

15.5

15.0

15.3

15.2

Right-of-use asset impairment

—

12.4

—

4.3

(Gain) on sale of real estate

—

(0.7

)

—

(0.2

)

(Gain) on disposal of assets held for sale

—

—

—

(1.5

)

Operating income (loss)

7.1

(4.4

)

7.6

3.8

Interest income

0.3

0.1

0.3

—

Income (loss) before income taxes

7.4

(4.3

)

7.9

3.8

Income tax provision (benefit)

1.9

(1.1

)

2.0

1.0

Net income (loss) and comprehensive income

5.6

%

(3.3

)

%

5.9

%

2.8

%

Results of Operations for the Quarter Ended March 31, 2026 vs. 2025

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.

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.

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.

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.

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.

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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.

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

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.

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.

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.

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.

Net income was $20.4 million, or $3.63 per diluted share for the nine months ended March 31, 2026, compared to net income of $9.5 million, or $1.70 per diluted share in the prior-year nine-month period. During the nine-month period ended March 31, 2025, the Company recorded a right-of-use asset impairment on the manufacturing facility in Mexicali, Mexico. In addition the Company recorded pre-tax gains related to the sale of its Dublin, Georgia facility and an ancillary building, formerly part of its Huntingburg, IN distribution center.

Liquidity and Capital Resources

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.

A summary of operating, investing, and financing cash flow is shown in the following table:

Nine Months Ended

March 31,

(in thousands)

2026

2025

Net cash provided by operating activities

$

27,195

$

21,353

Net cash (used in) provided by investing activities

(3,524

)

6,003

Net cash (used in) financing activities

(6,394

)

(9,483

)

Increase in cash and cash equivalents

$

17,277

$

17,873

Net cash provided by operating activities

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.

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

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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.

Net cash (used in) provided by investing activities

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

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.

Net cash (used in) financing activities

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.

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.

Line of Credit

On September 8, 2021, the Company, as the borrower, entered into a credit agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association (the “Lender”), and the other lenders thereto. The Credit Agreement has a five-year term and 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 March 31, 2026, management believes the Company was in compliance with all covenants.

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.

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”). E

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high. Filing date: 2025-08-22. Report date: 2025-06-30.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

The following analysis of the results of operations and financial condition of the Company should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

Results of Operations

The following table has been prepared as an aid in understanding the Company’s results of operations on a comparative basis for the fiscal years ended June 30, 2025, 2024, and 2023. Amounts presented are percentages of the Company’s net sales.

For the years ended June 30,

2025

2024

2023

Net sales

100.0

%

100.0

%

100.0

%

Cost of goods sold

77.8

78.9

82.0

Gross margin

22.2

21.1

18.0

Selling, general and administrative expenses

15.1

17.1

16.0

Restructuring expense

—

0.7

—

Right-of-use asset impairment

3.2

—

—

(Gain) on sale of real estate

(0.2

)

—

—

(Gain) on disposal of assets held for sale

(2.0

)

(0.8

)

—

Environmental remediation

—

—

(0.7

)

Other expense

—

—

0.1

Operating income

6.0

4.1

2.7

Interest income

0.1

0.0

0.0

Interest (expense)

(0.0

)

(0.4

)

(0.3

)

Income before income taxes

6.1

3.8

2.3

Income tax provision (benefit)

1.5

1.2

(1.4

)

Net income and comprehensive income

4.6

%

2.6

%

3.8

%

Fiscal 2025 Compared to Fiscal 2024

Net sales were $441.1 million for the year ended June 30, 2025, compared to net sales of $412.8 million in the prior year, an increase of $28.3 million or 6.9%. The increase in sales was primarily driven by unit volume in our soft seating products, offset by a decline in our homestyles ready-to-assemble product line.

Gross margin for the year ended June 30, 2025, was 22.2%, compared to 21.1% for the prior fiscal year, an increase of 110 basis points (“bps”). The 110-bps increase was primarily driven by fixed cost leverage on higher sales, supply chain cost savings, and product portfolio management.

Selling, general, and administrative (“SG&A”) expenses decreased by $3.7 million in the year ended June 30, 2025, compared to the prior fiscal year. As a percentage of net sales, SG&A expense was 15.1% in fiscal year 2025 compared to 17.1% of net sales in the prior fiscal year. The decrease of 200-bps is primarily due to fixed cost leverage on higher sales volume and structural cost savings partially offset by investments in growth initiatives. The prior year SG&A expense also included a $1.5 million expense due to CEO transition costs associated with the revaluation of previously awarded equity awards which did not recur in the current year.

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 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 was not fully recoverable and recorded a pre-tax non-cash asset impairment charge of $14.1 million during the quarter ended March 31, 2025. See Note 2, Leases, of the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for more information.

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During the year ended June 30, 2025, the Company completed the sale of its Dublin, Georgia facility which had been previously recorded as held for sale. The Company recorded a pre-tax gain of $5.0 million related to the sale. See Note 6, Assets Held For Sale, of the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for more information.

During the year ended June 30, 2025, the Company completed the sale of 2 separate ancillary buildings, formerly part of its Huntingburg, Indiana distribution center complex. The Company received proceeds of $0.8 million and recorded a pre-tax gain of $0.7 million related to the first sale. The Company received proceeds of $4.0 million and recorded a pre-tax gain of $3.7 million related to the second sale. The Company has adequate distribution capacity to support our growth as we continue to optimize our distribution and logistics network. See Note 6, Assets Held For Sale, of the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for more information.

Income tax expense was $6.8 million, or an effective rate of 25.3%, for the year ended June 30, 2025, compared to income tax expense of $5.0 million in the prior year, or an effective tax rate of 32.3%. The current year effective tax rate was primarily impacted by the effect of state and foreign taxes, offset by a research & development credit benefit. The prior year tax rate was impacted by the effect of state taxes, nondeductible stock compensation, and foreign taxes, offset by a research & development credit benefit. See Note 10, Income Taxes, of the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for more information.

Net income was $20.2 million, or $3.55 per diluted share for the year ended June 30, 2025, compared to net income of $5.5 million, or $1.91 per diluted share in the prior year.

On July 31, 2025, the President of the United States issued an executive order intended to clarify certain matters related to previously issued executive orders on tariffs. This executive order included, among other things, a country specific tariff of 20% on goods imported from Vietnam. The current situation is dynamic, and it is unknown if the United States and its trade partners will reach an agreement to further pause or adjust the current tariffs. Depending on our ability to mitigate these tariffs, they could have a material impact on our future net sales, cost of goods sold, profit and cash flow. The ultimate effect will be dependent on the magnitude and duration of the tariffs and the countries implicated as well as our ability to successfully mitigate the potential impact. The Company is assessing options to mitigate any potential impact, which includes supply chain adjustments, negotiating concessions with current suppliers, and pricing actions.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The OBBBA includes a number of provisions which impact the United States tax code. These regulations impacting the tax code have multiple effective dates ranging from fiscal years beginning January 1, 2025, to fiscal years beginning January 1, 2027. The Company has not adjusted its provision for income tax or measurement of deferred tax assets as of June 30, 2025, based on the changes that may be triggered by the OBBBA due to the law being signed on July 4, 2025. The Company is currently assessing the impact of the OBBBA but does not expect it to have a material impact on our future financial position and results of operations.

Fiscal 2024 Compared to Fiscal 2023

Net sales were $412.8 million for the year ended June 30, 2024, compared to net sales of $393.7 million in the prior year, an increase of $19.1 million or 4.8%. Sales of products sold through retailers increased by $22.9 million or 6.7% primarily driven by growth with strategic customers and new product introductions. Sales of products sold through e-commerce channels decreased by ($3.8) million, or (7.5%) due to a decrease in consumer demand.

Gross margin as a percent of net sales for the year ended June 30, 2024, was 21.1%, compared to 18.0% for the prior fiscal year, an increase of 310-bps. The 310-bps increase was primarily driven by an increase of 240-bps primarily related to cost savings initiatives for materials, labor, and logistics, product portfolio management and disciplined promotional pricing and a 70-bps improvement on volume leverage of fixed cost structure.

SG&A expenses increased by $7.6 million in the year ended June 30, 2024, compared to the prior fiscal year. 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. 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.

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. 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.

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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. The Company recorded a gain of $3.3 million related to the sale in the fiscal year. See Note 6, Assets Held For Sale, of the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for more information.

Income tax expense was $5.0 million, or an effective rate of 32.3%, for the year ended June 30, 2024, compared to income tax benefit of ($5.6) million in the prior year, or an effective tax rate of (60.3%). The 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. 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.

Liquidity and Capital Resources

Working capital (current assets less current liabilities) on June 30, 2025, was $110.4 million compared to $95.0 million on June 30, 2024. The $15.4 million increase in working capital is primarily due to an increase in cash of $35.2 million offset by a decrease of $9.0 million of trade receivables, a decrease of $7.4 million in inventory, an increase in sales & advertising related accruals of $2.0 million and a decrease of $1.7 million in assets held for sale. Capital expenditures were $3.3 million for the fiscal year ended June 30, 2025.

A summary of operating, investing, and financing cash flow is shown in the following table:

For the years ended June 30,

(in thousands)

2025

2024

Net cash provided by operating activities

$

36,979

$

31,883

Net cash provided by (used in) investing activities

9,432

(593

)

Net cash (used in) financing activities

(11,166

)

(29,894

)

Increase in cash and cash equivalents

$

35,245

$

1,396

Net cash provided by operating activities

For the year ended June 30, 2025, cash provided by operating activities was $37.0 million, which primarily consisted of net income of $20.2 million, adjusted for non-cash items including an impairment of our Mexicali facility right-of-use asset of $14.1 million, stock-based compensation expense of $3.9 million, and depreciation expense of $3.7 million, offset by gain on disposition of property, plant and equipment of $9.5 million, $3.8 million in deferred income tax benefit, and accounts receivable allowance benefit of $0.2 million. Net cash provided by operating assets and liabilities was $8.7 million and was primarily due to a decrease in trade receivables of $9.3 million and a decrease in inventory of $7.4 million due to inventory optimization initiatives, offset by an increase in other assets of $7.6 million primarily related to our receivable for recoverable VAT paid in Mexico.

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. 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.

Net cash provided by (used in) investing activities

For the year ended June 30, 2025, net cash provided by investing activities was $9.4 million, primarily due to proceeds of $11.6 million from the sales of property, plant and equipment, and corporate owned life insurance proceeds of $1.2 million, offset by capital expenditures of $3.3 million partially.

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

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Net cash (used in) financing activities

For the year ended June 30, 2025, net cash used in financing activities was $11.2 million, primarily due to proceeds from lines of credit of $202.3 million, offset by payments on lines of credit of $207.3 million, dividends paid of $3.6 million, and $2.8 million for tax payments on employee vested restricted shares netted with proceeds from the issuance of common stock.

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.

Financing Arrangements

Line of Credit

On September 8, 2021, the Company, as the borrower, entered into a credit agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association (the “Lender”), and the other lenders thereto. The Credit Agreement has a five-year term and provides for up to an $85 million revolving line of credit. 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.

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.

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 5.76% on June 30, 2025.

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.

As of June 30, 2025, there were no outstanding borrowings under the Credit Agreement, exclusive of fees and letters of credit.

Letters of credit outstanding at the Lender as of June 30, 2025, totaled $0.9 million.

See Note 9 Credit Arrangements of Notes to Consolidated Financial Statements of this Annual Report on Form 10-K.

Contractual Obligations

The following table summarizes our contractual obligations on June 30, 2025, and the effect these obligations are expected to have on our liquidity and cash flow in the future (in thousands):

2-3

4-5

More than

Total

1 Year

Years

Years

5 Years

Operating lease obligations

$

67,976

$

10,003

$

20,062

$

17,511

$

20,400

Warehouse management obligation

1,735

1,388

347

—

—

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Outlook

Our focus for fiscal 2026 will be to remain financially agile with strong liquidity, continue building our foundation for profitable long-term growth in both retail and e-commerce sales channels, build global supply chain resiliency, continue focusing on operational excellence, strengthen digital capabilities, re-imagine the customer experience, and build strong culture and talent.

Critical Accounting Policies

The discussion and analysis of our consolidated financial statements and results of operations are based on consolidated financial statements prepared in accordance with generally accepted accounting principles (GAAP) in the United States of America. Preparation of these consolidated financial statements requires the use of estimates and judgments that affect the reported results. We use estimates based on the best information available in recording transactions and balances resulting from business operations. Estimates are used for such items as the collectability of trade accounts receivable and inventory valuation. Ultimate results may differ from these estimates under different assumptions or conditions.

Allowance for Credit Losses – We establish an allowance for credit losses to reduce trade accounts receivable to an amount that reasonably approximates their net realizable value. Our accounts receivable allowance consists of an allowance for expected credit losses which is established through a review of open accounts, historical collection, and historical write-off amounts. The amount ultimately realized from trade accounts receivable may differ from the amount estimated in the consolidated financial statements.

Inventories – We value inventory at the lower of cost or net realizable value. Cost of manufactured inventory includes materials, labor and overhead. In addition, finished goods inventory includes capitalized freight, import duties, and warehousing costs. Our inventory valuation reflects markdowns for the excess of the cost over the amount expected to be realized and considers obsolete and excess inventory. Markdowns establish a new cost basis for the Company’s inventory. Subsequent changes in facts or circumstances do not result in the reversal of previously recorded markdowns or an increase in that newly established cost basis.

Valuation of Long-Lived Assets – We periodically review the carrying value of long-lived assets and estimated depreciable or amortizable lives for continued appropriateness. This review is based upon projections of anticipated future cash flows and is performed whenever events or changes in circumstances indicate that asset carrying values may not be recoverable or that the estimated depreciable or amortizable lives may have changed. For long-lived assets, including right-of-use lease assets, if the net book value of the asset is greater than its estimated fair value less cost to sell, an impairment is recorded for the excess of net book value over estimated fair value less cost to sell. We recorded $14.1 million of impairments in the fiscal year 2025 related to our Mexicali facility lease right-of-use asset. See Note 2, Leases, for the Company’s lease disclosures. No impairments were recorded in fiscal years 2024 and 2023.

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. Costs to terminate contracts are recognized upon the effectiveness of the termination agreement with the provider. Other associated restructuring costs are expensed as incurred. Any inventory impairment costs as a result of restructuring activities are accounted for as costs of goods sold.

Income Taxes - In determining taxable income for financial statement purposes, we must make certain estimates and judgments. These estimates and judgments affect the calculation of certain tax liabilities and the determination of the recoverability of certain deferred tax assets, which arise from temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating our ability to recover our deferred tax assets we consider all available positive and negative evidence including our past operating results, the existence of cumulative losses in the most recent years, and our forecast of future taxable income. In estimating future taxable income, we develop assumptions including the amount of future pre-tax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we are using to manage the underlying businesses.

At June 30, 2025, the Company determined that based on the weight of available evidence, we will be able to recover our deferred tax assets. The realization of our deferred tax assets is primarily dependent on future taxable income in the appropriate jurisdiction. 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. Refer to Note 10 Income Taxes of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for more information.

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