What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-08-22 compared with 2024-08-30 · 165 added, 138 removed, 527 unchanged (37% of the section changed)

27 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Inventories — Refer to Notes 1 and 3 to the financial statements

14 unchanged sentences

• We performed retrospective reviews of actual products sold in the current year against prior year inventory markdowns to net realizable value.

Mexicali Right-of-Use Asset Impairment — Refer to Notes 1 and 2 to the financial statements

Critical Audit Matter Description

The Company periodically reviews 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.

Events that result in an impairment review may include a significant decrease in the operating performance of the long-lived asset, or the decision to close a manufacturing facility, or distribution center.

If it is determined estimated fair value, less cost to sell, is less than the carrying value, the asset is written down to its fair value.

In the third quarter of fiscal year 2025, indicators arose that the right-of-use asset assigned to the Company’s manufacturing facility in Mexicali, Mexico may not be fully recoverable.

As a result of management’s analysis, management concluded that the right-of-use asset related to this lease is not fully recoverable and recorded a $14.1 million impairment in fiscal year 2025.

We identified the Mexicali Right-of-Use Asset Impairment as a critical audit matter because the impairment assessment involves significant judgment due to the estimation of future cash flows and fair values.

Key assumptions, sublease rental income per square foot and discount rate, are influenced by economic conditions and are inherently subjective.

Because of the materiality of the impairment and the complexity of the assumptions, auditing management’s estimates of estimated fair value required subjective auditor judgment.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the sublease rental income per square foot and selection of discount rate, among others:

• We tested the effectiveness of controls over management’s valuation, including those over the sublease rental income per square foot and selection of discount rate.

• We inquired of management regarding the viability of subleasing the manufacturing facility and appropriate sublease rental income per square foot.

• We evaluated the reasonableness of management’s plan to sublease the Mexicali, Mexico manufacturing facility through:

o Inspection of internal communications between management and the Board of Directors

o Inspection of historical subleasing agreements between the Company and tenants.

• We evaluated the methods and inputs used by management to determine the fair value of the lease right-of-use asset, as well as evaluated management's analysis to assess the sensitivity of sublease rental income per square foot and discount rate.

• With the assistance of fair value specialists, we evaluated the reasonableness of the sublease rental income per square foot by:

o Testing the source information underlying the determination of sublease rental income per square foot and testing the mathematical accuracy of the information

o Comparing sublease rental income per square foot to market data

o Developing ranges of independent estimates and comparing those to the sublease rental income per square foot selected by management.

• With the assistance of fair value specialists, we evaluated the reasonableness of the discount rate by:

o Testing the source information underlying the determination of the discount rate and testing the mathematical accuracy of the information

o Comparing the discount rate to market data

o Developing ranges of independent estimates and comparing those to the discount rate selected by management

o Evaluating the application of the discount rate on the anticipated future cash flows and recalculating the net present value.

/s/ Deloitte & Touche LLP

65 unchanged sentences

Treasury stock, at cost;

3,207 shares and 3,118 shares as of June 30, 2024 and

3,207 shares as of June 30, 2025 and

2024, respectively

Retained earnings

Accumulated other comprehensive income

Total shareholders' equity

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

See accompanying Notes to Consolidated Financial Statements.

5 unchanged sentences

Cost of goods sold

Selling, general and administrative

Selling, general and administrative expenses

Restructuring expense

Right-of-use asset impairment

(Gain) on sale of real estate

(Gain) on disposal of assets held for sale

Environmental remediation

(Gain) on disposal of assets

Other expense

1 unchanged sentence

Other income (expense):

Interest income

Interest (expense)

Total other (expense)

Total other income (expense)

Income before income taxes

Income tax expense (benefit)

Income tax provision (benefit)

Net income and comprehensive income

Weighted average number of common shares outstanding:

7 unchanged sentences

Issuance of common stock:

Stock options exercised, net

Long-term incentive compensation

Stock-based compensation

Vesting of restricted stock units and restricted shares

Treasury stock purchases

2 unchanged sentences

Issuance of common stock:

Stock options exercised, net

Long-term incentive compensation

Stock-based compensation

Vesting of restricted stock units and restricted shares

Stock options exercised, net

Treasury stock purchases

2 unchanged sentences

Issuance of common stock:

Stock options exercised, net

Long-term incentive compensation

Stock-based compensation

Treasury stock purchases

Vesting of restricted stock units and restricted shares

Stock options exercised, net

Cash dividends declared

11 unchanged sentences

Stock-based compensation expense

Changes in (recoveries) provision for losses on accounts receivable

(Gain) on disposition of capital assets

Change in provision for losses on accounts receivable

Right-of-use asset impairment

(Gain) on disposition of property, plant and equipment

Changes in operating assets and liabilities:

6 unchanged sentences

INVESTING ACTIVITIES:

Proceeds from sale of capital assets

Proceeds from sale of investments

Proceeds from sales of property, plant and equipment

Capital expenditures

Net cash (used in) investing activities

Net cash provided by (used in) investing activities

FINANCING ACTIVITIES:

11 unchanged sentences

Interest paid

Income taxes (refunded)

Interest received

Cash paid for income taxes, net

Capital expenditures in accounts payable

24 unchanged sentences

INVENTORIES – Inventories are stated at the lower of cost or net realizable value utilizing the first‑in - first‑out (“FIFO”) method.

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.

4 unchanged sentences

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 estimated fair value less cost to sell.

For long-lived assets, including right-of-use lease assets, if the net book value of the asset is greater than its estimated fair value less cost to sell, an impairment is recorded for the excess of net book value over estimated fair value less cost to sell.

ASSETS HELD FOR SALE – Assets held for sale represent land, buildings, machinery and equipment for locations that have met the criteria of “held for sale” accounting, as specified by Accounting Standards Codification (“ASC”) 360, “Property, Plant, and Equipment.” Once an asset is classified as held for sale, the Company ceases depreciating the asset.

6 unchanged sentences

Any inventory impairment costs as a result of restructuring activities are accounted for as cost of goods sold.

LEASES – The Company accounts for its leases in accordance with Accounting Standards Update (“ASU”) No.

2016-02, Leases (Topic 842) (“ASC 842”).

LEASES – The Company accounts for its leases in accordance with ASC 842, Leases.

ASC 842 requires lessees to (i) recognize a right-of-use asset (“ROU asset”) and a lease liability that is measured at the present value of the remaining lease payments, on the Consolidated Balance Sheets, (ii) recognize a single lease cost, calculated over the lease term on a straight-line basis and (iii) classify lease-related cash payments within operating and financing activities.

The Company has made an accounting policy election to not recognize short-term leases on the consolidated balance sheets and all non-lease components, such as common area maintenance, were excluded.

The Company made an accounting policy election to not recognize short-term leases on the Consolidated Balance Sheets and all non-lease components, such as common area maintenance, were excluded.

See Note 2, Leases , for the Company’s lease disclosures.

9 unchanged sentences

Revenue is reduced by appropriate allowances, estimated returns, price concessions, or similar adjustments as applicable.

The Company records revenue based on a five-step model in accordance with ASC 2014-09, Revenue from Contracts with Customers ( Topic 606 ).

The Company records revenue based on a five-step model in accordance with ASC 606, Revenue from Contracts with Customers .

For its customer contracts, typically purchase orders, the Company identifies the performance obligations (goods), determines the transaction price, allocates the contract transaction price to the performance obligations, and recognizes the revenue when the performance obligation is transferred to the customer.

21 unchanged sentences

DESIGN, RESEARCH, AND DEVELOPMENT COSTS – are charged to selling, general and administrative expenses in the periods incurred.

Expenditures for design, research, an d development costs were approximately $ 2.1 million, $ 2.1 million, and $ 2.9 million in fiscal years 2024, 2023, and 2022, respective ly.

Expenditures for design, research, an d development costs were approxima tely $ 2.1 million, $ 2.1 million, and $ 2.1 million in fiscal years 2025, 2024, and 2023, respective ly.

INSURANCE – The Company is self-insured for health care and most workers’ compensation up to predetermined amounts above which third-party insurance applies.

4 unchanged sentences

INCOME TAXES – The Company uses the liability method of accounting for income taxes.

Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted ta x rates and laws that will be in effect when the differences are expected to reverse.

The Company recognizes in its financial statements the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

19 unchanged sentences

See Note 11, Stock-Based Compensation .

SEGMENT REPORTING – The Company operates in one reportable segment, furniture products.

SEGMENT REPORTING – The Company operates as one operating segment and one reportable segment, furniture products.

The Company’s operations involve the distribution of manufactured and imported furniture for the residential market.

The Company’s furniture products are sold primarily throughout the United States and Canada by the Company’s internal sales force and various independent representatives.

The Company makes minimal export sales.

The Company’s furniture products are sold primarily throughout the United States by the Company’s internal sales force and various independent representatives.

The Company has minimal export sales, primarily to Canada or Mexico.

No single customer accounted for more than 10% of net sales.

TREASURY STOCK – Treasury stock purchases are stated at cost and presented as a reduction of equity on the consolidated balance sheets.

On June 1, 2020, the Company’s Board of Directors authorized a $ 6 million share repurchase program through June 9, 2021.

August 20, 2020, the Company’s Board of Directors authorized an additional $ 8 million share repurchase program to begin on September 4, 2020, through September 3, 2021.

On October 22, 2020, the Company’s Board of Directors authorized another $ 30 million share repurchase program through October 29, 2023.

On January 20, 2022, the Board of Directors approved a new repurchase program authorizing the Company to purchase up to an additional $ 30 million of the Company’s common stock through January 19, 2025.

As of October 31, 2020, the $ 6 million and $ 8 million repurchase programs were completed.

The Company completed the share repurchases of the October 22, 2020 plan in February 2022.

As of June 30, 2024 , the Company has purchased a total of 3,207,158 shares at a cost of $ 71.7 million under the four programs and has $ 2.1 million remaining in the January 2022, $ 30 million share repurchase program.

The Company accounts for its leases in accordance with ASU No.

2016-02, Leases (Topic 842) (“ASC 842”).

See Note 12, Segment Information .

TREASURY STOCK – Treasury stock purchases ar e stated at cost and presented as a reduction of equity on the consolidated balance sheets.

As of June 30, 2025 , the Company has purchased a total of 3,207,158 shares at a cost of $ 71.7 million under approved share repurchase programs and has $ 30 million remaining in the share repurchase program approved in December 2024.

RECENT ACCOUNTING STANDARDS PENDING ADOPTION – In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses”, which requires disclosure in the notes to the financial statements of specified information about certain costs and expenses.

The amendments are effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted.

The Company is currently evaluating the disclosure impacts of this ASU on its consolidated financial statements

In December 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No.

2023 09 “Improvements to Income Tax Disclosures.” The amendments in this ASU are intended to increase transparency through improvements to income tax disclosures primarily related to the income tax rate reconciliation and income taxes paid information.

This ASU will become effective for us for the annual period beginning in fiscal year 2026, with early adoption permitted.

The Company is currently evaluating the effect that the new guidance will have on our related disclosures, but do not expect this guidance will have a material impact on our financial position and results of operations.

RECENTLY ADOPTED ACCOUNTING STANDARDS – In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures which requires business entities to enhance segment disclosures about significant segment expenses and disclose the position and title of the chief operating decision maker.

The ASU also requires that a public entity with a single reportable segment, like the Company, provide all of the disclosures required as part of ASU 2023-07 and all existing disclosures required by Topic 280.

The ASU was adopted July 1, 2024, and has been applied retrospectively to all prior periods presented.

The adoption did not have an impact on the Company’s consolidated balance sheets or results of operations.

See Note 12, Segment Information .

The Company accounts for its leases in accordance with ASU 842, Leases.

ASC 842 requires lessees to (i) recognize a right-of-use asset (“ROU asset”) and a lease liability that is measured at the present value of the remaining lease payments on the Consolidated Balance Sheets, (ii) recognize a single lease cost, calculated over the lease term on a straight-line basis and (iii) classify lease-related cash payments within operating and financing activities.

The Company has made an accounting policy election to not recognize short-term leases on the consolidated balance sheets and all non-lease components, such as common area maintenance, were excluded.

At any given time during the lease term, the lease liability represents the present value of the remaining lease payments, and the ROU asset is measured as the amount of the lease liability, adjusted for pre-paid rent, unamortized initial direct costs and the remaining balance of lease incentives received.

Both the lease ROU asset and liability are reduced to zero at the end of the lease term.

The Company made an accounting policy election to not recognize short-term leases on the Consolidated Balance Sheets and all non-lease components, such as common area maintenance, were excluded.

At any given time during the lease term, the lease liability represents the present value of the remaining lease payments, and the ROU asset is measured as the amount of the lease liability, adjusted for pre-paid rent, unamortized initial direct costs, the remaining balance of lease incentives received, and any impairment.

Both the lease ROU asset and lease liability are reduced to zero at the end of the lease term.

The Company leases distribution centers and warehouses, manufacturing facilities, showrooms, and office space.

6 unchanged sentences

Due to the variable nature of these costs, they are not included in the measurement of the ROU asset and lease liability.

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.

The fair value of the right of use asset on March 31, 2025, was estimated under the income approach using a discounted cash flow technique, including assumptions for future sublease rental income and an appropriate discount rate.

This technique involves estimates and uncertainties and actual results could differ.

The impairment charge is included within

operating income in the Consolidated Statements of Income and Comprehensive Income under right-of-use asset impairment.

The remaining carrying value of the ROU asset related to the Mexicali lease was $ 13.5 million at June 30, 2025.

The components of the Company’s leases reflected on the Company’s consolidated statements of income were as follows:

31 unchanged sentences

PROPERTY, PLANT AND EQUIPMENT

A comparison of property, plant and equipment is as follows:

(in thousands)

8 unchanged sentences

RESTRUCTURING

Exit of Commercial Office, Hospitality and Vehicle Seating

On May 15, 2019, the Company announced its plans to exit the Commercial Office and custom-designed Hospitality product lines.

These changes were initial outcomes driven by customer and product line profitability and footprint utilization analyses in the fourth quarter of fiscal 2019.

On June 18, 2019, the Company announced that it completed the analysis and the planning process and set forth the comprehensive transformation program to be executed over a two-year period, which included previously announced restructuring activities on May 15, 2019.

The transformation program included activities such as business simplification, process improvement, exiting of non-core businesses, facility closures, and reductions in the workforce.

The Company has completed the portion of the restructuring activities related to the exit of the Commercial Office and custom-designed Hospitality product lines.

On April 28, 2020, the Company announced that it will exit the Vehicle Seating and the remainder of the Hospitality product lines, and subsequently closed its Dubuque, Iowa and Starkville, Mississippi manufacturing facilities.

The remaining properties listed for sale as part of the footprint optimization are included in Note 6, Assets Held for Sale .

The Company completed all the restructuring activities related to the exit of the Vehicle Seating and the remainder of the Hospitality product lines during fiscal 2021.

As a result of these planned actions, which were complete as of the fiscal year ended June 30, 2022, the Company had planned to incur pre-tax restructuring and related expenses of approximately $ 60 million over this two-year timeframe.

Total cumulative restructuring and related costs incurred as of June 30, 2022, were $ 59.4 million.

There were no costs related to these restructuring activities in the fiscal years ended June 30, 2023 and June 30, 2024.

Manufacturing Network Optimization

1 unchanged sentence

The closure was completed in the fourth quarter of fiscal year 2024.

As a result of the closure the Company expected to incur pre-tax restructuring expense of approximately $ 2.5 to $ 3.2 million.

Total cumulative restructuring costs related to the planned action were $ 3.0 million.

The Dublin, Georgia facility and property are listed for sale following the closure.

As a result of the closure the Company incurred cumulative restructuring expense and related costs of $ 3.0 million as of June 30, 2024.

See Note 6, Assets Held For Sale for more information.

10 unchanged sentences

Other associated costs include legal and professional fees, inventory and equipment transfer costs, and other transition costs.

During the year ended June 30, 2022, the Company recorded a decrease in a pension plan liability related to the exit of commercial office, hospitality and vehicle seating activities that resulted in an expense reduction of $ 0.2 million and recorded a net settlement agreement of $ 0.4 million.

Other associated costs include legal and professional fees, stock-based compensation expenses for retention restricted stock units in connection with the Company’s restructuring plan, ongoing facilities, and transition costs.

All expenses related to the manufacturing network optimization restructuring plan were incurred and paid during the year ended June 30, 2024.

The Company paid all remaining costs associated with the exit of commercial office, hospitality and vehicle seating restructuring program in the year ended June 30, 2023.

The roll forward of the accrued restructuring costs is as follows, for the years ended June 30, 2025, 2024, and 2023:

8 unchanged sentences

ASSETS HELD FOR SALE

During fiscal year 2020, the Company committed to a plan to sell assets located at the Company’s Starkville, Mississippi location as part of the Company’s restructuring plan, see Note 5 Restructuring .

The Company completed the sale of the Starkville, Mississippi location in the year ended June 30, 2024.

The Company received proceeds of $ 3.9 million and recorded a gain of $ 3.3 million related to the sale.

During fiscal year 2024, the Company committed to a plan to sell assets located at the Company's Dublin, Georgia location as part of the Company's announced closure of the facility.

As of June 30, 2024, the Company is actively marketing the facility and property in Dublin, Georgia.

A summary of the assets held for sale is included in the table below as of June 30, 2024.

Asset Category

(in thousands)

Dublin, Georgia

Building & building improvements

Land & land improvements

During fiscal year 2024, the Company committed to a restructuring plan to sell the Company's Dublin, Georgia location.

As of December 31, 2024, the Company completed the sale and received proceeds of $ 6.7 million and recorded a pre-tax gain of $ 5.0 million.

During the quarter ended March 31, 2025, the Company completed the sale of an ancillary building which was formerly part of the Company's 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 sale.

During fiscal year 2025, the Company committed to a plan to sell a second ancillary building at the Huntingburg, Indiana distribution center complex.

This property was recorded as held for sale at the quarter ended March 31, 2025, and the Company completed the sale during the quarter ended June 30, 2025.

The Company received proceeds of $ 4.0 million and recorded a pre-tax gain of $ 3.7 million related to the sale.

There are no assets held for sale as of June 30, 2025 .

OTHER NONCURRENT ASSETS

(in thousands)

Cash value of life insurance

VAT receivable

2 unchanged sentences

CREDIT ARRANGEMENTS

On August 28, 2020, the Company entered a two-year secured $ 25.0 million revolving line of credit with Dubuque Bank and Trust Company, with an interest rate of 1.50 % plus LIBOR, subject to a floor of 3.00 %.

The revolving line of credit was secured by essentially all the Company’s assets, excluding real property, and required the Company to maintain compliance with certain financial and non-financial covenants.

This line of credit was subsequently canceled in the first quarter of the fiscal year 2022.

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 Dubuque Bank and Trust and for working capital purposes.

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.

1 unchanged sentence

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, 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.

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.

As of June 30, 2025, 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.

1 unchanged sentence

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.

As of June 30, 2024, there was $ 4.8 million outstanding under the Credit Agreement, exclusive of fees and letters of credit.

Letters of credit outstanding at the Lender as of June 30, 2024, totaled $ 1.0 million.

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 m illion.

The Company recognizes deferred tax assets to the extent that they believe the assets are more likely than not to be realized.

2 unchanged sentences

Therefore, the Company reversed the previously recorded valuation allowance against the federal and state deferred tax assets recorded as of June 30, 2022, of $ 9.8 million.

As of June 30, 2024 the Company maintains is determination that it is more-likely-than-not that deferred tax assets will be realized.

Income tax expense was calculated based upon the following components of income before income taxes for the years ended June 30:

19 unchanged sentences

Remeasurement of deferred tax assets and valuation

Amended return impacts

State rate change and other state items

38 unchanged sentences

Generally, fiscal years 2021 through 2025 remain open to examination by the Internal Revenue Service or other taxing jurisdictions to which the Company is subject.

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.

The 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 financial position and results of operations.

STOCK-BASED COMPENSATION

The Company accounts for its stock-based compensation plans in accordance with ASC 718, Stock Compensation , which requires the Company to measure all share-based payments at the fair value as of grant date and recognize the cost over the requisite service period.

The Company accounts for its stock-based compensation plans in accordance with ASC 718, Stock Compensation , which requires the Company to measure all share-based payments at grant date fair value and recognize the cost over the requisite service period.

Restricted shares and restricted stock units (“RSUs”) generally vest over 1 to 3 years.

Stock options are granted at an exercise price equal to the fair value of the Company’s common stock price at the grant date and are exercisable for up to 10 years.

Stock-based compensation is included in selling, general and administrative, and restructuring expenses on the consolidated statements of income.

The stock-based compensation expense included in restructuring expense were for retention RSUs in connection with the Company’s restructuring plan.

Stock options are granted at an exercise price equal to the fair value of the Company’s common stock price at the grant date and are exercisable for up to 10 years from the date of grant.

Stock-based compensation is included in selling, general and administrative expenses on the Consolidated Statements of Income and Comprehensive Income.

Forfeitures are recognized as incurred.

Total stock-based compensation expense was $ 4.6 million, $ 3.2 million and $ 1.0 million for fiscal years 2024, 2023, and 2022, respectively.

Total stock-based compensation expense was $ 3.9 mil lion, $ 4.6 million and $ 3.2 million for fiscal years 2025, 2024, and 2023, respectively.

On December 14, 2022, the Company’s shareholders approved the Flexsteel Industries, Inc.

9 unchanged sentences

No further awards will be issued under this plan.

(3) 2013 Omnibus Stock Plan, and 2009 Stock Option Plan

(3) 2013 Omnibus Stock Plan

The 2013 Omnibus Stock Plan was for key employees, officers and directors and provides for the granting of incentive and nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights and performance units.

1 unchanged sentence

Long-Term Incentive Compensation

The table below sets forth, as of June 30, 2024, the number of unvested PSUs granted at the target performance level for the 2022-2024, 2023-2025, and 2024-2026 performance periods under the LTIP and the number of unvested RSUs granted in conjunction with the PSUs:

The table below sets forth, as of June 30, 2025, the number of unvested PSUs granted at the target performance level for the 2023-2025, 2024-2026, and 2025-2027 performance periods under the 2022 Plan and LTIP (as applicable) and the number of unvested RSUs granted in conjunction with the PSU s.

For PSUs awarded for the three year performance periods ending June 2025, 2026 and 2027, achievement is based on meeting performance goals set for each year within the three year period.

The Committee selected Adjusted Operating Income as the performance metric for the performance periods ending June 2025, 2026, and 2027:

Time Based Vest

7 unchanged sentences

Unvested as of June 30, 2025

To tal unrecognized stock-based compensation related to the unvested PSUs at the target performance level and the related unvested RSUs was $ 2.0 million as of June 30, 2024, which is expected to be recognized over a period of 1.5 years.

Total unrecognized stock-based compensation related to the unvested PSUs at the target performance level and the related unvested RSUs wa s $ 2.2 million as of June 30, 2025, which is expected to be recognized over a perio d of 0.9 years.

Restricted Shares and RSUs

5 unchanged sentences

Unvested as of June 30, 2025

Total unrecognized stock-based compensation related to unvested restricted shares and unvested RSUs (not granted in conjunction with the PSUs) was $ 0.2 million as of June 30, 2024, which is expected to be recognized over a weighted average period of 1.6 years.

Total unrecognized stock-based compensation related to unvested restricted shares and unvested RSUs (not granted in conjunction with the PSUs) wa s $ 0.2 million as of June 30, 2025, which is expected to be recognized over a weighted average period of 1.1 ye ars.

No stock options were granted during fiscal years 2025, 2024, and 2023.

15 unchanged sentences

During the quarter ended June 30, 2020, the Company awarded its former Chief Financial Officer/Chief Operating Officer (current Chief Executive Officer) 79,000 options outside of any Company stock plans.

All 79,000 options remain outstanding as of June 30, 2024, with an exercise price of $ 9.97 and a remaining life of 5.8 years.

There is no remaining unrecognized stock-based compensation expense related to these options.

During the quarter ended December 31, 2018, the Company awarded its former Chief Executive Officer 55,000 options outside of any Company stock plans.

All 55,000 options remain outstanding as of June 30, 2024, with an exercise price of $ 21.96 and a remaining life of 4.5 years.

All 79,000 options remain outstanding as of June 30, 2025 , with an exercise price of $ 9.97 and a remaining life of 4.8 ye ars.

There is no remaining unrecognized stock-based compensation expense related to these options.

SEGMENT INFORMATION

As disclosed in Note 1 – Summary of Significant Accounting Policies, the Company operates as a single operating segment and reportable segment reflecting the integrated nature of its operations across various products, manufacturing platforms and sales channels across the entire United States.

The Company's chief operating decision maker (“CODM”) is its President and Chief Executive Officer , who has final authority over the allocation of resources, assessment of performance, and key operating decisions.

The CODM manages the business on a consolidated basis and measures segment performance using operating income and net income, which the Company believes provide the best analysis of business performance.

The CODM analyzes the performance of operating income and net income to provide insight into all aspects of the segment’s operations and overall success for a given period.

In addition, the CODM reviews significant segment expenses focused on cost of sales, selling and general administrative expenses, and restructuring charges, net.

These costs used to measure segment profitability are the same costs already reported in the accompanying Consolidated Statements of Income and Comprehensive Income.

Similarly, segment assets are reported in the accompanying Consolidated Balance Sheets.

The Company has minimal export sales, primarily to Canada or Mexico.

The Company leases and operates three manufacturing facilities in Juarez, Mexico and leases one manufacturing facility in Mexicali, Mexico.

Long-lived assets, including property, plant & equipment and right-of-use assets related to leases, located in the United States and Mexico totaled $ 42.4 million and $ 35.4 million, respectively, at June 30, 2025 and $ 46.6 million and $ 51.5 million, respectively, at June 30, 2024, respectively.

BENEFIT AND RETIREMENT PLANS

1 unchanged sentence

The Company sponsors a defined contribution retirement plan, which covers substantially all employees.

The Company’s total matching contribution expense was $ 1.8 million, $ 1.6 million, and $ 2.0 million in fiscal years 2024, 2023, and 2022, respectively.

The Company’s total matching contribution expense w as $ 1.6 mi llion, $ 1.8 million, and $ 1.6 million in fiscal years 2025, 2024, and 2023, respectively.

Multi-employer Pension Plans

2 unchanged sentences

Unless otherwise noted, the most recent Pension Protection Act zone status available in 2025 and 2024 is for the plan’s year-end on December 31, 2024, and 2023, respectively.

The zone status is based on information that the Company received from the plan and is certified by the plan’s actuary.

The zone status is based on information that the Company received

from the plan and is certified by the plan’s actuary.

Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the yellow zone are between 65 percent and 80 percent funded, and plans in the green zone are at least 80 percent funded.

8 unchanged sentences

SW Areas Pension Fund

Steelworkers Pension Trust

Not applicable

With the closure of the Company’s Dubuque, Iowa manufacturing facility, the collective bargaining agreement for the Steelworkers Pension Trust was terminated as of June 30, 2020.

As of June 30, 2022, the Company had withdrawn from the Steelworkers Pension Trust and paid the previously recorded withdrawal liability of $ 1.2 million and recorded an expense reduction of $ 0.2 million for the year ended June 30, 2022, see Note 5 Restructuring .

COMMITMENTS AND CONTINGENCIES

Environmental Matters – In March 2016, the Company received a General Notice Letter for the Lane Street Groundwater Superfund Site (the “Lane Street Site”) located in Elkhart, Indiana from the U.S.

Environmental Protection Agency (EPA).

In April 2016, the EPA issued their proposed clean-up plan for groundwater pollution and request for public comment.

The Company responded to the request for public comment in May 2016.

The EPA issued a Record of Decision selecting a remedy in August 2016 and estimated total costs to remediate of $ 3.6 million.

In July 2017, the EPA issued a Special Notice Letter to the Company demanding that the Company perform the remedy selected and pay for the remediation cost and past response costs of $ 5.5 million.

On October 12, 2017, the Company, after consultation with its insurance carriers, offered an amount, fully reimbursable by insurance coverage, to the EPA to resolve this matter.

On November 6, 2017, the settlement offer extended on October 12, 2017, was rejected.

In April 2018, the EPA issued a Unilateral Administrative Order for Remedial Design and Remedial Action (the “Order”) against the Company.

The Order was issued under Section 106(a) of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C.

The Order directed the Company to perform remedial design and remedial action for the Lane Street Site.

The Order was to be effective May 29, 2018.

To ensure completion of the remediation work, the EPA required the Company to secure financial assurance in the initial amount of $ 3.6 million, which as noted above, was the estimated cost of remedial work.

The Company believed that financial assurance was not required because it met the relevant financial test criteria as provided in the Order.

In May 2018, the EPA agreed to suspend enforcement of the Order so that the Company could conduct environmental testing upgradient to its former manufacturing location pursuant to an Administrative Order on Consent (AOC).

On April 24, 2019, the Company signed an AOC with the EPA to conduct the upgradient investigation.

The Company negotiated site access to the upgradient property over a period of months in 2019, followed by completion of sampling activities on that property on September 28-29, 2019.

Following multiple exchanges from November 2019 through early 2020, the Company submitted a final and supplemental report to the EPA regarding the results of the upgradient investigation on June 17, 2020.

Despite the Company’s position that it did not cause or contribute to the contamination, the Company reached a settlement with the EPA and the State of Indiana, which was filed as a consent decree in the U.S.

District Court for the Northern District of Indiana on October 24, 2022.

The consent decree required Flexsteel to pay $ 9.8 million in resolution of the matter.

Flexsteel also reached agreements with its insurance carriers for partial reimbursement of the settlement.

During the quarter ended December 31, 2022, the Company made full payment in accordance with the settlement agreement and as a result of insurance proceeds received, the Company recorded income of $ 2.8 million for the quarter ended December 31, 2022, which is included in environmental remediation on the Consolidated Statements of Income and Comprehensive Income.

Other Proceedings – From time to time, the Company is subject to various other legal proceedings, including lawsuits, which arise out of, and are incidental to, the conduct of the Company’s business.

From time to time, the Company is subject to various other legal proceedings, including lawsuits, which arise out of, and are incidental to, the conduct of the Company’s business.

The Company does not consider any of such other proceedings that are currently pending, individually or in the aggregate, to be material to its business or likely to result in a material effect on its consolidated operating results, financial condition, or cash flows.

2 unchanged sentences

For the Quarter Ended

December 31 (a)

Operating income

Earnings per share:

(a) During the quarter ended December 31, 2024, the Company completed the sale of its Dublin, GA manufacturing facility.

See Note 6, Assets Held for Sale of the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for mor information.

(b) During the quarter ended March 31, 2025, the Company determined that the carrying amount of the right of use asset associated with its 12-year lease for a manufacturing facility in Mexicali, Mexico was no longer fully recoverable and recorded a pre-tax non-cash asset impairment charge of $ 14.1 .

See Note 2, Leases, of the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for more information .

In addition, during the quarter, the Company completed the sale of an ancillary building, formerly part of its Huntingburg, IN distribution center complex.

The Company recorded a pre-tax gain of $ 0.7 million related to the sale.

(c) During the quarter June 30, 2025, the Company completed the sale of a second ancillary building, formerly part of its Huntingburg, IN distribution center complex.

The Company recorded a pre-tax gain of $ 3.7 million related to the sale .

For the Quarter Ended

December 31 (a)

Operating income

Earnings per share:

(a) During the quarter ended March 31, 2024, the Company recorded expense of $ 2.6 million as a result of the restructuring activity associated with the closure of the Dublin, Georgia facility.

2 unchanged sentences

See Note 6, Assets Held for Sale , of the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for more information.

The Company recorded expense of $ 0.4 million as a result of the restructuring activity associated with the closure of the Dublin, Georgia facility.

T he Company recorded expense of $ 0.4 million as a result of the restructuring activity associated with the closure of the Dublin, Georgia facility.

See Note 5 Restructuring , of the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for more information.

For the Quarter Ended

December 31 (a)

Operating income

Earnings per share:

(a) During the quarter ended December 31, 2022, the Company recorded income of $ 2.8 million as a result of insurance proceeds received related to the settlement of the environmental remediation liability.

See Note 13 Commitments and Contingencies , of the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for more information.

(b) During the quarter June 30, 2023, it was determined the Company has reached a more-likely- than-not position that the Company will realize the entirety of its deferred tax assets.

Therefore, the Company has reversed the valuation allowance against the federal and state deferred tax assets recorded as of June 30, 2022 of $ 9.8 million.

See Note 10 Income Taxes, included in this Annual Report on Form 10-K for more information.

SUBSEQUENT EVENTS

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data