Flexsteel Industries Inc 10-Q for FY2020 Q3

Flexsteel Industries Inc (FLXS)

10-Q 2020-05-01 For: 2020-03-31

Added on April 10, 2026

About this 10-Q

Flexsteel Industries Inc filed this 10-Q on May 1, 2020, covering the quarter ended March 31, 2020 (FY2020 Q3).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $98.82M; down 11.4% from $111.54M a year earlier
Net loss: $5.27M; compared with a net loss of $15.55M a year earlier
Diluted EPS: -$0.66; compared with -$1.97 a year earlier

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Incorporated in State of Minnesota	42-0442319
(State or other Jurisdiction of	(I.R.S. Identification No.)
Incorporation or Organization)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	FLXS	The Nasdaq Stock Market, LLC


		Page
Part I – Financial Information
Item 1.	Financial Statements	3
	Consolidated Balance Sheets as of March 31, 2020 and June 30, 2019 (Unaudited)	3
	Consolidated Statements of Income (Loss) for the three and nine months ended March 31, 2020 and March 31, 2019 (Unaudited)	4
	Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended March 31, 2020 and March 31, 2019 (Unaudited)	4
	Consolidated Statements of Changes in Shareholders’ Equity for the nine months ended March 31, 2020 (Unaudited)	5
	Consolidated Statements of Changes in Shareholders’ Equity for the nine months ended March 31, 2019 (Unaudited)	6
	Consolidated Statements of Cash Flows for the nine months ended March 31, 2020 and March 31, 2019 (Unaudited)	7
	Notes to Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	20
Part II – Other Information
Item 1A.	Risk Factors	21
Item 6.	Exhibits	21
Signatures		22



	March 31,		June 30,
	2020		2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	62,540	$	22,247
Trade receivables - less allowances: March 31, 2020, $4,500; June 30, 2019, $250		34,292		38,157
Inventories		75,096		93,659
Other		14,924		11,904
Assets held for sale		129		—
Total current assets		186,981		165,967
NONCURRENT ASSETS:
Property, plant and equipment, net		74,653		79,238
Operating lease right-of-use assets		12,793		—
Deferred income taxes		93		7,564
Other assets		1,318		1,518
TOTAL ASSETS	$	275,838	$	254,287
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade	$	23,046	$	18,414
Lines of credit		15,000		—
Current portion of operating lease liabilities		4,686		—
Accrued liabilities:
Payroll and related items		3,842		4,428
Insurance		4,103		4,554
Restructuring costs		982		6,203
Advertising		2,724		3,497
Environmental remediation		3,600		3,600
Other		6,423		7,068
Total current liabilities		64,406		47,764
LONG-TERM LIABILITIES:
Operating lease liabilities, less current maturities		8,473		—
Other liabilities		692		1,096
Total liabilities		73,571		48,860

SHAREHOLDERS' EQUITY:
Common stock - $1 par value; authorized 15,000,000 shares; ‎ outstanding March 31, 2020, 8,000,663 shares; ‎ outstanding June 30, 2019, 7,902,708 shares		8,001		7,903
Additional paid-in capital		30,758		27,512
Retained earnings		163,508		170,004
Accumulated other comprehensive income		—		8
Total shareholders' equity		202,267		205,427
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	275,838	$	254,287


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2020		2019		2020		2019
Net sales	$	98,821	$	111,542	$	302,118	$	343,381
Cost of goods sold		84,973		90,214		254,999		278,786
Gross margin		13,848		21,328		47,119		64,595
Selling, general and administrative		20,115		22,915		55,678		62,484
Restructuring expense		2,377		—		13,448		—
ERP impairment		—		18,668		—		18,668
Gain on disposal of assets		302		—		19,269		—
Operating loss		(8,342)		(20,255)		(2,738)		(16,557)
Interest expense		16		—		16		—
Other income		135		158		328		397
Loss before income taxes		(8,223)		(20,097)		(2,426)		(16,160)
Income tax benefit		2,953		4,545		1,323		3,470
Net loss	$	(5,270)	$	(15,552)	$	(1,103)	$	(12,690)
Weighted average number of common shares outstanding:
Basic		7,965		7,892		7,955		7,884
Diluted		7,965		7,892		7,955		7,884
Loss per share of common stock:
Basic	$	(0.66)	$	(1.97)	$	(0.14)	$	(1.61)
Diluted	$	(0.66)	$	(1.97)	$	(0.14)	$	(1.61)


Common Stock - $1.00 Par Value
Shares Outstanding as of April 29, 2020	8,000,663



	Nine Months Ended March 31, 2020
	Total Par						Accumulated
	Value of		Additional				Other
	Common		Paid-In		Retained		Comprehensive
	Shares ($1 Par)		Capital		Earnings		(Loss) Income		Total
Balance at June 30, 2019	$	7,903	$	27,512	$	170,004	$	8	$	205,427
Adoption of ASU 2016-02		—		—		(42)		—		(42)
Unrealized loss on available for sale investments, ‎ net of tax		—		—		—		(8)		(8)
Long-term incentive compensation		—		109		—		—		109
Stock-based compensation		39		1,201		—		—		1,240
Cash dividends declared		—		—		(1,754)		—		(1,754)
Net income		—		—		9,551		—		9,551
Balance at September 30, 2019	$	7,942	$	28,822	$	177,759	$	—	$	214,523
Stock options exercised		2		19		—		—		21
Long-term incentive compensation		—		104		—		—		104
Stock-based compensation		6		1,787		—		—		1,793
Cash dividends declared		—		—		(1,816)		—		(1,816)
Net loss		—		—		(5,384)		—		(5,384)
Balance at December 30, 2019	$	7,950	$	30,732	$	170,559	$	—	$	209,241
Long-term incentive compensation		—		89		—		—		89
Stock-based compensation		7		449		—		—		456
Vesting of restricted stock units and restricted shares		44		(512)		—				(468)
Cash dividends declared		—		—		(1,781)		—		(1,781)
Net loss		—		—		(5,270)		—		(5,270)
Balance at March 31, 2020	$	8,001	$	30,758	$	163,508	$	—	$	202,267


	Nine Months Ended March 31, 2019

	Total Par						Accumulated
	Value of		Additional				Other
	Common		Paid-In		Retained		Comprehensive
	Shares ($1 Par)		Capital		Earnings		(Loss) Income		Total
Balance at June 30, 2018	$	7,868	$	26,321	$	209,553	$	(2,044)	$	241,698
Stock options exercised		3		41		—		—		44
Unrealized gain on available for sale investments, ‎ net of tax		—		—		—		17		17
Long-term incentive compensation		7		(115)		—		—		(108)
Stock-based compensation		6		440		—		—		446
Cash dividends declared		—		—		(1,734)		—		(1,734)
Net income		—		—		1,296		—		1,296
Balance at September 30, 2018	$	7,884	$	26,687	$	209,115	$	(2,027)	$	241,659
Stock options exercised		1		7		—		—		8
Unrealized loss on available for sale investments, ‎ net of tax		—		—		—		(32)		(32)
Stock-based compensation		4		318		—		—		322
Cash dividends declared		—		—		(1,736)		—		(1,736)
Net income		—		—		1,566		—		1,566
Balance at December 31, 2018	$	7,889	$	27,012	$	208,945	$	(2,059)	$	241,787
Stock options exercised		1		28		—		—		29
Unrealized loss on available for sale investments, ‎ net of tax		—		—		—		37		37
Long-term incentive compensation		—		(200)		—		—		(200)
Stock-based compensation		4		240		—		—		244
Net realized gain on terminated pension, ‎ net of tax		—		—		—		2,018		2,018
Cash dividends declared		—		—		(1,736)		—		(1,736)
Net loss		—		—		(15,552)		—		(15,552)
Balance at March 31, 2019	$	7,894	$	27,080	$	191,657	$	(4)	$	226,627



Fiscal year
(in thousands)
2020	$	4,617
2021		3,990
2022		2,229
2023		1,283
2024		1,330
Thereafter		—
Total future minimum lease payments	$	13,449



	Accrued								Accrued
	Restructuring								Restructuring
	June 30,								March 31,
(in thousands)	2019		Cost Incurred		Expenses Paid		Non-Cash		2020
Inventory impairment	$	—	$	276	$	—	$	(276)	$	—
One-time employee termination benefits		1,731		725		(2,294)		—		162
Contract termination costs		249		—		(82)		—		167
Other associated costs		4,223		12,723		(14,007)		(2,286)		653
Total	$	6,203	$	13,724	$	(16,383)	$	(2,562)	$	982


	Time Based Vest			Performance Based Vest			Total
		Weighted average			Weighted average			Weighted average
		fair value			fair value			fair value
(shares in thousands)	Shares	per share		Shares	per share		Shares	per share
Unvested as June 30, 2019	—	$	—	—	$	—	—	$	—
Granted	44		16.90	66		16.75	110		16.81
Forfeited	(5)		16.90	(7)		16.87	(12)		16.88
Unvested as of March 31, 2020	39	$	16.90	59	$	16.74	98	$	16.80



		Weighted
	Shares	Average
	(in thousands)	Exercise Price
Outstanding at June 30, 2019	225	$	28.37
Granted	30		15.14
Exercised	(2)		8.55
Cancelled	(21)		33.75
Outstanding at March 31, 2020	232	$	26.50



		Options	Weighted Average
Range of		Outstanding	Remaining	Exercise
Prices		(in thousands)	Life (Years)	Price
$	8.55 - 15.14	41	7.7	$	14.45
	17.23 - 19.77	22	2.5		18.88
	20.50 - 27.57	92	7.3		24.13
	31.06 - 32.80	46	7.0		32.28
	43.09 - 47.45	31	7.0		45.32
$	8.55 - 47.45	232	6.8	$	26.36



				Accumulated		Net Book
Location	Asset Category	Cost		Depreciation		Value
(in thousands)
Harrison, Arkansas	Building & building improvements	$	1,382	$	(1,354)	$	28
	Land & land improvements		92		(42)		50
	Machinery & equipment		1,391		(1,391)		—
Huntingburg, Indiana	Building		855		(855)		—
	Land		51		—		51
		$	3,771	$	(3,642)	$	129



	Three Months Ended
	March 31,
(in millions)	2020		2019		$ Change		% Change
Residential	$	88,511	$	93,867	$	(5,356)	(5.7)	%
Contract		10,310		17,675		(7,365)	(41.7)
Total	$	98,821	$	111,542	$	(12,721)	(11.4)	%



	Nine Months Ended
	March 31,
	2020		2019
OPERATING ACTIVITIES:
Net loss	$	(1,103)	$	(12,690)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		6,665		5,694
Deferred income taxes		7,471		242
Stock-based compensation expense		3,880		914
Change in provision for losses on accounts receivable		4,250		(110)
Change in reserve for VAT receivable		(1,431)		—
ERP impairment		—		18,668
(Gain) loss on disposition of capital assets		(19,269)		133
Defined benefit plan termination		—		2,455
Changes in operating assets and liabilities:
Trade receivables		(386)		1,235
Inventories		18,563		275
Other current assets		(1,992)		(6,876)
Other assets		176		219
Accounts payable - trade		4,498		3,044
Accrued liabilities		(7,051)		(785)
Other long-term liabilities		(383)		117
Net cash provided by operating activities		13,888		12,535
INVESTING ACTIVITIES:
Purchases of investments		(1,667)		(12,981)
Proceeds from sales of investments		1,673		28,909
Proceeds from sale of capital assets		20,452		42
Capital expenditures		(3,256)		(20,603)
Net cash provided by (used in) investing activities		17,202		(4,633)
FINANCING ACTIVITIES:
Dividends paid		(5,260)		(6,935)
Proceeds from line of credits		15,000		—
Proceeds from issuance of common stock		21		81
Shares withheld for tax payments on vested restricted shares		(558)		(211)
Net cash provided by (used in) financing activities		9,203		(7,065)
Increase in cash and cash equivalents		40,293		837
Cash and cash equivalents at beginning of period		22,247		27,750
Cash and cash equivalents at end of period	$	62,540	$	28,587



	Nine Months Ended
	March 31,
	2020
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,943

Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	$	3,573

Weighted-average remaining lease term (in years):
Operating leases		2.1

Weighted-average discount rate:
Operating leases		3.5%

Fiscal year
(in thousands)
Within one year	$	5,113
After one year and within two years		3,299
After two years and within three years		2,301
After three years and within four years		2,099
After four years and within five years		1,260
After five years		—
Total future minimum lease payments	$	14,072
Less – Discount		913
Lease liability	$	13,159



	March 31,		June 30,
(in thousands)	2020		2019
Raw materials	$	11,827	$	14,182
Work in process and finished parts		7,161		6,408
Finished goods		56,108		73,069
Total	$	75,096	$	93,659


	Nine Months Ended
	March 31,
(in thousands)	2020		2019
Net cash provided by operating activities	$	13,888	$	12,535
Net cash provided by (used in) investing activities		17,202		(4,633)
Net cash provided by (used in) financing activities		9,203		(7,065)
Increase in cash and cash equivalents	$	40,293	$	837


Exhibit No.
10.1	First Amendment to the Flexsteel Industries, Inc. Severance Plan for Management Employees, dated April 15, 2020*
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.*
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.*
32	Certification of Chief Executive Officer and Chief Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101.INS	XBRL Instance Document**
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
104.Cover Page	Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*	Filed herewith
**	In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed to be “furnished” and not “filed.”


		FLEXSTEEL INDUSTRIES, INC.


Date:	May 1, 2020	By:	/S/ Derek P. Schmidt
			Derek P. Schmidt
			Chief Financial Officer and Chief Operating Officer
			(Principal Financial & Accounting Officer)