Flexsteel Industries, Inc. (FLXS) Earnings Call Transcript & Summary

Good morning, and welcome to the 2020 Annual Shareholders' Meeting of Flexsteel Industries, Inc. I am the Chief Executive Officer and President of Flexsteel. It is my pleasure to welcome you here today for this meeting and to introduce Mr. Tom Levine, Chairman of the Board of Directors. Tom?

Thank you, Jerry, and welcome, everyone. We appreciate your joining us today. Due to the COVID-19 pandemic and to support the health of our shareholders, employees and directors, we are holding this meeting virtually. Our virtual meeting also allows us to be more inclusive and reach a greater number of our stockholders. We have stockholders attending via the web portal. Please note that all speakers at this meeting are remote. And, therefore, kindly bear with us should there be any technical issues. As is our custom, we will conduct the business portion of our meeting first, and we'll answer questions at the end of the meeting. Though we may not be able to answer every question, we will do our best to provide a response to as many as possible. In keeping with the digital approach to this year's meeting, it is now shortly after 10 a.m. Central Standard Time on December 9, 2020. And this meeting is now officially called to order. I would like to introduce to you the other members of the Board, all of whom are with us today. You've already heard from Jerry Dittmer, our CEO. Jerry has served on our Board since December of 2018 when he joined the company. Also with us today are Mary Bottie, who has been a Director since 2003; Bill Creekmuir, who has been a Director since 2019; Matt Kaness, who has been a Director since 2019; and Eric Rangen, who has served as a Director since 2002. I would now like to introduce you to Derek Schmidt, Flexsteel's Chief Financial Officer and Chief Operating Officer. Mr. Schmidt will act as the secretary of the meeting. I will turn to him with any procedural issues that may arise. At this point, I appoint Derek Schmidt as inspector of elections to tabulate the votes that are cast at this meeting. Mr. Schmidt has already executed his oath of office as Inspector of election, and it will be attached to the minutes of this meeting. After the formal meeting has been adjourned, Jerry Dittmer will provide an overview of the company's business activities and plans. We will then, as I said before, provide time for some questions. Only validated stockholders may ask questions in the designated field on the web portal. [Operator Instructions] Also note that this meeting is being recorded. However, no one attending via the webcast is permitted to use any audio recording device. The Board of Directors fixed October 12, 2020, as the record date for determining stockholders entitled to vote at this meeting. An affidavit has been delivered attesting to the fact that either: One, a notice of Internet availability of the notice of the meeting, the proxy statement and the 2020 annual report to stockholders; or two, the documents themselves were mailed on October 26, 2020, to all stockholders as of the record date and will be incorporated into the minutes of the meeting. The stockholder list shows that as of the record date, there were 7,378,785 shares of common stock outstanding entitled to vote at this meeting. We've been informed by the inspector of election that there are represented in person or by proxy shares of common stock representing 5,294,513 votes or approximately 71.8% of the voting power on the record date. Since this represents more than a majority of the voting power of all issued and outstanding stock that was entitled to vote on the record date, a quorum is present for purposes of transacting business. I will now turn the meeting over to Derek to go over the proposals that are being considered at this meeting.

Thank you, Tom. As explained in the meeting notice and proxy statement, we are voting on 3 proposals today: proposal 1, to elect 2 Class I directors to serve until the year 2023 annual meeting and until their respective successors have been elected and qualified or until their earlier resignation, removal or termination; proposal 2, advisory vote to approve the compensation of the company's named executive officers; and proposal 3, to approve an amendment to the company's Omnibus Stock Plan to increase the number of shares of common stock reserve for issuance from 700,000 shares to 950,000 shares. Tom?

Any stockholder who has not yet voted or wishes to change their vote may do so by clicking on the voting button on the web portal and following the instructions that appear there. Stockholders who have sent in proxies or voted by phone or Internet and do not want to change their vote do not need to take any further action. I will now briefly pause for just a few seconds in order to allow for any last-second voting. [Voting]

Now that everyone has had the opportunity to vote, I declare the polls for the 2020 Flexsteel Annual Stockholder Meeting closed. Derek, do we have preliminary results?

We do. The preliminary vote report shows that the 2 nominees, Mr. Kaness and Mr. Levine, for election to the Board have been duly elected. Furthermore, the preliminary vote report shows in favor to approve on an advisory basis the compensation of our named executive officers, and the number of shares reserved for issuance under the company's Omnibus Stock Plan is increased by 250,000 shares. We will be reporting the final vote results in a Form 8-K to be filed within 4 business days within the -- with the SEC.

Thank you, Derek. This now concludes the formal part of our meeting, and I hereby declare this meeting adjourned. At this point, I'm going to ask Jerry Dittmer, our President and Chief Executive Officer, to provide an update on the company's operations. Following his remarks, we will take questions as time allows. Jerry?

Thanks, Tom and Derek. Good morning, shareholders. All of us are currently living in unprecedented times. The COVID-19 pandemic has devastated the lives of millions, continues to adversely impact the global economy and has disrupted many aspects of Flexsteel's business operations. The past year has been mired with many unforeseen challenges for the company, but we are coming out on the other side of this. Despite these obstacles, our Board and employees' dedication to the company and commitment to caring for our customers has not wavered. I am proud of our team and how they have responded in this difficult and dynamic environment. Our transformation plan is working. With profitability restored in the first quarter of fiscal 2021 and plans in place to sustain that profitability, we are now pivoting to the next stage in our transformation to aggressively pursue new sources of profitable growth. We are in the process of building out comprehensive plans to achieve our full growth potential. Delivering growth above market will undoubtedly require new investments, which we currently intend to fund internally at this time. As we move forward in our reinvention journey, there are several strategies which are core to our future success and will guide our future growth plans. First, we are committed to being an omnichannel company. We intend to be wherever our customers and consumers want to buy furniture and to provide them a path to purchase consistent in how they want to buy. Second, we will expand our product portfolio across large, relevant categories in various price points. And we'll effectively market those products through powerful brands tailored to targeted consumer segments. Third, we will deliver a differentiated and valued customer experience through various brands and initiatives. And fourth, we will expand our agile, lean and resilient global supply chain as a competitive advantage. While the current environment remains very dynamic due to ongoing uncertainty, I am optimistic about the long-term future of Flexsteel and our ability to create value for you, our shareholders. Financial results for the past several years have not met our expectations, but we've turned the corner at the beginning of fiscal year 2021 and have confidence that we will build on this momentum. Our teams are competing well. And we are investing in the talent, culture and growth initiative needed to catapult the company's performance to even higher levels in the years to come. As cliche as it sounds, with a new year comes new hope. There have been so many unfortunate events that have affected all of us this past year, but we can't let that deter us. Let's keep our heads held high and press on. So with that being said, I hope everyone has an amazing holiday season, and we cannot wait to see you all in the new year. Thanks again for your time today.

Thank you, Jerry. Now we would like to open things up for stockholder questions. We will take stockholder questions that are being entered today on the web portal. Please note, we will attempt to answer as many questions as time allows, but only questions that are germane to the meeting will be addressed. I will ask Derek Schmidt to determine whether any stockholder questions have been submitted.

As of now, Tom, there have been no shareholder questions submitted.

Seeing that there are no questions, I think this completes our business today. I very much appreciate all stockholders who attended this meeting, and we look forward to communicating with you in 2021. And we wish you all a safe and healthy holiday season and an ability to get through these difficult times well. Thank you very much. Goodbye.