Good morning and welcome to the Flexsteel Industries Fourth Quarter and Fiscal Year 2019 Earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Donni Case, Investor Relations for Flexsteel Industries. Ms. Case, please go ahead.

Thank you Anita, and welcome to today’s call to discuss Flexsteel Industries fourth quarter and fiscal 2019 financial results. Our earnings release, which we issued after market close yesterday, Monday, August 26, is available on our Investor Relations section of our website, www.flexsteel.com under News and Events. On the call today is Jerry Ditmer, Chief Executive Officer, who is at an offsite location today, and Marcus Hamilton, Chief Financial Officer, who is here in Dubuque. Following management’s prepared remarks, we will open up the call to your questions. Before we begin, I would like to remind you that the comments on today’s call will include forward-looking statements which can be identified by the use of words such as estimate, anticipate, expect, and similar phrases. Forward-looking statements by their nature involve estimates, projections, goals, forecasts and assumptions, and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. Such risks and uncertainties include but are not limited to those that are described in our most recent annual report on Form 10-K as updated by our subsequent quarterly reports on Form 10-Q and other SEC filings, as applicable. These forward-looking statements speak only as of the date of this conference call and should not be relied upon as prediction of future events. Additionally, management may refer to non-GAAP measures which are intended to supplement but not substitute for the most directly comparable GAAP measures. The press release available on the website contains the financial and other quantitative information to be discussed today, as well as the reconciliation of the GAAP to non-GAAP measures. With that, I’d like to turn the call over to Jerry Ditmer. Jerry?

Thank you for joining us today. When we held our third quarter conference call on April 30, I committed to a new era of transparent communications with Flexsteel’s stakeholders. For those who have been following our public disclosures, you can see there has been a lot of activity during the fourth quarter surrounding the quick and decisive execution of our restructuring plan, all of which supports our end goal to better serve our customers, generate profitable growth, and improve shareholder returns. As I said before, it’s a tall yet achievable order given three key ingredients: best in class products, the talent and dedication of our people, and the financial flexibility to execute our strategy. I will start today with a progress update on our restructuring plan. In a few minutes, Marcus will unpack the financial results for us. Our approach has been to look at Flexsteel with an open mind and with a viewpoint of future growth opportunities. We analyzed the business and opportunities top to bottom, created a robust restructuring and profit improvement plan, and immediately started the job of executing some tough but necessary decisions. I’m very pleased to report that we have made tremendous progress restructuring our company since we announced our plan on April 1. Hand in hand with our mission to unlock the potential of Flexsteel, it was also critical to mobilize the entire organization by installing new leadership in key positions and bringing on top tier talent in high risk areas to drive a culture of winning through change. We now have the energized team necessary to turn our plan and vision into reality. Now I’ll summarize where we stand in the process. Since May 15, we completed the close of our Riverside, California manufacturing facility, which is now under a non-binding letter of…

Thank you Jerry. As Jerry just discussed, since our third quarter conference call in late April, we took significant strides [indiscernible] our control and return the company to profitability. That said, our financial results for the fourth quarter and year end sharply reflect both the measures we are taking to turn our business around and the outside pressures our industry is experiencing. What we feared most became a reality on May 10, the 10% tariff increase to a 25% tariff on all our products imported from China. As you know, Flexsteel has significant exposure with approximately 42% of fiscal year-to-date sales sourced from China. Suffice it to say the tariff has had an adverse effect on fourth quarter earnings. Net sales decreased 11% to $100 million with our residential business, accounting for the biggest shortfall based on the softer demand that was triggered by the tariff and related price increases. Also contributing to lower sales but to a much lesser degree was our exit from two contract business lines, custom design hospitality and commercial office. We reported a fiscal fourth quarter net loss of $19.9 million or $2.52 per share that compares to net income of $2.2 million or $0.28 per diluted share in the prior year quarter. The reported net loss includes $10 million of pre-tax restructuring expenses, a $7.7 million impairment of inventory related to the exit of commercial office and custom design hospitality product lines, a $2.6 million pre-tax ERP business information system impairment charge, and a $2.6 million pre-tax valuation allowance for foreign value added tax. Excluding these expenses, which totaled $22.9 million, non-GAAP adjusted net loss was $2.2 million or $0.28 per share compared with non-GAAP adjusted net income of $2.2 million or $0.28 per diluted share in the year ago quarter. Net sales for…

[Operator instructions] The first question today comes from JP Geygan with Global Value. Please go ahead.

Good morning, and thank you for that comprehensive update. I just have a few follow-up questions. As you think about your turnaround through fiscal year 2021, you said in your press release that you’ve targeted a 7% EBIT margin. You talked a little bit about how you make progress towards that number, but I’m hoping you might elaborate on how you achieve this, and maybe more specifically where we should expect revenue relative to recent sales data.

This is Jerry. At this point, we have really kind of told you everything in our prepared comment, the press release, the 8-K, etc. Where it’s going to come from, you’ve heard in my prepared comments a little bit about some different channels, some different distribution. That’s where it’s really going to come from. Do we know exactly where it’s going to come from? Absolutely not, so at this point in time there’s not a lot of other details we could really share at this point.

Okay. As a follow-on to that question, you did talk about new product launches. I wouldn’t typically expect you to issue an 8-K upon the new product launch, but how might you communicate that to the marketplace?

Well, we’d do it like we would any - we go to four major shows a year, two in Las Vegas and two in High Point. We’d also do it via our Home Styles business, working with our major customers there. New products is part of the life blood of residential furniture, and we really at least four times a year are introducing new products.

Okay, great. Moving on, can you help us reconcile the numbers you provided in your 8-Ks in mid-May and mid-June about your projected restructuring costs with the numbers you’ve provided in yesterday’s press release, and where you are to date?

Marcus, do you have any light you can shed on that?

Yes, so far we’ve--I think on the call, JP, it’d be tough for me to go through the detail of that, but essentially we’ve incurred about $10 million of restructuring charges so far to date, plus the $7.7 million for the inventory impairment, so that totals about $17.7 million versus what we had provided earlier on the May 15 call. At the next report out, we will provide a more detailed understanding of where we’re at progress-wise.

Okay. My back of the envelope math puts you somewhere between roughly $17 million and $23 million remaining in your restructuring program. Without committing you to a specific number, am I somewhere in the ballpark?

Yes, you’re somewhere in the ballpark.

Okay. Has your allocation between cash and non-cash charges changed significantly?

No.

Okay. My final question is in your June 8-K, you announced that you expected proceeds from the sale of real estate of $45 million to $55 million. Is that still a valid assumption, and if so, should we expect that from the sale of the four properties you’ve already announced or should we expect additional sales?

We have no reason to change our estimate that we put out there originally, and it will not all come from one sale, no.

Okay, great. Thank you for the update.

Again, if you have a question, please press star then one. Since there appears to be no further questions, this concludes our question and answer session. I would like to turn the conference back over to Jerry Ditmer for any closing remarks.

Thank you for participating in today’s call. Before signing off, I wanted to recognize the tremendous contribution and dedication that our employees have shown as we continue this journey together to reenergize our company. We know there is still hard work ahead but we are fully committed to realizing Flexsteel’s full potential and are very excited about our future. We are grateful for the support of our shareholders, and as pledged, we will keep you informed on our progress as it unfolds. Everyone have a great day. Thanks.

This conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.