UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
Commission file number
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) | (IRS employer identification no.) |
(Address of principal executive offices, zip code)
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(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated Filer ☐ | |
Non-accelerated Filer ☐ | Smaller reporting company |
Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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As of December 1, 2023, there were
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION |
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Item 1. |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. OTHER INFORMATION |
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Item 2. |
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Item 5. |
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Item 6. |
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
As of |
October 29, |
January 29, |
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2023 |
2023 |
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(unaudited) |
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Assets |
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Current assets |
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Cash and cash equivalents |
$ | $ | ||||||
Trade accounts receivable, net |
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Inventories |
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Income tax recoverable |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Cash surrender value of life insurance policies |
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Deferred taxes |
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Operating leases right-of-use assets |
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Intangible assets, net |
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Goodwill |
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Other assets |
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Total non-current assets |
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Total assets |
$ | $ | ||||||
Liabilities and Shareholders’ Equity |
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Current liabilities |
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Current portion of long-term debt |
$ | $ | ||||||
Trade accounts payable |
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Accrued salaries, wages and benefits |
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Customer deposits |
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Current portion of operating lease liabilities |
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Other accrued expenses |
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Total current liabilities |
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Long term debt |
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Deferred compensation |
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Operating lease liabilities |
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Other long-term liabilities |
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Total long-term liabilities |
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Total liabilities |
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Shareholders’ equity |
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Common stock, no par value, |
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Retained earnings |
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Accumulated other comprehensive income |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
$ | $ |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
For the |
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Thirteen Weeks Ended |
Thirty-Nine Weeks Ended |
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October 29, |
October 30, |
October 29, |
October 30, |
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2023 |
2022 |
2023 |
2022 |
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Net sales |
$ | $ | $ | $ | ||||||||||||
Cost of sales |
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Gross profit |
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Selling and administrative expenses |
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Intangible asset amortization |
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Operating income |
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Other income, net |
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Interest expense, net |
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Income before income taxes |
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Income tax expense |
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Net income |
$ | $ | $ | $ | ||||||||||||
Earnings per share |
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Basic |
$ | $ | $ | $ | ||||||||||||
Diluted |
$ | $ | $ | $ | ||||||||||||
Weighted average shares outstanding: |
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Basic |
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Diluted |
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Cash dividends declared per share |
$ | $ | $ | $ |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
For the |
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Thirteen Weeks Ended |
Thirty-Nine Weeks Ended |
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October 29, |
October 30, |
October 29, |
October 30, |
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2023 |
2022 |
2023 |
2022 |
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Net income |
$ | $ | $ | $ | ||||||||||||
Other comprehensive income: |
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Amortization of actuarial (gain)/loss |
( |
) | ( |
) | ||||||||||||
Income tax effect on amortization |
( |
) | ( |
) | ||||||||||||
Adjustments to net periodic benefit cost |
( |
) | ( |
) | ||||||||||||
Total comprehensive income |
$ | $ | $ | $ |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the |
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Thirty-Nine Weeks Ended |
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October 29, |
October 30, |
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2023 |
2022 |
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Operating Activities: |
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Net income |
$ | $ | ||||||
Adjustments to reconcile net income to net cash provided by/(used in) operating activities: |
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Depreciation and amortization |
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Deferred income tax expense |
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Noncash restricted stock and performance awards |
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Provision for doubtful accounts and sales allowances |
( |
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Gain on life insurance policies |
( |
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Loss/(Gain) on disposal of assets |
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Changes in assets and liabilities: |
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Trade accounts receivable |
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Inventories |
( |
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Income tax recoverable |
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Prepaid expenses and other assets |
( |
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Trade accounts payable |
( |
) | ||||||
Accrued salaries, wages, and benefits |
( |
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Customer deposits |
( |
) | ( |
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Operating lease assets and liabilities |
( |
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Other accrued expenses |
( |
) | ( |
) | ||||
Deferred compensation |
( |
) | ( |
) | ||||
Net cash provided by/(used in) operating activities |
$ | $ | ( |
) | ||||
Investing Activities: |
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Acquisitions |
( |
) | ( |
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Purchases of property and equipment |
( |
) | ( |
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Premiums paid on life insurance policies |
( |
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Proceeds received on life insurance policies |
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Net cash used in investing activities |
( |
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Financing Activities: |
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Purchase and retirement of common stock |
( |
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Cash dividends paid |
( |
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Payments for long-term loans |
( |
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Proceeds from long-term loans |
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Proceeds from revolving credit facility |
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Payments for revolving credit facility |
( |
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Debt issuance cost |
( |
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Net cash (used in)/provided by financing activities |
( |
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Net increase/(decrease) in cash and cash equivalents |
( |
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Cash and cash equivalents - beginning of year |
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Cash and cash equivalents - end of quarter |
$ | $ | ||||||
Supplemental disclosure of cash flow information: |
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Cash paid/(refund) for income taxes |
$ | $ | ( |
) | ||||
Cash paid for interest, net |
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Non-cash transactions: |
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(Decrease)/Increase in lease liabilities arising from changes in right-of-use assets |
$ | ( |
) | $ | ||||
Increase in property and equipment through accrued purchases |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except per share data)
(Unaudited)
Accumulated |
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Other |
Total |
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Common Stock |
Retained |
Comprehensive |
Shareholders' |
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Shares |
Amount |
Earnings |
Income (loss) |
Equity |
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Balance at July 31, 2022 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
Net income for the 13 weeks ended October 30, 2022 |
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Unrealized loss on defined benefit plan, net of tax of $ |
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Cash dividends paid ($ |
( |
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Purchase and retirement of common stock |
( |
) | $ | ( |
) | ( |
) | ( |
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Restricted stock grants, net of forfeitures |
( |
) | - | - | ||||||||||||||||
Restricted stock compensation cost |
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Performance-based restricted stock units cost |
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Balance at October 30, 2022 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
Balance at July 30, 2023 |
$ | $ | $ | $ | ||||||||||||||||
Net income for the 13 weeks ended October 29, 2023 |
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Unrealized loss on defined benefit plan, net of tax of $ |
( |
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Cash dividends paid ($ |
( |
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Purchase and retirement of common stock |
( |
) | $ | ( |
) | ( |
) | ( |
) | |||||||||||
Restricted stock grants, net of forfeitures |
- | |||||||||||||||||||
Restricted stock compensation cost |
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Performance-based restricted stock units cost |
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Balance at October 29, 2023 |
$ | $ | $ | $ |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONT.)
(In thousands, except per share data)
(Unaudited)
Accumulated |
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Other |
Total |
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Common Stock |
Retained |
Comprehensive |
Shareholders' |
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Shares |
Amount |
Earnings |
Income (loss) |
Equity |
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Balance at January 30, 2022 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
Net income for the 39 weeks ended October 30, 2022 |
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Unrealized loss on defined benefit plan, net of tax of $ |
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Cash dividends paid ($ |
( |
) | ( |
) | ||||||||||||||||
Purchase and retirement of common stock |
( |
) | ( |
) | ( |
) | ( |
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Restricted stock grants, net of forfeitures |
( |
) | ( |
) | ||||||||||||||||
Restricted stock compensation cost |
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Performance-based restricted stock units costs |
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Balance at October 30, 2022 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
Balance at January 29, 2023 |
$ | $ | $ | $ | ||||||||||||||||
Net income for the 39 weeks ended October 29, 2023 |
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Unrealized loss on defined benefit plan, net of tax of $ |
( |
) | ( |
) | ||||||||||||||||
Cash dividends paid ($ |
( |
) | ( |
) | ||||||||||||||||
Purchase and retirement of common stock |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Restricted stock grants, net of forfeitures |
( |
) | ( |
) | ||||||||||||||||
Restricted stock compensation cost |
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Performance-based restricted stock units costs |
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Balance at October 29, 2023 |
$ | $ | $ | $ |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in tables, except per share amounts, in thousands unless otherwise indicated)
(Unaudited)
For the Thirty-Nine Weeks Ended October 29, 2023
1. Preparation of Interim Financial Statements
The condensed consolidated financial statements of Hooker Furnishings Corporation and subsidiaries (referred to as “we,” “us,” “our,” “Hooker” or the “Company”) have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, these statements include all adjustments necessary for a fair statement of the results of all interim periods reported herein. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) are condensed or omitted pursuant to SEC rules and regulations. However, we believe that the disclosures made are adequate for a fair presentation of our results of operations and financial position. These financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our annual report on Form 10-K for the fiscal year ended January 29, 2023 (“2023 Annual Report”). The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect both the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from our estimates. Operating results for the interim periods reported herein may not be indicative of the results expected for the fiscal year.
The financial statements contained herein are being filed as part of a quarterly report on Form 10-Q covering the 2024 fiscal year thirteen-week period (also referred to as “three months,” “three-month period,” “quarter,” “third quarter” or “quarterly period”) that began July 31, 2023, and the thirty-nine week period (also referred to as “nine months”, “nine-month period” or “year-to-date period”) that began January 30, 2023, which both ended October 29, 2023. This report discusses our results of operations for these periods compared to the 2023 fiscal year thirteen-week period that began August 1, 2022, and the thirty-nine-week period that began January 31, 2022, which both ended October 30, 2022; and our financial condition as of October 29, 2023 compared to January 29, 2023.
References in these notes to the condensed consolidated financial statements of the Company to:
■ |
the 2024 fiscal year and comparable terminology mean the fifty-two-week fiscal year that began January 30, 2023 and will end January 28, 2024; and |
■ |
the 2023 fiscal year and comparable terminology mean the fifty-two-week fiscal year that began January 31, 2022 and ended January 29, 2023. |
2. Recently Adopted Accounting Policies
No new accounting pronouncements have been adopted in the 2024 fiscal year. We reviewed newly issued accounting pronouncements and concluded they are either not applicable to our business or are not expected to have a material effect on our consolidated financial statements as a result of future adoption.
3. Accounts Receivable
October 29, |
January 29, |
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2023 |
2023 |
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Gross accounts receivable |
$ | $ | ||||||
Customer allowances |
( |
) | ( |
) | ||||
Allowance for doubtful accounts |
( |
) | ( |
) | ||||
Trade accounts receivable |
$ | $ |
4. Inventories
October 29, |
January 29, |
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2023 |
2023 |
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Finished furniture |
$ | $ | ||||||
Furniture in process |
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Materials and supplies |
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Inventories at FIFO |
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Reduction to LIFO basis |
( |
) | ( |
) | ||||
Inventories |
$ | $ |
5. Property, Plant and Equipment
Depreciable Lives |
October 29, |
January 29, |
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(In years) |
2023 |
2023 |
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Buildings and land improvements |
$ | $ | |||||||||
Computer software and hardware |
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Machinery and equipment |
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Leasehold improvements |
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Furniture and fixtures |
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Other |
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Total depreciable property at cost |
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Less accumulated depreciation |
( |
) | ( |
) | |||||||
Total depreciable property, net |
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Land |
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Construction-in-progress |
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Property, plant and equipment, net |
$ | $ |
6. Cloud Computing Hosting Arrangement
We are in the process of implementing a common Enterprise Resource Planning system (ERP) across all divisions. The ERP system went live at Sunset West in December 2022 and in the legacy Hooker divisions in early September 2023. We expect the new ERP system to go live in the Home Meridian segment during fiscal 2025.
Capitalized Implementation Costs |
Capitalized interest expenses |
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Balance at January 29, 2023 |
$ | $ | ||||||
Costs capitalized during the period |
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Accumulated amortization during the period |
( |
) | ( |
) | ||||
Balance at October 29, 2023 |
$ | $ |
7. Fair Value Measurements
Fair value is the price that would be received upon the sale of an asset or paid upon the transfer of a liability (an exit price) in an orderly transaction between market participants on the applicable measurement date. We use a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:
■ |
Level 1, defined as observable inputs such as quoted prices in active markets for identical assets and liabilities; |
■ |
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and |
■ |
Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
As of October 29, 2023 and January 29, 2023, Company-owned life insurance was measured at fair value on a recurring basis based on Level 2 inputs. The fair value of the Company-owned life insurance is determined by inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. Additionally, the fair value of the Company-owned life insurance is marked to market each reporting period and any change in fair value is reflected in income for that period.
Fair value at October 29, 2023 |
Fair value at January 29, 2023 |
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Description |
Level 1 |
Level 2 |
Level 3 |
Total |
Level 1 |
Level 2 |
Level 3 |
Total |
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(In thousands) |
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Assets measured at fair value |
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Company-owned life insurance |
$ | $ | $ | $ | $ | $ | $ | $ |
8. Intangible Assets
Our intangible assets with indefinite lives consist of: goodwill related to the Shenandoah, Sunset West and BOBO Intriguing Objects acquisitions; and trademarks and tradenames related to the acquisitions of Bradington-Young, Home Meridian and BOBO Intriguing Objects. During the fiscal 2024 second quarter, we recorded the preliminary estimates of $
During the fiscal 2024 first quarter, we announced the rebranding of the Sam Moore product line to “HF Custom.” As a result, we reassessed the characteristics of the Sam Moore trade name and the roll-out process, and determined it qualified for amortization; consequently, we began amortizing the Sam Moore trade name over a
October 29, 2023 |
January 29, 2023 |
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Gross carrying amount |
Accumulated Amortization |
Gross carrying amount |
Accumulated Amortization |
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Intangible assets with indefinite lives: |
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Goodwill |
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Domestic Upholstery - Shenandoah * |
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Domestic Upholstery - Sunset West |
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All Other - BOBO Intriguing Objects |
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Goodwill |
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Trademarks and Trade names * |
- | - | ||||||||||||||
Intangible assets with definite lives: |
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Customer Relations |
( |
) | ( |
) | ||||||||||||
Trademarks and Trade names |
( |
) | ( |
) | ||||||||||||
Intangible assets, net |
( |
) | ( |
) |
*: The amounts are net of impairment charges of $
Amortization expenses for intangible assets with definite lives were $
9. Leases
We have operating leases for warehouses, showrooms, manufacturing facilities, offices and equipment. We recognized sub-lease income of $
Thirteen Weeks Ended |
Thirty-Nine Weeks Ended |
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October 29, 2023 |
October 30, 2022 |
October 29, 2023 |
October 30, 2022 |
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Operating lease cost |
$ | $ | $ | $ | ||||||||||||
Variable lease cost |
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Short-term lease cost |
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Total operating lease cost |
$ | $ | $ | $ | ||||||||||||
Operating cash outflows |
$ | $ | $ | $ |
During fiscal 2024 second quarter, we reduced our footprint by
October 29, 2023 |
January 29, 2023 |
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Real estate |
$ | $ | ||||||
Property and equipment |
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Total operating leases right-of-use assets |
$ | $ | ||||||
Current portion of operating lease liabilities |
$ | $ | ||||||
Long term operating lease liabilities |
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Total operating lease liabilities |
$ | $ |
For leases that commenced before July 2022, we used our
Undiscounted Future Operating Lease Payments |
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Remainder of fiscal 2024 |
$ | |||
2025 |
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2026 |
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2027 |
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2028 |
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2029 and thereafter |
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Total lease payments |
$ | |||
Less: impact of discounting |
( |
) | ||
Present value of lease payments |
$ |
10. Long-Term Debt
On July 26, 2022, we entered into the Fourth Amendment (the “amendment”) to the Second Amended and Restated Loan Agreement with Bank of America, N.A. (“BofA”) to replenish cash used to make the acquisition of substantially all of the assets of Sunset West (which closed at the beginning of the first quarter of fiscal 2023) (the “Sunset Acquisition”). The Second Amended and Restated Loan Agreement dated as of September 29, 2017, had previously been amended by a First Amendment to Second Amended and Restated Loan Agreement dated as of January 31, 2019, a Second Amendment to Second Amended and Restated Loan Agreement dated as of November 4, 2020, and a Third Amendment to Second Amended and Restated Loan Agreement dated as of January 27, 2021 (as so amended, the “Existing Loan Agreement”). Details of the individual credit facilities provided for in the Amendment are as follows:
■ | Unsecured Revolving Credit Facility. Under the Amendment, the expiration date of the existing $ |
■ | 2022 Secured Term Loan. The Amendment provided us with an $ |
■ | 2022 Unsecured Term Loan. The Amendment provided us with a $ |
We may prepay any outstanding principal amounts borrowed under either the Secured Term Loan or the Unsecured Term Loan at any time, without penalty provided that any payment is accompanied by all accrued interest owed. As of October 29, 2023, $
We incurred $
The Amendment also included customary representations and warranties and requires us to comply with customary covenants, including, among other things, the following financial covenants:
■ | Maintain a ratio of funded debt to EBITDA not exceeding: |
o |
2.25:1.0 through July 30, 2024; and |
o |
2.00:1.00 thereafter. |
■ |
A basic fixed charge coverage ratio of at least 1.25:1.00; and |
■ |
Limit capital expenditures to no more than $15.0 million during any fiscal year. |
The Existing Loan Agreement also limits our right to incur other indebtedness, make certain investments and create liens upon our assets, subject to certain exceptions, among other restrictions. The Existing Loan Agreement does not restrict our ability to pay cash dividends on, or repurchase, shares of our common stock, subject to our compliance with the financial covenants discussed above if we are not otherwise in default under the Existing Loan Agreement.
We were in compliance with each of these financial covenants at October 29, 2023 and expect to remain in compliance with existing covenants for the foreseeable future.
As of October 29, 2023, we had $
11. Earnings Per Share
We refer you to the discussion of Earnings Per Share in Note 2. Summary of Significant Accounting Policies, in the financial statements included in our 2023 Annual Report, for additional information concerning the calculation of earnings per share (EPS).
All stock awards are designed to encourage retention and to provide an incentive for increasing shareholder value. We have issued restricted stock awards to non-employee members of the board of directors since 2006 and to certain non-executive employees since 2014. We have issued restricted stock units (“RSUs”) to certain senior executives since fiscal 2012 under the Company’s Stock Incentive Plan. Each RSU entitles an executive to receive one share of the Company’s common stock if the executive remains continuously employed with the Company through the end of a three-year service period. The RSUs may be paid in shares of our common stock, cash or both at the discretion of the Compensation Committee of our board of directors. We have issued Performance-based Restricted Stock Units (“PSUs”) to certain senior executives since fiscal 2019 under the Company’s Stock Incentive Plan. Each PSU entitles the executive officer to receive one share of our common stock based on the achievement of two specified performance conditions if the executive officer remains continuously employed through the end of the three-year performance period. One target is based on our annual average growth in our EPS over the performance period and the other target is based on EPS growth over the performance period compared to our peers. The payout or settlement of the PSUs will be made in shares of our common stock.
October 29, |
January 29, |
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2023 |
2023 |
|||||||
Restricted shares |
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RSUs and PSUs |
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All restricted shares, RSUs and PSUs awarded that have not yet vested are considered when computing diluted earnings per share.
During the fiscal 2024 nine-month period, we purchased and retired
Thirteen Weeks Ended |
Thirty-Nine Weeks Ended |
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October 29, |
October 30, |
October 29, |
October 30, |
|||||||||||||
2023 |
2022 |
2023 |
2022 |
|||||||||||||
Net income |
$ | $ | $ | $ | ||||||||||||
Less: Unvested participating restricted stock dividends |
||||||||||||||||
Net earnings allocated to unvested participating restricted stock |
||||||||||||||||
Earnings available for common shareholders |
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Weighted average shares outstanding for basic earnings per share |
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Dilutive effect of unvested restricted stock, RSU and PSU awards |
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Weighted average shares outstanding for diluted earnings per share |
||||||||||||||||
Basic earnings per share |
$ | $ | $ | $ | ||||||||||||
Diluted earnings per share |
$ | $ | $ | $ |
12. Income Taxes
We recorded income tax expense of $
No material and non-routine positions have been identified that are uncertain tax positions.
Tax years ending February 2, 2020 through January 29, 2023 remain subject to examination by federal and state taxing authorities.
13. Segment Information
As a public entity, we are required to present disaggregated information by segment using the management approach. The objective of this approach is to allow users of our financial statements to see our business through the eyes of management based upon the way management reviews performance and makes decisions. The management approach requires segment information to be reported based on how management internally evaluates the operating performance of the company’s business units or segments. The objective of this approach is to meet the basic principles of segment reporting as outlined in ASC 280 Segments (“ASC 280”), which are to allow the users of our financial statements to:
■ |
better understand our performance; |
■ |
better assess our prospects for future net cash flows; and |
■ |
make more informed judgments about us as a whole. |
We define our segments as those operations our chief operating decision maker (“CODM”) regularly reviews to analyze performance and allocate resources. We measure the results of our segments using, among other measures, each segment’s net sales, gross profit and operating income, as determined by the information regularly reviewed by the CODM.
For financial reporting purposes, we are organized into
■ |
Hooker Branded, consisting of the operations of our imported Hooker Casegoods and Hooker Upholstery businesses; |
■ |
Home Meridian, a business acquired at the beginning of fiscal 2017, is a stand-alone, mostly autonomous business that serves a different type or class of customer than do our other operating segments and at much lower margins; |
■ |
Domestic Upholstery, which includes the domestic upholstery manufacturing operations of Bradington-Young, HF Custom (formerly Sam Moore), Shenandoah Furniture and Sunset West, a business acquired at the beginning of fiscal 2023; and |
■ |
All Other, consisting of H Contract, Lifestyle Brands and BOBO Intriguing Objects. None of these operating segments were individually reportable; therefore, we combined them in “All Other” in accordance with ASC 280. |
Changes to segment reporting for fiscal 2024
During the second quarter of fiscal 2024, we acquired substantially all the assets of BOBO Intriguing Objects. Based on the requirements of ASC 280: Segment Reporting, BOBO’s results are included in All Other on a prospective basis.
We regularly monitor our reportable segments for changes in facts and circumstances to determine whether changes in the identification or aggregation of operating segments are necessary. Before the fiscal 2024 third quarter, H Contract’s results included sales of products sourced from the Hooker Branded segment and Sunset West. Due to a change in the way management internally evaluates operating performance, beginning with fiscal 2024 third quarter, Hooker Branded and Domestic Upholstery segments’ results now include sales of products formerly included in H Contract’s results. Fiscal 2024 year-to-date period and fiscal 2023 results discussed below have been recast to reflect this change. The Home Meridian segment is unchanged.
Thirteen Weeks Ended |
Thirty-Nine Weeks Ended |
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October 29, |
October 30, |
October 29, |
October 30, |
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2023 |
2022 |
2023 |
2022 |
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% Net |
% Net |
% Net |
% Net |
|||||||||||||||||||||||||||||
Net Sales |
Sales |
Sales |
Sales |
Sales |
||||||||||||||||||||||||||||
Hooker Branded |
$ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
Home Meridian |
% | % | % | % | ||||||||||||||||||||||||||||
Domestic Upholstery |
% | % | % | % | ||||||||||||||||||||||||||||
All Other |
% | % | % | % | ||||||||||||||||||||||||||||
Consolidated |
$ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
Gross Profit |
||||||||||||||||||||||||||||||||
Hooker Branded |
$ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
Home Meridian |
% | % | % | % | ||||||||||||||||||||||||||||
Domestic Upholstery |
% | % | % | % | ||||||||||||||||||||||||||||
All Other |
% | % | % | % | ||||||||||||||||||||||||||||
Consolidated |
$ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
Operating Income/(Loss) |
||||||||||||||||||||||||||||||||
Hooker Branded |
$ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
Home Meridian |
% | ( |
) | - |
% | ( |
) | - |
% | ( |
) | - |
% | |||||||||||||||||||
Domestic Upholstery |
% | % | % | % | ||||||||||||||||||||||||||||
All Other |
( |
) | - |
% | ( |
) | - |
% | % | % | ||||||||||||||||||||||
Consolidated |
$ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
Capital Expenditures (net of disposals) |
||||||||||||||||||||||||||||||||
Hooker Branded |
$ | $ | $ | $ | ||||||||||||||||||||||||||||
Home Meridian |
||||||||||||||||||||||||||||||||
Domestic Upholstery |
||||||||||||||||||||||||||||||||
All Other |
||||||||||||||||||||||||||||||||
Consolidated |
$ | $ | $ | $ | ||||||||||||||||||||||||||||
Depreciation & Amortization |
||||||||||||||||||||||||||||||||
Hooker Branded |
$ | $ | $ | $ | ||||||||||||||||||||||||||||
Home Meridian |
||||||||||||||||||||||||||||||||
Domestic Upholstery |
||||||||||||||||||||||||||||||||
All Other |
||||||||||||||||||||||||||||||||
Consolidated |
$ | $ | $ | $ |
As of October 29, |
As of January 29, |
|||||||||||||||||||||||||||||||
2023 |
%Total |
2023 |
%Total |
|||||||||||||||||||||||||||||
Identifiable Assets |
Assets |
Assets |
||||||||||||||||||||||||||||||
Hooker Branded |
$ | % | $ | % | ||||||||||||||||||||||||||||
Home Meridian |
% | % | ||||||||||||||||||||||||||||||
Domestic Upholstery |
% | % | ||||||||||||||||||||||||||||||
All Other |
% | % | ||||||||||||||||||||||||||||||
Consolidated |
$ | % | $ | % | ||||||||||||||||||||||||||||
Consolidated Goodwill and Intangibles |
||||||||||||||||||||||||||||||||
Total Consolidated Assets |
$ | $ |
Net Sales (in thousands) |
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Thirteen Weeks Ended |
Thirty-Nine Weeks Ended |
|||||||||||||||||||||||||||||||
October 29, 2023 |
%Total |
October 30, 2022 |
%Total |
October 29, 2023 |
%Total |
October 30, 2022 |
%Total |
|||||||||||||||||||||||||
Casegoods |
$ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
Upholstery |
% | % | % | % | ||||||||||||||||||||||||||||
$ | % | $ | % | $ | % | $ | % |
14. Subsequent Events
Dividends
On
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
All references to the “Company,” “we,” “us” and “our” in this document refer to Hooker Furnishings Corporation and its consolidated subsidiaries, unless specifically referring to segment information. All references to the “Hooker,” “Hooker Division(s),” “Hooker Legacy Brands” or “traditional Hooker” divisions or companies refer to all current business units and brands except for those in the Home Meridian segment. The Hooker Branded segment includes Hooker Casegoods and Hooker Upholstery. The Domestic Upholstery segment includes Bradington-Young, HF Custom (formerly Sam Moore), Shenandoah Furniture and Sunset West. All Other includes H Contract, Lifestyle Brands, and BOBO Intriguing Objects.
Forward-Looking Statements
Certain statements made in this report, including statements under Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the notes to the consolidated financial statements included in this report, are not based on historical facts, but are forward-looking statements. These statements reflect our reasonable judgment with respect to future events and typically can be identified by the use of forward-looking terminology such as “believes,” “expects,” “projects,” “intends,” “plans,” “may,” “will,” “should,” “would,” “could” or “anticipates,” or the negatives thereof, or other variations thereof, or comparable terminology, or by discussions of strategy. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Those risks and uncertainties include but are not limited to:
■ |
general economic or business conditions, both domestically and internationally, including the current macro-economic uncertainties and challenges to the retail environment for home furnishings along with instability in the financial and credit markets, in part due to inflation and rising interest rates, including their potential impact on (i) our sales and operating costs and access to financing, (ii) customers, and (iii) suppliers and their ability to obtain financing or generate the cash necessary to conduct their respective businesses; |
■ |
the direct and indirect costs and time spent by our associates associated with the implementation of our Enterprise Resource Planning system (“ERP”), including costs resulting from unanticipated disruptions to our business; |
■ |
the cyclical nature of the furnishings industry, which is particularly sensitive to changes in consumer confidence, the amount of consumers’ income available for discretionary purchases, and the availability and terms of consumer credit; |
■ |
changes in consumer preferences, including increased demand for lower-priced furniture; |
■ |
difficulties in forecasting demand for our imported products and raw materials used in our domestic operations; |
■ |
risks associated with our reliance on offshore sourcing and the cost of imported goods, including fluctuation in the prices of purchased finished goods, customs issues, freight costs, including the price and availability of shipping containers, ocean vessels, ocean and domestic trucking, and warehousing costs and the risk that a disruption in our offshore suppliers or the transportation and handling industries, including labor stoppages, strikes, or slowdowns, could adversely affect our ability to timely fill customer orders; |
■ |
risks associated with Home Meridian segment restructuring and cost-savings efforts, including our ability to timely reduce expenses and return the segment to profitability; |
■ |
the impairment of our long-lived assets including goodwill, which can result in reduced earnings and net worth; |
■ |
adverse political acts or developments in, or affecting, the international markets from which we import products, including duties or tariffs imposed on those products by foreign governments or the U.S. government and possible future U.S. conflict with China; |
■ |
the interruption, inadequacy, security breaches or integration failure of our information systems or information technology infrastructure, related service providers or the internet or other related issues including unauthorized disclosures of confidential information, hacking or other cyber-security threats or inadequate levels of cyber-insurance or risks not covered by cyber-insurance; |
■ |
risks associated with our Georgia warehouse including the inability to realize anticipated cost savings and subleasing excess space on favorable terms; |
■ |
risks associated with domestic manufacturing operations, including fluctuations in capacity utilization and the prices and availability of key raw materials, as well as changes in transportation, warehousing and domestic labor costs, availability of skilled labor, and environmental compliance and remediation costs; |
■ |
the risks related to the Sunset Acquisition including integration costs, maintaining Sunset West’s existing customer relationships, debt service costs, interest rate volatility, the use of operating cash flows to service debt to the detriment of other corporate initiatives or strategic opportunities, the loss of key employees from Sunset West, the disruption of ongoing businesses or inconsistencies in standards, controls, procedures and policies across the business which could adversely affect our internal control or information systems and the costs of bringing them into compliance and failure to realize benefits anticipated from the Sunset Acquisition; |
■ |
the risks related to the BOBO Intriguing Objects acquisition, including the loss of a key BOBO employee, inconsistencies in standards, controls, procedures and policies across the business which could adversely affect our internal control or information systems and failure to realize benefits anticipated from the BOBO acquisition; |
■ |
changes in U.S. and foreign government regulations and in the political, social and economic climates of the countries from which we source our products; |
■ |
risks associated with product defects, including higher than expected costs associated with product quality and safety, regulatory compliance costs (such as the costs associated with the US Consumer Product Safety Commission’s new mandatory furniture tip-over standard, STURDY) related to the sale of consumer products and costs related to defective or non-compliant products, product liability claims and costs to recall defective products and the adverse effects of negative media coverage; |
■ |
disruptions and damage (including those due to weather) affecting our Virginia or Georgia warehouses, our Virginia, North Carolina or California administrative facilities, our High Point, Las Vegas, and Atlanta showrooms or our representative offices or warehouses in Vietnam and China; |
■ |
the risks specifically related to the concentrations of a material part of our sales and accounts receivable in only a few customers, including the loss of several large customers through business consolidations, failures or other reasons, or the loss of significant sales programs with major customers; |
■ |
our inability to collect amounts owed to us or significant delays in collecting such amounts; |
■ |
achieving and managing growth and change, and the risks associated with new business lines, acquisitions, including the selection of suitable acquisition targets, restructurings, strategic alliances and international operations; |
■ |
capital requirements and costs; |