Company Quick10K Filing
Quick10K
Hooker Furniture
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$29.06 12 $342
10-Q 2019-05-05 Quarter: 2019-05-05
10-K 2019-02-03 Annual: 2019-02-03
10-Q 2018-10-28 Quarter: 2018-10-28
10-Q 2018-07-29 Quarter: 2018-07-29
10-Q 2018-04-29 Quarter: 2018-04-29
10-K 2018-01-28 Annual: 2018-01-28
10-Q 2017-10-29 Quarter: 2017-10-29
10-Q 2017-07-30 Quarter: 2017-07-30
10-Q 2017-04-30 Quarter: 2017-04-30
10-K 2017-01-29 Annual: 2017-01-29
10-Q 2016-10-30 Quarter: 2016-10-30
10-Q 2016-07-31 Quarter: 2016-07-31
10-Q 2016-05-01 Quarter: 2016-05-01
10-K 2016-01-31 Annual: 2016-01-31
10-Q 2015-11-01 Quarter: 2015-11-01
10-Q 2015-08-02 Quarter: 2015-08-02
10-Q 2015-05-03 Quarter: 2015-05-03
10-K 2015-02-01 Annual: 2015-02-01
10-Q 2014-11-02 Quarter: 2014-11-02
10-Q 2014-08-03 Quarter: 2014-08-03
10-Q 2014-05-04 Quarter: 2014-05-04
10-K 2014-02-02 Annual: 2014-02-02
8-K 2019-06-12 Earnings, Exhibits
8-K 2019-06-12 Officers, Shareholder Vote
8-K 2019-04-17 Officers
8-K 2019-04-16 Earnings, Exhibits
8-K 2018-12-06 Earnings, Exhibits
8-K 2018-08-30 Earnings, Exhibits
8-K 2018-06-05 Shareholder Vote
8-K 2018-06-05 Earnings, Exhibits
8-K 2018-05-07 Officers, Exhibits
8-K 2018-04-24 Regulation FD, Exhibits
8-K 2018-04-05 Earnings, Exhibits
HIG Talcott Resolution Life Insurance 18,980
WPP WPP 15,850
NKTR Nektar Therapeutics 6,180
TPL Texas Pacific Land Trust 6,110
PLAY Dave & Buster's 2,130
RMNI Rimini Street 328
IORG Intreorg Systems 0
SEP Spectra Energy Partners 0
BDMS Birner Dental Management Services 0
BUDZ Weed 0
HOFT 2019-05-05
Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 6. Exhibits
EX-31.1 ex_147095.htm
EX-31.2 ex_147096.htm
EX-32.1 ex_147097.htm

Hooker Furniture Earnings 2019-05-05

HOFT 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 hookerfurn20190505_10q.htm FORM 10-Q hookerfurn20190505_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 


 

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended May 5, 2019

 

Commission file number 000-25349 

 

HOOKER FURNITURE CORPORATION

(Exact name of registrant as specified in its charter)

 

Virginia

54-0251350

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Number)

 

440 East Commonwealth Boulevard, Martinsville, VA 24112

(Address of principal executive offices, zip code)

 

(276) 632-2133

(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. Yes ☒ No ☐

 

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). Yes ☒ No ☐

 

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 ☐

Accelerated Filer ☒

 

Non-accelerated Filer   ☐

Smaller reporting company ☐

 

Emerging growth company ☐

 

 

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 ☐  No ☒

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, no par value 

HOFT

NASDAQ Global Select Market

 

As of June 7, 2019, there were 11,817,229 shares of the registrant’s common stock outstanding.

 

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

3

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

28

 

 

 

Item 4.

Controls and Procedures

28

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

Item 6.

Exhibits

29

 

 

 

Signature

30

 

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

As of

 

May 5,

   

February 3,

 
   

2019

   

2019

 
   

(unaudited)

         

Assets

               

Current assets

               

    Cash and cash equivalents

  $ 28,254     $ 11,435  

    Trade accounts receivable, net

    78,244       112,557  

    Inventories

    110,765       105,204  

    Prepaid expenses and other current assets

    6,957       5,735  

         Total current assets

    224,220       234,931  

Property, plant and equipment, net

    30,638       29,482  

Cash surrender value of life insurance policies

    24,533       23,816  

Deferred taxes

    2,170       4,522  

Operating leases right-of-use assets

    43,894       -  

Intangible assets, net

    35,159       35,755  

Goodwill

    40,058       40,058  

Other assets

    1,247       1,152  

         Total non-current assets

    177,699       134,785  

               Total assets

  $ 401,919     $ 369,716  
                 

Liabilities and Shareholders’ Equity

               

Current liabilities

               

    Current portion of term loans

  $ 5,829     $ 5,829  

    Trade accounts payable

    33,416       40,838  

    Accrued salaries, wages and benefits

    4,736       8,002  

    Income tax accrual

    1,292       3,159  

    Customer deposits

    6,140       3,023  

    Current portion of lease liabilities

    5,847       -  

    Other accrued expenses

    2,901       3,564  

         Total current liabilities

    60,161       64,415  

Long term debt

    28,171       29,628  

Deferred compensation

    10,791       11,513  

Lease liabilities

    38,171       -  

Other long-term liabilities

    3       984  

Total long-term liabilities

    77,136       42,125  

              Total liabilities

    137,297       106,540  
                 

Shareholders’ equity

               

    Common stock, no par value, 20,000 shares authorized,

      11,816 and 11,785 shares issued and outstanding on each date

    50,748       49,549  

    Retained earnings

    213,599       213,380  

    Accumulated other comprehensive income

    275       247  

              Total shareholders’ equity

    264,622       263,176  

                   Total liabilities and shareholders’ equity

  $ 401,919     $ 369,716  

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

 

HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

 

   

Thirteen Weeks Ended

 
   

May 5,

   

April 29,

 
   

2019

   

2018

 
                 

Net sales

  $ 135,518     $ 142,892  
                 

Cost of sales

    110,001       110,926  
                 

      Gross profit

    25,517       31,966  
                 

Selling and administrative expenses

    22,016       21,990  

Intangible asset amortization

    596       596  
                 

        Operating income

    2,905       9,380  
                 

Other (expense)/income, net

    (62 )     5  

Interest expense, net

    341       382  
                 

      Income before income taxes

    2,502       9,003  
                 

Income tax expense

    515       1,849  
                 

       Net income

  $ 1,987     $ 7,154  
                 
Earnings per share                

       Basic

  $ 0.17     $ 0.61  

       Diluted

  $ 0.17     $ 0.61  
                 
Weighted average shares outstanding:                

       Basic

    11,769       11,750  

       Diluted

    11,805       11,773  
                 

Cash dividends declared per share

  $ 0.15     $ 0.14  

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

 

HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

   

Thirteen Weeks Ended

 
   

May 5,

   

April 29,

 
   

2019

   

2018

 
                 

Net Income

  $ 1,987     $ 7,154  

       Other comprehensive income (loss):

               

                 Amortization of actuarial loss

    37       43  

                 Income tax effect on amortization

    (9 )     (11 )

        Adjustments to net periodic benefit cost

    28       32  

        Reclassification of tax effects due to the

             adoption of ASU 2018-02

    -       111  
                 

Total Comprehensive Income

  $ 2,015     $ 7,297  

 

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 

 

 

HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

  

   

For the 

 
   

Thirteen Weeks Ended

 
   

May 5,

   

April 29,

 
   

2019

   

2018

 

Operating Activities:

               

Net income

  $ 1,987     $ 7,154  

Adjustments to reconcile net income to net cash

provided by operating activities:

               

Depreciation and amortization

    1,716       1,828  

Gain on disposal of assets

    (274 )     (19 )

Deferred income tax expense

    2,344       1,638  

Noncash restricted stock and performance awards

    463       343  

Provision/(benefit from) for doubtful accounts and sales allowances

    862       (1,990 )

Gain on life insurance policies

    (555 )     (508 )

Changes in assets and liabilities:

               

Trade accounts receivable

    33,451       20,611  

Inventories

    (5,561 )     (321 )

Prepaid expenses and other current assets

    (3,186 )     (190 )

Trade accounts payable

    (8,165 )     2,042  

Accrued salaries, wages, and benefits

    (3,266 )     (3,005 )

Accrued income taxes

    (1,867 )     189  

Customer deposits

    3,117       387  

Operating lease liabilities

    (167 )     -  

Other accrued expenses

    (664 )     424  

Deferred compensation

    51       (43 )

Other long-term liabilities

    -       39  

              Net cash provided by operating activities

  $ 20,286     $ 28,579  
                 

Investing Activities:

               

Purchases of property and equipment

    (1,527 )     (370 )

Proceeds received on notes from sale of assets

    1,449       30  

Proceeds received on life insurance policies

    -       1,099  

Premiums paid on life insurance policies

    (157 )     (155 )

              Net cash (used in)/provided by investing activities

    (235 )     604  
                 

Financing Activities:

               

Payments for long-term debt

    (1,464 )     (11,893 )

Cash dividends paid

    (1,768 )     (1,647 )

              Net cash used in financing activities

    (3,232 )     (13,540 )
                 

Net increase in cash and cash equivalents

    16,819       15,643  

Cash and cash equivalents - beginning of year

    11,435       30,915  

Cash and cash equivalents - end of quarter

  $ 28,254     $ 46,558  
                 

Supplemental disclosure of cash flow information:

               

Cash paid for income taxes

  $ 38     $ 23  

Cash paid for interest, net

    329       324  

Non-cash transactions:

               

Increase in property and equipment through accrued purchases

    743       166  

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

 

HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands, except per share data)

(Unaudited)

 

                           

Accumulated

         
                           

Other

   

Total

 
   

Common Stock

   

Retained

   

Comprehensive

   

Shareholders'

 
   

Shares

   

Amount

   

Earnings

   

Income

   

Equity

 

      Balance at January 28, 2018

    11,762     $ 48,970     $ 180,122     $ 369     $ 229,461  

Net income

                    7,154               7,154  

Prior year adjustment for ASU 2014-09 and 2018-02

                    99       111       210  

Unrealized loss on defined benefit plan, net of tax of $11

                            32       32  

Cash dividends paid and accrued ($0.14 per share)

                    (1,647 )             (1,647 )

Restricted stock grants, net of forfeitures

    6       6                       6  

Restricted stock compensation cost

            106                       106  

      Balance at April 29, 2018

    11,768     $ 49,082     $ 185,728     $ 512     $ 235,322  
                                         
                                         
                                         
                                         
                                         
                                         

      Balance at February 3, 2019

    11,785     $ 49,549     $ 213,380     $ 247     $ 263,176  

Net income

                    1,987               1,987  

Unrealized loss on defined benefit plan, net of tax of $9

                            28       28  

Cash dividends paid and accrued ($0.15 per share)

                    (1,768 )             (1,768 )

Restricted stock grants, net of forfeitures

    31       344                       344  

Restricted stock compensation cost

            174                       174  

Recognition of PSUs as equity-based awards

            681                       681  

      Balance at May 5, 2019

    11,816     $ 50,748     $ 213,599     $ 275     $ 264,622  

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

 

HOOKER FURNITURE 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 Thirteen Weeks Ended May 5, 2019

 

1.

Preparation of Interim Financial Statements

 

The condensed consolidated financial statements of Hooker Furniture 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 February 3, 2019 (“2019 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 thirteen-week period (also referred to as “three months,” “three-month period,” “quarter,” “first quarter” or “quarterly period”) that began February 4, 2019 and ended May 5, 2019. This report discusses our results of operations for this period compared to the thirteen-week period that began January 29, 2018 and ended April 29, 2018; and our financial condition as of May 5, 2019 compared to February 3, 2019.

 

References in these notes to the condensed consolidated financial statements of the Company to:

 

 

the 2020 fiscal year and comparable terminology mean the fifty-two-week fiscal year that began February 4, 2019 and will end February 2, 2020; and

 

 

the 2019 fiscal year and comparable terminology mean the fifty-three-week fiscal year that began January 29, 2018 and ended February 3, 2019.

 

2.

Recently Adopted Accounting Policies

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“Topic 842”), which requires lessees to recognize lease right-of-use assets and liabilities on balance sheet and disclose key information about leasing arrangements. ASU 2016-02 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. We adopted Topic 842 standard on February 4, 2019 and used the effective date transition method. As a result, our condensed consolidated balance sheets prior to February 4, 2019 were not restated and continue to be reported under previous guidance that did not require the recognition of lease liabilities and corresponding lease assets on the condensed consolidated balance sheets. In addition, we have elected the package of practical expedients, which allowed us not to reassess prior conclusions related to the expired or existing leases, and not to reassess the accounting for initial direct costs. As a result of the adoption of Topic 842, we have operating lease right-of-use assets of $43.9 million and operating lease liabilities of $44.0 million as of May 5, 2019. The adoption of Topic 842 did not have a material impact on our condensed consolidated statements of income and condensed consolidated statement of cash flows for the three-month period ended May 5, 2019. See Note 8 for additional information and disclosures required by Topic 842.

 

3.

Accounts Receivable

  

   

May 5,

   

February 3,

 
   

2019

   

2019

 
                 

Trade accounts receivable

  $ 84,259     $ 117,732  

Other accounts receivable allowances

    (5,098 )     (4,267 )

Allowance for doubtful accounts

    (917 )     (908 )

   Accounts receivable

  $ 78,244     $ 112,557  

 

 

4.

Inventories

 

   

May 5,

   

February 3,

 
   

2019

   

2019

 

Finished furniture

  $ 119,582     $ 112,847  

Furniture in process

    1,528       1,825  

Materials and supplies

    10,325       10,896  

   Inventories at FIFO

    131,435       125,568  

Reduction to LIFO basis

    (20,670 )     (20,364 )

   Inventories

  $ 110,765     $ 105,204  

 

5.

Property, Plant and Equipment

 

   

Depreciable Lives

   

May 5,

   

February 3,

 
   

(In years)

   

2019

   

2019

 
                       

Buildings and land improvements

  15 - 30     $ 24,717     $ 24,588  

Computer software and hardware

  3 - 10       18,910       18,719  

Machinery and equipment

  10       8,983       8,934  

Leasehold improvements

 

Term of lease

      9,683       9,376  

Furniture and fixtures

  3 - 10       2,388       2,318  

Other

  5       665       665  

   Total depreciable property at cost

          65,346       64,600  

Less accumulated depreciation

          41,034       39,925  

   Total depreciable property, net

          24,312       24,675  

Land

          1,067       1,067  

Construction-in-progress

          5,259       3,740  

   Property, plant and equipment, net

        $ 30,638     $ 29,482  

 

6.

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 May 5, 2019 and February 3, 2019, 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.

 

On January 30, 2019, our Board of Directors voted to terminate the Pension Plan. Pension Plan termination is an eighteen to twenty-four-month process, that involves seeking certain approvals from both the IRS and Pension Benefit Guaranty Corporation (“PBGC”). As of February 3, 2019, current Pension Plan assets are invested in bond funds and are measured at fair value using Level 1 inputs, which are quoted prices in active markets. As of February 3, 2019, the funded status for this plan was $86,000 shown on the “Other assets” line of our condensed consolidated balance sheets. See Note 10. Employee Benefit Plans for additional information about the Plan.

 

 

Our assets measured at fair value on a recurring basis at May 5, 2019 and February 3, 2019, were as follows:

 

   

Fair value at May 5, 2019

   

Fair value at February 3, 2019

 

Description

 

Level 1

   

Level 2

   

Level 3

   

Total

   

Level 1

   

Level 2

   

Level 3

   

Total

 
    (In thousands)  

Assets measured at fair value

                                                               

Company-owned life insurance

  $ -     $ 24,533     $ -     $ 24,533     $ -     $ 23,816     $ -     $ 23,816  

Pension Plan assets*

    10,992       -       -       10,992       10,992       -       -       10,992  

 

* as of February 3, 2019 for Pension Plan assets.

 

7.

Intangible Assets

 

     

May 5,

   

February 3,

 

Non-amortizable Intangible Assets

Segment

 

2019

   

2019

 

Goodwill

Home Meridian

  $ 23,187     $ 23,187  

Goodwill

All Other

    16,871       16,871  

   Total Goodwill

    40,058       40,058  
                   

Trademarks and trade names - Home Meridian

Home Meridian

    11,400       11,400  

Trademarks and trade names - Bradington-Young

All Other

    861       861  

Trademarks and trade names - Sam Moore

All Other

    396       396  

   Total Trademarks and trade names

  $ 12,657     $ 12,657  
                   

   Total non-amortizable assets

  $ 52,715     $ 52,715  

 

Our amortizable intangible assets are recorded in our Home Meridian segment and All Other. The carrying amounts and changes therein of those amortizable intangible assets were as follows:

 

   

Amortizable Intangible Assets

 
   

Customer

                 
   

Relationships

   

Trademarks

   

Totals

 
                         

Balance at February 3, 2019

  $ 22,320     $ 778     $ 23,098  

Amortization

    (581 )     (15 )     (596 )

Balance at May 5, 2019

  $ 21,739     $ 763     $ 22,502  

 

For the remainder of fiscal 2020, amortization expense is expected to be approximately $1.8 million.

 

8.

Leases

 

On February 4, 2019, we adopted Accounting Standards Codification Topic 842 Leases. Our lease assets are composed of real estate and equipment. Real estate leases consist primarily of warehouses and offices, while equipment leases consist of vehicles, office and warehouse equipment. At the inception of a contract, we assess whether the contract is, or contains, a lease. Our assessment is based on: (a) whether there is an identified asset in the contract that is land or a depreciable asset – i.e. property, plant or equipment; (b) whether we have the right to control the use of the identified asset throughout the period of use, which may be different from the overall contract term; and (c) whether we have the right to direct the use of an identified asset if it can direct (and change) how and for what purpose the asset will be used throughout the period of use.

 

Leases are classified as either finance leases or operating leases based on criteria in Topic 842. All of our leases are classified as operating leases. We do not currently have finance leases but could in the future.

 

 

Operating lease right-of-use ("ROU") assets and liabilities are recognized on the adoption date based on the present value of lease payments over the remaining lease term. As interest rates are not explicitly stated or implicit in any of our leases, we utilized our incremental borrowing rate at the adoption date of February 4, 2019, which was one-month LIBOR plus 1.5%. ROU assets also include any lease payments made and exclude lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

 

At the inception of a lease, we allocate the consideration in the contract to each lease and non-lease component based on the component's relative stand-alone price to determine the lease payments. Lease and non-lease components are accounted for separately. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Included in lease expense are any variable lease payments incurred in the period that were not included in the initial lease liability. Some of our real estate leases contain variable lease payments, including payments based on the percentage increase in the Consumer Price Index for Urban Consumers (“CPI-U”). We used February 2019 CPI-U issued by the US Department of Labor’s Bureau of Labor Statistics to measure lease payments and calculate lease liabilities. Additional payments based on the change in an index or rate, or payments based on a change in our portion of the operating expenses, including real estate taxes and insurance, are recorded when incurred.

 

We have a sub-lease at one of our warehouses. In accordance with the provisions of Topic 842, since we have not been relieved as the primary obligor of the warehouse lease, we cannot net the sublease income against our lease payment to calculate the lease liability and ROU asset. Our practice has been, and we will continue to, straight-line the sub-lease income over the term of the sublease. We recognized $130,000 sub-lease income for the three-month period ended May 5, 2019.

 

Our leases have remaining lease terms of less than one year to seven years, some of which include options to extend the leases for up to seven years. We have elected not to recognize ROU assets and lease liabilities that arise from short term leases for any class of underlying asset. Short term leases are leases with lease terms of 12 months or less with either (a) no renewal option or (b) a renewal option which we are not reasonably certain to exercise.

 

We have elected to adopt a package of practical expedients provided under Topic 842 that allows us not to reassess: (a) whether expired or existing contracts contain a lease under the new definition of a lease; (b) lease classification of expired or existing leases; and (c) whether previously capitalized initial direct costs would qualify for capitalization under Topic 842.

 

The components of lease cost and supplemental cash flow information for leases for the three-months ended May 5, 2019 were:

 

   

13 Weeks Ended

 
   

May 5, 2019

 

Operating lease cost

  $ 2,076  

Short-term lease cost

    113  

Total operating lease cost

  $ 2,189  
         
         

Operating cash outflows

  $ 2,386  

 

The right-of-use assets and lease liabilities recorded on our Condensed Consolidated Balance Sheets as of May 5, 2019 were:

 

   

May 5, 2019

 

Real estate

  $ 42,679  

Property and equipment

    1,215  

Total operating leases right-of-use assets

  $ 43,894  
         

Current portion of operating lease liabilities

  $ 5,847  

Long term operating lease liabilities

    38,171  

Total operating lease liabilities

  $ 44,018  

 

Weighted-average remaining lease term is 7.8 years. We used our incremental borrowing rate which is LIBOR plus 1.5% at the adoption date. The weighted-average discount rate is 4.014%.

 

 

The following table reconciles the undiscounted future lease payments for operating leases to the operating lease liabilities recorded in the condensed consolidated balance sheet at May 5, 2019:

 

   

Undiscounted Future

Operating Lease Payments

 

Remainder of 2019

  $ 5,775  

2020

    7,689  

2021

    7,072  

2022

    5,478  

2023

    5,239  

2024 and thereafter

    20,251  

Total lease payments

  $ 51,504  

Less: impact of discounting

    (7,486 )

Present value of lease payments

  $ 44,018  

 

As of May 5, 2019, we did not have any additional operating or finance leases that had not yet commenced.

 

9.

Long-Term Debt

 

As of May 5, 2019, we had an aggregate $27.7 million available under our revolving credit facility to fund working capital needs. Standby letters of credit in the aggregate amount of $2.3 million, used to collateralize certain insurance arrangements and for imported product purchases, were outstanding under the revolving credit facility as of May 5, 2019. There were no additional borrowings outstanding under the revolving credit facility as of May 5, 2019.    

 

10.

Employee Benefit Plans

 

We maintain three retirement plans for the benefit of certain former and current employees, including a supplemental retirement income plan (“SRIP”) for certain former and current employees of Hooker Furniture Corporation, as well as two plans for the benefit of certain and former employees of Pulaski Furniture Corporation, which we assumed when we acquired the business of Home Meridian International. These legacy pension plan obligations include:

 

 

the Pulaski Furniture Corporation Supplemental Executive Retirement Plan (“SERP”) for certain former executives. The SERP is an unfunded plan and all benefits are paid solely out of our general assets; and

 

the Pension Plan for former Pulaski Furniture Corporation employees.

 

The SRIP, SERP and Pension Plan are all “frozen” and we do not expect to add additional participants to any of these plans in the future. On January 30, 2019, our Board of Directors voted to terminate the Pension Plan. Pension Plan termination is an eighteen to twenty-four-month process, that involves seeking certain approvals from both the IRS and PBGC. Once we receive the appropriate approvals, an insurance company will be selected to provide annuities for participants at an amount equal to their current monthly pension benefit. Upon settlement of the pension liability, we will reclassify the related pension losses currently recorded in accumulated other comprehensive loss, to the consolidated statements of operations. We expect to record pension settlement expenses against earnings which could adversely affect our earnings. Additionally, there could be excess costs to terminate the plan. We do not expect these expenses and costs to be material.

 

 

As of May 5, 2019, current Pension Plan assets are invested in bond funds and are measured at fair value using Level 1 inputs, which are quoted prices in active markets.

 

   

Thirteen Weeks Ended

 
   

May 5,

   

April 29,

 
   

2019

   

2018

 

Net periodic benefit costs

               

      Service cost

    26       82  

      Interest cost

    205       207  

      Actuarial loss

    37       43  

      Expected return on pension plan assets

    (101 )     (144 )

      Expected administrative expenses

    97       70  
                 

Consolidated net periodic benefit costs

  $ 264     $ 258  

 

The expected long-term rate of return on Pension Plan assets is 3.8% as of the Pension Plan’s most recent valuation date of February 3, 2019.

 

The SRIP and SERP plans are unfunded plans. We paid $178,000 in the first quarter and expect to pay a total of approximately $506,000 in benefit payments from our general assets during the remainder of fiscal 2020 to fund SRIP and SERP payments.

 

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 2019 Annual Report, for additional information concerning the calculation of earnings per share.

 

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.

 

We expect to continue to grant these types of awards annually in the future. The following table sets forth the number of outstanding restricted stock awards and RSUs and PSUs, net of forfeitures and vested shares, as of the fiscal period-end dates indicated:

 

   

May 5,

   

February 3,

 
   

2019

   

2019

 
                 

Restricted shares

    33       22  

RSUs and PSUs

    57       14  
      90       36  

 

The number of outstanding restricted shares increased due primarily to grants of restricted shares to a larger population of our non-executive employees as an incentive for retention and alignment of individual performance to our values. The number of RSUs and PSUs increased primarily due to the addition of three additional executive officers in the second quarter of fiscal 2019.

 

 

All restricted shares, RSUs and PSUs awarded that have not yet vested are considered when computing diluted earnings per share. The following table sets forth the computation of basic and diluted earnings per share:

 

   

Thirteen Weeks Ended

 
   

May 5,

   

April 29,

 
   

2019

   

2018

 
                 

Net income

  $ 1,987     $ 7,154  

   Less: Unvested participating restricted stock dividends

    4       2  

            Net earnings allocated to unvested participating restricted stock

    4       9  

Earnings available for common shareholders

    1,979       7,143  
                 

Weighted average shares outstanding for basic earnings per share

    11,769       11,750  

Dilutive effect of unvested restricted stock, RSU and PSU awards

    36       23  

   Weighted average shares outstanding for diluted earnings per share

    11,805       11,773  
                 

Basic earnings per share

  $ 0.17     $ 0.61  
                 

Diluted earnings per share

  $ 0.17     $ 0.61  

 

12.

Income Taxes

 

We recorded income tax expense of $515,000 for the fiscal 2020 first quarter compared to $1.8 million for the comparable prior year period. The effective tax rates for the fiscal 2020 and 2019 first quarters were 20.6% and 20.5%, respectively.

 

The net unrecognized tax benefits as of May 5, 2019 and February 3, 2019, which, if recognized, would affect our effective tax rate are $39,000 and $38,000, respectively.

 

Tax years ending January 31, 2016 through February 3, 2019 remain subject to examination by federal and state taxing authorities.

 

13.

Segment Information

 

For financial reporting purposes, we are organized into two reportable segments and “All Other”, which includes the remainder of our businesses:

 

 

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; and

 

All Other, which includes the domestic upholstery manufacturing operations of Bradington-Young, Sam Moore, Shenandoah Furniture, and H Contract. None of these operating segments were individually reportable; therefore, we combined them in “All Other” in accordance with ASC 280.

 

 

The following table presents segment information for the periods, and as of the dates, indicated:

 

   

Thirteen Weeks Ended

 
   

May 5, 2019

           

April 29, 2018

         
           

% Net

           

% Net

 

Net Sales

         

Sales

           

Sales

 

   Hooker Branded

  $ 39,600       29.2 %   $ 42,772       29.9 %

   Home Meridian

    67,630       49.9 %     70,596       49.4 %

   All Other

    28,288       20.9 %     29,524       20.7 %

Consolidated

  $ 135,518       100.0 %   $ 142,892       100.0 %
                                 

Gross Profit

                               

   Hooker Branded

  $ 12,556       31.7 %   $ 14,422       33.7 %

   Home Meridian

    5,903       8.7 %     10,416       14.8 %

   All Other

    7,058       25.0 %     7,128       24.1 %

Consolidated

  $ 25,517       18.8 %   $ 31,966       22.4 %
                                 

Operating Income

                               

   Hooker Branded

  $ 5,177       13.1 %   $ 6,726       15.7 %

   Home Meridian

    (4,993 )     -7.4 %     (288 )     -0.4 %

   All Other

    2,721       9.6 %     2,942       10.0 %

Consolidated

  $ 2,905       2.1 %   $ 9,380       6.6 %
                                 

Capital Expenditures

                               

   Hooker Branded

  $ 125             $ 210          

   Home Meridian

    117               36          

   All Other

    1,285               124          

Consolidated

  $ 1,527             $ 370          
                                 

 

                               

Depreciation

   & Amortization

                               

   Hooker Branded

  $ 492             $ 484          

   Home Meridian

    531               591          

   All Other

    693               753          

Consolidated

  $ 1,716             $ 1,828          

 

 

   

As of May 5,

           

As of February 3,

         
   

2019

   

%Total

   

2019

   

%Total

 

Identifiable Assets

         

Assets

           

Assets

 

   Hooker Branded

  $ 148,866       45.6 %   $ 108,445       36.9 %

   Home Meridian

    135,312       41.4 %     144,277       49.1 %

   All Other

    42,524       13.0 %     41,181       14.0 %

Consolidated

  $ 326,702       100.0 %   $ 293,903       100.0 %

   Consolidated Goodwill and Intangibles

    75,217               75,813          

Total Consolidated Assets

  $ 401,919             $ 369,716          

 

 

Sales by product type are as follows:

 

   

Net Sales (in thousands)

 
   

Thirteen Weeks Ended

 
   

May 5, 2019

   

%Total

   

April 29, 2018

   

%Total

 

Casegoods

  $ 84,464       62 %   $ 89,492       63 %

Upholstery

    51,054       38 %     53,400       37 %
    $ 135,518       100 %   $ 142,892       100 %

 

14.

Subsequent Events

 

Dividends

 

On June 5, 2019, our board of directors declared a quarterly cash dividend of $0.15 per share, payable on June 30, 2019 to shareholders of record at June 17, 2019.

 

 

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 Furniture Corporation and its consolidated subsidiaries, unless specifically referring to segment information. All references to the “Hooker,” “Hooker Division,” “Hooker Brands” or “traditional Hooker” divisions or companies refer to the current components of our Hooker Branded segment and All Other which includes Bradington-Young, Sam Moore, Shenandoah Furniture and H Contract.

 

References to the “Shenandoah acquisition” refer to the acquisition of substantially all of the assets of Shenandoah Furniture, Inc. on September 29, 2017. References to the “HMI acquisition” refer to the acquisition of substantially all of the assets of Home Meridian International, Inc. on February 1, 2016.

 

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, and instability in the financial and credit markets, including their potential impact on our (i) sales and operating costs and access to financing or (ii) customers and suppliers and their ability to obtain financing or generate the cash necessary to conduct their respective businesses;

 

 

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, such as the current U.S. administration imposing a 25% tariff on certain goods imported into the United States from China, including almost all furniture and furniture components manufactured in China, with the potential for additional or increased tariffs in the future;

 

 

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;

 

 

the risks specifically related to the concentrations of a material part of our sales and accounts receivable in only a few customers;

 

 

risks associated with product defects;

 

 

our inability to collect amounts owed to us;

 

 

disruptions involving our vendors or the transportation and handling industries, particularly those affecting imported products from Vietnam and China, including customs issues, labor stoppages, strikes or slowdowns and the availability of shipping containers and cargo ships;

 

 

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 or inadequate levels of cyber-insurance or risks not covered by cyber insurance;

 

 

disruptions and damage (including due to weather) affecting our Virginia, North Carolina or California warehouses, our Virginia or North Carolina administrative facilities or our representative offices or warehouses in Vietnam and China;

 

 

achieving and managing growth and change, and the risks associated with new business lines, acquisitions, restructurings, strategic alliances and international operations;

 

 

risks associated with our reliance on offshore sourcing and the cost of imported goods, including fluctuation in the prices of purchased finished goods, ocean freight costs and warehousing costs and the risk that a disruption in our offshore suppliers could adversely affect our ability to timely fill customer orders;

 

 

higher than expected employee medical and workers’ compensation costs that may increase the cost of our high-deductible healthcare and workers compensation plans;

 

 

 

our ability to successfully implement our business plan to increase sales and improve financial performance;

 

 

product liability claims;

 

 

risks related to our other defined benefit plans;

 

 

the possible impairment of our long-lived assets, which can result in reduced earnings and net worth;

 

 

the cost and difficulty of marketing and selling our products in foreign markets;

 

 

price competition in the furniture industry;

 

 

difficulties in forecasting demand for our imported products;

 

 

changes in domestic and international monetary policies and fluctuations in foreign currency exchange rates affecting the price of our imported products and raw materials;

 

 

the cyclical nature of the furniture 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;

 

 

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;

 

 

risks associated with distribution through third-party retailers, such as non-binding dealership arrangements;

 

 

capital requirements and costs, including the servicing of our floating-rate term loans;

 

 

competition from non-traditional outlets, such as internet and catalog retailers;

 

 

changes in consumer preferences, including increased demand for lower-quality, lower-priced furniture due to, among other things, fluctuating consumer confidence, amounts of discretionary income available for furniture purchases and the availability of consumer credit; and

 

 

higher than expected costs associated with product quality and safety, including regulatory compliance costs related to the sale of consumer products and costs related to defective or non-compliant products.

 

Our forward-looking statements could be wrong in light of these and other risks, uncertainties and assumptions. The future events, developments or results described in this report could turn out to be materially different. Any forward-looking statement we make speaks only as of the date of that statement, and we undertake no obligation, except as required by law, to update any forward-looking statements whether as a result of new information, future events or otherwise and you should not expect us to do so.

 

Also, our business is subject to a number of significant risks and uncertainties any of which can adversely affect our business, results of operations, financial condition or future prospects. For a discussion of risks and uncertainties that we face, see the Forward-Looking Statements detailed above and Item 1A, “Risk Factors” in our 2019 annual report on Form 10-K (the “2019 Annual Report”).

 

Investors should also be aware that while we occasionally communicate with securities analysts and others, it is against our policy to selectively disclose to them any material nonpublic information or other confidential commercial information. Accordingly, investors should not assume that we agree with any projection, forecast or report issued by any analyst regardless of the content of the statement or report, as we have a policy against confirming information issued by others.

 

This quarterly report on Form 10-Q includes our unaudited condensed consolidated financial statements for the thirteen-week period (also referred to as “three months,” “three-month period,” “quarter,” “first quarter” or “quarterly period”) that began February 4, 2019 and ended May 5, 2019. This report discusses our results of operations for this period compared to the 2019 fiscal year thirteen-week period that began January 29, 2018 and ended April 29, 2018; and our financial condition as of May 5, 2019 compared to February 3, 2019.

 

 

References in this report to:

 

 

the 2020 fiscal year and comparable terminology mean the fiscal year that began February 4, 2019 and will end February 2, 2020; and

 

 

the 2019 fiscal year and comparable terminology mean the fiscal year that began January 29, 2018 and ended February 3, 2019.

 

Dollar amounts presented in the tables below are in thousands except for per share data.

 

The following discussion should be read in conjunction with the condensed consolidated financial statements, including the related notes, contained elsewhere in this quarterly report. We also encourage users of this report to familiarize themselves with all of our recent public filings made with the Securities and Exchange Commission (“SEC”), especially our 2019 Annual Report. Our 2019 Annual Report contains critical information regarding known risks and uncertainties that we face, critical accounting policies and information on commitments and contractual obligations that are not reflected in our condensed consolidated financial statements, as well as a more thorough and detailed discussion of our corporate strategy and new business initiatives.

 

Our 2019 Annual Report and our other public filings made with the SEC are available, without charge, at www.sec.gov and at http://investors.hookerfurniture.com.

 

Overview

 

Hooker Furniture Corporation, incorporated in Virginia in 1924, is a designer, marketer and importer of casegoods (wooden and metal furniture), leather furniture and fabric-upholstered furniture for the residential, hospitality and contract markets. We also domestically manufacture premium residential custom leather and custom fabric-upholstered furniture. We are ranked among the nation’s top five largest publicly traded furniture sources, based on 2018 shipments to U.S. retailers, according to a 2019 survey by a leading trade publication.

 

We believe that consumer tastes and channels in which they shop for furniture are evolving at a rapid pace and we continue to change to meet these demands.

 

Our strategy is to leverage the financial strength afforded us by Hooker’s slower-growing but highly profitable traditional businesses in order to boost revenues and earnings both organically and by acquiring companies selling in faster-growing channels of distribution in which our traditional businesses are under-represented. Consequently, Hooker acquired Home Meridian on February 1, 2016 and Shenandoah Furniture on September 29, 2017.

 

We believe our acquisition of Home Meridian has better positioned us in some of the fastest growing and advantaged channels of distribution, including e-commerce, warehouse membership clubs and contract furniture. While growing faster than industry average, these channels tend to operate at lower margins. This acquisition has provided the Home Meridian segment’s leadership with greater financial flexibility by virtue of Hooker’s strong balance sheet and, consequently, has afforded it greater operational focus.

 

We also believe our acquisition of Shenandoah Furniture, a North Carolina-based domestic upholsterer has better positioned us in the “lifestyle specialty” retail distribution channel. For that channel, domestically- produced, customizable upholstery is extremely viable and preferred by the end consumers who shop at retailers in that channel. 

 

Executive Summary-Results of Operations

 

Consolidated net sales for the fiscal 2020 first quarter decreased $7.4 million or 5.2% as compared to the prior year period, from $142.9 million to $135.5 million. We experienced sales decreases in both of our reportable segments as well as All Other. The Hooker Branded segment net sales decreased $3.2 million or 7.4%, Home Meridian segment net sales decreased $3.0 million or 4.2%, All Other net sales decreased $1.2 million or 4.2%, all as compared to the fiscal 2019 first quarter.

 

Consolidated net income decreased $5.2 million or 72.2% in the fiscal 2020 first quarter.

 

 

As discussed in greater detail under “Results of Operations” below, the following are the primary factors that affected our consolidated fiscal 2020 first quarter results of operations:

 

 

Gross profit. Fiscal 2020 first quarter consolidated gross profit decreased both in absolute terms and as a percentage of net sales, due primarily to decreased gross profit in the Home Meridian segment and to a lesser extent in the Hooker Branded segment, as a result of sales declines, higher returns and allowances, increased product costs, in particular the 10% tariff on goods imported from China implemented late in our fiscal 2019 third quarter and higher freight and warehousing costs. Despite a sales decrease in this quarter, All Other’s gross profit increased as a percentage of net sales and stayed essentially flat in absolute terms.

 

 

Selling and administrative expenses. Consolidated selling and administrative (“S&A”) expenses for fiscal 2020 first quarter stayed essentially flat in absolute terms and increased as a percentage of net sales. Compensation expense increased due to increased headcount and benefits expense, and the absence of $1.0 million one-time life insurance gain recorded in fiscal 2019 first quarter, offset by decreased selling expenses due to lower net sales.

 

 

Intangible asset amortization expense. Intangible amortization expense on the Home Meridian and Shenandoah acquisition-related intangible assets was unchanged compared to the prior year first quarter.

 

 

Operating income. Consolidated operating income decreased $6.5 million or 69.0% in absolute terms in the fiscal 2020 first quarter and decreased from 6.6% to 2.1% as a percentage of net sales, due to the factors discussed above and in greater detail in the analysis below.

 

Review

 

Our disappointing earnings performance in the first quarter was driven primarily by several cost-related issues in our Home Meridian segment. Reduced demand and soft retail conditions across the home furnishings industry were the primary drivers of the sales decrease which also weighed on our earnings for the quarter. Given the sales decline and initial impact of a 10% tariff on furniture and component parts imported from China, we believe our Hooker Branded segment and All Other performed very well.

 

The Hooker Branded segment’s net sales decreased $3.2 million or 7.4% in the fiscal 2020 first quarter, due primarily to a decrease in incoming orders and net sales in the Hooker Casegoods division. Despite the sales decline, the segment was still highly profitable with a 13% operating income margin during the quarter, which we believe to be excellent performance under current market conditions. Decreased net sales in this segment were driven by weak consumer demand which we believe is affecting much of the furniture and home furnishings industry. Hooker Upholstery reported 3.0% sales growth in the first quarter due to higher average selling prices due to a shift in product mix toward more expensive sofas and sectionals.

 

The Home Meridian segment’s net sales decreased $3.0 million or 4.2% in the fiscal 2020 first quarter due primarily to soft retail conditions and higher than expected quality allowances in the quarter which negatively impacted net sales by $2.1 million or 3.0%. We believe the quality issue was resolved and do not believe it irreparably harmed the customer relationship.

 

Home Meridian’s margins were more affected by the tariff than our other business units due to the nature of their customer base, as many of its customers had large orders already in the pipeline at lower, pre-tariff prices. However, increased pricing and re-sourcing strategies are in place and we continue to adjust pricing and to rationalize sourcing to offset the increased tariffs. Warehousing and distribution costs were up due to the costs of storing and handling increased inventory related to increased quality costs and the shift to more inventory dependent e-commerce business. On a more positive note, Home Meridian’s emerging distribution channels continued to grow during the quarter. Samuel Lawrence Hospitality sales more than doubled and ended the quarter with backlog nearly 70% higher, both compared to the prior year period. Accentrics Home and other e-commerce sales in the other divisions grew sales by nearly 20% and maintained a better margin compared to the other Home Meridian channels.

 

Net sales in All Other decreased $1.2 million or 4.2% in the fiscal 2020 first quarter driven by decreased incoming orders in our domestic upholstery manufacturing divisions, partially offset by an approximate 40% sales increase in the H Contract division. Reduced order volume contributed to the operating inefficiencies and higher direct labor in Bradington-Young and Shenandoah divisions. However, lower material costs helped Bradington-Young improve its gross profit in absolute terms and as a percentage of net sales. Sales at Sam Moore were below prior year, but better controlled labor costs and cost reduction initiatives improved Sam Moore’s gross and operating margins. A new Sam Moore division president is now on board and will focus on growing Sam Moore’s top line. H Contract sales benefited from large backlog at fiscal 2019 year-end. Broader product offerings and favorable product mix helped H Contract improve gross and operating profits by nearly 50% and over 85% respectively. Despite the net sales decrease, All Other reported a solid operating income margin of approximately 10%

 

 

Despite disappointing operating results for the quarter, we generated $20.3 million in cash from operating activities and $1.4 million from proceeds received on a note receivable from the sale of a former distribution facility, paid $1.5 million for capital expenditures to expand our manufacturing facilities at Bradington-Young, $1.5 million towards our term loans, and $1.8 million in cash dividends to our shareholders. Cash and cash equivalents stood at $28.3 million at quarter-end, an increase of $16.8 million compared to the balance at fiscal 2019 year-end. Our total assets and liabilities each increased approximately $44 million due to the adoption of Topic 842, Leases. With strategic inventory management and cautious capital expenditures, along with an aggregate $27.7 million available under our existing revolver to fund working capital, we are confident in our financial condition.

  

Results of Operations

 

The following table sets forth the percentage relationship to net sales of certain items included in the condensed consolidated statements of income included in this report. 

 

   

Thirteen Weeks Ended

 
   

May 5,

   

April 29,

 
   

2019

   

2018

 

Net sales

    100.0 %     100.0 %

Cost of sales

    81.2       77.6  

Gross profit

    18.8       22.4  

Selling and administrative expenses

    16.2       15.4  

Intangible asset amortization

    0.4       0.4  

Operating income

    2.1       6.6  

Other income, net

    -       -  

Interest expense, net

    0.3       0.3  

Income before income taxes

    1.8       6.3  

Income tax expense

    0.4       1.3  

Net income

    1.5       5.0  

  

Fiscal 2020 First Quarter Compared to Fiscal 2019 First Quarter 

 

   

Net Sales

 
   

Thirteen Weeks Ended

 
   

May 5, 2019

           

April 29, 2018

           

$ Change

   

% Change

 
            % Net Sales             % Net Sales                  

Hooker Branded

  $ 39,600       29.2 %   $ 42,772       29.9 %   $ (3,172 )     -7.4 %

Home Meridian

    67,630       49.9 %     70,596       49.4 %     (2,966 )     -4.2 %

All Other

    28,288       20.9 %     29,524       20.7 %     (1,236 )     -4.2 %

Consolidated

  $ 135,518       100 %   $ 142,892       100 %   $ (7,374 )     -5.2 %

 

Unit Volume

 

FY20 Q1 % Increase

vs. FY19 Q1

Average Selling Price (ASP)

 

FY20 Q1 % Increase

vs. FY19 Q1

 
                     

Hooker Branded

    -10.3 %  

Hooker Branded

    4.2 %

Home Meridian

    -8.2 %  

Home Meridian

    5.8 %

All Other

    -10.0 %  

All Other

    6.6 %

Consolidated

    -8.7 %  

Consolidated

    4.9 %

 

 

Consolidated net sales decreased due to reduced sales volume in both Hooker Branded and Home Meridian segments, and All Other.

 

 

The net sales decrease in the Hooker Branded segment was attributable to decreased unit volume, partially offset by increased ASP, which was due to lower discounting related to tariffs and higher freight at Hooker Casegoods, and increased sales of higher-priced products, which were introduced in 2018 at Hooker Upholstery.

 

 

Net sales decreased in Home Meridian segment due to decreased unit volume with major furniture chains and mega accounts as well as higher allowances due to a quality issue, partially offset by increased volume in the Samuel Lawrence Hospitality business and to a lesser extent at Accentrics Home. ASP increased in four out of five divisions at Home Meridian segment, however, it was not sufficient to recover the volume loss.

 

 

All Other net sales decreased due to sales declines at our domestic upholstery manufacturing divisions which experienced reduced order volume, partially offset by H Contract increased net sales. All Other ASP increased due to increased mix of higher-priced leather products. Sam Moore and H Contract ASP stayed essentially flat.

 

   

Gross Income and Margin

 
   

Thirteen Weeks Ended

 
   

May 5, 2019

           

April 29, 2018

           

$ Change

   

% Change

 
          % Net Sales           % Net Sales              

Hooker Branded

  $ 12,556       31.7 %   $ 14,422       33.7 %   $ (1,866 )     -12.9 %

Home Meridian

    5,903       8.7 %     10,416       14.8 %     (4,513 )     -43.3 %

All Other

    7,058       25.0 %     7,128       24.1 %     (70 )     -1.0 %

Consolidated

  $ 25,517       18.8 %   $ 31,966       22.4 %   $ (6,449 )     -20.2 %

 

Consolidated gross profit decreased in absolute terms and as a percentage of net sales in the fiscal 2020 first quarter.

 

 

The Hooker Branded segment’s gross profit decreased $1.9 million due primarily to lower net sales and to a lesser extent higher distribution costs. Product costs were negatively impacted by tariff and higher freight cost.

 

 

The Home Meridian segment’s gross margin decreased in absolute terms and as a percentage of net sales due to the sales decline and was exacerbated by increased product costs due to tariffs and increased freight costs, larger than expected quality allowances, a heavier mix of certain lower-margin sales programs, and increased warehousing and distribution costs to handle excess inventory related to quality issues.

 

 

All Other’s gross profit decreased slightly in absolute terms but increased as a percentage of net sales. Although a smaller part of our business, H Contract contributed increased gross profit to All Other. In our domestic upholstery manufacturing divisions, favorable cost of goods sold was attributable to lower material costs and cost reduction initiatives, partially offset by increased direct labor due to the inefficiencies of operating at reduced order volumes.

 

   

Selling and Administrative Expenses (S&A)

 
   

Thirteen Weeks Ended

 
   

May 5, 2019

           

April 29, 2018

           

$ Change

   

% Change

 
            % Net Sales             % Net Sales                  

Hooker Branded

  $ 7,379       18.6 %   $ 7,696       18.0 %   $ (317 )     -4.1 %

Home Meridian

    10,562       15.6 %     10,371       14.7 %     191       1.8 %

All Other

    4,075       14.4 %     3,923       13.3 %     152       3.9 %

Consolidated

  $ 22,016       16.2 %   $ 21,990       15.4 %   $ 26       0.1 %

 

 

Consolidated selling and administrative (“S&A”) expenses increased as a percentage of net sales and stayed flat in absolute terms in the fiscal 2020 first quarter.

 

 

Hooker Branded segment S&A expenses decreased in absolute terms in the fiscal 2020 first quarter due to decreased selling expenses as the result of lower sales, and the recognition of a deferred gain related to the sale of a former distribution facility which we had owner-financed that was paid during the quarter, partially offset by higher employee compensation and benefits expenses due to personnel-related changes and the absence of a $1.0 million life insurance gain recorded in the prior year period. Hooker Branded segment S&A expenses increased as a percentage of net sales due to lower net sales.

 

 

Home Meridian segment S&A expenses increased slightly in absolute terms and as a percentage of net sales due to increased employee compensation due to increased headcount, and increased travel expense, partially offset by decreased selling expenses and bonus accrual due to lower sales and profitability.

 

 

All Other S&A expenses increased slightly in absolute terms and as a percentage of net sales due to higher employee benefits expenses and sample costs.

 

   

Intangible Asset Amortization

 
   

Thirteen Weeks Ended

 
   

May 5, 2019

           

April 29, 2018

           

$ Change

   

% Change

 
          % Net Sales           % Net Sales              

Intangible asset amortization

  $ 596       0.4 %   $ 596       0.4 %   $ -       0.0 %

 

Intangible asset amortization expense stayed the same compared to the prior year first quarter.

 

   

Operating Profit and Margin

 
   

Thirteen Weeks Ended

 
   

May 5, 2019

           

April 29, 2018

           

$ Change

   

% Change

 
          % Net Sales           % Net Sales              

Hooker Branded

  $ 5,177       13.1 %   $ 6,726       15.7 %   $ (1,549 )     -23.0 %

Home Meridian

    (4,993 )     -7.4 %     (288 )     -0.4 %     (4,705 )     -1633.7 %

All Other

    2,721       9.6 %     2,942       10.0 %     (221 )     -7.5 %

Consolidated

  $ 2,905       2.1 %   $ 9,380       6.6 %   $ (6,475 )     -69.0 %

 

Operating profitability decreased in absolute terms and as a percentage of net sales, due to the factors discussed above.

 

   

Interest Expense, net

 
   

Thirteen Weeks Ended

 
   

May 5, 2019

           

April 29, 2018

           

$ Change

   

% Change

 
          % Net Sales           % Net Sales              

Consolidated interest expense, net

  $ 341       0.3 %   $ 382       0.3 %   $ (41 )     -10.7 %

 

Consolidated interest expense decreased due to the pay-off of the New Unsecured Term Loan in December 2018, partially offset by increased interest rates on our variable-rate term loans.

 

   

Income taxes

 
   

Thirteen Weeks Ended

 
   

May 5, 2019

           

April 29, 2018

           

$ Change

   

% Change

 
          % Net Sales           % Net Sales              

Consolidated income tax expense

  $ 515       0.4 %   $ 1,849       1.3 %   $ (1,334 )     -72.1 %
                                                 

Effective Tax Rate

    20.6 %             20.5 %                        

 

 

 

We recorded income tax expense of $515,000 for the fiscal 2020 first quarter compared to $1.8 million for the comparable prior year period. The effective tax rates for the fiscal 2020 and 2019 first quarters were 20.6% and 20.5%, respectively.

 

   

Net Income

 
   

Thirteen Weeks Ended

 
   

May 5, 2019

           

April 29, 2018

           

$ Change

   

% Change

 
          % Net Sales           % Net Sales              

Consolidated

  $ 1,987       1.5 %   $ 7,154       5.0 %   $ (5,167 )     -72.2 %
                                                 

Diluted earnings per share

  $ 0.17             $ 0.61                          

 

Outlook

 

We continue to adapt to the challenges we faced in the first quarter and the subsequent additional tariff announced early in our second quarter.

 

Home Meridian’s management is taking steps to reduce the impact of many of the factors that negatively affected profitability in the first quarter, including improved specifications and procedures for manufacturing, additional inspection and testing procedures and shifting away from certain challenged production facilities. Furthermore, its management is thoroughly analyzing the quality and cost aspects of specific products, factories, and customers and will discontinue any products and end relationships with vendors that cannot reliably meet its specification and performance standards. Additionally, certain customers will be targeted for price increases to cover unreasonable levels of deductions. Home Meridian continues to implement price increases and resource production to non-tariff countries to improve gross margins on products affected by the 10% tariff imposed in fiscal 2019. That segment is working through higher freight costs on that inventory as well, which we expect will also improve gross margins in the coming quarters.

 

Finished furniture and component parts shipped from China after May 10, 2019 will become subject to an additional 15% tariff. The additional amount brings the total tariff on furniture imports from China to 25%. As of February 2019, we imported over 40% of our products from China. Our strategies to address the increased tariffs by segment include:

 

 

Hooker Brands: Hooker Casegoods and Hooker Upholstery are passing on price increases from the tariffs, beyond the amount offset by vendor concessions, in the form of a surcharge that can be reversed if tariffs are dropped or reduced. Hooker Upholstery is moving a significant portion of production outside of China during the next six months and has also received vendor price concessions. At Hooker Casegoods, a long-term relationship and the specialized craftsmanship of the company’s main Chinese supplier makes moving entirely away from China a less desirable action. However, tariffs will be priced into all new items, and the vendor is opening a factory in Vietnam, where some production can be shifted. We are continuing to develop production in alternative countries and are receiving vendor price concessions.

 

 

Home Meridian: Home Meridian’s value-priced upholstery division, PRI, is re-sourcing production away from China, projecting that 90% of production will be in non-tariff countries by the fall. Other divisions are moving production to non-tariff countries to a lesser degree and are examining product margins in order to rationalize product offerings. Home Meridian is also receiving vendor price concessions and raising prices where possible.

 

 

All Other: Domestic upholstery divisions in the All Other are enacting selected price increases and receiving vendor concessions to help mitigate the impact of tariffs on component parts imported from China. We currently operate five upholstery manufacturing plants in the United States which employ approximately 630 associates.

 

While we are encouraged to see some improvement in incoming orders, order activity is inconsistent across divisions and we expect the current challenges will persist throughout the summer, a traditionally slower selling season for home furnishings. Overall, the residential furniture industry is experiencing deflated demand and sluggish retail conditions and we expect the newly-enacted 25% tariff on Chinese imports to cause business disruptions in the industry throughout the next several months.

 

We are more optimistic about the second half of the fiscal year. We expect demand to increase to normal or above-average levels beginning around the Labor Day holiday and into the fall, which is traditionally the strongest season of the year for furniture sales. We also expect that some of our large retail customers will have completed their rebalancing of inventories and be in a better position to receive new products.

 

 

Both short term and long term, we are addressing our challenges. We have active strategies to expand our business beyond the current product line and customer base. We remain confident in our business model and strategies and in our strategic execution and are making the necessary investments to perform at a high level.

 

We face a number of significant risks and uncertainties, as more fully discussed in Item 1A, “Risk Factors” in our 2019 Annual Report.

 

Financial Condition, Liquidity and Capital Resources

 

Cash Flows – Operating, Investing and Financing Activities

 

   

Thirteen Weeks Ended

 
   

May 5,

     

April 29,

 
   

2019

     

2018

 

Net cash provided by operating activities

  $ 20,286       $ 28,579  

Net cash (used in)/provided by investing activities

    (235 )       604  

Net cash used in financing activities

    (3,232 )       (13,540 )

Net increase in cash and cash equivalents

  $ 16,819       $ 15,643  

 

During the three months ended May 5, 2019, cash generated from operations of $20.3 million and $1.4 million proceeds on a note receivable helped to pay $1.8 million in cash dividends, $1.5 million in long-term debt payments, $1.5 million of capital expenditures to expand our domestic manufacturing capacities and to enhance our business systems and facilities, and $157,000 in life insurance premiums.

 

In comparison, during the three months ended April 29, 2018, cash generated from operations of $28.6 million and $1.1 million in proceeds received under Company-owned life insurance policies helped to fund an increase in cash and cash equivalents of $15.6 million and pay approximately $12 million in long-term debt payments, $1.6 million in cash dividends and $370,000 of capital expenditures to enhance our business systems and facilities.

 

Liquidity, Financial Resources and Capital Expenditures

 

Our financial resources include:

 

 

available cash and cash equivalents, which are highly dependent on incoming order rates and our operating performance;

 

expected cash flow from operations; and

 

available lines of credit.

 

We believe these resources are sufficient to meet our business requirements through fiscal 2020 and for the foreseeable future, including:

 

 

capital expenditures;

 

working capital, including capital required to fund our retirement plans;

 

the payment of regular quarterly cash dividends on our common stock; and

 

the servicing of our acquisition-related debt.

 

Loan Agreements and Revolving Credit Facility

 

We currently have one unsecured term loan and one secured term loan outstanding and a revolving credit facility. The term loans are related to the Home Meridian acquisition. Details of our loan agreements and revolving credit facility are outlined below.

 

Original Loan Agreement

 

On February 1, 2016, we entered into an amended and restated loan agreement (the “Original Loan Agreement”) with Bank of America, N.A. (“BofA”) in connection with the closing of the Home Meridian acquisition. Also on February 1, 2016, we borrowed in full the amounts available under the Unsecured Term Loan (the “Unsecured Term Loan”) and the Secured Term Loan (the “Secured Term Loan”) in connection with the completion of the Home Meridian acquisition.

 

 

Details of the individual credit facilities provided for in the Original Loan Agreement are as follows:

 

 

Unsecured revolving credit facility. The Original Loan Agreement increased the amount available under our existing unsecured revolving credit facility from $15 million to $30 million and increased the sublimit of the facility available for the issuance of letters of credit from $3 million to $4 million. Amounts outstanding under the revolving facility bear interest at a rate, adjusted monthly, equal to the then-current LIBOR monthly rate plus 1.50%. We must also pay a quarterly unused commitment fee that is based on the average daily amount of the facility utilized during the applicable quarter;

 

 

Unsecured Term Loan. The Original Loan Agreement provided us with a $41 million Unsecured Term Loan. Any amount borrowed under the Unsecured Term Loan bears interest at a rate, adjusted monthly, equal to the then-current LIBOR monthly rate plus 1.50%. We must repay any principal amount borrowed under the Unsecured Term Loan in monthly installments of approximately $490,000, together with any accrued interest, until the full amount borrowed is repaid or until February 1, 2021, at which time all amounts outstanding under the Unsecured Term Loan will become due and payable; and

 

 

Secured Term Loan. The Original Loan Agreement provided us with a $19 million term loan secured by a security interest in certain Company-owned life insurance policies granted to BofA under a security agreement, dated as of February 1, 2016 (the “Security Agreement”). Any amount borrowed under the Secured Term Loan bears interest at a rate, adjusted monthly, equal to the then-current LIBOR monthly rate plus 0.50%. We must pay the interest accrued on any principal amounts borrowed under the Secured Term Loan on a monthly basis until the full principal amount borrowed is repaid or until February 1, 2021, at which time all amounts outstanding under the Secured Term Loan will become due and payable. BofA’s rights under the Security Agreement are enforceable upon the occurrence of an event of default under the Original Loan Agreement.

 

New Loan Agreement

 

On September 29, 2017, we entered into a second amended and restated loan agreement (the “New Loan Agreement”) with BofA in connection with the completion of the Shenandoah acquisition.  The New Loan Agreement:

 

 

amends and restates the Original Loan Agreement detailed above such that our existing $30 million unsecured revolving credit facility (the “Existing Revolver”), Unsecured Term Loan, and Secured Term Loan all remain outstanding under the New Loan Agreement; and

 

 

provided us with a new $12 million unsecured term loan (the “New Unsecured Term Loan”), which we subsequently paid off in full.

 

The New Loan Agreement 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 August 31, 2019; and

 

o

2.00:1.00 thereafter.

 

o

A basic fixed charge coverage ratio of at least 1.25:1.00; and

 

o

Limit capital expenditures to no more than $15.0 million during any fiscal year beginning in fiscal 2020.

 

The New 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 New 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 New Loan Agreement. We paid off the New Unsecured Term Loan in fiscal 2019.

 

We were in compliance with each of these financial covenants at May 5, 2019 and expect to remain in compliance with existing covenants for the foreseeable future.

 

As of May 5, 2019, $17.0 million was outstanding under the Unsecured Term Loan, $17.1 million was outstanding under the Secured Term Loan, respectively.

 

 

Revolving Credit Facility Availability

 

As of May 5, 2019, we had an aggregate $27.7 million available under our revolving credit facility to fund working capital needs. Standby letters of credit in the aggregate amount of $2.3 million, used to collateralize certain insurance arrangements and for imported product purchases, were outstanding under the revolving credit facility as of May 5, 2019. There were no additional borrowings outstanding under the revolving credit facility as of May 5, 2019.

 

Capital Expenditures

 

We spent $1.5 million for capital expenditures during the quarter, $1.2 million of which was spent on the expansion of our Bradington-Young manufacturing facility. We expect to spend between $4.0 to $4.5 million in the remainder of the 2020 fiscal year to maintain and continue to enhance our operating systems and facilities.

 

Share Repurchase Authorization

 

During fiscal 2013, our Board of Directors authorized the repurchase of up to $12.5 million of shares of the Company’s common stock. The authorization does not obligate us to acquire a specific number of shares during any period and does not have an expiration date, but it may be modified, suspended or discontinued at any time at the discretion of our Board of Directors. Repurchases may be made from time to time in the open market, or through privately negotiated transactions or otherwise, in compliance with applicable laws, rules and regulations, and subject to our cash requirements for other purposes, compliance with the covenants under the Loan Agreement and other factors we deem relevant. No shares have been repurchased since fiscal 2013. Approximately $11.8 million remained available for future repurchases under the authorization as of May 5, 2019.

 

Commitments and Contractual Obligations

 

As of May 5, 2019, our commitments and contractual obligations related to our operating leases were as follows:

 

   

Cash Payments Due by Period (In thousands)

 
   

Less than

                   

More than

         
   

1 Year

   

1-3 Years

   

3-5 Years

   

5 years

   

Total

 

Operating leases*

    7,667       19,511       10,445       14,063       51,686  

 

*These amounts represent estimated cash payments due under operating leases for real estate utilized in our operations and warehouse and office equipment, as well as short term leases with remaining terms less than 12 months. See Note 8 for additional information and disclosures about our leases.

 

Critical Accounting Policies

 

Except as discussed below, there have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our 2019 Annual Report.

 

On the first day of the current fiscal year, we adopted the accounting standard outlined in Part 1, Notes to Condensed Consolidated Financial Statements, “Note 2. Recently Adopted Accounting Policies” (“Note 2”). See Note 2 for additional information related to the impact of adopting this accounting standard.

  

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

We are exposed to various types of market risk in the normal course of our business, including the impact of interest rate changes, raw materials price risk and changes in foreign currency exchange rates, which could impact our results of operations or financial condition. We manage our exposure to this risk through our normal operating activities.

 

Interest Rate Risk

 

Borrowings under our revolving credit facility and the Unsecured Term Loan bear interest based on LIBOR plus 1.5% and borrowings under the Secured Term Loan bear interest based on LIBOR plus 0.5%. As such, these debt instruments expose us to market risk for changes in interest rates. There was no outstanding balance under our revolving credit facility as of May 5, 2019, other than standby letters of credit in the amount of $2.3 million; however, as of May 5, 2019, $34.0 million was outstanding under our term loans. A 1% increase in the LIBOR rate would result in an annual increase in interest expenses on our terms loans of approximately $314,000.

 

Raw Materials Price Risk

 

We are exposed to market risk from changes in the cost of raw materials used in our domestic upholstery manufacturing processes; principally, wood, fabric and foam products.  Increases in home construction activity could result in increases in wood and fabric costs. Additionally, the cost of petroleum-based foam products we utilize are sensitive to crude oil prices, which vary due to supply, demand and geo-political factors.

 

Currency Risk

 

For imported products, we generally negotiate firm pricing denominated in U.S. Dollars with our foreign suppliers, typically for periods of at least one year.  We accept the exposure to exchange rate movements beyond these negotiated periods. We do not use derivative financial instruments to manage this risk but could choose to do so in the future.  Most of our imports are purchased from suppliers located in Vietnam and China.  The Chinese currency floats within a limited range in relation to the U.S. Dollar, resulting in exposure to foreign currency exchange rate fluctuations.

 

Since we transact our imported product purchases in U.S. Dollars, a relative decline in the value of the U.S. Dollar could increase the price we pay for imported products beyond the negotiated periods. We generally expect to reflect substantially all of the effect of any price increases from suppliers in the prices we charge for imported products. However, these changes could adversely impact sales volume or profit margins during affected periods.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended May 5, 2019. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective as of May 5, 2019 to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the Company’s management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting during the fiscal quarter ended May 5, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II. OTHER INFORMATION 

 

Item 6.     Exhibits

 

  

3.1

Amended and Restated Articles of Incorporation of the Company, as amended March 28, 2003 (incorporated by reference to Exhibit 3.1 of the Company’s Form 10-Q (SEC File No. 000-25349) for the quarter ended February 28, 2003)

  

  

  

  

3.2

Amended and Restated Bylaws of the Company, as amended December 10, 2013 (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K (SEC File No. 000-25349) for the year ended February 2, 2014)

  

  

  

  

4.1

Amended and Restated Articles of Incorporation of the Company, as amended (See Exhibit 3.1)

 

  

  

  

4.2

Amended and Restated Bylaws of the Company, as amended (See Exhibit 3.2)

  

  

  

  

31.1*

Rule 13a-14(a) Certification of the Company’s principal executive officer

  

  

  

  

31.2*

Rule 13a-14(a) Certification of the Company’s principal financial officer

  

  

  

  

32.1**

Rule 13a-14(b) Certification of the Company’s principal executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

  

  

  

  

101*

The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended May 5, 2019, formatted in Extensible Business Reporting Language (“XBRL”): (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of income, (iii) condensed consolidated statements of comprehensive income, (iv) condensed consolidated statements of cash flows, and (v) the notes to the condensed consolidated financial statements

 


*Filed herewith

** Furnished herewith

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

HOOKER FURNITURE CORPORATION

 

 

 

 

 

Date: June 14, 2019

By:

/s/ Paul A. Huckfeldt

 

 

 

Paul A. Huckfeldt

 

 

 

Chief Financial Officer and

Senior Vice President – Finance and

Accounting

 

 

 

30