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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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 |
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 2, 2022, there were
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION |
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Item 1. |
3 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
20 |
Item 3. |
32 |
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Item 4. |
33 |
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PART II. OTHER INFORMATION |
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Item 2. |
34 |
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Item 6. |
34 |
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35 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
As of |
October 30, |
January 30, |
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2022 |
2022 |
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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 lease 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 loss |
( |
) | ( |
) | ||||
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 30, |
October 31, |
October 30, |
October 31, |
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2022 |
2021 |
2022 |
2021 |
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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/(loss) |
( |
) | ||||||||||||||
Other income, net |
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Interest expense, net |
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Income/(Loss) before income taxes |
( |
) | ||||||||||||||
Income tax expense/(benefit) |
( |
) | ||||||||||||||
Net income/(loss) |
$ | $ | ( |
) | $ | $ | ||||||||||
Earnings/(Loss) 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/(LOSS)
(In thousands)
(Unaudited)
For the |
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Thirteen Weeks Ended |
Thirty-Nine Weeks Ended |
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October 30, |
October 31, |
October 30, |
October 31, |
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2022 |
2021 |
2022 |
2021 |
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Net income/(loss) |
$ | $ | ( |
) | $ | $ | ||||||||||
Other comprehensive income: |
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Amortization of actuarial loss |
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Income tax effect on amortization |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Adjustments to net periodic benefit cost |
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Total comprehensive income/(loss) |
$ | $ | ( |
) | $ | $ |
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 30, |
October 31, |
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2022 |
2021 |
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Operating Activities: |
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Net income |
$ | $ | ||||||
Adjustments to reconcile net income to net cash (used in)/provided by 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 |
( |
) | ||||||
Gain on life insurance policies |
( |
) | ( |
) | ||||
Changes in assets and liabilities: |
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Trade accounts receivable |
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Inventories |
( |
) | ( |
) | ||||
Income tax recoverable |
( |
) | ||||||
Prepaid expenses and other assets |
( |
) | ( |
) | ||||
Trade accounts payable |
( |
) | ( |
) | ||||
Accrued salaries, wages, and benefits |
( |
) | ||||||
Accrued income taxes |
( |
) | ||||||
Customer deposits |
( |
) | ||||||
Operating lease liabilities |
( |
) | ||||||
Other accrued expenses |
( |
) | ||||||
Deferred compensation |
( |
) | ( |
) | ||||
Net cash (used in)/provided by operating activities |
$ | ( |
) | $ | ||||
Investing Activities: |
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Acquisitions |
( |
) | ||||||
Purchases of property and equipment |
( |
) | ( |
) | ||||
Premiums paid on life insurance policies |
( |
) | ( |
) | ||||
Net cash used in investing activities |
( |
) | ( |
) | ||||
Financing Activities: |
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Proceeds from long-term loans |
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Payments for long-term loans |
( |
) | ||||||
Proceeds from revolving credit facility |
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Payments for revolving credit facility |
( |
) | ||||||
Debt issuance cost |
( |
) | ||||||
Purchase and retirement of common stock |
( |
) | ||||||
Cash dividends paid |
( |
) | ( |
) | ||||
Cash provided by/(used in) financing activities |
( |
) | ||||||
Net decrease in cash and cash equivalents |
( |
) | ( |
) | ||||
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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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 August 1, 2021 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
Net income for the 13 weeks ended October 31, 2021 |
( |
) | ( |
) | ||||||||||||||||
Unrealized loss on defined benefit plan, net of tax of $ |
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Cash dividends paid and accrued ($ |
( |
) | ( |
) | ||||||||||||||||
Restricted stock grants, net of forfeitures |
( |
) | ( |
) | ( |
) | ||||||||||||||
Restricted stock compensation cost |
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Performance-based restricted stock units costs |
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PSU awards |
- | - | ||||||||||||||||||
Balance at October 31, 2021 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
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 and accrued ($ |
( |
) | ( |
) | ||||||||||||||||
Purchase and retirement of common stock |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Restricted stock grants, net of forfeitures |
( |
) | - | - | ||||||||||||||||
Restricted stock compensation cost |
||||||||||||||||||||
Performance-based restricted stock units costs |
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Balance at October 30, 2022 |
$ | $ | $ | ( |
) | $ |
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 31, 2021 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
Net income for the 39 weeks ended October 31, 2021 |
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Unrealized loss on defined benefit plan, net of tax of $ |
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Cash dividends paid and accrued ($ |
( |
) | ( |
) | ||||||||||||||||
Restricted stock grants, net of forfeitures |
( |
) | ( |
) | ||||||||||||||||
Restricted stock compensation cost |
||||||||||||||||||||
Performance-based restricted stock units costs |
||||||||||||||||||||
PSU awards |
( |
) | ( |
) | ||||||||||||||||
Balance at October 31, 2021 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
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 and accrued ($ |
( |
) | ( |
) | ||||||||||||||||
Purchase and retirement of common stock |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Restricted stock grants, net of forfeitures |
( |
) | ( |
) | ||||||||||||||||
Restricted stock compensation cost |
||||||||||||||||||||
Performance-based restricted stock units costs |
||||||||||||||||||||
Balance at October 30, 2022 |
$ | $ | $ | ( |
) | $ |
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 30, 2022
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 30, 2022 (“2022 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 2023 fiscal year thirteen-week period (also referred to as “three months,” “three-month period,” “quarter,” “third quarter” or “quarterly period”) that began August 1, 2022, and the thirty-nine-week period (also referred to as “nine months”, “nine-month period” or “year-to-date period”) that began January 31, 2022, which both ended October 30, 2022. This report discusses our results of operations for these periods compared to the 2022 fiscal year thirteen-week period that began August 2, 2021, and the thirty-nine-week period that began February 1, 2021, which both ended October 31, 2021; and our financial condition as of October 30, 2022 compared to January 30, 2022.
References in these notes to the condensed consolidated financial statements of the Company to:
■ |
the 2023 fiscal year and comparable terminology mean the fifty-two-week fiscal year that began January 31, 2022 and will end January 29, 2023; and |
■ |
the 2022 fiscal year and comparable terminology mean the fifty-two-week fiscal year that began February 1, 2021 and ended January 30, 2022. |
On January 31, 2022, the first day of our 2023 fiscal year, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Sunset HWM, LLC (“Sunset West”) and its three members to acquire substantially all the assets of Sunset West (the “Sunset Acquisition”). Simultaneously, we closed on the transaction by paying $
Sunset West’s results are included in the Domestic Upholstery segment’s results beginning with the fiscal 2023 first quarter. Consequently, comparable prior-year information for Sunset West is not included in the financial statements presented in this report. The acquisition is discussed in greater detail below in Note 3 Acquisition.
2. Recently Adopted Accounting Policies
No new accounting pronouncements have been adopted in the 2023 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 because of future adoption.
3. Acquisition
In accordance with FASB Accounting Standards Codification Topic 805, “Business Combinations” (“ASC 805”), the Acquisition has been accounted for using the acquisition method of accounting. We recorded assets acquired, including identifiable intangible assets, and liabilities assumed, from Sunset West at their respective fair values at the date of completion of the Acquisition. The excess of the purchase price over the net fair value of such assets and liabilities was recorded as goodwill.
The following table summarizes the preliminary estimates of the fair values of the identifiable assets acquired and liabilities assumed in the Acquisition as of October 30, 2022. The preliminary estimates of fair value of identifiable assets acquired and liabilities assumed are subject to revision, which may result in adjustments to the preliminary values presented below, when management’s appraisals and estimates are finalized. In the fourth quarter of fiscal 2023, we received $
Fair Value Estimates of Assets Acquired and Liabilities Assumed
The consideration and components of our initial fair value allocation of the purchase price paid at closing and in the subsequent net working capital adjustment consisted of the following:
Purchase price consideration
Fair value estimates of assets acquired and liabilities assumed |
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Purchase price consideration |
||||
Cash paid for assets acquired |
$ | |||
Cash receivable from the seller for final working capital adjustment |
( |
) | ||
Escrow |
||||
Fair value of earnout |
||||
Total purchase price |
$ | |||
Accounts receivable |
$ | |||
Inventory |
||||
Prepaid expenses and other current assets |
||||
Property |
||||
Intangible assets |
||||
Goodwill |
||||
Customer deposits |
( |
) | ||
Accounts payable |
( |
) | ||
Accrued expenses |
( |
) | ||
Total purchase price |
$ |
Property was recorded at fair value and primarily consists of machinery and equipment. Property and equipment will be amortized over their estimated useful lives.
Goodwill is calculated as the excess of the purchase price over the net assets acquired. The goodwill recognized is attributable to growth opportunities and expected synergies. All goodwill is expected to be deductible for income tax purposes.
Intangible assets, consist of two separately identified assets:
■ | Sunset West customer relationships, which are definite-lived intangible assets with an aggregate fair value of $ |
■ | The Sunset West trade name, which is definite-lived intangible asset with fair value of $ |
■ | The total weighted average amortization period for these assets is |
We incurred Acquisition-related costs of $
4. Accounts Receivable
October 30, |
January 30, |
|||||||
2022 |
2022 |
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Gross accounts receivable |
$ | $ | ||||||
Customer allowances |
( |
) | ( |
) | ||||
Allowance for doubtful accounts |
( |
) | ( |
) | ||||
Trade accounts receivable |
$ | $ |
5. Inventories
October 30, |
January 30, |
|||||
2022 |
2022 |
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Finished furniture |
$ | $ | ||||
Furniture in process |
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Materials and supplies |
||||||
Inventories at FIFO |
||||||
Reduction to LIFO basis |
( |
) | ( |
) | ||
Inventories |
$ | $ |
6. Property, Plant and Equipment
Depreciable Lives |
October 30, |
January 30, |
|||||||||
(In years) |
2022 |
2022 |
|||||||||
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 |
|||||||||||
Less accumulated depreciation |
( |
) | ( |
) | |||||||
Total depreciable property, net |
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Land |
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Construction-in-progress |
|||||||||||
Property, plant and equipment, net |
$ | $ |
7. Cloud Computing Hosting Arrangement
We are in the process of implementing a common Enterprise Resource Planning (ERP) system across all divisions and expect to go-live with this system at Sunset West in late fiscal 2023 and in our legacy Hooker divisions in early fiscal 2024, with other segments and divisions following thereafter. Based on the provisions of ASU 2018-15, Intangibles — Goodwill and Other — Internal-Use Software, we capitalize implementation costs incurred to develop internal-use software associated with hosting arrangements that are service contracts. These costs are recorded on “Other noncurrent assets” line of our condensed consolidated balance sheets. Amortization expense is expected to commence at system go-live in the second half of fiscal 2023. The capitalized implementation costs at October 30, 2022 and January 30, 2022 were as follows:
Capitalized Implementation Costs |
||||
Balance at January 30, 2022 |
$ | |||
Costs capitalized during the period |
||||
Balance at October 30, 2022 |
$ |
8. 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 30, 2022 and January 30, 2022, 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.
Our assets measured at fair value on a recurring basis at October 30, 2022 and January 30, 2022, were as follows:
Fair value at October 30, 2022 |
Fair value at January 30, 2022 |
|||||||||||||||||||||||||||||||
Description |
Level 1 |
Level 2 |
Level 3 |
Total |
Level 1 |
Level 2 |
Level 3 |
Total |
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(In thousands) |
||||||||||||||||||||||||||||||||
Assets measured at fair value |
||||||||||||||||||||||||||||||||
Company-owned life insurance |
$ | $ | $ | $ | $ | $ | $ | $ |
9. Intangible Assets
During the fiscal 2023 nine-month period, we recorded both non-amortizable and amortizable intangible assets because of the Acquisition. Details of these new intangible assets, as well as previously recorded intangible assets assigned to our Domestic Upholstery and Home Meridian segments, are shown in the following two tables:
January 30, 2022 | October 30, 2022 | |||||||||||||
Non-amortizable Intangible Assets | Segment | Beginning Balance | Acquisition | Net Book Value | ||||||||||
Goodwill - Shenandoah Furniture | Domestic Upholstery | $ | $ | $ | ||||||||||
Goodwill - Sunset West | Domestic Upholstery | |||||||||||||
Total Goodwill | $ | $ | $ | |||||||||||
Trademarks and trade names - Home Meridian | Home Meridian | |||||||||||||
Trademarks and trade names | Domestic Upholstery | |||||||||||||
Total Trademarks and trade names | $ | $ | $ | |||||||||||
Total non-amortizable assets | $ | $ | $ |
Our amortizable intangible assets are recorded in our Home Meridian and Domestic Upholstery segments. The carrying amounts and changes therein of those amortizable intangible assets were as follows:
Amortizable Intangible Assets |
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Customer |
||||||||||||
Relationships |
Trademarks |
Totals |
||||||||||
Balance at January 30, 2022 |
$ | $ | $ | |||||||||
Acquisition |
||||||||||||
Amortization |
( |
) | ( |
) | ( |
) | ||||||
Balance at October 30, 2022 |
$ | $ | $ |
For the remainder of fiscal 2023, amortization expense is expected to be approximately $
10. Leases
We have operating leases for warehouses, showrooms, manufacturing facilities, offices and equipment. We recognized sub-lease income of $
The components of lease cost and supplemental cash flow information for leases for the three-months and nine-months ended October 30, 2022 and October 31, 2021 were:
Thirteen Weeks Ended |
Thirty-Nine Weeks Ended |
|||||||||||||||
October 30, 2022 |
October 31, 2021 |
October 30, 2022 |
October 31, 2021 |
|||||||||||||
Operating lease cost |
$ | $ | $ | $ | ||||||||||||
Variable lease cost |
||||||||||||||||
Short-term lease cost |
||||||||||||||||
Total lease cost |
$ | $ | $ | $ | ||||||||||||
Operating lease cash outflows |
$ | $ | $ | $ |
The right-of-use assets and lease liabilities recorded on our condensed consolidated balance sheets as of October 30, 2022 and January 30, 2022 were as follows:
October 30, 2022 |
January 30, 2022 |
|||||||
Real estate |
$ | $ | ||||||
Property and equipment |
||||||||
Total leases right-of-use assets |
$ | $ | ||||||
Current portion of operating lease liabilities |
$ | $ | ||||||
Long term operating lease liabilities |
||||||||
Total lease liabilities |
$ | $ |
For leases that commenced before July 2022, we used our incremental borrowing rate which was LIBOR plus
The following table reconciles the undiscounted future lease payments for operating leases to the operating lease liabilities recorded in the condensed consolidated balance sheets on October 30, 2022:
Undiscounted Future Operating Lease Payments |
||||
Remainder of 2023 |
$ | |||
2024 |
||||
2025 |
||||
2026 |
||||
2027 |
||||
2028 and thereafter |
||||
Total lease payments |
$ | |||
Less: impact of discounting |
( |
) | ||
Present value of lease payments |
$ |
As of October 30, 2022, the Company had an additional lease for a showroom in High Point, North Carolina. This lease was commenced in November 2022 with an initial lease term of
11. Debt
On July 26, 2022, we entered into the Fourth Amendment to the Second Amended and Restated Loan Agreement (the “Amendment”) with Bank of America, N.A. (“BofA”) to replenish cash used to make the 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 a $ |
● | 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 30, 2022, $
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 |
2.50:1.0 through July 30, 2023; |
o |
2.25:1.0 through July 30, 2024; and |
o |
2.00:1.00 thereafter. |
We were in compliance with each of these financial covenants at October 30, 2022 and expect to remain in compliance with existing covenants through fiscal 2023 and for the foreseeable future.
During the fiscal 2023 second quarter, we drew $
12. 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 2022 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:
October 30, |
January 30, |
|||||||
2022 |
2022 |
|||||||
Restricted shares |
||||||||
RSUs and PSUs |
||||||||
All restricted shares, RSUs and PSUs awarded that have not yet vested are considered when computing diluted earnings per share.
During the fiscal 2023 nine-month period, we purchased and retired
The following table sets forth the computation of basic and diluted earnings/(loss) per share:
Thirteen Weeks Ended |
Thirty-Nine Weeks Ended |
|||||||||||||||
October 30, |
October 31, |
October 30, |
October 31, |
|||||||||||||
2022 |
2021 |
2022 |
2021 |
|||||||||||||
Net income/(loss) |
$ | $ | ( |
) |
$ | $ | ||||||||||
Less: Unvested participating restricted stock dividends |
||||||||||||||||
Net earnings allocated to unvested participating restricted stock |
||||||||||||||||
Earnings/(Loss) available for common shareholders |
( |
) |
||||||||||||||
Weighted average shares outstanding for basic earnings per share |
||||||||||||||||
Dilutive effect of unvested restricted stock, RSU and PSU awards |
||||||||||||||||
Weighted average shares outstanding for diluted earnings per share |
||||||||||||||||
Basic earnings/(loss) per share |
$ | $ | ( |
) |
$ | $ | ||||||||||
Diluted earnings/(loss) per share |
$ | $ | ( |
) |
$ | $ |
13. 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 3, 2019 through January 30, 2022 remain subject to examination by federal and state taxing authorities.
14. 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, Sam Moore, Shenandoah Furniture and newly acquired Sunset West; and |
■ |
All Other, consisting of H Contract and Lifestyle Brands. Neither 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 2023
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 2023 first quarter, H Contract’s results included sales of seating products sourced from Sam Moore. Due to a change in the way management internally evaluates operating performance, beginning with fiscal 2023 first quarter Sam Moore’s results now include sales of seating products formerly included in H Contract’s results. Fiscal 2022 results discussed below have been recast to reflect this change. The Hooker Branded and Home Meridian segments are unchanged.
As discussed in Note 3 above, we acquired substantially all the assets of Sunset West on the first day of the 2023 fiscal year. Based on our analysis and the requirements of ASC 280: Segment Reporting, Sunset West’s results are included in the Domestic Upholstery segment on a prospective basis.
The following table presents segment information for the periods, and as of the dates, indicated. Prior-year information has been recast to reflect the change discussed above.
Thirteen Weeks Ended |
Thirty-Nine Weeks Ended |
|||||||||||||||||||||||||||||||
October 30, |
October 31, |
October 30, |
October 31, |
|||||||||||||||||||||||||||||
2022 |
2021 |
2022 |
2021 |
|||||||||||||||||||||||||||||
% Net |
% Net |
% Net |
% Net |
|||||||||||||||||||||||||||||
Net Sales |
Sales |
Sales |
Sales |
Sales |
||||||||||||||||||||||||||||
Hooker Branded |
$ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
Home Meridian |
% | % | % | % | ||||||||||||||||||||||||||||
Domestic Upholstery |
% | % | % | % | ||||||||||||||||||||||||||||
All Other |
% | % | % | % | ||||||||||||||||||||||||||||
Consolidated |
$ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
Gross Profit/(Loss) |
||||||||||||||||||||||||||||||||
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 30, |
As of January 30, |
|||||||||||||||||||||||||||||||
2022 |
%Total |
2022 |
%Total |
|||||||||||||||||||||||||||||
Identifiable Assets |
Assets |
Assets |
||||||||||||||||||||||||||||||
Hooker Branded |
$ | % | $ | % | ||||||||||||||||||||||||||||
Home Meridian |
% | % | ||||||||||||||||||||||||||||||
Domestic Upholstery |
% | % | ||||||||||||||||||||||||||||||
All Other |
% | % | ||||||||||||||||||||||||||||||
Consolidated |
$ | % | $ | % | ||||||||||||||||||||||||||||
Consolidated Goodwill and Intangibles |
||||||||||||||||||||||||||||||||
Total Consolidated Assets |
$ | $ |
Sales by product type are as follows:
Net Sales (in thousands) |
||||||||||||||||||||||||||||||||
Thirteen Weeks Ended |
Thirty-Nine Weeks Ended |
|||||||||||||||||||||||||||||||
October 30, 2022 |
%Total |
October 31, 2021 |
%Total |
October 30, 2022 |
%Total |
October 31, 2021 |
%Total |
|||||||||||||||||||||||||
Casegoods |
$ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
Upholstery |
% | % | % | % | ||||||||||||||||||||||||||||
$ | % | $ |