2023 Annual Report
HOO K E R®
F U R N I S H I N G S
hookerfurnishings.com
MESSAGE TO OUR SHAREHOLDERS
A New Home Furnishings Landscape
As our economy and industry return to more normal conditions after the multi-year impacts of Covid-19 and global supply chain disruptions, we
have adjusted our strategy to a changing home furnishings landscape.
The industry, as a whole, is shifting from two years of historically-high furniture demand to a reliance on market share gains. In this new
environment, we’re confident in the many exciting initiatives underway to broaden our total addressable market and visibility to current and new
customers.
During this time of transition, we made some difficult decisions in fiscal 2023 for the long-term benefit of the Company and its shareholders.
Some of these decisions had a substantial unfavorable impact on our fiscal 2023 results and will spill over into fiscal 2024. However, we believe
in our strategic direction and the potential for Home Meridian to recover from the challenges of the last few years and contribute to our
profitability going forward. This time of transition will continue in fiscal 2024, as we
move away from higher-risk businesses and focus on our core strengths.
Broadening Our Reach
We have multiple marketing and merchandising initiatives underway across the
Company to expand market share. At the Spring High Point Market, we debuted a
nearly 120,000-square-foot Hooker Legacy Brands Showroom in a prime location at
the center of the market encompassing the entire third floor of the Showplace Building.
Featuring abundant natural lighting, high ceilings, a compelling presentation and
outdoor patio, the elevation of our High Point Market shopping experience helped us
engage thousands of new prospects.
Last fall, we introduced the Portfolio warehouse stocking program in a newly renovated
Home Meridian High Point Showroom. Encompassing an assortment of over 1,000
ready-to-ship SKUs across the segment’s brands, this rollout is enabling us to diversify
our customer base and distribution channels for Home Meridian, reaching a vast
network of independent retailers and interior designers.
Other initiatives underway include opening a showroom in the Atlanta Market to reach
thousands of interior designers who attend the show that do not come to the High
Point market, and continuing to develop more lifestyle-oriented collections appealing
to multiple regions of the country. We’re expanding the distribution of Sunset West’s outdoor
furnishings brand nationwide and are launching new lines such as the “M” domestically-
produced upholstery and imported occasional brand addressing a casual, comfortable modern
lifestyle. Through these and more, we expect to see increased momentum in the coming year.
At the Spring 2023 High Point Market, we presented
the first comprehensive display of the Sunset West
outdoor furnishings line in the Southeast US, a
boost to our expansion of the brand to national
distribution.
Short Term Pain, Long Term Gain
While painful in the short term, our decision to exit the unprofitable ACH business and
reposition our PRI unit, rather than dragging out corrective actions, was an intentional effort to
set us on a path to profitability sooner. This action is part of our final phase of reorganization at
Home Meridian, and because of this, we’re confident we can turn the segment to profitability
by the end of this year.
Going forward, Home Meridian will focus working capital on the product lines that matter most
to our partners. That means a return to our core businesses: Pulaski, Samuel Lawrence, PRI and
Last fall, we introduced the Portfolio
warehouse stocking program, offering an
assortment of over 1,000 ready-to-ship
SKUs across HMI’s brands. The program
is enabling us to diversify our customer base
and distribution channels for HMI, reaching
a vast network of independent retailers and
interior designers.
SLH. We believe we have a significant opportunity with these companies to create a sustainable profit center at Home Meridian and to
move past the volatility of recent years.
Fiscal Year 2023 in Review
We entered fiscal year 2023 with extremely high order backlogs, a result of the unprecedented demand created by consumers’ renewed
focus on comfortable and stylish living spaces brought about by the safer-at-home policies of the Covid-19 pandemic. As we moved
toward the third quarter, we saw demand begin to cool, especially for our Home Meridian segment, whose large customers had ordered
heavily to meet pandemic demand and found themselves with excess inventory. As consumer behavior began to normalize, we saw
discretionary spending return to a more typical split between products, services, entertainment and travel, rather than the larger share
that had been directed towards durable goods like furniture. Demand also softened in response to higher inflation, stock market and
employment uncertainty, and the Federal Reserve’s efforts to control inflation with a series of interest rate hikes.
Our Hooker Legacy segments, Hooker Branded and Domestic Upholstery, were less impacted by these changes, especially earlier in the
year, due to their high backlogs and the nature of their business models, which relied primarily on warehouse-serviced, smaller orders and
custom manufacturing. Later in the year, order rates in those divisions slowed as well. Consolidated net sales were below prior year for the
first half of the year. A year earlier, Covid-related temporary factory closures at our Asian suppliers in the late-summer and fall of fiscal
2022 brought shipments to a virtual standstill. And fourth quarter sales, especially at Home Meridian, continued to reflect the overstocked
situation at major customers.
After two years of surging orders and backlogs, which at times we were unable to fully service, this slowing consumer demand resulted
in high inventories at many of our retail partners and in our distribution centers. This was compounded by our suppliers returning to full
production and quickly working through backlogs accumulated prior to and during the late calendar 2021 factory closures, adding to our
increased inventories and excess working capital requirements. We began working inventories down to appropriate levels in late fiscal 2023
and continue to do so into fiscal 2024, with a goal of rightsizing our inventory by early summer.
One welcome result of this return-to-normal has been a decline in the astronomical ocean freight costs we experienced over the past two
years due to vessel and equipment shortages. While freight rates have not returned to pre-pandemic levels, rates are well below their peak
and appear to have stabilized. We will begin to realize savings that will favorably impact profitability in the coming year as we sell through
our existing, higher-cost inventory and replenish with goods carrying lower freight charges.
A change to our business
During the year, sales softened in the ecommerce channel, leaving us with excess inventories. And those inventories were additionally
burdened with high freight costs in place until late calendar-year 2022. While ecommerce remains a vital channel to our overall business,
the low-cost items sold through our Accentrics Home (ACH) business unit were not contributing sufficient margin to offset the costs
and resources required to properly service those customers. We concluded that exiting the ACH business line was in the long-term
interests of the Company and would allow us to devote resources to more profitable businesses and initiatives. We continue to sell in the
vital ecommerce channel, but we will not design and stock items specifically for ecommerce, which will reduce our working capital and
warehousing requirements and the risk associated with selling low-priced items subject to dramatic cost swings based on shipping and
handling charges.. At the same time, and for similar reasons, we determined that repositioning PRI as a container-direct only model would
reduce inventory risk and cash requirements, in this relatively lower-margin business.
These changes, much as earlier decisions to exit the Clubs Channel and the ready-to-assemble product lines, are another step towards
returning our Home Meridian segment to profitability. We have significantly reduced the overhead associated with Home Meridian, and
will continue to do so throughout fiscal 2024. Unfortunately, some of these cost reductions were personnel related. Other cost reductions
included adjusting our warehousing footprint in Savannah and our High Point, NC Administrative Office, consolidating systems and
administrative tasks, and reducing our investment in Home Meridian inventories. In order to accomplish the overhead reduction, we
concluded the best course of action was to write down and liquidate the ACH inventory expeditiously, which will allow us to complete our
restructuring during fiscal 2024, rather than incurring these costs over a longer time period. This decision resulted in a pre-tax charge of
$24M, and was the driver of the operating loss we reported for fiscal 2023.
Performance by Segment
Hooker Branded -The Hooker Branded segment entered fiscal 2023 with a substantial order backlog. Sales, however, were somewhat
soft in the first quarter due to poor inventory availability resulting from the Covid-related factory shutdowns in the late summer and fall
of calendar year 2021 we noted earlier. While a strong warehouse inventory position somewhat mitigated the impact, the interrupted
inventory flow eventually caught up with us in Q1 of fiscal 2023. In the second quarter, factory production roared back, and we were able to
get back in stock; in fact, we were temporarily over stocked. Shipments were solid for the remainder of the year thanks to the order backlog.
We were relatively pleased with the segment’s operating profitability, which remained over 10% but was down from prior- year levels. Gross
margins were unfavorably impacted by the massively higher freight costs experienced since the onset of the Covid-19 demand spike.
Despite the industry-wide higher costs, we committed to our customers to maintain prices on orders in the backlog, which accounted for a
large portion of the orders shipped during the year.
Investing in future growth, we continued to update our Enterprise Resource Planning system (ERP), bolstered our staff and introduced the
whole-home Charleston Collection inspired by the classic charm and coastal retreat of the Southern region. The updated traditional styling
of the collection was extremely well received and placed, with the first
placements shipping to retail now.
Home Meridian – Home Meridian’s $62.6 million sales decrease drove
our reduction in consolidated revenues for the year. We reported an
operating loss at Home Meridian due to the $24 million charge to exit
the ACH business and reposition PRI, but also due to the lower sales
volume for much of the year, as well as high freight costs on much of the
segment’s inventory. The higher freight costs challenged gross margins,
particularly in the ACH business unit. Losses in ACH and, to a lesser
degree, disposal costs from our previously announced exits from the
Clubs Channel and ready-to- assemble business were the primary loss
drivers of the segment. Other Home Meridian business units showed
signs of improvement during the year, giving us reason to believe that a
more streamlined, margin-focused Home Meridian can be a contributor
to corporate results on a consistent basis once we complete our exit
from these unprofitable business units. Excluding the ACH exit costs,
Home Meridian reported an approximate $9 million improvement
from the prior year, as Pulaski, Samuel Lawrence Furniture and Samuel
Lawrence Hospitality reported operating income over $3 million
combined.
The much-anticipated and delayed rollout of the Drew & Jonathan
Home licensed collection at retail has been a bright spot, exceeding
expectations with sales and enthusiasm from consumers and retailers.
The collection is now on approximately 450 retail floors, including
independent furniture stores, national and regional retailers.
Inspired by the classic charm and coastal retreat ambience
of Charleston, Hooker Casegood’s updated traditional-styled
collection of the same name is the largest whole home collection
in company history. The collection features an array of accent
finishes like the Black Cherry shown on this secretary with a
drop-front lid and pewter-colored pulls.
Overall, we see significant momentum at Home Meridian with meaningful new placements with major customers. We expect the product
commitments made by customers will positively affect the current fiscal year, helping put Home Meridian on the path for solid and
sustainable profitability.
Domestic Upholstery - Domestic Upholstery segment sales increased about 50% from the prior year, benefiting from large order
backlogs, full production schedules, improved raw material availability and the addition of Sunset West, which we acquired in February 2022,
and which accounted for about half the total increase.
Bradington-Young, Sam Moore and Shenandoah each achieved the
second consecutive year of double-digit sales gains.
Segment gross margins improved thanks to increased operating
efficiencies, despite higher costs for many raw materials. Operating
profitability improved significantly over the prior year thanks to
improved capacity utilization and price increases implemented
to offset labor and material costs inflation, which were slow to be
realized due to our decision not to increase prices on the order
backlogs. And we are pleased with the Year 1 progress at Sunset
West which, in addition to integrating into our organization, moved
to a larger facility in Southern California, implemented a new ERP
system, established operations at our Savannah, GA distribution
facility and increased its market presence by participating in the High
Point Furniture Market for the first time, leveraging the power of
our Hooker Legacy sales force, one of the strongest in the furniture
industry.
In order to leverage the brand equity of Hooker Furnishings and
create a more seamless shopping experience for consumers and
retailers, we have re-named Sam Moore “HF Custom.” While the
Sam Moore name will remain internally and at the Virginia factory
and headquarters, this customer-facing change helps us elevate
the perceived value of the upholstery line to the upper-middle
fashion perception of Hooker Furnishings. It also presents Hooker
Furnishings as a single source for home furnishings under a united
Hooker brand, cementing us as a whole home source for high-style,
high-quality furnishings.
Our B.E.S.T. Strategy
While navigating through challenging times, we know we
cannot simply deal with the short-term. Our commitment to our
stakeholders is to manage for the short-term and build a sustainable,
growing company for the long-term. With that mission in mind,
our management group created and developed over 100 initiatives
to incorporate into a strategic plan that will guide us in the coming
years. To succinctly communicate this plan and create alignment
throughout our organization we developed the acronym B.E.S.T.
Placed well across independent brick & mortar stores, national retailers
and regional chains, with proprietary product in the works for major
retailers, the Drew & Jonathan Home licensed collection by HMI is
now on approximately 450 retail floors.
HF Custom, formerly known as Sam Moore, has reimagined
traditional in fresh colors with a mix of transitional items and
traditional silhouettes for a modern traditional.
B. “Be who we say we are.” – We are always mindful of the legacy and history of our nearly 100 year-old Company and the values that
brought us to this point. To ‘Be who we say we are’ is to show genuine interest and compassion to our employees, the communities in which
we live and work and to our society, to honor our commitments and to always deal ethically and honestly. We are committed to diversity,
equity and inclusion and fair compensation throughout our organization, therefore we conducted a thorough, Company-wide review of
pay and position and continue to work to ensure that we have a diverse, fairly compensated workforce throughout. We have increased
our charitable giving, and broadened our reach to include locations beyond our headquarters. We also have contributed to specific needs
when they arise, such as the donation of 1,600 beds for South Florida hurricane relief. And we continue to encourage our employees to
support organizations close to them, and to help co-workers and others in the community when needs arise.
E. “Eliminate unnecessary risk.” – Exiting high-risk, low-profitability businesses is one step in eliminating unnecessary risk. As we learned
through recent raw material shortages, and through the sudden imposition of import tariffs in 2018, a geographically diverse sourcing
footprint can reduce the risks of delayed or lost production, sudden cost increases and transportation delays and availability. Our sourcing
teams have identified alternative sources for some products and continue to search for other options, not to eliminate current suppliers
but to expand our worldwide footprint. Another element of sourcing-related risk is the need to reduce inventory obsolescence. The
Hooker Branded segment has successfully managed obsolescence for over a decade, using a time-proven sales and operations planning
process. We are now implementing that same process at Home Meridian and expect to see reduced obsolete or overstocked inventory,
lower working capital requirements, and increased inventory turnover as this process matures.
S. “Speed to market.” – Ecommerce has changed the world’s expectations about delivery times. And speed to market, while becoming
an expectation, can also be a competitive advantage. Our Portfolio warehouse inventory program gives Home Meridian customers
access to in-stock goods which can ship from our Savannah, GA distribution center shortly after order. This distribution center is
strategically located near a primary port of entry and some of our most important markets. For customers in the Western US, Hooker
Legacy companies established dedicated shipping lane programs to speed delivery to that region, reducing our reliance on LTL carriers’
schedules. The same sales and operations planning process that should reduce obsolescence risk is also expected to help maintain
at least a 90% in-stock position for warehouse goods. These are just a few examples of the many speed-to-market initiatives that are
underway or planned for the coming year.
T. increase “Total addressable market.” – We must remain relevant and visible to our customers. Not just to our existing customers, but
to new customers in channels we see growth opportunities. Initiatives such as the new M product line offering a more modern aesthetic
than most of our Hooker legacy divisions’ current product offerings are part of our effort to stay current and at the forefront of home
fashion. M launched at the April 2023 High Point Furniture Market after over 2 years in development and very positive previews.
And while interior designers are already an important customer base, there is a large untapped community of designers, who we are
reaching through our recently opened Las Vegas and Atlanta showrooms as well as the new
High Point Showroom. We have already seen an increase in our interior design customer
base from our presence in Las Vegas, even before opening in Atlanta and Showplace.
The Showplace showroom, which will be used to display Hooker Branded and Domestic
Upholstery segment products is larger and more easily accessible than our previous
showroom and is considered a major draw for interior designers. We believe the updated
design and destination-nature of this new showroom will help drive a substantial increase in
interior designer business and will appeal to many
of our existing customers as well, by showing our
products in a compelling and engaging
new setting.
Our Board of Directors
At our annual meeting in June, we will bid farewell
to Henry Williamson, who retires after 19 years of
service. Henry has served as Audit Committee
Chair, Lead Director and most recently as our
Board Chair, demonstrating a keen business
sense and a willingness to challenge management,
but always with good humor, compassion, and a
genuine concern for the Company. We appreciate
all his contributions to Hooker Furnishings, and we
will miss him. Joining our board in October 2022,
was Chris Henson, a recently retired executive from
Truist Financial Corporation, who brings broad
executive finance and operations management
experience and a strong belief in the importance of
organizational culture. We look forward to working with Chris for many years to come.
Designed with today’s consumer in mind, M is a new, modern
lifestyle furniture brand by Hooker Furnishings. Inspired by
organic earth tones and rooted in simplicity, the line blends
classic modern and transitional styles effortlessly. Shown here is
the Ashe Chat Set with sleek and timeless occasional pieces from
the Archer group.
Looking forward
Fiscal 2024 will be another year of transition, as we move away from higher-risk businesses and focus on our core strengths, while expanding
our reach, increasing visibility and staying current with changing marketplace dynamics . In addition to the steps we took to reduce
inventory, we began to reduce overhead in fiscal 2023; however, we must complete the liquidation of that inventory before we can fully
realize our cost reduction goals. We expect to begin reporting the results of these efforts in the second half of fiscal 2024 and reap full
benefit of these actions beginning in fiscal 2025. We also expect to begin to see increased momentum from many of our other strategic
initiatives in the coming year.
We believe the market for home furnishings is fundamentally strong, strengthened by favorable demographic trends as Millennials and
Gen Z enter their prime earning and household formation years, lifestyle trends such as work-from-home and a general renewed interest
in home décor which was an offshoot of the Covid-19 safer-at-home policies. But these factors are subject to economic factors such as
interest rates, unemployment, stock market performance, consumer confidence and societal trends. Our recovery, as it has been over
the last few years, may not be linear. We may see peaks and valleys, to which we constantly strive to react appropriately. While we seek
to mitigate unnecessary risks, we are always ready to act with boldness, with an eye on our future and strategic plan – to focus on being
B.E.S.T.
Respectfully,
Jeremy Hoff
Chief Executive Officer and Director
Paul A. Huckfeldt
Senior Vice President - Finance and Accounting
and Chief Financial Officer
Jeremy Hoff, Paul Huckfeldt
About the Front Cover Photo:
Hooker Furnishings has relocated its Hooker Legacy Brands High Point Market Showroom to a prime location encompassing the entire
third floor of the Showplace Building. The space has the ambience of a high-end destination retail storefront, with abundant natural
lighting, a grand entrance and an open floor concept with wide architectural corridors that open to the atrium of the building, guiding
visitors into each of the Company’s brand showrooms. An outdoor terrace is furnished with seating, firepits and accent items from
company’s Sunset West outdoor furniture line.
Board of Directors & Executive Officers
Jeremy R. Hoff
Director; Chief Executive Officer - Hooker
Furnishings Corporation
W. Christopher Beeler Jr.
Director; Chairman - Virginia Mirror Company and
Virginia Glass Products
Maria C. Duey
Director; Chief Executive Officer and Founder-
Leonine Advisory and Support Services
Paulette Garafalo
Director; CEO and President - Paul Stuart
Christopher L. Henson
Director; Retired Head of Banking and Insurance -
Truist Financial Corporation; formerly President &
Chief Operating Officer - BB&T Corporation (now
Truist Financial Corporation)
Tonya H. Jackson
Director; Senior Vice President and Chief Product
Delivery Officer - Lexmark
Ellen C. Taaffe
Clinical Professor of Management and Organizations,
Kellogg School of Management
Henry Williamson Jr.
Board Chair; Retired Chief Operating Officer - Truist
Financial Corporation (formerly BB & T Corporation)
and Branch Banking and Trust Company of North
Carolina, South Carolina and Virginia
Hooker Furniture Board of Directors.
Front Row, left to right: Paulette Garafalo, Jeremy
Hoff, Tonya Jackson
Back Row, left to right: Maria Duey,
Henry Williamson Jr., Ellen Taaffe, Christopher Beeler
Executive Officers
Christopher Henson
Jeremy Hoff
Chief Executive Officer
Paul Huckfeldt
Chief Financial Officer
Tod Phelps
Senior Vice President,
Operations & Chief
Information Officer
Anne Smith
Chief Administrative Officer &
President, Domestic Upholstery
HOO K E R®
F U R N I S H I N G S
Financial Highlights1
(in thousands, except per share data)
For the:
Fifty-two
Fifty-two
Fifty-two
Weeks Ended Weeks Ended Weeks Ended Weeks Ended Weeks Ended
February 3,
January 31,
January 29,
2019
2021
2023
January 30,
2022
February 2,
2020
Fifty-three
Fifty-two
STATEMENT OF OPERATIONS DATA
Net sales
Operating (loss) income
Net (loss) income
PER SHARE DATA
Basic (loss) earnings per share
Diluted (loss) earnings per share2
Weighted average shares outstanding- basic
Weighted average shares outstanding- diluted2
Cash dividends per share
$
583,102
(6,046)
(4,312)
$
593,612
14,843
11,718
$
540,081
(14,364)
(10,426)
$
610,824
22,707
17,083
$
683,501
52,675
39,873
$
$
(0.37)
(0.37)
11,593
$
$
0.99
0.97
11,852
$
$
(0.88)
(0.88)
11,822
$
$
1.44
1.44
11,784
$
$
3.38
3.38
11,759
11,593
0.82
$
11,970
0.74
$
11,822
0.66
$
11,838
0.61
$
11,783
0.57
$
1 These financial highlights should be read in conjunction with the Selected Financial Data, Consolidated Financial Statements, including the related Notes,
and Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's annual report on Form 10-K
included in this report.
2 Due to the fiscal 2023 and 2021 net losses, approximately 117,000 and 119,000 unvested restricted shares, respectively, would have been anti-dilutive
and are therefore excluded from the calculation of diluted earnings per share.
NET SALES
($ in millions)
OPERATING INCOME (LOSS)
($ in millions)
NET INCOME (LOSS)
($ in millions)
DILUTED EARNINGS (LOSS)
PER SHARE
$52.7
$39.9
$3.38
$683.5
$610.8
$593.6 $583.1
$540.1
$22.7
$17.1
$1.44
$14.8
$11.7
$0.97
'19
'20
'21
'22
'23
'19
'20
'21
'22
'23
'19
'20
'21
'22
'23
$(4.3)
'23
$(0.37)
'23
$(0.88)
$(6.0)
'23
$(10.4)
$(14.4)
'19
'20
'21
'22
'23
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended January 29, 2023
Commission file number 000-25349
HOOKER FURNISHINGS CORPORATION
(Exact name of registrant as specified in its charter)
Virginia
(State or other jurisdiction of incorporation or organization)
54-0251350
(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)
(Former name, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, no par value
Trading Symbol(s)
HOFT
Name of Each Exchange
on Which Registered
NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 ☐
Non-accelerated Filer ☐
Emerging growth company ☐
Accelerated filer ☒
Smaller reporting 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 has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price
at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the
registrant’s most recently completed second fiscal quarter: $193 million.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of April 10, 2023:
Common stock, no par value
(Class of common stock)
11,053,397
(Number of shares)
Documents incorporated by reference: Portions of the registrant’s definitive Proxy Statement for its Annual Meeting of Shareholders
scheduled to be held June 6, 2023 are incorporated by reference into Part III.
Hooker Furnishings Corporation
TABLE OF CONTENTS
Part I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Information about our Executive Officers
Part II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Part IV
Item 15. Exhibits, Financial Statement Schedules
Item 16. Form 10-K Summary
Signatures
Index to Consolidated Financial Statements
Page
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F-1
All references to 2023, 2022, 2021, 2020, and 2019 or other years are referring to our fiscal years, unless otherwise stated. Our fiscal
years end on the Sunday closest to January 31, with fiscal 2023 ending on January 29, 2023. Our quarterly periods are based on
thirteen-week “reporting periods” (which end on a Sunday) rather than quarterly periods consisting of three calendar months. As a
result, each quarterly period generally is thirteen weeks, or 91 days, long, except as noted below. In some years (generally once every
six years) the fourth quarter will be fourteen weeks long and the fiscal year will consist of fifty-three weeks. The 2019 fiscal year that
ended on February 3, 2019 was a 53-week fiscal year.
On January 31, 2022, the first day of our 2023 fiscal year, we entered into an Asset Purchase Agreement with Sunset HWM, LLC
(“Sunset West”) and its three members to acquire substantially all of the assets of Sunset West (the “Sunset Acquisition”). The results of
operations of Sunset West are included in the Domestic Upholstery segment’s results beginning with the fiscal 2023 first quarter.
Consequently, Sunset West’s results are not included in our results prior to the 2023 fiscal year.
All references to the “Company,” “we,” “us” and “our” in this document refer to Hooker Furnishings Corporation and its consolidated
subsidiaries, unless specifically referring to segment information. All references to the “Hooker,” “Hooker Division(s),” “Hooker Legacy
Brands” or “traditional Hooker” divisions or companies refer to all current business units and brands except for those in the Home
Meridian segment. The Hooker Branded segment includes Hooker Casegoods and Hooker Upholstery. The Domestic Upholstery
segment includes Bradington-Young, HF Custom (formerly Sam Moore), Shenandoah Furniture and Sunset West. All Other includes H
Contract and Lifestyle Brands.
Forward-Looking Statements
Certain statements made in this report, including statements under Part II, Item 7. “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 negative thereof, or other variations thereon, or comparable
terminology, or by discussions of strategy. Forward-looking statements are subject to risks and uncertainties that could cause actual
results to differ materially from those in the forward-looking statements. Those risks and uncertainties include but are not limited to:
■ general economic or business conditions, both domestically and internationally, including the current macro-economic
uncertainties and challenges to the retail environment for home furnishings along with instability in the financial and credit
markets, in part due to rising interest rates, including their potential impact on (i) our 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;
■ difficulties in forecasting demand for our imported products and raw materials used in our domestic operations;
■
risks associated with our reliance on offshore sourcing and the cost of imported goods, including fluctuation in the prices of
purchased finished goods, customs issues, freight costs, including the price and availability of shipping containers, ocean
vessels, ocean and domestic trucking, and warehousing costs and the risk that a disruption in our offshore suppliers or the
transportation and handling industries, including labor stoppages, strikes, or slowdowns, could adversely affect our ability to
timely fill customer orders;
■
risks associated with HMI segment restructuring and cost-savings efforts, including our ability to timely dispose of excess
inventories, reduce expenses and return the segment to profitability;
■
the impairment of our long-lived assets, which can result in reduced earnings and net worth;
■
adverse political acts or developments in, or affecting, the international markets from which we import products, including
duties or tariffs imposed on those products by foreign governments or the U.S. government and possible future U.S. conflict
with China;
■
the direct and indirect costs and time spent by our associates associated with the implementation of our Enterprise Resource
Planning system (“ERP”), including costs resulting from unanticipated disruptions to our business;
4
■
the interruption, inadequacy, security breaches or integration failure of our information systems or information technology
infrastructure, related service providers or the internet or other related issues including unauthorized disclosures of confidential
information, hacking or other cyber-security threats or inadequate levels of cyber-insurance or risks not covered by cyber-
insurance;
■
risks associated with our newly leased warehouse space in Georgia including the inability to realize anticipated cost savings,
access to warehouse labor and information systems;
■
■
risks associated with domestic manufacturing operations, including fluctuations in capacity utilization and the prices and
availability of key raw materials, as well as changes in transportation, warehousing and domestic labor costs, availability of
skilled labor, and environmental compliance and remediation costs;
the risks related to the recent Sunset Acquisition including integration costs, maintaining Sunset West’s existing customer
relationships, debt service costs, interest rate volatility, the use of operating cash flows to service debt to the detriment of other
corporate initiatives or strategic opportunities, the loss of key employees from Sunset West, the disruption of ongoing
businesses or inconsistencies in standards, controls, procedures and policies across the business which could adversely affect
our internal control or information systems and the costs of bringing them into compliance and failure to realize benefits
anticipated from the Sunset Acquisition;
■
changes in U.S. and foreign government regulations and in the political, social and economic climates of the countries from
which we source our products;
■
risks associated with product defects, including higher than expected costs associated with product quality and safety,
regulatory compliance costs (such as the costs associated with the US Consumer Product Safety Commission’s new mandatory
furniture tip-over standard) related to the sale of consumer products and costs related to defective or non-compliant products,
product liability claims and costs to recall defective products and the adverse effects of negative media coverage;
■ disruptions and damage (including those due to weather) affecting our Virginia or Georgia warehouses, our Virginia, North
Carolina or California administrative facilities, our High Point, Las Vegas, and Atlanta showrooms or our representative offices
or warehouses in Vietnam and China;
■
the risks specifically related to the concentrations of a material part of our sales and accounts receivable in only a few customers,
including the loss of several large customers through business consolidations, failures or other reasons, or the loss of significant
sales programs with major customers;
■ our inability to collect amounts owed to us or significant delays in collecting such amounts;
■
achieving and managing growth and change, and the risks associated with new business lines, acquisitions, including the
selection of suitable acquisition targets, restructurings, strategic alliances and international operations;
■
■
■
capital requirements and costs;
risks associated with distribution through third-party retailers, such as non-binding dealership arrangements;
the cost and difficulty of marketing and selling our products in foreign markets;
■
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;
■ price competition in the furniture industry;
■
■
competition from non-traditional outlets, such as internet and catalog retailers; and
changes in consumer preferences, including increased demand for lower-priced furniture.
5
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” below.
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.
6
ITEM 1. BUSINESS
Hooker Furnishings Corporation
Part I
Hooker Furnishings Corporation, incorporated in Virginia in 1924, is a designer, marketer and importer of casegoods (wooden and metal
furniture), leather furniture, fabric-upholstered furniture and outdoor furniture for the residential, hospitality and contract markets. We
also domestically manufacture premium residential custom leather, custom fabric-upholstered furniture and outdoor furniture.
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. 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 (the “Sunset West Members”) to acquire
substantially all of the assets of Sunset West (the “Sunset Acquisition”). Sunset West is a leading West Coast-based manufacturer of
outdoor furniture with its headquarters in Vista, California. The acquisition enables us to immediately gain market share in the growing
outdoor furniture segment of the industry. For more information regarding the Sunset Acquisition, please see Item 7 and Note 4 to our
Consolidated Financial Statements on page F-15.
Reportable Segments
Furniture sales account for all of our net sales. For financial reporting purposes and as described further below, we are organized into
three reportable segments, Hooker Branded, Home Meridian and Domestic Upholstery. Our other businesses are aggregated into “All
Other”. See Note 18 -Segment Information to our Consolidated Financial Statements for additional financial information regarding our
operating segments.
Products
Our product lines cover the design spectrum of residential furniture: traditional, contemporary and transitional. Further, our product
lines are in the “good”, “better” and “best” product categories, which carry medium and upper price points. Hooker Furnishings
Corporation consists of the following three operating segments and “All Other”:
■ The Hooker Branded segment which includes two businesses:
□ Hooker Casegoods, which covers a wide range of design categories and includes home entertainment, home office,
accent, dining and bedroom furniture in the upper-medium price points sold under the Hooker Furniture brand; and
□ Hooker Upholstery, imported upholstered furniture targeted at the upper-medium price-range.
■ The Home Meridian segment which includes the following brands/marketing units:
□ Pulaski Furniture, casegoods covering the complete design spectrum in a wide range of bedroom, dining room, accent
and display cabinets at medium price points;
□ Samuel Lawrence Furniture, value-conscious offerings in bedroom, dining room, home office and youth furnishings;
□ Prime Resources International, value-conscious imported leather motion upholstery;
□ Samuel Lawrence Hospitality, a designer and supplier of hotel furnishings targeted toward four and five-star hotels;
and
□ Accentrics Home (“ACH”), home furnishings centered around an eclectic mix of unique pieces and materials that
focused on e-commerce customers. Due to low profitability, management decided to exit this channel at the end of
fiscal 2023.
■ The Domestic Upholstery segment which includes the following operations:
□ Bradington-Young, a seating specialist in upscale motion and stationary leather furniture;
□ HF Custom (formerly Sam Moore Furniture), a specialist in fashion forward custom upholstery offering a selection
of chairs , sofas, sectionals, recliners and a variety of accent upholstery pieces;
□ Shenandoah Furniture, an upscale upholstered furniture business specializing in private label sectionals, modulars,
sofas, chairs, ottomans, benches, beds and dining chairs in the upper-medium price points for lifestyle specialty
retailers; and
□ Sunset West, a designer and manufacturer of comfortable, stylish and high-quality outdoor furniture.
7
■ All Other consisting of:
□ The H Contract product line which supplies upholstered seating and casegoods to upscale senior living and assisted
living facilities through designers, design firms, industry dealers and distributors that service that market; and
□ Lifestyle Brands, a business started in fiscal 2019 targeted at the interior designer channel.
Sourcing
Imported Products
We have sourced products from foreign manufacturers for over thirty years, predominantly from Asia. Imported casegoods and
upholstered furniture together accounted for approximately 72% of our net sales in fiscal 2023, 82% of our net sales in fiscal 2022 and
83% of our net sales in fiscal 2021.
Our imported furniture business is subject to inherent risks in importing products manufactured abroad, including, but not limited to,
supply disruptions and delays due to a variety of reasons, including our foreign suppliers’ factory capacities, factory shutdowns, and
delays including those caused by the COVID-19 pandemic and possible similar health-related issues, much higher ocean freight costs,
container and vessel space availability, currency exchange rate fluctuations, economic and political developments and instability, as
well as the laws, policies and actions of foreign governments and the United States. These laws, policies and actions may include
regulations affecting trade or the application of tariffs, much like the 25% tariff on certain goods imported into the United States from
China, including almost all furniture and furniture components manufactured in China since fiscal 2019. In response to these tariffs, we
began re-sourcing products from non-tariff countries, primarily Vietnam and reduced our Chinese imports to less than 10% of total
imports by the end of fiscal 2023. Additionally, we are beginning to further diversify our sourcing footprint to include other countries,
including Malaysia, Mexico and India.
Because of the large number and diverse nature of the foreign suppliers from which we source our imported products, we have flexibility
in the sourcing of products among any particular supplier or country. However, a disruption in our supply chain from a major supplier
or from Vietnam or China in general, could significantly compromise our ability to fill customer orders for products manufactured at
that factory or in that country. Supply disruptions and delays on selected items could occur for six months or longer. If we were to be
unsuccessful in obtaining those products from other sources or at a comparable cost, a disruption in our supply chain from a major
furniture supplier, or from Vietnam or China in general, could decrease our sales, earnings and liquidity. For example, in calendar 2021,
the COVID-19 related lockdown at our suppliers in Vietnam and Malaysia, along with constrained container and steamship availability
as well as congestion at U.S. ports, negatively impacted our shipments and inventory levels in early calendar 2022.
Given the sourcing capacity available in Vietnam, China and other low-cost producing countries, we currently believe the risks from
these potential supply disruptions are manageable in the long-term; however, we have limited insight into the extent to which our
business could be further impacted by COVID-19 or other possible pandemics, and there are many unknowns including, how long we
will be impacted, the severity of the impacts and the probability of a recurrence of COVID-19 or similar regional or global pandemics.
See Item 1A, “Risk Factors” for additional information on our risks related to imported products.
For imported products, we generally negotiate firm pricing with foreign suppliers in U.S. Dollars, typically for a term of at least one
year. However, under certain circumstances, we may re-negotiate pricing during the year. Due to the global supply chain crisis and
inflation pressure in Asia and the U.S., we were forced to re-negotiate prices multiple times during fiscal 2023 and 2022. We accept the
exposure to exchange rate movements during these negotiated periods. We do not use derivative financial instruments to manage this
risk but could choose to do so in the future. Since we transact our imported product purchases in U.S. Dollars, a relative decline in the
value of the U.S. Dollar compared to the currencies from which we obtain our imported products could increase the price we pay for
imported products beyond the negotiated periods. We generally expect to reflect substantially all of the effects of any price increases
from suppliers in the prices we charge for imported products. However, these price changes could adversely impact sales volume and
profit margin during the affected periods. Conversely, a relative increase in the value of the U.S. Dollar compared to the currencies from
which we obtain our imported products could decrease the cost of imported products and favorably impact net sales and profit margins
during the affected period. However, due to other factors, such as inflationary pressure in China and other countries, we may not fully
realize savings when exchange rates fall. Therefore, lower exchange rates may only have a tempering effect on future price increases by
merely delaying cost increases on imported products. See also Item 7A. “Quantitative and Qualitative Disclosures About Market Risk.”
8
Raw Materials
Significant materials used in manufacturing our domestic upholstered furniture products include leather, fabric, foam, wooden and metal
frames and electronic mechanisms. Most of the leather is imported from Italy and South America, and is purchased as full hides and cut
and sewn in our facilities or is purchased as pre-cut and sewn kits processed by our vendors to our pattern specifications. We believe
our sources for raw materials are adequate and that we are not dependent on any one supplier. Our five largest domestic upholstery
suppliers accounted for 33% of our raw materials purchases for domestic upholstered furniture manufacturing operations in fiscal 2023.
Should disruptions with these suppliers occur, other than macro disruptions affecting all such suppliers, we believe we could successfully
source these products from other suppliers without significant disruption to our operations. For example, due to the Russian invasion of
Ukraine, there is a shortage of Russian Birch which was the third largest source of US hardwood plywood imports in calendar 2021.
Prior to the invasion, a large portion of the plywood used at one division of our Domestic Upholstery segment was Russian Birch. We
were able to find an alternative plywood source at a higher price during fiscal 2023 and this issue was mitigated as of early calendar
2023.
Customers
Our home furnishings products are sold through a variety of retailers including independent furniture stores, department stores, mass
merchants, national chains, catalog merchants, interior designers, and e-commerce retailers. No single customer accounted for more
than 6% of our consolidated sales in fiscal 2023. Our top five customers accounted for approximately 22% of our fiscal 2023
consolidated sales. The loss of any one or more of these customers would have a material adverse impact on our business. Less than 2%
of our sales in fiscal 2023 were to international customers. We define sales to international customers as sales to customers outside of
the United States and Canada since our independent domestic sales force services both countries.
Competition
The furniture industry is highly competitive and includes a large number of foreign and domestic manufacturers and importers, none of
which dominates the market in our price points. While the markets in which we compete include a large number of relatively small and
medium-sized manufacturers, certain competitors have substantially greater sales volumes and financial resources than we do. U.S.
imports of furniture produced overseas, such as from Vietnam and China, have stabilized in recent years. The primary competitive
factors for home furnishings in our price points include price, style, availability, service, quality and durability. Competitive factors in
the hospitality and contract furniture markets include product value and utility, lead times, on-time delivery and the ability to respond
to requests for special and non-standard products. We believe our design capabilities, ability to import and/or manufacture upholstered
furniture, product value, longstanding customer and supplier relationships, significant sales, distribution and inventory capabilities, ease
of ordering, financial strength, experienced management and customer support are significant competitive advantages.
Warehousing and Distribution
We distribute furniture to retailers directly from factories and warehouses in Asia via our container direct programs and from our
facilities in Virginia, North Carolina, Georgia and California, and in limited cases, from customer operated warehouses in strategic
locations. Due to our exit from the ACH business unit which demanded significant amounts of inventory to meet the quick shipping
requirements of its e-commerce model, we anticipate a reduction in the physical footprint of the Georgia warehouse over the course of
fiscal 2024.
Working Capital Practices
Inventory: We generally import casegoods inventory and certain upholstery items in amounts that enable us to meet the delivery
requirements of our customers, our internal in-stock goals and minimum purchase requirements from our sourcing partners. Our
domestic upholstery segment products are made to order and shipped shortly after they are produced; however, this segment carries
significant amounts of raw materials for production. We do not carry significant amounts of hospitality products, as most of these
products are built to order and are shipped shortly after their manufacture directly to the customer.
The majority of products in the Hooker Branded segment are shipped from our U.S. warehouses. In calendar 2021, the COVID-19
related lockdowns at our suppliers in Vietnam and Malaysia, along with the supply chain disruptions, resulted in low inventory levels
within the Hooker Branded segment in early fiscal 2023. These conditions improved throughout fiscal 2023, and inventory levels are
now higher than usual, with plans to work them down over the course of the fiscal 2024 first half.
9
A large percentage of products sold at our Home Meridian segment are not warehoused by us but ship directly to our customers and
thus are not included in our inventory. However, Home Meridian’s warehoused inventory increased significantly during fiscal 2023 due
primarily to increased inventory in the ACH division, which is focused on the e-commerce channel. A slowing in the ecommerce
business, coupled with an aggressive backlog reduction by our Asian suppliers after the end of COVID-19-related lockdowns in the
late-summer of 2021, resulted in a substantial ACH inventory increase in fiscal 2023. Due to low profitability, low rates of sales and a
general slowing of furniture sales in the e-commerce space, we decided to exit this division and recorded $24.4 million write-downs of
ACH inventories and other excess inventories during the fourth quarter of fiscal 2023. We expect the exit of the ACH business and the
inventory write down will lead to improvements in working capital, inventory turns and obsolescence reserves.
Accounts receivable: Substantially all of our trade accounts receivable are due from retailers and dealers that sell residential home
furnishings or commercial purchasers of our hospitality and senior living products, which consist of a large number of entities with a
broad geographic dispersion. We perform credit evaluations of our customers and generally do not require collateral. For qualified
customers, we offer payment terms, generally requiring payment 30 days from shipment. However, we may offer extended payment
terms in certain circumstances, including to promote sales of our product. We purchase accounts receivable insurance on certain
customers if their risk profile warrants it and the insurance is available. Due to the highly customized nature of our hospitality products,
we typically require a 50% deposit upon order, a 40% deposit before goods reach a U.S. port and the remaining 10% balance due within
30 days of the receipt of goods by the customer. For our outdoor furnishings, most orders require a 50% deposit upon order and the
balance when production is started.
Accounts payable: Payment for our imported products warehoused first in Asia is due 10 to 14 days after our quality audit inspections
are complete and the vendor invoice is presented. Payment for goods which are shipped to our US warehouses or container direct to our
customers FOB Origin (free on board origin, which means the buyer is responsible for the costs and liability of the freight during
transport) is generally due upon proof of lading onto a US-bound vessel and invoice presentation; however, payment terms, depending
on the supplier, can stretch up to 45 days from invoice date. Payment terms for domestic raw materials and non-inventory related charges
vary but are generally 30 days from invoice date.
Order Backlog
At January 29, 2023, our backlog of unshipped orders was as follows:
Order Backlog
(Dollars in 000s)
Reporting Segment
Dollars
Weeks
Dollars
Weeks
January 29, 2023
January 30, 2022
Hooker Branded
Home Meridian
Domestic Upholstery
All Other
$
19,276
43,052
28,404
4,654
5.0 $
10.3
9.4
23.2
68,925
167,968
67,068
6,148
Consolidated
$
95,386
8.5 $
310,109
17.9
31.3
32.6
44.5
27.2
In the discussion below and herein, we reference changes in sales orders or “orders” and sales order backlog (unshipped orders at a point
in time) or “backlog” over and compared to certain periods of time and changes discussed are in sales dollars and not units of inventory,
unless stated otherwise. We believe orders are generally good current indicators of sales momentum and business conditions. If the
items ordered are in stock and the customer has requested immediate delivery, we generally ship products in about seven days or less
from receipt of order; however, orders may be shipped later if they are out of stock or there are production or shipping delays or the
customer has requested the order to be shipped at a later date. It is our policy and industry practice to allow order cancellation for
casegoods up to the time of shipment or, in the case of container direct orders, up until the time the container is booked with the ocean
freight carrier; therefore, customer orders for casegoods are not firm. However, domestically produced upholstered products are
predominantly custom-built and consequently, cannot be cancelled once the leather or fabric has been cut. Additionally, our hospitality
products are highly customized and are generally not cancellable.
10
For the Hooker Branded and Domestic Upholstery segments and All Other, we generally consider backlogs to be one helpful indicator
of sales for the upcoming 30-day period, but because of our relatively quick delivery and our cancellation policies, we do not consider
order backlogs to be a reliable indicator of expected long-term sales. We generally consider the Home Meridian segment’s backlog to
be one helpful indicator of that segment’s sales for the upcoming 90-day period. Due to (i) the average sales order sizes of its mass and
mega account channels of distribution, (ii) the proprietary nature of many of its products and (iii) the project nature of its hospitality
business, for which average order sizes tend to be larger and consequently, the Home Meridien segment’s order backlog tends to be
larger. There have been exceptions to the general predictive nature of our orders and backlogs noted in this paragraph, such as during
times of extremely high demand and supply chain challenges as experienced during the immediate aftermath of the initial COVID-19
crisis and subsequent recovery. They are discussed in greater detail below and in Item 7 and are essential to understanding our prospects.
In the prior fiscal year, orders were not being converted to shipments as quickly as would be expected compared to the pre-pandemic
environment due to the lack and cost of shipping containers and vessel space as well as limited overseas vendor capacity. As a result,
backlogs were significantly elevated and reached historical levels. At the end of fiscal 2023, order backlog decreased by $214.7 million
or 69%, as compared to the prior year end. The decrease was largely attributable to more normalized levels of shipping, especially in
the Hooker legacy divisions, lower incoming orders in the Home Meridian segment, and to a lesser degree at Hooker Branded and
Domestic Upholstery segments, driven by a decrease in overall demand when compared to the prior year’s surge in demand after the
initial COVID crisis, absence of Clubs channel orders and decreased orders from retailer customers with high inventory levels delaying
shipments.
Seasonality
Generally, sales in our fiscal first quarter are lower than our other fiscal quarters due to the post-Lunar New Year shipping lag and sales
in our fiscal fourth quarter are generally stronger due to the pre-Lunar New Year surge in shipments from Asia.
Environmental Matters
As a part of our business operations, our manufacturing sites generate both non-hazardous and hazardous wastes; the treatment, storage,
transportation and disposal of which are subject to various local, state and federal laws relating to environmental protection. Our policy
is to record monitoring commitments and environmental liabilities when expenses are probable and can be reasonably estimated. The
costs associated with our environmental responsibilities, compliance with federal, state and local laws regulating the discharge of
materials into the environment, or costs otherwise relating to the protection of the environment, have not had and are not expected to
have a material effect on our financial position, results of operations, capital expenditures or competitive position.
We are actively working to refine and align our environmental stewardship based on current best practices, shareholder expectations
and regulatory developments through our ESG-focused committee called CARE (Community Action & Responsibility for our
Environment). It regularly updates management and updates the Board at least quarterly on these initiatives. We note the following
recent and ongoing activities and new developments:
■ we have put in place several initiatives focused on preserving natural resources and reducing our energy usage to lower our
carbon footprint through optimizing our facilities including a multi-year project with the goal of switching to LED lighting and
cleaner-operating electric forklifts in many locations including our new distribution center in Georgia, which is outfitted with
energy-efficient lighting and electric vehicle charging stations;
■ by the end of fiscal 2023, all divisions were EFEC (“Enhancing Furniture’s Environmental Culture”) certified, except for the
recently acquired Sunset West division;
■ we use FSC (“Forest Stewardship Council”) compliant paper products and replaced Styrofoam packing with recyclable material
for repacking in all distribution centers;
■ we recycle, reuse or repurpose substantially all pallets; repurpose wood chips and sawdust from our Bradington-Young and the
Shenandoah’s Valdese and Mount Airy facilities for use in the farming industry; repurpose leather for use in belts and boots,
and in all divisions dispose of substantially all eWaste using an Environmental Protection Agency compliant eWaste recycling
firm;
■ we provided monetary support by the Company and volunteer hours via employees to the Sustainable Furnishings Council, the
Arbor Day Foundation, the Eco-Council of the Dan River basin, and Foothills Conservancy to support various projects
including the cultivation of the Mayo River State Park in Henry County, Virginia, which opened for public use in 2022; and
11
■
reached the following certifications for all wood products used within our Shenandoah production facilities: AHMI
(Appalachian Hardwood Manufacturers, Inc.), CPA Certified (Composite Panel Association), ECO-Certified (Sustainable Use
of Wood Fiber), FSC (Forest Stewardship Council), Rainforest Alliance Certified, and SFI (Sustainable Forestry Initiative).
Human Capital Resources
As of January 29, 2023, we had 1,259 full-time employees, of which 292 were employed in our Hooker Branded segment, 246 were
employed in our Home Meridian segment, 715 were employed in our Domestic Upholstery segment and 6 were employed in All Other.
1,070 employees were located in the United States and 189 were located in Asia. None of our employees are represented by a labor
union. We consider our relations with our employees to be good.
We are committed to creating a diverse, equitable and inclusive space for all our employees, customers and retail partners. The core
values of our Company include integrity, caring and inclusivity that affirms every individual. Our leadership team is committed to
fostering an environment where everyone is welcomed, respected, listened to and valued for their unique contributions to the
organization, and to providing a work environment that is free from all forms of harassment, discrimination and inequality. We recruit,
employ, train, promote and compensate our employees without regard to race, ethnicity, age, gender, gender identity, religion, national
origin, citizenship, marital status, veteran’s status or disability. All facilities have established human resource departments with formal
hiring processes and controls in place to ensure ethical and fair hiring practices. The action steps we have taken recently or are working
on currently include:
■
■
a Diversity, Equity, and Inclusion (“DEI”) leadership team with over 15 senior executives representing all divisions of the
Company meeting on a regular basis to guide both short- and long-term goals in addition to creating the overall strategic
direction of DEI at the Company;
an employee-led diversity council AIDE (Advancement of Inclusion, Diversity, and Equity) consisting of a diverse group of
employees that meets monthly with the goal of increasing institutional awareness of issues relating to inclusivity and equality
for a more diverse and welcoming workplace. The AIDE Council initiatives include:
o DEI training for managers, new employee on-boarding, and all employees;
o monthly recruiting meetings between HR and AIDE liaison to work on attracting and sourcing more diverse
candidates, assist in making the interview process welcoming to all, and create metrics to measure organizational
progress;
o
addition of two company-wide floating holidays allowing employees to have time-off for holidays of their choosing;
o
campaigns to educate employees on diverse holidays and heritage months; and
o DEI-focused section added to annual performance review for all employees and the Company’s Corporate Social
Responsibility report;
■ has a formal Vendor Code of Conduct that requires vendors to conduct business in a fair and ethical manner; and
■
formalized our Occupational Health and Safety Policy.
We compensate employees competitively relative to the industry and local labor market, and in accordance with all applicable federal,
state and local wage, work hour, overtime and benefit laws. In addition, we offer affordable and competitive benefits to support the well-
being of all employees including health insurance, disability and life insurance, worker’s compensation, wellness credits, paid time off,
a 401(k) savings plan with company-match, an employee assistance program, and training and educational opportunities for all
employees, including educational stipends or renewable college scholarships to children and spouses of all employees, excluding family
members of current and former officers and board directors of the Company.
12
Patents and Trademarks
The Hooker Furnishings, Hooker Furniture, Bradington-Young, Sam Moore, Pulaski Furniture, Samuel Lawrence Furniture, Samuel
Lawrence Hospitality, Room Gear, Right2Home, Home Meridian International, Prime Resources International, Accentrics Home,
HMidea, Shenandoah, H Contract, Homeware, MARQ and Sunset West trade names represent many years of continued business. We
believe these trade names are well-recognized and associated with quality and service in the furnishings industry. We also own a number
of patents and trademarks, both domestically and internationally, none of which is considered to be material.
Governmental Regulations
Our company is subject to U.S. federal, state and local laws and regulations in the areas of safety, health, employment and environmental
pollution controls, as well as U.S. and international trade laws and regulations. We are also subject to foreign laws and regulations. In
the past, compliance with these laws and regulations has not had any material effect on our earnings, capital expenditures or competitive
position in excess of those affecting others in our industry; however, the effect of compliance in the future cannot be predicted. We
believe we are in material compliance with applicable U.S. and international laws and regulations.
Additional Information
You may visit us online at hookerfurnishings.com, hookerfurniture.com, bradington-young.com, sammoore.com, homemeridian.com,
pulaskifurniture.com, slh-co.com, hcontractfurniture.com and sunsetwestusa.com. We make available, free of charge through our
Hooker Furnishings website hookerfurnishings.com, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, amendments to those reports, and other documents as soon as practical after they are filed with or furnished to the
Securities and Exchange Commission (“SEC”). A free copy of our annual report on Form 10-K may also be obtained by contacting Earl
Armstrong, Corporate Controller and Secretary at earmstrong@hookerfurnishings.com or by calling 276-632-2133.
ITEM 1A. RISK FACTORS
Our business is subject to a variety of risks. The risk factors discussed below should be considered in conjunction with the other
information contained in this annual report on Form 10-K. If any of these risks actually materialize, our business, results of operations,
financial condition or future prospects could be negatively impacted. These risks are not the only ones we face. There may be additional
risks that are presently unknown to us or that we currently believe to be immaterial that could affect us.
» Risks related to our business and industry
We rely on offshore sourcing from Vietnam and China for most of our sales. Consequently:
■ A disruption in supply from Vietnam or China or from our most significant suppliers in Asia could adversely affect our
ability to timely fill customer orders for these products and decrease our sales, earnings and liquidity.
In fiscal 2023, imported products sourced from Vietnam and China accounted for 91% of our import purchases and our top
five suppliers in Vietnam and China accounted for 50% of our fiscal 2023 import purchases. Our supply chain could be
adversely impacted by the uncertainties of health concerns and governmental restrictions. A disruption in our supply chain, or
from Vietnam or China in general, such as the COVID-19 related lockdown in certain parts of Asia in the Summer of calendar
2021, could significantly impact our ability to fill customer orders for products manufactured in those countries. In some cases,
we were able to provide substitutions using inventory on hand, in-transit and from our domestic warehouses, but not enough to
entirely mitigate the lost sales. Supply disruptions and delays on selected items could occur for six months or longer before the
impact of remedial measures would be reflected in our results. If we are unsuccessful in obtaining those products from other
sources or at comparable cost, a disruption in our supply chain from our largest import furniture suppliers, or from Vietnam or
China in general, could adversely affect our sales, earnings, financial condition and liquidity.
13
■ Our inability to accurately forecast demand for our imported products could cause us to purchase too much, too little
or the wrong mix of inventory.
Manufacturing and delivery lead times for our imported products necessitate that we make forecasts and assumptions regarding
current and future demand for these products. If our forecasts and assumptions are inaccurate, we may purchase excess or
insufficient amounts of inventory. If we purchase too much or the wrong mix of inventory, we may be forced to sell it at lower
margins, which could adversely affect our sales, earnings, financial condition and liquidity. If we purchase too little or the
wrong mix of inventory, we may not be able to fill customer orders and may lose market share and weaken or damage customer
relationships, which also could adversely affect our sales, earnings, financial condition and liquidity.
■
Increased transportation costs, including freight costs on imported products could decrease earnings and liquidity.
Transportation costs on our imported products are affected by a myriad of factors including the global economy, petroleum
prices and ocean freight carrier capacity. In the recent past, especially during fiscal 2022, transportation costs, including ocean
freight costs and domestic trucking costs, on imported products represented a significant portion of the cost of those products.
We saw a significant spike in these costs during that time and our profitability was materially impacted. To mitigate the
increased costs, we implemented price increases and surcharges; however, there can be no assurance that we will be successful
in increasing prices or receiving freight surcharges in the future or that we can do it quickly enough to offset increased costs.
Increased transportation costs, both domestically and internationally, in the future would likely adversely affect earnings,
financial condition and liquidity.
■ Our dependence on suppliers could, over time, adversely affect our ability to service customers.
We rely heavily on suppliers we do not own or control, including a large number of non-U.S. suppliers. All of our suppliers
may not provide goods that meet our quality, design or other specifications in a timely manner and at a competitive price. If
our suppliers do not meet our specifications, we may need to find alternative suppliers, potentially at a higher cost, or may be
forced to discontinue products. Also, delivery of goods from non-U.S. suppliers may be delayed for reasons not typically
encountered for domestically manufactured furniture, such as shipment delays caused by customs issues, labor issues, port-
related issues such as weather, congestion or port equipment, decreased availability of shipping containers and/or the inability
to secure space aboard shipping vessels to transport our products. Our failure to timely fill customer orders due to an extended
business interruption for a major supplier, or due to transportation issues, could negatively impact existing customer
relationships and adversely affect our sales, earnings, financial condition and liquidity.
■ Potential future increases in tariffs on manufactured goods imported from China or new tariffs imposed on other
countries from which we source, including Vietnam, could adversely affect our business.
New tariffs could be imposed on manufactured goods from other countries from which we source, including Vietnam. Inability
to reduce product costs, pass through price increases or find other suitable manufacturing sources outside of China may have a
material adverse impact on sales volume, earnings and liquidity. In addition, the tariffs, and our responses to the tariffs, may
cause our products to become less competitive due to price increases or less profitable due to lower margins. Our inability to
effectively manage the negative impacts of changing U.S. and foreign trade policies could adversely affect our business and
financial results.
■ We are subject to 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.
Changes in political, economic and social conditions, as well as in the laws and regulations in the foreign countries from which
we source our products could adversely affect our sales, earnings, financial condition and liquidity. These changes could make
it more difficult to provide products and service to our customers or could increase the cost of those products. International
trade regulations and policies of the United States and the countries from which we source finished products could adversely
affect us. Imposition of trade sanctions relating to imports, taxes, import duties and other charges on imports affecting our
products could increase our costs and decrease our earnings. For example, the U.S. Department of Commerce imposes tariffs
on wooden bedroom furniture coming into the United States from China. In this case, none of the rates imposed have been of
sufficient magnitude to alter our import strategy in any meaningful way; however, these and other tariffs are subject to review
and could be increased or new tariffs implemented in the future.
14
■ Changes in the value of the U.S. Dollar compared to the currencies for the countries from which we obtain our imported
products could adversely affect our sales, earnings, financial condition and liquidity.
For imported products, we generally negotiate firm pricing with our foreign suppliers in U.S. Dollars, typically for periods of
at least one year. We accept the exposure to exchange rate movements during these negotiated periods. We do not use derivative
financial instruments to manage this risk but could choose to do so in the future. 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 must pay for imported
products beyond the negotiated periods. These price changes could decrease our sales, earnings, financial condition and
liquidity during affected periods.
■ Supplier transitions, including cost or quality issues, could result in longer lead times and shipping delays.
In the past, inflation concerns, and to a lesser extent quality and supplier viability concerns, affecting some of our imported
product suppliers located in China prompted us to source more of our products from lower cost suppliers located in other
countries, such as Vietnam. As discussed above, during fiscal 2020 and fiscal 2021 we transitioned a significant portion of our
imported product purchases from China to Vietnam due to the imposition of tariffs on most furniture and component parts
imported from China. As conditions dictate, we could be forced to make similar transitions in the future. When undertaken,
transitions of this type involve significant planning and coordination by and between us and our new suppliers in these
countries. Despite our best efforts and those of our new sourcing partners, these transition efforts are likely to result in longer
lead times and shipping delays over the short term. Risks associated with product defects, including higher than expected costs
associated with product quality and safety, and regulatory compliance costs related to the sale of consumer products and costs
related to defective or non-compliant products, including product liability claims and costs to recall defective products. One or
a combination of these issues could adversely affect our sales, earnings, financial condition and liquidity.
A disruption affecting our domestic facilities could disrupt our business.
The facilities in which we store our inventory in Virginia, North Carolina, Georgia and California are critical to our success. Our
corporate and divisional headquarters, which house our administration, sourcing, sales, finance, merchandising, customer service and
logistics functions for our imported and domestic products are located in Virginia, North Carolina and California.
Our domestic upholstery manufacturing facilities are located in Virginia, North Carolina and California. Furniture manufacturing creates
large amounts of highly flammable wood dust and utilizes other highly flammable materials such as varnishes and solvents in its
manufacturing processes and is therefore subject to the risk of losses arising from explosions and fires. Additionally, our domestic
operations could be negatively affected by public health events, such as the COVID-19 pandemic. Any disruption affecting our domestic
facilities, for even a relatively short period of time, could adversely affect our ability to ship our furniture products and disrupt our
business, which could adversely affect our sales, earnings, financial condition and liquidity.
Labor shortages and rising labor costs could disrupt operations at our domestic warehousing and manufacturing facilities
We observed a strong labor market after the COVID-19 pandemic. We continue to experience difficulties in recruiting skilled labor into
our domestic upholstery plants and warehouses and in some skilled or professional positions. Lack of qualified workers and high
turnover in a variety of positions caused increased training costs and adversely affected our production schedules and the ability to ship
our furniture products. Furthermore, we experienced higher labor costs and ongoing inflationary pressure. Should these issues persist or
increase due to the COVID-19 pandemic, similar future pandemics or for other reasons, our sales, earnings, financial condition and
liquidity could again be adversely affected.
Fluctuations in the price, availability or quality of raw materials for our domestically manufactured upholstered furniture could
cause manufacturing delays, adversely affect our ability to provide goods to our customers or increase our costs.
We use various types of wood, leather, fabric, foam and other filling material, high carbon spring steel, bar and wire stock and other raw
materials in manufacturing upholstered furniture. We depend on outside suppliers for raw materials and must obtain sufficient quantities
of quality raw materials from these suppliers at acceptable prices and in a timely manner. We do not have long-term supply contracts
with our suppliers. Unfavorable fluctuations in the price, quality or availability of required raw materials could negatively affect our
ability to meet the demands of our customers. We may not always be able to pass price increases on raw materials through to our
customers due to competition and other market pressures. In addition, the price increases are frequently implemented on future orders
instead of existing order backlogs. Considering our lead times of five to six months, the benefits of new pricing could be offset by
continued price increases from our suppliers that could impact us before we realize the benefit from our price increases. The inability to
meet customers’ demands or recover higher costs could adversely affect our sales, earnings, financial condition and liquidity.
15
If demand for our domestically manufactured upholstered furniture declines, we may respond by realigning manufacturing.
Our domestic manufacturing operations make only upholstered furniture. A decline in demand for our domestically produced
upholstered furniture could result in the realignment of our domestic manufacturing operations and capabilities and the implementation
of cost-saving measures. These programs could include the consolidation and integration of facilities, functions, systems and procedures.
We may decide to source certain products from other suppliers instead of continuing to manufacture them. These realignments and cost-
saving measures typically involve initial upfront costs and could result in decreases in our near-term earnings before the expected cost
savings are realized, if they are realized at all. We may not always accomplish these actions as quickly as anticipated and may not
achieve the expected cost savings, which could adversely affect our sales, earnings, financial condition and liquidity.
We may experience impairment of our long-lived assets, which would decrease our earnings and net worth.
At January 29, 2023, we had $73.7 million in net long-lived assets, consisting primarily of property, plant and equipment, trademarks,
trade names and goodwill. Our goodwill, some trademarks and tradenames have indefinite useful lives and, consequently, are not subject
to amortization for financial reporting purposes, but are tested for impairment annually or more frequently if events or circumstances
indicate that the asset might be impaired. As an example, COVID-19 had a material impact on our financial performance in the fiscal
2021 first quarter and on the market valuations, discount rates and other inputs used in our intangibles valuation analysis. We determined
that an immediate intangible asset valuation was necessary given our performance and changing market dynamics. As a result of the
intangible asset valuation analysis, in the fiscal 2021 first quarter, we recorded $44.3 million in non-cash impairment charges to write
down goodwill and certain tradenames in the Home Meridian segment and goodwill in the Shenandoah division of its Domestic
Upholstery segment. In fiscal 2023, we wrote off $12,500 representing the remaining value of the Right2Home trade name in the Home
Meridian segment due to the decision to exit the ACH business unit in the fourth quarter of fiscal 2023. Our definite-lived assets consist
of property, plant and equipment and certain intangible assets related to our recent acquisitions and are tested for impairment whenever
events or circumstances indicate that the carrying amount of the asset may not be recoverable. The outcome of impairment testing could
result in the write-down of all or a portion of the value of these assets. A write-down of our assets would, in turn, reduce our earnings
and net worth. See Note 10 to our Consolidated Financial Statements for additional information.
Our sales and operating results could be adversely affected by product safety concerns.
If our product offerings do not meet applicable safety standards or consumers' expectations regarding safety, we could experience
decreased sales, increased costs and/or be exposed to legal and reputational risk. Events that give rise to actual, potential or perceived
product safety concerns could expose us to regulatory enforcement action and/or private litigation. While we carry general and umbrella
liability insurance for such events, settlements or jury awards could exceed our policy limits. Reputational damage caused by real or
perceived product safety concerns or failure to prevail in private litigation against us could adversely affect our business, sales, earnings,
financial condition and liquidity.
The implementation of our Enterprise Resource Planning (“ERP”) system could disrupt our business.
We are in the process of implementing a common ERP system across all divisions. The ERP system went live at Sunset West in the
fourth quarter of fiscal 2023, and is expected to go-live in our legacy Hooker divisions in fiscal 2024, with Home Meridian segment
following thereafter. Although we currently expect the ERP implementation to increase efficiencies by leveraging a common, cloud-
based system throughout all divisions and standardizing processes and reporting, our ERP system implementation may not result in
improvements that outweigh its costs and may disrupt our operations. Our inability to mitigate existing and future disruptions could
adversely affect our sales, earnings, financial condition and liquidity. For example, when the ERP system went live at Sunset West in
December 2022, the conversion process significantly impacted its shipping activities and negatively impacted its sales and profitability
in the fiscal 2023 fourth quarter due to longer than expected post-implementation stabilization. We expect these issues to be resolved in
the first quarter of fiscal 2024. The ERP system implementation subjects us to substantial costs and inherent risks associated with
migrating from our legacy systems. These costs and risks could include, but are not limited to:
● Significant capital and operating expenditures;
● Disruptions to our domestic and international supply chains;
16
Inability to fill customer orders accurately and on a timely basis, or at all;
Inability to process payments to suppliers, vendors and associates accurately and in a timely manner;
●
●
● Disruption to our system of internal controls;
●
●
●
Inability to fulfill our SEC or other governmental reporting requirements in a timely or accurate manner;
Inability to fulfill international, federal, state or local tax filing requirements in a timely or accurate manner; and
Increased demands on management and staff time to the detriment of other corporate initiatives.
A material part of our sales and accounts receivable are concentrated in a few customers. The loss of several large customers
through business consolidations or otherwise, the loss of a major customer or significant sales programs with major customers,
failures or other reasons, including economic downturn and the adverse economic effects of the COVID-19 pandemic or similar
events, could adversely affect our business.
One customer accounted for approximately 6% of our consolidated sales in fiscal 2023, our top five customers accounted for about 22%
of our fiscal 2023 consolidated sales. Approximately 20% of our consolidated accounts receivable is concentrated in our top five
customers. Should any one of these receivables become uncollectible, it would have an immediate and material adverse impact on our
financial condition and liquidity. The loss of any one or more of these customers could adversely affect our sales, earnings, financial
condition and liquidity. The loss of several of our major customers through business consolidations, the loss of major product
placements, failures or otherwise, could adversely affect our sales, earnings, financial condition and liquidity and the resulting loss in
sales may be difficult or impossible to replace. Amounts owed to us by a customer whose business fails, or is failing, may become
uncollectible (in whole or in part), and we could lose future sales, any of which could adversely affect our sales, earnings, financial
condition and liquidity.
We may not be able to collect amounts owed to us.
We grant payment terms to most customers ranging from 30 to 60 days and do not generally require collateral. However, in some
instances we provide longer payment terms. We purchase credit insurance on certain customers’ receivables and factor certain other
customer accounts. Some of our customers have experienced, and may in the future experience, credit-related issues. Were the COVID-
19 or a similar pandemic or another major, unexpected event with negative economic effects occur, we may not be able to collect
amounts owed to us or such payment may only occur after significant delay. While we perform credit evaluations of our customers,
those evaluations may not prevent uncollectible trade accounts receivable. Credit evaluations involve significant management diligence
and judgment, especially in the current environment. We may be unable to obtain sufficient credit insurance on certain customers’
receivable balances. Should more customers than we anticipate experience liquidity issues, if payment is not received on a timely basis,
or if a customer declares bankruptcy or closes stores, we may have difficulty collecting amounts owed to us by these customers, which
could adversely affect our sales, earnings, financial condition and liquidity.
We may engage in acquisitions and investments in companies, form strategic alliances and pursue new business lines. These
activities could disrupt our business, divert management attention from our current business, pose integration concerns, dilute
our earnings per share, decrease the value of our common stock and decrease our earnings and liquidity.
Our growth strategy includes growth by acquisition, which is highly dependent upon finding attractive targets and there can be no
assurance those targets will be found. We may acquire or invest in businesses such as those that offer complementary products or that
we believe offer competitive advantages. However, we may fail to identify significant liabilities or risks that could negatively affect us
or result in our paying more for the acquired company or assets than they are worth. We may also have difficulty assimilating and
integrating the operations and personnel of an acquired business into our current operations. Acquisitions may disrupt or distract
management from our ongoing business. We may pay for future acquisitions using cash, stock, the assumption of debt or a combination
of these. Future acquisitions could result in dilution to existing shareholders and to earnings per share and decrease the value of our
common stock. We may pursue new business lines in which we have limited or no prior experience or expertise. These pursuits may
require substantial investment of capital, personnel and management attention. New business initiatives may fail outright or fail to
produce an adequate return, which could adversely affect our earnings, financial condition and liquidity.
17
We may fail to realize all of the anticipated benefits of the Sunset Acquisition.
We incurred significant debt, acquisition and acquisition-related costs in connection with the Sunset Acquisition, but we may fail to
realize all the anticipated benefits of the Sunset Acquisition or they may take longer to realize than expected. While we believe the
Sunset Acquisition will be accretive to our earnings per share, this expectation is based on preliminary estimates which may materially
change. Although we do not expect to merge operations or change customer-facing services, the success of this acquisition will depend,
in part, on our ability to improve each business by sharing best practices in order to lower costs, improve efficiencies and grow sales.
We have based our expectations in part on the historical results and trends in Sunset West’s business; however there can be no assurance
regarding when or the extent to which we will be able to realize these benefits. Achieving the anticipated benefits is subject to a number
of uncertainties, including whether the business acquired can be operated in the manner we intend. Events outside of our control could
also adversely affect our ability to realize the anticipated benefits from the acquisition. Thus, the integration of Sunset West’s business
may be unpredictable, subject to delays or changed circumstances, and we can give no assurance that the acquired business will perform
in accordance with our expectations, or that our expectations with respect to integration or benefits as a result of the contemplated
acquisition will materialize.
The integration process in on-going and could result in the diversion of management attention to the detriment of other areas, the loss
of key employees, the disruption of ongoing businesses or inconsistencies in standards, controls, procedures and policies. If the
integration is not completed as planned, our ongoing business and financial results may be adversely affected, which could adversely
affect our sales, earnings, financial condition and liquidity.
We may fail to realize the benefits of HMI segment restructuring and cost-savings efforts.
During the fourth quarter of fiscal 2023, management approved a plan to exit the Accentrics Home (ACH) e-commerce brand of the
HMI segment along with repositioning the Prime Resources International (PRI) brand as a direct-container only business model. We
recorded a $24.4 million charge in the fiscal 2023 fourth quarter to write-down certain segment inventories to market and also recorded
severance expenses. We expect to reduce the physical footprints at our Savannah, GA warehouse and High Point, NC administrative
office over the course of the current 2024 fiscal year with a concurrent reduction in lease, warehouse, and related expenses. We expect
these actions will return the HMI segment to profitability sometime in fiscal 2024. However, we may be unable to realize these cost
savings in a timely manner or at all. If these efforts are unsuccessful, in whole or in part, our ongoing business and financial results may
be adversely affected, which could adversely affect our sales, earnings, financial condition and liquidity.
We may lose market share due to furniture retailers by-passing us and sourcing directly from non-U.S. furnishings sources.
Some large furniture retailers are sourcing directly from non-U.S. furniture factories. Over time, this practice may expand to smaller
retailers. As a result, we are continually subject to the risk of losing market share to these non-U.S. furnishings sources, which could
adversely affect our sales, earnings, financial condition and liquidity.
Failure to anticipate or timely respond to changes in fashion and consumer tastes could adversely impact our business.
Furniture is a styled product and is subject to rapidly changing fashion trends and consumer tastes, as well as to increasingly shorter
product life cycles. If we fail to anticipate or promptly respond to these changes, we may lose market share or be faced with the decision
of whether to sell excess inventory at reduced prices. This could adversely affect our sales, earnings, financial condition and liquidity.
Our results of operations for any quarter are not necessarily indicative of our results of operations for a full year.
Home furnishings sales fluctuate from quarter to quarter due to factors such as changes in economic and competitive conditions,
seasonality, weather conditions, availability of raw materials and finished inventory and changes in consumer order patterns. From time
to time, we have experienced, and may continue to experience, volatility with respect to availability of and demand for our home
furnishing products. Accordingly, our results of operations for any quarter are not necessarily indicative of the results of operations to
be expected for a full year or the next quarter.
» Other general risk factors applicable to us and our business
We may not be able to maintain, raise prices, or raise prices in a timely manner in response to inflation and increasing costs.
Competitive and market forces could prohibit or delay future successful price increases for our products in order to offset on a timely
basis increased costs of labor, finished goods, raw materials, freight and other product-related costs, which could adversely affect our
sales, earnings, financial condition and liquidity.
18
Economic downturns could result in decreased sales, earnings and liquidity.
The furniture industry is particularly sensitive to cyclical variations in the general economy and to uncertainty regarding future economic
prospects, including those caused by pandemics such as COVID-19. Home furnishings are generally considered a postponable purchase
by most consumers. Economic downturns could affect consumer spending habits by decreasing the overall demand for home furnishings.
Changes in interest rates, consumer confidence, new housing starts, existing home sales, the availability of consumer credit and broader
national or geopolitical factors have particularly significant effects on our business. We have seen negative effects on all of these
measures due to the COVID-19 pandemic. A recovery in our sales could lag significantly behind a general recovery in the economy
after an economic downturn, due to, among other things, the postponable nature and relatively significant cost of home furnishings
purchases or scarcity of transportation and Asian manufacturing capacity during times of increased demand. These events could also
impact retailers, who are our primary customers, possibly adversely affecting our sales, earnings, financial condition and liquidity.
The impact of future pandemics could adversely affect our business, results of operations, financial condition, liquidity and stock
price.
At the initial height of the COVID-19 pandemic, home furnishings purchases are largely postponable and heavily influenced by
consumer confidence and most of our customers’ businesses are classified as non-essential. Consequently, traffic to our customers’
stores and demand for our products significantly decreased, our sales deteriorated and our earnings were negatively impacted. COVID-
19 also impacted our Asian supply chain, particularly as a result of mandatory shutdowns in locations where our products are
manufactured in the Summer of calendar 2021, and we experienced out-of-stocks and lost sales as a result. Additionally, the demand
surge that occurred after the initial height of the pandemic caused supplier capacity constraints, shipping container and steamship space
shortages. These logistics issues increased costs, led to out-of-stocks and adversely affected our sales and earnings.
The extent of the continued impact of a pandemic or other global health crisis on our business and financial results depends on future
developments, including the emergence of new and different strains of the virus and the effectiveness of vaccinations and other public
health measures and could result in similar or worse public health outcomes compared to the Covid-19 pandemic.
The sweeping nature of pandemics makes it extremely difficult to predict how our business and operations could be affected in the
longer run. Any of the foregoing factors, or other cascading effects of this or other pandemics, could materially increase our costs,
negatively impact our sales and damage the Company’s results of operations and its liquidity, possibly to a significant degree. The
duration of any such impacts also cannot be predicted.
The interruption, inadequacy or security failure of our information systems or information technology infrastructure or the
internet or inadequate levels of cyber-insurance could adversely impact our business, sales, earnings, financial condition and
liquidity.
Our information systems (software) and information technology (hardware) infrastructure platforms and those of third parties who
provide these services to us, including internet service providers and third parties who store data for us on their servers (“the cloud”),
facilitate and support every facet of our business, including the sourcing of raw materials and finished goods, planning, manufacturing,
warehousing, customer service, shipping, accounting, payroll and human resources. Our systems, and those of third parties who provide
services to us, are vulnerable to disruption or damage caused by a variety of factors including, but not limited to: power disruptions or
outages; natural disasters or other so-called “Acts of God”; computer system or network failures; viruses or malware; physical or
electronic break-ins; the theft of computers, tablets and smart phones utilized by our employees or contractors; unauthorized access,
phishing and cyber-attacks. The risk of cyberattacks also includes attempted breaches of contractors, business partners, vendors and
other third parties. We have a cybersecurity program designed to protect and preserve the integrity of our information systems.
Additionally, we implemented a multi-factor authentication process in order to enhance the security of our remote work environment.
We have experienced and expect to continue to experience actual or attempted cyber-attacks of our information systems or networks;
however, none of these actual or attempted cyber-attacks had a material impact on our operations or financial condition. Additionally,
while we carry cyber insurance, including insurance for social engineering fraud, the amounts of insurance we carry may be inadequate
due either to inadequate limits available from the insurance markets or inadequate coverage purchased. Because cyber threat scenarios
are inherently difficult to predict and can take many forms, cyber insurance may not cover certain risks. Further, legislative or regulatory
action in these areas is evolving, and we may be unable to adapt our information systems or to manage the information systems of third
parties to accommodate these changes. If these information systems or technologies are interrupted or fail, or we are unable to adapt our
systems or those of third parties as a result of legislative or regulatory actions, our operations and reputation may be adversely affected,
we may be subject to legal proceedings, including regulatory investigations and actions, which could diminish investor and customer
confidence which could adversely affect our sales, earnings, financial condition and liquidity.
19
Unauthorized disclosure of confidential information provided to us by our customers, employees, or third parties could harm
our business.
We rely on the internet and other electronic methods to transmit confidential information and we store confidential information on our
networks. If there was a disclosure of confidential information by our employees or contractors, including accidental loss, inadvertent
disclosure or unapproved dissemination of information, or if a third party were to gain access to the confidential information we possess,
our reputation could be harmed, and we could be subject to civil or criminal liability and regulatory actions. A claim that is brought
against us, successful or unsuccessful, that is uninsured or under-insured could harm our business, result in substantial costs, divert
management attention and adversely affect our sales, earnings, financial condition and liquidity.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Set forth below is information with respect to our principal properties on April 14, 2023. We believe all of these properties are well-
maintained and in good condition. During fiscal 2023, we estimate our upholstery plants operated at approximately 87% of capacity on
a one-shift basis. All our production facilities are equipped with automatic sprinkler systems. All facilities maintain modern fire and
spark detection systems, which we believe are adequate. We have leased certain warehouse facilities for our distribution and import
operations, typically on a short or medium-term basis. We expect that we will be able to renew or extend these leases or find alternative
facilities to meet our warehousing and distribution needs at a reasonable cost. All facilities set forth below are active and operational,
representing in the aggregate approximately 3.8 million square feet of owned space, leased space or properties utilized under third-party
operating agreements.
Location
Martinsville, VA
Segment Use
Primary Use
All segments
Corporate Headquarters, Distribution,
Approximate Size
in Square Feet
1,595,151
Owned or Leased
Owned / Leased
High Point, N.C.
Midway, GA
Bedford, VA
Hickory, N.C.
Mt. Airy, N.C.
Valdese, N.C.
Cherryville, N.C.
Vista, CA
Las Vegas, NV
Ho Chi Minh City, VN
Dongguan, China
All segments
HM, DU
DU
DU
DU
DU
DU
DU
HB, DU, AO
HB, HM
HB, HM
Manufacturing and Warehousing
Office and Showrooms
Warehouse
Manufacturing and Offices
Manufacturing and Offices
Manufacturing and warehousing
Manufacturing and warehousing
Manufacturing Supply Plant
Manufacturing and Offices
Showrooms
Office, Warehouse and Distribution
Office
HB=Hooker Branded, HM=Home Meridian, DU=Domestic Upholstery
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
20
247,857
1,006,880
327,000
166,000
104,150
102,905
53,000
38,353
14,428
108,364
1,855
Leased
Leased
Owned
Owned
Leased
Leased
Owned
Leased
Leased
Leased
Leased
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Hooker Furnishings’ executive officers and their ages as of April 14, 2023 and the calendar year each joined the Company are as follows:
Name
Jeremy R. Hoff
Paul A. Huckfeldt
Anne J. Smith
Tod R. Phelps
Age
49
65
Position
Chief Executive Officer and Director
Chief Financial Officer and Senior Vice President - Finance and
Accounting
Year Joined
Company
2017
2004
61
54
Chief Administration Officer and President - Domestic Upholstery
Senior Vice President - Operations and Chief Information Officer
2008
2017
Jeremy R. Hoff has been Chief Executive Officer and Director since February 2021. Mr. Hoff served as President of Hooker Legacy
Brands from February 2020 to January 2021, President of the Hooker Branded segment from April 2018 to January 2020. Mr. Hoff
joined the Company in August of 2017 as President of Hooker Upholstery. Prior to that, Mr. Hoff served as President of Theodore
Alexander USA from December 2015 to August 2017.
Paul A. Huckfeldt has been Senior Vice President - Finance and Accounting since September 2013 and Chief Financial Officer since
January 2011. Mr. Huckfeldt served as Vice President – Finance and Accounting from December 2010 to September 2013, Corporate
Controller and Chief Accounting Officer from January 2010 to January 2011, Manager of Operations Accounting from March 2006 to
December 2009 and led the Company’s Sarbanes-Oxley implementation and subsequent compliance efforts from April 2004 to March
2006.
Anne J. Smith has been Chief Administration Officer and President – Domestic Upholstery since February 2021. Ms. Smith served as
Chief Administration Officer from July 2018 to January 2021, Senior Vice President – Administration from January 2014 to June 2018,
Vice President- HR and Administration from January 2011 to January 2014 and Vice President-Human Resources from November 2008
to January 2011. Ms. Smith joined the Company in January of 2008 as Director of Human Resources.
Tod R. Phelps has been Chief Information Officer and Senior Vice President – Operations since February 2021. Mr. Phelps joined the
Company in April 2017 as Chief Information Officer. From March 2014 to April 2017, he served as Chief Technology Officer of
Heritage Home Group, LLC.
21
Hooker Furnishings Corporation
Part II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our stock is traded on the NASDAQ Global Select Market under the symbol “HOFT”. As of January 29, 2023, we had approximately
11,500 beneficial shareholders. As we have done in the past, we currently expect that future regular quarterly dividends will be declared
and paid in the months of March, June, September and December. Although we presently intend to continue to declare regular cash
dividends on a quarterly basis for the foreseeable future, the determination as to the payment and the amount of any future dividends
will be made by the Board of Directors on a quarterly basis and will depend on our then-current financial condition, capital requirements,
results of operations and any other factors then deemed relevant by the Board of Directors.
Purchase of Equity Securities by the Issuer and Affiliated Purchasers
On June 6, 2022, our Board of Directors authorized the repurchase of up to $20 million of the Company’s common shares. 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 for our
revolving credit facility and other factors we deem relevant.
The following table details the repurchase activities in the fourth quarter of fiscal 2023:
Total Number
of Shares
Purchased
Average Price
Paid Per Share
Total Number
of Shares
Purchased As
Part of Publicly
Announced
Program
Maximum
Dollar Value of
Shares That
May Yet Be
Purchased
Under The
Program
October 31, 2022 - December 4, 2022
December 5, 2022 - January 1, 2023
January 2, 2023 - January 29, 2023
88,975
73,634
58,858
17.34
17.45
19.75
$
88,975
73,634
58,858
10,640,433
9,095,935
7,809,500
6,646,127
Total
221,467 $
18.02
221,467
Through fiscal 2023, we had used approximately $13.3 million of the authorization to purchase 819,632 of our common shares (at an
average price of $16.27 per share), with approximately $6.6 million remaining available for future purchases under the authorization as
of the end of fiscal 2023.
22
Performance Graph (1)
The following graph compares cumulative total shareholder return for the Company with a broad performance indicator, the Russell
2000® Index (2), and a published industry index, the Household Furniture Index (3), for the period from January 28, 2018 to January
29, 2023.
(1) The graph shows the cumulative total return on $100 invested at the beginning of the measurement period in our common stock
or the specified index, including reinvestment of dividends.
(2) The Russell 2000® Index, prepared by Frank Russell Company, measures the performance of the 2,000 smallest companies out
of the 3,000 largest U.S. companies based on total market capitalization and includes the Company.
(3) Household Furniture Index as prepared by Zacks Investment Research, Inc. consists of companies under Standard Industrial
Classification (SIC) Codes 2510 and 2511, which includes home furnishings companies that are publicly traded in the United
States or Canada. At January 29, 2023, Zacks Investment Research, Inc. reported that these two SIC Codes consisted of Bassett
Furniture Industries, Inc., Compass Diversified Holdings, Dorel Industries, Ethan Allen Interiors, Inc., Flexsteel Industries, Inc.,
Hooker Furnishings Corporation, Horrison Resources Inc., Instadose Pharma Corp., Kimball International, Inc., La-Z-Boy, Inc.,
Leggett & Platt, Inc., Luvu Brands, Inc., MasterBrand, Inc., Natuzzi Spa, Nova Lifestyle, Inc., Purple Innovation, Inc., The Rowe
Companies, Sleep Number Corp. and Tempur Sealy International, Inc.
23
ITEM 6. SELECTED FINANCIAL DATA
SEC disclosure rules no longer require the presentation of selected financial data; however, based on shareholder and internal feedback
we continue to provide this information. The following selected financial data for each of our last five fiscal years has been derived from
our audited, consolidated financial statements. The selected financial data should be read in conjunction with the consolidated financial
statements, including the related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations
included elsewhere in this report. Additionally, we face a number of significant risks and uncertainties, as more fully discussed in Item
1A, “Risk Factors”, above. If any or a combination of these risks and uncertainties were to occur, the information below may not be
fully indicative of our future financial condition or results of operations.
Fiscal Year Ended (1)
January 29, January 30, January 31, February 2, February 3,
2021
2023
2019
2020
2022
(In thousands, except per share data)
Income Statement Data:
Net sales
Cost of sales
Inventory valuation expense (2)
Casualty loss (3)
Gross profit
Selling and administrative expenses
Goodwill impairment (4)
Trade names impairment (4)
Intangible asset amortization (4)
Operating (loss)/income
Other income, net
Interest Expense, net
(Loss)/income before income taxes
Income tax (benefit)/expense
Net (loss)/income
Per Share Data:
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
Cash dividends per share
Net book value per share (5)
Weighted average number of shares outstanding (basic)
Balance Sheet Data:
Cash and cash equivalents
Trade accounts receivable
Inventories
Working capital
Total assets
Long-term debt (including current maturities) (6)
Shareholders’ equity
$
$
$
583,102 $
461,056
28,752
-
93,294
95,815
-
13
3,512
(6,046 )
416
519
(6,149 )
(1,837 )
(4,312 )
593,612 $
488,508
3,402
-
101,702
84,475
-
-
2,384
14,843
373
110
15,106
3,388
11,718
540,081 $
426,810
523
-
112,748
80,410
39,568
4,750
2,384
(14,364 )
336
540
(14,568 )
(4,142 )
(10,426 )
610,824 $
494,365
2,501
-
113,958
88,867
-
-
2,384
22,707
458
1,238
21,927
4,844
17,083
(0.37 ) $
(0.37 )
0.82
21.33
11,593
0.99 $
0.97
0.74
22.01
11,852
(0.88 ) $
(0.88 )
0.66
21.76
11,822
1.44 $
1.44
0.61
23.25
11,784
19,002 $
62,129
96,675
137,265
381,716
24,266
236,021
69,366 $
73,727
75,023
170,777
374,559
-
261,128
65,841 $
83,290
70,159
169,612
352,273
-
257,503
36,031 $
87,653
92,813
171,838
393,708
30,138
274,121
683,501
535,172
842
500
146,987
91,928
-
-
2,384
52,675
369
1,454
51,590
11,717
39,873
3.38
3.38
0.57
22.37
11,759
11,435
112,557
105,204
170,516
369,716
35,508
263,176
(1) Our fiscal years end on the Sunday closest to January 31, with fiscal 2023 ending on January 29, 2023. The fiscal years presented above all
had 52 weeks, except for the 2019 fiscal year that ended on February 3, 2019, was a 53-week fiscal year.
(2) Represents the inventory write downs of ACH and other excess inventories related to the exit of ACH and repositioning of the PRI business
in fiscal 2023. See Note 3 to our Consolidated Financial Statements for additional information.
(3) Represents the insurance deductible for a casualty loss experienced at one of our Hooker Branded segment facilities in fiscal 2019.
(4) Represents impairment charges and amortization expense on acquisition-related intangibles. See Note 10 to our Consolidated Financial
Statements for additional information on our intangible assets.
(5) Net book value per share is derived by dividing “shareholders’ equity” by the number of common shares issued and outstanding, excluding
unvested restricted shares, all determined as of the end of each fiscal period.
(6) Long-term debt (including current maturities): Fiscal 2023 amounts consist of acquisition related term loans to fund the Sunset Acquisition.
Prior periods shown consisted of term loans incurred to fund a portion of the Home Meridian and Shenandoah acquisitions, which were paid
off in January 2021.
24
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
As you read Management’s Discussion and Analysis, please refer to the selected financial data and the consolidated financial statements,
including the related notes, contained elsewhere in this annual report. We especially encourage you to familiarize yourself with:
■ All of our recent public filings made with the SEC which are available, without charge, at www.sec.gov and at
http://investors.hookerfurnishings.com;
■ The forward-looking statements disclaimer contained prior to Item 1 of this report, which describe the significant risks and
uncertainties that could cause actual results to differ materially from those forward-looking statements made in this report,
including those contained in this section of our annual report on Form 10-K;
■ The company-specific risks found in Item 1A. “Risk Factors” of this report. This section contains critical information
regarding significant risks and uncertainties that we face. If any of these risks materialize, our business, financial condition
and future prospects could be adversely impacted; and
■ Our commitments and contractual obligations and off-balance sheet arrangements described on page 34 and in Note 19 to our
Consolidated Financial Statements on page F-34 of this report. This note describes commitments, contractual obligations and
off-balance sheet arrangements, some of which are not reflected in our consolidated financial statements.
In Management’s Discussion and Analysis, we analyze and explain the annual changes in some specific line items in the consolidated
financial statements for fiscal 2023 compared to fiscal 2022. We also provide information regarding the performance of each of our
operating segments and All Other. The analysis and discussions of fiscal 2022 compared to fiscal 2021 results are in our 2022 Form-
10K available through Hooker Furnishings and SEC websites.
Unless otherwise indicated, references to the “Company,” “we,” “our” or “us” refer to Hooker Furnishings Corporation and its
consolidated subsidiaries, unless specifically referring to segment information. All references to the “Hooker,” “Hooker Division,”
“Hooker Legacy Brands” or “traditional Hooker” divisions or companies refer to the current components of our Hooker Branded
segment, the Domestic Upholstery segment including Bradington-Young, HF Custom, Shenandoah Furniture and Sunset West, and All
Other which includes H Contract and Lifestyle Brands.
Furniture sales account for all of our net sales. For financial reporting purposes, we are organized into three reportable segments- Hooker
Branded, Home Meridian and Domestic Upholstery, with our other businesses included in All Other. 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, H Contract’s results included sales of seating products sourced from HF
Custom. Due to a change in the way management internally evaluates operating performance, beginning with fiscal 2023 first quarter,
HF Custom’s results, which are included in Domestic Upholstery, 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. Additionally, based on our analysis and the requirements of ASC 280: Segment Reporting, the operational
results of the newly acquired Sunset West division are included in the Domestic Upholstery segment starting in the first quarter of fiscal
2023 on a prospective basis. See Note 18 to our consolidated financial statements for additional financial information regarding our
segments.
Overview
Executive Summary- Fiscal 2023 Results of Operations
Consolidated net sales decreased by $10.5 million, or 1.8%, compared to the previous fiscal year. The decrease was driven by a $62.6
million, or 22.4% sales decline in the Home Meridian segment, which was largely offset by a significant increase of $49.9 million or
46.7% in the Domestic Upholstery segment. Hooker Branded segment net sales had a minor decrease of $1.1 million, or 0.5%. Despite
being a small portion of the consolidated results, All Other revenue increased by 45.3% or $3.3 million. Consolidated gross profit and
margin decreased by $8.4 million and 110 bps, respectively, primarily due to the gross loss in the Home Meridian segment resulting
from the $24.4 million write down of ACH and other excess inventories, and to a lesser extent, a decrease in gross profit and margin in
the Hooker Branded segment. The charge was initially expected to be $34 million, but estimates were refined during our year-end
financial close and was ultimately less than originally estimated in part as sales of the inventory thus far in fiscal 2024 have been at less
of a discount than originally expected. These decreases were partially offset by increased profitability in the Domestic Upholstery
segment. The Company reported a consolidated operating loss of $6.0 million or (1.0%) operating margin, as compared to operating
income of $14.8 million in the previous fiscal year. Consolidated net loss was $4.3 million or ($0.37) per diluted share, as compared to
net income of $11.7 million or $0.97 per diluted share in the prior year period.
25
Our fiscal 2023 performance is discussed in greater detail below under “Review” and “Results of Operations”.
Review
Fiscal 2023 was a challenging year as we faced macro-economic uncertainties, ongoing inflation, volatile interest rates and a slowdown
in the demand for home furnishings following the prior year’s demand surge after the initial COVID crisis. Despite these challenges,
we were encouraged by the improvements in the global supply chain, a strong labor market, and our overseas vendors returning to
normal production levels. As discussed below, we were pleased to report solid results in both Hooker Branded and Domestic Upholstery
segments; however, we had to make difficult but necessary decisions aimed at optimizing our resources and improving profitability in
the Home Meridian segment.
The Hooker Branded segment’s net sales slightly decreased by $1.1 million, or 0.5%, as compared to the all-time record net sales this
segment achieved in the prior fiscal year. At the beginning of the fiscal year, this segment experienced inventory unavailability due to
the COVID-related lockdown at our suppliers in Vietnam and their slow re-openings in late 2021 and early 2022. Inventory levels
increased throughout fiscal 2023, allowing us to fulfill a significant portion of the large order backlog carried over from the prior year.
However, in the third quarter, there was a temporary delay in shipments due to inventory mix issues. Dealers delayed receipts of orders
until collections could ship complete. This was resolved in the fourth quarter. By the end of fiscal year 2023, inventory had increased
by $35 million in this segment compared to the previous year-end and more than doubled compared to fiscal 2020 and 2021 year-end.
Meanwhile, gross profit and margin for the segment decreased by $3.8 million or 180 bps due to much higher-than-expected demurrage
expenses and increased warehousing labor costs, driven by the large inventory volume as well as port and warehouse congestion in the
U.S.. Operating income decreased to $20.5 million, with an operating margin of 10.3%, compared to $30.7 million and 15.3%,
respectively, in the prior year. The decline was due to higher compensation expenses (due to increased headcount, wage inflation and
favorable performance to budget which affected staff variable compensation), higher professional services and training expenses, higher
lease expense at the new Hooker showroom in High Point, NC, which is expected to come online in April 2023, and other increased
operating expenditures as business returned to the pre-pandemic environment. Despite a significant decrease in incoming orders
compared to the strong rebound in the prior year, order backlog remained 76% higher than pre-pandemic levels at fiscal 2020 year end.
The Home Meridian segment experienced a decline of $62.6 million, or 22.4% in net sales, compared to the prior year. Moreover, the
segment recorded an operating loss of $37.2 million, driven by lower sales volume due to the demand environment and a $24.4 million
inventory write down related to the exit of the ACH business unit and repositioning of PRI in the fourth quarter of fiscal 2023.
■ Nearly 60% of the decrease was driven by sales decreases at PRI and SLF, which service major furniture chains and mass
merchants. These brands experienced decreased incoming orders as retail customers focused on reducing their own excess
inventories by delaying incoming shipments. Pulaski’s fiscal 2023 net sales were essentially flat.
■ Over 30% of the net sales decrease was driven by HMidea, which was exited in fiscal 2022 and focused on Clubs channel
sales. The Company made the decision to exit HMidea in the prior fiscal year due to continued losses driven by low margins
and excessive chargebacks. While this led to a decrease in revenue, the exit resulted in significant improvement in returns and
allowances costs.
■ E-commerce sales decreased due primarily to the normalization of post-COVID consumer demand. The ACH business unit,
which focused on e-commerce business, contributed about 13% of Home Meridian’s overall revenue, but accounted for over
50% of the operating loss in this segment, primarily due to the write-down of its inventories to market. The e-commerce
business model requires significant capital investment and high handling costs, as we carried significant amounts of inventory
to meet quick shipping demands as compared to Home Meridian's other business units, which primarily use a container direct
model. Additionally, these lower-priced and lower-margin inventories carried historically high freight costs we paid in the prior
year. During the second half of fiscal 2023, we implemented targeted promotions to accelerate sales and reduced inventory by
approximately $8 million. However, given the inventory levels, industry discounting levels and low demand, continuing to sell
ACH inventory at or near cost would not reach the breakeven but incur additional lease, warehouse labor and other costs. As a
result, we decided to exit the ACH business and recorded $24.4 million charge to write down the ACH and other excess
inventories. With lower inventory levels, we also expect to reduce the physical footprints and related expenses at the Georgia
warehouse and other facilities during fiscal 2024.
26
We believe the actions to eliminate these slow-moving and low-margin categories, reduce overhead, and focus our resources on more
profitable products, sales channels and customer mix are essential for sustained performance and long-term profitability.
The Domestic Upholstery segment’s net sales increased by $49.9 million, or 46.7% compared to the prior fiscal year. The sales increase
was due primarily to the addition of Sunset West results, which accounted for approximately 54% of the increase, while the remainder
was due to double-digit sales growth at Bradington-Young, HF Custom, and Shenandoah for the second consecutive year. Manufacturing
constraints such as shortages and inconsistent deliveries of certain raw materials that we experienced in the prior year were no longer
an issue. Gross margin was 20.8%, compared to 19.5% in the prior year. Higher sales volume and operating near full capacity
significantly improved indirect and fixed costs absorption and direct labor efficiency; however, price inflation of raw materials and
higher freight surcharges offset the favorable sales variances by approximately 300 bps and 220 bps, respectively. Additionally, Sunset
West's shipping activities were disrupted by the conversion of the new ERP system in the fourth quarter due to longer than expected
post-implementation stabilization, resulting in low shipments and unabsorbed costs. This issue was largely resolved in the first quarter
of fiscal 2024. The segment reported an operating income of $8.9 million, with a 5.7% operating margin compared to $4.7 million and
4.4% in the prior year, respectively. Incoming orders decreased mostly due to current demand, while shipments were higher and aligned
with internal goals, fulfilling and reducing the historically high order backlogs which was carried over from the prior year. At the end
of fiscal 2023, order backlog, excluding Sunset West, remained 57% higher than pre-pandemic levels at fiscal 2020 year end.
Cash and cash equivalents stood at $19 million at fiscal 2023 year-end, a decrease of $50.4 million from the prior year-end. During
fiscal 2023, we used a portion of cash on hand and cash collected from accounts receivable to fund $19 million increase in inventory,
$13.3 million share repurchases, $9.6 million in cash dividends to our shareholders, $5.4 million for development of our new cloud-
based ERP system, and $4.2 million capital expenditure for enhancements of other systems and facilities. During fiscal 2023, we received
$25 million in term loan proceeds to replenish cash used to make the Sunset Acquisition. In the third quarter of fiscal 2023, our Board
of Directors approved the increase of our quarterly dividend to $0.22 per share, an increase of 10% or $0.02 per share, representing the
seventh consecutive annual dividend increase. In fiscal 2023, dividends totaled $0.82 per share or $9.6 million in the aggregate, an
increase of 10.8% or $0.08 per share, compared to the prior year.
In addition to our cash balance, at fiscal 2023 third quarter end, we had $26.4 million available under our $35 million revolving credit
facility with BofA (the “Existing Revolver”) to fund working capital needs and have access to $27.6 million in cash surrender value of
Company-owned life insurance policies. We believe that our liquidity and capital requirements will be further improved through the
write down of ACH inventories and other excess inventories, as discussed above. With strategic inventory management, reasonable
capital expenditures, and prudent expense management, we believe we have the financial resources to support our business operations
for the foreseeable future.
Results of Operations
The following table sets forth the percentage relationship to net sales of certain items for the annual periods included in the consolidated
statements of income:
Net sales
Cost of sales
Inventory write downs
Gross profit
Selling and administrative expenses
Intangible asset amortization
Operating (loss)/income
Other income (expense), net
Interest expense, net
(Loss)/Income before income taxes
Income tax (benefit)/expense
Net (loss)/income
Fifty-two weeks ended
January 29,
2023
January 30,
2022
100.0 %
79.1
4.9
16.0
16.4
0.6
(1.0 )
0.1
0.1
(1.0 )
(0.3 )
(0.7 )
100.0 %
82.3
0.6
17.1
14.2
0.4
2.5
0.1
-
2.6
0.6
2.0
27
Fiscal 2023 Compared to Fiscal 2022
Net Sales
January 29,
2023
Fifty-two weeks ended
January 30,
2022
$ Change
% Change
Hooker Branded
Home Meridian
Domestic Upholstery
All Other
Consolidated
% Net Sales
$
$
199,602
216,338
156,717
10,445
583,102
34.2 % $
37.1 %
26.9 %
1.8 %
100 % $
% Net Sales
33.8 % $
47.0 %
18.0 %
1.2 %
100 % $
200,692
278,902
106,827
7,191
593,612
(1,090 )
(62,564 )
49,890
3,254
(10,510 )
-0.5 %
-22.4 %
46.7 %
45.3 %
-1.8 %
Unit Volume and Average Selling Price (“ASP”)
FY23 %
Increase /
(Decrease) vs.
FY22
Average Selling Price
FY23 %
Increase /
(Decrease) vs.
FY22
-12.8 % Hooker Branded
-26.7 % Home Meridian
3.1 % Domestic Upholstery *
31.7 % All Other
-22.1 % Consolidated
14.2 %
3.7 %
17.5 %
7.3 %
19.3 %
Unit Volume
Hooker Branded
Home Meridian
Domestic Upholstery *
All Other
Consolidated
*Sunset West is excluded from the Domestic Upholstery segment in the Unit Volume and ASP portions of the table above since it was
not a part of our fiscal 2022 results. Consequently, we believe including its fiscal 2023 results would skew Domestic Upholstery results
and reduce the usefulness of those portions of the table.
Consolidated net sales decreased primarily due to sales decline in the Home Meridian segment, partially offset by revenue growth at
Domestic Upholstery segment and All Other.
■ Hooker Branded segment’s net sales remained essentially flat as compared to the prior year’s robust sales, which were driven
by a surge in demand following the initial outbreak of COVID-19. The decrease in unit volume was attributable to shipment
disruptions caused by inventory unavailability in the first quarter of fiscal 2023, and to a lesser extent, temporary inventory
mix issues due to some inventories received as incomplete collections. ASP increased due to a large percentage of the shipments
carrying price increases we implemented during the two most recent years to mitigate higher freight and product costs.
■ Home Meridian segment’s net sales decreased by 22.4% compared to the prior year period. The decline was attributable to the
absence of sales in the Clubs channels which we decided to exit in the prior year, decreased sales volume with traditional
furniture chains and mass merchants, as well as the e-commerce channel, partially offset by increased net sales in the hospitality
business. ASP increased in all current divisions due to the freight surcharges and price increases we imposed to mitigate higher
freight and product costs, while being negatively impacted by the Clubs channels closeout sales and heavy discounting at ACH
in the second half of fiscal 2023.
■ Domestic Upholstery net sales increased by 46.7% compared to the prior year due to the addition of Sunset West’s results as
well as double digit sales growth at each of Bradington Young, HF Custom and Shenandoah for the second consecutive year.
ASP increased across all three divisions in response to the inflation of raw material costs. Unit volume increased as all divisions
were operating near full capacity and working through backlog.
■ All Other net sales increased significantly in fiscal 2023 driven by increased sales volume at H Contract due to the recovery of
the senior living industry after the COVID pandemic.
28
Gross Profit/(Loss) and Margin
January 29,
2023
Fifty-two weeks ended
January 30,
2022
% Segment
Net Sales
% Segment
Net Sales
$ Change
% Change
Hooker Branded
Home Meridian
Domestic Upholstery
All Other
Consolidated
$
$
59,344
(2,620 )
32,633
3,937
93,294
29.7 % $
-1.2 %
20.8 %
37.7 %
16.0 % $
63,146
15,213
20,860
2,483
101,702
31.5 % $
5.5 %
19.5 %
34.5 %
17.1 % $
(3,802 )
(17,833 )
11,773
1,454
(8,408 )
-6.0 %
-117.2 %
56.4 %
58.6 %
-8.3 %
Consolidated gross profit and margin both decreased as compared to the prior year, attributed primarily to a gross loss at the Home
Meridian segment, while partially offset by an increase in gross profit and margin at Domestic Upholstery segment.
■ The Hooker Branded segment gross profit and margin decreased due to increased warehousing costs which exceeded such
costs in the prior year by 160 bps. These costs included higher demurrage expenses due to large inventory receipts during the
year and supply chain disruptions, increased warehouse labor costs, and increased fuel and trucking expenses due to inflation.
■ The Home Meridian segment recorded a gross loss, primarily due to its sales decline and the $24.4 million write-down of ACH
inventories and other excess inventories, which more than offset a decrease in customer chargebacks after the exit from the
Clubs channel as well as price increases and freight surcharges. Additionally, the savings generated from consolidating the
California and North Carolina warehouses helped offset higher-than-expected labor and transition costs incurred at the Georgia
warehouse.
■ Domestic Upholstery segment gross profit and margin both increased in fiscal 2023 due to the addition of Sunset West results
and improved profitability at HF Custom and Shenandoah. Favorable sales variances and operating near full capacity benefited
production efficiencies and overhead absorption. Despite a double-digit sales increase, Bradington-Young’s gross profit and
margin both decreased due primarily to leather cost inflation and, to a lesser extent, increased direct labor costs. Additionally,
higher freight surcharges negatively impacted profitability of each division.
■ All Other gross profit and margin both increased in fiscal 2023 due to strong net sales at H Contract.
Selling and Administrative Expenses (“S&A”)
January 29,
2023
Fifty-two weeks ended
January 30,
2022
% Segment
Net Sales
% Segment
Net Sales
$ Change
% Change
Hooker Branded
Home Meridian
Domestic Upholstery
All Other
Consolidated
$
$
38,814
33,215
21,584
2,202
95,815
19.4 % $
15.4 %
13.8 %
21.1 %
16.4 % $
32,479
35,139
15,135
1,722
84,475
16.2 % $
12.6 %
14.2 %
23.9 %
14.2 % $
6,335
(1,924 )
6,449
480
11,340
19.5 %
-5.5 %
42.6 %
27.9 %
13.4 %
Consolidated selling and administrative expenses increased in absolute terms and as a percentage of net sales driven by increased S&A
expenses at Hooker Branded segment and the addition of Sunset West expenses.
■ Hooker Branded segment S&A expenses increased in absolute terms and as a percentage of net sales driven by general spending
increases as business returned to more normal levels and because of inflation in multiple line items including wages and
benefits. Compensation levels also increased due to increased headcount and higher levels of staff variable compensation driven
by favorable performance compared to budget. Additionally, bad debt reserves increased due to higher AR balances. These
increases were partially offset by the absence of executive bonuses due to missed budgeted profit goals in fiscal 2023. We
recorded a much larger downward adjustment of executive bonus and long-term incentive accruals in fiscal 2022, which
exacerbates the comparisons between the two years.
29
■ Home Meridian segment S&A expenses decreased in absolute terms, attributable to decreased compensation expense resulting
from personnel changes, decreased selling costs due to lower net sales, and decreased bad debt expense on lower AR balances.
These decreases were partially offset by higher designing fees related to a new licensing arrangement, higher international
travel expenses as normal travel schedules resumed, and higher depreciation expenses on additions of property and equipment
at the Georgia warehouse. S&A expenses increased as a percentage of net sales due to lower net sales.
■ Domestic Upholstery segment S&A expenses increased in absolute terms in fiscal 2023 due principally to the addition of
Sunset West’s S&A expenses, as well as higher compensation expenses and higher selling costs resulting from higher net sales
at each division. S&A expenses decreased as a percentage of net sales due to increased net sales.
■ All Other S&A expenses increased in absolute terms while decreased as a percentage of net sales due to higher selling costs
on increased net sales.
Intangible Asset Amortization
January 29,
2023
Fifty-two weeks ended
January 30,
2022
$ Change
% Change
Intangible asset amortization
$
3,512
0.6 % $
% Net Sales
% Net Sales
0.4 % $
2,384
1,128
47.3 %
Intangible asset amortization expense was higher in fiscal 2023 due to Sunset Acquisition-related amortization expense. See Note
10 Intangible Assets and Goodwill to our Consolidated Financial Statements for additional information about our amortizable intangible
assets.
Operating (Loss)/Profit and Margin
January 29,
2023
Fifty-two weeks ended
January 30,
2022
% Segment
Net Sales
% Segment
Net Sales
$ Change
% Change
Hooker Branded
Home Meridian
Domestic Upholstery
All Other
Consolidated
$
$
20,529
(37,181 )
8,871
1,735
(6,046 )
10.3 % $
-17.2 %
5.7 %
16.6 %
-1.0 % $
30,667
(21,260 )
4,675
761
14,843
15.3 % $
-7.6 %
4.4 %
10.6 %
2.5 % $
(10,138 )
(15,921 )
4,196
974
(20,889 )
-33.1 %
-74.9 %
89.8 %
128.0 %
-140.7 %
Operating profitability decreased both in absolute terms and as a percentage of net sales in fiscal 2023 compared to the prior-year period
due to the factors discussed above. Sunset West operating profit of $683,000 for the fiscal 2023, net of $1.1 million in intangible asset
amortization expense on Sunset Acquisition-related intangibles, was included in the Domestic Upholstery segment’s results.
Interest Expense, net
Fifty-two Weeks Ended
Interest expense, net
$
519
0.1 % $
% Net Sales
% Net Sales
0.0 % $
110
409
371.8 %
January 29,
2023
January 30,
2022
$ Change
% Change
Consolidated interest expense increased in fiscal 2023 due primarily to interest on new term loans and the amounts drawn on the
revolving credit facility throughout the year.
30
Income Taxes
Fifty-two weeks ended
January
29, 2023
January 30,
2022
% Net
Sales
% Net
Sales
$ Change % Change
Consolidated income tax (benefit)/expense
$
(1,837 )
-0.3 % $
3,388
0.6 % $
(5,225 )
-154.2 %
Effective Tax Rate
29.9 %
22.4 %
We recorded income tax benefit of $1.8 million for fiscal 2023, compared to income tax expense of $3.4 million for fiscal 2022. The
effective tax rates for fiscal 2023 and 2022 were 29.9% and 22.4%, respectively. The effective tax rate was higher in fiscal 2023 due to
the impact of the cash surrender value of company-owned life insurance which was added to the favorable tax impact of the pretax loss
in current year, versus a subtraction from tax expense in the case of a pretax profit. See Note 17 Income Taxes to our Consolidated
Financial Statements for additional information about our income taxes.
Net (Loss)/Income and (Loss)/Earnings Per Share
Fifty-two weeks ended
January
29, 2023
January 30,
2022
% Net
Sales
% Net
Sales
$ Change % Change
$
(4,312 )
-0.7 % $
11,718
2.0 % $
(16,030 )
-136.8 %
Net (loss)/income
Consolidated
Diluted (loss)/earnings per share
$
(0.37 )
$
0.97
The analysis and discussion of fiscal 2022 compared to fiscal 2021 results are available in Item 7 of our 2022 Annual Report on
Form-10K available through Hooker Furnishings and SEC websites.
Financial Condition, Liquidity and Capital Resources
Summary Cash Flow Information – Operating, Investing and Financing Activities
January 29,
2023
Fifty-Two Weeks Ended
January 30,
2022
January 31,
2021
Net cash (used in)/provided by operating
activities
Net cash used in investing activities
Net cash provided by/(used in) financing
activities
Net (decrease)/increase in cash and cash
equivalents
$
(21,718 ) $
(29,965 )
19,209 $
(6,862 )
68,263
(476 )
1,319
(8,822 )
(37,977 )
$
(50,364 ) $
3,525 $
29,810
During fiscal 2023, we used a portion of the $25 million term-loan proceeds and existing cash and cash equivalents on hand to fund the
$25 million Acquisition, build up inventory levels by $19 million, pay $13.3 million in purchases and retirement of common stock, $9.6
million in cash dividends, $5.4 million for the development of our new cloud-based ERP system, $4.2 million capital expenditures to
enhance our business systems and facilities, and $492,000 in life insurance premiums on Company-owned life insurance policies.
Company-owned life insurance policies are in place to compensate us for the loss of key employees and to facilitate business continuity.
During fiscal 2022, we used a portion of the $19.2 million generated from operations and $372,000 in life insurance proceeds to pay
$8.8 million in cash dividends, $6.7 million in capital expenditures to enhance our systems and facilities and $560,000 for insurance
premiums on Company-owned life insurance policies.
31
During fiscal 2021, we used existing cash, a portion of the $68.3 million generated from operations and $1.3 million in life insurance
proceeds to retire our $30.1 million in outstanding term loans related to the Home Meridian acquisition, pay $7.8 million in cash
dividends, $1.2 million in capital expenditures to enhance our systems and facilities and to pay $555,000 for insurance premiums on
Company-owned life insurance policies.
Liquidity, Financial Resources and Capital Expenditures
Our sources of liquidity are:
■
■
■
■
available cash and cash equivalents, which are highly dependent on incoming order rates and our operating performance;
expected cash flow from operations;
available lines of credit; and
cash surrender value of Company-owned life-insurance.
The most significant components of our working capital are inventory, accounts receivable and cash and cash equivalents reduced by
accounts payable and accrued expenses.
Our most significant ongoing short-term cash requirements relate primarily to funding operations (including expenditures for inventory,
lease payments and payroll), quarterly dividend payments and capital expenditures related primarily to our ERP project, showroom
renovations and upgrading systems, buildings and equipment. The timing of our working capital needs can vary greatly depending on
demand for and availability of raw materials and imported finished goods but is generally the greatest in the mid-summer as a result of
inventory build-up for the traditional fall selling season. Long-term cash requirements relate primarily to funding lease payments.
While we generally fund short-term and long-term cash requirements with cash from operating activities, during fiscal 2023, at
various times we borrowed and repaid amounts totaling $36.2 million on our revolving line of credit. We believe our primary sources
of liquidity will satisfy our cash requirements over both the short-term (the next twelve months) and long-term.
Loan Agreements and Revolving Credit Facility
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 Sunset Acquisition. The Second Amended and Restated Loan
Agreement dated as of September 29, 2017, had previously been amended by a First Amendment to Second Amended and Restated
Loan Agreement dated as of January 31, 2019, a Second Amendment to Second Amended and Restated Loan Agreement dated as of
November 4, 2020, and a Third Amendment to Second Amended and Restated Loan Agreement dated as of January 27, 2021 (as so
amended, the “Existing Loan Agreement”). Details of the individual credit facilities provided for in the Amendment are as follows:
■ Unsecured Revolving Credit Facility. Under the Amendment, the expiration date of the existing $35 million Unsecured
Revolving Credit Facility (the “Existing Revolver”) was extended to July 26, 2027. Any amounts outstanding will bear interest
at a rate per annum, equal to the then current Bloomberg Short-Term Bank Yield Index (“BSBY”) (adjusted periodically) plus
1.00%. The interest rate will be adjusted on a monthly basis. The actual daily amount of undrawn letters of credit is subject to
a quarterly fee equal to a per annum rate of 1%. 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;
■ 2022 Secured Term Loan. The Amendment provided us with a $18 million term loan (the “Secured Term Loan”), which was
disbursed to us on July 26, 2022. We are required to pay monthly interest only payments at a rate per annum equal to the then
current BSBY rate (adjusted periodically) plus 0.90% on the outstanding balance until the principal is paid in full. The interest
rate will be adjusted on a monthly basis. On July 26, 2027, the entire outstanding indebtedness is due in full, including all
principal and interest. The Secured Term Loan is secured by certain company-owned life insurance policies under a Security
Agreement (Assignment of Life Insurance Policy as Collateral) dated July 26, 2022, by and between the Company and BofA;
and
■ 2022 Unsecured Term Loan. The Amendment provided us with a $7 million unsecured term loan (the “Unsecured Term Loan”),
which was disbursed to us on July 26, 2022. We are required to pay monthly principal payments of $116,667 and monthly
interest payments at a rate per annum equal to the then current BSBY (adjusted periodically) plus 1.40% on the outstanding
balance until paid in full. The interest rate will be adjusted monthly. On July 26, 2027, the entire outstanding indebtedness is
due in full, including all principal and interest.
32
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 January 29, 2023, $6.3 million was
outstanding under the Unsecured Term Loan, and $18 million was outstanding under the Secured Term Loan.
We incurred $37,500 in debt issuance costs in connection with our term loans. As of January 29, 2023, unamortized loan costs of $33,750
were netted against the carrying value of our term loans on our condensed consolidated balance sheets.
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.
● A basic fixed charge coverage ratio of at least 1.25:1.00; and
● Limit capital expenditures to no more than $15.0 million during any fiscal year.
The Existing Loan Agreement also limits our right to incur other indebtedness, make certain investments and create liens upon our
assets, subject to certain exceptions, among other restrictions. The Existing Loan Agreement does not restrict our ability to pay cash
dividends on, or repurchase, shares of our common stock, subject to our compliance with the financial covenants discussed above, if we
are not otherwise in default under the Existing Loan Agreement.
We were in compliance with each of these financial covenants at January 29, 2023 and expect to remain in compliance with existing
covenants for the foreseeable future.
Revolving Credit Facility Availability
As of January 29, 2023, we had $26.4 million available under our $35 million Existing Revolver to fund working capital needs. Standby
letters of credit in the aggregate amount of $8.6 million, used to collateralize certain insurance arrangements and for imported product
purchases, were outstanding under the Existing Revolver as of January 29, 2023. There were no additional borrowings outstanding under
the Existing Revolver as of January 29, 2023.
Share Repurchase Authorization
On June 6, 2022, our Board of Directors authorized the repurchase of up to $20 million of the Company’s common shares. 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 for our
revolving credit facility and other factors we deem relevant.
Through the end of fiscal 2023, we had used approximately $13.3 million of the authorization to purchase 819,632 of our common
shares (at an average price of $16.27 per share), with approximately $6.7 million remaining available for future purchases under the
authorization as of the end of the fiscal 2023.
Capital Expenditures
We expect to spend between $2.5-$3.5 million in capital expenditures in fiscal 2024 to maintain and enhance our operating systems and
facilities.
33
Enterprise Resource Planning
During calendar 2021, our Board of Directors approved an upgrade to our current ERP system and implementation efforts began shortly
thereafter. The ERP system went live at Sunset West in December 2022 and is expected to go-live in our legacy Hooker divisions in
fiscal 2024, with the Home Meridian segment following afterwards. To complete the ERP system implementation as anticipated, we
will be required to expend significant financial and human resources. We anticipate spending approximately $4.0 million in fiscal 2024,
with a significant amount of time invested by our associates.
Material Capital Commitments
Our material capital commitments primarily consist of term loan and lease payments.
Contractual term-loan and interest payments assuming identical effective interest rates as of the end of fiscal 2023 are expected to be
$2.7 million in fiscal 2024, $2.6 million in fiscal 2025, $2.5 million in fiscal 2026, $2.5 million in fiscal 2027 and $19.2 million in fiscal
2028 including the payoff of $18 million Secured Term Loan.
We lease office space, warehousing facilities, showroom space and office equipment under leases expiring over the next five years.
Future minimum annual commitments under leases and operating agreements are $10 million in fiscal 2024, $10.1 million in fiscal
2025, $10.2 million in fiscal 2026, $10.3 million in fiscal 2027 and $8.9 in fiscal 2028.
Dividends
We declared and paid dividends of $0.82 per share or approximately $9.6 million in fiscal 2023, an increase of 10.8% or $0.08 per share
compared to $0.74 per share in fiscal 2022.
On March 3, 2023, our Board of Directors declared a quarterly cash dividend of $0.22 per share, payable on March 31, 2023 to
shareholders of record at March 17, 2023.
Our Board of Directors will continue to evaluate the appropriateness of the current dividend rate considering our performance and
economic conditions in future quarters.
Recently Issued Accounting Pronouncements
No new accounting pronouncements were adopted in fiscal 2023 and none are expected to be adopted in fiscal 2024. We reviewed newly
issued accounting pronouncements and concluded they are either not applicable to our business or are not expected to have a material
effect on our consolidated financial statements as a result of future adoption.
Outlook
Economic indicators remain mixed. We are encouraged by the stabilization of global supply chain dynamics, some moderation of
inflation and continuing strength in employment levels, but concerned about possible instability in global banking, interest rates and the
stock market. Other headwinds include retailers delaying shipments due to temporarily high inventory levels, and the regulatory
uncertainty with respect to anti-tipping standards on bedroom storage furniture, which we believe negatively impacted incoming order
rates in the fiscal 2024 first quarter, especially from larger customers of our Home Meridian segment. Based on recent developments, it
appears the tip-over issue is near resolution and we do not expect it to have a long-term impact on demand or product costs.
As the industry returns to more typical demand and supply chain constraints continue to improve, previously astronomical ocean freight
rates have declined, and appear to have stabilized. We expect to begin realizing cost savings and improved margins as the year progresses
as we sell though our existing, higher-cost inventory and replenish with goods carrying lower freight charges.
There is significant momentum at Home Meridian with meaningful new placements with major customers. We expect the product
commitments made by customers will positively affect the current fiscal year, helping put HMI on the path for solid and sustainable
profitability. With the opening of our new Hooker Legacy Showroom and our first Spring High Point Market in the renovated HMI and
Portfolio showrooms, we expect an exciting, well-attended furniture market next week. We believe our new High Point and Las Vegas
showrooms and plans to show at the Atlanta Market this summer present an opportunity for us to get our brands in front of more
customers and prospects in the next 12 months than at any time in our history.
34
Critical Accounting Policies and Estimates
The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results
we report in our consolidated financial statements. Critical accounting estimates are those that involve a significant level of estimation
uncertainty and have had or are reasonably likely to have a material impact on our financial condition and results of operations. Specific
areas requiring the application of management’s estimates and judgments include, among others, revenue recognition, inventory
valuation, assumptions pertaining to valuation of goodwill and intangible assets and useful lives of long-lived assets. Accordingly, a
different financial presentation could result depending on the judgments, estimates or assumptions that are used. However, we do not
believe that actual results will deviate materially from our estimates related to our accounting policies described below but because
application of these accounting policies involves the exercise of judgment and the use of assumptions as to future uncertainties, actual
results could differ materially from these estimates. Therefore, we consider an understanding of the variability and judgment required
in making these estimates and assumptions to be critical in fully understanding and evaluating our reported financial results.
Revenue Recognition
We recognize revenue pursuant to Accounting Standards Codification 606, which requires revenue to be recognized at an amount that
reflects the consideration we expect to be entitled to receive in exchange for transferring goods or services to our customers. Our policy
is to record revenue when control of the goods transfers to the customer. We have a present right to payment at the time of shipment as
customers are invoiced at that time. We believe the customer obtains control of goods at the time of shipment, which is typically when
title passes. While the customer may not enjoy immediate physical possession of the products, the customers’ right to re-direct shipment
indicates control. In the very limited instances when products are sold under consignment arrangements, we do not recognize revenue
until control over such products has transferred to the end consumer. Orders are generally non-cancellable once loaded into a shipping
trailer or container.
The transaction price for each contract is the stated price of the product, reduced by any stated discounts or allowances at that point in
time. We do not engage in sales of products that attach a future material right which could result in a separate performance obligation
for the purchase of goods in the future at a material discount. The implicit contract with the customer, as reflected in the order
acknowledgement and invoice, states the final terms of the sale, including the description, quantity, and price of each product purchased.
The transaction price reflects the amount of estimated consideration to which we expect to be entitled. This amount of variable
consideration included in the transaction price, and measurement of net sales, is included in net sales only to the extent that it is probable
that there will be no significant reversal in a future period.
Net sales are comprised of gross revenues from sales of home furnishings and hospitality furniture products and are recorded net of
allowances for trade promotions, estimated product returns, rebate advertising programs and other discounts. Physical product returns
are very rare due to the high probability of damages to our products in return transit. Other revenues, primarily royalties, are immaterial
to our overall results. Payment is typically due within 30-60 days of shipment for customers qualifying for payment terms. Collectability
is reasonably assured since we extend credit to customers for whom we have performed credit evaluations and/or from whom we have
received a down payment or deposit. Due to the highly-customized nature of our hospitality products, we typically require substantial
prepayments on these orders, with the balance due within 30 days of delivery.
Acquisition of Sunset West.
The acquisition of Sunset West was accounted for using the acquisition method of accounting in accordance with ASC Topic 805,
Business Combinations. The acquisition method of accounting involved the allocation of the $26.0 million purchase price to the
estimated fair values of the assets acquired and liabilities assumed. The $26.0 million in assets acquired included a customer relationships
intangible asset with an acquisition-date fair value of $10.4 million. The allocation process involved the use of estimates and assumptions
made in connection with estimating the fair value of assets acquired and liabilities assumed including cash flows expected to be derived
from the use of the asset including projected cash flows, the timing of such cash flows, the remaining useful life of assets, royalty rates
and applicable discount rates. Inputs used are generally obtained from historical data supplemented by current and anticipated market
conditions and growth rates. If the actual results differ from the estimates and judgements used in these fair values, the amounts recorded
in the Consolidated Financial Statements could result in a possible impairment of these assets or require acceleration of the amortization
expense of finite-lived intangible assets.
35
Inventory
Inventories, consisting of finished furniture for sale, raw materials, manufacturing supplies and furniture in process, are stated at the
lower of cost, or market value, with cost determined using the last-in, first-out (LIFO) method. Under this method, inventory is valued
at cost, which is determined by applying a cumulative index to current year inventory dollars.
We review inventories on hand and record an allowance for slow-moving and obsolete inventory based on historical experience, current
sales trends and market conditions, expected sales and other factors. When we identify inventory that is unlikely to be sold or that has a
cost basis in excess of its net realizable value, we record a write-down to reduce the carrying amount of inventory to its estimated net
realizable value. In fiscal 2023, we recorded $24.4 million inventory write down on the ACH and other excess inventories related to the
exit of ACH business unit and repositioning of PRI business unit as a direct-container only business model. These estimates and
assumptions were based on then current inventory levels, industry discounting levels, current demand, and offers to purchase these
inventories.
Concentrations of Sourcing Risk
In fiscal 2023, imported products sourced from Vietnam and China accounted for 91% of our import purchases and our top five suppliers
in Vietnam and China accounted for 50% of our fiscal 2023 import purchases. A disruption in our supply chain, or from Vietnam or
China in general, could significantly impact our ability to fill customer orders for products manufactured in those countries. Our supply
chain could be adversely impacted by the uncertainties of health concerns and governmental restrictions. In some cases, we were able
to provide substitutions using inventory on hand, in-transit and from our domestic warehouses, but not enough to entirely mitigate the
lost sales. Supply disruptions and delays on selected items could occur for six months or longer before the impact of remedial measures
would be reflected in our results. If we are unsuccessful in obtaining those products from other sources or at comparable cost, a disruption
in our supply chain from our largest import furniture suppliers, or from Vietnam or China in general, could adversely affect our sales,
earnings, financial condition and liquidity.
ITEM 7A. 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 the Existing Revolver, the Secured Term Loan and the Unsecured Term loan bear interest based on BSBY plus 1.00%,
BSBY plus 0.90% and BSBY plus 1.40%, respectively. As such, these debt instruments expose us to market risk for changes in interest
rates. There was no outstanding balance under the Existing Revolver as of January 29, 2023 other than standby letters of credit in the
amount of $8.6 million. As of January 29, 2023, $24.3 million was outstanding under our term loans. A 1% increase in the BSBY rate
would result in an annual increase in interest expenses on our terms loans of approximately $237,000.
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.
36
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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements listed in Item 15(a), and which begin on page F-5, of this report are incorporated herein by
reference and are filed as a part of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. 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 January 29, 2023. Based on this evaluation, our principal
executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of January
29, 2023, the end of the period covered by this annual report, 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 Securities and Exchange Commission’s rules and forms.
Management’s Report on Internal Control over Financial Reporting
In accordance with Section 404 of the Sarbanes-Oxley Act and SEC rules thereunder, management has conducted an assessment of our
internal control over financial reporting as of January 29, 2023, based on the framework in Internal Control-Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s report regarding that
assessment is included on page F-2 of this report, with our consolidated financial statements, and is incorporated herein by reference.
Report of Registered Public Accounting Firm
Our independent registered public accounting firm, KPMG LLP, audited the consolidated financial statements included in this annual
report on Form 10-K and has issued an audit report on the effectiveness of our internal control over financial reporting. KPMG’s report
is included on page F-3 and F-4 of this report, with our consolidated financial statements, and is incorporated herein by reference.
Changes in Internal Control over Financial Reporting
On January 31, 2022, we closed on the acquisition of substantially all of the assets of Sunset HWM, LLC (“Sunset West"). As permitted
by SEC guidance for newly acquired businesses, we excluded Sunset West’s operations from the scope of our Sarbanes-Oxley Section
404 report on internal controls over financial reporting for the year ending January 29, 2023. We expect to complete the implementation
of our internal control structure at Sunset West in fiscal 2024.
As previously discussed, during the fourth quarter of fiscal 2023 we implemented a new ERP system at Sunset West. As mentioned
above, we were not required to include Sunset West’s operations in the scope of our Sarbanes-Oxley Section 404 report on internal
controls over financial reporting (ICFR) for the year ending January 29, 2023. Consequently, this implementation did not result in
material changes to our ICFR. These system changes were not undertaken in response to any actual or perceived deficiencies in our
ICFR.
There have been no changes in our internal control over financial reporting during the fiscal quarter ended January 29, 2023, that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
37
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not Applicable.
38
Hooker Furnishings Corporation
Part III
In accordance with General Instruction G (3) of Form 10-K, most of the information called for by Items 10, 11, 12, 13 and 14 of Part
III will be incorporated by reference to the Company’s definitive Proxy Statement for its Annual Meeting of Shareholders scheduled to
be held June 6, 2023 (the “2023 Proxy Statement”), as set forth below.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information relating to our directors will be set forth under the caption “Proposal One-Election of Directors” in the 2023 Proxy Statement
and is incorporated herein by reference.
Information relating to our executive officers is included in Part I of this report under the caption “Information about our Executive
Officers” and is incorporated herein by reference.
Information relating to compliance with Section 16(a) of the Exchange Act will be set forth under the caption “Delinquent Section 16(a)
Reports” in the 2023 Proxy Statement and is incorporated herein by reference.
Information relating to the code of ethics that applies to our principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions will be set forth under the caption “Code of Business Conduct and Ethics”
in the 2023 Proxy Statement and is incorporated herein by reference.
Information relating to material changes, if any, in the procedures by which shareholders may recommend nominees for our Board of
Directors will be set forth under the caption “Procedures for Shareholder Recommendations of Director Nominees” in the 2023 Proxy
Statement and is incorporated herein by reference.
Information relating to the Audit Committee of our Board of Directors, including the composition of the Audit Committee and the
Board’s determinations concerning whether certain members of the Audit Committee are “financial experts” as that term is defined
under Item 407(d)(5) of Regulation S-K will be set forth under the captions “Corporate Governance” and “Audit Committee” in the
2023 Proxy Statement and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to this item will be set forth under the captions “Report of the Compensation Committee,” “Executive
Compensation” and “Director Compensation” in the 2023 Proxy Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
SHAREHOLDER MATTERS
Information relating to this item will be set forth under the captions “Equity Compensation Plan Information” and “Security Ownership
of Certain Beneficial Owners and Management” in the 2023 Proxy Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information relating to this item will be set forth in the last two paragraphs under the caption “Audit Committee” and the caption
“Corporate Governance” in the 2023 Proxy Statement and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Information relating to this item will be set forth under the caption “Proposal Two - Ratification of Selection of Independent Registered
Public Accounting Firm” in the 2023 Proxy Statement and is incorporated herein by reference.
39
Hooker Furnishings Corporation
Part IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Documents filed as part of this report on Form 10-K:
(1) The following reports and financial statements are included in this report on Form 10-K:
Management’s Report on Internal Control Over Financial Reporting
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of January 29, 2023 and January 30, 2022
Consolidated Statements of Operations for the fifty-two-week periods ended January 29, 2023, January 30, 2022 and January 31,
2021
Consolidated Statements of Comprehensive (Loss) / Income for the fifty-two-week periods ended January 29, 2023, January 30,
2022 and January 31, 2021
Consolidated Statements of Cash Flows for the fifty-two-week periods ended January 29, 2023, January 30, 2022 and January 31,
2021
Consolidated Statements of Shareholders’ Equity for the fifty-two-week periods ended January 29, 2023, January 30, 2022 and
January 31, 2021
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules:
Financial Statement Schedules have been omitted because the information required has been separately disclosed in the consolidated
financial statements or related notes.
(b) Exhibits:
3.1
3.2
Amended and Restated Articles of Incorporation of the Company, as amended September 16, 2021 (incorporated by
reference to Exhibit 3.1 of the Company’s Form 10-Q (SEC File No. 000-25349) for the quarter ended October 31, 2021)
Amended and Restated Bylaws of the Company as amended December 10, 2013 (incorporated by reference to Exhibit 3.2
of the Company’s Form 10-Q (SEC File No. 000-25349) for the fiscal year ended February 2, 2014)
4.1 Amended and Restated Articles of Incorporation of the Company (See Exhibit 3.1)
4.2 Amended and Restated Bylaws of the Company (See Exhibit 3.2)
4.3 Description of the Company’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended (incorporated by reference to Exhibit 4.3 of the Company’s Annual Report on Form 10-K (SEC File No. 000-
25349) for the year ended February 2, 2020).
Pursuant to Regulation S-K, Item 601(b)(4)(iii), instruments, if any, evidencing long-term debt not exceeding 10% of the
Company’s total assets have been omitted and will be furnished to the Securities and Exchange Commission upon request.
40
10.1(a)
Form of Executive Life Insurance Agreement dated December 31, 2003, between the Company and certain of its executive
officers (incorporated by reference to Exhibit 10.1 of the Company’s Form 10-Q (SEC File No. 000-25349) for the quarter
ended February 29, 2004)*
10.1(b)
Form of Outside Director Restricted Stock Agreement (incorporated by reference to Exhibit 99.1 of the Company’s Current
Report on Form 8-K (SEC File No. 000-25349) filed on January 17, 2006)*
10.1(c)
2020 Amendment and Restatement of the Hooker Furniture Corporation Stock Incentive Plan (incorporated by reference to
Appendix A of the Company’s Definitive Proxy Statement dated May 8, 2020 (SEC File No. 000-25349))*
10.1(d)
2010 Amended and Restated Hooker Furniture Corporation Supplemental Retirement Income Plan, dated as of June 8, 2010
(incorporated by reference to Exhibit 10.1 of the Company’s Form 10-Q (SEC File No. 000-25349) for the quarter ended
October 31, 2010)*
10.1(e)
Form of Time-Based Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.1 of the Company’s Current
Report on Form 8-K (SEC File No. 000-25349) filed on February 13, 2012)*
10.1(f)
Form of Performance Grant Agreement (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form
8-K (SEC File No. 000-25349) filed on February 13, 2012)*
10.1(i)
Form of Performance Share Agreement (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form
8-K (SEC File No. 000-25349) filed on May 11, 2018)*
10.1(j)
First Amendment to the 2010 Amended and Restated Hooker Furniture Corporation Supplemental Retirement Income plan
(incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (SEC File No. 000-25349) filed
with the SEC on November 15, 2019)*
10.1(k) Employment Agreement, dated July 13, 2022, by and between Hooker Furnishings Corporation and Jeremy R. Hoff
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (SEC File No. 000-25349) filed
on July 18, 2022).*
10.1(l)
Employment Agreement, dated July 13, 2022, by and between Hooker Furnishings Corporation and Paul A. Huckfeldt
(incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (SEC File No. 000-25349) filed
on July 18, 2022).*
10.1(m) Employment Agreement, dated July 13, 2022, by and between Hooker Furnishings Corporation and Anne J. Smith
(incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K (SEC File No. 000-25349) filed
on July 18, 2022).*
10.1(n) Employment Agreement, dated July 13, 2022, by and between Hooker Furnishings Corporation and Tod R. Phelps
(incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K (SEC File No. 000-25349) filed
on July 18, 2022).*
10.2(a)
Second Amended and Restated Loan Agreement, dated as of September 29, 2017, between Bank of America, N.A. and
Hooker Furniture Corporation, Bradington-Young, LLC, Sam Moore Furniture LLC and Home Meridian Group, LLC
(incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K (SEC File No. 000-25349) filed on September 29,
2017)
10.2(b)
First Amendment to Second Amended and Restated Loan Agreement, dated as of February 1, 2019, between Bank of
America, N.A. and Hooker Furniture Corporation, Bradington-Young, LLC, Sam Moore Furniture LLC and Home Meridian
Group, LLC. (incorporated by reference to Exhibit 10.2(d) of the Company’s Form 10-K (SEC File No. 000-25349) filed on
April 19, 2019)
41
10.2(c)
10.2(d)
10.2(e)
10.2(f)
10.3
Second Amendment to the Second Amended and Restated Loan Agreement, dated as of November 4, 2020, between Bank
of America, N.A. and Hooker Furniture Corporation, Bradington-Young, LLC, Sam Moore Furniture LLC, and Home
Meridian Group, LLC (incorporated by reference to Exhibit 10.1 of the Company’s Form 10-Q (SEC File No. 000-25349)
filed on December 10, 2020)
Third Amendment to Second Amended and Restated Loan Agreement, dated as of January 27, 2021, between Bank of
America, N.A. and Hooker Furniture Corporation, Bradington-Young, LLC, Sam Moore Furniture LLC and Home Meridian
Group, LLC (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K (SEC File No. 000-25349) filed on
January 28, 2021)
Fourth Amendment to Second Amended and Restated Loan Agreement, dated as of July 26, 2022, between Bank of
America, N.A. and Hooker Furnishings Corporation, Bradington-Young, LLC, Sam Moore Furniture LLC and Home
Meridian Group, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (SEC File
No. 000-25349) filed on July 28, 2022).
Security Agreement (Assignment of Life Insurance Policy as Collateral), dated July 26, 2022, by and between Hooker
Furnishings Corporation and Bank of America, N.A. (incorporated by reference to Exhibit 10.2 to the Company’s Current
Report on Form 8-K (SEC File No. 000-25349) filed on July 28, 2022)
Asset Purchase Agreement dated January 31, 2022 by and among the Company, Sunset West, Wes Stewart, Heath Malone
and Martin Jamroz (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K (SEC File No. 000-25349) filed
on February 1, 2022)
21 List of Subsidiaries:
Bradington-Young LLC, a North Carolina limited liability company
Home Meridian Group, LLC, a Virginia limited liability company
Sam Moore Furniture LLC, a Virginia limited liability company
23
Consent of Independent Registered Public Accounting Firm (filed herewith)
31.1
Rule 13a-14(a) Certification of the Company’s principal executive officer (filed herewith)
31.2 Rule 13a-14(a) Certification of the Company’s principal financial officer (filed herewith)
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 (furnished herewith)
101
The following financial statements from the Company's Annual Report on Form 10-K for the fiscal year ended January 29,
2023, formatted in Interactive Extensible Business Reporting Language (“IXBRL”): (i) consolidated balance sheets, (ii)
consolidated statements of operations, (iii) consolidated statements of comprehensive income, (iv) consolidated statements
of cash flows, (v) consolidated statements of shareholders’ equity and (vi) the notes to the consolidated financial statements,
tagged as blocks of text (filed herewith)
104
Cover page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
*Management contract or compensatory plan
ITEM 16. FORM 10-K SUMMARY
None.
42
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
April 14, 2023
HOOKER FURNISHINGS CORPORATION
/s/ Jeremy R. Hoff
Jeremy R. Hoff
Chief Executive Officer and Director (Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
/s/ Jeremy R. Hoff
Jeremy R. Hoff
/s/ Paul A. Huckfeldt
Paul A. Huckfeldt
/s/ W. Christopher Beeler, Jr
W. Christopher Beeler, Jr.
/s/ Maria C. Duey
Maria C. Duey
/s/ Paulette Garafalo
Paulette Garafalo
/s/ Christopher L. Henson
Christopher L. Henson
/s/ Tonya H. Jackson
Tonya H. Jackson
/s/ Ellen C. Taaffe
Ellen C. Taaffe
/s/ Henry G. Williamson, Jr.
Henry G. Williamson, Jr.
Chief Executive Officer and
Director (Principal Executive Officer)
Senior Vice President - Finance and Accounting
and Chief Financial Officer (Principal
Financial and Accounting Officer)
Director
Director
Director
Director
Director
Director
Director (Board Chair)
43
Date
April 14, 2023
April 14, 2023
April 14, 2023
April 14, 2023
April 14, 2023
April 14, 2023
April 14, 2023
April 14, 2023
April 14, 2023
HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Management’s Report on Internal Control Over Financial Reporting
Reports of Independent Registered Public Accounting Firm (PCAOB ID 185)
Consolidated Balance Sheets as of January 29, 2023 and January 30, 2022
Consolidated Statements of Operations for the fifty-two-week periods ended January 29, 2023, January 30, 2022 and January
31, 2021
Consolidated Statements of Comprehensive (Loss) / Income for the fifty-two-week periods ended January 29, 2023, January
30, 2022 and January 31, 2021
Consolidated Statements of Cash Flows for the fifty-two-week periods ended January 29, 2023, January 30, 2022 and January
31, 2021
Consolidated Statements of Shareholders’ Equity for the fifty-two-week periods ended January 29, 2023, January 30, 2022
and January 31, 2021
F-2
F-3
F-5
F-6
F-7
F-8
F-9
Notes to Consolidated Financial Statements
F-10
F-1
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
To the Shareholders of
Hooker Furnishings Corporation
Martinsville, Virginia
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Securities
Exchange Act Rule 13a-15(f). Under the supervision and with the participation of management, including the principal executive officer
and principal financial officer, the Company conducted an evaluation of the effectiveness of its internal control over financial reporting
based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). Based on the Company’s evaluation under that framework, management concluded that the
Company’s internal control over financial reporting was effective as of January 29, 2023.
The effectiveness of the Company’s internal control over financial reporting as of January 29, 2023 has been audited by KPMG LLP,
the Company’s independent registered public accounting firm, as stated in their report which is included herein.
Jeremy R. Hoff
Chief Executive Officer and Director
(Principal Executive Officer)
April 14, 2023
Paul A. Huckfeldt
Senior Vice President – Finance and Accounting
and Chief Financial Officer
(Principal Financial and Accounting Officer)
April 14, 2023
F-2
Report of Independent Registered Public Accounting Firm
To the Shareholders and
Board of Directors
Hooker Furnishings Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Hooker Furnishings Corporation and subsidiaries (the Company) as
of January 29, 2023 and January 30, 2022, the related consolidated statements of operations, comprehensive (loss)/income,
shareholders’ equity, and cash flows for each of the years in the three-year period ended January 29, 2023, and the related notes
(collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of January 29, 2023 and January 30, 2022, and the results of its operations and its
cash flows for each of the years in the three-year period ended January 29, 2023, in conformity with U.S. generally accepted
accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of January 29, 2023, based on criteria established in Internal
Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our
report dated April 14, 2023 expressed an unqualified on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining,
on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements
that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are
material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a
whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or
on the accounts or disclosures to which it relates.
Acquisition date fair value of customer relationships intangible asset
As discussed in Notes 1 and 4 to the consolidated financial statements, on January 31, 2022, the Company acquired substantially all
assets of Sunset HWM, LLC for consideration of approximately $26.0 million. As a result of the transaction, the Company acquired a
customer relationships intangible asset with an acquisition date fair value of $10.4 million.
We identified the evaluation of the acquisition date fair value of the customer relationships intangible asset as a critical audit matter.
There was a high degree of auditor judgment in evaluating certain assumptions included in the discounted cash flow model used to
estimate the acquisition date fair value of the customer relationships intangible asset. Specifically, subjective and complex auditor
judgment was required to evaluate the projected cash flows and discount rate assumptions. Additionally, the evaluation of the discount
rate assumption required specialized skills and knowledge.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the
operating effectiveness of certain internal controls related to the acquisition date fair value of the customer relationships intangible
asset. This included controls related to the review of the projected cash flows and the discount rate. We evaluated the reasonableness
of the projected cash flows used by the Company by comparing them to cash flows of similar operating segments of the Company and
to actual post-acquisition results. We performed sensitivity analyses over the projected cash flows and discount rate to assess the
impact of changes in those assumptions on the Company’s determined fair value. We involved valuation professionals with
specialized skills and knowledge, who assisted in evaluating the Company’s discount rate by comparing it to a discount rate that was
independently developed using publicly available market data for comparable entities.
We have served as the Company’s auditor since 2003.
Raleigh, North Carolina
April 14, 2023
F-3
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Hooker Furnishings Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited Hooker Furnishings Corporation and subsidiaries' (the Company) internal control over financial reporting as of
January 29, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of January 29, 2023, based on criteria established in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of January 29, 2023 and January 30, 2022, the related consolidated
statements of operations, comprehensive (loss)/income, shareholders’ equity, and cash flows for each of the years in the three-year
period ended January 29, 2023, and the related notes (collectively, the consolidated financial statements), and our report dated
April 14, 2023 expressed an unqualified opinion on those consolidated financial statements.
The Company acquired Sunset HWM, LLC during 2022, and management excluded from its assessment of the effectiveness of the
Company’s internal control over financial reporting as of January 29, 2023, Sunset HWM, LLC’s internal control over financial
reporting associated with total assets of $39.1 million and total revenues of $27.0 million included in the consolidated financial
statements of the Company as of and for the year ended January 29, 2023. Our audit of internal control over financial reporting of the
Company also excluded an evaluation of the internal control over financial reporting of Sunset HWM, LLC.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control
over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based
on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Raleigh, North Carolina
April 14, 2023
F-4
HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
As of
Assets
Current assets
Cash and cash equivalents
Trade accounts receivable, net
(See notes 5 and 6)
Inventories (see note 7)
Income tax recoverable
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net (See note 8)
Cash surrender value of life insurance policies (See note 11)
Deferred taxes (See note 17)
Operating leases right-of-use assets (See note 12)
Intangible assets, net (See note 10)
Goodwill (See note 10)
Other assets (See note 9)
Total non-current assets
Total assets
Liabilities and Shareholders’ Equity
Current liabilities
Current portion of long-term debt (See note 13)
Trade accounts payable
Accrued salaries, wages and benefits
Customer deposits
Current portion of operating lease liabilities (See note 12)
Other accrued expenses
Total current liabilities
Long term debt (See note 13)
Deferred compensation (See note 14)
Operating lease liabilities (See note 12)
Other long-term liabilities (See note 4)
Total long-term liabilities
Total liabilities
Shareholders’ equity
Common stock, no par value, 20,000 shares authorized,
11,197 and 11,922 shares issued and outstanding on each date
Retained earnings
Accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
$
See accompanying Notes to Consolidated Financial Statements.
F-5
January 29,
2023
January 30,
2022
$
19,002 $
69,366
$
$
62,129
96,675
3,079
6,418
187,303
27,010
27,576
14,484
68,949
31,779
14,952
9,663
194,413
381,716 $
1,393 $
16,090
9,290
8,511
7,316
7,438
50,038
22,874
8,178
63,762
843
95,657
145,695
50,770
184,386
865
236,021
381,716 $
73,727
75,023
4,361
5,237
227,714
28,058
26,479
11,612
51,854
23,853
490
4,499
146,845
374,559
-
30,916
7,141
7,145
7,471
4,264
56,937
-
9,924
46,570
-
56,494
113,431
53,295
207,884
(51 )
261,128
374,559
HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
For the 52 Week Periods Ended January 29, 2023, January 30, 2022 and January 31, 2021
2023
2022
2021
Net sales
$
583,102 $
593,612 $
540,081
Cost of sales
Inventory valuation expense (See note 3)
Gross profit
Selling and administrative expenses
Goodwill impairment charges
Trade name impairment charges
Intangible asset amortization
461,056
28,752
488,508
3,402
426,810
523
93,294
101,702
112,748
95,815
-
13
3,512
84,475
-
-
2,384
80,410
39,568
4,750
2,384
Operating (loss)/income
(6,046 )
14,843
(14,364 )
Other income, net
Interest expense, net
416
519
373
110
336
540
(Loss)/income before income taxes
(6,149 )
15,106
(14,568 )
Income tax (benefit)/expense
(1,837 )
3,388
(4,142 )
Net (loss)/income
$
(4,312 ) $
11,718 $
(10,426 )
(Loss)/earnings per share:
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
$
$
(0.37 ) $
(0.37 ) $
0.99 $
0.97 $
(0.88 )
(0.88 )
11,593
11,593
11,852
11,970
11,822
11,822
Cash dividends declared per share
$
0.82 $
0.74 $
0.66
See accompanying Notes to Consolidated Financial Statements.
F-6
HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) / INCOME
(In thousands)
For the 52 Week Periods Ended January 29, 2023, January 30, 2022 and January 31, 2021
Net (Loss)/Income
Other comprehensive income:
Amortization of actuarial gain /(loss)
Income tax effect on amortization
Adjustments to net periodic benefit cost
2023
2022
2021
$
(4,312 ) $
11,718 $
(10,426 )
1,204
(288 )
916
994
(237 )
757
(125 )
30
(95 )
Total Comprehensive (Loss)/Income
$
(3,396 ) $
12,475 $
(10,521 )
See accompanying Notes to Consolidated Financial Statements.
F-7
HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the 52 Week Periods Ended January 29, 2023, January 30, 2022 and January 31, 2021
Operating Activities:
Net (loss)/income
Adjustments to reconcile net income to net cash
provided by operating activities:
Inventory valuation expense
Goodwill and intangible asset impairment charges
Depreciation and amortization
Loss/(Gain) on disposal of assets
Deferred income tax expense/(benefit)
Non-cash restricted stock and performance awards
Provision for doubtful accounts and sales allowances
Gain on life insurance policies
Changes in assets and liabilities:
Trade accounts receivable
Inventories
Income tax recoverable
Prepaid expenses and other current assets
Trade accounts payable
Accrued salaries, wages and benefits
Accrued income taxes
Customer deposits
Operating lease assets and liabilities
Other accrued expenses
Deferred compensation
Net cash (used in)/provided by operating activities
Investing Activities:
Acquisition
Purchases of property, plant and equipment
Proceeds from sale of property and equipment
Premiums paid on life insurance policies
Proceeds received on life insurance policies
Net cash used in investing activities
Financing Activities:
Proceeds from long-term loans
Payments for long-term loans
Proceeds from revolving credit facility
Payments for revolving credit facility
Debt issuance cost
Purchase and retirement of common stock
Cash dividends paid
Net cash provided by/(used in) financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of year
Cash and cash equivalents at the end of year
Supplemental schedule of cash flow information:
Interest paid, net
Income taxes paid, net
Supplemental schedule of noncash investing activities:
Increase in lease liabilities arising from obtaining right-of-use assets
Increase in property and equipment through accrued purchases
2023
2022
2021
$
(4,312 ) $
11,718 $
(10,426 )
28,752
-
8,829
94
(3,160 )
1,244
(3,673 )
(1,179 )
16,831
(47,827 )
1,283
(5,711 )
(15,781 )
2,148
-
(1,911 )
(57 )
3,254
(542 )
(21,718 )
(25,274 )
(4,199 )
-
(492 )
-
(29,965 )
25,000
(700 )
36,190
(36,190 )
(37 )
(13,342 )
(9,602 )
1,319
(50,364 )
69,366
19,002 $
3,402
-
7,814
(18 )
2,323
(28 )
45
(1,008 )
9,518
(8,265 )
(4,361 )
(4,400 )
(1,312 )
76
(501 )
2,890
708
908
(300 )
19,209
-
(6,692 )
18
(560 )
372
(6,862 )
-
-
-
-
-
-
(8,822 )
(8,822 )
3,525
65,841
69,366 $
642 $
101
- $
5,888
25,241
128
24,513
15
523
44,318
6,778
-
(11,262 )
1,741
4,686
(1,207 )
(323 )
22,131
751
515
6,686
2,204
501
904
888
(856 )
(289 )
68,263
-
(1,210 )
-
(555 )
1,289
(476 )
-
(30,139 )
-
-
-
-
(7,838 )
(37,977 )
29,810
36,031
65,841
444
5,872
2,236
33
$
$
See accompanying Notes to Consolidated Financial Statements.
F-8
HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except per share data)
For the 52 Week Periods Ended January 29, 2023, January 30, 2022 and January 31, 2021
Balance at February 2, 2020
Net loss
Unrealized loss on defined benefit plan, net of tax
of $30
Cash dividends paid and accrued ($0.66 per share)
Restricted stock grants, net of forfeitures
Restricted stock compensation cost
Performance-based restricted stock units cost
Balance at January 31, 2021
Net income
Unrealized gain on defined benefit plan, net of tax
of $237
Cash dividends paid and accrued ($0.74 per share)
Restricted stock grants, net of forfeitures
Restricted stock compensation cost
Performance-based restricted stock units cost
PSU awards
Balance at January 30, 2022
Net loss
Unrealized gain on defined benefit plan, net of
tax of $288
Cash dividends paid and accrued ($0.82 per
share)
Purchase and retirement of common stock
Restricted stock grants, net of forfeitures
Restricted stock compensation cost
Performance-based restricted stock units cost
PSU awards
Balance at January 29, 2023
Common Stock
Shares
Amount
Retained
Earnings
Comprehensive Shareholders'
Income / (Loss)
Equity
11,838 $
51,582 $
223,252 $
(713 ) $
274,121
Accumulated
Other
Total
$
(10,426 )
$
(10,426 )
50 $
11,888 $
169
809
763
53,323 $
$
(7,838 )
(95 )
204,988 $
(808 ) $
(95 )
(7,838 )
169
809
763
257,503
$
11,718
$
11,718
34 $
11,922 $
(126 )
1,074
502
(1,478 )
53,295 $
$
(8,822 )
757
207,884 $
(51 ) $
757
(8,822 )
(126 )
1,074
502
(1,478 )
261,128
$
(4,312 )
$
(4,312 )
916
916
(820 )
95
11,197 $
(3,770 )
(101 )
1,266
606
(526 )
50,770 $
(9,602 )
(9,584 )
184,386 $
865 $
(9,602 )
(13,354 )
(101 )
1,266
606
(526 )
236,021
See accompanying Notes to Consolidated Financial Statements.
F-9
HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in tables, except per share amounts, in thousands unless otherwise indicated)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Hooker Furnishings Corporation and subsidiaries (the “Company,” “we,” “us” and “our”) design, import, manufacture and market
residential household furniture, hospitality and contract furniture for sale to wholesale and retail merchandisers located principally in
North America.
Consolidation
The consolidated financial statements include the accounts of Hooker Furnishings Corporation and our wholly owned subsidiaries. All
material intercompany accounts and transactions have been eliminated in consolidation. All references to the Company refer to the
Company and our consolidated subsidiaries, unless specifically referring to segment information.
Operating Segments
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 three operating segments and “All Other”, which includes the remainder of our
businesses:
operating segments and at much lower margins;
■ Hooker Branded, consisting of the operations of our imported Hooker Casegoods and Hooker Upholstery businesses;
■ Home Meridian, a stand-alone, mostly autonomous business that serves a different type or class of customer than do our other
■ Domestic Upholstery, which includes the domestic upholstery manufacturing operations of Bradington-Young, HF Custom
■ All Other, consisting of H Contract and Lifestyle Brands. Neither of these operating segments were individually reportable;
(formerly Sam Moore), Shenandoah Furniture and Sunset West; and
therefore, we combined them in “All Other” in accordance with ASC 280.
Cash and Cash Equivalents
We consider cash on hand, demand deposits in banks and all highly liquid investments with an original maturity of three months or less
to be cash and cash equivalents.
F-10
Trade Accounts Receivable
Substantially all of our trade accounts receivable are due from retailers and dealers that sell residential home furnishings or commercial
purchasers of our hospitality and senior living products, and consist of a large number of entities with a broad geographic dispersion.
We perform credit evaluations of our customers and generally do not require collateral.
These trade accounts receivable are reported net of customer allowances and an allowance for doubtful accounts.
Reserves for customer allowances comprise the majority of the reduction of our gross trade accounts receivable to the estimated fair
value reported on the face of our financial statements. We regularly review and revise customer allowances based on unprocessed claims
received and current and historical activity and any agreements made with specific customers. Historically, in the Home Meridian
segment, Clubs channel customers drove most of the customer allowance activity due to their consumer-facing product return policies.
We based anticipated future claims on historical experience with these customers.
We regularly review and revise accounts receivable for doubtful accounts based upon historical bad debts. If the financial condition of
a customer or customers were to deteriorate, resulting in an impairment of their ability to make payments, additional bad debt allowances
may be required. In the event a receivable is determined to be potentially uncollectible, we engage collection agencies or law firms to
attempt to collect amounts owed to us after all internal collection attempts have ended. Once we have determined the receivable is
uncollectible, it is charged against the allowance for doubtful accounts.
Fair Value Measurements
We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent
possible. We determine fair value based on assumptions that we believe market participants would use in pricing an asset or liability in
the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following
fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
■ Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at
the measurement date.
■ Level 2 Inputs: Observable inputs other than quoted prices included in Level 1 inputs that are observable for the asset or
liability, either directly or indirectly, for substantially the full term of the asset or liability.
■ Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are
not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at
measurement date.
Fair Value of Financial Instruments
The carrying value of certain of our financial instruments (cash and cash equivalents, trade accounts receivable and payable, and accrued
liabilities) approximates fair value because of the short-term nature of those instruments. The carrying value of Company-owned life
insurance is marked to market each reporting period and any change in fair value is reflected in income for that period. See Note 11 for
details.
Inventories
Inventories, consisting of finished furniture for sale, raw materials, manufacturing supplies and furniture in process, are stated at the
lower of cost, or market value, with cost determined using the last-in, first-out (LIFO) method. Under this method, inventory is valued
at cost, which is determined by applying a cumulative index to current year inventory dollars. We believe the use of the LIFO method
results in a better matching of costs and revenues. We review inventories on hand and record an allowance for slow-moving and obsolete
inventory based on historical experience and expected sales.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less allowances for depreciation. Provision for depreciation has been computed at
annual rates using straight-line or declining balance depreciation methods that will amortize the cost of the depreciable assets over their
estimated useful lives.
F-11
Leases
Leases are classified as either finance leases or operating leases based on criteria in Topic 842. All of our current 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. For leases without explicitly stated or implicit interest rates that
commenced after the adoption date and before July 2022, we used our incremental borrowing rate which was one-month LIBOR at the
lease commencement date plus 1.5%. When we entered into the new loan agreement, our incremental borrowing rate for unsecured term
loan became the current BSBY rate plus 1.40%. We use this rate as the discount rate for leases commenced in July 2022 and thereafter.
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
upon adoption of this standard. 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 is to straight-line the sub-lease income over the term of the sublease.
Our leases have remaining lease terms of less than one year to ten years, some of which include options to extend the leases for up to
ten 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.
Impairment of Long-Lived Assets
Long-lived assets, such as property, plant and equipment and definite-lived assets, are evaluated for impairment annually or more
frequently when events or changes in circumstances indicate that the carrying amount of the assets or asset groups may not be recoverable
through the estimated undiscounted future cash flows from the use of those assets. When any such impairment exists, the related assets
are written down to fair value. Long-lived assets subject to disposal by sale are measured at the lower of their carrying amount or fair
value less estimated cost to sell, are no longer depreciated, and are reported separately as “assets held for sale” in the consolidated
balance sheets.
Intangible Assets and Goodwill
We own both definite-lived (amortizable) assets and indefinite-lived intangible assets. Our amortizable intangible assets are related to
the Shenandoah, Sunset West and Home Meridian acquisitions and includes customer relationships and trademarks. Our indefinite lived
assets include goodwill related to the Shenandoah and Sunset acquisitions, as well as the Bradington-Young and Sam Moore tradenames.
We may acquire additional amortizable assets and/or indefinite lived intangible assets in the future. Our indefinite-lived intangible assets
are not amortized but are tested for impairment annually or more frequently if events or circumstances indicate that the asset might be
impaired.
F-12
Our goodwill, trademarks and trade names are tested for impairment annually as of the first day of our fourth quarter or more frequently
if events or changes in circumstances indicate that the asset might be impaired. Circumstances that could indicate a potential impairment
include, but are not limited to:
■
■
■
■
a significant adverse change in the economic or business climate either within the furniture industry or the national or global
economy;
significant changes in demand for our products;
loss of key personnel; and
the likelihood that a reporting unit or significant portion of a reporting unit will be sold or otherwise subject to disposal.
The assumptions used to determine the fair value of our intangible assets are highly subjective and judgmental and include long-term
growth rates, sales volumes, projected revenues, assumed royalty rates and factors used to develop an applied discount rate. If the
assumptions that we use in these calculations differ from actual results, we may realize additional impairment on our intangible assets
that may have a material-adverse effect on our results of operations and financial condition.
Cash Surrender Value of Life Insurance Policies
We own seventy-four life insurance policies on certain of our current and former executives and other key employees. These policies
had a carrying value of $27.8 million at January 29, 2023 and have a face value of approximately $56 million as of that date. Proceeds
from the policies are used to fund certain employee benefits and for other general corporate purposes. We account for life insurance as
a component of employee benefits cost. Consequently, the cost of the coverage and any resulting gains or losses related to those insurance
policies are recorded as a decrease or increase to operating income. Cash payments that increase the cash surrender value of these
policies are classified as investing outflows on the Consolidated Statements of Cash Flows, with amounts paid in excess of the increase
in cash surrender value included in operating activities. Gains on life insurance policies, which typically occur at the time a policy is
redeemed, are included in the reconciliation of net income to net cash used in or provided by operating activities.
Revenue Recognition
We recognize revenue pursuant to Accounting Standards Codification 606, which requires revenue to be recognized at an amount that
reflects the consideration we expect to be entitled to receive in exchange for transferring goods or services to our customers. Our policy
is to record revenue when control of the goods transfers to the customer. We have a present right to payment at the time of shipment as
customers are invoiced at that time. We believe the customer obtains control of goods at the time of shipment, which is typically when
title passes. While the customer may not enjoy immediate physical possession of the products, the customers’ right to re-direct shipment
indicates control. In the very limited instances when products are sold under consignment arrangements, we do not recognize revenue
until control over such products has transferred to the end consumer. Orders are generally non-cancellable once loaded into a shipping
trailer or container.
The transaction price for each contract is the stated price of the product, reduced by any stated discounts or allowances at that point in
time. We do not engage in sales of products that attach a future material right which could result in a separate performance obligation
for the purchase of goods in the future at a material discount. The implicit contract with the customer, as reflected in the order
acknowledgement and invoice, states the final terms of the sale, including the description, quantity, and price of each product purchased.
The transaction price reflects the amount of estimated consideration to which we expect to be entitled. This amount of variable
consideration included in the transaction price, and measurement of net sales, is included in net sales only to the extent that it is probable
that there will be no significant reversal in a future period.
Net sales are comprised of gross revenues from sales of home furnishings and hospitality furniture products and are recorded net of
allowances for trade promotions, estimated product returns, rebate advertising programs and other discounts. Physical product returns
are very rare due to the high probability of damages to our products in return transit. Other revenues, primarily royalties, are immaterial
to our overall results. Payment is typically due within 30-60 days of shipment for customers qualifying for payment terms. Collectability
is reasonably assured since we extend credit to customers for whom we have performed credit evaluations and/or from whom we have
received a down payment or deposit. Due to the highly-customized nature of our hospitality products, we typically require substantial
prepayments on these orders, with the balance due within 30 days of delivery. For our outdoor furnishings, most orders require a 50%
deposit upon order and the balance when production is started.
F-13
Cost of Sales
The major components of cost of sales are:
the cost of imported products purchased for resale;
■
raw materials and supplies used in our domestically manufactured products;
■
labor and overhead costs associated with our domestically manufactured products;
■
the cost of our foreign import operations;
■
■
charges associated with our inventory reserves;
■ warehousing and certain shipping and handling costs; and
■
all other costs required to be classified as cost of sales.
Selling and Administrative Expenses
The major components of our selling and administrative expenses are:
■
■
■
■
the cost of our marketing and merchandising efforts, including showroom expenses;
sales and design commissions;
the costs of administrative support functions including, executive management, information technology, human resources and
finance; and
all other costs required to be classified as selling and administrative expenses.
Advertising
We offer advertising programs to qualified dealers under which we may provide signage, catalogs and other marketing support to our
dealers and may reimburse some advertising and other costs incurred by our dealers in connection with promoting our products. The
cost of these programs does not exceed the fair value of the benefit received. We charge the cost of point-of-purchase materials (including
signage, catalogs, and fabric and leather swatches) to selling and administrative expense as incurred. Advertising costs charged to selling
and administrative expense for fiscal years 2023, 2022 and 2021 were $2.0 million, $1.9 million, and $2.1 million, respectively. The
costs for other advertising allowance programs are charged against net sales. We also have arrangements with some dealers to reimburse
them for a portion of their advertising costs, which provides advertising benefits to us. Costs for these arrangements are expensed as
incurred and are netted against net sales in our consolidated statements of operations and comprehensive income.
Earnings Per Share
We use the two-class method to compute basic earnings per share. Under this method we allocate earnings to common shares and
participating securities according to their participation rights in dividends declared and undistributed earnings and divide the income
available to each class by the weighted average number of common shares for the period in each class. Unvested restricted stock grants
made to our non-employee directors and certain employees are considered participating securities because the shares have the right to
receive non-forfeitable dividends. Because the participating shares have no obligation to share in net losses, we do not allocate losses
to our common shares in this calculation.
Diluted earnings per share reflect the potential dilutive effect of securities that could share in our earnings. Restricted stock awarded to
non-employee directors and certain employees and restricted stock units granted to employees that have not yet vested are considered
when computing diluted earnings per share. We use the treasury stock method to determine the dilutive effect of both unvested restricted
stock and unvested restricted stock units. Shares of unvested restricted stock and unvested restricted stock units under a stock-based
compensation arrangement are considered options for purposes of computing diluted earnings per share and are considered outstanding
shares as of the grant date for purposes of computing diluted earnings per share even though their exercise may be contingent upon
vesting. Those stock-based awards are included in the diluted earnings per share computation even if the non-employee director may be
required to forfeit the stock at some future date, or no shares may ever be issued to the employees. Unvested restricted stock and unvested
restricted stock units are not included in outstanding common shares in computing basic earnings per share.
F-14
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates
and assumptions that affect the reported amounts of: (i) assets and liabilities, including disclosures regarding contingent assets and
liabilities at the dates of the financial statements; and (ii) revenue and expenses during the reported periods. Significant items subject to
such estimates and assumptions include inventory reserves, useful lives of fixed and intangible assets; allowance for doubtful accounts;
deferred tax assets; the valuation of fixed assets and goodwill; our pension and supplemental retirement income plans; and stock-based
compensation. These estimates and assumptions are based on our best judgments. We evaluate these estimates and assumptions on an
ongoing basis using historical experience and other factors, including the current economic environment, which we believe to be
reasonable under the circumstances. We adjust our estimates and assumptions as facts and circumstances dictate. Actual results could
differ from our estimates.
NOTE 2 – FISCAL YEAR
Our fiscal years end on the Sunday closest to January 31. In some years, generally once every six years, the fourth quarter will be
fourteen weeks long and the fiscal year will consist of fifty-three weeks. The 2019 fiscal year that ended on February 3, 2019 was a 53-
week fiscal year. Our quarterly periods are based on thirteen-week “reporting periods,” which end on Sundays. As a result, each quarterly
period generally will be thirteen weeks, or 91 days long, except during a 53-week fiscal year which will have 14 weeks in the fourth
quarter.
In the notes to the consolidated financial statements, references to the:
■ 2023 fiscal year and comparable terminology mean the fiscal year that began January 31, 2022 and ended January 29, 2023;
■ 2022 fiscal year and comparable terminology mean the fiscal year that began February 1, 2021 and ended January 30, 2022;
■ 2021 fiscal year and comparable terminology mean the fiscal year that began February 3, 2020 and ended January 31, 2021.
NOTE 3 – INVENTORY VALUATION CHARGES
We recorded inventory valuation charges of $28.8 million, $3.4 million and $523,000, respectively, in each of fiscal 2023, fiscal 2022
and fiscal 2021 for slow-moving and obsolete inventory. During the fourth quarter of fiscal 2023, we recorded net inventory valuation
charges of approximately $24.4 million to write down the value of ACH and PRI inventories and other excess inventories to market,
including excess Samuel Lawrence Furniture brand inventories. Management approved a plan to exit the Accentrics Home (ACH) e-
commerce brand of the Home Meridian segment along with repositioning the Prime Resources International (PRI) brand as a direct-
container only business model at the end of fiscal 2023. Due to historically high freight costs on these inventories, high handling costs,
current demand and industry discounting levels, as well as our current inventory levels, management determined that a viable and
profitable market for these products didn’t exist and was unwilling to continue to incur additional lease, warehouse, labor and other
costs to store and sell aging inventory below cost. These inventory valuation charges were included as a separate line item below cost
of goods sold in the Consolidated Statement of Operations.
NOTE 4 – ACQUISITION
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 $23.9 million in cash and $2 million subject to an escrow
arrangement and possible earn-out payments to the Sunset West Members up to an aggregate of $4 million with the closing cash
consideration subject to adjustment for customary working capital estimates. In the fourth quarter of fiscal 2023, we received $639,000
from the seller for the final working capital adjustments. Under the Asset Purchase Agreement, the Company also assumed specified
liabilities of Sunset West.
In accordance with FASB Accounting Standards Codification Topic 805, “Business Combinations” (“ASC 805”), the Sunset 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 Sunset 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 fair values of the identifiable assets acquired and liabilities assumed in the Sunset Acquisition as of
January 29, 2023.
F-15
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
Purchase price consideration
Cash paid for assets acquired
Cash received 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
$
$
$
$
23,909
(639 )
2,003
766
26,039
1,560
2,577
90
7
11,451
14,462
(3,276 )
(816 )
(16 )
26,039
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 $10.4 million.
The customer relationships are amortizable and will be amortized over a period of 10 years; and
■ The Sunset West trade name, which is definite-lived intangible asset with fair value of $1.1 million. The trade name is
amortizable and will be amortized over a period of 12 years.
■ The total weighted average amortization period for these assets is 10.2 years.
We incurred Sunset Acquisition-related costs of $414,000 in fiscal 2022 and $69,000 in fiscal 2023. These expenses were included in
the “Selling and administrative expenses” line of our fiscal 2022 and fiscal 2023 condensed consolidated statements of operations.
Sunset West’s results are included in the Domestic Upholstery segment’s results beginning with the fiscal 2023 first quarter, which
include $27 million in net sales and $683,000 million of operating income, including $1.1 million in intangible amortization expense
for the fiscal 2023.
Results of operations starting from the date of acquisition of Sunset West have been included in our Consolidated Financial Statements
for the year ended January 29, 2023. The Sunset West acquisition is not material to our Consolidated Financial Statements, and therefore,
supplemental pro forma financial information for the year ended January 29, 2023 and the respective prior year periods related to the
acquisition is not included herein.
F-16
NOTE 5 – DOUBTFUL ACCOUNTS AND CUSTOMER ALLOWANCES
The activity in the allowance for doubtful accounts was:
January 29,
2023
Fifty-Two Weeks Ended
January 30,
2022
January 31,
2021
Balance at beginning of year
Non-cash charges to cost and expenses
Less uncollectible receivables written off, net
of recoveries
Balance at end of year
$
$
2,016 $
109
(356 )
1,769 $
2,338 $
(76 )
(246 )
2,016 $
903
1,262
173
2,338
The activity in customer allowances was:
January 29,
2023
Fifty-Two Weeks Ended
January 30,
2022
January 31,
2021
Balance at beginning of year
Charges to cost and expenses
Less allowances applied
Less uncollectible receivables written off, net
of recoveries
Balance at end of year
$
$
7,284 $
11,983
(15,364 )
(201 )
3,702 $
6,993 $
23,766
(23,305 )
(170 )
7,284 $
3,493
29,243
(25,666 )
(77 )
6,993
NOTE 6 – ACCOUNTS RECEIVABLE
Gross accounts receivable
Customer allowances
Allowance for doubtful accounts
Trade accounts receivable
NOTE 7 – INVENTORIES
Finished furniture
Furniture in process
Materials and supplies
Inventories at FIFO
Reduction to LIFO basis
Inventories
January 29,
2023
January 30,
2022
67,600 $
(3,702 )
(1,769 )
62,129 $
83,027
(7,284 )
(2,016 )
73,727
January 29,
2023
January 30,
2022
115,015 $
1,943
13,509
130,467
(33,792 )
96,675 $
89,066
2,314
13,179
104,559
(29,536 )
75,023
$
$
$
$
F-17
At January 29, 2023 and January 30, 2022 and January 31, 2021, we had $2.4 million and $8.9 million, respectively, in consigned
inventories, which are included in the “Finished furniture” line in the table above.
At January 29, 2023 and January 30, 2022, we held $12.3 million and $11.1 million, respectively, in inventory outside of the United
States, in Vietnam and China.
NOTE 8 – PROPERTY, PLANT AND EQUIPMENT
Buildings and land improvements
Computer software and hardware
Machinery and equipment
Leasehold improvements
Furniture and fixtures
Other
Total depreciable property at cost
Less accumulated depreciation
Total depreciable property, net
Land
Construction-in-progress
Property, plant and equipment, net
Depreciable
Lives
(In years)
January 29,
2023
January 30,
2022
$
15 - 30
3 - 10
10
Term of lease
3 - 8
5
$
32,723 $
15,887
11,013
11,894
5,991
694
78,202
(53,427 )
24,775
1,077
1,158
27,010 $
32,030
15,648
10,390
10,984
5,829
676
75,557
(49,077 )
26,480
1,077
501
28,058
Depreciation expense for fiscal 2023, 2022 and 2021 was $5.3 million, $5.4 million and $4.4 million, respectively.
Capitalized Software Costs
Certain costs incurred in connection with developing or obtaining computer software for internal use are capitalized. These costs are
amortized over periods of ten years or less. Capitalized software is reported as a component of computer software and hardware above
and on the property, plant, and equipment line of our consolidated balance sheets. The activity in capitalized software costs was:
Balance beginning of year
Additions
Amortization expense
Balance end of year
January 29,
2023
Fifty-Two Weeks Ended
January 30,
2022
January 31,
2021
$
$
2,223 $
-
(875 )
1,348 $
3,211 $
65
(1,053 )
2,223 $
4,277
33
(1,099 )
3,211
NOTE 9 – CLOUD COMPUTING HOSTING ARRANGEMENT
We are in the process of implementing a common Enterprise Resource Planning (ERP) system across all divisions. The ERP system
went live at Sunset West in December 2022 and is expected to go-live in our legacy Hooker divisions in fiscal 2024, with the Home
Meridian segment following afterwards. Based on the provisions of ASU 2018-15, Intangibles — Goodwill and Other — Internal-Use
Software, we capitalize implementation costs associated with hosting arrangements that are service contracts. These costs are recorded
on “Other noncurrent assets” line of our consolidated balance sheets. Amortization expense commenced as the system went live at
Sunset West in the fourth quarter of fiscal 2023. In addition, we recorded capitalized interest of $84,000 as we entered into new term
loans in July 2022. Implementation costs are amortized over ten years on a straight-line basis.
F-18
The capitalized implementation costs at January 29, 2023 and January 30, 2022 were as follows
Balance at January 30, 2022
Costs capitalized during the period
Accumulated amortization
Balance at January 29, 2023
NOTE 10 – INTANGIBLE ASSETS AND GOODWILL
Capitalized
Implementation
Costs
Capitalized
interest expenses
$
$
3,228 $
5,382
(12 )
8,598 $
-
84
(0 )
84
Our goodwill, some trademarks and trade names have indefinite useful lives and, consequently, are not subject to amortization for
financial reporting purposes but are tested for impairment annually or more frequently if events or circumstances indicate that the asset
might be impaired.
Our non-amortizable intangible assets consist of:
■ Goodwill related to the Shenandoah and Sunset West acquisitions; and
■ Trademarks and tradenames related to the acquisitions of Bradington-Young (acquired in 2002), Sam Moore (acquired in 2007)
and Home Meridian (acquired in 2016).
We review goodwill annually for impairment or more frequently if events or circumstances indicate that it might be impaired.
In accordance with ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, we
perform our annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. Management
judgment is a significant factor in the goodwill impairment evaluation process. The computations require management to make estimates
and assumptions, the most critical of which are potential future cash flows and the appropriate discount rate.
In conjunction with our evaluation of the cash flows generated by the Home Meridian, Bradington-Young and Sam Moore reporting
units, we evaluated the carrying value of trademarks and trade names using the relief from royalty method, which values the
trademark/trade name by estimating the savings achieved by ownership of the trademark/trade name when compared to licensing the
mark/name from an independent owner. The inputs used in the trademark/trade name analyses are considered Level 3 fair value
measurements.
The adverse economic effects brought on by the COVID-19 pandemic, including reductions in our sales, earnings and market value, as
well as other changing market dynamics, required that we perform a valuation of our intangible assets in the 2021 first quarter. The
calculation methodology for the fair value of our Home Meridian segment’s and the Shenandoah division of our Domestic Upholstery
segment’s goodwill included three approaches: the Discounted Cash Flow Method (DCF) which was given the largest weighting, the
Guideline Public Company Method (GPCM) based on the consideration of the facts of the Company’s peer competitors and the
Guideline Transaction Method (GTM) based on consideration of transactions with varying risk profiles, geographies and market
conditions. The income approach, specifically the relief from royalty method, was used as the valuation methodology for our trade
names and trademarks, based on cash flow projections and growth rates for each trade name for five years in the future provided by
management, and a royalty rate benchmark for companies with similar activities. As a result of our intangible asset valuation analysis,
in the first quarter of fiscal 2021, we recorded $44.3 million non-cash impairment charges including $23.2 million to Home Meridian
goodwill, $16.4 million to Shenandoah goodwill and $4.8 million to certain of Home Meridian segment’s trade names.
During the fiscal 2023, we recorded both non-amortizable and amortizable intangible assets because of the Sunset Acquisition. Based
on our internal analyses at January 29, 2023, the fair values of our non-amortizable trademarks and trade names exceeded their carrying
values and we concluded that Shenandoah and Sunset West goodwill in the Domestic Upholstery segment is not impaired.
F-19
Details of our non-amortizable intangible assets are as follows:
Non-amortizable
Intangible Assets
Segment
Balance at February, 2020
Impairment Charges
Balance at January 31,
2021
Balance at January 30,
2022
Acquisition
Balance at January 29,
2023
Goodwill
Trademarks and trade names
Home
Home
Meridian Domestic Upholstery
Sunset
West
Shenandoah
Total
Meridian Domestic Upholstery
Sam
Bradington-
Moore
Young
Total
Total non-
amortizable
assets
$ 23,187 $
(23,187 )
16,871 $
(16,381 )
- $ 40,058 $ 11,400 $
(4,750 )
- (39,568 )
861 $
396 $ 12,657 $
(4,750 )
52,715
(44,318 )
-
490
-
490
-
6,650
861
396
-
-
490
490
-
- 14,462 14,462
6,650
-
861
396
7,907
-
8,397
-
7,907
-
8,397
14,462
$
- $
490 $ 14,462 $ 14,952 $
6,650 $
861 $
396 $
7,907 $
22,859
Our amortizable intangible assets are recorded in the Home Meridian and in Domestic Upholstery segments. In fiscal 2023, we wrote
off $12,500 representing the remaining value of the Right2Home trade name in the Home Meridian segment due to the decision to exit
of the ACH business unit in the fourth quarter of fiscal 2023. The carrying amounts and changes therein of those amortizable intangible
assets were as follows:
Amortizable Intangible Assets
Customer
Relationships
Trademarks
Totals
Balance at January 30, 2022
Acquisition
Amortization
Impairment
Balance at January 29, 2023
$
$
15,348 $
10,401
(3,364 )
-
22,385 $
598 $
1,050
(148 )
(13 )
1,487 $
15,946
11,451
(3,512 )
(13 )
23,872
The estimated amortization expense associated with our amortizable intangible assets is expected to be as follows:
Fiscal Year
Amount
2024
2025
2026
2027
2028
2029 and thereafter
3,500
3,487
3,487
3,487
2,178
7,733
23,872
$
F-20
NOTE 11 – 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 January 29, 2023 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 January 29, 2023 and January 30, 2022 were as follows:
Description
Level 1
Fair value at January 29, 2023
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Fair value at January 30, 2022
(In thousands)
Assets measured at fair
value
Company-owned life
insurance
NOTE 12 – LEASES
$
- $
27,576 $
- $
27,576 $
- $
26,479 $
- $
26,479
In fiscal 2020, we adopted Accounting Standards Codification Topic 842 Leases. We have a sub-lease at one of our warehouses and we
recognized sub-lease income of $445,000, $890,000, and $576,000 in fiscal 2023, fiscal 2022, and fiscal 2021, respectively.
The components of lease cost and supplemental cash flow information for leases in fiscal 2023, 2022 and 2021 were:
Operating lease cost
Variable lease cost
Short-term lease cost
Total operating lease cost
Fifty-two Weeks Ended
January 29, 2023 January 30, 2022 January 31, 2021
8,367
$
146
291
8,804
9,908 $
234
327
10,469 $
8,144 $
208
117
8,469 $
$
Operating cash outflows
$
10,527 $
7,730 $
7,921
The right-of-use assets and lease liabilities recorded on our Consolidated Balance Sheets as of January 29, 2023 and January 30, 2022
were:
Real estate
Property and equipment
Total operating leases right-of-use assets
January 29, 2023 January 30, 2022
50,749
$
1,105
51,854
68,212 $
737
68,949 $
$
Current portion of operating lease liabilities
Long term operating lease liabilities
Total operating lease liabilities
$
$
7,316 $
63,762
71,078 $
7,471
46,570
54,041
F-21
For leases that commenced before July 2022, we used our incremental borrowing rate which was LIBOR plus 1.5%. When we entered
into the new loan agreement our incremental borrowing rate for unsecured term loan became the current BSBY rate plus 1.40%. We use
this rate as discount rate for leases commenced in July 2022 and thereafter. The weighted-average discount rate is 4.00%. The weighted-
average remaining lease term is 8.0 years.
The following table reconciles the undiscounted future lease payments for operating leases to the operating lease liabilities recorded in
the consolidated balance sheet at January 29, 2023:
Fiscal Year
2024
2025
2026
2027
2028
2029 and thereafter
Total lease payments
Less: impact of discounting
Present value of lease payments
Undiscounted
Future
Operating Lease
Payments
$
$
$
9,995
10,102
10,182
10,267
8,931
35,131
84,608
(13,530 )
71,078
As of January 29, 2023, the Company had an additional lease for a showroom in Atlanta, Georgia. This lease is expected to commence
in May of calendar 2023 with an initial lease term of 3 years and estimated future minimum rental commitments of approximately $1.0
million. Since the lease has not yet commenced, the undiscounted amounts are not included in the table above.
NOTE 13 – LONG-TERM 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 Sunset Acquisition. The Second Amended and Restated Loan
Agreement dated as of September 29, 2017, had previously been amended by a First Amendment to Second Amended and Restated
Loan Agreement dated as of January 31, 2019, a Second Amendment to Second Amended and Restated Loan Agreement dated as of
November 4, 2020, and a Third Amendment to Second Amended and Restated Loan Agreement dated as of January 27, 2021 (as so
amended, the “Existing Loan Agreement”). Details of the individual credit facilities provided for in the Amendment are as follows:
■ Unsecured Revolving Credit Facility. Under the Amendment, the expiration date of the existing $35 million Unsecured
Revolving Credit Facility (the “Existing Revolver”) was extended to July 26, 2027. Any amounts outstanding will bear interest
at a rate per annum, equal to the then current Bloomberg Short-Term Bank Yield Index (“BSBY”) (adjusted periodically) plus
1.00%. The interest rate will be adjusted on a monthly basis. The actual daily amount of undrawn letters of credit is subject to
a quarterly fee equal to a per annum rate of 1%. 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;
■ 2022 Secured Term Loan. The Amendment provided us with a $18 million term loan (the “Secured Term Loan”), which was
disbursed to us on July 26, 2022. We are required to pay monthly interest only payments at a rate per annum equal to the then
current BSBY rate (adjusted periodically) plus 0.90% on the outstanding balance until the principal is paid in full. The interest
rate will be adjusted on a monthly basis. On July 26, 2027, the entire outstanding indebtedness is due in full, including all
principal and interest. The Secured Term Loan is secured by certain company-owned life insurance policies under a Security
Agreement (Assignment of Life Insurance Policy as Collateral) dated July 26, 2022, by and between the Company and BofA;
and
■ 2022 Unsecured Term Loan. The Amendment provided us with a $7 million unsecured term loan (the “Unsecured Term Loan”),
which was disbursed to us on July 26, 2022. We are required to pay monthly principal payments of $116,667 and monthly
interest payments at a rate per annum equal to the then current BSBY (adjusted periodically) plus 1.40% on the outstanding
balance until paid in full. The interest rate will be adjusted monthly. On July 26, 2027, the entire outstanding indebtedness is
due in full, including all principal and interest.
F-22
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 January 29, 2023, $6.3 million was
outstanding under the Unsecured Term Loan, and $18 million was outstanding under the Secured Term Loan.
We incurred $37,500 in debt issuance costs in connection with our term loans. As of January 29, 2023, unamortized loan costs of $33,750
were netted against the carrying value of our term loans on our condensed consolidated balance sheets.
Principal payments on the term loans are as follows:
Fiscal Year
2024
2025
2026
2027
2028
Total principal payments
Principal
payments
$
$
1,400
1,400
1,400
1,400
18,700
24,300
The carrying amount of the term loans approximates their fair value at January 29, 2023.
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.
● A basic fixed charge coverage ratio of at least 1.25:1.00; and
● Limit capital expenditures to no more than $15.0 million during any fiscal year.
The Existing Loan Agreement also limits our right to incur other indebtedness, make certain investments and create liens upon our
assets, subject to certain exceptions, among other restrictions. The Existing Loan Agreement does not restrict our ability to pay cash
dividends on, or repurchase, shares of our common stock, subject to our compliance with the financial covenants discussed above, if we
are not otherwise in default under the Existing Loan Agreement.
We were in compliance with each of these financial covenants at January 29, 2023 and expect to remain in compliance with existing
covenants for the foreseeable future.
While we generally fund short-term and long-term cash requirements with cash from operating activities, during fiscal 2023, at various
times we borrowed and repaid amounts totaling $36.2 million on our revolving line of credit. We believe our primary sources of liquidity
will satisfy our cash requirements over both the short-term (the next twelve months) and long-term.
As of January 29, 2023, we had $26.4 million available under our $35 million Existing Revolver to fund working capital needs. Standby
letters of credit in the aggregate amount of $8.6 million, used to collateralize certain insurance arrangements and for imported product
purchases, were outstanding under the Existing Revolver as of January 29, 2023 There were no additional borrowings outstanding under
the Existing Revolver as of January 29, 2023.
F-23
NOTE 14 – EMPLOYEE BENEFIT PLANS
Employee Savings Plans
We sponsor a tax-qualified 401(k) retirement plan covering substantially all employees. This plan assists employees in meeting their
savings and retirement planning goals through employee salary deferrals and discretionary employer matching contributions. Our
contributions to the plan amounted to $1.5 million in fiscal 2023, $1.4 million in fiscal 2022, and $1.3 million in fiscal 2021.
Executive Benefits
SRIP and SERP Overview
We maintain two “frozen” retirement plans, which are paying benefits and may include active employees among the participants but we
do not expect to add participants to these plans in the future. The two plans include:
■ a supplemental retirement income plan (“SRIP”) for certain former and current executives of Hooker Furnishings Corporation;
■ the Pulaski Furniture Corporation Supplemental Executive Retirement Plan (“SERP”) for certain former executives.
and
SRIP and SERP
The SRIP provides monthly payments to participants or their designated beneficiaries based on a participant’s “final average monthly
earnings” and “specified percentage” participation level as defined in the plan, subject to a vesting schedule that may vary for each
participant. The benefit is payable for a 15-year period following the participant’s termination of employment due to retirement,
disability or death. In addition, the monthly retirement benefit for each participant, regardless of age, becomes fully vested and the
present value of that benefit is paid to each participant in a lump sum upon a change in control of the Company as defined in the plan.
The SRIP is unfunded and all benefits are payable solely from our general assets. The plan liability is based on the aggregate actuarial
present value of the vested benefits to which participating employees are currently entitled but based on the employees’ expected dates
of separation or retirement. No employees have been added to the plan since 2008 and we do not expect to add additional employees in
the future, due to changes in our compensation philosophy, which emphasizes more performance-based compensation measures in total
management compensation.
The SERP provides monthly payments to eight retirees or their designated beneficiaries based on a defined benefit formula as defined
in the plan. The benefit is payable for the life of the retiree with the following forms available as a reduced monthly benefit: Ten-year
Certain and Life; 50% or 100% Joint and Survivor Annuity. The SERP is unfunded and all benefits are payable solely from our general
assets. The plan liability is based on the aggregate actuarial present value of the benefits to which retired employees are currently entitled.
No employees have been added to the plan since 2006 and we do not expect to add additional employees in the future.
F-24
Summarized SRIP and SERP information as of each fiscal year-end (the measurement date) is as follows:
Change in benefit obligation:
Beginning projected benefit obligation
Service cost
Interest cost
Benefits paid
Actuarial (gain)/ loss
Ending projected benefit obligation (funded status)
Accumulated benefit obligation
Discount rate used to value the ending benefit obligations:
Amount recognized in the consolidated balance sheets:
Current liabilities (Accrued salaries, wages and benefits line)
Non-current liabilities (Deferred compensation line)
Total
SRIP (Supplemental Retirement
Income Plan)
January 29,
2023
January 30,
2022
$
$
$
$
$
$
9,426
126
243
(815 )
(1,004 )
$
7,976
10,572
133
178
(904 )
(553 )
9,426
7,783
$
9,277
4.85 %
2.70 %
877
7,099
7,976
$
$
877
8,549
9,426
January 29,
2023
Fifty-Two Weeks Ended
January 30,
2022
January 31,
2021
Net periodic benefit cost
Service cost
Interest cost
Net loss
Net periodic benefit cost
$
$
126
243
83
452
$
$
133 $
178
402
713 $
Other changes recognized in accumulated other comprehensive income
Net (gain) / loss arising during period
Amortizations:
Gain (loss)
Total recognized in other comprehensive loss (income)
(1,004 )
(553 )
(83 )
(1,087 )
(402 )
(955 )
128
249
338
715
530
(338 )
192
Total recognized in net periodic benefit cost and accumulated other
comprehensive income
$
(635 ) $
(242 ) $
907
Assumptions used to determine net periodic benefit cost:
Discount rate
Increase in future compensation levels
2.70 %
4.00 %
1.75 %
4.00 %
2.50 %
4.00 %
Estimated Future Benefit Payments:
Fiscal 2024
Fiscal 2025
Fiscal 2026
Fiscal 2027
Fiscal 2028
Fiscal 2029 through fiscal 2033
$
877
960
960
787
817
3,943
For the SRIP, the discount rate used to determine the fiscal 2023 net periodic cost was 2.70%, based on the Mercer yield curve and the
plan’s expected benefit payments. At January 29, 2023, combining the Mercer yield curve and the plan's expected benefit payments
resulted in a rate of 4.85%. This rate was used to value the ending benefit obligations.
F-25
At January 29, 2023, the actuarial gain related to the SRIP amounted to $1 million, net of tax of $288,000. At January 30, 2022, the
actuarial gain related to the SRIP amounted to $553,000, net of tax of $229,000. The estimated actuarial gain that will be amortized
from accumulated other comprehensive income into net periodic benefit cost over the 2024 fiscal year is $279,203. There is no expected
prior service (cost) or credit amortization.
Change in benefit obligation:
Beginning projected benefit obligation
Service cost
Interest cost
Benefits paid
Actuarial (gain)/loss
Ending projected benefit obligation (funded status)
Accumulated benefit obligation
Discount rate used to value the ending benefit obligations:
Amount recognized in the consolidated balance sheets:
Current liabilities (Accrued salaries, wages and benefits line)
Non-current liabilities (Deferred compensation line)
Total
SERP (Supplemental Executive
Retirement Plan)
January 29,
2023
January 30,
2022
$
$
$
$
$
$
1,531
-
41
(158 )
(119 )
$
1,295
1,681
-
34
(145 )
(39 )
1,531
1,295
$
1,531
4.70 %
2.80 %
155
1,140
1,295
$
$
156
1,375
1,531
Net periodic benefit cost
Service cost
Interest cost
Net gain
Net periodic benefit cost
Other changes recognized in accumulated other comprehensive income
Net (gain)/loss arising during period
Amortizations:
Gain (Loss)
Total recognized in other comprehensive loss (income)
January 29,
2023
Fifty-Two Weeks Ended
January 30,
2022
January 31,
2021
$
$
$
-
41
(2 )
$
39
(119 )
2
(117 )
- $
34
34 $
(39 )
-
(39 )
-
46
-
46
(67 )
0
(67 )
Total recognized in net periodic benefit cost and accumulated other
comprehensive income
$
(78 ) $
(5 ) $
(21 )
Assumptions used to determine net periodic benefit cost:
Discount rate
Increase in future compensation levels
2.80 %
N/A
2.10 %
N/A
2.60 %
N/A
Estimated Future Benefit Payments:
Fiscal 2024
Fiscal 2025
Fiscal 2026
Fiscal 2027
Fiscal 2028
Fiscal 2029 through fiscal 2033
$
155
150
144
137
130
529
F-26
For the SERP, the discount rate assumption used to measure the projected benefit obligations is set by reference to a certain hypothetical
AA-rated corporate bond spot-rate yield curve constructed by our actuary, Aon (“Aon”) and the plan’s projected cash flows, rounded to
the nearest 10 bps. At January 29, 2023, combining the Aon AA Above Median yield curve and the plan's expected benefit payments
created a rate of 4.70%. This rate was used to value the ending benefit obligations. At January 30, 2022, combining the Aon AA Above
Median yield curve and the plan's expected benefit payments created a rate of 2.80%. This rate used to determine the fiscal 2023 net
periodic cost. The change in the discount rate from 2.80% to 4.70% decreased liabilities.
At January 29, 2023, the actuarial gain related to the SERP was $119,000. At January 30, 2022, the actuarial gain related to the SERP
was $39,000.
NOTE 15 – SHARE-BASED COMPENSATION
Our Stock Incentive Plan permits incentive awards of restricted stock, restricted stock units, stock appreciation rights and performance
grants to key employees. A maximum of 750,000 shares of the Company’s common stock is authorized for issuance under the Stock
Incentive Plan. The Stock Incentive Plan also provides for annual restricted stock awards to non-employee directors. We have issued
restricted stock awards to our non-employee directors since January 2006 and certain other management employees since 2014.
We account for restricted stock awards as “non-vested equity shares” until the awards vest or are forfeited. Restricted stock awards to
non-employee directors and certain other management employees vest if the director/employee remains on the board/employed through
the specified vesting period for shares and may vest earlier upon certain events specified in the plan. For shares issued to non-employee
directors during fiscal 2016 and after, there is a 12-month service period. The fair value of each share of restricted stock is the market
price of our common shares on the grant date. The weighted average grant-date fair values of restricted stock awards issued during fiscal
2023 were $22.19, $18.26, $16.65 and $13.41, during fiscal 2022 was $37.20, during fiscal 2021 were $13.92 and $29.34, respectively.
The restricted stock awards outstanding as of January 29, 2023 had an aggregate grant-date fair value of $2.6 million, after taking vested
and forfeited restricted shares into account. As of January 29, 2023, we have recognized non-cash compensation expense of
approximately $1.2 million related to these non-vested awards. During fiscal 2023, 23,239 shares vested with an average grant date fair
value of $799,000. The remaining $1.4 million of grant-date fair value for unvested restricted stock awards outstanding at January 29,
2023 will be recognized over the remaining vesting periods for these awards. 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.
For each restricted stock issuance, the following table summarizes restricted stock activity, including the weighted average issue price
of those shares on the grant date, the fair value of each grant of restricted stock on the grant date, compensation expense recognized for
the unvested shares of restricted stock for each grant and the remaining fair value of the unvested shares of restricted stock for each
grant as of January 29, 2023:
Whole
Grant-Date Aggregate
Compensation
Number of Fair Value Grant-Date
Expense
Restricted shares Issued on April 7, 2020
Forfeited
23,484 $
(6,748 )
Shares
Per Share
13.92 $
Fair Value Recognized
327 $
(94 )
222 $
Restricted shares Issued on October 19, 2020
1,022
29.34
30
23
Restricted shares Issued on April 8, 2021
Forfeited
Restricted shares Issued on January 31, 2022
Forfeited
Restricted shares Issued on April 11, 2022
16,613
(6,599 )
22,534
(4,958 )
61,011
(2,541 )
37.20
22.19
18.26
618
(245 )
500
(110 )
1,114
(46 )
Grant-Date Fair
Value
Unrecognized
At
January 29,
2023
11
7
146
227
130
260
297
771
Restricted shares Issued on June 8, 2022
25,224
16.65
420
280
Restricted shares Issued on October 12, 2022
3,262
13.41
44
22
140
22
Awards outstanding at January 29, 2023:
132,304
$
2,557 $
1,201 $
1,356
F-27
We have awarded time-based restricted stock units to certain senior executives since 2011. Each restricted stock unit, or “RSU”, entitles
the executive to receive one share of the Company’s common stock if he remains continuously employed with the Company through
the end of a three-year service period. The RSUs may be paid in shares of the Company’s common stock, cash or both, at the discretion
of the Compensation Committee. The RSUs are accounted for as “non-vested stock grants.” Similar to the restricted stock grants issued
to our non-employee directors, RSU compensation expense is recognized ratably over the applicable service period. However, unlike
restricted stock grants, no shares are issued, or other payment made, until the end of the applicable service period (commonly referred
to as “cliff vesting”) and grantees are not entitled to receive dividends on their RSUs during that time. The fair value of each RSU is the
market price of a share of our common stock on the grant date, reduced by the present value of the dividends expected to be paid on a
share of our common stock during the applicable service period, discounted at the appropriate risk-free rate.
The following table presents RSU activities for the year ended January 29, 2023:
Whole
Grant-Date Aggregate
Compensation
Number of Fair Value Grant-Date
Expense
Units
Per Unit
Fair Value Recognized
Grant-Date Fair
Value
Unrecognized
At
January 29,
2023
RSUs Awarded on April 7, 2020
Forfeited
Partial vested due to separation
RSUs Awarded on April 8, 2021
Forfeited
RSUs for retention Awarded on April 8, 2021
Forfeited
17,672 $
(7,183 )
(1,437 )
8,186
(1,882 )
4,865
(1,613 )
12.01
35.05
35.05
212
(86 )
287
(66 )
171
(57 )
135
70
119
7
RSUs for retention Awarded on April 11, 2022
19,157
15.86
304
85
Awards outstanding at January 29, 2023:
37,765
$
765 $
409 $
We have issued Performance-based Restricted Stock Units (“PSUs”) to our named executive officers 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. PSUs awarded in fiscal 2021 were forfeited as the performance targets were not met. The following
table presents PSU activities for the year ended January 29, 2023:
Whole
Grant-Date Aggregate
Compensation
Number of Fair Value Grant-Date
Expense
Grant-Date Fair
Value
Unrecognized
At
January 29,
2023
PSUs Awarded on April 8, 2021
Forfeited
20,243 $
(3,764 )
Units
Per Unit
37.20 $
Fair Value Recognized
753 $
(140 )
409 $
PSUs Awarded on April 11, 2022
46,725
18.26
853
284
Awards outstanding at January 29, 2023:
63,204
$
1,466 $
693 $
F-28
86
44
219
356
204
569
773
NOTE 16 – EARNINGS PER SHARE
We refer you to the Earnings Per Share disclosure in Note 1-Summary of Significant Accounting Policies, above, for more detailed
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:
Restricted shares
RSUs and PSUs
January 29,
2023
January 30,
2022
January 31,
2021
132,304
100,969
233,273
59,500
77,841
137,341
54,747
140,911
195,658
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:
Net (loss)/income
Less: Dividends on unvested restricted shares
Net earnings allocated to unvested restricted stock
Earnings available for common shareholders
Weighted average shares outstanding for basic earnings per share
Dilutive effect of unvested restricted stock awards
Weighted average shares outstanding for diluted earnings per share
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
January 29,
2023
Fifty-Two Weeks Ended
January 30,
2022
January 31,
2021
$
$
$
$
(4,312 ) $
103
-
(4,415 ) $
11,593
*
11,593
11,718 $
46
61
11,611 $
11,852
118
11,970
(10,426 )
36
-
(10,462 )
11,822
*
11,822
(0.37 ) $
0.99 $
(0.88 )
(0.37 ) $
0.97 $
(0.88 )
*Due to net loss in fiscal 2023 and fiscal 2021, approximately 117,000 and 119,000 shares would have been antidilutive and are therefore
excluded from the calculation of earnings per share, respectively.
F-29
NOTE 17 – INCOME TAXES
Our provision for income taxes was as follows for the periods indicated:
Current expense
Federal
Foreign
State
Total current expense
Deferred taxes
Federal
State
Total deferred taxes
Income tax (benefit)/expense
January 29,
2023
Fifty-Two Weeks Ended
January 30,
2022
January 31,
2021
$
$
1,024 $
75
223
1,322
(2,617 )
(542 )
(3,159 )
(1,837 ) $
650 $
107
307
1,064
1,980
344
2,324
3,388 $
5,858
108
1,154
7,120
(9,554 )
(1,708 )
(11,262 )
(4,142 )
Total tax benefit for fiscal 2023 was $1.5 million, of which $1.8 million benefit was allocated to continuing operations and $ 288,000
tax expense was allocated to other comprehensive income. Total tax expense for fiscal 2022 was $3.6 million, of which $3.4 million
expense was allocated to continuing operations and $237,000 tax expense was allocated to other comprehensive income. Total tax
benefit for fiscal 2021 was $4.2 million, of which $4.1 million benefit was allocated to continuing operations and $ 30,000 tax benefit
was allocated to other comprehensive income.
The effective income tax rate differed from the federal statutory tax rate as follows for the periods indicated:
Income taxes at statutory rate
Increase (decrease) in tax rate resulting from:
State taxes, net of federal benefit
Officer's life insurance
Expiration of capital loss
Change in valuation allowance
Consolidated Appropriation Act provisions
Other
Effective income tax rate
January 29,
2023
Fifty-Two Weeks Ended
January 30,
2022
January 31,
2021
21.0 %
21.0 %
4.1
4.0
0.0
-0.2
0.0
1.0
29.9 %
3.4
-1.3
2.0
-1.9
0.0
-0.8
22.4 %
21.0 %
3.0
1.7
0.0
0.0
1.8
0.9
28.4 %
F-30
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities for the period
indicated were:
Assets
Intangible assets
Inventories
Deferred compensation
Allowance for bad debts
Employee benefits
Loss and credit carryover
Accrued liabilities
Deferred rent
Other
Total deferred tax assets
Valuation allowance
Liabilities
Property, plant and equipment
Inventories
Other
Total deferred tax liabilities
Net deferred tax assets
January 29,
2023
January 30,
2022
$
$
6,409 $
3,618
3,007
889
746
418
79
605
215
15,986
(100 )
15,886
1,117
-
285
1,402
14,484 $
7,212
-
2,807
2,079
643
88
320
618
194
13,961
(88 )
13,873
1,361
900
-
2,261
11,612
At January 29, 2023 and January 30, 2022 our net deferred asset was $14.5 and $11.6 million, respectively. The increase in the valuation
allowance of $12,000 was due to additional foreign tax credit carry forward. We expect to fully realize the benefit of the deferred tax
assets, with the exception of the foreign tax credit carry forward, in future periods when the amounts become deductible. The foreign
tax credit carry forward is $100,000 and expires beginning in fiscal 2029.
Current accounting standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. The guidance also addresses de-recognition, classification,
interest and penalties, accounting in interim periods and disclosure. We do not have unrecognized tax benefits as of January 29, 2023.
Tax years ending February 2, 2020 through January 29, 2023 remain subject to examination by federal and state taxing authorities.
F-31
NOTE 18 – 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 three reportable segments and “All Other”, which includes the remainder of our
businesses:
a different type or class of customer than do our other operating segments and at much lower margins;
■ 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
■ Domestic Upholstery, which includes the domestic upholstery manufacturing operations of Bradington-Young, HF Custom
■ All Other, consisting of H Contract and Lifestyle Brands, a new business started in late fiscal 2019. Neither of these operating
segments were individually reportable; therefore, we combined them in “All Other” in accordance with ASC 280.
(formerly Sam Moore), Shenandoah Furniture and newly acquired Sunset West; and
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 HF Custom. Due to a change
in the way management internally evaluates operating performance, beginning with fiscal 2023 first quarter HF Custom’s results now
include sales of seating products formerly included in H Contract’s results. Fiscal 2022 and fiscal 2021 results discussed below have
been recast to reflect this change. The Hooker Branded and Home Meridian segments are unchanged.
As discussed in Note 4 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.
F-32
The following table presents segment information for the periods, and as of the dates, indicated. Prior-year information has been recast
to reflect the changes in segments discussed above.
Net Sales
Hooker Branded
Home Meridian
Domestic Upholstery
All Other
Consolidated
Gross Profit/(Loss)
Hooker Branded
Home Meridian
Domestic Upholstery
All Other
Consolidated
Operating (Loss)/Income
Hooker Branded
Home Meridian
Domestic Upholstery
All Other
Consolidated
Capital Expenditures
Hooker Branded
Home Meridian
Domestic Upholstery
All Other
Consolidated
Depreciation & Amortization
Hooker Branded
Home Meridian
Domestic Upholstery
All Other
Consolidated
Assets
Hooker Branded
Home Meridian
Domestic Upholstery
All Other
Consolidated Assets
Consolidated Goodwill and
Intangibles
Total Consolidated Assets
January 29,
2023
Fifty-Two Weeks Ended
January 30,
2022
January 31,
2021
% Net
Sales
% Net
Sales
% Net
Sales
$
$
$
$
$
$
$
$
$
$
199,602
216,338
156,717
10,445
583,102
34.2 % $
37.1 %
26.9 %
1.8 %
100 % $
200,692
278,902
106,827
7,191
593,612
33.8 % $
47.0 %
18.0 %
1.2 %
100 % $
162,442
282,423
88,600
6,616
540,081
59,344
(2,620 )
32,633
3,937
93,294
29.7 % $
-1.2 %
20.8 %
37.7 %
16.0 % $
63,146
15,213
20,860
2,483
101,702
31.5 % $
5.5 %
19.5 %
34.5 %
17.1 % $
51,832
39,832
18,897
2,187
112,748
20,529
(37,181 )
8,871
1,735
(6,046 )
10.3 % $
-17.2 %
5.7 %
16.6 %
-1.0 % $
30,667
(21,260 )
4,675
761
14,843
15.3 % $
-7.6 %
4.4 %
10.6 %
2.5 % $
22,827
(26,071 )
(11,683 )
563
(14,364 )
26.4 %
52.3 %
16.4 %
1.2 %
96 %
31.9 %
14.1 %
21.3 %
33.1 %
20.9 %
14.1 %
-9.2 %
-13.2 %
8.5 %
-2.7 %
1,813
1,280
1,106
-
4,199
2,092
2,899
3,827
11
8,829
$
$
$
$
558
4,829
1,295
10
6,692
2,530
2,594
2,678
12
7,814
$
$
$
$
377
347
475
11
1,210
1,809
2,160
2,797
12
6,778
As of
January 29,
As of
January 30,
2023
%Total
Assets
2022
%Total
Assets
$
$
$
174,523
92,469
66,435
1,558
334,985
46,731
381,716
52.1 % $
27.6 %
19.8 %
0.5 %
100 % $
170,968
130,890
47,232
1,126
350,216
48.8 %
37.4 %
13.5 %
0.3 %
100 %
24,343
374,559
$
F-33
Sales by product type are as follows:
2023
Net Sales (in thousands)
Fiscal
2022
2021
Casegoods
Upholstery
$
$
328,849
254,253
583,102
56 % $
44 %
$
348,548
245,064
593,612
59 % $
41 %
$
329,906
210,175
540,081
61 %
39 %
No significant long-lived assets were held outside the United States at either January 29, 2023 or January 30, 2022. International
customers accounted for less than 2% of consolidated invoiced sales in fiscal 2023, 2022 and 2021. We define international sales as
sales outside of the United States and Canada.
NOTE 19 – COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET ARRANGEMENTS
Commitments and Off-Balance Sheet Arrangements
We lease office space, warehousing facilities, showroom space and office equipment under leases expiring over the next five years. Rent
expense, was $11.5 million in fiscal 2023, $10.1 million in fiscal 2022, and $10.7 million in fiscal 2021. Future minimum annual
commitments under leases, operating agreements, interest and principal payments on term loans and deferred compensation payments
are $13.7 million in fiscal 2024, $13.8 million in fiscal 2025, $13.8 million in fiscal 2026, $13.6 million in fiscal 2027 and $29.1 million
in fiscal 2028.
We had letters of credit outstanding totaling $8.6 million on January 29, 2023. We utilize letters of credit to collateralize certain imported
inventory purchases and certain insurance arrangements.
In the ordinary course of our business, we may become involved in legal proceedings involving contractual and employment
relationships, product liability claims, intellectual property rights and a variety of other matters. We do not believe that any pending
legal proceedings will have a material impact on our financial position or results of operations.
Our business is subject to a number of significant risks and uncertainties, including our reliance on offshore sourcing, any of which can
adversely affect our business, results of operations, financial condition or future prospects.
NOTE 20 – CONCENTRATIONS OF RISK
Imported Products Sourcing
We source imported products through multiple vendors, located in nine countries. Because of the large number and diverse nature of
the foreign factories from which we can source our imported products, we have some flexibility in the placement of products in any
particular factory or country.
Factories located in Vietnam and China are a critical resource for Hooker Furnishings. In fiscal 2023, imported products sourced from
Vietnam and China accounted for 91% of our import purchases and our top five suppliers in those countries accounted for 50% of our
fiscal 2023 import purchases. A disruption in our supply chain from Vietnam or China could significantly impact our ability to fill
customer orders for products manufactured at that factory or in that country.
Raw Materials Sourcing for Domestic Upholstery Manufacturing
Our five largest domestic upholstery suppliers accounted for 33% of our raw materials supply purchases for domestic upholstered
furniture manufacturing operations in fiscal 2023. One supplier accounted for 8.7% of our raw material purchases in fiscal 2023. Should
disruptions with these suppliers occur, we believe we could successfully source these products from other suppliers without significant
disruption to our operations.
F-34
Concentration of Sales and Accounts Receivable
One customer accounted for approximately 6% of our consolidated sales in fiscal 2023. Our top five customers accounted for 22% of
our fiscal 2023 consolidated sales. The loss of any one or more of these customers could adversely affect our earnings, financial condition
and liquidity. At January 29, 2023, 20% of our consolidated accounts receivable is concentrated in our top five customers.
NOTE 21 – RELATED PARTY TRANSACTIONS
We lease the four properties utilized in Shenandoah’s operations. One of our employees has an ownership interest in the entities that
own these properties. The leases commenced on September 29, 2017 with an option to renew each for an additional seven years. All
four leases include annual rent escalation clauses with respect to minimum lease payments after the initial 84-month term of the lease is
completed. In addition to monthly lease payments, we also incur expenses for property taxes, routine repairs and maintenance and other
operating expenses. The total amount of the lease expenses and other expenses do not have a material effect on our consolidated financial
statements.
NOTE 22 – SUBSEQUENT EVENTS
Cash Dividend
On March 3, 2023, our Board of Directors declared a quarterly cash dividend of $0.22 per share, payable on March 31, 2023 to
shareholders of record at March 17, 2023.
HMI Inventory Valuation Losses
On March 14, 2023, we announced that we had approved a plan to exit the ACH e-commerce brand of our HMI operating segment along
with repositioning the PRI business unit as a direct-container only business model. Concurrent with that exit, we recorded a $24.4 million
non-cash charge related to the exit, which was recorded in the fourth fiscal quarter of the recently ended 2023 fiscal year on both ACH
and PRI inventories and other excess inventories along with severance of about $250,000, most of which was recorded in the fiscal 2023
fourth quarter. In addition to these actions, we expect to reduce the physical footprints at our Savannah, Ga warehouse and High Point,
NC administrative office over the course of the current 2024 fiscal year with a concurrent reduction in lease, warehouse, and related
expenses. See Note 3 above for additional information.
F-35
CORPORATE DATA
CORPORATE OFFICES
Hooker Furnishings Corporation
440 East Commonwealth Boulevard
Martinsville, VA 24112 or
P.O. Box 4708
Martinsville, VA 24115
276-632-2133
STOCK TRANSFER AGENT AND DIVIDEND DISBURSING
AGENT:
American Stock Transfer & Trust Co., LLC
6201 15th Avenue
Brooklyn, NY 11219
Toll free: 800-937-5449
Website: www.astfinancial.com
Email: help@astfinancial.com
LEGAL COUNSEL
McGuireWoods LLP
Gateway Plaza
800 East Canal Street
Richmond, VA 23219
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
Suite 850
4242 Six Forks Road
Raleigh, NC 27609
ANNUAL MEETING
The Annual Meeting of Shareholders of Hooker Furnishings Corporation
will be held on Tuesday, June 6, 2023 at the Hooker Furnishings
Corporation Corporate Offices, 440 East Commonwealth Blvd.
Martinsville, VA 24112.
ANNUAL REPORT ON FORM 10-K
Hooker Furnishings Corporation’s Annual Report on Form 10-K,
included herein, is also available on our website at hookerfurnishings.
com. A free copy of our Form 10-K may also be obtained by
contacting Earl Armstrong, Corporate Controller and Secretary at
the corporate offices of the Company.
QUARTERLY FINANCIAL INFORMATION
Quarterly Financial results are announced by press releases that are
available at hookerfurnishings.com in the “Investor Relations” section.
The Company’s quarterly reports on Form 10-Q are also available at
hookerfurnishings.com.
This 2023 Annual Report contains forward-looking statements, including
discussions about our strategy and expectations regarding our future performance,
which are subject to various risks and uncertainties. Factors that could cause actual
results to differ materially from management’s projections, forecasts, estimates and
expectations include, but are not limited to, the factors described in our annual
report on Form 10-K, which is included as part of this report, including under
“Item 1- Business—Forward-Looking Statements” and “Item 1A. Risk Factors.” 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.
With retro transitional styling, the Bradington-Young Alora
Stationary Sofa is characterized by its curved arms and
frame and retro-styled splay legs. Designed with a deeper
seat, it offers maximum comfort for smaller spaces.
H CONTRACT expanded its successful senior living-
focused dining chair line with 8 new chairs in a mix of
traditional and modern looks, bringing the total dining
chair portfolio to more than 35 selections.
In a warm and inviting transitional style, the
Anthology Collection dining group by Pulaski has
a double pedestal table base with triple X braces,
sunburst veneer patterns and a warm natural finish
over knotty oak veneers.
Characterized by its oversized, angular arms, the Crew Sofa by
Bradington-Young sits low and deep and is covered in the Winchester
Coffee Bean leather. The group was placed very well on retail floors
following the Fall High Point Market.
HOO K E R®
F U R N I S H I N G S
Hooker Casegoods • PRI • Shenandoah • Bradington-Young • SLH • HF Custom
Pulaski • Hooker Upholstery • SLF • H Contract • Sunset West
440 East Commonwealth Boulevard, Martinsville, Va 24112 • PO Box 4708 Martinsville, Va 24115 • 276.632.2133
hookerfurnishings.com