What changed in this filing

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Item 1. Financial Statements

2020-09-09 compared with 2020-07-27 · 116 added, 61 removed, 331 unchanged (35% of the section changed)

20 unchanged sentences

Accrued salaries, wages and benefits

Income tax payable

Customer deposits

5 unchanged sentences

Lease liabilities

Other long-term liabilities

Total long-term liabilities

12 unchanged sentences

Thirteen Weeks Ended

Twenty-Six Weeks Ended

Cost of sales

3 unchanged sentences

Intangible asset amortization

Operating (loss)/income

Operating income / (loss)

Other expense, net

Interest expense, net

(Loss)/income before income taxes

Income tax (benefit)/expense

Net (loss)/income

(Loss) / earnings per share

Income/(loss) before income taxes

Income tax expense / (benefit)

Net income/(loss)

Earnings/(Loss) per share

Weighted average shares outstanding:

2 unchanged sentences

HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(In thousands)

Thirteen Weeks Ended

Net (loss)/Income

Twenty-Six Weeks Ended

Net income/(loss)

Other comprehensive income (loss):

2 unchanged sentences

Adjustments to net periodic benefit cost

Total Comprehensive (Loss)/Income

Total Comprehensive Income/(Loss)

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

HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW S

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Thirteen Weeks Ended

Twenty-Six Weeks Ended

Operating Activities:

5 unchanged sentences

Gain on disposal of assets

Deferred income tax expense

Deferred income tax (benefit) / expense

Noncash restricted stock and performance awards

(Benefit from)/provision for doubtful accounts and sales allowances

Provision for doubtful accounts and sales allowances

Gain on life insurance policies

16 unchanged sentences

Proceeds received on life insurance policies

Net cash provided/(used in) by investing activities

Net cash used in investing activities

Financing Activities:

6 unchanged sentences

Supplemental disclosure of cash flow information:

Cash paid for interest, net

Cash paid for income taxes

Cash paid for interest, net

Non-cash transactions:

14 unchanged sentences

Recognition of PSUs as equity-based awards

Balance at May 5, 2019

Balance at August 4, 2019

Balance at February 2, 2020

3 unchanged sentences

Restricted stock compensation cost

Recognition of PSUs as equity-based awards

Balance at May 3, 2020

Performance-based restricted stock units cost

Balance at August 2, 2020

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

HO OKER FURNITURE CORPORATION AND SUBSIDIARIES

HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar and share amounts in tables, except per share amounts, in thousands unless otherwise indicated)

For the Thirteen Weeks Ended May 3, 2020

For the Twenty-Six Weeks Ended August 2, 2020

Preparation of Interim Financial Statements

9 unchanged sentences

Operating results for the interim periods reported herein may not be indicative of the results expected for the fiscal year.

The financial statements contained herein are being filed as part of a quarterly report on Form 10-Q covering the thirteen-week period (also referred to as “three months,” “three-month period,” “quarter,” “first quarter” or “quarterly period”) that began February 3, 2020 and ended May 3, 2020.

This report discusses our results of operations for this period compared to the thirteen-week period that began February 4, 2019 and ended May 5, 2019;

and our financial condition as of May 3, 2020 compared to February 2, 2020.

The financial statements contained herein are being filed as part of a quarterly report on Form 10-Q covering the 2021 fiscal year thirteen-week period (also referred to as “three months,” “three-month period,” “quarter,” “second quarter” or “quarterly period”) that began May 4, 2020, and the twenty-six week period (also referred to as “six months”, “six-month period” or “first half”) that began February 3, 2020, which both ended August 2, 2020.

This report discusses our results of operations for this period compared to the 2020 fiscal year thirteen-week period that began May 6, 2019 and the twenty-six week period that began February 4, 2019, which both ended August 4, 2019;

and our financial condition as of August 2, 2020 compared to February 2, 2020.

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

14 unchanged sentences

In December 2019, the FASB issued ASU 2019-12, Income Tax (Topic 740) – Simplifying the Accounting for Income Taxes.

The amendments in this Update simplify the accounting for income taxes by removing certain exceptions for intraperiod tax allocation, the recognition of deferred tax liabilities after an investment in a foreign entity transitions to or from the equity method, and the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year.

The amendments in this update simplify the accounting for income taxes by removing certain exceptions for intra-period tax allocation, the recognition of deferred tax liabilities after an investment in a foreign entity transitions to or from the equity method, and the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year.

The amendments also introduce new guidance on determining how to apply the income tax guidance to franchise taxes that are partially based on income, clarifying the accounting for transactions that result in a step-up in the tax basis of goodwill, and the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period.

36 unchanged sentences

Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of May 3, 2020 and February 2, 2020, Company-owned life insurance was measured at fair value on a recurring basis based on Level 2 inputs.

As of August 2, 2020 and February 2, 2020, 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 May 3, 2020 and February 2, 2020, were as follows:

Fair value at May 3, 2020

Our assets measured at fair value on a recurring basis at August 2, 2020 and February 2, 2020, were as follows:

Fair value at August 2, 2020

Fair value at February 2, 2020

4 unchanged sentences

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.

We hired an external service provider to perform the valuation of our goodwill and intangible assets..

The calculation methodology for the fair value of our Home Meridian segment and the Shenandoah division of our Domestic Upholstery segment 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 Discounted Cash Flow 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, we recorded $44.3 million non-cash impartment 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.

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.

Twenty-Six Weeks Ended

August 2, 2020

February 2, 2020

Non-amortizable Intangible Assets

Beginning Balance

Impairment Charges

Net Book Value

Beginning Balance

Impairment Charges

Net Book Value

Home Meridian

14 unchanged sentences

Balance at February 2, 2020

Balance at May 3, 2020

Balance at August 2, 2020

For the remainder of fiscal 2021, amortization expense is expected to be approximately $ 1.2 million.

In fiscal 2020, we adopted Accounting Standards Codification Topic 842 Leases.

We recognized $144,000 sub-lease income for the three-month period ended May 3, 2020.

The components of lease cost and supplemental cash flow information for leases for the three-months ended May 3, 2020 were:

13 Weeks Ended

We recognized sub-lease income of $ 144,000 for the three-month period and $ 288,000 for the six-month period, both ended August 2, 2020.

The components of lease cost and supplemental cash flow information for leases for the three-months and six-months ended August 2, 2020 were:

Thirteen Weeks Ended

Twenty-Six Weeks Ended

August 2, 2020

August 4, 2019

August 2, 2020

August 4, 2019

Operating lease cost

3 unchanged sentences

Operating cash outflows

The right-of-use assets and lease liabilities recorded on our Condensed Consolidated Balance Sheets as of May 3, 2020 were:

The right-of-use assets and lease liabilities recorded on our Condensed Consolidated Balance Sheets as of August 2, 2020 were:

August 2, 2020

February 2, 2020

7 unchanged sentences

The weighted-average discount rate is 2.75 %.

The following table reconciles the undiscounted future lease payments for operating leases to the operating lease liabilities recorded in the condensed consolidated balance sheets on May 3, 2020:

Due to the COVID-19 pandemic, we received concessions on several of our leases, including changes in lease terms and deferred rent payments.

We accounted for the concessions as lease modifications and used current LIBOR plus 1.5% for those leases.

The weighted-average discount rate decreased due to a decrease in LIBOR.

None of the modifications had a material effect on our condensed consolidated financial statements or results of operations.

The following table reconciles the undiscounted future lease payments for operating leases to the operating lease liabilities recorded in the condensed consolidated balance sheets on August 2, 2020:

Undiscounted Future Operating Lease Payments

4 unchanged sentences

Present value of lease payments

Due to the COVID-19 pandemic, we received concessions on several of our leases, including changes in lease terms and deferred rent payments.

We accounted for the concessions as lease modifications.

None of the modifications had a material effect on our condensed consolidated financial statements or results of operations.

As of May 3, 2020, we did not have any additional operating or finance leases that had not yet commenced.

Long-Term Debt

As of May 3, 2020, we had an aggregate $25.7 million available under the Existing Revolver to fund working capital needs.

Standby letters of credit in the aggregate amount of $4.3 million, used to collateralize certain insurance arrangements and for imported product purchases, were outstanding under the revolving credit facility as of May 3, 2020.

There were no additional borrowings outstanding under the Existing Revolver as of May 3, 2020.

As of August 2, 2020, we did not have any additional operating or finance leases that had not yet commenced.

As of August 2, 2020, we had an aggregate $ 25.7 million available under the Existing Revolver to fund working capital needs.

Standby letters of credit in the aggregate amount of $ 4.3 million, used to collateralize certain insurance arrangements and for imported product purchases, were outstanding under the revolving credit facility as of August 2, 2020.

There were no additional borrowings outstanding under the Existing Revolver as of August 2, 2020.

We currently have one unsecured term loan and one secured term loan outstanding and a revolving credit facility.

1 unchanged sentence

The full remaining principal amounts of $ 27.2 million on our term loans are due on February 1, 2021.

We expect to refinance the balance of our term loans and any balance due under our revolving credit facility (currently $0) during fiscal 2021.

We expect to enter into a new credit facility on or before the expiration of the current agreement.

Employee Benefit Plans

5 unchanged sentences

Thirteen Weeks Ended

Twenty-Six Weeks Ended

Net periodic benefit costs

5 unchanged sentences

The SRIP and SERP plans are unfunded plans.

We paid $178,000 in the first quarter of fiscal 2021 and expect to pay a total of approximately $551,000 in benefit payments from our general assets during the remainder of fiscal 2021 to fund SRIP and SERP payments.

In fiscal 2021, we paid $ 181 ,000 in the second quarter and $ 359 ,000 in the first half and expect to pay a total of approximately $ 370 ,000 in benefit payments from our general assets during the remainder of fiscal 2021 to fund SRIP and SERP payments.

Earnings Per Share

14 unchanged sentences

RSUs and PSUs

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.

All restricted shares, RSUs and PSUs awarded that have not yet vested are considered when computing diluted earnings per share.

1 unchanged sentence

Thirteen Weeks Ended

Net (loss)/ income

Twenty-Six Weeks Ended

Net income/(loss)

Unvested participating restricted stock dividends

Net earnings allocated to unvested participating restricted stock

(Loss)/earnings available for common shareholders

Earnings/(loss) available for common shareholders

Weighted average shares outstanding for basic earnings per share

1 unchanged sentence

Weighted average shares outstanding for diluted earnings per share

Basic (loss) / earnings per share

Diluted (loss) / earnings per share

*Due to the net loss recorded in the fiscal 2021 first quarter, approximately 36,000 potentially dilutive shares would have been antidilutive and are therefore excluded from the calculation above.

We recorded income tax benefit of $10.9 million for the fiscal 2021 first quarter, of which income tax benefit of $10.6 million was recorded related to goodwill and trade name impairment charges, compared to $515,000 income tax expense for the comparable prior year period.

The effective tax rates for the fiscal 2021 and 2020 first quarters were 23.8% and 20.6%, respectively.

Basic earnings/(loss) per share

Diluted earnings/(loss) per share

*Due to the fiscal 2021 year-to-date net loss, approximately 31,000 shares would have been antidilutive and are therefore excluded from the calculation of earnings per share for the twenty-six weeks ended August 2, 2020.

We recorded income tax expense of $ 1.6 million for the fiscal 2021 second quarter compared to $ 1.2 million for the comparable prior year period.

The effective tax rates for the fiscal 2021 and 2020 second quarters were 21.8 % and 23.1 %, respectively.

We recorded income tax benefit of $ 9.3 million for the fiscal 2021 first half, of which income tax benefit of $ 10.7 million was recorded related to goodwill and trade name impairment charges, compared to $ 1.8 million income tax expense for the comparable prior year period.

respectively.

The effective tax rates for the first half of fiscal 2021 and 2020 were 24.2 % and 22.3 %.

An entity is required to make its best estimate of the annual effective tax rate for the full fiscal year at the end of each interim period and to use this rate to calculate its income taxes on a year-to-date basis.

1 unchanged sentence

ASU 2019-12 removes this exception and no longer limits the computed benefit.

We elected to early adopt ASU 2019-12 in the first quarter of fiscal 2021 and recognized an additional $4.0 million of tax benefit that exceeds our anticipated annual income tax benefit.

The net unrecognized tax benefits as of May 3, 2020 and February 2, 2020, which, if recognized, would affect our effective tax rate are $3,000.

We elected to early adopt ASU 2019-12 in the first quarter of fiscal 2021 and recognized an additional $ 5.4 million of tax benefit that exceeds our anticipated annual income tax benefit in the fiscal 2021 first half.

The net unrecognized tax benefits as of August 2, 2020 and February 2, 2020, which, if recognized, would affect our effective tax rate are $ 3 ,000.

Tax years ending January 29, 2017 through February 2, 2020 remain subject to examination by federal and state taxing authorities.

12 unchanged sentences

domestic upholstery producers Bradington-Young, Sam Moore and Shenandoah Furniture were moved from All Other and aggregated into a new reportable segment called “Domestic Upholstery.” All Other now consists of H Contract and Lifestyle Brands.

Lifestyle Brands is a business in its start-up phase targeted at the interior designer channel.

Lifestyle Brands is a business in its start-up phase targeted at the interior design channel.

The Hooker Branded and Home Meridian segments were unchanged.

9 unchanged sentences

Thirteen Weeks Ended

Twenty-Six Weeks Ended

August 2, 2020

August 4, 2019

August 2, 2020

August 4, 2019

Hooker Branded

$ 38,820 29.7 % $ 39,405 25.9 % $ 65,982 28.1 % $ 79,004 27.5 %

Home Meridian

71,168 54.6 % 87,188 57.3 % 128,833 54.7 % 154,818 53.8 %

Domestic Upholstery

17,507 13.4 % 22,663 14.8 % 34,290 14.6 % 47,987 16.7 %

3,042 2.3 % 2,992 2.0 % 6,029 2.6 % 5,957 2.0 %

$ 130,537 100.0 % $ 152,248 100.0 % $ 235,134 100.0 % $ 287,766 100.0 %

Hooker Branded

$ 12,443 32.1 % $ 11,820 30.0 % $ 20,448 31.0 % $ 24,376 30.9 %

Home Meridian

10,510 14.8 % 10,951 12.6 % 17,320 13.4 % 16,854 10.9 %

Domestic Upholstery

Operating (loss)/Income

3,021 17.3 % 4,917 21.7 % 5,804 16.9 % 10,919 22.8 %

1,026 33.7 % 1,138 38.0 % 2,082 34.5 % 2,194 36.8 %

$ 27,000 20.7 % $ 28,826 18.9 % $ 45,654 19.4 % $ 54,343 18.9 %

Operating Income/(Loss)

Hooker Branded

$ 6,090 15.7 % $ 4,088 10.4 % $ 7,423 11.2 % $ 9,265 11.7 %

Home Meridian

1,083 1.5 % ( 66 ) - 0.1 % ( 29,265 ) - 22.7 % ( 5,059 ) - 3.3 %

Domestic Upholstery

( 10 ) - 0.1 % 1,260 5.6 % ( 16,820 ) - 49.1 % 3,552 7.4 %

349 11.5 % 486 16.3 % 736 12.2 % 915 15.4 %

$ 7,512 5.8 % $ 5,768 3.8 % $ ( 37,926 ) - 16.1 % $ 8,673 3.0 %

Capital Expenditures

Hooker Branded

$ 29 $ 386 $ 82 $ 511

Home Meridian

20 57 108 173

Domestic Upholstery

& Amortization

54 1,680 294 2,965

$ 103 $ 2,133 $ 484 $ 3,659

Depreciation & Amortization

Hooker Branded

$ 445 $ 490 $ 894 $ 982

Home Meridian

533 547 1,068 1,078

Domestic Upholstery

700 715 1,397 1,404

$ 1,681 $ 1,755 $ 3,365 $ 3,471

As of August 2,

As of February 2,

8 unchanged sentences

Thirteen Weeks Ended

Subsequent E vents

On June 2, 2020, our board of directors declared a quarterly cash dividend of $0.16 per share, which was paid on June 30, 2020 to shareholders of record at June 16, 2020.

Twenty-Six Weeks Ended

August 2, 2020

August 4, 2019

August 2, 2020

August 4, 2019

Subsequent Events

On September 2, 2020 , our board of directors declared a quarterly cash dividend of $ 0.16 per share, payable on September 30, 2020 to shareholders of record at September 18, 2020 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements