Item 1. Financial Statements
Item 1. Financial Statements
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
As of
August 2,
February 2,
2020
2020
(unaudited)
Assets
Current assets
Cash and cash equivalents
$
82,210
$
36,031
Trade accounts receivable, net
67,115
87,653
Inventories
67,707
92,813
Income tax recoverable
-
751
Prepaid expenses and other current assets
6,331
4,719
Total current assets
223,363
221,967
Property, plant and equipment, net
28,271
29,907
Cash surrender value of life insurance policies
24,904
24,888
Deferred taxes
14,044
2,880
Operating leases right-of-use assets
37,987
39,512
Intangible assets, net
27,429
33,371
Goodwill
490
40,058
Other assets
1,190
1,125
Total non-current assets
134,315
171,741
Total assets
$
357,678
$
393,708
Liabilities and Shareholders’ Equity
Current liabilities
Current portion of term loans
$
27,200
$
5,834
Trade accounts payable
24,143
25,493
Accrued salaries, wages and benefits
4,206
4,933
Income tax payable
975
-
Customer deposits
4,328
3,351
Current portion of lease liabilities
6,844
6,307
Other accrued expenses
3,344
4,211
Total current liabilities
71,040
50,129
Long term debt
-
24,282
Deferred compensation
11,235
11,382
Lease liabilities
32,411
33,794
Other long-term liabilities
538
-
Total long-term liabilities
44,184
69,458
Total liabilities
115,224
119,587
Shareholders’ equity
Common stock, no par value, 20,000 shares authorized,
11,890 and 11,838 shares issued and outstanding on each date
52,628
51,582
Retained earnings
190,411
223,252
Accumulated other comprehensive loss
( 585
)
( 713
)
Total shareholders’ equity
242,454
274,121
Total liabilities and shareholders’ equity
$
357,678
$
393,708
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
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HOOKER FURNITURE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
For the
Thirteen Weeks Ended
Twenty-Six Weeks Ended
Aug 2,
Aug 4,
Aug 2,
Aug 4,
2020
2019
2020
2019
Net sales
$
130,537
$
152,248
$
235,134
$
287,766
Cost of sales
103,537
123,422
189,480
233,423
Gross profit
27,000
28,826
45,654
54,343
Selling and administrative expenses
18,892
22,462
38,070
44,478
Goodwill impairment charges
-
-
39,568
-
Trade name impairment charges
-
-
4,750
-
Intangible asset amortization
596
596
1,192
1,192
Operating income / (loss)
7,512
5,768
( 37,926
)
8,673
Other expense, net
10
32
51
94
Interest expense, net
118
328
327
669
Income/(loss) before income taxes
7,384
5,408
( 38,304
)
7,910
Income tax expense / (benefit)
1,610
1,248
( 9,259
)
1,763
Net income/(loss)
$
5,774
$
4,160
$
( 29,045
)
$
6,147
Earnings/(Loss) per share
Basic
$
0.49
$
0.35
$
( 2.46
)
$
0.52
Diluted
$
0.48
$
0.35
$
( 2.46
)
$
0.52
Weighted average shares outstanding:
Basic
11,824
11,787
11,811
11,778
Diluted
11,853
11,810
11,811
11,811
Cash dividends declared per share
$
0.16
$
0.15
$
0.32
$
0.30
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
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HOOKER FURNITURE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(In thousands)
(Unaudited)
For the
Thirteen Weeks Ended
Twenty-Six Weeks Ended
Aug 2,
Aug 4,
Aug 2,
Aug 4,
2020
2019
2020
2019
Net income/(loss)
$
5,774
$
4,160
$
( 29,045
)
$
6,147
Other comprehensive income (loss):
Amortization of actuarial loss
84
37
168
74
Income tax effect on amortization
( 20
)
( 9
)
( 40
)
( 18
)
Adjustments to net periodic benefit cost
64
28
128
56
Total Comprehensive Income/(Loss)
$
5,838
$
4,188
$
( 28,917
)
$
6,203
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
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HOOKER FURNITURE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the
Twenty-Six Weeks Ended
Aug 2,
Aug 4,
2020
2019
Operating Activities:
Net (loss)/income
$
( 29,045
)
$
6,147
Adjustments to reconcile net income to net cash
provided by operating activities:
Goodwill and intangible asset impairment charges
44,318
-
Depreciation and amortization
3,365
3,471
Gain on disposal of assets
-
( 285
)
Deferred income tax (benefit) / expense
( 10,665
)
2,155
Noncash restricted stock and performance awards
1,046
558
Provision for doubtful accounts and sales allowances
3,396
1,053
Gain on life insurance policies
( 651
)
( 624
)
Changes in assets and liabilities:
Trade accounts receivable
17,142
25,206
Inventories
25,106
( 8,389
)
Income tax recoverable
751
( 3,856
)
Prepaid expenses and other current assets
( 1,261
)
( 3,191
)
Trade accounts payable
( 1,391
)
( 9,058
)
Accrued salaries, wages, and benefits
( 726
)
( 2,856
)
Accrued income taxes
975
( 3,159
)
Customer deposits
977
2,475
Operating lease liabilities
678
187
Other accrued expenses
( 867
)
1,033
Deferred compensation
20
145
Net cash provided by operating activities
$
53,168
$
11,012
Investing Activities:
Purchases of property and equipment
( 484
)
( 3,659
)
Proceeds received on notes from sale of assets
-
1,459
Premiums paid on life insurance policies
( 453
)
( 489
)
Proceeds received on life insurance policies
673
-
Net cash used in investing activities
( 264
)
( 2,689
)
Financing Activities:
Payments for long-term debt
( 2,929
)
( 2,928
)
Cash dividends paid
( 3,796
)
( 3,541
)
Cash used in financing activities
( 6,725
)
( 6,469
)
Net increase in cash and cash equivalents
46,179
1,854
Cash and cash equivalents - beginning of year
36,031
11,435
Cash and cash equivalents - end of quarter
$
82,210
$
13,289
Supplemental disclosure of cash flow information:
Cash paid for income taxes
$
220
$
6,622
Cash paid for interest, net
295
599
Non-cash transactions:
Decrease in lease liabilities arising from obtaining right-of-use assets
$
1,987
$
266
Increase in property and equipment through accrued purchases
41
49
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
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HOOKER FURNITURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except per share data)
(Unaudited)
Accumulated
Other
Total
Common Stock
Retained
Comprehensive
Shareholders'
Shares
Amount
Earnings
Income (loss)
Equity
Balance at February 3, 2019
11,785
$
49,549
$
213,380
$
247
$
263,176
Net income
6,147
6,147
Unrealized loss on defined benefit plan, net of tax of $ 18
56
56
Cash dividends paid and accrued ($ 0.15 per share)
( 3,541
)
( 3,541
)
Restricted stock grants, net of forfeitures
53
344
344
Restricted stock compensation cost
367
367
Recognition of PSUs as equity-based awards
584
584
Balance at August 4, 2019
11,838
$
50,844
$
215,986
$
303
$
267,133
Balance at February 2, 2020
11,838
$
51,582
$
223,252
$
( 713
)
$
274,121
Net loss
( 29,045
)
( 29,045
)
Unrealized loss on defined benefit plan, net of tax of $ 40
128
128
Cash dividends paid and accrued ($ 0.16 per share)
( 3,796
)
( 3,796
)
Restricted stock grants, net of forfeitures
52
169
169
Restricted stock compensation cost
442
442
Performance-based restricted stock units cost
435
435
Balance at August 2, 2020
11,890
$
52,628
$
190,411
$
( 585
)
$
242,454
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
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HOOKER FURNITURE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in tables, except per share amounts, in thousands unless otherwise indicated)
(Unaudited)
For the Twenty-Six Weeks Ended August 2, 2020
1. Preparation of Interim Financial Statements
The condensed consolidated financial statements of Hooker Furniture Corporation and subsidiaries (referred to as “we,” “us,” “our,” “Hooker” or the “Company”) have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, these statements include all adjustments necessary for a fair statement of the results of all interim periods reported herein. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) are condensed or omitted pursuant to SEC rules and regulations. However, we believe that the disclosures made are adequate for a fair presentation of our results of operations and financial position. These financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our annual report on Form 10-K for the fiscal year ended February 2, 2020 (“2020 Annual Report”). The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect both the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from our estimates. Operating results for the interim periods reported herein may not be indicative of the results expected for the fiscal year.
The financial statements contained herein are being filed as part of a quarterly report on Form 10-Q covering the 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:
■
the 2021 fiscal year and comparable terminology mean the fifty-two-week fiscal year that began February 3, 2020 and will end January 31, 2021; and
■
the 2020 fiscal year and comparable terminology mean the fifty-two-week fiscal year that began February 4, 2019 and ended February 2, 2020.
We continually monitor our reportable segments for changes in facts and circumstances to determine whether changes in the identification or aggregation of operating segments are necessary. In the fourth quarter of fiscal 2020, we updated our reportable segments. Consequently, the segment disclosures in this filing have been recast to reflect these changes and therefore differ from prior quarterly filings. See Note 13 Segment Information for additional details.
2. Recently Adopted Accounting Policies
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326). This update seeks to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments, including trade receivables, and other commitments to extend credit held by a reporting entity at each reporting date. The amendments require an entity to replace the incurred loss impairment methodology in current GAAP with a methodology that reflects current expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. We adopted the provisions of Topic 326 on February 3, 2020, the first day of our 2021 fiscal year. The adoption of this standard did not have a material effect on our condensed consolidated financial statements or results of operations. We will continue to actively monitor the impact of the COVID-19 pandemic on expected credit losses.
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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 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. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. We elected to adopt ASU 2019-12 on February 3, 2020, the first day of our 2021 fiscal year. The adoption of this standard impacted our condensed consolidated balance sheets and statements of operations by $5.4 million. See Note 12 Income Taxes for additional details.
3. Accounts Receivable
August 2,
February 2,
2020
2020
Trade accounts receivable
$
75,198
$
91,261
Receivable from factor
-
788
Other accounts receivable allowances
( 6,526
)
( 3,493
)
Allowance for doubtful accounts
( 1,557
)
( 903
)
Accounts receivable
$
67,115
$
87,653
“Receivable from factor” represented amounts due with respect to factored accounts receivable. The agreement was discontinued in early fiscal 2021.
4. Inventories
August 2,
February 2,
2020
2020
Finished furniture
$
80,770
$
106,495
Furniture in process
1,278
1,304
Materials and supplies
8,151
8,479
Inventories at FIFO
90,199
116,278
Reduction to LIFO basis
( 22,492
)
( 23,465
)
Inventories
$
67,707
$
92,813
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5. Property, Plant and Equipment
Depreciable Lives
August 2,
February 2,
(In years)
2020
2020
Buildings and land improvements
15 - 30
$
31,316
$
31,316
Computer software and hardware
3 - 10
19,243
19,166
Machinery and equipment
10
9,317
9,271
Leasehold improvements
Term of lease
9,785
9,737
Furniture and fixtures
3 - 10
2,603
2,597
Other
5
651
651
Total depreciable property at cost
72,915
72,738
Less accumulated depreciation
46,250
44,089
Total depreciable property, net
26,665
28,649
Land
1,077
1,077
Construction-in-progress
529
181
Property, plant and equipment, net
$
28,271
$
29,907
6. Fair Value Measurements
Fair value is the price that would be received upon the sale of an asset or paid upon the transfer of a liability (an exit price) in an orderly transaction between market participants on the applicable measurement date. We use a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:
■
Level 1, defined as observable inputs such as quoted prices in active markets for identical assets and liabilities;
■
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
■
Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.
As of 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 August 2, 2020 and February 2, 2020, were as follows:
Fair value at August 2, 2020
Fair value at February 2, 2020
Description
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
(In thousands)
Assets measured at fair value
Company-owned life insurance
$
-
$
24,904
$
-
$
24,904
$
-
$
24,888
$
-
$
24,888
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7. Intangible Assets
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.
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 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
Segment
Beginning Balance
Impairment Charges
Net Book Value
Beginning Balance
Impairment Charges
Net Book Value
Goodwill
Home Meridian
$
23,187
$
( 23,187
)
$
-
$
23,187
$
-
$
23,187
Goodwill
Domestic Upholstery
16,871
( 16,381
)
490
16,871
-
16,871
Total Goodwill
40,058
( 39,568
)
490
40,058
-
40,058
Trademarks and trade names - Home Meridian
Home Meridian
11,400
( 4,750
)
6,650
11,400
-
11,400
Trademarks and trade names - Bradington-Young
Domestic Upholstery
861
-
861
861
-
861
Trademarks and trade names - Sam Moore
Domestic Upholstery
396
-
396
396
-
396
Total Trademarks and trade names
$
12,657
$
( 4,750
)
$
7,907
$
12,657
$
-
$
12,657
Total non-amortizable assets
$
52,715
$
( 44,318
)
$
8,397
$
52,715
$
-
$
52,715
Our amortizable intangible assets are recorded in our Home Meridian and Domestic Upholstery segments. The carrying amounts and changes therein of those amortizable intangible assets were as follows:
Amortizable Intangible Assets
Customer
Relationships
Trademarks
Totals
Balance at February 2, 2020
$
19,996
$
718
$
20,714
Amortization
( 1,162
)
( 30
)
( 1,192
)
Balance at August 2, 2020
$
18,834
$
688
$
19,522
For the remainder of fiscal 2021, amortization expense is expected to be approximately $ 1.2 million.
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8. Leases
In fiscal 2020, we adopted Accounting Standards Codification Topic 842 Leases. 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
$
2,153
$
2,123
$
4,253
$
4,200
Variable lease cost
22
-
69
-
Short-term lease cost
67
178
186
291
Total operating lease cost
$
2,242
$
2,301
$
4,508
$
4,491
Operating cash outflows
$
1,931
$
1,948
$
3,833
$
4,334
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
Real estate
$
36,909
$
38,175
Property and equipment
1,078
1,337
Total operating leases right-of-use assets
$
37,987
$
39,512
Current portion of operating lease liabilities
$
6,844
$
6,307
Long term operating lease liabilities
32,411
33,794
Total operating lease liabilities
$
39,255
$
40,101
The weighted-average remaining lease term is 7.0 years. We used our incremental borrowing rate which is LIBOR plus 1.5 % at the adoption date. The weighted-average discount rate is 2.75 %. 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
Remainder of 2020
$
3,947
2021
7,451
2022
5,671
2023
5,726
2024
5,280
2025 and thereafter
15,205
Total lease payments
$
43,280
Less: impact of discounting
( 4,025
)
Present value of lease payments
$
39,255
As of August 2, 2020, we did not have any additional operating or finance leases that had not yet commenced.
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9. Debt
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. The term loans are related to the Home Meridian acquisition. The full remaining principal amounts of $ 27.2 million on our term loans are due on February 1, 2021. We expect to enter into a new credit facility on or before the expiration of the current agreement.
10. Employee Benefit Plans
We maintain two “frozen” retirement plans, which are paying benefits and may include active employees among the participants. 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 Furniture Corporation; and
■
the Pulaski Furniture Corporation Supplemental Executive Retirement Plan (“SERP”) for certain former executives.
Thirteen Weeks Ended
Twenty-Six Weeks Ended
August 2,
August 4,
August 2,
August 4,
2020
2019
2020
2019
Net periodic benefit costs
Service cost
32
26
64
52
Interest cost
74
204
148
409
Actuarial loss
84
37
169
74
Expected return on pension plan assets
-
( 101
)
-
( 202
)
Expected administrative expenses
-
98
-
195
Consolidated net periodic benefit costs
$
190
$
264
$
381
$
528
The SRIP and SERP plans are unfunded plans. 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.
11. Earnings Per Share
We refer you to the discussion of Earnings Per Share in Note 2. Summary of Significant Accounting Policies, in the financial statements included in our 2020 Annual Report, for additional information concerning the calculation of earnings per share.
All stock awards are designed to encourage retention and to provide an incentive for increasing shareholder value. We have issued restricted stock awards to non-employee members of the board of directors since 2006 and to certain non-executive employees since 2014. We have issued restricted stock units (“RSUs”) to certain senior executives since fiscal 2012 under the Company’s Stock Incentive Plan. Each RSU entitles an executive to receive one share of the Company’s common stock if the executive remains continuously employed with the Company through the end of a three-year service period. The RSUs may be paid in shares of our common stock, cash or both at the discretion of the Compensation Committee of our board of directors. We have issued Performance-based Restricted Stock Units (“PSUs”) to certain senior executives since fiscal 2019 under the Company’s Stock Incentive Plan. Each PSU entitles the executive officer to receive one share of our common stock based on the achievement of two specified performance conditions if the executive officer remains continuously employed through the end of the three-year performance period. One target is based on our annual average growth in our EPS over the performance period and the other target is based on EPS growth over the performance period compared to our peers. The payout or settlement of the PSUs will be made in shares of our common stock.
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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:
August 2,
February 2,
2020
2020
Restricted shares
57
46
RSUs and PSUs
159
76
216
122
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 goals.
All restricted shares, RSUs and PSUs awarded that have not yet vested are considered when computing diluted earnings per share. The following table sets forth the computation of basic and diluted earnings per share:
Thirteen Weeks Ended
Twenty-Six Weeks Ended
August 2,
August 4,
August 2,
August 4,
2020
2019
2020
2019
Net income/(loss)
$
5,774
$
4,160
$
( 29,045
)
$
6,147
Less: Unvested participating restricted stock dividends
9
7
17
10
Net earnings allocated to unvested participating restricted stock
28
15
-
18
Earnings/(loss) available for common shareholders
5,737
4,138
( 29,062
)
6,119
Weighted average shares outstanding for basic earnings per share
11,824
11,787
11,811
11,778
Dilutive effect of unvested restricted stock, RSU and PSU awards
29
23
*
33
Weighted average shares outstanding for diluted earnings per share
11,853
11,810
11,811
11,811
Basic earnings/(loss) per share
$
0.49
$
0.35
$
( 2.46
)
$
0.52
Diluted earnings/(loss) per share
$
0.48
$
0.35
$
( 2.46
)
$
0.52
*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.
12. Income Taxes
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. Under the current income tax guidance, there is an exception that when the year-to-date loss for an interim period exceeds the projected loss for the full fiscal year, the income tax benefit recognized year-to-date is limited to the amount of benefit that would be recognized if the year-to-date loss were the anticipated loss for the full fiscal year. 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 $ 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.
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Tax years ending January 29, 2017 through February 2, 2020 remain subject to examination by federal and state taxing authorities.
13. Segment Information
As a public entity, we are required to present disaggregated information by segment using the management approach. The objective of this approach is to allow users of our financial statements to see our business through the eyes of management based upon the way management reviews performance and makes decisions. The management approach requires segment information to be reported based on how management internally evaluates the operating performance of the company’s business units or segments. The objective of this approach is to meet the basic principles of segment reporting as outlined in ASC 280 Segments (“ASC 280”), which are to allow the users of our financial statements to:
■
better understand our performance;
■
better assess our prospects for future net cash flows; and
■
make more informed judgments about us as a whole.
We define our segments as those operations our chief operating decision maker (“CODM”) regularly reviews to analyze performance and allocate resources. We measure the results of our segments using, among other measures, each segment’s net sales, gross profit and operating income, as determined by the information regularly reviewed by the CODM.
We continually monitor our reportable segments for changes in facts and circumstances to determine whether changes in the identification or aggregation of operating segments are necessary. In the fourth quarter of fiscal 2020, we updated our reportable segments as follows: 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 design channel. The Hooker Branded and Home Meridian segments were unchanged. Therefore, for financial reporting purposes, we are organized into three reportable segments and “All Other”, which includes the remainder of our businesses:
■
Hooker Branded , consisting of the operations of our imported Hooker Casegoods and Hooker Upholstery businesses;
■
Home Meridian , a business acquired at the beginning of fiscal 2017, is a stand-alone, mostly autonomous business that serves a different type or class of customer than do our other operating segments and at much lower margins;
■
Domestic Upholstery, which includes the domestic upholstery manufacturing operations of Bradington-Young, Sam Moore and Shenandoah Furniture; and
■
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.
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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:
Thirteen Weeks Ended
Twenty-Six Weeks Ended
August 2, 2020
August 4, 2019
August 2, 2020
August 4, 2019
% Net
% Net
% Net
% Net
Net Sales
Sales
Sales
Sales
Sales
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 %
All Other
3,042 2.3 % 2,992 2.0 % 6,029 2.6 % 5,957 2.0 %
Consolidated
$ 130,537 100.0 % $ 152,248 100.0 % $ 235,134 100.0 % $ 287,766 100.0 %
Gross Profit
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
3,021 17.3 % 4,917 21.7 % 5,804 16.9 % 10,919 22.8 %
All Other
1,026 33.7 % 1,138 38.0 % 2,082 34.5 % 2,194 36.8 %
Consolidated
$ 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 %
All Other
349 11.5 % 486 16.3 % 736 12.2 % 915 15.4 %
Consolidated
$ 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
54 1,680 294 2,965
All Other
- 10 - 10
Consolidated
$ 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
All Other
3 3 6 7
Consolidated
$ 1,681 $ 1,755 $ 3,365 $ 3,471
As of August 2,
As of February 2,
2020
%Total
2020
%Total
Identifiable Assets
Assets
Assets
Hooker Branded
$
189,816
57.6
%
$
144,112
45.0
%
Home Meridian
93,216
28.3
%
138,313
43.2
%
Domestic Upholstery
45,485
13.7
%
36,085
11.3
%
All Other
1,242
0.4
%
1,769
0.5
%
Consolidated
$
329,759
100.0
%
$
320,279
100.0
%
Consolidated Goodwill and Intangibles
27,919
73,429
Total Consolidated Assets
$
357,678
$
393,708
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Sales by product type are as follows:
Net Sales (in thousands)
Thirteen Weeks Ended
Twenty-Six Weeks Ended
August 2, 2020
%Total
August 4, 2019
%Total
August 2, 2020
%Total
August 4, 2019
%Total
Casegoods
$
79,181
61
%
$
98,488
65
%
$
142,373
61
%
$
182,954
64
%
Upholstery
51,356
39
%
53,760
35
%
92,761
39
%
104,812
36
%
$
130,537
100
%
$
152,248
100
%
$
235,134
100
%
$
287,766
100
%
14. Subsequent Events
Dividends
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 .
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.