What changed in this filing

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Item 1A. Risk Factors

2021-04-16 compared with 2020-04-17 · 125 added, 114 removed, 110 unchanged (68% of the section changed)

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There may be additional risks that are presently unknown to us or that we currently believe to be immaterial that could affect us.

We expect the impact of COVID-19 to adversely affect our sales, earnings, financial condition and liquidity.

The COVID-19 pandemic is a serious threat to health and economic wellbeing affecting our customers, our associates and our suppliers.

Federal, state and local authorities have recommended social distancing and have imposed or are considering quarantine and isolation measures on large portions of the population, including mandatory business closures for all non-essential businesses in certain jurisdictions.

As home furnishings purchases are largely postponable and most of our customer’s businesses are classified as non-essential, traffic to our customers’ stores and demand for our products have decreased and our sales have deteriorated, therefore we expect our earnings and liquidity to be negatively impacted as a result.

COVID-19 also impacted and continues to impact our Asian supply chain, particularly as a result of mandatory shutdowns in locations where our products are manufactured, we have experienced out-of-stocks and lost sales as a result.

Due to decreased demand and stay-at-home orders issued by the state government, our domestic manufacturing and warehouse associates are working fewer hours and most of our administrative associates are tele-commuting.

However, we may be forced to close locations for reasons such as the health of our associates, because of disruptions in the continued operation of our domestic or Asian supply chain or due to further federal, state or local orders impacting our operations.

The extent of the impact of COVID-19 on our business and financial results will also depend on future developments, including the duration and spread of the outbreak within the markets in which we operate and the related impact on consumer confidence and spending, all of which are highly uncertain and ever-changing.

The sweeping nature of the COVID-19 pandemic makes it extremely difficult to predict how our business and operations will be affected in the longer run.

However, the likely overall economic impact of the pandemic is viewed as highly negative to the general economy.

Any of the foregoing factors, or other cascading effects of the coronavirus pandemic, 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.

Risks related to COVID-19 and future pandemics

The impact of COVID-19 and future pandemics could adversely affect our business, results of operations, financial condition and liquidity, and stock price.

The COVID-19 pandemic is a serious threat to health and economic well-being affecting our customers, our associates and our suppliers.

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 at the initial height of the pandemic, 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, 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 has caused supplier capacity restraints, shipping container and steamship space shortages.

These logistics issues have increased costs, led to out-of-stocks and adversely affected our sales and earnings.

Additionally, our sales order backlog is at historic levels due to these factors, and we cannot assure that we will be able to convert this backlog into sales at a normal pace or at all.

We face the risk that current consumer demand could soften, or our customers could go elsewhere for products if our competitors are able to solve the current issues and we cannot.

Alternatively, solving these issues may significantly diminish our profit margins if we are unable to offset these additional costs.

The extent of the continued impact of COVID-19 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.

Other pandemics are also possible with similar or worse public health outcomes.

The sweeping nature of pandemics makes it extremely difficult to predict how our business and operations could be affected in the longer run.

However, the likely overall economic impact of pandemics is viewed as highly negative to the general economy.

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 cannot be predicted.

Risks related to our business and industry

We rely on offshore sourcing from Vietnam and China for most of our sales.

Consequently:

Recently enacted tariffs and potential future increases in tariffs on manufactured goods imported from China could adversely affect our business.

Effective September 24, 2018, the current U.S.

administration imposed a 10% tariff on certain goods imported into the United States from China, including all furniture and furniture components manufactured in China, which increased to 25% in May 2019.

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.

A disruption in supply from Vietnam or China or from our most significant Vietnamese or Chinese supplier s could adversely affect our ability to timely fill customer orders for these products and decrease our sales, earnings and liquidity.

In fiscal 2020, imported products sourced from Vietnam and China accounted for nearly all of our import purchases and our top five suppliers in Vietnam and China account for approximately half of our fiscal 2020 import purchases.

A disruption in supply from Vietnam or China or from our most significant Vietnamese or Chinese suppliers could adversely affect our ability to timely fill customer orders for these products and decrease our sales, earnings and liquidity.

In fiscal 2021, 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 45% of our fiscal 2021 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 early 2020, the COVID-19 outbreak in China resulted in the temporary shutdown or reduced capacity of our vendors’ factories and significantly slowed the post-Chinese New Year production recovery.

Consequently, we experienced some out-of-stocks, but we in some cases were able to provide substitutions out of inventory on hand, in-transit and from our domestic warehouses, but not enough to entirely mitigate the lost sales.

Many of our vendors’ factories are back online and others have closed temporarily because of low demand due to the effects of COVID-19 in the U.S.

and elsewhere.

Consequently, we expect shortages of certain products.

For example, in early calendar 2020, the COVID-19 outbreak in China resulted in the temporary shutdown or reduced capacity of our vendors’ factories and significantly slowed the post-Chinese New Year production recovery.

Consequently, we experienced some out-of-stocks, but in some cases were able to provide substitutions out of inventory on hand, in-transit and from our domestic warehouses, but not enough to entirely mitigate the lost sales.

Although many of our vendors’ factories are now back online, limitations on supply include scarcity of some raw materials and components, limited availability of shipping containers and ocean vessel space, and production delays from some import suppliers.

Consequently, we have been faced with shortages of certain products.

If such disruptions were to occur again, we believe that we would have sufficient inventory on hand and in transit to our U.S.

warehouses in Virginia, North Carolina and California to adequately meet demand for several months or slightly longer with an additional month’s worth of demand available for immediate shipment from our warehouses in Asia.

We believe we could, most likely at higher cost, source most of the products currently sourced in Vietnam or China from factories in other countries and could produce certain upholstered products domestically at our own factories.

We believe we could, most likely at higher cost, source most of the products currently sourced in Vietnam or China from factories in other countries, again assuming an adequate number of shipping containers and vessels were available, and could produce certain upholstered products domestically at our own factories.

However, 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.

Additionally, we have limited insight into how our supply chain could be further impacted by COVID-19 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.

If we were to be 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.

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Ocean freight rates on our imported products are affected by a myriad of factors including the global economy, petroleum prices and ocean freight carrier capacity.

Increased ocean freight rates in the future would likely adversely affect earnings, financial condition and liquidity.

We have seen a significant spike in ocean freight costs over the past year and have been able to partially offset these increases through price increases and temporary freight surcharges.

However, there can be no assurance that we will be successful in increasing prices or receiving freight surcharges in the future.

Also, increased ocean freight rates 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.

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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.

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.

Effective September 24, 2018, the prior U.S.

New tariffs could be imposed on manufactured goods from other countries from which we source, including Vietnam.

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.

Changes in the value of the U.S.

Dollar compared to the currencies for the countries from which we obtain our imported products could adver sely affect our sales, earnings, financial condition and liquidity.

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 beyond these negotiated periods.

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.

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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 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 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.

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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 and North Carolina.

Additionally, we are in the process of consolidating our Home Meridian segment’s East Coast warehousing operations into an 800,000 square foot distribution center in Liberty County, Georgia.

We believe that this strategically located facility near the Port of Savannah and major interstate highways will allow us to more efficiently service our customers, reduce transportation costs and better position us for future growth.

This leased facility is currently under construction and we expect to occupy it in the Fall of 2021.

Risks associated with our newly leased warehouse space in Georgia, include delays in construction and occupancy and risks associated with our move to the facility, including information systems, access to warehouse labor and the inability to realize anticipated cost savings.

Our domestic upholstery manufacturing facilities are located in Virginia and North Carolina.

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 have been negatively affected recently by COVID-19.

We enacted business continuity plans and most administrative employees are telecommuting given recommendations for social distancing and stay-at-home orders from state and local governments.

We instituted increased cleaning regimens and have instituted social distancing for manufacturing and warehousing associates.

Additionally, due to the adverse effect on our sales, some domestic associates have been furloughed or laid off.

Additionally, our domestic operations have been negatively affected by COVID-19 and experienced some COVID-related employee absences.

It has become increasingly difficult to recruit skilled labor into our domestic upholstery plants and training and turnover costs have increased.

We activated business continuity plans in early calendar 2020 and many administrative employees have been telecommuting given recommendations for social distancing.

We also instituted increased cleaning regimens and have instituted social distancing and masking protocols for office, manufacturing and warehousing associates.

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.

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Unfavorable fluctuations in the price, quality or availability of required raw materials could negatively affect our ability to meet the demands of our customers.

For example, our domestic upholstery segment is currently facing foam allocations of between 60-75% of requested amounts.

We may not always be able to pass price increases in raw materials through to our customers due to competition and other market pressures.

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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.

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.

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.

A material part of our sales and accounts receivable are concentrated in a few customers.

The loss of several large customers through business consolidations, failures or other reasons , including the adverse economic effects of the COVID-19 pandemic or similar events, could adversely affect our business.

The loss of several large customers through business consolidations, the loss of a major customer or significant sales programs with major customers, failures or other reasons, including the adverse economic effects of the COVID-19 pandemic or similar events, could adversely affect our business.

One customer accounted for approximately 12% of our consolidated sales in fiscal 2021, our top five customers accounted for about 30% of our fiscal 2021 consolidated sales.

35% of our consolidated accounts receivable is concentrated in our top five customers.

Approximately half 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, 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.

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.

Sales and earnings in the Clubs channel of our Home Meridian segment are subject to higher volatility than other distribution channels subject to our success or failure in developing suitable products at acceptable prices for this channel.

Given the relatively liberal return policies in this channel, we are subject to higher-than-normal customer chargebacks.

While we accrue estimated amounts for chargebacks based on sales and chargeback history, those accruals may not be adequate and given the relative size of customers in this channel, we may not be successful in negotiating resolutions to these extra costs.

Consequently, our sales and earnings could be adversely affected.

Should the negative economic effects of COVID-19 persist, or another similar event or events occur, the negative developments described in this paragraph would be more likely to occur.

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However, in some instances we provide longer payment terms.

As a result of the COVID-19 pandemic, during the fiscal 2021 first quarter some customers have requested extended payment terms or informed us they will not pay amounts within agreed upon terms.

We also purchase credit insurance on certain customers’ receivables and factor certain other customer accounts.

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.

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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.

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.

Our sales and operating results could be adversely affected by product safety concerns.

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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.

We incurred s ignificant debt to provide permanent financing for recent acquisition s .

We currently owe $30.1 million on term loans for recent acquisitions.

Principal and interest payments on the borrowed funds were $6.4 million in fiscal 2020.

We are subject to interest rate volatility due to the variable interest rates on these term loans.

Among other risks, our debt:

may limit our flexibility to pursue other strategic opportunities or react to changes in our business and the industry in which we operate and, consequently, place us at a competitive disadvantage to competitors with less debt;

will require a portion of our cash flows from operations to be used for debt service payments, thereby reducing the availability of cash flows to fund working capital, capital expenditures, dividend payments and other general corporate purposes;

may result in higher interest expense in the event of increases in market interest rates for both long‑term debt as well as any borrowings under our line of credit at variable rates;

may require that additional terms, conditions or covenants be placed on us.

Additionally, all balances under these term loans are due and payable on February 1, 2021, the first day of fiscal 2022.

We intend to refinance these loans during fiscal 2021.

If we are unsuccessful in refinancing these loans, it would have a material adverse impact on our liquidity.

If the negative economic effects of COVID-19 persist, it would likely have a material adverse effect on our sales, earnings and liquidity.

Consequently, our credit rating may decrease and refinancing our debt may be more difficult and any new loans more costly.

The implementation of our Enterprise Resource Planning system could disrupt our business.

We are in the beginning phases of implementing a common Enterprise Resource Planning (ERP) system across all divisions.

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.

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;

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;

Increased demands on management and staff time to the detriment of other corporate initiatives.

We may engage in acquisitions and investments in companies, form strategic alliances and pursue new business lines.

These activities could disrupt our business, dilute our earnings per share, decrease the value of our common stock and decrease our earnings and liquidity.

We may acquire or invest in businesses such as those that offer complementary products and that we believe offer competitive advantages.

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.

We have publicly stated our goal of reaching $1 billion in sales by our 100 th anniversary in 2024.

Achieving that goal 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.

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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 and personnel.

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.

We may experience impairment of our long-lived assets, which would decrease our earnings and net worth.

At February 2, 2020, we had $103.3 million in net long-lived assets, consisting primarily of property, plant and equipment, trademarks, trade names and goodwill.

At January 31, 2021, we had $53.5 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.

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.

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.

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See Notes 8 and 9 for additional information.

We may not be able to maintain or raise prices in response to inflation and increasing costs.

Competitive and market forces could prohibit future successful price increases for our products in order to offset increased costs of finished goods, raw materials, freight and other product-related costs, which could adversely affect our sales, earnings, financial condition and liquidity.

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 the current and evolving negative economic effects of the COVID-19 pandemic.

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.

These events could also impact retailers, our primary customers, possibly adversely affecting 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.

furniture sources .

furnishings sources.

Some large furniture retailers are sourcing directly from non-U.S.

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Over time, this practice may expand to smaller retailers.

As a result, we are continually subject to the risk of losing market share, which could adversely affect our sales, earnings, financial condition and liquidity.

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.

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This could adversely affect our sales, earnings, financial condition and liquidity.

We may incur higher employee costs in the future.

We maintain self-insured healthcare and workers compensation plans for our employees.

We have insurance coverage in place for aggregate claims above specified amounts in any year for both plans.

Our healthcare costs in recent years have generally increased at the same rate or greater than the national average, and healthcare costs have increased more rapidly than general inflation in the U.S.

Continued inflation in healthcare costs, as well as additional costs we may incur as a result of current or future federal or state healthcare legislation and regulations, could significantly increase our employee healthcare costs in the future.

Our workers compensation claims costs have had only a modest impact on our overall results of operations for quite some time;

however, these costs may increase in the future without warning.

Continued increases in our healthcare costs and increased workers compensation claims costs could adversely affect our 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.

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Accordingly, our results of operations for any quarter are not necessarily indicative of the results of operations to be expected for a full year.

Future costs of complying with various laws and regulations may adversely impact future operating results.

Our business is subject to various domestic and international laws and regulations that could have a significant impact on our operations and the cost to comply with such laws and regulations could adversely impact our sales, earnings, financial condition and liquidity.

In addition, failure to comply with such laws and regulations, even inadvertently, could produce negative consequences which could adversely impact our operations and reputation.

Other general risk factors applicable to us and our business

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.