HOOKER FURNISHINGS Corp 10-Q

Item 1. Financial Statements HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) August 3, February 2, 2025 2025 (unaudited) As of Assets Current assets Cash and cash equivalents $ 821 $ 6,295 Trade accounts receivable, net 41,316 58,198 Inventories 58,532 70,755 Income tax recoverable 39 521 Prepaid expenses and other current assets 7,434 5,355 Total current assets 108,142 141,124 Property, plant and equipment, net 28,222 28,195 Cash surrender value of life insurance policies 30,157 29,238 Deferred taxes 18,068 16,057 Operating leases right-of-use assets 41,797 45,575 Intangible assets, net 20,321 22,104 Goodwill 15,036 15,036 Other assets 16,300 16,613 Total non-current assets 169,901 172,818 Total assets $ 278,043 $ 313,942 Liabilities and Shareholders’ Equity Current liabilities Trade accounts payable $ 14,116 $ 20,001 Accrued salaries, wages and benefits 4,465 3,851 Accrued income taxes 34 49 Customer deposits 6,781 5,655 Current portion of operating lease liabilities 7,798 7,502 Other accrued expenses 2,947 2,916 Total current liabilities 36,141 39,974 Long term debt 5,225 21,717 Deferred compensation 6,454 6,795 Operating lease liabilities 37,103 41,073 Total long-term liabilities 48,782 69,585 Total liabilities 84,923 109,559 Shareholders’ equity Common stock, no par value, 20,000 shares authorized, 10,750 and 10,703 shares issued and outstanding on each date 50,619 50,474 Retained earnings 141,996 153,336 Accumulated other comprehensive income 505 573 Total shareholders’ equity 193,120 204,383 Total liabilities and shareholders’ equity $ 278,043 $ 313,942 The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 1 HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) For the Thirteen Weeks Ended Twenty-Six Weeks Ended August 3, July 28, August 3, July 28, 2025 2024 2025 2024 Net sales $ 82,149 $ 95,081 $ 167,465 $ 188,652 Cost of sales 65,312 74,159 131,627 148,358 Gross profit 16,837 20,922 35,838 40,294 Selling and administrative expenses 20,366 23,147 42,018 46,614 Intangible asset amortization 872 924 1,785 1,849 Operating (loss) / income ( 4,401 ) ( 3,149 ) ( 7,965 ) ( 8,169 ) Other income, net 92 1,486 218 1,963 Interest expense, net 171 203 549 567 (Loss) / income before income taxes ( 4,480 ) ( 1,866 ) ( 8,296 ) ( 6,773 ) Income tax (benefit) / expense ( 1,203 ) 85 ( 1,967 ) ( 731 ) Net (loss) / income $ ( 3,277 ) $ ( 1,951 ) $ ( 6,329 ) $ ( 6,042 ) (Loss) / earnings per share Basic $ ( 0.31 ) $ ( 0.19 ) $ ( 0.60 ) $ ( 0.57 ) Diluted $ ( 0.31 ) $ ( 0.19 ) $ ( 0.60 ) $ ( 0.57 ) Weighted average shares outstanding: Basic 10,612 10,521 10,587 10,509 Diluted 10,612 10,521 10,587 10,509 Cash dividends declared per share $ 0.23 $ 0.23 $ 0.46 $ 0.46 The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 2 HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) / INCOME (In thousands) (Unaudited) For the Thirteen Weeks Ended Twenty-Six Weeks Ended August 3, July 28, August 3, July 28, 2025 2024 2025 2024 Net (loss) / income $ ( 3,277 ) $ ( 1,951 ) $ ( 6,329 ) $ ( 6,042 ) Other comprehensive income: Actuarial adjustments ( 45 ) ( 59 ) ( 89 ) ( 118 ) Income tax effect on adjustments 11 14 21 28 Adjustments to net periodic benefit cost ( 34 ) ( 45 ) ( 68 ) ( 90 ) Total comprehensive (loss) / income $ ( 3,311 ) $ ( 1,996 ) $ ( 6,397 ) $ ( 6,132 ) The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 3 HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) For the Twenty-Six Weeks Ended August 3, July 28, 2025 2024 Operating Activities: Net (loss) / income $ ( 6,329 ) $ ( 6,042 ) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,375 4,617 Deferred income tax expense ( 1,990 ) ( 1,941 ) Noncash restricted stock and performance awards 144 425 Provision for doubtful accounts and sales allowances ( 182 ) ( 326 ) Gain on life insurance policies ( 724 ) ( 1,596 ) Loss / (gain) on disposal of assets 15 ( 2 ) Changes in assets and liabilities: Trade accounts receivable 17,063 7,608 Inventories 12,224 4,716 Income tax recoverable 482 1,141 Prepaid expenses and other assets ( 2,370 ) ( 6,153 ) Trade accounts payable ( 6,037 ) 3,434 Accrued salaries, wages, and benefits 614 ( 1,326 ) Accrued income taxes ( 16 ) - Customer deposits 1,125 2,794 Operating lease assets and liabilities 105 284 Other accrued expenses 39 ( 1,919 ) Deferred compensation ( 431 ) ( 400 ) Net cash provided by operating activities $ 18,107 $ 5,314 Investing Activities: Purchases of property and equipment ( 1,695 ) ( 1,421 ) Premiums paid on life insurance policies ( 326 ) ( 326 ) Proceeds received on life insurance policies - 936 Proceeds from sales of assets - 3 Net cash used in investing activities $ ( 2,021 ) $ ( 808 ) Financing Activities: Proceeds from revolving credit facility 32,440 - Payments on revolving credit facility ( 48,956 ) - Payments for long-term loans - ( 700 ) Cash dividends paid ( 5,011 ) ( 4,915 ) Debt issuance cost ( 33 ) - Net cash used in financing activities $ ( 21,560 ) $ ( 5,615 ) Net decrease in cash and cash equivalents ( 5,474 ) ( 1,109 ) Cash and cash equivalents - beginning of year 6,295 43,159 Cash and cash equivalents - end of quarter $ 821 $ 42,050 Supplemental disclosure of cash flow information: Cash paid for / (refund of) income taxes, net of refund $ ( 443 ) $ 65 Cash paid for interest, net 609 728 Non-cash transactions: Increase in lease liabilities arising from changes in right-of-use assets $ 10 $ 903 Increase in property and equipment through accrued purchases 152 11 The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 4 HOOKER FURNISHINGS 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 Equity Balance at April 28, 2024 10,679 $ 49,729 $ 169,174 $ 689 $ 219,592 Net loss for the 13 weeks ended July 28, 2024 ( 1,951 ) ( 1,951 ) Actuarial adjustments on defined benefit plan, net of tax of $ 14 ( 45 ) ( 45 ) Cash dividends paid and accrued ($ 0.23 per share) ( 2,478 ) ( 2,478 ) Restricted stock grants, net of forfeitures 35 ( 132 ) ( 132 ) Restricted stock compensation cost 496 496 Performance-based restricted stock units cost ( 143 ) ( 143 ) Balance at July 28, 2024 10,714 $ 49,950 $ 164,745 $ 644 $ 215,339 Balance at May 4, 2025 10,712 $ 50,831 $ 147,787 $ 539 $ 199,157 Net loss for the 13 weeks ended August 3, 2025 ( 3,277 ) ( 3,277 ) Actuarial adjustments on defined benefit plan, net of tax of $ 11 ( 34 ) ( 34 ) Cash dividends paid and accrued ($ 0.23 per share) ( 2,514 ) ( 2,514 ) Restricted stock grants, net of forfeitures 38 - - Restricted stock compensation cost 218 218 Performance-based restricted stock units cost ( 430 ) ( 430 ) Balance at August 3, 2025 10,750 $ 50,619 $ 141,996 $ 505 $ 193,120 The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 5 HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONT.) (In thousands, except per share data) (Unaudited) Accumulated Other Total Common Stock Retained Comprehensive Shareholders’ Shares Amount Earnings Income (loss) Equity Balance at January 28, 2024 10,672 $ 49,524 $ 175,717 $ 734 $ 225,975 Net loss for the 26 weeks ended July 28, 2024 ( 6,042 ) ( 6,042 ) Actuarial adjustments on defined benefit plan, net of tax of $ 28 ( 90 ) ( 90 ) Cash dividends paid ($ 0.46 per share) ( 4,930 ) ( 4,930 ) Restricted stock grants, net of forfeitures 42 ( 338 ) ( 338 ) Restricted stock compensation cost 765 765 Performance-based restricted stock units costs ( 1 ) ( 1 ) Balance at July 28, 2024 10,714 $ 49,950 $ 164,745 $ 644 $ 215,339 Balance at February 2, 2025 10,703 $ 50,474 $ 153,336 $ 573 $ 204,383 Net loss for the 26 weeks ended August 3, 2025 ( 6,329 ) ( 6,329 ) Actuarial adjustments on defined benefit plan, net of tax of $ 21 ( 68 ) ( 68 ) Cash dividends paid ($ 0.46 per share) ( 5,011 ) ( 5,011 ) Restricted stock grants, net of forfeitures 47 ( 211 ) ( 211 ) Restricted stock compensation cost 635 635 Performance-based restricted stock units costs ( 279 ) ( 279 ) Balance at August 3, 2025 10,750 $ 50,619 $ 141,996 $ 505 $ 193,120 The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 6 HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollar and share amounts in tables, except per share amounts, in thousands unless otherwise indicated) (Unaudited) For the Twenty-Six Weeks Ended August 3, 2025 1. Preparation of Interim Financial Statements The condensed consolidated financial statements of Hooker Furnishings Corporation and subsidiaries (referred to as “we,” “us,” “our,” “Hooker” or the “Company”) have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management these statements include all adjustments necessary for a fair statement of the results of all interim periods reported herein. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) are condensed or omitted pursuant to SEC rules and regulations. However, we believe that the disclosures made are adequate for a fair presentation of our results of operations and financial position. These financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our annual report on Form 10-K for the fiscal year ended February 2, 2025 (“2025 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 2026 fiscal year thirteen-week period (also referred to as “three months,” “three-month period,” “quarter,” “second quarter” or “quarterly period”) that began May 5, 2025, and the twenty-six week period (also referred to as “six months,” “six-month period” or “first half”) that began February 3, 2025, which both ended August 3, 2025. This report discusses our results of operations for these periods compared to the 2025 fiscal year thirteen-week period that began April 29, 2024, and the twenty-six-week period that began January 29, 2024, which both ended July 28, 2024; and our financial condition as of August 3, 2025 compared to February 2, 2025. References in these notes to the condensed consolidated financial statements of the Company to: ■ the 2026 fiscal year and comparable terminology mean the fifty-two-week fiscal year that began February 3, 2025 and will end February 1, 2026; and ■ the 2025 fiscal year and comparable terminology mean the fifty-three-week fiscal year that began January 29, 2024 and ended February 2, 2025. 2. Recently Adopted Accounting Policies In December 2023, the FASB issued Accounting Standards Updates “ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The new guidance requires enhanced effective tax rate reconciliation and income taxes paid disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 (our fiscal 2026). We are currently evaluating the impact that the adoption of this new guidance will have on our consolidated financial statements and will add necessary disclosures upon adoption. In November 2024, the FASB issued ASU 2024-03, “Disaggregation of income statement expenses”. The new guidance requires new tabular disclosures to disaggregate prescribed natural expenses underlying any income statement caption. ASU 2024-03 is effective for annual periods beginning after December 15, 2026 (our fiscal 2028). We are currently evaluating the impact that the adoption of this new guidance will have on our consolidated financial statements and will add necessary disclosures upon adoption. We reviewed all other newly issued accounting pronouncements and concluded that they are either not applicable to our business or are not expected to have a material effect on our consolidated financial statements as a result of future adoption. 7 3. Accounts Receivable August 3, February 2, 2025 2025 Gross accounts receivable $ 47,132 $ 64,344 Customer allowances ( 1,084 ) ( 1,019 ) Allowance for doubtful accounts ( 4,732 ) ( 5,127 ) Trade accounts receivable $ 41,316 $ 58,198 4. Inventories August 3, February 2, 2025 2025 Finished furniture $ 70,745 $ 82,635 Furniture in process 1,588 1,524 Materials and supplies 11,574 11,229 Inventories at FIFO 83,907 95,388 Reduction to LIFO basis ( 25,375 ) ( 24,633 ) Inventories $ 58,532 $ 70,755 5. Property, Plant and Equipment Depreciable Lives August 3, February 2, (In years) 2025 2025 Buildings and land improvements 15 - 30 $ 34,446 $ 34,439 Machinery and equipment 10 12,248 12,165 Computer software and hardware 3 - 10 8,231 8,581 Leasehold improvements Term of lease 13,646 13,233 Furniture and fixtures 3 - 10 7,497 7,487 Other 5 701 701 Total depreciable property at cost 76,769 76,606 Less accumulated depreciation ( 52,912 ) ( 51,443 ) Total depreciable property, net 23,857 25,163 Land 1,077 1,077 Construction-in-progress 3,288 1,955 Property, plant and equipment, net $ 28,222 $ 28,195 6. Cloud Computing Hosting Arrangement We are implementing a common Enterprise Resource Planning (ERP) system across all divisions. The ERP system went live at Sunset West in December 2022 and in the legacy Hooker divisions and for consolidated reporting in early September 2023. Based on the provisions of ASU 2018-15, Intangibles — Goodwill and Other — Internal-Use Software, we capitalize implementation costs associated with hosting arrangements that are service contracts. These costs are recorded in “other noncurrent assets” of our consolidated balance sheets. We amortize on a straight-line basis over 10-years term. The amortization expenses are recorded as a component of selling and administrative expenses in our consolidated statements of operations. 8 During the second quarter of fiscal 2026, we capitalized $ 287,000 of implementation costs and interest, related to the ERP system and a new supply chain planning software, compared with $ 1.2 million in the second quarter of fiscal 2025. For the six-month periods, capitalized implementation costs and interest totaled $ 551,000 in fiscal 2026 and $ 2.6 million in fiscal 2025. Amortization expense was $ 368,000 in the second quarter of fiscal 2026 and $ 292,000 in the second quarter of fiscal 2025, and $ 735,000 and $ 582,000 for the respective six-month periods. The capitalized implementation costs at August 3, 2025 and February 2, 2025 were as follows: August 3, 2025 February 2, 2025 Gross carrying amount Accumulated amortization Gross carrying amount Accumulated amortization Implementation Costs $ 17,210 $ ( 2,287 ) $ 16,782 $ ( 1,561 ) Interest Expenses 720 ( 36 ) 596 ( 27 ) 7. 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 3, 2025 and February 2, 2025, 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 3, 2025 and February 2, 2025, were as follows: Fair value at August 3, 2025 Fair value at February 2, 2025 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 $ - $ 30,157 $ - $ 30,157 $ - $ 29,238 $ - $ 29,238 9 8. Intangible Assets Our intangible assets with indefinite lives consist of: goodwill related to the Shenandoah, Sunset West and BOBO Intriguing Objects acquisitions; and trademarks and tradenames related to the acquisitions of Bradington-Young, Home Meridian and BOBO Intriguing Objects. Our intangible assets with definite lives are recorded in our Home Meridian and Domestic Upholstery segments. Details of our intangible assets are as follows: August 3, 2025 February 2, 2025 Gross carrying amount Impairment / Accumulated Amortization Gross carrying amount Impairment / Accumulated Amortization Intangible assets with indefinite lives: Goodwill Domestic Upholstery - Shenandoah * 490 - 490 - Domestic Upholstery - Sunset West 14,462 - 14,462 - All Other - BOBO Intriguing Objects 84 - 84 - Goodwill 15,036 - 15,036 - Trademarks and Trade names * 5,180 - 5,180 - Intangible assets with definite lives: Customer Relationships 38,001 ( 24,029 ) 38,001 ( 22,349 ) Trademarks and Trade names 2,334 ( 1,164 ) 2,334 ( 1,062 ) Intangible assets, net 45,515 ( 25,193 ) 45,515 ( 23,411 ) *: The amounts are net of impairment charges of $ 16.4 million related to Shenandoah goodwill and $ 7.6 million related to certain Home Meridian segment trade names, of which $ 4.8 million were recorded in fiscal 2021 and $ 2.8 million were recorded in fiscal 2025. Amortization expenses for intangible assets with definite lives were $ 872,000 and $ 924,000 for the second quarters of fiscal 2026 and 2025, respectively, and $ 1.8 million for the first half of both fiscal 2026 and 2025. For the remainder of fiscal 2026, amortization expense is expected to be approximately $ 1.7 million. 9. Leases We have operating leases for warehouses, showrooms, manufacturing facilities, offices and equipment. Sub-lease income totaled $ 119,000 in the second quarter and $ 200,000 for the first half of fiscal 2026, compared with $ 18,000 and $ 71,000 , respectively, in fiscal 2025 periods. The components of lease cost and supplemental cash flow information for leases for the second quarters and six-months of fiscal 2026 and 2025 were: Thirteen Weeks Ended Twenty-Six Weeks Ended August 3, 2025 July 28, 2024 August 3, 2025 July 28, 2024 Operating lease cost $ 2,515 $ 2,533 $ 5,056 $ 5,060 Variable lease cost 74 83 163 188 Short-term lease cost 50 83 99 199 Total operating lease cost $ 2,639 $ 2,699 $ 5,318 $ 5,447 Operating cash outflows $ 2,601 $ 2,554 $ 5,213 $ 5,163 10 The right-of-use assets and lease liabilities recorded on our condensed consolidated balance sheets as of August 3, 2025 and February 2, 2025 were as follows: August 3, 2025 February 2, 2025 Real estate $ 40,995 $ 44,640 Property and equipment 802 935 Total operating leases right-of-use assets $ 41,797 $ 45,575 Current portion of operating lease liabilities $ 7,798 $ 7,502 Long term operating lease liabilities 37,103 41,073 Total operating lease liabilities $ 44,901 $ 48,575 The weighted-average discount rate is 5.53 %. The weighted-average remaining lease term is 5.8 years. 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 3, 2025: Undiscounted Future Operating Lease Payments Remainder of fiscal 2026 $ 5,008 2027 10,091 2028 8,426 2029 7,725 2030 7,337 2031 and thereafter 14,481 Total lease payments $ 53,068 Less: impact of discounting ( 8,167 ) Present value of lease payments $ 44,901 During the fiscal 2026 second quarter, we entered into an agreement to terminate and surrender the Georgia warehouse by October 31, 2025. This amendment is expected to reduce right-of-use assets by approximately $ 10.1 million, lease liabilities by $ 10.7 million, and lease payments by $ 13.4 million over the remaining lease term. Since the agreement has not yet commenced, the modification is not reflected in the table above. 10. Long-Term Debt On December 5, 2024, the Company and its wholly owned subsidiaries, Bradington-Young, LLC, Sam Moore Furniture LLC and Home Meridian Group, LLC (together with the Company, the “Borrowers”), entered into an Amended and Restated Loan and Security Agreement (the “Amended and Restated Loan Agreement”) with Bank of America, N.A. (“BofA”), as lender. The Amended and Restated Loan Agreement amends, restates and replaces the Second Amended and Restated Loan Agreement, dated as of September 29, 2017, between the Borrowers and BofA, as amended (the “Existing Loan Agreement”). The outstanding principal amount of loans and letters of credit issued under the Existing Loan Agreement and used to collateralize certain insurance arrangements and for imported product purchases will remain outstanding as loans and letters of credit under the Amended and Restated Loan Agreement. The Amended and Restated Loan Agreement provides for a revolving credit facility in a committed principal amount of up to $ 70,000,000 (the “Revolving Commitment”), including subline of $ 8,000,000 for letters of credit, and an option to increase the Revolving Commitment by up to $ 30,000,000 upon meeting certain conditions, including agreement by BofA to increase the Revolving Commitment by such amount. Proceeds of loans and letters of credit under the Amended and Restated Loan Agreement will be available (a) on entry into the Amended and Restated Loan Agreement to replace the outstanding loans and letters of credit outstanding under the Existing Loan Agreement and to pay fees and expenses related to entry into the Amended and Restated Loan Agreement and (b) from and after entry into the Amended and Restated Loan Agreement, for general working capital and other corporate purposes of the Borrower. Availability of loans and letters of credit under the Revolving Commitment is capped by a borrowing base formula calculated as of any date as the sum for the Borrowers of (a) the value of their accounts receivable, (b) the value of their inventory, (c) the value of their in-transit inventory and (d) the life insurance cash surrender value of company-owned life insurance policies, in each case subject to eligibility requirements, advance rates, valuation metrics, reductions for write-offs and other dilutive items and reserves (the “Borrowing Base”). The lesser of the Revolving Commitment and the Borrowing Base, in each case net of the principal amount of outstanding loans and the face amount of letters of credit, constitutes “Availability” under the Amended and Restated Credit Agreement. 11 Outstanding loans under the Amended and Restated Loan Agreement will bear interest at a rate per annum equal to the then-current Term SOFR Rate for a period of one month plus 0.10% plus a margin of 1.75%. The Term SOFR Rate will be adjusted on a monthly basis. Letters of credit are subject to a letter of credit fee equal to the actual daily amount of undrawn letters of credit multiplied by a per annum rate of 1.75 % and a fronting fee equal to the actual daily amount of undrawn letters of credit multiplied by a per annum rate of 0.125 %. We must also pay a monthly unused commitment fee that is based on the average daily unused amount of Revolving Commitment multiplied by a per annum rate of 0.25 %. All accrued interest and fees are payable in cash monthly in arrears. We may prepay any outstanding principal amounts borrowed under the Amended and Restated Loan Agreement at any time, without penalty provided that any payment is accompanied by all accrued interest owed. Subject to the Borrowers having sufficient borrowing base capacity and customary conditions precedent to borrowing, amounts repaid may be reborrowed. The Revolving Commitment will terminate, and all amounts outstanding thereunder will be due and payable, on December 5, 2029. The obligations under the Amended and Restated Loan Agreement are secured by a first priority security interest in substantially all of the assets of the Borrowers, other than real estate, including all Company-owned life insurance policies, all accounts receivable, all inventory, all intellectual property, all equipment and all other personal property. The Amended and Restated Loan Agreement includes customary representations and warranties and requires the Borrowers to comply with customary affirmative and negative covenants, including, among other things, a financial covenant requiring the maintenance of a ratio of (x) EBITDA net of capital expenditures (to the extent not paid using Borrowed Money) to (y) the sum of debt service and dividends paid, in each case as of the last day of each month for the trailing twelve-month period ending on such day, of at least 1.0 to 1.0, if an event of default has occurred and is continuing or Availability has fallen below 10% of the Revolving Commitment at any time (until such time as both Availability is 10% or greater and no event of default exists, for the 30 consecutive days prior to such month end). The Amended and Restated Loan Agreement also limits the Borrowers’ right to incur other indebtedness, make certain investments and create liens upon our assets, subject to certain exceptions, among other restrictions. The Amended and Restated Loan Agreement does not restrict the Company’s ability to pay cash dividends on, or repurchase, shares of its common stock, subject to (a) no default existing prior to or resulting from such dividend or repurchase, (b) Availability is not less than 15% of the Revolving Commitment for each of the preceding 45 days prior to announcement of such dividend or repurchase and after giving pro forma effect to such dividend or repurchase and (c) if Availability is less than 20% of the Revolving Commitment on any day in such 45-day period, the Borrowers are in compliance with the financial covenant described above after giving effect to such dividend or repurchase. We incurred $ 480,000 in fiscal 2025 and an additional $ 33,000 in fiscal 2026 first half in debt issuance costs in connection with our term loans. As of August 3, 2025, unamortized loan costs of $ 447,000 were netted against the carrying value of our term loans on our consolidated balance sheets. As of August 3, 2025, we had $ 5.6 million principal amount of outstanding loans and $ 6.7 million face amount of letters of credit. We had $ 57.7 million of Availability based on the current Borrowing Base. There were no additional borrowings outstanding under the Amended and Restated Loan Agreement as of August 3, 2025. 11. Earnings Per Share We refer you to the discussion of Earnings Per Share in Note 1. Summary of Significant Accounting Policies, in the financial statements included in our 2025 Annual Report, for additional information concerning the calculation of earnings per share (EPS). 12 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 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 applicable vesting date. 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 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. Historically, 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. For the PSUs issued under the Company’s 2024 Plan in fiscal 2025 and afterwards, one target is the Company’s annual EPS growth over the performance period and the other target is the Company’s total shareholder return during the performance period compared to the Company’s peer group. The payout or settlement of the PSUs will be made in shares of our common stock. We expect to continue to grant these types of awards annually in the future. The following table sets forth the number of outstanding restricted stock awards and RSUs and PSUs, net of forfeitures and vested shares, as of the fiscal period-end dates indicated: August 3, February 2, 2025 2025 Restricted shares 126 151 RSUs and PSUs 183 115 309 266 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 3, July 28, August 3, July 28, 2025 2024 2025 2024 Net (loss) / income $ ( 3,277 ) $ ( 1,951 ) $ ( 6,329 ) $ ( 6,042 ) Less: Unvested participating restricted stock dividends 29 41 62 82 Net earnings allocated to unvested participating restricted stock - - - - (Loss) / Earnings available for common shareholders ( 3,306 ) ( 1,992 ) ( 6,391 ) ( 6,124 ) Weighted average shares outstanding for basic earnings per share 10,612 10,521 10,587 10,509 Dilutive effect of unvested restricted stock, RSU and PSU awards - - - - Weighted average shares outstanding for diluted earnings per share 10,612 10,521 10,587 10,509 Basic (loss) / earnings per share $ ( 0.31 ) $ ( 0.19 ) $ ( 0.60 ) $ ( 0.57 ) Diluted (loss) / earnings per share $ ( 0.31 ) $ ( 0.19 ) $ ( 0.60 ) $ ( 0.57 ) Due to net losses, approximately 106,000 shares and 115,000 shares for the second quarter and first half of fiscal 2026, and 169,000 shares and 176,000 shares for the second quarter and first half of fiscal 2025, respectively, would have been antidilutive and are therefore excluded from the calculation of earnings per share, respectively. 13 12. Income Taxes We recorded an income tax benefit of $ 1.2 million for the fiscal 2026 second quarter, compared to an income tax expense of $ 85 ,000 in the fiscal 2025 second quarter. The effective tax rates for these periods were 26.9 % and ( 4.5 %), respectively. The fiscal 2025 second quarter reflected an income tax expense despite a pretax loss due to the effective tax rate annualization method. For the first half of fiscal 2026, we recorded income tax benefits of $ 2.0 million compared to $ 731 ,000 in the prior-year period, with effective tax rates of 23.7 % and 10.8 %, respectively. The differences in the rates reflect the impacts of favorable tax adjustments, specifically the cash surrender value gain of company-owned life insurance, over expected pretax income in fiscal 2025 as opposed to an expected pretax loss in fiscal 2026 under the annualization method. No material and non-routine positions have been identified as uncertain tax positions. Tax years ending January 29, 2023 through February 2, 2025 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. The Company’s CODM is the Chief Executive Officer. The CODM regularly reviews net sales, gross profit, and operating income by segment as the primary measures of segment performance. The CODM reviews net sales as a primary indicator of operational performance, assessing how much revenue is brought in from core business activities, after returns, allowances, and discounts, which reflects demand and execution of each segment’s strategy. Gross profit, which is derived from net sales and cost of sales, is reviewed by the CODM as a diagnostic metric, particularly useful in evaluating margin trends. Operating income is the key profitability metric used to assess performance across segments and make decisions related to resource allocation, including capital expenditures, headcount, and other investment initiatives. Each of these metrics are considered in budgeting, forecasting, and operational planning decisions. 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 , 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, HF Custom (formerly Sam Moore), Shenandoah Furniture and Sunset West; and ■ All Other , consisting of intercompany eliminations and operating segments that are not individually reportable. Due to a change in the way management internally evaluates operating performance, beginning with the fiscal 2026 first quarter, Hooker Branded and Domestic Upholstery segments’ results now include all the sales of products formerly included in H Contract’s results. Fiscal 2025 results discussed below have been recast to reflect this change. 14 The following tables present segment information for the periods, and as of the dates, indicated. Thirteen Weeks Ended Twenty-Six Weeks Ended August 3, 2025 July 28, 2024 August 3, 2025 July 28, 2024 % Net % Net % Net % Net Net Sales Sales Sales Sales Sales Hooker Branded $ 36,250 44.1 % $ 35,785 37.6 % $ 73,359 43.8 % $ 72,593 38.5 % Home Meridian 16,932 20.6 % 30,516 32.1 % 35,742 21.3 % 56,940 30.2 % Domestic Upholstery 28,677 34.9 % 28,556 30.0 % 57,590 34.4 % 58,583 31.1 % All Other 290 0.4 % 224 0.2 % 774 0.5 % 536 0.3 % Consolidated $ 82,149 100 % $ 95,081 100 % $ 167,465 100 % $ 188,652 100 % Cost of Sales Hooker Branded $ 25,709 70.9 % $ 25,077 70.1 % $ 51,754 70.5 % $ 50,428 69.5 % Home Meridian 15,878 93.8 % 24,570 80.5 % 31,955 89.4 % 47,543 83.5 % Domestic Upholstery 23,372 81.5 % 23,910 83.7 % 47,005 81.6 % 49,232 84.0 % All Other 353 121.7 % 602 268.8 % 913 118.0 % 1,155 215.5 % Consolidated $ 65,312 79.5 % $ 74,159 78.0 % $ 131,627 78.6 % $ 148,358 78.6 % Gross Profit Hooker Branded $ 10,541 29.1 % $ 10,708 29.9 % $ 21,605 29.5 % $ 22,165 30.5 % Home Meridian 1,054 6.2 % 5,946 19.5 % 3,787 10.6 % 9,397 16.5 % Domestic Upholstery 5,305 18.5 % 4,646 16.3 % 10,585 18.4 % 9,351 16.0 % All Other ( 63 ) - 21.7 % ( 378 ) - 168.8 % ( 139 ) - 18.0 % ( 619 ) - 115.5 % Consolidated $ 16,837 20.5 % $ 20,922 22.0 % $ 35,838 21.4 % $ 40,294 21.4 % Selling and Administrative Expenses Hooker Branded $ 10,532 29.1 % $ 11,037 30.8 % $ 21,569 29.4 % $ 22,316 30.7 % Home Meridian 4,641 27.4 % 6,511 21.3 % 9,886 27.7 % 12,905 22.7 % Domestic Upholstery 5,169 18.0 % 5,338 18.7 % 10,458 18.2 % 10,756 18.4 % All Other 24 8.3 % 261 116.5 % 105 13.6 % 637 118.8 % Consolidated $ 20,366 24.8 % $ 23,147 24.3 % $ 42,018 25.1 % $ 46,614 24.7 % Intangible assets amortization Home Meridian $ 328 1.9 % $ 330 1.1 % $ 655 1.8 % $ 661 1.2 % Domestic Upholstery 544 1.9 % 594 2.1 % 1,130 2.0 % 1,188 2.0 % Consolidated $ 872 1.1 % $ 924 1.0 % $ 1,785 1.1 % $ 1,849 1.0 % Operating (Loss) / Income Hooker Branded $ 10 0.0 % $ ( 329 ) - 0.9 % $ 37 0.1 % $ ( 150 ) - 0.2 % Home Meridian ( 3,916 ) - 23.1 % ( 896 ) - 2.9 % ( 6,754 ) - 18.9 % ( 4,169 ) - 7.3 % Domestic Upholstery ( 408 ) - 1.4 % ( 1,285 ) - 4.5 % ( 1,004 ) - 1.7 % ( 2,593 ) - 4.4 % All Other ( 87 ) - 30.0 % ( 639 ) - 285.3 % ( 244 ) - 31.5 % ( 1,257 ) - 234.5 % Consolidated $ ( 4,401 ) - 5.4 % $ ( 3,149 ) - 3.3 % $ ( 7,965 ) - 4.8 % $ ( 8,169 ) - 4.3 % Other Income, net Hooker Branded $ 13 0.0 % $ 358 1.0 % $ 94 0.1 % $ 744 1.0 % Home Meridian 47 0.3 % 16 0.1 % 61 0.2 % 106 0.2 % Domestic Upholstery - 0.0 % 766 2.7 % - 0.0 % 766 1.3 % All Other 32 11.0 % 346 154.5 % 63 8.1 % 347 64.7 % Consolidated $ 92 0.1 % $ 1,486 1.6 % $ 218 0.1 % $ 1,963 1.0 % Interest expense - Corporate $ 171 0.2 % $ 203 0.2 % $ 549 0.3 % $ 567 0.3 % Income taxes - Corporate $ ( 1,203 ) - 1.5 % $ 85 0.1 % $ ( 1,967 ) - 1.2 % $ ( 731 ) - 0.4 % Net (loss) / income - Corporate $ ( 3,277 ) - 4.0 % $ ( 1,951 ) - 2.1 % $ ( 6,329 ) - 3.8 % $ ( 6,042 ) - 3.2 % 15 We recorded $ 2.0 million in consolidated restructuring costs in the second quarter of fiscal 2026. These costs included $ 1.3 million in severance and warehouse consolidation expenses and approximately $ 700,000 in inventory liquidation losses at the Georgia warehouse. For the first half of fiscal 2026, total restructuring costs were $ 2.5 million, consisting of $ 1.7 million in severance and warehouse consolidation expenses and $ 821,000 in inventory liquidation losses at the same facility. As of August 3, 2025 and February 2, 2025, we had accrued restructuring charges of approximately $ 300,000 and $ 174,000 , respectively. The balance as of August 3, 2025 is expected to be paid during the next five months. The restructuring costs were recorded under cost of sales and selling and administrative expenses in the statements of operations. Thirteen Weeks Ended Twenty-Six Weeks Ended August 3, 2025 July 28, 2024 August 3, 2025 July 28, 2024 Restructuring Costs Hooker Branded $ 655 $ - $ 782 $ - Home Meridian 1,161 - 1,437 - Domestic Upholstery 152 - 265 - All Other 38 - 45 - Consolidated $ 2,006 $ - $ 2,529 $ - Capital Expenditures Hooker Branded $ 749 $ 240 $ 1,424 $ 445 Home Meridian 16 16 149 251 Domestic Upholstery 79 323 122 714 All Other - - - 11 Consolidated $ 844 $ 579 $ 1,695 $ 1,421 Depreciation & Amortization Hooker Branded $ 536 $ 562 $ 1,068 $ 1,114 Home Meridian 586 659 1,169 1,284 Domestic Upholstery 998 1,087 2,033 2,166 All Other 52 27 105 53 Consolidated $ 2,172 $ 2,335 $ 4,375 $ 4,617 As of August 3, As of February 2, 2025 %Total 2025 % Total Assets Assets Assets Hooker Branded $ 144,062 59.4 % $ 153,373 55.4 % Home Meridian 43,209 17.8 % 62,338 22.5 % Domestic Upholstery 54,845 22.6 % 58,746 21.2 % All Other 571 0.2 % 2,344 0.8 % Consolidated Assets $ 242,687 100 % $ 276,801 100 % Consolidated Goodwill and Intangibles 35,356 37,141 Total Consolidated Assets $ 278,043 $ 313,942 Sales by product type are as follows: Net Sales (in thousands) Thirteen Weeks Ended Twenty-Six Weeks Ended August 3, 2025 %Total July 28, 2024 % Total August 3, 2025 %Total July 28, 2024 % Total Casegoods $ 47,459 58 % $ 55,731 59 % $ 96,829 58 % $ 108,583 58 % Upholstery 34,690 42 % 39,350 41 % 70,636 42 % 80,069 42 % $ 82,149 100 % $ 95,081 100 % $ 167,465 100 % $ 188,652 100 % 14. Subsequent Events Dividends On September 9, 2025 , our board of directors declared a quarterly cash dividend of $ 0.23 per share which will be paid on September 30, 2025 to shareholders of record at September 19, 2025 . 16