UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~November~~ May 3, ~~201~~20920

Commission file number 000-25349

HOOKER FURNITURE CORPORATION

(Exact name of registrant as specified in its charter)

Virginia	54-0251350
(State or other jurisdiction of incorporation or organization)	(IRS employer identification no.)

440 East Commonwealth Boulevard, Martinsville, VA 24112

(Address of principal executive offices, ~~zip code)~~zip code)

(276) 632-2133

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

	Large accelerated Filer ☐	Accelerated ~~Filer~~filer ☒
	Non-accelerated Filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	HOFT	NASDAQ Global Select Market

As of ~~December 6, 2019,~~July 21, 2020, there were ~~11,838,367~~11,889,968 shares of the registrant’s common stock outstanding.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	34

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1719

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3032

Item 4.	Controls and Procedures	3133

PART II. OTHER INFORMATION

Item 6.	Exhibits	3234

Signature		3335

EXPLANATORY NOTE

Reliance on SEC Relief from Filing Requirements

On March 25, 2020, the U.S. Securities and Exchange Commission (the “SEC”) issued an order under Section 36 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and certain rules thereunder (Release No. 34-88465) (the “Order”), which allows a registrant to delay the filing of certain reports under the Exchange Act by up to 45 days after the original due date of such report if a registrant is unable to meet the filing deadline due to circumstances related to the COVID-19 pandemic. The Order extends the deadlines for certain required filings under the Exchange Act, including Form 10-Q, by up to 45 days after the original filing deadline. Hooker Furniture Corporation (the “Company”) is relying on the Order and therefore delayed the filing of this Quarterly Report on Form 10-Q for the period ended May 3, 2020, which was originally due on June 12, 2020, due to circumstances related to the COVID-19 pandemic.

On June 12, 2020, the Company filed a Current Report on Form 8-K stating that the preparation of the Company’s Quarterly Report on Form 10-Q was delayed due to circumstances related to the COVID-19 pandemic. The adverse economic effects brought on by the COVID-19 pandemic, including reductions in the Company’s sales, earnings, and market value, as well as other changing market dynamics, triggered an interim impairment assessment and required the Company to perform a valuation of its intangible assets, such as goodwill and trade names. The Company required additional time to complete its analysis and valuation which it has now completed.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

As of	November 3,			February 3,		May 3,			February 2,
	2019			2019		2020			2020
	(unaudited)					(unaudited)
Assets
Current assets
Cash and cash equivalents	$	24,498		$	11,435	$	51,240		$	36,031
Trade accounts receivable, net		92,603			112,557		63,852			87,653
Inventories		103,615			105,204		82,050			92,813
Income tax recoverable		2,348			-		1,618			751
Prepaid expenses and other current assets		4,119			5,735		5,545			4,719
Total current assets		227,183			234,931		204,305			221,967
Property, plant and equipment, net		30,782			29,482		29,256			29,907
Cash surrender value of life insurance policies		25,016			23,816		25,603			24,888
Deferred taxes		3,035			4,522		12,905			2,880
Operating leases right-of-use assets		40,872			-		37,786			39,512
Intangible assets, net		33,967			35,755		28,025			33,371
Goodwill		40,058			40,058		490			40,058
Other assets		1,528			1,152		1,112			1,125
Total non-current assets		175,258			134,785		135,177			171,741
Total assets	$	402,441		$	369,716	$	339,482		$	393,708

Liabilities and Shareholders’ Equity
Current liabilities
Current portion of term loans	$	5,833		$	5,829	$	28,170		$	5,834
Trade accounts payable		27,407			40,838		13,396			25,493
Accrued salaries, wages and benefits		5,449			8,002		3,271			4,933
Income tax accrual		-			3,159
Customer deposits		13,030			3,023		4,024			3,351
Current portion of lease liabilities		6,395			-		6,162			6,307
Other accrued expenses		3,913			3,564		2,490			4,211
Total current liabilities		62,027			64,415		57,513			50,129
Long term debt		25,253			29,628		-			24,282
Deferred compensation		10,611			11,513		11,310			11,382
Lease liabilities		35,304			-		32,581			33,794
Other long-term liabilities		3			984
Total long-term liabilities		71,171			42,125		43,891			69,458
Total liabilities		133,198			106,540		101,404			119,587

Shareholders’ equity
Common stock, no par value, 20,000 shares authorized, 11,838 and 11,785 shares issued and outstanding on each date		51,177			49,549
Common stock, no par value, 20,000 shares authorized, 11,871 and 11,838 shares issued and outstanding on each date							52,187			51,582
Retained earnings		218,131			213,380		186,540			223,252
Accumulated other comprehensive (loss) income		(65	)		247
Accumulated other comprehensive loss							(649	)		(713	)
Total shareholders’ equity		269,243			263,176		238,078			274,121
Total liabilities and shareholders’ equity	$	402,441		$	369,716	$	339,482		$	393,708

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

Table of Contents

HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME~~OPERATIONS

(In thousands, except per share data)

(Unaudited)

	For the
	Thirteen Weeks Ended				Thirty-Nine Weeks Ended					Thirteen Weeks Ended
	Nov 3,		Oct 28,		Nov 3,		Oct 28,			May 3,			May 5,
	2019		2018		2019		2018			2020			2019

Net sales	$	158,176	$	171,474	$	445,942	$	483,026		$	104,597		$	135,518

Cost of sales		129,777		135,638		363,201		379,079			85,944			110,001
Casualty loss		-		-		-		500
Total Cost of sales		129,777		135,638		363,201		379,579

Gross profit		28,399		35,836		82,741		103,447			18,653			25,517

Selling and administrative expenses		22,810		22,979		67,286		68,150			19,177			22,016
Goodwill impairment charges											39,568			-
Trade name impairment charges											4,750			-
Intangible asset amortization		596		596		1,788		1,788			596			596

Operating income		4,993		12,261		13,667		33,509
Operating (loss)/income											(45,438	)		2,905

Other income, net		309		200		215		275
Other expense, net											(42	)		(62	)
Interest expense, net		316		354		986		1,099			208			341

Income before income taxes		4,986		12,107		12,896		32,685
(Loss)/income before income taxes											(45,688	)		2,502

Income tax expense		1,066		2,775		2,829		7,504
Income tax (benefit)/expense											(10,869	)		515

Net income	$	3,920	$	9,332	$	10,067	$	25,181
Net (loss)/income										$	(34,819	)	$	1,987

Earnings per share
(Loss) / earnings per share									(Loss) / earnings per share
Basic	$	0.33	$	0.79	$	0.85	$	2.14		$	(2.95	)	$	0.17
Diluted	$	0.33	$	0.79	$	0.85	$	2.13		$	(2.95	)	$	0.17

Weighted average shares outstanding:							Weighted average shares outstanding:
Basic		11,789		11,763		11,782		11,758			11,798			11,769
Diluted		11,816		11,778		11,821		11,778			11,798			11,805

Cash dividends declared per share	$	0.15	$	0.14	$	0.45	$	0.42		$	0.16		$	0.15

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

Table of Contents

HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~

~~(In thousands)~~

~~(Unaudited)~~

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME

(In thousands)

(Unaudited)

For the

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

November 3,

October 28,

November 3,

October 28,

2019

2018

2019

2018

Net Income
$ 3,920 $ 9,332 $ 10,067 $ 25,181
Other comprehensive income (loss):

                Gain on pension plan settlement
(520 ) - (520 ) -
                 Income tax effect on settlement
124 - 124 -
                 Amortization of actuarial loss
37 43 111 129
                 Income tax effect on amortization
(9 ) (10 ) (27 ) (31 )
Adjustments to net periodic benefit cost
(368 ) 33 (312 ) 98

Reclassification of tax effects due to the adoption of ASU 2018-02
- - - 111

Total Comprehensive Income
$ 3,552 $ 9,365 $ 9,755 $ 25,390

	Thirteen Weeks Ended
	May 3,			May 5,
	2020			2019

Net (loss)/Income	$	(34,819	)	$	1,987
Other comprehensive income (loss):
Amortization of actuarial loss		84			37
Income tax effect on amortization		(20	)		(9	)
Adjustments to net periodic benefit cost		64			28

Total Comprehensive (Loss)/Income	$	(34,755	)	$	2,015

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

Table of Contents

HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	For the							For the
	Thirty-Nine Weeks Ended							Thirteen Weeks Ended
	Nov 3,			Oct 28,				May 3,			May 5,
	2019			2018				2020			2019
Operating Activities:				Operating Activities:
Net income	$	10,067		$	25,181
Net (loss)/income								$	(34,819	)	$	1,987
Adjustments to reconcile net income to net cash provided by operating activities:							Adjustments to reconcile net income to net cash provided by operating activities:
Goodwill and intangible asset impairment charges									44,318			-
Depreciation and amortization		5,260			5,558				1,685			1,716
Gain on pension settlement		(520	)		-
Gain on disposal of assets		(271	)		(66	)			-			(274	)
Deferred income tax expense		1,461			254				(10,045	)		2,344
Noncash restricted stock and performance awards		891			919				605			463
Provision/(benefit from) for doubtful accounts and sales allowances		1,365			(1,692	)
(Benefit from)/provision for doubtful accounts and sales allowances									(328	)		862
Gain on life insurance policies		(715	)		(608	)			(571	)		(555	)
Changes in assets and liabilities:				Changes in assets and liabilities:
Trade accounts receivable		18,589			9,036				24,129			33,451
Inventories		1,589			(16,862	)			10,763			(5,561	)
Income tax recoverable		(2,348	)		-				(867	)		-
Prepaid expenses and other current assets		(638	)		(484	)			(1,468	)		(3,186	)
Trade accounts payable		(13,456	)		5,566				(12,149	)		(8,165	)
Accrued salaries, wages, and benefits		(2,553	)		(484	)			(1,661	)		(3,266	)
Accrued income taxes		(3,159	)		(2,412	)			-			(1,867	)
Customer deposits		10,006			(1,359	)			673			3,117
Operating lease liabilities		536			-				367			(167	)
Other accrued expenses		350			503				(1,720	)		(664	)
Deferred compensation		156			(2,253	)			12			51
Other long-term liabilities		-			122
Net cash provided by operating activities	$	26,610		$	20,919			$	18,924		$	20,286

Investing Activities:				Investing Activities:
Purchases of property and equipment		(4,745	)		(2,464	)			(380	)		(1,527	)
Proceeds received from sale of assets		1,465			99
Proceeds received on notes from sale of assets									-			1,449
Premiums paid on life insurance policies									(162	)		(157	)
Proceeds received on life insurance policies		-			1,225				673			-
Premiums paid on life insurance policies		(558	)		(620	)
Net cash used in investing activities		(3,838	)		(1,760	)
Net cash provided/(used in) by investing activities									131			(235	)

Financing Activities:				Financing Activities:
Payments for long-term debt		(4,393	)		(15,679	)			(1,952	)		(1,464	)
Cash dividends paid		(5,316	)		(4,946	)			(1,894	)		(1,768	)
Net cash used in financing activities		(9,709	)		(20,625	)
Cash used in financing activities									(3,846	)		(3,232	)

Net increase/(decrease) in cash and cash equivalents		13,063			(1,466	)
Net increase in cash and cash equivalents									15,209			16,819
Cash and cash equivalents - beginning of year		11,435			30,915				36,031			11,435
Cash and cash equivalents - end of quarter	$	24,498		$	29,449			$	51,240		$	28,254

Supplemental disclosure of cash flow information:				Supplemental disclosure of cash flow information:
Cash paid for interest, net								$	240		$	329
Cash paid for income taxes	$	6,754		$	9,661				43			38
Cash paid for interest, net		852			973

Non-cash transactions:				Non-cash transactions:
Increase in lease liabilities arising from obtaining right-of-use assets	$	272		$	-
Decrease in lease liabilities arising from obtaining right-of-use assets								$	(3	)	$	-
Increase in property and equipment through accrued purchases		25			104				51			743

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

Table of Contents

HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands, except per share data)

(Unaudited)

									Accumulated													Accumulated
									Other			Total										Other			Total
	Common Stock					Retained			Comprehensive			Shareholders'			Common Stock				Retained			Comprehensive			Shareholders'
	Shares		Amount			Earnings			Income			Equity			Shares		Amount		Earnings			Income (loss)			Equity
Balance at January 28, 2018		11,762	$	48,970		$	180,122		$	368		$	229,460
Net income							25,181						25,181
Prior year adjustment for ASU 2014-09 and 2018-02							99			111			210
Unrealized loss on defined benefit plan, net of tax of $31										98			98
Cash dividends paid and accrued ($0.14 per share)							(4,945	)					(4,945	)
Restricted stock grants, net of forfeitures		23		(30	)								(30	)
Restricted stock compensation cost				450									450
Balance at October 28, 2018		11,785	$	49,390		$	200,457		$	577		$	250,424


Balance at February 3, 2019		11,785	$	49,549		$	213,380		$	247		$	263,176			11,785	$	49,549	$	213,380		$	247		$	263,176
Net income							10,067						10,067							1,987						1,987
Gain on pension settlement, net of tax of $124										(396	)		(396	)
Unrealized loss on defined benefit plan, net of tax of $27										84			84
Unrealized loss on defined benefit plan, net of tax of $9																							28			28
Cash dividends paid and accrued ($0.15 per share)							(5,316	)					(5,316	)						(1,768	)					(1,768	)
Restricted stock grants, net of forfeitures		53		344									344			31		344								344
Restricted stock compensation cost				600									600					174								174
Recognition of PSUs as equity-based awards				684									684					681								681
Balance at November 3, 2019		11,838	$	51,177		$	218,131		$	(65	)	$	269,243
Balance at May 5, 2019																11,816	$	50,748	$	213,599		$	275		$	264,622



Balance at February 2, 2020																11,838	$	51,582	$	223,252		$	(713	)	$	274,121
Net loss																				(34,819	)					(34,819	)
Unrealized loss on defined benefit plan, net of tax of $20																							64			64
Cash dividends paid and accrued ($0.16 per share)																				(1,893	)					(1,893	)
Restricted stock grants, net of forfeitures																33		169								169
Restricted stock compensation cost																		218								218
Recognition of PSUs as equity-based awards																		218								218
Balance at May 3, 2020																11,871	$	52,187	$	186,540		$	(649	)	$	238,078

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 ~~Thirty-Nine~~Thirteen Weeks Ended ~~November~~May 3, ~~2019~~2020

1.	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 ~~3, 2019~~2, 2020 (“~~2019~~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 thirteen-week period (also referred to as “three months,” “three-month period,” “quarter,” ~~“third~~“first quarter” or “quarterly period”) that began ~~August 5, 2019,~~February 3, 2020 and ~~the thirty-nine week period (also referred to as “nine months”, “nine-month period” or “year-to-date period”) that began February 4, 2019, which both~~ ended ~~November~~May 3, ~~2019.~~2020. This report discusses our results of operations for this period compared to the ~~2019 fiscal year~~ thirteen-week period that began ~~July 30, 2018~~February 4, 2019 and ~~the thirty-nine-week period that began January 29, 2018, which both~~ ended ~~October 28, 2018;~~May 5, 2019; and our financial condition as of ~~November~~May 3, ~~2019~~2020 compared to February ~~3, 2019.~~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 ~~will end~~ended February 2, ~~2020; and~~2020.

■

~~the 2019 fiscal year and comparable terminology mean the fifty-three-week fiscal year that began January 29, 2018 and ended February 3, 2019.~~

2. Recently Adopted Accounting Policies

In ~~February~~June 2016, the FASB issued ASU ~~No. 2016-02,~~ ~~Leases~~ ~~(Topic 842) (“Topic 842”), which requires lessees~~2016-13, Financial Instruments—Credit Losses (Topic 326). This update seeks to ~~recognize lease right-of-use assets and liabilities on-balance sheet and disclose key~~provide financial statement users with more decision-useful information about ~~leasing arrangements. ASU 2016-02 was subsequently amended~~the expected credit losses on financial instruments, including trade receivables, and other commitments to extend credit held by ~~ASU No. 2018-01,~~ ~~Land Easement Practical Expedient~~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 ~~Transition to Topic 842; ASU No. 2018-10,~~ ~~Codification Improvements to Topic 842, Leases~~;fiscal years, and ~~ASU No. 2018-11,~~ ~~Targeted Improvements~~.interim periods within those fiscal years, beginning after December 15, 2019. We adopted the provisions of Topic ~~842 standard~~326 on February 4,3, 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.

Table of Contents

In December 2019, the FASB issued ASU 2019-12, Income Tax (Topic 740) – Simplifying the Accounting for Income Taxes. The amendments in this Update simplify the accounting for income taxes by removing certain exceptions for intraperiod tax allocation, the recognition of deferred tax liabilities after an investment in a foreign entity transitions to or from the equity method, and ~~used~~ 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 ~~date transition method. As a result,~~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 ~~prior to February 4, 2019 were not restated~~ and continue to be reported under previous guidance that did not require the recognition of lease liabilities and corresponding lease assets on the condensed consolidated balance sheets. In addition, we have elected the package of practical expedients, which allowed us not to reassess prior conclusions related to the expired or existing leases, and not to reassess the accounting for initial direct costs. As a result of the adoption of Topic 842, we have operating lease right-of-use assets of $40.9 million and operating lease liabilities of $41.7 million as of November 3, 2019. The adoption of Topic 842 did not have a material impact on our condensed consolidated statements of ~~income and condensed consolidated statement of cash flows for the three-month or nine-month period ended November 3, 2019.~~operations by $4.0 million. See Note 912 Income Taxes for additional ~~information and disclosures required by Topic 842.~~details.

~~Table of Contents~~

3. Accounts Receivable

	November 3,			February 3,			May 3,			February 2,
	2019			2019			2020			2020

Trade accounts receivable	$	98,818		$	117,732		$	68,204		$	91,261
Receivable from factor							$	5		$	788
Other accounts receivable allowances		(5,452	)		(4,267	)		(2,881	)		(3,493	)
Allowance for doubtful accounts		(763	)		(908	)		(1,476	)		(903	)
Accounts receivable	$	92,603		$	112,557		$	63,852		$	87,653

“Receivable from factor” represented amounts due with respect to factored accounts receivable. The agreement was discontinued in early fiscal 2021.

4. Inventories

	November 3,			February 3,			May 3,			February 2,
	2019			2019			2020			2020
Finished furniture	$	116,501		$	112,847		$	95,628		$	106,495
Furniture in process		1,092			1,825			1,323			1,304
Materials and supplies		8,965			10,896			8,495			8,479
Inventories at FIFO		126,558			125,568			105,446			116,278
Reduction to LIFO basis		(22,943	)		(20,364	)		(23,396	)		(23,465	)
Inventories	$	103,615		$	105,204		$	82,050		$	92,813

5. Property, Plant and Equipment

	Depreciable Lives	November 3,		February 3,		Depreciable Lives	May 3,		February 2,
	(In years)	2019		2019		(In years)	2020		2020

Buildings and land improvements	15 - 30	$	31,295	$	24,588	15 - 30	$	31,316	$	31,316
Computer software and hardware	3 - 10		19,100		18,719	3 - 10		19,219		19,166
Machinery and equipment	10		9,116		8,934	10		9,304		9,271
Leasehold improvements	Term of lease		9,443		9,376	Term of lease		9,737		9,737
Furniture and fixtures	3 - 10		2,454		2,318	3 - 10		2,599		2,597
Other	5		650		665	5		651		651
Total depreciable property at cost			72,058		64,600			72,826		72,738
Less accumulated depreciation			42,853		39,925			45,172		44,089
Total depreciable property, net			29,205		24,675			27,654		28,649
Land			1,077		1,067			1,077		1,077
Construction-in-progress			500		3,740			525		181
Property, plant and equipment, net		$	30,782	$	29,482		$	29,256	$	29,907

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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.

~~Table of Contents~~

As of ~~November~~May 3, ~~2019~~2020 and February ~~3, 2019,~~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.

On January 30, 2019, our Board of Directors voted to terminate the Pension Plan. We settled all Pension Plan obligations during the quarter with the purchase of annuities for plan participants. See Note 11. Employee Benefit Plans for additional information about the Plan.

Our assets measured at fair value on a recurring basis at ~~November~~May 3, ~~2019~~2020 and February ~~3, 2019,~~2, 2020, were as follows:

	Fair value at November 3, 2019								Fair value at February 3, 2019								Fair value at May 3, 2020								Fair value at February 2, 2020
Description	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(In thousands)																(In thousands)
Assets measured at fair value
Company-owned life insurance	$	-	$	25,016	$	-	$	25,016	$	-	$	23,816	$	-	$	23,816	$	-	$	25,603	$	-	$	25,603	$	-	$	24,888	$	-	$	24,888
Pension Plan assets	$	-		-		-		-		10,992		-		-		10,992

7. Intangible Assets

November 3,

February 3,

Non-amortizable Intangible Assets
Segment

2019

2019

Goodwill
Home Meridian
$ 23,187 $ 23,187
Goodwill
All Other
16,871 16,871
   Total Goodwill
40,058 40,058

Trademarks and trade names - Home Meridian
Home Meridian
11,400 11,400
Trademarks and trade names - Bradington-Young
All Other
861 861
Trademarks and trade names - Sam Moore
All Other
396 396
   Total Trademarks and trade names
$ 12,657 $ 12,657

   Total non-amortizable assets
$ 52,715 $ 52,715

The adverse economic effects brought on by the COVID-19 pandemic, including reductions in our sales, earnings, and market value, as well as other changing market dynamics, required that we perform a valuation of our intangible assets. We hired an external service provider to perform the valuation of our goodwill and intangible assets..

The calculation methodology for the fair value of our Home Meridian segment and the Shenandoah division of our Domestic Upholstery segment included three approaches: the Discounted Cash Flow Method (DCF) which was given the largest weighting, the Guideline Public Company Method (GPCM) based on the consideration of the facts of the Company’s peer competitors and the Guideline Transaction Method (GTM) based on consideration of transactions with varying risk profiles, geographies and market conditions.

The Discounted Cash Flow Method was used as the valuation methodology for our trade names and trademarks, based on cash flow projections and growth rates for each trade name for five years in the future provided by management, and a royalty rate benchmark for companies with similar activities.

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As a result of our intangible asset valuation analysis, we recorded $44.3 million non-cash impartment charges including $23.2 million to Home Meridian goodwill, $16.4 million to Shenandoah goodwill, and $4.8 million to certain of Home Meridian segment’s trade names.

		May 3, 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 ~~segment~~ and ~~All Other.~~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 3, 2019
$ 22,320 $ 778 $ 23,098
Amortization
(1,743 ) (45 ) (1,788 )
Balance at November 3, 2019
$ 20,577 $ 733 $ 21,310

	Amortizable Intangible Assets
	Customer
	Relationships			Trademarks			Totals

Balance at February 2, 2020	$	19,996		$	718		$	20,714
Amortization		(581	)		(15	)		(596	)
Balance at May 3, 2020	$	19,415		$	703		$	20,118

For the remainder of fiscal ~~2020,~~2021, amortization expense is expected to be approximately ~~$596,000.~~$1.8 million.

8~~. Customer Deposits~~

Due to the highly customized nature of our hospitality products, we typically require a 50% deposit with order, a 40% deposit before goods reach a U.S. port and the remaining 10% balance due within 30 days of the receipt of goods by the customer. These deposits have increased $10.0 million since our fiscal 2019 year-end principally due to increased order activity in our Home Meridian segment’s hospitality division.

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9.8. Leases

~~On February 4, 2019,~~In fiscal 2020, we adopted Accounting Standards Codification Topic 842 Leases. Our lease assets are composed of real estate and equipment. Real estate leases consist primarily of warehouses and offices, while equipment leases consist of vehicles, office and warehouse equipment. At the inception of a contract, we assess whether the contract is, or contains, a lease. Our assessment is based on: (a) whether there is an identified asset in the contract that is land or a depreciable asset – i.e. property, plant or equipment; (b) whether we have the right to control the use of the identified asset throughout the period of use, which may be different from the overall contract term; and (c) whether we have the right to direct the use of an identified asset if it can direct (and change) how and for what purpose the asset will be used throughout the period of use.

Leases are classified as either finance leases or operating leases based on criteria in Topic 842. All of our leases are classified as operating leases. We do not currently have finance leases but could in the future.

Operating lease right-of-use ("ROU") assets and liabilities are recognized on the adoption date based on the present value of lease payments over the remaining lease term. As interest rates are not explicitly stated or implicit in any of our leases, we utilized our incremental borrowing rate at the adoption date of February 4, 2019, which was one-month LIBOR plus 1.5%. For leases without explicitly stated or implicit interest rates that commenced after the adoption date, we used our incremental borrowing rate which was one-month LIBOR at the lease commencement date plus 1.5%. ROU assets also include any lease payments made and exclude lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

At the inception of a lease, we allocate the consideration in the contract to each lease and non-lease component based on the component's relative stand-alone price to determine the lease payments. Lease and non-lease components are accounted for separately. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Included in lease expense are any variable lease payments incurred in the period that were not included in the initial lease liability. Some of our real estate leases contain variable lease payments, including payments based on the percentage increase in the Consumer Price Index for Urban Consumers (“CPI-U”). We used February 2019 CPI-U issued by the US Department of Labor’s Bureau of Labor Statistics to measure lease payments and calculate lease liabilities. Additional payments based on the change in an index or rate, or payments based on a change in our portion of the operating expenses, including real estate taxes and insurance, are recorded when incurred.

We have a sub-lease at one of our warehouses. In accordance with the provisions of Topic 842, since we have not been relieved as the primary obligor of the warehouse lease, we cannot net the sublease income against our lease payment to calculate the lease liability and ROU asset. Our practice has been, and we will continue to, straight-line the sub-lease income over the term of the sublease. We recognized ~~$130,000 and $347,000~~$144,000 sub-lease income for the three-month ~~and nine-month~~ period ended ~~November~~May 3, ~~2019, respectively.~~

Our leases have remaining lease terms of less than one year to seven years, some of which include options to extend the leases for up to seven years. We have elected not to recognize ROU assets and lease liabilities that arise from short term leases for any class of underlying asset. Short term leases are leases with lease terms of 12 months or less with either (a) no renewal option or (b) a renewal option which we are not reasonably certain to exercise.

We have elected to adopt a package of practical expedients provided under Topic 842 that allows us not to reassess: (a) whether expired or existing contracts contain a lease under the new definition of a lease; (b) lease classification of expired or existing leases; and (c) whether previously capitalized initial direct costs would qualify for capitalization under Topic 842.

2020. The components of lease cost and supplemental cash flow information for leases for the ~~three-month and nine-month periods~~three-months ended ~~November~~May 3, ~~2019~~2020 were:

	Thirteen Weeks Ended		Thirty-Nine Weeks Ended		13 Weeks Ended		13 Weeks Ended
	November 3, 2019		November 3, 2019		May 3, 2020		May 5, 2019
Operating lease cost	$	2,090	$	6,289	$	2,100	$	2,076
Variable lease cost						46		-
Short-term lease cost		173		467		116		113
Total operating lease cost	$	2,263	$	6,756	$	2,262	$	2,189


Operating cash outflows	$	1,918	$	6,255	$	1,852	$	2,386

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The right-of-use assets and lease liabilities recorded on our Condensed Consolidated Balance Sheets as of ~~November~~May 3, ~~2019~~2020 were:

	November 3, 2019		May 3, 2020		February 2, 2020
Real estate	$	39,750	$	36,585	$	38,175
Property and equipment		1,122		1,201		1,337
Total operating leases right-of-use assets	$	40,872	$	37,786	$	39,512


Current portion of operating lease liabilities	$	6,395	$	6,162	$	6,307
Long term operating lease liabilities		35,304		32,581		33,794
Total operating lease liabilities	$	41,699	$	38,743	$	40,101

~~Weighted-average~~The weighted-average remaining lease term is ~~7.5~~7.3 years. We used our incremental borrowing rate which is LIBOR plus 1.5% at the adoption date. The weighted-average discount rate is ~~4.00%~~3.99%.

The following table reconciles the undiscounted future lease payments for operating leases to the operating lease liabilities recorded in the condensed consolidated balance ~~sheet at November~~sheets on May 3, ~~2019:~~2020:

	Undiscounted Future Operating Lease Payments			Undiscounted Future Operating Lease Payments
Remainder of 2019	$	2,327
2020		7,732
Remainder of 2020				$	6,051
2021		7,114			7,182
2022		5,520			5,588
2023		5,267			5,333
2024 and thereafter		20,394
2024					5,280
2025 and thereafter					15,205
Total lease payments	$	48,354		$	44,639
Less: impact of discounting		(6,655	)		(5,896	)
Present value of lease payments	$	41,699		$	38,743

Due to the COVID-19 pandemic, we received concessions on several of our leases, including changes in lease terms and deferred rent payments. We accounted for the concessions as lease modifications. None of the modifications had a material effect on our condensed consolidated financial statements or results of operations. As of ~~November~~May 3, ~~2019,~~2020, we did not have any additional operating or finance leases that had not yet commenced.

109. Long-Term Debt

As of ~~November~~May 3, ~~2019,~~2020, we had an aggregate $25.7 million available under ~~our revolving credit facility~~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 ~~November~~May 3, ~~2019.~~2020. There were no additional borrowings outstanding under the Existing Revolver as of May 3, 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 $28.2 million on our term loans are due on February 1, 2021. We expect to refinance the balance of our term loans and any balance due under our revolving credit facility as(currently $0) during fiscal 2021.

Table of ~~November 3, 2019.~~

Contents

1110. Employee Benefit Plans

We maintain ~~three~~two “frozen” retirement plans, ~~for~~which are paying benefits and may include active employees among the ~~benefit of certain former and current employees, including a supplemental retirement income plan (“SRIP”) for certain former and current employees of Hooker Furniture Corporation, as well as~~participants. We do not expect to add participants to these plans in the future. The two plans ~~for the benefit of certain and former employees of Pulaski Furniture Corporation, which we assumed when we acquired the business of Home Meridian International. These legacy pension plan obligations~~ 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. ~~The SERP is an unfunded plan and all benefits are paid solely out of our general assets; and~~

■

~~the Pension Plan for former Pulaski Furniture Corporation employees.~~

~~The SRIP, SERP and Pension Plan are all “frozen” and we do not expect to add additional participants to any of these plans in the future.~~

~~Table of Contents~~

On January 30, 2019, our Board of Directors voted to terminate the Pension Plan. We settled all Pension Plan obligations during the quarter with the purchase of nonparticipating annuity contracts for plan participants. Consequently, we recognized a $520,000 settlement gain during the quarter, which is recorded in the “other income” line of our condensed consolidated statements of income. The $520,000 represented an amount recorded in accumulated other comprehensive income until the pension obligation was settled upon plan termination.

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended						Thirteen Weeks Ended
	November 3,			October 28,			November 3,			October 28,			May 3,		May 5,
	2019			2018			2019			2018			2020		2019
Net periodic benefit costs
Service cost		26			81			78			243			32		26
Interest cost		204			206			613			618			74		205
Actuarial loss		37			43			111			129			84		37
Expected return on pension plan assets		(101	)		(144	)		(304	)		(431	)		-		(101	)
Pension plan administrative expenses		98			70			293			210
Expected administrative expenses														-		97

Consolidated net periodic benefit costs	$	264		$	256		$	791		$	769		$	190	$	264

The SRIP and SERP plans are unfunded plans. We paid ~~$171,000 in the third quarter and $520,000~~$178,000 in the first ~~nine months. We~~quarter of fiscal 2021 and expect to pay a total of approximately ~~$164,000~~$551,000 in benefit payments from our general assets during the remainder of fiscal ~~2020~~2021 to fund SRIP and SERP payments.

121. 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 ~~2019~~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.

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:

	November 3,		February 3,		May 3,		February 2,
	2019		2019		2020		2020

Restricted shares		49		22		60		46
RSUs and PSUs		78		36		159		76
		127		58		219		122

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The number of outstanding restricted shares increased due primarily to grants of restricted shares to a larger population of our non-executive employees as an incentive for retention and alignment of individual performance to our values. ~~The number of RSUs and PSUs increased primarily due to the addition of three additional executive officers in the second quarter of fiscal 2019.~~

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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

Thirty-Nine Weeks Ended

November 3,

October 28,

November 3,

October 28,

2019

2018

2019

2018

Net income
$ 3,920 $ 9,332 $ 10,067 $ 25,181
Less: Unvested participating restricted stock dividends
7 3 18 8
Net earnings allocated to unvested participating restricted stock
16 17 33 41
Earnings available for common shareholders
3,897 9,312 10,016 25,132

Weighted average shares outstanding for basic earnings per share
11,789 11,763 11,782 11,758
Dilutive effect of unvested restricted stock, RSU and PSU awards
27 15 39 20
Weighted average shares outstanding for diluted earnings per share
11,816 11,778 11,821 11,778

Basic earnings per share
$ 0.33 $ 0.79 $ 0.85 $ 2.14

Diluted earnings per share
$ 0.33 $ 0.79 $ 0.85 $ 2.13

	Thirteen Weeks Ended
	May 3,			May 5,
	2020			2019

Net (loss)/ income	$	(34,819	)	$	1,987
Less: Unvested participating restricted stock dividends		8			4
Net earnings allocated to unvested participating restricted stock		-			4
(Loss)/earnings available for common shareholders		(34,827	)		1,979

Weighted average shares outstanding for basic earnings per share		11,798			11,769
Dilutive effect of unvested restricted stock, RSU and PSU awards*		-			36
Weighted average shares outstanding for diluted earnings per share		11,798			11,805

Basic (loss) / earnings per share	$	(2.95	)	$	0.17

Diluted (loss) / earnings per share	$	(2.95	)	$	0.17

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

132. Income Taxes

We recorded income tax ~~expense~~benefit of ~~$1.1~~$10.9 million for the fiscal ~~2020 third~~2021 first quarter, of which income tax benefit of $10.6 million was recorded related to goodwill and trade name impairment charges, compared to ~~$2.8 million~~$515,000 income tax expense for the comparable prior year period. The effective tax rates for the fiscal 2021 and 2020 ~~and 2019 third~~first quarters were ~~21.4%~~23.8% and ~~22.9%~~20.6%, respectively. ~~The~~

An entity is required to make its best estimate of the annual effective tax ~~rates~~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 ~~nine months~~quarter of fiscal ~~2020~~2021 and ~~2019 were 21.9% and 23.0%.~~recognized an additional $4.0 million of tax benefit that exceeds our anticipated annual income tax benefit.

The net unrecognized tax benefits as of ~~November~~May 3, ~~2019~~2020 and February ~~3, 2019,~~2, 2020, which, if recognized, would affect our effective tax rate are ~~$40,000 and $38,000, respectively.~~$3,000.

Tax years ending January ~~31, 2016~~29, 2017 through February ~~3, 2019~~2, 2020 remain subject to examination by federal and state taxing authorities.

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143. Segment Information

~~For~~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 designer channel. The Hooker Branded and Home Meridian segments were unchanged. Therefore, for financial reporting purposes, we are organized into ~~two~~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, ~~which includes the domestic upholstery manufacturing operations~~consisting of ~~Bradington-Young, Sam Moore, Shenandoah Furniture~~H Contract and ~~H Contract. None~~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:~~indicated. Prior-year information has been recast to reflect the changes in segments discussed above:

		Thirteen Weeks Ended											Thirty-Nine Weeks Ended											Thirteen Weeks Ended
		November 3, 2019						October 28, 2018					November 3, 2019						October 28, 2018					May 3, 2020						May 5, 2019
					% Net					% Net						% Net					% Net						% Net						% Net
Net Sales	��				Sales					Sales						Sales					Sales						Sales						Sales
Hooker Branded		$	43,703			27.6	%	$	46,479		27.1	%	$	122,707			27.5	%	$	129,801		26.9	%	$	27,162			26.0	%	$	39,600			29.2	%
Home Meridian			85,776			54.3	%		95,013		55.4	%		240,594			54.0	%		266,631		55.2	%		57,665			55.1	%		67,630			49.9	%
Domestic Upholstery																									16,783			16.0	%		25,324			18.7	%
All Other			28,697			18.1	%		29,982		17.5	%		82,641			18.5	%		86,594		17.9	%		2,987			2.9	%		2,964			2.2	%
Consolidated		$	158,176			100.0	%	$	171,474		100.0	%	$	445,942			100.0	%	$	483,026		100.0	%	$	104,597			100.0	%	$	135,518			100.0	%

Gross Profit
Hooker Branded		$	13,947			31.9	%	$	14,334		30.8	%	$	38,323			31.2	%	$	41,372		31.9	%	$	8,005			29.5	%	$	12,556			31.7	%
Home Meridian			7,286			8.5	%		15,382		16.2	%		24,139			10.0	%		43,196		16.2	%		6,809			11.8	%		5,903			8.7	%
Domestic Upholstery																									2,783			16.6	%		6,002			23.7	%
All Other			7,166			25.0	%		6,120		20.4	%		20,279			24.5	%		18,879		21.8	%		1,056			35.4	%		1,056			35.6	%
Consolidated		$	28,399			18.0	%	$	35,836		20.9	%	$	82,741			18.6	%	$	103,447		21.4	%	$	18,653			17.8	%	$	25,517			18.8	%

Operating Income (Loss)
Operating (loss)/Income
Hooker Branded		$	6,188			14.2	%	$	5,712		12.3	%	$	15,453			12.6	%	$	17,381		13.4	%	$	1,333			4.9	%	$	5,177			13.1	%
Home Meridian			(3,955	)		-4.6	%		4,829		5.1	%		(9,013	)		-3.7	%		10,168		3.8	%		(30,348	)		-52.6	%		(4,993	)		-7.4	%
Domestic Upholstery																									(16,810	)		-100.2	%		2,292			9.1	%
All Other			2,760			9.6	%		1,720		5.7	%		7,227			8.7	%		5,960		6.9	%		387			12.9	%		429			14.5	%
Consolidated		$	4,993			3.2	%	$	12,261		7.2	%	$	13,667			3.1	%	$	33,509		6.9	%	$	(45,438	)		-43.4	%	$	2,905			2.1	%

Capital Expenditures
Hooker Branded		$	89					$	350				$	600					$	699				$	53					$	125
Home Meridian			126						143					300						330					89						117
Domestic Upholstery																									238						1,285
All Other			871						1,138					3,845						1,435					-						-
Consolidated		$	1,086					$	1,631				$	4,745					$	2,464				$	380					$	1,527

Depreciation & Amortization
Depreciation
& Amortization
Hooker Branded		$	471					$	984				$	1,453					$	1,479				$	455					$	492
Home Meridian			549						851					1,627						1,795					528						531
Domestic Upholstery																									699						690
All Other			768						1,248					2,180						2,284					3						3
Consolidated		$	1,788					$	3,083				$	5,260					$	5,558				$	1,685					$	1,716

	As of November 3,					As of February 3,					As of May 3,					As of February 2,
	2019		%Total			2019		%Total			2020		%Total			2020		%Total
Identifiable Assets			Assets					Assets					Assets					Assets
Hooker Branded	$	140,920		42.9	%	$	108,445		36.9	%	$	153,298		49.3	%	$	144,112		45.0	%
Home Meridian		146,971		44.8	%		144,277		49.1	%		111,905		36.0	%		138,313		43.2	%
Domestic Upholstery												43,840		14.1	%		36,085		11.3	%
All Other		40,525		12.3	%		41,181		14.0	%		1,924		0.6	%		1,769		0.5	%
Consolidated	$	328,416		100.0	%	$	293,903		100.0	%	$	310,967		100.0	%	$	320,279		100.0	%
Consolidated Goodwill and Intangibles		74,025					75,813					28,515					73,429
Total Consolidated Assets	$	402,441				$	369,716				$	339,482				$	393,708

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Sales by product type are as follows:

	Net Sales (in thousands)																				Net Sales (in thousands)
	Thirteen Weeks Ended										Thirty-Nine Weeks Ended										Thirteen Weeks Ended
	November 3, 2019		%Total			October 28, 2018		%Total			November 3, 2019		%Total			October 28, 2018		%Total			May 3, 2020		%Total			May 5, 2019		%Total
Casegoods	$	105,018		66	%	$	108,584		63	%	$	288,470		65	%	$	304,370		63	%	$	63,602		61	%	$	84,464		62	%
Upholstery		53,158		34	%		62,890		37	%		157,472		35	%		178,656		37	%		40,995		39	%		51,054		38	%
	$	158,176		100	%	$	171,474		100	%	$	445,942		100	%	$	483,026		100	%	$	104,597		100	%	$	135,518		100	%

154. Subsequent Events

Dividends

On ~~December 5, 2019,~~June 2, 2020, our board of directors declared a quarterly cash dividend of $0.16 per share, ~~an increase of 6.7% or $0.01 per share, payable~~which was paid on ~~December~~June 30, ~~2019~~2020 to shareholders of record at ~~December~~June 16, ~~2019.~~2020.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

All references to the “Company,” “we,” “us” and “our” in this document refer to Hooker Furniture Corporation and its consolidated subsidiaries, unless specifically referring to segment information. All references to the ~~“Hooker~~“Hooker”,” “Hooker ~~Division~~Division”,” “Hooker Legacy Brands” or “traditional Hooker” divisions or companies refer to the current components of our Hooker Branded segment, the Domestic Upholstery Segment including Bradington-Young, Sam Moore, and Shenandoah Furniture, and All Other which includes ~~Bradington-Young, Sam Moore, Shenandoah Furniture~~H Contract and ~~H Contract.~~Lifestyle Brands.

References to the “Shenandoah acquisition” refer to the acquisition of substantially all of the assets of Shenandoah Furniture, Inc. on September 29, 2017. References to the “HMI acquisition” refer to the acquisition of substantially all of the assets of Home Meridian International, Inc. on February 1, 2016.

Forward-Looking Statements

Certain statements made in this report, including statements under Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the notes to the consolidated financial statements included in this report, are not based on historical facts, but are forward-looking statements. These statements reflect our reasonable judgment with respect to future events and typically can be identified by the use of forward-looking terminology such as “believes,” “expects,” “projects,” “intends,” “plans,” “may,” “will,” “should,” “would,” “could” or “anticipates,” or the negatives thereof, or other variations thereof, or comparable terminology, or by discussions of strategy. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Those risks and uncertainties include but are not limited to:

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The effect and consequences of the coronavirus (COVID-19) pandemic or future pandemics on a wide range of matters including U.S. and local economies; our business operations and continuity; the health and productivity of our employees; and the impact on our supply chain, the retail environment and our customer base;

■

general economic or business conditions, both domestically and internationally, and instability in the financial and credit markets, including their potential impact on our (i) sales and operating costs and access to financing or (ii) customers and suppliers and their ability to obtain financing or generate the cash necessary to conduct their respective businesses;

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adverse political acts or developments in, or affecting, the international markets from which we import products, including duties or tariffs imposed on those products by foreign governments or the U.S. government, such as the current U.S. administration imposing a 25% tariff on certain goods imported into the United States from China, including almost all furniture and furniture components manufactured in China, with the potential for additional or increased tariffs in the future;

■

sourcing transitions away from China, including the lack of adequate manufacturing capacity and skilled labor and longer lead times, due to competition and increased demand for resources in those countries;

■

~~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;~~

■

~~the risks specifically related to the concentrations of a material part of our sales and accounts receivable in only a few customers;~~

■

risks associated with product defects, including higher than expected costs associated with product quality and safety, and regulatory compliance costs related to the sale of consumer products and costs related to defective or non-compliant products, including product liability claims and costs to recall defective products;

■

~~our inability to collect amounts owed to us;~~

■

disruptions involving our vendors or the transportation and handling industries, particularly those affecting imported products from Vietnam and China, including customs issues, labor stoppages, strikes or slowdowns and the availability of shipping containers and cargo ships;

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the interruption, inadequacy, security breaches or integration failure of our information systems or information technology infrastructure, related service providers or the internet or other related issues including unauthorized disclosures of confidential information or inadequate levels of cyber-insurance or risks not covered by cyber insurance;

■

disruptions and damage (including due to weather) affecting our Virginia, North Carolina or California warehouses, our Virginia or North Carolina administrative facilities or our representative offices or warehouses in Vietnam and China;

■

~~achieving and managing growth and change, and the risks associated with new business lines, acquisitions, restructurings, strategic alliances and international operations;~~

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■

risks associated with our reliance on offshore sourcing and the cost of imported goods, including fluctuation in the prices of purchased finished goods, ocean freight costs and warehousing costs and the risk that a disruption in our offshore suppliers could adversely affect our ability to timely fill customer orders;

■

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;

■

difficulties in forecasting demand for our imported products;

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■

risks associated with domestic manufacturing operations, including fluctuations in capacity utilization and the prices and availability of key raw materials, as well as changes in transportation, warehousing and domestic labor costs, availability of skilled labor, and environmental compliance and remediation costs;

■

the risks specifically related to the concentrations of a material part of our sales and accounts receivable in only a few customers;

■

our inability to collect amounts owed to us or significant delays in collecting such amounts;

■

achieving and managing growth and change, and the risks associated with new business lines, acquisitions, restructurings, strategic alliances and international operations;

■

higher than expected employee medical and workers’ compensation costs that may increase the cost of our high-deductible healthcare and workers compensation plans;

■

~~our ability to successfully implement our business plan to increase sales and improve financial performance;~~product liability claims;

■

risks related to our other defined benefit plans;

■

the ~~possible~~ impairment of our long-lived assets, which can result in reduced earnings and net worth;

■

capital requirements and costs, including the servicing of our floating-rate term loans;

■

risks associated with distribution through third-party retailers, such as non-binding dealership arrangements;

■

the cost and difficulty of marketing and selling our products in foreign markets;

■

~~price competition in the furniture industry;~~

■

~~difficulties in forecasting demand for our imported products;~~

■

changes in domestic and international monetary policies and fluctuations in foreign currency exchange rates affecting the price of our imported products and raw materials;

■

the cyclical nature of the furniture industry, which is particularly sensitive to changes in consumer confidence, the amount of consumers’ income available for discretionary purchases, and the availability and terms of consumer credit;

■

~~risks associated with domestic manufacturing operations, including fluctuations~~price competition in ~~capacity utilization and~~ the prices and availability of key raw materials, as well as changes in transportation, warehousing and domestic labor costs, availability of skilled labor, and environmental compliance and remediation costs;

■

~~risks associated with distribution through third-party retailers, such as non-binding dealership arrangements;~~

■

~~capital requirements and costs, including the servicing of our floating-rate term loans;~~furniture industry;

■

competition from non-traditional outlets, such as internet and catalog retailers; and

■

changes in consumer preferences, including increased demand for lower-quality, lower-priced furniture due to, among other things, fluctuating consumer confidence, amounts of discretionary income available for furniture purchases and the availability of consumer credit.

Our forward-looking statements could be wrong in light of these and other risks, uncertainties and assumptions. The future events, developments or results described in this report could turn out to be materially different. Any forward-looking statement we make speaks only as of the date of that statement, and we undertake no obligation, except as required by law, to update any forward-looking statements whether as a result of new information, future events or otherwise and you should not expect us to do so.

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Also, our business is subject to a number of significant risks and uncertainties any of which can adversely affect our business, results of operations, financial condition or future prospects. For a discussion of risks and uncertainties that we face, see the Forward-Looking Statements detailed above and Item 1A, “Risk Factors” in our ~~2019~~2020 annual report on Form 10-K (the ~~“2019~~“2020 Annual Report”).

Investors should also be aware that while we occasionally communicate with securities analysts and others, it is against our policy to selectively disclose to them any material nonpublic information or other confidential commercial information. Accordingly, investors should not assume that we agree with any projection, forecast or report issued by any analyst regardless of the content of the statement or report, as we have a policy against confirming information issued by others.

This quarterly report on Form 10-Q includes our unaudited condensed consolidated financial statements for the thirteen-week period (also referred to as “three months,” “three-month period,” “quarter,” ~~“third~~“first quarter” or “quarterly period”) that began ~~August 5, 2019,~~February 3, 2020 and ~~the thirty-nine week period (also referred to as “nine months,” “nine-month period” or “year-to-date period”) that began February 4, 2019, which both~~ ended ~~November~~May 3, ~~2019.~~2020. This report discusses our results of operations for this period compared to the ~~2019~~2020 fiscal year thirteen-week period that began ~~July 30, 2018~~February 4, 2019 and ~~the thirty-nine-week period that began January 29, 2018, which both~~ ended ~~October 28, 2018;~~May 5, 2019; and our financial condition as of ~~November~~May 3, ~~2019~~2020 compared to February ~~3, 2019.~~2, 2020.

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References in this report to:

■

the 2021 fiscal year and comparable terminology mean the fiscal year that began February 3, 2020 and will end January 31, 2021; and

■

the 2020 fiscal year and comparable terminology mean the fiscal year that began February 4, 2019 and ~~will end~~ended February 2, ~~2020; and~~

■

~~the 2019 fiscal year and comparable terminology mean the fiscal year that began January 29, 2018 and ended February 3, 2019.~~2020.

Dollar amounts presented in the tables below are in thousands except for per share data.

The following discussion should be read in conjunction with the condensed consolidated financial statements, including the related notes, contained elsewhere in this quarterly report. We also encourage users of this report to familiarize themselves with all of our recent public filings made with the Securities and Exchange Commission (“SEC”), especially our ~~2019~~2020 Annual Report. Our ~~2019~~2020 Annual Report contains critical information regarding known risks and uncertainties that we face, critical accounting policies and information on commitments and contractual obligations that are not reflected in our condensed consolidated financial statements, as well as a more thorough and detailed discussion of our corporate strategy and new business initiatives.

Our ~~2019~~2020 Annual Report and our other public filings made with the SEC are available, without charge, at www.sec.gov and at http://investors.hookerfurniture.com.

Overview

Hooker Furniture Corporation, incorporated in Virginia in 1924, is a designer, marketer and importer of casegoods (wooden and metal furniture), leather furniture and fabric-upholstered furniture for the residential, hospitality and contract markets. We also domestically manufacture premium residential custom leather and custom fabric-upholstered furniture. We are ranked among the nation’s top five largest publicly traded furniture sources, based on ~~2018~~2019 shipments to U.S. retailers, according to a ~~2019~~2020 survey by a leading trade publication.

We believe that consumer tastes and channels in which they shop for furniture are evolving at a rapid pace and we continue to change to meet these demands.

Our strategy is to leverage the financial strength afforded us by Hooker’s slower-growing but highly profitable traditional businesses in order to boost revenues and earnings both organically and by acquiring companies selling in faster-growing channels of distribution in which our traditional businesses are under-represented. Consequently, Hooker acquired the business of Home Meridian on February 1, 2016 and Shenandoah Furniture on September 29, 2017.

We believe our acquisition of Home Meridian has better positioned us in some of the fastest growing and advantaged channels of distribution, including e-commerce, warehouse membership clubs and ~~contract~~hospitality furniture. While growing faster than industry average, these channels tend to operate at lower margins.

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We also believe our acquisition of Shenandoah Furniture, a North Carolina-based domestic upholsterer has better positioned us in the “lifestyle specialty” retail distribution channel. For that channel, domestically- produced, customizable upholstery is extremely viable and preferred by the end consumers who shop at retailers in that channel.

COVID-19

During the fiscal 2021 first quarter, COVID-19 was recognized as a global pandemic. Federal, state and local governments in the U.S and elsewhere have imposed restrictions on travel and business operations and are advising or requiring individuals to limit or eliminate time outside of their homes. Temporary closures of certain businesses were also ordered in certain jurisdictions and other businesses temporarily closed voluntarily. Consequently, the COVID-19 outbreak severely restricted the level of economic activity in the U.S. and around the world.

We monitor information on COVID-19 from the Centers for Disease Control and Prevention (“CDC”) and believe we are adhering to their recommendations regarding the health and safety of our personnel. To address the potential human impact of the virus, most of our administrative staff are telecommuting. For those administrative staff not telecommuting and our warehouse and domestic manufacturing employees, we have implemented social distancing and mask policies, instituted daily temperature checks and have stepped-up facility cleaning at each location. Non-essential domestic travel for our employees has ceased and international travel has been prohibited outright. Testing and treatment for COVID-19 is covered 100% under our medical plan and counseling is available through our employee assistance plan to assist employees with financial, mental and emotional stress related to the virus and other issues. In addition, we are offering temporary paid leave to employees diagnosed with the virus (and those associates with another diagnosed person or persons in their household) and are working to accommodate associates with child-care issues related to school or day-care closures and anticipated re-openings.

To address the financial impact of the virus, we have delayed non-essential capital spending and have implemented other cost-cutting measures, including abbreviated shifts, furloughs, the temporary closure of our domestic manufacturing plants, staff reductions, temporary fee reductions for our Board of Directors, temporary salary reductions for officers and other managers, rationalizing current import purchase orders and we are working with our vendors to cut costs and extend payment terms where we can.

Demand for home furnishings appears to be increasing as order rates in all divisions have increased. Orders plummeted over 70% year over year in March and approximately 65% year over year in April. Cancellations of stock orders by large customers and deferred orders from retailers who closed their stores during the shutdown partially drove the steep declines. Orders declined significantly during the first few weeks of May but then recovered resulting in an about a 5% overall reduction for the full month compared to the prior year. Fiscal June and July orders have continued this positive trend.

Executive ~~Summary-~~~~Results~~Summary-Results of Operations

Consolidated net sales for the fiscal ~~2020 third~~2021 first quarter decreased ~~$13.3~~by $30.9 million or ~~7.8%~~22.8% as compared to the prior year period, from ~~$171.5~~$135.5 million to ~~$158.2 million due primarily to $9.2 million or 9.7% net~~$104.6 million. Nearly 50% of the sales decrease occurred in April, the ~~Home Meridian segment, and to a lesser extent net~~first full month we operated under COVID-19 crisis conditions, which caused greatly reduced demand for our products. We experienced significant sales decreases in all three reportable segments during the fiscal 2021 first quarter. Hooker ~~Branded segment and All Other of $2.8 million and $1.3 million, respectively.~~

~~For the first nine months of fiscal 2020, consolidated~~Branded’s net sales decreased ~~$37.1~~by $12.4 million or ~~7.7% from $483.0 million to $445.9 million as compared to the prior year period due to sales decreases in both of our reportable segments as well as All Other.~~31.4%, Home ~~Meridian segment net sales declined by $26.0 million or 9.8%, the Hooker Branded segment~~Meridian’s net sales decreased ~~$7.1~~by $10.0 million or ~~5.5%~~14.7% and Domestic Upholstery’s net sales decreased by $8.5 million or 33.7%. All Other net sales ~~decreased $4.0 million or 4.6%,~~stayed essentially flat, all as compared to the fiscal ~~2019 nine-month~~2020 first quarter.

The adverse economic effects brought on by the COVID-19 pandemic triggered an interim intangible asset impairment analysis which required us to perform a valuation of our intangible assets. As a result of the valuation analysis, we recorded $44.3 million in non-cash impairment charges to write down goodwill and tradenames in our Home Meridian segment and goodwill in the Shenandoah division of our Domestic Upholstery segment. Our stock price was near a six-year low at the impairment measurement date at the end of the fiscal 2021 first quarter, which was near the zenith of the COVID-19 crisis to that point. Our deflated quarter-end market valuation was one of the primary inputs in the valuation analysis and the analysis indicated these assets were impaired and it was appropriate to write them down.

Primarily due to the impairment charge, but also due to lower sales, and despite cost cutting measures (described further on page 23), for the first time since the housing crisis over a decade ago, we reported quarterly operating and net losses in the fiscal 2021 first quarter. Consolidated net loss was $34.8 million compared to $2.0 million of net income reported in the fiscal 2020 first quarter. Loss per share was $2.95 as compared to earnings per share of $0.17 in the comparable prior year period.

~~Consolidated net income decreased $5.4 million or 58.0% and $15.1 million or 60.0%, as compared to the prior year third quarter and first nine months, respectively.~~

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As discussed in greater detail under “Results of Operations” below, the following are the primary factors that affected our consolidated fiscal ~~2020 third~~2021 first quarter ~~and first nine months~~ results of operations:

■

Gross profit. ~~Fiscal 2020 third quarter and first nine-months, consolidated~~Consolidated gross profit decreased both in absolute terms and as a percentage of net sales, due to decreased gross profit ~~in the Home Meridian segment and to a lesser extent in the~~at Hooker Branded ~~segment, partially offset by increased~~and Domestic Upholstery, as a result of sales declines in both segments and unabsorbed costs in Domestic Upholstery due to the temporary idling of most of its domestic manufacturing operations in April. Home Meridian’s gross profit increased in absolute terms and as a percentage of net sales due to the non-recurrence of several major prior-year costs including excess tariffs, higher returns and allowances, and increased product costs. All ~~Other. In the nine-month period, the~~Other’s gross profit ~~decrease was also partially offset by the absence~~stayed essentially flat in absolute terms and as a percentage of ~~$500,000 casualty loss related to the damage caused by torrential rains at one of our warehouse facilities recorded in the fiscal 2019 second quarter.~~net sales.

■

Selling and administrative expenses. Consolidated selling and administrative (“S&A”) expenses for fiscal 2021 first quarter decreased in absolute terms ~~but increased as a percentage of~~due to decreased selling expenses on lower net sales and profitability, decreased compensation expenses, and other decreased operating expenses, partially offset by increased allowances for doubtful accounts and the absence of a deferred gain recognized in the ~~fiscal 2020 third quarter and first nine months.~~prior year period related to the sale of a former distribution facility. S&A ~~expense~~expenses increased as a percentage of net sales due to lower ~~sales. S&A expenses decreased in absolute terms due to decreased selling expenses and compensation costs resulting from lower~~ net ~~sales and profitability, partially offset by increased salaries and wages and the absence of $1.0 million one-time life insurance gain recorded in fiscal 2019 first quarter.~~sales.

■

~~Intangible asset amortization expense.~~Goodwill and trade name impairment charges. ~~Intangible amortization expense on~~We recorded $44.3 million in non-cash impairment charges during the quarter.$39.6 million goodwill impairment charges were recorded in the Home Meridian segment and ~~Shenandoah acquisition-related intangible assets~~the Domestic Upholstery segment. $4.8 million in trade name impairment charges were recorded in the Home Meridian segment. We recorded income tax benefit of $10.9 million for the fiscal 2021 first quarter, of which income tax benefit of $10.6 million was ~~unchanged compared~~recorded related to ~~the prior year periods.~~these impairment charges.

■

Operating ~~income~~loss. Consolidated operating ~~income decreased from $12.3~~loss was $45.4 million, a decrease of $48.3 million compared to ~~$5.0~~$2.9 million ~~and from 7.2% to 3.2% as a percentage of net sales~~operating income in the ~~fiscal 2020 third quarter. For the fiscal 2020~~prior year first ~~nine months, consolidated operating income decreased from $33.5 million to $13.7 million and from 6.9% to 3.1% as a percentage of net sales,~~quarter, due to the factors discussed above and in greater detail in the analysis below.

Review

~~Our lower third quarter~~Fiscal 2021 started on a positive note with increased incoming orders in February as compared with the prior year; however, the COVID-19 pandemic significantly impacted our business in March and April. Consolidated net sales decreased by about 23% compared to prior year first quarter. Decreased demand for home furnishings driven by the temporary closure of many of our customers’ stores and ~~earnings~~continuing deterioration in the retail environment were ~~disappointing. They were impacted significantly by higher chargebacks~~the primary drivers of the decline in orders and ~~reduced volume from a single large retail customer in our Home Meridian segment. The lingering effects of 25% tariffs on finished goods~~sales. We reported operating and ~~component parts imported from China, along with spotty retail demand that has continued through~~net losses for the first ~~nine months of the year, also negatively affected our performance.~~

~~The sales decline with the single major customer represented 70% of~~time in over a $9 million volume reduction at the Home Meridian segment, and approximately $3 million in chargebacks from the same retailer drove a $4.0 million operating loss for the quarter in the segment. That compares to operating income of about $5 million at Home Meridian in the same quarter a year ago. Several other factors also negatively affected Home Meridian’s current quarter results including about $600,000 in demurrage costs due to excess inventory that we added in anticipation of increased sales, and $450,000 in costs to store that inventory and additional excess inventory due to quality-related customer returns from a major customer last year. We also wrote that inventory down by $650,000 to market value during the quarter to increase the rate of sale. Additionally, Home Meridian incurred about $200,000 in start-up costs for HMIdea during the current quarter. These costs were partially offset by a $520,000 gain on the settlement of our pension plan during the quarter, recorded in other income.

decade. On a more positive note, ~~Home Meridian’s hospitality and~~our e-commerce sales continued to grow. Samuel Lawrence Hospitality’s (“SLH”) net sales increased over 30% for the first nine months and ended the quarter with backlog 27% higher than the prior year period and is expected to continue to grow. Home Meridian has also launched a new division, HMidea, which will offer better-quality, ready-to-assemble furniture to mass marketers and e-commerce customers. HMidea’s initial launch was well received at the October High Point Furniture Market and the line is expected continue to grow even in the ~~coming months.~~

Percentage-wise, sales in Hooker Branded and All Other were down in the mid-to-low single digits, respectively, and gross profits and operating income improved compared to the prior year third quarter as a percentage of net sales. The impact of 25% tariffs on imported furniture from China enacted this summer has generally resulted in a 10% price increase on the portion of the Company’s product line imported from China in the Hooker Branded segment, suppressing retail demand. In total, given the challengingcurrent muted retail environment, ~~and~~which has proven the ~~continued impact~~value of tariffs, we were gratified to improve profitability performance in the Hooker Branded segment and All Other. The Hooker Branded Segment achieved a 190-basis-point improvement in operating income margin, and All Other achieved a 390-basis-point improvement compared to prior year third quarter.

~~Table~~our strategy of ~~Contents~~

pursuing multiple distribution channels at multiple price points.

The Hooker Branded segment’s net sales decreased ~~$2.8~~$12.4 million or ~~6.0%~~31.4% in the fiscal ~~2020 third~~2021 first quarter, driven by reduced demand. The majority of this segment’s customers are traditional furniture stores and small or regional chains, most of which were closed since late March, leading to nearly 30% incoming order decline in the segment. Despite the sales decline, this segment was still highly profitable with a 29.5% gross margin and a 4.9% operating income margin during the quarter, which we believe to be excellent performance under current economic conditions.

The Home Meridian segment’s net sales decreased $10.0 million or 14.7% in the fiscal 2021 first quarter due primarily to lower sales volume due to the COVID-19 pandemic. Current economic factors, such as high unemployment and low consumer confidence, have resulted in a ~~net sales~~weak retail environment for home furnishings and caused discretionary purchases of furniture to decline. Consequently, Home Meridian experienced a spike in order cancellations in March and April, which resulted in nearly 50% decrease in ~~the Hooker Casegoods division, partially offset by a net sales increase at Hooker Upholstery. Hooker Casegoods experienced reduced~~ incoming orders and 25.3% decrease in backlog compared to the prior year first quarter. In addition to the aforementioned intangible asset impairment charges recorded in this segment of $27.9 million and sales decline, lower margin sales ~~volume driven by lower consumer demand~~programs, promotion expenses and ~~softness~~unexpected chargebacks also contributed to the $30.3 million operating loss. On a more positive note, we believe the cost-related issues which negatively impacted Home Meridian’s sales and profitability in the ~~home furnishings industry. Volume loss was partially mitigated~~prior year, such as excess tariffs and higher than expected quality allowances, are largely behind us. The resourcing transition to non-tariff countries is well along. Samuel Lawrence Furniture benefited from the Vietnam mixing warehouse program and reported a marginally profitable quarter. Home Meridian’s emerging distribution channels, including ecommerce and hospitality, had solid performance during the quarter. Samuel Lawrence Hospitality’s net sales increased by ~~higher average selling prices~~22.6% as ~~we adjusted pricing to mitigate increased product costs and excess tariffs. Hooker Upholstery~~large projects were already in the pipeline at year-end. E-commerce sales, which were less impacted by retail shutdowns during the COVID-19 pandemic, continued to grow at a steady pace and accounted for 35% of Home Meridian’s total sales in the quarter, while maintaining better margins compared to the other Home Meridian channels.

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The Domestic Upholstery segment’s net sales ~~and gross profit, both~~decreased by $8.5 million or 33.7% in the ~~double digits, due~~fiscal 2021 first quarter driven by decreased sales volume and lower average selling prices. The segment experienced a 40% decrease in incoming orders as compared to ~~broader product offerings~~the same period from the prior year. In response to those reduced orders, we temporarily closed our manufacturing plants at Bradington-Young and ~~favorable~~Shenandoah for about a month during the quarter, and Sam Moore operated at about 50% capacity during that period. Reduced order volume and unabsorbed indirect costs contributed to operating inefficiencies and significantly impacted gross margin in this segment.

All Other’s net sales were essentially flat; however, it reported $387,000 in operating income in the fiscal 2021 first quarter driven by solid H Contract performance, with a 16% increase in incoming orders and 68% higher backlog compared to the prior year first quarter. Despite unfavorable product mix ~~with more higher-priced sofas and sectionals sold. Hooker Upholstery’s incoming orders increased over 10% compared to~~having a modest adverse impact on gross margin, H Contract margins remained strong. Lifestyle Brands, a new business started in fiscal 2019, ~~third~~also reported a profit for the quarter.

~~Our sourcing transitions to non-tariff countries are on schedule. Company-wide,~~To address the financial impact of COVID-19 pandemic, during the fiscal 2021 first quarter we ~~expect~~implemented certain measures to reduce operating expenses and preserve cash which included temporary fee reductions for our Board of Directors, temporary salary reductions for officers and certain other managers, strategic staff reductions, the ~~portion~~temporary closure of our ~~overall product line imported from China from about 40% at~~domestic manufacturing plants and the ~~end~~furlough of manufacturing, warehouse and administrative associates, delaying all non-critical capital spending, rationalizing current import purchase orders, working with our ~~most recent fiscal year~~vendors to ~~approximately 22% by this fiscal year end, with further progress expected in fiscal 2021.~~cut costs and extend payment terms where we could.

~~Net sales in All Other decreased $1.3 million or 4.3% in~~Despite the fiscal 2020 third quarter due to sales declines at Bradington –Young and Sam Moore, driven by decreased incoming orders, partially offset by continued strong sales in H Contract division and a lower-single digit sales increase at Shenandoah. Despite net sales declines, three out of four divisions improved gross margin in the third quarter, benefiting from lower material costs and better cost containment, partially offset by operating inefficiencies and higher direct labor due to lower production volume in the third quarter. However, favorable material costs have leveled out and we do not expect additional decreases in the near future. H Contract incoming orders increased over 15% in the third quarter and finishedloss for the quarter, with backlog over 20% higher than the prior year quarter end. Broader product offerings and favorable product mix with heavier weighting of imported casegoods significantly improved H Contract net sales and profitability. All Other reported a solid operating income margin of 9.6% and 8.7% for the fiscal 2020 third quarter and year to date, respectively.

Cash and cash equivalents increased $13.1 million to $24.5 million compared to $11.4 million at fiscal 2019 year-end, principally due to customer deposits in Home Meridian’s hospitality division and the collection of accounts receivable. Despite disappointing operating results thus far in fiscal 2020, we generated ~~$26.6~~$18.9 million in cash from operating activities, received $673,000 life insurance proceeds, paid $2.2 million in principal and ~~$1.4 million from proceeds received~~interest on ~~a note receivable from the sale of a former distribution facility. In addition, we paid $5.3~~our term loans, and distributed $1.9 million in cash dividends to our ~~shareholders, $4.7~~shareholders. Cash and cash equivalents stood at $51.2 million ~~for capital expenditures to expand our manufacturing facilities, and $4.4~~at fiscal 2021 first quarter-end, an increase of $15.2 million ~~towards our term loans. Our total assets and liabilities as of November 3, 2019 each increased approximately $41 million due~~compared to the ~~adoption of Topic 842, Leases on the first day of the current fiscal year. We are working to reduce excess inventory and exited one of the temporary warehouses early in the~~balance at fiscal 2020 ~~fourth quarter. With strategic inventory management and cautious capital expenditures, along~~year-end.

Along with an aggregate $25.7 million available under our existing ~~revolving credit facility~~revolver to fund working capital, we are confident in our financial condition ~~going forward.~~and we believe we have financial resources to weather the expected short-term impacts of COVID-19; however, an extended impact may continue to materially and adversely affect our sales, earnings and liquidity.

Results of Operations

The following table sets forth the percentage relationship to net sales of certain items included in the condensed consolidated statements of income included in this report.

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended						Thirteen Weeks Ended
	November 3,			October 28,			November 3,			October 28,			May 3,			May 5,
	2019			2018			2019			2018			2020			2019
Net sales		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		82.0			79.1			81.4			78.5			82.2			81.2
Casualty loss		-			-			-			0.1
Total cost of sales		82.0			79.1			81.4			78.6
Gross profit		18.0			20.9			18.6			21.4			17.8			18.8
Selling and administrative expenses		14.4			13.4			15.1			14.1			18.3			16.2
Goodwill impairment charges														37.8			-
Trade name impairment charges														4.6			-
Intangible asset amortization		0.4			0.3			0.4			0.4			0.6			0.4
Operating income		3.2			7.2			3.1			6.9
Other income, net		0.2			0.1			-			0.1
Operating (loss)/income														(43.4	)		2.1
Interest expense, net		0.2			0.2			0.2			0.2			0.2			0.3
Income before income taxes		3.2			7.1			2.9			6.8
(Loss)/income before income taxes														(43.7	)		1.8
Income tax expense		0.7			1.6			0.6			1.6			(10.4	)		0.4
Net income		2.5			5.4			2.3			5.2
Net (loss)/income														(33.3	)		1.5

Table of Contents

Fiscal ~~2020 Third~~2021 First Quarter Compared to Fiscal ~~201~~20~~9 Third~~20 ~~Quarter~~ First Quarter

Net Sales

Thirteen Weeks Ended

November 3, 2019

October 28, 2018

$ Change

% Change

% Net Sales

% Net Sales

Hooker Branded
$ 43,703 27.6 % $ 46,479 27.1 % $ (2,776 ) -6.0 %
Home Meridian
85,776 54.3 % 95,013 55.4 % (9,237 ) -9.7 %
All Other
28,697 18.1 % 29,982 17.5 % (1,285 ) -4.3 %
Consolidated
$ 158,176 100 % $ 171,474 100 % $ (13,298 ) -7.8 %

Fiscal 2020 results have been recast based on the re-composition of our reportable segments during the fiscal 2020 fourth quarter. See Note 13 Segment Information for additional details regarding the re-composition of our operating segments.

Unit Volume	FY20 Q3 % Increase vs. FY19 Q3			Average Selling Price (ASP)	FY20 Q3 % Increase vs. FY19 Q3
								Net Sales
								Thirteen Weeks Ended
								May 3, 2020					May 5, 2019					$ Change			% Change
										% Net Sales					% Net Sales
Hooker Branded		-21.1	%	Hooker Branded		19.7	%	$	27,162		26.0	%	$	39,600		29.2	%	$	(12,438	)		-31.4	%
Home Meridian		-4.7	%	Home Meridian		-1.7	%		57,665		55.1	%		67,630		49.9	%		(9,965	)		-14.7	%
Domestic Upholstery									16,783		16.0	%		25,324		18.7	%		(8,541	)		-33.7	%
All Other		-11.2	%	All Other		6.7	%		2,987		2.9	%		2,964		2.2	%		23			0.8	%
Consolidated		-7.5	%	Consolidated		1.7	%	$	104,597		100	%	$	135,518		100	%	$	(30,921	)		-22.8	%

Unit Volume	FY21 Q1 % Increase vs. FY20 Q1			Average Selling Price (ASP)	FY21 Q1 % Increase vs. FY20 Q1

Hooker Branded		-35.3	%	Hooker Branded		5.6	%
Home Meridian		-18.3	%	Home Meridian		3.3	%
Domestic Upholstery		-31.0	%	Domestic Upholstery		-4.4	%
All Other		-5.1	%	All Other		1.8	%
Consolidated		-21.6	%	Consolidated		-2.1	%

Consolidated net sales decreased ~~primarily~~ due to significantly reduced sales ~~decline~~volume in all three reportable segments versus the ~~Home Meridian segment and to a lesser extent in the Hooker Branded segment and All Other.~~prior year period.

■

The net sales decrease in the Hooker Branded segment was ~~due to a sales decrease in Hooker Casegoods while partially offset by continued sales growth in Hooker Upholstery. The sales decline was~~ attributable to decreased unit volume in both Hooker Casegoods and Hooker Upholstery divisions. ASP increased in Hooker Branded segment due to increased ASP in Hooker Casegoods, partially offset by decreased ASP in Hooker Upholstery driven by higher discounting and advertising allowances on e-commerce sales. However, increased ASP ~~which~~ was ~~due~~not sufficient to ~~price increases necessitated by~~recover the ~~imposition of tariffs on goods imported from China and higher freight costs, as well as increased sales of higher-priced products by Hooker Upholstery.~~steep volume loss.

■

Net sales decreased in ~~the~~ Home Meridian segment driven by decreased unit volume with major furniture chains and mega accounts due to ~~sales volume loss with club accounts and higher quality chargebacks from a large customer,~~significantly reduced orders, partially offset by increased ~~volume~~sales in ~~Pulaski Furniture and Samuel Lawrence Furniture as their sales begin to return to normal, as well as in Accentrics Home business, which focuses on~~ the ~~growing e-commerce channels. ASP decreased in three out of five divisions but increased significantly at~~ Samuel Lawrence Hospitality (“SLH”) business and to a lesser extent club and e-commerce sales at Accentrics Home. ASP increase was attributable to increased ASP in SLH due to ~~favorable product mix, and at PRI as~~ the ~~result~~nature of ~~margin improvement efforts.~~its projects.

■

~~All Other~~Domestic Upholstery segment net sales decreased due to ~~reduced~~volume loss and decreased ASP. In April, we temporarily shut down Bradington-Young and Shenandoah manufacturing plants and kept the Sam Moore division operating at 50% capacity in response to COVID-19 pandemic restrictions as well as decreased incoming ~~orders at our domestic upholstery manufacturing divisions, partially offset by continued strong~~orders. Thus, Bradington-Young and Shenandoah essentially did not report sales ~~at H Contract. All Other~~in April, while Sam Moore’s April net sales were only 37% of the prior year amount. Domestic Upholstery segment ASP ~~increased~~decreased due ~~primarily~~ to ~~increased sales~~a smaller mix of higher-priced ~~products at~~ Bradington-Young ~~and Shenandoah.~~leather products.

Gross Income and Margin

Thirteen Weeks Ended

November 3, 2019

October 28, 2018

$ Change

% Change

% Net Sales % Net Sales
Hooker Branded
$ 13,947 31.9 % $ 14,334 30.8 % $ (387 ) -2.7 %
Home Meridian
7,286 8.5 % 15,382 16.2 % (8,096 ) -52.6 %
All Other
7,166 25.0 % 6,120 20.4 % 1,046 17.1 %
Consolidated
$ 28,399 18.0 % $ 35,836 20.9 % $ (7,437 ) -20.8 %

Table of Contents

■

All Other net sales increased slightly due to the addition of Lifestyle Brands sales and increased H Contract ASP, partially offset by H Contract decreased unit volume.

	Gross Income and Margin
	Thirteen Weeks Ended
	May 3, 2020					May 5, 2019					$ Change			% Change
			% Net Sales					% Net Sales
Hooker Branded	$	8,005		29.5	%	$	12,556		31.7	%	$	(4,551	)		-36.2	%
Home Meridian		6,809		11.8	%		5,903		8.7	%		906			15.3	%
Domestic Upholstery		2,783		16.6	%		6,002		23.7	%		(3,219	)		-53.6	%
All Other		1,056		35.4	%		1,056		35.6	%		-			0.0	%
Consolidated	$	18,653		17.8	%	$	25,517		18.8	%	$	(6,864	)		-26.9	%

Consolidated gross profit decreased in absolute terms and as a percentage of net sales in the fiscal ~~2020 third quarter.~~

■

The Hooker Branded segment’s gross profit increased as a percentage of net sales and decreased in absolute terms, which was attributable to lower discounting and increased sales at Hooker Upholstery.

■

The Home Meridian segment’s gross profit decreased in absolute terms and as a percentage of net sales due principally to lower sales and the effects of higher customer chargebacks as well as increased product costs due to excess tariff costs, higher freight costs and charges to write inventory of quality-related returns down to market price. Increased warehousing and distribution costs to handle the excess inventory related to quality issues also negatively impacted gross margin.

■

All Other’s gross profit increased in absolute terms and as a percentage of net sales despite a sales decline in the third quarter. Our domestic upholstery manufacturing divisions continued to benefit from favorable cost of goods sold due to lower material costs, decreased benefits expense due to lower medical claims, partially offset by under-absorption of overhead expense due to reduced order volumes and sales of heavily discounted discontinued product at Sam Moore. H Contract gross profit benefitted from favorable product mix.

Selling and Administrative Expenses (S&A)

Thirteen Weeks Ended

November 3, 2019

October 28, 2018

$ Change

% Change

% Net Sales % Net Sales
Hooker Branded
$ 7,760 17.8 % $ 8,623 18.6 % $ (863 ) -10.0 %
Home Meridian
10,907 12.7 % 10,219 10.8 % 688 6.7 %
All Other
4,143 14.4 % 4,137 13.8 % 6 0.1 %
Consolidated
$ 22,810 14.4 % $ 22,979 13.4 % $ (169 ) -0.7 %

~~Consolidated S&A expenses decreased in absolute terms but increased as a percentage of net sales in the fiscal 2020 third quarter.~~

■

Hooker Branded segment S&A expenses decreased in absolute terms and as a percentage of net sales due to decreased compensation costs, lower selling expenses, decreased bad debt expense and other costs.

■

Home Meridian segment S&A expenses increased in absolute terms due primarily to increased wages related to the resourcing transition underway in Asia, increased professional services expenses due to higher compliance costs and consulting fees and start-up costs for the new HMIdea division. The increase in Home Meridian S&A expenses was partially offset by decreased selling expenses due to lower sales. Home Meridian segment S&A expenses increased as a percentage of net sales due to lower net sales and higher S&A expenses.

■

~~All Other S&A expenses stayed flat in absolute terms and increased as a percentage of net sales due to lower net sales.~~

Intangible Asset Amortization

Thirteen Weeks Ended

November 3, 2019

October 28, 2018

$ Change

% Change

% Net Sales % Net Sales
Intangible asset amortization
$ 596 0.4 % $ 596 0.3 % $ - 0.0 %

~~Intangible asset amortization expense stayed the same compared to~~2021 first quarter versus the prior year ~~third quarter.~~

Operating Profit (Loss) and Margin

Thirteen Weeks Ended

November 3, 2019

October 28, 2018

$ Change

% Change

% Net Sales

% Net Sales

Hooker Branded
$ 6,188 14.2 % $ 5,712 12.3 % $ 476 8.3 %
Home Meridian
(3,955 ) -4.6 % 4,829 5.1 % (8,784 ) -181.9 %
All Other
2,760 9.6 % 1,720 5.7 % 1,040 60.5 %
Consolidated
$ 4,993 3.2 % $ 12,261 7.2 % $ (7,268 ) -59.3 %

~~Table of Contents~~

~~Operating profitability decreased in absolute terms and as a percentage of net sales, due to the factors discussed above.~~

Interest Expense, net

Thirteen Weeks Ended

November 3, 2019

October 28, 2018

$ Change

% Change

% Net Sales % Net Sales
Consolidated interest expense, net
$ 316 0.2 % $ 354 0.2 % $ (38 ) -10.7 %

~~Consolidated interest expense decreased due to lower average loan balances, partially offset by increased interest rates on our variable-rate term loans.~~

Income taxes

Thirteen Weeks Ended

November 3, 2019

October 28, 2018

$ Change

% Change

% Net Sales % Net Sales
Consolidated income tax expense
$ 1,066 0.7 % $ 2,775 1.6 % $ (1,709 ) -61.6 %

Effective Tax Rate
21.4 % 22.9 %

~~We recorded income tax expense of $1.1 million for the fiscal 2020 third quarter compared to $2.8 million for the comparable prior year~~ period. ~~The effective tax rates for the fiscal 2020 and 2019 third quarters were 21.4% and 22.9%, respectively.~~

Net Income

Thirteen Weeks Ended

November 3, 2019

October 28, 2018

$ Change

% Change

Net Income % Net Sales % Net Sales
Consolidated
$ 3,920 2.5 % $ 9,332 5.4 % $ (5,412 ) -58.0 %

Diluted earnings per share
$ 0.33 $ 0.79

~~Fiscal 2020 First~~ ~~Nine Months~~ ~~Compared to Fiscal 201~~~~9 First Nine Months~~

Net Sales

Thirty-Nine Weeks Ended

November 3, 2019

October 28, 2018

$ Change

% Change

% Net Sales % Net Sales
Hooker Branded
$ 122,707 27.5 % $ 129,801 26.9 % $ (7,094 ) -5.5 %
Home Meridian
240,594 54.0 % 266,631 55.2 % (26,037 ) -9.8 %
All Other
82,641 18.5 % 86,594 17.9 % (3,953 ) -4.6 %
Consolidated
$ 445,942 100 % $ 483,026 100 % $ (37,084 ) -7.7 %

Unit Volume

FY20 YTD %
Increase
vs. FY19 YTD

Average Selling Price (ASP)

FY20 YTD %
Increase
vs. FY19 YTD

Hooker Branded
-14.0 %
Hooker Branded
10.5 %
Home Meridian
-9.4 %
Home Meridian
1.1 %
All Other
-9.8 %
All Other
5.5 %
Consolidated
-10.0 %
Consolidated
3.5 %

~~Table of Contents~~

Consolidated net sales decrease was driven by net sales decline in the Home Meridian segment, and to a lesser extent in the Hooker Branded segment and All Other. Incoming orders declined primarily due to the soft retail environment, especially earlier in the fiscal year.

■

Net sales decreased in the Hooker Branded segment due to decreased net sales in the Hooker Casegoods division, partially offset by a net sales increase at Hooker Upholstery. Unit volume decreased in this segment while ASP increased due to price increases in response to excess tariffs and higher freight costs, lower discounts, as well as increased sales of higher-priced sofas and sectionals at Hooker Upholstery. Net sales were negatively impacted by higher than expected allowances on increased e-commerce sales.

■

Net sales decreased in Home Meridian segment due to sales volume loss with club accounts and major furniture chains, as well as higher allowances and chargebacks due to quality issues, partially offset by increased volume in the Samuel Lawrence Hospitality business and e-commerce sales growth. ASP increased at Samuel Lawrence Hospitality due to favorable product mix and Accentrics Home which focuses on e-commerce channels, partially offset by decreased ASP in the traditional channels.

■

All Other net sales decreased due to sales declines at our domestic upholstery manufacturing divisions which experienced reduced incoming orders, partially offset by a strong net sales increase at H Contract. ASP increased in all four divisions included in All Other; however, it was not sufficient to mitigate the volume loss.

Gross Income and Margin

Thirty-Nine Weeks Ended

November 3, 2019

October 28, 2018

$ Change

% Change

% Net Sales % Net Sales
Hooker Branded
$ 38,323 31.2 % $ 41,372 31.9 % $ (3,049 ) -7.4 %
Home Meridian
24,139 10.0 % 43,196 16.2 % (19,057 ) -44.1 %
All Other
20,279 24.5 % 18,879 21.8 % 1,400 7.4 %
Consolidated
$ 82,741 18.6 % $ 103,447 21.4 % $ (20,706 ) -20.0 %

~~Consolidated gross profit decreased in absolute terms and as a percentage of net sales in the fiscal 2020 first nine months.~~

■

The Hooker Branded segment’s gross profit decreased $4.6 million due primarily to the net sales decline. Gross margin decreased from 31.7% to 29.5% due to the increase of fixed expenses as a percentage of net sales on lower net ~~sales and increased cost of sales in Hooker Casegoods, partially offset by increased gross profit~~sales. Product costs were negatively impacted in Hooker Upholstery due to ~~steady sales growth, favorable~~a higher mix of product ~~mix, and the absence of a $500,000 casualty loss recorded in fiscal 2019 second quarter. Hooker Branded segment product costs were negatively impacted by excess tariffs and~~sourced from China which carry higher ~~freight~~ costs.

■

~~The~~ Home Meridian segment gross margin increased in absolute terms and as a percentage of net sales despite a net sales decline. In the prior year period, this segment was heavily impacted by increased product costs due to excess tariffs, unexpected quality allowances, and increased warehousing and distribution costs to handle excess inventory. These issues did not re-occur in the fiscal 2021 first quarter, which we believe is the result of the resourcing transition to Vietnam which has helped to reduce product costs, and the exit of temporary warehouses, which has reduced warehousing and handling costs. Home Meridian gross margins were, however, negatively impacted by some lower-margin sales programs.

■

Domestic Upholstery segment’s gross ~~margin~~profit decreased significantly in absolute terms and as a percentage of net sales due ~~primarily~~ to the net sales decline ~~increased product~~and inefficiencies of operating at reduced production volume. Unabsorbed indirect and fixed costs ~~and loss of~~adversely impacted gross margin ~~due to higher quality allowances. This segment was more impacted~~ by excess tariff costs, increased freight costs, resourcing transition costs, and increased warehousing and distribution costs to handle excess inventory related to quality issues and inventory build due to business being slower than forecast.6.5% in this segment.

■

All Other’s gross profit ~~increased~~and margin stayed flat in absolute terms and as a percentage of net ~~sales, primarily due to the sales increase at H Contract; however, all four divisions improved gross margin as a percentage of net~~ sales. In our domestic upholstery manufacturing divisions, favorable cost of goods sold was attributable to lower material costs, lower benefits expense and cost containment efforts, partially offset by under-absorbed overhead and operating costs as our domestic upholstery divisions continue to operate at lower production levels due to reduced incoming orders. H Contract benefitted from favorable product mix and contributed 75% of the increased gross profit in All Other.

~~Table of Contents~~

	Selling and Administrative Expenses (S&A)																Selling and Administrative Expenses (S&A)
	Thirty-Nine Weeks Ended																Thirteen Weeks Ended
	November 3, 2019					October 28, 2018					$ Change			% Change			May 3, 2020					May 5, 2019					$ Change			% Change
			% Net Sales					% Net Sales											% Net Sales					% Net Sales
Hooker Branded	$	22,870		18.6	%	$	23,992		18.5	%	$	(1,122	)		-4.7	%	$	6,672		24.6	%	$	7,379		18.6	%	$	(707	)		-9.6	%
Home Meridian		32,152		13.4	%		32,027		12.0	%		125			0.4	%		8,886		15.4	%		10,562		15.6	%		(1,676	)		-15.9	%
Domestic Upholstery																		2,949		17.6	%		3,447		13.6	%		(498	)		-14.4	%
All Other		12,264		14.8	%		12,131		14.0	%		133			1.1	%		670		22.4	%		628		21.2	%		42			6.7	%
Consolidated	$	67,286		15.1	%	$	68,150		14.1	%	$	(864	)		-1.3	%	$	19,177		18.3	%	$	22,016		16.2	%	$	(2,839	)		-12.9	%

Consolidated selling and administrative (“S&A&A”) expenses decreased in absolute terms ~~but~~while increased as a percentage of net sales in the fiscal ~~2020~~2021 first ~~nine months.~~quarter versus the prior year period.

Table of Contents

■

The Hooker Branded ~~segment~~segment’s S&A expenses decreased in absolute terms in the fiscal 2021 first quarter due primarily to decreased ~~compensation~~selling costs ~~and selling expenses~~ as the result of lower net sales, ~~and profitability,~~decreased employee compensation expenses related to temporary salary reductions, furloughs and the ~~recognition~~elimination of positions due to the COVID-19 pandemic and decreased travel and market expenses due also to COVID-19. The decreases were partially offset by higher bad debt expenses due to a customer write-off during the quarter unrelated to COVID-19 and an increase in reserves to recognize expected future credit losses under the aforementioned ASC 326 requirements effective for us during the current quarter, increased advertising supply expenses for new product introductions, and the absence of a deferred gain related to the sale of a former distribution facility which we had owner-financed which was paid off during the first quarter. Lower costs were partially offset by higher salaries and wages due to increased headcount, higher expenses to support e-commerce, and the absence of a $1.0 million life insurance gain recorded in the prior year period. Hooker Branded ~~segment S&A expenses stayed essentially flat as a percentage of net sales.~~

■

Home Meridian segment S&A expenses increased in absolute terms due primarily to increased labor costs related to the sourcing transition in Asia, increased professional service fees for compliance and training, increased travel expenses incurred during the sourcing transition and start-up costs for HMIdea, partially offset by decreased selling expenses and bonus attributable to lower sales and profitability. Home Meridian segment S&A expenses increased as a percentage of net sales due to lower net sales.

■

The Home Meridian segment’s S&A expenses decreased in absolute terms while staying relatively flat as a percentage of net sales. The decrease was principally attributable to lower selling expenses due to net sales, and to a lesser extent spending reductions, decreased travel and professional service expenses which were higher in the prior year period due to the resourcing transition. These expenses decreased in the current period as the resourcing transition was in its final stages and business travel was also limited due to COVID-19 pandemic.

■

The Domestic Upholstery segment’s S&A expenses decreased in absolute terms due to decreased selling expenses on lower net sales, partially offset by higher medical claim costs.

■

All Other S&A expenses increased slightly in absolute terms and as a percentage of net sales due to ~~higher compensation costs, higher benefits expenses due to medical claims and increased advertising supplies expenses to support the launch of a new brand.~~internal personnel changes.

Intangible Asset Amortization

Thirty-Nine Weeks Ended

November 3, 2019

October 28, 2018

$ Change

% Change

% Net Sales % Net Sales
Intangible asset amortization
$ 1,788 0.4 % $ 1,788 0.4 % $ - 0.0 %

	Goodwill impairment charges
	Thirteen Weeks Ended
	May 3, 2020					May 5, 2019					$ Change		% Change
			% Net Sales					% Net Sales
Home Meridian	$	23,187		40.2	%	$	-		0.0	%	$	23,187
Domestic Upholstery		16,381		97.6	%		-		0.0	%		16,381
Consolidated		39,568		37.8	%		-					39,568

	Trade name impairment charges
	Thirteen Weeks Ended
	May 3, 2020					May 5, 2019			$ Change		% Change
			% Net Sales					% Net Sales
Home Meridian	$	4,750		8.2	%	$	-		$	4,750
Consolidated	$	4,750		4.6	%	$	-			4,750

We recorded $23.2 million and $16.4 million in non-cash impairment charges to write down goodwill in Home Meridian segment and the Shenandoah division under Domestic Upholstery segment, respectively. We also recorded $4.8 million non-cash impairment charges to write down tradenames in the Home Meridian segment.

	Intangible Asset Amortization
	Thirteen Weeks Ended
	May 3, 2020					May 5, 2019					$ Change		% Change
			% Net Sales					% Net Sales
Intangible asset amortization	$	596		0.6	%	$	596		0.4	%	$	-		0.0	%

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Intangible asset amortization expense stayed the same compared to the prior year ~~nine-month period.~~first quarter.

	Operating Profit (Loss) and Margin																	Operating (Loss)/Profit and Margin
	Thirty-Nine Weeks Ended																	Thirteen Weeks Ended
	November 3, 2019						October 28, 2018					$ Change			% Change			May 3, 2020						May 5, 2019						$ Change			% Change
				% Net Sales					% Net Sales												% Net Sales						% Net Sales
Hooker Branded	$	15,453			12.6	%	$	17,381		13.4	%	$	(1,928	)		-11.1	%	$	1,333			4.9	%	$	5,177			13.1	%	$	(3,844	)		-74.3	%
Home Meridian		(9,013	)		-3.7	%		10,168		3.8	%		(19,181	)		-188.6	%		(30,348	)		-52.6	%		(4,993	)		-7.4	%		(25,355	)		-507.8	%
Domestic Upholstery																			(16,810	)		-100.2	%		2,292			9.1	%		(19,102	)		833.4	%
All Other		7,227			8.7	%		5,960		6.9	%		1,267			21.3	%		387			12.9	%		429			14.5	%		(42	)		-9.8	%
Consolidated	$	13,667			3.1	%	$	33,509		6.9	%	$	(19,842	)		-59.2	%	$	(45,438	)		-43.4	%	$	2,905			2.1	%	$	(48,343	)		-1664.1	%

Operating profitability decreased in absolute terms and as a percentage of net sales, ~~in fiscal 2020 first nine months,~~ due to the factors discussed above.

Interest Expense, net

Thirty-Nine Weeks Ended

November 3, 2019

October 28, 2018

$ Change

% Change

% Net Sales % Net Sales
Consolidated interest expense, net
$ 986 0.2 % $ 1,099 0.2 % $ (113 ) -10.3 %

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	Interest Expense, net
	Thirteen Weeks Ended
	May 3, 2020					May 5, 2019					$ Change			% Change
			% Net Sales					% Net Sales
Consolidated interest expense, net	$	208		0.2	%	$	341		0.3	%	$	(133	)		-39.0	%

Consolidated interest expense decreased in fiscal 2021 first quarter primarily due to ~~loan balances, partially offset by increased~~lower interest rates on our variable-rate term ~~loans.~~loans, as well as lower principal balances.

	Income taxes																		Income taxes
	Thirty-Nine Weeks Ended																		Thirteen Weeks Ended
	November 3, 2019						October 28, 2018						$ Change			% Change			May 3, 2020						May 5, 2019						$ Change			% Change
				% Net Sales						% Net Sales												% Net Sales						% Net Sales
Consolidated income tax expense	$	2,829			0.6	%	$	7,504			1.6	%	$	(4,675	)		-62.3	%
Consolidated income tax (benefit)/expense																			$	(10,869	)		-10.4	%	$	515			0.4	%	$	(11,384	)		-2210.5	%

Effective Tax Rate		21.9	%					23.0	%											23.8	%					20.6	%

We recorded income tax ~~expense~~benefit of ~~$2.8~~$10.9 million for the fiscal ~~2020~~2021 first ~~nine months~~quarter, of which income tax benefit of $10.6 million was recorded related to goodwill and trade name impairment charges, compared to ~~$7.5 million~~$515,000 income tax expense for the comparable prior year period. The effective tax rates for the fiscal 2021 and 2020 first quarters were 23.8% and ~~2019 first nine months were 21.9% and 23.0%~~20.6%, respectively.

	Net Income																Net (Loss)/Income
	Thirty-Nine Weeks Ended																Thirteen Weeks Ended
	November 3, 2019					October 28, 2018					$ Change			% Change			May 3, 2020						May 5, 2019					$ Change			% Change
			% Net Sales					% Net Sales
Net (loss) / income																				% Net Sales					% Net Sales
Consolidated	$	10,067		2.3	%	$	25,181		5.2	%	$	(15,114	)		-60.0	%	$	(34,819	)		-33.3	%	$	1,987		1.5	%	$	(36,806	)		-1852.3	%

Diluted earnings per share	$	0.85				$	2.13
Diluted (loss) / earnings per share																	$	(2.95	)				$	0.17

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Outlook

The COVID-19 crisis drove the most significant downturn in our business in over 50 years. However, the disruption has not been as severe as we initially projected. Based on the improvement in orders and retail sales we’ve seen since the end of the fiscal 2021 first quarter, as stores and the economy continue to reopen, we are cautiously optimistic that the worst is behind us and that business will steadily improve through the summer and fall. We believe the Company remains in exceptional financial condition with a strong balance sheet and barring a second nationwide or large-scale lock-down, we expect business to improve each quarter as we go through the year. However, we have limited visibility of how the economic and health crises may fluctuate in the coming months and face headwinds of significant levels of unemployment, recent social unrest and general uncertainty.

After beginning the current fiscal year on an upturn with an 8.3% year-over-year increase in consolidated incoming orders in February, orders plummeted over 70% year-over-year in March and approximately 65% year-over-year in April partially driven by cancellations of stock orders by large customers and deferred orders from retailers who closed their stores during the shutdown. Orders declined significantly during the first few weeks of May but then recovered resulting in about a 5% overall reduction for the full month of May compared to the prior year. Fiscal June and to-date July orders have continued this positive trend with fiscal June orders and orders thus far in July at higher rate than the comparable month a year ago. We believe there are several positive factors in play such as pent-up demand, more focus on home environments and less competition for discretionary consumer spending from travel, dining out, sporting events, concerts and other activities.

In addition, Hooker’s domestic upholstery manufacturing facilities for Bradington-Young, Sam Moore and Shenandoah began ramping up production in early May and are currently operating near capacity on a consolidated basis, which is a significant increase over the fiscal 2021 first quarter, which will improve efficiencies and cost absorption.

As of the end of our fiscal 2021 first quarter of May 3, 2020, our cash position was $51.2 million, an increase of $15.2 million over the end of the 2020 fiscal year on February 2, 2020. Since the end of the fiscal 2021 first quarter on May 3, 2020, we added an additional $31.0 million in cash to the quarter-end balance as of the date of July 23, 2020. Additionally, we have access to about $26 million under our existing revolver to fund working capital requirements and have access to an additional $25.6 million in cash surrender value of Company-owned life insurance policies. While we expect our cash balances to decline somewhat as we rebuild inventories and trade receivables increase- both to accommodate increased sales- we expect our liquidity to be sufficient. Discussions with our lender to refinance our credit facility which expires in February 2021 have begun and we expect to be successful in refinancing our debt; however, we believe we have sufficient financial resources to continue to operate even without refinancing our debt. We expect to continue managing cash and spending cautiously as we move through the coming months.

We face a number of significant risks and uncertainties, as more fully discussed in Item 1A, “Risk Factors” in our ~~2019~~2020 Annual Report.

Compared to the fiscal 2020 second quarter, consolidated orders increased by about $8 million or 5% in the fiscal 2020 third quarter. However, compared to the same period a year ago, consolidated orders dipped approximately $15 million or about 8%. The decline in orders from the one large Home Meridian segment customer is a significant part of that reduction, along with the subdued demand resulting from increased prices due to tariffs. While some retail components of the home furnishings industry like large national chains, club stores, international sales and full-line furniture independent retailers are sluggish, sales performance in other channels such as e-commerce, hospitality, contract furniture and interior design are up.

On a consolidated basis, we expect earnings to improve on a sequential basis next quarter. We believe the earnings performance momentum we have in the Hooker Branded segment and in All Other will continue, and for the Home Meridian segment earnings to improve significantly from the third quarter of fiscal 2020 despite the reduced volume from the single large customer.

However, there are two calendar dynamics that will impact our performance in the fourth quarter of fiscal 2020. First, last year was a 53-week leap year, so Company-wide we will have one less week of shipments this year. In addition to this lost week of shipping, the Chinese and Vietnamese New Year holiday vacations are earlier, which will result in an additional five to ten fewer shipping days this fiscal year for our container direct customers.

We remain highly engaged as a management team in strategic planning and continue to benefit from having a diverse portfolio of 11 operating units across many different distribution channels, price points and products. We are addressing our long-term and short-term challenges and have active strategies in place to expand our business beyond the current product line and customer base. We remain confident in our business model, market position and strategies and believe we will adapt successfully to the challenges posed by the current business climate.

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Financial Condition, Liquidity and Capital Resources

Cash Flows – Operating, Investing and Financing Activities

Thirty-Nine Weeks Ended

November 3,

October 28,

2019

2018

Net cash provided by operating activities
$ 26,610 $ 20,919
Net cash used in investing activities
(3,838 ) (1,760 )
Net cash used in financing activities
(9,709 ) (20,625 )
Net increase/(decrease) in cash and cash equivalents
$ 13,063 $ (1,466 )

	Thirteen Weeks Ended
	May 3,			May 5,
	2020			2019
Net cash provided by operating activities	$	18,924		$	20,286
Net cash provided by/(used in) investing activities		131			(235	)
Cash used in financing activities		(3,846	)		(3,232	)
Net increase in cash and cash equivalents	$	15,209		$	16,819

During the ~~nine~~three months ended ~~November~~May 3, ~~2019,~~2020, we used ~~some~~a portion of the ~~$26.6~~$18.9 million of cash generated from operations and $673,000 life insurance proceeds to pay $2.2 million in principal and interest payments on our term loans, $1.9 million in cash dividends, and $162,000 in life insurance premiums on Company-owned life insurance policies.

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In comparison, during the three months ended May 5, 2019, cash generated from operations of $20.3 million and $1.4 million of proceeds on a note receivable helped to pay ~~for $5.3~~$1.8 million in cash dividends, ~~$4.7~~$1.5 million in long-term debt payments, $1.5 million of capital expenditures to expand our domestic manufacturing capacities and to enhance our business systems and facilities, ~~$4.4 million in long-term debt payments,~~ and ~~$558,000 in life insurance premiums.~~

In comparison, during the nine months ended October 28, 2018, cash generated from operations of $20.9 million (despite a $3.0 million contribution to our Pension Plan) and $1.2 million in proceeds received under Company-owned life insurance policies helped to pay $15.7 million in long-term debt payments, $4.9 million in cash dividends, $2.5 million of capital expenditures to enhance our business systems and facilities, and $620,000$157,000 in life insurance premiums.

Liquidity, Financial Resources and Capital Expenditures

Our financial resources include:

■

available cash and cash equivalents, which are highly dependent on incoming order rates and our operating performance;

■

expected cash flow from operations; ~~and~~

■

available lines of ~~credit.~~credit; and

■

cash surrender value of Company-owned life insurance.

We believe these resources are sufficient to meet our business requirements through fiscal ~~2020~~2021 and for the foreseeable future, including:

■

limited capital expenditures;

■

working ~~capital, including capital required to fund our retirement plans;~~

■

~~the payment of regular quarterly cash dividends on our common stock;~~capital; and

■

the servicing of our acquisition-related debt.

Loan Agreements and Revolving Credit Facility

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. Details of our loan agreements and revolving credit facility are outlined below.

Original Loan Agreement

On February 1, 2016, we entered into an amended and restated loan agreement (the “Original Loan Agreement”) with Bank of America, N.A. (“BofA”) in connection with the closing of the Home Meridian acquisition. Also on February 1, 2016, we borrowed in full the amounts available under the Unsecured Term Loan (the “Unsecured Term Loan”) and the Secured Term Loan (the “Secured Term Loan”) in connection with the completion of the Home Meridian acquisition.

Details of the individual credit facilities provided for in the Original Loan Agreement are as follows:

■

Unsecured revolving credit facility. The Original Loan Agreement increased the amount available under our existing unsecured revolving credit facility from $15 million to $30 million and increased the sublimit of the facility available for the issuance of letters of credit from $3 million to $4 million. Amounts outstanding under the revolving facility bear interest at a rate, adjusted monthly, equal to the then-current LIBOR monthly rate plus 1.50%. We must also pay a quarterly unused commitment fee that is based on the average daily amount of the facility utilized during the applicable quarter;

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■

Unsecured Term Loan. The Original Loan Agreement provided us with a $41 million Unsecured Term Loan. Any amount borrowed under the Unsecured Term Loan bears interest at a rate, adjusted monthly, equal to the then-current LIBOR monthly rate plus 1.50%. We must repay any principal amount borrowed under the Unsecured Term Loan in monthly installments of approximately $490,000, together with any accrued interest, until the full amount borrowed is repaid or until February 1, 2021, at which time all amounts outstanding under the Unsecured Term Loan will become due and payable; and

■

Secured Term Loan. The Original Loan Agreement provided us with a $19 million term loan secured by a security interest in certain Company-owned life insurance policies granted to BofA under a security agreement, dated as of February 1, 2016 (the “Security Agreement”). Any amount borrowed under the Secured Term Loan bears interest at a rate, adjusted monthly, equal to the then-current LIBOR monthly rate plus 0.50%. We must pay the interest accrued on any principal amounts borrowed under the Secured Term Loan on a monthly basis until the full principal amount borrowed is repaid or until February 1, 2021, at which time all amounts outstanding under the Secured Term Loan will become due and payable. BofA’s rights under the Security Agreement are enforceable upon the occurrence of an event of default under the Original Loan Agreement.

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New Loan Agreement

On September 29, 2017, we entered into a second amended and restated loan agreement (the “New Loan Agreement”) with BofA in connection with the completion of the Shenandoah acquisition. The New Loan Agreement:

■

amends and restates the Original Loan Agreement detailed above such that our existing $30 million unsecured revolving credit facility (the “Existing Revolver”), Unsecured Term Loan, and Secured Term Loan all remain outstanding under the New Loan Agreement; and

■

provided us with a new $12 million unsecured term loan (the “New Unsecured Term Loan”), which we subsequently paid off in full.

The New Loan Agreement also included customary representations and warranties and requires us to comply with customary covenants, including, among other things, the following financial covenants:

Maintain a ratio of funded debt to EBITDA not exceeding:

2.50:1.0 through August 31, 2018;

2.25:1.0 through August 31, 2019; and

2.00:1.00 thereafter.

A basic fixed charge coverage ratio of at least 1.25:1.00; and

Limit capital expenditures to no more than $15.0 million during any fiscal year beginning in fiscal 2020.

The New Loan Agreement also limits our right to incur other indebtedness, make certain investments and create liens upon our assets, subject to certain exceptions, among other restrictions. The New Loan Agreement does not restrict our ability to pay cash dividends on, or repurchase shares of our common stock, subject to our compliance with the financial covenants discussed above, if we are not otherwise in default under the New Loan Agreement. We paid off the New Unsecured Term Loan in fiscal 2019.

We were in compliance with each of these financial covenants at ~~November~~May 3, ~~2019~~2020 and expect to remain in compliance with existing covenants for the foreseeable future. We believe we have the financial resources to weather the expected short-term impacts of COVID-19; however, an extended impact may materially and adversely affect our sales, earnings and liquidity.

As of ~~November~~May 3, ~~2019, $14.0~~2020, $11.1 million was outstanding under the Unsecured Term Loan, $17.1 million was outstanding under the Secured Term ~~Loan, respectively. We expect to refinance any outstanding balances due under these term loans prior to their due dates of February 1, 2021.~~Loan.

Revolving Credit Facility Availability

As of ~~November~~May 3, ~~2019,~~2020, we had an aggregate $25.7 million available under our revolving credit facility 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 ~~November~~May 3, ~~2019.~~2020. There were no additional borrowings outstanding under the revolving credit facility as of ~~November~~May 3, ~~2019.~~2020.

Expected Refinancing in Fiscal 2021

All amounts outstanding on our term loans and revolving credit facility are due and payable on the first day of fiscal 2022, February 1, 2021 and discussions with our lender about refinancing have begun. We expect to refinance any amounts outstanding under these loans and credit facility during fiscal 2021. However, 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 or the availability of loans may be limited and refinancing our debt may be more difficult and loans more costly.

Capital Expenditures

~~We spent $4.7~~Prior to the COVID-19 crisis, we expected to spend between $2.5 million ~~for~~to $4.5 million in capital expenditures ~~during~~in fiscal ~~2020 first nine months, $3.3~~2021 to maintain and enhance our operating systems and facilities. However, due to the negative economic effects of COVID-19, we have delayed indefinitely about $3 million ~~of which was spent on the expansion of our Bradington-Young manufacturing facility.~~in non-critical capital spending. We expect to spend ~~minimal amounts during~~between $1.0 to $2.0 million in the remainder of the 2021 fiscal ~~2020~~year to maintain and continue to enhance our operating systems and facilities.

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~~Share Repurchase Authorization~~COVID-19 Cost Cutting and Cash Preservation Measures

During the fiscal ~~2013,~~2021 first quarter, we initiated certain measures to reduce operating expenses and preserve cash which include temporary fee reductions for our Board of Directors, ~~authorized~~temporary salary reductions for officers and certain other managers, strategic staff reductions, the repurchase of up to $12.5 million of shares of the Company’s common stock. The authorization does not obligate us to acquire a specific number of shares during any period and does not have an expiration date, but it may be modified, suspended or discontinued at any time at the discretiontemporary closure of our ~~Board~~domestic manufacturing plants and the furlough of ~~Directors. Repurchases may be made from time~~manufacturing, warehouse and administrative associates, delaying all non-critical capital spending, rationalizing current import purchase orders, working with our vendors to ~~time in the open market, or through privately negotiated transactions or otherwise, in compliance with applicable laws, rules~~cut costs and ~~regulations, and subject to our cash requirements for other purposes, compliance with the covenants under the Loan Agreement and other factors~~extend payment terms where we ~~deem relevant. No shares have been repurchased since fiscal 2013. Approximately $11.8 million remained available for future repurchases under the authorization as of November 3, 2019.~~

~~Commitments and Contractual Obligations~~can.

As of ~~November~~the end of our fiscal 2021 first quarter of May 3, ~~2019,~~2020, our ~~commitments and contractual obligations related to our operating leases were~~cash position had increased by $15.2 million over the end of the 2020 fiscal year on February 2, 2020. Since the end of the fiscal 2021 first quarter on May 3, 2020, we added an additional $31 million in cash as ~~follows:~~of July 23, 2020.

Cash Payments Due by Period (In thousands)

Less than

More than

1 Year

1-3 Years

3-5 Years

5 years

Total

Operating leases*
2,516 20,366 10,507 15,155 48,544

Dividends

*These amounts represent estimatedSubsequent to the end of the fiscal 2021 first quarter on June 2, 2020, our board of directors declared a quarterly cash ~~payments due~~dividend of $0.16 per share, which was paid on June 30, 2020 to shareholders of record at June 16, 2020. We have seen steady improvement in orders and shipments since the end of our fiscal 2021 first quarter on May 3, 2020. We expect our low fixed cost business model, which served us well during the Great Recession, to help us navigate the current disruption. Our cash position has remained strong and has continued to improve since our fiscal year-end in early February, with additional availability under ~~operating leases for real estate utilized~~our revolving credit facility if needed. Consequently, while we are confident in our ~~operations~~future and ~~warehouse and office equipment, as well as short term leases with remaining terms less than 12 months. See Note 9 for additional information and disclosures about~~are proud of our ~~leases.~~

~~Recently Issued Accounting Standards~~

~~In June 2016,~~fifty-plus year history of consistently paying dividends, we have limited visibility into future economic conditions. The Board will continue to evaluate 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. The amendments will be applied through a cumulative-effect adjustment to retained earnings asappropriateness of the ~~beginning of the first reporting period~~current dividend rate considering our performance and economic conditions in which guidance is effective, which is a modified-retrospective approach. We are presently completing our analysis of the effects of adopting this standard on our consolidated financial statements and results of operations. Based on our analysis to-date, we do not believe the adoption of this standard will have a material effect on our consolidated financial statements or results of operations.future quarters.

Critical Accounting Policies

Except as discussed below, there have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our ~~2019~~2020 Annual Report.

On the first day of the current fiscal year, we adopted the accounting ~~standard~~standards outlined in Part 1, Notes to Condensed Consolidated Financial Statements, “Note 2. Recently Adopted Accounting Policies” (“Note 2”). See Note 2 for additional information related to the impact of adopting this accounting standard.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to various types of market risk in the normal course of our business, including the impact of interest rate changes, raw materials price risk and changes in foreign currency exchange rates, which could impact our results of operations or financial condition. We manage our exposure to this risk through our normal operating activities.

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Interest Rate Risk

Borrowings under our revolving credit facility and the Unsecured Term Loan bear interest based on LIBOR plus 1.5% and borrowings under the Secured Term Loan bear interest based on LIBOR plus 0.5%. As such, these debt instruments expose us to market risk for changes in interest rates. There was no outstanding balance under our revolving credit facility as of ~~November~~May 3, ~~2019,~~2020, other than standby letters of credit in the amount of $4.3 million; however, as of ~~November~~May 3, ~~2019, $31.1~~2020, $28.2 million was outstanding under our term loans. A 1% increase in the LIBOR rate would result in an annual increase in interest expenses on our terms loans of approximately ~~$284,000.~~$197,000.

Raw Materials Price Risk

We are exposed to market risk from changes in the cost of raw materials used in our domestic upholstery manufacturing processes; principally, wood, fabric and foam products. Increases in home construction activity could result in increases in wood and fabric costs. Additionally, the cost of petroleum-based foam products we utilize are sensitive to crude oil prices, which vary due to supply, demand and geo-political factors.

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Currency Risk

For imported products, we generally negotiate firm pricing denominated in U.S. Dollars with our foreign suppliers, typically for periods of at least one year. We accept the exposure to exchange rate movements beyond these negotiated periods. We do not use derivative financial instruments to manage this risk but could choose to do so in the future. Most of our imports are purchased from suppliers located in Vietnam and China. The Chinese currency floats within a limited range in relation to the U.S. Dollar, resulting in exposure to foreign currency exchange rate fluctuations.

Since we transact our imported product purchases in U.S. Dollars, a relative decline in the value of the U.S. Dollar could increase the price we pay for imported products beyond the negotiated periods. We generally expect to reflect substantially all of the effect of any price increases from suppliers in the prices we charge for imported products. However, these changes could adversely impact sales volume or profit margins during affected periods.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended ~~November~~May 3, ~~2019.~~2020. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective as of ~~November~~May 3, ~~2019~~2020 to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the Company’s management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the fiscal quarter ended ~~November~~May 3, ~~2019,~~2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 6. Exhibits

3.1	~~3.1~~	Amended and Restated Articles of Incorporation of the Company, as amended March 28, 2003 (incorporated by reference to Exhibit 3.1 of the Company’s Form 10-Q (SEC File No. 000-25349) for the quarter ended February 28, 2003)

3.2	~~3.2~~	Amended and Restated Bylaws of the Company, as amended December 10, 2013 (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K (SEC File No. 000-25349) for the year ended February 2, 2014)

4.1	~~4.1~~	Amended and Restated Articles of Incorporation of the Company, as amended (See Exhibit 3.1)

4.2	~~4.2~~	Amended and Restated Bylaws of the Company, as amended (See Exhibit 3.2)

	~~10.1~~31.1	First Amendment to the 2010 Amended and Restated Hooker Furniture Corporation Supplemental Retirement Income plan (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (SEC File No. 000-25349) filed with the SEC on November 15, 2019)

	31.1*	Rule 13a-14(a) Certification of the Company’s principal executive officer

31.2*	31.2*	Rule 13a-14(a) Certification of the Company’s principal financial officer

32.1**	32.1**	Rule 13a-14(b) Certification of the Company’s principal executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101*	101*	The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended ~~November~~May 3, ~~2019,~~2020, formatted in Extensible Business Reporting Language (“XBRL”): (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of income, (iii) condensed consolidated statements of comprehensive income, (iv) condensed consolidated statements of cash flows, and (v) the notes to the condensed consolidated financial statements

*Filed herewith

** Furnished herewith

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	HOOKER FURNITURE CORPORATION


Date: ~~December 13, 2019~~July 27, 2020	By:	/s/ Paul A. Huckfeldt
		Paul A. Huckfeldt
		Chief Financial Officer and Senior Vice President – Finance and Accounting

	Operating Profit (Loss) and Margin
	Thirteen Weeks Ended
	November 3, 2019						October 28, 2018					$ Change			% Change
				% Net Sales					% Net Sales
Hooker Branded	$	6,188			14.2	%	$	5,712		12.3	%	$	476			8.3	%
Home Meridian		(3,955	)		-4.6	%		4,829		5.1	%		(8,784	)		-181.9	%
All Other		2,760			9.6	%		1,720		5.7	%		1,040			60.5	%
Consolidated	$	4,993			3.2	%	$	12,261		7.2	%	$	(7,268	)		-59.3	%

Unit Volume	FY20 YTD % Increase vs. FY19 YTD			Average Selling Price (ASP)	FY20 YTD % Increase vs. FY19 YTD

Hooker Branded		-14.0	%	Hooker Branded		10.5	%
Home Meridian		-9.4	%	Home Meridian		1.1	%
All Other		-9.8	%	All Other		5.5	%
Consolidated		-10.0	%	Consolidated		3.5	%