Hooker Furniture(US:HOFT)2025-12-12 22:21Sales Performance - For the nine-month period of fiscal 2026, the combined net sales of Pulaski Furniture and Samuel Lawrence Furniture accounted for approximately 15% of consolidated net sales[98]. - Consolidated net sales for Q3 FY2026 decreased by $11.9 million, or 14.4%, to $70.7 million compared to $82.7 million in the prior-year period, primarily due to timing of shipments in the hospitality business[106]. - For the first nine months of FY2026, consolidated net sales decreased by $22.0 million, or 9.4%, to $211.1 million compared to $233.1 million in the prior-year period, largely due to lower hospitality net sales[109]. - The Hooker Branded segment's net sales increased by 1.1% for both Q3 and the nine-month period, supported by higher average selling prices[120]. - Domestic Upholstery segment's net sales increased by $870,000, or 3.0%, in Q3, with Shenandoah Furniture reporting a 7.2% increase for the quarter[120]. - All Other segment's net sales decreased significantly, primarily due to a decline in hospitality net sales from timing of shipments[120]. - Hooker Branded segment's net sales decreased by $990,000, or 8.0%, in the third quarter, and by $1.7 million, or 5.0%, for the nine-month period[123]. - Consolidated net sales for the third quarter were $18.2 million, a decrease of 24.5% compared to the prior year[123]. - Net sales decreased by $11.3 million, or 52.3%, in Q3 and $22.5 million, or 37.6%, for the nine-month period due to significantly lower unit volume[132]. Order Backlog - Consolidated order backlog decreased 10.3% compared to the fiscal year-end on February 2, 2025, and 23.8% compared to the prior year third quarter end[104]. - Hooker Branded's backlog increased 17.2% compared to fiscal year-end and 7.9% compared to the prior-year third quarter, supported by a 4.1% increase in incoming orders during the quarter[105]. - Domestic Upholstery's backlog decreased 10.9% from year-end but increased 7.5% compared to the prior-year quarter-end, driven by a 3.5% increase in incoming orders[105]. - The absence of large projects in the hospitality business during the current period contributed to the decrease in consolidated order backlog[104]. Strategic Changes - The divestiture of Pulaski Furniture and Samuel Lawrence Furniture brands represents a strategic shift and will result in a significant change to the Company's operations and financial reporting[98]. - Management initiated a formal process to sell the Pulaski Furniture and Samuel Lawrence Furniture brands due to substantial sales declines and misalignment with long-term strategic direction[96][97]. - The Home Meridian segment will be eliminated following the sale of Pulaski Furniture and Samuel Lawrence Furniture, with its remaining brand reclassified into the "All Other" category[98]. - The Company is focused on realigning its portfolio around its strongest brands to achieve sustainable, long-term profitability[97]. Financial Performance - Gross profit from continuing operations decreased by $2.4 million, but gross margin improved slightly to 25.6% from 24.8% in the prior-year period, driven by margin improvement at Hooker Branded[107]. - Consolidated operating loss for Q3 FY2026 was $16.3 million, including $15.6 million in non-cash impairment charges, with a net loss of $12.5 million, or ($1.18) per diluted share[108]. - Consolidated gross margin improved to 25.0% from 23.9% in the prior-year period, despite a $2.9 million decrease in gross profit, primarily due to increased profitability at Domestic Upholstery[110]. - The company recorded $15.6 million in non-cash impairment charges during the third quarter, including $14.5 million for goodwill impairment in the Sunset West division[125]. - The operating loss for the third quarter was $16.3 million, driven by the $15.6 million impairment charge and $597,000 in restructuring costs[126]. - Net loss from continuing operations for the third quarter was $3.6 million, a decrease of 17.7% compared to the prior year[129]. - The company reported a diluted loss per share from continuing operations of $0.34 for the third quarter[129]. Cost Management - The company exceeded its initial goal to reduce fixed costs by approximately $25 million by the end of Q3 FY2026, with a new cost structure in place[113]. - Restructuring costs of approximately $600,000 were recorded in Q3 FY2026, primarily related to severance associated with cost-reduction initiatives[108]. - Consolidated selling and administrative (S&A) expenses decreased by $5.9 million in the third quarter and by $9.7 million for the nine-month period, primarily due to the exit of the PRI business and lower restructuring costs[123]. - The Domestic Upholstery segment's S&A expenses decreased by $263,000, or 1.4%, in the third quarter, with restructuring costs totaling $127,000[124]. - All Other S&A expenses decreased significantly due to the absence of bad debt from a major customer bankruptcy in the prior year[124]. Cash Flow and Financing - Cash provided by operating activities totaled $22.9 million compared to $(11.9) million used in operations for the same period last year[140]. - Cash used in financing activities was $25.5 million, compared to $8.3 million in the prior-year period, mainly due to $17.9 million of repayments on the revolving credit facility[138]. - Cash generated from collections of trade accounts receivable was $13.6 million, compared to $1.4 million outflows in the prior-year period[140]. - The company recorded a net loss from discontinued operations of $(8,640) million, a decrease of 83.6% compared to the previous year[136]. - The Amended and Restated Loan Agreement provides for a revolving credit facility of up to $70 million, with an option to increase by up to $30 million[145]. - As of November 2, 2025, the company had $4.1 million in outstanding loans and $2.1 million in letters of credit, with an availability of $63.8 million based on the current borrowing base[153]. - The company expects to incur approximately $1 million in capital expenditures for the remainder of fiscal 2026 to maintain and enhance operating systems and facilities[154]. - A quarterly cash dividend of $0.115 per share was declared on December 11, 2025, to be paid on December 31, 2025[155]. - The outstanding loans under the Amended and Restated Loan Agreement bear interest at a rate of Term SOFR plus 1.85%, with a potential annual increase in interest expenses of approximately $41,000 for a 1% increase in the SOFR rate[158]. - The company incurred $480,000 in debt issuance costs in fiscal 2025 and an additional $33,000 in the first half of fiscal 2026[153]. - The financial covenant requires a maintenance ratio of at least 1.0 to 1.0 for EBITDA net of capital expenditures to debt service and dividends if availability falls below 10%[151]. Market Risks - The company is exposed to market risks including interest rate changes, raw materials price risk, and foreign currency exchange rate fluctuations[157]. - The company does not use derivative financial instruments to manage currency risk but may consider doing so in the future[160]. - The Amended and Restated Loan Agreement allows for prepayment of outstanding principal amounts without penalty, subject to certain conditions[148]. - The obligations under the loan agreement are secured by a first priority security interest in substantially all assets of the borrowers, excluding real estate[150].