We have sourced products from foreign manufacturers since 1988.for nearly thirty years, predominantly from Asia. Imported casegoods and upholstered furniture together accounted for approximately 70%83% of our net sales in fiscal 2016, 71%2020, 84% of our net sales in fiscal 2015,2019, and 72%87% of our net sales in fiscal 2014.  We import finished furniture in a variety of styles, materials and product lines.  We believe the best way to leverage our financial strength and differentiate our import business from the industry is through innovative and collaborative design, extensive product lines, compelling  products, value, consistent quality, excellent customer service, easy ordering and quick delivery through significant finished goods inventories, world-class global logistics and robust distribution systems.

Our imported furniture business is subject to inherent risks in importing products manufactured abroad, including, but not limited to, supply disruptions and delays due to a variety of reasons, including due to the coronavirus (COVID-19) pandemic and possible similar health-related issues, currency exchange rate fluctuations, transportation-related issues, economic and political developments and instability, as well as the laws, policies and actions of foreign governments and the United States. These actslaws, policies and actions may include regulations affecting trade or the application of tariffs.

Because of the large number and diverse nature of the foreign suppliers from which we source our imported products, we have flexibility in the sourcing of products among any particular supplier or country. However, a disruption in our supply plant capacitychain from a major supplier or from Vietnam or China in North Carolinageneral, could significantly compromise our ability to fill customer orders for products manufactured at that factory or in that country. Supply disruptions and Virginiadelays on selected items could occur for our domestic upholstered furniture production.  We consider the machinery and equipment at these locationssix months or longer. If we were to be generally modern and well-maintained.

Given the sourcing capacity available in China, Vietnam and other natural woven products, often accented with marble, stone, slate, glass, ceramic,  brass and/low-cost producing countries, we currently believe the risks from these potential supply disruptions are manageable, however, we have limited insight into the extent to which our business could be further impacted by COVID-19 and there are many unknowns including, how long we will be impacted, the severity of the impacts and the probability of a recurrence of COVID-19 or hand-painted finishes.

For imported products, we generally negotiate firm pricing with foreign suppliers in U.S. Dollars, typically for a term 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. Since we transact our imported product purchases in U.S. Dollars, a relative decline in the value of the U.S. Dollar compared to the currencies from which we obtain our imported products could increase the price we pay for imported products beyond the negotiated periods. We generally expect to reflect substantially all of the effects of any price increases from suppliers in the prices we charge for imported products. However, these price changes could adversely impact sales volume and profit margin during affected periods. Conversely, a relative increase in the value of the U.S. Dollar compared to the currencies from which we obtain our imported products could decrease the cost of imported products and favorably impact net sales and profit margins during affected periods.period. However, due to other factors, such as inflationary pressure in China and other countries, we may not fully realize savings when exchange rates fall. Therefore, lower exchange rates may only have a tempering effect on future price increases by merely delaying cost increases on imported products. See also “ItemItem 7A. Quantitative“Quantitative and Qualitative Disclosures About Market Risk.”

The furniture industry is highly competitive and includes a large number of foreign and domestic manufacturers and importers, none of which dominates the market in our price points. While the markets in which we compete include a large number of relatively small and medium-sized manufacturers, certain competitors have substantially greater sales volumes and financial resources than we do. U.S. imports of furniture produced overseas, such as from ChinaVietnam and other Asian countries,China, have stabilized in recent years.

Warehousing and Distribution

We distribute furniture to retailers directly from factories and warehouses in Asia via our container direct programs and from our distribution centers in Virginia, North Carolina and California, and in limited cases, from customer operated warehouses in strategic locations. It is our policy and industry practice to allow order cancellation for casegoods up to the time of shipment or, in the case of container direct orders, up until the time the container is booked with the ocean freight carrier, therefore, customer orders for casegoods are not firm. However, domestically produced upholstered products are predominantly custom-built and consequently, cannot be cancelled once the leather or fabric has been cut. Additionally, our hospitality products are highly customized and are generally not cancellable.

Working Capital Practices

Inventory: We generally import casegoods inventory and certain upholstery items in amounts that enable us to meet the delivery requirements of our customers, our internal in-stock goals and minimumpurchase requirements from our sourcing partners. However, during fiscal 2019 and 2020 we accelerated the delivery and subsequently increased inventory levels of some imported products from China due to the threat of tariffs on those products and the threat of subsequent increased tariffs. However, a large percentage of products sold are not warehoused by us but ship directly to our customers and thus not included as inventory. We do not carry significant amounts of domestically produced upholstery inventory or hospitality products, as most of these products are built to order and are shipped shortly after their manufacture.

Accounts receivable: Substantially all of our trade accounts receivable are due from retailers and dealers that sell residential home furnishings or commercial purchasers of our hospitality and senior living products, which consist of a large number of entities with a broad geographic dispersion. We perform credit evaluations of our customers and generally do not require collateral. For qualified customers, we offer payment terms, generally requiring payment 30 days from shipment. However, we may offer extended payment terms in certain circumstances, including to promote sales of our product. Due to the COVID-19 crisis in the U.S. and the related decline in demand for home furnishings that began in the first quarter of fiscal 2021, some customers have informed us that they intend to take extended credit terms of 60-120 days. We purchase accounts receivable insurance on certain customers or factor their receivables if their risk profile warrants it and the insurance is available. 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.

Accounts payable: Payment for our imported products warehoused first in Asia is due ten to fourteen days after our quality audit inspections are complete and the vendor invoice is presented. Payment for goods which are shipped to our US warehouses or container direct to our customers FOB Origin is generally due upon proof of lading onto a US-bound vessel and invoice presentation; however, payment terms, depending on the supplier, can stretch up to 45 days from invoice date. Payment terms for domestic raw materials and non-inventory related charges vary but are generally 30 days from invoice date.

Order Backlog

At February 2, 2020, our backlog of unshipped orders was as follows:

Order backlog increased $9.8 million or 9.4% as compared to the prior-year due to orders in the Home Meridian segment during the 2020 fiscal fourth quarter and due to the timing of orders received in the Domestic Upholstery segment for two major customers near the end of fiscal 2020.

For the Hooker Branded segment, Domestic Upholstery segment and All Other, we consider unshipped order backlogs to be one helpful indicator of sales for the upcoming 30-day period, but because of our relatively quick delivery and our cancellation policies (discussed under Warehousing and Distribution, above), we do not consider order backlogs to be a reliable indicator of expected long-term sales. We consider the Home Meridian segment’s backlog to be one helpful indicator of that segment’s sales for the upcoming 90-day period. Due to (i) Home Meridian’s sales volume, (ii) the average sales order sizes of its mass, club and mega account channels of distribution, (iii) the proprietary nature of many of its products and (iv) the project nature of its hospitality business, that segment’s average order sizes tend to be larger and consequently, its order backlog tends to be larger. However, due to the order and supply disruptions caused by COVID-19, a spike in order cancellations in early fiscal 2021 has decreased the usefulness of order backlog at February 2, 2020 as an indicator of future sales.

Seasonality

Generally, sales in our fiscal first quarter are lower than our other fiscal quarters due to the post-Chinese New Year shipping lag and sales in our fiscal fourth quarter are generally stronger due to the pre-Chinese New Year surge in shipments from Asia and the product introduction schedule of a major customer.

Environmental Matters

As a part of our business operations, our manufacturing sites generate both non-hazardous and hazardous wastes; the treatment, storage, transportation and disposal of which are subject to various local, state and national laws relating to environmental protection.  We are in various stages of investigation, remediation or monitoring of alleged or acknowledged contamination at current or former manufacturing sites for soil and groundwater contamination,  none of which we believe is material to our results of operations or financial position. Our policy is to record monitoring commitments and environmental liabilities when expenses are probable and can be reasonably estimated. The costs associated with our environmental responsibilities, compliance with federal, state and local laws regulating the discharge of materials into the environment, or costs otherwise relating to the protection of the environment, have not had and are not expected to have a material effect on our financial position, results of operations, capital expenditures or competitive position.

As of January 31, 2016,February 2, 2020, we had 6451,251 full-time employees, of which 222236 were employed in the casegoodsour Hooker Branded segment, 414377 were employed in the upholsteryour Home Meridian segment, 630 were employed in our Domestic Upholstery segment and 98 were employed in the All Other segment.Other. None of our employees are represented by a labor union. We consider our relations with our employees to be good.

The Hooker Furniture, Bradington-Young, and Sam Moore, Pulaski Furniture, Samuel Lawrence Furniture, Samuel Lawrence Hospitality, Room Gear, Right2Home, Home Meridian International, Prime Resources International, Accentrics Home, HMidea, Shenandoah, H Contract, Homeware and MARQ trade names represent many years of continued business.  We believe these trade names are well-recognized and associated with quality and service in the furniture industry.  We also own a number of patents and trademarks, both domestically and internationally, none of which is considered to be material.

Our company is subject to U.S. federal, state and local laws and regulations in the areas of safety, health, employment and environmental pollution controls, as well as U.S. and international trade laws and regulations. We are also subject to foreign laws and regulations. ComplianceIn the past, compliance with these laws and regulations has not in the past had any material effect on our earnings, capital expenditures, or competitive position in excess of those affecting others in our industry; however, the effect of compliance in the future cannot be predicted. We believe we are in material compliance with applicable U.S. and international laws and regulations.

You may visit us online at hookerfurniture.com, bradington-young.com, sammoore.com, homeware.comhomemeridian.com, pulaskifurniture.com, slh-co.com and hcontractfurniture.com. We make available, free of charge through our Hooker Furniture website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to those reports, and other documents as soon as practical after they are filed with or furnished to the Securities and Exchange Commission. A free copy of our annual report on Form 10-K may also be obtained by contacting Robert W. Sherwood, Vice President - Credit,Earl Armstrong, Corporate Controller and Secretary and Treasurer at BSherwood@hookerfurniture.comEarmstrong@hookerfurniture.com or by calling 276-632-2133.

Our business is subject to a variety of risks. The risk factors discussed below should be considered in conjunction with the other information contained in this annual report on Form 10-K. If any of these risks actually materialize, our business, results of operations, financial condition or future prospects could be negatively impacted. These risks are not the only ones we face. There may be additional risks that are presently unknown to us or that we currently believe to be immaterial that could affect our business.us.

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

In fiscal 2016, imported products sourced from China and Vietnam accounted for approximately 68% and 26%, respectively, of our import purchases and the factory in China from which we directly source the largest portion of our import products accounted for approximately 58% of our worldwide purchases of imported products. Furniture manufacturing creates large amounts of highly flammable wood dust and utilizes other highly flammable materials such as varnishes and solvents in its manufacturing processes and is therefore subject to the risk of losses arising from explosions and fires. A disruption in our supply chain from this factory, or from China or Vietnam in general, could significantly impact our ability to fill customer orders for products manufactured at that factory or in that country.  If such a disruption were to occur, we believe that we would have sufficient inventory on hand and in transit to our U.S. warehouses in Martinsville, VA to adequately meet demand for approximately 4.5 months with up to an additional 1.25 months available for immediate shipment from our warehouses in Asia. We believe that we could, most likely at higher cost, source most of the products currently sourced in China from factories in other countries and could produce certain upholstered products domestically at our own factories.  However, supply disruptions and delays on selected items could occur for up to 6 months beforeexpect the impact of remedial measures would be reflected in our results.  If we wereCOVID-19 to be unsuccessful in obtaining those products from other sources or at comparable cost, a disruption in our supply chain from our largest import furniture supplier, or from China or Vietnam in general, could adversely affect our sales, earnings, financial condition and liquidity.

The COVID-19 pandemic is a serious threat to health and economic wellbeing affecting our customers, our associates and our suppliers. Federal, state and local authorities have recommended social distancing and have imposed or are considering quarantine and isolation measures on large portions of the population, including mandatory business closures for all non-essential businesses in certain jurisdictions. As home furnishings purchases are largely postponable and most of our customer’s businesses are classified as non-essential, traffic to our customers’ stores and demand for our products have decreased and our sales have deteriorated, therefore we expect our earnings and liquidity to be negatively impacted as a result. COVID-19 also impacted and continues to impact our Asian supply chain, particularly as a result of mandatory shutdowns in locations where our products are manufactured, we have experienced out-of-stocks and lost sales as a result. Due to decreased demand and stay-at-home orders issued by the state government, our domestic manufacturing and warehouse associates are working fewer hours and most of our administrative associates are tele-commuting. However, we may be forced to close locations for reasons such as the health of our associates, because of disruptions in the continued operation of our domestic or Asian supply chain or due to further federal, state or local orders impacting our operations.

The extent of the impact of COVID-19 on our business and financial results will also depend on future developments, including the duration and spread of the outbreak within the markets in which we operate and the related impact on consumer confidence and spending, all of which are highly uncertain and ever-changing. The sweeping nature of the COVID-19 pandemic makes it extremely difficult to predict how our business and operations will be affected in the longer run. However, the likely overall economic impact of the pandemic is viewed as highly negative to the general economy. Any of the foregoing factors, or other cascading effects of the coronavirus pandemic, could materially increase our costs, negatively impact our sales and damage the company’s results of operations and its liquidity, possibly to a significant degree. The duration of any such impacts cannot be predicted.

We rely on offshore sourcingfrom Vietnam and China for most of our sales. Consequently:

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

Effective September 24, 2018, the current U.S. administration imposed a 10% tariff on certain goods imported into the United States from China, including all furniture and furniture components manufactured in China, which increased to 25% in May 2019. Inability to reduce product costs, pass through price increases or find other suitable manufacturing sources outside of China may have a material adverse impact on sales volume, earnings and liquidity. In addition, the tariffs, and our responses to the tariffs, may cause our products to become less competitive due to price increases or less profitable due to lower margins. Our inability to effectively manage the negative impacts of changing U.S. and foreign trade policies could adversely affect our business and financial results.

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We are subject to changes in U.S. and foreign government regulations and in the political, social and economic climates of the countries from which we source our products.products.

Changes in political, economic and social conditions, as well as in the laws and regulations in the foreign countries from which we source our products could adversely affect our sales, earnings, financial condition and liquidity. These changes could make it more difficult to provide products and service to our customers or could increase the cost of those products. International trade regulations and policies of the United States and the countries from which we source finished products could adversely affect us. Imposition of trade sanctions relating to imports, taxes, import duties and other charges on imports affecting our products could increase our costs and decrease our earnings. For example, since 2004, the U.S. Department of Commerce has imposedimposes tariffs on wooden bedroom furniture coming into the United States from China. In this case, none of the rates imposed have been of sufficient magnitude to alter our import strategy in any meaningful way; however, these and other tariffs are subject to review and could be implementedincreased or increasednew tariffs implemented in the future.

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

In fiscal 2020, imported products sourced from Vietnam and China accounted for nearly all of our import purchases and our top five suppliers in Vietnam and China account for approximately half of our fiscal 2020 import purchases. A disruption in our supply chain, or from Vietnam or China in general, could significantly impact our ability to fill customer orders for products manufactured in those countries. Our supply chain could be adversely impacted by the uncertainties of health concerns and governmental restrictions. In early 2020, the COVID-19 outbreak in China resulted in the temporary shutdown or reduced capacity of our vendors’ factories and significantly slowed the post-Chinese New Year production recovery. Consequently, we experienced some out-of-stocks, but we in some cases were able to provide substitutions out of inventory on hand, in-transit and from our domestic warehouses, but not enough to entirely mitigate the lost sales. Many of our vendors’ factories are back online and others have closed temporarily because of low demand due to the effects of COVID-19 in the U.S. and elsewhere. Consequently, we expect shortages of certain products. If such disruptions were to occur again, we believe that we would have sufficient inventory on hand and in transit to our U.S. warehouses in Virginia, North Carolina and California to adequately meet demand for several months or slightly longer with an additional month’s worth of demand available for immediate shipment from our warehouses in Asia. We believe we could, most likely at higher cost, source most of the products currently sourced in Vietnam or China from factories in other countries and could produce certain upholstered products domestically at our own factories. However, supply disruptions and delays on selected items could occur for six months or longer before the impact of remedial measures would be reflected in our results. Additionally, we have limited insight into how our supply chain could be further impacted by COVID-19 and there are many unknowns including how long we will be impacted, the severity of the impacts and the probability of a recurrence of COVID-19 or similar regional or global pandemics. If we were to be unsuccessful in obtaining those products from other sources or at comparable cost, a disruption in our supply chain from our largest import furniture suppliers, or from Vietnam or China in general, could adversely affect our sales, earnings, financial condition and liquidity.

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Increased freight costs on imported products could decrease earnings and liquidity.

Ocean freight costs on imported products currently represent a significant portion of the cost of our imported products. Ocean freight rates on our imported products are affected by a myriad of factors including the global economy, petroleum prices and ocean freight carrier capacity. Increased ocean freight rates in the future would likely adversely affect earnings, financial condition and liquidity.

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Our dependence on non-U.S. suppliers could, over time, adversely affect our ability to service customers.

We rely exclusivelyheavily on non-U.S. suppliers for our casegoods furniture products and forwe do not own or control, including a significant portionlarge number of non-US suppliers. All of our upholstered products.  Our non-U.S. suppliers may not provide goods that meet our quality, design or other specifications in a timely manner and at a competitive price. If our suppliers do not meet our specifications, we may need to find alternative vendors,suppliers, potentially at a higher cost, or may be forced to discontinue products. Also, delivery of goods from non-U.S. vendorssuppliers may be delayed for reasons not typically encountered for domestically manufactured furniture, such as shipment delays caused by customs issues, labor issues, port-related issues such as weather, congestion or port equipment, decreased availability of shipping containers and/or the inability to secure space aboard shipping vessels to transport our products. Our failure to timely fill customer orders due to an extended business interruption for a major non-U.S. supplier, or due to transportation issues, could negatively impact existing customer relationships and adversely affect our sales, earnings, financial condition and liquidity.

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Our inability to accurately forecast demand for our imported products could cause us to purchase too much, too little or the wrong mix of inventory.inventory.

Manufacturing and delivery lead times for our imported products necessitate that we make forecasts and assumptions regarding current and future demand for these products. If our forecasts and assumptions are inaccurate, we may purchase excess or insufficient amounts of inventory. If we purchase too much or the wrong mix of inventory, we may be forced to sell it at lower margins, which could adversely affect our sales, earnings, financial condition and liquidity. If we purchase too little or the wrong mix of inventory, we may not be able to fill customer orders and may lose market share and weaken or damage customer relationships, which also could adversely affect our sales, earnings, financial condition and liquidity.

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Changes in the value of the U.S. Dollar compared to the currencies for the countries from which we obtain our imported products could adverselyadversely affect our sales, earnings, financial condition and liquidity.

For imported products, we generally negotiate firm pricing with our foreign suppliers in U.S. Dollars, typically for periods of at least one year. We accept the exposure to exchange rate movements beyond these negotiated periods. We do not use derivative financial instruments to manage this risk but could choose to do so in the future. 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 must pay for imported products beyond the negotiated periods. These price changes could decrease our sales, earnings, financial condition and liquidity during affected periods.

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Supplier transitions, including cost or quality issues, could result in longer lead times and shipping delays.delays.

In the past, inflation concerns, and to a lesser extent quality and supplier viability concerns, affecting some of our imported product suppliers located in China prompted us to source more of our products from lower cost suppliers located in other countries, such as Vietnam. As discussed above, during fiscal 2020 we transitioned a significant portion of our imported product purchases from China to Vietnam due to the imposition of tariffs on most furniture and Indonesia.component parts imported from China. As conditions dictate, we could be forced to make similar transitions in the future. When undertaken, transitions of this type involve significant planning and coordination by and between us and our new suppliers in these countries. Despite our best efforts and those of our new sourcing partners, these transition efforts are likely to result in longer lead times and shipping delays over the short term, whichterm. 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. One or a combination of these issues could adversely affect our sales, earnings, financial condition and liquidity.

The interruption, inadequacy, security failure or integration failure of our information systems or information technology infrastructure or the internet could adversely impact our business,sales, earnings, financial condition and liquidity.

Our information systems (software) and information technology (hardware) infrastructure platforms and those of third parties who provide these services to us, including internet service providers and third-parties who store data for us on their servers, facilitate and support every facet of our business, including the sourcing of raw materials and finished goods, planning, manufacturing, warehousing, customer service, shipping, accounting and human resources. Our systems, and those of third parties who provide services to us, are vulnerable to disruption or damage caused by a variety of factors including, but not limited to: power disruptions or outages; natural disasters or other so-called “Acts of God”; computer system or network failures; viruses or malware; physical or electronic break-ins; the theft of computers, tablets and smart phones utilized by our employees or contractors; unauthorized access and cyber-attacks. If these information systems or technologies are interrupted or fail, our operations may be adversely affected, which could adversely affect our sales, earnings, financial condition and liquidity.

Unauthorized disclosure of confidential information provided to us by our customers, employees, or third parties could harm our business.

We rely on the internet and other electronic methods to transmit confidential information and we store confidential information on our networks. If there was a disclosure of confidential information by our employees or contractors, including accidental loss, inadvertent disclosure or unapproved dissemination of information, or if a third party were to gain access to the confidential information we possess, our reputation could be harmed and we could be subject to civil or criminal liability and regulatory actions. A claim that is brought against us, successful or unsuccessful, that is uninsured or under-insured could harm our business, result in substantial costs, divert management attention and adversely affect our sales, earnings, financial condition and liquidity.

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We may engage in acquisitions and investments in companies, form strategic alliances and pursue new business lines. These activities could disrupt our business, dilute our earnings per share, decrease the value of our common stock and decrease our earnings and liquidity.

We may acquire or invest in businesses that offer complementary products and that we believe offer competitive advantages.  However, we may fail to identify significant liabilities or risks that could negatively affect us or result in our paying more for the acquired company or assets than they are worth.  We may also have difficulty assimilating the operations and personnel of an acquired business into our current operations.  Acquisitions may disrupt or distract management from our ongoing business.  We may pay for future acquisitions using cash, stock, the assumption of debt, or a combination of these.  Future acquisitions could result in dilution to existing shareholders and to earnings per share and decrease the value of our common stock. We may pursue new business lines in which we have limited or no prior experience or expertise. These pursuits may require substantial investment of capital and personnel. New business initiatives may fail outright or fail to produce an adequate return, which could adversely affect our earnings, financial condition and liquidity.

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

We are in the final phase of implementing an Enterprise Resource Planning (ERP) system in our legacy Hooker Furniture business. (HMI operates on a separate ERP platform.) Our ERP system implementation may not result in improvements that outweigh its costs and may disrupt our operations. Our inability to mitigate existing and future disruptions could adversely affect our sales, earnings, financial condition and liquidity. The ERP system implementation subjects us to substantial costs and inherent risks associated with migrating from our legacy systems. These costs and risks could include, but are not limited to:

§	significant capital and operating expenditures;

§	disruptions to our domestic and international supply chains;

§	inability to fill customer orders accurately and on a timely basis, or at all;

§	inability to process payments to suppliers, vendors and associates accurately and in a timely manner;

§	disruption of our internal control structure;

§	inability to fulfill our SEC or other governmental reporting requirements in a timely or accurate manner;

§	inability to fulfill federal, state and local tax filing requirements in a timely or accurate manner; and

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

We may not be able to collect amounts owed to us.

We grant payment terms to most customers ranging from 30 to 60 days and do not generally require collateral. However, in some instances we provide longer payment terms. Some of our customers have experienced, and may in the future experience, credit-related issues. While we perform credit evaluations of our customers, those evaluations may not prevent uncollectible trade accounts receivable. Credit evaluations involve significant management diligence and judgment. Should more customers than we anticipate experience liquidity issues, or if payment is not received on a timely basis, we may have difficulty collecting amounts owed to us by these customers, which could adversely affect our sales, earnings, financial condition and liquidity.

Our new business initiatives could fail to meet growth and profitability targets.

During fiscal 2014, we launched H Contract and Homeware, two new business initiatives which comprise our All Other operating segment. Both businesses require experience and expertise outside of our traditional skillset, so we hired professionals who we believe have the skills and experience to lead them. H Contract has been profitable on an operating profit basis for the last two fiscal years and its net sales have increased; however, there is no guarantee that H Contract’s early successes will continue and that its sales and earnings will continue to grow. Homeware has not yet achieved operating profitability. Consequently, we adjusted Homeware’s strategy during the second half of fiscal 2016. Despite these changes, we may not succeed in growing Homeware into a profitable business and it may fail outright or fail to produce an adequate return. We expect this segment to have a negative impact on our short-term earnings and liquidity as we attempt to grow these businesses. If Homeware fails to become profitable or H Contract’s early successes diminish or stall, our sales, earnings, financial condition and liquidity could be adversely affected.

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A disruption affecting our Martinsville and Henry County Virginia warehouses, distribution or administrativedomestic facilities could disrupt our business.

Our Martinsville

The warehouses in which we store our inventory in Virginia, North Carolina and Henry County Virginia facilitiesCalifornia are critical to our success. Our Martinsville, Virginia warehouses housed approximately 50% of our consolidated inventories at January 31, 2016. During fiscal 2016, approximately 60% of our invoiced sales were shipped out of our Martinsville facilities. Additionally, our corporate and divisional headquarters, which houses all ofhouse our corporate administration, sourcing, sales, finance, merchandising, customer service and trafficlogistics functions for our imported and domestic products isare located in this area.Virginia and North Carolina. Our domestic upholstery manufacturing facilities are located in Virginia and North Carolina. Furniture manufacturing creates large amounts of highly flammable wood dust and utilizes other highly flammable materials such as varnishes and solvents in its manufacturing processes and is therefore subject to the risk of losses arising from explosions and fires. Additionally, our domestic operations have been negatively affected recently by COVID-19. We enacted business continuity plans and most administrative employees are telecommuting given recommendations for social distancing and stay-at-home orders from state and local governments. We instituted increased cleaning regimens and have instituted social distancing for manufacturing and warehousing associates. Additionally, due to the adverse effect on our sales, some domestic associates have been furloughed or laid off. Any disruption affecting our Martinsville areadomestic facilities, for even a relatively short period of time, could adversely affect our ability to ship our imported furniture products and disrupt our business, which could adversely affect our sales, earnings, financial condition and liquidity.

Our ability to grow and maintain sales and earnings depends on the successful execution of our business strategies.

We are primarily a residential furniture design, sourcing, marketing and logistics company with domestic upholstery manufacturing capabilities.  We are completely dependent on non-U.S. suppliers for all of our casegoods furniture products and a significant portion of our upholstered products. Our ability to grow and maintain sales and earnings depends on:

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the continued correct selection and successful execution and refinement of our overall business strategies and business systems for designing, marketing, sourcing, distributing and servicing our products;

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good decisions about product mix and inventory availability targets;

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the enhancement of relationships and business systems that allow us to continue to work more efficiently and effectively with our global sourcing suppliers; and

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the right mix between domestic manufacturing and foreign sourcing for upholstered products.

Our traditional customer base, independent furniture stores and regional chains, is getting smaller and the demographic profile of the typical home furnishings consumer is evolving. Therefore, we must:

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identify and adapt to trends in retailing; and

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develop strategies to sell in the channels in which our consumers prefer to shop.

All of these factors affect our ability to grow and maintain sales, earnings and liquidity.

Failure to anticipate or timely respond to changes in fashion and consumer tastes could adversely impact our business.

Furniture is a styled product and is subject to rapidly changing fashion trends and consumer tastes, as well as to increasingly shorter product life cycles.  If we fail to anticipate or promptly respond to these changes we may lose market share or be faced with the decision of whether to sell excess inventory at reduced prices.  This could adversely affect our sales, earnings, financial condition and liquidity.

Fluctuations in the price, availability or quality of raw materials for our domestically manufactured upholstered furniture could cause manufacturing delays, adversely affect our ability to provide goods to our customers or increase our costs.

We use various types of wood, leather, fabric, foam and other filling material, high carbon spring steel, bar and wire stock and other raw materials in manufacturing upholstered furniture. We depend on outside suppliers for raw materials and must obtain sufficient quantities of quality raw materials from these suppliers at acceptable prices and in a timely manner. We do not have long-term supply contracts with our suppliers. Unfavorable fluctuations in the price, quality or availability of required raw materials could negatively affect our ability to meet the demands of our customers. We may not always be able to pass price increases in raw materials through to our customers due to competition and other market pressures. The inability to meet customers’ demands or recover higher costs could adversely affect our sales, earnings, financial condition and liquidity.

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If demand for our domestically manufactured upholstered furniture declines, we may respond by realigning manufacturing.

Our domestic manufacturing operations make only upholstered furniture. A decline in demand for our domestically produced upholstered furniture could result in the realignment of our domestic manufacturing operations and capabilities and the implementation of cost-savingcost-saving measures. These programs could include the consolidation and integration of facilities, functions, systems and procedures. We may decide to source certain products from other suppliers instead of continuing to manufacture them. These realignments and cost-savingcost-saving measures typically involve initial upfront costs and could result in decreases in our near-term earnings before the expected cost savings are realized, if they are realized at all. We may not always accomplish these actions as quickly as anticipated and may not achieve the expected cost savings, which could adversely affect our sales, earnings, financial condition and liquidity.

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The interruption, inadequacy or security failure of our information systems or information technology infrastructure or the internet or inadequate levels of cyber-insurance could adversely impact our business,sales, earnings, financial condition and liquidity.

Our information systems (software) and information technology (hardware) infrastructure platforms and those of third parties who provide these services to us, including internet service providers and third-parties who store data for us on their servers (“the cloud”), facilitate and support every facet of our business, including the sourcing of raw materials and finished goods, planning, manufacturing, warehousing, customer service, shipping, accounting, payroll and human resources. Our systems, and those of third parties who provide services to us, are vulnerable to disruption or damage caused by a variety of factors including, but not limited to: power disruptions or outages; natural disasters or other so-called “Acts of God”; computer system or network failures; viruses or malware; physical or electronic break-ins; the theft of computers, tablets and smart phones utilized by our employees or contractors; unauthorized access, phishing and cyber-attacks. The risk of cyberattacks also includes attempted breaches of contractors, business partners, vendors and other third parties. We have a cybersecurity program designed to protect and preserve the integrity of our information systems. We have experienced and expect to continue to experience actual or attempted cyber-attacks of our information systems or networks; however, none of these actual or attempted cyber-attacks had a material impact on our operations or financial condition. Additionally, while we carry cyber insurance, including insurance for social engineering fraud, the amounts of insurance we carry may be inadequate due either to inadequate limits available from the insurance markets or inadequate coverage purchased. Because cyber threat scenarios are inherently difficult to predict and can take many forms, cyber insurance may not cover certain risks. Further, legislative or regulatory action in these areas is evolving, and we may be unable to adapt our information systems or to manage the information systems of third parties to accommodate these changes. If these information systems or technologies are interrupted or fail, or we are unable to adapt our systems or those of third parties as a result of legislative or regulatory actions, our operations and reputation may be adversely affected, we may be subject to legal proceedings, including regulatory investigations and actions, which could diminish investor and customer confidence which could adversely affect our sales, earnings, financial condition and liquidity.

A material part of our sales and accounts receivable are concentrated in a few customers. The loss of several large customers through business consolidations, failures or other reasons, including the adverse economic effects of the COVID-19 pandemic or similar events, could adversely affect our business.

One customer accounted for approximately 11% of our consolidated sales in fiscal 2020, our top five customers accounted for about 30% of our fiscal 2020 consolidated sales. 35% of our consolidated accounts receivable is concentrated in our top five customers. Should any one of these receivables become uncollectible, it would have an immediate and material adverse impact on our financial condition and liquidity. The loss of any one or more of these customers could adversely affect our sales, earnings, financial condition and liquidity. The loss of several of our major customers through business consolidations, failures or otherwise, could adversely affect our sales, earnings, financial condition and liquidity and the resulting loss in sales may be difficult or impossible to replace. Should the negative economic effects of COVID-19 persist or another similar event or events occur, the negative developments described in this paragraph would be more likely to occur. Amounts owed to us by a customer whose business fails, or is failing, may become uncollectible, and we could lose future sales, any of which could adversely affect our sales, earnings, financial condition and liquidity.

We may not be able to collect amounts owed to us.

We grant payment terms to most customers ranging from 30 to 60 days and do not generally require collateral. However, in some instances we provide longer payment terms. As a result of the COVID-19 pandemic, during the fiscal 2021 first quarter some customers have requested extended payment terms or informed us they will not pay amounts within agreed upon terms. We also purchase credit insurance on certain customers’ receivables and factor certain other customer accounts. Some of our customers have experienced, and may in the future experience, credit-related issues. Were the negative economic effects of COVID-19 to persist or a similar pandemic or another major, unexpected event with negative economic effects occur, we may not be able to collect amounts owed to us or such payment may only occur after significant delay. While we perform credit evaluations of our customers, those evaluations may not prevent uncollectible trade accounts receivable. Credit evaluations involve significant management diligence and judgment, especially in the current environment. We may be unable to obtain sufficient credit insurance on certain customers’ receivable balances. Should more customers than we anticipate experience liquidity issues, if payment is not received on a timely basis, or if a customer declares bankruptcy or closes stores, we may have difficulty collecting amounts owed to us by these customers, which could adversely affect our sales, earnings, financial condition and liquidity.

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Unauthorized disclosure of confidential information provided to us by our customers, employees, or third parties could harm our business.

We rely on the internet and other electronic methods to transmit confidential information and we store confidential information on our networks. If there was a disclosure of confidential information by our employees or contractors, including accidental loss, inadvertent disclosure or unapproved dissemination of information, or if a third party were to gain access to the confidential information we possess, our reputation could be harmed, and we could be subject to civil or criminal liability and regulatory actions. A claim that is brought against us, successful or unsuccessful, that is uninsured or under-insured could harm our business, result in substantial costs, divert management attention and adversely affect our sales, earnings, financial condition and liquidity.

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

If our product offerings do not meet applicable safety standards or consumers' expectations regarding safety, we could experience decreased sales, increased costs and/or be exposed to legal and reputational risk. Events that give rise to actual, potential or perceived product safety concerns could expose us to regulatory enforcement action and/or private litigation. While we carry general and umbrella liability insurance for such events, settlements or jury awards could exceed our policy limits. Reputational damage caused by real or perceived product safety concerns or failure to prevail in private litigation against us could adversely affect our business, sales, earnings, financial condition and liquidity.

We incurred significant debt to provide permanent financing for recent acquisitions.

We currently owe $30.1 million on term loans for recent acquisitions. Principal and interest payments on the borrowed funds were $6.4 million in fiscal 2020. We are subject to interest rate volatility due to the variable interest rates on these term loans. Among other risks, our debt:

■

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

■

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

■

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

■

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

Additionally, all balances under these term loans are due and payable on February 1, 2021, the first day of fiscal 2022. We intend to refinance these loans during fiscal 2021. If we are unsuccessful in refinancing these loans, it would have a material adverse impact on our liquidity. If the negative economic effects of COVID-19 persist, it would likely have a material adverse effect on our sales, earnings and liquidity. Consequently, our credit rating may decrease and refinancing our debt may be more difficult and any new loans more costly.

We may engage in acquisitions and investments in companies, form strategic alliances and pursue new business lines. These activities could disrupt our business, dilute our earnings per share, decrease the value of our common stock and decrease our earnings and liquidity.

We may acquire or invest in businesses such as those that offer complementary products and that we believe offer competitive advantages. However, we may fail to identify significant liabilities or risks that could negatively affect us or result in our paying more for the acquired company or assets than they are worth. We may also have difficulty assimilating and integrating the operations and personnel of an acquired business into our current operations. Acquisitions may disrupt or distract management from our ongoing business. We may pay for future acquisitions using cash, stock, the assumption of debt, or a combination of these. Future acquisitions could result in dilution to existing shareholders and to earnings per share and decrease the value of our common stock. We may pursue new business lines in which we have limited or no prior experience or expertise. These pursuits may require substantial investment of capital and personnel. New business initiatives may fail outright or fail to produce an adequate return, which could adversely affect our earnings, financial condition and liquidity.

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

Accounting rules require that long-lived assets be tested for impairment when circumstances indicate, but at least annually.  

At January 31, 2016February 2, 2020, we had $24.2$103.3 million in net long-lived assets, consisting primarily of property, plant and equipment, trademarks, trade names and trade names.goodwill. Our goodwill, some trademarks and tradenames have indefinite useful lives and, consequently, are not subject to amortization for financial reporting purposes, but are tested for impairment annually or more frequently if events or circumstances indicate that the asset might be impaired. Our definite-lived assets consist of property, plant and equipment and certain intangible assets related to our recent acquisitions and are tested for impairment whenever events or circumstances indicate that the carrying amount of the asset may not be recoverable. The outcome of impairment testing could result in the write-offwrite-down of all or a portion of the value of these assets. A write-down of our assets would, in turn, reduce our earnings and net worth; factors which may lead toworth. See Notes 9 and 10 for additional write-downs of our long-lived assets include, but are not limited to:

§

A significant decrease in the market value of a long-lived asset;

§

A significant adverse change in the extent or manner in which a long-lived asset group is being used, or in its physical condition;

§

A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset, including an adverse action or assessment by a regulator;

§

An accumulation of costs significantly in excess of the amount originally expected to acquire or construct a long-lived asset;

§

A current period operating or cash flow loss or a projection or forecast that demonstrates continuing losses associated with a long-lived asset’s use; and

§

A current expectation that more-likely-than-not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.

information.

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

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

Economic downturns could result in decreased sales, earnings and liquidity.

The furniture industry is particularly sensitive to cyclical variations in the general economy and to uncertainty regarding future economic prospects.prospects, including the current and evolving negative economic effects of the COVID-19 pandemic. Home furnishings are generally considered a postponable purchase by most consumers. Economic downturns could affect consumer spending habits by decreasing the overall demand for home furnishings. Changes in interest rates, consumer confidence, new housing starts, existing home sales, the availability of consumer credit and broader national or geopolitical factors have particularly significant effects on our business. We have seen negative effects on all of these measures due to the COVID-19 pandemic. A recovery in our sales could lag significantly behind a general recovery in the economy after an economic downturn, due to, among other things, the postponable nature and relatively significant cost of home furnishings purchases. These events could also impact retailers, our primary customers, possibly adversely affecting our sales, earnings, financial condition and liquidity.

We may lose market share due to competition.

The furniture industry is very competitiveretailers by-passing us and fragmented.  We compete with numerous domestic and non-U.S. residential furniture sources.  Some competitors have greater financial resources than we have and often offer extensively advertised, well-recognized, branded products.  Competitionsourcing directly from non-U.S. furniture sources has increased dramatically over the past decade.  We may not be able to meet price competition or otherwise respond to competitive pressures, including increases in supplier and production costs.  Also, due to the large number of competitors and their wide range of product offerings, we may not be able to continue to differentiate our products (through value and styling, finish and other construction techniques) from those of our competitors.  In addition, some.

Some large furniture retailers are sourcing directly from non-U.S. furniture factories. Over time, this practice may expand to smaller retailers. As a result, we are continually subject to the risk of losing market share, which could adversely affect our sales, earnings, financial condition and liquidity.

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The loss of several large customers through business consolidations, failures

Failure to anticipate or other reasonstimely respond to changes in fashion and consumer tastes could adversely affectimpact our business.

The lossbusiness.

Furniture is a styled product and is subject to rapidly changing fashion trends and consumer tastes, as well as to increasingly shorter product life cycles. If we fail to anticipate or promptly respond to these changes we may lose market share or be faced with the decision of several of our major customers through business consolidations, failures or otherwise,whether to sell excess inventory at reduced prices. This could adversely affect our sales, earnings, financial condition and liquidity.  Lost sales may be difficult to replace.  Amounts owed to us by a customer whose business fails, or is failing, may become uncollectible, and we could lose future sales, any of which could adversely affect our sales, earnings, financial condition and liquidity.

We may incur higher employee costs in the future.

We maintain a self-insured healthcare planand workers compensation plans for our employees. We have insurance coverage in place for aggregate claims above a specified amountamounts in any year. While ouryear for both plans. Our healthcare costs in recent years have generally increased at the same rate or greater than the national average, thoseand healthcare costs have increased more rapidly than general inflation in the U.S. economy. Continued inflation in healthcare costs, as well as additional costs we may incur as a result of current or future federal or state healthcare legislation and regulations, could significantly increase our employee healthcare costs in the future. Our workers compensation claims costs have had only a modest impact on our overall results of operations for quite some time; however, these costs may increase in the future without warning. Continued increases in our healthcare costs and increased workers compensation claims costs could adversely affect our earnings, financial condition and liquidity.

Our results of operations for any quarter are not necessarily indicative of our results of operations for a full year.

Home furnishings sales fluctuate from quarter to quarter due to factors such as changes in economic and competitive conditions, seasonality, weather conditions and changes in consumer order patterns. From time to time, we have experienced, and may continue to experience, volatility with respect to demand for our home furnishing products. The acquisition and integration of Home Meridian may increase that volatility. Accordingly, our results of operations for any quarter are not necessarily indicative of the results of operations to be expected for a full year.

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

Our business is subject to various domestic and international laws and regulations that could have a significant impact on our operations and the cost to comply with such laws and regulations could adversely impact our sales, earnings, financial condition and liquidity. In addition, failure to comply with such laws and regulations, even inadvertently, could produce negative consequences which could adversely impact our operations and reputation.

Risks Specific to the Acquisition and Integration of Home Meridian

We may fail to realize all of the anticipated benefits of the Home Meridian acquisition.

While we believe that the Home Meridian acquisition will be accretive to our earnings per share beginning in fiscal 2017, this expectation is based on preliminary estimates which may materially change. While we do not expect to merge operations or change customer-facing services, the success of this acquisition will depend, in part, on our ability to improve each business by sharing best practices in order to lower costs, improve efficiencies and grow sales. There can be no assurance regarding when or the extent to which we will be able to realize these benefits. Achieving the anticipated benefits is subject to a number of uncertainties, including whether the business acquired can be operated in the manner we intend. Events outside of our control could also adversely affect our ability to realize the anticipated benefits from the acquisition. Thus, the integration of Home Meridian’s business may be unpredictable, subject to delays or changed circumstances, and we can give no assurance that the acquired business will perform in accordance with our expectations, or that our expectations with respect to integration or benefits as a result of the acquisition will materialize. Additionally, a major asset acquired in this acquisition was Home Meridian’s existing customer relationships. While we believe that these relationships will continue and result in profitable sales, there can be no assurance that they will.

The anticipated benefits and cost savings of the proposed acquisition may not be realized fully or at all, or may take longer to realize than expected. The integration process could result in the loss of key employees, the disruption of ongoing businesses or inconsistencies in standards, controls, procedures and policies. If the integration is not completed as planned, our ongoing business and financial results may be adversely affected, which could adversely affect our sales, earnings, financial condition and liquidity.

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We incurred significant debt to provide permanent financing for the acquisition.

We funded $60 million of the acquisition price with term loans. Acquisition-related principal and interest payments on the borrowed funds are expected to be approximately $7.0 million in fiscal 2017. We are subject to interest rate volatility due to the variable rates of interest on our loans. Among other risks, our debt:

§

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

§

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

§

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

§

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

The intangible assets we expect to record as a result of the acquisition could become impaired.

We expect to account for this acquisition using the acquisition method of accounting, which could result in charges to our earnings that could adversely affect our reported operating results. Under this method, we will allocate the total purchase price to the assets acquired and liabilities assumed from HMI based on their fair values as of February 1, 2016 (the date of the completion of the acquisition) and will record any excess of the purchase price over those fair values as goodwill. To the extent the value of goodwill or intangible assets were to become impaired, we may be required to incur charges relating to the impairment of those assets. Goodwill is tested for impairment annually or whenever events or changes in circumstances indicate impairment may have occurred. If we make changes in our business strategy or if market or other conditions adversely affect operations in any of our businesses, we may be forced to record a non-cash impairment charge, which would reduce our reported assets, net income and shareholders’ equity. If the testing performed indicates that impairment has occurred, we are required to record an impairment charge for the difference between the carrying value of the goodwill and the implied fair value of the goodwill in the period the determination is made. The testing of goodwill for impairment requires us to make significant estimates about our future performance and cash flows, as well as other assumptions. These estimates can be affected by numerous factors, including: future business operating performance, changes in economic conditions and interest rates, regulatory, industry or market conditions, changes in business operations, or changes in competition. Any changes in key assumptions, or actual performance compared with key assumptions, about our business and its future prospects could affect the fair value of one or more business segments, which may result in an impairment charge which would adversely affect our earnings and financial condition.

We incurred significant acquisition and acquisition‑related costs in connection with this transaction and expect to incur additional acquisition and integration-related costs in fiscal 2017.

Through the end of our 2016 fiscal year, we incurred approximately $1.1 million in deal-related costs and anticipate incurring approximately $1.5 million in additional deal and integration-related costs in fiscal 2017. We could encounter other integration-related costs or other factors, such as the failure to realize benefits anticipated from the proposed transaction, which could negatively impact the projected financial consequences of the acquisition and adversely affect our financial condition and liquidity. Our anticipated costs to achieve the integration of Home Meridian may differ significantly from our current estimates. The integration may place an additional burden on our management and internal resources, and the diversion of management’s attention during the integration process could have an adverse effect on our business, financial condition and expected operating results. Any of these factors could adversely affect our earnings, financial condition and liquidity.

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We assumed HMI’s legacy pension plan obligations.

We assumed approximately $9.0 million of HMI’s legacy pension plan obligations on the acquisition date of February 1, 2016. While the plan is frozen and no new participants are being added, we expect to be impacted by the plan’s investment performance, changes in actuarial assumptions and the funded status of the plan, which could adversely affect our financial condition and liquidity. Should we decide to terminate the pension plan in the future, we expect to record settlement expenses against our earnings and contribute a final cash contribution, which could adversely affect our financial condition and liquidity.

Risks Specific to HMI’s Operations or to the Operations of the Combined Entity

As previously mentioned, we completed the acquisition of substantially all of the assets of Home Meridian International (HMI) subsequent to the end of our 2016 fiscal year and we are early into the process of integrating the two companies. The risks outlined above are forward looking, but are largely based on our operations before the completion of the acquisition on February 1, 2016. However, except for the risk factors above that deal with domestic manufacturing and upholstery operations, we believe that the risk factors disclosed represent, in all material respects, most of the risks of the combined companies. However, there are risk factors not detailed above that are either specific to Home Meridian’s operations or different enough from those discussed above to warrant separate or additional disclosure:

A material part of HMI’s sales and accounts receivable are concentrated in a few customers, some of which are existing Hooker customers.

Sixty-percent of HMI’s fiscal 2015 sales were concentrated in ten customers. Hooker sold to six of those ten customers during its 2016 fiscal year and sales to those customers accounted for nearly 12% of Hooker’s fiscal 2016 sales. Two of those ten customers each accounted for over 10% of HMI’s fiscal 2015 sales and both of those customers combined accounted for over 27% of HMI’s total fiscal 2015 sales. Of those two customers, Hooker sold to only one during its 2016 fiscal year and those sales accounted for less than 1% of Hooker’s fiscal 2016 sales. Those same two customers accounted for over 30% of HMI’s accounts receivable at the end of its fiscal year on November 1, 2015. HMI’s results will be included in Hooker’s quarterly and annual fiscal 2017 results; however, we are early into the 2017 fiscal year and therefore unable to determine if the two customers referenced above will account for 10% or more of the combined entity’s sales or accounts receivable for fiscal 2017. However,  the loss of one or a combination of those customers, could adversely affect our earnings, financial condition and liquidity.

A disruption affecting Home Meridian’s Madison, NC, Mayodan, NC or Redlands, CA warehouses or its High Point, NC administrative facilities could disrupt our business.

Home Meridian’s domestic warehouses are critical to its success. Its division headquarters houses most of its administration, sourcing, sales, finance, merchandising, customer service and traffic functions. A disruption affecting any or a combination of these facilities, for even a relatively short period of time, could adversely affect its ability to ship its products and disrupt its business, which could adversely affect our sales, earnings, financial condition and liquidity.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2.     PROPERTIES

Set forth below is information with respect to our principal properties at April 15, 2016.17, 2020. We believe all of these properties are well-maintained and in good condition. During fiscal 2016,2020, we estimate our upholstery plants operated at approximately 81%78% of capacity on a one-shift basis. All our production facilities are equipped with automatic sprinkler systems. All facilities maintain modern fire and spark detection systems, which we believe are adequate. We have leased certain warehouse facilities for our distribution and import operations, typically on a short andor medium-term basis. We expect that we will be able to renew or extend these leases or find alternative facilities to meet our warehousing and distribution needs at a reasonable cost. All facilities set forth below are active and operational, representing approximately 3.54.0 million square feet of owned space, leased space or properties utilized under third-party operating agreements.

Location		Segment Use		Primary Use		Approximate Size in Square Feet		Owned or Leased
Martinsville, Va.	All segments			Corporate Headquarters All segments		43,000 Corporate Headquarters, Distribution, Manufacturing and Warehousing			Owned
Martinsville, Va.		All segments 1,489,766		Owned / Leased
Distribution and Imports High Point, N.C.		580,000 All segments			Owned
Martinsville, Va.		All segments Office, Showroom and Warehouse			Customer Support Center 225,292		146,000 Leased
Madison / Mayodan, NC			Owned
Martinsville, Va.		All segments HM			Distribution Warehouse		628,000 935,144			Leased (1)
High Point, N.C.	All segments Redlands, CA.			Showroom HM		80,000 Warehouse			Leased (2)
Cherryville, N.C.		Upholstery 327,790		Leased
Bedford, Va.		DU		Manufacturing and Offices		327,000		Owned
Hickory, N.C.		DU		Manufacturing and Offices		166,000		Leased
Mt. Airy, N.C.		DU		Manufacturing and warehousing		104,150		Leased
Valdese, N.C.		DU		Manufacturing and warehousing		102,905		Leased
Cherryville, N.C.		DU		Manufacturing Supply Plant	53,000			Owned (3)
Hickory, N.C. 53,000		Upholstery Owned
Dongguan, China			Manufacturing HB, HM		91,000 Office, Warehouse and Distribution			Owned (3)
Hickory, N.C. 213,426		Upholstery Leased
Haining, China			Manufacturing and Offices HM		36,400 Office			Leased (3) (4)
Bedford, Va. 1,690		Upholstery			Manufacturing and Offices		327,000			Owned (5) Leased
High Point, N.C.	*			Showroom		77,000			Leased (6) (13)
High Point, N.C.		*			Office		23,796			Leased (6) (7)
High Point, N.C.		*			Warehouse		16,900			Leased (6) (8)
Madison, N.C.		*			Warehouse		500,000			Leased (6) (9)
Mayodan, N.C.		*			Warehouse		100,000			Leased (6) (10)
Mayodan, N.C.		*			Warehouse		235,144			Leased (6) (11)
Redlands, CA.		*			Warehouse		327,790			Leased (6) (12)
Ho Chi Minh City, Vietnam		*VN			Office and Warehouse HB, HM		4,893 Office, Warehouse and Distribution			Leased (6) (14)
Haining, China 57,893		* Leased
Thu Dau Mot, VN			Warehouse HB		5,920 Office			Leased (6) (12)
Haining, China 1,722		*			Office		1,690			Leased (6) (15)
Dongguan, China		*			Office		1,571			Leased (6) (16)
(1) Lease expires March 31, 2021.
(2) Lease expires October 31, 2016.
(3) Comprise the principal properties of Bradington-Young LLC.
(4) Lease expires December 15, 2016 and provides for 2 two-year extensions at our election.
(5) Comprise the principal properties of Sam Moore Furniture LLC.
(6) Comprise the principal properties of Home Meridian International.
(7) Lease expires March 31, 2022.
(8) Lease expires May 31, 2016.
(9) Lease expires August 31, 2016.
(10) Lease expires May 31, 2020 and provides for two twelve-month extensions at our election.
(11) Lease expires October 31, 2020.
(12) Lease expires December 31, 2016.
(13)  Lease expires October 31, 2023.
(14)  Lease expires March 15, 2018.
(15)  Lease expires September 17, 2016.
(16)  Lease expires September 30, 2016.
* The completion of the acquisition of HMI's assets occurred subsequent to the end of our 2016 fiscal year.
Consequently, we have not yet determined the operating segments of the combined entity.

HB=Hooker Branded, HM=Home Meridian, DU=Domestic Upholstery

ITEM 3.     LEGAL PROCEEDINGS

None.

ITEM 4.     MINE SAFETY DISCLOSURES

None.

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Set forth below is information regarding principal properties we utilize that are owned and operated by third parties.

Location		Segment Use		Primary Use		Approximate Size in Square Feet
Guangdong, China		Casegoods		Distribution		210,000 (1)
Ho Chi Minh City, Vietnam		Casegoods		Distribution		25,000 (2)
(1) This property is subject to an operating agreement that expires on July 31, 2016.
Renewal is automatic unless either party gives notice to terminate 120 days prior to expiration.
(2) This property is subject to an operating agreement that may be canceled by either party
upon 45 days written notice and is canceled if no storage or other services are performed
under the contract for 180 days.

ITEM 3.                     LEGAL PROCEEDINGS

None.

ITEM 4.                     MINE SAFETY DISCLOSURES

None.

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INFORMATION ABOUT OUR EXECUTIVE OFFICERS OF

HOOKER FURNITURE CORPORATION

Hooker Furniture’s executive officers and their ages as of April 15, 201617, 2020 and the calendar year each joined the Company are as follows:

Name		Age		Position		Year Joined Company
Paul B. Toms, Jr.		61		Chairman and Chief Executive Officer		1983
Paul A. Huckfeldt		58		Chief Financial Officer and		2004
				Senior Vice President - Finance and Accounting
Michael W. Delgatti, Jr.		62		President - Hooker Furniture Corporation		2009
Anne M. Jacobsen		54		Senior Vice President-Administration		2008
George Revington		69		President and Chief Operating Officer - Home Meridian		2016

Name		Age		Position		Year Joined Company
Paul B. Toms, Jr.		65		Chairman and Chief Executive Officer		1983
Paul A. Huckfeldt		62		Chief Financial Officer and		2004
				Senior Vice President - Finance and Accounting
Anne Jacobsen Smith		58		Chief Administration Officer		2008
D. Lee Boone		57		Co-President - Home Meridian Segment		2016
Jeremy R. Hoff		46		President - Hooker Legacy Brands		2017
Douglas Townsend		53		Co-President - Home Meridian Segment		2016

Paul B. Toms, Jr. has been Chairman and Chief Executive Officer since December 2000 and also served as President for most of the period from November 2006 to August 2011. Mr. Toms was President and Chief Operating Officer from December 1999 to December 2000, Executive Vice President - Marketing from 1994 to December 1999, Senior Vice President - Sales and Marketing from 1993 to 1994, and Vice President - Sales from 1987 to 1993. Mr. Toms joined the Company in 1983 and has been a Director since 1993.

Paul A. Huckfeldt has been Senior Vice President - Finance and Accounting since September 2013 and Chief Financial Officer since January 2011. Mr. Huckfeldt served as Vice President – Finance and Accounting from December 2010 to September 2013, Corporate Controller and Chief Accounting Officer from January 2010 to January 2011, Manager of Operations Accounting from March 2006 to December 2009 and led the Company’s Sarbanes-Oxley implementation and subsequent compliance efforts from April 2004 to March 2006.

Michael W. Delgatti, Jr.

Anne Jacobsen Smithhas been PresidentChief Administration Officer since February 2014. Mr. DelgattiJuly 2018. Ms. Smith served as Senior Vice President – Hooker UpholsteryAdministration from August 2011 to January 2014 and Executive Vice-President of Corporate Sales from September 2012 to January 2014. Mr. Delgatti joined the Company in January of 2009 as Executive Vice-President of Hooker Upholstery.

Anne M. Jacobsen has been SeniorJune 2018, Vice President- Administration since January 2014. Ms. Jacobsen joined the Company in January of 2008 as Director of Human Resources and served as Vice President- H RHR and Administration from January 2011 to January 2014 and Vice President-Human Resources from November 2008 to January 2011.

George Revington Ms. Smith joined the Company in January of 2008 as President and Chief Operating OfficerDirector of Human Resources.

D. Lee Boonehas been Co-President of the Home Meridian divisionSegment since June 2018. Mr. Boone joined the Company upon the acquisition of Home Meridian’s assets by the Company in February 2016.2016 as President of Samuel Lawrence Furniture, a division of Home Meridian International. Prior to that, Mr. RevingtonBoone served as President of Legacy Classic Furniture from 2006 to 2012.

Jeremy R. Hoffhas been President of Hooker Legacy Brands since February 2020. Mr. Hoff served as President of the Hooker Branded Segment from April 2018 to January 2020. Mr. Hoff joined the Company in August of 2017 as President of Hooker Upholstery. Prior to that, Mr. Hoff served as President of Theodore Alexander USA from December 2015 to August 2017 and Senior Vice President of sales at A.R.T. Furniture Inc. from April 2015 to November 2015 and Vice-President of Sales from March 2011 to April 2015.

Douglas Townsendhas been Co-President of the Home Meridian Segment since June 2018. Mr. Townsend joined the Company upon the acquisition of Home Meridian’s assets by the Company in February 2016 as Senior Vice President of U.S. Operations and Chief Operating Officer of both Samuel Lawrence Hospitality and the Clubs Division.  Prior to the acquisition, he was Executive OfficerVice President of Home Meridian International since its creation in 2006.

from October 2011 to February 2016.

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Hooker Furniture Corporation

Part II

ITEM 5.     MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER STOCKHOLDERMATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our stock is traded on the NASDAQ Global Select Market under the symbol “HOFT”. The table below sets forth the high and low sales prices per share for our common stock and the dividends per share we paid with respect to our common stock for the periods indicated.

		Sales Price Per Share								Dividends
		High				Low				Per Share
November 2, 2015 - January 31, 2016		$	30.51			$	24.00			$	0.10
August 3, - November 1, 2015			26.50				22.16				0.10
May 4, - August 2, 2015			27.30				23.50				0.10
February 2 - May 3, 2015			26.67				17.57				0.10
November 3, 2014 - February 1, 2015		$	18.77			$	14.25			$	0.10
August 4, - November 2, 2014			16.00				14.24				0.10
May 5, - August 3, 2014			17.40				13.60				0.10
February 3 - May 4, 2014			16.24				13.64				0.10

As of January 31, 2016,February 2, 2020, we had approximately 5,3007,000 beneficial shareholders. We currently expect that future regular quarterly dividends will be declared and paid in the months of March, June, September and December. Although we presently intend to continue to declare regular cash dividends on a quarterly basis for the foreseeable future, the determination as to the payment and the amount of any future dividends will be made by the Board of Directors on a quarterly basis and will depend on our then-current financial condition, capital requirements, results of operations and any other factors then deemed relevant by the Board of Directors.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

During the fiscal 2013 first quarter, our Board of Directors authorized the repurchase of up to $12.5 million of the Company’s common shares. During fiscal 2013, we used an aggregate of $671,000 to purchase 57,700 shares of our stock at an average price of $11.63 per share. No shares were purchased duringhave been repurchased since fiscal 2014, 2015 or fiscal 2016.2013. Approximately $11.8 million remainsremained available under the board’s authorization as of January 31, 2016.February 2, 2020. In April 2020 (fiscal 2021), our Board of Directors terminated this repurchase authorization after several years of inactivity. For additional information regarding this repurchase authorization, see the “Share Repurchase Authorization” section in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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Performance Graph

The following graph compares cumulative total shareholder return for the Company with a broad performance indicator, the Russell 2000^® Index, and ana published industry index, the Household Furniture Index, for the period from January 30, 2011February 1, 2015 to January 31, 2016.

February 2, 2020.

(1)	The graph shows the cumulative total return on $100 invested at the beginning of the measurement period in our common stock or the specified index, including reinvestment of dividends.

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(2)	The Russell 2000® Index, prepared by Frank Russell Company, measures the performance of the 2,000 smallest companies out of the 3,000 largest U.S. companies based on total market capitalization. capitalization and includes the Company.

(3)

Household Furniture Index as prepared by Zacks Investment Research, Inc. consists of companies under SICStandard Industrial Classification (SIC) Codes 2510 and 2511, which includes home furnishings companies that are publicallypublicly traded in the United States or Canada.  At January 31, 2016,February 2, 2020, Zacks Investment Research, Inc. reported that these two SIC Codes consisted of Bassett Furniture Industries,Nova Lifestyle, Inc., Dorel Industries,La-Z-Boy, Inc., Ethan Allen Interiors,Leggett & Platt, Inc., Flexsteel Industries, Inc., Hooker Furniture Corporation, La-Z-Boy, Inc.Sleep Number Corp., Leggett & Platt, Inc., Natuzzi SPA-ADR, Nova Lifestyle, Inc., Select Comfort Corporation, Stanley Furniture Company,Kimball International, Inc., Luvu Brands, Inc., KimballTempur Sealy International, Inc., Compass Diversified Holdings, Natuzzi Spa, Purple Innovation, Inc., Bassett Furniture Industries, Inc., Ethan Allen Interiors, Inc., Horrison Resources, Inc., The Rowe Companies, and Tempur Sealy.  Dorel Industries.

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ITEM 6.     SELECTED FINANCIAL DATA

The following selected financial data for each of our last five fiscal years has been derived from our audited, consolidated financial statements. The selected financial data should be read in conjunction with the consolidated financial statements, including the related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this report. Additionally, we face a number of significant risks and uncertainties, as more fully discussed in Item 1A, “Risk Factors”, above. If any or a combination of these risks and uncertainties were to occur, the information below may not be fully indicative of our future financial condition or results of operations.

		Fiscal Year Ended (1)
		January 31,				February 1,				February 2,				February 3,				January 29,
		2016				2015				2014				2013				2012
		(In thousands, except per share data)
Income Statement Data:
Net sales		$	246,999			$	244,350			$	228,293			$	218,359			$	222,505
Cost of sales			178,311				181,550				173,568				165,813				173,642
Gross profit			68,688				62,800				54,725				52,546				48,863
Selling and administrative expenses (2)			44,426				43,752				42,222				39,606				40,375
Goodwill and intangible asset impairment charges (3)			-				-				-				-				1,815
Operating income			24,262				19,048				12,503				12,940				6,673
Other income (expense), net			197				350				(35	)			53				272
Income before income taxes			24,459				19,398				12,468				12,993				6,945
Income taxes			8,274				6,820				4,539				4,367				1,888
Net income			16,185				12,578				7,929				8,626				5,057
Per Share Data:
Basic earnings per share		$	1.50			$	1.17			$	0.74			$	0.80			$	0.47
Diluted earnings per share		$	1.49			$	1.16			$	0.74			$	0.80			$	0.47
Cash dividends per share			0.40				0.40				0.40				0.40				0.40
Net book value per share (4)			14.46				13.30				12.57				12.19				11.78
Weighted average shares outstanding (basic)			10,779				10,736				10,722				10,745				10,762
Balance Sheet Data:
Cash and cash equivalents		$	53,922			$	38,663			$	23,882			$	26,342			$	40,355
Trade accounts receivable			28,176				32,245				29,393				28,272				25,807
Inventories			43,713				44,973				49,016				49,872				34,136
Working capital			111,462				100,871				94,142				92,200				89,534
Total assets			181,653				170,755				155,481				155,823				149,171
Long-term debt			-				-				-				-				-
Shareholders' equity			156,061				142,909				134,803				131,045				127,113

		Fiscal Year Ended (1)
		February 2,				February 3,				January 28,				January 29,				January 31,
		2020				2019				2018				2017				2016
		(In thousands, except per share data)
Income Statement Data:
Net sales		$	610,824			$	683,501			$	620,632			$	577,219			$	246,999
Cost of sales			496,866				536,014				485,815				451,098				178,311
Casualty loss (2)			-				500				-				-				-
Gross profit			113,958				146,987				134,817				126,121				68,688
Selling and administrative expenses (3)			88,867				91,928				87,279				83,186				43,959
Intangible asset amortization (4)			2,384				2,384				2,084				3,134				-
Operating income (3)			22,707				52,675				45,454				39,801				24,729
Other income (expense), net (3)			458				369				1,566				349				(206	)
Interest Expense, net			1,238				1,454				1,248				954				64
Income before income taxes			21,927				51,590				45,772				39,196				24,459
Income taxes			4,844				11,717				17,522				13,909				8,274
Net income			17,083				39,873				28,250				25,287				16,185
Per Share Data:
Basic earnings per share		$	1.44			$	3.38			$	2.42			$	2.19			$	1.50
Diluted earnings per share		$	1.44			$	3.38			$	2.42			$	2.18			$	1.49
Cash dividends per share			0.61				0.57				0.50				0.42				0.40
Net book value per share (5)			23.25				22.37				19.53				17.16				14.46
Weighted average shares outstanding (basic) (6)			11,784				11,759				11,633				11,531				10,779
Balance Sheet Data:
Cash and cash equivalents		$	36,031			$	11,435			$	30,915			$	39,792			$	53,922
Trade accounts receivable			87,653				112,557				92,803				92,578				28,176
Inventories			92,813				105,204				84,459				75,303				43,713
Working capital			171,838				170,516				153,162				147,856				111,462
Total assets			393,708				369,716				350,058				318,696				181,653
Long-term debt (including current maturities) (7)			30,138				35,508				53,425				47,710				-
Shareholders' equity			274,121				263,176				229,460				197,927				156,061

(1)

(1)

Our fiscal years end on the Sunday closest to January 31. The fiscal years presented above all had 52 weeks, except for the prior fiscal year ended February 3, 2013,2019, which had 53 weeks.

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(2)

(2)

Represents the insurance deductible for a casualty loss experienced at one of our Hooker Branded segment facilities in fiscal 2019.

(3)

Amounts for fiscal 2018, 2017 and 2016 have been adjusted to reflect the reclassifications from Selling and administrative expenses (“S&A”) to Other income (expense), net of certain benefits costs as a result of adopting ASU 2017-07, Improving the Presentation of Net Periodic PensionCost and Net Periodic Postretirement Benefit Cost. This accounting standard requires bifurcation of net benefit cost such that all benefit costs except service cost are reported outside of operating costs. Amounts reclassified from S&A to Other income (expense), net were ($30,000), $581,000 and $467,000 for fiscal 2014 included $2.1 million of startup costs pre-tax ($1.4 million, or $0.13 per share after tax)2018, 2017 and 2016, respectively.

(4)

Represents amortization expense on acquisition-related intangibles. The Home Meridian acquisition occurred on February 1, 2016 and the Shenandoah acquisition occurred on September 29, 2017.See note 10 for our H Contract and Homeware business initiatives.

(3)	Basedadditional information on our annual impairment analyses, we recorded intangible asset impairment charges in fiscal 2012, $1.8 million pretax ($1.1 million after tax or $0.10 per share) on our Bradington-Young trade name.assets.

(4)

(5)

Net book value per share is derived by dividing “shareholders’ equity” by the number of common shares issued and outstanding, excluding unvested restricted shares, all determined as of the end of each fiscal period.

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(6)

Weighted average outstanding shares outstanding changed materially as a result of issuing 716,910 shares of common stock to the designees of HMI as partial consideration for the Home Meridian acquisition and 176,018 shares of common stock to the shareholders of SFI as partial consideration for the Shenandoah acquisition.

(7)

Long-term debt (including current maturities) consists of term loans incurred to fund a portion of the Home Meridian and Shenandoah acquisitions.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be

As you read in conjunction withManagement’s Discussion and Analysis, please refer to the selected financial data and the consolidated financial statements, including the related notes, contained elsewhere in this annual report. We especially encourage users of this reportyou to familiarize themselvesyourself with:

§ ■

All of our recent public filings made with the Securities and Exchange Commission (“SEC”).  Our public filings made with the SEC which are available, without charge, at www.sec.gov and at http://investors.hookerfurniture.com;

§ ■

The forward-looking statements disclaimer contained inprior to Item 1 of this report, which describe the significant risks and uncertainties that could cause actual results to differ materially from those forward-looking statements made in this report, including those contained in this section of our annual report on Form 10-K;

§ ■

The company-specific risks found in Item 1A1A. “Risk Factors” of this report. This section contains critical information regarding significant risks and uncertainties that we face. If any of these risks materialize, our business, financial condition and future prospects could be adversely impacted; and

§ ■

Our commitments and contractual obligations and off-balance sheet arrangements described on page 3635-36 and in Note 1519 on page F-27F-39 of this report. These sections describe commitments, contractual obligations and off-balance sheet arrangements, some of which are not reflected in our consolidated financial statements.

In Management’s Discussion and Analysis, we analyze and explain the annual changes in some specific line items in the consolidated financial statements for fiscal 2020 compared to fiscal 2019 and for fiscal 2019 compared to fiscal 2018. We also provide information regarding the performance of each of our operating segments and All Other.

Unless otherwise indicated, references to the Company in this discussion“Company”, "we," "our" or "us" refer to the CompanyHooker Furniture Corporation and its consolidated subsidiaries, unless specifically referring to segment information. Unless otherwise indicated, amounts shown in tables are in thousands, except for share and per share data.

Our fiscal years end onAll references to the Sunday closest“Hooker”, “Hooker Division”, “Hooker Legacy Brands” or “traditional Hooker” divisions or companies refer to January 31. In some years (generally once every six years) the fourth quarter will be fourteen weeks long andcurrent components of our Hooker Branded segment, the fiscal year will consist of fifty-three weeks. For example, the 2013 fiscal year that ended on February 3, 2013 was a 53-week fiscal year. Our quarterly periods are based on thirteen-week “reporting periods” (which end on a Sunday) rather than quarterly periods consisting of three calendar months.  As a result, each quarterly period generally is thirteen weeks, or 91 days, long, except as noted above.

The financial statements filed as part of this annual report on Form 10-K include the:

§

fifty-two week period that began February 2, 2015 and ended on January 31, 2016 (fiscal 2016);

§

fifty-two week period that began February 3, 2014 and ended on February 1, 2015 (fiscal 2015); and

§

fifty-two week period that began February 4, 2013 and ended on February 2, 2014 (fiscal 2014).

Nature of Operations

Hooker Furniture Corporation (the “Company”, “we,” “us” and “our”) is a home furnishings marketing, design and logistics company offering worldwide sourcing of residential and contract casegoods and upholstery, as well as domestically-produced custom leather and fabric-upholstered furniture. We were incorporated in Virginia in 1924 and are ranked among the nation’s top 10 largest publicly traded furniture sources, based on 2015 shipments to U.S. retailers, according to a 2015 survey published by Furniture Today, a leading trade publication. We are a key resource for residential wood and metal furniture (commonly referred to as “casegoods”) and upholstered furniture.  Our major casegoods product categories include accents, home office, dining, bedroom and home entertainment furniture under the Hooker Furniture brand.  Our residential upholstered seating companies includeDomestic Upholstery segment including Bradington-Young, a specialist in upscale motion and stationary leather furniture and Sam Moore and Shenandoah Furniture, a specialist in upscale occasional chairs, settees, sofas and sectional seating with an emphasis on cover-to-frame customization.  An extensive selection of designs and formats along with finish and cover options in each of these product categories makes us a comprehensive resource for retailers primarily targeting the upper-medium price range.  We also market a line of imported leather upholstery under the Hooker Upholstery trade name.  We also work directly with several large customers to develop private-label, unbranded products exclusively for those customers. OurAll Other which includes H Contract division supplies upholstered seating and casegoodsLifestyle Brands.

References to upscale senior living facilities throughout the country, working with designers specializing in“Shenandoah acquisition” refer to our acquisition of substantially all of the contract industry to provide functional furniture for senior living facilities that meets the style and comfort expectationsassets of today’s retirees. Homeware is an online-only brand that is sold through leading international e-commerce retailers. It supplies unique chairs, sofas and ottomans designed to be assembled in minutes by the consumer with no tools or hardware required.

Shenandoah Furniture, Inc. on September 29, 2017.

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For our core product line, our principal customers are both traditional and online retailers of residential home furnishings that are broadly dispersed throughout the United States and in thirty-six other countries around the globe. Our customers include independent furniture stores, specialty retailers, department stores, catalog and internet merchants, interior designers and national and regional chains. They are serviced by over 60 independent North American

Furniture sales representatives and 8 foreign sales representatives. H Contract’s customers include designers, design firms, industry dealers and distributors and senior living facilities throughout the United States. It has its own sales force of independent multi-line sales representatives. Homeware’s customers are primarily online home furnishings retailers.

On January 5, 2016, we entered into an asset purchase agreement with Home Meridian International, Inc. (“HMI”) to acquire substantiallyaccount for all of HMI’s assets in exchange for $85 million in cash and approximately $20.3 million in unregistered shares of our common stock, of which $5.3 million was due to a working capital adjustment provided for in the asset purchase agreement. We completed the acquisition on February 1, 2016, subsequent to the end of our 2016 fiscal year and thus none of the results of HMI are included in our fiscal 2016 results. We believe this acquisition will more than double the size of the Company on a net sales basis and consequently, make us one of the top five public sources for the U.S. furniture market. See note 18 to our consolidated financial statements for additional information.

sales. For financial reporting purposes, we are organized into three reportable segments- Hooker Branded, Home Meridian and Domestic Upholstery, with our other businesses included in All Other. 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. Fiscal 2020, 2019 and 2018 results discussed below have been recast based on the re-composition of our operating segments during the 2020 fourth quarter. See Note 18 to our consolidated financial statements for additional financial information regarding our segments.

Overview

Hooker Furniture Corporation, incorporated in Virginia in 1924, is a designer, marketer and importer of casegoods furniture, upholstered(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 shipments to U.S. retailers, according to a 2019 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 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 furniture. While growing faster than industry average, these channels tend to operate at lower margins.

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.

Executive Summary- Fiscal 2020Results of Operations

Consolidated net sales for fiscal 2020 decreased by 10.6% or $72.7 million as compared to fiscal 2019, from $683.5 million to $610.8 million due primarily to $47.2 million or 12.2% sales decreases in the Home Meridian segment, and to a lesser extent in the Hooker Branded segment and Domestic Upholstery of $16.7 million and $10.9 million decreases respectively, partially offset by $2.1 million net sales increase in All Other. Sales volume loss in all other.

Overview

Consumer home furnishings purchases are driven by an array of factors, including general economic conditions such as:

§

consumer confidence;

§

availability of consumer credit;

§

energy and other commodity prices; and

§

housing and mortgage markets;

three segments as well as lifestyle-driven factors suchone week less of sales compared to fiscal 2019 led to the net sales decreases. The shorter fiscal year accounted for approximately 18% of the 10% net sales decline.

Consolidated net income for fiscal 2020 decreased by $22.8 million or 57.2% as changes in:

§

fashion trends;

§

disposable income; and

§

household formation and turnover.

Our lower overhead, variable-cost import operations help drive our profitability and provide us with more flexibilitycompared to respond to changing demand by adjusting inventory purchases from suppliers. This import model requires constant vigilance due to a larger investment in inventory and longer production lead times. We constantly evaluate our imported furniture suppliers and when quality concerns, inflationary pressures, or trade barriers, such as duties and tariffs, diminish our value proposition, we transition sourcing to other suppliers, often located in different countries or regions.

Our domestic upholstery operations have significantly higher overhead and fixed costs than our import operations, and their profitability has been and can be adversely affected by economic downturns. Our upholstery segment operations have been profitable since fiscal 2013, with overall profitability improving each year, primarily due to improving profitability in our domestic upholstery, which lagged the import operations during the economic downturn but are now seeing the impact of cost reduction efforts and improving sales on their operations.

Fiscal 2016 Executive Summary-Results of Operations

All segments reported improved operating profitability over the prior year, even on generally modest sales increases. Consolidated gross profit increased 9.4% or $5.9 million primarily due to decreased discounting, reduced returns and allowances and lower quality costsearnings on sales decline.

As discussed in greater detail under “Results of Operations” below, the following are the primary factors that affected our casegoods segment; improved operating efficiencies and decreased contract manufacturing in our upholstery segment; and increased net sales in our All Other segment, due primarily to a 70% net sales increase at H Contract. Flat selling and administrative expenses (“S&A”) as a percentage of net sales were due primarily to increased net sales. S&A increased by $674,000 in absolute terms due primarily to $1.2 million in acquisition-related costs recognized in theconsolidated fiscal year which were mostly offset by other decreases in S&A discussed below.  Consolidated operating income increased $5.2 million or about 28% to nearly 10% of net sales due to these factors. Our casegoods segment generated an operating margin of about 12% and upholstery segment operating income more than doubled. Net income increased $3.6 million or nearly 30%.

2020 operations:

■

Gross profit. Consolidated gross profit decreased in absolute terms and as a percentage of net sales due primarily to decreased gross profit in the Home Meridian segment and to a lesser extent in the Hooker Branded segment as the result of lower net sales and higher product costs in both segments as well as increased customer chargebacks and inventory storage and handling costs in our Home Meridian segment. Domestic Upholstery segment gross profit decreased in absolute terms but increased as a percentage of net sales. Consolidated gross profit decrease was partially offset by increased gross profit in All Other and the absence of $500,000 casualty loss related to the damage caused by torrential rains at one of our warehouse facilities recorded in the fiscal 2019.

■

Selling and administrative expenses. Consolidated selling and administrative (S&A) expenses decreased in absolute terms due to decreased selling expenses and compensation costs resulting from lower net sales and profitability in all three segments, partially offset by increased salaries and wages in the Home Meridian segment incurred during the sourcing transition in Asia and increased selling expenses in All Other on higher net sales. S&A expenses increased as a percentage of net sales due to lower sales.

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■	Intangible asset amortization expense. Consolidated intangible amortization expense on the Home Meridian and Shenandoah acquisition-related intangible assets was unchanged compared to fiscal 2019.

■	Operating income. In fiscal 2020, consolidated operating income decreased by $30.0 million as compared to fiscal 2019, from $52.7 million to $22.7 million, or from 7.7% to 3.7% as a percentage of net sales due to the factors discussed above and in greater detail in the analysis below.

Review

Fiscal 2020 marked a difficult year in our 95-year history. Sales were soft going into fiscal 2020 (which began on February 4, 2019) due to a stock-market downturn in late 2018 and a 35-day US government shutdown which lasted until January 2019. These soft sales were exacerbated by the fact that many of our customers were already in an over-inventoried position in an effort to get ahead of the threatened increase in tariffs on January 1, 2019. Tariffs on finished goods and component parts imported from China created a chain reaction of higher product costs, higher selling prices to our customers, inventory disruptions and the increased costs and management resources needed to shift production to factories in non-tariff countries. Also in late 2018, we encountered an unexpected quality issue with the Home Meridian segment’s largest customer which had an adverse impact on sales and earnings for much of fiscal 2020.

Hooker Branded segment net sales decreased by $16.7 million or 9.4% in fiscal 2020, due to a net sales decrease in the Hooker Casegoods division while partially offset by a moderate net sales increase in the Hooker Upholstery division. We increased prices by about 10% on products imported from China to help offset the 25% tariff which was enacted in May 2019 as well as higher freight costs. However, reduced incoming orders and lower sales volume driven by lower consumer demand and softness in home furnishings sales at retail diminished the effect of pricing adjustment and led to a 11% net sales decrease in the Hooker Casegoods division. In an effort to grow sales and support our traditional business as well as our competence in advantaged distribution channels, we continued to bring new introductions and expanded some of our best-selling collections. Given the soft sales in the Hooker Branded segment, we were relatively pleased to maintain Hooker Casegoods profitability close to the same level as compared to prior year. Hooker Upholstery division had a low single-digit net sales increase due to broader and well-received product offerings which led to a 9% increase of incoming orders, as well as favorable product mix with more higher-priced sofas and sectionals sold.

Home Meridian segment net sales decreased by $47.2 million or 12.2% in fiscal 2020. The sales decline with one single major customer represented nearly 80% of the Home Meridian segment’s sales decrease, along with about $4 million in unexpected chargebacks from the same customer. Sales declines with traditional furniture chains represented the remaining sales decrease. Profitability was impacted by the sales decline as well as a write-down of excess inventory, related to the quality issue, to market value (a $1 million charge) and higher demurrage and warehousing costs to store surplus inventory. The segment was more impacted by the imposition of tariffs, with an approximately $7 million negative impact to its gross margin. The majority of Home Meridian’s sales are shipped from our Asian manufacturing partners directly to our retailers rather than stocked in our US warehouses. This fact prevented us from building inventory levels before the 25% tariff became effective. Additionally, due to their size and the price points at which they operate, many of the Home Meridian segment’s customers are more sensitive to price and we were not able to recover enough of the excess tariffs by raising prices.

On a more positive note, Home Meridian’s hospitality and e-commerce sales continued to grow. Samuel Lawrence Hospitality’s (“SLH”) net sales increased over 40% in fiscal 2020. However, excess tariffs and higher freight costs adversely impacted its profitability in this year. Samuel Lawrence Furniture (“SLF”) implemented a mixing warehouse program in Vietnam and offered more options for sourcing products. Its incoming orders increased 9.7% in the fourth quarter of fiscal 2020 and finished the year with backlog 25% higher than prior year end. Prime Resources International (“PRI”) had a difficult year with the majority of Home Meridian’s operating loss coming from this division. Consequently, new division leadership is in the process of rebuilding PRI’s business. Its incoming orders picked up by $3 million in January and it finished the year with backlog 5.5% higher than prior year end. Additionally, Home Meridian has also launched a new division, HMidea, which offers better-quality, ready-to-assemble furniture to mass marketers and e-commerce customers. About $500,000 in start-up costs were incurred for HMidea during the year. These costs were partially offset by a $520,000 gain on the settlement of our pension plan in the third quarter of fiscal 2020, recorded in other income.

Domestic Upholstery segment net sales decreased by $10.9 million or 10.2% due to sales decline in all three domestic upholstery manufacturing divisions driven by decreased unit volume. Bradington-Young and Sam Moore experienced reduced incoming orders throughout fiscal 2020, while Shenandoah’s incoming orders picked up in the fourth quarter and finished the year with backlog nearly 40% higher than prior year end. Our domestic manufacturing divisions benefitted from lower material costs, lower employee benefits expense, and cost reductions implemented by management. However, favorable material costs have leveled out and we do not expect additional decreases in the near future. These positives were partially offset by higher direct labor costs and operating inefficiencies due to lower production volume. Despite decreased net sales, Domestic Upholstery segment reported a solid operating income margin of 6.9% for fiscal 2020, compared to 7.1% in the prior year.

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All Other reported $2.1 million or 20.7% net sales increase due to strong sales in the H Contract division. H Contract incoming orders increased approximately 15% in fiscal 2020 and finished the year with backlog 28% higher than the prior year end. Growing business in the senior living facilities and contract markets, broader product offerings and favorable product mix with heavier weighting of imported casegoods significantly improved H Contract net sales and profitability.

Despite the imposition of 25% tariffs on goods imported from China and soft retail demand that continued through the year, we were pleased that our Hooker Branded segment, Domestic Upholstery segment and All Other all reported solid operating income to mitigate the $7.2 million operating loss in the Home Meridian segment. Although our overall results were down significantly, some business units showed improvement, or flat performance, which helped mitigate particularly poor performance in other business units.

Our cash and cash equivalents increased approximately $25 million to $36 million as of February 2, 2020 principally due to the collection of accounts receivable and reduced inventory levels for lower than expected sales. Despite disappointing operating results in fiscal 2020, we generated $41.4 million in cash from operating activities and $1.4 million from proceeds received on a note receivable from the sale of a former distribution facility. In addition, in the third quarter of fiscal 2020, our Board of Directors approved the increase of our quarterly dividend to $0.16 per share, an increase of 6.7% or $0.01 per share, for a total of $0.61 per share or about $7.2 million paid in fiscal 2020, an increase of 7.0% or $0.04 per share, compared to the prior year. We also paid $6.4 million in term loan principal and interest and $5.1 million for capital expenditures to expand our manufacturing facilities.

Our total assets and liabilities as of February 2, 2020 each increased approximately $40 million due to the adoption of Topic 842, Leases on the first day of the current fiscal year. With an aggregate $25.7 million available under our Existing Revolver to fund working capital, strategic inventory management and cautious capital expenditures, we are confident in our current financial condition. We believe we have financial resources to weather the expected short-term impacts of COVID-19; however, we have limited insight into the extent to which our business may be impacted by COVID-19, and there are many unknowns including how long and how severely we’ll be impacted. An extended and severe impact may 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 for the annual periods included in the consolidated statements of income:

		Fifty-two				Fifty-three				Fifty-two
		weeks ended				weeks ended				weeks ended
		February 2,				February 3,				January 28,
		2020				2019				2018
Net sales			100.0	%			100.0	%			100.0	%
Cost of sales			81.3				78.5				78.3
Gross profit			18.7				21.5				21.7
Selling and administrative expenses			14.5				13.4				14.1
Intangible asset amortization			0.4				0.3				0.3
Operating income			3.7				7.7				7.3
Other income (expense), net			0.1				0.1				0.3
Interest expense, net			0.2				0.2				0.2
Income before income taxes			3.6				7.5				7.4
Income taxes			0.8				1.7				2.8
Net income			2.8				5.8				4.6

23

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		Fifty-two				Fifty-two				Fifty-two
		weeks ended				weeks ended				weeks ended
		January 31,				February 1,				February 2,
		2016				2015				2014
Net sales			100.0	%			100.0	%			100.0	%
Cost of sales			72.2				74.3				76.0
Gross profit			27.8				25.7				24.0
Selling and administrative expenses			18.0				17.9				18.5
Operating income			9.8				7.8				5.5
Other income, net			0.1				0.2				0.0
Income before income taxes			9.9				7.9				5.5
Income taxes			3.3				2.8				2.0
Net income			6.6				5.1				3.5

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Fiscal 20162020 Compared to Fiscal 2015

2019

Fiscal 2020 and 2019 results have been recast based on the re-composition of our operating segments during the fiscal 2020 fourthquarter.

Net Sales

		Fifty-two weeks ended								Fifty-two weeks ended
		January 31, 2016								February 1, 2015								$ Change				% Change
						% Net Sales								% Net Sales
Casegoods		$	155,106				62.8	%		$	153,882				63.0	%		$	1,224				0.8	%
Upholstery			84,090				34.0	%			86,362				35.3	%			(2,272	)			-2.6	%
All Other			8,033				3.3	%			5,025				2.1	%			3,008				59.9	%
Intercompany Eliminations			(230	)							(919	)							689
Consolidated		$	246,999				100.0	%		$	244,350				100.0	%		$	2,649				1.1	%

		Fifty-two weeks ended								Fifty-three weeks ended
		February 2, 2020								February 3, 2019								$ Change				% Change
						% Net Sales								% Net Sales
Hooker Branded		$	161,990				26.4	%		$	178,710				26.2	%		$	(16,720	)			-9.4	%
Home Meridian			340,630				55.8	%			387,825				56.7	%			(47,195	)			-12.2	%
Domestic Upholstery			95,670				15.7	%			106,580				15.6	%			(10,910	)			-10.2	%
All Other			12,534				2.1	%			10,386				1.5	%			2,148				20.7	%
Consolidated		$	610,824				100	%		$	683,501				100	%		$	(72,677	)			-10.6	%

Unit Volume and Average Selling Price

Unit Volume		FY16 % Increase vs. FY15				Average Selling Price ("ASP")		FY16 % Increase vs. FY15
Casegoods			-3.7	%		Casegoods			4.1	%
Upholstery			-5.2	%		Upholstery			2.7	%
All other			98.0	%		All other			-19.7	%
Consolidated			-1.5	%		Consolidated			2.0	%

The increase in consolidated (“ASP”)

Unit Volume		FY20 % Increase/ -Decrease vs. FY19			Average Selling Price		FY20 % Increase/ -Decrease vs. FY19
Hooker Branded			-16.6	%	Hooker Branded			9.7	%
Home Meridian			-12.2	%	Home Meridian			-1.9	%
Domestic Upholstery			-13.8	%	Domestic Upholstery			3.8	%
All Other			14.9	%	All Other			2.8	%
Consolidated			-12.7	%	Consolidated			1.3	%

Consolidated net sales fordecreased $72.7 million or 10.6% compared to fiscal 2016 was principally due to increased unit volume in our All Other segment due to significantly increased sales at H Contract and higher ASP in our casegoods segment due to lower product discounting.

We believe the decreased unit volume in our casegoods segment was due to:

§

Slowing retail furniture sales in the second half of 2016;

§

Lingering product availability challenges due to expanding lead times and late deliveries of certain of our more popular October 2014 market introductions in that segment during the fiscal 2016 first quarter. We received most of the October market introductions and delivered standing orders to customers during the fiscal 2016 second quarter; however, late deliveries resulted in delayed reorders even on products which have retailed well, which impacted shipments into the fiscal 2016 second half; and

§

Outages of key component products that prevented orders for certain suites from shipping during the fiscal 2016 third quarter.

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Unit volume decreases in our upholstery segment were primarily caused by:

§

decreases at Hooker upholstery due to pressure on motion upholstery pricing and, to a lesser extent, exiting lower margin sales programs at the expense of net sales; and

§

decreases at Sam Moore due to the effects of discontinuing unprofitable sales programs at the expense of net sales and lingering post-ERP implementation inefficiencies during the second half of fiscal 2016.

Gross Profit

		Fifty-two weeks ended								Fifty-two weeks ended
		January 31, 2016								February 1, 2015								$ Change				% Change
						% Segment Net Sales								% Segment Net Sales
Casegoods		$	47,558				30.7	%		$	44,868				29.2	%		$	2,690				6.0	%
Upholstery			18,852				22.4	%			16,489				19.1	%			2,363				14.3	%
All Other			2,252				28.0	%			1,465				29.2	%			787				53.7	%
Intercompany Eliminations			26								(22	)							48
Consolidated		$	68,688				27.8	%		$	62,800				25.7	%		$	5,888				9.4	%

Consolidated gross profit increased in the fiscal 2016, primarily due to:

§

Improved casegoods segment gross profit due to decreased discounting due to a better product mix, lower cost of goods sold due to declining freight costs, which more than offset vendor price increases, and lower returns and allowances and other quality related costs as a result of better product quality;

§

Improved upholstery segment gross profit due to operating efficiencies such as decreased contract manufacturing and lower medical claims expense in that segment; and

§

Improved All Other segment gross profit due primarily to increased net sales at H Contract.

Selling and Administrative Expenses

		Fifty-two weeks ended								Fifty-two weeks ended
		January 31, 2016								February 1, 2015								$ Change				% Change
						% Segment Net Sales								% Segment Net Sales
Casegoods		$	29,049				18.7	%		$	27,582				17.9	%		$	1,467				5.3	%
Upholstery			12,833				15.3	%			13,618				15.8	%			(785	)			-5.8	%
All Other			2,544				31.7	%			2,552				50.8	%			(8	)			-0.3	%
Consolidated		$	44,426				18.0	%		$	43,752				17.9	%		$	674				1.5	%

Flat consolidated S&A expenses as a percentage of net sales were2019 due primarily to slightly increased$47.2 million or 12.2% net sales decrease in the Home Meridian segment, and to a lesser extent the recognition of $1.1 milliondecreases in acquisition-related costs in casegoodsthe Hooker Branded segment S&A. Consolidated S&A increased by $674,000 in absolute terms due primarily due to the acquisition-related costs, which wereand Domestic Upholstery, partially offset by other decreases in S&A, such as bad debts and banking expenses.  Upholstery segment S&A decreased primarily due to lower selling expenses due to decreased net sales and lower banking and bad debt expenses.  Selling and administrative expenses in our All Other segment decreased despite a net sales increase in that segment, as our H Contract and Homeware businesses have each progressed beyond the startup phase.

Operating Income

		Fifty-two weeks ended								Fifty-two weeks ended
		January 31, 2016								February 1, 2015								$ Change				% Change
						% Segment Net Sales								% Segment Net Sales
Casegoods		$	18,509				11.9	%		$	17,286				11.2	%		$	1,223				7.1	%
Upholstery			6,020				7.2	%			2,871				3.3	%			3,149				109.7	%
All Other			(293	)			-3.6	%			(1,087	)			-21.6	%			794				73.0	%
Intercompany Eliminations			26								(22	)							48
Consolidated		$	24,262				9.8	%		$	19,048				7.8	%		$	5,214				27.4	%

Operating income increased forAll Other. Fiscal 2020 had 52 weeks while fiscal 2016 compared2019 had 53 weeks. The additional week in fiscal 2019 contributed approximately $13.4 million to the prior year both as a percentage ofconsolidated net sales based on the average net sales per shipping day in the table below.

■

Hooker Branded segment net sales decreased $16.7 million or 9.4% due to decreased net sales in the Hooker Casegoods division, partially offset by a single-digit net sales increase in the Hooker Upholstery division. Decreased unit volume was attributable to lower incoming orders due to the soft retail environment. ASP increased due to price increases and lower discounting in response to the imposition of tariffs on goods imported from China and higher freight costs, as well as increased sales of higher-priced products at Hooker Upholstery. Net sales were negatively impacted by higher than expected quality, sales and advertising allowances.

■

Home Meridian segment net sales decreased $47.2 million or 12.2% driven by sales volume loss with one major customer and with traditional furniture chains, as well as higher than expected chargebacks from the same major customer, partially offset by continued net sales growth in the Samuel Lawrence Hospitality business and the absence of a large quality-related return in the fourth quarter of fiscal 2019. ASP decreased due to customer mix in the traditional channels.

■

Domestic Upholstery net sales decreased $10.9 million or 10.2% due to unit volume loss in all three domestic upholstery manufacturing divisions as the result of continued low incoming orders through fiscal 2020. ASP increased in all three divisions, especially with increased sales of higher-priced Bradington-Young and Shenandoah products, however, it was not sufficient to mitigate the volume loss.

■

All Other net sales increased $2.1 million or 20.7% due to a double-digit net sales increase at H Contract.

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Because we report on a fiscal year that ends on the Sunday closest to January 31^st of each year, the 2019 fiscal year was one week longer than the comparable 2020 fiscal year. The following table presents average net sales per shipping day in thousands for the 2020 and 2019 fiscal years:

		Average Net Sales Per Shipping Day
		Fifty-two weeks ended				Fifty-three weeks ended				%
		February 2, 2020				February 3, 2019				Change
Hooker Branded		$	645			$	698				-7.6	%
Home Meridian			1,357				1,515				-10.4	%
Domestic Upholstery			381				416				-8.4	%
All Other			50				41				22.0	%
Consolidated		$	2,433			$	2,670				-8.9	%
Shipping Days			251				256

Gross Profit

		Fifty-two weeks ended								Fifty-three weeks ended
		February 2, 2020								February 3, 2019								$ Change				% Change
						% Segment Net Sales								% Segment Net Sales
Hooker Branded		$	51,462				31.8	%		$	58,122				32.5	%		$	(6,660	)			-11.5	%
Home Meridian			36,936				10.8	%			62,850				16.2	%			(25,914	)			-41.2	%
Domestic Upholstery			21,120				22.1	%			22,503				21.1	%			(1,383	)			-6.1	%
All Other			4,440				35.4	%			3,512				33.8	%			928				26.4	%
Consolidated		$	113,958				18.7	%		$	146,987				21.5	%		$	(33,029	)			-22.5	%

Consolidated gross profit decreased in absolute terms due to the factors discussed above.

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Income Taxes

		Fifty-two weeks ended								Fifty-two weeks ended
		January 31, 2016								February 1, 2015								$ Change				% Change
						% Net Sales								% Net Sales
Consolidated income tax expense		$	8,274				3.3	%		$	6,820				2.8	%		$	1,454				21.3	%
Effective Tax Rate			33.8	%							35.2	%

We recorded income tax expense of $8.3by $33.0 million during fiscal 2016, compared to $6.8 million for fiscal 2015, due primarily to higher taxable income.  The effective income tax rates for the two fiscal years were 33.8% and 35.2% respectively. The decrease in effective rate is primarily due to the domestic production deduction as well as a decrease in uncertain tax positions.

Net Income and Earnings Per Share

		Fifty-two weeks ended								Fifty-two weeks ended
		January 31, 2016								February 1, 2015								$ Change				% Change
						% Net Sales								% Net Sales
Consolidated		$	16,185				6.6	%		$	12,578				5.1	%		$	3,607				28.7	%
Diluted earnings per share		$	1.49							$	1.16

Fiscal 2015 Compared to Fiscal 2014

Net Sales

		Fifty-two weeks ended								Fifty-two weeks ended
		February 1, 2015								February 2, 2014								$ Change				% Change
						% Net Sales								% Net Sales
Casegoods		$	153,882				63.0	%		$	143,802				63.0	%		$	10,080				7.0	%
Upholstery			86,362				35.3	%			83,027				36.4	%		$	3,335				4.0	%
All Other			5,025				2.1	%			1,487				0.7	%		$	3,538				237.9	%
Intercompany Eliminations			(919	)							(23	)						$	(896	)
Consolidated		$	244,350				100.0	%		$	228,293				100.0	%		$	16,057				7.0	%

Unit Volume		FY15 % Increase vs. FY14				Average Selling Price		FY15 % Increase vs. FY14
Casegoods			-3.8	%		Casegoods			11.5	%
Upholstery			-2.3	%		Upholstery			6.6	%
All other			234.2	%		All other			2.9	%
Consolidated			-1.5	%		Consolidated			9.3	%

The increase in consolidated net sales in fiscal 2015 was primarily due to higher average selling prices in all operating segments, partially offset by lower casegoods and upholstery segment unit volume. Average selling price increased due to increased sales of products in the ‘best’ segment of our ‘better-best’ product assortment, as well as reduced casegoods discounting, which was a result of significant improvements in inventory management which reduced the amount of excess and obsolete inventory sold during the year and the discounts required to move those products. Unit volume decreases in our casegoods segment were primarily due to reduced sales of off-priced products, as well as reduced sales of the lower-priced Opus Designs and Envision products, as we exit those product lines.  Upholstery net sales increased due to net sales gains at both Sam Moore and Bradington-Young, which were due primarily to higher average selling prices, partially offset by lower unit volume. We believe that the all other segment percentages shown are of limited use since the businesses in this segment are starting from a very low base and just completed their first full fiscal year in operation in fiscal 2015.

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Gross Profit

		Fifty-two weeks ended								Fifty-two weeks ended
		February 1, 2015								February 2, 2014								$ Change				% Change
						% Segment Net Sales								% Segment Net Sales
Casegoods		$	44,868				29.2	%		$	38,762				27.0	%		$	6,106				15.8	%
Upholstery			16,489				19.1	%			15,393				18.5	%			1,096				7.1	%
All Other			1,465				29.2	%			588				39.5	%			877				149.1	%
Intercompany Eliminations			(22	)							(18	)							(4	)
Consolidated		$	62,800				25.7	%		$	54,725				24.0	%		$	8,075				14.8	%

Consolidated gross profit increased, primarily due to:

§

decreased casegoods segment discounting, partially offset by increased returns and allowances;

§

a $1.1 million gross profit increase in our upholstery segment due primarily to higher net sales and reduced manufacturing costs; and

§

a substantial increase in net sales for our H Contract business initiative as that business completes its first full year in operation and begins to establish itself in the contract furniture industry.

Selling and Administrative Expenses

		Fifty-two weeks ended								Fifty-two weeks ended
		February 1, 2015								February 2, 2014								$ Change				% Change
						% Segment Net Sales								% Segment Net Sales
Casegoods		$	27,582				17.9	%		$	26,612				18.5	%		$	970				3.6	%
Upholstery			13,618				15.8	%			13,480				16.2	%			138				1.0	%
All Other			2,552				50.8	%			2,130				143.3	%			422				19.8	%
Consolidated		$	43,752				17.9	%		$	42,222				18.5	%		$	1,530				3.6	%

Casegoods segment selling and administrative expenses decreased as a percentage of net sales duefrom 21.5% to 18.7% as compared to fiscal 2019.

■

Hooker Branded segment gross profit decreased both in absolute terms and as a percentage of net sales due to lower net sales and increased product costs, which were attributable to excess tariffs and higher freight costs, partially offset by price increases which helped mitigate the tariff impact as well as the absence of a $500,000 casualty loss we recognized in fiscal 2019.

■

Home Meridian segment gross profit decreased both in absolute terms and as a percentage of net sales due primarily to net sales decline and increased product costs and was exacerbated by higher quality-related expenses. Excess tariff costs and write-down of inventory with quality issues to market price had nearly $12 million adverse impact to gross profit. Increased warehousing and distribution costs to handle the inventory related to quality issues and higher freight costs incurred in hospitality projects also negatively impacted gross margin.

■

Domestic Upholstery segment gross profit decreased in absolute terms driven by lower net sales but increased as a percentage of net sales. Bradington Young and Shenandoah reported improved gross profit as a percentage of net sales, while Sam Moore gross profit stayed essentially flat as a percentage of its net sales. Our domestic upholstery manufacturing divisions gross margin benefitted from lower material costs and decreased benefits expenses due to lower medical claims, while negatively impacted by labor and manufacturing inefficiencies due to reduced production volume and sales of obsolete inventory.

■

Although a small part of our business, All Other contributed nearly $1.0 million increase to consolidated gross profit, which was attributable to strong sales and favorable product mix at H Contract.

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Selling and Administrative Expenses

		Fifty-two weeks ended								Fifty-three weeks ended
		February 2, 2020								February 3, 2019								$ Change				% Change
						% Segment Net Sales								% Segment Net Sales
Hooker Branded		$	29,949				18.5	%		$	32,854				18.4	%		$	(2,905	)			-8.8	%
Home Meridian			42,771				12.6	%			42,688				11.0	%			83				0.2	%
Domestic Upholstery			13,433				14.0	%			13,845				13.0	%			(412	)			-3.0	%
All Other			2,714				21.7	%			2,541				24.5	%			173				6.8	%
Consolidated		$	88,867				14.5	%		$	91,928				13.4	%		$	(3,061	)			-3.3	%

Consolidated selling and administrative expenses decreased in absolute terms but increased as a percentage of net sales in fiscal 2020.

■

Hooker Branded segment S&A expenses decreased in absolute terms due principally to decreased selling expenses and compensation costs as the result of lower net sales and profitability, decreased benefits expense due to lower employee medical costs and a gain on company-owned life insurance, and the recognition of a deferred gain related to the sale of a former distribution facility which we had owner-financed and was paid off during the first quarter. These decreases were partially offset by higher salaries and wages due to increased headcount and the absence of a $1.0 million life insurance gain recorded in fiscal 2019. Hooker Branded segment S&A expenses stayed essentially flat as a percentage of net sales due to lower net sales.

■

Home Meridian segment S&A expenses stayed flat in absolute terms and increased as a percentage of net sales. Increased labor costs related to the sourcing transition in Asia and the start-up costs for the new HMidea division were nearly offset by decreased selling expenses and compensation costs as the result of lower net sales and profitability as well as lower employee benefits expense. Home Meridian segment S&A expenses increased as a percentage of net sales due to lower net sales and higher S&A expenses.

■

Domestic Upholstery segment expenses decreased in absolute terms driven by lower selling expense and compensation costs due to lower net sales and earnings, as well as better spending control, partially offset by higher salaries and wages, and higher benefits expenses due to medical claims. Domestic Upholstery S&A expenses increased as a percentage of net sales due to lower net sales.

■

All Other S&A expenses increased in absolute terms due to higher selling expense as the result of increased H Contract net sales and earnings, and increased advertising supplies expenses to support the launch of Lifestyle Brands.

Intangible Asset Amortization

		Fifty-two Weeks Ended								Fifty-three Weeks Ended
		February 2, 2020								February 3, 2019								$ Change				% Change
						% Net Sales								% Net Sales
Intangible asset amortization		$	2,384				0.4	%		$	2,384				0.3	%		$	-				0.0	%

Intangible asset amortization expense was unchanged compared to the prior year period. See Note 10. Intangible Assets and Goodwill for additional information about our amortizable intangible assets.

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Operating Income

		Fifty-two weeks ended								Fifty-three weeks ended
		February 2, 2020								February 3, 2019								$ Change				% Change
						% Segment Net Sales								% Segment Net Sales
Hooker Branded		$	21,512				13.3	%		$	25,269				14.1	%		$	(3,757	)			-14.9	%
Home Meridian			(7,169	)			-2.1	%			18,828				4.9	%			(25,997	)			-138.1	%
Domestic Upholstery			6,637				6.9	%			7,607				7.1	%			(970	)			-12.8	%
All Other			1,727				13.8	%			971				9.4	%			756				77.9	%
Consolidated		$	22,707				3.7	%		$	52,675				7.7	%		$	(29,968	)			-56.9	%

Operating profitability decreased both in absolute terms and as a percentage of net sales in fiscal 2020 compared to the same prior-year period due to the factors discussed above.

Interest Expense, net

		Fifty-two Weeks Ended								Fifty-three Weeks Ended
		February 2, 2020								February 3, 2019								$ Change				% Change
						% Net Sales								% Net Sales
Interest expense, net		$	1,238				0.2	%		$	1,454				0.2	%		$	(216	)			-14.9	%

Consolidated interest expense in fiscal 2020 decreased due to lower balances on our term loans.

Income Taxes

		Fifty-two weeks ended								Fifty-three weeks ended
		February 2, 2020								February 3, 2019								$ Change				% Change
						% Net Sales								% Net Sales
Consolidated income tax expense		$	4,844				0.8	%		$	11,717				1.7	%		$	(6,873	)			-58.7	%
Effective Tax Rate			22.1	%							22.7	%

We recorded income tax expense of $4.8 million for fiscal 2020 compared to $11.7 million for the same prior year period. The effective tax rates for the fiscal 2020 and 2019 were 22.1% and 22.7%, respectively. Our effective tax rate was lower in fiscal 2020 due primarily to decreased state income taxes. We adopted ASU 2014-09 and ASU 2018-02 in the first quarter of fiscal 2019. The adoptions resulted in the reclassification of $120,000 from federal tax payable and $111,000 from Accumulated Other Comprehensive Income, both to retained earnings. See Note 17 “Income Taxes” for additional information about our income taxes.

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Net Income and Earnings Per Share

		Fifty-two weeks ended								Fifty-three weeks ended
		February 2, 2020								February 3, 2019								$ Change				% Change
Net Income						% Net Sales								% Net Sales
Consolidated		$	17,083				2.8	%		$	39,873				5.8	%		$	(22,790	)			-57.2	%
Diluted earnings per share		$	1.44							$	3.38

Fiscal 2019 Compared to Fiscal 2018

The Shenandoah acquisition closed during the third quarter of fiscal 2018. Consequently, Domestic Upholstery segment’s fiscal 2018 results only included four-months of Shenandoah’s results beginning on September 29, 2017 through the end of our fiscal 2018 which ended on January 28, 2018.

Fiscal 2019 and 2018 results have been recast based on the re-composition of our operating segments during the fiscal 2020 fourth quarter.

Net Sales

		Fifty-three weeks ended								Fifty-two weeks ended
		February 3, 2019								January 28, 2018								$ Change				% Change
						% Net Sales								% Net Sales
Hooker Branded		$	178,710				26.2	%		$	166,754				26.9	%		$	11,956				7.2	%
Home Meridian			387,825				56.7	%			365,472				58.9	%			22,353				6.1	%
Domestic Upholstery			106,580				15.6	%			78,392				12.6	%			28,188				36.0	%
All Other			10,386				1.5	%			10,014				1.6	%			372				3.7	%
Consolidated		$	683,501				100.0	%		$	620,632				100.0	%		$	62,869				10.1	%

Unit Volume and Average Selling Price (“ASP”)

Unit Volume		FY19 % Increase/ -Decrease vs. FY18			Average Selling Price		FY19 % Increase/ -Decrease vs. FY18
Hooker Branded			6.5	%	Hooker Branded			0.2	%
Home Meridian			3.5	%	Home Meridian			3.7	%
Domestic Upholstery			-3.8	%	Domestic Upholstery			6.1	%
All Other			-5.0	%	All Other			10.7	%
Consolidated			3.5	%	Consolidated			2.9	%

*Shenandoah is excluded from Domestic Upholstery segment in the Unit Volume and ASP tables above since only four months of its results was included in fiscal 2018. Consequently, we believe including its fiscal 2019 results would skew the segment’s results and reduce the usefulness of the table above.

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Consolidated net sales increased $62.9 million or 10.1% compared to fiscal 2018. Fiscal 2019 had 53 weeks while fiscal 2018 and 2017 had 52 weeks. The additional week in fiscal 2019 increased consolidated net sales by $13.4 million based on the average net sales per shipping day in the table below.

■

Hooker Branded segment net sales increased $12.0 million or 7.2% primarily due to higher sales volume as the result of strong orders and expanded channels of distribution. Good in-stock positions on best-sellers supported steady shipments. Net sales also benefitted from favorable advertising costs, product mix, and increased sales of Hooker Upholstery sectionals, which had higher ASP.

■

Home Meridian segment net sales increased $22.4 million or 6.1% driven by higher unit volumes and ASP. We raised our selling prices in response to the previously mentioned tariff and increased product costs. Sales volume increased in four out of five business units due to increased sales into emerging channels. The net sales increase was partially offset by a sales decline in traditional channels and unfavorable returns and allowances in the fourth quarter of fiscal 2019.

■

Domestic Upholstery segment net sales increased $28.2 million or 36.0% compared to fiscal 2018. Most of the increase was attributable to a full year of Shenandoah’s net sales being included in fiscal 2019 (as compared to only four months in the prior year) and to a lesser extent, strong sales at Bradington-Young, partially offset by a sales decrease at Sam Moore. ASP increased due to increased sales of higher-priced Bradington-Young luxury motion products. Domestic Upholstery’s unit volume decreased due to the volume decline at Sam Moore.

■

All Other net sales increased due primarily to an upper single digit net sales increase at H Contract. Decreased unit volume and higher ASP was attributable to the absence of Homeware closeout in 2018.

Because we report on a fiscal year that ends on the Sunday closest to January 31^st of each year, the 2019 fiscal year was one week longer than the comparable 2018 fiscal year. The following table presents average net sales per shipping day in thousands for the 2019 and 2018 fiscal years:

		Average Net Sales Per Shipping Day
		Fifty-three weeks ended				Fifty-two weeks ended				%
		February 3, 2019				January 28, 2018				Change
Hooker Branded		$	698			$	664				5.1	%
Home Meridian			1,515				1,456				4.0	%
Domestic Upholstery			416				312				33.3	%
All Other			41				40				2.5	%
Consolidated		$	2,670			$	2,472				8.0	%
Shipping Days			256				251

Gross Profit

		Fifty-three weeks ended								Fifty-two weeks ended
		February 3, 2019								January 28, 2018								$ Change				% Change
						% Segment Net Sales								% Segment Net Sales
Hooker Branded		$	58,122				32.5	%		$	53,007				31.8	%		$	5,115				9.6	%
Home Meridian			62,850				16.2	%			62,325				17.1	%			525				0.8	%
Domestic Upholstery			22,503				21.1	%			16,228				20.7	%			6,275				38.7	%
All Other			3,512				33.8	%			3,257				32.5	%			255				7.8	%
Consolidated		$	146,987				21.5	%		$	134,817				21.7	%		$	12,170				9.0	%

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Consolidated gross profit increased in absolute terms primarily due to increased:

by $12.2 million and decreased slightly as a percentage of net sales in fiscal 2019.

§ ■

commission expense Hooker Branded segment gross profit increased in absolute terms and as a percentage of net sales due to higher sales;sales and lower product costs. Hooker Branded gross profit also benefited from favorable customer mix, driven by growth of ecommerce sales. The improved margin was negatively impacted by higher product costs, increased warehousing and freight costs due to increased inventory levels and a $500,000 casualty loss we recognized early this year.

§ ■

bonus expense Home Meridian segment gross profit increased slightly in absolute terms due to additional sales, but decreased as a percentage of net sales. Lower-margin orders due to unfavorable customer mix, inflation of product cost due to the implementation of the 10% tariff and higher earnings; andproduct costs negatively impacted Home Meridian’s gross profit.

§ ■

bad debts expense Domestic Upholstery segment gross profit increased in absolute terms and as a percentage of net sales primarily due to the write-offaddition of a customer account during the period.full year of Shenandoah’s results in fiscal 2019, and to a lesser extent solid gross profit increase at Bradington Young due to strong sales in this division, as well as moderately lower direct labor and material costs. Despite a sales decline at Sam Moore, its gross profit stayed essentially flat in absolute terms and increased as a percentage of net sales.

These increases were partially offset by decreased:

§ ■

professional services All Other gross profit increased in absolute terms and as a percentage of net sales due to increased gross profit at H Contract and the absence of Homeware closeout sales at lower compliance costs; andmargin in 2018.

§

salaries and benefits expense due to the retirement of an executive in early fiscal 2015 and decreases in medical claims expense and increases in the cash surrender value of Company-owned life insurance.

Upholstery segment

Selling and Administrative Expenses

		Fifty-three weeks ended								Fifty-two weeks ended
		February 3, 2019								January 28, 2018								$ Change				% Change
						% Segment Net Sales								% Segment Net Sales
Hooker Branded		$	32,854				18.4	%		$	30,868				18.5	%		$	1,986				6.4	%
Home Meridian			42,688				11.0	%			43,164				11.8	%			(476	)			-1.1	%
Domestic Upholstery			13,845				13.0	%			11,015				14.1	%			2,830				25.7	%
All Other			2,541				24.5	%			2,232				22.3	%			309				13.8	%
Consolidated		$	91,928				13.4	%		$	87,279				14.1	%		$	4,649				5.3	%

Consolidated selling and administrative expenses increased in absolute terms but decreased as a percentage of net sales primarily due to increased net sales but increased in absolute terms primarily due to increased:

fiscal 2019.

§ ■

Hooker Branded segment S&A expenses increased in absolute terms and was primarily driven by higher compensation costs due to increased headcount, higher employee medical costs, and higher bonus and selling expenses due to increased sales and increased income. These increases were partially offset by a $1.0 million gain on company-owned life insurance recognized during the fiscal 2019 first quarter and the absence of $700,000 Shenandoah-acquisition related costs recorded in prior year period. Hooker Branded segment S&A expenses decreased as a percentage of net sales due to higher net sales.

■

Home Meridian segment S&A expenses decreased in absolute terms and as a percentage of net sales due to decreased bonus expense due to lower sales and earnings as compared to budget, decreased selling expenses on lower-margin orders, and lower bad debt expense in the current year due to the write-offabsence of a customer accountbalance written off during the period;prior year period. These decreases were partially offset by increased employee compensation and benefits expenses.

§ ■

benefits expense Domestic Upholstery S&A expenses increased in absolute terms due primarily to the inclusion of a full year of Shenandoah’s operations in fiscal 2019. The increase was also driven by higher compensation, higher employee medical claims expense.

These increases were partially offset by decreased:

§

advertising supplies due to better cost management;costs and

§

higher professional services due to reduced manufacturing-related consulting.increased compliance costs, while partially offset by decreased S&A expenses at Sam Moore due to lower selling expenses and better spending control.

All other segment selling and administrative expenses increased primarily due to completing its first full year of operations, which included increased spending on salaries, wages and benefits and marketing expenses as we grow these new business initiatives out of their start-up phases, and higher commissions and other variable costs due to increased sales.

■

All Other S&A expenses increased in absolute terms and as a percentage of net sales due to increased selling expenses and compensation costs as the result of higher net sales, as well as increased salaries due to increased headcount at H Contract.

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Operating Income

		Fifty-two weeks ended								Fifty-two weeks ended
		February 1, 2015								February 2, 2014								$ Change				% Change
						% Segment Net Sales								% Segment Net Sales
Casegoods		$	17,286				11.2	%		$	12,150				8.4	%		$	5,136				42.3	%
Upholstery			2,871				3.3	%			1,913				2.3	%			958				50.1	%
All Other			(1,087	)			-21.6	%			(1,542	)			-103.7	%			455				-29.5	%
Intercompany Eliminations			(22	)							(18	)							(4	)
Consolidated		$	19,048				7.8	%		$	12,503				5.5	%		$	6,545				52.3	%

Operating income increased for

Intangible Asset Amortization

		Fifty-three Weeks Ended								Fifty-two Weeks Ended
		February 3, 2019								January 28, 2018								$ Change				% Change
						% Net Sales								% Net Sales
Intangible asset amortization		$	2,384				0.3	%		$	2,084				0.3	%		$	300				14.4	%

Intangible asset amortization expense was higher in the fiscal 2015 compared2019 due to the prior yearaddition of Shenandoah acquisition-related amortization expense for the full year. The increase was partially offset by the short amortization period of certain short-lived Shenandoah acquisition-related intangible assets which was recorded in the fiscal 2018. See Note 10. Intangible Assets and Goodwill for additional information about our amortizable intangible assets.

Operating Income

		Fifty-three weeks ended								Fifty-two weeks ended
		February 3, 2019								January 28, 2018								$ Change				% Change
						% Segment Net Sales								% Segment Net Sales
Hooker Branded		$	25,269				14.1	%		$	22,139				13.3	%		$	3,130				14.1	%
Home Meridian			18,828				4.9	%			17,828				4.9	%			1,000				5.6	%
Domestic Upholstery			7,607				7.1	%			4,463				5.7	%			3,144				70.4	%
All Other			971				9.4	%			1,024				10.2	%			(53	)			-5.2	%
Consolidated		$	52,675				7.7	%		$	45,454				7.3	%		$	7,221				15.9	%

Operating profitability increased both in absolute terms and as a percentage of net sales and in absolute terms,fiscal 2019 compared to the same prior-year period due to the factors discussed above.

Interest Expense, net

		Fifty-three Weeks Ended								Fifty-two Weeks Ended
		February 3, 2019								January 28, 2018								$ Change				% Change
						% Net Sales								% Net Sales
Interest expense, net		$	1,454				0.2	%		$	1,248				0.2	%		$	206				16.5	%

Consolidated interest expense in fiscal 2019 increased primarily due to higher interest rates on our variable-rate term loans, partially offset by the $10 million unscheduled loan payment made on the New Unsecured Term Loan in the first quarter of fiscal 2019.

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Income Taxes

		Fifty-two weeks ended								Fifty-two weeks ended
		February 1, 2015								February 2, 2014								$ Change				% Change
						% Net Sales								% Net Sales
Consolidated income tax expense		$	6,820				2.8	%		$	4,539				2.0	%		$	2,281				50.3	%
Effective Tax Rate			35.2	%							36.4	%

		Fifty-three weeks ended								Fifty-two weeks ended
		February 3, 2019								January 28, 2018								$ Change				% Change
						% Net Sales								% Net Sales
Consolidated income tax expense		$	11,717				1.7	%		$	17,522				2.8	%		$	(5,805	)			-33.1	%
Effective Tax Rate			22.7	%							38.3	%

We recorded income tax expense of $6.8 million during fiscal 2015, compared to $4.6$11.7 million for fiscal 2014, due primarily2019 compared to higher taxable income.$17.5 million for the same prior year period. The effective income tax rates for the two fiscal years2019 and 2018 were 35.2%22.7% and 36.4%38.3%, respectively. The lowerOur effective income tax rate was lower in fiscal 2015 was due2019 as a result of the recently enacted Tax Cuts and Jobs Act of 2017 as well as the absence of $1.8 million for the re-measurement of deferred tax assets and liabilities recorded in the fourth quarter of fiscal 2018, partially offset by increased state income taxes. We adopted ASU 2014-09 and ASU 2018-02 in the first quarter of fiscal 2019. The adoptions resulted in the reclassification of $120,000 from federal tax payable and $111,000 from Accumulated Other Comprehensive Income, both to a smaller impactretained earnings. See Note 2 “Summary of certain permanent differences due to higher taxable income.

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TableSignificant Accounting Policies” for additional information on the adoptions of Contents

these accounting standards.

Net Income and Earnings Per Share

		Fifty-two weeks ended								Fifty-two weeks ended
		February 1, 2015								February 2, 2014								$ Change				% Change
						% Net Sales								% Net Sales
Consolidated		$	12,578				5.1	%		$	7,929				3.5	%		$	4,649				58.6	%
Earnings per share		$	1.16							$	0.74

		Fifty-three weeks ended								Fifty-two weeks ended
		February 3, 2019								January 28, 2018								$ Change				% Change
Net Income						% Net Sales								% Net Sales
Consolidated		$	39,873				5.8	%		$	28,250				4.6	%		$	11,623				41.1	%
Diluted earnings per share		$	3.38							$	2.42

Financial Condition, Liquidity and Capital Resources

Balance Sheet and Working Capital

The following chart shows changes in our total assets, current assets, current liabilities, net working capital and working capital ratio at January 31, 2016 compared to February 1, 2015:

		Balance Sheet and Working Capital
		January 31, 2016				February 1, 2015				$ Change
Total Assets		$	181,653			$	170,755			$	10,898
Cash		$	53,922			$	38,663			$	15,259
Trade Receivables			28,176				32,245				(4,069	)
Inventories			43,713				44,973				(1,260	)
Prepaid Expenses & Other			2,256				2,353				(97	)
Total Current Assets		$	128,067			$	118,234			$	9,833
Trade accounts payable		$	9,105			$	10,293			$	(1,188	)
Accrued salaries, wages and benefits			4,834				4,824				10
Other accrued expenses, commissions and deposits			2,666				3,950				(1,284	)
Total current liabilities		$	16,605			$	19,067			$	(2,462	)
Net working capital		$	111,462			$	99,167			$	12,295
Working capital ratio		7.7 to 1				6.2 to 1

As of January 31, 2016, total assets increased compared to February 1, 2015, primarily due to increased cash and cash equivalents due to increased operating cash flows during fiscal 2016, decreased accounts receivable due to lower sales in fourth quarter of fiscal 2016 compared to fiscal 2015 and decreased inventories as a result of more effectively matching inventory levels with projected demand.

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Summary Cash Flow Information – Operating, Investing and Financing Activities

		Fifty-Two Weeks Ended				Fifty-Two Weeks Ended				Fifty-Two Weeks Ended
		January 31,				February 1,				February 2,
		2016				2015				2014
Net cash provided by operating activities		$	23,036			$	22,768			$	5,696
Net cash used in investing activities			(3,455	)			(3,681	)			(3,855	)
Net cash used in financing activities			(4,322	)			(4,306	)			(4,301	)
Net  increase (decrease) in cash and cash equivalents		$	15,259			$	14,781			$	(2,460	)

		Fifty-Two Weeks Ended				Fifty-Three Weeks Ended				Fifty-Two Weeks Ended
		February 2,				February 3,				January 28,
		2020				2019				2018
Net cash provided by operating activities		$	41,429			$	9,662			$	27,746
Net cash used in investing activities			(4,254	)			(4,511	)			(36,483	)
Net cash used in financing activities			(12,579	)			(24,631	)			(140	)
Net increase (decrease) in cash and cash equivalents		$	24,596			$	(19,480	)		$	(8,877	)

During fiscal 2016, $23.02020, we used some of the $41.4 million of cash generated from operations and cash on hand funded$1.4 million proceeds received from a note receivable to pay $7.2 million cash dividends, of $4.3$6.4 million purchases of propertyprincipal payments and equipment of $2.8interest towards our term loans, $5.1 million in capital expenditures to expand our domestic manufacturing capacities and to enhance our business systems and facilities and $590,000 insurance premiums on Company-owned life insurance premium payments of $707,000.policies. Company-owned life insurance policies are in place to compensate us for the loss of key employees, to facilitate business continuity and to serve as a funding mechanism for certain executive benefits.

During fiscal 2015, $22.82019, $9.7 million of cash generated from operations, $1.2 million life insurance proceeds and cash on hand fundedhelped make $17.9 million in principal payments on our term loans, $6.7 million in cash dividends, of $4.3$5.2 million purchases of propertycapital expenditures, and equipment of $3.0 million and$652,000 insurance premiums on Company-owned life insurance premium paymentspolicies.

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Table of $789,000.Contents

During fiscal 2014, $5.72018, $27.7 million of cash generated from operations, cash on hand, and $12.0 million term-loan proceeds receivedhelped partially fund the Shenandoah acquisition, make $6.3 million long-term debt payments, $5.8 million in cash dividends, fund $3.2 million capital expenditures to enhance our business systems and facilities and pay $673,000 insurance premiums on Company-owned life insurance policies of $517,000, funded cash dividends of $4.3 million, purchases of property and equipment of $3.5 million and Company-owned life insurance premium payments of $834,000.

policies.

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 20172021 and for the foreseeable future, including:

§ ■

limited capital expenditures;

§ ■

working capital, including capital required for insourcing our Bradington-Young trade receivables in fiscal 2017capital; and for our new business initiatives;

§ ■

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

§

the servicing of debt related to our acquisition of HMI.acquisition-related debt.

As of January 31, 2016, we had an aggregate $13.3 million available under our revolving credit facility to fund working capital needs. Standby letters of credit in the aggregate amount of $1.7 million, used to collateralize certain insurance arrangements and for imported product purchases, were outstanding under the revolving credit facility as of January 31, 2016.  There were no additional borrowings outstanding under the revolving credit facility on January 31, 2016.

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 “Loan“Original Loan Agreement”) with Bank of America, N.A. (“BofA”) in connection with the completionclosing of the Home Meridian acquisition. The Loan Agreement increases the amount available under our existing unsecured revolving credit facility to $30 million and increases the sublimit of such facility available for the issuance of letters of credit to $4 million. Amounts outstanding under the revolving facility will 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 basedAcquisition. Also on the average daily amount of the facility utilized during the applicable quarter.

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The Loan Agreement also provides us with a $41 million unsecured term loan (the “Unsecured Term Loan”) and a $19 million term loan (the “Secured Term Loan”) secured by a security interest in certain Company-owned life insurance policies granted to BofA by us under a security agreement, dated as of February 1, 2016 (the “Security Agreement”). BofA’s rights under the Security Agreement are enforceable upon the occurrence of an event of default under the Loan Agreement. Any amount borrowed under the Unsecured Term Loan will bear interest at a rate, adjusted monthly, equal to the then current LIBOR monthly rate plus 1.50%. Any amount borrowed under the Secured Term Loan will bear interest at a rate, adjusted monthly, equal to the then current LIBOR monthly rate plus 0.50%. We must repay any principal amount borrowed under 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 Unsecured Term Loan will become due and payable. We must pay the interest accrued on any principal amount borrowed under 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. We may prepay any outstanding principal amounts borrowed under either the Unsecured Term Loan or the Secured Term Loan in full or in part on any interest payment date without penalty. 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 this acquisition.the Home Meridian Acquisition.

Details of the individual credit facilities provided for in the Original Loan Agreement were 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;

■

Unsecured Term Loan. The Original Loan Agreement provided us with a $41 million Unsecured Term Loan. Any amount borrowed under the Unsecured Term Loan will bear 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 amounts borrowed under the Secured Term Loan will bear 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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This

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:

■

amended and restated 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 in fiscal 2019.

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

§	Maintain a tangible net worth of at least $105.0 million plus 40% of net income before taxes;

§ ●	Maintain a ratio of funded debt to EBITDA not exceeding:

□ o

2.50:1.0 through August 31, 2017;2018;

□ o

2.25:1.0 through August 31, 2018;2019; and

□ o

2.00:1.0 September 1, 2018 and1.00 thereafter.

§

Maintain a ●

A basic fixed charge coverage chargeratio of 1.25 to 1.0;at least 1.25:1.00; and

§

●

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

§	Limitations on the types of investments we are allowed to make.

The New Loan Agreement also limits our right to incur other indebtedness, make certain investments and to 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 were in compliance with theeach of these financial covenants of our previous loan agreement at January 31, 2016. Further, weFebruary 2, 2020 and expect to beremain in compliance with theexisting covenants under the new Amended and Restated Loan Agreement for fiscal 2017 and into the foreseeable future. The AmendedWe believe we have financial resources to weather the expected short-term impacts of COVID-19; however, an extended impact may materially and Restated Loan Agreement does not restrictadversely affect our ability to pay cash dividends on, or repurchase sharessales, earnings and liquidity.

Revolving Credit Facility Availability

As of our common stock, subject to complying with the financial covenantsFebruary 2, 2020, we had an aggregate $25.7 million available under the agreement.

Factoring Arrangement

We currently factor substantially allExisting Revolver to fund working capital needs. Standby letters of Bradington-Young’s accounts receivable, in most cases without recourse to us.  Historically, we have factored these receivables because factoring:

§	allowed us to outsource the administrative burden of the credit and collections functions for our domestic upholstery operations;

§	allowed us to transfer the collection risk associated with the majority of our domestic upholstery receivables to the factor; and

§	provided us with an additional, potential source of short-term liquidity.

In order to realize operational efficiencies, cost savings, leverage best practices and present a single face to our customers, we plan to end our factoring relationship as our  ERP system becomes fully operational at Bradington-Young 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 February 2, 2020. There were no additional borrowings outstanding under the Existing Revolver as of February 2, 2020.

Expected Refinancing in Fiscal 2021

All amounts outstanding on our terms loans and revolving credit facility are due and payable on the first halfday of fiscal 2017.2022, February 1, 2021. We expect to refinance any amounts outstanding under these loans and credit facility during fiscal 2021. However, given our current and projected liquidity, we do not expectif the transition tonegative economic effects of COVID-19 persist, it would likely have a material adverse effect on our futuresales, earnings and liquidity.

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

Capital Expenditures

We expect

Prior to the COVID-19 crisis, we expected to spend between $3.5$2.5 million to $5.0$4.5 million in capital expenditures in the 2017 fiscal year2021 to maintain and enhance our operating systems and facilities. Of these estimated amounts,However, due to the negative economic effects of COVID-19, we expect to spend approximately $400,000 on the implementation of our legacy Hooker Enterprise Resource Planning (ERP) systemhave delayed indefinitely about $3 million in our upholstery segment during fiscal 2017.

non-critical capital spending.

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Enterprise Resource Planning

Our new ERP system became operational

COVID-19 Cost Cutting and Cash Preservation Measures

In early fiscal 2021, we initiated certain measures to reduce operating expenses and preserve cash which include temporary  fee reductions for our casegoodsBoard of Directors,  temporary salary reductions for officers and imported upholstery operations earlycertain other managers, strategic staff reductions, the temporary closure of our domestic manufacturing plants and the furlough of manufacturing, warehouse and administrative associates, delaying all non-critical capital spending, rationalizing current import purchase orders, working with our vendors to cut costs and extend payment terms where we can.

During fiscal 2020, our cash position increased by nearly $25 million over the prior-year and we added an additional $17 million in the third quarter of fiscal 2013, at H Contract and Homeware when their operations began in fiscal 2014 and at Sam Moore in the second fiscal quarter of 2016. Implementation is scheduled to be completed at Bradington-Young (BY) during the first half of fiscal 2017. Once BY is fully operational on the ERP platform, we expect to realize operational efficiencies and cost savings as well as present a single face to our customers and leverage best practices across the traditional Hooker organization. HMI operates on a separate ERP platform.

Cost savings are difficult to quantify until the ERP system becomes fully operational across our Hooker business units. We expect to be able to reduce administrative functions, which are presently duplicated across our segments and improve our purchasing power and economies of scale.  In addition to the capital expenditures discussed above, our ERP implementation will require a significant amount of time invested by our associates.

We refer you to Item “1A. Risk Factors”, above, for additional discussion of risks involved in our ERP system conversion and implementation.

cash through mid-April 2020.

Share Repurchase Authorization

During the fiscal 2013, first quarter, our Board of Directors authorized the repurchase of up to $12.5 million of the Company’s common shares. The authorization doesdid not obligate us to acquire a specific number of shares during any period and doesdid not have an expiration date, but it may becould have been modified, suspended or discontinued at any time at the discretion of our Board of Directors. Repurchases may behave been made from time to time in the open market, or through privately negotiated transactions or otherwise, in compliance with applicable laws, rules and regulations, and were subject to our cash requirements for other purposes, compliance with the covenants under the loan agreement for our revolving credit facility and other factors we deemdeemed relevant. No shares were purchased under the authorization during fiscal 2016, fiscal 2015 or fiscal 2014.2020. Approximately $11.8 million remained available for future purchases under the authorization as of January 31, 2016.

February 2, 2020. In April 2020 (fiscal 2021), our Board of Directors terminated this repurchase authorization after several years of inactivity.

Dividends

We declared and paid dividends of $0.61 per share or approximately $7.2 million in fiscal 2020, an increase of 7.0% or $0.04 per share compared to $0.57 per share in fiscal 2019. On March 1, 20162, 2020 our Board of Directors declared a quarterly cash dividend of $0.10$0.16 per share, payable on March 31, 20162020 to shareholders of record at March 15, 2016. We declared and paid dividends of $0.40 per share or approximately $4.3 million in fiscal 2016.

17, 2020.

Commitments and Contractual Obligations

As of January 31, 2016,February 2, 2020, our commitments and contractual obligations were as follows:

		Cash Payments Due by Period (In thousands)
		Less than												More than
		1 Year				1-3 Years				3-5 Years				5 years				Total
Deferred compensation payments (1)		$	354			$	1,060			$	1,590			$	11,226			$	14,230
Operating leases (2)			1,857				2,781				2,701				212				7,551
Other long-term obligations (3)			1,175				331				63				-				1,569
Total contractual cash obligations		$	3,386			$	4,172			$	4,354			$	11,438			$	23,350

__________________

		Cash Payments Due by Period (In thousands)
		Less than												More than
		1 Year				1-3 Years				3-5 Years				5 years				Total
Long Term Debt (1)		$	5,856			$	24,282			$	-			$	-			$	30,138
Deferred compensation payments (2)			728				2,067				2,220				4,853				9,868
Operating leases (3)			7,934				12,769				10,609				15,205				46,517
Total contractual cash obligations		$	14,518			$	39,118			$	12,829			$	20,058			$	86,523

(1)

(1)

These amounts represent obligations due under the Unsecured Term Loan and the Secured Term Loan. See Note 13 to the consolidated financial statements beginning on page F-25 for additional information about our long-term debt obligations.

(2)

These amounts represent estimated cash payments to be paid to participants in our supplemental retirement income plan or “SRIP”SRIP through fiscal year 2043, which is 15 years after the last current SRIP plan participant is assumed to have retired. SERP benefits are paid over the lifetimes of plan participants, so the year of final payment is unknown. The present value of these benefits (the actuarially derived projected benefit obligation for this plan) wasthe SRIP and SERP) were approximately $8.2$10.3 million and $1.9 million, respectively, at January 31, 2016February 2, 2020, and isare shown on our consolidated balance sheets, with $354,000$729,000 recorded in current liabilities and $7.8$11.4 million recorded in long-term liabilities. TheUnder the SRIP, the monthly retirement benefit for each participant, regardless of age, would become fully vested and the present value of that benefit would be paid to each participant in a lump sum upon a change in control of the Company as defined in the plan. See note 10Note 14 to the consolidated financial statements beginning on page F-18F-26 for additional information about the SRIP.SRIP and SERP.

(2)

(3)

These amounts represent estimated cash payments due under operating leases for real estate utilized in our operations and warehouse and office equipment. $6.7 million of these estimated cash payments pertain to two leases: (1) Our CDC II warehouseequipment, as well as short term leases with remaining terms less than 12 months. See Note 12 for additional information and distribution facility and (2)disclosures about our showroom at the International Home Furnishings Center. See Item 2 “Properties,” for a description of our leased real estate.leases.

(3)	These amounts represent estimated cash payments due under various long-term service and support agreements, for items such as warehouse management services, information technology support and human resources related consulting and support.

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Off-Balance Sheet Arrangements

Standby letters of credit in the aggregate amount of $1.7$4.3 million, used to collateralize certain insurance arrangements and for imported product purchases, were outstanding under our revolving credit facility as of January 31, 2016.February 2, 2020. See the “Commitments and Contractual Obligations” table above and Note 1619 to the consolidated financial statements included in this annual report on Form 10-K for additional information on our off-balance sheet arrangements.

Substantially all of the cash value of our company owned life insurance is pledged as collateral for our secured term loan.

Recently Issued Accounting Pronouncements

In May 2014,August 2018, the Financial Accounting Standards Board (the “FASB”)FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”No. 2018-14, Compensation —Retirement Benefits —Defined Benefit Plans —General (Subtopic 715-20) —Disclosure Framework —Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”). The amendments in ASU 2014-09 affects any entitythis update change the disclosure requirements for employers that either enters into contracts with customers to transfer goods sponsor defined benefit pension and/or services or enters into contractsother post-retirement benefit plans. It eliminates requirements for certain disclosures that are no longer considered cost beneficial and requires new disclosures that the transfer of nonfinancial assets unless those contracts are within the scope of other standards. This ASU will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance, and creates a Topic 606, Revenue from Contracts with Customers.FASB considers pertinent. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”), which defers the effective date of ASU 2014-09 for all entities by one year. ASU 2014-09 is now effective for financial statements issued for annual reporting periods beginningfiscal years ending after December 15, 2017. We are currently evaluating the impact of the pending adoption of ASU 2014-09 on our consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory (“ASU 2015-11”). The amendments in ASU 2015-11 require an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonable predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using last-in, first-out (“LIFO”) or the retail inventory method. The amendments do not apply to LIFO or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (“FIFO”) or average cost.  The amendment is effective for public entities for fiscal years beginning after December 15, 2016 and should be applied prospectively, however early2020. Early adoption is permitted. We do not anticipateexpect the adoption of ASU 2015-112018-14 will have a material impact on our consolidated financial statements.

statements or disclosures.

In July 2015,June 2016, the FASB issued ASU 2015-16, Business Combinations2016-13, Financial Instruments—Credit Losses (Topic 805): Simplifying326). This update seeks to provide financial statement users with more decision-useful information about the Accounting for Measurement Period Adjustments. ASU 2015-16 requires that an acquirer recognize adjustmentsexpected credit losses on financial instruments, including trade receivables, and other commitments to provisional amounts that are identified during the measurement period in theextend credit held by a reporting period in which the adjustment amounts are determined.entity at each reporting date. The amendments require an entity to replace the incurred loss impairment methodology in this Update requirecurrent GAAP with a methodology that the acquirer record, in the same period’s financial statements, the effect on earningsreflects current expected credit losses and requires consideration of changes in depreciation, amortization, or other income effects, if any, as a resultbroader range of the changereasonable and supportable information to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. Any current period adjustments to provisional amounts that would have impacted a prior period’s earnings had they been recognized at the acquisition date are required to be presented separately on the face of the income statement or disclosed in the notes.inform credit loss estimates. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, including2019. Early adoption is permitted for fiscal years, and interim periods within those fiscal years.years, beginning after December 15, 2018. The amendments in this ASU shouldwill be applied prospectivelythrough a cumulative-effect adjustment to adjustments to provisional amounts that occur after the effective date of this ASU with earlier application permitted for financial statements that have not been issued. Therefore the amendments in ASU 2015-16 will become effective for usretained earnings as of the beginning of our 2017 fiscal year. We are currently evaluating the impact of the pending adoption of ASU 2015-16 on our consolidated financial statements.

In November 2015, the FASB issued Accounting Standards Update No. 2015-17 (ASU 2015-17), Balance Sheet Classification of Deferred Taxes. This update amends the balance sheet classification of deferred taxes and requires that deferred tax liabilities and assets be classified as noncurrent on the balance sheet. Previous guidance required deferred tax liabilities and assets to be separated into current and noncurrent amounts on the balance sheet. Thefirst reporting period in which guidance is effective, for fiscal years beginning on or after December 15, 2016, and interim periods within those years. Early adoptionwhich is permitted asa modified-retrospective approach. We have finalized our analysis of the beginning of any interim or annual reporting period.  This guidance may be applied either prospectively, for all deferred tax assets and liabilities, or retrospectively by reclassifying the comparative balance sheet.  We have early adopted this standard and have applied retrospective treatment of the standard.  We feel the classification of all deferred tax assets and liabilities as noncurrent provides a more informative disclosure because many of our deferred tax items are by definition short-term, however are of a recurring nature and tend to behave more like non-current assets or liabilities. The retrospective reclassification resulted in a reduction in current assets of $1.7 million and an increase in non-current assets of the same amount for the period ended February 1, 2015.

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Strategy

Our strategy is to offer world-class style, quality and product value as a complete residential casegoods and upholstered furniture resource through excellence in product design, global sourcing, manufacturing, logistics, sales, marketing and customer service.  We strive to be an industry leader in sales growth and profitability performance, thereby providing an outstanding investment for our shareholders and contributing to the well-being of our customers, employees, suppliers and communities.  Additionally, we strive to nurture the relationships, teamwork and integrity that characterizes our corporate culture and that has distinguished our company for over 90 years.

Fiscal 2016 in Review

Profitability improvement was the high point of fiscal 2016.  All operating segments reported improved profitability over the prior year, even on essentially flat sales in the casegoods segment and decreased sales in the upholstery segment. We believe sales were impacted by an uneven national and global economy which culminated in stock market declines in the fourth quarter of calendar 2015, despite generally positive economic news.  We believe this market behavior has a short-term influence on big-ticket purchases such as home furnishings, but we continue to believe that housing and the US economy in general will continue to trend positively, but not without occasional downward pressures.

Our Casegoods segment, a major contributor to corporate profitability, reported a 7% increase in operating profit despite disappointing sales growth and approximately $1.1 million of professional fees related to the Home Meridian acquisition.  Casegoods reported another year of operating income margin in excess of 10%, thanks to continued low discounting, relatively low inflation, lower quality related costs, and a focus on account and sales program profitability, as well as ongoing cost containment efforts.

We are especially pleased with the fiscal 2016 performance of our upholstery segment, which doubled operating income compared to the prior year.  Bradington-Young (B-Y) built on good performance in the prior year, growing operating profit by 70% thanks to a 5% sales increase and manufacturing cost improvements as B-Y’s factories continue to run smoothly and efficiently. Sam Moore also reported $1.5 million in operating income, in its first profitable year, even while implementing an Enterprise Resource Planning system at their location during the year.  After resolving the typical bumps and slowdowns after going live mid-year, Sam Moore is now reaping the benefits of the substantial time and financial investment we’ve made in these systems.  Information is now more readily available for customers and for internal planning, scheduling and purchasing and we are moving closer to our goal of ‘One Face to the Customer’. While Sam Moore’s sales volume declined from the prior year, some of the lost sales were in unprofitable or low profitability sales programs. Focusing on more profitable sales and significantly improved manufacturing efficiency contributed to the income turnaround. Hooker Upholstery also experienced a 4% sales decline due to changes with some of our largest customers and lower demand for some of Hooker Upholstery’s more upscale imported leather seating.  Despite this volume decline, Hooker Upholstery was able to increase operating income by nearly 30%, thanks to cost and inventory management and the addition of new product categories such as bar and counter stools to meet changing customer preferences.

Our All Other segment also showed improvement in fiscal 2016.  H Contract, which sells casegoods and upholstery to the senior living market, increased net sales by nearly 70% over the prior year and reported 6.2% operating income in its second full year of operations.  While still a relatively small part of our volume, we are pleased with the progress H Contract has made and believe it will continue to grow at well above industry average for several more years. During the past year, H Contract focused on improving business processes and customer service, added marketing and operations personnel, increased sales representation coverage and invested in new products and additional marketing to grow the business.  Thanks to its ability to leverage Hooker casegoods and the unique look of many Sam Moore designed products, supplemented by wood and upholstered products sourced from other vendors, H Contract has developed significant relationships with some of the largest developers in the senior living industry.

Homeware, our other internal growth initiative, grew sales by about 28% and reduced operating losses by more than 40% while repositioning and redefining its strategy.  After determining that the costs of merchandising and driving traffic to a consumer web site proved to be more than we were willing to spend, we evaluated the data gathered during Homeware’s first year in operation and revised our strategy. We believe that the original Homeware concept; high fashion, high quality products, which were easy to assemble and could be shipped via parcel delivery services; still resonates with consumers. Our challenges were to improve the product value proposition and increase sales volume of products reflecting Homeware’s core values.  To accomplish these objectives, we pared the product line, discontinued consumer direct marketing and online sales and began sourcing products from lower cost suppliers.  We are focused on promoting these updated products through major online home furnishings retailers and believe Homeware will see greater success under this new business model.

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Home Meridian Acquisition

On January 5, 2016, we entered into an asset purchase agreement (“the “Agreement”) with Home Meridian International, Inc. (“HMI”) to acquire substantially all of HMI’s assets in exchange for $85 million in cash and $15.0 million in unregistered shares of our common stock, with both amounts subject to adjustment for certain working capital estimates detailed in the Agreement. We completed the acquisition on February 1, 2016, subsequent to the end of our 2016 fiscal year. The working capital adjustment, paid for with 186,312 shares of our common stock, totaled $5.3 million and was driven by an increase in HMI’s accounts receivable due to strong sales towards the end of 2015.  We also assumed certain liabilities of HMI, including approximately $7.8 million of liabilities related to certain retirement plans. The assumed liabilities did not include HMI’s indebtedness (as defined in the Agreement).

We have had a long and successful history in the furniture industry for over ninety years; marketing, sourcing and manufacturing wood and upholstery furniture, primarily in the mid-to-upper price points, and much of it through traditional furniture retailers.  We have adapted to changes within those channels and price points and have become a major supplier in our channels. However, a great deal of furniture is sold in channels and at price points in which we have traditionally not been a factor.  For several years, we sought to find appropriate investments to expand our reach with furniture consumers and find ways to do business in new channels, new products or new customers.  We have long desired to invest to position Hooker Furniture for the future furniture market and looked for acquisition or investment opportunities which would help us meet those objectives.

When we were offered the opportunity to negotiate to purchase Home Meridian International, we saw those opportunities.  HMI was a privately held furniture supplier, whose sales had grown at about three times the industry growth rate, was profitable on an operating income basis and appeared to be establishing itself as a key supplier within its distribution channels.

Like Hooker, casegoods are a substantial portion of the HMI business’s revenues; however, there are few similarities beyond that.  In HMI we see a business which addresses the needs of mass market furniture suppliers including ‘big box’ furniture stores, department stores, and warehouse clubs and rental stores.  Many of HMI’s customers are ‘mega-accounts’ capable of purchasing large quantities and maintaining their own national or regional distribution networks.  These mega-accounts are focused on product price, value and sourcing, which HMI is able to maximize by delivering over 70% of its sales container direct from factories in Asia.  A lean, data and technology driven business, HMI is able to offer a strong value proposition for the mid-price products which comprise the bulk of their offerings. HMI sales teams collaborate with merchandise managers at these mega-accounts to design and develop new products. Overall, we believe that HMI understands how to do business in this channel and to be a key supplier to these accounts.

Beyond the mega-account strategy, HMI offers us other avenues for growth as well, through a well- developed e-commerce division. This division, which develops products and programs for major e-retailers sells more moderately priced products through traditional furniture stores and through its growing hospitality division, which supplies hotels and other institutional customers. In addition to products and distribution channels, the acquisition brings together two strong performers in the furniture industry which we believe will create the second largest casegoods source and the fifth largest public furniture supplier in the US.  Opportunities to leverage costs and best practices across the organization will help create value beyond the earnings accretion, which will occur by combining these two profitable entities and the combined management and employee group offers greater growth and succession planning opportunities for employees in both organizations.

We believe this move will help diversify our customer and product portfolio, help create growth and implement best practices in both organizations and will help position us for market leadership well into the future.

We expect to record significant tangible and intangible assets on our consolidated balance sheets during our fiscal 2017 first fiscal quarter. For certain tangible and intangible assets, reevaluating fair value as of the completion date of the acquisition will result in additional depreciation and/or amortization expense that exceed the combined amounts recorded by Hooker and HMI prior to the acquisition. This increased expense will be recorded by us over the useful lives of the underlying assets. We expect to record approximately $3.4 million in amortization expense on those intangible assets during fiscal 2017 and expect amortization expense of approximately $1.4 million per year starting in fiscal 2018 through fiscal 2027.

This acquisition is not without substantial risks. We refer you to Item 1A. Risk Factors and note 18 to our consolidated financial statements in this report for additional information.

Potential Duties on Accent Chests

On May 27, 2014, the U.S. Department of Commerce (“DoC”) determined that certain accent chests manufactured in China for one of our competitors constitute “wooden bedroom furniture” that is subject to anti-dumping duties under the Continued Dumping Subsidy Offset Act of 2000. In early June 2014, the DoC directed U.S. Customs and Border Protection (“CBP”) to begin collecting the anti-dumping duty on these items. While the DoC ruling applies only to the specific accent chests mentioned in the ruling, it is uncertain whether CBP also will begin to collect anti-dumping duties with respect to other similar accent chests imported from China. We currently import, and have imported in the past, accent chests from China that may be similar to those that are subject to the DoC ruling, including accent chests sourced from the same Chinese company that manufactures the accent chests addressed by the DoC ruling.

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We are currently not able to determine whether any of the accent chests we source from China, now or in the past, would be subject to the anti-dumping duties. Nor are we able to estimate the potential amount of any such duties.  We do not believe the duties, if any, would be assessed retroactively; however, CBP audits can go back five years and any assessment could be subject to interest and penalties. Ifadoption of the bedroom furniture anti-dumping duties, or related penalties, were to be assessed on accent chests that we import, or have imported in the past, from China, our results of operations, financial condition, liquidity and prospects could be adversely affected.

During the fiscal 2015 third quarter, the DoC agreed to reconsider some of its earlier findings related to accent chests  and early in the fiscal 2015 fourth quarter, DoC reaffirmed its decision that certain of our competitor’s accent chests constituted wooden bedroom furniture subject to anti-dumping duties. The competitor challenged DoC’s position in the United States Court of International Trade (“CIT”). On December 1, 2015, the court issued a decision remanding the accent chest issue to DoC with the instruction to reconsider the treatment of accent chests in a manner consistent with the court’s decision, which on balance is favorable to our views.   DoC issued a remand decision holding that the accent chests were not bedroom furniture.  On February 29, 2016, the CIT sustained that determination.  DoC has 60 days to appeal that decision.

Customs Penalty

In September 2009, CBP issued an audit report asserting that we had not paid all required antidumping duties due with respect to certain bedroom furniture we imported from China. In February 2015, CBP assessed a civil penalty of approximately $2.1 million and unpaid duties of approximately $500,000 on the matter.  In December 2015, in response to our petition to eliminate or modify the assessment, CBP revised the proposed penalty to approximately $1.7 million, while leaving the duty assessment at approximately $500,000.  We continue to assert that no antidumping duties are due and that there is no basis for the imposition of a penalty.  We intend to vigorously defend against the penalty. In the opinion of management, the ultimate disposition of this matterstandard will not have a material adverse effect on our consolidated financial position,statements and results of operations.

COVID-19

As discussed under "Item 1A. Risk Factors," an outbreak of COVID-19 was identified in China and has subsequently been recognized as a global pandemic by the World Health Organization. Federal, state and local governments in the U.S and elsewhere have imposed restrictions on travel and business operations and are advising or liquidity.

Our business is subjectrequiring individuals to a numberlimit or eliminate time outside of significant riskstheir homes. Temporary closures of businesses have also been ordered in certain jurisdictions and uncertainties, includingother businesses have temporarily closed  voluntarily. These actions have expanded significantly over the past month throughout the United States. Consequently, the COVID-19 outbreak has severely restricted the level of economic activity in the U.S. and around the world.

We monitor information on COVID-19 from the CDC and believe we are adhering to their recommendations regarding the health and safety of our reliance on offshore sourcing, 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 “Forward Looking Statements” beginning on page 3 of this report and Item 1A, “Risk Factors” beginning on page 12 of this report.

Outlook

Looking forward, we see a generally healthy US economy, but one with more volatility than that to which many investors are accustomed.  We also see a furniture industry in which consumer tastes and the channels in which they shop are evolving at a rapid rate.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 appropriate social distancing policies and have stepped-up facility cleaning at each location. Non-essential domestic travel for our employees has ceased and international travel has been prohibited out-right. 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.

To begin 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 working with our vendors to cut costs and extend payment terms where we can.

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Outlook

The COVID-19 pandemic presents an economic challenge of unprecedented proportions with an uncertain time frame. Due to these changes, we also continue to change. Sometimes evolving and growing and sometimes with big changes, such as the acquisitionaforementioned effects of Home Meridian International, which gives us access to many new customers, distribution channels and price points and helps position us, we believe,  for market leadership well into the future.

So far in fiscal 2017,COVID-19, we have seen lowerdecreased demand for home furnishings in our productsindustry and for our company. We have also seen a spike in order cancellations over the last few weeks prior to filing this Annual Report, which has blunted some of the strong backlog we had at fiscal year-end. While we built significant cash last year and have enhanced our cash position further in fiscal 2021, some customers have taken or are expected to take extended payment terms and we expect cash collections to slow. Lower earnings will also have a negative impact on our cash position.

Because of these factors, we are preparing for a significant downturn lasting anywhere from four to six months. We expect sales and earnings to be down materially in the fiscal 2021 first quarter and for fiscal 2021, both as compared to the same period a year ago. However, given the mostly positive economic news over the past year,prior-year periods, but we are optimistic aboutunable to reasonably estimate the extent of those decreases. Additionally, we have limited insight into the extent to which our longer-termbusiness may be impacted by the COVID-19 pandemic and there are many unknowns including the severity and duration of the current crisis.

Further delays in the receipt of goods and other unanticipated impacts to our supply chain, including on direct imports or goods purchased domestically, or our customers, could have a more significant impact on our future withbusiness (including sales). The extent of the impact will depend on future developments, which are highly uncertain and cannot be predicted. We continue to monitor the situation closely and may implement further measures to provide additional financial flexibility as we work to protect our core businesses, our new venturescash position and in our new Home Meridian division.

As we progress through 2017, we will focus on:

§

evaluating ways to expand into new distribution channels;

§

successfully integrating the Home Meridian division;

§

leveraging best practices in order to lower costs, improve efficiencies and grow sales;

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growing and improving the profitability of our new business initiatives;

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building on our initial successes in expanding our merchandising reach in the “better” parts of our “good-better-best” casegoods product offerings;

§

growing sales of our Cynthia Rowley home furnishings collection;

§

improving the product assortment and value proposition of the Hooker Upholstery imported products line;

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improving operating profitability and increasing production capacity at Sam Moore;

§

mitigating inflation on our imported products and raw materials;

§

maintaining proper inventory levels and optimizing product availability on best-selling items;

§

strengthening our relationships with key vendors and sourcing product from cost-competitive locations and from quality-conscious sourcing partners;

§

offering an array of new products and designs, which we believe will help generate additional sales;

§

upgrading and refining our information systems capabilities to support our businesses, including implementing an  ERP system at Bradington-Young; and

§

controlling costs.

We face a number of significant risks and uncertainties, as more fully discussed in Item 1A, “Risk Factors” beginning on page 12 and in our “Forward Looking Statements” beginning on page 3, which can affect adversely our results of operations and financial condition.

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liquidity.

Critical Accounting Policies and Estimates

Hooker Furniture’s

Our significant accounting policies are described in “Note 12 – Summary of Significant Accounting Policies” to the consolidated financial statements beginning at page F-1F-10 in this report. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying financial statements and related notes. In preparing these financial statements, we have made our best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. We do not believe that actual results will deviate materially from our estimates related to our accounting policies described below. However, because application of these accounting policies involves the exercise of judgment and the use of assumptions as to future uncertainties, actual results could differ materially from these estimates.

Allowance for Doubtful Accounts.  We evaluate

Purchase Price Allocation. For the adequacyShenandoah acquisition, we allocated the purchase price to the various tangible and intangible assets acquired and liabilities assumed, based on their estimated fair values. Determining the fair value of our allowance for doubtful accounts atcertain assets and liabilities acquired is subjective in nature and often involves the enduse of each quarter.  In performing this evaluation, we analyze the payment history of our significant past due accounts, subsequent cash collections on these accountsestimates and comparative accounts receivable aging statistics.  Based on this information, along with considerationassumptions, which are inherently uncertain. Many of the general condition of the economy, we develop what we considerestimates and assumptions used to be a reasonable estimate of the uncollectible amounts included in accounts receivable.  This estimate involves significant judgment and actual uncollectible amounts may differ materially from our estimate.

Valuation of Inventories.  We value all of our inventories at the lower of cost or market (using the last-in, first-out (“LIFO”) method).  LIFO costdetermine fair values, such as those used for all of our inventories is determined using the dollar-value, link-chain method.  This method allows for the more current cost of inventories to be reported in cost of sales, while the inventories reported on the balance sheet consist of the costs of inventories acquired earlier, subject to adjustment to the lower of cost or market.  Hence, if pricesintangible assets, are rising, the LIFO method will generally lead to higher cost of sales and lower profitability as compared to the first-in, first-out (“FIFO”) method.  We evaluate our inventory for excess or slow moving items based on recent and projected sales and order patterns.  We establish an allowance for those items when the estimated market or net sales value is lower than their recorded cost.  This estimate involves significant judgment and actual values may differ materially from our estimate.

Income Taxes. At times, tax law and generally accepted accounting principles differ in the treatment of certain income and expense items.  These items may be excluded or included in taxable income at different times than is required for GAAP or “book” reporting purposes. These differences may be permanent or temporary in nature.

For quarterly reporting purposes, we determine our annual effective income tax ratemade based on forecasted pre-tax book incomeinformation and forecasted permanent bookdiscount rates. To assist in the purchase price allocation process, as well as the estimate of remaining useful lives of acquired assets, we engaged a third-party appraisal firm. In addition, the judgments made in determining the estimated fair value assigned to each class of assets acquired and tax differences. The rateliabilities assumed, as well as asset lives, can materially impact our results of operations.

Revenue Recognition. We recognize revenue pursuant to Accounting Standards Codification 606, which requires revenue to be recognized at an amount that reflects the consideration we expect to be entitled to receive in exchange for transferring goods or services to our customers. Our policy is establishedto record revenue when control of the goods transfers to the customer. We have a present right to payment at the beginningtime of shipment as customers are invoiced at that time. We believe the customer obtains control of goods at the time of shipment, which is typically when title passes. While the customer may not enjoy immediate physical possession of the year andproducts, the customers’ right to re-direct shipment indicates control. In the very limited instances when products are sold under consignment arrangements, we do not recognize revenue until control over such products has transferred to the end consumer. Orders are generally non-cancellable once loaded into a shipping trailer or container.

The transaction price for each contract is evaluated onthe stated price of the product, reduced by any stated discounts or allowances at that point in time. We do not engage in sales of products that attach a quarterly basis.  We considerfuture material right which could result in a separate performance obligation for the level and mixpurchase of income of our separate legal entities, statutory tax rates, business credits availablegoods in the various jurisdictionsfuture at a material discount. The implicit contract with the customer, as reflected in the order acknowledgement and invoice, states the final terms of the sale, including the description, quantity, and price of each product purchased. The transaction price reflects the amount of estimated consideration to which we operateexpect to be entitled. This amount of variable consideration included in the transaction price, and permanent tax differences. Significant judgmentmeasurement of net sales, is requiredincluded in evaluating tax positions that affect the annual tax rate.   Any changesnet sales only to the forecasted information may cause adjustments to the effective rate. Additional tax, interest and penalties associated with uncertain tax positions are recognized in tax expense on a quarterly basis.

To the extent that any bookit is probable that there will be no significant reversal in a future period.

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Net sales are comprised of gross revenues from sales of home furnishings and tax differenceshospitality furniture products and are temporaryrecorded net of allowances for trade promotions, estimated product returns, rebate advertising programs and other discounts. Physical product returns are very rare due to the high probability of damages to our products in return transit. Other revenues, primarily royalties, are immaterial to our overall results. Payment is typically due within 30-60 days of shipment for customers qualifying for payment terms. Collectability is reasonably assured since we extend credit to customers for whom we have performed credit evaluations and/or from whom we have received a down payment or deposit. Due to the highly-customized nature of our hospitality products, we typically require substantial prepayments on these orders, with the balance due within 30 days of delivery.

Leases. Our lease assets are composed of real estate and equipment. Real estate leases consist primarily of warehouses, showrooms 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 book realization will occur in a different period thanright to control the tax realization, a deferred tax asset or liability is established. To the extent that a deferred tax asset is created, we evaluate our ability to realize this asset.  If we determine that we will not be able to fully utilize deferred tax assets, we establish a valuation reserve. In assessing the realization of deferred tax assets, we consider whether it is more likely than not that some portion or alluse of the deferred tax assetsidentified 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 realized. The ultimate realizationused throughout the period of deferred tax assets is primarily dependent upon the generationuse.

Leases are classified as either finance leases or operating leases based on criteria in Topic 842. All of future taxable income during the periods in which those temporary differences reverse.

our leases are classified as operating leases. We early adopted Accounting Standards Update No. 2015-17 (ASU 2015-17), Balance Sheet Classification of Deferred Taxesdo not currently have finance leases but could in the fourth quarter of fiscal 2016 and have applied retrospective treatment of the standard. Consequently, all deferred taxfuture.

Operating lease right-of-use ("ROU") assets and liabilities are classifiedrecognized 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 upon adoption of this standard. 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 non-current onthe primary obligor of the warehouse lease, we cannot net the sublease income against our consolidated balance sheetslease 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.

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 feel the classification of all deferred taxhave elected not to recognize ROU assets and lease liabilities as noncurrent providesthat 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 more informative disclosure because many of our deferred tax itemsrenewal option which we are by definition short-term, however are of a recurring nature and tendnot reasonably certain to behave more like non-current assets or liabilities. The retrospective reclassification results in a reduction in current assets of $1.7 million and an increase in non-current assets of the same amount for the period ended February 1, 2015.

exercise.

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Impairment of Long-Lived Assets

Tangible and Definite Lived Intangible Assets

We regularly review our property, plant and equipment and definite lived intangible assets for indicators of impairment, as specified in the Property, Plant and Equipment topic of the Accounting Standards Codification. Although not exhaustive, this accounting guidance lists potential indicators of impairment, which we use to facilitate our review. These potential indicators of impairment include:

§ ■

A significant decrease in the market value of the long-lived asset;

§ ■

A significant adverse change in the extent or manner in which a long-lived asset group is being used, or in its physical condition;

§ ■

A significant adverse change in the legal factors or in the business climate that could affect the value of a long-lived asset, including an adverse action or assessment by a regulator;

§ ■

An accumulation of costs significantly in excess of the amount originally expected to acquire or construct a long-lived asset;

§ ■

A current period operating or cash flow loss or a projection or forecast that demonstrates continuing losses associated with the long-lived asset’s use; and

§ ■

A current expectation that more-likely-than-not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.

When an indicator of impairment is present, the impairment test for our property, plant and equipment requires us to assess the recoverability of the value of the assets by comparing their net carrying value to the sum of undiscounted estimated future cash flows directly associated with and arising from use and eventual disposition of the assets. We principally use our internal forecasts to estimate the undiscounted future cash flows used in our impairment analyses. These forecasts are subjective and are largely based on management’s judgment, primarily due to the changing industry in which we compete;compete, changing consumer tastes, trends and demographics and the current economic environment. We monitor changes in these factors as part of the quarter-end review of these assets. While our forecasts have been reasonably accurate in the past, during periods of economic instability, uncertainty, or rapid change within our industry, we may not be able to accurately forecast future cash flows from our long-lived assets and our future cash flows may be diminished. Therefore, our estimates and assumptions related to the viability of our long-lived assets may change and are reasonably likely to change in future periods. These changes could adversely affect our consolidated statements of income and consolidated balance sheets. As of January 31, 2016, the fair value of our property, plant and equipment was substantially in excess of its carrying value.

When we conclude that any of these assets are impaired, the asset is written down to its fair value. Any impaired assets that we expect to dispose of by sale are measured at the lower of their carrying amount or fair value, less estimated cost to sell; are no longer depreciated; and are reported separately as “assets held for sale” in the consolidated balance sheets, if we expect to dispose of the assets in one year or less.

Intangible Assets

and Goodwill

We own certainboth definite-lived (amortizable) assets and indefinite-lived intangible assets. Our amortizable intangible assets including thoseare related to the Home Meridian and Shenandoah acquisitions and include customer relationships, backlog and trademarks. Our indefinite lived assets include goodwill, trademarks and tradenames related to the Home Meridian and Shenandoah acquisitions, as well as the Bradington-Young and Sam Moore and Homeware.tradenames. We may acquire additional amortizable assets and/or indefinite lived intangible assets in the future. Our principal indefinite-lived intangible assets are trademarks, trade names and a URL, which are not amortized but are tested for impairment annually or more frequently if events or circumstances indicate that the asset might be impaired.

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Our goodwill, trademarks and trade names are tested for impairment annually as of the first day of our fourth quarter or more frequently if events or changes in circumstances indicate that the asset might be impaired. Circumstances that could indicate a potential impairment include, but are not limited to:

■

a significant adverse change in the economic or business climate either within the furniture industry or the national or global economy;

■

significant changes in demand for our products;

■

loss of key personnel; and

■

the likelihood that a reporting unit or significant portion of a reporting unit will be sold or otherwise subject to disposal.

The fair value of our indefinite-lived intangible assetstrademarks and tradenames is determined based on the estimated earnings and cash flow capacity of those assets. The impairment test consists of a comparison of the fair value of the indefinite-lived intangible assets with their carrying amount. If the carrying amount of the indefinite-lived intangible assets exceeds their fair value, an impairment loss is recognized in an amount equal to that excess.

Trade

At February 2, 2020, the fair values of our Bradington-Young, Home Meridian, Sam Moore and Shenandoah non-amortizable trademarks and trade names exceeded their carrying values. Based an independent valuation conducted at the 2020 fiscal year-end the fair values of the Pulaski Furniture, Samuel Lawrence Furniture and Prime Resources International trademarks exceeded their carrying values by $130,000, $10,000 and $10,000, respectively.

The goodwill impairment test consists of a two-step process, if necessary. However, we first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test outlined in ASC Topic 350. The more likely than not threshold is defined as having a likelihood of more than 50 percent. If, after assessing the totality of events or circumstances, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary and our goodwill is considered to be unimpaired. However, if based on our qualitative assessment we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we will proceed with performing quantitative assessment. The quantitative assessment involves estimating the implied fair value of our goodwill using projected future cash flows that are tested fordiscounted using a weighted average cost of capital analysis that reflects current market conditions. Management judgment is a significant factor in the goodwill impairment annuallyevaluation process. The computations require management to make estimates and assumptions, the most critical of which are potential future cash flows and the appropriate discount rate. In addition to our qualitative assessment, management performed a quantitative analysis on the Home Meridian reporting  unit’s goodwill in the fiscal 2020 fourth quarter. Based on our qualitative assessment and quantitative analysis, we have concluded that our goodwill is not impaired as of the first day of our fiscal fourth quarter or more frequently if events or changes in circumstances indicate that the asset might be impaired.  Circumstances that could indicate a potential impairment include, but are not limited to:

§

a significant adverse change in the economic or business climate either within the furniture industry or the national or global economy;

§

significant changes in demand for our products;

§

loss of key personnel; and

§

the likelihood that a reporting unit or significant portion of a reporting unit will be sold or otherwise subject to disposal.

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February 2, 2020.

The assumptions used to determine the fair value of our intangible assets are highly subjective and judgmental and include long-term growth rates, sales volumes, projected revenues, assumed royalty rates and factors used to develop an applied discount rate. If the assumptions that we use in these calculations differ from actual results, we may realize additional impairment on our intangible assets whichthat may have a material-adverse effect on our results of operations and financial condition.

At January 31, 2016, the fair value of our Bradington-Young trade name exceeded its carrying value by approximately $1.4 million, and the fair value of our Sam Moore trade name was approximately $637,000 in excess of its carrying value.

Concentrations of Sourcing Risk

We source imported products through approximately 18 different vendors, from approximately 20 separate factories, located in five countries.  Because of the large number and diverse nature of the foreign factories from which we can source our imported products, we have some flexibility in the placement of products in any particular factory or country.

Factories located in China and Vietnam are an important resource for Hooker Furniture.  

In fiscal year 2016,2020, imported products sourced from ChinaVietnam and VietnamChina accounted for approximately 68% and 26%, respectively,nearly all of our import purchases and the factoryour top five suppliers in Vietnam and China from which we directly source the most product accountedaccount for approximately 58%half of our worldwide purchases of imported product.fiscal 2020 import purchases. A sudden disruption in our supply chain, from this factory, or from Vietnam or China in general, could significantly impact our ability to fill customer orders for products manufactured at that factory or in that country.those countries. If such a disruption were to occur, we believe that we would have sufficient inventory currently on hand in and in transit to our U.S. warehouses in Martinsville, VAVirginia, North Carolina and California to adequately meet demand for approximately four and one-halfseveral months or slightly longer with an additional one and one quarter monthsmonth’s worth of demand available for immediate shipment from our Asia warehouse. Also, with the broad spectrum of product we offer, we believe that,warehouses in some cases, buyers could be offered similar product available from alternative sources.Asia. We believe that we could, most likely at higher cost, source most of the products currently sourced in Vietnam or China from factories in other countries and could produce certain upholstered products domestically at our own factories. However, supply disruptions and delays on selected items could occur for up to six months.months before the impact of remedial measures would be reflected in our results. If we were to be unsuccessful in obtaining those products from other sources or at comparable cost, then a sudden disruption in theour supply chain from our largest import furniture supplier,suppliers, or from Vietnam or China in general, could have a short-term material adverse effect onadversely affect our resultssales, earnings, financial condition and liquidity.

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Table of operations.  Given the capacity available in China and other low-cost producing countries, we believe the risks from these potential supply disruptions are manageable.Contents

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various types of market risk fromin 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.

Interest Rate Risk

In conjunction with the Shenandoah acquisition, we entered into new financing arrangements as described in "Note 13 Long-Term Debt" included in Part II, Item 8. “Financial Statements” of this Form 10-K. Borrowings under the 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 February 2, 2020, other than standby letters of credit in the amount of $4.3 million. However, as of February 2, 2020, $30.1 million was outstanding under our term loans. A 1% increase in the LIBOR rate would result in an annual increase in interest expense on our term loans of approximately $270,000.

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.

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.

Amounts outstanding under our revolving credit facility would bear interest at variable rates. In the past, we have entered into swap agreements to hedge against the potential impact of increases in interest rates on our floating-rate debt instruments. There was no outstanding balance under our revolving credit facility as of January 31, 2016, other than standby letters of credit in the amount of $1.7 million.  Therefore, a fluctuation in market interest rates of one percentage point (or 100 basis points) would not have a material impact on our results of operations or financial condition.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements listed in Item 15(a), and which begin on page F-1,F-5, of this report are incorporated herein by reference and are filed as a part of this report.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

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Certain Non-GAAP Financial Measures

In our Annual Report to Shareholders (of which this annual report on Form 10-K is a part), under the heading “Financial Highlights,” we reported net income and earnings per share both including and excluding the impactTable of restructuring and asset impairment charges.Contents

The net income, earnings per share and operating income margin figures excluding the impact of the items specified above are “non-GAAP” financial measures.  We provide this information because we believe it is useful to investors in evaluating our ongoing operations.  Non-GAAP financial measures provide insight into this selected financial information and should be evaluated in the context in which they are presented.  These measures are of limited usefulness in evaluating  our overall financial results presented in accordance with GAAP and should be considered in conjunction with the consolidated financial statements, including the related notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this report.

ITEM 9.                     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.     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 January 31, 2016.February 2, 2020. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of January 31, 2016,February 2, 2020, the end of the period covered by this annual report, 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 Securities and Exchange Commission’s rules and forms. 

Management’s Annual Report on Internal Control over Financial Reporting

In accordance with Section 404 of the Sarbanes-Oxley Act and SEC rules thereunder, management has conducted an assessment of our internal control over financial reporting as of January 31, 2016,February 2, 2020, based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s report regarding that assessment is included on page F-2 of this report, with our consolidated financial statements, and is incorporated herein by reference.

Report of Registered Public Accounting Firm

Our independent registered public accounting firm, KPMG LLP, audited the consolidated financial statements included in this annual report on Form 10-K and has issued an audit report on the effectiveness of our internal control over financial reporting. KPMG’s report is included on page F-3 and F-4 of this report, with our consolidated financial statements, and is incorporated herein by reference.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting for our fourthduring the fiscal quarter ended January 31, 2016,February 2, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.      OTHER INFORMATION

None.

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Hooker Furniture Corporation

Part III

In accordance with General Instruction G (3) of Form 10-K, most of the information called for by Items 10, 11, 12, 13 and 14 of Part III will be incorporated by reference to the Company’s definitive Proxy Statement for its Annual Meeting of Shareholders scheduled to be held June 2, 201611, 2020 (the “2016“2020 Proxy Statement”), as set forth below.

ITEM 10.      DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information relating to our directors will be set forth under the caption “Proposal One-Election of Directors” in the 20162020 Proxy Statement and is incorporated herein by reference.

Information relating to our executive officers is included in Part I of this report under the caption “Executive Officers of Hooker Furniture Corporation”“Information about our Executive Officers” and is incorporated herein by reference.

Information relating to compliance with Section 16(a) of the Exchange Act will be set forth under the caption “Section“Delinquent Section 16(a) Beneficial Ownership Reporting Compliance”Reports” in the 20162020 Proxy Statement and is incorporated herein by reference.

Information relating to the code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions will be set forth under the caption “Code of Business Conduct and Ethics” in the 20162020 Proxy Statement and is incorporated herein by reference.

Information relating to material changes, if any, in the procedures by which shareholders may recommend nominees for our Board of Directors will be set forth under the caption “Procedures for Shareholder Recommendations of Director Nominees” in the 20162020 Proxy Statement and is incorporated herein by reference.

Information relating to the Audit Committee of our Board of Directors, including the composition of the Audit Committee and the Board’s determinations concerning whether certain members of the Audit Committee are “financial experts” as that term is defined under Item 407(d)(5) of Regulation S-K will be set forth under the captions “Corporate Governance” and “Audit Committee” in the 20162020 Proxy Statement and is incorporated herein by reference.

ITEM 11.      EXECUTIVE COMPENSATION

Information relating to this item will be set forth under the captions “Report of the Compensation Committee,” “Executive Compensation” and “Director Compensation” in the 20162020 Proxy Statement and is incorporated herein by reference.

ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

Information relating to this item will be set forth under the captions “Equity Compensation Plan Information” and “Security Ownership of Certain Beneficial Owners and Management” in the 20162020 Proxy Statement and is incorporated herein by reference.

ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information relating to this item will be set forth in the last paragraphtwo paragraphs under the caption “Audit Committee” and the caption “Corporate Governance” in the 20162020 Proxy Statement and is incorporated herein by reference.

ITEM 14.     PRINCIPAL ACCOUNTING FEES AND SERVICES

Information relating to this item will be set forth under the caption “Proposal Two-Three- Ratification of Selection of Independent Registered Public Accounting Firm” in the 20162020 Proxy Statement and is incorporated herein by reference.

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Hooker Furniture Corporation

Part IV

ITEM 15.     EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)		Documents filed as part of this report on Form 10-K:
(1)		The following reports and financial statements are included in this report on Form 10-K:
		Management’s Report on Internal Control Over Financial Reporting
		Reports of Independent Registered Public Accounting Firm
		Consolidated Balance Sheets as of January 31, 2016February 2, 2020 and February 1, 2015.3, 2019
		Consolidated Statements of Income for the fifty-two week periodsfifty-two-week period ended February 2, 2020, the fifty-three-week period ended February 3, 2019 and the fifty-two-week period ended January 31, 2016, February 1, 2015, and February 2, 2014.28, 2018
		Consolidated Statements of Comprehensive Income for the fifty-two week periodsfifty-two-week period ended February 2, 2020, the fifty-three-week period ended February 3, 2019 and the fifty-two-week period ended January 31, 2016, February 1, 2015, and February 2, 2014.28, 2018
		Consolidated Statements of Cash Flows for the fifty-two week periodsfifty-two-week period ended February 2, 2020, the fifty-three-week period ended February 3, 2019 and the fifty-two-week period ended January 31, 2016, February 1, 2015, and February 2, 2014.28, 2018
		Consolidated Statements of Shareholders’ Equity for the fifty-two week periodsfifty-two-week period ended February 2, 2020, the fifty-three-week period ended February 3, 2019 and the fifty-two-week period ended January 31, 2016, February 1, 2015, and February 2, 2014.28, 2018
		Notes to Consolidated Financial Statements
(2)		Financial Statement Schedules:
		Financial Statement Schedules have been omitted because the information required has been separately disclosed in the consolidated financial statements or related notes.
(b)		Exhibits:

2.1
2.1		Asset Purchase Agreement, by and between the Company and Home Meridian International, Inc., dated as of January 5, 2016September 6, 2017, by and among Hooker Furniture Corporation, Shenandoah Furniture Corporation, Gideon C. Huddle and Candace H. Payne (incorporated by reference to Exhibit 2.1 of the Company’s Form 8-K (SEC File No. 000-25349) filed on January 7, 2016September 29, 2017)
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		Amended and Restated Bylaws of the Company as amended December 10, 2013 (incorporated by reference to Exhibit 3.2 of the Company’s Form 10-K (SEC File No. 000-25349) for the fiscal year ended February 2, 2014)
4.1		Amended and Restated Articles of Incorporation of the Company (See Exhibit 3.1)
4.2		Amended and Restated Bylaws of the Company (See Exhibit 3.2)
4.3		Description of the Company’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (filed herewith).
		Pursuant to Regulation S-K, Item 601(b)(4)(iii), instruments, if any, evidencing long-term debt not exceeding 10% of the Company’s total assets have been omitted and will be furnished to the Securities and Exchange Commission upon request.

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10.1(a)		Form of Executive Life Insurance Agreement dated December 31, 2003, between the Company and certain of its executive officers (incorporated by reference to Exhibit 10.1 of the Company’s Form 10-Q (SEC File No. 000-25349) for the quarter ended February 29, 2004)*
10.1(b)		Form of Outside Director Restricted Stock Agreement (incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K (SEC File No. 000-25349) filed on January 17, 2006)*
10.1(c)		2015 Amendment and Restatement of the Hooker Furniture Corporation Stock Incentive Plan (incorporated by reference to Appendix A of the Company’s Definitive Proxy Statement dated March 1, 2015 (SEC File No. 000-25349))*
10.1(d)		2010 Amended and Restated Hooker Furniture Corporation Supplemental Retirement Income Plan, dated as of June 8, 2010 (incorporated by reference to Exhibit 10.1 of the Company’s Form 10-Q (SEC File No. 000-25349) for the quarter ended October 31, 2010)*
10.1(e)		Form of Time-Based Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (SEC File No. 000-25349) filed on February 13, 2012)*
10.1(f)		Form of Performance Grant Agreement (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K (SEC File No. 000-25349) filed on February 13, 2012)*
10.1(g) 10.1(i)		Employment Agreement, dated August 22, 2011,June 4, 2018, between Michael W. Delgatti, Jr.Anne Jacobsen and the Company (incorporated by reference to Exhibit 10.1(l) of the Company’s Form 10-K (SEC File No. 000-25349) filed on April 12, 2013)*
10.1(h)	Consulting Letter Agreement dated May 21, 2014, between the Company and Alan D. Cole. (incorporated by reference to Exhibit 10.1(b)10.1 of the Company’s Form 10-Q (SEC File No. 000-25349) for the quarter ended May 4, 2014)filed on December 6, 2018)*
10.1(i) 10.1(j)		Employment Agreement, dated January 5, 2016,June 25, 2018, between George RevingtonDonald Lee Boone and the Company* (filed herewith)Company (incorporated by reference to Exhibit 10.2 of the Company’s Form 10-Q (SEC File No. 000-25349) filed on December 6, 2018)*
10.2(a) 10.1(k)		Employment Agreement, dated June 4, 2018, between Jeremy Hoff and the Company (incorporated by reference to Exhibit 10.3 of the Company’s Form 10-Q (SEC File No. 000-25349) filed on December 6, 2018)*
10.1(l)		Employment Agreement, dated June 4, 2018, between Douglas Townsend and the Company (incorporated by reference to Exhibit 10.4 of the Company’s Form 10-Q (SEC File No. 000-25349) filed on December 6, 2018)*
10.1(m)		Form of Performance Share Agreement (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K (SEC File No. 000-25349) filed on May 11, 2018)*
10.1		First Amendment to the 2010 Amended and Restated Loan Agreement, dated as of February 1, 2016, between Bank of America, N.A., the Company, Bradington-Young, LLC and Same MooreHooker Furniture LLCCorporation Supplemental Retirement Income plan (incorporated by referencedreference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (SEC File No. 000-25349) filed with the SEC on February 2, 2016November 15, 2019)
10.2(b) 10.2(a)		Security Agreement (Assignment of Life Insurance Policy as Collateral), dated as of February 1, 2016, between Bank of America, N.A. and the Company (incorporated by referenced to Exhibit 10.2 of the Company’s Current Report on Form 8-K (SEC File No. 000-25349) filed on February 2, 20162016)
21 10.2(b)	List	Second Amended and Restated Loan Agreement, dated as of Subsidiaries:September 29, 2017, between Bank of America, N.A. and Hooker Furniture Corporation, Bradington-Young, LLC, Sam Moore Furniture LLC and Home Meridian Group, LLC (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K (SEC File No. 000-25349) filed on September 29, 2017)
10.2(c)		First Amendment to Second Amended and Restated Loan Agreement, dated as of February 1, 2019, between Bank of America, N.A. and Hooker Furniture Corporation, Bradington-Young, LLC, Sam Moore Furniture LLC and Home Meridian Group, LLC. (incorporated by reference to Exhibit 10.2(d) of the Company’s Form 10-K (SEC File No. 000-25349) filed on April 19,2019)

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21		List of Subsidiaries:
		Bradington-Young LLC, a North Carolina limited liability company
		Home Meridian Group, LLC, a Virginia limited liability company
		Sam Moore Furniture LLC, a Virginia limited liability company
23		Consent of Independent Registered Public Accounting Firm (filed herewith)
31.1		Rule 13a-14(a) Certification of the Company’s principal executive officer (filed herewith)
31.2		Rule 13a-14(a) Certification of the Company’s principal financial officer (filed herewith)
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 (furnished herewith)
101		The following financial statements from the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2016,February 2, 2020, formatted in Extensible Business Reporting Language (“XBRL”): (i) consolidated balance sheets, (ii) consolidated  statements of income, (iii) consolidated statements of comprehensive income, (iv) consolidated statements of cash flows, (v) consolidated statements of shareholders’ equity and (vi) the notes to the consolidated financial statements, tagged as blocks of text (filed herewith)

*Management contract or compensatory plan

ITEM 16.          FORM 10-K SUMMARY

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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

April 15, 2016                                                                       /s/  Paul B. Toms, Jr.                                                  

Paul B. Toms, Jr.

Chairman and Chief Executive Officer

	HOOKER FURNITURE CORPORATION
April 17, 2020	By:	/s/ Paul B. Toms, Jr.
		Paul B. Toms, Jr.
		Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature		Title		Date
/s/ Paul B. Toms, Jr.		Chairman, Chief Executive Officer and		April 15, 201617, 2020
Paul B. Toms, Jr.		Director (Principal Executive Officer)
/s/ Paul A. Huckfeldt		Senior Vice President - Finance and Accounting		April 15, 2016 17, 2020
Paul A. Huckfeldt		and Chief Financial Officer (Principal
		Financial and Accounting Officer)
/s/ W. Christopher Beeler, Jr.		Director		April 15, 2016 17, 2020
W. Christopher Beeler, Jr.
/s/ Paulette Garafalo		Director		April 17, 2020
Paulette Garafalo
/s/ John L. Gregory, III		Director		April 15, 2016 17, 2020
John L. Gregory, III
/s/ Tonya H. Jackson		Director		April 17, 2020
Tonya H. Jackson
/s/ E. Larry Ryder		Director		April 15, 2016 17, 2020
E. Larry Ryder
/s/ David G. Sweet		Director		April 15, 2016
David G. Sweet
/s/ Ellen C. Taaffe		Director		April 15, 2016 17, 2020
Ellen C. Taaffe
/s/ Henry G. Williamson, Jr.Jr	.	Director		April 15, 2016 17, 2020
Henry G. Williamson, Jr.

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HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Management’s Report on Internal Control Over Financial Reporting	F-2
Reports of Independent Registered Public Accounting Firm	F-3
Consolidated Balance Sheets as of January 31, 2016February 2, 2020 and February 1, 20153, 2019	F-5
Consolidated Statements of Income for the fifty-two week periodsfifty-two-week period ended February 2, 2020, the fifty-three-week period ended February 3, 2019 and the fifty-two-week period ended January 31, 2016, February 1, 2015 and February 2, 201428, 2018	F-6
Consolidated Statements of Comprehensive Income for the fifty-two week periodsfifty-two-week period ended February 2, 2020, the fifty-three-week period ended February 3, 2019 and the fifty-two-week period ended January 31, 2016, February 1, 2015 and February 2, 201428, 2018	F-7
Consolidated Statements of Cash Flows for the fifty-two week periodsfifty-two-week period ended February 2, 2020, the fifty-three-week period ended February 3, 2019 and the fifty-two-week period ended January 31, 2016, February 1, 2015 and February 2, 201428, 2018	F-8
Consolidated Statements of Shareholders’ Equity for the fifty-two week periodsfifty-two-week period ended February 2, 2020, the fifty-three-week period ended February 3, 2019 and the fifty-two-week period ended January 31, 2016, February 1, 2015 and February 2, 201428, 2018	F-9
Notes to Consolidated Financial Statements	F-10

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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

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To the Shareholders of

Hooker Furniture Corporation

Martinsville, Virginia

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Securities Exchange Act Rule 13a-15(f). Under the supervision and with the participation of management, including the principal executive officer and principal financial officer, the Company conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013)(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the Company’s evaluation under that framework, management concluded that the Company’s internal control over financial reporting was effective as of January 31, 2016.

February 2, 2020.

The effectiveness of the Company’s internal control over financial reporting as of January 31, 2016February 2, 2020 has been audited by KPMG LLP, the Company’s independent registered public accounting firm, as stated in their report which is included herein.

Paul B. Toms, Jr.

Chairman and Chief Executive Officer

(Principal Executive Officer)

April 15, 2016

17, 2020

Paul A. Huckfeldt

Senior Vice President – Finance and Accounting

and Chief Financial Officer

(Principal Financial and Accounting Officer)

April 15, 2016

17, 2020

F-2

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Report of Independent Registered Public Accounting Firm

The

To the Shareholders and Board of Directors and Shareholders

Hooker Furniture Corporation:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Hooker Furniture Corporation and subsidiaries’subsidiaries (the Company) as of February 2, 2020 and February 3, 2019,  the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended February 2, 2020, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of February 2, 2020 and February 3, 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended February 2, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 31, 2016,February 2, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, (COSO).and our report dated April 17, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for revenue due to the adoption of Accounting Standards Codification 606, Revenue from Contracts with Customers.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG LLP

We have served as the Company’s auditor since 2003.

Raleigh, North Carolina
April 17, 2020

F-3

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors
Hooker Furniture Corporation:

Opinion on Internal Control Over Financial Reporting

We have audited Hooker Furniture Corporation and subsidiaries’ (the Company) internal control over financial reporting as of February 2, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 2, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. 

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of February 2, 2020 and February 3, 2019, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended February 2, 2020, and the related notes (collectively, the consolidated financial statements), and our report dated April 17, 2020 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control overOver Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Hooker Furniture Corporation maintained, in all material respects, effective internal control over financial reporting as of January 31, 2016, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Hooker Furniture Corporation and subsidiaries as of January 31, 2016 and February 1, 2015, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the fifty-two week periods ended January 31, 2016, February 1, 2015 and February 2, 2014 and our report dated April 15, 2016 expressed an unqualified opinion on those consolidated financial statements.

/s/S/ KPMG LLP

Charlotte,

Raleigh, North Carolina

April 15, 2016

17, 2020

F-4

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Hooker Furniture Corporation:

We have audited the accompanying consolidated balance sheets of Hooker Furniture Corporation and subsidiaries as of January 31, 2016 and February 1, 2015, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the fifty-two week periods ended January 31, 2016, February 1, 2015 and February 2, 2014. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hooker Furniture Corporation and subsidiaries as of January 31, 2016 and February 1, 2015, and the results of their operations and their cash flows for each of the years in the fifty-two week periods ended January 31, 2016, February 1, 2015 and February 2, 2014, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Hooker Furniture Corporation’s internal control over financial reporting as of January 31, 2016, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated April 15, 2016 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP

Charlotte, North Carolina

April 15, 2016

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HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

---

As of		January 31,				February 1,
		2016				2015
Assets
Current assets
Cash and cash equivalents		$	53,922			$	38,663
Trade accounts receivable, less allowance for doubtful        accounts of $1,032 and $1,329 on each respective date			28,176				32,245
Inventories			43,713				44,973
Prepaid expenses and other current assets			2,256				2,353
Total current assets			128,067				118,234
Property, plant and equipment, net			22,768				22,824
Cash surrender value of life insurance policies			21,888				20,373
Deferred taxes			5,350				5,892
Intangible assets			1,382				1,382
Other assets			2,198				2,050
Total non-current assets			53,586				52,521
Total assets		$	181,653			$	170,755
Liabilities and Shareholders’ Equity
Current liabilities
Trade accounts payable		$	9,105			$	10,293
Accrued salaries, wages and benefits			4,834				4,824
Income tax accrual			357				1,368
Accrued commissions			818				916
Other accrued expenses			694				813
Customer deposits			797				853
Total current liabilities			16,605				19,067
Deferred compensation			8,409				8,329
Income tax accrual			166				90
Other liabilities			412				360
Total long-term liabilities			8,987				8,779
Total liabilities			25,592				27,846
Shareholders’ equity
Common stock, no par value, 20,000 shares authorized,         10,818 and 10,774 shares issued and outstanding on each date			18,667				17,852
Retained earnings			137,255				125,392
Accumulated other comprehensive income (loss)			139				(335	)
Total shareholders’ equity			156,061				142,909
Total liabilities and shareholders’ equity		$	181,653			$	170,755

As of		February 2,				February 3,
		2020				2019
Assets
Current assets
Cash and cash equivalents		$	36,031			$	11,435
Trade accounts receivable, net            (See notes 6 and 7)			87,653				112,557
Inventories (see note 8)			92,813				105,204
Income tax recoverable			751				-
Prepaid expenses and other current assets			4,719				5,735
Total current assets			221,967				234,931
Property, plant and equipment, net (See note 9)			29,907				29,482
Cash surrender value of life insurance policies (See note 11)			24,888				23,816
Deferred taxes (See note 17)			2,880				4,522
Operating leases right-of-use assets (See note 12)			39,512				-
Intangible assets, net (See note 10)			33,371				35,755
Goodwill (See notes 4 and 10)			40,058				40,058
Other assets			1,125				1,152
Total non-current assets			171,741				134,785
Total assets		$	393,708			$	369,716
Liabilities and Shareholders’ Equity
Current liabilities
Current portion of term loans		$	5,834			$	5,829
Trade accounts payable			25,493				40,838
Accrued salaries, wages and benefits			4,933				8,002
Income tax accrual (See note 17)			-				3,159
Customer deposits			3,351				3,023
Current portion of lease liabilities			6,307				-
Other accrued expenses			4,211				3,564
Total current liabilities			50,129				64,415
Long term debt (See note 13)			24,282				29,628
Deferred compensation (See note 14)			11,382				11,513
Lease liabilities			33,794				-
Other liabilities			-				984
Total long-term liabilities			69,458				42,125
Total liabilities			119,587				106,540
Shareholders’ equity
Common stock, no par value, 20,000 shares authorized,        11,838 and 11,785 shares issued and outstanding on each date			51,582				49,549
Retained earnings			223,252				213,380
Accumulated other comprehensive (loss) income			(713	)			247
Total shareholders’ equity			274,121				263,176
Total liabilities and shareholders’ equity		$	393,708			$	369,716

See accompanying Notes to Consolidated Financial Statements.

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HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

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For the 52 Week Periods Ended January 31, 2016, February 1, 2015, and February 2, 2014.

		2016				2015				2014
Net sales		$	246,999			$	244,350			$	228,293
Cost of sales			178,311				181,550				173,568
Gross profit			68,688				62,800				54,725
Selling and administrative expenses			44,426				43,752				42,222
Operating income			24,262				19,048				12,503
Other income (expense), net			197				350				(35	)
Income before income taxes			24,459				19,398				12,468
Income taxes			8,274				6,820				4,539
Net income		$	16,185			$	12,578			$	7,929
Earnings per share:
Basic		$	1.50			$	1.17			$	0.74
Diluted		$	1.49			$	1.16			$	0.74
Weighted average shares outstanding:
Basic			10,779				10,736				10,722
Diluted			10,807				10,771				10,752
Cash dividends declared per share		$	0.40			$	0.40			$	0.40

For the 52 Week Period Ended February 2, 2020, the 53 Week Period Ended February 3, 2019 and the 52 Week Period Ended January 28, 2018.
		2020				2019				2018
Net sales		$	610,824			$	683,501			$	620,632
Cost of sales			496,866				536,014				485,815
Casualty loss			-				500				-
Gross profit			113,958				146,987				134,817
Selling and administrative expenses			88,867				91,928				87,279
Intangible asset amortization			2,384				2,384				2,084
Operating income			22,707				52,675				45,454
Other income, net			458				369				1,566
Interest expense, net			1,238				1,454				1,248
Income before income taxes			21,927				51,590				45,772
Income taxes			4,844				11,717				17,522
Net income		$	17,083			$	39,873			$	28,250
Earnings per share:
Basic		$	1.44			$	3.38			$	2.42
Diluted		$	1.44			$	3.38			$	2.42
Weighted average shares outstanding:
Basic			11,784				11,759				11,633
Diluted			11,838				11,783				11,663
Cash dividends declared per share		$	0.61			$	0.57			$	0.50

See accompanying Notes to Consolidated Financial Statements.

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HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

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For the 52 Week Periods Ended January 31, 2016, February 1, 2015, and February 2, 2014.

		2016				2015				2014
Net Income		$	16,185			$	12,578			$	7,929
Other comprehensive income (loss):
Amortization of actuarial gain (loss)			751				(687	)			(163	)
Income tax effect on amortization			(277	)			254				59
Adjustments to net periodic benefit cost			474				(433	)			(104	)
Total Comprehensive Income		$	16,659			$	12,145			$	7,825

For the 52 Week Period Ended February 2, 2020, the 53 Week Period Ended February 3, 2019 and the 52 Week Period Ended January 28, 2018.
		2020				2019				2018
Net Income		$	17,083			$	39,873			$	28,250
Other comprehensive income (loss):
Gain on pension plan settlement			(520	)			-				-
Income tax effect on settlement			124				-				-
Amortization of actuarial (loss) gain			(740	)			(305	)			(144	)
Income tax effect on amortization			176				73				26
Adjustments to net periodic benefit cost			(960	)			(232	)			(118	)
Reclassification of tax effects due to the adoption of ASU 2018-02			-				111				-
Total Comprehensive Income		$	16,123			$	39,752			$	28,132

See accompanying Notes to Consolidated Financial Statements.

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Table of Contents

HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

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For the 52 Week Periods Ended January 31, 2016, February 1, 2015, and February 2, 2014.

		2016				2015				2014
Operating Activities:
Net income		$	16,185			$	12,578			$	7,929
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			2,946				2,599				2,491
Loss / (gain) on disposal of assets			83				(23	)			(8	)
Deferred income tax expense			544				(135	)			340
Non-cash restricted stock and performance awards			829				123				338
Provision for doubtful accounts			(105	)			928				456
Changes in assets and liabilities
Trade accounts receivable			4,174				(3,780	)			(1,576	)
Income tax recoverable			-				682				(682	)
Inventories			1,260				4,043				856
Gain on life insurance policies			(799	)			(709	)			(147	)
Prepaid expenses and other current assets			(207	)			(76	)			30
Trade accounts payable			(1,273	)			3,216				(4,499	)
Accrued salaries, wages and benefits			273				1,347				162
Accrued income taxes			(1,011	)			1,368				(751	)
Accrued commissions			(98	)			(18	)			(62	)
Customer deposits			(56	)			194				659
Other accrued expenses			(119	)			56				(31	)
Deferred compensation			358				317				88
Other long-term liabilities			52				58				103
Net cash provided by operating activities			23,036				22,768				5,696
Investing Activities:
Purchases of property, plant and equipment			(2,847	)			(2,994	)			(3,471	)
Proceeds received on notes receivable			93				31				36
Proceeds from sale of property and equipment			6				71				22
Purchase of intangible			-				-				(125	)
Premiums paid on life insurance policies			(707	)			(789	)			(834	)
Proceeds received on life insurance policies			-				-				517
Net cash used in investing activities			(3,455	)			(3,681	)			(3,855	)
Financing Activities:
Cash dividends paid			(4,322	)			(4,306	)			(4,301	)
Net cash used in financing activities			(4,322	)			(4,306	)			(4,301	)
Net increase (decrease) in cash and cash equivalents			15,259				14,781				(2,460	)
Cash and cash equivalents at the beginning of year			38,663				23,882				26,342
Cash and cash equivalents  at the end of year		$	53,922			$	38,663			$	23,882
Supplemental schedule of cash flow information:
Income taxes paid, net		$	8,837			$	4,696			$	5,534
Supplemental schedule of noncash investing activities:
Increase in property and equipment through accrued purchases		$	85				-			$	43

For the 52 Week Period Ended February 2, 2020, the 53 Week Period Ended February 3, 2019 and the 52 Week Period Ended January 28, 2018.
		2020				2019				2018
Operating Activities:
Net income		$	17,083			$	39,873			$	28,250
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			7,100				7,442				6,647
Gain on pension settlement			(520	)			-				-
(Gain)/Loss on disposal of assets			(271	)			(73	)			571
Proceeds from Casualty Loss			-				409				-
Deferred income tax expense (benefit)			1,940				(1,221	)			4,110
Non-cash restricted stock and performance awards			1,296				1,284				1,175
Provision for doubtful accounts and sales allowances			(435	)			(799	)			(531	)
Gain on life insurance policies			(831	)			(748	)			(582	)
Changes in assets and liabilities:
Trade accounts receivable			25,339				(17,982	)			2,908
Inventories			12,391				(21,323	)			(6,776	)
Income tax recoverable			(751	)			-				-
Prepaid expenses and other current assets			(557	)			267				(1,067	)
Trade accounts payable			(15,349	)			8,130				(4,623	)
Accrued salaries, wages and benefits			(3,070	)			(1,643	)			129
Accrued income taxes			(3,159	)			(672	)			(612	)
Customer deposits			328				(1,270	)			(339	)
Operating lease liabilities			299				-				-
Other accrued expenses			645				604				(696	)
Deferred compensation			(49	)			(2,757	)			(1,151	)
Other long-term liabilities			-				141				333
Net cash provided by operating activities			41,429				9,662				27,746
Investing Activities:
Acquisitions			-				-				(32,773	)
Purchases of property, plant and equipment			(5,129	)			(5,214	)			(3,166	)
Proceeds received on notes receivable			1,449				119				120
Proceeds from sale of property and equipment			16				11				9
Premiums paid on life insurance policies			(590	)			(652	)			(673	)
Proceeds received on life insurance policies			-				1,225				-
Net cash used in investing activities			(4,254	)			(4,511	)			(36,483	)
Financing Activities:
Proceeds from long-term debt			-				-				12,000
Payments for long-term debt			(5,368	)			(17,917	)			(6,285	)
Debt issuance cost			-				-				(39	)
Cash dividends paid			(7,211	)			(6,714	)			(5,816	)
Net cash used in financing activities			(12,579	)			(24,631	)			(140	)
Net increase (decrease) in cash and cash equivalents			24,596				(19,480	)			(8,877	)
Cash and cash equivalents at the beginning of year			11,435				30,915				39,792
Cash and cash equivalents at the end of year		$	36,031			$	11,435			$	30,915
Supplemental schedule of cash flow information:
Interest paid, net		$	993			$	1,338				1,135
Income taxes paid, net			6,818				13,613			$	14,122
Supplemental schedule of noncash investing activities:
Acquisition cost paid in common stock		$	-			$	-				8,396
Increase in lease liabilities arising from obtaining right-of-use assets			625				-				-
Increase in property and equipment through accrued purchases			5				23				58

See accompanying Notes to Consolidated Financial Statements.

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HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands, except per share data)

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For the 52 Week Periods Ended January 31, 2016, February 1, 2015 and February 2, 2014.

														Accumulated
														Other				Total
		Common Stock								Retained				Comprehensive				Shareholders'
		Shares				Amount				Earnings				Income				Equity
Balance at February 3, 2013			10,746			$	17,360			$	113,483			$	202			$	131,045
Net income			-				-				7,929				-				7,929
Unrealized loss on defined benefit plan, net of tax of $59			-				-				-				(104	)			(104	)
Cash dividends paid and accrued ($0.40 per share)			-				-				(4,301	)			-				(4,301	)
Restricted stock grants, net of forfeitures			7				(8	)			9				-				-
Restricted stock compensation cost			-				233				-				-				233
Balance at February 2, 2014			10,753			$	17,585			$	117,120			$	98			$	134,803
Net income			-				-				12,578				-				12,578
Unrealized loss on defined benefit plan, net of tax of $254			-				-				-				(433	)			(433	)
Cash dividends paid and accrued ($0.40 per share)			-				-				(4,306	)			-				(4,306	)
Restricted stock grants, net of forfeitures			21				51				-				-				51
Restricted stock compensation cost			-				216				-				-				216
Balance at February 1, 2015			10,774			$	17,852			$	125,392			$	(335	)		$	142,909
Net income			-				-				16,185				-				16,185
Unrealized loss on defined benefit plan, net of tax of $(277)			-				-				-				474				474
Cash dividends paid and accrued ($0.40 per share)			-				-				(4,322	)			-				(4,322	)
Restricted stock grants, net of forfeitures			44				563				-				-				563
Restricted stock compensation cost			-				252				-				-				252
Balance at January 31, 2016			10,818			$	18,667			$	137,255			$	139			$	156,061

For the 52 Week Period Ended February 2, 2020, the 53 Week Period Ended February 3, 2019 and the 52 Week Period Ended January 28, 2018.
														Accumulated
														Other				Total
		Common Stock								Retained				Comprehensive				Shareholders'
		Shares				Amount				Earnings				Income / (Loss)				Equity
Balance at January 29, 2017			11,563			$	39,753			$	157,688			$	486			$	197,927
Net income											28,250								28,250
Unrealized loss on defined benefit plan, net of tax of $26															(118	)			(118	)
Cash dividends paid and accrued ($0.50 per share)											(5,816	)							(5,816	)
Stock issued for acquisition			176				8,396												8,396
Restricted stock grants, net of forfeitures			23				432												432
Restricted stock compensation cost							389												389
Balance at January 28, 2018			11,762			$	48,970			$	180,122			$	368			$	229,460
Net income										$	39,873							$	39,873
Prior year adjustment for ASU 2014-09 and 2018-02											99			$	111				210
Unrealized loss on defined benefit plan, net of tax of $73														$	(232	)			(232	)
Cash dividends paid and accrued ($0.57 per share)											(6,714	)							(6,714	)
Restricted stock grants, net of forfeitures			23			$	(30	)											(30	)
Restricted stock compensation cost						$	609												609
Balance at February 3, 2019			11,785			$	49,549			$	213,380			$	247			$	263,176
Net income										$	17,083							$	17,083
Gain on pension settlement, net of tax of $124														$	(396	)			(396	)
Unrealized loss on defined benefit plan, net of tax of $176														$	(564	)			(564	)
Cash dividends paid and accrued ($0.61 per share)											(7,211	)							(7,211	)
Restricted stock grants, net of forfeitures			53			$	344												344
Restricted stock compensation cost						$	790												790
Recognition of PSUs as equity-based awards						$	899												899
Balance at February 2, 2020			11,838			$	51,582			$	223,252			$	(713	)		$	274,121

See accompanying Notes to Consolidated Financial Statements.

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Table of Contents

Notes to Consolidated Financial Statements

HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(TablesDollar and share amounts in thousands,tables, except per share data)

amounts, in thousands unless otherwise indicated)

For the Fifty-Two Weeks Ended February 2, 2020

NOTE 1 – RECENTLY ADOPTED ACCOUNTING STANDARDS

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“Topic 842”), which requires lessees to recognize lease right-of-use assets and liabilities on-balance sheet and disclose key information about leasing arrangements. ASU 2016-02 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. We adopted Topic 842 standard on February 4, 2019 and used the effective date transition method. As a result, 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 $39.5 million and operating lease liabilities of $40.1 million as of February 2, 2020. 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 fiscal 2020. See Note 12 for additional information and disclosures required by Topic 842.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). This new standard replaced most existing revenue recognition guidance in GAAP and codified guidance under FASB Topic 606. The underlying principle of this new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration that the entity expects to be entitled to receive in exchange for those goods or services. We adopted ASU No. 2014-09 as of January 29, 2018 using the modified retrospective method. As a result of adopting Topic 606, we recorded an increase to retained earnings of approximately $210,000, net of tax, as of January 29, 2018, due to the cumulative effect related to the change in accounting for shipments with synthetic FOB destination shipping terms. Results for the reporting period beginning after January 29, 2018 are presented under Topic 606, while prior period amounts continue to be reported in accordance with the Company's historic accounting practices under previous guidance. However, given the nature of our products and our sales terms and conditions, with the exception of sales with synthetic FOB destination shipping terms which are immaterial, the timing and amount of revenue recognized based on the underlying principles of ASU No. 2014-09 are consistent with our revenue recognition policy under previous guidance.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Hooker Furniture Corporation and subsidiaries (the “Company,” “we,” “us” and “our”) design, import, manufacture and market residential household furniture, hospitality and contract furniture for sale to wholesale and retail merchandisers located principally in North America.

Consolidation

The consolidated financial statements include the accounts of Hooker Furniture Corporation and our wholly owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. All references to the Company refer to the Company and our consolidated subsidiaries, unless specifically referring to segment information. For comparative purposes, certain amounts in

Operating Segments

As a public entity, we are required to present disaggregated information by segment using the consolidatedmanagement 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 notes have been reclassifiedmakes decisions. The management approach requires segment information to conformbe 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 fiscal 2016 presentation.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.

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Table of Contents

Segments

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.

For financial reporting purposes, we are organized into three operating segments – casegoods, upholstery and an All Other segment. The upholstery segment consists“All Other”, which includes the remainder of Bradington-Young, Sam Moore Furniture and Hooker Upholstery. The All Other segment consists of H Contract and Homeware.

our businesses:

■

Hooker Branded, consisting of the operations of our imported Hooker Casegoods and Hooker Upholstery businesses;

■

Home Meridian, a business acquired at the beginning of fiscal 2017, is a stand-alone, mostly autonomous business that serves a different type or class of customer than do our other operating segments and at much lower margins;

■

Domestic Upholstery, which includes the domestic upholstery manufacturing operations of Bradington-Young, Sam Moore and Shenandoah Furniture; and

■

All Other, consisting of H Contract and Lifestyle Brands. Neither of these operating segments were individually reportable; therefore, we combined them in “All Other” in accordance with ASC 280.

Cash and Cash Equivalents

We temporarily invest unusedconsider cash balanceson hand, demand deposits in a high quality, diversified money market fund that provides for daily liquiditybanks and pays dividends monthly.  Cash equivalents are stated at cost plus accrued interest, which approximates fair value.

all highly liquid investments with an original maturity of three months or less to be cash and cash equivalents.

Trade Accounts Receivable

Accounts receivable are reported net of the allowance for doubtful accounts and sales-related allowances. Substantially all of our trade accounts receivable are due from retailers and dealers that sell residential home furnishings or commercial purchasers of our hospitality and senior living products, and consist of a large number of entities with a broad geographic dispersion. We perform credit evaluations of our customers and generally do not require collateral. We regularly review and revise accounts receivable for doubtful accounts and customer allowances based upon historical bad debts and customer allowances and any agreements with specific customers. If the financial condition of a customer or customers were to deteriorate, resulting in an impairment of their ability to make payments, additional bad debt allowances may be required. In the event a receivable is determined to be potentially uncollectible, we engage collection agencies or law firms to attempt to collect amounts owed to us after all internal collection attempts have ended. Once we have determined the receivable is uncollectible, it is charged against the allowance for doubtful accounts. Bradington-Young factors substantially all

Business Combinations-Purchase Price Allocation

For business combinations, we allocate the purchase price to the various tangible and intangible assets acquired and liabilities assumed, based on their estimated fair values. Determining the fair value of their receivablescertain assets and liabilities acquired is subjective in nature and often involves the use of significant estimates and assumptions, which are inherently uncertain. Many of the estimates and assumptions used to determine fair values, such as those used for intangible assets, are made based on forecasted information and discount rates. To assist in the purchase price allocation process, as well as the estimate of remaining useful lives of acquired assets, we may engage a non-recourse basis.  Accounts receivable are reported netthird-party appraisal firm. In addition, the judgments made in determining the estimated fair value assigned to each class of allowance for doubtful accounts.

assets acquired and liabilities assumed, as well as asset lives, can materially impact our results of operations.

Fair Value Measurements

We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. We determine fair value based on assumptions that we believe market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

§ ■

Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

§ ■

Level 2 Inputs: Observable inputs other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

§ ■

Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

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Table of Contents

Fair Value of Financial Instruments

The carrying value for eachof certain of our financial instruments (consisting of cash(cash and cash equivalents, trade accounts receivable and payable, and accrued liabilities) approximates fair value because of the short-term nature of those instruments.

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Table The carrying value of Contents

NotesCompany-owned life insurance is marked to Consolidated Financial Statements - Continued

(Tablesmarket each reporting period and any change in thousands, except per share data)

fair value is reflected in income for that period. See Note 11 for details.

Inventories

All inventories are stated at the lower of cost, or market value, with cost determined using the last-in, first-out (LIFO) method.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, less allowances for depreciation. Provision for depreciation has been computed at annual rates using straight-line or declining balance depreciation methods that will amortize the cost of the depreciable assets over their estimated useful lives.

Leases

Leases are classified as either finance leases or operating leases based on criteria in Topic 842. All of our current 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. For leases without explicitly stated or implicit interest rates that commenced after the adoption date, we use 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 upon adoption of this standard. 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.

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.

Impairment of Long-Lived Assets

Long-lived assets, such as property, plant and equipment and definite-lived assets, are evaluated for impairment annually or more frequently when events or changes in circumstances indicate that the carrying amount of the assets or asset groups may not be recoverable through the estimated undiscounted future cash flows from the use of those assets. When any such impairment exists, the related assets are written down to fair value. Long-lived assets subject to disposal by sale are measured at the lower of their carrying amount or fair value less estimated cost to sell, are no longer depreciated, and are reported separately as “assets held for sale” in the consolidated balance sheets.

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Table of Contents

Intangible Assets

and Goodwill

We own certainboth definite-lived (amortizable) assets and indefinite-lived intangible assets. Our amortizable intangible assets are related to our upholstery segmentthe Shenandoah and all other segment.Home Meridian acquisitions and includes customer relationships and trademarks. Our indefinite lived assets include goodwill related to the Shenandoah and Home Meridian acquisitions, as well as the Bradington-Young and Sam Moore tradenames. We may acquire additional amortizable assets and/or indefinite lived intangible assets in the future. Our indefinite-lived intangible assets are trademarks, trade names and a URL, which are not amortized but are tested for impairment annually or more frequently if events or circumstances indicate that the asset might be impaired. The fair value of our indefinite-lived intangible assets is determined based on the estimated earnings

Our goodwill, trademarks and cash flow capacity of those assets.  The impairment test consists of a comparison of the fair value of the indefinite-lived intangible assets with their carrying amount.  If the carrying amount of the indefinite-lived intangible assets exceeds their fair value, an impairment loss is recognized in an amount equal to that excess.

Tradetrade names are tested for impairment annually as of the first day of our fiscal fourth quarter or more frequently if events or changes in circumstances indicate that the asset might be impaired. Circumstances that could indicate a potential impairment include:

include, but are not limited to:

§ ■

a significant adverse change in the economic or business climate either within the furniture industry or the national or global economy;

§ ■

significant changes in demand for our products;

§ ■

loss of key personnel; and

§ ■

the likelihood that a reporting unit or significant portion of a reporting unit will be sold or otherwise subject to disposal.

The assumptions used to determine the fair value of our intangible assets are highly subjective involve significant judgmentand judgmental and include long termlong-term growth rates, sales volumes, projected revenues, assumed royalty rates and various factors used to develop an applied discount rate. If the assumptions that we use in these calculations differ from actual results, we may realize additional impairment ofon our intangible assets whichthat may have a material adversematerial-adverse effect on our results of operations and financial condition.

Cash Surrender Value of Life Insurance Policies

We own eighty-seven78 life insurance policies on certain of our current and former executives and other key employees. These policies havehad a carrying value of approximately $22$24.9 million at February 2, 2020 and have a face value of approximately $35 million.$54 million as of that date. Proceeds from the policies are used to fund certain employee benefits and for other general corporate purposes. We account for life insurance as a component of employee benefits cost. Consequently, the cost of the coverage and any resulting gains or losses related to those insurance policies are recorded as a decrease or increase to operating income. Cash payments that increase the cash surrender value of these policies are classified as investing outflows on the Consolidated Statements of Cash Flows, with amounts paid in excess of the increase in cash surrender value included in operating activities. Gains on life insurance policies, which typically occur at the time a policy is redeemed, are included in the reconciliation of net income to net cash used in or provided by operating activities.

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TableSubstantially all of Contents

Notesthe cash value of our company owned life insurance is pledged as collateral for our secured term loan.

Revenue Recognition

We recognize revenue pursuant to Consolidated Financial Statements - Continued

(TablesAccounting Standards Codification 606, which requires revenue to be recognized at an amount that reflects the consideration we expect to be entitled to receive in thousands, except per share data)

Revenue Recognition

exchange for transferring goods or services to our customers. Our salespolicy is to record revenue is recognized when title andcontrol of the risk of loss passgoods transfers to the customer, which typically occurscustomer. We have a present right to payment at the time of shipment.shipment as customers are invoiced at that time. We believe the customer obtains control of goods at the time of shipment, which is typically when title passes. While the customer may not enjoy immediate physical possession of the products, the customers’ right to re-direct shipment indicates control. In some cases however, title doesthe very limited instances when products are sold under consignment arrangements, we do not passrecognize revenue until the shipment is deliveredcontrol over such products has transferred to the customer. Salesend consumer. Orders are generally non-cancellable once loaded into a shipping trailer or container.

The transaction price for each contract is the stated price of the product, reduced by any stated discounts or allowances at that point in time. We do not engage in sales of products that attach a future material right which could result in a separate performance obligation for the purchase of goods in the future at a material discount. The implicit contract with the customer, as reflected in the order acknowledgement and invoice, states the final terms of the sale, including the description, quantity, and price of each product purchased. The transaction price reflects the amount of estimated consideration to which we expect to be entitled. This amount of variable consideration included in the transaction price, and measurement of net sales, is included in net sales only to the extent that it is probable that there will be no significant reversal in a future period.

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Net sales are comprised of gross revenues from sales of home furnishings and hospitality furniture products and are recorded net of allowances for trade promotions, estimated product returns, rebate advertising programs and other discounts.

Physical product returns are very rare due to the high probability of damages to our products in return transit. Other revenues, primarily royalties, are immaterial to our overall results. Payment is typically due within 30-60 days of shipment for customers qualifying for payment terms. Collectability is reasonably assured since we extend credit to customers for whom we have performed credit evaluations and/or from whom we have received a down payment or deposit. Due to the highly-customized nature of our hospitality products, we typically require substantial prepayments on these orders, with the balance due within 30 days of delivery.

Cost of Sales

The major components of cost of sales are:

§ ■

the cost of imported products purchased for resale;

§ ■

raw materials and supplies used in our domestically manufactured products;

§ ■

labor and overhead costs associated with our domestically manufactured products;

§ ■

the cost of our foreign import operations;

§ ■

charges associated with our inventory reserves;

§ ■

warehousing and certain shipping and handling costs; and

§ ■

all other costs required to be classified as cost of sales.

Selling and Administrative Expenses

The major components of our selling and administrative expenses are:

§ ■

the cost of our marketing and merchandising efforts, including showroom expenses;

§ ■

sales and design commissions;

§ ■

the costs of administrative support functions including, executive management, information technology, human resources and finance; and

§ ■

all other costs required to be classified as selling and administrative expenses.

Advertising

We offer advertising programs to qualified dealers under which we may provide signage, catalogs and other marketing support to our dealers and may reimburse some advertising and other costs incurred by our dealers in connection with promoting our products. The cost of these programs does not exceed the fair value of the benefit received. We charge the cost of point-of-purchase materials (including signage, catalogs, and catalogs)fabric and leather swatches) to selling and administrative expense as incurred. Advertising costs charged to selling and administrative expense for fiscal years 2016, 20152020, 2019 and 20142018 were $2.3$3.4 million, $2.0$3.3 million, and $2.2$3.0 million, respectively. The costs for other advertising allowance programs are charged against net sales. We also have arrangements with some dealers to reimburse them for a portion of their advertising costs, which provides advertising benefits to us. Costs for these arrangements are expensed as incurred and are netted against revenuesnet sales in our consolidated statements of income and comprehensive income.

Income Taxes

At times, tax law and generally accepted accounting principles differ in the treatment of certain income and expense items. These items may be excluded or included in taxable income at different times than is required for GAAP or “book” reporting purposes. These differences may be permanent or temporary in nature.

We determine our annual effective income tax rate based on forecasted pre-tax book income and forecasted permanent book and tax differences. The rate is established at the beginning of the year and is evaluated on a quarterly basis.  We consider the level and mix of income of our separate legal entities, statutory tax rates, business credits available in the various jurisdictions in which we operate and permanent tax differences. Significant judgment is required in evaluating tax positions that affect the annual tax rate.   Any changes to the forecasted information may cause adjustments to the effective rate. Additional tax, interest and penalties associated with uncertain tax positions are recognized in tax expense on a quarterly basis.

To the extent any book and tax differences are temporary in nature, that is, the book realization will occur in a different period than the tax realization, a deferred tax asset or liability is established. To the extent a deferred tax asset is created, we evaluate our ability to realize this asset. If we determine that we will not be able to fully utilize deferred tax assets, we establish a valuation reserve. In assessing the realization of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is primarily dependent upon the generation of future taxable income during the periods in which those temporary differences reverse.

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Notes to Consolidated Financial Statements - Continued

(Tables in thousands, except per share data)

We early adopted Accounting Standards Update No. 2015-17 (ASU 2015-17), Balance Sheet Classification of Deferred Taxes in the fourth quarter of fiscal 2016 and have applied retrospective treatment of the standard. Consequently, all All deferred tax assets and liabilities are classified as non-current on our consolidated balance sheets We feel the classificationsheets.

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Table of all deferred tax assets and liabilities as noncurrent provides a more informative disclosure because many of our deferred tax items are by definition short-term, however are of a recurring nature and tend to behave more like non-current assets or liabilities. The retrospective reclassification results in a reduction in current assets of $1.7 million and an increase in non-current assets of the same amount for the period ended February 1, 2015.Contents

Earnings Per Share

We use the two classtwo-class method to compute basic earnings per share.  Under this method we allocate earnings to common shares and participating securities according to their participation rights in dividends declared and undistributed earnings and divide the income available to each class by the weighted average number of common shares for the period in each class.  Unvested restricted stock grants made to our non-employee directors and certain employees are considered participating securities because the shares have the right to receive non-forfeitable dividends.  Because the participating shares have no obligation to share in net losses, we do not allocate losses to our common shares in this calculation. 

Diluted earnings per share reflect the potential dilutive effect of securities that could share in our earnings.  Restricted stock awarded to non-employee directors and certain employees and restricted stock units granted to employees that have not yet vested are considered when computing diluted earnings per share.  We use the treasury stock method to determine the dilutive effect of both unvested restricted stock and unvested restricted stock units. Shares of unvested restricted stock and unvested restricted stock units under a stock-based compensation arrangement are considered options for purposes of computing diluted earnings per share and are considered outstanding shares as of the grant date for purposes of computing diluted earnings per share even though their exercise may be contingent upon vesting. Those stock-based awards are included in the diluted earnings per share computation even if the non-employee director may be required to forfeit the stock at some future date, or no shares may ever be issued to the employees. Unvested restricted stock and unvested restricted stock units are not included in outstanding common shares in computing basic earnings per share. 

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of: (i) assets and liabilities, including disclosures regarding contingent assets and liabilities at the dates of the financial statements; and (ii) revenue and expenses during the reported periods. Significant items subject to such estimates and assumptions include the useful lives of fixed and intangible assets; allowance for doubtful accounts; deferred tax assets; the valuation of fixed assets;assets and goodwill; our pension and supplemental retirement income plan;plans; and stock-based compensation. These estimates and assumptions are based on our best judgments. We evaluate these estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which we believe to be reasonable under the circumstances. We adjust our estimates and assumptions as facts and circumstances dictate. Actual results could differ from our estimates.

NOTE 2- 3 – FISCAL YEAR

Our fiscal years end on the Sunday closest to January 31. In some years, generally once every six years, the fourth quarter will be fourteen weeks long and the fiscal year will consist of fifty-three weeks. For example, the 2013The 2019 fiscal year that ended on February 3, 20132019 was a 53-week fiscal year. Our quarterly periods are based on thirteen-week “reporting periods,” which end on Sundays. As a result, each quarterly period generally will be thirteen weeks, or 91 days long, except as noted above.

during a 53-week fiscal year which will have 14 weeks in the fourth quarter.

In the notes to the consolidated financial statements, references to the:

§ ■

2016 fiscal year and comparable terminology mean the fiscal year that began February 2, 2015 and ended January 31, 2016;

§

2015 fiscal year and comparable terminology mean the fiscal year that began February 3, 2014 and ended February 1, 2015; and

§

2014 2020 fiscal year and comparable terminology mean the fiscal year that began February 4, 20132019 and ended February 2, 2014.2020;

■

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

■

2018 fiscal year and comparable terminology mean the fiscal year that began January 30, 2017 and ended January 28, 2018.

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NOTE 4 –SHENANDOAH ACQUISITION

On September 29, 2017, we completed the previously announced acquisition (the “Shenandoah acquisition”) of substantially all of the assets of Shenandoah Furniture, Inc. (“SFI”) pursuant to the Asset Purchase Agreement the Company and SFI entered into on September 6, 2017 (the “Asset Purchase Agreement”). Upon completion and including post-closing working capital adjustments, the Company paid $32.8 million in cash (the “Cash Consideration”) and issued 176,018 shares of the Company’s common stock (the “Stock Consideration”) to the shareholders of SFI as consideration for the Shenandoah acquisition. The Cash Consideration included an additional payment of approximately $770,000 pursuant to working capital adjustments provided for in the Asset Purchase Agreement. The number of shares of common stock issued at closing for the Stock Consideration was determined by reference to the mean closing price of the Company’s common stock for the ten trading days immediately preceding the business day preceding the closing date ($45.45). Under the Asset Purchase Agreement, we also assumed certain assets and liabilities of SFI. The assumed liabilities did not include the indebtedness (as defined in the Asset Purchase Agreement) of SFI.

Also on September 29, 2017, we entered into a second amended and restated loan agreement (the “Loan Agreement”) with Bank of America, N.A. (“BofA”) in connection with the completion of the Shenandoah acquisition. The Loan Agreement amends and restates the amended and restated loan agreement the Company entered into with BofA on February 1, 2016, in connection with its acquisition of substantially all of the assets of Home Meridian International, Inc. The Amended and Restated Loan Agreement provides us with a new $12 million unsecured term loan (the “New Unsecured Term Loan”). On September 29, 2017, we borrowed the full $12 million available under the New Unsecured Term Loan in connection with the completion of the Shenandoah acquisition. For additional details regarding the Loan Agreement, see Note 13. “Long-Term Debt,” below.

In accordance with FASB Accounting Standards Codification Topic 805, “Business Combinations” (“ASC 805”), the Shenandoah acquisition has been accounted for using the acquisition method of accounting. We recorded assets acquired, including identifiable intangible assets, and liabilities assumed, from SFI at their respective fair values at the date of completion of the acquisition.  The excess of the purchase price over the net fair value of such assets and liabilities was recorded as goodwill.

The following table summarizes the estimates of the fair values of the identifiable assets acquired and liabilities assumed in the Shenandoah acquisition as of September 29, 2017.

Purchase price consideration
Cash paid for assets acquired, including working capital adjustment		$	32,773
Value of shares issued for assets acquired			8,000
Fair value adjustment to shares issued for assets acquired*			396
Total purchase price		$	41,169
Fair value estimates of assets acquired and liabilities assumed
Accounts receivable		$	3,576
Inventory			2,380
Prepaid expenses and other current assets			52
Property and equipment			5,401
Intangible assets			14,300
Goodwill			16,871
Accounts payable			(699	)
Accrued expenses			(712	)
Total purchase price		$	41,169

*As provided by the Asset Purchase Agreement, we calculated the number of common shares issued to SFI by dividing $8 million by the mean closing price of our common stock for the ten trading days immediately preceding the business day immediately preceding the closing date ($45.45). However, U.S. Generally Accepted Accounting Standards provide that we value stock consideration exchanged in the Shenandoah acquisition at fair value. Consequently, we adjusted the purchase price by $396,000, which represents the difference in the mean closing price of the Company’s common stock for the ten trading days immediately preceding the business day preceding the closing date ($45.45) and the price on September 29, 2017, multiplied by the number of common shares issued (176,018.) No additional consideration was transferred to SFI as a result of this adjustment.

Notes

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During the fiscal 2018 fourth quarter, we paid $123,000 cash for the post-closing working capital adjustment which increased the purchase price by that same amount. Additionally, we (i) refined our estimates of the values of certain intangible assets which increased intangible assets by $1.1 million, (ii) recorded additional accrued expenses of $123,000 and (iii) decreased property and equipment by $17,000. These adjustments decreased goodwill by $774,000.

Property and equipment were recorded at fair value and primarily consist of machinery and equipment and leasehold improvements. Property and equipment will be amortized over their estimated useful lives and leasehold improvements will be amortized over the lesser of their useful lives or the remaining lease period.

Goodwill is calculated as the excess of the purchase price over the fair value net assets acquired. The goodwill recognized is attributable to Consolidated Financial Statements - Continued

(Tablesgrowth opportunities and expected synergies. All goodwill is expected to be deductible for income tax purposes.

Intangible assets other than goodwill, consist of three separately identified assets:

■

Shenandoah customer relationships, which are definite-lived intangible assets with an aggregate fair value of $13.2 million. The customer relationships are amortizable and will be amortized over a period of thirteen years;

■

The Shenandoah tradename, which is definite-lived intangible assets with an aggregate fair value of $700,000. The trade name is amortizable and will be amortized over a period of twenty years; and

■

Shenandoah’s order backlog which is a definite-lived intangible asset with an aggregate fair value of $400,000 that we amortized over four months, with all of the expense recognized in fiscal year 2018.

The total weighted average amortization period for these assets is 12.1 years.

The following unaudited consolidated pro forma summary has been prepared by adjusting our historical data to give effect to the Shenandoah acquisition as if it had occurred on February 1, 2016:

		Pro Forma - Unaudited
		13 Weeks Ended				52 Weeks Ended
		January 28, 2018				January 28, 2018
		(Pro forma)				(Pro forma)
Net Sales		$	175,365			$	649,936
Net Income		$	8,775			$	32,977
Basic EPS		$	0.75			$	2.82
Diluted EPS		$	0.75			$	2.81

The unaudited consolidated pro forma financial information was prepared in thousands, except per share data)accordance with existing standards and is not necessarily indicative of the results of operations that would have occurred if the Shenandoah acquisition had been completed on the date indicated, nor is it indicative of our future operating results.

Material adjustments, net of income tax,  included in the fiscal 2017 pro forma financial information in the table above consist of the amortization of intangible assets ($171,000 in the quarterly period and $943,000 in the annual period), addition of transaction related costs ($0 in the quarterly period and $520,000 in the annual period), interest on additional debt incurred as part of the acquisition ($46,000 in the quarterly period and $197,000 in the annual period), salary expense ($46,000 in the quarterly period and $185,000 in the annual period), and income tax on Shenandoah operations ($536,000 in the quarterly period and $2.4 million in the annual period).

Material adjustments, net of income tax, included in the fiscal 2018 pro forma financial information in the table above consist of the amortization of intangible assets (decrease of $132,000 in the quarterly period and a net increase of $191,000 in the annual period), reclassification of transaction related costs to fiscal 2017 (-$67,000 in the quarterly period and -$522,000 in the annual period), interest on additional debt incurred as part of the acquisition (-$13,000 in the quarterly period and $61,000 in the annual period), salaries ($0 in the quarterly period and $123,000 in the annual period), and income tax on Shenandoah operations ($0 in the quarterly period and $2.4 million in the annual period).

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The unaudited pro forma results do not reflect events that either have occurred or may occur in the future. They also do not give effect to certain charges that we expect to incur in connection with the Shenandoah acquisition, including, but not limited to, additional professional fees, employee integration, retention, potential asset impairments and accelerated depreciation and amortization.

We incurred approximately $800,000 in Shenandoah acquisition-related costs in fiscal 2018. These expenses are included in the “Selling and administrative expenses” line of our condensed consolidated statements of income. Included in our fiscal 2018 results are Shenandoah’s October 2017 through January 2018 results, which include $11.3 million in net sales and $604,000 of operating income, including $750,000 in intangible amortization expense.

NOTE 35 – ALLOWANCE FOR Casualty Loss

On May 18, 2018, the Martinsville/Henry County, Va. area experienced torrential rains. Two of our Hooker Brands segment warehouse facilities were damaged as a result. No employees were injured, and the casualty loss caused only a nominal disruption in our ability to fulfill and ship orders. The costs associated with the recovery efforts exceeded our insurance deductible of $500,000. Consequently, we recorded a $500,000 casualty loss during the fiscal 2019 second quarter. We incurred another $409,000 of repair and remediation-related expenses during the third quarter, which was recovered from our casualty insurer during the fourth quarter of fiscal 2019.

NOTE 6 – DOUBTFUL ACCOUNTS

AND OTHER ACCOUNTS RECEIVABLE ALLOWANCES

The activity in the allowance for doubtful accounts was:

		Fifty-Two				Fifty-Two				Fifty-Two
		Weeks Ended				Weeks Ended				Weeks Ended
		January 31,				February 1,				February 2,
		2016				2015				2014
Balance at beginning of year		$	1,329			$	1,243			$	1,249
Non-cash charges to cost and expenses			(105	)			928				456
Less uncollectible receivables written off, net of recoveries			(192	)			(842	)			(462	)
Balance at end of year		$	1,032			$	1,329			$	1,243

		Fifty-Two				Fifty-Three				Fifty-Two
		Weeks Ended				Weeks Ended				Weeks Ended
		February 2,				February 3,				January 28,
		2020				2019				2018
Balance at beginning of year		$	908			$	1,014			$	508
Non-cash charges to cost and expenses			417				158				767
Less uncollectible receivables written off, net of recoveries			(422	)			(264	)			(261	)
Balance at end of year		$	903			$	908			$	1,014

The activity in other accounts receivable allowances was:

		Fifty-Two				Fifty-Three				Fifty-Two
		Weeks Ended				Weeks Ended				Weeks Ended
		February 2,				February 3,				January 28,
		2020				2019				2018
Balance at beginning of year		$	4,267			$	5,117			$	6,298
Charges to cost and expenses			31,815				41,606	)			30,447	)
Less uncollectible receivables written off, net of recoveries			(32,589	)			(42,456	)			(31,628	)
Balance at end of year		$	3,493			$	4,267			$	5,117

NOTE 47 – ACCOUNTS RECEIVABLE

		January 31,				February 1,
		2016				2015
Trade accounts receivable		$	25,520			$	25,322
Receivable from factor			3,688				8,252
Allowance for doubtful accounts			(1,032	)			(1,329	)
Accounts receivable		$	28,176			$	32,245

		February 2,				February 3,
		2020				2019
Trade accounts receivable		$	91,261			$	117,732
Receivable from factor			788				-
Other accounts receivable allowances			(3,493	)			(4,267	)
Allowance for doubtful accounts			(903	)			(908	)
Accounts receivable		$	87,653			$	112,557

“Receivable from factor” representsrepresented amounts due with respect to factored accounts receivable. Before the fiscal 2016 second quarter, we factored substantially all of our domestically-produced upholstery accounts receivable without recourse to us. However, we ended Sam Moore’s factoring relationship when our ERP system became fully operational there at the beginning of the fiscal 2016 second quarter. Since that time, we have been managing Sam Moore’s accounts receivable in-house.  As of November 1, 2015 there were no outstanding receivables for which payment was due to us from the factor as part of its residual obligations under Sam Moore’s legacy factoring agreement.

Under our current factoring agreement, which continues to serve Bradington-Young (BY), invoices for domestically produced BY upholstery products are generated and transmitted to our customers, with copies to the factor on a daily basis, as products are shipped to our customers. The factor collects the amounts due and remits collected funds to us semi-weekly, less factoring fees. We retain ownership of the accounts receivable until the invoices are 90 days past due. At that time, the factor pays us the net invoice amount, less factoring fees, and takes ownership of the accounts receivable. The factor is then entitled to collect the invoices on its own behalf and retain any subsequent remittances. The invoiced amounts are reported as accounts receivable on our condensed consolidated balance sheets, generally from the date the merchandise is shipped to our customer until payment is received from the factor.

A limited number of our accounts receivable for our domestically produced BY upholstery products are factored with recourse to us.a single customer. The amountsagreement was discontinued in early fiscal 2021.

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Table of these receivables at January 31, 2016 and February 1, 2015 were $255,000 and $237,000, respectively. If the factor is unable to collect the amounts due, invoices are returned to us for collection. We include an estimate of potentially uncollectible receivables in the calculation of our allowance for doubtful accounts.Contents

NOTE 58 – INVENTORIES

		January 31,				February 1,
		2016				2015
Finished furniture		$	55,120			$	54,896
Furniture in process			727				615
Materials and supplies			7,994				9,131
Inventories at FIFO			63,841				64,642
Reduction to LIFO basis			(20,128	)			(19,669	)
Inventories		$	43,713			$	44,973

		February 2,				February 3,
		2020				2019
Finished furniture		$	106,495			$	112,847
Furniture in process			1,304				1,825
Materials and supplies			8,479				10,896
Inventories at FIFO			116,278				125,568
Reduction to LIFO basis			(23,465	)			(20,364	)
Inventories		$	92,813			$	105,204

If the first-in, first-out (FIFO) method had been used in valuing all inventories, net income would have been $16.5$19.5 million in fiscal 2016, $13.42020, $41.5 million in fiscal 20152019, and $8.2$28.1 million in fiscal 2014.2018. We recorded total LIFO expense of $499,000 in fiscal 2016, $1.3$3.1 million in fiscal 2015 and $493,0002020, $2.1 million in fiscal 2014. The reduction2019, and LIFO income of $225,000 in LIFO basis as offiscal 2018.

At February 2, 20142020 and February 3, 2013 was $18.4 million and $17.9 million, respectively.

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Notes to Consolidated Financial Statements - Continued

(Tables in thousands, except per share data)

At January 31, 2016 and February 1, 2015,2019, we had approximately$424,000 and $1.3 million and $1.1 million, respectively, in consigned inventories, which are included in the “Finished furniture” line in the table above.

At January 31, 2016,February 2, 2020, we held $11.0$9.6 million in inventory (approximately 6% of total assets) outside of the United States, in China and in Vietnam. At February 1, 2015,3, 2019, we held $10.2$8.1 million in inventory (approximately 6% of total assets) outside of the United States, in China and in Vietnam.

NOTE 69 – PROPERTY, PLANT AND EQUIPMENT

		Depreciable Lives			February 2,				February 3,
		(In years)			2020				2019
Buildings and land improvements		15 - 30			$	31,316			$	24,588
Computer software and hardware		3 - 10				19,166				18,719
Machinery and equipment		10				9,271				8,934
Leasehold improvements		Term of lease				9,737				9,376
Furniture and fixtures		3 - 8				2,597				2,318
Other		5				651				665
Total depreciable property at cost						72,738				64,600
Less accumulated depreciation						44,089				39,925
Total depreciable property, net						28,649				24,675
Land						1,077				1,067
Construction-in-progress						181				3,740
Property, plant and equipment, net					$	29,907			$	29,482

Depreciation expense for fiscal 2020, 2019 and 2018 were $4.7 million, $5.0 million and $4.5 million, respectively.

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		Depreciable Lives			January 31,				February 1,
		(In years)			2016				2015
Buildings and land improvements		15 - 30			$	22,777			$	22,162
Computer software and hardware		3 - 10				16,137				18,444
Machinery and equipment		10				4,864				4,757
Leasehold improvements		Term of lease				2,817				2,840
Furniture and fixtures		3 - 8				1,453				2,240
Other		5				546				628
Total depreciable property at cost						48,594				51,070
Less accumulated depreciation						27,739				32,790
Total depreciable property, net						20,855				18,280
Land						1,067				1,067
Construction-in-progress						846				3,477
Property, plant and equipment, net					$	22,768			$	22,824

The decreases in computer software and hardware, furniture and fixtures and accumulated depreciation line items above are primarily due to the write-offTable of fully depreciated assets that are no longer in use.Contents

At January 31, 2016, construction-in-progress consisted of approximately $294,000 of expenditures related to our ongoing Enterprise Resource Planning (ERP) conversion efforts and approximately $552,000 related to various other projects to enhance our facilities and operations.

The decrease in the construction-in-progress line item above is primarily due to placing our ERP asset in service when the Sam Moore division went-live on our ERP platform during the fiscal 2016 second quarter. This partially offset the decreases in the computer software and hardware line item discussed above.

No significant property, plant or equipment was held outside of the United States at either January 31, 2016 or February 1, 2015.

Capitalized Software Costs

Certain costs incurred in connection with developing or obtaining computer software for internal use are capitalized. These costs are amortized over periods of ten years or less. Capitalized software is reported as a component of computer software and hardware above and on the property, plant, and equipment line of our consolidated balance sheets. The activity in capitalized software costs was:

		Fifty-Two Weeks				Fifty-Two Weeks				Fifty-Two Weeks
		Ended				Ended				Ended
		January 31,				February 1,				February 2,
		2016				2015				2014
Balance beginning of year		$	2,726			$	2,550			$	3,954
Purchases			4,113				606				173
Amortization expense			(777	)			(430	)			(311	)
Disposals			-				-				(1,266	)
Balance end of year		$	6,062			$	2,726			$	2,550

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Notes to Consolidated Financial Statements - Continued

(Tables in thousands, except per share data)

		Fifty-Two Weeks				Fifty-Three Weeks				Fifty-Two Weeks
		Ended				Ended				Ended
		February 2,				February 3,				January 28,
		2020				2019				2018
Balance beginning of year		$	5,123			$	5,982			$	6,510
Additions			286				373				630
Amortization expense			(1,132	)			(1,227	)			(1,151	)
Disposals			-				(5	)			(7	)
Balance end of year		$	4,277			$	5,123			$	5,982

NOTE 710 – INTANGIBLE ASSETS

				January 31,				February 1,
		Segment		2016				2015
Non-amortizable Intangible Assets
Trademarks and trade names - Bradington-Young		Upholstery		$	861			$	861
Trademarks and trade names - Sam Moore		Upholstery			396				396
URL- Homeware.com		All other			125				125
Total Non-amortizable Intangible Assets					1,382				1,382

We recorded certain intangible assets related to the acquisitions of Bradington-Young and Sam Moore and upon purchase of the Homeware.com URL. The Bradington-Young and Sam Moore AND GOODWILL

Our goodwill, some trademarks and trade names have indefinite useful lives and, consequently, are not subject to amortization for financial reporting purposes but are tested for impairment annually or more frequently if events or circumstances indicate that the asset might be impaired.  See “Note 1 – Summary

Our non-amortizable intangible assets consist of:

■

Goodwill and trademarks and tradenames related to the Home Meridian and Shenandoah acquisitions; and

■

Trademarks and tradenames related to the acquisitions of Bradington-Young (acquired in 2002), Sam Moore (acquired in 2007) and Home Meridian (acquired in 2016).

We review goodwill annually for impairment or more frequently if events or circumstances indicate that it might be impaired.

In accordance with ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, the goodwill impairment test consists of Significant Accounting Policies: Intangible Assets.”

Trademarksa two-step process, if necessary. However, we first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the goodwill impairment test outlined in ASC Topic 350. The more likely than not threshold is defined as having a likelihood of more than 50 percent. If, after assessing the totality of events or circumstances, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the impairment test is unnecessary and trade namesour goodwill is considered to be unimpaired. However, if based on our qualitative assessment we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we will proceed with performing the quantitative assessment. The quantitative assessment involves estimating the fair value of our goodwill using projected future cash flows that are relateddiscounted using a weighted average cost of capital analysis that reflects current market conditions. Management judgment is a significant factor in the goodwill impairment evaluation process. The computations require management to make estimates and assumptions, the acquisitionsmost critical of Bradington-Youngwhich are the potential future cash flows and Sam Moore. an appropriate discount rate. In addition to our qualitative assessment, management performed a quantitative analysis on the Home Meridian reporting unit’s goodwill in the fiscal 2020 fourth quarter. Based on our qualitative assessment and quantitative analysis, we have concluded that our goodwill is not impaired as of February 2, 2020.

In conjunction with our evaluation of the cash flows generated by the Home Meridian, Bradington-Young and Sam Moore reporting units, we evaluated the carrying value of trademarks and trade names using the relief from royalty method, which values the trademark/trade name by estimating the savings achieved by ownership of the trademark/trade name when compared to licensing the mark/name from an independent owner. The inputs used in the trademark/trade name analyses are considered Level 3 fair value measurements.

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At January 31, 2016, the fair value

Details of our Bradington-Young trade name exceeded itsnon-amortizable intangible assets are as follows:

			February 2,				February 3,
Non-amortizable Intangible Assets	Segment		2020				2019
Goodwill	Home Meridian		$	23,187			$	23,187
Goodwill	Domestic Upholstery			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	Domestic Upholstery			861				861
Trademarks and trade names - Sam Moore	Domestic Upholstery			396				396
Total Trademarks and trade names			$	12,657			$	12,657
Total non-amortizable assets			$	52,715			$	52,715

The following table is a rollforward of goodwill for the 2020 and 2019 fiscal years:

Segment		February 2, 2020				February 3, 2019
Home Meridian		$	23,187			$	23,187
Domestic Upholstery			16,871				16,871
		$	40,058			$	40,058

Our amortizable intangible assets are recorded in the Home Meridian and in Domestic Upholstery segments. The carrying value by approximately $1.4 million,amounts and the fair valuechanges 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			(2,324	)			(60	)			(2,384	)
Balance at February 2, 2020		$	19,996			$	718			$	20,714

The weighted-average amortization period for all amortizable intangible assets is 9.2 years. The weighted-average amortization period for customer relationships is 9.0 years and is 15.8 years for our Sam Moore trade name was approximately $637,000 in excesstrademarks.

The estimated amortization expense associated with our amortizable intangible assets is expected to be as follows:

Fiscal Year		Amount
2021		2,384
2022		2,384
2023		2,384
2024		2,384
2025		2,359
2026 and thereafter		8,819
		$ 20,714

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Table of its carrying value.Contents

Gross intangible assets and total accumulated amortization for each major class of intangible assets is as follows:

		February 2, 2020				February 3, 2019
Goodwill		$	40,058			$	40,058
Trademarks and tradenames			13,435				13,495
Accumulated amortization			(60	)			(60	)
Trademarks and tradenames, net			13,375				13,435
Customer relationships			22,320				24,644
Accumulated amortization			(2,324	)			(2,324	)
Customer relationships, net			19,996				22,320
Total Goodwill and other intangible assets, net		$	73,429			$	75,813

NOTE 811 – FAIR VALUE MEASUREMENTS

Fair value is the price that would be received upon the sale of an asset or paid upon the transfer of a liability (an exit price) in an orderly transaction between market participants on the applicable measurement date. We use a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

Level 1, defined as observable inputs such as quoted prices in active markets for identical assets and liabilities;

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and

Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of January 31, 2016February 2, 2020, and February 1, 2015,3, 2019, 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.

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Table

On January 30, 2019, our Board of Contents

NotesDirectors voted to Consolidated Financial Statements - Continued

(Tables in thousands, except per share data)

As of January 31, 2016, a mortgage note receivable, secured by a lien onterminate the property, was measured at fair value on a non-recurring basis using Level 3 inputs. The note receivable was delivered to us by the buyer as part of the purchase price for our Cloverleaf facilityPension Plan. We settled all Pension Plan obligations during the fiscal 2015 first2020 third quarter and was recorded at approximately $1.6 million, the original face value of the note. The carrying value of the note is assumed to approximate its fair value. We measure the probability that amounts due to us under this note will be collected primarily based on the buyer’s payment history. Specifically, we consider the buyer’s adherence to the contractual payment terms for both timeliness and payment amounts. Should it become probable that we would be unable to collect all amounts due according to the contractual terms of the note, we would measure the note for impairment and record a valuation allowance against the note, if needed, with the related expense charged to incomepurchase of annuities for that period.  The current portion ofplan participants. See Note 14. Employee Benefit Plans for additional information about the note receivable is included in the prepaid expenses and other current assets line of our condensed consolidated balance sheets. The non-current portion is included in the “Other Assets” line of our condensed consolidated balance sheets.

Plan.

Our assets measured at fair value on a recurring and non-recurring basis at January 31, 2016February 2, 2020 and February 1, 2015,3, 2019, were as follows

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

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NOTE 12 – LEASES

On February 4, 2019, 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, showrooms 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 and are not included in the calculation of our lease liabilities.

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 $405,000 sub-lease income in fiscal 2020.

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.

The components of lease cost and supplemental cash flow information for leases in fiscal 2020 were:

		Fifty-two Weeks Ended
		February 2, 2020
Operating lease cost		$	8,408
Variable lease cost			153
Short-term lease cost			581
Total operating lease cost		$	9,142
Operating cash outflows		$	8,725

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The right-of-use assets and lease liabilities recorded on our Condensed Consolidated Balance Sheets as of February 2, 2020 were:

		February 2, 2020
Real estate		$	38,175
Property and equipment			1,337
Total operating leases right-of-use assets		$	39,512
Current portion of operating lease liabilities		$	6,307
Long term operating lease liabilities			33,794
Total operating lease liabilities		$	40,101

Weighted-average remaining lease term is 7.4 years. We used our incremental borrowing rate which is LIBOR plus 1.5% at the adoption date. The weighted-average discount rate is 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 February 2, 2020:

		Undiscounted Future Operating Lease Payments
2020		$	7,805
2021			7,182
2022			5,588
2023			5,329
2024			5,280
2025 and thereafter			15,205
Total lease payments		$	46,389
Less: impact of discounting			(6,288	)
Present value of lease payments		$	40,101

As of February 2, 2020, we did not have any additional material operating or finance leases that had not yet commenced.

Under ASC 840, future minimum lease payments as of February 3, 2019 were as follows:

		Minimum Future Operating Lease Payments
2019		$	7,778
2020			7,226
2021			5,320
2022			3,610
2023			2,412
2024 and thereafter			588
Total minimum lease payments		$	26,934

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		Fair value at January 31, 2016																Fair value at February 1, 2015
Description		Level 1				Level 2				Level 3				Total				Level 1				Level 2				Level 3				Total
		(In thousands)
Assets measured at fair value
Company-owned life insurance		$	-			$	21,888			$				$	21,888			$	-			$	20,373			$	-			$	20,373
Mortgage note receivable			-								1,575				1,575				-				-				1,575				1,575

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NOTE 9 13– LONG-TERM DEBT

Subsequent

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 endHome Meridian acquisition. Details of our loan agreements and revolving credit facility are detailed below.

Original Loan Agreement

On February 1, 2016, fiscal year, we completed the acquisition of substantially all of the assets of Home Meridian International, Inc. and entered into an amended and restated loan agreement with Bank of America. See Item 7 and note 18 to our consolidated financial statements for additional information.

Our 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 of January 31, 2016, which was scheduled to expire on July 31, 2018, included the following terms:

follows:

§ ■

A $15.0 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;

■

Unsecured Term Loan. The Original Loan Agreement provided us with a $41 million Unsecured Term Loan. Any amount borrowed under the Unsecured Term Loan will bear 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 amounts borrowed under the Secured Term Loan will bear 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.

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:

■

amended and restated the Original Loan Agreement detailed above such that our existing $30 million unsecured revolving credit facility up to $3.0 million of which could have been used to support letters of credit;(the “Existing Revolver”), Unsecured Term Loan, and Secured Term Loan all remain outstanding under the New Loan Agreement; and

§ ■

A floating interest rate, adjusted monthly, based on USD LIBOR, plus an applicable margin based on the ratio of our funded debt to our EBITDA (each as defined provided us with a new $12 million unsecured term loan (the “New Unsecured Term Loan”), which we subsequently paid off in the agreement);full in fiscal 2019.

§

A quarterly unused commitment fee of 0.20%; and

§

No pre-payment penalty.

The Company could have permanently terminated or reduced the $15 million revolving commitment under the loan agreement without penalty. The loan agreementNew Loan Agreement also included customary representations and warranties and requiredrequires us to comply with customary covenants, including, among other things, the following financial covenants:

§ ●

Maintain a tangible net worthratio of funded debt to EBITDA not exceeding:

o

2.00:1.00;

●

A basic fixed charge coverage ratio of at least $95.0 million;1.25:1.00; and

§ ●

Limit capital expenditures to no more than $15.0 million during any fiscal year; andyear 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.

§

Maintain a ratio of funded debt to EBITDA not exceeding 2.0:1.0.

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We were in compliance with each of these financial covenants at January 31, 2016 and, asFebruary 2, 2020.

The full remaining principal amounts of that date,$30.1 million on our term loans are due on February 1, 2021. We expect to remain in compliance with existing covenants throughrefinance the balance of our term loans and any balance due under our revolving credit facility (currently $0) during fiscal 20172021.

Given that our term loans have a floating rate of interest and forour credit profile has not materially changed since the foreseeable future. The loan agreement did not restrictinception of the loans, the carrying amount of our ability to pay cash dividends on, or repurchase our common shares, subject to complying with the financial covenants under the agreement.

term loans approximates their fair value at February 2, 2020. 

As of January 31, 2016,February 2, 2020, we had an aggregate $13.3$25.7 million available under our revolving credit facilitythe Existing Revolver to fund working capital needs. Standby letters of credit in the aggregate amount of $1.7$4.3 million, used to collateralize certain insurance arrangements and for imported product purchases, were outstanding under the revolving credit facility as of January 31, 2016.February 2, 2020. There were no additional borrowings outstanding under the revolving credit facility on January 31, 2016.

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TableExisting Revolver as of Contents

Notes to Consolidated Financial Statements - Continued

(Tables in thousands, except per share data)

February 2, 2020.

NOTE 1014 – EMPLOYEE BENEFIT PLANS

Employee Savings Plans

We sponsor a tax-qualified 401(k) retirement plan covering substantially all employees. This plan assists employees in meeting their savings and retirement planning goals through employee salary deferrals and discretionary employer matching contributions. Our contributions to the plan amounted to $666,000$1.4 million in fiscal 2016, $605,0002020, $1.3 million in fiscal 2015,2019 and $593,000$974,000 in fiscal 2014.

2018.

We adopted ASU 2017-07 as of the beginning of our 2019 fiscal year on January 29, 2018. Components of net periodic benefit cost other than the service cost for the SRIP, SERP and the Pension Plan are included in the line item “Other income, net” in our condensed consolidated statements of income. Service cost is included in our condensed consolidated statements of income under “Selling and administrative expenses.” The adoption resulted in the reclassification of a $30,000 gain from Selling and administrative expenses to Other income, net in fiscal 2018 consolidated statements of income.

Executive Benefits

Pension, SRIP and SERP Overview

We provide supplemental executivemaintain two “frozen” retirement plans, which are paying benefits and may include active employees among the participants but we do not expect to certain management employees under add participants to these plans in the future. The two plans include:

■

a supplemental retirement income plan (“SRIP”) for certain former and current executives of Hooker Furniture Corporation; and

■

the Pulaski Furniture Corporation Supplemental Executive Retirement Plan (“SERP”) for certain former executives.

In January 2019, we terminated the Pulaski Furniture Corporation Pension Plan (“SRIP”Pension Plan”).   settled all the obligations in fiscal 2020 which was also frozen and had been frozen since we acquired it in the Home Meridian acquisition.

SRIP and SERP

The SRIP provides monthly payments to participants or their designated beneficiaries based on a participant’s “final average monthly earnings” and “specified percentage” participation level as defined in the plan, subject to a vesting schedule that may vary for each participant. The benefit is payable for a 15-year period following the participant’s termination of employment due to retirement, disability or death. In addition, the monthly retirement benefit for each participant, regardless of age, becomes fully vested and the present value of that benefit is paid to each participant in a lump sum upon a change in control of the Company as defined in the plan. The SRIP is unfunded and all benefits are payable solely from our general assets. The plan liability is based on the aggregate actuarial present value of the vested benefits to which participating employees are currently entitled but based on the employees’ expected dates of separation or retirement. No employees have been added to the plan since 2008 and we do not expect to add additional employees in the future, due to changes in our compensation philosophy, which emphasizes more performance-based compensation measures in total management compensation.

The SERP provides monthly payments to eight retirees or their designated beneficiaries based on a defined benefit formula as defined in the plan.  The benefit is payable for the life of the retiree with the following forms available as a reduced monthly benefit: Ten-year Certain and Life; 50% or 100% Joint and Survivor Annuity. The SERP is unfunded and all benefits are payable solely from our general assets. The plan liability is based on the aggregate actuarial present value of the benefits to which retired employees are currently entitled. No employees have been added to the plan since 2006 and we do not expect to add additional employees in the future.

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Summarized planSRIP and SERP information as of each fiscal year-end (the measurement date) is as follows:

		SRIP (Supplemental Retirement Income Plan)
		Fifty-Two				Fifty-Three
		Weeks Ended				Weeks Ended
		February 2,				February 3,
		2020				2019
Change in benefit obligation:
Beginning projected benefit obligation		$	9,622			$	9,365
Service cost			104				326
Interest cost			351				341
Benefits paid			(537	)			(511	)
Actuarial loss			716				101
Ending projected benefit obligation (funded status)		$	10,256			$	9,622
Accumulated benefit obligation		$	10,131			$	9,182
Discount rate used to value the ending benefit obligations:			2.50	%			3.75	%
Amount recognized in the consolidated balance sheets:
Current liabilities (Accrued salaries, wages and benefits line)		$	557			$	511
Non-current liabilities (Deferred compensation line)			9,699				9,111
Total		$	10,256			$	9,622

		Fifty-Two				Fifty-Three				Fifty-Two
		Weeks Ended				Weeks Ended				Weeks Ended
		February 2,				February 3,				January 28,
		2020				2019				2018
Net periodic benefit cost
Service cost		$	104			$	326			$	302
Interest cost			351				341				345
Net loss			149				172				62
Net periodic benefit cost		$	604			$	839			$	709
Other changes recognized in accumulated other comprehensive income
Net loss arising during period			716				101				393
Amortizations:
Loss			(149	)			(172	)			(62	)
Total recognized in other comprehensive loss (income)			567				(71	)			331
Total recognized in net periodic benefit cost and
accumulated other comprehensive income		$	1,171			$	768			$	1,040
Assumptions used to determine net periodic benefit cost:
Discount rate			3.75	%			3.75	%			4.00	%
Increase in future compensation levels			4.00	%			4.00	%			4.00	%

Estimated Future Benefit Payments:
Fiscal 2021		$	556
Fiscal 2022			868
Fiscal 2023			868
Fiscal 2024			955
Fiscal 2025			955
Fiscal 2026 through fiscal 2030			4,202

		Fifty-Two				Fifty-Two
		Weeks Ended				Weeks Ended
		January 31,				February 1,
		2016				2015
Change in benefit obligation:
Beginning projected benefit obligation		$	8,385			$	7,662
Service cost			406				102
Interest cost			289				339
Benefits paid			(354	)			(354	)
Actuarial (gain) loss			(573	)			636
Ending projected benefit obligation (funded status)		$	8,153			$	8,385
Accumulated benefit obligation		$	7,446			$	7,373
Discount rate used to value the ending benefit obligations:			4.25	%			3.5	%
Amount recognized in the consolidated balance sheets:
Current liabilities (Accrued salaries, wages and benefits line)		$	354			$	354
Non-current liabilities (Deferred compensation line*)			7,799				8,031
Total		$	8,153			$	8,385

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Notes to Consolidated Financial Statements - Continued

(Tables in thousands, except per share data)

*Total Deferred Compensation in the Long-Term Liabilities section of our Consolidated Balance Sheets is $8.4 million at January 31, 2016 and $8.3 million at February 1, 2015. These totals include the SRIP amounts shown in the table above, as well as additional long-term compensation-related items unrelated to our SRIP.

		Fifty-Two				Fifty-Two				Fifty-Two
		Weeks Ended				Weeks Ended				Weeks Ended
		January 31,				February 1,				February 2,
		2016				2015				2014
Net periodic benefit cost
Service cost		$	406			$	102			$	256
Interest cost			289				339				292
Net  loss (gain)			178				(51	)			(106	)
Net periodic benefit cost		$	873			$	390			$	442
Other changes recognized in accumulated other comprehensive income
Net (gain) loss arising during period			(574	)			636				57
(Loss) gain			(178	)			51				106
Total recognized in other comprehensive  (income) loss			(752	)			687				163
Total recognized in net periodic benefit cost and       accumulated other comprehensive income		$	121			$	1,077			$	605
Assumptions used to determine net periodic benefit cost:
Discount rate (Moody's Composite Bond Rate)			3.5	%			4.5	%			4.0	%
Increase in future compensation levels			4.0	%			4.0	%			4.0	%

Estimated Future Benefit Payments:
Fiscal 2017		$	354
Fiscal 2018			530
Fiscal 2019			530
Fiscal 2020			795
Fiscal 2021			795
Fiscal 2022 through Fiscal 2026			4,376

The decrease in

For the net loss recognized in other accumulated comprehensive income was primarily due to an increase inSRIP, the discount rate from 3.5% at February 1, 2015used to 4.25% atdetermine the fiscal 2020 net periodic cost was 3.75% based on the Moody’s Composite Bond Rate as of January 31, 2016.2019. The discount rate utilized in each period was the Annualized Moody’s Composite Bond Rate rounded to the nearest 0.25%.

At February 2, 2020, combining the Mercer yield curve and the plan's expected benefit payments resulted in a rate of 2.50%. This rate was used to value the ending benefit obligations. Increasing the SRIP discount rate by 1% would decrease the projected benefit obligation at January 31, 2016February 2, 2020 by approximately $610,000.$695,000. Similarly, decreasing the discount rate by 1% would increase the projected benefit obligation at January 31, 2016February 2, 2020 by $688,000.

At January 31, 2016, the actuarial gains related to this plan amounted to $139,000, net of tax of ($79,000). $780,000.

At February 1, 2015,2, 2020, the actuarial losses related to this planthe SRIP amounted to ($335,000),$716,000, net of tax of $198,000.$149,000. At February 3, 2019, the actuarial losses related to the SRIP amounted to $101,000, net of tax of $23,000. The estimated actuarial loss that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the 2021 fiscal year is $337,633. There is no expected prior service (cost) or credit amortization.

		SERP (Supplemental Executive Retirement Plan)
		Fifty-Two				Fifty-Three
		Weeks Ended				Weeks Ended
		February 2,				February 3,
		2020				2019
Change in benefit obligation:
Beginning projected benefit obligation		$	1,805			$	2,008
Service cost			-				-
Interest cost			67				70
Benefits paid			(180	)			(185	)
Actuarial loss (gain)			168				(88	)
Ending projected benefit obligation (funded status)		$	1,860			$	1,805
Accumulated benefit obligation		$	1,860			$	1,805
Discount rate used to value the ending benefit obligations:			2.60	%			3.90	%
Amount recognized in the consolidated balance sheets:
Current liabilities (Accrued salaries, wages and benefits line)		$	172			$	173
Non-current liabilities (Deferred compensation line)			1,688				1,632
Total		$	1,860			$	1,805

F-28

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Table of Contents

		Fifty-Two				Fifty-Three				Fifty-Two
		Weeks Ended				Weeks Ended				Weeks Ended
		February 2,				February 3,				January 28,
		2020				2019				2018
Net periodic benefit cost
Service cost		$	-			$	-			$	-
Interest cost			67				70				83
Net gain			(5	)			-				-
Net periodic benefit cost		$	62			$	70			$	83
Other changes recognized in accumulated other comprehensive income
Net loss (gain) arising during period			168				(88	)			(160	)
Amortizations:
Gain (Loss)			5				-				-
Total recognized in other comprehensive loss (income)			173				(88	)			(160	)
Total recognized in net periodic benefit cost and
accumulated other comprehensive income		$	235			$	(18	)		$	(77	)
Assumptions used to determine net periodic benefit cost:
Discount rate			3.90	%			3.64	%			3.77	%
Increase in future compensation levels			N/A				N/A				N/A

Estimated Future Benefit Payments:
Fiscal 2021		$	172
Fiscal 2022			168
Fiscal 2023			163
Fiscal 2024			158
Fiscal 2025			152
Fiscal 2026 through fiscal 2030			651

For the SERP, the discount rate assumption used to measure the postretirement benefit obligations is set by reference to a certain hypothetical AA-rated corporate bond spot-rate yield curve constructed by our actuary, Aon Hewitt (“Aon”). This yield curve was constructed from the underlying bond price and yield data collected as of the Plan’s measurement date and is represented by a series of annualized, individual discount rates with durations ranging from six months to seventy-five years. Aon then applies the yield curve to the actuarially projected cash flow patterns to derive the appropriate discount rate. At February 3, 2019, the plan used 3.90% based on the Aon AA Above Median yield curve as of January 31, 2019. This rate was used to determine the fiscal 2020 net periodic cost. At February 2, 2020, combining the Aon AA Above Median yield curve and the plan's expected benefit payments created a rate of 2.60%. This rate was used to value the ending benefit obligations. Increasing the SERP discount rate by 1% would decrease the projected benefit obligation at February 2, 2020 by approximately $130,000. Similarly, decreasing the discount rate by 1% would increase the projected benefit obligation at February 2, 2020 by $148,000.

At February 2, 2020, the actuarial loss related to the SERP was $168,000. At February 3, 2019, the actuarial gain related to the SERP was $88,000. The estimated net transition (asset)/obligation, prior service (cost) credit and actuarial gain (loss)loss that will be amortized from accumulated other comprehensive income into net periodic benefit cost over fiscal 20172020 are $0 and $73,000, respectively.

We also provide a life insurance program for certain executives.  The life insurance program provides death benefit protection for these executives during employment up to age 65.  Coverage under the program declines when a participating executive attains age 60 and automatically terminates when the executive attains age 65 or terminates employment with us for any reason, other than death, whichever occurs first.  The life insurance policies funding this program are owned by the Company with a specified portion of the death benefits payable under those policies endorsed to the insured executives’ designated beneficiaries.

immaterial.

F-29

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F-19

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Table of Contents

The Pension Plan

On January 30, 2019, our Board of Directors voted to terminate the Pension Plan. We settled all Pension Plan obligations during the third quarter of fiscal 2020 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.

Summarized Pension Plan information as of February 2, 2020 (the measurement date) is as follows:

Pulaski Furniture Pension Plan
		Fifty-Two				Fifty-Three
		Weeks Ended				Weeks Ended
		February 2,				February 3,
		2020				2019
Change in benefit obligation:
Beginning projected benefit obligation		$	10,906			$	11,198
Acquisition
Service cost			-				-
Interest cost			303				415
Benefits paid			(522	)			(708	)
Settlement			(12,557	)			-
Actuarial loss			1,870				1
Ending projected benefit obligation		$	-			$	10,906
Change in Plan Assets:
Beginning fair value of plan assets		$	10,992			$	8,757
Actual return on plan assets			1,960				23
Employer contributions			344				3,110
Actual expenses paid			(217	)			(190	)
Settlement			(12,557	)			-
Actual benefits paid			(522	)			(708	)
Ending fair value of plan assets		$	-			$	10,992
Funded Status of the Plan		$	-			$	86
Discount rate used to value the ending benefit obligations:			N/A				3.80	%
Amount recognized in the consolidated balance sheets:
Current liabilities (Accrued salaries, wages and benefits line)		$	-			$	86
Non-current liabilities (Deferred compensation line)			-				-
Net Asset/(Liability)		$	-			$	86

Notes to Consolidated Financial Statements - Continued

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(Tables in thousands, except per share data)

Table of Contents

		Fifty-Two				Fifty-Three				Fifty-Two
		Weeks Ended				Weeks Ended				Weeks Ended
		February 2,				February 3,				January 28,
		2020				2019				2018
Net periodic benefit cost
Expected administrative expenses		$	105			$	280			$	280
Interest cost			303				415				695
Net gain			(305	)			(575	)			(933	)
Net periodic benefit cost		$	103			$	120			$	42
Settlement/Curtailment Income			(193	)			-				(562	)
Total net periodic benefit cost (Income)		$	(90	)		$	120			$	(520	)
Other changes recognized in other comprehensive income
Net (gain) loss arising during period			327				464				(590	)
Amortization:
Gain			193				-				562
Total recognized in other comprehensive (income) loss			520				464				(28	)
Total recognized in net periodic benefit cost and       accumulated other comprehensive income		$	430			$	584			$	(548	)
Assumptions used to determine net periodic benefit cost:
Discount rate			3.80	%			3.82	%			4.14	%
Increase in future compensation levels			N/A				N/A				N/A

Performance Grants

The Compensation Committee of our Board of Directors annually awards performance grants to certain senior executives under the Company’s Stock Incentive Plan. Payments under these awards are based on our achieving specified performance targets during a designated performance period. Generally, each executive must remain continuously employed with the Company through the end of the performance period. Typically, performance grants can be paid in cash, shares of the Company’s common stock, or both, at the discretion of the Compensation Committee at the time payment is made.

Outstanding performance grants are classified as liabilities since the (i) settlement amount for each grant is not known until after the applicable performance period is completed and (ii) settlement of the grants may be made in common stock, cash or a combination of both. The estimated cost of each grant is recorded as compensation expense over its performance period when it becomes probable that the applicable performance targets will be achieved. The expected cost of the performance grants is revalued each reporting period. As assumptions change regarding the expected achievement of performance targets, a cumulative adjustment is recorded and future compensation expense will increase or decrease based on the currently projected performance levels. If we determine that it is not probable that the minimum performance thresholds for outstanding performance grants will be met, no further compensation cost will be recognized and any previously recognized compensation cost will be reversed.

During fiscal 2013,2017, the Compensation Committee awarded performance grants for the 20142018 fiscal year. The 20142017 awards had a three-year performance period that ended on January 15, 2016.28, 2018. The performance criteria for these awards were met and were paid in April 2016.2018. During fiscal 20152018, fiscal 2019 and fiscal 2016,2020, the Compensation Committee awarded performance grants for the 2015 and 2016 fiscal years that have three-year performance periods ending on January 29, 2017February 3, 2019, February 2, 2020 and January 28, 2018.31, 2021, respectively. The following amounts were accrued in our consolidated balance sheets as of the fiscal period-end dates indicated:

		February 2,				February 3,
		2020				2019
Performance grants
Fiscal 2017 grant (Current liabilities, Accrued wages, salaries and benefits)		$	-			$	621
Fiscal 2018 grant (Current liabilities, Accrued wages, salaries and benefits)			333				468
Total performance grants accrued		$	333			$	1,089

F-31

		January 31,				February 1,
		2016				2015
Performance grants
Fiscal 2013 grant (Current liabilities, Accrued wages, salaries and benefits)		$	-			$	689
Fiscal 2014 grant (Current liabilities, Accrued wages, salaries and benefits)			619				195
Fiscal 2015 grant (Non-current liabilities, Deferred compensation)			429				86
Fiscal 2016 grant (Non-current liabilities, Deferred compensation)			129				-
Total performance grants accrued		$	1,177			$	970

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Table of Contents

NOTE 11 15– SHARE-BASED COMPENSATION

Our Stock Incentive Plan permits incentive awards of restricted stock, restricted stock units, stock appreciation rights and performance grants to key employees. A maximum of 750,000 shares of the Company’s common stock is authorized for issuance under the Stock Incentive Plan. The Stock Incentive Plan also provides for annual restricted stock awards to non-employee directors. We have issued restricted stock awards to our non-employee directors since January 2006 and certain other management employees since 2014.

We account for restricted stock awards as “non-vested equity shares” until the awards vest or are forfeited. Restricted stock awards to non-employee directors and certain other management employees vest if the director/employee remains on the board/employed through a 36-month servicethe specified vesting period for shares and may vest earlier upon certain events specified in the plan. For shares issued to non-employee directors during fiscal 2016 and after, there is a 12-month service period. The fair value of each share of restricted stock is the market price of our common shares on the grant date. The weighted average grant-date fair values of restricted stock awards issued during fiscal year 20162020 were $25.72, $26.09$29.77, $29.21 and $21.44,$19.87, during 2015fiscal 2019 were $15.96$37.83 and $13.86 per share,$46.88, during fiscal 2018 were $31.45, $41.70 and in 2014 and 2013 was $15.96 and $10.38 per share,$39.05, respectively.

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Table of Contents

Notes to Consolidated Financial Statements - Continued

(Tables in thousands, except per share data)

The restricted stock awards outstanding as of January 31, 2016February 2, 2020 had an aggregate grant-date fair value of $476,000,$1.2 million, after taking vested and forfeited restricted shares into account. As of January 31, 2016,February 2, 2020, we have recognized non-cash compensation expense of approximately $274,000$654,000 related to these non-vested awards and $626,000$1.9 million for awards that have vested. The remaining $202,000$563,000 of grant-date fair value for unvested restricted stock awards outstanding at January 31, 2016February 2, 2020 will be recognized over the remaining vesting periods for these awards.

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.

For each restricted stock issuance, the following table summarizes restricted stock activity, including the weighted average issue price of those shares on the grant date, the fair value of each grant of restricted stock on the grant date, compensation expense recognized for the unvested shares of restricted stock for each grant and the remaining fair value of the unvested shares of restricted stock for each grant as of January 31, 2016:

		Whole				Grant-Date				Aggregate				Compensation				Grant-Date Fair Value
		Number of				Fair Value				Grant-Date				Expense				Unrecognized At
		Shares				Per Share				Fair Value				Recognized				January 31, 2016
Previous Awards (vested)														$	626
Restricted shares Issued on June 7, 2013			6,876			$	15.96				110				80				10
Forfeited			(1,269	)		$	15.96				(20	)			-				-
Balance			5,607								90				80				10
Restricted shares Issued on June 4, 2014			1,624			$	13.86				23				13				10
Restricted shares Issued on June 10, 2014			8,385			$	15.96				133				61				49
Forfeited			(1,434	)		$	15.96				(23	)			-				-
Balance			6,951								110				61				49
Restricted shares Issued on April 6, 2015			5,741			$	21.44				123				34				89
Restricted shares Issued on June 9, 2015			4,302			$	26.09				112				75				37
Restricted shares Issued on July 21, 2015			694			$	25.72				18				11				7
Awards outstanding at January 31, 2016:			24,919							$	476			$	274			$	202

February 2, 2020:

		Whole Number of Shares				Grant-Date Fair Value Per Share				Aggregate Grant-Date Fair Value				Compensation Expense Recognized				Grant-Date Fair Value Unrecognized At February 2, 2020
Previous Awards (vested)														$	1,901
Restricted shares Issued on April 13, 2017			4,572				31.45				142				102				6
Forfeited			(1,058	)							(34	)
Restricted shares Issued on May 7, 2018			7,972				37.83				301				156				111
Forfeited			(886	)							(34	)
Restricted shares Issued on April 17, 2019			15,239				29.77				454				109				283
Forfeited			(2,058	)							(62	)
Restricted shares Issued on May 8, 2019			1,027				29.21				30				7				23
Restricted shares Issued on June 17, 2019			21,138				19.87				420				280				140
Awards outstanding at February 2, 2020:			45,946							$	1,217			$	654			$	563

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Table of Contents

Notes to Consolidated Financial Statements - Continued

(Tables in thousands, except per share data)

We have awarded time-based restricted stock units to certain senior executives since 2011. Each restricted stock unit, or “RSU”, entitles the executive to receive one share of the Company’s common stock if he remains continuously employed with the Company through the end of a three-year service period. The RSUs may be paid in shares of the Company’s common stock, cash or both, at the discretion of the Compensation Committee. The RSUs are accounted for as “non-vested stock grants.” Similar to the restricted stock grants issued to our non-employee directors, RSU compensation expense is recognized ratably over the applicable service period. However, unlike restricted stock grants, no shares are issued, or other payment made, until the end of the applicable service period (commonly referred to as “cliff vesting”) and grantees are not entitled to receive dividends on their RSUs during that time. The fair value of each RSU is the market price of a share of our common stock on the grant date, reduced by the present value of the dividends expected to be paid on a share of our common stock during the applicable service period, discounted at the appropriate risk-free rate.

The following table presents RSU activity for the years ended January 31, 2016 and February 3, 2013, adjusted for forfeitures (as there were not RSU activities for the fiscal year ended February 2, 2014):

2020:

		Whole Number of Units				Grant-Date Fair Value Per Unit				Aggregate Grant-Date Fair Value				Compensation Expense Recognized				Grant-Date Fair Value Unrecognized At February 2, 2020
Previous Awards (vested)														$	959
RSUs Awarded on April 15, 2017			6,258			$	30.03				185				129				4
Forfeited			(2,687	)							(52	)
RSUs Awarded on June 4, 2018			6,032			$	35.86				216				125				69
Forfeited			(616	)							(22	)
RSUs Awarded on April 17, 2019			10,196			$	28.01				286				78				168
Forfeited			(1,441	)							(40	)
Awards outstanding at February 2, 2020:			17,742							$	573			$	332			$	241

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.

		Whole Number of Units				Grant-Date Fair Value Per Unit				Aggregate Grant-Date Fair Value				Compensation Expense Recognized				Grant-Date Fair Value Unrecognized At February 2, 2020
PSUs Awarded on June 4, 2018			22,499			$	35.86				807				538				229
Forfeited			(893	)							(40	)
PSUs Awarded on April 17, 2019			36,412			$	29.77				1,084				361				642
Forfeited			(2,700	)							(81	)
Awards outstanding at February 2, 2020:			55,318							$	1,770			$	899			$	871

The number of RSUs and PSUs increased primarily due to the addition of three executive officers in the second quarter of fiscal 2019.

F-33

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		Whole				Grant-Date				Aggregate				Compensation				Grant-Date Fair Value
		Number of				Fair Value				Grant-Date				Expense				Unrecognized At
		Units				Per Unit				Fair Value				Recognized				January 31, 2016
Previous Awards (vested)														$	305
RSUs Awarded on April 15, 2014			7,322			$	12.91				95				63				32
RSUs Awarded on April 6, 2015			5,518			$	17.52				97				27				70
Awards outstanding at January 31, 2016:			12,840							$	192			$	90			$	102

Table of Contents

NOTE 1216 – EARNINGS PER SHARE

We refer you to the Earnings Per Share disclosure in Note 1-Summary2-Summary of Significant Accounting Policies, above, for more detailed 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 managementnon-executive employees since 2014 and2014. We have issued restricted stock units (RSUs)(“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 year-endperiod-end dates indicated:

		January 31,				February 1,				February 2,
		2016				2015				2014
Restricted shares			24,919				27,458				28,614
Restricted stock units			12,840				24,546				32,353
			37,759				52,004				60,967

		February 2,				February 3,				January 28,
		2020				2019				2018
Restricted shares			45,946				22,070				15,777
RSUs and PSUs			73,060				14,189				19,397
			119,006				36,259				35,174

All restricted shares, RSUs and PSUs awarded that have not yet vested are considered when computing diluted earnings per share. Unlike the restricted stock grants issued to our non-employee directors, the transfer of ownership of common shares issued under our RSUs, if any,  occurs after the three-year vesting period; however, RSUs are also considered when computing diluted earnings per share.

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Table of Contents

Notes to Consolidated Financial Statements - Continued

(Tables in thousands, except per share data)

The following table sets forth the computation of basic and diluted earnings per share:

		Fifty-Two				Fifty-Two				Fifty-Two
		Weeks Ended				Weeks Ended				Weeks Ended
		January 31,				February 1,				February 2,
		2016				2015				2014
Net income		$	16,185			$	12,578			$	7,929
Less: Dividends on unvested restricted shares			11				11				12
Net earnings allocated to unvested restricted stock			40				33				22
Earnings available for common shareholders		$	16,134			$	12,534			$	7,895
Weighted average shares outstanding for basic    earnings per share			10,779				10,736				10,722
Dilutive effect of unvested restricted stock awards			28				35				30
Weighted average shares outstanding for diluted       earnings per share			10,807				10,771				10,752
Basic earnings per share		$	1.50			$	1.17			$	0.74
Diluted earnings per share		$	1.49			$	1.16			$	0.74

We completed the acquisition of substantially all of the assets of Home Meridian International subsequent to the end of our 2016

		Fifty-Two				Fifty-Three				Fifty-Two
		Weeks Ended				Weeks Ended				Weeks Ended
		February 2,				February 3,				January 28,
		2020				2019				2018
Net income		$	17,083			$	39,873			$	28,250
Less: Dividends on unvested restricted shares			25				11				10
Net earnings allocated to unvested restricted stock			60				68				50
Earnings available for common shareholders		$	16,998			$	39,794			$	28,190
Weighted average shares outstanding for basic    earnings per share			11,784				11,759				11,633
Dilutive effect of unvested restricted stock awards			54				24				30
Weighted average shares outstanding for diluted       earnings per share			11,838				11,783				11,663
Basic earnings per share		$	1.44			$	3.38			$	2.42
Diluted earnings per share		$	1.44			$	3.38			$	2.42

In fiscal year on February 1, 2016. Upon completion,2018, we issued 716,910176,018 shares of our common stock to the designees of Home MeridianSFI as partial consideration for the acquisition.Shenandoah acquisition on September 29, 2017.

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Table of Contents

NOTE 1317 –INCOME TAXES

Our provision for income taxes was as follows for the periods indicated:

		Fifty-Two				Fifty-Two				Fifty-Two
		Weeks Ended				Weeks Ended				Weeks Ended
		January 31,				February 1,				February 2,
		2016				2015				2014
Current expense
Federal		$	7,196			$	6,024			$	3,755
Foreign			41				40				41
State			771				635				403
Total current expense			8,008				6,699				4,199
Deferred taxes
Federal			244				97				214
State			22				24				126
Total deferred taxes			266				121				340
Income tax expense		$	8,274			$	6,820			$	4,539

		Fifty-Two				Fifty-Three				Fifty-Two
		Weeks Ended				Weeks Ended				Weeks Ended
		February 2,				February 3,				January 28,
		2020				2019				2018
Current expense
Federal		$	2,312			$	10,537			$	12,022
Foreign			255				118				85
State			334				2,247				1,390
Total current expense			2,901				12,902				13,497
Deferred taxes
Federal			1,645				(963	)			4,038
State			298				(222	)			(13	)
Total deferred taxes			1,943				(1,185	)			4,025
Income tax expense		$	4,844			$	11,717			$	17,522

Total tax expense for fiscal 20162020 was $8.6$4.5 million, of which $8.3$4.8 million expense was allocated to continuing operations and $277,000 was allocated to other comprehensive income. Total$ 300,000 tax expense for fiscal 2015 was $6.6 million, of which $6.8 million was allocated to continuing operations and $254,000 benefit was allocated to other comprehensive income. Total tax expense for fiscal 20142019 was $4.5$11.6 million, of which $4.5$11.7 million expense was allocated to continuing operations and $73,000 tax benefit was allocated to other comprehensive income. Total tax expense for fiscal 2018 was $17.5 million, of which $17.5 million was allocated to continuing operations and $59,000$26,000 tax benefit was allocated to Other Comprehensive Income.

F-23

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Table of Contents

Notes to Consolidated Financial Statements - Continued

(Tables in thousands, except per share data)

other comprehensive income.

The effective income tax rate differed from the federal statutory tax rate as follows for the periods indicated:

		Fifty-Two				Fifty-Three				Fifty-Two
		Weeks Ended				Weeks Ended				Weeks Ended
		February 2,				February 3,				January 28,
		2020				2019				2018
Income taxes at statutory rate			21.0	%			21.0	%			33.9	%
Increase (decrease) in tax rate resulting from:
State taxes, net of federal benefit			2.4				3.2				2.0
Officer's life insurance			-1.1				-0.7				-0.6
Tax Cuts and Jobs Act of 2017			0.0				0.0				4.0
Other			-0.2				-0.8				-1.0
Effective income tax rate			22.1	%			22.7	%			38.3	%

F-35

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		Fifty-Two				Fifty-Two				Fifty-Two
		Weeks Ended				Weeks Ended				Weeks Ended
		January 31,				February 1,				February 2,
		2016				2015				2014
Income taxes at statutory rate			35.0	%			35.0	%			34.0	%
Increase (decrease) in tax rate resulting from:
State taxes, net of federal benefit			2.1				2.0				2.1
Domestic Production Deduction			(0.6	)			-				-
Officer's life insurance			(1.1	)			(1.2	)			(1.8	)
Other, net			(1.6	)			(0.6	)			2.1
Effective income tax rate			33.8	%			35.2	%			36.4	%

Table of Contents

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities for the period indicated were:

		January 31,				February 1,
		2016				2015
Assets
Deferred compensation		$	4,345			$	4,120
Allowance for bad debts			380				492
State income taxes			43				8
Property, plant and equipment			-				405
Intangible assets			703				524
Charitable contribution carryforward			-				246
Inventories			158				-
Other			378				404
Total deferred tax assets			6,007				6,199
Valuation allowance			-				-
			6,007				6,199
Liabilities
Employee benefits			256				362
Inventories			-				143
Property, plant and equipment			321				-
Total deferred tax liabilities			577				505
Net deferred tax asset without AOCI			5,430				5,694
Deferred tax asset (liability) in AOCI			(80	)			198
Total net deferred tax asset		$	5,350			$	5,892

		February 2,				February 3,
		2020				2019
Assets
Deferred compensation		$	2,673			$	3,572
Allowance for bad debts			1,050				1,236
Employee benefits			607				335
Inventories			600				882
Capital loss carryover			393				339
Accrued liabilities			338				448
Deferred rent			231				168
Other			431				169
Total deferred tax assets			6,323				7,149
Valuation allowance			(393	)			(339	)
			5,930				6,810
Liabilities
Intangible assets			1,737				923
Property, plant and equipment			1,313				1,288
Unrecognized pension actuarial losses			-				77
Total deferred tax liabilities			3,050				2,288
Net deferred tax assets		$	2,880			$	4,522

At January 31, 2016February 2, 2020 and February 1, 20153, 2019 our net deferred tax asset was $5.4$2.9 million and $5.9 million,$4.5, respectively. The increase in the valuation allowance of $54,000 was due to foreign tax credit limitations. We expect to fully realize the benefit of the deferred tax assets, with the exception of the capital loss carry forward and foreign tax credit carry forward, in future periods when the amounts become deductible.

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Table of Contents

Notes to Consolidated Financial Statements - Continued

(Tables The capital loss carry-forward is $1.4 million and expires in thousands, except per share data)

At February 1, 2015, we had an uncertainfiscal 2022. The foreign tax position of $284,000 related to our investmentcredit carry-forward is $54,000 and expires beginning in a captive insurance arrangement. The reserve decreased to $74,000 at January 31, 2016.  Also, at February 1, 2015, we had a reserve of $142,000 for an uncertain tax position related to the use of state loss carryforwards in our tax returns. The balance of this reserve was $147,000 at January 31, 2016. We expect $55,000 of this uncertain tax position to be settled during the next twelve months.

fiscal 2029.

Current accounting standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The guidance also addresses de-recognition, classification, interest and penalties, accounting in interim periods and disclosures.

A reconciliation of the beginning and ending amount of total unrecognized tax benefits for the fiscal years ended January 31, 2016February 2, 2020 and February 1, 20153, 2019 are as follows:

		January 31,				February 1,
		2016				2015
Balance, beginning of year		$	482			$	359
Increase related to prior year tax positions			-				75
Decrease related to prior year tax positions			(203	)			-
Increase related to current year tax positions			-				48
Balance, end of year		$	279			$	482

		February 2,				February 3,
		2020				2019
Balance, beginning of year		$	43			$	91
Decrease related to prior year tax positions			(39	)			(48	)
Balance, end of year		$	4			$	43

The net unrecognized tax benefits as of January 31, 2016,February 2, 2020 which, if recognized, would affect our effective tax rate are $221,000.$3,000. We expect that $74,000$4,000 of gross unrecognized tax benefits will decrease within the next year.

We have elected to classify interest and penalties recognized with respect to unrecognized tax benefits as income tax expense. Interest expense of $12,000$1,000 and $26,000$5,600 was accrued as of January 31, 2016February 2, 2020 and February 1, 2015,3, 2019, respectively.

Tax years ending January 30, 2013,29, 2017, through January 31, 2016February 2, 2020 remain subject to examination by federal and state taxing authorities. An examination of the fiscal 2013 with federal taxing authorities was completed during fiscal 2016 with no changes. An examination of our North Carolina state tax returns for fiscal year 2012 and 2013 is underway with the North Carolina Department of Revenue.

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Table of Contents

Notes to Consolidated Financial Statements - Continued

(Tables in thousands, except per share data)

NOTE 1418 – 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 three operatingreportable segments – casegoods furniture, upholstered furniture and an “All Other” segment,, which includes H Contract and Homeware. the remainder of our businesses:

■

Hooker Branded, consisting of the operations of our imported Hooker Casegoods and Hooker Upholstery businesses;

■

Home Meridian, a business acquired at the beginning of fiscal 2017, is a stand-alone, mostly autonomous business that serves a different type or class of customer than do our other operating segments and at much lower margins;

■

Domestic Upholstery, which includes the domestic upholstery manufacturing operations of Bradington-Young, Sam Moore and Shenandoah Furniture; and

■

All Other, consisting of H Contract and Lifestyle Brands, a new business started in late fiscal 2019. Neither of these operating segments were individually reportable; therefore, we combined them in “All Other” in accordance with ASC 280.

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Table of Contents

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.

		Fifty-Two Weeks Ended								Fifty-Three Weeks Ended								Fifty-Two Weeks Ended
		February 2, 2020								February 3, 2019								January 28, 2018
						% Net								% Net								% Net
Net Sales						Sales								Sales								Sales
Hooker Branded		$	161,990				26.4	%		$	178,710				26.2	%		$	166,754				26.9	%
Home Meridian			340,630				55.8	%			387,825				56.7	%			365,472				58.9	%
Domestic Upholstery			95,670				15.7	%			106,580				15.6	%			78,392				12.6	%
All Other			12,534				2.1	%			10,386				1.5	%			10,014				1.6	%
Consolidated		$	610,824				100	%		$	683,501				100	%		$	620,632				100	%
Gross Profit
Hooker Branded		$	51,462				31.8	%		$	58,122				32.5	%		$	53,007				31.8	%
Home Meridian			36,936				10.8	%			62,850				16.2	%			62,325				17.1	%
Domestic Upholstery			21,120				22.1	%			22,503				21.1	%			16,228				20.7	%
All Other			4,440				35.4	%			3,512				33.8	%			3,257				32.5	%
Consolidated		$	113,958				18.7	%		$	146,987				21.5	%		$	134,817				21.7	%
Operating Income
Hooker Branded		$	21,512				13.3	%		$	25,269				14.1	%		$	22,139				13.3	%
Home Meridian			(7,169	)			-2.1	%			18,828				4.9	%			17,828				4.9	%
Domestic Upholstery			6,637				6.9	%			7,607				7.1	%			4,463				5.7	%
All Other			1,727				13.8	%			971				9.4	%			1,024				10.2	%
Consolidated		$	22,707				3.7	%		$	52,675				7.7	%		$	45,454				7.3	%
Capital Expenditures
Hooker Branded		$	690							$	843							$	1,372
Home Meridian			496								534								1,098
Domestic Upholstery			3,914								3,807								696
All Other			29								30								-
Consolidated		$	5,129							$	5,214							$	3,166
Depreciation    & Amortization
Hooker Branded		$	1,930							$	1,979							$	1,956
Home Meridian			2,218								2,407								2,716
Domestic Upholstery			2,938								3,049								1,968
All Other			14								7								7
Consolidated		$	7,100							$	7,442							$	6,647

		Fifty-Two Weeks Ended								Fifty-Two Weeks Ended								Fifty-Two Weeks Ended
		January 31, 2016								February 1, 2015								February 2, 2014
						% Net								% Net								% Net
Net Sales						Sales								Sales								Sales
Casegoods		$	155,106				62.8	%		$	153,882				63.0	%		$	143,802				63.0	%
Upholstery			84,090				34.0	%			86,362				35.3	%			83,027				36.4	%
All other			8,033				3.3	%			5,025				2.1	%			1,487				0.7	%
Intercompany eliminations			(230	)							(919	)							(23	)
Consolidated		$	246,999				100.0	%		$	244,350				100.0	%		$	228,293				100.0	%
Gross Profit
Casegoods		$	47,558				30.7	%		$	44,868				29.2	%		$	38,762				27.0	%
Upholstery			18,852				22.4	%			16,489				19.1	%			15,393				18.5	%
All other			2,252				28.0	%			1,465				29.2	%			588				39.5	%
Intercompany eliminations			26								(22	)							(18	)
Consolidated		$	68,688				27.8	%		$	62,800				25.7	%		$	54,725				24.0	%
Operating Income
Casegoods		$	18,509				11.9	%		$	17,286				11.2	%		$	12,150				8.4	%
Upholstery			6,020				7.2	%			2,871				3.3	%			1,913				2.3	%
All other			(293	)			-3.6	%			(1,087	)			-21.6	%			(1,542	)			-103.7	%
Intercompany eliminations			26								(22	)							(18	)
Consolidated		$	24,262				9.8	%		$	19,048				7.8	%		$	12,503				5.5	%
Capital Expenditures
Casegoods		$	2,219							$	2,124							$	2,489
Upholstery			621								830								982
All other			7								40								-
Consolidated		$	2,847							$	2,994							$	3,471
Depreciation    & Amortization
Casegoods		$	1,808							$	1,591							$	1,551
Upholstery			1,126								1,005								940
All other			12								3								-
Consolidated		$	2,946							$	2,599							$	2,491

		As of January 31,								As of February 1,
		2016				%Total				2015				%Total
Total Assets						Assets								Assets
Casegoods		$	146,794				80.8	%		$	135,403				79.3	%
Upholstery			34,010				18.7	%			33,788				19.8	%
All other			863				0.5	%			1,605				0.9	%
Intercompany eliminations			(14	)							(41	)
Consolidated		$	181,653				100.0	%		$	170,755				100.0	%

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		As of February 2,								As of February 3,
		2020				%Total				2019				%Total
Assets						Assets								Assets
Hooker Branded		$	144,112				45.0	%		$	109,702				37.3	%
Home Meridian			138,313				43.2	%			144,277				49.1	%
Domestic Upholstery			36,085				11.3	%			38,467				13.1	%
All Other			1,769				0.6	%			1,457				0.5	%
Consolidated Assets		$	320,279				100	%		$	293,903				100	%
Consolidated Goodwill and Intangibles			73,429								75,813
Total Consolidated Assets		$	393,708							$	369,716

Sales by product type are as follows:

		Net Sales (in thousands)
		Fiscal
		2020								2019								2018
Casegoods		$	397,192				65	%		$	417,677				61	%		$	404,808				65	%
Upholstery			213,632				35	%			265,824				39	%			215,824				35	%
		$	610,824							$	683,501							$	620,632

No significant long-lived assets were held outside the United States at either January 31, 2016February 2, 2020 or February 2, 2014.3, 2019. International customers accounted for approximately 5%1.6% of consolidated invoiced sales in fiscal 20162020, 1.2% fiscal 2019 and approximately 6%2.5% of consolidated netinvoiced sales in both fiscal 20152018. We define international sales as sales outside of the United States and fiscal 2014. 

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Table of Contents

Notes to Consolidated Financial Statements - Continued

(Tables in thousands, except per share data)

Canada.

NOTE 1519 – COMMITMENTS, CONTINGENCIES AND OFF BALANCE SHEET ARRANGEMENTS

Customs Penalty

In September 2009, U.S. Customs and Border Protection (“CBP”) issued an audit report asserting that we had not paid all required antidumping duties due with respect to certain bedroom furniture we imported from China. In February 2015, CBP assessed a civil penalty of approximately $2.1 million and unpaid duties of approximately $500,000 on the matter.  In December 2015, in response to our petition to eliminate or modify the assessment, CBP revised the proposed penalty to approximately $1.7 million, while leaving the duty assessment at approximately $500,000.  We continue to assert that no antidumping duties are due and that there is no basis for the imposition of a penalty.  We intend to vigorously defend against the penalty. In the opinion of management, the ultimate disposition of this matter will not have a material adverse effect on our consolidated financial position, results of operations, or liquidity.

Commitments and Off-Balance Sheet Arrangements

We lease office space, warehousing facilities, showroom space and office equipment under leases expiring over the next five years. Rent expense was $3.1$11.2 million in fiscal 2016, $2.82020, $10.1 million in fiscal 20152019, and $2.3$9.0 million in fiscal 2014.2018. Future minimum annual commitments under leases and operating agreements are $3.0$8.7 million in fiscal 2017, $1.72021, $8.2 million in fiscal 2018 and $1.42022, $6.6 million in each of fiscal 2019,2023, $6.4 million in fiscal 20202024 and $6.4 million in fiscal 2021.

2025.

We had letters of credit outstanding totaling $1.7$4.3 million on January 31, 2016.February 2, 2020. We utilize letters of credit to collateralize certain imported inventory purchases and certain insurance arrangements.

Substantially all of the cash value of our company owned life insurance is pledged as collateral for our secured term loan.

In the ordinary course of our business, we may become involved in legal proceedings involving contractual and employment relationships, product liability claims, intellectual property rights and a variety of other matters. We do not believe that any pending legal proceedings will have a material impact on our financial position or results of operations.

Our business is subject to a number of significant risks and uncertainties, including our reliance on offshore sourcing, 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 “Forward Looking Statements” beginning on page 3 of this report and Item 1A, “Risk Factors” beginning on page 12 of this report.

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Table of Contents

Notes to Consolidated Financial Statements - Continued

(Tables in thousands, except per share data)

NOTE 1620 – CONCENTRATIONS OF SOURCING RISK

Imported Products Sourcing

We source imported products through approximately 18 differentmultiple vendors, from approximately 20 separate factories, located in fiveeight countries. Because of the large number and diverse nature of the foreign factories from which we can source our imported products, we have some flexibility in the placement of products in any particular factory or country.

Factories located in ChinaVietnam and VietnamChina are a critical resource for Hooker Furniture. In fiscal year 2016,2020, imported products sourced from ChinaVietnam and VietnamChina accounted for 68% and 26%, respectively,nearly all of our import purchases and the factoryour top five suppliers in China from which we directly source the most productthose countries accounted for 58%approximately half of our worldwide purchases of imported product.fiscal 2020 import purchases. A disruption in our supply chain from this factory,Vietnam or from China or Vietnam in general, could significantly impact our ability to fill customer orders for products manufactured at that factory or in that country.

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Raw Materials Sourcing for Domestic Upholstery Manufacturing

Our five largest domestic upholstery suppliers accounted for 28% of our raw materials supply purchases for domestic upholstered furniture manufacturing operations in fiscal 2020. One supplier accounted for 8.1% of our raw material purchases in fiscal 2020. Should disruptions with these suppliers occur, we believe we could successfully source these products from other suppliers without significant disruption to our operations.

Concentration of Sales and Accounts Receivable

One customer accounted for nearly 11% of our consolidated sales in fiscal 2020. Our top five customers accounted for approximately 30% of our fiscal 2020 consolidated sales. The loss of any one or more of these customers could adversely affect our earnings, financial condition and liquidity. At February 2, 2020, 35% of our consolidated accounts receivable is concentrated in our top five customers. Should any one of these receivables become uncollectible, it would have an immediate and material adverse impact on our financial condition and liquidity.

NOTE 1721 – CONSOLIDATED QUARTERLY DATA (Unaudited-(Unaudited- see accompanying accountant’s report.)

		Fiscal Quarter
		First				Second				Third				Fourth
2016
Net sales		$	60,956			$	60,140			$	65,338			$	60,565
Cost of sales			44,581				44,047				47,173				42,510
Gross profit			16,375				16,093				18,165				18,055
Selling and administrative expenses			11,133				10,234				11,525				11,534
Net income			3,472				3,938				4,630				4,145
Basic earnings per share		$	0.32			$	0.36			$	0.43			$	0.38
Diluted earnings per share		$	0.32			$	0.36			$	0.43			$	0.38

2015
Net sales		$	61,396			$	54,883			$	63,168			$	64,903
Cost of sales			45,786				41,226				47,137				47,401
Gross profit			15,610				13,657				16,031				17,502
Selling and administrative expenses			11,367				10,243				11,148				10,994
Net income			2,804				2,272				3,204				4,298
Basic earnings per share		$	0.26			$	0.21			$	0.30			$	0.40
Diluted earnings per share		$	0.26			$	0.21			$	0.30			$	0.40

		Fiscal Quarter
		First				Second				Third				Fourth
2020
Net sales		$	135,518			$	152,248			$	158,176			$	164,882
Cost of sales			110,001				123,422				129,777				133,665
Gross profit			25,517				28,826				28,399				31,217
Selling and administrative expenses			22,016				22,462				22,810				21,581
Net income			1,987				4,160				3,920				7,016
Basic earnings per share		$	0.17			$	0.35			$	0.33			$	0.59
Diluted earnings per share		$	0.17			$	0.35			$	0.33			$	0.59

2019
Net sales		$	142,892			$	168,661			$	171,474			$	200,475
Cost of sales			110,926				133,016				135,638				156,935
Gross profit			31,966				35,645				35,836				43,540
Selling and administrative expenses			21,990				23,184				22,979				23,777
Net income			7,154				8,693				9,332				14,691
Basic earnings per share		$	0.61			$	0.74			$	0.79			$	1.25
Diluted earnings per share		$	0.61			$	0.74			$	0.79			$	1.24

Earnings per share for each fiscal quarter is derived using the weighted average number of shares outstanding during that quarter. Earnings per share for each fiscal year is derived using the weighted average number of shares outstanding on an annual basis. Consequently, the sum of earnings per share for the quarters of a fiscal year may not equal earnings per share for the full fiscal year.

NOTE 22 – RELATED PARTY TRANSACTIONS

We lease the four properties utilized in Shenandoah’s operations. One of our employees has an ownership interest in the entities that own these properties. The leases commenced on September 29, 2017 and an option to renew each for an additional seven years. All four leases include annual rent escalation clauses with respect to minimum lease payments after the initial 84-month term of the lease is completed. In addition to monthly lease payments, we also incur expenses for property taxes, routine repairs and maintenance and other operating expenses.  We paid $821,000 in lease payments to these entities during fiscal 2020.

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Table of Contents

Notes to Consolidated Financial Statements - Continued

(Tables in thousands, except per share data)

NOTE 1823 – SUBSEQUENT EVENTS

Acquisition of Home Meridian International

On February 1, 2016, we completed the previously announced acquisition (the “Acquisition”) of substantially all of the assets of Home Meridian International, Inc. (“Home Meridian”) pursuant to the Asset Purchase Agreement into which we and Home Meridian entered on January 5, 2016 (the “Asset Purchase Agreement”). Upon completion, we paid $85 million in cash and issued 716,910 shares of our common stock (the “Stock Consideration”) to designees of Home Meridian as consideration for the Acquisition. The Stock Consideration consisted of (i) 530,598 shares due to the $15 million of consideration payable in shares of our common stock under the Asset Purchase Agreement, and (ii) 186,312 shares issued pursuant to working capital adjustments detailed in the Asset Purchase Agreement. The working capital adjustment was driven by an increase in HMI’s accounts receivable due to strong sales towards the end of 2015. The number of shares of common stock issued at closing for the Stock Consideration was determined by reference to the mean closing price of our common stock for the fifteen trading days immediately preceding the closing date ($28.27). Under the Asset Purchase Agreement, we also assumed certain liabilities of Home Meridian, including approximately $7.8 million of liabilities related to certain retirement plans. The assumed liabilities did not include the indebtedness (as defined in the Asset Purchase Agreement) of Home Meridian.

Also on February 1, 2016, we entered into an amended and restated loan agreement (the “Loan Agreement”) with Bank of America, N.A. (“BofA”) in connection with the completion of this acquisition. The Loan Agreement increases the amount available under our existing unsecured revolving credit facility to $30 million and increases the sublimit of such facility available for the issuance of letters of credit to $4 million. Amounts outstanding under the revolving facility will 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.

The Loan Agreement also provides us with a $41 million unsecured term loan (the “Unsecured Term Loan”) and a $19 million term loan (the “Secured 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”). BofA’s rights under the Security Agreement are enforceable upon the occurrence of an event of default under the Loan Agreement. Any amount borrowed under the Unsecured Term Loan will bear interest at a rate, adjusted monthly, equal to the then current LIBOR monthly rate plus 1.50%. Any amount borrowed under the Secured Term Loan will bear interest at a rate, adjusted monthly, equal to the then current LIBOR monthly rate plus 0.50%. We must repay any principal amount borrowed under 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. We must pay the interest accrued on any principal amount 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. We may prepay any outstanding principal amounts borrowed under either the Unsecured Term Loan or the Secured Term Loan in full or in part on any interest payment date without penalty. On February 1, 2016, we borrowed in full the amounts available under the Unsecured Term Loan and the Secured Term Loan in connection with the completion of this acquisition.

The Loan Agreement includes customary representations and warranties and requires us to comply with certain customary covenants, including, among other things, the following financial covenants: (i) maintaining at least a specified minimum level of tangible net worth, (ii) maintaining a ratio of funded debt to EBITDA not exceeding a specified amount and (iii) maintaining a basic fixed charge coverage ratio within a specified range. The Loan Agreement also limits our right to incur other indebtedness and to create liens upon our assets, subject to certain exceptions, among other restrictions. The 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 Loan Agreement.

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Notes to Consolidated Financial Statements - Continued

(Tables in thousands, except per share data)

Since the closing date we have made unscheduled payments of $5.0 million on the Unsecured Term Loan and $1.8 million on the Secured Term Loan, in addition to the regularly scheduled debt service payments required by the Loan agreement.

Pro forma consolidated net sales and net income for the combined entity are estimated to be $571 million and $22.5 million, respectively, for the year ended January 31, 2016. These pro forma estimates assume the transaction took place on February 2, 2015, the beginning of Hooker Furniture’s 2016 fiscal year, which end on January 31, 2016.  The pro forma net sales and net earnings estimates include estimates for interest expense related to the Bank of America Acquisition Credit Facility and amortization expense of identified intangible assets, net of the elimination of historical amortization of Home Meridian intangible assets. The pro forma net sales and net earnings estimates exclude non-recurring transaction related costs from the statement of operations of both companies and interest expense paid by Home Meridian under its former credit agreement.

Fair Value Estimates of Assets Acquired and Liabilities Assumed

The consideration and components of Hooker Furniture’s initial fair value allocation of the purchase price paid at closing and in the subsequent Net Working Capital Adjustment consisted of the following:

Fair value estimates of assets acquired and liabilities assumed
Purchase price consideration
Cash paid for assets acquired		$	85,000
Value of shares issued for assets acquired			15,000
Value of shares issued for excess net working capital			5,267
Cash paid for net working capital adjustment			995
Total purchase price		$	106,262
Accounts receivable		$	45,360
Inventory			37,607
Prepaid expenses and other current assets			2,045
Property and equipment			5,814
Intangible assets			28,800
Goodwill			21,023
Accounts payable and accrued expenses			(18,948	)
Accrued expenses			(6,783	)
Pension plan and deferred compensation liabilities			(8,656	)
Total purchase price		$	106,262

Substantially all of these amounts are subject to subsequent adjustment as we continue to gather information during the measurement period. Certain intangible assets were acquired as part this transaction. Trade names, customer relationships, and order backlog have been assigned preliminary fair values subject to additional analysis during the measurement period.  Some of these intangible assets have been assigned useful lives while others have been determined to be indefinite-lived.

F-30

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Table of Contents

Notes to Consolidated Financial Statements - Continued

(Tables in thousands, except per share data)

We have not yet determined the composition of our operating segments for the combined entity. We expect to be able to deduct goodwill for income tax purposes; however, book and tax goodwill may differ due to differences in book and tax capitalization rules.  

Cash Dividend

On March 1, 2016,2, 2020, our Board of Directors declared a quarterly cash dividend of $0.10$0.16 per share, payable on March 31, 20162020 to shareholders of record at March 15, 2016.

17, 2020.

COVID-19

In late 2019, an outbreak of COVID-19 was identified and has subsequently been recognized as a global pandemic by the World Health Organization. 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 businesses have also been ordered in certain jurisdictions and other businesses have temporarily closed on a voluntarily basis. Consequently, the COVID-19 outbreak has severely restricted the level of economic activity in the U.S. and around the world.

Due to the aforementioned effects of COVID-19, we have seen decreased demand for home furnishings in our industry and for our company. We have also seen a spike in order cancellations over the last few weeks prior to filing this Annual Report, which has blunted some of the strong backlog we had at fiscal year-end. Some customers have taken or are expected to take extended payment terms and we expect cash collections to slow.

To begin 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 Board of Directors, temporary salary reductions for officers and other managers, rationalizing current import purchase orders and working with our vendors to cut costs and extend payment terms where we can.

We expect sales and earnings to be down materially in the fiscal 2021 first quarter and for fiscal 2021, both as compared to prior-year periods, but we are unable to reasonably estimate the extent of those decreases. Additionally, we note we have limited insight into the extent to which our business may be impacted by the COVID-19 pandemic and there are many unknowns including the severity and duration of the current crisis. Further delays in the receipt of goods and other unanticipated impacts to our supply chain, including on direct imports or goods purchased domestically, or our customers, could have a more significant impact on our future business (including sales and earnings).

We continue to monitor the situation closely and may implement further measures to provide additional financial flexibility as we work to protect our cash position and liquidity.

F-31

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F-41

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