Hooker Furnishings Corporation

Ladies and gentlemen, and welcome to the Hooker Furniture Quarterly Investor Conference Call, reporting its operating results for the 2021 third quarter. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. To ask a question during the session, you will need to press star one on your telephone. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Paul Huckfeldt, Vice President, Finance and Chief Financial Officer for Hooker Furniture Corporation.

Thank you, Joelle. Good morning, and welcome to our quarterly conference call to review financial results for the fiscal 2021 third quarter, which began August 3, 2020, and ended November 1, 2020. We certainly appreciate your participation this morning. Paul Toms, our Chairman and CEO, Jeremy Hoff, President of our Hooker Legacy Brands, and Lee Boone, President of our Home Meridian Division, are joining us today. For the question and answer portion of the call, our Chief Administrative Officer, Ann Smith, will also be available to take questions. During our call, we may make forward-looking statements which are subject to risks and uncertainties. A discussion of factors that could cause our actual results to differ materially from management's expectations is contained in our press release and SEC filing announcing our fiscal 2021 third quarter results. Any forward-looking statement speaks only as of today, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after today's call. This morning, we reported consolidated net sales of $149.7 million and net income of $10 million, or $0.84 per diluted share, for our fiscal 2021 third quarter ended November 1, 2020. Compared to last year's third quarter, our net sales decreased 8.5 million or 5.4%, while net income increased $6.2 million or 157%. Earnings per diluted share increased over 150% from 33 cents a year ago. For the fiscal 2021 first nine months, consolidated net sales were $384.8 million, down 61 million or 13.7% compared to the last year period. We reported a net loss of $19 million, or $1.61 per diluted share, compared to $0.85 earnings per diluted share in the prior first nine months. The year-to-date net loss was driven by a $34 million, or $2.88 per share, non-cash intangible asset impairment charge we recorded in Q1. The COVID-19 pandemic had a material impact on our financial performance, market valuations, and other factors in the 2021 first quarter, which triggered the need to perform an intangible asset valuation analysis as of the end of Q1. As a result of this analysis, we wrote down goodwill and certain trade names in our HMI segment and goodwill in our Shenandoah Furniture Division of the domestic upholstery segments. Also, on December 2nd, the company was pleased to announce that our board of directors declared a quarterly cash dividend of 18 cents per share, representing a 12.5% increase over the previous quarterly dividend and the fifth consecutive annual dividend increase. The dividend is payable on December 31st to shareholders of record as of December 16th. Now I'll turn the call over to Paul Toms, who will comment on our fiscal third quarter results.

Thank you, Paul, and good morning, everyone. We were encouraged on many fronts by our third quarter financial performance and pleased that the business rebound that began in mid-May continues to gain traction. Consolidated incoming orders were up 33.8% during the quarter, and our consolidated backlog is now up 87.5% compared to a year ago. While overall we had a small consolidated sales dip driven by ongoing disruptions in the supply chain from the COVID-19 pandemic, two of our four operating segments achieved sales increases compared to the prior year. Sequentially, we're growing weekly sales and reported a $19 million or 15% consolidated revenue increase in the third quarter compared to the second quarter. We believe that furniture continues to be an advantage sector in the economy, benefiting from a renewed focus on the home, a strong housing market, and less discretionary spending competition from travel, dining out, and entertainment. In order to service the robust demand for our products, we are adding employees at most locations. Supply chain bottlenecks in this environment of surging demand are the greatest business challenge we face presently. Limitations on supply include scarcity of some raw materials and components, limited availability of shipping containers and ocean vessel space, production delays from some import suppliers, and the process of getting our domestic upholstery production ramped back up after the factories were temporarily closed during the economic shutdown earlier this year. In addition, we've had to work around some COVID-related employee absences, all while keeping employee safety a top priority. Regarding the pandemic-related challenges, we are addressing and working through the supply chain disruptions and making slow but steady progress. Our overseas vendors are increasing capacity and production each month, and all three of our domestic upholstery divisions were operating at current full capacity. At the end of the third quarter, we're in the process of expanding capacity with additional personnel hires at each location. In addition to the brisk incoming orders and weekly sales growth we're experiencing, our operating and net income profitability performance during the quarter was strong. Consolidated operating income increased by $8 million, or 161%, as compared to the prior year third quarter. The Hooker branded segment reported $7.7 million in operating income and achieved an operating margin at a high level. The Home Meridian segment reported $2.5 million of operating income compared to a $4 million operating loss in the prior year third quarter. The majority of the improvement was the result of reduced excess costs versus the prior year, including lower returns and allowances with a major customer. reduced inventory and carrying costs, and fewer inventory write downs. The domestic upholstery segment reported $2.4 million in operating income for the third quarter, representing solid improvements compared to operating losses in the first and second quarter of the current fiscal year at the height of the initial COVID-19 crisis. With that, I'll turn the call over to Jeremy Hall from President of Hooker Legacy Brands to comment on results for that division.