Hooker Furnishings Corporation

Greetings, ladies and gentlemen, and welcome to the Hooker Furniture Quarterly Investor Conference Call, reporting its operating results for the fourth quarter 2021 period. 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'll need to press star 1 on your telephone. As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Paul Huckfeld, Vice President, Finance and Chief Financial Officer for Hooker Furniture Corporation.

Thank you, Josh. Good morning, and welcome to our quarterly conference call to review our financial results for the fiscal 2021 fourth quarter and full year, both of which ended on January 31, 2021. Joining me this morning is Jeremy Hoff, our Chief Executive Officer. We certainly appreciate your participation today. During our call, we may make certain forward-looking statements which are subject to risks and uncertainty. 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 year-end 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. For our fiscal 2021 fourth quarter, which began on November 2nd and ended on November January 31st, 2021. We reported consolidated net sales of $155.3 million, with a net income of $8.5 million, a $1.5 million, or 22% increase compared to the prior fourth quarter. Earnings per share for the quarter were $0.71 per diluted share, an increase of 20%. Net sales for the quarter decreased by $9.6 million, or 5.8%, compared to last year's fourth quarter. Quarterly sales increased in two of the company's three reportable segments, with hooker-branded sales up almost $10 million, or 25%, over the prior year, and domestic upholstery sales up 1.4 million, or about 6%, compared to a year ago. The consolidated sales decrease for the quarter was driven by a $20 million sales decline in the home meridian segment, where global supply chain disruptions constrained these segments' ability to shift their strong order backlog. For the 2021 fiscal year, which began on February 3, 2020 and ended on January 31, 2021, we reported sales of $540 million, an 11.6% decrease from the prior year, driven by a $58 million decrease in the home meridian segment. For the year, the company reported a net loss of $10.4 million, or $0.88 per diluted share, compared to net sales of $610 million, and a net income of $17 million, or $1.44 per diluted share, a year ago. The net loss was due to a $44.3 million non-cash impairment charge, or $33.7 million net of income tax, to write down the goodwill and trade names in the Homeridian segment and goodwill in the Shenandoah division of our domestic upholstery segment. Adverse economic effects of the COVID-19 pandemic on first quarter orders and our share price at the time triggered an intangible asset impairment analysis in the first quarter of fiscal 2021 in the depths of the COVID-19 economic crisis, which required the company to perform a valuation of its intangible assets. The valuation led to the impairment charge, resulting in a $10.4 million loss, Hooker Furniture Corporation's first annual net loss since 1929. Excluding impairment charges, operating income for the fiscal year improved by $7.2 million. Hooker ended the year on a strong note with consolidated orders up almost 6% and an order backlog more than double the same time just a year ago. Now I'll turn the call over to Jeremy to comment on our fiscal 2021 and fourth quarter results.

Thank you, Paul, and good morning, everyone. While the volatile economic environment driven by the COVID-19 pandemic resulted in one of the most challenging years in our 97 year history. We're very pleased with our recovery in the second half of the year, and we believe that our company emerged stronger through adversity. Considering the once in a century global health crisis that occurred during fiscal 2021 and how severe the downturn in our industry was during much of the first half of the year, our recovery in the second half was significant, particularly in the areas of profitability and demand. Our fourth quarter results included a 22% increase in net income and higher sales in two of our three reportable segments. Our solid profitability performance in the fourth quarter built on momentum from the third quarter in which we reported net income of $10 million, an increase of $6.2 million, or 158% compared to the same period a year ago. Beginning in June, the company experienced historically high levels of demand and and backlogs that continue to be strong. We believe this level of demand sets us up for a solid shipping year in fiscal 2022, assuming global logistics bottlenecks, such as the scarcity of ocean vessels and containers, higher transportation costs, raw materials shortages, and lowered worldwide production capacity improve. Another indicator of our strong second half recovery is that about 75% of the consolidated net sales decrease for the year occurred in the first half of fiscal 2021, caused by the initial severity of the COVID-19-related economic crisis to our company and the industry as a whole. During that time, many of our retail partners closed for weeks, global production was on hold, our Q1 orders plummeted by over 40%, and we had to temporarily close five of our six upholstery plants for more than a month. After around 10 weeks of significantly lower demand, Orders surged as furniture emerged as an advantage sector during the economic downturn. Home furnishings benefited and continue to take advantage of pent-up demand, strengthen the housing market, and less competition from other discretionary spending such as travel, dining out, apparel, and entertainment. Since summer of 2020, we have been working to ramp up production in our domestic factories and with our international suppliers to keep up with demand. As our company responded to multiple disruptions during the year, we believe our strategic adaptations placed the company in a stronger competitive position than pre-pandemic. The scale of our company, strength of our balance sheet, and the skills and dedication of our U.S. and international teams enable us to successfully navigate a devastating macroeconomic event in a way we believe positions the company to take advantage of the positive momentum and favorable demographics for the home furnishings industry. Some of the enduring strategic adaptations Hooker Furniture Corporation made during the year, including reduced dependency on suppliers in China, a faster product-to-market strategy utilizing video for customer showroom tours and improved photography, and the rationalization of our product line to maximize production capacity and capital utilization. At HMI, significant progress was made on multiple fronts that positively impacted profitability for the year. Operating profit for the fiscal year was nearly $2 million at HMI, an improvement of almost $9 million compared to the previous year and after excluding the impact of the intangibles charge. This profit improvement was primarily the result of significant spending reductions implemented early last year to mitigate the impact of the pandemic disruptions. In addition, HMI's strategies to minimize the impact of China tariffs were largely accomplished in fiscal 21. Excess returns and allowances were significantly reduced versus prior year as well. Growth and profit enhancement strategies have been put in place at HMI to mitigate the global supply chain headwinds, and the company is entering fiscal 2022 with record backlogs, reduced overhead, proven product sales performance, strong customer relationships, and the exciting new Scott Brothers brand launch on track for the year. For the consolidated company during the year, we launched our One Company, One Culture initiative, designed to bring together the best practices, processes, people, and culture through our 12 divisions to build a stronger and more cohesive organization. Centered around a common ERP system, Project One will bring the entire company onto a single system and standardize best practices across the company and industry. At year end, we made changes in our management structure as our longtime CEO, Paul Thomas, retired. As I succeeded him on February 1st, 2021, the transition provided an opportunity to combine our operations and marketing teams to support the growth of our 12 unique businesses. Each of the 12 has a leader, product line, price point focus, and distribution channel targets that keep them distinct. Our one-team approach ensures all are supported with the full scope and scale of our company. We cannot say enough how appreciative we are of our entire team who gave exemplary effort under trying circumstances over the past year. Our team pulled together and produced extraordinary results under difficult conditions. They found new ways to work, to show product, and stay in touch with customers and suppliers throughout the world while staying positive, productive, and engaged. Our employees dealt with personal and business disruptions while working from home and other remote locations. Many employees who could not work remotely followed strict safety protocols in warehouses and factories. All of these adaptations were made with energy and a spirit of teamwork that will serve us well as we strive to become one company, one culture. Now I want to turn the discussion back to Paul, who will discuss highlights in each of our reportable segments.