HOOKER FURNISHINGS Corp

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) / INCOME

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONT.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar and share amounts in tables, except per share amounts, in thousands unless otherwise indicated)

For the Twenty-Six Weeks Ended August 3, 2025

The condensed consolidated financial statements of Hooker Furnishings Corporation and subsidiaries (referred to as “we,” “us,” “our,” “Hooker” or the “Company”) have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management these statements include all adjustments necessary for a fair statement of the results of all interim periods reported herein. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) are condensed or omitted pursuant to SEC rules and regulations. However, we believe that the disclosures made are adequate for a fair presentation of our results of operations and financial position. These financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our annual report on Form 10-K for the fiscal year ended February 2, 2025 (“2025 Annual Report”). The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect both the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from our estimates. Operating results for the interim periods reported herein may not be indicative of the results expected for the fiscal year.

The financial statements contained herein are being filed as part of a quarterly report on Form 10-Q covering the 2026 fiscal year thirteen-week period (also referred to as “three months,” “three-month period,” “quarter,” “second quarter” or “quarterly period”) that began May 5, 2025, and the twenty-six week period (also referred to as “six months,” “six-month period” or “first half”) that began February 3, 2025, which both ended August 3, 2025. This report discusses our results of operations for these periods compared to the 2025 fiscal year thirteen-week period that began April 29, 2024, and the twenty-six-week period that began January 29, 2024, which both ended July 28, 2024; and our financial condition as of August 3, 2025 compared to February 2, 2025.

References in these notes to the condensed consolidated financial statements of the Company to:

In December 2023, the FASB issued Accounting Standards Updates “ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The new guidance requires enhanced effective tax rate reconciliation and income taxes paid disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 (our fiscal 2026). We are currently evaluating the impact that the adoption of this new guidance will have on our consolidated financial statements and will add necessary disclosures upon adoption.

In November 2024, the FASB issued ASU 2024-03, “Disaggregation of income statement expenses”. The new guidance requires new tabular disclosures to disaggregate prescribed natural expenses underlying any income statement caption. ASU 2024-03 is effective for annual periods beginning after December 15, 2026 (our fiscal 2028). We are currently evaluating the impact that the adoption of this new guidance will have on our consolidated financial statements and will add necessary disclosures upon adoption.

We reviewed all other newly issued accounting pronouncements and concluded that they are either not applicable to our business or are not expected to have a material effect on our consolidated financial statements as a result of future adoption.

We are implementing a common Enterprise Resource Planning (ERP) system across all divisions. The ERP system went live at Sunset West in December 2022 and in the legacy Hooker divisions and for consolidated reporting in early September 2023. Based on the provisions of ASU 2018-15, Intangibles — Goodwill and Other — Internal-Use Software, we capitalize implementation costs associated with hosting arrangements that are service contracts. These costs are recorded in “other noncurrent assets” of our consolidated balance sheets. We amortize on a straight-line basis over 10-years term. The amortization expenses are recorded as a component of selling and administrative expenses in our consolidated statements of operations.

During the second quarter of fiscal 2026, we capitalized $287,000 of implementation costs and interest, related to the ERP system and a new supply chain planning software, compared with $1.2 million in the second quarter of fiscal 2025. For the six-month periods, capitalized implementation costs and interest totaled $551,000 in fiscal 2026 and $2.6 million in fiscal 2025. Amortization expense was $368,000 in the second quarter of fiscal 2026 and $292,000 in the second quarter of fiscal 2025, and $735,000 and $582,000 for the respective six-month periods.

The capitalized implementation costs at August 3, 2025 and February 2, 2025 were as follows:

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:

As of August 3, 2025 and February 2, 2025, 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.

Our assets measured at fair value on a recurring basis at August 3, 2025 and February 2, 2025, were as follows:

Our intangible assets with indefinite lives consist of: goodwill related to the Shenandoah, Sunset West and BOBO Intriguing Objects acquisitions; and trademarks and tradenames related to the acquisitions of Bradington-Young, Home Meridian and BOBO Intriguing Objects. Our intangible assets with definite lives are recorded in our Home Meridian and Domestic Upholstery segments. Details of our intangible assets are as follows:

Amortization expenses for intangible assets with definite lives were $872,000 and $924,000 for the second quarters of fiscal 2026 and 2025, respectively, and $1.8 million for the first half of both fiscal 2026 and 2025. For the remainder of fiscal 2026, amortization expense is expected to be approximately $1.7 million.

We have operating leases for warehouses, showrooms, manufacturing facilities, offices and equipment. Sub-lease income totaled $119,000 in the second quarter and $200,000 for the first half of fiscal 2026, compared with $18,000 and $71,000, respectively, in fiscal 2025 periods.

The components of lease cost and supplemental cash flow information for leases for the second quarters and six-months of fiscal 2026 and 2025 were:

The right-of-use assets and lease liabilities recorded on our condensed consolidated balance sheets as of August 3, 2025 and February 2, 2025 were as follows:

The weighted-average discount rate is 5.53%. The weighted-average remaining lease term is 5.8 years.

The following table reconciles the undiscounted future lease payments for operating leases to the operating lease liabilities recorded in the condensed consolidated balance sheets on August 3, 2025:

During the fiscal 2026 second quarter, we entered into an agreement to terminate and surrender the Georgia warehouse by October 31, 2025. This amendment is expected to reduce right-of-use assets by approximately $10.1 million, lease liabilities by $10.7 million, and lease payments by $13.4 million over the remaining lease term. Since the agreement has not yet commenced, the modification is not reflected in the table above.

On December 5, 2024, the Company and its wholly owned subsidiaries, Bradington-Young, LLC, Sam Moore Furniture LLC and Home Meridian Group, LLC (together with the Company, the “Borrowers”), entered into an Amended and Restated Loan and Security Agreement (the “Amended and Restated Loan Agreement”) with Bank of America, N.A. (“BofA”), as lender. The Amended and Restated Loan Agreement amends, restates and replaces the Second Amended and Restated Loan Agreement, dated as of September 29, 2017, between the Borrowers and BofA, as amended (the “Existing Loan Agreement”). The outstanding principal amount of loans and letters of credit issued under the Existing Loan Agreement and used to collateralize certain insurance arrangements and for imported product purchases will remain outstanding as loans and letters of credit under the Amended and Restated Loan Agreement.

The Amended and Restated Loan Agreement provides for a revolving credit facility in a committed principal amount of up to $70,000,000 (the “Revolving Commitment”), including subline of $8,000,000 for letters of credit, and an option to increase the Revolving Commitment by up to $30,000,000 upon meeting certain conditions, including agreement by BofA to increase the Revolving Commitment by such amount. Proceeds of loans and letters of credit under the Amended and Restated Loan Agreement will be available (a) on entry into the Amended and Restated Loan Agreement to replace the outstanding loans and letters of credit outstanding under the Existing Loan Agreement and to pay fees and expenses related to entry into the

Amended and Restated Loan Agreement and (b) from and after entry into the Amended and Restated Loan Agreement, for general working capital and other corporate purposes of the Borrower.

Availability of loans and letters of credit under the Revolving Commitment is capped by a borrowing base formula calculated as of any date as the sum for the Borrowers of (a) the value of their accounts receivable, (b) the value of their inventory, (c) the value of their in-transit inventory and (d) the life insurance cash surrender value of company-owned life insurance policies, in each case subject to eligibility requirements, advance rates, valuation metrics, reductions for write-offs and other dilutive items and reserves (the “Borrowing Base”). The lesser of the Revolving Commitment and the Borrowing Base, in each case net of the principal amount of outstanding loans and the face amount of letters of credit, constitutes “Availability” under the Amended and Restated Credit Agreement.

Outstanding loans under the Amended and Restated Loan Agreement will bear interest at a rate per annum equal to the then-current Term SOFR Rate for a period of one month plus 0.10% plus a margin of 1.75%. The Term SOFR Rate will be adjusted on a monthly basis. Letters of credit are subject to a letter of credit fee equal to the actual daily amount of undrawn letters of credit multiplied by a per annum rate of 1.75% and a fronting fee equal to the actual daily amount of undrawn letters of credit multiplied by a per annum rate of 0.125%. We must also pay a monthly unused commitment fee that is based on the average daily unused amount of Revolving Commitment multiplied by a per annum rate of 0.25%. All accrued interest and fees are payable in cash monthly in arrears.

We may prepay any outstanding principal amounts borrowed under the Amended and Restated Loan Agreement at any time, without penalty provided that any payment is accompanied by all accrued interest owed. Subject to the Borrowers having sufficient borrowing base capacity and customary conditions precedent to borrowing, amounts repaid may be reborrowed. The Revolving Commitment will terminate, and all amounts outstanding thereunder will be due and payable, on December 5, 2029.

The obligations under the Amended and Restated Loan Agreement are secured by a first priority security interest in substantially all of the assets of the Borrowers, other than real estate, including all Company-owned life insurance policies, all accounts receivable, all inventory, all intellectual property, all equipment and all other personal property.

The Amended and Restated Loan Agreement includes customary representations and warranties and requires the Borrowers to comply with customary affirmative and negative covenants, including, among other things, a financial covenant requiring the maintenance of a ratio of (x) EBITDA net of capital expenditures (to the extent not paid using Borrowed Money) to (y) the sum of debt service and dividends paid, in each case as of the last day of each month for the trailing twelve-month period ending on such day, of at least 1.0 to 1.0, if an event of default has occurred and is continuing or Availability has fallen below 10% of the Revolving Commitment at any time (until such time as both Availability is 10% or greater and no event of default exists, for the 30 consecutive days prior to such month end).

The Amended and Restated Loan Agreement also limits the Borrowers’ right to incur other indebtedness, make certain investments and create liens upon our assets, subject to certain exceptions, among other restrictions. The Amended and Restated Loan Agreement does not restrict the Company’s ability to pay cash dividends on, or repurchase, shares of its common stock, subject to (a) no default existing prior to or resulting from such dividend or repurchase, (b) Availability is not less than 15% of the Revolving Commitment for each of the preceding 45 days prior to announcement of such dividend or repurchase and after giving pro forma effect to such dividend or repurchase and (c) if Availability is less than 20% of the Revolving Commitment on any day in such 45-day period, the Borrowers are in compliance with the financial covenant described above after giving effect to such dividend or repurchase.

We incurred $480,000 in fiscal 2025 and an additional $33,000 in fiscal 2026 first half in debt issuance costs in connection with our term loans. As of August 3, 2025, unamortized loan costs of $447,000 were netted against the carrying value of our term loans on our consolidated balance sheets.

As of August 3, 2025, we had $5.6 million principal amount of outstanding loans and $6.7 million face amount of letters of credit. We had $57.7 million of Availability based on the current Borrowing Base. There were no additional borrowings outstanding under the Amended and Restated Loan Agreement as of August 3, 2025.

We refer you to the discussion of Earnings Per Share in Note 1. Summary of Significant Accounting Policies, in the financial statements included in our 2025 Annual Report, for additional information concerning the calculation of earnings per share (EPS).

All stock awards are designed to encourage retention and to provide an incentive for increasing shareholder value. We have issued restricted stock awards to non-employee members of the board of directors since 2006 and to certain non-executive employees since 2014. We have issued 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 applicable vesting date. 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 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. Historically, 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. For the PSUs issued under the Company’s 2024 Plan in fiscal 2025 and afterwards, one target is the Company’s annual EPS growth over the performance period and the other target is the Company’s total shareholder return during the performance period compared to the Company’s peer group. The payout or settlement of the PSUs will be made in shares of our common stock.

We expect to continue to grant these types of awards annually in the future. The following table sets forth the number of outstanding restricted stock awards and RSUs and PSUs, net of forfeitures and vested shares, as of the fiscal period-end dates indicated:

All restricted shares, RSUs and PSUs awarded that have not yet vested are considered when computing diluted earnings per share.

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

Due to net losses, approximately 106,000 shares and 115,000 shares for the second quarter and first half of fiscal 2026, and 169,000 shares and 176,000 shares for the second quarter and first half of fiscal 2025, respectively, would have been antidilutive and are therefore excluded from the calculation of earnings per share, respectively.

We recorded an income tax benefit of $1.2 million for the fiscal 2026 second quarter, compared to an income tax expense of $85,000 in the fiscal 2025 second quarter. The effective tax rates for these periods were 26.9% and (4.5%), respectively. The fiscal 2025 second quarter reflected an income tax expense despite a pretax loss due to the effective tax rate annualization method. For the first half of fiscal 2026, we recorded income tax benefits of $2.0 million compared to $731,000 in the prior-year period, with effective tax rates of 23.7% and 10.8%, respectively. The differences in the rates reflect the impacts of favorable tax adjustments, specifically the cash surrender value gain of company-owned life insurance, over expected pretax income in fiscal 2025 as opposed to an expected pretax loss in fiscal 2026 under the annualization method.

No material and non-routine positions have been identified as uncertain tax positions.

Tax years ending January 29, 2023 through February 2, 2025 remain subject to examination by federal and state taxing authorities.

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 280Segments(“ASC 280”), which are to allow the users of our financial statements to:

We define our segments as those operations our chief operating decision maker (“CODM”) regularly reviews to analyze performance and allocate resources. The Company’s CODM is the Chief Executive Officer. The CODM regularly reviews net sales, gross profit, and operating income by segment as the primary measures of segment performance. The CODM reviews net sales as a primary indicator of operational performance, assessing how much revenue is brought in from core business activities, after returns, allowances, and discounts, which reflects demand and execution of each segment’s strategy. Gross profit, which is derived from net sales and cost of sales, is reviewed by the CODM as a diagnostic metric, particularly useful in evaluating margin trends. Operating income is the key profitability metric used to assess performance across segments and make decisions related to resource allocation, including capital expenditures, headcount, and other investment initiatives. Each of these metrics are considered in budgeting, forecasting, and operational planning decisions.

For financial reporting purposes, we are organized into three reportable segments and “All Other”, which includes the remainder of our businesses:

The following tables present segment information for the periods, and as of the dates, indicated.

We recorded $2.0 million in consolidated restructuring costs in the second quarter of fiscal 2026. These costs included $1.3 million in severance and warehouse consolidation expenses and approximately $700,000 in inventory liquidation losses at the Georgia warehouse. For the first half of fiscal 2026, total restructuring costs were $2.5 million, consisting of $1.7 million in severance and warehouse consolidation expenses and $821,000 in inventory liquidation losses at the same facility. As of August 3, 2025 and February 2, 2025, we had accrued restructuring charges of approximately $300,000 and $174,000, respectively. The balance as of August 3, 2025 is expected to be paid during the next five months. The restructuring costs were recorded under cost of sales and selling and administrative expenses in the statements of operations.

Sales by product type are as follows:

Dividends

On September 9, 2025, our board of directors declared a quarterly cash dividend of $0.23 per share which will be paid on September 30, 2025 to shareholders of record at September 19, 2025.