HOOKER FURNISHINGS Corp Income Taxes Disclosure

NOTE 16 – INCOME TAXES

 

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

 

		52 Weeks Ended				53 Weeks Ended				52 Weeks Ended
		February 1,				February 2,				January 28,
		2026				2025				2024
Current expense
Federal		$	-			$	-			$	6
Foreign			15				41				47
State			18				42				-
Total current expense			33				83				53
Deferred taxes
Federal			(3,463	)			(1,852	)			2,887
State			(824	)			(133	)			416
Total deferred taxes			(4,287	)			(1,985	)			3,303
Income tax (benefit)/expense		$	(4,254	)		$	(1,902	)		$	3,356

 

Total tax benefit for fiscal 2026 was $8.9 million, of which $4.3 million benefit was allocated to continuing operations, $4.5 million benefit was allocated to discontinued operations, and $94,000 tax benefit was allocated to other comprehensive income.

 

Total tax benefit for fiscal 2025 was $4.0 million, of which $1.9 million benefit was allocated to continuing operations, $2.0 million benefit was allocated to discontinued operations, and $51,000 tax benefit was allocated to other comprehensive income.

 

Total tax expense for fiscal 2024 was $2.6 million, of which $3.4 million expense was allocated to continuing operations, $.8 million benefit allocated to discontinued operations, and $41,000 tax benefit was allocated to other comprehensive income.

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

 

		52 Weeks Ended								53 Weeks Ended								52 Weeks Ended
		February 1,								February 2,								January 28,
		2026								2025								2024
		Amounts				Percentages				Amounts				Percentages				Amounts				Percentages
Income taxes at statutory rate		$	(3,575	)			21.0	%		$	(1,694	)			21.0	%		$	3,297				21.0	%
State taxes, net of federal benefit			(637	)			3.7	%			(72	)			0.9	%			328				2.1	%
Foreign taxes			16				-0.1	%			41				-0.5	%			47				0.3	%
Tax credits			(32	)			0.2	%			(51	)			0.6	%			(75	)			-0.5	%
Nontaxable or nondeductible items:
Officer’s life insurance			(279	)			1.6	%			(255	)			3.2	%			(207	)			-1.3	%
Nondeductible meals and entertainment			67				-0.4	%			111				-1.4	%			117				0.8	%
Stock compensation			150				-0.9	%			90				-1.1	%			(28	)			-0.2	%
Other			(52	)			0.3	%			(79	)			1.0	%			(121	)			-0.8	%
Change in valuation allowance			90				-0.5	%			7				-0.1	%			8				0.1	%
Other			(1	)			0.1	%			-				0.0	%			(10	)			-0.1	%
Effective income tax rate			(4,254	)			25.0	%			(1,902	)			23.6	%			3,356				21.4	%

 

State and local income taxes in California and Virginia comprise the majority of the domestic state and local taxes, net of federal category, for all years. All of the foreign taxes relate to China for all years.

 

In fiscal year 2026, income taxes paid (net of refunds) were ($445,000), including ($491,000) for federal, $16,000 for foreign (China) and $30,000 for state. All of the state tax is for Texas.

 

In fiscal year 2025, income taxes paid (net of refunds) were ($2.4 million), including ($2.2 million) for federal, $41,000 for foreign (China) and ($288,000) for state. Included in state income taxes are ($124,000) for California and ($110,000) for Virginia.

 

In fiscal year 2024, income taxes paid (net of refunds) were $23,000, including none for federal, $47,000 for foreign (China) and ($25,000) for state. Included in state income taxes are ($58,000) for Georgia, $29,000 for Texas and $5,000 for Oregon.

 

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

 

		February 1,				February 2,
		2026				2025
Assets
Intangible assets		$	9,079			$	5,174
Deferred compensation			1,762				1,956
Allowance for bad debts			1,275				1,410
Employee benefits			803				924
Loss and credit carryover			16,022				11,687
Accrued liabilities			206				262
Deferred rent			555				819
Total deferred tax assets			29,702				22,232
Valuation allowance			(204	)			(229	)
			29,498				22,003
Liabilities
Inventories			2,628				4,175
Research and development costs			1,774				356
Property, plant and equipment			68				1,235
Other			87				180
Total deferred tax liabilities			4,557				5,946
Net deferred tax assets		$	24,941			$	16,057

  

At February 1, 2026 and February 2, 2025 our net deferred tax assets were $24.9 and $16.1 million, respectively. The decrease in the valuation allowance of $25,000 was due to additional foreign tax credit carryforward and a portion of state loss carryforwards. We expect to fully realize the benefit of the net deferred tax assets, after valuation allowance, in future periods when the amounts become deductible.

 

We have federal and state net operating loss carry forwards of $58.4 million and $41.2 million, respectively, which have various expiration dates beginning in fiscal 2039 through fiscal 2046, with all the federal and $20.9 million of state net operating loss carry forwards having an indefinite carry forward period. We have foreign tax credit carry forwards of $204,000 which expire beginning in fiscal 2029 through fiscal 2036. We also have charitable contribution carry forwards of $5.4 million, which expire in fiscal 2028 through fiscal 2031.

 

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 disclosure. We do not have unrecognized tax benefits as of February 1, 2026.

 

Tax years ending January 29, 2023 through February 1, 2026 remain subject to examination by federal and state taxing authorities.