Risk Factors Dashboard
Once a year, publicly traded companies issue a comprehensive report of their business, called a 10-K. A component mandated in the 10-K is the ‘Risk Factors’ section, where companies disclose any major potential risks that they may face. This dashboard highlights all major changes and additions in new 10K reports, allowing investors to quickly identify new potential risks and opportunities.
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Risk Factors - HOFT
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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 us.
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Economic downturns could result in decreased sales, earnings and liquidity.
The furniture industry is particularly sensitive to cyclical variations in the general economy and the current macro-economic conditions that affect consumer spending. Economic uncertainty, including persistent inflationary pressures, elevated interest rates, and the slow housing market, may negatively impact consumer confidence and discretionary spending. Home furnishings purchases are generally considered discretionary and may be postponed by consumers during periods of economic downturns or reduced household purchasing power.
Demand for our products is influenced by a number of macroeconomic factors, including changes in interest rates, consumer confidence, new housing starts, existing home sales, the availability of consumer credit and broader national or geopolitical factors. In recent years, the housing market has experienced periods of slowdown due in part to higher mortgage rates and affordability challenges, which have adversely affected demand of home furnishings. In addition, higher interest rates and tighter credit conditions reduce discretionary consumer spending, which in turn may reduce demand for home furnishings.
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 nature and relatively significant cost of home furnishings purchases resulting in a temporary shift in consumer discretionary spending away from home furnishings, or scarcity of transportation and Asian manufacturing capacity during times of increased demand. Additionally, most of our sales are of wooden or metal Casegoods products, which have a slower replacement cycle than our upholstered home furnishings products.
These factors also impact retailers, who are our primary customers. If our retail customers experience reduced consumer demand, increased financial pressure, or inventory adjustments in response to economic conditions, our sales, earnings, financial condition and liquidity could be adversely affected.
We rely on offshore sourcing from Vietnam for most of our sales and source other products internationally as well. Consequently:
| ◾ | Potential future increases in tariffs or new tariffs imposed on other countries from which we source, including Vietnam, China, or Mexico, could adversely affect our business. |
Changes in U.S. trade policies, including the imposition of new tariffs, increases in existing tariffs, or other trade restrictions, could adversely affect our business. A significant portion of our products is sourced from foreign manufacturers, including Vietnam and China, which accounted for 87% and 5% of our total imports in fiscal 2026, respectively. As a result, our cost of goods sold and supply chain could be significantly affected by changes in tariffs or other trade measures imposed by the U.S. or other countries. Inability to mitigate the tariff impact and reduce product costs, pass through price increases or find other suitable manufacturing sources may have a material adverse impact on sales volume, earnings and liquidity. Inability to reduce product costs, pass through price increases or find other suitable manufacturing sources 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.
Changes in trade policies could also disrupt established sourcing strategies, require us to shift production to alternative countries or suppliers, and increase supply chain complexity. In response to evolving trade policies, we have taken steps in recent years to diversify our sourcing base and reduce reliance on certain countries, including shifting a portion of our sourcing from China to other countries such as Vietnam and Mexico. However, these efforts may not fully mitigate the impact of tariffs or other trade restrictions. Alternative sourcing locations may have higher production costs, limited manufacturing capacity, or logistical challenges that could increase costs or disrupt supply. The scope, timing, and duration of tariffs and other trade restrictions remain uncertain. Further increases in tariffs or expansion of countries and products subject to tariffs could materially increase the cost of goods sold and adversely affect our operating results, financial condition, and cash flows.
| ◾ | 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. |
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. These risks may be even more pronounced with new product launches, like our current Margaritaville product launch. 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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| ◾ | A disruption in supply from Vietnam or from our most significant suppliers in Asia could adversely affect our ability to timely fill customer orders for these products and decrease our sales, earnings and liquidity. |
In fiscal 2026, imported products sourced from Vietnam accounted for 87% of our import purchases and our top five suppliers in Vietnam accounted for 69% of our fiscal 2026 import purchases. Our supply chain could be adversely impacted by the uncertainties of health concerns such as COVID-19 or similar pandemics and governmental restrictions. A disruption in our supply chain, or from Vietnam in general, such as the COVID-19 related lockdown in certain parts of Asia in the Summer of calendar 2021, could significantly impact our ability to fill customer orders for products manufactured in those countries. In some cases, we believe we would have sufficient inventory on hand and in-transit or be able to provide substitutions from our domestic warehouses but may not be enough to entirely mitigate the lost sales. 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. If we are 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 in general, could adversely affect our sales, earnings, financial condition and liquidity.
| ◾ | Increased transportation costs, including freight costs on imported products, could decrease earnings and liquidity. |
Transportation costs on our imported products are affected by a myriad of factors including the global economy, petroleum prices and ocean freight carrier capacity. Ongoing geopolitical conflicts and instability, including disruptions to key shipping routes, have increased volatility in global shipping markets and have resulted in higher ocean freight rates, longer transit times, and reduced carrier capacity. In the recent past, especially after the COVID-19 pandemic, transportation costs, including ocean freight costs and domestic trucking costs, on imported products represented a significant portion of the cost of those products. We saw a significant spike in these costs during that time and our profitability was materially impacted. To mitigate the increased costs, we implemented price increases and surcharges; however, there can be no assurance that we will be successful in increasing prices or receiving freight surcharges in the future or that we can do it quickly enough to offset increased costs. Increased transportation costs, both domestically and internationally, in the future would likely adversely affect our earnings, financial condition and liquidity.
| ◾ | Our dependence on suppliers could, over time, adversely affect our ability to service customers. |
We rely heavily on suppliers we do not own or control, including a large number of non-U.S. suppliers. All of our 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 suppliers, potentially at a higher cost, or may be forced to discontinue products. Also, delivery of goods from non-U.S. suppliers 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 supplier, or due to transportation issues, could negatively impact existing customer relationships and adversely affect our sales, earnings, financial condition and liquidity.
| ◾ | 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. |
Changes in political, economic and social conditions, including geopolitical conflicts or instability affecting key global shipping routes and our suppliers, 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.
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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 adversely 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 during 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 the periods affected.
| ◾ | Supplier transitions, including cost or quality issues, could result in longer lead times and shipping 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. Additionally, in the past we transitioned a significant portion of our imported product purchases from China to Vietnam due to the imposition of tariffs in 2018 on most furniture and 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. 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.
We may engage in acquisitions and investments in companies, form strategic alliances and pursue new business lines. These activities could disrupt our business, divert management attention from our current business, pose integration concerns or difficulties, dilute our earnings per share, decrease the value of our common stock and decrease our earnings and liquidity.
Growth by acquisition is highly dependent upon finding attractive targets and there can be no assurance those targets will be found. We may acquire or invest in businesses such as those that offer complementary products or 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 or strategic alliances 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. Outside of the acquisition framework, there are risks involved with new business lines and product line launches. We may pursue new business lines in which we have limited or no prior experience or expertise. Further, new product line launches always have inherent risks regarding attracting customers without an established track record or defined market expectations. Like with our current launch of the new Margaritaville product line, these pursuits may require substantial investment of capital, personnel and management attention. New business initiatives may fail outright or fail to produce an adequate return, which could adversely affect our earnings, financial condition and liquidity.
If demand for our domestically manufactured upholstered furniture declines, we may respond by realigning manufacturing or implementing cost-saving measures.
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-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-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.
10
A disruption affecting our domestic facilities could disrupt our business.
The facilities in which we store our inventory in Virginia, North Carolina and California are critical to our success. Our corporate and divisional headquarters, which house our administration, sourcing, sales, finance, merchandising, customer service and logistics functions for our imported and domestic products are located in Virginia, North Carolina and California. Additionally, our primary showrooms are located in North Carolina.
Our domestic upholstery manufacturing facilities are located in Virginia, North Carolina and California. Furniture manufacturing creates large amounts of highly flammable wood dust and may utilize other highly flammable materials such as foam, 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 could be negatively affected by natural disasters such as hurricanes and floods, and public health events. Any disruption affecting our domestic facilities, even for a relatively short period of time, could adversely affect our ability to ship our furniture products and disrupt our business, which could adversely affect our sales, earnings, financial condition and liquidity.
Fluctuations in the price (including tariffs), 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 (including those due to the potential implementation of additional reciprocal tariffs), 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 on raw materials through to our customers due to competition and other market pressures. In addition, the price increases are frequently implemented on future orders instead of existing order backlogs. Considering our lead times during periods of high demand, the benefits of new pricing could be offset by continued price increases from our suppliers, which could impact us before we realize the benefit from our price increases. The inability to meet customers’ demands or recover higher costs could adversely affect our sales, earnings, financial condition and liquidity.
We may not be able to maintain, raise prices, or raise prices in a timely manner in response to inflation and increasing costs.
Competitive and market forces could prohibit or delay future successful price increases for our products in order to offset increased costs of labor, finished goods, raw materials, freight and other product-related costs on a timely basis, which could adversely affect our sales, earnings, financial condition and liquidity.
We may experience impairment of our long-lived assets, which would decrease our earnings and net worth.
At February 1, 2026, we had $38.8 million in net long-lived assets, consisting primarily of property, plant and equipment, trademarks, trade names 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. 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-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.
During fiscal 2026, we reviewed triggering events under ASU 2021-03, Intangibles – Goodwill and Other (Topic 350). Due to adverse economic conditions, including declines in our market value, as well as other changes in market dynamics, we identified triggering events that necessitated a valuation of our goodwill and intangible assets. We engaged an independent third-party valuation firm to assist in performing the assessment. Based on this analysis, we recorded non-cash impairment charges of $14.5 million related to the impairment of Sunset West goodwill within the Domestic Upholstery segment, $558,000 for the trade name in the remaining HMI business classified in All Other, and $556,000 for the Bradington-Young trade name in the Domestic Upholstery segment. See Note 9 to our Consolidated Financial Statements for additional information.
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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.
A material part of our sales and accounts receivable are concentrated in a few customers. The loss of several large customers through business consolidations or otherwise, the loss of a major customer or significant sales programs with major customers, failures or other reasons, including economic downturn and the adverse economic effects of a future pandemic or similar events, could adversely affect our business.
One customer accounted for approximately 9% of our consolidated sales in fiscal 2026, and our top five customers accounted for about 26% of our fiscal 2026 consolidated sales. Approximately 23% 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, the loss of major product placements, 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. Amounts owed to us by a customer whose business fails, or is failing, may become uncollectible (in whole or in part), 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. We 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 an economic downturn, pandemic or another major, unexpected event with negative economic effects to occur, we may not be able to collect amounts owed to us or such payment may only occur after significant delay. Were an economic downturn, 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. In fiscal 2026 and 2025, we recorded approximately $1 million and $3.1 million in bad debt expense due to bankruptcies of two large customers.
Our existing and future debt obligations could impair our liquidity and financial condition.
Our Amended and Restated Loan Agreement, consisting of an asset-based lending facility of up to $70 million from Bank of America, is secured by substantially all of our assets and contains provisions that limit the amount of our future borrowings under that facility. Moreover, the terms of our Amended and Restated Loan Agreement also include financial and negative covenants that, among other things, may limit our ability to incur additional indebtedness. If we violate any loan covenants and do not obtain a waiver from our lender, our indebtedness under this arrangement would become immediately due and payable, and the lender could foreclose on its security, which could materially adversely affect our business and future financial condition and could require us to curtail or otherwise cease our existing operations.
Labor shortages and rising labor costs could disrupt operations at our domestic warehousing and manufacturing facilities.
At times, especially during the post COVID-19 demand surge, we have experienced difficulties in recruiting skilled labor into our domestic upholstery plants and warehouses and in some skilled or professional positions. Lack of qualified workers and high turnover in a variety of positions caused increased training costs and adversely affected our production schedules and our ability to ship our furniture products. Furthermore, we experienced higher labor costs and persistent inflationary pressure. Should these issues re-occur or increase due to future pandemics or for other reasons, our sales, earnings, financial condition and liquidity could again be adversely affected.
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We may lose market share due to furniture retailers by-passing us and sourcing directly from non-U.S. furnishings sources.
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 to these non-U.S. furnishings sources, which could adversely affect our sales, earnings, financial condition 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.
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, availability of raw materials and finished inventory and changes in consumer order patterns. From time to time, we have experienced, and may continue to experience, volatility with respect to availability of and demand for our home furnishing products. Accordingly, our results of operations for any quarter are not necessarily indicative of the results of operations to be expected for a full year or the next quarter.
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. Additionally, we implemented a multi-factor authentication process in order to enhance the security of our remote work environment. We have experienced and expect to continue to experience actual or attempted cyberattacks of our information systems or networks; however, none of these actual or attempted cyberattacks 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 cyberthreat 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.
13
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.
We may fail to realize the benefits of the sale of Pulaski Furniture and Samuel Lawrence casegoods brands
We evaluate and may pursue the divestiture of businesses or product lines that we determine are underperforming or no longer align with our strategic priorities. During fiscal 2026, we determined that the two largest businesses in the Home Meridian segment no longer aligned with our long-term strategy to streamline our portfolio and enhance profitability by focusing on brands that generate consistent earnings, and we completed the sale of the Pulaski Furniture (“PFC”) and Samuel Lawrence Furniture (“SLF”) casegoods brands within this segment.
Divesting involves a number of risks and uncertainties. We may incur significant costs associated with such transactions, including transaction costs, employee-related costs, and costs associated with exiting facilities or other contractual obligations. Divestitures may also disrupt relationships with customers, suppliers, and employees, particularly where the divested business had operational or customer relationships that overlap with our remaining operations. In addition, we may retain certain liabilities associated with the divested business, including obligations related to the legacy PFC pension plan.
Furthermore, the anticipated benefits of a divestiture, including improved profitability, reduced complexity, or greater strategic focus, may not be realized within the expected timeframe or at all. If we are unable to successfully execute divestitures or achieve the expected benefits from such transactions, our business, financial condition, and results of operations could be adversely affected.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Risk Management and Strategy
| ◾ | Risk assessments, including vulnerability scans and penetration testing to identify potential system weaknesses. These assessments are performed internally and supported by |
| ◾ | Alignment of our cybersecurity framework with industry standards; |
| ◾ | Employee training and awareness: all employees receive mandatory regular cybersecurity training, with additional specialized sessions for high-risk roles. We also conduct simulated phishing exercises to enhance awareness and preparedness; |
14
| ◾ | Continuous monitoring and threat detection: our IT security team utilizes advanced tools for real-time network and system monitoring, enabling rapid detection and response to potential threats; and |
| ◾ | Comprehensive cyber insurance coverage, including protection against social engineering fraud and other cyber incidents, to further mitigate potential financial losses. |
Governance
The board of directors oversees the Company’s practice for assessing, identifying and managing material risks from cybersecurity threats.
Management is responsible for the day-to-day oversight and management of cybersecurity risks.
The VP of Enterprise Systems and Applications has over 30 years of experience in information technology, enterprise systems, and operational risk management, including responsibility for infrastructure and operations in complex, multi-site environments. This experience includes the implementation and oversight of IT governance and control frameworks aligned with recognized standards, including ITIL and ISO/IEC 20000, as well as the establishment of processes related to service continuity, supplier management, configuration management, and operational controls. In addition, the VP’s experience also includes leading enterprise technology initiatives, including system implementations, data center migrations, business continuity planning, and vendor and third-party risk management.
Senior executives, including the Company’s
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