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SECURITIES AND EXCHANGE COMMISSION
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the quarter ended November 30, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ____ to ____
Commission file number 0-4173
DMI FURNITURE, INC.
DELAWARE | 41-0678467 | |||
(State of incorporation) | (IRS employer ID number) |
One Oxmoor Place, 101 Bullitt Lane, Louisville, Kentucky 40222
(Address of principal executive offices)
Registrant’s telephone number with area code: (502) 426-4351
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $0.10 PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____
Indicate the number of shares outstanding of each of the Registrant’s classes of Common Stock as of the last practicable date.
Class | Outstanding at November 30, 2002 | ||
Common Stock, Par Value $0.10 per Share | 4,290,378 |
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INDEX
Page | ||
Part I. Financial Information | ||
Consolidated Balance Sheets – November 30, 2002 and August 31, 2002 | 3, 4 | |
Consolidated Statements of Operations - Three Months Ended November 30, 2002 and December 1, 2001 | 5 | |
Consolidated Statements of Cash Flows – Three Months Ended November 30, 2002 and December 1, 2001 | 6, 7 | |
Consolidated Statement of Stockholders’ Equity - Three Months Ended November 30, 2002 | 8 | |
Notes to Consolidated Financial Statements | 9 -12 | |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 13-18 | |
Part II. Other Information | 19-23 |
Index to exhibits
10. | (a) Second Amended and Restated Credit Agreement | |
99. | (a) Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
(b) Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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DMI FURNITURE, INC.
(Amounts in thousands)
(Unaudited) | |||||||||
November 30, | August 31, | ||||||||
ASSETS | 2002 | 2002 | |||||||
Current assets: | |||||||||
Cash | $ | 286 | $ | 169 | |||||
Accounts receivable (net of allowances of $200 on Nov. 30, 2002 and $200 on Aug 31, 2002) | 17,299 | 17,530 | |||||||
Inventories | 21,945 | 17,477 | |||||||
Other current assets | 1,223 | 447 | |||||||
Current portion of deferred income taxes | 1,304 | 1,058 | |||||||
Total current assets | 42,057 | 36,681 | |||||||
Property, plant and equipment, at cost: | |||||||||
Land | 655 | 655 | |||||||
Buildings and improvements | 8,815 | 8,815 | |||||||
Machinery and equipment | 7,404 | 7,404 | |||||||
Leasehold improvements | 513 | 513 | |||||||
Assets held for disposition | 377 | 377 | |||||||
Construction in progress | 148 | 45 | |||||||
17,912 | 17,809 | ||||||||
Less accumulated depreciation | 9,263 | 8,920 | |||||||
Net property, plant and equipment | 8,649 | 8,889 | |||||||
Other assets | 900 | 797 | |||||||
Total assets | $ | 51,606 | $ | 46,367 | |||||
See accompanying notes.
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DMI FURNITURE, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
(Continued)
(Unaudited) | |||||||||||
November 30, | August 31, | ||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | 2002 | 2002 | |||||||||
Current liabilities: | |||||||||||
Trade accounts payable | $ | 8,041 | $ | 4,813 | |||||||
Accrued liabilities | 3,218 | 3,007 | |||||||||
Long-term debt due within one year | 930 | 930 | |||||||||
Total current liabilities | 12,189 | 8,750 | |||||||||
Long-term liabilities: | |||||||||||
Long-term debt | 20,467 | 19,391 | |||||||||
Accrued pension costs | 963 | 963 | |||||||||
Deferred compensation | 74 | 70 | |||||||||
Deferred income taxes | 298 | 20 | |||||||||
Other long-term liabilities | 584 | 584 | |||||||||
Total long-term liabilities | 22,386 | 21,028 | |||||||||
Commitments and Contingencies | |||||||||||
Stockholders’ equity: | |||||||||||
Common stock, $0.10 par value, 9,600,000 shares authorized, 4,290,378 shares outstanding (4,280,379 on Aug. 31, 2002) | 429 | 428 | |||||||||
Additional paid-in capital | 17,107 | 17,090 | |||||||||
Retained earnings/(deficit) | 254 | (170 | ) | ||||||||
Accumulated other comprehensive loss | (759 | ) | (759 | ) | |||||||
Total stockholders’ equity | 17,031 | 16,589 | |||||||||
Total liabilities and stockholders’ equity | $ | 51,606 | $ | 46,367 | |||||||
See accompanying notes.
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DMI FURNITURE, INC.
Amounts in thousands (except per share amounts)
(Unaudited)
Three months ended | |||||||||||
November 30, | December 1, | ||||||||||
2002 | 2001 | ||||||||||
Net sales | $ | 25,994 | $ | 25,266 | |||||||
Cost of sales | 21,762 | 20,929 | |||||||||
Gross profit | 4,232 | 4,337 | |||||||||
Margin | 16.3 | % | 17.2 | % | |||||||
Selling, general and administrative expenses | 3,183 | 3,374 | |||||||||
% of sales | 12.2 | % | 13.4 | % | |||||||
Operating profit | 1,049 | 963 | |||||||||
Margin | 4.0 | % | 3.8 | % | |||||||
Other income (expense): | |||||||||||
Interest expense | (409 | ) | (425 | ) | |||||||
Other income (expense) | 3 | (2 | ) | ||||||||
(406 | ) | (427 | ) | ||||||||
Income before income taxes | 643 | 536 | |||||||||
Provision for income taxes | (219 | ) | (209 | ) | |||||||
Net income | $ | 424 | $ | 327 | |||||||
Earnings per common share: | |||||||||||
Basic | $ | 0.10 | $ | 0.08 | |||||||
Diluted | $ | 0.10 | $ | 0.08 | |||||||
Average common and equivalent shares outstanding | 4,307 | 4,320 | |||||||||
See accompanying notes.
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DMI FURNITURE, INC.
(Amounts in thousands)
(Unaudited)
Three months ended | |||||||||||
November 30, | December 1, | ||||||||||
2002 | 2001 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 424 | $ | 327 | |||||||
Adjustments to reconcile net income to net cash provided (used) by operating activities: | |||||||||||
Depreciation and amortization | 342 | 226 | |||||||||
Deferred income taxes | 32 | 58 | |||||||||
Changes in assets and liabilities: | |||||||||||
Accounts receivable | 231 | 2,936 | |||||||||
Inventories | (4,468 | ) | (881 | ) | |||||||
Other assets | (879 | ) | 48 | ||||||||
Trade accounts payable | 3,228 | (252 | ) | ||||||||
Accrued liabilities | 229 | 40 | |||||||||
Accrued pension costs | — | (30 | ) | ||||||||
Deferred compensation | 4 | (13 | ) | ||||||||
Total adjustments | (1,281 | ) | 2,132 | ||||||||
Net cash provided/(used) by operating activities | (857 | ) | 2,459 | ||||||||
Cash flows used by investing activities: | |||||||||||
Capital expenditures | (101 | ) | (126 | ) | |||||||
Net cash used by investing activities | (101 | ) | (126 | ) | |||||||
See accompanying notes.
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DMI FURNITURE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Continued)
(Unaudited)
Three months ended | |||||||||||
November 30, | December 1, | ||||||||||
2002 | 2001 | ||||||||||
Cash flows provided/(used) by financing activities: | |||||||||||
Borrowings from line-of-credit | $ | 7,608 | $ | 6,750 | |||||||
Payments on line-of-credit | (6,300 | ) | (9,150 | ) | |||||||
Payments on long-term debt | (233 | ) | (202 | ) | |||||||
Net cash (used)/provided by financing activities | 1,075 | (2,602 | ) | ||||||||
Increase/(decrease) in cash | 117 | (269 | ) | ||||||||
Cash - beginning of period | 169 | 517 | |||||||||
Cash - end of period | $ | 286 | $ | 248 | |||||||
Cash paid for: | |||||||||||
Interest | $ | 433 | $ | 412 | |||||||
Income taxes | $ | 111 | $ | 45 | |||||||
Non cash Items: | |||||||||||
Interest rate derivatives | $ | — | $ | (126 | ) | ||||||
Stock grants | $ | 18 | $ | 25 | |||||||
See accompanying notes.
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CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (1)
(Amounts in thousands)
Three months ended November 30, 2002
(Unaudited)
Number of | Accumulated | ||||||||||||||||||||||
Common | Additional | Retained | Other | ||||||||||||||||||||
Common | Shares | Paid-In | Earnings/ | Comprehensive | |||||||||||||||||||
Stock | Outstanding | Capital | (Deficit) | Income/(loss) (2) | Total | ||||||||||||||||||
Balances at August 31, 2002 | $ | 428 | 4,280 | $ | 17,090 | $ | (170 | ) | $ | (759 | ) | $ | 16,589 | ||||||||||
Net income | 424 | 424 | |||||||||||||||||||||
Issuance of common stock | 1 | 10 | 17 | 18 | |||||||||||||||||||
Balances at November 30, 2002 | $ | 429 | 4,290 | $ | 17,107 | $ | 254 | $ | (759 | ) | $ | 17,031 | |||||||||||
(1) | Total comprehensive income for the three months ended November 30, 2002 was $424. | |
(2) | The components of accumulated other comprehensive income/(loss), net of tax are as follows: November 30, 2002 - Interest rate derivative ($350) and Minimum Pension Liability ($409) |
See accompanying notes.
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Notes to Consolidated Financial Statements
(1) Financial Statements and Organization
Building and Leasehold Improvements | 8 - 35 yrs. | ||
Machinery and Equipment | 3 - 15 yrs. |
(2) Income Taxes
Three Months Ended | ||||||||||
November 30, 2002 | December 1, 2001 | |||||||||
Current | $ | 187 | $ | 151 | ||||||
Deferred | 32 | 58 | ||||||||
Total | $ | 219 | $ | 209 | ||||||
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Three Months Ended | |||||||||||
November 30, 2002 | December 1, 2001 | ||||||||||
Tax at 34% statutory rate | $ | 237 | $ | 186 | |||||||
State income taxes net of federal benefit | 19 | 11 | |||||||||
Other | (37 | ) | 12 | ||||||||
Income Taxes | $ | 219 | $ | 209 | |||||||
(3) Earnings Per Common Share
In thousands, except per share amounts | ||||||||||
Three Months Ended | ||||||||||
November 30, 2002 | December 1, 2001 | |||||||||
Net Income | $ | 424 | $ | 327 | ||||||
Average common shares outstanding | 4,284 | 4,273 | ||||||||
Common stock equivalents-dilutive options | 23 | 47 | ||||||||
Average shares of common stock and equivalents outstanding | 4,307 | 4,320 | ||||||||
Basic earnings per share (Net income divided by average common shares outstanding) | $ | 0.10 | $ | 0.08 | ||||||
Diluted earnings per share (Net income divided by average shares of common stock and equivalents outstanding) | $ | 0.10 | $ | 0.08 | ||||||
(4) Inventories
November 30, 2002 | August 31, 2002 | |||||||||
Finished Products | $ | 18,996,000 | $ | 14,669,000 | ||||||
Work in Process | 383,000 | 428,000 | ||||||||
Raw Materials | 2,566,000 | 2,380,000 | ||||||||
Total | $ | 21,945,000 | $ | 17,477,000 | ||||||
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(5) Long Term Debt
Period | Maximum Availability | ||||
November 15, 2002- January 31, 2003 | $ | 23,000,000 | |||
February 1, 2003-July 31, 2003 | $ | 21,000,000 | |||
August 1, 2003-January 31, 2004 | $ | 23,000,000 | |||
February 1, 2004-July 31, 2004 | $ | 21,000,000 | |||
August 1, 2004-December 31, 2004 | $ | 23,000,000 |
(6) Major Customers and Sources of Supply
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(7) Derivative & Hedging Activities
(8) Fair Value of Financial Instruments
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Preliminary Note Regarding Forward-Looking Statements
The information set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in the other portions of this report includes forward-looking statements about the Corporation and its business as of January 6, 2003. The forward-looking statements relate to overall business conditions during the next fiscal quarter that ends on March 1, 2003. For this purpose, the use of words such as “believes,” “anticipates,” “plans,” “expects,” and similar expressions are intended to identify forward-looking statements. Factors that realistically could cause results to differ materially from those in the forward-looking statements include the cyclical and seasonal nature of the furniture market; the availability and cost of raw materials and labor; availability, terms and deployment of capital; labor actions or other events that disrupt the flow of goods from off-shore manufacturing sources; merchandising decisions by one or more of the Company’s major customers that adversely affect their decision to purchase and the dollar volume of their purchases of the Company’s furniture products; changes in fashion or tastes that adversely affect consumer perception of the Company’s furniture products; general conditions in the capital markets or in the general economy; demographic changes that affect consumer purchases of furniture; competition; and other factors identified in “Management’s Discussion and Analysis of Financial Condition and Results of Operations; below, in “Item 1. Business,” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of the Company’s FY 2002 Annual Report on Form 10-K, and in the Company’s other filings with the Securities and Exchange Commission. The forward-looking statements included in this report speak only as of the date on which they are made. The Company undertakes no obligation to update any of its forward-looking statements to reflect events or circumstances occurring after the date on which such statement is made.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Critical Accounting Policies, Estimates and Judgments
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RESULTS OF OPERATIONS
Overview
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contract and voting to ratify the contract is expected in January 2003. The effects of the temporary port closings on the West Coast had a minimal impact on the revenues for the quarter and resulted in a slight increase in freight costs.
Results of Operations
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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Key elements of the Consolidated Statements of Cash Flows:
Three months ended | ||||||||||||
November 30, 2002 | December 1, 2001 | |||||||||||
Net cash provided/(used) by operating activities | $ | (857,000 | ) | $ | 2,459,000 | |||||||
Net cash used by investing activities | (101,000 | ) | (126,000 | ) | ||||||||
Net cash flows provided/(used) by operating and investing activities | $ | (958,000 | ) | $ | 2,333,000 | |||||||
Net cash provided/(used) by financing activities | 1,075,000 | (2,602,000 | ) | |||||||||
Net change in cash | $ | 117,000 | $ | (269,000 | ) | |||||||
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Period | Maximum Availability | ||||
November 15, 2002- January 31, 2003 | $ | 23,000,000 | |||
February 1, 2003-July 31, 2003 | $ | 21,000,000 | |||
August 1, 2003-January 31, 2004 | $ | 23,000,000 | |||
February 1, 2004-July 31, 2004 | $ | 21,000,000 | |||
August 1, 2004-December 31, 2004 | $ | 23,000,000 |
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
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DISCLOSURE CONTROLS AND PROCEDURES
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Election of Directors
For | % | Against | % | |||||
Donald D. Dreher | 3,588,292 | 99.0 | 30,562 | 1.0 | ||||
Joseph G. Hill | 3,603,149 | 99.5 | 15,705 | 0.5 | ||||
Thomas M. Levine | 3,603,192 | 99.5 | 15,662 | 0.5 | ||||
David M. Martin | 3,603,192 | 99.5 | 15,662 | 0.5 | ||||
W. Howard Armistead | 3,603,192 | 99.5 | 15,662 | 0.5 | ||||
Joseph S. Chalfant | 3,588,292 | 99.0 | 30,562 | 1.0 |
Ratification of Accountants
For | % | Against | % | Abstain | % | |||||||
Deloitte Touche LLP | 3,614,224 | 99.9 | 1,587 | 0.0 | 3,043 | 0.0 |
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PART VI. EXHIBITS AND REPORTS ON FORM 8-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
DATED: January 6, 2003 | DMI FURNITURE, INC. |
By:/S/Phillip J. Keller | |
Vice President, Finance, | |
Chief Financial Officer, | |
Treasurer, and Principal | |
Accounting Officer President |
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CERTIFICATIONS
Certification of Chief Executive Officer
Date: January 6, 2003
/S/Donald D. Dreher | |
President, Chief | |
Executive Officer, Chairman | |
of the Board and Director |
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Certification of Chief Financial Officer
Date: January 6, 2003
/s/Phillip J. Keller | |
Vice President, Finance, | |
Chief Financial Officer, | |
Treasurer, and Principal | |
Accounting Officer |
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