SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-Q
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[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended January 23, 2000
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________________ to ________________
COMMISSION FILE NUMBER 0-314
Pulaski Furniture Corporation
(Exact name of registrant as specified in its charter)
Virginia
(State or other jurisdiction of incorporation)
54-0594965
(IRS employer identification number)
P.O. Box 1371, Pulaski, Virginia
(Address of principal executive offices)
24301
(Zip Code)
540-980-7330
(Registrant's telephone number)
Indicate by checkmark 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 issuer's classes
of common stock as of the latest practicable date:
2,896,425 shares of common stock outstanding as of March 7, 2000
Pulaski Furniture Corporation
Index
PART I: Financial Statements
Consolidated Condensed Balance Sheets as of
January 23, 2000 and October 31, 1999 . . . . . . . . . . . . . . 2
Consolidated Condensed Statements of Income
Three 4-week periods ended January 23, 2000
and January 24, 1999 . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows
Three 4-week periods ended January 23, 2000
and January 25, 1999 . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Condensed Financial Statements . . . . . . 5
Management's Discussion and Analysis of the
Consolidated Condensed Statements of Income . . . . . . . . . . . 7
PART II: Other Information . . . . . . . . . . . . . . . . . . . . . 9
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . 11
Pulaski Furniture Corporation
Consolidated Condensed Balance Sheets
(in thousands)
January 23, October 31,
2000 1999
ASSETS ---------- ----------
Current assets:
Cash and cash equivalents $ 1,362 $ 1,182
Marketable securities 439 432
Accounts receivable, net 41,208 47,607
---------- ----------
43,009 49,221
Inventories:
Raw materials 32,900 27,887
Work-in-process 10,456 9,597
Finished goods 34,155 34,987
---------- ----------
77,511 72,471
Less LIFO reserve (17,575) (16,743)
---------- ----------
59,936 55,728
Prepaid expenses 882 1,325
Deferred income taxes 318 318
---------- ----------
Total current assets 104,145 106,592
Property, plant and equipment, net 38,078 38,761
Cash surrender value of life insurance 895 895
Excess purchase price over fair value of
assets acquired, net 6,501 6,607
Other 11 11
---------- ----------
Total assets $ 149,630 $ 152,866
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses:
Accounts payable $ 11,767 $ 11,053
Wages and commissions 2,165 4,088
Taxes withheld from employees 701 401
Other accrued liabilities 2,661 2,662
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17,294 18,204
Notes payable 19,953 22,953
Federal and state income taxes 948 1,478
Current portion of long-term debt 3,500 3,500
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Total current liabilities 41,695 46,135
Long-term notes payable 35,943 36,379
Deferred income taxes 3,332 3,332
Deferred compensation 2,991 3,063
Shareholders' equity
Common stock 6,563 6,022
Retained earnings 60,019 58,941
Unamortized restricted stock (913) (1,006)
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Total shareholders' equity 65,669 63,957
Total liabilities and shareholders' equity $ 149,630 $ 152,866
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See accompanying notes to financial statements.
Pulaski Furniture Corporation
Consolidated Condensed Statements of Income
(in thousands, except for per share data)
Three 4-week periods ended
Jan 23, Jan 24, Incr
2000 1999 (Decr) %
--------- --------- -------- ----
Net sales $ 51,160 $ 40,942 $10,218 25.0 %
Costs and expenses
Cost of sales 40,209 32,997 7,212 21.9
Selling & administrative 7,716 5,690 2,026 35.6
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Total 47,925 38,687 9,238 23.9
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Operating income 3,235 2,255 980 43.5
Other income and expenses
Interest expense 850 471 379 80.5
Interest income 0 (14) 14 100.0
Miscellaneous income (53) (198) 145 (73.2)
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Total 797 259 538 207.7
Income before income taxes 2,438 1,996 442 22.1
Provision for taxes on income 868 705 163 23.1
---------- ---------- --------
Net income $ 1,570 $ 1,291 $ 279 21.6
========== ========== ========
Weighted average number
of shares outstanding:
Basic 2,882,068 2,880,409
Diluted 2,888,112 2,891,096
Earnings per share:
Basic $0.54 $0.45
Diluted $0.54 $0.45
Cash dividends per share: $0.17 $0.17
See accompanying notes to financial statements.
Pulaski Furniture Corporation
Consolidated Statements of Cash Flows
Three 4-week periods ended
January 23, January 24,
2000 1999
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OPERATING ACTIVITIES
Net income $ 1,570,330 $ 1,291,326
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation/amortization 1,199,647 1,101,201
Provision for deferred income taxes 0 (22,500)
Provision for deferred compensation (71,957) (82,864)
Miscellaneous income on trading securities (6,710) 0
Changes in operating assets and liabilities:
Decrease in trade receivables 6,399,023 6,375,613
Increase in inventories (4,207,190) (399,681)
Decrease in prepaid expenses 442,482 340,861
Decrease in accounts payable and
other accrued expenses (910,436) (2,816,193)
Decrease in federal and state
income taxes payable (529,527) (91,487)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 3,885,662 5,696,276
INVESTING ACTIVITIES
Purchase of property, plant and equipment (410,897) (669,820)
Increase in cash surrender value 0 (3,470)
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NET CASH USED IN INVESTING ACTIVITIES (410,897) (673,290)
FINANCING ACTIVITIES
Proceeds from issuance of common stock 633,607 635,701
Payment of dividends (492,256) (492,081)
Decrease in notes payable (3,000,000) (6,000,000)
Payments on long-term debt (436,436) (436,204)
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NET CASH USED IN FINANCING ACTIVITIES (3,295,085) (6,292,584)
------------ ------------
Increase (decrease) in cash and cash equivalents 179,680 (1,269,598)
Cash and cash equivalents at beginning of period 1,181,998 1,452,166
------------ ------------
Cash and cash equivalents at end of period $ 1,361,678 $ 182,568
============ ============
See accompanying notes to financial statements.
Pulaski Furniture Corporation
Notes to Consolidated Condensed Financial Statements
The consolidated financial statements include the accounts of Pulaski
Furniture Corporation (the "Corporation") and its wholly owned subsidiaries.
Intercompany transactions have been eliminated in consolidation. See notes to
the financial statements included in the Corporation's 10-K for the year ended
October 31, 1999, for information concerning accounting policies, long-term
debt, stock options and other financial matters. Except for the acquisition
discussed below, there have been no material changes in financial matters
since October 31, 1999.
On February 28, 1999, Dawson Furniture Corporation, Inc. ("Dawson"), a newly
formed and wholly owned subsidiary of the Corporation, acquired substantially
all of the assets of Dawson Heritage Furniture Company, Inc. ("DHFC"). Dawson
borrowed approximately $16 million to finance the acquisition, which was
accounted for as an asset purchase transaction. In connection with the
purchase, Dawson acquired assets with a fair value of approximately $10.7
million and assumed liabilities of approximately $1.5 million. All preliminary
allocations of the purchase price have been made and Dawson has recorded
goodwill of approximately $6.8 million for the excess purchase price
(including assumed liabilities) over the fair value of assets acquired. The
consolidated financial statements reflect the operations of the acquired
business from the date of acquisition.
The following unaudited pro forma results of operations assumes the
acquisition of DHFC had occurred at the beginning of fiscal 1999. These
pro forma results contain certain adjustments resulting from the acquisition
and the related financing. The pro forma results have been prepared for
comparative results only and do not purport to indicate the results that
would have actually occurred had the acquisition been in effect on the dates
indicated or which may occur in the future.
Three 4-week periods ended
January 24,1999
------------
(thousands, except per share)
Net sales $46,014
Net income 1,492
Earnings per share $0.52
Prior to the completion of the acquisition, the Corporation had entered into
a short-term agreement with Dawson Heritage Furniture Company, Inc. which
compensated the Corporation for marketing related services. Under the terms
of this agreement, the Corporation has recognized miscellaneous other income
in the amount of $242,000 in the quarter ended January 24,1999.
In the opinion of the Corporation, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
normal accruals) necessary to present fairly the financial position as of
January 23, 2000 and October 31, 1999, and the results of operations and
cash flows for the three 4-week periods ended January 23, 2000 and
January 24, 1999.
The results of operations for the three 4-week periods ended January 23,
2000 and January 24, 1999 are not necessarily indicative of the
results to be expected for the full year. See Management's Discussion and
Analysis for a discussion on the cyclical nature of the Corporation's
operating results.
Pulaski Furniture Corporation
Notes to Consolidated Condensed Financial Statements
The following table sets forth the computation of earnings per share:
Three 4-week periods ended
January 23, January 24,
2000 1999
------------ ------------
Numerator:
Net income $ 1,570,330 $ 1,291,326
Denominator:
Denominator for basic earnings per
share - weighted average shares 2,882,068 2,880,409
Effect of dilutive securities:
Stock options 574 7,183
Stock purchase plan 5,470 3,504
Denominator for diluted earnings per
share - adjusted weighted average shares 2,888,112 2,891,096
Basic earnings per share $0.54 $0.45
Diluted earnings per share $0.54 $0.45
Pulaski Furniture Corporation
Management's Discussion and Analysis of the
Consolidated Condensed Statements of Income
Comparison of First Quarter 2000 to First Quarter 1999 (See page 3 for dollar
and percent changes.)
- -----------------------------------------------------------------------------
The 25% growth in net sales over last year is due primarily to the incremental
volume from the Dawson operations, which added approximately $5.9 million in
sales, and to internal growth resulting from the continued strong retail
demand for household furniture. Internal sales grew approximately 11% over
the first quarter of 1999
Cost of sales, as a percentage of sales, dropped from 80.6% in 1999 to 78.6%
in 2000, due primarily to higher average selling prices. Selling and
administrative costs, as a percentage of net sales, rose from 13.9% in 1999
to 15.1% in 2000, due largely to increased expenditures for developing,
marketing, and displaying new product. Despite the increase in selling and
administrative costs, operating margins improved from 5.51% to 6.32% on the
strength of the gross margin improvement.
Interest expense increased from 1.15% of net sales to 1.67% in 2000 as a
result of higher outstanding debt balances and interest rates. The 1999
quarter included miscellaneous other income derived from marketing related
services provided to Dawson Heritage Furniture Company prior to the
acquisition, as discussed in the Notes.
The increase in net income is due primarily to the increase in net sales, and
To the improvement in gross margins.
Seasonality
- -----------
Historically, the quarterly results of the Corporation have reflected a cyc-
lical pattern, as indicated below:
QTR 1 QTR 2 QTR 3 QTR 4
4-year average of net sales volume 21.49% 22.75% 19.02% 36.74%
This pattern reveals that the Corporation's first quarter, ending in January,
has accounted for approximately 22% of net sales volume. The second quarter,
ending in April, is roughly equivalent in sales volume to the first quarter,
while the third quarter, ending in July, shows a drop in volume to 19%. The
remainder, or 37% of sales volume, is recorded in the fourth quarter, which
comprises four 4-week reporting periods and which also includes the strongest
selling season for certain product lines. However, due to a number of risks
and uncertainties beyond the Corporation's control, including economic condi-
tions and consumer confidence, historical trends should not be viewed as an
accurate predictor of future results. The Corporation believes the results
of the first quarter ended January 23, 2000, are reasonable in relation to
the historical pattern, considering the retail environment for household
furniture.
Year 2000
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In prior years, the Corporation discussed the nature and progress of its
plans to become Year 2000 ready. In late 1999, the Corporation completed
its remediation and testing of systems. As a result of those planning and
implementation efforts, the Corporation experienced no significant disruptions
in mission critical information technology and non-information technology
systems and believes those systems successfully responded to the Year 2000
date change. The Corporation expensed or capitalized, as appropriate,
approximately $900,000 during 1998 and 1999 in connection with remediating
its systems. The Corporation is not aware of any material problems resulting
from Year 2000 issues, either with its products, its internal systems, or
the products and services of third parties. The Corporation will continue to
monitor its mission critical computer applications and those of its suppliers
and vendors throughout the year 2000 to ensure that any latent Year 2000
matters that arise are addressed promptly.
Pulaski Furniture Corporation
Management's Discussion and Analysis of the
Consolidated Condensed Statements of Income (continued)
Capital Resources and Liquidity
- --------------------------------
Working capital provided by operations was $2,691,000 for the quarter ended
January 23, 2000 compared to $2,287,000 for the quarter ended January 24,
1999. Net working capital increased by $1,993,000 during the first quarter
of 2000 compared with an increase of $1,321,000 in the first quarter of 1999.
During the first quarter of 2000, the Corporation's average amount of
outstanding indebtedness for borrowed money was $62,316,951. The weighted
average rate of interest on such indebtedness was approximately 5.9% per
annum.
Cautionary Factors
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Some of the information presented in this report, constitutes forward looking
comments within the meaning of the Private Securities Litigation Reform Act
of 1995. Although the Corporation believes its expectations are based on
reasonable assumptions within the bounds of its knowledge of its business and
operations, there can be no assurance that actual results will not differ
materially from its expectations. Factors which could cause actual results to
differ from expectations include, without limitation, the timing of orders
received from customers, the gain or loss of significant customers, comp-
etition from other manufacturers, changes in the demand for the Corporation's
products, increases in the cost of the product, changes in the market in
general, and fluctuations in currencies.
Pulaski Furniture Corporation
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
On February 11, 2000, the Corporation held its annual meeting of share-
holders, at which the following business was transacted:
Hugh V.White, Jr. was elected to serve as Class I director of the
Corporation, for a term of three years.
The votes for the election of the directors were as follows:
FOR AGAINST ABSTAIN
---------- ---------- ----------
Mr. White 2,440,152 0 221,977
The terms of the following directors continued beyond the 2000 annual
meeting: Robert C. Greening, Jr., John G. Wampler, Harry H. Warner, and
Harry J.G. van Beek.
Item 5. Other Information
All other information called for by other items of Part II of the Form 10-Q
is either inapplicable or the response to the items would be negative.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule*
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended
January 23, 2000.
* Filed herewith.
Pulaski Furniture Corporation
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 thereunto duly authorized.
PULASKI FURNITURE CORPORATION
Date: March 7, 2000 /s/ John G. Wampler
---------------------------------------
John G. Wampler
President and Chief Executive Officer
/s/ Carl W. Hoffman
---------------------------------------
Carl W. Hoffman
Treasurer
(Principal Accounting Officer)
Pulaski Furniture Corporation
Exhibit Index
Exhibit
Number Description
27 Financial Data Schedule