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 25, 1998
[ ] 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:
2,813,324 shares of common stock outstanding as of February 27, 1998
Pulaski Furniture Corporation
Index
PART I: Financial Statements
Consolidated Condensed Balance Sheets as of
January 25, 1998 and November 2, 1997 . . . . . . . . . . . . . . 2
Consolidated Condensed Statements of Income
Three 4-week periods ended January 25, 1998
and January 26, 1997 . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows
Three 4-week periods ended January 25, 1998
and January 26, 1997 . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Condensed Financial Statements . . . . . . 5
Management's Discussion and Analysis of the
Consolidated Condensed Statements of Income . . . . . . . . . . . 6
PART II: Other Information . . . . . . . . . . . . . . . . . . . . . 8
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . 10
Pulaski Furniture Corporation
Consolidated Condensed Balance Sheets
(in thousands)
January 25, November 2,
1998 1997
ASSETS ---------- ----------
Current assets:
Cash and cash equivalents $ 6,585 $ 2,702
Accounts receivable, net 24,966 36,726
---------- ----------
31,551 39,428
Inventories:
Raw materials 13,328 13,270
Work-in-process 6,751 5,220
Finished goods 24,014 27,612
---------- ----------
44,093 46,102
Less LIFO reserve (14,758) (14,758)
---------- ----------
29,335 31,344
Prepaid expenses 462 874
Recoverable income taxes 0 1,474
Deferred income taxes 1,277 1,277
---------- -----------
Total current assets 62,625 74,397
Property, plant and equipment, net 34,641 35,248
Cash surrender value of life insurance 1,223 1,223
Other 11 11
---------- -----------
Total assets $ 98,500 $ 110,879
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses:
Accounts payable $ 5,860 $ 6,222
Wages and commissions 1,084 2,902
Taxes withheld from employees 462 400
Other accrued liabilities 1,069 1,889
---------- ----------
8,475 11,413
Notes payable 2,000 12,000
Federal and state income taxes 103 0
Current portion of long-term debt 2,000 2,000
---------- ----------
Total current liabilities 12,578 25,413
Long-term notes payable 25,338 25,774
Deferred income taxes 3,720 3,742
Deferred compensation 2,628 2,681
Shareholders' equity
Common stock 5,408 4,989
Retained earnings 49,001 48,479
Unamortized restricted stock (173) (199)
---------- ----------
Total shareholders' equity 54,236 53,269
Total liabilities and shareholders' equity $ 98,500 $ 110,879
========== ==========
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. 25, Jan. 26, Incr
1998 1997 (Decr) %
--------- --------- -------- ----
Net sales $ 36,310 $ 35,422 $ 888 2.5 %
Costs and expenses
Cost of sales 29,215 28,487 728 2.6
Selling & administrative 5,098 5,315 (217) (4.1)
---------- ---------- --------
Operating income 1,997 1,620 377 23.3
Other income and expenses
Interest expense 446 585 (139) (23.8)
Interest income (4) (4) 0 0.0
---------- ---------- --------
Total 442 581 (139) (23.9)
Income before income taxes 1,555 1,039 516 49.7
Provision for taxes on income 555 375 180 48.0
---------- ---------- --------
Net income $ 1,000 $ 664 $ 336 50.6
========== ========== ========
Weighted average number
of shares outstanding:
Basic 2,815,724 2,820,855
Diluted 2,824,204 2,828,625
Earnings per share:
Basic $0.36 $0.24
Diluted $0.35 $0.23
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 25, January 26,
1998 1997
------------ ------------
OPERATING ACTIVITIES
Net income $ 1,000,107 $ 663,841
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation/amortization 1,152,624 1,229,252
Provision for deferred income taxes (22,500) (22,500)
Provision for deferred compensation (52,582) (6,692)
Changes in operating assets and liabilities:
Decrease in trade receivables 11,760,138 11,646,045
(Increase) decrease in inventories 2,008,859 (1,556,105)
(Increase) decrease in prepaid expenses 412,946 (221,808)
Decrease in recoverable income taxes 1,473,577 0
Decrease in accounts payable and
accrued expenses (2,937,763) (2,656,558)
Increase (decrease) in federal and state
income taxes payable 102,361 (419,044)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 14,897,767 8,656,431
INVESTING ACTIVITIES
Purchase of property, plant and equipment (520,020) (848,351)
Increase in cash surrender value 0 (7,095)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (520,020) (855,446)
FINANCING ACTIVITIES
Proceeds from issuance of common stock 514,930 469,210
Repurchase of common stock (96,250) (400,000)
Payment of dividends (477,925) (482,383)
Decrease in notes payable (10,000,000) (9,000,000)
Payments on long-term debt (435,979) (508,458)
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (10,495,224) (9,921,631)
------------ ------------
Increase (decrease) in cash and cash equivalents 3,882,523 (2,120,646)
Cash and cash equivalents at beginning of period 2,702,339 2,396,850
------------ ------------
Cash and cash equivalents at end of period $ 6,584,862 $ 276,204
============ ============
See accompanying notes to financial statements.
Pulaski Furniture Corporation
Notes to Consolidated Condensed Financial Statements
See notes to financial statements included in the Corporation's 10-K for the
year ended November 2, 1997, for information concerning accounting policies,
long-term debt, stock options and other financial matters. There have been
no material changes in financial matters since November 2, 1997.
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 25, 1998 and November 2, 1997, and the results of operations and
cash flows for the three 4-week periods ended January 25, 1998 and January
26, 1997.
The results of operations for the three 4-week periods ended January 25,
1998 and January 26, 1997 are not necessarily indicative of the results to
be expected for the full year. See Management's Discussion and Analysis for
a detailed discussion on the cyclical nature of the Corporation's operating
results.
In 1997, the Financial Accounting Standards Board issued Statement of Finan-
cial Accounting Standards No. 128, "Earnings per Share." Statement 128 re-
placed the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of options,
warrants, and convertible securities. Diluted earnings per share is very
similar to the previously reported fully diluted earnings per share. All
earnings per share amounts for all periods have been presented, and where
necessary, restated to conform to the Statement 128 requirements.
The following table sets forth the computation of earnings per share:
Three 4-week periods ended
January 25, January 26,
1998 1997
------------ ------------
Numerator:
Net income $ 1,000,107 $ 663,841
Denominator:
Denominator for basic earnings per
share - weighted average shares 2,815,724 2,820,855
Effect of dilutive securities:
Stock options 4,800 3,421
Stock purchase plan 3,680 4,349
Denominator for diluted earnings per
share - adjusted weighted average shares 2,824,204 2,828,625
Basic earnings per share $0.36 $0.24
Diluted earnings per share $0.35 $0.23
Pulaski Furniture Corporation
Management's Discussion and Analysis of the
Consolidated Condensed Statements of Income
Comparison of First Quarter 1998 to First Quarter 1997 (See page 3 for
dollar and percent changes.)
- ----------------------------------------------------------------------------
The stronger retail environment in the first quarter of 1998 caused an incr-
ease in orders throughout the period and was the primary reason for the sales
increase compared with the 1997 quarter. The 1997 quarter included sales of
two divisions subsequently closed. The increase in net income was due primar-
ily to the sales increase, lower administrative and interest expense, and the
elimination of the two unprofitable divisions.
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 22.4% 22.7% 18.3% 36.6%
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 18%. 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 25, 1998, are reasonable in relation to
the historical pattern, considering the retail environment for household
furniture.
The Corporation recognizes that the year 2000 presents many challenges for
information systems. In light of this recognition, management has enacted a
strategic business plan to ensure the needs of the year 2000 are met and that
the costs of preparing for this challenge are both understood and manageable.
Based on recent assessments, the Corporation has determined that it will be
required to modify or replace significant portions of its software so that
its computer systems will properly reflect dates beyond December 31, 1999. If
such modifications are not made, or are not completed timely, the Year 2000
Issue could have a material impact on the operations of the Corporation. The
Corporation expects to complete the modifications timely.
The Corporation will use both internal and external resources to reprogram,
or replace, and test the software for the Year 2000 modifications. The Corp-
oration is funding the Year 2000 project with cash generated from operations.
The project will be expensed or capitalized as appropriate over the next two
years, and is not expected to have a material effect on the results of oper-
ations.
Formal communications with all significant suppliers, customers and financial
service organizations of the Corporation is currently underway to determine
the extent to which the Corporation might be made vulnerable by those third
parties' failure to remediate their own Year 2000 Issue. The Corporation has
determined that it has no exposure to contingencies related to the Year 2000
for the products already sold.
Pulaski Furniture Corporation
Management's Discussion and Analysis of the
Consolidated Condensed Statements of Income (cont.)
Capital Resources and Liquidity
- --------------------------------
Working capital provided by operations was $2,100,000 for the quarter ended
January 25, 1998 compared to $1,864,000 for the quarter ended January 26,
1997. Net working capital increased by $1,063,000 during the first quarter
of 1998 compared with a decrease of $2,913,000 in the first quarter of 1997.
During the first quarter of 1998, the Corporation's average amount of
outstanding indebtedness for borrowed money was $33,969,871. The weighted
average rate of interest on such indebtedness was approximately 5.58% per
annum.
Pulaski Furniture Corporation
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
On February 13, 1998, the Corporation held its annual meeting of share-
holders, at which the following business was transacted:
O. Kenton McCartney, III, was elected to serve as a Class I director
of the Corporation for a term of two years.
Robert C. Greening, Jr., and John G. Wampler were elected to serve as
Class II directors of the Corporation, each for a term of three years.
The votes for the election of the Class I directors and for the approval
of the resolution were as follows:
FOR AGAINST ABSTAIN
---------- ---------- ----------
Mr. McCartney 2,314,436 0 5,091
Mr. Greening 2,314,586 0 4,941
Mr. Wampler 2,314,586 0 4,941
The terms of the following directors continued beyond the 1998 annual
meeting: Bernard C. Wampler, Harry H. Warner, Harry J.G. van Beek, and
Hugh V. White, Jr.
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
4 Amended and Restated Rights Agreement between Pulaski
Furniture Corporation and First Union National Bank,
dated as of December 15, 1997. *
27 Financial Data Schedule *
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter
ended January 25, 1998.
* 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: February 27, 1998 /s/ John G. Wampler
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John G. Wampler
President and Chief Executive Officer
/s/ Jason A. Gibbs
---------------------------------------
Jason A. Gibbs
Treasurer and Chief Financial Officer
(Principal Accounting Officer)
Pulaski Furniture Corporation
Exhibit Index
Exhibit
Number Description
4 Amended and Restated Rights Agreement between Pulaski Furn-
iture Corporation and First Union National Bank, dated as of
December 15, 1997.
27 Financial Data Schedule