SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
----
Exchange Act of 1934
For the quarterly period ended February 28, 2001 or
-----------------
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 000-25349.
HOOKER FURNITURE CORPORATION
----------------------------
(Exact name of registrant as specified in its charter)
Virginia 54-0251350
------------------------------- --------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
440 East Commonwealth Boulevard Martinsville, VA 24112
--------------------------------------------------------
(Address of principal executive offices, Zip Code)
(540) 632-2133
-----------------------------
(Registrant's telephone number,
including area code)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 issuer's classes of
common stock as of March 26, 2001.
Class Number
----- ------
Common Stock, no par value 7,617,298 Shares
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HOOKER FURNITURE CORPORATION
BALANCE SHEETS
(In thousands, including share data)
(Unaudited)
February 28, November 30,
2001 2000
Assets
Current assets
Cash, primarily interest-bearing deposits............. $ 2,021 $ 1,243
Trade receivables, less allowances of $620 and $525... 28,358 31,019
Inventories........................................... 39,006 42,785
Prepaid expenses and other............................ 2,109 1,963
-------- --------
Total current assets.............................. 71,494 77,010
Property, plant and equipment, net..................... 49,652 48,767
Other assets........................................... 7,753 7,754
-------- --------
$128,899 $133,531
======== ========
Liabilities and Stockholders' Equity
Current liabilities
Trade accounts payable............................... $ 1,749 $ 5,406
Accrued salaries, wages and benefits................. 3,831 6,470
Other accrued expenses............................... 2,378 2,884
Current maturities of long-term debt................ 1,877 1,581
-------- --------
Total current liabilities.......................... 9,835 16,341
Long-term debt......................................... 27,646 27,919
Deferred liabilities................................... 3,224 3,300
-------- --------
Total liabilities..................................... 40,705 47,560
-------- --------
Common stock held by ESOP.............................. 10,289 10,412
Stockholders' Equity
Common stock, no par value, 10,000 shares authorized,
7,617 shares issued and outstanding................... 2,684 2,605
Unearned ESOP shares (1,741 and 1,761 shares).......... (21,759) (22,009)
Retained earnings...................................... 96,980 94,963
-------- --------
Total stockholders' equity............................ 77,905 75,559
-------- --------
$128,899 $133,531
======== ========
The accompanying notes are an integral part of the financial statements.
2
HOOKER FURNITURE CORPORATION
STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
Three Months Ended
February 28, February 29,
2001 2000
Net sales............................ $55,924 $56,680
Cost of sales........................ 42,324 42,438
------- -------
Gross profit..................... 13,600 14,242
Selling and administrative expenses.. 9,461 9,082
------- -------
Operating income................. 4,139 5,160
Other expense, net................... 200 50
------- -------
Income before taxes............. 3,939 5,110
Income taxes........................ 1,496 1,941
------- -------
Net income...................... $ 2,443 $ 3,169
======= =======
Earnings per share:
Basic and diluted............... $.42 $.42
======= =======
Weighted average shares outstanding.. 5,857 7,617
======= =======
The accompanying notes are an integral part of the financial statements.
3
HOOKER FURNITURE CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
February 28, February 29,
2001 2000
Cash flows from operating activities:
Cash received from customers.............................. $ 58,867 $ 55,603
Cash paid to suppliers and employees...................... (53,466) (54,729)
Income taxes paid, net.................................... (1,065) (492)
Interest paid, net........................................ (417) (106)
-------- --------
Net cash provided by operating activities............... 3,919 276
-------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment, net............ (2,615) (3,770)
-------- --------
Net cash absorbed by investing activities............... (2,615) (3,770)
-------- --------
Cash flows from financing activities:
Proceeds from long-term debt.............................. 2,500 5,500
Payments on long-term debt................................ (2,477)
Cash dividends paid....................................... (549) (648)
-------- --------
Net cash provided (absorbed) by financing activities.... (526) 4,852
-------- --------
Net increase in cash........................................ 778 1,358
Cash at beginning of year................................... 1,243 157
-------- --------
Cash at end of period....................................... $ 2,021 $ 1,515
======== ========
Reconciliation of net income to net cash provided
by operating activities:
Net income............................................... $ 2,443 $ 3,169
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization...................... 1,730 1,342
Non-cash ESOP cost................................. 329
Gain on disposal of property, plant and equipment.. (2)
Changes in assets and liabilities:
Trade receivables............................... 2,661 (1,285)
Inventories..................................... 3,779 (1,431)
Prepaid expenses and other assets............... (145) 347
Trade accounts payable.......................... (3,657) (2,065)
Other accrued expenses.......................... (3,145) 223
Deferred liabilities............................ (76) (22)
-------- --------
Net cash provided by operating activities............... $ 3,919 $ 276
======== ========
The accompanying notes are an integral part of the financial statements.
4
HOOKER FURNITURE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(In thousands, except share and per share data)
1. Preparation of Interim Financial Statements
The financial statements of Hooker Furniture Corporation (referred to as
"Hooker" or the "Company") have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission ("SEC"). In the opinion
of management, these statements include all adjustments necessary for a fair
presentation of the results of all interim periods reported herein. All such
adjustments are of a normal recurring nature. Certain information and footnote
disclosures prepared in accordance with generally accepted accounting principles
are condensed or omitted pursuant to SEC rules and regulations. However,
management believes that the disclosures made are adequate for a fair
presentation of results of operations and financial position. Operating results
for the interim periods reported herein may not be indicative of the results
expected for the year. These financial statements should be read in conjunction
with the financial statements and accompanying notes included in Hooker's Annual
Report on Form 10K for the fiscal year ended November 30, 2000.
Certain items in the financial statements for periods prior to 2001 have been
reclassified to conform to the 2001 method of presentation.
2. Inventories
(Unaudited)
February 28, November 30,
2001 2000
Finished furniture....... $33,877 $38,408
Furniture in process..... 2,460 2,647
Materials and supplies... 14,048 12,883
------- -------
50,385 53,938
Reduction to LIFO basis.. 11,379 11,153
------- -------
$39,006 $42,785
======= =======
3. Property, Plant and Equipment
(Unaudited)
February 28, November 30,
2001 2000
Buildings................................. $ 43,494 $ 43,285
Machinery and equipment .................. 47,888 46,235
Office fixtures and equipment............. 10,888 10,292
Construction in progress and other........ 3,084 2,927
-------- --------
Property, plant and equipment, at cost.. 105,354 102,739
Less accumulated depreciation .......... 56,988 55,258
-------- --------
48,366 47,481
Land...................................... 1,286 1,286
-------- --------
$ 49,652 $ 48,767
======== ========
5
Notes to Financial Statements - Continued
4. Long-Term Debt
(Unaudited)
February 28, November 30,
2001 2000
Term loan.......................... $22,023 $22,500
Industrial revenue bonds due 2006.. 7,000 7,000
Revolving line of credit........... 500
------- -------
29,523 29,500
Less current maturities............ 1,877 1,581
------- -------
$27,646 $27,919
======= =======
6
HOOKER FURNITURE CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations - First Quarter 2001 Compared to First Quarter 2000
Net sales decreased $756,000 or 1.3% for the three-month period ended February
28, 2001, from the comparable 2000 period. Unit volume in the 2001 period
approximated the year ago period but average selling prices declined as the
Company became more aggressive in discounting its products in response to the
slower business environment.
Gross profit margin declined to 24.3% in the 2001 period compared to 25.1% for
the three-month period ended February 29, 2000, principally due to heavier
promotional discounting in the current year period. During the first quarter of
2001, the Company cut production schedules at all of its factories to 35 hours
per week in order to reduce inventories and better match the incoming order
rate. The Company reduced inventory levels by $3.8 million during the three
months since November 30, 2000, while improving delivery times to customers. The
Company expects to continue reducing inventory levels during the second quarter
as well.
Selling and administrative expenses increased $379,000 to $9.5 million during
the first quarter ended February 28, 2001 from the comparable 2000 period.
During the 2001 period, the Company incurred higher depreciation expense for new
technology placed in service last year, additional expenses related to the
addition of 14,000 square feet to its High Point, NC showroom space that will
debut at the upcoming April 2001 international furniture market, and higher
advertising costs. These cost increases were partially offset by cost reductions
in other areas of the business. As a percentage of net sales, selling and
administrative expenses increased to 16.9% in the 2001 period from 16.0% in the
comparable 2000 period.
As a result of the above, operating income decreased to 7.4% of net sales in the
2001 period from 9.1% in the comparable 2000 period.
The Company's effective tax rate was 38.0% in both first quarter periods.
Financial Condition, Liquidity and Capital Resources
As of February 28, 2001, assets totaled $128.9 million, down from $133.5 million
at November 30, 2000. Stockholders' equity at February 28, 2001, was $77.9
million, rising from $75.6 million at November 30, 2000. The Company's long-term
debt, including current maturities, was $29.5 million at February 28, 2001 and
November 30, 2000. Working capital increased to $61.7 million as of February 28,
2001 from $60.7 million at the end of the 2000 period, reflecting the Company's
improved cash position and lower levels of accounts payable and accrued
expenses. Incoming orders slowed slightly during the first quarter as furniture
retailers felt the impact of unstable financial markets and declining consumer
confidence. The Company expects shipments during the fiscal second quarter of
2001 to approximate or reflect a slight decline from the strong second quarter
experienced in 2000, but remains guardedly optimistic about improved business
prospects for the second half of the year. Production schedules are expected to
remain at 35 hours per week through April 2001. The Company will evaluate the
need for further reduced work schedules prior to the end of April, but does not
expect work schedules to fall below 35 hours per week.
During the three-month period ended February 28, 2001, cash generated from
operations ($3.9 million) funded capital expenditures ($2.6 million), an
increase in available cash ($778,000), and dividend payments ($549,000). During
the comparable 2000 period, cash generated from operations ($276,000) and
borrowings from the Company's revolving credit line ($5.5 million) funded
7
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Continued
capital expenditures ($3.8 million), an increase in available cash ($1.4
million) and dividend payments ($648,000).
Cash generated from operations of $3.9 million during the 2001 period increased
from $276,000 in the comparable 2000 period. Higher levels of cash received from
customers ($3.3 million), resulting in lower trade receivables, and lower
payments to suppliers and employees ($1.3 million) resulting from reduced
production schedules and lower inventory levels were partially offset by higher
tax and interest payments (increases of $573,000 and $311,000, respectively) in
the 2001 period compared with the prior year quarter.
Investing activities consumed $2.6 million during the 2001 period compared to
$3.8 million in the comparable 2000 period. Capital expenditures were higher in
the 2000 period as the Company completed the addition to its Central
Distribution Center and continued its construction of raw lumber grading,
storage and drying facilities at the Maiden, North Carolina plant.
The Company used cash of $526,000 (principally dividend payments) for financing
activities in the 2001 period compared to generating cash of $4.9 million from
financing activities in the 2000 period. During the 2000 period, the Company
borrowed $5.5 million from its revolving line of credit to fund capital
expenditures ($3.8 million), dividend payments ($648,000) and an increase in
available cash ($1.4 million). In December 2000, the Company declared a
quarterly dividend of $.085 per share that was paid in February 2001.
At February 28, 2001, the Company had $9.3 million available under its revolving
line of credit (net of $206,000 of outstanding letters of credit) and $6.1
million of availability under additional lines of credit to fund working capital
needs. The Company believes it has the financial resources needed to meet
business requirements in the foreseeable future, including capital expenditures
for the expansion of manufacturing capacity, working capital requirements, and
the Company's dividend program.
Forward-Looking Statements
Certain statements made in this report are not based on historical facts, but
are forward-looking statements. These statements can be identified by the use
of forward-looking terminology such as "believes," "expects," "may," "will,"
"should," or "anticipates" or the negative thereof or other variations thereon
or comparable terminology, or by discussions of strategy. These statements
reflect the Company's reasonable judgment with respect to future events and are
subject to risks and uncertainties that could cause actual results to differ
materially from those in the forward-looking statements. Such risks and
uncertainties include the cyclical nature of the furniture industry,
fluctuations in the price of lumber which is the most significant raw material
used by the Company, competition in the furniture industry, capital costs and
general economic or business conditions, either nationally or internationally.
8
Item 3. Quantitative And Qualitative Disclosures About Market Risk
The Company's obligations under its lines of credit, industrial revenue bonds,
and term loan bear interest at variable rates. The Company has entered into
interest rate swap agreements that, in effect, fix the rate of interest on the
industrial revenue bonds at 4.71% through 2006 and on the term loan at 7.4%
through 2010. At February 28, 2001, the Company had $500,000 outstanding under
its lines of credit. A 10% fluctuation in market interest rates would not have
a material impact on the Company's results of operations or financial condition.
9
HOOKER FURNITURE CORPORATION
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
Form 8-K filed December 20, 2000, announcing the retirement of J. Clyde Hooker,
Jr. as Chief Executive Officer and Chairman of the Board and the promotions of
Paul B. Toms, Jr. to Chief Executive Officer and Chairman of the Board, Douglas
C. Williams to President and Chief Operating Officer, and E. Larry Ryder to
Executive Vice President - Finance and Administration.
10
SIGNATURE
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.
HOOKER FURNITURE CORPORATION
Date: March 28, 2001 By: /s/ E. Larry Ryder
-------------------------
E. Larry Ryder
Executive Vice President -
Finance and Administration
(Principal Financial and Accounting Officer)
11